The Improper Payments Information Act (IPIA) of 2002, as amended by the Improper Payments Elimination and Recovery Act of 2010 and the Improper Payments Elimination and Recovery Improvement Act of 2012, requires agencies to periodically review all programs and activities and identify those that may be susceptible to significant improper payments, take multiple actions when programs and activities are identified as susceptible to significant improper payments, and annually report information on their improper payments monitoring and minimization efforts. The Office of Management and Budgets (OMB) Circular A-123, Managements Responsibility for Enterprise Risk Management and Internal Control (July 15, 2016), Appendix C, Requirements for Payment Integrity Improvement (June 26, 2018), defines an improper payment(1) and provides guidance to agencies to comply with IPIA, as amended, and for agency improper payments efforts. The Department of Commerce (Department) has not itself identified any programs or activities susceptible to significant improper payments.
The Department recognizes the importance of maintaining adequate internal controls to ensure proper payments, and the Departments commitment to continuous improvement in the overall disbursement management process remains high. Each of the Departments payment offices has implemented policies and procedures to detect and prevent improper payments. For FY 2020 and beyond, the Department will continue its efforts to ensure the integrity of its disbursements.
(1) Excerpts: An improper payment is any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Incorrect amounts are overpayments or underpayments that are made to eligible recipients (including inappropriate denials of payment or service, any payment that does not account for credit for applicable discounts, payments that are for an incorrect amount, and duplicate payments). An improper payment also includes any payment that was made to an ineligible recipient or for an ineligible good or service, or payments for goods or services not received (except for such payments authorized by law). In addition, when an agency's review is unable to discern whether a payment was proper as a result of insufficient or lack of documentation, this payment should also be considered an improper payment. A questioned cost should not be considered an improper payment until the transaction has been completely reviewed and is confirmed to be improper.
The term payment in this guidance means any disbursement or transfer of Federal funds (including a commitment for future payment, such as cash, securities, loans, loan guarantees, and insurance subsidies) to any non-Federal person, non-Federal entity, or Federal employee, that is made by a Federal agency, a Federal contractor, a Federal grantee, or a governmental or other organization administering a Federal program or activity. The term payment includes disbursements made pursuant to prime contracts awarded under the Federal Acquisition Regulation and Federal awards subject to the 2 C.F.R. Part 200 Uniform Administrative Requirements, Costs Principles and Audit Requirements for Federal Awards (Uniform Guidance) that are expended by recipients.
On February 9, 2018, the President signed into law the Bipartisan Budget Act of 2018, which provided supplemental appropriations to many federal agencies for disaster relief purposes, among others. The Economic Development Administration (EDA) was appropriated $600.0 million and the National Oceanic and Atmospheric Administration (NOAA) was appropriated $400.1 million. Pursuant to OMB Memorandum M-18-14, Implementation of lnternal Controls and Grant Expenditures for the Disaster-Related Appropriations (March 30, 2018), the Department would have been required to submit a statistical sampling and estimation plan to OMB by June 30, 2019 for each of EDA and NOAA FY 2018 disbursements, to calculate and report an annual improper payments estimate, had EDA or NOAA disbursements exceeded $10.0 million. However, disbursements for each bureau did not exceed $10.0 million. Accordingly, the Department did not submit statistical sampling and estimation plans to OMB. The Department, effective with its FY 2020 Agency Financial Report (AFR), will begin reporting on the disaster funds received by EDA and NOAA if disbursements for a fiscal year exceed $10.0 million for that bureau.
Executive Order 13520, Reducing Improper Payments and Eliminating Waste in Federal Programs, was issued on November 20, 2009, to help federal agencies reduce and prevent improper payments through increased transparency and improved agency accountability. The Executive Order requires that, along with other requirements, federal agencies with high-priority or risk-susceptible programs (for purposes of improper payments) name accountable officers for improper payments; monitor any such programs; establish goals for reducing improper payments; and report high-dollar improper payments. The Department established, as required, a prominently displayed link on its home page to internet-based resources on addressing improper payments, and also provides on this web page a web link to the U.S. Governments payment integrity web site (see PaymentAccuracy.gov website information discussed on this web page).
The Department does not have any programs/activities that OMB has determined to be a high-priority program with regard to improper payments under Executive Order 13520.
The Department does not have any programs/activities that have improper payments exceeding the statutory thresholds established under IPIA of 2002, as amended, and which is also defined in OMB Circular A-123, Appendix C, Part I, Definitions and Determinations, section B), item 1) as gross annual improper payments (i.e., the total amount of overpayments and underpayments) in the program exceeding (1) both 1.5 percent of program outlays and $10 million of all program or activity payments made during the fiscal year reported; or (2) $100 million (regardless of the improper payments percentage of total program outlays).
Agencies should track improper payments identified and recaptured through various agency endeavors. OMB Circular A-123, Appendix C, Part III, Prevention and Recovery, section C), item 4b) indicates the following possible sources of improper payments information:
Statistical samples and risk assessments;
Agency post-payment reviews;
Prior payment recapture audits;
Office of Inspector General reviews;
U.S. Government and Accountability Office reviews;
Reports from the public;
Audit reports; and
Results of agency audit resolution and follow-up process.
Department of Commerce Payment Integrity Annual Reporting
Detailed information on the Departments payment integrity monitoring, minimization, and recapture efforts is included in the Departments FY 2019 Agency Financial Report, Other Information (Unaudited) section, Payment Integrity, at the following web link: http://www.osec.doc.gov/ofm/OFM_Publications.html.
Below is a summary of key Department of Commerce payment integrity efforts.
Department of Commerce Key Payment Integrity Monitoring/Minimization Efforts
Quarterly Improper Payments and Recaptures Reporting
The Department has continuous processes in place and actively works with each of the Departments payment offices to identify and implement additional procedures to prevent and detect improper payments. In FY 2020, the Department continues with the bureaus quarterly reporting of improper payments, and payment recaptures data, to the Departments Office of Financial Management, along with identifying the nature of larger improper payments and identifying any necessary control enhancements.
Improper Payments Risk Assessments
The Department annually conducts an assessment of the effectiveness of internal control over financial reporting, in compliance with OMB Circular A-123, Appendix C. Furthermore, every three years, the assessment includes a review of internal controls over disbursement processes, including Department-wide sample testing of disbursements for improper payments and for appropriate internal control attributes. The most recent review performed indicated that internal controls over disbursement processes were sound.
Each of the Departments bureaus/reporting entities periodically completes or updates, over a one to three-year period (depending on the size of the entity), improper payments risk assessments covering all of its programs/activities as required by OMB Circular A-123, Appendix C. These improper payments risk assessments of the entities programs/activities also incorporate improper payments risk assessments every three years of the control, procurement, and grants management environments. The program/activity improper payments risk assessments performed in FY 2019 address improper payments risk factors set forth in OMB Circular A-123, Appendix C that should be addressed, which are: whether the program or activity reviewed is new to the agency; the complexity of the program or activity reviewed, particularly with respect to determining correct payment amounts; the volume of payments made annually; whether payments or payment eligibility decisions are made outside of the agency, for example, by a state or local government, or a regional federal office; recent major changes in program funding, authorities, practices, or procedures; the level, experience, and quality of training for personnel responsible for making program eligibility determinations or certifying that payments are accurate; the inherent risks of improper payments due to the nature of agency programs or operations; significant deficiencies in the audit reports of the agency including, but not limited to, the agency Inspector General or the U.S. General Accountability Office audit report findings, or other relevant management findings; and results from prior improper payment work.
None of the program/activity improper payments risk assessments performed in FY 2019 (or performed in prior fiscal years) revealed any programs or activities considered susceptible to significant improper payments.
Post-Payment Reviews and Other Procedures Performed
The Department has extensive payment integrity monitoring, minimization, recapturing, and corrective actions efforts in place, including the identification of improper payments through bureau post-payment reviews, the Office of Inspector General (OIG) audits or reviews, Single Audit Act audits of grants/cooperative agreements, other grants/cooperative agreements audits, contract closeout reviews, grants/cooperative agreements closeout reviews, other audits or reviews, sample reviews of Department-wide sustained disallowed costs (SDC), and Department-wide sample testing of disbursements under internal controls testing.
Sample Reviews of Department-wide Sustained Disallowed Costs
The Department last performed in September 2018 a periodic review of the statuses of recent Department-wide SDCs of $10 thousand or more, and intends to perform another review in FY 2020. SDCs could result, for example, from Single Audit Act audit reports related to grants/cooperative agreements, OIG audits or reviews, post-payment reviews, closeout reviews, grant/cooperative agreement-specific audits or reviews, and contracts/obligations-specific audits or reviews. The statuses of the SDCs provided by the contractor are utilized by the Department for its comprehensive payment integrity and overpayment recapture efforts, including reporting, monitoring, recapturing, and corrective actions; the statuses are further followed up on by the Department as appropriate.
Departmental Use of U.S. Department of the Treasury's Do Not Pay Portal for Payment Integrity
Pursuant to OMB Memorandum M-12-11 dated April 12, 2012, Reducing Improper Payments through the Do Not Pay List, the Department in 2013 implemented the Departments OMB-approved plan to perform periodic (primarily weekly) prepayment eligibility reviews of Do Not Pay portal databases for the Departments domestic, non-classified, non-employee-related, non-intragovernmental disbursements. The Department currently performs prepayment checking of the following Do Not Pay portal databases: (a) Death Master File (DMF) data from Social Security Administrations and from other sources; and (b) the U.S. General Services Administrations System for Award Management (SAM) Exclusion Records.
The prepayment checking performed by the Department excludes prepayment eligibility reviews of grantees under ASAP, as the U.S. Department of the Treasury (Treasury) performs continuous monitoring of the Do Not Pay portal of ASAP grantees. Bureau payment and acquisition offices, as appropriate, follow up on any vendors initially matched to the Do Not Pay portal databases checked, and perform further research as necessary to follow through and resolve any issues identified by the Do Not Pay portal matches. In most cases, the initial matches are subsequently determined by the Department to be false matches. Other Departmental offices are also consulted as appropriate.
Furthermore, the Departments payment offices receive, from the Do Not Pay portal, monthly reports listing any match results of payments made to the following databases: (a) DMF; and (b) SAM Exclusion Records. Payment offices research and follow up on matches, as appropriate, and submit to the Do Not Pay portal monthly Adjudication Reports summarizing the results of their efforts.
Since the inception of the payment offices Do Not Pay portal prepayment eligibility reviews and reviews of the Do Not Pay portal post-payment match reports, the Department has not had any significant true matches to DMF and SAM Exclusion Records. While the Departments use of the Do Not Pay portal since inception has not yet identified or led to the prevention of any significant improper payments, the Department supports the use of the Do Not Pay portal as a sound financial management practice to identify and minimize improper payments.
Office of Inspector General Payment Integrity Efforts
The Departments OIG keeps the Department accountable for its use of federal funds by conducting audits, evaluations, and investigations of the Departments programs and activities. The OIGs Office of Audit and Evaluation supervises and conducts independent and objective audits and other reviews of the Departments programs and activities to ensure they operate economically, efficiently, and effectively. The OIGs Office of Investigations investigates alleged or suspected fraud, waste, abuse, and misconduct by Departmental employees, contractors, recipients of financial assistance, and others involved in the Department's programs and operations.
For more information about the OIGs reports and activities, the following web link to OIGs home page is provided: http://www.oig.doc.gov/Pages/default.aspx.
Report Fraud, Waste, Abuse, and Whistleblower Reprisal: If you know of fraud, waste, abuse, or mismanagement in Department of Commerce programs and operations, report it to the OIG Hotline. This includes alleged/suspected wrongdoing by Department of Commerce employees, contractors, grantees, recipients of financial assistance, and others involved in the Department's programs and operations; and if you suspect that you have been retaliated against for whistleblowing. The OIGs Report Fraud, Waste, Abuse, and Whistleblower Reprisal web page is located at the following web link: http://www.oig.doc.gov/Pages/Hotline.aspx.
Treasury, in coordination with the U.S. Department of Justice and OMB, established the PaymentAccuracy.gov website, to create a centralized location to publish information about U.S. Government improper payments made to individuals, organizations, and contractors. This website also provides a centralized place where suspected incidents of fraud, waste, and abuse can be reported, and contains information about (1) current and historical rates and amounts of improper payments; (2) why improper payments occur; and (3) what agencies are doing to reduce and recapture improper payments. The website also contains extensive information, guidance, and links to other useful resources for addressing improper payments.
This website contains additional information and data about the Departments improper payments, including improper payments information included in previous Departmental Agency Financial Reports that is no longer included in the Departments FY 2019 Agency Financial Report.