A Framework for Managing Improper Payments in Emergency Assistance Programs

The Government Accountability Office (GAO) announced on July 13, 2023, a five-principle approach for managing improper payments in response to a provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.¹ According to the GAO, the federal government has made improper payments totaling approximately 2.4 trillion USD since 2003.² A significant portion of these improper payments are due to an increase in emergency governmental aid programs in connection with national emergencies such as natural disasters, cyber-attacks, and pandemics. In emergencies, the risk of improper payments may increase because the need to provide assistance quickly can inhibit the effectiveness of controls. The GAO’s Framework for Managing Improper Payments provides Congress and federal agencies with a strategic approach to preventing and detecting improper payments.

What's New?

The GAO announced a new framework that provides Congress and federal agencies with an overall approach to prevent and reduce improper payments in emergency assistance programs. The new framework outlines the following five principles:

1. Commit to managing improper payments
2. Identify and assess improper payment risks
3. Design and implement effective control activities
4. Monitor the effectiveness of controls in managing improper payments 
5. Provide and obtain information to manage improper payments
   
   

The GAO emphasizes that agencies are better able to mitigate the risk of improper payment during emergencies if they have taken steps to manage this risk effectively under normal conditions. The GAO states when emergencies take place, agencies may need to create new programs or significantly expand existing ones, which can increase risk. This increased risk may require additional emphasis on specific elements of the framework, such as those described below. Delaying or omitting the implementation of these elements may lead to increased risk of improper payments. 

The GAO notes that applying the five principles of the GAO’s framework can help address the increased risk of improper payments during emergencies. 

Principle 1 — Agencies must commit to managing improper payments through internal control plans with established control activities at the beginning of a program, and assign clear roles and responsibilities to manage improper payments. Developing internal control plans that agencies can immediately implement or adapt in a future emergency can help ensure that agencies are ready to respond to emergencies effectively. 

Principle 2 — Agencies must periodically identify and assess the risk of improper payments. Assessing risks will help decision makers estimate whether programs within their organization are susceptible to significant improper payments early. Leveraging existing risk assessments can help an agency in their early identification of risks. Timeliness is important because estimating improper payments after the first year of assistance has passed could be too late, as most funds would already be disbursed. If an agency estimates improper payments expeditiously, including during the initial year of implementation, it can assist programs in addressing issues sooner. 

Principle 3 — Agencies should establish control activities that leverage existing resources and prioritize prepayment controls at the beginning of a program. The GAO notes emergency programs may allow applicants to certify their own eligibility for assistance, which could save time, but also increase the risk of improper payments, specifically due to fraud. When agencies prioritize and implement prepayment controls, such as using existing data sources to verify applicants’ eligibility and identity, they may stop improper payments before they are issued. 

Principle 4 — The GAO necessitates the need to implement timely risk-based monitoring of payments and controls. The GAO states that monitoring the controls used by nonfederal entities is a step to meeting oversight responsibilities and could help ensure the effective use of federal funds. GAO also emphasizes when gaps and vulnerabilities are discovered, there is a need for corrective actions by the agency. Corrective actions must be assigned to accountable owners so the root cause of improper payment findings can be assessed and ad-dressed. Agencies should ask, “Why did this occur?” and “What are possible corrective actions?” in order to detect and mitigate the risk of improper payments. 

Principle 5 — Federal entities, non-federal entities, and state/local auditors are encouraged to share improper payment/fraud information to help inform future policymaking, controls, oversight, and mission delivery while enhancing public transparency. The GAO states agencies should support non-federal entities with improper payment risk management and statutory compliance, including reporting requirements. Non-federal entities may be a key player in program delivery. 

What Does This Mean For Your Organization

The GAO Improper Payments Risk Management Framework emphasizes it is critical to mitigate improper payments through stakeholder collaboration and preparedness. The existing “pay-and-chase” models yielded a rise in improper payments and painful claw-back experiences. The GAO holds that adherence to the five principles provides agencies and their stakeholders greater certainty when carrying out mission objectives. 

To ensure that agencies proactively mitigate improper payment risk:

• Review A Framework for Managing Improper Payments in Emergency Assistance Programs — GAO-23-105876
• Review A Framework for Managing Fraud Risks in Federal Programs —  GAO-15-593
• Review the agencies’ recent, or complete a current, Fraud Risk Assessment
• Conduct training for relevant employees including non-federal stakeholders
• Assess the susceptibility of significant improper payments in programs
• Partner with nonfederal entities to deploy strong identity verification and eligibility mechanisms
  
  

How Guidehouse Can Help

Guidehouse can assist agencies to assess their improper payments controls and antifraud activities. Guidehouse also offers strategic fraud risk management development and implementation services, including:

• Complete fraud and improper payment risk assessments for offices and programs to identify gaps
• Benchmark fraud risk management programs against leading commercial and government practices
• Conduct investigations to determine the facts, analyze the root cause of the misconduct, identify control breakdowns, and deploy remediation measures if potential fraud is identified or suspected.