Our friends at National Review point us today to Matthew Dickerson's recent review of the federal government's improper payments rate:
The Biden Administration has reported a total of $764 billion in improper payments in just three years The improper payment rate has averaged 5.9 percent during President Biden’s administration. The pre-pandemic historical average was a 4.23 percent improper payment rate. If the Biden Administration had simply kept improper payments at the historical norm, improper payments would have been $210 billion lower over the last three years.
This finger-pointing is misguided. The spike in improper payments was largely due to pandemic-era programs that were hastily and sloppily put together by the Trump administration. What's more, as Dickerson himself points out, improper payments from the unemployment expansion were accounted for in 2023 even though they were actually paid out in 2021 and 2022. He also doesn't account for recoveries of improper payments. Here's an apples-to-apples chart:
Following the pandemic spike, the improper payment rate dropped to 3.8%. Over the last 15 years the trend has been almost perfectly flat.
POSTSCRIPT: I have to say that I'm impressed with the speediness of this report. The 2023 fiscal year only ended two months ago and we already have improper payments all tallied up.
But that also prompts a question: If agencies can figure out this quickly that improper payments have been made, why do they make them in the first place?
EAFP as opposed to LBYL. One checks for errors before doing anything, the other handles errors as they are encountered. Guess which one is quicker.
Been a while since I've dealt with this issue - I used to work for the USDA Food and Nutrition Service -- but my recollection is that we had to estimate improper payments based off of historial stuides of the issue. So it was a basic calculation of what was spent in a given fiscal year multiplied by the historical improper payment rate for each program (Food Stamps, WIC, School Lunch/Breakfast, etc). Also, at least in our case, the improper paymenrs were made by state and local officials, not by Federal officials.
" If agencies can figure out this quickly that improper payments have been made, why do they make them in the first place?"
Ooo! Ooo! I saw this on Columbo. It's so Eddie Albert can be rich and get laid by Suzanne Pleshette.
The DOD makes improper payments because the regulations force them to allow vendors to be able to submit invoices for direct payment without receipt and acceptance of the goods or services the vendor claims to have provided. The Defense Contract Audit Agency then uses algorithms to determine what invoices need formal review before being entitled for payment and are also responsible for final audit before contract closeout.
Under this environment improper payments are not what you might think. They can be a simple as DCAA down the road deciding that the rates the vendor charged on a COST type contract were too high and a retro rate adjustment is needed.
The other big hurdle is that DOD still has a ton of legacy systems, micro systems that all need to interact with the modern ERPs - funding for unglamorous stuff like ERPs and convincing each Department and Agency to standardize on one audit ready ERP is worse than herding cats. So payments are sometimes misplaced and must be manually matched to the correct system or payments get double counted because the accounting did not eliminate payments between two DOD entities.
This being the 21st century we're now expected to depend less on hazy estimates and more on actuals. But it's still taking a bit too long of time to backtrack to determine the improper payments and fix them. And yes we're fixing some of the ugly messes allowed by the previous administration.
Let's take the IRS as an example. You can lie like hell on your tax return and claim a huge refund, and as long as there are no errors in your return, you'll get that money. And some time later, you'll get a letter from the IRS demanding the money back. Better to pay everyone rapidly and catch the cheats later than to delay everyone just to catch the (relatively few) cheats more quickly.
I would expect that any agency handling a lot of payments will randomly audit a representative sample of them. If 3 million UI cheques went out and an audit of 1,000 of them shows that 3 were the result of fraudulent claims, we can extrapolate that 9,000 of the 3 million cheques were for fraudulent claims. That means they know there were 9,000 improper payments, but they don't know which ones, except for the three identified by audit.