Updated Data on Improper Payments

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White House briefing room blog titled Updated Data on Improper Payments, dated December 30, 2021, in which the Office of Management and Budget releases annual Government-wide improper payments data. The post says the Government-wide improper payment rate rose from 5.6% to 7.2% between fiscal year 2020 and fiscal year 2021, largely driven by the unemployment insurance rate of 18.71% from July 2020 to June 2021. It attributes the UI rate to a surge in claims that overwhelmed state agencies and cites a Pandemic Response Accountability Committee report on outdated IT systems and reduced controls. It lists administration steps, including $2 billion in the American Rescue Plan for grants, Tiger Teams and upgrades to UI systems.

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3/30/22, 11:14 AM Updated Data on Improper Payments | The White House

BRIEFING ROOM

Updated Data on Improper Payments

DECEMBER 30, 2021 » BLOGS

Today, the Office of Management and Budget is releasing annual Government-wide data on
improper payments. Before getting into the numbers, it’s important to understand exactly
what this data tells us—and what it doesn’t.

An improper payment is a payment that should not have been made or that was made in the
wrong amount. That includes overpayments, underpayments, or even payments made to the
right recipient in the right amount but not in strict adherence to the relevant statute or
regulation. If an agency can’t confirm whether a particular payment is made improperly at the
time that it’s reviewed, the entire payment counts toward the improper payment rate—even if
only a fraction of the payment is ultimately found to have been made improperly. And even in
cases where improper payments are subsequently recovered, they are still counted as

improper. In other words, not all improper payments represent a loss to taxpayers.

The data released today underscores the depth of the problems facing states that were in many
cases overwhelmed by the unique and compounding challenges caused by the COVID-19
pandemic—and a general legacy of neglected oversight under the previous Administration.
Overall, the analysis estimates that between fiscal year 2020 and fiscal year 2021, the
Government-wide improper payment rate rose from 5.6% to 7.2%. This increase was largely

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driven by growth in the improper payment rate in the Federal-State Unemployment Insurance
(UI) program, which totaled 18.71% from July 2020 to June 2021—roughly 5-8 percentage
points higher than during a normal, non-pandemic 12-month period. Data was not collected
during the middle of 2020 as a result of the chaotic challenges state-run UI systems faced, so
this is our first full-year look at UI errors during the pandemic. And, we know that problems
accumulated from early in the pandemic are still being discovered and will take a long time to

clean up.

What accounts for this elevated rate, particularly in the UI system? As the pandemic took hold

in 2020, it triggered a massive surge in UI claims that overwhelmed state-run agencies

responsible for administering unemployment insurance. In March 2020, initial claims rose

from 211,000 a week to 6.6 million a week. For example, more claims were filed in nine months

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in Florida than in the previous eight years—combined. This surge in claims caused massive
delays for State agencies. In Ohio, for example, by October 2020 it took more than 70 days to
process many new claims, whereas before the pandemic the vast majority were completed in
under two weeks.

A report from the Pandemic Response Accountability Committee (PRAC) that looked at 16
states across the country found that many lacked the capacity to respond to the crush of new
claims and relied on outdated IT systems, and that limited statutory fraud and eligibility
controls made them more susceptible to improper payments. As the PRAC notes, a National
Association of State Workforce Agencies report found that more than half of states were still
relying on outdated unemployment computer systems as of February 2021. The PRAC also
found that, “States’ response times to process claims were not the only area of UI impacted by
the pandemic-related claims surge.” Controls meant to stop fraud and reduce improper
payments “were often reduced to handle the influx or were simply not effective enough,” and
some states misinterpreted guidance from the previous Administration, For example, the
PRAC notes that Ohio’s unemployment audit found that it “did not establish sufficient
procedures or controls to ensure that pandemic unemployment benefits were paid to only
eligible claimants,” which led to the failure “to detect, recover or report overpayments and
ineligible payments.”

Since the President took office, the Biden Administration has taken crucial steps to help states
modernize their UI systems, fight fraud, and improve oversight. The American Rescue Plan
included $2 billion to support grants to prevent identity theft, deploy “Tiger Teams” to work
with state UI officials, upgrade outdated IT systems, and more. The Administration established
anew data-sharing agreement between states and the Department of Labor (DOL) Inspector
General (IG) to help prevent multi-state UI fraud. DOL is working with law enforcement
agencies to counter the organized criminal syndicates targeting UI benefits. In May, the
President launched an Initiative on Identity Theft Prevention and Public Benefits that will
finalize a set of recommendations and reforms next year to address these challenges head-on.
And thanks to our historic jobs and economic recovery, the average number of Americans filing
for unemployment is about 205,000 per week—reaching the lowest 4-week averages since 1969,
which will help further ease pressure on overwhelmed state bureaucracies.

Here at OMB, we’ve also been working closely with the oversight community—including IGs
and the Government Accountability Office —alongside agencies across Government to make

payment integrity a top priority, particularly when it comes to payment errors that result in

monetary loss. Earlier this month, OMB issued new guidance instructing agencies to restore
the integrity and independence of their IGs, and to work with Congress to ensure thatIG
offices can exercise their vital oversight role. We updated OMB’s longstanding payment

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integrity guidance to help agencies spend less time on low-value compliance and more time
building capacity to help prevent improper payments with a focus on those resulting in
monetary loss. And we issued implementation guidance for the American Rescue Plan to help
ensure the highest level of accountability and payment integrity in the critical relief programs
that have driven our economic recovery—and we are actively working toward similar steps to

support accountability in implementation of the Infrastructure Investment and Jobs Act.

President Biden has been very clear that this Administration will take decisive action to ensure
our Government delivers results for the American people in the most effective, equitable, and
accountable way possible. That means committing to facing the real challenges of combatting
payment errors and making Government work better. Sharing this data transparently and
being direct about the challenges we face are part of that commitment. We won’t solve these
problems overnight. But the bottom line is that the Administration is going to remain laser-
focused on taking every step possible to deliver the effective, efficient, and accountable
Government the American people expect and deserve.

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