Treasury seeks greater data sharing in interagency plan to curb improper payments

Agencies saw a governmentwide decrease in improper payments last year, after a surge of them at the height of the COVID-19 pandemic.

Now an interagency group is drafting a playbook to build on those pandemic-era lessons.

Members of the Joint Financial Management and Improvement Program are planning to release a three-year Payment Integrity Plan this fall.

JFMIP members include the Treasury Department, the Office of Management and Budget, the Government Accountability Office and the Office of Personnel Management.

Treasury Deputy Assistant Secretary for Accounting Policy and Financial Transparency Renata Miskell says the strategy is focused on getting agencies better access to data to proactively stop improper payments.

“It’s really all about paying the right person the right amount at the right time,” Miskell said. “When you receive a check, or ideally a direct deposit into your account, that’s really one of the most direct ways that you actually interact with the government. It’s also one of the most important functions that the government performs, so it’s important that we do it with integrity, and do so in a way that prevents improper payments and fraud.”

Miskell said the Payment Integrity Plan focuses on getting agencies access to data and analytics key to real-time prevention and detection. She added that a lack of access to data remains a “root cause” of improper payments.

In an effort to further reduce improper payments, Congress is giving Treasury’s Bureau of the Fiscal Service access to the Social Security Administration’s Death Master File. The bureau handles about 90% of all federal payments.

Miskell said the bureau will have access to SSA’s Death Master File for three years, starting this December. However, she said the bureau is planning to make full use of this data in the hopes of convincing lawmakers to permanently codify its access to this data into law.

“It’s actually really challenging to get access to that whole Death Master File, both in terms of costs, and also because of privacy and security reasons. It’s really all about breaking through some of those complex challenges and making it easy to do the right thing,” Miskell said. “We hope to just have permanent access in general, because we know that this is a very valuable data set that can be challenging to access for a federal agency,” Miskell said.

Fiscal Service established an Office of Payment Integrity earlier this year, bringing its Payment Integrity Center of Excellence and Do Not Pay under one roof.

The bureau also piloted a commercially available account verification tool to verify whether bank accounts actually belong to the individual or organization that’s receiving payment.

Miskell said this tool helped the bureau screen pandemic-era Economic Impact Payments and Advanced Child Tax Credits, and prevented the federal government from issuing about 130 million improper payments.

The bureau is also piloting tools that will make it easier for Supplemental Nutrition Assistance Program (SNAP) and Medicaid enrollees to verify their income and eligibility.

“There are people who are non-traditional earners, who may not have a history with commercial services that provide that information. And then the commercial information is also really expensive, so if you’re a state or if you’re a federal program, it can be really challenging to find dollars to pay for that service,” Miskell said.

The three-year Payment Integrity Plan is also focused on strengthening interagency partnerships to reduce instances of improper payments.

Miskell said the majority of improper payments stem from federally funded, state-administered programs like Medicaid and federal-state unemployment insurance program.

The Office of Management and Budget, in a blog post last December, found improper payments grew most under the Federal-State Unemployment Insurance program, which saw its improper payment rate reach nearly 19% — eight points higher than pre-pandemic rates.

“We know that problems accumulated from early in the pandemic are still being discovered and will take a long time to clean up,” OMB wrote in the blog post.

Improper payments include overpayments, underpayments, as well as payments in the right amount to the right person, but not strictly adhering to legal or regulatory requirements.

“Coming off of the pandemic, we saw how important partnerships were in response and recovery efforts,” Miskell said. “It’s important to strengthen the partnership with the states that administer these programs, and really help make the connection between the federal resources and the state challenges.”

Fiscal Service partnered with the Federal Emergency Management Agency (FEMA) when standing up its COVID-19 Funeral Assistance program. The bureau helped provide account verification services to ensure the FEMA funds covered legitimate funeral expenses.

“They asked us, ‘Hey, this program could be subject to lots of fraud. Can you help us?’ So we proactively engaged with them, we shared tools,” Miskell said.

Miskell said Fiscal Serviced helped FEMA avoid about $86 million in potentially improper payments from its funeral assistance program.  FEMA estimates it awarded $2.8 billion in payments through the program.

The three-year plan is also focused on scaling up payment integrity programs across the government.

GAO found in a recent report that agencies saw a slight decrease in improper payments decrease in 2022, compared to the year prior.

“The decline is a step in the right direction, and I think it reflects the ongoing collaboration and the tremendous, almost herculean efforts that agencies took to put controls in place to prevent fraud and improper payments,” Miskell said.

As agencies look to further reduce improper payments, they’ll also have to balance program integrity with the speed of payment.

Miskell applauded agencies for getting emergency funding out to the public quickly. She estimated that, at the height of the pandemic, the federal government issued $400 billion in pandemic relief spending in a matter of days.

“That’s great, we were able to deliver funding in record time to help provide relief. But at the same time, we saw fraudsters taking advantage of that record-breaking assistance and exploiting those vulnerabilities,” she said.

GAO last month, as part of this effort, released a guide to reduce payment errors and fraud in emergency assistance programs.

“It gives really some concrete and practical steps that program managers can go through to set up that program to make sure that they’re assessing risk,” Miskell said.

To reduce improper payments among longstanding federal programs, Miskell said agencies should address the vulnerabilities that IGs highlighted as a significant source of fraud.

“The pay-and-chase model is not the best way to promote payment integrity. Once money goes out the door, it is really challenging to get it back, and so it’s really important to set those controls up front.”

Looking forward, Miskell said artificial intelligence and emerging technologies, if used responsibly, could become a “game changer when it comes to enabling real-time prevention and detection.”

“Just as it can be a really positive thing for government, in terms of more efficiently [and] effectively delivering services, you can also assist fraudsters and nefarious actors in quickly exploiting weaknesses in federal programs and taking advantage of taxpayer dollars in a way that’s inappropriate,” Miskell said.

“Fraud has always been kind of something that’s been out there. But the speed and the magnitude at which it occurs and can occur is really the kind of the biggest change.”

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