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The federal government has a $100 billion budget leak

A U.S. Treasury benefit check. Associated Press/Photo by Bradly C. Bower

The federal government has a $100 billion budget leak

Federal agencies admit to making almost $100 billion in benefit payments last year to people who may not have been entitled to receive them. But congressional investigators say the figure could be even higher.

“The amounts here are absolutely staggering,” said Rep. John Mica, R-Fla. “It’s over $100 billion each of the last five years.” Mica chairs the House Oversight government operations subcommittee, which held a hearing Wednesday on the improper payments.

Federal agencies are required to estimate the improper payments they issue, whether through fraud or mistake. The estimates include overpayments, underpayments, payments to the wrong recipient, and payments without proper documentation. Examples include Medicare payments for unnecessary treatment and unemployment benefits for people who are secretly working.

In 2013, federal agencies estimated they made $97 billion in overpayments, with $9 billion in underpayments. That adds up to 3.5 percent of all the payments made by the federal government and about 15 percent of the budget deficit. Despite the staggering numbers, they’ve been worse. The Obama administration has reduced improper payments since they peaked at $121 billion in 2010, said Beth Cobert, deputy director of the White House budget office. Agencies also recovered $22 billion in overpayments last year, she said.

A new report by the Government Accountability Office, though, questions the accuracy of agency estimates. “The federal government is unable to determine the full extent to which improper payments occur and reasonably assure that appropriate actions are taken to reduce them,” said Beryl H. Davis, director of financial management at the GAO, the congressional investigative arm.

Davis told the subcommittee some agencies don’t develop estimates for programs that could be susceptible to improper payments. The Pentagon especially has faced criticism. Last year, the GAO declared the Pentagon’s 2011 estimates to be “neither reliable nor statistically valid because of long-standing and pervasive financial management weaknesses.”

The largest estimates of improper payments come from healthcare programs. Medicare’s programs for older Americans accounted for $50 billion in the 2013 budget year, far exceeding any other program. Most of the overpayments were for cases lacking proper documentation, said Shantanu Agrawal, a deputy administrator for the Centers for Medicare & Medicaid Services. Medicaid issues totaled $14.4 billion in improper payments.

The earned income tax credit, which pays tax refunds to the working poor, generated about $14.5 billion in problem payments—24 percent of all EITC payments. Internal Revenue Service Commissioner John Koskinen said improper payments often go to people claiming children they don’t have or misreporting their income. But the problem, according to Koskinen, is that the agency doesn’t have enough money to fight fraud. The IRS’s $11.29 billion budget is at least $1.35 billion too small, Koskinen said Wednesday, especially for combatting organized crime.

Another $6.2 billion in improper benefit payments went to unemployment insurance, totaling 9 percent of that program’s payments. Some people didn’t meet state requirements to seek employment or continued to get benefits after returning to work, the Labor Department said. Others were ineligible to begin with because they voluntarily quit their jobs or were fired.

The Associated Press contributed to this report.

Andrew Branch Andrew is a World Journalism Institute graduate and a former WORLD correspondent.

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