OMBlog

Eliminating Billions in Payment Errors

As part of the President’s Campaign to Cut Waste, this Administration has taken an aggressive approach to attacking waste, fraud, and abuse within government agencies.  Nowhere is this more apparent than in combatting improper payments – those Federal payments that are made in the wrong amount, to the wrong entity, or for the wrong purpose.

When the President took office, the rate of wasteful government-wide improper payments was on the rise.  Since then, the President has taken forceful steps to cut down on improper payments, such as issuing an Executive Order putting in place new measures to increase transparency and hold agency officials accountable to the American public, directing agencies to intensify and expand efforts to recover improper payments, establishing a “Do Not Pay” list for agencies to check before making payments, and signing into law the landmark Improper Payments Elimination and Recovery Act.  And the Administration has moved quickly to deploy cutting-edge forensic technologies to crack down on such waste for the first time in government.

These efforts have resulted in the elimination of billions of dollars in wasteful improper payments.  Today, we are pleased to report that the government-wide error rate has decreased to 4.3 percent, having steadily declined from its high-water mark of 5.4 percent in Fiscal Year (FY) 2009.  We have successfully reduced error rates in major programs all across the government—Medicare Fee-for-Service, Medicaid, Unemployment Insurance (UI), the Earned Income Tax Credit, SNAP (Food Stamps), Pell Grants, the School Lunch program, and Retirement, Survivors, and Disability Insurance.

Across the board, Federal agencies are taking targeted steps to combat erroneous payments.  As just one example, the Department of Labor is actively working with states to reduce UI improper payments. All states have been called to action to ensure that UI integrity is a top priority and to develop state-specific strategies to bring down the overpayment rate.  DOL also recently launched a partnership with the New York Department of Labor to establish a UI Integrity Center of Excellence.  This new Center will drive collaborative work with the Labor Department and other states to develop and implement innovative strategies that can be used to combat improper payments and build capacity nationally to use data analytics and predictive modeling more effectively. 

In total, the government has so far avoided over $47 billion in improper payments over the past three years, almost hitting the President’s ambitious goal of avoiding $50 billion in improper payments by the end of FY 2012.  The Administration also surpassed, by more than double, the President’s goal of recapturing for America’s taxpayers $2 billion in overpayments to contractors by the end of FY 2012.  We are announcing today that Federal agencies recaptured a record $4.4 billion in overpayments to contractors over the last three years, due in large part to the success of the Medicare Fee-for-Service Recovery Audit Contractor program.

Notably, when Department of Defense commercial payments are factored in, the total for improper payments avoided over the three years jumps to nearly $70 billion, and the government-wide error rate falls to 3.7 percent.  While including these new amounts can make year-to-year comparisons more complex, it is a more comprehensive snapshot of today’s government-wide error rate. 

These are promising results, to be sure, but we will not rest as long as there is a single dollar of improper payment.  Every dollar paid in error represents an unacceptable waste of taxpayer resources.  This Administration is committed to keeping up the fight to reduce waste, fraud, and abuse and continuing to attack this challenge with every tool at our disposal.

Danny Werfel is Controller of the Office of Management and Budget    

Taking Contractor Accountability to the Next Level

Since coming into office in 2009, President Obama has made great strides in making government more accountable to the American people, pursuing tough reforms to cut waste and act as responsible stewards of taxpayer dollars.  In the area of contracting, this Administration has slashed billions in spending and taken aggressive steps to hold contractors accountable and ensure that we don’t do business with those who seek to abuse or misuse Federal funds. 

Last fall, former OMB Director Jack Lew reminded agencies of their ongoing responsibility to do business with contractors who place a premium on integrity, performance, and quality--and not do business with firms who are proven bad actors and put Americans’ hard-earned dollars at risk for waste, fraud, and abuse.  In a November 2011 memorandum to federal agencies, he called on agency heads to make sure they are fully equipped to suspend or debar contractors whenever necessary to keep federal missions out of harm’s way. The ability to debar or ban a certain company from doing business with the U.S. government is an important tool we have to protect taxpayer dollars from waste, fraud and abuse.  

Today, a new report shows the results of the Administration’s stepped up accountability efforts. The new report from the Interagency Suspension and Debarment Committee (ISDC), a coordinating body of Federal representatives, found that in each of the past three years, agencies have collectively increased suspensions and debarments of companies that fail to play by the rules, going from just over 1900 in FY 2009 to more than 3000 in FY 2011.  While the vast majority of government contractors compete fairly to deliver the best value to the American people, it is critical that the government take a hard line against those who would defraud taxpayers. The report shows the Obama Administration has made significant progress in cracking down on bad actors.  Just as significant as the progress are the management actions that underlie it, and indicate an increased agency commitment to protecting taxpayer resources. 

• All of the 24 major executive branch agencies  -- which account for more than 98 percent of federal procurement spending -- reported having a senior accountable official in place, as called for by last November’s memorandum, with responsibility for assessing the agency’s suspension and debarment program. 
• These same agencies reported taking decisive steps to address resources, policies, or both, to ensure appropriate consideration of suspension and debarment when warranted.  Steps taken have ranged from formally establishing or reestablishing suspension and debarment programs -- such as at the Departments of Health and Human Services and Commerce, which together account for $22 billion in annual contract spending -- and increasing personnel resources for existing programs, to creating new internal monitoring mechanisms, to simplifying referrals for potential suspension or debarment, to implementing automatic referrals to the agency’s suspending and debarring official under certain circumstances.

Through this increased management attention and building capability where it did not exist before, agencies are now better equipped to protect the public from wrongdoers before critical agency resources are unnecessarily wasted.  For instance:

• As a result of completely revamping its debarment and suspension program in 2009, the Department of Interior was able to suspend a contractor within a week of learning from one of its contracting officers that the contractor – who was about to receive a federal contract for demolition and removal of water monitoring stations -- had been indicted in the State of Indiana on charges of attempting to bribe a state official to get state contracts.  Upon conviction, DOI imposed debarment on the contractor.
• The United States Agency for International Development (USAID), which, as of 2011 now maintains a dedicated staff focused on suspension and debarment activities, debarred 16 people in 2012 for their participation in a scheme to submit fraudulent receipts for the administration of federal foreign assistance to support public health, food aid, and disaster assistance in Malawi.  By working with its recipient organization to assure that the unlawfully claimed funds were not reimbursed, USAID was able to avoid waste and abuse of taxpayer funds designed to provide vital assistance to a developing country. 

Strengthening agency suspension and debarment capabilities is just one of a number of ways the Obama Administration has attacked waste and abuse to get better value from our contractors.  Restoring competition to its rightful place as the cornerstone of our acquisition system is another.  There is no greater every-day remedy than competition for curbing fraud, improving contractor performance and promoting accountability for results.  With concerted agency efforts, we have seen the amount of contract dollars competed over the last three years  rise to 64 percent, the highest average level of competition in Federal contracting we have seen over any three year period in the last quarter century and 8 percent higher than the average level of competition reported during the last Administration. 

The Obama Administration’s intensified focus on contractor accountability will continue to drive even better results as agencies continue to build the skills of their workforce.  With more than one out of every six dollars of Federal government spending going to contractors, that is good news for America’s taxpayers.

Joe Jordan is Administrator of OMB’s Office of Federal Procurement Policy

Spending Less, Spending Smarter

Under the Administration’s Campaign to Cut Waste, we are scrutinizing every dollar of Federal spending to make sure that funds are spent efficiently and effectively.  As part of the campaign, last fall, in Executive Order 13589, “Promoting Efficient Spending,”the President charged Federal agencies with tightening their belts to find efficiencies and savings in areas such as printing, fleet, and travel.  That effort is paying off.  Federal agencies are hard at work executing on plans to achieve administrative cost savings in these areas. Agencies achieved over $2 billion in reduced costs in the first quarter of 2012 compared to the same period of time in 2010, and we’re announcing today that agencies achieved another $2 billion in savings in the second quarter.  That puts us at $4 billion dollars in savings – well on track to meet and exceed our goal of $8 billion by the end of FY 2013. 

But perhaps just as important as the savings themselves is the fact that they are indicative of innovative management practices Federal agencies are implementing to get the most out of every dollar.  We are spending less money, and we’re spending it smarter in order to get the most bang for our buck.

For instance, United States Department of Agriculture (USDA) is consolidating its cell phone contracts.  An analysis of USDA’s cellular inventory showed that USDA had over 700 plans and about 36,000 lines of service.  The number of plans has been reduced considerably, and about 1,700 unused and obsolete lines have been discontinued, resulting in savings of approximately $4.7 million this year alone. 

Making Forms Simpler

To fulfill its functions, the federal government asks people to fill out a lot of forms. To get permits and licenses, to pay taxes, and to qualify for benefits and grants, forms are often required. Too often, however, those forms are too confusing and complicated, especially for individuals and small businesses.  Today we are doing something about that problem.

From now on, agencies will be asked to test complex or lengthy forms in advance, by seeing if people can actually understand them. Advance testing can take many forms. Agencies might use focus groups. They might use web-based experiments. They might try in-person observations of how users understand the forms.  From those tests, agencies will be better able to identify the likely burdens on members of the public and to find ways to increase simplification and ease of comprehension.

Here’s an example from a closely related area: labeling. In 2011, the Environmental Protection Agency and the Department of Transportation unveiled new and improved fuel economy labels. The new labels promote informed choices by telling consumers, clearly and simply, about annual fuel costs and about the likely five-year savings or costs of particular cars (compared to the average vehicle). The new labels followed an extensive process of testing, to see what really would be most useful for consumers. In the future, we will be engaging in similar testing for forms, increasing simplicity, reducing confusion, and saving time.

In recent years, we have made a lot of progress in reducing red tape, increasing plain language, and eliminating complexity. Today’s action is a significant further step in this direction.

A Regulatory Reformer Leaves His Mark

With regret and deep gratitude, I am announcing that Office of Information and Regulatory Affairs Administrator Cass Sunstein will be leaving OMB this month.  Having served in the Administration since the very start, and with the recent birth of a baby daughter and the coming of the new school year, Cass will be rejoining Harvard Law School as the Felix Frankfurter Professor of Law and Director of the new Program on Behavioral Economics and Public Policy. 

We are grateful to Cass for his years of public service and for his leadership and dedication in assisting the President in overseeing the nation's regulatory program. Among other things, his emphasis on transparency and on innovative, low-cost regulatory tools contributed to the Administration's Open Government Initiative; to numerous efforts to promote clear, simple disclosure to inform consumers and investors; and to creative reforms to increase public participation in the regulatory process and to promote accountability to the American public.

Cass also oversaw the historic government-wide regulatory "lookback," designed to streamline, improve, and sometimes eliminate existing rules -- helping businesses, consumers, and workers alike. That effort has already produced over $10 billion in five-year savings, along with the elimination of tens of millions of hours in annual paperwork burdens. Because the lookback has been institutionalized, and made a regular feature of American government, far greater savings are expected over time. His leadership in promoting disciplined consideration of costs and benefits, and selection of the least costly alternative, helped generate, to date, well over $100 billion in net benefits.  

Cass has also played a leading role in the Administration's Smart Disclosure initiative, designed to use modern technologies to better inform consumers; in promoting consideration of cumulative burdens of rules; in recent efforts to simplify our regulatory system and to reduce reporting burdens; and in implementing the recommendations of the President's Jobs Council. He has also participated in the design of numerous rules that are, among other things, saving lives on the highways by making vehicles safer and reducing distracted driving; dramatically increasing the fuel economy of the nation’s cars and trucks; protecting public health by reducing air pollution; making our food supply safer; and protecting against discrimination on the basis of disability and sexual orientation.

I can’t thank Cass enough for all he has done for OMB, for the Administration, and for the American people. 

In Cass’s place, Boris Bershteyn, OMB’s General Counsel, will be stepping in to serve as Acting OIRA Administrator. Boris brings with him a tremendous knowledge of regulatory affairs, and currently serves on the Council of the Administrative Conference of the United States, an independent federal agency dedicated to improving the administrative process through consensus-driven applied research. Boris has served as OMB General Counsel since June 2011 and as the Deputy General Counsel from 2009 to 2010.  Between his tours at OMB, he served as Special Assistant to the President and Associate White House Counsel, with responsibility for legal issues in regulatory, economic, health, and environmental policy.  I know Boris will ensure a smooth transition as he picks up where Cass left off.  

Mid-Session Review 2013

Today, OMB released the Mid-Session Review (MSR), which updates the Administration’s estimates for outlays, receipts, and the deficit in light of economic, legislative, and other developments since the President’s 2013 Budget was released in February. As it does each year, the MSR shows the budget outlook under the Administration's policies, which for fiscal year 2013 include the full enactment of the President’s proposals promoting jobs and economic growth and balanced deficit reduction.

Consistent with the February Budget, the MSR shows that under the President’s policies deficits will be reduced to below 3 percent of GDP by 2017 and remain below 3 percent through the rest of the decade.  As a result, debt held by the public as a percent of GDP will be stabilized by 2015 and then set on a downward trajectory through the rest of the decade.

The MSR shows an improvement in the deficit in 2012 and over the following ten years (2013-2022) compared to February’s projections.  For 2012, the deficit is now projected to be $1.211 trillion, $116 billion lower than the $1.327 trillion deficit projected in February.  This reflects lower-than-expected spending, partially offset by lower-than-expected receipts.  As a percentage of GDP, the 2012 deficit is now projected to equal 7.8 percent, down from 8.5 percent projected in February. Cumulative deficits over the 2013-2022 period are project­ed to be $240 billion lower than forecast in February. 

The MSR economic forecast, which was completed in June, makes only minor modifications to the economic forecast included in the President’s 2013 Budget.  As in the Budget, the MSR projects the economic recovery that began in 2009 will continue at a moderate rate and unemployment will gradually decline.

The MSR notes that much of the improvement in the economic picture since late 2008, when we were in midst of the worst recession since the Great Depression, resulted from the American Recovery and Reinvestment Act (Recovery Act) and other growth-creating legislation promoted and signed into law by the President.  However, the MSR also notes the economy still faces significant headwinds that have held down growth and limited gains in employment. 

Enactment of some of the President’s proposals to promote near-term economic and job growth in the face of such headwinds has been delayed by Republicans in Congress.  The MSR assumes these proposals, which have traditionally earned bipartisan support, will still be enacted. The delayed enactment shifts costs into later years, accounting for part of the expected drop in the 2012 deficit and some of the small increase in the 2013 deficit compared to the February projection.

With the enactment of these measures, the MSR projects real GDP will grow at a rate of 2.3 percent in 2012 and 2.7 percent in 2013 (year over year).  The MSR then projects stronger growth for 2014 through 2018, as the economy absorbs unused capacity and returns to its potential. In the long run, the MSR projects real GDP growth to average 2.5 percent, which is unchanged from previous forecasts. 

The MSR also reflects the Administration’s belief that Congress can and must enact a comprehensive and balanced deficit reduction package, along the lines of the President’s Budget that includes additional measures to strengthen the near-term economy and create jobs, and puts the Nation on a sound long-term fiscal course.  That package should avoid the sequestration scheduled to take effect on January 2, 2013.  The sequestration is, by design, bad policy that will have destructive effects on both defense and non-defense programs and services.  With more than five months remaining before the sequestration must be initiated, Congress has ample time to act.  The Administration stands ready to work with Congress to get the job done.  

Jeffrey Zients is the Acting Director of the Office of Management and Budget. 

Communications Update

After three and a half years as a valued advisor and strategist and four budgets, OMB’s Associate Director for Communications and Strategic Planning and senior advisor Ken Baer departed last week.  Ken leaves a legacy that includes bringing OMB communications into the 21^stcentury with the OMBlog and OMB’s twitter presence as he heads to the private sector by way of a long and well deserved family vacation.

I am pleased to announce that Steven Posner is carrying on the torch and joining OMB this week as the Associate Director for Strategic Planning and Communications.  Steve brings a wealth of experience in both the legislative and executive branches to his role at OMB.  For the past eleven years, he has served as Communications Director and Deputy Communications Director for the Senate Budget Committee Democratic staff.  In that capacity, he helped develop and implement the communications strategy for the Committee and served as lead writer, drafting budget materials, speeches, and chart presentations for Chairman Kent Conrad (D-ND).  Prior to his role on the Budget Committee, Steve worked in the Clinton Administration’s Treasury Department as Senior Advisor to the Assistant Secretary for Public Affairs, where he was the Department’s spokesman for economic and tax policy issues.  He previously worked as an Account Executive and Research Analyst at the public affairs firm Powell Tate.  Steve holds a Master’s degree in Public Policy from Harvard University, JFK School of Government and a Bachelor’s degree in History from Colgate University.

He will join spokeswoman and Deputy Associate Director Moira Mack who has taken an expanded leadership role in the Communications office, handling a wide range of Communication issues on both the Management and Budget side and has ensured that OMB’s press office has continued to operate to the highest standard. Moira will continue this expanded role under Steve's leadership.

With Steven and Moira at the helm, I am confident OMB communications will continue to serve the Administration and the public well, building on the progress of the last three and a half years as we continue to move forward the President’s agenda. 

New Progress, New Leadership at GATB

The effort to create lasting, sustainable transparency and accountability across government is a long-term one, and one that the President and the Vice President are committed to seeing through. That’s why last June, the President created the Government Accountability and Transparency Board (GATB).Using the lessons learned from implementing the Recovery Act, the GATB was charged with recommending ways to improve the tracking and display of Federal spending data and broaden the use of cutting-edge fraud detection technologies. 

Since then, the GATB has been working closely with the Recovery Accountability and Transparency Board (Recovery Board), which established a new benchmark for how we should collect, display and oversee Federal spending data under the Recovery Act through Recovery.gov and its innovative Recovery Operations Center. Together with the Recovery Board, Federal agencies, OMB and others, the GATB is a critical driver of continued progress in our forthcoming efforts to make Federal spending data more complete, more transparent, and more reliable.

Last December, the GATB submitted to the President its initial report, containing key recommendations for concrete steps the government should take to enhance transparency and accountability. Today, the GATB provided the President with an update on its progress on the three steps they recommended taking.

1. Leveraging cutting-edge technology to improve government-wide accountability.The GATB recommended expanding the use of cutting-edge tools that can help detect and prevent waste, fraud and abuse, and creating a centralized platform for ensuring accountability in spending across the government. To advance this cause, the Recovery Board has partnered with the GATB to initiate pilots with both agencies and Inspectors General on how best to deploy new forensic and analytical capabilities government-wide. In addition, the Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) launched the President’s Do Not Pay tool to help Federal agencies prevent the types of improper payments that have plagued government for too long – including pension payments to the deceased and payments to fraudulent contractors. In April 2012, OMB issued a memorandum directing agencies to use this tool. By next spring, we expect every major Federal agency will be leveraging the Do Not Pay solution to combat improper payments.  Collectively, these solutions are moving us closer to the GATB’s vision of a common platform for government-wide spending accountability, and the GATB will continue to drive us towards greater centralization over time.
    
2. Streamline and integrate how we collect and display data.The GATB recommended working to create a single electronic collection system for grant related data to eliminate system redundancies, and reduce recipients’ burden of reporting to multiple agencies. To advance this idea, the Recovery Board is both exploring the use of Recovery.gov as a template for displaying they type of spending data currently displayed on www.USAspending.govand also launching a pilot with selected grant recipients to see whether FederalReporting.gov can be used as a centralized collection point for grant data. Further, the GATB is evaluating how existing system consolidation efforts, like the General Services Administration’s (GSA) System for Award Management, to integrate collection of spending data and create a single, cohesive source for these data across the Federal government. In addition, Federal agencies such as the Department of Defense and the Department of Health and Human Services are hard at work in developing new methods for standardizing Federal grant and contract data.
    
3. Migrate to a universal ID system for all Federal awards.The GATB identified steps needed to move the government toward a universal award ID system to ensure uniformity and consistency of data and enhance transparency of government spending. This effort is critical to make sure that we aren’t just providing the public with more data, but rather data that is more reliable, easier to use, and more meaningful in tracking how Federal dollars are spent.  Accordingly, efforts are underway to assess the feasibility of implementing a universal award ID, as well as determining the “intelligent” components that would underpin it. In doing so, the GATB is engaging with other agencies, in particular Treasury, to assess the costs and benefits of a universal award ID, and determining how to move forward as expeditiously as possible.
    

These first steps cannot – and won’t – be the last. Already, OMB is also developing a new Statement of Spending that will make transparent information about where and how Federal agencies spend tax dollars part of agencies’ annual audited financial statements. We will be piloting this new statement with a number of agencies in their financial reports that will be submitted in November of this year. 

We will continue to work in close concert with Congress, Federal agencies, inspectors general, recipients of Federal funds, and other stakeholders to root out waste and drive efficiencies in Federal spending.  To help lead this effort, the President has announced his intent to name Richard (Dick) T. Ginman, Director of Defense Procurement and Acquisition Policy at the Department of Defense, to serve as the new Chairman of the GATB. Mr. Ginman has more than 37 years of experience in the areas of contracting and financial management, and has served as a vocal leader on the GATB in driving progress in Federal spending transparency and accountability. Under Mr. Ginman’s leadership, I am confident that the GATB will continue to serve as an indispensable voice in pushing the Federal government to function more efficiently, effectively, accountably for the American people. 

And ultimately, creating this kind of government – one that is more transparent and accountable to the American people than ever before – is something that the President has been committed to since day one. 

Paper Cuts

President Obama has made it a priority to reduce paperwork and reporting burdens on the American public. Recent reforms are eliminating tens of millions of burden-hours imposed on both businesses and individuals.

Many of these reforms have been spurred by Executive Order 13563, which calls for a government-wide “lookback” at existing regulatory requirements. Building on that Executive Order, President Obama recently issued Executive Order 13610, which specifically directs agencies to prioritize “initiatives that will produce significant quantifiable monetary savings or significant quantifiable reductions in paperwork burdens.” Executive Order 13610 also requires agencies to focus on “cumulative burdens” and to “give priority to reforms that would make significant progress in reducing those burdens.”

Today, in response to Executive Order 13610, we are taking action to promote additional burden reductions. A new guidance document directs agencies to take meaningful steps to decrease paperwork and reporting burdens on the American people, including small businesses. These steps include: