Improper Payments Information Act of 2002: Background, Implementation, and Assessment

Garrett Hatch
Analyst in American National Government

Virginia A. McMurtry
Specialist in American National Government

On November 26, 2002, the Improper Payments Information Act (IPIA) was signed into law as P.L. 107-300 (116 Stat. 2350). Augmenting previous financial management reform laws, the IPIA seeks to increase financial accountability in the federal government, and thus reduce wasteful spending. The law requires agencies to identify each year programs and activities vulnerable to significant improper payments, to estimate the amount of overpayments or underpayments, and to report to Congress on steps being taken to reduce such payments. 

In May 2003, the Office of Management and Budget (OMB) issued guidance to agencies on the implementation of the IPIA, which was revised and incorporated into OMB Circular A-123 as Appendix C in August 2006. OMB's guidance, while consistent with some provisions of the IPIA, has been criticized on several counts. Whereas the statute requires agencies to report to Congress on all programs with more than $10 million in estimated improper payments, OMB added an additional threshold, such that agencies must only report on programs with improper payments that exceed both $10 million and 2.5% of total program payments. Critics have identified a number of examples of programs with improper payments over $10 million that are not reported to Congress because they do not also meet the 2.5% threshold. In the 2006 update of its guidance, OMB stated that it may determine on a case-by-case basis that some programs are to be subject to annual Performance and Accountability Report requirements, even if they do not meet the 2.5% threshold. 

OMB's guidance has also been criticized for permitting agencies to exempt some programs from the IPIA's annual requirement for risk assessment. Under the act, every program and activity is to be reviewed each year. OMB's guidance, however, now allows agencies to review a program once every three years if it has been deemed low-risk. Critics say this runs counter to the language and intent of the IPIA, and that it leaves open the possibility that improper payments might go undetected during the exemption period. 

For FY2009, OMB reported a government-wide error rate of 5.0% and total improper payments of $98 billion. This figure does not cover all at-risk outlays which lack improper payment estimates and are not yet reflected in the error rate or improper payment amounts. Until valid estimates become available for all risk-susceptible programs, the full extent of the improper payments problem will remain unknown. 

In the 111th Congress, Senator Carper, along with four cosponsors, introduced S. 1508, the Improper Payments Elimination and Recovery Act of 2009, similar to S. 2583 as reported in the 110th Congress. On July 29, 2009, the bill, as amended, was ordered reported favorably by the full committee. A companion measure, H.R. 3393, was introduced in the House. In 2009, both House and Senate subcommittees held hearings relevant to the issue of improper payments. President Obama has announced his support for the measures. 

On November 15, 2009, President Obama issued E.O. 13519, "Reducing Improper Payments and Eliminating Waste in Federal Programs." A White House memorandum regarding "Finding and Recapturing Improper Payments" followed on March 10, 2010.


Date of Report: March 25, 2010
Number of Pages: 26
Order Number: RL34164
Price: $29.95

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