Emergency Relief Funds: Significant Improvements Are Needed (GAO-22-105715)
Summary
GAO-22-105715, a testimony dated March 17, 2022 before the Committee on Homeland Security and Governmental Affairs, United States Senate, given as the statement of Gene L. Dodaro, Comptroller General of the United States. It states that, as of January 31, 2022, the federal government had obligated $4.2 trillion and expended $3.6 trillion of its COVID-19 relief funds. The testimony reports that when GAO reviewed the federal response to the pandemic, it found agencies had significant shortcomings in their application of fundamental internal controls and financial and fraud risk management practices. GAO is making 10 matters for congressional consideration intended to enhance the transparency and accountability of federal spending.
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United States Government Accountability Office
Testimony
Before the Committee on Homeland
Security and Governmental Affairs,
United States Senate
EMERGENCY RELIEF
For Release on Delivery
Expected at 10:15 a.m. EDT
Thursday, March 17, 2022
FUNDS
Significant Improvements
Are Needed to Ensure
Transparency and
Accountability for
COVID-19 and Beyond
Statement of Gene L. Dodaro,
Comptroller General of the United States
GAO-22-105715
March 17, 2022
EMERGENCY RELIEF FUNDS
Significant Improvements Are Needed to Ensure
Transparency and Accountability for COVID-19 and
Highlights of GAO-22-105715, a testimony
Beyond
before the Committee on Homeland Security
and Governmental Affairs, United States
Senate
Why GAO Did This Study What GAO Found
During emergencies, federal agencies When reviewing the federal government’s response to the COVID-19 pandemic,
must get relief funds out quickly while GAO found that agencies had significant shortcomings in their application of
ensuring appropriate financial fundamental internal controls and financial and fraud risk management practices.
safeguards are in place. GAO noted Such shortcomings—stemming in part from the need to distribute funds quickly—
early in the COVID-19 pandemic that were exacerbated by existing financial management weaknesses. As a result,
agencies gave priority to swiftly billions of dollars were at risk for improper payments, including those from fraud,
distributing funds and implementing providing limited assurance that programs effectively met their objectives.
new programs; however, tradeoffs
were made that limited progress in To help address these shortcomings, GAO suggests Congress take legislative
achieving transparency and action to address the following:
accountability goals.
• New program improper payment reporting. (1) Designate all new federal
As of January 31, 2022 (the most programs distributing more than $100 million in any one fiscal year as
recent data available), the federal “susceptible to improper payments,” and, thus, subject to more timely
government had obligated $4.2 trillion improper payment reporting requirements; and (2) require agencies to report
and expended $3.6 trillion, 90 percent improper payment information in their annual financial reports.
and 79 percent, respectively, of the
$4.6 trillion in funds from six COVID-19 • Fraud risk management reporting. Reinstate the requirement that
relief laws. agencies report on their antifraud controls and fraud risk management efforts
This testimony focuses on GAO’s in their annual financial reports. Such reporting will increase congressional
assessment of (1) federal agencies’ oversight to better ensure fraud prevention during normal operations and
application of fundamental internal emergencies.
controls and financial and fraud risk
management practices for COVID-19 • Fraud analytics. Establish a permanent analytics center of excellence to aid
spending, and (2) opportunities for the oversight community in identifying improper payments and fraud.
Congress to improve these practices • Chief Financial Officer (CFO) authorities. Clarify that agency CFOs have
during emergencies and national oversight responsibility for internal controls over financial reporting and key
crises. financial information; and require agency CFOs to (1) certify the reliability
GAO reviewed its COVID-19 findings and validity of improper payment risk assessments and estimates and
on internal controls and financial and monitor associated corrective action plans, and (2) approve improper
fraud risk management practices. GAO payment estimate methodology in certain circumstances.
compared those findings to
fundamental practices for internal • Internal control plans. Require the Office of Management and Budget
control, financial management, and (OMB) to provide guidance for agencies to develop internal control plans that
fraud risk management. can then be put to immediate use for future emergency funding and require
agencies to report such plans to OMB and Congress.
What GAO Recommends
• USAspending.gov. (1) Clarify the responsibilities and authorities of OMB
GAO has made 271 recommendations and Treasury for ensuring the quality of federal spending data available on
and five matters for congressional USAspending.gov, and (2) extend the previous requirement for agency
consideration across its COVID-19 inspectors general to review agency data submissions on a periodic basis.
work. In today’s testimony, GAO is
making 10 matters for congressional • Data sharing. Amend the Social Security Act to accelerate and make
consideration intended to enhance the permanent the requirement for the Social Security Administration to share its
transparency and accountability of full death data with Treasury’s Do Not Pay working system.
federal spending.
Collectively, these actions can help agencies ensure that they can distribute
View GAO-22-105715. For more information,
contact Jessica Farb at (202) 512-7114 or funds rapidly while having appropriate financial safeguards in place. In addition,
farbj@gao.gov. these actions will help increase transparency and accountability and strengthen
agency efforts to provide proper stewardship of federal funds.
United States Government Accountability Office
Letter Letter
Chairman Peters, Ranking Member Portman, and Members of the
Committee:
I appreciate the opportunity to discuss the federal government’s response
to the COVID-19 pandemic. To address this crisis, Congress and the
administration have provided about $4.6 trillion in relief funding, as of
January 31, 2022. 1 Agencies across the federal government acted quickly
to stand up new programs and greatly scale up existing programs.
Federal COVID-19 relief funds were distributed broadly to state, local,
tribal, and territorial governments, businesses, and individuals to combat
the effects of the pandemic on the public health system as well as the
economy.
During public health and other emergencies or economic crises, federal
agencies must get relief funds out quickly while ensuring appropriate
financial and other safeguards are in place. Agencies can do so by
applying effective internal controls, consistent with those used for
nonemergency federal spending. Internal controls comprise the plans,
methods, policies, and procedures used to fulfill the mission, strategic
plan, goals, and objectives of the entity, and go hand-in-hand with
effective financial and fraud risk management practices. 2 Federal internal
control standards provide the overall framework for establishing and
maintaining such a system. Collectively, these practices provide
transparency and accountability to Congress and the public for federal
spending.
The CARES Act includes a provision for us to report regularly on the
public health and economic impacts of the pandemic and the federal
response. GAO is to report on, among other things, the pandemic’s
effects on public health, the economy, and public and private institutions
of the United States, including the federal government’s public health and
1Total budgetary resources, reported to Treasury’s Governmentwide Treasury Account
Symbol Adjusted Trial Balance System, reflect appropriations, as well as transfers,
adjustments, recoveries, rescissions, and returns of unused indefinite appropriations.
Therefore, amounts can fluctuate month to month.
2The Federal Managers’ Financial Integrity Act of 1982 requires the Comptroller General
to issue standards for internal control in the federal government. 31 U.S.C. § 3512(c). The
Office of Management and Budget (OMB) Circular No. A-123 provides specific
requirements for assessing and reporting on controls in the federal government. See,
GAO, Standards for Internal Control in the Federal Government, GAO-14-704G
(Washington, D.C.: Sept. 10, 2014).
Page 1 GAO-22-105715
homeland security efforts. 3 Next month, we will issue our tenth recurring
government-wide report since the pandemic began. 4 In addition, we have
issued 132 standalone reports, testimonies, and science and technology
spotlights focused on different aspects of the pandemic.
Across this body of work, we have made 271 recommendations to federal
agencies and raised five matters for congressional consideration. 5 As of
February 2022, agencies had fully or partially addressed 106 of these 271
recommendations, and Congress had fully addressed one matter. The
intent of these recommendations were for agencies to implement mid-
course corrections where appropriate and to increase transparency and
accountability of the federal COVID-19 response and for future
emergencies.
My comments today will summarize key findings from this body of work
related to federal financial and fraud risk management during the COVID-
19 pandemic. Specifically, I will discuss
1. our assessment of the federal government’s application of
fundamental internal controls and proper stewardship of federal funds
and risk management practices for COVID-19 spending, and
2. opportunities for Congress to increase transparency and
accountability of federal spending during emergency and
nonemergency periods by strengthening federal financial and fraud
risk management practices.
Given the government-wide scope of this work, we undertook a variety of
methodologies. These methodologies included examining federal laws
and agency documents, guidance, processes, and procedures, and
available agency budgetary data and other financial and management
information. In addition, we interviewed federal, state, and tribal officials,
and industry representatives. We also reviewed prior GAO work. More
detailed information on the objectives, scope, and methodology that this
statement is based on can be found in the individual reports from which
3Pub. L. No. 116-136, § 19010, 134 Stat. at 579–81.
4For a complete list of our recurring CARES Act reports, see
https://www.gao.gov/coronavirus and the Related GAO Products page at the end of this
report.
5Of the 271 recommendations and five matters, 37 recommendations and two matters
were aimed at improving agencies’ internal controls and financial and fraud risk
management practices.
Page 2 GAO-22-105715
we obtained this information. For this statement, we reviewed our COVID-
19 findings on internal controls and financial and fraud risk management
practices. GAO compared those findings to fundamental practices for
internal control, financial management, and fraud risk management.
We conducted the work on which this statement is based in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on
our audit objectives.
Background
Federal COVID-19 In addition to the devastating effects on public health, the pandemic
Funding and Spending continues to have lingering effects on the economy. While the national
economy continues to recover from the COVID-19 pandemic, indicators
of inflation have generally increased in recent months, suggesting that
inflation could be somewhat higher, and persist for somewhat longer than
previously expected.
The six COVID-19 relief laws have provided about $4.6 trillion for the
response and recovery from the pandemic. 6 As of January 31, 2022, the
most recent date for which government-wide information was available at
the time of our analysis, the federal government had obligated a total of
$4.2 trillion and expended $3.6 trillion, 90 and 79 percent, respectively, of
these relief funds, as reported by federal agencies to the Department of
6For the purposes of this testimony, the COVID-19 relief laws consist of the six laws
providing comprehensive relief across federal agencies and programs that Treasury uses
to report COVID-19 spending. These six laws are the American Rescue Plan Act of 2021
(ARPA), Pub. L. No. 117-2, 135 Stat. 4; Consolidated Appropriations Act, 2021, Pub. L.
No. 116-260, div. M and N, 134 Stat. 1182 (2020); Paycheck Protection Program and
Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020); CARES Act,
Pub. L. No. 116-136, 134 Stat. 281 (2020); Families First Coronavirus Response Act, Pub.
L. No. 116-127, 134 Stat. 178 (2020); and the Coronavirus Preparedness and Response
Supplemental Appropriations Act, 2020, Pub. L. No. 116-123, 134 Stat. 146. On March 9,
2022, Congress introduced an emergency supplemental bill to provide an additional $15.6
billion in relief funds to continue the U.S. government’s efforts to combat COVID-19 in the
United States and abroad.
Page 3 GAO-22-105715
the Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial
Balance System. 7
The major spending areas shown in table 1 represent $3.8 trillion, or 82
percent, of the total amounts provided. For these nine spending areas,
agencies reported obligations totaling $3.5 trillion and expenditures of
government-wide COVID-19 relief funds totaling $3.2 trillion as of January
31, 2022.
Table 1: COVID-19 Relief Funding and Spending, as of January 31, 2021
Dollars in billions
Total Total Total
Major spending area budgetary resources obligations expenditures
Economic Impact Payments 871.5 847.7 847.7
(Department of the Treasury)
Business Loan Programs 838.0 827.7 827.8a
(Small Business Administration)
Unemployment Insurance 724.1 723.3 672.6
(Department of Labor)
Coronavirus State and Local Fiscal Recovery Funds 350.0 245.3 245.3
(Department of the Treasury)
Public Health and Social Services Emergency Fund 345.7 296.6 218.6
(Department of Health and Human Services)
Education Stabilization Fund 277.8 276.7 87.1
(Department of Education)
Coronavirus Relief Fund 150.0 150.0 149.9
(Department of the Treasury)
Supplemental Nutrition Assistance Programs 117.1 80.8 79.4
(Department of Agriculture)
Disaster Relief Fund 97.0 78.8 25.2
(Department of Homeland Security)b
7An obligation is a definite commitment that creates a legal liability of the U.S. government
for the payment of goods and services ordered or received, or a legal duty on the part of
the U.S. government that could mature into a legal liability by virtue of actions on the part
of another party that are beyond the control of the U.S. government. An expenditure is the
actual spending of money, or an outlay. Expenditures include some estimates, such as
estimated subsidy costs for direct loans and loan guarantees. Increased spending in
Medicaid and Medicare is not accounted for in the funding provided by the COVID-19
relief laws. Federal agencies use the Governmentwide Treasury Account Symbol Adjusted
Trial Balance System to report proprietary financial reporting and budgetary execution
information to Treasury.
Page 4 GAO-22-105715
Total Total Total
Major spending area budgetary resources obligations expenditures
Other areasc 836.7 624.9 469.6
Totald 4,607.8 4,151.8 3,623.3
Source: GAO analysis of data from the Department of the Treasury and applicable agencies. | GAO-22-105715
Note: Total budgetary resources, obligations, and expenditure data shown for the major spending
areas are based on data reported by applicable agencies to Treasury’s Governmentwide Treasury
Account Symbol Adjusted Trial Balance System. Each spending area may include multiple programs.
Total budgetary resources reflect the amount of funding made available for the COVID-19 response
under the American Rescue Plan Act of 2021 (ARPA), Pub. L. No. 117-2, 135 Stat. 4; Consolidated
Appropriations Act, 2021, Pub. L. No. 116-260, div. M and N, 134 Stat. 1182 (2020); Paycheck
Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020);
CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020); Families First Coronavirus Response Act,
Pub. L. No. 116-127, 134 Stat. 178 (2020); and Coronavirus Preparedness and Response
Supplemental Appropriations Act, 2020, Pub. L. No. 116-123, 134 Stat. 146. Total budgetary
resources reflect appropriations, as well as transfers, adjustments, recoveries, rescissions, and
returns of unused indefinite appropriations. Therefore, amounts can fluctuate month to month.
An obligation is a definite commitment that creates a legal liability of the U.S. government for the
payment of goods and services ordered or received, or a legal duty on the part of the U.S.
government that could mature into a legal liability by virtue of actions on the part of another party that
are beyond the control of the U.S. government. An expenditure is the actual spending of money, or an
outlay. Expenditures shown include some estimates, such as estimated subsidy costs for direct loans
and loan guarantees.
a
The Small Business Administration’s Business Loan Program account includes activity for the
Paycheck Protection Program loan guarantees and certain other loan subsidies. These expenditures
relate mostly to the loan subsidy costs (i.e., the loan’s estimated long-term costs to the U.S.
government). Reported expenditures were $60 million greater than outlays for January 2022. SBA
officials were unable to provide an explanation in time for this testimony.
b
Funding provided to the Disaster Relief Fund is generally not specific to individual disasters.
Therefore, Treasury’s methodology for determining COVID-19-related obligations and expenditures
does not capture obligations and expenditures for the COVID-19 response based on funding other
than what was provided in the COVID-19 relief laws. Further, Treasury’s methodology includes all
obligations and expenditures based on funding in the COVID-19 relief laws, including those for other
disasters. In its Disaster Relief Fund Monthly Report dated February 7, 2022, the Department of
Homeland Security reported COVID-19-related obligations totaling $95.1 billion and expenditures
totaling $69.8 billion as of January 31, 2022.
c
Several provisions in the Families First Coronavirus Response Act and ARPA authorized increases
in Medicaid payments to states and U.S. territories. The Congressional Budget Office estimated that
federal expenditures from these provisions would be approximately $76.9 billion through fiscal year
2030. The largest increase to federal Medicaid spending is based on a temporary formula change
rather than a specific appropriated amount. Some of the estimated costs in this total are for the
Children’s Health Insurance Program, permanent changes to Medicaid, and changes not specifically
related to COVID-19. This increased spending is not accounted for in the funding provided by the
COVID-19 relief laws and therefore not included in this table.
d
Because of rounding, amounts shown in columns may not sum to the totals.
Internal Controls An effective internal control system helps agencies adapt to shifting
environments, evolving demands, changing risks, and new priorities.
Applicable standards for internal control call for agencies to, among other
actions, design and document management roles and responsibilities,
assess risk, communicate internally and externally, and monitor the
effectiveness of the agency’s controls.
Page 5 GAO-22-105715
Internal controls for managing and overseeing federal funding, including
emergency relief spending, include the following key aspects:
• Culture and structure. Establishment of an organizational culture
and structure conducive to managing risks related to fraud and
improper payments (payments that should not have been made or
that were made in an incorrect amount), including sufficient,
appropriate resources to oversee risk management activities.
• Quality data. Maintenance of timely, reliable spending and other data
to support the internal control system.
• Risk assessment. Assessments of the risk that fraud and other
improper payments could occur, focus on changes in risk related to
federal spending, and development and documentation of appropriate
responses to identified risks, such as through a control plan.
• Risk control. Development and implementation of appropriate control
activities to respond to identified fraud and improper payment risks,
based on the control plan, including (1) an appropriate balance, based
on risk and program needs, of pre- and post-payment controls to
provide reasonable assurance that payments were made or used
appropriately; and (2) appropriate analytical capacity.
• Effectiveness assessments. Regular assessment of the
effectiveness of internal controls over fraud and other improper
payments, including (1) estimates of improper payment amounts, (2)
evaluation and documentation of deficiencies and their root causes,
(3) determination of appropriate corrective actions, and (4) reports on
the results of assessments and related actions taken to reduce fraud
and improper payments.
Page 6 GAO-22-105715
Improper Payments Reducing improper payments is critical to safeguarding federal funds.
Improper payments have consistently been a government-wide issue. 8
We have reported on improper payments as a material deficiency or
material weakness in internal control in our audit reports on the U.S.
government’s consolidated financial statements since fiscal year 1997.
Since fiscal year 2003, cumulative improper payment estimates have
totaled about $2.2 trillion (see fig. 1). 9 For fiscal year 2021, the Office of
Management and Budget (OMB) reported that federal agencies had
estimated about $281 billion in improper payments, which was an
increase of about $75 billion from the prior fiscal year and approximately
double the amount reported in fiscal year 2017. 10 However, this estimate
does not reflect all government-wide improper payments. Notably, several
agencies with large programs that have been identified as susceptible to
significant improper payments are not reporting estimates, and some
reported estimates are not comprehensive.
8Improper payments include both overpayments and underpayments, any payments to an
ineligible recipient, any payment for an ineligible good or service, any duplicate payment,
any payment for a good or service not received (except for such payments where
authorized by law), and any payment that does not account for credit for applicable
discounts under statutory, contractual, administrative, or any other legally applicable
requirements. See 31 U.S.C. § 3351(4). When an executive agency’s review is unable to
discern whether a payment was proper as a result of insufficient or lack of documentation,
this payment must also be included in the improper payment estimate. 31 U.S.C. §
3352(c)(2). While not all improper payments are the result of fraud, all payments made as
a result of fraudulent activities are considered to be improper payments. In addition,
improper payment estimates are not intended to measure fraud in a particular program.
9In 2003, federal executive agencies were required by statute to begin reporting estimated
improper payments for certain programs and activities. Statutes that govern improper
payment reporting define executive agency to mean a department, an agency, or an
instrumentality in the executive branch of the U.S. government. 31 U.S.C. § 102. Prior-
year improper payment estimates have not been adjusted for inflation.
10Agencies report improper payment information at www.paymentaccuracy.gov—a U.S.
government website managed by the Office of Management and Budget (OMB)—which
contains, among other things, information about current and historical rates and amounts
of estimated improper payments
Page 7 GAO-22-105715
Figure 1: Cumulative Government-wide Improper Payment Estimates for Fiscal
Years 2003 through 2021 Totaled $2.2 Trillion
Note: The specific programs and total number of programs that constitute the government-wide sum
of improper payment estimates vary from year to year. The number of programs included in the
government-wide total generally increased over time as programs reported improper payment
estimates for the first time. Generally, while decreases in estimated improper payments were reported
for some programs in a specific fiscal year, these were more than offset by increases for certain other
programs. For example, increases in improper payment rates and outlays in the Department of Health
and Human Services’ Medicaid and Department of Labor’s unemployment insurance programs
contributed to the large increases in estimated improper payments in fiscal year 2021.
Prior-year improper payment estimates have not been adjusted for inflation.
Improper payments are a pervasive problem across the federal
government. For fiscal year 2021, 16 agencies reported improper
payment estimates for 86 federal programs or activities. In addition, 26 of
these 86 programs and activities reported estimated improper payment
rates of 10 percent or greater. 11
11Agencies are required to develop improper payment estimates and corrective action
plans for any programs or activities identified as susceptible to significant improper
payments by the agency administering the program or activity, OMB, or statute.
Page 8 GAO-22-105715
Our work on improper payments has provided suggested actions for
Congress and federal agencies to enhance federal financial management
and reasonably assure that appropriate actions are taken to reduce them.
We also have ongoing work developing a framework for managing
improper payments for emergency assistance programs. Specifically, the
framework will incorporate standards for internal controls and financial
and fraud risk management practices, as well as requirements and
guidance from relevant laws and guidance on improper payments. This
work will highlight aspects of managing improper payments that arise in
the context of emergency assistance, which may necessitate special
considerations. For more information on improper payment estimates
across the federal government, see appendix I.
Fraud Risks in Federal The public health crisis, economic instability, and increased flow of
Spending federal funds associated with the COVID-19 pandemic have increased
pressures and opportunities for fraud—the act of obtaining something of
value through willful misrepresentation. Recognizing fraud risks and
deliberately managing them in an emergency environment can help
federal managers safeguard public resources while providing needed
relief. 12
To help combat fraud in government agencies and programs—both
during normal operations and emergencies—GAO published A
Framework for Managing Fraud Risks in Federal Programs (Fraud Risk
Framework). 13 Issued in 2015, the Fraud Risk Framework identifies
leading practices for managing fraud risk and encompasses control
activities to prevent, detect, and respond to fraud, with an emphasis on
prevention (see fig. 2).
12Fraud risks exist when individuals have an opportunity to engage in fraudulent activity,
have an incentive or are under pressure to commit fraud, or are able to rationalize
committing fraud. When fraud risks can be identified and mitigated, fraud may be less
likely to occur. Whether an act is fraudulent is determined through the judicial or other
adjudicative system.
13GAO, A Framework for Managing Fraud Risks in Federal Programs, GAO-15-593SP
(Washington, D.C.: July 28, 2015).
Page 9 GAO-22-105715
Figure 2: Components of the Fraud Risk Framework
In June 2016, the Fraud Reduction and Data Analytics Act of 2015
(FRDAA) was enacted. This act required OMB to establish guidelines for
federal agencies to create controls to identify and assess fraud risks and
to design and implement antifraud control activities. 14 FRDAA further
required OMB to incorporate the leading practices from GAO’s framework
in these guidelines. Although FRDAA was repealed in March 2020, the
Payment Integrity Information Act of 2019 requires these guidelines to
remain in effect. 15
14Pub. L. No. 114-186, 130 Stat. 546 (2016).
15Pub. L. No. 116-117, § 2(a), 134 Stat. 113, 131-32 (2020) (codified at 31 U.S.C. §
3357). These guidelines may be periodically modified by OMB in consultation with GAO,
as OMB and GAO may determine necessary.
Page 10 GAO-22-105715
In June 2020, we reported that because the government needed to
provide funds and other assistance quickly to those affected by COVID-
19 and its economic effects, federal relief programs are vulnerable to
significant risk of fraudulent activities. 16 Managers may perceive a conflict
between their priorities to fulfill the program’s mission—such as efficiently
disbursing funds or providing services to beneficiaries, particularly during
emergencies—and taking actions to safeguard taxpayer dollars from
improper use. However, the purpose of proactively managing fraud risks,
even during emergencies, is to facilitate, not hinder, the program’s
mission and strategic goals by ensuring that taxpayer dollars and
government services serve their intended purposes.
Focusing on fraud prevention can help most effectively manage risks.
However, when emergency response situations limit the use of preventive
controls, agencies can leverage detective controls, such as through data
collection and analysis, to help identify potential fraud more readily and to
assist in response and recovery.
During the COVID-19 pandemic, there have been immediate needs for
Agency Shortcomings emergency relief funding. However, we found significant shortcomings in
in Internal Controls agencies’ application of fundamental internal controls and financial and
fraud risk management practices to reasonably assure that COVID-19
and Financial and emergency relief payments were made properly, to eligible recipients, and
Risk Management that funds were used for their intended purposes. These shortcomings left
agencies vulnerable to significant improper payments and fraud.
Practices Led to
Significant Improper
Payments and Fraud
in COVID-19 Relief
Programs
Agencies Lacked Although federal laws have required agencies to submit specific internal
Appropriate Internal control plans for relief funds in previous emergencies, there was no such
Controls to Monitor the
Distribution and Use of
COVID-19 Relief Funds
16GAO, COVID-19: Opportunities to Improve Federal Response and Recovery Efforts,
GAO-20-625 (Washington, D.C.: June 25, 2020).
Page 11 GAO-22-105715
requirement for the COVID-19 pandemic. 17 We found that many
agencies—including those that administer some of the largest COVID-19
relief programs—did not develop effective internal controls or apply
financial management practices to manage and oversee the distribution
and use of COVID-19 relief funds. These internal controls and financial
practices included designing, documenting, and finalizing policies and
procedures for overseeing the distribution of relief funding; monitoring the
receipt and use of funds, such as through post-payment reviews and
recovery audits; and implementing mechanisms to verify recipients’
eligibility and identity. 18
An effective, robust internal control system helps agencies adapt to
shifting environments, evolving demands, changing risks, and new
priorities throughout the lifecycle of federal programs. We also found that,
when new programs began or existing ones were greatly expanded,
agencies frequently did not develop or implement preventive internal
controls to help them oversee and assess relief programs prior to making
any payments. In addition, agencies also delayed applying certain
financial management practices, such as reviewing payments after they
have been made, and did not have mechanisms in place to verify
recipients’ eligibility and identity.
17For example, in 2017 and 2018, three supplemental appropriations acts were enacted to
provide disaster relief funding to help mitigate the effects of Hurricanes Harvey, Irma, and
Maria and the California wildfires. See Pub. L. No. 115-56, div. B, 131 Stat. 1129, 1136
(2017); Pub. L. No. 115-72, div. A, 131 Stat. 1224 (2017); and Pub. L. No. 115-123, div. B,
subdiv. 1, 132 Stat. 64, 65 (2018). These supplemental appropriations acts provided an
internal control oversight framework to limit improper payments of these funds; requiring
the Office of Management and Budget (OMB) to issue criteria for federal agencies to use
in designing internal controls for spending disaster relief funding; and requiring federal
agencies to submit their internal control plans for relief fund spending to GAO, their
respective inspectors general, OMB, and Congress. In 2013, a supplemental
appropriations act with similar internal control requirements was enacted to provide
disaster relief funding following Hurricane Sandy. See Pub. L. No. 113-2, div. A, 127 Stat.
4 (2013).
18Post-payment reviews and recovery audits are additional financial management
practices that agencies can use to determine whether payments were made appropriately
to eligible recipients in correct amounts and used by recipients in accordance with law and
applicable agreements. Agencies then use the results of such reviews and audits to
recover, or collect, overpayments, unused payments, and payments not made or used
properly from recipients. Recovery audits are not audits in the traditional sense, but rather
control processes specifically designed to identify and recapture overpayments after they
have been made.
Page 12 GAO-22-105715
Internal Controls Paycheck Protection Program and Economic Injury Disaster Loans.
Beginning in June 2020, in our first government-wide report on the federal
response to the COVID-19 pandemic, we noted the need for the Small
Business Administration (SBA) to develop and implement plans to
respond to program integrity risks in its small business loan programs. 19
Specifically, we recommended that SBA develop and implement plans to
identify and respond to risks in the Paycheck Protection Program (PPP)
to, among other things, ensure program integrity, achieve program
effectiveness, and address potential fraud. 20 Similarly, in March 2021, we
recommended that SBA implement a comprehensive oversight plan to
identify and respond to risks in the Economic Injury Disaster Loan (EIDL)
program to help ensure program integrity, achieve program effectiveness,
and address potential fraud. 21
In March 2021, based on our findings on these programs and the audit of
SBA’s fiscal year 2020 financial statements, we added SBA’s emergency
loans for small businesses issued under PPP and the EIDL program to
our High Risk List. 22 These two programs together comprise the largest
amount of COVID-19 relief funding, estimated at over $900 billion. While
these loans and advances helped many small businesses, SBA’s limited
internal controls and lack of finalized oversight plans for these programs
created significant risk of hundreds of millions of dollars in improper
payments. Furthermore, SBA initially failed to provide us with key PPP
and EIDL data and information on a timely basis, which impeded efforts to
ensure transparency and accountability for the programs.
In addition to our findings about SBA’s limited internal controls, the
auditors of SBA’s financial statements found issues with the agency’s
consolidated financial statements 2 years in a row. For fiscal year 2020,
the SBA’s consolidated financial statements received a disclaimer of
opinion, meaning external auditors were unable to express an opinion
19GAO-20-625.
20As of February 2022, SBA had partially addressed this recommendation.
21As of February 2022, SBA had partially addressed this recommendation.
22We designate federal programs and operations as “high risk” due to their vulnerabilities
to fraud, waste, abuse, and mismanagement, or because they need transformation. GAO,
High-Risk Series: Dedicated Leadership Needed to Address Limited Progress in Most
High Risk Areas, GAO-21-119SP (Washington, D.C.: Mar. 2, 2021).
Page 13 GAO-22-105715
due to insufficient evidence. 23 Additionally, for fiscal year 2021, SBA
received a disclaimer of opinion on one of its financial statements and the
remainder were unaudited. 24 As the basis for both years’ disclaimers, the
auditors reported that SBA was unable to provide adequate evidence to
support a significant number of transactions and account balances due to
inadequate processes and controls related to its implementation of its
programs authorized under the CARES Act and related legislation,
including PPP. SBA’s auditor made 30 recommendations in its fiscal year
2021 auditor’s report to address control deficiencies related to these
programs.
Payroll Support Program. In November 2020, we found that Treasury
had not completed developing and implementing a plan to monitor
recipients’ compliance with the Payroll Support Program—which provided
$32 billion in assistance to aviation businesses—3 months after the first
quarterly compliance reports were due. 25
Coronavirus State and Local Fiscal Recovery Funds. In October
2021, we reported that Treasury officials told us they were developing
plans for overseeing the Coronavirus State and Local Fiscal Recovery
Funds (CSLFRF), including developing the department’s approach for
monitoring recipients’ use of program funds. However, Treasury had not
finalized or documented such plans for CSLFRF, which provides funds to
states, local, and tribal governments, the District of Columbia, and U.S.
territories for a broad range of costs stemming from the fiscal effects of
the COVID-19 pandemic. 26 The American Rescue Plan Act of 2021
(ARPA) appropriated $350 billion to Treasury for the program, and as of
August 2021, Treasury had distributed approximately $240 billion, or
23See Small Business Administration, Office of Performance Management and the Chief
Financial Officer, Agency Financial Report for Fiscal Year 2020 (Washington D.C.: Dec.
18, 2020).
24See Small Business Administration, Office of Performance, Planning and the Chief
Financial Officer, Agency Financial Report for Fiscal Year 2021 (Washington D.C.: Nov.
15, 2021).
25GAO, COVID-19: Urgent Actions Needed to Better Ensure an Effective Federal
Response, GAO-21-191 (Washington, D.C.: Nov. 30, 2020).
26GAO, COVID-19: Additional Actions Needed to Improve Accountability and Program
Effectiveness of Federal Response, GAO-22-105051 (Washington, D.C.: Oct. 27, 2021).
Page 14 GAO-22-105715
almost 70 percent, of these funds. 27 We recommended that Treasury
finalize these key recipient monitoring policies and procedures; Treasury
agreed with our recommendation. As of February 2022, Treasury officials
had partially addressed this recommendation, but have yet to provide us
with the documented policies and procedures.
Post-payment Reviews and Provider Relief Fund. In October 2021, we found that the Health
Recovery Audits Resources and Services Administration (HRSA), within the Department of
Health and Human Services, had not established time frames for
implementing and completing post-payment reviews for all Provider Relief
Fund recipients. This fund provides financial relief to eligible health care
providers that provided COVID-19 diagnoses, testing, or health care after
January 31, 2020. As of December 31, 2021, HRSA had allocated about
$174 billion and had distributed about $146 billion of the $178 billion in
appropriated program funds.
In addition to not establishing time frames for implementing and
completing post-payment review of Provider Relief Fund spending, we
found that HRSA had not finalized procedures for recovering
overpayments or recovered the bulk of the overpayments that it had
already identified from recipients. We recommended that HRSA establish
time frames for completing post-payment reviews to promptly address
risks and identify overpayments, as well as finalize and implement post-
payment recovery of any Provider Relief Fund overpayments, unused
payments, or payments not properly used. HRSA partially agreed with
these recommendations but noted it would need to wait to begin certain
recovery audits until after the grace period for provider reporting ended on
November 30, 2021 or January 1, 2022, depending on when providers
received their funds. As of December 2021, HRSA had not yet developed
or implemented its plans for post-payment review or recovery audits of
Provider Relief Funds.
Emergency Rental Assistance. In January 2022, we found that
Treasury had not yet designed processes, such as post-payment reviews
or recovery audits, for identifying and recovering overpayments made by
grantees to households, landlords, or utility providers to help reasonably
27Pub. L. No. 117-2, tit. IX, subtit. M, § 9901, 135 Stat. at 223 (codified at 42 U.S.C. §§
802-03). Section 9901 of ARPA appropriated $350 billion in total funding for two funds—
the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery
Fund. For purposes of this testimony, we discuss these two funds collectively as the
Coronavirus State and Local Fiscal Recovery Funds (CSLFRF).
Page 15 GAO-22-105715
assure payment integrity for the Emergency Rental Assistance (ERA)
programs. 28 We recommended it do so; Treasury officials stated in
January 2022 that the agency is working to establish such reviews and
recovery audits, as well as initiating a desk review plan that uses risk-
based analytics to identify the highest risk recipients.
Recipient Eligibility and Identity Confirming the eligibility and identify of individuals to distribute payments
Verification correctly—such as through confirming wage information or housing status
or verifying identity—are key activities that agencies can conduct to help
identify and reduce improper payments, including those that result from
fraud. Improper payments related to misrepresented eligibility or identity
have been difficult for program offices to measure. As part of agency
improper payment estimates, for fiscal year 2021 and onward, federal
executive agencies are specifically required to report on the portion of
their programs’ improper payment estimates where the root cause of the
improper payment is due to failure to verify identity. 29
We found that federal and state agencies have relied on self-attestation
or self-certification for individuals to verify their eligibility or identity in
order to receive assistance from some emergency relief programs, which
left them open to significant fraud risks. For example:
• Unemployment Insurance. In October 2021, we identified that
unemployment insurance (UI) programs, both the regular
unemployment insurance program and pandemic-specific programs,
were at risk of fraud. Fraudulent activities included individuals using
stolen or fake identity information or personally identifiable information
to apply for and receive unemployment benefits. 30 According to
officials from the Department of Labor (DOL), although DOL was
28Congress appropriated $46.55 billion to Treasury for the ERA programs to address
financial and housing instability caused by the COVID-19 pandemic. Congress
appropriated these funds in December 2020 and March 2021, known as ERA1 and ERA2,
respectively. For the purposes of this statement, we refer to ERA1 and ERA2 collectively
as the ERA programs. Treasury uses the same approach but considers ERA1 and ERA2
to be separate programs managed by the same office. The ERA programs make funding
available to state, territorial, tribal, and local governments (grantees), which are to use the
funds to provide assistance to eligible households for rent, utility, and other housing-
related expenses.
29OMB Circular A-123, Appendix C, Requirements for Payment Integrity Improvement
(OMB M-21-19). For fiscal year 2021, agencies estimated that about $7.7 billion in
improper payments included “identity” as a root cause.
30GAO-22-105051.
Page 16 GAO-22-105715
aware of isolated occurrences of identity-related fraud before the
pandemic, such as the use of false identities, it saw an increase in the
frequency and volume of identity-related fraud, as well as significantly
more sophisticated fraud schemes, since the pandemic began.
In June 2021, the DOL Office of Inspector General (OIG) reported that
it had identified nearly $8 billion in potentially fraudulent UI benefits
paid from March 2020 through October 2020. 31 DOL continues to
invest in its own identity verification resources and has made funds
available to states to address potential fraud and identity theft in the
UI programs, but we recommended that it comprehensively assess
fraud risk, such as identity theft, and examine the suitability of existing
fraud controls. As of February 10, 2022, DOL had reported
approximately $32.6 billion in UI overpayments from April 2020
through December 2021, although these overpayments may not all
have been the result of fraud.
• Paycheck Protection Program and Economic Injury Disaster
Loans. In January 2022, we reported that a federal jury convicted an
individual who had submitted fraudulent applications seeking more
than $1.5 million in PPP and EIDL loans for fictitious businesses.
Specifically, this individual used the identities of elderly residents of
senior living facilities and falsified official documents about these
fictitious business to support PPP and EIDL applications. In January
2021, we reported that the Department of Justice had filed charges
related to identity theft in the EIDL program based on law enforcement
investigations.
In July 2021, we analyzed the 51 cases for which the Department of
Justice had filed fraud charges for EIDL loans as of March 2021 and
found that 19 cases involved identity theft and 39 cases involved false
attestation based on law enforcement investigations. 32 In March 2022,
the Department of Justice announced it had seized over $1 billion in
loan proceeds from individuals who sought to defraud the EIDL
program.
31For more information, see Department of Labor, Office of Inspector General, Alert
Memorandum: The Employment and Training Administration Needs to Issue Guidance to
Ensure State Workforce Agencies Provide Requested Unemployment Insurance Data to
the Office of Inspector General, Report No. 19-21-005-03-315 (Washington, D.C.: June
16, 2021).
32GAO, Economic Injury Disaster Loan Program: Additional Actions Needed to Improve
Communication with Applicants and Address Fraud Risks, GAO-21-589, (Washington,
D.C.: Jul. 30, 2021). Cases may include multiple charges.
Page 17 GAO-22-105715
• Emergency Rental Assistance. In February 2022, we reported that
Treasury allows ERA grantees to determine the eligibility of applicants
who cannot provide supporting documentation, such as a signed
lease to demonstrate a rental obligation, through self-attestation, or
written attestations provided by applicants. 33 We and other federal
and local auditors who oversee ERA funds have acknowledged that,
while relying on self-attestation expedites application processing and
makes it easier for applicants without formal documentation to qualify
for funding, it also increases the risk of fraud. 34
We recommended that Treasury, in consultation with Treasury OIG,
develop and implement procedures to monitor and evaluate these
grantees’ controls. Monitoring procedures should include information
on the minimum internal control systems expected for ERA grantees
that rely on self-attestation and other administrative flexibilities that
could increase risks of improper payments. Treasury said it planned to
update its compliance testing procedures to include information on
control systems expected for grantees that rely on administrative
flexibilities, which generally aligns with our recommendation.
In October 2020, the Joint Financial Management Improvement Program,
a cooperative venture between Treasury, OMB, the Office of Personnel
Management, and GAO, began an initiative to identify key practices to
enhance identity verification and potentially reduce improper payments.
As part of this effort, the Joint Financial Management Improvement
Program convened a panel of experts from federal, state, and
international governments, as well as the private and nonprofit sectors. It
plans to issue a report later this year that distills concepts and ideas
discussed by the expert panel into a set of key practices and
considerations.
To accompany the report, the Joint Financial Management Improvement
Program will also publish an interactive and illustrative model that allows
users to understand the potential benefits and tradeoffs of implementing
various identity verification tools and processes.
33GAO, Emergency Rental Assistance: Additional Grantee Monitoring Needed to Manage
Known Risks, GAO-22-105490 (Washington, D.C.: Feb. 10, 2022).
34In February 2021, Treasury updated its guidance for the ERA programs to require
grantees to document policies and procedures for determining eligibility, including
specifying under what circumstances they will accept self-attestations without further
documentation.
Page 18 GAO-22-105715
In addition, according to a March 1, 2022 White House fact sheet on
combatting fraud and identity theft in pandemic relief programs, the
President plans to announce a new executive order in the coming weeks
on preventing and detecting identity theft in public benefit programs. 35
Agencies Did Not At the beginning of March 2022, the White House noted that there has
Strategically Manage been an “expansion of foreign and domestic criminal syndicates
defrauding” benefits programs intended to help Americans deal with the
Fraud Risks pandemic’s impacts. 36 Additionally, the Pandemic Response
Accountability Committee (PRAC) has stated that the unprecedented
amount of money made available for pandemic relief, along with the fact
that most funds were distributed quickly, put the money at a higher risk for
fraud. 37 The extent of fraud associated with COVID-19 relief funds has not
yet been determined. One of the many challenges is that, because of
fraud’s deceptive nature, programs can incur financial losses related to
fraud that are never identified and such losses are difficult to reliably
estimate.
However, many individuals have already pleaded guilty to federal charges
of defrauding COVID-19 relief programs. Based on our analysis of
Department of Justice case information, we found that from March 2020
through January 2022, at least 417 individuals pleaded guilty to and 11
individuals were convicted at trial of federal charges of defrauding
COVID-19 relief programs—including SBA’s PPP and EIDL program,
DOL’s UI programs, and economic impact payments issued by Treasury
35White House, Fact Sheet: President Biden to Announce New Steps to Combat Criminal
Fraud and Identity Theft in Pandemic Relief Programs (Washington, D.C.: Mar. 1 2022),
accessed Mar. 7, 2022,
https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/01/fact-sheet-pre
sident-biden-to-announce-new-steps-to-combat-criminal-fraud-and-identity-theft-in-pande
mic-relief-programs/.
36White House, Fact Sheet: President Biden to Announce New Steps to Combat Criminal
Fraud and Identity Theft in Pandemic Relief Programs.
37The CARES Act established the PRAC within the Council of Inspectors General on
Integrity and Efficiency, the oversight and coordination body for the inspector general
community. Pub. L. No. 116-136, § 15010(b), 134 Stat. 281, 534 (2020). The PRAC is
composed of 21 inspectors general.
Page 19 GAO-22-105715
(including the Internal Revenue Service), among others. 38 As shown in
figure 3, the majority of these individuals pleaded guilty or were convicted
at trial of charges related to SBA’s PPP and EIDL program and DOL’s UI
programs.
38Of the at least 428 individuals who pleaded guilty or were convicted at trial, at least 241
had been sentenced as of January 31, 2022. Sentences varied. For example, in one case
of UI fraud, an individual was sentenced to 1 year of probation and an order to pay a
$2,000 fine and over $16,000 in restitution. In another case, an individual pleaded guilty to
PPP fraud and was sentenced to over 17 years in prison, 5 years supervised release, and
an order to pay nearly $4.5 million in restitution.
Page 20 GAO-22-105715
Figure 3: Number of Individuals That Have Pleaded Guilty to or Were Convicted at Trial of Federal Fraud-Related Charges by
COVID-19 Relief Program, as of Jan. 31, 2022
Page 21 GAO-22-105715
The number of individuals facing fraud-related charges has continued to
grow since March 2020 and will likely increase, as these cases take time
to develop. Based on our analysis of Department of Justice case
information through January 2022, federal charges were pending against
at least 566 individuals or entities for attempting to defraud COVID-19
relief programs.
Additionally, our hotline—known as FraudNet—as well as other federal
hotlines, including the SBA OIG’s and DOL OIG’s hotlines, have received
numerous complaints from the public, many of them alleging potential
fraud involving COVID-19 relief funds. For example, in October 2021,
SBA OIG reported that from March 2020 through August 2021, it received
215,000 hotline complaints alleging fraudulent activity in PPP and the
EIDL program, and has launched numerous investigations into this
potentially fraudulent activity. As of January 3, 2022, DOL OIG reported
opening more than 31,000 investigative matters involving alleged UI
fraud.
We recognize that eliminating all fraud and fraud risks is not a realistic
goal. However, agencies should make every effort to minimize fraud and
maximize help to individuals in legitimate need.
Across our COVID-19 work, we found that agencies did not consistently
apply leading practices to manage fraud risks in COVID-19 spending,
including designating dedicated antifraud entities or assessing fraud risks.
For example:
• Paycheck Protection Program and Economic Injury Disaster
Loans. SBA’s approach to managing fraud risks in PPP and the EIDL
program, as well as in its longstanding programs, has not been
strategic. For example, SBA did not designate a dedicated antifraud
entity until February 2022. This new entity—the Fraud Risk
Management Board—is to oversee and coordinate SBA’s fraud risk
prevention, detection, and response activities.
Further, in March 2021, we found that that SBA had not conducted
fraud risk assessments for PPP and the EIDL program. 39 When SBA
developed its fraud risk assessments for the programs in October
2021, SBA had already distributed most of the programs’ funding. As
we mentioned in prior work, fraud risk assessments are most helpful
39GAO, COVID-19: Sustained Federal Action Is Crucial as Pandemic Enters Its Second
Year, GAO-21-387 (Washington, D.C.: Mar. 31, 2021).
Page 22 GAO-22-105715
in developing preventive fraud controls to avoid costly and inefficient
“pay-and-chase” activities.
• Unemployment Insurance. In October 2021, we found that DOL had
not clearly assigned defined responsibilities to a dedicated antifraud
entity or comprehensively assessed fraud risks for the UI programs, in
alignment with leading practices. 40 We made six recommendations to
improve DOL’s ability to identify and assess fraud risks to the UI
programs, including that DOL designate a dedicated antifraud entity
with clearly defined and documented responsibilities and authority,
including for facilitating communication about fraud issues to
stakeholders. DOL neither agreed nor disagreed with these
recommendations.
In February 2022, DOL noted that its Employment and Training
Administration, in partnership with its Office of Chief Financial Officer,
is responsible for fraud risk management in the UI programs.
However, the department has yet to document the designation of
these offices as the dedicated antifraud entities or these officials’
antifraud roles and responsibilities in departmental policies and
procedures. In addition, DOL had not yet conducted a comprehensive
fraud risk assessment. In February 2022, DOL said that it will use our
Fraud Risk Framework for its risk assessment activities for the UI
program and that work on developing the assessment in the UI
program using the framework will occur in fiscal year 2022.
Agency OIGs have also raised concerns about the ability of agencies to
strategically manage fraud risks. For example, SBA OIG identified
managing fraud risks as a top management challenge for the agency,
citing the susceptibility of pandemic relief programs to significant fraud
risks and vulnerabilities as a particular concern. DOL OIG has similarly
reported significant concerns with the ability of DOL and state workforce
agencies to deploy UI and other program benefits expeditiously and
efficiently while ensuring integrity and adequate oversight, particularly in
response to national emergencies and disasters.
In light of our findings, as well as those of the OIGs, we are concerned
about the pace and extent to which agencies since 2016—when FRDAA
was enacted—have implemented controls to prevent, detect, and respond
to fraud in a manner consistent with leading practices. These leading
practices are applicable during normal operations, as well as during
emergencies. Had agencies already been strategically managing their
40GAO-22-105051.
Page 23 GAO-22-105715
fraud risks, they would have been better positioned to identify and
respond to the heightened risks that emerged during the pandemic.
Congress’ ability to oversee agencies’ efforts to manage fraud risks is
hindered by the lack of fraud-related reporting requirements. FRDAA and
the Payment Integrity Information Act of 2019 required agencies to report
on their antifraud controls and fraud risk management efforts in their
annual financial reports. However, the requirement to report such
information ended with the fiscal year 2020 annual financial report and,
since then, there has been no similar requirement for agencies to report
on their efforts to manage fraud risks. 41
Agencies Generally Did Quickly reporting improper payment estimates for emergency relief
Not Estimate Improper programs is critical to agency accountability and transparency over
whether appropriated funds were spent for their intended purposes. In
Payments for Emergency
addition, estimating improper payments and identifying root causes help
Relief Programs ensure that agencies develop and implement corrective actions to help
reduce them.
Under OMB’s current improper payment estimate guidance, agencies are
not required to estimate improper payments for programs in their initial
year of operation. Specifically, according to the guidance, agencies
should complete a risk assessment to determine susceptibility to
significant improper payments after the first 12 months of program
operations; a determination of susceptibility triggers reporting
requirements in the following fiscal year. 42 Therefore, for programs that
are newly established in response to an emergency, agencies will need to
conduct new risk assessments to determine if the new programs are
susceptible to significant improper payments. 43 As a result, in some
41The Payment Integrity Information Act of 2019 includes multiple ongoing reporting
requirements for agencies related to improper payments generally but none specifically
mention fraud.
42Agencies are required by statute to report estimates for all programs and activities
identified as susceptible to significant improper payments. 31 U.S.C. § 3352(c)(1).
According to OMB, giving agencies until the year following the initial susceptibility
determination is necessary due to multiple factors, such as the time needed to secure a
contract for a statistician and develop an appropriate sampling and estimation
methodology, and the need for programs to report on 12 full months of data in their annual
reporting.
43Agencies may also decide to incorporate emergency relief funding into existing agency
programs for improper payment risk assessment and reporting.
Page 24 GAO-22-105715
instances, agencies may not report improper payment estimates
associated with new emergency relief programs until 2 to 3 years after the
program is established, if at all.
Most agencies did not report estimates for new COVID-19 relief programs
for fiscal year 2021. In November 2020, we suggested Congress
consider, in any future legislation appropriating COVID-19 relief funds,
designating all executive agency programs and activities making more
than $100 million in payments from COVID-19 relief funds as “susceptible
to significant improper payments.” 44
In addition, due to concerns about the possibility that improper payments,
including those resulting from fraudulent activity, could be widespread, we
recommended that SBA expeditiously estimate improper payments and
report estimates and error rates for PPP. 45 However, in its fiscal year
2021 Agency Financial Report, SBA did not report improper payment
estimates for the program. SBA officials stated the agency plans to report
estimates for PPP in its fiscal year 2022 Agency Financial Report, which
will likely be issued in November 2022. Delays in estimating improper
payments can negatively affect an agency’s ability to develop timely
corrective actions.
Federal Agencies Lack While responsibilities for planning and implementing fraud risk
Permanent, Government- management and detection activities start with agency management
officials as noted above, the oversight community plays a critical role in
wide Analytic Capabilities
identifying and investigating suspected fraud. The importance of this role
to Help Agencies Identify in nonemergency periods is heightened during emergencies such as the
Fraud COVID-19 pandemic as agencies work to implement large-scale relief
efforts quickly.
At the outset of the pandemic, there was no permanent, government-wide
analytic capability to help federal agencies identify fraud. Previously, this
type of analytical capability existed within the Recovery Operations
Center, established by the Recovery Board, which was created by the
American Recovery and Reinvestment Act of 2009 to oversee funds
appropriated under the act and composed of agency inspectors general.
The Disaster Relief Appropriations Act of 2013 expanded the Recovery
Board’s mandate to include oversight of Hurricane Sandy funding through
September 30, 2015. In an example of its work, the Recovery Operations
44GAO-21-191.
45GAO-21-191.
Page 25 GAO-22-105715
Center researched 104 entities in New York and New Jersey that had
$329 million in debris-removal contracts. The Recovery Operations
Center forwarded the information to the Department of Homeland
Security OIG. The findings showed entities whose owners had federal or
state tax liens and organizations with previous fraudulent activities
receiving debris-removal contracts.
GAO previously recommended that Congress and Treasury preserve the
Recover Operations Center’s functions, given its proven value in ensuring
federal spending accountability. 46 Congress and Treasury did not
implement our recommendations to make such a center permanent, and
the Recovery Board and center activity terminated at the end of
September 2015.
In March 2021, ARPA appropriated $40 million dollars to the PRAC,
which subsequently established the Pandemic Analytics Center of
Excellence (PACE). The role of PACE is to help oversee the trillions of
dollars in federal pandemic-related emergency spending. According to the
PRAC, the PACE applies the best practices from the Recovery
Operations Center, with the goal of building an “affordable, flexible, and
scalable analytics platform” to support OIGs during their pandemic-related
work, including beyond the organization’s sunset date in 2025.
However, PACE was not established until more than a year after
agencies began distributing relief funds. The delayed establishment of the
center resulted in valuable time lost for OIGs to help program officials
understand fraud risks and identify potential fraud. In addition, the center
is focused on pandemic programs only and is time-limited. Without
permanent government-wide analytics capabilities to assist the oversight
community, agencies will have limited resources to apply to nonpandemic
programs to ensure robust financial stewardship, as well as better
prepare for applying fundamental financial and fraud risk management
practices to future emergency funding.
OMB Did Not Issue Timely Timely and useful audit guidance can help ensure recipients’ appropriate
Guidance for Single Audits use of federal funds and reduce the likelihood of improper payments.
State, local, and private auditors play a role in ensuring that federal
payments are distributed appropriately. These auditors conduct external
46GAO, Federal Spending Accountability: Preserving Capabilities of Recovery Operations
Center Could Help Sustain Oversight of Federal Expenditures, GAO-15-814 (Washington,
D.C.: Sept. 14, 2015).
Page 26 GAO-22-105715
audits of organizations (such as state and local governments and
nonprofit organizations) that receive a significant level of federal financial
assistance—known as single audits. 47 Single audits help determine,
among other things, whether recipients have complied with laws,
regulations, and the provisions of contracts or grant agreements that may
have a direct and material effect on each of the recipients’ major
programs. OMB prepares annually, with input from federal agencies, a
Compliance Supplement to help consolidate legal requirements for
numerous programs into one central place.
COVID-19 relief funding provided to agencies for new and existing
programs across the federal government has significantly increased the
number of entities, such as local governments, subject to single audits
and the demand for auditors to conduct these audits. The American
Institute of Certified Public Accountants estimated that thousands of new
single audits or program-specific audits are triggered by the influx of
COVID-19 relief funding, including for entities that received federal
awards through the Provider Relief Fund and Shuttered Venue Operators
Grant programs, which may be subject to single audit requirements for
the first time. 48 The association also stated that the compounding effect of
delayed OMB Compliance Supplements and related addendums and the
influx of new auditees have resulted in both a spike in the quantity of audit
work and major redistribution of the timing of work for certified public
accountants. As a result, workload compression may negatively affect the
ability to complete timely, quality single audits.
47The Single Audit Act, codified at 31 U.S.C. §§ 7501-06, establishes requirements for
nonfederal entities (defined as states, the District of Columbia, U.S. territories, Indian
tribes, local governments, and nonprofit organizations) expending $750,000 or more in
federal awards in their fiscal year to undergo a single audit, which is an audit of the entity’s
financial statements and federal awards (or, in limited circumstances, program-specific
audits) for the fiscal year. These audits are conducted in accordance with OMB’s
implementing guidance, which is reprinted in 2 C.F.R part 200. 31 U.S.C. § 7502; 2 C.F.R.
§ 200.501.
48Many Shuttered Venue Operators Grant program recipients (e.g., museums and
aquariums) and Provider Relief Fund recipients (e.g., hospitals) are nonprofit
organizations subject to single audit requirements based on their pandemic and other
federal award expenditures. Further, in its single audit implementing regulations, the
Department of Health and Human Services requires for-profit organizations that receive
$750,000 or more in annual aggregated departmental awards (including Provider Relief
Fund payments) during their fiscal year to undergo either (1) an audit in conformance with
single audit requirements, or (2) a financial related audit of the applicable award(s) in
accordance with generally accepted government auditing standards. 45 C.F.R. §§ 75.2,
75.216, 75.501.
Page 27 GAO-22-105715
We found that OMB was delayed in providing single audit guidance for
COVID-19 relief programs, including the Coronavirus Relief Fund,
CSLFRF, and the ERA programs. For example, as we reported in July
2021, OMB officials told us that the 2021 Compliance Supplement would
not include guidance for CSLFRF and other programs established by
ARPA. 49 OMB provided auditors with a 6-month extension for submitting
single audit reports for 2021. 50
As a result of the lag in OMB’s issuance of relevant single audit guidance
for COVID-19 relief funds in its annual Compliance Supplement, auditors
were delayed in conducting single audits and reporting results. These
delays could affect recipients’ development of corrective action plans and
resolution of findings identified during the audits, as well as federal
agencies’ formulation of management decisions about single audit
findings.
For example, in July 2021, we identified that California expended
approximately $7.5 billion of the $9.5 billion Coronavirus Relief Fund
payments allocated to the state between July 1, 2020, and December 31,
2020. 51 However, because California’s fiscal year ends June 30 and given
OMB’s 6-month extension for entities with fiscal year ends of June 30,
2021, the single audit results of its Coronavirus Relief Fund spending for
fiscal year 2021 will not be due until September 30, 2022, and the
management decision letter regarding such findings will not be due until
March 31, 2023—almost 3 years after California started spending the
payments.
49GAO, COVID-19: Continued Attention Needed to Enhance Federal Preparedness,
Response, Service Delivery, and Program Integrity, GAO-21-551 (Washington, D.C.: July
19, 2021).
50OMB’s 2021 single audit guidance related to the COVID-19 pandemic directed federal
awarding agencies, in their capacity as cognizant or oversight agencies for audit, to
provide 6-month audit submission due date extensions for 2021 single audit reports for
entities whose fiscal year ends on or before June 30, 2021. See OMB M-21-20, Promoting
Public Trust in the Federal Government through Effective Implementation of the American
Rescue Plan Act and Stewardship of the Taxpayer Resources (Mar. 19, 2021).
51GAO-21-551. The CARES Act, as amended, appropriated $150 billion to Treasury for
the Coronavirus Relief Fund, which provided payments to states, local governments, U.S.
territories, tribal governments, and the District of Columbia, to offset the direct and indirect
costs of their response to the COVID-19 pandemic that were incurred between March 1,
2020, and December 31, 2021. 42 U.S.C. § 801.
Page 28 GAO-22-105715
In March 2021, we reported that auditors who conduct single audits of
entities with fiscal years that end June 30 have expressed a need to
obtain the Compliance Supplement by no later than April of each year in
order to effectively plan their audits and conduct interim testing. OMB
issued the 2021 Compliance Supplement in August 2021 and two
addendums, the first in December 2021 and the second in January 2022.
These addendums include guidance specific to CSLFRF and other
COVID-19 relief programs such as pandemic nutrition assistance
programs. However, neither the 2021 Compliance Supplement, nor the
two addendums, included guidance specific to ERA, despite OMB listing
them as “higher risk” programs.
In January 2022, we recommended that OMB, in consultation with
Treasury, issue single audit guidance for the ERA programs—which had
already distributed over 80 percent in program funding—quickly. 52 In
response to this recommendation, Treasury officials told us that the
agency was working with OMB to issue single audit guidance on ERA.
We continue to meet periodically with OMB and the audit community to
discuss the audit community’s concerns and additional single audit
guidance needed. OMB plans to issue the 2022 Compliance Supplement
at the end of April 2022.
Agencies Lack Quality Quality federal spending data is key for management to help assess
Federal Spending Data for whether agencies are meeting program objectives. In addition, providing
clear and transparent information about limitations and inconsistencies of
Financial Management
data can help users understand the extent to which the data are
Reviews comparable and reliable.
We found challenges related to implementation of guidance for timely and
reliable reporting on COVID-19-related funds. For example:
• Timely reporting. OMB issued guidance in April 2020 that required
agencies to report CARES Act spending data through
52GAO, COVID-19: Significant Improvements Are Needed for Overseeing Relief Funds
and Leading Responses to Public Health Emergencies, GAO-22-105291 (Washington,
D.C.: Jan. 27, 2022).
Page 29 GAO-22-105715
USAspending.gov. 53 To meet this requirement, and to meet the need
for greater frequency of reporting, OMB’s guidance required agencies
with COVID-19 funding to move from quarterly to monthly reporting.
To give agencies time to review and attest to the quality of the data
they were submitting, the filing deadline was set roughly 30 days after
each monthly reporting period. Although this has resulted in more
timely information, it does not represent real-time display of financial
data to the public. 54
• Data reliability. In March 2021, we found that errors related to
tracking initial COVID-19 spending data caused discrepancies
between outlays and obligations for some federal agencies’ spending
reported on USAspending.gov resulting in these data being
unreliable. 55 According to officials from Treasury, DOL, the
Department of Health and Human Services, and SBA, these
discrepancies resulted from errors in agencies’ implementation of the
OMB guidance to code COVID-19 spending data.
The Digital Accountability and Transparency Act of 2014 (DATA Act)
expanded previous federal transparency legislation by requiring agencies
to report their agency spending information and link it to federal program
activities to provide more effective tracking of federal spending. The
DATA Act aims to improve the quality of data submitted to
USAspending.gov by holding federal agencies accountable for the
completeness and accuracy of the data submitted. The DATA Act
required agency inspectors general and GAO to review and report on the
completeness, timeliness, quality, and accuracy of the data, as well as
53OMB Memorandum M-20-21, Implementation Guidance for Supplemental Funding
Provided in Response to the Coronavirus Disease 2019 (COVID-19). In March 2021, OMB
issued guidance requiring agencies to use the reporting mechanisms established in OMB
Memorandum M-20-21 to ensure all spending of funds provided in ARPA is reported
monthly to USAspending.gov. OMB Memorandum M-21-20.
54GAO, Federal Spending Transparency: Opportunities Exist to Further Improve the
Information Available on USAspending.gov, GAO-22-104702 (Washington, D.C.: Nov. 8,
2021).
55GAO-21-387.
Page 30 GAO-22-105715
the implementation and use of data standards. 56 However, this reporting
requirement ended in 2021. 57
In our work examining DATA Act implementation and efforts to report
federal spending data, we found that OMB and Treasury have made
progress in improving the quality, transparency, and usefulness of the
data submitted to and displayed on USAspending.gov; however, issues
persist. 58 For example, we found that Treasury does not have processes
to prevent or detect incomplete or inaccurate data displayed on
USAspending.gov and provide agencies with information to assist them
with improving their data submissions. 59
We recommended that Treasury design and implement such processes
to prevent and detect incomplete and inaccurate data and to provide
agencies with information to help them reconcile differences in their
unlinked financial and award data. Treasury agreed with our
recommendation, and we will continue to monitor its implementation.
Although these findings and recommendations were not specific to
COVID-19 relief funding, they have implications for tracking and
accounting for this funding, as well as relief funding for future
emergencies and overall government spending.
Of the 57 federal agency OIG reports issued during 2021, 44 identified
areas for improving the accuracy, completeness, and timeliness of data
reported to USAspending.gov and made recommendations to agencies
for such improvement. Six of these reports made recommendations that
specifically called for consultation with OMB, Treasury, or both. For
example:
56Pub. L. No. 113-101, §§ 2-3, 128 Stat. 1146, 1146–51. The DATA Act amended the
Federal Funding Accountability and Transparency Act of 2006. Pub. L. No. 109-282, 120
Stat. 1186 reprinted in 31 U.S.C. § 6101 note. We refer to language added to the Federal
Funding Accountability and Transparency Act by the DATA Act as DATA Act
requirements.
57GAO, DATA Act: OIGs Reported that Quality of Agency-Submitted Data Varied, and
Most Recommended Improvements, GAO-20-540 (Washington, D.C.: July 9, 2020).
58GAO-22-104702 and Federal Spending Transparency: Opportunities Exist for Treasury
to Further Improve USAspending.gov’s Use and Usefulness, GAO-22-104127
(Washington, D.C.: Dec. 16, 2021).
59GAO-22-104702.
Page 31 GAO-22-105715
• Two OIGs recommended that agencies consult with OMB and
Treasury as necessary when developing their data reporting policies
and procedures or to clarify data standards.
• Two other OIGs recommended that agencies communicate with
Treasury regarding errors found in agencies’ financial assistance data
submissions caused by Treasury’s DATA Act broker or financial
assistance awards reporting system.
The federal government has provided over $4 trillion in relief funds to
Congress Can Take assist individuals, businesses, and localities to respond to, and recover
Certain Actions Now from, the COVID-19 pandemic. The size and scope of this funding made
it susceptible improper payments and fraud. Unfortunately, the
to Increase fundamental internal controls and financial and fraud risk management
Transparency and practices that could help to identify and reduce improper payments and
manage fraud risks were not consistently in place as funds were
Accountability of distributed, further increasing the chances of improper payments and
Emergency Relief fraud.
Spending We have identified 10 actions that Congress can take to strengthen
internal controls and financial and fraud risk management practices
across the government. Such actions will increase accountability and
transparency in federal spending in both emergency and nonemergency
periods. (See appendix II for the list of the 10 matters for congressional
consideration.)
Require OMB to provide guidance for agencies to develop internal
control plans that would then immediately be ready for use in, or
adaptation for, future emergencies or crises and require agencies to
report these plans to OMB and Congress. Requiring OMB to develop
and provide guidance for internal control plans now would help ensure
that agencies have considered the payment integrity risks associated with
emergency funding and developed internal controls to help mitigate those
risks. Such planning could also help provide critical transparency tools to
give Congress some assurance that agencies will be able to establish
and adapt, as appropriate and necessary, effective and efficient controls
over new or expanded federal funding during emergencies.
In addition, this planning can help ensure consistency of oversight across
the federal government. For example, agencies’ planning for and
establishment of strong back-end controls, such as post-payment reviews
and recovery audits, are critical when the quick disbursement of funds
makes front-end controls difficult to apply. In addition, we have made
Page 32 GAO-22-105715
recommendations to OMB since 2013 to develop robust guidance for
agencies to design internal control plans for disaster relief funding and
develop a strategy to ensure that agencies communicate such plans
sufficiently and timely. OMB has not yet sufficiently addressed these
recommendations.
Designate all new programs making more than $100 million in
payments “susceptible to significant improper payments.”
Designating all new federal programs with more than $100 million in
annual spending would make these programs subject to the statutory
requirement for agencies to estimate and report on these programs’
improper payments. In our November 2020 report, we suggested that
Congress consider designating executive agency programs and activities
making more than $100 million in payments specifically from COVID-19
relief funds as “susceptible to significant improper payments” in any future
legislation appropriating COVID-19 relief funds. We believe that Congress
should amend provisions enacted by the Payment Integrity Information
Act of 2019 to designate all newly established executive agency
programs and activities, both emergency-specific and otherwise, making
more than $100 million in payments in any one fiscal year as “susceptible
to significant improper payments” for their initial years of operation.
Reinstate the requirement for agencies to report on their antifraud
controls and fraud risk management efforts in agency financial
reports. Requiring agencies to report annually on their antifraud controls
and fraud risk management efforts will help facilitate congressional
oversight and focus agency attention on strategic fraud risk
management—both during normal operations and in emergencies—and
help align their efforts with leading practices.
Establish a permanent analytics center of excellence to aid the
oversight community in identifying improper payments and fraud.
Establishing such a capability would further aid the oversight community’s
efforts to assess and identify fraud, as well as to help agencies identify
areas of potential fraud risks so that they can implement preventive and
detective controls or evaluate existing controls for opportunities for
improvement. Ongoing challenges with fraud and improper payments
highlight the value of these analytical capabilities, not only for emergency
spending but to tackle these challenges across the federal government
where they have been a growing concern in recent years.
Strengthen management of improper payment risks and spending
data and require improper payment reporting in agencies’ annual
Page 33 GAO-22-105715
financial reports. Since enactment of the Chief Financial Officers Act of
1990 (CFO Act), accounting and financial reporting standards have
continued to evolve to provide greater transparency and accountability
over the federal government’s operations and financial condition,
including long-term sustainability.
In August 2020, we suggested eight matters for congressional
consideration to improve federal financial management through
refinements to the CFO Act. Such matters included that Congress
consider legislation to require:
• CFOs and deputy CFOs at the CFO Act agencies to have the
necessary responsibilities to carry out federal financial management
activities effectively;
• OMB to prepare a government-wide 4-year financial management
plan, including actions for improving financial management systems,
and agency CFOs to implement such plans at the agency level
• OMB to prepare comprehensive financial management performance-
based metrics to be used to evaluate the financial management
performance of agencies, and require reporting of government-wide
and agency performance against the metrics; and
• Agency identification and, if necessary, development of key financial
management information needed for effective financial management
and decision-making, as well as annual assessments and reporting by
agency management on the effectiveness of internal control over key
financial management information and auditor testing and reporting on
agency internal control over the information. 60
Today we are suggesting three matters with additional refinements based
on experiences during the COVID-19 pandemic and the rapid growth and
magnitude of improper payments.
• Clarify that (1) CFOs at CFO Act agencies have oversight
responsibility for internal controls over financial reporting and key
financial management information that includes spending data and
improper payment information, and (2) executive agency internal
control assessment, reporting, and audit requirements for key
60GAO, Federal Financial Management: Substantial Progress Made since Enactment of
the 1990 CFO Act; Refinements Would Yield Added Benefits, GAO-20-566 (Washington,
D.C.: Aug. 6, 2020).
Page 34 GAO-22-105715
financial management information, discussed above, include internal
controls over spending data and improper payment information.
• Require each agency CFO to (1) submit a statement, in agencies’
annual financial reports, certifying the reliability of improper payment
risk assessments and the validity of improper payment estimates, and
describing the actions of the CFO to monitor the development and
implementation of any corrective action plans; and (2) approve any
methodology that is not designed to produce a statistically valid
estimate.
• Require improper payment information required to be reported under
the Payment Integrity Information Act of 2019 to be included in
agency financial reports.
Extend requirements for OIGs to report on USAspending.gov data
periodically. Extending the requirement for ongoing OIG oversight
through periodic reviews could help ensure that the quality of agency data
submissions to USAspending.gov continues to improve. The data
included in USAspending.gov helps provide transparency to policymakers
and the public about where federal dollars are being spent. The DATA
Act’s requirement that agency inspectors general review and report on
the completeness, timeliness, quality, and accuracy of agency data
submissions to USAspending.gov expired. 61 According to the OIG
community, few OIGs plan to continue to review and report on this
information without further requirements.
Clarify the responsibilities and authorities of OMB and Treasury for
ensuring the quality of data available on USAspending.gov. Clarifying
the responsibilities and authorities of OMB and Treasury could help
achieve the DATA Act’s purpose to improve the quality and transparency
of federal spending data even as the responsibility for submitting quality
data to USAspending.gov rests primarily with the federal agencies who
produce or manage that data. Both OMB and Treasury have key roles in
ensuring the quality of the data available to users of the
USAspending.gov website. For example, the DATA Act gives OMB and
Treasury joint responsibility for establishing government-wide financial
data standards for funds reported on USAspending.gov, which includes
61The DATA Act required each OIG to issue three reports assessing agency data
submissions and implementation and use of data standards. The last report was due
November 2021. Pub. L. No. 113-101, § 3, 128 Stat. at 1151. For more information, see
GAO-20-540.
Page 35 GAO-22-105715
data related to COVID-19 spending. 62 However, implementation of the act
has shown the need for Congress to clarify responsibilities and authorities
for ensuring the quality of the data made available on the website, as well
as the roles for OMB and Treasury to achieve this goal.
Accelerate and make permanent the Social Security
Administration’s sharing of full death data with Treasury’s Do Not
Pay working system. To enhance identity verification through data
sharing, we have previously suggested that Congress consider amending
the Social Security Act to explicitly allow the Social Security
Administration to share its full death data with Treasury’s Do Not Pay
system, a data matching service for agencies to use in preventing
payments to ineligible individuals. 63 In December 2020, Congress passed
and the President signed into law the Consolidated Appropriations Act,
2021, which requires the Social Security Administration, to the extent
feasible, to share its full death data with Treasury’s Do Not Pay working
system for a 3-year period, effective on the date that is 3 years from
enactment of that act.
We maintain that sharing this data will allow agencies to enhance their
efforts to identify and prevent improper payments to deceased individuals.
Therefore, it will be important for the Social Security Administration and
Treasury to work together to implement this legislation. As such, we
suggest that Congress accelerate and make permanent the requirement
for the Social Security Administration to share its full death data with
Treasury’s Do Not Pay working system to enhance identity verification
efforts within the federal government.
Chairman Peters, Ranking Member Portman, and Members of the
Committee, this concludes my prepared statement. I would be pleased to
respond to any questions.
For further information about this testimony, please contact Jessica Farb,
GAO Contact Managing Director, Health Care, at (202) 512-7114 or farbj@gao.gov;
Orice Williams Brown, Chief Operating Officer, at (202) 512-5600 or
williamso@gao.gov; or A. Nicole Clowers, Managing Director,
Congressional Relations, at (202) 512-4400 or clowersa@gao.gov.
62Pub. L. No. 113-101, § 3, 128 Stat. at 1148.
63GAO, Improper Payments: Strategy and Additional Actions Needed to Help Ensure
Agencies Use the Do Not Pay Working System as Intended, GAO-17-15 (Washington,
D.C.: Oct. 14, 2016), and GAO-20-625.
Page 36 GAO-22-105715
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report.
Page 37 GAO-22-105715
Appendix I: Improper Payments across the
Appendix I: Improper Payments across the
Federal Government
Federal Government
Estimating Improper Improper payments—payments that should not have been made or that
Payments were made in an incorrect amount—have consistently been a
government-wide issue. 1 Since fiscal year 2003, federal executive
agencies have been required by statute to report estimated improper
payments for certain programs and activities. 2 For fiscal year 2021, 16
agencies reported improper payment estimates totaling about $281
billion, based on improper payment estimates reported individually by 86
federal programs or activities on http://www.paymentaccuracy.gov/. 3 This
was an increase of about $75 billion from the prior fiscal year. Most of the
estimated improper payments were concentrated in the following areas:
Department of Health and Human Services’ Medicaid program ($99
billion); Department of Labor’s (DOL) unemployment insurance (UI)
programs ($78 billion); and Department of Health and Human Services’
Medicare program ($50 billion).
Federal agencies continue to report significant estimated improper
payment amounts and rates. For fiscal year 2021, 15 programs had
reported over $1 billion in estimated improper payments, with 8 of these
programs reporting over $1 billion for each of the last 5 fiscal years. In
addition, for fiscal year 2021, agencies reported estimated improper
payment rates of 10 percent or greater for 26 programs and activities,
accounting for about 87 percent of the government-wide total of reported
1Improper payments include both overpayments and underpayments, any payments to an
ineligible recipient, any payment for an ineligible good or service, any duplicate payment,
any payment for a good or service not received (except for such payments where
authorized by law), and any payment that does not account for credit for applicable
discounts under statutory, contractual, administrative, or any other legally applicable
requirements. See 31 U.S.C. § 3351(4). When an executive agency’s review is unable to
discern whether a payment was proper as a result of insufficient or lack of documentation,
this payment must also be included in the improper payment estimate. 31 U.S.C. §
3352(c)(2). While not all improper payments are the result of fraud, all payments made as
a result of fraudulent activities are considered to be improper payments. In addition,
improper payment estimates are not intended to measure fraud in a particular program.
2Statutes that govern improper payment reporting define executive agency to mean a
department, an agency, or an instrumentality in the executive branch of the U.S.
government. 31 U.S.C. § 102.
3For purposes of this report, the estimated improper payment rate (also referred to as the
“improper payment rate”) is the estimated amount of improper payments expressed as a
percentage of program outlays in a given fiscal year. The website,
www.paymentaccuracy.gov—a U.S. government website managed by the Office of
Management and Budget (OMB)—which contains, among other things, information about
current and historical rates and amounts of estimated improper payments.
Page 38 GAO-22-105715
Appendix I: Improper Payments across the
Federal Government
estimated improper payments. 4 As shown in figure 4, the number of
programs reporting an improper payment rate of at least 10 percent has
been growing in the past 5 fiscal years.
Figure 4: Number of Programs Reporting Annual Improper Payment Rates Higher
than Ten Percent for Fiscal Years 2017 through 2021
Note: The estimated improper payment rate is the estimated amount of improper payments
expressed as a percentage of program outlays in a given fiscal year.
Our audit work has also consistently shown that federal agencies have
not been reporting improper payment estimates for all risk-susceptible
programs. We continued to identify some risk-susceptible programs for
which agencies did not report fiscal year 2021 estimated improper
4Agencies are required to develop improper payment estimates and corrective action
plans for any programs or activities identified as susceptible to significant improper
payments by the agency administering the program or activity, the Office of Management
and Budget, or statute.
Page 39 GAO-22-105715
Appendix I: Improper Payments across the
Federal Government
payment amounts. 5 It is also important to note that, with the exception of
two DOL UI programs, the $281 billion of reported fiscal year 2021
improper payment estimates generally do not include estimates related to
the expenditures to fund response and recovery efforts for the COVID-19
pandemic. For example, the Small Business Administration (SBA) does
not plan to report improper payment estimates for its Paycheck Protection
Program (PPP) until its fiscal year 2022 agency financial report is issued,
which will likely be in November 2022. 6 Moreover, DOL did not include
two of its COVID-19 programs in its UI improper payment estimates. 7
Managing Improper During emergencies and crises when the federal government provides
Payments for Emergency emergency assistance, the risk of improper payments may be higher
because the need to provide such assistance quickly can detract from the
Assistance Programs
planning and implementation of effective controls. Effective management
of improper payments helps facilitate the goals of emergency assistance
programs by ensuring that taxpayer resources serve their intended
purpose.
We also have ongoing work developing a framework for managing
improper payments for emergency assistance programs. Specifically, the
framework will incorporate standards for internal controls and financial
and fraud risk management practices, as well as requirements and
guidance from relevant laws and guidance on improper payments. This
work will highlight aspects of managing improper payments that arise in
the context of emergency assistance, which may necessitate special
considerations.
5Risk-susceptible programs that did not report fiscal year 2021 estimated improper
payments include the Department of Health and Human Services’ Temporary Assistance
for Needy Families, the Department of Health and Human Services’ Advance Premium
Tax Credit, Department of the Treasury’s Premium Tax Credit, and U.S. Department of
Agriculture’s Supplemental Nutrition Assistance Program.
6Since March 2020, Congress has provided commitment authority of about $814 billion for
PPP under SBA’s largest guaranteed loan program, its 7(a) small business lending
program. PPP loans, made by lenders but guaranteed 100 percent by SBA, are low
interest (1 percent) and fully forgivable if certain conditions are met.
7DOL did not report improper payment estimates for Pandemic Unemployment Assistance
or Mixed Earner Unemployment Compensation.
Page 40 GAO-22-105715
Appendix II: Matters for Congressional
Appendix II: Matters for Congressional
Consideration
Consideration
We are making the following 10 matters for congressional consideration:
• Congress should pass legislation requiring the Office of Management
and Budget (OMB) to provide guidance for agencies to develop plans
for internal control that would then immediately be ready for use in, or
adaptation for, future emergencies or crises and requiring agencies to
report these internal control plans to OMB and Congress. (Matter for
Congressional Consideration 1)
• Congress should amend the Payment Integrity Information Act of
2019 to designate all new federal programs making more than $100
million in payments in any one fiscal year as “susceptible to significant
improper payments” for their initial years of operation. (Matter for
Congressional Consideration 2)
• Congress should amend the Payment Integrity Information Act of
2019 to reinstate the requirement that agencies report on their
antifraud controls and fraud risk management efforts in their annual
financial reports. (Matter for Congressional Consideration 3)
• Congress should establish a permanent analytics center of excellence
to aid the oversight community in identifying improper payments and
fraud. (Matter for Congressional Consideration 4)
• Congress should clarify that (1) chief financial officers (CFO) at CFO
Act agencies have oversight responsibility for internal controls over
financial reporting and key financial management information that
includes spending data and improper payment information; and (2)
executive agency internal control assessment, reporting, and audit
requirements for key financial management information, discussed in
an existing matter for congressional consideration in our August 2020
report, include internal controls over spending data and improper
payment information. (Matter for Congressional Consideration 5)
• Congress should require agency CFOs to (1) submit a statement in
agencies’ annual financial reports certifying the reliability of improper
payments risk assessments and the validity of improper payment
estimates, and describing the actions of the CFO to monitor the
development and implementation of any corrective action plans; and
(2) approve any methodology that is not designed to produce a
statistically valid estimate. (Matter for Congressional Consideration 6)
• Congress should consider legislation to require improper payment
information required to be reported under the Payment Integrity
Information Act of 2019 to be included in agencies’ annual financial
reports. (Matter for Congressional Consideration 7)
Page 41 GAO-22-105715
Appendix II: Matters for Congressional
Consideration
• Congress should amend the DATA Act to extend the previous
requirement for agency inspectors general to review the
completeness, timeliness, quality, and accuracy of their respective
agency data submissions on a periodic basis. (Matter for
Congressional Consideration 8)
• Congress should amend the DATA Act to clarify the responsibilities
and authorities of OMB and Department of the Treasury for ensuring
the quality of data available on USAspending.gov. (Matter for
Congressional Consideration 9)
• Congress should amend the Social Security Act to accelerate and
make permanent the requirement for the Social Security
Administration to share its full death data with the Department of the
Treasury’s Do Not Pay working system. (Matter for Congressional
Consideration 10)
Page 42 GAO-22-105715
Related GAO Products Related GAO Products
Recurring CARES Act COVID-19: Significant Improvements Are Needed for Overseeing Relief
Reports Funds and Leading Responses to Public Health Emergencies.
GAO-22-105291. Washington, D.C.: January 27, 2022.
COVID-19: Additional Actions Needed to Improve Accountability and
Program Effectiveness of Federal Response. GAO-22-105051.
Washington, D.C.: October 27, 2021.
COVID-19: Continued Attention Needed to Enhance Federal
Preparedness, Response, Service Delivery, and Program Integrity.
GAO-21-551. Washington, D.C.: July 19, 2021.
COVID-19: Sustained Federal Action Is Crucial as Pandemic Enters Its
Second Year. GAO-21-387. Washington, D.C.: March 31, 2021.
COVID-19: Critical Vaccine Distribution, Supply Chain, Program Integrity,
and Other Challenges Require Focused Federal Attention. GAO-21-265.
Washington, D.C.: January 28, 2021.
COVID-19: Urgent Actions Needed to Better Ensure an Effective Federal
Response. GAO-21-191. Washington, D.C.: November 30, 2020.
COVID-19: Federal Efforts Could Be Strengthened by Timely and
Concerted Actions. GAO-20-701. Washington, D.C.: September 21, 2020.
COVID-19: Brief Update on Initial Federal Response to the Pandemic,
GAO-20-708. Washington, D.C.: August 31, 2020.
COVID-19: Opportunities to Improve Federal Response and Recovery
Efforts. GAO-20-625. Washington, D.C.: June 25, 2020.
Other Related GAO Emergency Rental Assistance: Additional Grantee Monitoring Needed to
Products Manage Known Risks. GAO-22-105490. Washington, D.C.: February 10,
2022.
Federal Spending Transparency: Opportunities Exist to Further Improve
USAspending.gov’s Use and Usefulness. GAO-22-104127. Washington,
D.C.: December 16, 2021.
Federal Spending Transparency: Opportunities Exist for Treasury to
Further Improve the Information Available on USAspending.gov.
GAO-22-104702. Washington, D.C.: November 8, 2021.
Page 43 GAO-22-105715
Related GAO Products
COVID-19: Additional Risk Assessment Actions Could Improve HUD
Oversight of CARES Act Funds. GAO-21-104542. Washington, D.C.:
September 30, 2021.
Economic Injury Disaster Loan Program: Additional Actions Needed to
Improve Communication with Applicants and Address Fraud Risks.
GAO-21-589. Washington, D.C.: July 30, 2021.
Paycheck Protection Program: SBA Added Program Safeguards, but
Additional Actions Are Needed. GAO-21-577. Washington, D.C.: July 29,
2021.
Federal Financial Management: Substantial Progress Made since
Enactment of the 1990 CFO Act; Refinements Would Yield Added
Benefits. GAO-20-566. Washington, D.C.: August 6, 2020.
DATA Act: OIGs Reported that Quality of Agency-Submitted Data Varied,
and Most Recommended Improvements, GAO-20-540. Washington, D.C.:
July 9, 2020.
Improper Payments: Strategy and Additional Actions Needed to Help
Ensure Agencies Use the Do Not Pay Working System as Intended.
GAO-17-15. Washington, D.C.: October 14, 2016.
Federal Spending Accountability: Preserving Capabilities of Recovery
Operations Center Could Help Sustain Oversight of Federal
Expenditures. GAO-15-814. Washington, D.C.: September 14, 2015.
A Framework for Managing Fraud Risks in Federal Programs.
GAO-15-593SP. Washington, D.C.: July 28, 2015.
Standards for Internal Control in the Federal Government. GAO-14-704G.
Washington, D.C.: September 10, 2014.
(105715)
Page 44 GAO-22-105715
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