Eliminating improper payments has been a key objective of the federal government for the past 10 years, beginning in 2002 with the issuance of the Improper Payments Information Act and Recovery Auditing Act.
Over the past decade, the Office of Management and Budget has provided guidance to assist agencies with implementing these laws and has monitored progress during this time. Despite the requirements, guidance and efforts that agencies have put forth, improper payments remain a sizable challenge, with an estimated $115 billion in improper payments reported for fiscal 2011.
Given the state of the federal budget and debt, this is a problem that must be addressed — in fact, the taxpayers are demanding it.
In June 2010, President Obama issued a memorandum on improving payment accuracy through a “Do Not Pay” list. The memo emphasized the importance of preventing improper payments and leveraging available data to ensure payments are not made to those who should not receive them. The president directed that a “single point of entry” be established through which agencies may access relevant data.
OMB and the Treasury Department rose to the challenge and, in a short time, developed a Do Not Pay solution. In April, OMB issued a memorandum requiring that all agencies submit a plan to OMB outlining how they intend to use Do Not Pay. The final versions of these plans were due to OMB on Aug. 31.
Do Not Pay is likely to have a meaningful impact in reducing improper payments because it was designed with the following three values in mind:
Data security. Working closely with the Federal Reserve Banks of St. Louis and Kansas City, Treasury developed the solution in a way that will enable privacy and data security requirements to be met. When data is transmitted from agencies to the Do Not Pay solution, those files must be encrypted. Treasury teamed with each agency to understand specific privacy considerations when determining the most effective implementation of the solution. Agencies should also implement the necessary internal controls to ensure compliance with the encryption requirement.
Simplicity. The Do Not Pay solution is a verification tool. There is a common misconception that it will tell agencies who they should not pay. Rather, the solution provides access to a number of databases containing information that, when compared with agency payee data, will help agencies determine whether to pay or not pay. Treasury has made it easy for agencies to access this information by enabling four different uses: single online search, batch matching, continuous monitoring and data analytics services.
Relevant and useful data. Seven data sources are available in the Do Not Pay solution. They include the General Services Administration’s Excluded Parties List System, which has information on companies and individuals debarred or suspended from federal contracting, and the Social Security Administration’s Death Master File, which lists people who have died.
Treasury continually evaluates new data sources, adding them to the tool through iterative releases each year. Treasury is seeking an active user community to drive requirements going forward, encouraging agencies to share new data source ideas.
With implementation likely to begin in earnest in early November, the impact of the Do Not Pay list remains to be seen. However, the approach taken by Treasury in the design of Do Not Pay has set the table for success.
Wendy Morris is a director at MorganFranklin Corp.