Treasury OIG, Audit of Treasury's Compliance with the PIIA Requirements for Fiscal Year 2023 (OIG-24-029) (2024-05-29)
Summary
Audit Report OIG-24-029 of the Treasury Office of Inspector General, dated May 29, 2024, transmits an audit by RMA Associates (RMA) of the Department of the Treasury's compliance with the Payment Integrity Information Act of 2019 (PIIA) for fiscal year 2023. RMA determined that Treasury was not in compliance with PIIA for FY 2023. The memorandum states that Treasury did not comply with 2 of 10 PIIA reporting requirements. It states that Treasury did not adequately conclude whether the Emergency Rental Assistance Program (ERA) and Air Carrier Payroll Support Programs (PSP) are likely to make improper payments and unknown payments above or below the statutory threshold, and that four IRS programs did not report an improper payment rate of less than 10 percent.
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“Treasury OIG, Audit of Treasury's Compliance with the PIIA Requirements for Fiscal Year 2023 (OIG-24-029) (2024-05-29).”
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Audit Report
OIG-24-029
FINANCIAL MANAGEMENT
Audit of Treasury’s Compliance with the PIIA
Requirements for Fiscal Year 2023
May 29, 2024
Office of Inspector General
Department of the Treasury
This Page Intentionally Left Blank
DEPARTMENT OF THE TREASURY
W AS H I N GT ON, D.C. 2 0220
May 29, 2024
OFFICE OF
INS PECT OR G EN ER AL
MEMORANDUM FOR ANNA CANFIELD ROTH
ASSISTANT SECRETARY FOR MANAGEMENT
FROM: Ade Bankole /s/
Director, Financial Statement Audits
SUBJECT: Audit of Treasury’s Compliance with PIIA Requirements
for Fiscal Year 2023
We hereby transmit the attached subject report. Under a contract monitored by our
office, RMA Associates (RMA), 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) 2023. As part of the
audit, RMA also assessed Treasury’s compliance with additional improper payment
reporting requirements set forth in Executive Order 13520, Reducing Improper
Payments and Eliminating Waste in Federal Programs, 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.
RMA 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, RMA determined that Treasury was not in compliance with PIIA
for FY 2023. Treasury did not comply with 2 of 10 PIIA reporting requirements.
Specifically, Treasury did not adequately conclude whether programs are likely to
make Improper Payments (IPs) and Unknown Payments (UPs) above or below the
statutory threshold for two pandemic relief programs—the Emergency Rental
Assistance Program (ERA) and Air Carrier Payroll Support Programs (PSP); and 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: (i) Earned Income Tax Credit; (ii) American Opportunity Tax Credit; (iii)
Additional Child Tax Credit; and (iv) Net Premium Tax Credit. Treasury complied
with the remaining eight PIIA requirements.
Page 2
RMA also found that the Office of Capital Access (OCA) management did not
provide appropriate justification memos for the ERA, Homeowners Assistance Fund
(HAF), and PSP pandemic relief programs in concluding that payment recapture
audits were deemed not cost-effective for FY 2023 reporting. OCA also failed to
provide a timely justification for not performing a payment recapture audit for the
Coronavirus Capital Projects Fund. In addition, OCA and the Community
Development Financial Institutions Fund managements’ responses to certain risk
assessment questions in the qualitative risk assessments over the HAF program
and Emergency Response Program, respectively, were inaccurate in determining the
payment type’s susceptibility to significant improper payments. RMA noted that
although the inaccurate responses to the risk assessment questions affected the
rating of a risk factor from not susceptible to susceptible, these inaccurate
responses did not affect the overall risk assessment rating for the 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 RMA’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 2023. RMA is responsible for the attached
auditors’ report dated May 29, 2024, and the conclusions expressed therein.
However, our review disclosed no instances where RMA 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) 439-5835, 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
PIIA Requirements for Fiscal Year 2023
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4121 Wilson Blvd, Suite 1100
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Phone: (571) 429-6600
www.rmafed.com
May 29, 2024
Mr. Ade Bankole
Director, Financial Statement Audits
Office of Inspector General
Department of the Treasury
Dear Mr. Bankole,
RMA Associates, LLC 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 2023.
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,
Reza Mahbod, CPA, CISA, CGFM, CICA, CGMA, CDFM, CFE, CDPSE
President
RMA Associates, LLC
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Table of Contents
Audit Report ...............................................................................................................................1
Results in Brief ...........................................................................................................................3
Background .................................................................................................................................5
Audit Results ..............................................................................................................................9
Appendix 1: Objective, Scope, and Methodology ...................................................................... 20
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment Reporting
Requirements in FY 2023 and IRS Management’s Response ..................................................... 22
Appendix 3: Treasury Programs’ Compliance with PIIA Criteria .............................................. 45
Appendix 4: Treasury Management’s Response ........................................................................ 51
Appendix 5: Report Distribution ............................................................................................... 56
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Acronyms
ACTC Additional Child Tax Credit
AFR Agency Financial Report
AOTC American Opportunity Tax Credit
CDFI Community Development Financial Institutions
EITC Earned Income Tax Credit
EO Executive Order
ERA Emergency Rental Assistance
FY Fiscal Year
GAO Government Accountability Office
HAF Homeowners Assistance Fund
IP Improper Payment
IPERA Improper Payments Elimination and Recovery Act of 2010
IPERIA Improper Payments Elimination and Recovery Improvement Act of
2012
IPIA Improper Payments Information Act of 2002
IRS Internal Revenue Service
Net PTC Net Premium Tax Credit
OCA Office of Capital Access
OCC Office of the Comptroller of the Currency
ODCFO Office of the Deputy Chief Financial Officer
OIG Office of Inspector General
OMB Office of Management and Budget
ORP Office of Recovery Programs
PIIA Payment Integrity Information Act of 2019
PSP Air Carrier Payroll Support Program
PTC Premium Tax Credit
RCG Risk and Control Group
RMA RMA Associates, LLC
RTC Refundable Tax Credit
TIGTA Treasury Inspector General for Tax Administration
Treasury U.S. Department of the Treasury
Treasury’s PIIA Guidance FY 2023 Treasury Implementation Guide for OMB Circular A-123
Appendix C: Requirements for Payment Integrity Improvement
UP Unknown Payment
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Audit Report
May 29, 2024
Richard K. Delmar
Acting Inspector General
Department of the Treasury
Washington, D.C.
RMA Associates, LLC (RMA) conducted a performance audit of the Department of the Treasury’s
(Treasury) Fiscal Year (FY) 2023 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 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 the 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 improper payment reporting requirements set forth in
Executive Order (EO) 13520, Reducing Improper Payments and Eliminating Waste in Federal
Programs; 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. We conducted our fieldwork from January 2024 through May 2024 in
Arlington, VA. 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 the PIIA for FY 2023. This summarization includes IRS’s management
response to TIGTA’s audit findings. TIGTA issued its report on May 17, 2024, which is included
in its entirety as Appendix 2 of this report.
We conducted this performance audit in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
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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As a result of our audit, we determined Treasury was not in compliance with PIIA for FY 2023.
Treasury did not adequately conclude whether programs are likely to make Improper Payments
(IPs) and Unknown Payments (UPs) above or below the statutory threshold for two pandemic relief
programs—the Emergency Rental Assistance Program (ERA) and Air Carrier Payroll Support
Programs (PSP); and IRS did not report an improper payment rate of less than 10 percent for four
of its programs identified as susceptible to significant improper payments: (1) Earned Income Tax
Credit; (2) Additional Child Tax Credit; (3) American Opportunity Tax Credit; and (4) Net
Premium Tax Credit. Susceptibility to significant improper payments 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 2023 or (2) $100 million (OMB’s threshold).
We also noted the following findings:
· Insufficient justification memos in determining the cost-effectiveness of conducting
payment recapture audits for the ERA, Homeowners Assistance Fund (HAF), and PSP
pandemic relief programs.
· Untimely submission of a justification memo related to the cost-effectiveness of a payment
recapture audit for the Coronavirus Capital Projects Fund pandemic relief program.
However, RMA noted that Treasury management subsequently submitted the justification
memo concluding that a recapture payment audit was not deemed cost-effective for this
program.
· Inaccurate responses to certain risk assessment questions during the completion of the risk
assessment for two fund groups.6 However, RMA noted that these 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,
RMA Associates, LLC
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 2023 because it did not fully comply with the
requirements to adequately conclude whether two programs are likely to make IP and UPs above
or below the statutory threshold, and to report an improper payment rate of less than 10 percent
for four programs identified as susceptible to significant improper payments. 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) published IP and UP estimates for
programs susceptible to significant IPs and UPs in the accompanying materials to the AFR; 5)
published corrective action plans for each program for which an estimate above the statutory
threshold was published in the accompanying materials to the AFR; 6) 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; 7) demonstrated improvements to payment
integrity or reached a tolerable IP and UP rate; and 8) developed a plan to meet the IP and UP
reduction target. Treasury did not comply with the requirements to adequately conclude whether
programs are likely to make IPs and UPs above or below the statutory threshold for the ERA and
PSP programs, and 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:
· Earned Income Tax Credit (EITC) – IRS estimates 33.5 percent ($21.9 billion) of the total
EITC payments of $65.4 billion in FY 2023 were improper.
· Additional Child Tax Credit (ACTC) – IRS estimates 14.5 percent ($0.5 billion) of the
total ACTC payments of $3.8 billion in FY 2023 were improper.
· American Opportunity Tax Credit (AOTC) – IRS estimates 31.6 percent ($1.7 billion) of
the total AOTC payments of $5.2 billion in FY 2023 were improper.
· Net Premium Tax Credit (Net PTC) – IRS estimates 26.0 percent ($1.0 billion) of the total
Net PTC payments of $3.7 billion in FY 2023 were improper.
We determined that Treasury was in compliance 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 improper
payment reporting. We identified the Office of Capital Access (OCA) management, formerly
known as the Office of Recovery Programs (ORP), did not provide appropriate justification memos
for the ERA, HAF, and PSP pandemic relief programs in concluding that payment recapture audits
were deemed not cost-effective for these programs for FY 2023 reporting.
We also identified that OCA management failed to provide evidence of its payment recapture
audit, or a justification memo that establishes the payment recapture audit was deemed not cost-
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effective, for the Coronavirus Capital Projects Fund, which had a total non-federal disbursement
of $31.3 million for FY 2023 reporting. OCA management subsequently submitted the justification
memo for this fund for FY 2023 reporting, concluding that a payment recapture audit was deemed
not cost-effective for this program.
Lastly, for OCA’s HAF program and Community Development Financial Institutions (CDFI)
Fund’s Emergency Response program, we identified four instances and two instances,
respectively, in which management’s responses to the risk assessment questions in its qualitative
risk assessment related to these programs were inaccurate in determining the payment type’s
susceptibility to significant improper payments. RMA noted, however, that these inaccurate
responses did not affect the overall risk assessment rating for the programs identified.
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 concurred with our recommendations
and noted that under Treasury’s PSP, Treasury awarded $59 billion in financial assistance to the
domestic aviation industry for the continued payment of employee wages, salaries, and benefits.
The majority of PSP funds – approximately 89 percent – were awarded to large air carriers based
on the reports that the carriers had filed with the U.S. Department of Transportation. In contrast,
the CARES Act required Treasury to provide financial assistance to smaller air carriers and
aviation contractors in an amount that the applicants certified, using sworn financial statements or
other appropriate data, as the amount of wages, salaries, and benefits they paid to their employees
during the time period from April 1, 2019 through September 30, 2019. OIG audits of this latter
group have revealed that some smaller recipients overstated their requested awardable amounts
due to the improper inclusion of certain categories of expenses. Treasury has recouped
$147 million so far.
Management also noted that through Treasury’s ERA programs, Congress appropriated a total of
$47 billion to address financial and housing instability caused by the COVID-19 pandemic and
tasked Treasury with implementing ERA rapidly and under extraordinary emergency conditions.
Despite these challenges, Treasury quickly implemented the program and oversaw unprecedented
rental assistance. As of June 30, 2023, ERA had already provided more than 12.3 million rental
assistance payments to families in need.
Management further noted they have long held that refundable tax credits (RTCs) are not
“payments” as intended under the improper payments legislation, as the tax system is a collection
system rather than a payment system. Management noted 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.
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 was largely
compliant with the reporting requirements contained in the PIIA for FY 2023. However, IRS still
has not satisfied the PIIA goal of reducing the overall improper payment rate for EITC, ACTC,
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AOTC, and Net PTC to less than 10 percent. TIGTA also reported that all required quarterly
scorecards were posted to PaymentAccuracy.gov for FY 2023.
Additionally, TIGTA reported that IRS has been unable to reduce improper payment rate estimates
to less than 10 percent for each of its high-risk programs, most notably EITC. In Treasury’s FY
2023 AFR, IRS noted that part of its actions to mitigate the risk of improper payments included
outreach to taxpayers and tax preparers in lieu of conducting additional pre-refund audits.
However, these initiatives may not make an immediate impact on the improper payment rates, if
at all, due to the time it takes for taxpayers to file returns and for IRS to examine those returns.
TIGTA also reported that their review of the risk assessment template found that it does not allow
IRS to provide an accurate assessment of improper payment risk. The questions on the risk
assessment are for general applicability and not intended to cover the unique nature of the IRS
refundable credits program. Because the risk assessment template does not allow for an accurate
assessment of improper payment risk related to IRS’s refundable credits programs, this could
become problematic for those programs that are not regularly evaluated by external audit agencies
and may have a higher risk than the template identifies. TIGTA reported that Treasury is aware of
the unique nature of the refundable tax credits and has been understanding of the justifications IRS
may have to make when completing the template.
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.
In 2009, EO 13520, Reducing Improper Payments and Eliminating Waste in Federal Programs,
required Federal agencies to intensify their efforts to eliminate payment error, waste, fraud, and
abuse in major Federal programs while continuing to ensure that these programs serve and provide
access to their intended beneficiaries. It increased Federal agencies’ accountability and required
that Federal agencies provide their agency Inspector General with detailed information on efforts
to identify and reduce the number of improper payments in Federal programs with the highest
dollar value of improper payments.
Following EO 13520, 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.
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In accordance with IPERIA and EO 13520, Offices of Inspector General (OIG) 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 exceed $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 its high priority programs to include
improvements for determining and estimating improper payments.
For the FY 2023 reporting, OMB determined that EITC, ACTC, AOTC, 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 over $10 million in Total Non-Federal
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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.
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 eleven 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 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 RCG. Fund Groups identified as susceptible to significant IPs through the risk
assessments and all OMB-designated high priority programs will develop a 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;
· Root cause for IPs;
· Tolerable rates;
· Data and information themes;
· Corrective actions; and
· Non-compliant programs.
For FY 2023, Treasury identified EITC, AOTC, ACTC, and Net PTC as programs susceptible to
significant improper payments.
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, 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.
Payment Recapture 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 recapture audit is
a review and analysis of an agency’s or program’s accounting and financial records, and other
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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 recapture audits and treatment of recaptured improper payments. The steps to perform a
payment recapture audit include:
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 November 15, 2023, 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;
· summary discussing the nature of RTC claims; and
· IRS’s strategies to address the tax gap and reduce RTC errors.
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 EITC, ACTC, AOTC, 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
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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
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 2023 because Treasury did not
adequately conclude whether programs are likely to make IPs and UPs above or below the statutory
threshold for the ERA and PSP pandemic relief programs and IRS did not report an overall
improper payment rate of less than 10 percent for the EITC, ACTC, AOTC, and Net PTC
programs. We discuss this further in our Finding 1 below. Treasury complied with the other PIIA
requirements as outlined in Table 1. In addition, Appendix 3 provides a summary of Treasury
programs’ compliance with PIIA reporting criteria for programs identified as susceptible to
significant improper payments for FY 2023 reporting and for programs not susceptible to improper
payments that conducted an IP risk assessment in FY 2023 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 No
above or below statutory threshold
Publish IP and UP estimates for programs susceptible to significant IPs Yes
and 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 Yes
and 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: RMA’s and TIGTA’s review of the Department of the Treasury’s Compliance with PIIA requirements for FY 2023
for the programs listed in Appendix 3.
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Additionally, OMB determined that IRS’s EITC, ACTC, AOTC, and Net PTC refundable tax
credits are high-priority programs for FY 2023. In compliance with EO 13520 for these high-
priority programs, we noted that Treasury (1) established targets to reduce and recover improper
payments; (2) provided the methodology to identify and measure improper payments; and (3)
provided plans and supporting analysis to ensure that initiatives undertaken do not unduly burden
program access and participation by eligible beneficiaries.
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; (2) performed risk
assessments using required criteria defined by OMB Circular A-123 (with exceptions noted); and
(3) conformed to OMB guidance for payment recapture audits (with exceptions noted). In addition,
we determined that Treasury complied with the requirement to post required improper payment
information to the PaymentAccuracy.gov website.
Finding 1: Treasury Was Not in Compliance with PIIA for FY 2023
We determined that Treasury was not in compliance with PIIA for FY 2023 due to Treasury not
adequately concluding whether the ERA and PSP pandemic relief programs are likely to make IPs
and UPs above or below the statutory threshold. RMA identified OCA, formerly ORP,
management inadequately concluded that the ERA and PSP programs are not susceptible to IPs in
their risk assessments completed for FY 2023 reporting, when these programs are likely
susceptible to IPs. RMA identified that certain questions on the qualitative risk assessments were
answered incorrectly by OCA management. OCA management indicated a rating as not
susceptible, but it should have been susceptible.
OCA’s Pandemic Relief Programs. OMB M-21-19 states “2b. Adequately concluded whether
the program is likely to make IPs and UPs above or below the statutory threshold: To achieve
compliance the agency must ensure that the IP risk assessment methodology used adequately
concludes whether the program is likely to make IPs plus UPs above or below the statutory
threshold.”
In addition, OMB M-21-19 defines payment as “any transfer of Federal funds to any non-Federal
person or entity or a Federal employee, that is made by a Federal agency, a Federal contractor, a
Federal grantee, or a Governmental or other organization administering a Federal program or
activity.”
OCA management did not adequately complete its program-specific risk assessments over ERA
and PSP programs. Specifically, responses to several of the ERA risk assessment questions focused
on payments made at the agency level and did not consider payments made at the state and/or
grantee level. In addition, the ERA risk assessment did not fully consider improper payments
reported by ERA grantees and the results of Single Act Audit findings.
The risk assessment for the PSP program failed to consider that the OCA re-certification effort,
which was aimed at addressing systemic improper payments, was not fully effective. Specifically,
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the re-certification effort relied on self-certification by air carriers and contractors but in March
2023 Treasury OIG informed OCA management, that based on their audits of a sample of air
carriers and contractors, 60 percent of the entities re-certified incorrectly.
The inadequate conclusion of these programs’ susceptibility to IPs impacts Treasury’s compliance
with the PIIA requirement of adequately concluding whether programs are likely to make IPs and
unknown payments above or below the statutory threshold.
Recommendation
RMA recommends Treasury’s RCG work with OCA management to consider all information
available when answering risk assessment questions to ensure adequate completion and conclusion
of susceptibility for these program-specific risk assessments.
Management’s Concurrence and RMA’s Response
Treasury concurs with this recommendation. RCG will revise its Departmental guidance to all
Components to better ensure they adequately complete risk assessment questionnaires and
consider all information available when concluding on the overall susceptibility of risk.
Treasury’s response meets the intent of the audit recommendation.
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 under Treasury’s PSP – which
was authorized by the CARES Act (PSP1), Consolidated Appropriations Act of 2021 (PSP2), and
the American Rescue Plan Act (PSP3) – Treasury awarded $59 billion in financial assistance to
the domestic aviation industry for the continued payment of employee wages, salaries, and
benefits. The funding had been urgently needed because the number of airline passengers suddenly
dropped by an unprecedented 60% in 2020 due to the COVID-19 pandemic. At Congress’
direction, Treasury created and implemented these programs on an expedited timeframe, including
the publication of application procedures within five days after the passage of the CARES Act.
Approximately 700 large and small businesses in every state received PSP assistance. Recipients
reported using the PSP assistance to fully or partially fund the salaries and benefits of more than
640,000 aviation employees during the pandemic, help maintain critical infrastructure capacity,
and facilitate industry recovery. Additionally, recipients reported more than 360,000 aviation jobs
being retained or created as a result of receiving PSP assistance. Employment levels in the aviation
industry now surpass 2019 (pre-pandemic) levels.
Management noted that the majority of PSP funds – approximately 89 percent – were awarded to
large air carriers based on the reports that the carriers had filed with the U.S. Department of
Transportation under 14 C.F.R. part 241. In contrast, the CARES Act required Treasury to provide
financial assistance to smaller air carriers and aviation contractors in an amount that the applicants
certified, using sworn financial statements or other appropriate data, as the amount of wages,
salaries, and benefits that they paid to their employees during the time period from April 1, 2019,
through September 30, 2019. OIG audits of this latter group have revealed that some smaller
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recipients overstated their requested awardable amounts due to the improper inclusion of certain
categories of expenses. Treasury has recouped $147 million so far. All three PSP programs have
now concluded. Treasury will make no further payments to air carriers or aviation contractors.
Management further noted that COVID-19 pushed families across the country to fall behind on
their rent—many of whom already struggled with the cost of housing. At the end of 2020, nearly
a fifth of renting households reported being behind on rent. One in six reported that eviction within
two months was very likely. Through Treasury’s ERA programs – which were authorized by the
Consolidated Appropriations Act of 2021 (ERA1) and American Rescue Plan Act (ERA2),
respectively – Congress appropriated a total of $47 billion to address financial and housing
instability caused by the COVID-19 pandemic. The ERA programs provided critical funding for
state, local, territorial, and Tribal governments to prevent eviction and provide assistance to
households for rent, utilities, and other eligible expenses. Moreover, Congress tasked Treasury
with implementing ERA rapidly and under extraordinary emergency conditions. Despite these
challenges, Treasury quickly implemented the program and oversaw unprecedented rental
assistance. As of June 30, 2023, ERA had already provided more than 12.3 million rental assistance
payments to families in need. The period of performance for ERA1 ended in December 2022 so
there are no more payments in ERA1. As of June 30, 2023, grantees in ERA2 (which do not include
Tribal governments), have reported to have expended 80% of the ERA2 allocations and have until
September 30, 2025 (about 15 months) to expend the remaining funds.
Refundable Tax Credit Programs. We also determined that Treasury was not in compliance with
PIIA for FY 2023 due to IRS not reporting an overall improper payment rate of less than 10 percent
for EITC, ACTC, AOTC, and Net PTC. Specifically, according to TIGTA’s report, IRS reported
an improper payment rate of 33.5 percent (or $21.9 billion), 14.5 percent (or $0.5 billion), 31.6
percent (or $1.7 billion), and 26.0 percent (or $1.0 billion) for EITC, ACTC, AOTC, 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.
As TIGTA has reported previously, OMB advised IRS that, as an alternative to reducing the
improper payment rate to less than 10 percent, a reduction target may remain constant given the
complexities of the programs, as long as the complexities are explained in the Treasury AFR,
which the IRS did.7
TIGTA did not make any recommendations related to this finding.
In a written response, management noted that they have long held that RTCs are not “payments”
as intended under the improper payments legislation, as the tax system is a collection system rather
than a payment system. Whereas a payment system is generally designed to implement internal
controls that provide for appropriate verification and validation prior to payments being made, the
statutory structure and design for administering RTCs prevent the IRS from verifying or validating
such amounts prior to making the refund payment. Consequently, RTC overclaims are not the
result of internal control weaknesses that they can remediate internally, but are, in fact, the result
of factors beyond their control under the current law and existing authority. Even if they could
7
TIGTA, Report No. 2021-40-036, Improper Payment Rates for Refundable Tax Credits Remain High (May 2021).
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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 GAO 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. Additionally, management noted that they 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 AFR as part of a broader
discussion on the tax gap and tax burden.
Finding 2: Insufficient Justification Memos for ERA, HAF, and PSP Programs
for FY 2023 Reporting
RMA identified OCA management did not provide appropriate justification memos for the ERA,
HAF, and PSP programs in concluding that payment recapture audits were deemed not cost-
effective for these programs for FY 2023 reporting.
OCA management last provided a justification memo for ERA, HAF, and PSP programs in
September 2022:
· Stating no known improper payments to date have been made to primary recipients through
the ERA I, ERA II, and HAF programs; and
· Describing PSP’s implementation of a compliance process that required recipients to
recertify that their awards were correctly determined before receiving additional payments
under the PSP program.
OMB M-21-19 requires “All programs that expend $1,000,000 or more annually should be
considered for recovery audits, however, agencies are only required to conduct recovery audits if
conducting the audits would be cost-effective. If an agency determines that it would be unable to
conduct a cost-effective recovery audit for certain programs, the analysis will need to be repeated
only if circumstances change within the program that might make a recovery audit cost-effective.”
OCA management did not update its analysis for FY 2023 reporting for these three programs that
considers 1) known and likely improper payments made to recipients at the state and/or grantee
level for ERA and HAF; and 2) information received in March 2023 that PSP’s self-certification
process was not effective.
Insufficient justification memos increase the risk of not conducting recovery audits and activities
in a manner that will ensure the greatest financial benefit for the agency.
Recommendation
RMA recommends Treasury’s RCG require OCA management to conduct and provide an updated
analysis and justification memo that takes into consideration known and likely improper payments
made to recipients at all levels as reflected in audits and other information, that might impact its
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conclusion on whether payment recapture audits are cost-effective for its pandemic relief
programs.
Management’s Concurrence and RMA’s Response
Treasury concurs with this recommendation. RCG will revise its Departmental guidance to better
ensure OCA and other Components update their analyses and justification memos as needed to
take into consideration updated information related to known and likely improper payments related
to recipients at all levels for purposes of concluding on the cost-effectiveness of performing
payment recapture audits for their programs.
Treasury’s response meets the intent of the audit recommendation.
Finding 3: Untimely Submission of Justification Memo for OCA
RMA identified OCA management failed to provide evidence of its payment recapture audit, or a
justification memo if the payment recapture audit was deemed not cost-effective, for the
Coronavirus Capital Projects Fund, a pandemic relief program, which had a total non-federal
disbursement of $31.3 million for FY 2023 reporting.
At the time the finding was identified, OCA management had not yet determined whether it would
be cost effective to conduct a payment recapture audit. However, OCA management has
traditionally submitted justification memos for its short-term programs. OCA management has
subsequently submitted the justification memo for this fund for FY 2023 reporting to Treasury’s
RCG on April 4, 2024, which was past the Treasury due date of August 7, 2023.
OMB M-21-19 states that, “All programs that expend $1,000,000 or more annually should be
considered for recovery audits, however, agencies are only required to conduct recovery audits if
conducting the audits would be cost-effective.”
Treasury’s PIIA Guidance, Phase 5: Other Activities, Payment Recapture Audit, Page 19, “If it is
determined that a payment recapture audit is not cost-beneficial, Components must provide
ODCFO with a justification memo documenting why the Component believes it will not be cost-
effective to perform a payment recapture audit.”
FY 2023 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 8, “Due Date: August 7, 2023, Milestone: If a Component determines that it
would not be cost-effective to perform a payment recapture audit, submit a justification for each
Fund Group to the ODCFO. (The justification is not needed if it was sent in a previous year).”
Treasury’s RCG did not update their tracking sheet appropriately for FY 2023 since the
Coronavirus Capital Projects Fund expended under $1,000,000 and did not need to submit a
justification in FY 2022. In addition, OCA management did not adequately review the tracking
sheet to ensure all programs that expended over $1,000,000 were appropriately identified.
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Failure to conduct a payment recapture audit or provide a justification memo if an audit was
deemed not cost-effective per Treasury guidance, increases the risk of not identifying and
recovering overpayments in accordance with OMB requirements, and can lead to inaccurate
payment recapture reporting on PaymentAccuracy.gov.
Recommendation
RMA recommends Treasury’s RCG emphasize the requirement that Components review for
completeness and accuracy the tracking sheet used to determine the fund groups that have
expended over $1,000,000 and would therefore need to provide evidence of either a payment
recapture audit or a justification memo by Treasury’s due dates. Further, RCG should complete a
thorough review of the tracking sheets submitted by Components for completeness and accuracy.
Management’s Concurrence and RMA’s Response
Treasury concurs with this recommendation. RCG has revised the tracking sheet to automatically
highlight fund groups that were previously under $1 million, that are now over the $1 million
threshold, and must conduct payment recapture auditing or submit a cost-effective justification
memo. During the annual roundtable meeting with Components, RCG reemphasized the
requirement that Components must review the tracking sheet for completeness and accuracy.
Additionally, a second-party review will be conducted of the internal tracking sheet used to
determine all fund groups that have expended over the $1 million threshold.
Treasury’s response meets the intent of the audit recommendation.
Finding 4: Inaccurate Completion of HAF and CDFI Fund Risk Assessments
RMA identified OCA and CDFI Fund management’s responses to certain risk assessment
questions in its qualitative risk assessment over the HAF program and Emergency Response
Program that were inaccurate in determining the payment type’s susceptibility to significant
improper payments. Specifically, RMA identified four instances and two instances where OCA
and CDFI Fund management, respectively, indicated a rating as not susceptible but should have
been susceptible.
RMA noted that although the inaccurate responses to the risk assessment questions affected the
rating of a risk factor from not susceptible to susceptible, these inaccurate responses did not affect
the overall risk assessment rating for the programs identified.
FY 2023 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 “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.”
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OCA and CDFI Fund management did not adequately complete its program-specific risk
assessments over the HAF program and Emergency Response Program. In addition, OCA, CDFI
Fund management, and Treasury’s RCG did not identify these inaccurate responses during their
review of the risk assessment.
These inaccurate responses can lead to an inaccurate assessment of a program’s susceptibility to
improper payments, increasing the likelihood of improper payments occurring in the future.
Recommendation
Since this is a repeat condition from prior years, RMA recommends Treasury’s RCG works with
all components to accurately complete and review the program-specific risk assessments.
Management’s Concurrence and RMA’s Response
Treasury concurs with this recommendation. Though this is a repeat condition from prior years,
Treasury notes that this finding occurring across a number of its programs declined significantly
from 21 instances reported in the prior year’s audit down to six instances in this year’s audit. RCG
made improvements to the FY 2024 risk assessment template provided to Components to
streamline and improve the clarity of several questions that certain Components previously
responded to improperly. Additionally, in the FY 2024 guidance, RCG accelerated the timing of
receipt of the risk assessments to provide RCG more time to review and provide feedback to
Components, thus facilitating a more efficient review and clearance process for them. Finally,
RCG hosted a roundtable for all Treasury components to discuss the improvements and continue
to emphasize the importance of ensuring the accuracy and quality control reviews of the risk
assessments.
Treasury’s response meets the intent of the audit recommendation.
Management’s response to our report is provided in Appendix 4.
Treasury Inspector General for Tax Administration Audit Results
The following are excerpts from TIGTA’s FY 2023 PIIA audit report. TIGTA did not make any
recommendations in their report.
Finding 1: Assessment of FY 2023 Compliance With Improper Payment
Reporting Requirements
TIGTA’s review found that IRS was largely compliant with the reporting requirements contained
in the PIIA for FY 2023. IRS still has not satisfied the PIIA goal of reducing the overall improper
payment rate for ACTC, AOTC, EITC, and Net PTC to less than 10 percent. TIGTA also reported
that all required quarterly scorecards were posted to PaymentAccuracy.gov for FY 2023.
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Finding 2: Despite IRS Efforts, Improper Payment Rate Estimates Continue to
Be High
TIGTA reported that IRS has been unable to reduce improper payment rate estimates to less than
10 percent for each of its high-risk programs, most notably EITC. According to the Treasury AFR,
EITC estimated error rates have ranged from 22.8 percent to 33.5 percent from FY 2006 through
FY 2023. This is despite IRS’s efforts to reduce these rates.
TIGTA reported that in the FY 2023 AFR, IRS noted that part of its actions to mitigate the risk of
improper payments included outreach to taxpayers and tax preparers in lieu of conducting
additional pre-refund audits. IRS has implemented several different outreach initiatives intended
to raise public awareness and encourage eligible taxpayers to claim refundable credits.
Specifically, the IRS will reduce the number of pre-refund audits focused on refundable credits
while also expanding outreach to help taxpayers claim the credits correctly at the time of filing.
According to IRS, focusing on helping taxpayers submit accurate filings will increase payment
accuracy while reducing administrative burdens for both IRS and the tax filer. In addition, IRS
also intends to increase enforcement activities that focus on unscrupulous preparers who contribute
to the noncompliance in this area. However, these initiatives may not make an immediate impact
on the improper payment rates, if at all, due to the time it takes for taxpayers to file returns and for
IRS to examine those returns.
IRS implements strategies that educate taxpayers and preparers by proactively sharing information
about the eligibility requirements for refundable credits and identifying the most common errors.
Some of IRS’s outreach and education strategies include nationwide tax forums and refundable
credits summit, technical training and tax preparer toolkits, webinars and tax preparer alerts, and
EITC Central and EITC Awareness Day.
IRS has indicated that refundable credit noncompliance among tax return preparers has been a
growing concern for several years. The IRS has shifted its focus from examining potentially
noncompliant taxpayers to addressing noncompliant return preparers who file tax returns claiming
the ACTC, AOTC, and EITC.8 Some of these efforts include focused treatment for return
preparers, “knock and talk” visits, and “ghost preparers.”
Lastly, IRS is issuing notices and letters to taxpayers to both encourage potentially eligible
taxpayers to take a credit and inform taxpayers who were not selected for audit of their potential
risk of noncompliance. Examples of IRS issuing letters and notices to taxpayers are Letter 6589,
EITC Compliance Refresh-Letter 1 (Soft), Letter 6591, Advance Child Tax Credit Outreach Letter
for TY 21 filers yet to file (English & Spanish), Letter 6571, ARPA Section 9663 Notice, and
Notices.
8
TIGTA currently has a separate audit, Changes to the Earned Income Taxpayer Credit Audit Examination Strategy
(Audit No. 2024308026), to review the Wage and Investment Division’s portion of the IRS’s examination plan and
the changes to the EITC case selection processes to ensure a fair and equitable examination selection process and to
assess compliance with the Secretary of the Treasury’s directive to the IRS.
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Finding 3: The Treasury Department Risk Assessments Still Do Not Accurately
Reflect the Level of Risk for the IRS Refundable Credit Programs
TIGTA’s review of the risk assessment template found that it does not allow IRS to provide an
accurate assessment of improper payment risk. TIGTA reported the questions on the risk
assessment are for general applicability and not intended to cover the unique nature of IRS
refundable credits program.
Although the results of the completed qualitative risk assessments for the Advance Child Tax
Credit and Child and Dependent Care Tax Credit indicated that these credits were not susceptible
to improper payment risk, the IRS revised the risk assessment and deemed them “susceptible.”
The IRS deemed these programs susceptible because of the similarity of these programs with other
programs that have high error rates and deficiencies identified by external audit agencies, such as
TIGTA.
TIGTA previously reported similar concerns with the accuracy of the assessment of improper
payment risk.9 Because the risk assessment template does not allow for an accurate assessment of
improper payment risk, this could become problematic for those programs that are not regularly
evaluated by external audit agencies and may have a higher risk than the template identifies.
TIGTA met with IRS and discussed the effectiveness of a risk assessment that must be changed to
accommodate IRS programs. Representatives from the IRS Office of the Chief Financial Officer
noted that they did not participate in updating the new risk assessment templates and that it would
be difficult to modify the template to reflect the unique nature of the refundable tax credits and
still have a generally applicable template. Treasury is aware of this unique nature and has been
understanding of the justifications the IRS may have to make when completing the template.
TIGTA did not make any recommendations in their report.
9
TIGTA, Report No. 2017-40-030, Revised Refundable Credit Risk Assessments Still Do Not Provide an Accurate
Measure of the Risk of Improper Payments (Apr. 2017) and TIGTA, Report No. 2016-40-036, Without Expanded
Error Correction Authority, Billions of Dollars in Identified Potentially Erroneous Earned Income Credit Claims Will
Continue to Go Unaddressed Each Year (Apr. 2016).
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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) 2023 compliance with the Payment Integrity Information Act of 2019 (PIIA).
We assessed Treasury’s compliance with the reporting requirements set forth in PIIA; and
Executive Order 13520, Reducing Improper Payments and Eliminating Waste in Federal
Programs. Our audit scope covered the period October 1, 2022, through September 30, 2023 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 the PIIA.
To accomplish our objective, we performed the following activities during audit fieldwork
conducted from January 2024 through May 2024:
· We reviewed applicable laws, regulations, and guidance issued by the Office of
Management and Budget (OMB), and 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 2023 Agency Financial Report (AFR) and any accompanying
information to assess whether Treasury:
o published payment integrity information in an AFR;
o posted AFR and accompanying materials on its 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, if required and applicable;
o demonstrated improvements to payment integrity or reached a tolerable IP and UP
rate, if applicable;
o developed a plan to meet the IP and UP reduction target, if required and applicable;
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 which completed a risk assessment for year three in the three-year
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. RMA issued Finding 1: Treasury Was Not in Compliance with
PIIA for FY 2023 and Finding 4: Inaccurate Completion of Homeowners Assistance Fund
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Page 20
4121 Wilson Blvd, Suite 1100
Arlington, VA 22203
Phone: (571) 429-6600
www.rmafed.com
(HAF) and Community Development Financial Institutions Fund Risk Assessments as a
result of our testing.
· 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 (RCG); 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. RMA identified inaccurate sum formulas
that resulted in an immaterial error in calculating the consolidated overpayment amounts
identified and recovered outside of payment recapture audits and worked with Treasury
RCG to streamline and simplify the consolidated payment recapture reporting spreadsheet
and ensure calculations are accurate by ensuring a second-party review of the formulas in
the spreadsheet is performed. RMA also issued Finding 2: Insufficient Justification Memos
for Emergency Rental Assistance, HAF, and Air Carrier Payroll Support Programs for FY
2023 Reporting and Finding 3: Untimely Submission of Justification Memo for Office of
Capital Access as a result of our testing.
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 operating
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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4121 Wilson Blvd, Suite 1100
Arlington, VA 22203
Phone: (571) 429-6600
www.rmafed.com
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper
Payment Reporting Requirements in FY 2023 and IRS Management’s
Response
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
Assessment of Fiscal Year 2023 Compliance With
Improper Payment Reporting Requirements
May 17, 2024
Report Number: 2024-400-026
This report remains the property of the Treasury Inspector General for Tax Administration (TIGTA) and may not be disseminated beyond the
Internal Revenue Service without the permission of TIGTA. This report may contain confidential return information protected from disclosure
pursuant to I.R.C. § 6103(a). Such information may be disclosed only to Department of the Treasury employees who have a need to know this
information in connection with their official tax administration duties.
TIGTACommunications@tigta.treas.gov | www.tigta.gov
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
HIGHLIGHTS: Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Final Audit Report issued on May 17, 2024 Report Number 2024-400-026
Why TIGTA Did This Audit What TIGTA Found
For FY 2023, the IRS was largely compliant with the reporting
This audit was initiated because
requirements contained in the Payment Integrity Information Act
TIGTA is required to annually
of 2019. However, the IRS still has not satisfied the Payment Integrity
assess and report on the IRS’s
Act goal to reduce improper payment rates to less than 10 percent.
compliance with the reporting
requirements contained in the The IRS estimated the improper payment rates for the following
Payment Integrity Information Act programs: Additional Child Tax Credit (ACTC), American Opportunity
of 2019. The objective of this Tax Credit (AOTC), Earned Income Tax Credit (EITC) and Net Premium
review was to determine whether Tax Credit (PTC).
the IRS complied with the annual
improper payment reporting
requirements for Fiscal
Year (FY) 2023.
Impact on Tax Administration
The Payment Integrity Information
Act of 2019 and the Office of
Management and Budget (OMB)
define an improper payment as In the FY 2023 Agency Financial Report, the IRS noted that part of its
any payment that should not have actions to mitigate the risk of improper payments included outreach
been made, was made in an to taxpayers and tax preparers in lieu of conducting additional
incorrect amount, or was made to pre-refund audits. The IRS has implemented several different
an ineligible recipient. The IRS outreach initiatives intended to raise public awareness and
currently has identified four encourage eligible taxpayers to claim refundable tax credits.
programs that meet the OMB’s Specifically, the IRS will reduce the number of pre-refund audits
definition of a high-priority focused on refundable tax credits while also expanding outreach to
program susceptible to improper help taxpayers claim the credits correctly at the time of filing.
payments. The OMB defines According to the IRS, focusing on helping taxpayers submit accurate
high-priority programs as filings will increase payment accuracy while reducing administrative
programs with improper payments burdens for both the IRS and the tax filer. In addition, the IRS also
resulting in monetary losses that intends to increase enforcement activities that focus on unscrupulous
exceed $100 million annually. preparers who contribute to the noncompliance in this area.
However, these initiatives may not make an immediate impact on the
improper payment rates.
Finally, this review also found that the Department of the Treasury
risk assessment template does not allow the IRS to provide an
accurate assessment of improper payment risk. While the results of
the qualitative risk assessments for the Advance Child Tax Credit and
Child and Dependent Care Tax Credit indicated that these credits
were not susceptible to improper payment risk, the IRS deemed them
“susceptible.” The IRS deemed these programs susceptible because
of the similarity of these programs with other programs that have
high error rates and deficiencies identified by external audit agencies,
such as TIGTA.
What TIGTA Recommended
TIGTA did not make any recommendations in this report.
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
May 17, 2024
MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE
FROM: Matthew A. Weir
Acting Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Assessment of Fiscal Year 2023 Compliance With
Improper Payment Reporting Requirements (Audit No.: 2024400001)
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 2023. This
review is part of our Fiscal Year 2024 Annual Audit Plan and addresses the major management
and performance challenge of Tax Fraud and Improper Payments.
Management’s complete response to the draft report is included as Appendix IV. If you have
any questions, please contact me or Diana Tengesdal, Assistant Inspector General for Audit
(Returns Processing and Account Services).
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Table of Contents
Background .....................................................................................................................................Page 1
Results of Review........................................................................................................................Page 3
Assessment of Fiscal Year 2023 Compliance With
Improper Payment Reporting Requirements ............................................................Page 4
Despite Internal Revenue Service Efforts, Improper
Payment Rate Estimates Continue to Be High ..........................................................Page 5
The Treasury Department Risk Assessments Still Do Not
Accurately Reflect the Level of Risk for the IRS
Refundable Credit Programs............................................................................................Page 9
Appendices
Appendix I – Detailed Objective, Scope, and Methodology ................................Page 10
Appendix II – Programs Identified for Improper Payment Risk
Assessments ..........................................................................................................................Page 11
Appendix III – Improper Payment Laws Repealed by the Payment
Integrity Information Act of 2019 ..................................................................................Page 12
Appendix IV – Management’s Response to the Draft Report .............................Page.13
Appendix V – Glossary of Terms.....................................................................................Page.15
Appendix VI – Abbreviations ...........................................................................................Page.17
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Background
The Payment Integrity Information Act of 2019 (PIIA) and the Office of Management and Budget
(OMB) define an improper payment as any payment that should not have been made, was made
in an incorrect amount, or was made to an ineligible recipient.1 Agency Inspectors General are
responsible for evaluating agency information related to improper payments.
On March 2, 2020, the PIIA repealed several improper payment laws but set forth similar
improper payment reporting requirements.2 For example, agencies must conduct a
program-specific risk assessment for each program or activity identified by the agency as
exceeding $10 million in annual outlays at least once every three years, provide the
methodology for identifying and measuring improper payments, and report on actions the
agency intends to take to prevent future improper payments. In addition, the following remain
in effect:
Executive Order 13520, Reducing Improper Payments, issued on
November 20, 2009, requires Federal agencies to provide agency Inspectors
General with detailed information on efforts to identify and reduce the number
of improper payments in Federal programs with the highest dollar value of
improper payments.
The Consolidated Appropriations Act of 2021 , enacted on
December 27, 2020.3 This Act directed the Internal Revenue Service (IRS) to
make the elimination of improper payments an utmost priority. In addition,
the Act directed the IRS to implement, within 270 calendar days of enactment
of the Act, all open and unimplemented recommendations from the Treasury
Inspector General for Tax Administration (TIGTA) and the Government
Accountability Office that address improper payments, or report on
impediments to implementation of each open recommendation. We
previously assessed the IRS’s compliance with this requirement and found the
IRS reported all unimplemented recommendations as required.4
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 Agency Financial Report (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.
1
Pub. L. No. 116-117, 134 Stat. 113. Additionally, see Appendix V for a glossary of terms.
2
See Appendix III for a list of repealed improper payment laws.
3
Pub. L. No. 116-260, 134 Stat. 1182.
4
TIGTA, Report No. 2021-40-036, Improper Payment Rates for Refundable Tax Credits Remain High (May 2021) and
TIGTA, Report No. 2022-40-037, Programs Susceptible to Improper Payments Are Not Adequately Assessed and
Reported (May 2022).
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Process to identify IRS programs for improper payment risk assessment
Agencies must conduct an improper payment risk assessment at least once every three years for
each program with annual outlays over $10 million. The Department of the Treasury (hereafter
referred to as Treasury Department) identifies the programs that the IRS must assess for the risk
of improper payments each fiscal year. The IRS must complete a Treasury Certification for each
program that was not identified as needing a risk assessment this year stating there were no
material changes to the program since the last risk assessment was completed. For Fiscal Year
(FY) 2023, the Treasury Department selected 15 program fund groups that required certification
and six IRS programs that required a risk assessment.5
The IRS can use one of two types of risk assessments:
Qualitative Risk Assessment – used to assess the risk that a program’s internal
controls could lead to susceptible improper payments. The OMB requires
agencies to conduct qualitative assessments after the first 12 months of the
program and at least once every three fiscal years thereafter. Once the IRS
determines that a program is susceptible to improper payments, it must
produce a statistically valid estimate of the improper payments the following
fiscal year.
Quantitative Risk Assessment – used to review a sample of disbursements to
formulate the overall estimated improper payment rate. In cases in which a
quantitative risk assessment is conducted, it could take one of several forms,
such as a statistical assessment similar to what is required for the regular
improper payment estimate or a nonstatistical assessment in which its ratio of
improper payments and unknown payments is projected to the annual outlays.
In addition, the IRS must provide the following information as part of an improper payment
estimate for any program identified as susceptible to significant improper payments as a result
of a risk assessment for inclusion in the Treasury Department’s next fiscal year Treasury AFR:
Ø The rate and amount of improper payments.
Ø The root causes of the improper payments.
Ø The actions taken to address the root causes.
Ø The annual improper payment reduction targets.
Ø A discussion of any limitations to the IRS’s ability to reduce improper payments.
The Treasury Department and the IRS continue to request relief from improper payment
reporting requirements for refundable tax credit claims
In their Business Case to Eliminate Redundant Reporting of Refundable Tax Credits, dated
October 30, 2020, the Treasury Department and the IRS informed the OMB that the tax system is
primarily a collection system and not a payment program. Further, the business case states that
while the refundable portions of refundable tax credits are considered outlays and currently fall
5
Appendix II provides the list of the six IRS programs identified by the Treasury Department for improper payment
risk assessments in FY 2023.
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
under the scope of payments under the PIIA, the Treasury Department and the IRS do not
believe that refundable tax credits should be considered improper payments under the PIIA
because they do not believe that the refundable tax credits meet the definition of payments in
the traditional sense. Instead, the Treasury Department believes the credits should be reported
only under the Tax Gap framework that comprehensively assesses the tax collection system. The
IRS noted in its business case that refundable tax credit overclaims are largely due to their
statutory design and the complexities taxpayers face when self-certifying eligibility and not due
to internal control weaknesses, financial management deficiencies, or reporting failures. In
addition, the IRS noted that Tax Gap estimates and other comprehensive compliance analyses
are more effective in helping the IRS identify noncompliance and allocate limited resources
effectively. In May 2023, we reported that the OMB continues to review the IRS’s business case,
provided to the OMB in October 2020.6 As of March 26, 2024, IRS officials confirmed that there
have been no changes in the status of refundable credits reporting. The IRS continues to
support the business case and is working to find a better approach to reporting on these
programs.
Results of Review
The OMB defines high-priority programs as programs with improper payments resulting in
monetary losses that exceed $100 million annually. For FY 2023, as shown in Figure 1, the IRS
reported the estimated dollar amount and percentage rate of improper payments associated
with four of its high-priority programs susceptible to improper payments: Additional Child Tax
Credit (ACTC); American Opportunity Tax Credit (AOTC), Earned Income Tax Credit (EITC) and
Net Premium Tax Credit (PTC).
Figure 1: FY 2023 Total Claims, Improper Payments, and
Improper Payment Rates7
Improper Improper
Program Claims
Payments Payment Rate
(in billions)
(in billions)
ACTC $3.8 $0.5 14.5%
AOTC $5.2 $1.7 31.6%
Net PTC $3.7 $1.0 26.0%
EITC $65.4 $21.9 33.5%
Source: FY 2023 Treasury AFR.
6
TIGTA, Report No. 2023-40-032, Fiscal Year 2022 Improper Payment Reporting Requirements Were Largely Met;
However, Improper Payment Estimates Are Less Precise (May 2023).
7
For presentation purposes, the improper payment rates, total payments, and estimated improper payments as
presented may be impacted by rounding. Further detail is available within the datasets found on
www.paymentaccuracy.gov.
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Assessment of Fiscal Year 2023 Compliance With Improper Payment
Reporting Requirements
The IRS was largely compliant with the reporting requirements contained in the PIIA for FY 2023.
Although the IRS complied with 12 of 13 requirements, it still has not satisfied the PIIA goal of
reducing the overall improper payment rate for the ACTC, AOTC, EITC, and the Net PTC to less
than 10 percent. As we have reported previously, the OMB advised the IRS that as an alternative
to reducing the improper payment rate to less than 10 percent, a reduction target may remain
constant given the complexities of the programs, as long as the complexities are explained in
the Treasury AFR, which the IRS did.8
Figure 2 provides a summary of our evaluation of the IRS’s compliance with the various
improper payment reporting requirements.
Figure 2: Compliance With Improper Payment Requirements for FY 2023
Source of IRS
Improper Payment Requirement
Requirement Compliance
Published Payment Integrity information with the annual
PIIA
financial statement.
Posted the annual financial statement and accompanying PIIA/
materials to agency website. Executive Order
Conducted improper payment risk assessments for each
program with annual outlays greater than $10 million at least PIIA
once in the last three years.
Adequately concluded whether programs are likely to make
improper payments and unknown payments above or below PIIA
statutory threshold.9
Published improper payment and unknown payment
estimates for programs susceptible to improper payments and
PIIA
unknown payments in 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 PIIA
the accompanying materials to the annual financial statement.
Published an improper payment and unknown payment
reduction target for each program for which an estimate
PIIA
above the statutory threshold was published in the
accompanying materials to the annual financial statement.
8
TIGTA, Report No. 2021-40-036, Improper Payment Rates for Refundable Tax Credits Remain High (May 2021).
9
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.
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Source of IRS
Improper Payment Requirement
Requirement Compliance
Demonstrated improvements to payment integrity or to reach
PIIA
a tolerable improper payment and unknown payment rate.
Developed a plan to meet the improper payment and PIIA/
unknown payment reduction target. Executive Order
Reported an improper payment and unknown payment
estimate of less than 10% for each program for which an
PIIA
estimate was published in the accompanying materials to the
annual financial statement.
Established targets to reduce and recover improper payments. Executive Order
Provided the methodology to identify and measure improper
Executive Order
payments.
Provided plans and supporting analysis to ensure that the
initiatives undertaken do not unduly burden program access Executive Order
and participation by eligible beneficiaries.
Source: TIGTA’s review of the IRS’s compliance with improper payment requirements for FY 2023 for the
IRS’s four high-risk programs.
The OMB also posts quarterly scorecards associated with high-priority programs to
www.paymentaccuracy.gov. It determines the scorecards to be posted based on the prior year’s
AFR. We previously reported that the Treasury Department expected to report on the Net PTC
in its quarterly scorecards for FY 2023.10 We found that all required quarterly scorecards were
posted to www.paymentaccuracy.gov for FY 2023.11
Despite Internal Revenue Service Efforts, Improper Payment Rate Estimates
Continue to Be High
The IRS has been unable to reduce improper payment rate estimates to less than 10 percent for
each of its high-risk programs, most notably the EITC. According to the Treasury AFR, the EITC
estimated error rates have ranged from 22.8 percent to 33.5 percent from FY 2006 through
FY 2023. This is despite the IRS’s efforts to reduce these rates. Figure 3 provides a comparison
of the improper payment rates from FY 2021 through FY 2023.12
10
TIGTA, Report No. 2023-40-032, Fiscal Year 2022 Improper Payment Reporting Requirements Were Largely Met;
However, Improper Payment Estimates Are Less Precise (May 2023).
11
For FY 2023, the OMB waived the 1 st quarter scorecards reporting for all agencies.
12
Beginning in FY 2022, the IRS changed its estimation of improper payments. Specifically, the IRS relied on a smaller
National Research Program sample size and changed the period for reporting on claims and improper payments. In
May 2023, we reported that this change to the sampling plan makes interpreting year-to-year changes in the IRS’s
reported improper payment estimates difficult.
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Figure 3: FY 2021 Through FY 2023 Improper Payment Rates13
Source: Information obtained from www.paymentaccuracy.gov.
The IRS’s outreach initiatives may not have an immediate impact on reducing improper
payments
In the FY 2023 AFR, the IRS noted that part of its actions to mitigate the risk of improper
payments included outreach to taxpayers and tax preparers in lieu of conducting additional
pre-refund audits. The IRS has implemented several different outreach initiatives intended to
raise public awareness and encourage eligible taxpayers to claim refundable credits. Specifically,
the IRS will reduce the number of pre-refund audits focused on refundable credits while also
expanding outreach to help taxpayers claim the credits correctly at the time of filing. According
to the IRS, focusing on helping taxpayers submit accurate filings will increase payment accuracy
while reducing administrative burdens for both the IRS and the tax filer. In addition, the IRS also
intends to increase enforcement activities that focus on unscrupulous preparers who contribute
to the noncompliance in this area. However, these initiatives may not make an immediate
impact on the improper payment rates, if at all, due to the time it takes for taxpayers to file
returns and for the IRS to examine those returns. The following are details of the IRS’s
refundable credits strategies targeting both taxpayers and tax practitioners to help increase
payment accuracy.
The IRS implements strategies that educate taxpayers and preparers by proactively sharing
information about the eligibility requirements for refundable credits and identifying the most
common errors. Some of their outreach and education strategies include the following:
13
The IRS did not start calculating the improper payment estimates for Net PTC until FY 2022.
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Ø Nationwide Tax Forums and Refundable Credits Summit. These annual events are
instrumental in helping the IRS achieve its strategic goals of improving taxpayer service
and reducing improper payments. The Nationwide Tax Forums provide tax professionals
with the latest information they need to prepare accurate tax returns and reduce
improper payments. The IRS noted that historically 10,000 to 15,000 external
participants attend the Nationwide Tax Forums and 40 to 45 external participants from
approximately 29 organizations and agencies attend the annual Refundable Credit
Summit.
Ø Technical Training and Tax Preparer Toolkits. The IRS provides training modules and
free resources on IRS.gov to assist tax return preparers with due diligence requirements
and information on refundable credits.
Ø Webinars and Tax Preparer Alerts. The IRS hosts virtual discussions and issues alerts
on refundable credits and eligibility requirements.
Ø EITC Central and EITC Awareness Day. The IRS maintains a website
(https://www.eitc.irs.gov/) dedicated to providing resources to taxpayers and tax return
preparers on eligibility for the EITC. The IRS also participates in social media awareness
campaigns and provides images, sample messages, and targeted audience suggestions
for its partners to post on social media to help spread awareness. Additionally, in
January 2024, the IRS and partners highlighted the importance of the EITC during its
“EITC Awareness Day.”
The IRS has indicated that refundable credit noncompliance among tax return preparers has
been a growing concern for several years. The IRS has shifted its focus from examining
potentially noncompliant taxpayers to addressing noncompliant return preparers who file tax
returns claiming the ACTC, AOTC, and EITC.14 Some of these efforts include:
Ø Focused treatment for return preparers. The IRS plans to focus their efforts on up to
23,865 potentially noncompliant tax return preparers during FY 2024, which represents
an increase of almost 20 percent from the FY 2023 plan. The IRS intends to conduct
focused correspondence examinations, outbound calls, and post-refund client audits of
preparers with patterns of noncompliance. Tax return preparers are assigned treatments
based on the level of risk, which is derived from a combination of return volume,
egregiousness, treatment history, and degree of improvement. In addition, the IRS can
issue letters to alert return preparers who prepared highly questionable refundable
credits or to alert them that some of their clients who claimed the EITC will be audited.
14
TIGTA currently has a separate audit, Changes to the Earned Income Taxpayer Credit Audit Examination Strategy
(Audit No. 2024308026), to review the Wage and Investment Division’s portion of the IRS’s examination plan and the
changes to the EITC case selection processes to ensure a fair and equitable examination selection process and to
assess compliance with the Secretary of Treasury’s directive to the IRS.
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Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Ø “Knock and Talk” visits. “Knock and Talk” visits are optional educational visits,
conducted in-person by revenue agents or special agents with the IRS’s Criminal
Investigation division. These visits are intended to educate tax return preparers on their
due diligence requirements and any changes to tax law. The IRS plans 426 “Knock and
Talk” visits for FY 2024.
Ø “Ghost preparers.” The IRS is using data analytics to identify “ghost preparers” and
reach out to taxpayers to help it identify who these preparers are that did not sign the
return. In February 2024, the IRS issued approximately 1,000 letters to taxpayers trying
to obtain information on these “ghost preparers.”
The IRS is issuing notices and letters to taxpayers to both encourage potentially eligible
taxpayers to take a credit and inform taxpayers who were not selected for audit of their
potential risk of noncompliance. Examples of the IRS issuing letters and notices to taxpayers are
as follows:
Ø Letter 6589, EITC Compliance Refresh-Letter 1 (Soft) , was issued to approximately
55,000 taxpayers in January 2024. This letter informs taxpayers, not selected for audit,
that they may not be entitled to some or all of the EITC claimed on their tax return. The
letter instructs taxpayers to review their return to confirm eligibility and if the credit was
claimed in error, file an amended return to remove or recalculate the credit.
Ø Letter 6591, Advance Child Tax Credit Outreach Letter for TY 21 filers yet to file
(English & Spanish) , was sent to 1,824,071 taxpayers who had not yet filed a Tax
Year 2021 return as of November 1, 2023, but to whom IRS records indicate Advance
Child Tax Credit payments were issued, to inform them of the need to file a Tax
Year 2021 return to claim any remaining amount of child tax credit to which they may be
entitled. This letter was issued in response to a prior TIGTA review that identified
4.1 million taxpayers who did not file a Tax Year 2021 return but may have been eligible
to claim the credit.15
Ø Letter 6571, ARPA Section 9663 Notice , was issued to 10,069 taxpayers advising them
that they may be eligible to receive a refund of additional PTC or excess Advance PTC
that they repaid for Tax Year 2021. This letter was issued in response to a TIGTA
recommendation to send letters to 10,069 taxpayers.16
Ø Notices. Based on information available at filing, taxpayers who appear to qualify for
the EITC or ACTC, but do not claim the credits will receive one of the following notices:
CP 08, You May Qualify for Child Tax Credit (CTC); CP 09, Earned Income Credit - You
15
TIGTA, Report No. 2023-47-035, American Rescue Plan Act: Review of the Reconciliation of the Child Tax Credit
(June 2023).
16
TIGTA, Report No. 2023-47-036, American Rescue Plan Act: Continued Review of Premium Tax Credit Provisions
(June 2023).
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Page 33
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
May Be Entitled to EIC (issued to taxpayers with at least one qualifying child); or CP 27,
EIC Potential for T/P Without Qualifying Children. The IRS indicated that the historical
response rate to these notices is around 20 percent.
The Treasury Department Risk Assessments Still Do Not Accurately Reflect
the Level of Risk for the IRS Refundable Credit Programs
Our review of the risk assessment template found that it does not allow the IRS to provide an
accurate assessment of improper payment risk. The risk assessments are created and
distributed by the Treasury Department and were updated in FY 2023 based on trends the
Treasury Department noticed throughout all the bureaus. Thus, the questions on the risk
assessment are for general applicability and not intended to cover the unique nature of the IRS
refundable credits program.
Although the results of the completed qualitative risk assessments for the Advance Child Tax
Credit and Child and Dependent Care Tax Credit indicated that these credits were not
susceptible to improper payment risk, the IRS revised the risk assessment and deemed them
“susceptible.” The IRS deemed these programs susceptible because of the similarity of these
programs with other programs that have high error rates and deficiencies identified by external
audit agencies, such as TIGTA. Figure 4 outlines some of the reasons the IRS used to support its
decision to change the overall risk rating from “not-susceptible” to “susceptible” in FY 2023.
Figure 4: Results From the FY 2023 Qualitative Risk Assessment
Source: Excerpt from the FY 2023 Qualitative Risk Assessment.
We previously reported similar concerns with the accuracy of the assessment of improper
payment risk.17 For example, the annual risk assessments underestimated the risk of improper
payments for both ACTC and AOTC despite the IRS’s own compliance data showing differently.
Because the risk assessment template does not allow for an accurate assessment of improper
payment risk, this could become problematic for those programs that are not regularly
evaluated by external audit agencies and may have a higher risk than the template identifies.
We met with the IRS and discussed the effectiveness of a risk assessment that must be changed
to accommodate IRS programs. Representatives from the IRS Office of the Chief Financial
Officer noted that they did not participate in updating the new risk assessment templates and
17
TIGTA, Report No. 2017-40-030, Revised Refundable Credit Risk Assessments Still Do Not Provide an Accurate
Measure of the Risk of Improper Payments (Apr. 2017) and TIGTA, Report No. 2016-40-036, Without Expanded Error
Correction Authority, Billions of Dollars in Identified Potentially Erroneous Earned Income Credit Claims Will Continue
to Go Unaddressed Each Year (Apr. 2016).
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Page 34
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
that it would be difficult to modify the template to reflect the unique nature of the refundable
tax credits and still have a generally applicable template. The Treasury Department is aware of
this unique nature and has been understanding of the justifications the IRS may have to make
when completing the template.
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Page 35
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this audit was to determine whether the IRS complied with the annual
improper payment reporting requirements for FY 2023. To accomplish this objective, we:
· Obtained and reviewed the information that the IRS provided to the Treasury
Department for inclusion in the AFR to determine if the information provided satisfied
the requirements.
· Evaluated the adequacy of the IRS’s FY 2023 risk assessments for the IRS revenue
program funds identified by the Treasury Department.
· Reviewed the IRS’s methodology to calculate the EITC, ACTC, AOTC, and Net PTC
improper payment rates for FY 2023.
· Followed up on select prior audit findings or recommendations to determine their status.
Performance of This Review
This review was performed with information obtained from the Office of the Chief Financial
Officer and the Office of Return Integrity located at the IRS Headquarters in Washington, D.C.,
during the period November 2023 through March 2024. We conducted this performance audit
in accordance with generally accepted government auditing standards. Those standards require
that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objective. We believe that
the evidence obtained provides a reasonable basis for our findings and conclusions based on
our audit objective.
Major contributors to the report were Diana M. Tengesdal, Assistant Inspector General for Audit
(Returns Processing and Account Services); Linna K. Hung, Director; Nina A. Hill, Audit Manager;
Erica Law, Lead Auditor; Carina Schusterman, Auditor; and Laura Christoffersen, Applied
Research and Technology Division.
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 in place to ensure
that the IRS met the annual improper payment reporting requirements established in the PIIA
and Executive Order 13520. We tested these controls by reviewing and analyzing relevant
documents and holding discussions with IRS management.
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Page 36
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Appendix II
Programs Identified for Improper Payment Risk Assessments
The following IRS programs were identified by the Treasury Department for improper payment
risk assessments for FY 2023.
Type of Total Non-Federal
IRS Program
Assessment Disbursements
Earned Income Tax Credit IP Estimate $64.3 billion
Additional Child Tax Credit IP Estimate $131.4 billion**
American Opportunity Tax Credit IP Estimate $3.8 billion
Premium Tax Credit IP Estimate $85.1 billion
Child and Dependent Care Tax Credit Qualitative $7.4 billion
Advance Child Tax Credit Qualitative **
** Additional Child Tax Credit and Advance Child Tax Credit are reported under the same fund symbol
and are part of the same disbursement.
Source: IRS Office of the Chief Financial Officer. IP = Improper Payment
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Page 37
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Appendix III
Improper Payment Laws Repealed by the Payment Integrity
Information Act of 2019
Improper Payment Law Description
Enacted on November 26, 2002, the law requires Federal agencies,
Improper Payments including the IRS, to estimate the dollar amount of improper payments
Information Act of 20021 and report to Congress annually on the causes of and the steps taken to
reduce improper payments.
Enacted July 22, 2010, the Act redefined what “significant improper
Improper Payments
payments” are; strengthened agency reporting requirements and defined
Elimination and Recovery
significant as exceeding either 1.5 percent of program outlays and
Act of 20102
$10 million of all program activities or $100 million.
Enacted on January 10, 2013, the Act codifies many parts of Executive
Improper Payments
Order 13520 and requires the OMB Director to identify a list of
Elimination and Recovery
high-priority Federal programs and agencies to develop additional or
Improvement Act of
supplemental measures for tracking progress in reducing improper
20123
payments in these programs.
Enacted on June 30, 2016, the Act requires the OMB to establish guidelines
Fraud Reduction and Data to identify and assess fraud risks and design and implement control
Analytics Act of 20154 activities in order to prevent, detect, and respond to fraud, including
improper payments.
Source: TIGTA review of legislation related to improper payments.
1
Pub. L. No. 107-300, 116 Stat. 2350.
2
Pub. L. No. 111-204, 124 Stat. 2224.
3
Pub. L. No. 112-248, 126 Stat. 2390.
4
Pub. L. No. 114-186, 130 Stat. 546.
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Page 38
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Appendix IV
Management’s Response to the Draft Report
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Page 39
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
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Page 40
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Appendix V
Glossary of Terms
Term Definition
A credit for individuals who receive less than the full amount of the
Additional Child Tax Credit nonrefundable Child Tax Credit. The ACTC may result in a refund even if no
tax is owed.
Advance Premium A tax credit that is paid in advance to a taxpayer’s insurance company to
Tax Credit help cover the cost of premiums.
Presents the Treasury Department’s financial and performance information
Agency Financial Report
for the fiscal year, with comparative prior year data where appropriate.
A credit for qualified education expenses paid for an eligible student for
American Opportunity
the first four years of higher education. A partially refundable Federal tax
Tax Credit
credit used to help parents and college students offset the costs of college.
Earned Income Tax Credit A refundable tax credit for low-income to moderate-income workers.
Any yearly accounting period, regardless of its relationship to a calendar
Fiscal Year year. The Federal Government’s fiscal year begins on October 1 and ends
on September 30.
High-Priority Program Program identified as susceptible to significant improper payments.
Any payment that should not have been made or that was made in an
incorrect amount under statutory, contractual, administrative, or other
Improper Payment
legally applicable requirements (including both overpayments and
underpayments).
Improper Payment Rate Amount in improper payments divided by the amount in program outlays.
When the PTC exceeds the Advance PTC (PTC minus Advance PTC = Net
Net Premium Tax Credit PTC). The Net PTC reduces a taxpayer’s tax liability and, if it is more than
the tax liability, results in a refundable tax credit.
A payment to liquidate an obligation generally equal to cash
Outlay
disbursements (the measure of Government spending).
A payment in excess of what is due. When an overpayment occurs, the
improper amount is the difference between the amount due and the
Overpayment
amount that was actually paid. Overpayments are monetary loss improper
payments.
Any disbursement or transfer of Federal funds to any non-Federal person,
non-Federal entity, or Federal employee that is made by a Federal agency,
Payment
contractor, grantee, or a governmental or other organization administering
a Federal program or activity.
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Page 41
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Term Definition
Refundable tax credit that helps eligible individuals and families cover the
Premium Tax Credit premiums for their health insurance purchased through the Health
Insurance Marketplace.
Activities or sets of activities recognized as programs by the public, the
Program OMB, or Congress as well as those that entail program management or
policy direction.
A technique used to quantify risk associated with improper payments and
unknown payments. For example, a qualitative improper payment risk
assessment methodology prioritizes the identified improper payment and
Qualitative Risk
unknown payment risks using a predefined rating scale. Risks will be
Assessment
scored based on their probability or likelihood of occurring and the impact
on improper payments and unknown payments in the program should they
occur.
A risk assessment technique that focuses on measurable data such as
improper or unknown payment amount. For example, a quantitative
Quantitative Risk
improper payment risk assessment will provide numerical improper
Assessment
payment amounts and assess the probability of their occurrence. The
assessment may be similar to the regular improper payment estimate.
Annual improper payments and unknown payments, i.e., the sum of
monetary loss improper payments, non-monetary loss improper payments,
Significant Improper and unknown payments, in the program exceeding 1) both 1.5 percent of
Payment program outlays and $10 million of all program or activity payments made
during the fiscal year reported or 2) $100 million (regardless of the
improper payment percentage of total program outlays).
The estimated difference between the amount of tax that taxpayers should
Tax Gap
pay and the amount that is paid voluntarily and on time.
A 12-month accounting period for keeping records on income and
Tax Year expenses used as the basis for calculating the annual taxes due. For most
individual taxpayers, the tax year is synonymous with the calendar year.
A payment that is less than what is due. When an underpayment occurs,
the improper amount is the difference between the amount due and the
Underpayment
amount that was actually paid. An underpayment is a non-monetary
loss improper payment.
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Page 42
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
Assessment of Fiscal Year 2023 Compliance
With Improper Payment Reporting Requirements
Appendix VI
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 of 2019
PTC Premium Tax Credit
TIGTA Treasury Inspector General for Tax Administration
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Page 43
Appendix 2: TIGTA’s Assessment of IRS Compliance with the Improper Payment
Reporting Requirements in FY 2023 and IRS Management’s Response
To report fraud, waste, or abuse,
contact our hotline on the web at www.tigta.gov or via e-mail at
oi.govreports@tigta.treas.gov.
To make suggestions to improve IRS policies, processes, or systems
affecting taxpayers, contact us at www.tigta.gov/form/suggestions.
Information you provide is confidential, and you may remain anonymous.
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Page 44
Internal Revenue Service - HQ
Disbursement EIC (EITC)
Internal Revenue Service -
Payment-Child Credit Exceeds
Liability (ACTC)
Internal Revenue Service -
Payment-Where American
Opportunity Credit, Recovery
Act (AOTC)
Internal Revenue Service -
Refundable Premium
Assistance Tax Credit (Net
Program Name
PTC)
Departmental Offices –
Emergency Rental Assistance
(ERA) (3)
Table 1 below summarizes Treasury programs’ compliance with the PIIA reporting requirements
Yes Yes Yes Yes Yes Published payment integrity information with the annual financial
statement (1)
Yes Yes Yes Yes Yes Posted the annual financial statement and accompanying materials on
the agency website (1)
Table 1: Treasury Programs' Compliance with PIIA Criteria for Programs Identified as Susceptible to Significant Improper
Yes Conducted IP risk assessments for each program with annual outlays
N/A N/A N/A N/A
greater than $10 million at least once in the last three years
Page 45
No Adequately concluded whether the program is likely to make IPs and
N/A N/A N/A N/A
UPs above or below the statutory threshold
Yes Yes Yes Yes Published IP and UP estimates for programs susceptible to significant
N/A
IPs in the accompanying materials to the annual financial statement (2)
by program for programs that are identified as susceptible to significant improper payments for
Published corrective action plans for each program for which an
N/A Yes Yes Yes Yes estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement (2)
Published IP and UP reduction target for each program for which an
N/A Yes Yes Yes Yes estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement (2)
4121 Wilson Blvd, Suite 1100
Has demonstrated improvements to payment integrity or reached a
Appendix 3: Treasury Programs’ Compliance with PIIA Criteria
N/A Yes Yes Yes Yes
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tolerable IP and UP rate (2)
Arlington, VA 22203
Yes Yes Yes Yes Has developed a plan to meet the IP and UP reduction target (2)
N/A
Phone: (571) 429-6600
Reported an IP and UP estimate of less than 10% for each program for
Payments
N/A No No No No which an estimate was published in the accompanying materials to the
FY 2023 reporting.
www.rmafed.com
annual financial statement (2)
Departmental Offices – PSP
Yes Yes Yes No N/A N/A N/A N/A N/A N/A
Program (3)
Program Name
(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” criterion, which are applicable at an agency Published payment integrity information with the annual financial
statement (1)
Posted the annual financial statement and accompanying materials on
level, if the agency is compliant, then the programs are all compliant. the agency website (1)
Conducted IP risk assessments for each program with annual outlays
(2) The requirements apply only to programs for which an estimate above the statutory threshold was published in the greater than $10 million at least once in the last three years
Page 46 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,
Published IP and UP estimates for programs susceptible to significant
IPs in the accompanying materials to the annual financial statement (2)
Treasury will not plan to report an improper payment estimate either in its AFR or on PaymentAccuracy.gov, per the 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 (2)
memorandum, Limitations in Quantifying the Amount and Rate of Improper Payments for Short-Term Programs, Published 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 (2)
4121 Wilson Blvd, Suite 1100
submitted to OMB on August 1, 2022. Has demonstrated improvements to payment integrity or reached a
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
tolerable IP and UP rate (2)
Arlington, VA 22203
(3) Risk assessments were performed for FY 2023, and programs were deemed susceptible to significant improper Has developed a plan to meet the IP and UP reduction target (2)
Phone: (571) 429-6600
Reported an IP and UP estimate of less than 10% for each program for
payments. which an estimate was published in the accompanying materials to the www.rmafed.com
annual financial statement (2)
Fiscal Service –
Reimbursements to Federal
Reserve Banks
Fiscal Service – Federal
Reserve Bank Reimbursement
Fund
Treasury Franchise Fund
Departmental Offices – Funds
Appropriated to Global
Environment Facility
Departmental Offices – Funds
Contribution to the Asian
Program Name
Table 2 below summarizes Treasury programs’ compliance with the PIIA reporting requirements
Development Fund
Departmental Offices –
Contributions International
Development Association
Yes Yes Yes Yes Yes Yes Published payment integrity information with the annual financial
statement (1)
Yes Yes Yes Yes Yes Yes Posted the annual financial statement and accompanying materials on
the agency website (1)
Table 2: Treasury Programs' Compliance with PIIA Criteria for Programs Not Susceptible to Improper Payments that
Yes Yes Yes Yes Yes Yes Conducted IP risk assessments for each program with annual outlays
by program for programs not susceptible to improper payments that conducted an improper
greater than $10 million at least once in the last three years
Page 47
Yes Yes Yes Yes Yes Yes Adequately concluded whether the program is likely to make IPs and
UPs above or below the statutory threshold
Published IP and UP estimates for programs susceptible to significant
N/A N/A N/A N/A N/A N/A
IPs in the accompanying materials to the annual financial statement (2)
Published corrective action plans for each program for which an
N/A N/A N/A N/A N/A N/A estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement (2)
payment risk assessment in FY 2023 based on Treasury’s three-year rotation schedule in
Published IP and UP reduction target for each program for which an
N/A N/A N/A N/A N/A N/A estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement (2)
4121 Wilson Blvd, Suite 1100
Has demonstrated improvements to payment integrity or reached a
N/A N/A N/A N/A N/A N/A
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
tolerable IP and UP rate (2)
Arlington, VA 22203
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
Phone: (571) 429-6600
Conducted an Improper Payment Risk Assessment
Reported an IP and UP estimate of less than 10% for each program for
N/A N/A N/A N/A N/A N/A which an estimate was published in the accompanying materials to the
accordance with OMB guidance.
www.rmafed.com
annual financial statement (2)
Departmental Offices –
Contribution to African
Development Fund
Departmental Offices –
Contribution to Europe Bank
for Reconstruction
Departmental Offices –
International Fund for
Agriculture Development
Departmental Offices – Global
Food Security Fund
Fiscal Service – Restitution of
Forgone Interest
Internal Revenue Service –
Child and Dependent Care Tax
Credit
Internal Revenue Service –
Advance Child Tax Credit
Fiscal Service – D.C. Water &
Sewage
Fiscal Service – Travel
Program Name
Promotion Fund, Corp for
Travel Promotion
Community Development
Financial Institutions – CDFI
Bond Guarantee Program
Financing Fund
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Published payment integrity information with the annual financial
statement (1)
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 Conducted IP risk assessments for each program with annual outlays
greater than $10 million at least once in the last three years
Page 48
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Adequately concluded whether the program is likely to make IPs and
UPs above or below the statutory threshold
Published IP and UP estimates for programs susceptible to significant
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
IPs in the accompanying materials to the annual financial statement (2)
Published corrective action plans for each program for which an
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement (2)
Published IP and UP reduction target for each program for which an
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement (2)
4121 Wilson Blvd, Suite 1100
Has demonstrated improvements to payment integrity or reached a
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
tolerable IP and UP rate (2)
Arlington, VA 22203
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
Phone: (571) 429-6600
Reported an IP and UP estimate of less than 10% for each program for
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A which an estimate was published in the accompanying materials to the www.rmafed.com
annual financial statement (2)
Community Development
Financial Institutions – Capital
Magnet Fund
Community Development
Financial Institutions – CDFI
Emergency Response Program
Departmental Offices –
Contributions to the IMF
Facilities & Trust Funds
Departmental Offices – State
Small Business Credit Initiative
(SSBCI)
Departmental Offices –
Homeowners Assistance Fund
(HAF)
Departmental Offices –
Emergency Capital Investment
Fund (ECIP)
Departmental Offices –
Program Name
Coronavirus Capital Projects
Fund (CPF)
Departmental Offices – Local
Assistance and Tribal
Consistency Fund (LATCF)
Departmental Offices – IA
Technical Assistance Program
Yes Yes Yes Yes Yes Yes Yes Yes Yes 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 Conducted IP risk assessments for each program with annual outlays
greater than $10 million at least once in the last three years
Page 49
Yes Yes Yes Yes Yes Yes Yes Yes Yes Adequately concluded whether the program is likely to make IPs and
UPs above or below the statutory threshold
Published IP and UP estimates for programs susceptible to significant
N/A N/A N/A N/A N/A N/A N/A N/A N/A
IPs in the accompanying materials to the annual financial statement (2)
Published corrective action plans for each program for which an
N/A N/A N/A N/A N/A N/A N/A N/A N/A estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement (2)
Published IP and UP reduction target for each program for which an
N/A N/A N/A N/A N/A N/A N/A N/A N/A estimate above the statutory threshold was published in the
accompanying materials to the annual financial statement (2)
4121 Wilson Blvd, Suite 1100
Has demonstrated improvements to payment integrity or reached a
N/A N/A N/A N/A N/A N/A N/A N/A N/A
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
tolerable IP and UP rate (2)
Arlington, VA 22203
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
Phone: (571) 429-6600
Reported an IP and UP estimate of less than 10% for each program for
N/A N/A N/A N/A N/A N/A N/A N/A N/A which an estimate was published in the accompanying materials to the www.rmafed.com
annual financial statement (2)
4121 Wilson Blvd, Suite 1100
Arlington, VA 22203
Phone: (571) 429-6600
www.rmafed.com
Published IP and UP estimates for programs susceptible to significant
Reported an IP and UP estimate of less than 10% for each program for
Posted the annual financial statement and accompanying materials on Conducted IP risk assessments for each program with annual outlays Adequately concluded whether the program is likely to make IPs and
Published IP and UP reduction target for each program for which an
Published payment integrity information with the annual financial Has demonstrated improvements to payment integrity or reached a
Published corrective action plans for each program for which an
Has developed a plan to meet the IP and UP reduction target (2)
estimate above the statutory threshold was published in the estimate above the statutory threshold was published in the which an estimate was published in the accompanying materials to the
Program Name
statement (1) greater than $10 million at least once in the last three years
the agency website (1) UPs above or below the statutory threshold IPs in the accompanying materials to the annual financial statement (2) accompanying materials to the annual financial statement (2)
tolerable IP and UP rate (2)
accompanying materials to the annual financial statement (2) annual financial statement (2)
Treasury Inspector General for
Tax Administration – Treasury Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
IG for Tax Administration
Financial Crimes Enforcement
Network – Salaries and Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Expenses, FinCEN
Office of the Comptroller of the
Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Currency
Alcohol, Tobacco, Tax and
Trade Bureau – Internal
Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
Revenue, Collections for Puerto
Rico
Departmental Offices – Salaries
Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A
and Expenses, OIG
(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” criterion, 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 improper payment 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.
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
Page 50
4121 Wilson Blvd, Suite 1100
Arlington, VA 22203
Phone: (571) 429-6600
www.rmafed.com
Appendix 4: Treasury Management’s Response
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
Page 51
4121 Wilson Blvd, Suite 1100
Arlington, VA 22203
Phone: (571) 429-6600
www.rmafed.com
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
Page 52
4121 Wilson Blvd, Suite 1100
Arlington, VA 22203
Phone: (571) 429-6600
www.rmafed.com
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
Page 53
4121 Wilson Blvd, Suite 1100
Arlington, VA 22203
Phone: (571) 429-6600
www.rmafed.com
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
Page 54
4121 Wilson Blvd, Suite 1100
Arlington, VA 22203
Phone: (571) 429-6600
www.rmafed.com
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
Page 55
4121 Wilson Blvd, Suite 1100
Arlington, VA 22203
Phone: (571) 429-6600
www.rmafed.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
Member of the American Institute of Certified Public Accountants’ Government Audit Quality Center
Page 56
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