Treasury OIG-26-036: Audit of Treasury’s Compliance with the PIIA Requirements for Fiscal Year 2025 (Aug. 5, 2026)
Summary
Audit Report OIG-26-036 of the Office of Inspector General, Department of the Treasury, dated August 5, 2026, on Treasury's compliance with the Payment Integrity Information Act of 2019 (PIIA) for fiscal year 2025. The transmittal memorandum to William Sessions, Acting Assistant Secretary for Management, is signed /s/ by Shiela Michel, Acting Director, Financial Statement Audits. It states that GenTech Associates, Inc audited under a contract monitored by the office and determined that Treasury was not in compliance with PIIA for FY 2025, because Treasury did not comply with 2 of 10 PIIA reporting requirements, including the requirement to report an improper payment rate of less than 10 percent for four IRS programs.
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“Treasury OIG-26-036: Audit of Treasury’s Compliance with the PIIA Requirements for Fiscal Year 2025 (Aug. 5, 2026).”
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Audit Report
OIG-26-036
FINANCIAL MANAGEMENT
Audit of Treasury’s Compliance with the PIIA
Requirements for Fiscal Year 2025
August 5, 2026
Office of Inspector General
Department of the Treasury
This Page Intentionally Left Blank
DEPART MENT OF THE TREASURY
W AS H I N GT ON, D.C. 2 0220
August 5, 2026
OFFICE OF
INS PECT OR G EN ER AL
MEMORANDUM FOR WILLIAM SESSIONS
ACTING ASSISTANT SECRETARY FOR MANAGEMENT
FROM: Shiela Michel /s/
Acting Director, Financial Statement Audits
SUBJECT: Audit of Treasury’s Compliance with PIIA Requirements
for Fiscal Year 2025
We hereby transmit the attached subject report. Under a contract monitored by our
office, GenTech Associates, Inc (GenTech), a certified independent public
accounting firm, audited the Department of the Treasury’s (Treasury) compliance
with the Payment Integrity Information Act of 2019 (PIIA) for fiscal year (FY)
2025. As part of the audit, GenTech also assessed Treasury’s compliance with
additional improper payment reporting requirements set forth in the Office of
Management and Budget (OMB) Circular No. A-123, Appendix C, Requirements for
Payment Integrity Improvement and OMB Circular No. A-136, Financial Reporting
Requirements.
GenTech considered the results of Treasury Inspector General for Tax
Administration’s audit of the Internal Revenue Service’s (IRS) compliance with the
improper payment reporting requirements in forming its conclusions on Treasury’s
compliance with PIIA, and the results were incorporated in the audit report.
In its audit report, GenTech determined that Treasury was not in compliance with
PIIA for FY 2025. Treasury did not comply with 2 of 10 PIIA reporting
requirements. Specifically, Treasury did not comply with the requirement to report
an improper payment rate of less than 10 percent for four IRS programs identified
as susceptible to significant improper payments: (1) Earned Income Tax Credit; (2)
American Opportunity Tax Credit; (3) Additional Child Tax Credit; and (4) Net
Premium Tax Credit. Treasury complied with the remaining eight PIIA requirements.
Additionally, IRS failed to demonstrate improvements to payment integrity.
GenTech found that Treasury provided inaccurate responses to certain risk
assessment questions for one fund group and inconsistent response for travel card
and claims and/or voucher payment types used across eight fund groups in
determining payment types’ susceptibility to improper payments. However,
Page 2
GenTech noted that these inaccurate responses did not affect the overall risk
assessment rating for all programs identified.
Our contract required that the audit be performed in accordance with generally
accepted government auditing standards. In connection with the contract, we
reviewed GenTech’s report and related documentation and inquired of its
representatives. Our review, as differentiated from an audit performed in
accordance with U.S. generally accepted government auditing standards, was not
intended to enable us to conclude on Treasury’s overall compliance with
requirements contained in PIIA for FY 2025. GenTech is responsible for the
attached auditors’ report dated July 31, 2026, and the conclusions expressed
therein. However, our review disclosed no instances where GenTech did not
comply, in all material respects, with U.S. generally accepted government auditing
standards.
If you wish to discuss this report, please contact me at (202) 486-1415, or a
member of your staff may contact Catherine Yi, Manager, Financial Statement
Audits, at (202) 553-7412.
Attachment
Department of the Treasury
Audit of Treasury’s Compliance with
Payment Integrity Information Act of 2019
Requirements for Fiscal Year 2025
8751 Wesleyan Road
Indianapolis, IN 46268
Phone: (866) 432-1040
www.gentechassociates.com
July 31, 2026
Ms. Shiela Michel
Acting Director, Financial Audit
Office of Inspector General
Department of the Treasury
Dear Ms. Michel,
GenTech Associates, Inc., is pleased to present our final report on the Department of the
Treasury’s (Treasury) compliance with Payment Integrity Information Act of 2019 requirements
for Fiscal Year 2025.
Thank you for the opportunity to serve your organization and the assistance provided by your staff
and that of Treasury. We will be happy to answer any questions you may have concerning the
report.
Very respectfully,
Marcia Bischak, CPA
Engagement Partner
GenTech Associates, Inc.
8751 Wesleyan Road
Indianapolis, IN 46268
Phone: (866) 432-1040
www.gentechassociates.com
Table of Contents
Audit Report.................................................................................................................................... 1
Results in Brief ............................................................................................................................... 3
Background ..................................................................................................................................... 4
Audit Results................................................................................................................................... 8
Appendix 1: Objective, Scope, and Methodology ........................................................................ 16
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment Reporting
Requirements in FY 2025 and IRS Management’s Response ...................................................... 18
Appendix 3: Treasury Programs’ Compliance with PIIA Criteria ............................................... 19
Appendix 4: Treasury Management’s Response .......................................................................... 47
Appendix 5: Report Distribution .................................................................................................. 50
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Acronyms
ACTC Additional Child Tax Credit
AFR Agency Financial Report
AOTC American Opportunity Tax Credit
BEP Bureau of Engraving and Printing Fund
DO Departmental Offices
EITC Earned Income Tax Credit
EO Executive Order
ERA Emergency Rental Assistance
ERC Employee Retention Credit
FRF Federal Research Fund
FSA Bureau of the Fiscal Service – Fiscal Service
Administrative Salaries and Expenses
FY Fiscal Year
GAO Government Accountability Office
IP Improper Payment
IPERA Improper Payments Elimination and Recovery Act of 2010
IPERIA Improper Payments Elimination and Recovery
Improvement Act
IPIA Improper Payments Information Act of 2002
IP PIN Identity Protection Personal Identification Number
IRS Internal Revenue Service
Net PTC Net Premium Tax Credit
ODCFO Office of the Deputy Chief Financial Officer
OIG Office of Inspector General
OMB Office of Management and Budget
PIIA Payment Integrity Information Act of 2019
RCG Risk and Control Group
GenTech GenTech Associates, Inc.
RTC Refundable Tax Credit
TIGTA Treasury Inspector General for Tax Administration
Treasury U.S. Department of the Treasury
Treasury’s PIIA Guidance FY 2024 Treasury Implementation Guide for OMB
Circular A-123, Appendix C: Requirements for Payment
Integrity Improvement
UP Unknown Payment
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Audit Report
July 31, 2026
Loren J. Sciurba
Deputy Inspector General
Department of the Treasury
Washington, D.C.
GenTech Associates, Inc. (GenTech), conducted a performance audit of the Department of the
Treasury’s (Treasury) Fiscal Year (FY) 2025 compliance with the Payment Integrity Information
Act of 2019 (PIIA).
The objective of our audit was to assess and report on Treasury’s overall compliance with
requirements contained in PIIA, 1 enacted to establish requirements for federal agencies to cut
down on improper payments (IPs) made by the federal government. PIIA replaced the Fraud
Reduction and Data Analytics Act of 2015, 2 Improper Payments Elimination and Recovery
Improvement Act of 2012 (IPERIA), 3 Improper Payments Elimination and Recovery Act of 2010
(IPERA), 4 and Improper Payments Information Act of 2002 (IPIA). 5 As part of our audit, we also
assessed Treasury’s compliance with additional IP reporting requirements set forth in Office of
Management and Budget (OMB) Circular No. A-123, Appendix C, Requirements for Payment
Integrity Improvement, and OMB Circular No. A-136, Financial Reporting Requirements. We
conducted our fieldwork from January 2026 through July 2026 at our Contract Offices. Appendix
1 contains a more detailed description of our objective, scope, and methodology.
This report also summarizes the results of the Treasury Inspector General for Tax Administration’s
(TIGTA) assessment of the Internal Revenue Service’s (IRS) compliance with the reporting
requirements contained in PIIA for FY 2025. This summarization includes the IRS’s management
response to TIGTA’s audit findings. TIGTA issued its report on July 27, 2026. We have included
TIGTA’s report in its entirety as Appendix 2 of this report.
We conducted this performance audit in accordance with Generally Accepted Government
Auditing Standards (GAGAS). 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.
As a result of our audit, we determined Treasury was not in compliance with PIIA for FY 2025.
The IRS did not report an IP rate of less than 10 percent for four of its programs identified as
1
Pub. L. No. 116-117, 134 Stat. (March 2, 2020)
2
Pub. L. No. 114-186, 130 Stat. (June 30, 2016)
3
Pub. L. No. 112-248, 126 Stat. (January 10, 2013)
4
Pub. L. No. 111-204, 124 Stat. (July 22, 2010)
5
Pub. L. No. 107-300, 116 Stat. (November 26, 2002)
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susceptible to significant IPs: (1) Additional Child Tax Credit (ACTC), (2) American Opportunity
Tax Credit (AOTC), (3) Earned Income Tax Credit (EITC), and (4) Net Premium Tax Credit (Net
PTC). Susceptibility to significant IPs means that the result of the IP risk assessments determined
these programs are likely to have annual IPs exceeding (1) both 1.5 percent of program outlays
and $10 million of all program or activity payments made during FY 2025, or (2) $100 million
(OMB’s threshold). Additionally, the IRS failed to demonstrate improvements to payment
integrity.
Treasury also provided inaccurate responses to certain risk assessment questions for one fund
group 6 and an inconsistent response for travel card and claims and/or voucher payment types used
across eight fund groups. Treasury’s inaccurate responses did not affect the overall risk assessment
rating for these fund groups.
Additional information on the results of our audit is included in the accompanying report. A
distribution list for this report is provided as Appendix 5.
Very respectfully,
GenTech Associates, Inc.
6
A fund group is a set of activities recognized as a program within the Treasury bureaus and offices.
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Results in Brief
Treasury was not in compliance with PIIA for FY 2025 because it did not report an improper
payment rate of less than 10 percent for four of its programs identified as susceptible to significant
IPs. Additionally, the IRS failed to demonstrate improvements to payment integrity. We
determined that Treasury complied with eight of the ten PIIA requirements. Treasury: (1)
published payment integrity information in the Agency Financial Report (AFR); (2) posted the
AFR and accompanying materials to its website; (3) conducted IP risk assessments for each
program with annual outlays greater than $10 million at least once in the last three years; (4)
adequately concluded whether the program is likely to make IPs and unknown payments (UPs)
above or below the statutory threshold; (5) published IP and UP estimates for programs susceptible
to significant IPs and UPs in the accompanying materials to the AFR; (6) published corrective
action plans for each program for which an estimate above the statutory threshold was published
in the accompanying materials to the AFR; (7) published an IP and UP reduction target for each
program for which an estimate above the statutory threshold was published in the accompanying
materials to the AFR; and (8) developed a plan to meet the IP and UP reduction target. Treasury
did not comply with the requirement to report an improper payment rate of less than 10 percent
for its programs identified as susceptible to significant improper payments because IRS reported
an improper payment rate of more than 10 percent for four of its programs identified as susceptible
to significant improper payments, including:
• Additional Child Tax Credit (ACTC) – IRS estimates 13.6 percent ($4.5 billion) of the
total ACTC payments of $33.4 billion in FY 2025 were improper.
• American Opportunity Tax Credit (AOTC) – IRS estimates 30.7 percent ($1.5 billion) of
the total AOTC payments of $5 billion in FY 2025 were improper.
• Earned Income Tax Credit (EITC) – IRS estimates 32.7 percent ($21.1 billion) of the
total EITC payments of $64.7 billion in FY 2025 were improper.
• Net Premium Tax Credit (Net PTC) – IRS estimates 31.6 percent ($0.8 billion) of the
total Net PTC payments of $2.6 billion in FY 2025 were improper.
Treasury did not demonstrate improvements to payment integrity. IRS’s overall improper payment
rate increased from 21.9 percent in FY 2024 to 26.5 percent in FY 2025.
We determined that Treasury complied with all other OMB improper payment reporting
requirements.
In addition to the compliance criteria, we reviewed Treasury’s risk assessments and recapture audit
programs to determine the accuracy and completeness of Treasury’s improper payment reporting.
We determined responses to certain questions in their qualitative risk assessments were inaccurate
and inconsistent in determining payment types’ susceptibility to improper payments. Treasury’s
inaccurate responses did not affect the overall risk assessment rating for all programs identified.
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As part of our reporting process, we provided a draft of this report to Treasury management for
review and comment. In a written response, management noted that refundable tax credits (RTCs)
generally have complex eligibility rules that may be difficult for the IRS to verify. Consequently,
RTC overclaims are not the result of internal control weaknesses that can be remediated internally
but are, in fact, the result of factors beyond Treasury’s control under current law and existing
authority. Management also noted that they are continuing to collaborate with IRS to identify a
more effective way to report on estimated payment errors associated with the RTC programs in
the Department’s AFR as part of a broader discussion on the tax gap and tax burden.
Additionally, Treasury management concurred with all findings and recommendations related to
payment integrity deliverables of non-IRS Treasury Components. Management also provided their
planned corrective actions, implementation dates, and responsible officials in their response.
Management’s response to our report is provided in Appendix 4.
We also summarized TIGTA’s audit results in this report. TIGTA reported that IRS did not meet
the PIIA goal of reducing improper payment rate for ACTC, AOTC, EITC, and Net PTC to less
than 10 percent. Additionally, IRS failed to demonstrate improvements to payment integrity.
TIGTA reported that IRS has not been able to reduce its improper payment rate estimates to less
than 10 percent for each of its high-risk refundable tax credit programs, and in FY 2025, these
rates increased. According to the FY 2025 Treasury AFR, IRS would need to reduce improper
payments for its RTC programs by $17.5 billion to reach the goal of 10 percent. According to
TIGTA, factors beyond IRS’s control contribute to improper payments and IRS will continue to
focus on outreach and education in lieu of increasing examinations.
TIGTA’s report and IRS’s management response are provided in Appendix 2.
Background
Improper Payments Compliance and Reporting Requirements
Under IPIA, Federal agencies were required to review and identify programs and activities
susceptible to improper payments on an annual basis and report estimates of improper payments
to Congress along with actions to reduce estimated improper payments that exceeded $10 million.
On July 22, 2010, the President signed IPERA into law. IPERA amended IPIA, strengthening
agencies’ program reviews and reporting requirements. IPERA expanded the types of payments
to be reviewed and established the requirement for agencies to conduct recovery audits if cost-
effective. IPERA also required Inspectors General to report on their respective agencies’
compliance with IPERA each fiscal year. IPERIA further expanded agency improper payment
requirements to foster greater agency accountability.
In accordance with IPERIA, Offices of Inspectors General (OIGs) are required to review and
report on their respective agencies’ OMB-designated high-priority programs, if any. According to
OMB, high-priority programs are all programs with IPs resulting in monetary loss that exceeds
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$100 million annually. Specifically, OIGs are to review management’s assessment of the level of
risk, the quality of the improper payment estimates and methodology, and the oversight and
financial controls in place to identify and prevent improper payments. Recommendations, if any,
are to be provided for modifying agency plans related to the agency’s high-priority programs, to
include improvements for determining and estimating improper payments.
For FY 2025 reporting, OMB determined that ACTC, AOTC, EITC, and Net PTC are high-priority
programs.
In Memorandum 15-02, dated October 20, 2014, OMB issued revisions to OMB Circular No. A-
123, Appendix C, to provide agencies guidance on implementing all improper payment
compliance and reporting requirements. In June 2018, OMB further revised the OMB guidance
(OMB M-18-20) in an effort to transform the improper payment compliance framework to create
a more unified, comprehensive, and less burdensome set of requirements. According to OMB M-
18-20, all agencies should institute a systematic method of reviewing all programs once every
three years to determine the programs’ improper payment risk.
On March 2, 2020, PIIA repealed IPERIA, IPERA, and IPIA but set forth similar improper
payment reporting requirements. Under PIIA, agencies must conduct a program-specific risk
assessment for each program or activity identified by the agency, provide the methodology for
identifying and measuring improper payments, and report on actions the agency intends to take to
prevent future improper payments. PIIA requires the OMB Director to identify a list of high
priority Federal programs for greater levels of oversight and review, in which the highest dollar
value or highest rate of improper payments occur or for which there is a higher risk of improper
payments. Agencies with high-priority programs are required to submit an annual report to the
Inspector General and OMB on actions (1) taken or planned to recover improper payments and
(2) intended to prevent future improper payments. The annual report is also required to be available
to the public through a website.
OMB once again updated Circular A-123, Appendix C, with guidance directly related to the
Inspectors General review and issued OMB M-21-19, Transmittal of Appendix C to OMB Circular
A-123, Requirements for Payment Integrity Improvement, on March 5, 2021. This guidance is
effective starting in FY 2021. Each program with annual outlays over $10 million must conduct
an IP risk assessment at least once every three years to determine whether the program is likely to
have IPs and UPs above the statutory threshold.
Treasury’s Improper Payment Risk Assessment
Treasury issued Comprehensive Treasury Guidance for Payment Integrity Reporting in
Accordance with OMB Circular A-123 Appendix C, Requirements for Payment Integrity
Improvement (Treasury’s PIIA Guidance) to all Treasury’s Bureaus and Offices (hereafter referred
to as “Components”). For all Fund Groups with more than $10 million in Total Non-Federal
Disbursements, a risk assessment is required once every three years. For Fund Groups that were
new in the prior fiscal year, a risk assessment is required in the current fiscal year. An off-cycle
risk assessment must be completed if there is a significant change in legislation and/or significant
increase in funding levels.
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Components have the option to conduct a qualitative or a quantitative risk assessment. Programs
should choose the methodology that reasonably supports whether the program is or is not
susceptible to significant IPs. The qualitative risk assessment consists of a questionnaire template
(Qualitative Questionnaire) that Components must complete to assess their susceptibility to IPs.
The Qualitative Questionnaire aligns risk assessment questions and risk ratings to the 11 risk
factors that could be considered when conducting a qualitative IP risk assessment according to
OMB M-21-19:
1) Whether the program reviewed is new to the agency;
2) The complexity of the program reviewed;
3) The volume of payments made through the program reviewed;
4) Whether payments or payment eligibility decisions are made outside of the agency, such
as by a state or local government;
5) Recent major changes in program funding, authorities, practices, or procedures;
6) The level, experience, and quality of training for personnel responsible for making program
eligibility determinations or certifying that payments are accurate;
7) Significant deficiencies in the audit report or other relevant management findings of the
agency that might hinder accurate payment certification;
8) Similarities (a combination of outlays, mission, payment process, etc.) to other programs
that have reported IP and UP estimates or been deemed susceptible to significant IPs;
9) The accuracy and reliability of IP and UP estimates previously reported for the program,
or other indicator of potential susceptibility to IPs and UPs identified by the OIG of the
executive agency; the U.S. Government Accountability Office (GAO); other audits
performed by or on behalf of the federal, state, or local government; disclosures by the
executive agency; or any other means;
10) Whether the program lacks information or data systems to confirm eligibility or provide
for other payment integrity needs; and
11) The risk of fraud as assessed by the agency under the Standards for Internal Control in
the Federal Government, published by the GAO (commonly known as the “Green
Book”).
Based on the Component responses, the Qualitative Questionnaire automatically calculates the
risk assessment rating (Susceptible or Not Susceptible) for each payment type and the overall risk
assessment rating for the Fund Group based on the annual percentages and risk assessment ratings
for all payment types.
The quantitative risk assessment (Quantitative Summary) consists of a review of a sample of
disbursements to calculate the IP and UP amount and rate. The IP and UP amount and rate are
compared to OMB’s threshold to determine susceptibility to significant IPs. Fund Groups that are
not required to complete a risk assessment for a given year are required to complete a certification
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to attest that there has not been a significant change in legislation or funding since the last risk
assessment has been completed.
After each component completes and reviews its risk assessment, the results are provided to
Treasury’s Risk and Control Group (RCG). Fund Groups identified as susceptible to significant
IPs through the risk assessments and all OMB-designated high-priority programs will develop a
statistical sampling methodology and perform testing and calculate the annual estimated amount
of IPs and UPs and the respective rates the following fiscal year. They will also identify the reasons
they are at risk of IPs and UPs and create a corrective action plan to prevent and reduce the IPs
and UPs. Lastly, programs susceptible to IPs report the following payment integrity information
with their annual financial statement and on PaymentAccuracy.gov:
• IP Reduction Outlook;
• IP Root Cause;
• Data and Information Themes;
• Corrective Actions; and
• Non-Compliance.
On August 1, 2022, the Office of the Deputy Chief Financial Officer (ODCFO) submitted a
memorandum to OMB, Limitations in Quantifying the Amount and Rate of Improper Payments
for Short-Term Programs, explaining that, due to the short timeframe over which the majority of
disbursements will be made by a number of programs created by the American Rescue Plan Act
of 2021; the Coronavirus Aid, Relief, and Economic Security Act; and the Consolidated
Appropriations Act of 2021 (COVID-19 related programs) for which Treasury is responsible,
quantifying the amount and rate of improper payments, assessing the root cause, and developing
corrective action plans to reduce payment errors in the future would provide minimal value and
be an ineffective use of resources. Therefore, for short-term programs such as the COVID-19
programs, Treasury will follow the guidance in OMB Circular A-123, Appendix C, for assessing
risk to identify those programs deemed susceptible to significant improper payments. However,
Treasury will not plan to report an improper payment estimate of such programs either in its AFR
or on PaymentAccuracy.gov.
Recovery Audits
PIIA requires agencies to conduct recovery audits (also referred to as payment recapture audits)
to prevent, detect, and recover overpayments, if conducting such audits would be cost-effective,
for each program and activity that expends $1 million or more annually. A payment recovery audit
is a review and analysis of an agency’s or program’s accounting and financial records and other
pertinent information supporting its payments that is specifically designed to identify
overpayments.
Treasury’s PIIA Guidance requires each component to complete, certify, and submit a worksheet
providing a consistent reporting format that includes information on the results of the component’s
payment recovery audits and treatment of recaptured improper payments. The steps to perform a
payment recovery audit include:
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1. Develop and perform a cost benefit analysis;
2. Establish targets for the payment recapture audit program;
3. Perform the payment recapture audit;
4. Dispose of recaptured funds; and
5. Report the results.
The worksheets are submitted to the RCG for review and the data is consolidated and reported on
the PaymentAccuracy.gov website.
Treasury’s Improper Payment Reporting
On January 27, 2026, Treasury published its payment integrity information with its annual
financial statement, in accordance with OMB Circular A-136, to include:
• A hyperlink to the PaymentAccuracy.gov website;
• A summary of their payment integrity activities and results;
• A summary discussing the nature of RTC programs;
• IRS’s strategies to address the tax gap and reduce RTC errors; and
• A summary of Treasury’s pandemic relief programs that were determined to be
susceptible to significant improper payments.
The following payment integrity information is also published on PaymentAccuracy.gov through
OMB’s annual data request:
• IP and UP amounts and rates for the ACTC, AOTC, EITC, and Net PTC programs;
• High-priority program results;
• IP root causes;
• Confirmed fraud;
• Payment recapture reporting information; and
• All programs assessed for risk of improper payment during the risk assessment cycle.
Audit Results
According to OMB Circular A-123, an agency is required to meet ten specific requirements to be
compliant with PIIA. The ten requirements are (1) publishing payment integrity information in the
AFR; (2) posting the AFR and accompanying materials to its website; (3) conducting IP risk
assessments for each program with annual outlays greater than $10 million at least once in the last
three years; (4) adequately concluding whether the program is likely to make IPs and UPs above
or below the statutory threshold; (5) publishing IP and UP estimates for programs susceptible to
significant IPs and UPs in the accompanying materials to the AFR; (6) publishing corrective action
plans for each program for which an estimate above the statutory threshold was published in the
accompanying materials to the AFR; (7) publishing an IP and UP reduction target for each program
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for which an estimate above the statutory threshold was published in the accompanying materials
to the AFR; (8) demonstrating improvements to payment integrity or reaching a tolerable IP and
UP rate; (9) developing a plan to meet the IP and UP reduction target; and (10) reporting an IP
and UP estimate of less than 10 percent for each program for which an estimate was published in
the accompanying materials to the AFR.
We found that Treasury was not in compliance with PIIA for FY 2025 because IRS did not report
an overall improper payment rate of less than 10 percent for the ACTC, AOTC, EITC, and Net
PTC programs and failed to demonstrate improvements to payment integrity. We discuss this
further in our Finding 1 below. Treasury complied with the other PIIA requirements, as outlined
in Table 1. In addition, in Appendix 3, Table 2 provides a summary of Treasury programs’
compliance with PIIA reporting requirements for programs that are identified as susceptible to
significant IPs for FY 2025 reporting, and Table 3 provides a summary of Treasury programs’
compliance with PIIA reporting criteria for programs that conducted an IP risk assessment in FY
2025. The risk assessment is based on Treasury’s three-year rotation schedule in accordance with
OMB guidance.
Table 1: Treasury’s Compliance with PIIA Requirements
PIIA Requirement Compliance
Publish payment integrity information in the AFR Yes
Post the AFR and accompanying materials to its website Yes
Conduct IP risk assessments for each program with annual outlays greater Yes
than $10 million at least once in the last three years
Adequately conclude whether programs are likely to make IPs and UPs Yes
above or below statutory threshold
Publish IP and UP estimates for programs susceptible to significant IPs and Yes
UPs in the accompanying materials to the AFR
Publish corrective action plans for each program for which an estimate Yes
above the statutory threshold was published in the accompanying materials
to the AFR
Publish an IP and UP reduction target for each program for which an Yes
estimate above the statutory threshold was published in the accompanying
materials to the AFR
Demonstrate improvements to payment integrity or reach a tolerable IP and No
UP rate
Develop a plan to meet IP and UP reduction target Yes
Report an IP and UP estimate of less than 10 percent for each program for No
which an estimate was published in the accompanying materials to the
AFR
Source: GenTech’s and TIGTA’s review of Treasury’s compliance with PIIA requirements for FY 2025 for the
programs listed in Appendix 3.
We also reviewed Treasury’s risk assessment process and recapture audit programs to determine
the accuracy and completeness of Treasury improper payments reporting. We noted that Treasury:
(1) Included the required improper payment disclosures in the AFR;
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(2) Performed risk assessments using required criteria defined by OMB Circular A-123 (with
exceptions noted);
(3) Conformed to OMB guidance for payment recapture audits; and
(4) Posted required improper payment information to the PaymentAccuracy.gov website.
Finding 1: Treasury Was Not in Compliance with PIIA for FY 2025
We determined that Treasury was not in compliance with PIIA for FY 2025 due to IRS not
reporting an overall improper payment rate of less than 10 percent for ACTC, AOTC, EITC, and
Net PTC. Specifically, according to TIGTA’s report, IRS reported an improper payment rate of
13.6 percent (or $4.5 billion), 30.7 percent (or $1.5 billion), 32.7 percent (or $21.1 billion), and
31.6 percent (or $0.8 billion) for ACTC, AOTC, EITC, and Net PTC, respectively. PIIA requires
an IP and UP estimate of less than 10 percent for each program for which an estimate was
published in the accompanying materials to the annual financial statement. Additionally, the IRS
failed to demonstrate improvements to payment integrity.
TIGTA did not make any recommendations related to this finding.
As part of our reporting process, we provided a draft of this report to Treasury management for
review and comment. In a written response, management noted that RTCs generally have complex
eligibility rules that may be difficult for the IRS to verify, particularly at the time the taxpayer files
a return, due to the lack of available and relevant third-party data. Consequently, management
noted RTC overclaims are not the result of internal control weaknesses that can remediate
internally but are, in fact, the result of factors beyond their control under current law and existing
authority. Additionally, management noted even if they could obtain legislative changes and invest
in additional resources and verification solutions that would ultimately reduce overclaims, the
benefits derived would be marginal relative to the cost of doing so. Audits by the Government
Accountability Office and TIGTA have also concluded that RTC overclaims are largely due to the
statutory design and complexity of the RTCs, not internal control weaknesses, financial
management deficiencies, or reporting failures.
Finding 2: Inaccurate Completion of Program-Specific Risk Assessments
GenTech determined the Bureau of Engraving and Printing (BEP), Bureau of the Fiscal Service –
Fiscal Service Administrative Salaries and Expenses (FSA), Departmental Offices (DO),
Community Development Financial Institutions Fund (CDF), and Federal Research Fund (FRF)
managements’ responses to certain questions in their qualitative risk assessments were inaccurate
in determining payment types’ susceptibility to significant improper payments. Specifically:
• Six instances where BEP management indicated a rating of “susceptible” but should have
indicated a rating of “not susceptible” in its qualitative risk assessment.
• One instance where the Administrative Resource Center (ARC) 7 provided inconsistent
7
As of the date of this report, the Bureau of Fiscal Service’s Administrative Resource Center (ARC) is now the
Center for Financial Management.
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responses that were used across eight fund groups for travel card and claims and/or voucher
payment types for FSA, CDF, FRF, and DO.
GenTech noted these inaccurate responses did not affect the overall risk assessment rating for all
programs identified.
FY 2025 Annual Treasury Guidance for Payment Integrity Reporting in Accordance with OMB
Circular A-123, Appendix C, Requirements for Payment Integrity Improvement, Section III:
Deliverables, Page 9, states, “Submit the completed Qualitative Risk Assessment questionnaires
by Payment Type for each Fund Group if Component is performing a qualitative risk assessment,
or the completed Quantitative Risk Assessment summary if the Component is performing a
quantitative risk assessment. Both the Qualitative questionnaires and the Quantitative summaries
should be certified by a senior level official of the Component.”
Additionally, Page 11 states, “Work performed is subject to review by the ODCFO and the
Department’s auditors. Components must maintain their documentation at a level that can
withstand management and auditor scrutiny. As such, Components should ensure all deliverables
are reviewed for accuracy and completeness prior to submission to ODCFO.”
During FY 2025, Treasury revised the Qualitative Risk Assessment Questionnaire by removing
the answer key and incorporating additional guidance. Although Treasury’s RCG provided
training on these changes, BEP and ARC did not adequately apply the revised guidance when
completing program-specific risk assessments. In addition, BEP, ARC, and RCG review controls
did not detect the inaccurate responses prior to submission.
These inaccuracies increase the risk that programs may be improperly assessed as more or less
susceptible to improper payments, which may affect the design and implementation of appropriate
mitigation controls.
Recommendations
We recommend that:
1. Treasury’s RCG develop and disseminate supplemental guidance that provides clearer
instructions for completing qualitative risk assessment questions, including how responses
to identified risks should align with the related susceptibility determination.
2. The component’s management implement enhanced supervisory review procedures to
ensure qualitative risk assessment responses are accurate, consistent, and supported prior
to submission. This should include a documented secondary review focused on the
appropriateness of susceptibility determinations and alignment with Treasury guidance.
3. The component’s management should establish procedures to validate responses provided
by shared service providers (e.g., ARC) to ensure consistency, accuracy, and alignment
with program conditions prior to incorporating those responses into Component risk
assessments.
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Management’s Concurrence and GenTech’s Response
Treasury concurs with GenTech’s recommendations. Treasury’s RCG will provide clearer
instructions for completing the qualitative risk assessment questions beginning in the upcoming
fiscal year. RCG will also provide guidance to Components on performing reviews of
their qualitative risk assessments prior to submitting them to the ODCFO.
Additionally, RCG will provide the Components with further instructions on reviewing the shared
service providers’ qualitative risk assessment(s).
Treasury’s response meets the intent of the audit recommendations.
Management’s response to our report is provided in Appendix 4.
Treasury Inspector General for Tax Administration’s Audit Results
The following are excerpts from TIGTA’s FY 2025 PIIA audit report. TIGTA made five
recommendations in their report.
Finding 1: Assessment of FY 2025 Compliance With Improper Payment
Reporting Requirements
TIGTA’s review found that IRS has still not met the PIIA goal of reducing the improper payment
rate for ACTC, AOTC, EITC, and Net PTC to less than 10 percent and IRS failed to demonstrate
improvements to payment integrity. The IRS’s overall improper payment rate increased from 21.9
percent in FY 2024 to 26.5 percent in FY 2025.
Finding 2: Legislative Changes Are Needed to Reduce Refundable Tax Credit
Improper Payments
TIGTA reported that IRS runs various automated checks on a tax return before paying a refund.
For example, the IRS reported that from FYs 2023 through 2025, it used math error authority to
reduce refundable credit claims by approximately 2 percent ($7.6 billion). Using this authority, it
adjusted total claims from $330.5 billion to approximately $322.8 billion. 8 The IRS also conducts
prerefund and post refund examinations. However, these processes only address a small
percentage of refundable tax credit claims. The IRS examined less than one percent of refundable
credit claims for FYs 2023 through 2025. Also, during this same period, prerefund examinations
of refundable credits decreased approximately 70 percent along with the total credits that were
disallowed. For example, in FY 2025, the IRS reported that for pre and post refund examinations
it selected 79,000 (0.3 percent) of the 24.6 million tax returns claiming EITC.
One reason examinations are decreasing is due to reductions in staffing. Specifically, in FY 2025,
the IRS’s Refundable Credits Examination Operations Unit lost about 20 percent (86 examiners)
of its 439 examiners. The IRS has also reported that budget reductions resulted in decreased
8
Figures surrounding math error authority are rounded and may not reconcile.
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examination staffing. Moreover, when the IRS received additional funding through the Inflation
Reduction Act, the Secretary of Treasury directed the IRS not to increase examinations
for Taxpayers earning $400,000 per year or less.9 For example, the EITC is an anti-poverty
credit established by Congress for working families and is available to low and moderate-
income taxpayers.
In October 2020, the IRS estimated it would need to examine 4.2 million more tax returns before
issuing the refunds to be compliant with this goal. This is more than the IRS identifies annually
for potential examinations. At the time, the IRS estimated that the additional examinations would
cost more than $2.5 billion (an average of $595 per exam). Applying the IRS’s current average
cost of $804 for prerefund examinations, we estimate the cost to conduct 4.2 million additional
examinations has increased to $3.4 billion a year. In addition, TIGTA estimated that the IRS would
need 12,700 more examiners to conduct the additional examinations the IRS estimates are needed.
The IRS could allocate examiners from other functions to conduct refundable tax credit
examinations. However, doing so would negatively affect the IRS’s ability to balance its
enforcement efforts across tax administration.
Recently proposed legislation to address improper payments in federal programs indicates that
reducing financial loss to the government should be preventative in nature and that agencies should
have access to appropriate records and data assets. 10 In May 2025, TIGTA recommended that the
IRS work with the Office of Tax Policy to request additional legislative considerations that will
help the IRS reduce improper payments of refundable tax credits. 11 Accordingly, the IRS
submitted to the Treasury Department a proposed legislative change addressing duplicate
dependent claims, which are associated with refundable credit noncompliance. However, there has
not been any progress with these proposed changes.
Legislative changes to simplify refundable credit requirements will make it easier for taxpayers to
correctly determine whether they are eligible and could reduce taxpayer errors. Ensuring that the
simplified requirements can be verified to reliable government data and providing the IRS access
to that data will enable it to accurately verify refundable credit claims when they are filed. Finally,
authorizing the IRS to systemically correct refundable credit claims when reliable data indicates
the taxpayer is ineligible will enable it to efficiently prevent the issuance of erroneous refunds.
Recommendations
TIGTA recommended that IRS:
• Request that the Office of Tax Policy and Congress work on legislative changes that would
simplify and streamline refundable credit eligibility.
9
Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818.
10
H.R. 8467, 119th Cong. (Introduced in House April 23, 2026), Zeroing Out Monetary Benefits Improperly
Expended Act (ZOMBIE Act).
11
TIGTA, Report No. 2025-400-025, Assessment of Fiscal Year 2025 Compliance With Improper Payment
Reporting Requirements p. 8 (May 2025).
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• Identify specific areas within refundable credit tax administration where additional
correctable error authority could be requested. Once identified, request these increased
authorities via the Office of Tax Policy and Congress.
• Identify opportunities to work with external partners (i.e., other federal agencies, states, and
private institutions) and leverage available data to systemically verify refundable credit
eligibility. This should include working with the external partners to establish data sharing
agreements, and with the Office of Tax Policy and Congress to obtain access to the data, if
needed.
Finding 3: IRS Could Expand Social Media Outreach to Increase Awareness
for Refundable Credit Eligibility
The IRS indicates in its corrective action plans that it will continue to focus on outreach and
education to reduce improper payments in lieu of increasing examinations. The IRS balances its
outreach strategies by focusing on reaching eligible taxpayers who are not claiming credits and
educating taxpayers and tax return preparers on the eligibility requirements.
Strategies include the Nationwide Tax Forum, targeted communication and education, updates to
guidance, and expanded engagement with tax professionals. As part of the outreach and
education strategies, the IRS has a Return Preparer Strategy Program, which combines education
and enforcement of tax return preparers. The treatment of return preparers is based on
egregiousness and may lead to barring preparers from preparing or filing tax returns. In FY2025,
the Return Preparer Strategy Program reported protecting $467 million in revenue through its
various treatment strategies.
Moreover, the IRS generally uses the same strategies year after year. While these strategies are
helpful, they are not effective in significantly reducing the improper payment rate. As noted
previously, the improper payment rate for FY 2025 increased from the prior year.
Additionally, the IRS uses social media to share updates on tax changes and scam alerts,
promote online account tools and provide other informational content regarding refundable
credit eligibility.
TIGTA found that the IRS can improve its use of social media strategies by leveraging paid
services to reach additional taxpayers and expand its messaging surrounding refundable credit
eligibility and compliance.
As of May 2025, the IRS indicated that it had approximately 1.5 million followers on its various
social media platforms. Additionally, for FY 2025, the IRS reported that 2 percent of posts (178
out of 8,246 posts) on five different social media platforms were related to the refundable credit
programs.
TIGTA believes the IRS is missing the opportunity to expand its reach to taxpayers via social
media. If complex eligibility requirements are a factor in the IRS’s improper payments error
rates, increasing communications to taxpayers beyond those who currently follow its social
media platforms, may help reduce improper claims.
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In 2024, research indicated that 68 percent of Americans (232 million) used social media.
Additionally, social media has become a growing channel of communication and information
sharing. According to the Pew Research Center, about half of U.S. adults report getting news
from these platforms. Increasing the IRS’s social media content and expanding its distribution to
educate taxpayers on refundable credit eligibility increases awareness and potentially
compliance in these areas.
Recommendations
TIGTA recommended that IRS:
• Use funding to distribute social media content for refundable credits beyond current
followers and increase taxpayer and preparer awareness of the refundable tax credit
eligibility requirements.
• Monitor the paid social media distributions to determine the impact and effectiveness
to inform future decisions on educational needs.
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Appendix 1: Objective, Scope, and Methodology
The overall objective of our audit was to determine the Department of the Treasury’s (Treasury)
fiscal year (FY) 2025 compliance with the Payment Integrity Information Act of 2019 (PIIA). We
assessed Treasury’s compliance with the reporting requirements set forth in PIIA. Our audit scope
covered the period October 1, 2024, through September 30, 2025, and did not include the review
of programs and activities administered by the Internal Revenue Service (IRS). The Treasury
Inspector General for Tax Administration (TIGTA) is responsible for the audit of IRS’s
compliance with reporting requirements contained in PIIA.
To accomplish our objective, we performed the following activities during audit fieldwork
conducted from January 2026 through July 2026:
• We reviewed applicable laws, regulations, and guidance issued by OMB, as well as
Comprehensive Treasury Guidance for Payment Integrity Reporting in Accordance with
OMB Circular A-123 Appendix C: Requirements for Payment Integrity Improvement.
• We reviewed the FY 2025 Agency Financial Report (AFR) and any accompanying
information to assess whether Treasury:
o Published payment integrity information with the annual financial statement;
o Posted the annual financial statement and accompanying materials on the agency
website;
o Conducted improper payment (IP) risk assessments for each program with annual
outlays greater than $10 million at least once in the last three years;
o Adequately concluded whether the program is likely to make IPs and unknown
payments (UPs) above or below the statutory threshold;
o Published IP and UP estimates for programs susceptible to significant IPs and UPs
in the accompanying materials to the annual financial statement;
o Published corrective action plans for each program for which an estimate above the
statutory threshold was published in the accompanying materials to the annual
financial statement;
o Published an IP and UP reduction target for each program for which an estimate
above the statutory threshold was published in the accompanying materials to the
annual financial statement;
o Demonstrated improvements to payment integrity or reached a tolerable IP and UP
rate;
o Developed a plan to meet the IP and UP reduction target; and
o Reported an IP and UP estimate of less than 10 percent for each program for which
an estimate was published in the accompanying materials to the annual financial
statement.
• To assess Treasury’s program-specific risk assessment process, we selected the population
of all non-IRS programs that completed a risk assessment for year three in the three-year
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rotation. To determine the completeness and accuracy of the information reported and
compliance with the applicable guidance, we reviewed the program risk assessments and
supporting documentation. GenTech issued Finding 2: Inaccurate Completion of Program-
Specific Risk Assessments.
• To assess Treasury’s payment recapture audit program, we tested all non-IRS reporting
entities’ recapture audit programs. To determine the completeness and accuracy of the
information reported and compliance with the applicable guidance, we reviewed the
components’ submissions of the payment recapture audit results and determined if the
component (1) employed an internal control program to prevent, detect, and recover
overpayments; (2) considered all programs that expend $1 million or more annually; (3)
prepared and submitted justifications for those programs that did not complete a payment
recapture audit; (4) completed and submitted Payment Recapture Audit Results worksheets
to Treasury’s Risk and Control Group; and (5) disposed of recovered funds in accordance
with OMB guidance. In addition, we reviewed the supporting documentation related to the
payment recapture audit results for all non-IRS components that completed a payment
recapture audit. We determined if the component accurately reported the payment
recapture audit results on PaymentAccuracy.gov.
Management is responsible for the design, implementation, and operating effectiveness of the
agency’s internal controls over payment integrity. We assessed Treasury’s internal controls and
compliance with policies and procedures necessary to satisfy the audit objectives. We determined
that the principles of designing and implementing control activities within the control activities
component of internal controls, as well as the principle of performing monitoring activities within
the monitoring component of internal controls, were significant to Treasury’s improper payment
reporting.
We assessed whether internal controls are properly designed, implemented, and operated
effectively by reviewing and inspecting relevant documents and data and re-performing
procedures. However, because our review was limited to these internal control components and
underlying principles, it may not have disclosed all internal control deficiencies that may have
existed at the time of this audit.
We also assessed the reliability of the improper payment data by (1) reconciling the data to
supporting documentation, (2) reviewing existing information about the data and the system that
produced them, and (3) conducting an interview with Treasury’s personnel knowledgeable about
the data. We determined that the data were sufficiently reliable for the purposes of this report.
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper
Payment Reporting Requirements in FY 2025 and IRS Management’s
Response
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
Assessment of Fiscal Year 2025 Compliance With
Improper Payment Reporting Requirements
July 27, 2026
Report Number: 2026-400-039
TIGTACommunications@tig treas.gov | www.tigta.gov
1
18
Final Audit Report issued on July 27, 2026 Report Number 2026-400-039
Why TIGTA Did This Audit What TIGTA Found
The Inspectors General are For FY 2025, the IRS
required to annually assess and did not comply with
report on agency improper all PIIA requirements
payment requirements contained because it did not
in the Payment Integrity reduce the improper
Information Act (PIIA). payment rate to less
than 10 percent for
We assessed whether the IRS
the 4 high-risk
complied with annual improper
refundable tax credit
payment reporting requirements
programs.
for Fiscal Year (FY) 2025.
Additionally, the
Impact on Tax Administration IRS's overall
An improper payment is any improper payment rate increased from 21.9 percent in FY 2024 to
payment that should not have 26.5 percent in FY 2025.
been made or that was made in an For the IRS to effectively reduce improper payment rates and prevent
incorrect amount. financial loss to the government, it would need to prevent refunds
from being issued during return processing. The IRS runs various
The IRS has four programs that
automated checks on a tax return before paying a refund, but it has
they have deemed susceptible to
limited ability and information to timely verify taxpayer eligibility. For
improper payments. All four
example, the IRS reported that from FYs 2023 through 2025, it used
programs are refundable tax
math error authority to reduce total claims by approximately
credits and include the Additional
2 percent ($7.6 billion), adjusting claims from $330.5 billion to
Child Tax Credit, American
approximately $322.8 billion.
Opportunity Tax Credit, Earned
Income Tax Credit, and Net Outside of its existing math error authority, however, the IRS does
Premium Tax Credit. A refundable not have sufficient or reliable data to systemically prevent ineligible
tax credit can result in a refund individuals from receiving refundable credits. For example,
even if the taxpayer does not have relationship eligibility criteria cannot be verified at the time of filing.
a tax liability. Therefore, improperly Therefore, the IRS generally must examine questionable refundable
issuing these credits to taxpayers tax credit claims before issuing a refund to prevent financial loss to
represents a significant financial the government. However, the IRS reported that it examines less than
loss to the government. one percent of returns claiming these credits. Additionally, in the past
three FYs, prerefund examinations of refundable credits have
For FY 2025, the overall improper
declined by approximately 70 percent.
payment rate for the four
refundable tax credits was The IRS indicated that it would continue to focus on outreach and
26.5 percent and the total education in lieu of increasing examinations in a prerefund
estimated improper payments environment. However, these strategies make little impact on the
were approximately $28.1 billion. IRS’s overall improper payment rate. Without legislative intervention,
it is likely the IRS’s improper payment rate will continue to remain
above the 10 percent threshold.
What TIGTA Recommended
We made five recommendations to the IRS including: work with
Office of Tax Policy and Congress to request legislative changes to
refundable credits eligibility; increase correctable error authority;
create data sharing agreements with external partners to systemically
verify refundable credit eligibility; and improve its social media
strategies. IRS management agreed with all of our recommendations.
19
Treasury Inspector General for tax administration seal.
U.S. DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20024
July 27, 2026
MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE
FROM: Diana M. Tengesdal
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Assessment of Fiscal Year 2025 Compliance With
Improper Payment Reporting Requirements (Audit No.: 2026400001)
This report presents the results of our review to determine whether the Internal Revenue Service
complied with the annual improper payment reporting requirements for Fiscal Year 2025. This
review is part of our Fiscal Year 2026 Annual Program Plan and addresses the major
management and performance challenge of Ensuring Tax Compliance.
Management’s complete response to the draft report is included as Appendix IV. If you have any
questions, please contact me or Deann L. Baiza, Assistant Inspector General for Audit (Returns
Processing and Account Services).
20
Table of Contents
Background .....................................................................................................................................Page 1
Results of Review .......................................................................................................................Page 2
Fiscal Year 2025 Assessment of the IRS’s Compliance With
Improper Payment Reporting Requirements ............................................................Page 2
Legislative Changes Are Needed to Reduce Refundable Tax Credit
Improper Payments.............................................................................................................Page 3
Recommendations 1 through 3: ................................................... Page 7
The IRS Could Expand Social Media Outreach to Increase
Awareness for Refundable Credit Eligibility ...............................................................Page 8
Recommendations 4 and 5: ............................................................ Page 9
Appendices
Appendix I – Detailed Objective, Scope, and Methodology................................Page 10
Appendix II – Additional Guidance for Improper Payments................................Page 11
Appendix III – Programs Identified for Improper Payment Risk
Assessments...........................................................................................................................Page 12
Appendix IV –Management’s Response to the Draft Report ..............................Page 13
Appendix V – Abbreviations.............................................................................................Page 18
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Background
An improper payment is any payment that should not have been made or that was made in an
incorrect amount (including both overpayments and underpayments). The Payment Integrity
Information Act of 2019 (PIIA) requires agencies to annually report on all programs and activities
and identify those that may be susceptible to significant improper payments.1 Agencies must
estimate annual improper payments in susceptible programs and activities and report the results
of their efforts to address improper payments.
Further, the Office of Management and Budget (OMB) Circular A-123 Appendix C,
Requirements for Payment Integrity Improvement, directs agencies to conduct an improper
payment risk assessment at least once every three years for programs with annual outlays of
more than $10 million. The Department of the Treasury (herein referred to as the Treasury
Department) identifies the programs that the IRS must assess for the risk of improper payments
each fiscal year (FY). The IRS must also complete a Treasury certification for each program that
was not identified as needing a risk assessment stating there were no material changes (e.g.,
legislative changes, internal control changes, or audit reports impacting improper payments) to
the program since the last risk assessment was completed.2 Every year, Inspectors General must
review agency compliance with improper payment legislation and guidance.
For FY 2025, the IRS completed 12 certifications and 9 risk assessments for the required
programs.3 If a program is identified as susceptible to significant improper payments, the
following must be reported:
• The rate and dollar amount of improper payments.
• The root causes of the improper payments.
• The actions taken to address the root causes.
• The annual improper payment reduction targets.
• A discussion of any limitations to the IRS’s ability to reduce improper payments.
The IRS has identified four programs as being susceptible to improper payments. All four
programs are refundable tax credits and include the Additional Child Tax Credit (ACTC),
American Opportunity Tax Credit (AOTC), Earned Income Tax Credit (EITC), and
Net Premium Tax Credit (PTC). A refundable tax credit can result in a refund even if the taxpayer
does not have a tax liability. As a result, improperly issuing these credits to taxpayers represents
a significant financial loss to the government.
For FY 2025, the overall improper payment rate for the four refundable tax credits was
26.5 percent and the total estimated improper payments were approximately $28.1 billion. The
improper payment rates for these four programs ranged from 13.6 percent for the ACTC to
1
31 U.S.C. §§ 3351-3358.
2
See Appendix II for a list of additional legislation governing improper payments.
3
See Appendix III for a detailed list of the nine programs that had risk assessments.
22
32.7 percent for the EITC. Figure 1 provides a breakdown of the total payment amount for each
of the refundable credits and the estimated improper payment amount and rate.
Figure 1: FY 2025 IRS Estimated Improper Payment Rates for
Refundable Credits
Estimated Improper
Estimated Improper Total Payments
IRS Program Payments
Payment Rate (in Billions)
(in Billions)
ACTC 13.6% $33.4 $4.5
AOTC 30.7% $5.0 $1.5
EITC 32.7% $64.7 $21.1
Net PTC 31.6% $2.6 $0.8
4 26.5% $105.7 $28.1
Total
Source: FY 2025 Treasury Department Agency Financial Report. For FY 2025, the IRS reported
on claims and improper payments associated with Tax Year 2023 tax returns filed in 2024 and
2025. Total amounts may not add up due to rounding.
Results of Review
Fiscal Year 2025 Assessment of the IRS’s Compliance With Improper
Payment Reporting Requirements
For FY 2025, we determined that the IRS did not comply with all PIIA requirements. The IRS did
not meet the PIIA goal of reducing the improper payment rate to less than 10 percent for the
4 high-risk refundable tax credit programs. Additionally, the IRS failed to demonstrate
improvements to payment integrity. The IRS’s overall improper payment rate increased from
21.9 percent in FY 2024 to 26.5 percent in FY 2025. Figure 2 summarizes our evaluation of the
IRS’s compliance with the FY 2025 improper payment requirements.
4
The Total Improper Payment Rate is calculated by dividing the total estimated improper payment by the total
payment amount.
23
Figure 2: Compliance With Improper Payment
Requirements for FY 2025
Improper Payment Requirement
IRS Compliance Met – Yes
Published payment integrity information with the annual financial statement.
Posted the annual financial statement and accompanying materials to
agency website.
Conducted improper payment risk assessments for each program with annual outlays greater
than $10 million at least once in the last 3 years.
Adequately concluded whether programs are likely to make improper payments and
unknown payments above or below statutory threshold.5
Published improper payment and unknown payment estimates for programs susceptible to
significant improper payments and unknown payments in the accompanying materials to the
annual financial statement.
Published corrective action plans for each program for which an estimate above the statutory
threshold was published in the accompanying materials to the annual financial statement.
Published an improper payment and unknown payment reduction target for each program for
which an estimate above the statutory threshold was published in the accompanying
materials to the annual financial statement.
Developed a plan to meet the improper payment and unknown payment
reduction target.
IRS Compliance Met – No
Demonstrated improvements to payment integrity or reached a tolerable improper payment
and unknown payment rate.
Reported an improper payment and unknown payment estimate of less than 10% for each
program for which an estimate was published in the accompanying materials to the annual
financial statement.
Source: Analysis of the IRS’s compliance with improper payment requirements for FY 2025.
Legislative Changes Are Needed to Reduce Refundable Tax Credit Improper
Payments
The IRS has not been able to reduce its improper payment rate estimates to less than 10 percent
for each of its high-risk refundable tax credit programs, and in FY 2025 these rates increased.
However, we do not believe the IRS can achieve this goal with its current authority and
resources.
According to the FY 2025 Treasury Department Agency Financial Report (AFR), to meet this
target, the IRS would need to reduce refundable credit improper payments by $17.5 billion to
reach the goal of 10 percent. Figure 3 provides a comparison of the improper payment rates for
FYs 2023 through 2025.
5
Unknown payments are payments made by a program where it is still unknown whether the payment is proper or
improper. Payments are reported as unknown so that a program does not unintentionally over or under report the
payment type results.
24
Figure 3: FYs 2023 Through 2025 Improper Payment Rates
Source: FYs 2023 through 2025 Treasury Department AFRs.
Factors that contribute to improper payments of refundable credits
The FY 2025 Treasury Department AFR explains the complexities of the IRS’s refundable tax
credit programs and notes that errors are not caused by internal control weaknesses. Rather,
they are mostly due to factors beyond the IRS’s control. Our independent reviews of IRS
refundable tax credit programs support the Treasury Department’s assessment.6
The agency continues to report the following as the primary causes of refundable tax credit
errors.
· Complex statutory eligibility rules. Refundable tax credits generally have complex
eligibility rules, often relating to personal family and living arrangements. These eligibility
rules can vary across the refundable tax credits and can change from year to year. The
eligibility rules contribute to errors by taxpayers when claiming these credits.
· Inability to verify taxpayer-provided information. Taxpayer information, especially
relating to eligibility rules, is difficult for the IRS to verify at the time a taxpayer files a
return. Much of the information necessary to validate the accuracy of a refundable tax
credit claim before issuing a refund is not comprehensively available in any U.S.
government database.
· Limited correctable error authority. The IRS has limited authority, referred to as math
error authority, to correct mismatches at filing. Math error authority allows the IRS to
6
TIGTA, Report No. 2021-40-070, Addressing Complex and Inconsistent Earned Income Tax Credit and Additional
Child Tax Credit Rules May Reduce Unintentional Errors and Increase Participation (September 2021), TIGTA, Report
No. 2023-47-037, American Rescue Plan Act: Assessment of the Expanded Child and Dependent Care and Earned
Income Tax Credits (June 2023), and TIGTA, Report No. 2026-4S0-022, Reliable Data is Needed to Effectively Reduce
Improper Earned Income Tax Credit Payments for Nonwork Social Security Numbers (May 2026). Additional reports
assessing the IRS’s administration of refundable tax credits can be found at www.oversight.gov.
25
systemically correct mathematical errors, certain scenarios related to Taxpayer
Identification Numbers, or entries on a tax return exceeding the statutory limit of the
credit claimed. However, this authority cannot be used to systemically evaluate
refundable credit claims for ineligibility. For example, the IRS cannot use math error
authority to systemically deny a claim if the taxpayer does not meet the required
relationship criteria. Therefore, outside of math error authority, the IRS must examine the
tax return when it has indications that the taxpayer is ineligible to claim refundable
credits.
· Statutory Refund Issuance Deadline. To prevent improper payments on refundable
credits, the IRS would need to stop refunds before they are paid to taxpayers. However,
this creates a challenge for the IRS given the statutory requirement to pay interest on
refunds that are issued more than 45 days from the return due date. Holding all
refundable credit claims to verify eligibility before refunds are issued would increase the
costs of interest payments on valid refund claims that could not be verified within the
45-day period. Consequently, the IRS is balancing the need to detect and prevent
improper payments and the requirement to timely issue refunds on valid claims.
Significantly reducing improper payments through prerefund examinations is
unachievable
The IRS runs various automated checks on a tax return before paying a refund. For example, the
IRS reported that from FYs 2023 through 2025, it used math error authority to reduce
refundable credit claims by approximately 2 percent ($7.6 billion). Using this authority, it
adjusted total claims from $330.5 billion to approximately $322.8 billion.7
The IRS also conducts prerefund and post refund examinations. However, these processes only
address a small percentage of refundable tax credit claims. The IRS examined less than one
percent of refundable credit claims for FYs 2023 through 2025. Also, during this same period,
prerefund examinations of refundable credits decreased approximately 70 percent along with
the total credits that were disallowed. For example, in FY 2025, the IRS reported that for pre and
post refund examinations it selected 79,000 (0.3 percent) of the 24.6 million tax returns claiming
EITC. Figure 4 provides a detailed breakdown of the IRS’s efforts to reduce refundable tax credit
improper payments through prerefund examinations.
7
Figures surrounding math error authority are rounded and may not reconcile.
26
Figure 4: IRS Prerefund Examinations and Refundable Credits Disallowed
Have Decreased Substantially From FYs 2023 Through 2025
Source: The IRS’s examination metrics for FYs 2023 through 2025, M=million, K=thousand. Multiple
refundable credits can be claimed on a tax return.
One reason examinations are decreasing is due to reductions in staffing. Specifically, in FY 2025,
the IRS’s Refundable Credits Examination Operations Unit lost about 20 percent (86 examiners)
of its 439 examiners. The IRS has also reported that budget reductions resulted in decreased
examination staffing. Moreover, when the IRS received additional funding through the
Inflation Reduction Act, the Secretary of Treasury directed the IRS not to increase examinations
for taxpayers earning $400,000 per year or less.8 For example, the EITC is an anti-poverty credit
established by Congress for working families and is available to low and moderate-income
taxpayers.
In October 2020, the IRS estimated it would need to examine 4.2 million more tax returns before
issuing the refunds to be compliant with this goal. This is more than the IRS identifies annually
for potential examinations. At the time, the IRS estimated that the additional examinations
would cost more than $2.5 billion (an average of $595 per exam). Applying the IRS’s current
average cost of $804 for prerefund examinations, we estimate the cost to conduct 4.2 million
additional examinations has increased to $3.4 billion a year. In addition, we estimate that the IRS
would need 12,700 more examiners to conduct the additional examinations the IRS estimates
are needed.
The IRS could allocate examiners from other functions to conduct refundable tax credit
examinations. However, doing so would negatively affect the IRS’s ability to balance its
enforcement efforts across tax administration. We are conducting a separate review to assess
the IRS’s plans to improve the efficiency and effectiveness of the examination function with
fewer employees and enhanced technology.
Recently proposed legislation to address improper payments in federal programs indicates that
reducing financial loss to the government should be preventative in nature and that agencies
8
Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818.
27
should have access to appropriate records and data assets.9 In May 2025, we recommended that
the IRS work with the Office of Tax Policy to request additional legislative considerations that
will help the IRS reduce improper payments of refundable tax credits.10 Accordingly, the IRS
submitted to the Treasury Department a proposed legislative change addressing duplicate
dependent claims, which are associated with refundable credit noncompliance. However, there
has not been any progress with these proposed changes.
Legislative changes to simplify refundable credit requirements will make it easier for taxpayers
to correctly determine whether they are eligible and could reduce taxpayer errors. Ensuring that
the simplified requirements can be verified to reliable government data and providing the IRS
access to that data will enable it to accurately verify refundable credit claims when they are filed.
Finally, authorizing the IRS to systemically correct refundable credit claims when reliable data
indicates the taxpayer is ineligible will enable it to efficiently prevent the issuance of erroneous
refunds.
The Chief, Taxpayer Services, should:
Recommendation 1: Request that the Office of Tax Policy and Congress work on legislative
changes that would simplify and streamline refundable credit eligibility.
Management’s Response: IRS management agreed with this recommendation and will
share the report and recommendation with the Office of Tax Policy for consideration.
Recommendation 2: Identify specific areas within refundable credit tax administration where
additional correctable error authority could be requested. Once identified, request these
increased authorities via the Office of Tax Policy and Congress.
Management’s Response: IRS management agreed with this recommendation and will
identify the specific areas within refundable credit tax administration where additional
correctable error authority would be helpful and will share the information and this
report with the Office of Tax Policy.
Recommendation 3: Identify opportunities to work with external partners (i.e., other federal
agencies, states, and private institutions) and leverage available data to systemically verify
refundable credit eligibility. This should include working with the external partners to establish
data sharing agreements, and with the Office of Tax Policy and Congress to obtain access to the
data, if needed.
Management’s Response: IRS management agreed with this recommendation and will
identify opportunities to work with external partners and evaluate where sharing
agreements could leverage available data to systemically verify refundable credit
eligibility.
9
H.R. 8467, 119th Cong. (Introduced in House April 23, 2026), Zeroing Out Monetary Benefits Improperly Expended
Act (ZOMBIE Act).
10
TIGTA, Report No. 2025-400-025, Assessment of Fiscal Year 2024 Compliance With Improper Payment Reporting
Requirements p. 8 (May 2025).
28
The IRS Could Expand Social Media Outreach to Increase Awareness for
Refundable Credit Eligibility
The IRS indicates in its corrective action plans that it will continue to focus on outreach and
education to reduce improper payments in lieu of increasing examinations. The IRS balances its
outreach strategies by focusing on reaching eligible taxpayers who are not claiming credits and
educating taxpayers and tax return preparers on the eligibility requirements.
Strategies include the Nationwide Tax Forum, targeted communication and education, updates
to guidance, and expanded engagement with tax professionals. As part of the outreach and
education strategies, the IRS has a Return Preparer Strategy Program, which combines education
and enforcement of tax return preparers. The treatment of return preparers is based on
egregiousness and may lead to barring preparers from preparing or filing tax returns. In
FY 2025, the Return Preparer Strategy Program reported protecting $467 million in revenue
through its various treatment strategies.
Moreover, the IRS generally uses the same strategies year after year. While these strategies are
helpful, they are not effective in significantly reducing the improper payment rate. As noted
previously, the improper payment rate for FY 2025 increased from the prior year. Figure 5
provides a comparative list of outreach and education strategies for the last three fiscal years.
Figure 5: IRS Outreach and Education Strategies
FY 2023 FY 2024 FY 2025
Nationwide Tax Forums
Interactive Due Diligence Training Module
Tax Preparer Toolkit
Software Developers Working Group
Tax Preparer Alerts
Refundable Credits Summit
Filing Season Readiness Filing Season Readiness
Webinars Webinars
Tax Professional Awareness
Week
Dependent Database Meeting
Source: FYs 2023 through 2025 Treasury Department AFRs.
Additionally, the IRS uses social media to share updates on tax changes and scam
alerts, promote online account tools, and provide other informational content regarding
refundable credit eligibility. We found that the IRS can improve its use of social media strategies
by leveraging paid services to reach additional taxpayers and expand its messaging surrounding
refundable credit eligibility and compliance.
As of May 2025, the IRS indicated that it had approximately 1.5 million followers on its various
social media platforms. Additionally, for FY 2025, the IRS reported that 2 percent of posts
(178 out of 8,246 posts) on five different social media platforms were related to the refundable
credit programs.
29
The IRS Communications and Liaison’s Social Media Branch does not pay social media platforms
for visibility, promotion, outreach, or activity of any kind. The Social Media Branch indicated it
does not have the legislative authority to use appropriated funds for social media promotion or
paid marketing to disseminate information. Additionally, the IRS indicated that Communications
and Liaison does not have funding allocated for paid marketing purposes.
The annual appropriations language states that,
No part of any appropriation contained in this or any other Act shall be used directly or
indirectly, including by private contractor, for publicity or propaganda purposes within
the United States not heretofore authorized by Congress.
While the appropriations language does not provide a definition of either term (i.e., publicity or
propaganda), the Government Accountability Office has identified three activities that are
prohibited by the annual appropriation’s language, including: 1) self-aggrandizement, 2) covert
propaganda, and 3) purely partisan materials. It is not clear if paying to disseminate
informational content to taxpayers would fall into these categories.
The IRS General Legal Services indicated that so long as there is a logical relationship between
the IRS’s mission and outreach activities and the activities would not fall within any of the above
three prohibitions, the IRS generally has flexibility to spend money on advertisement for public
outreach. They indicated that fact-specific determinations could be made accordingly for the
purposes of paid social media outreach.
We believe the IRS is missing the opportunity to expand its reach to taxpayers via social media.
If complex eligibility requirements are a factor in the IRS’s improper payments error rates,
increasing communications to taxpayers beyond those who currently follow its social media
platforms, may help reduce improper claims.
In 2024, research indicated that 68 percent of Americans (232 million) used social media.
Additionally, social media has become a growing channel of communication and information
sharing. According to the Pew Research Center, about half of U.S. adults report getting news
from these platforms. Increasing the IRS’s social media content and expanding its distribution to
educate taxpayers on refundable credit eligibility increases awareness and potentially
compliance in these areas.
The Chief, Communications and Liaison, should:
Recommendation 4: Use funding to distribute social media content for refundable credits
beyond current followers and increase taxpayer and preparer awareness of the refundable tax
credit eligibility requirements.
Management’s Response: IRS management agreed with this recommendation and will
analyze and assess current social media content to determine if funding is necessary to
increase taxpayer and preparer awareness of refundable tax credit eligibility
requirements.
Recommendation 5: Monitor the paid social media distributions to determine the impact and
effectiveness, and inform future decisions on educational outreach.
Management’s Response: IRS management agreed with this recommendation. If funds
are expended on paid social media activity, the IRS will monitor the results to inform
future decision-making.
30
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this audit is to determine whether the IRS complied with the annual
improper payment reporting requirements for FY 2025. To accomplish our objective, we:
· Obtained and reviewed the information the IRS provided to the Department of the
Treasury for inclusion in the AFR to determine if information was provided to satisfy the
reporting requirements.
· Evaluated the adequacy of the IRS’s FY 2025 risk assessment for the IRS revenue
program funds identified by the Department of the Treasury.
· Identified the IRS’s efforts to reduce improper payment rates.
Performance of This Review
This review was performed with information obtained from the Office of the Chief Financial
Officer, Research Applied Analytics and Statistics, Return Integrity and Compliance Services, and
Communications & Liaison located at the IRS National Headquarters in Washington, D.C. during
the period October 2025 through July 2026. We conducted this performance audit in
accordance with generally accepted government auditing standards. These 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 objective. We believe that
the evidence obtained provides a reasonable basis for our findings and conclusions based on
our audit objective.
Data Validation Methodology
During this review, we obtained data from the published FY 2025 AFR. We also obtained
information from the IRS, which included metrics from Taxpayers Services Refundable Credits
Program Management and the Compliance Data Warehouse in the form of analyzed results. We
performed tests to assess the reliability of data reported by the IRS. We evaluated the data by
(1) reviewing various sources for consistent reporting, (2) evaluating the data logic for accuracy,
and (3) interviewing agency officials knowledgeable about the data. We did not test IRS systems
or perform data analyses in this audit. We determined that the data were sufficiently reliable for
purposes of this report.
Internal Controls Methodology
Internal controls relate to management’s plans, methods, and procedures used to meet their
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance. We determined that the
following internal controls were relevant to our audit objective: the controls established to
ensure IRS compliance with PIIA improper payment reporting requirements. We tested these
controls by reviewing reports, analyzing support documents, and meeting with IRS officials.
31
Appendix II
Additional Guidance for Improper Payments
In addition to PIIA, improper payment reporting is also governed by or related to the following
guidance:
Ø Executive Order 14247, Modernizing Payments To and From America’s Bank
Account , effective March 25, 2025, mandates the transition to electronic payments for all
federal disbursements and receipts by digitizing payments to the extent permissible
under applicable law. The phase out of paper checks for all federal disbursements and
receipts was effective as of September 30, 2025. The executive order addresses the
increase in mail-theft complaints since the pandemic. In addition, Department of
Treasury checks are 16 times more likely to be reported lost or stolen, returned
undeliverable, or altered than Electronic Funds Transfer.
Ø Executive Order 14249, Protecting America’s Bank Account Against Fraud, Waste,
and Abuse, effective March 25, 2025, enables the Department of Treasury to more easily
conduct improper payment and fraud prevention screening before disbursing funds on
behalf of agencies. It requires agencies to provide the Department of Treasury with
information needed to track transactions through the United States General Fund in
greater detail. This executive order was implemented due to the lack of sufficient
controls to track transactions flowing through the General Fund to determine if they
were proper. Agencies' past underinvestment in technology and longstanding challenges
with access to accurate data have prevented them from more fully safeguarding taxpayer
dollars against fraud and improper payments.
Ø OMB Circular A-136, Financial Reporting Requirements , effective on July 14, 2025,
includes guidance to federal agencies that are required to report improper payments.
The circular states that agencies must include a link to PaymentAccuracy.gov and provide
a summary of its payment integrity activities and results in its AFR or Performance and
Accountability Report.
Ø OMB Circular A-123 Appendix C, Requirements for Payment Integrity
Improvement , issued on March 5, 2021. Appendix C provides agencies and Inspectors
General with guidance on improper payment determinations and reporting. Every year,
each agency Inspector General must review its agency’s improper payment reporting in
the AFR and any accompanying material, such as that provided on
www.paymentaccuracy.gov, to determine if the agency complies with improper payment
legislation and OMB guidance.
32
Appendix III
Programs Identified for Improper Payment Risk Assessments
The Treasury Department identified the following IRS programs for improper payment risk
assessments for FY 2025.
Figure 1: IRS Programs Identified for Risk Assessments
Treasury Fund Risk Assessment
IRS Program
Symbol Determination
Build America Bonds and Recovery Zone Economic
20X0935
Development Bonds
Qualified School Construction Bonds 20X0946
New Clean Renewable Energy Bonds 20X0947
Qualified Energy Conservation Bonds 20X0948
Not susceptible
Energy Security 20X0958
Advanced Manufacturing Investment Credit 20X0962
Elective Credit for Energy Property and Electricity
20X0963
Produced
Clean Vehicle Credit 20X0964
Credit for Previously Owned Clean Vehicles 20X0965
Source: IRS Office of the Chief Financial Officer.
33
Appendix IV
Management’s Response to the Draft Report
34
35
36
37
38
Appendix V
Abbreviations
ACTC Additional Child Tax Credit
AFR Agency Financial Report
AOTC American Opportunity Tax Credit
EITC Earned Income Tax Credit
FY Fiscal Year
IRS Internal Revenue Service
OMB Office of Management and Budget
PIIA Payment Integrity Information Act
PTC Premium Tax Credit
TIGTA Treasury Inspector General for Tax Administration
39
To report fraud, waste, or abuse,
contact our hotline on the web at
https://www.tigta.gov/reportcrime-misconduct.
To make suggestions to improve IRS policies, processes, or systems
affecting taxpayers, contact us at
TIGTACommunications@tigta.treas.gov.
Information you provide is confidential, and you may remain anonymous.
40
Internal Revenue Service –
Refundable Premium Assistance
Tax Credit (Net PTC)
Internal Revenue Service – US
Internal Revenue Service –
Coronavirus Payments – Internal Revenue Service –
Economic Impact Payments and
Recovery Rebate Credits (3) Payment-Where American
Internal Revenue Service – US
Internal Revenue Service – HQ
Coronavirus Refundable Credits
– Sick and Family Leave Credit
Payment-Child Credit Exceeds
Opportunity Credit, Recovery
and Employee Retention Credit
Program Name
(3)
Departmental Offices – Act (AOTC)
Emergency Rental Assistance
Disbursement EIC (EITC) Liability (ACTC)
(3)
Published payment integrity information with the annual
Yes Yes Yes Yes Yes Yes Yes financial statement (1)
Posted the annual financial statement and accompanying
Yes Yes Yes Yes Yes Yes Yes materials on the agency website (1)
Table 2 summarizes Treasury programs’ compliance with the PIIA reporting requirements by -ASSOCIATES- GenTech
Conducted IP risk assessments for each program with annual
Yes Yes Yes N/A N/A N/A N/A outlays greater than $10 million at least once in the last three
years
Adequately concluded whether the program is likely to make
Table 2: Treasury Programs’ Compliance with PIIA Criteria for Programs Identified as Susceptible to Significant Improper
41 Yes Yes Yes N/A N/A N/A N/A IPs and UPs above or below the statutory threshold
Published IP and UP estimates for programs susceptible to
N/A N/A N/A Yes Yes Yes Yes significant IPs in the accompanying materials to the annual
financial statement (2)
Published corrective action plans for each program for which
program for programs that are identified as susceptible to significant improper payments for FY
N/A N/A N/A Yes Yes Yes Yes an estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement (2)
Published an IP and UP reduction target for each program for
which an estimate above the statutory threshold was published
N/A N/A N/A Yes Yes Yes Yes in the accompanying materials to the annual financial statement
(2)
Appendix 3: Treasury Programs’ Compliance with PIIA Criteria
Has demonstrated improvements to payment integrity or
N/A N/A N/A No No No No reached a tolerable IP and UP rate (2)
N/A N/A N/A Yes Yes Yes Yes Has developed a plan to meet the IP and UP reduction target (2)
Payments
2025 reporting.
www.gentechassociates.com
Reported an IP and UP estimate of less than 10% for each
N/A N/A N/A No No No No program for which an estimate was published in the
accompanying materials to the annual financial statement (2)
GenTech
-ASSOCIATES-
www.gentechassociates.com
(1) For the “Published payment integrity information with the annual financial statement” and “Posted the annual financial
statement and accompanying materials on the agency website” criteria, which are applicable at an agency level, if the agency is
compliant, then the programs are all compliant.
(2) The requirements apply only to programs for which an estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement. For short-term programs such as the COVID-19 programs, Treasury
will not plan to report an IP estimate either in its AFR or on PaymentAccuracy.gov, per the memorandum, Limitations in
Quantifying the Amount and Rate of Improper Payments for Short-Term Programs, submitted to OMB on August 1, 2022.
(3) Risk assessments were performed for FY 2024 and programs were deemed susceptible to significant IPs.
Table 3 summarizes Treasury programs’ compliance with the PIIA reporting requirements by
program for programs not susceptible to improper payments that conducted an improper
payment risk assessment in FY 2025 based on Treasury’s three-year rotation schedule in
accordance with OMB guidance.
Table 3: Treasury Programs’ Compliance with PIIA Criteria for Programs Not Susceptible to Improper Payments that
Conducted an Improper Payment Risk Assessment
Published payment integrity information with the annual Adequately concluded whether the program is likely to
Reported an IP and UP estimate of less than 10% for
Posted the annual financial statement and accompanying Has demonstrated improvements to payment integrity or
Published IP and UP estimates for programs susceptible
Published corrective action plans for each program for Published an IP and UP reduction target for each
Conducted IP risk assessments for each program with
Has developed a plan to meet the IP and UP reduction
which an estimate above the statutory threshold was program for which an estimate above the statutory each program for which an estimate was published in the
annual outlays greater than $10 million at least once in to significant IPs in the accompanying materials to the
financial statement (1) materials on the agency website (1) make IPs and UPs above or below the statutory threshold reached a tolerable IP and UP rate (2) target (2)
published in the accompanying materials to the annual threshold was published in the accompanying materials accompanying materials to the annual financial
Program Name
the last three years annual financial statement (2) financial statement (2) to the annual financial statement (2) statement (2)
Internal Revenue Service -
Build America Bonds and
Recovery Zone Economic Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Development Bonds
Internal Revenue Service –
Qualified School Construction Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Bonds
Internal Revenue Service –
New Clean Renewable Energy Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Bonds
Internal Revenue Service –
Qualified Energy Conservation Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Bonds
Internal Revenue Service –
Energy Security Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Internal Revenue Service –
Advanced Manufacturing Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Investment Credit
42
Community Development ~
Community Development Community Development – Community Development Internal Revenue Service –
Financial Institutions Fund – Community Development Bureau of Engraving and Internal Revenue Services –
Financial Institutions Fund – Financial Institutions Fund – Elective Credit for Energy
Community Development Capital Magnet Fund – Non-
Internal Revenue Services –
Community Development Community Development Financial Institutions Fund –
Financial Institutions (CDFI) Printing – Bureau of Engraving
Credit for Previously Owned
Property and Electricity
Financial Assistance Related
Financial Institutions (CDFI)
Program Name
Program Bank Enterprise Financial Institutions Program-
Capital Magnet Fund
Clean Vehicle Credit Produced
Award Program Program Payments Clean Vehicles
Native Initiatives and Printing Fund
Published payment integrity information with the annual
financial statement (1)
Yes Yes Yes Yes Yes Yes Yes Yes Yes
Posted the annual financial statement and accompanying
materials on the agency website (1)
Yes Yes Yes Yes Yes Yes Yes Yes Yes
-ASSOCIATES-
~ GenTech
Conducted IP risk assessments for each program with
annual outlays greater than $10 million at least once in
Yes Yes Yes Yes Yes Yes Yes Yes Yes the last three years
Adequately concluded whether the program is likely to
make IPs and UPs above or below the statutory threshold
43 Yes Yes Yes Yes Yes Yes Yes Yes Yes
Published IP and UP estimates for programs susceptible
to significant IPs in the accompanying materials to the
N/A N/A N/A N/A N/A N/A N/A N/A N/A annual financial statement (2)
Published corrective action plans for each program for
which an estimate above the statutory threshold was
N/A N/A N/A N/A N/A N/A N/A N/A N/A published in the accompanying materials to the annual
financial statement (2)
Published an IP and UP reduction target for each
program for which an estimate above the statutory
N/A N/A N/A N/A N/A N/A N/A N/A N/A threshold was published in the accompanying materials
to the annual financial statement (2)
Has demonstrated improvements to payment integrity or
reached a tolerable IP and UP rate (2)
N/A N/A N/A N/A N/A N/A N/A N/A N/A
Has developed a plan to meet the IP and UP reduction
target (2)
N/A N/A N/A N/A N/A N/A N/A N/A N/A www.gentechassociates.com
Reported an IP and UP estimate of less than 10% for
each program for which an estimate was published in the
N/A N/A N/A N/A N/A N/A N/A N/A N/A accompanying materials to the annual financial
statement (2)
Community Development Community Development ~
Fiscal Service – Federal Departmental Offices –
District of Columbia Pensions – District of Columbia (DC) Departmental Offices – Office Departmental Offices – Financial Institutions Fund – Financial Institutions Fund –
Fiscal Service – Check Forgery
Payment of School Departmental Offices – Salaries Departmental Offices – Federal Community Development Community Development
Cybersecurity Enhancement Coronavirus Capital Projects
DC Judicial Retirement & Pensions – DC Federal Pension of Terrorism and Financial Financial Institutions (CDFI) Financial Institutions (CDFI)
Improvement
Program Name
Program – Small Dollar Loan Program – Non-Federal
Account Fund
Insurance Fund
Survivors Annuity Fund Fund and Expenses Intelligence Research Fund Program Financial Assistance Payments
Published payment integrity information with the annual
financial statement (1)
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Posted the annual financial statement and accompanying
materials on the agency website (1)
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
-ASSOCIATES-
~ GenTech
Conducted IP risk assessments for each program with
annual outlays greater than $10 million at least once in
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes the last three years
Adequately concluded whether the program is likely to
make IPs and UPs above or below the statutory threshold
44 Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Published IP and UP estimates for programs susceptible
to significant IPs in the accompanying materials to the
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A annual financial statement (2)
Published corrective action plans for each program for
which an estimate above the statutory threshold was
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A published in the accompanying materials to the annual
financial statement (2)
Published an IP and UP reduction target for each
program for which an estimate above the statutory
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A threshold was published in the accompanying materials
to the annual financial statement (2)
Has demonstrated improvements to payment integrity or
reached a tolerable IP and UP rate (2)
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Has developed a plan to meet the IP and UP reduction
target (2)
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A www.gentechassociates.com
Reported an IP and UP estimate of less than 10% for
each program for which an estimate was published in the
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A accompanying materials to the annual financial
statement (2)
~ GenTech -ASSOCIATES-
www.gentechassociates.com
~
Published payment integrity information with the annual Adequately concluded whether the program is likely to
Reported an IP and UP estimate of less than 10% for
Posted the annual financial statement and accompanying Has demonstrated improvements to payment integrity or
Published IP and UP estimates for programs susceptible
Published corrective action plans for each program for Published an IP and UP reduction target for each
Conducted IP risk assessments for each program with
Has developed a plan to meet the IP and UP reduction
which an estimate above the statutory threshold was program for which an estimate above the statutory each program for which an estimate was published in the
annual outlays greater than $10 million at least once in to significant IPs in the accompanying materials to the
financial statement (1) materials on the agency website (1) make IPs and UPs above or below the statutory threshold reached a tolerable IP and UP rate (2) target (2)
published in the accompanying materials to the annual threshold was published in the accompanying materials accompanying materials to the annual financial
Program Name
the last three years annual financial statement (2) financial statement (2) to the annual financial statement (2) statement (2)
Fiscal Service – Claims for
Contract Disputes Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Fiscal Service – Corporation
for Public Broadcasting Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Fiscal Service – Debt
Collection Special Fund Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Fiscal Service – Emergency
Planning & Security Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Fiscal Service – Financial
Agent Services Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Fiscal Service – Fiscal Service
Administrative Salaries and Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Expenses
Fiscal Service – Judgements,
U.S. Courts Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Fiscal Service – Payment to
Legal Services Corporation Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Fiscal Service – Payment to
Resolution Funds Corporation Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Fiscal Service – Resident
Tuition Sup Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Fiscal Service – Travel
Promotion Fund, Corp for Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Travel Promotion
Office of International
Assistance – Clean Tech Fund Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Loans Financing Acct
Office of International
Assistance – Contribution to Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
African Development Bank
Office of International
Assistance – Contribution to
International Bank Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Reconstruction
45
Office of International Office of International
Assistance – Contribution to Assistance – Contribution to
Program Name
the Asian Development Fund Multilat INV Guar
Published payment integrity information with the annual
financial statement (1)
~
Yes Yes
(2) The requirements apply only to programs for which an estimate above the statutory threshold was published in the
Posted the annual financial statement and accompanying
materials on the agency website (1)
Yes Yes
(1) For the “Published payment integrity information with the annual financial statement” and “Posted the annual financial -ASSOCIATES-
~c=' GenTech
Conducted IP risk assessments for each program with
annual outlays greater than $10 million at least once in
Yes Yes the last three years
Adequately concluded whether the program is likely to
make IPs and UPs above or below the statutory threshold
accompanying materials to the annual financial statement. For short-term programs such as the COVID-19 programs, Treasury
46 Yes Yes
Published IP and UP estimates for programs susceptible
to significant IPs in the accompanying materials to the
N/A N/A annual financial statement (2)
Published corrective action plans for each program for
statement and accompanying materials on the agency website” criteria, which are applicable at an agency level, if the agency is
which an estimate above the statutory threshold was
N/A N/A published in the accompanying materials to the annual
financial statement (2)
will not plan to report an IP estimate either in its AFR or on PaymentAccuracy.gov, per the memorandum, Limitations in
Published an IP and UP reduction target for each
program for which an estimate above the statutory
N/A N/A threshold was published in the accompanying materials
to the annual financial statement (2)
Has demonstrated improvements to payment integrity or
reached a tolerable IP and UP rate (2)
N/A N/A
Has developed a plan to meet the IP and UP reduction
target (2)
N/A N/A
Quantifying the Amount and Rate of Improper Payments for Short-Term Programs, submitted to OMB on August 1, 2022.
compliant, then the programs are all compliant.
www.gentechassociates.com
Reported an IP and UP estimate of less than 10% for
each program for which an estimate was published in the
N/A N/A accompanying materials to the annual financial
statement (2)
Appendix 4 Treasury Management's Response
DEPARTMENT
Y OF THE TREASURY
WASHINGTON, D.C
MEMORANDUM FOR ACTING DIRECTOR SHIELA MICHEL
FINANCIAL AUDIT,
OFFICE OF INSPECTOR GENERAL A
FROM: John W. York. Assistant Secretary for Management / I
SUBJECT: Audit of Treasury's Compliance with the Payment Int grity Repo i g
Requirements for Fiscal Year (FY) 2025
We have reviewed the draft audit report of GenTech Associates (as contracted by Treasury's
Office of Inspector General) on Treasury's improper payment reporting for FY 2025 and
appreciate the opportunity to respond. We recognize the importance of achieving full compliance
with the Payment Integrity Information Act of2019 (PIIA), which includes complying with the
Office of Management and Budget (0MB) Memorandum M-19-21 Appendix C to Circular A-
123, Requirementsfor Payment Integrity Improvement; Executive Order 13520, Reducing
Improper Payments and Eliminating Waste in Federal Programs; and 0MB Circular A-136.
Financial Reporting Requiremeflls.
Your audit concluded that Treasury was not in compliance with PIIA for FY 2025 because the
Internal Revenue Service (IRS). as reported by the Treasury Inspector General for Tax
Administration (TIGTA), did not report an overall improper payment rate of less than 10 percent
for four refundable tax credit (RTC) programs-the Earned Income Tax Credit. the Additional
Child Tax Credit, the American Opportunity Tax Credit, and the Net Premium Tax Credit.
Additionally, the IRS failed to demonstrate improvements to payment integrity. We appreciate
your acknowledgement that Treasury complied with alt other PIIA requirements.
RTCs generally have complex eligibility rules that may be difficult for the IRS to verify,
particularly at the time the taxpayer files a return, due to the lack of available and relevant third
party data. Consequently, RTC overclaims are not the result of internal control weaknesses that
we can remediate internally but are, in fact, the result of factors beyond our control under current
law and existing authority. Even if we could obtain legislative changes and invest in additional
resources and verification solutions that would ultimately reduce overclaims, the benefits derived
would be marginal relative to the cost of doing so. Audits by the Government Accountability
Office and TIGTA have also concluded that RTC overclaims are largely due to the statutory
design and complexity of the RTCs, not internal control weaknesses. financial management
deficiencies, or reporting failures.
We are continuing to collaborate with the IRS to identify a more effective way to report on
estimated payment errors associated with the RTC programs in the Department's Agency
Financial Report as part of a broader discussion on the tax gap and tax burden.
Attached is our response to the other finding and recommendations made in your report related
to payment integrity deliverables of non-IRS Treasury Components. If you have any questions.
please contact Carole Banks, Deputy Chief Financial Officer, at (202) 286-2202.
47
Appendix 4 Treasury Management's Response
Attachment
Attachment l: Management's Response to PIIA Audit Recommendations
48
Appendix 4 Treasury Management's Response
Attachment 1
Management's Response to PIIA Audit Recommendations
GenTech's Finding
During FY 2025, the Bureau of Engraving and Printing (BEP) and Fiscal Service's
Administrative Resource Center (ARC) did not adequately apply Treasury's guidance when
completing program-specific risk assessments, nor did the review controls within those
components or within Treasury's Risk and Control Group (RCG) properly detect the inaccurate
responses.
GenTech's Recommendations:
I. Treasury's RCG should develop and disseminate supplemental guidance that provides clearer
instructions for completing qualitative risk assessment questions, including how responses to
identified risks should align with the related susceptibility determination.
2. The components' management should implement enhanced supervisory review procedures to
ensure qualitative risk assessment responses are accurate, consistent, and supported prior to
submission. This should include a documented secondary review focused on the appropriateness
of susceptibility determinations and alignment with Treasury guidance.
3. The components' management should establish procedures to validate responses provided by
shared service providers (e.g., ARC) to ensure consistency, accuracy, and alignment with
program conditions prior to incorporating those responses into component risk assessments.
Management's Response:
Treasury management concurs with GenTech's recommendations. Treasury's RCG will provide
components with clearer instructions for completing the qualitative risk assessment questions
beginning in Fiscal Year 2027. The RCG will also provide guidance to components on
performing reviews of their qualitative risk assessments prior to submission.
Additionally, RCG will provide the components with further guidance on how to review the
qualitative risk assessment(s) of shared service providers.
Implementation Date: May 15, 2027
Responsible Official(s): Assistant Secretary for Management and Deputy Chief Financial Officer
49
3
GenTech
-ASSOCIATES-
www.gentechassociates.com
Appendix 5: Report Distribution
Department of the Treasury
Secretary of the Treasury
Deputy Secretary
Assistant Secretary for Management
Deputy Chief Financial Officer
Director, Risk and Control Group
Office of Management and Budget
Controller, Office of Federal Financial Management
OIG Budget Examiner
U.S. Senate
Chairman and Ranking Member
Committee on Homeland Security and Governmental Affairs
Chairman and Ranking Member
Committee on Finance
Chairman and Ranking Member
Committee on Appropriations
U.S. House of Representatives
Chairman and Ranking Member
Committee on Oversight and Accountability
Chairman and Ranking Member
Committee on Ways and Means
Chairman and Ranking Member
Committee on Appropriations
U.S. Government Accountability Office
Comptroller General of the United States
U.S. Congress
Joint Committee on Taxation
50
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