WASHINGTON – Today, Sen. Tom Carper (D-Del.), Chairman of the Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security, chaired a hearing entitled, “Assessing Efforts to Combat Waste and Fraud in Federal Programs.”

For more information on the hearing or to watch a webcast of the hearing, please click here.

A copy of Sen. Carper’s opening statement, as prepared for delivery, follows:

“Today’s hearing will focus on the very high levels of improper payments made by federal agencies, as well as our efforts to curb these very wasteful and sometimes fraudulent payments. As everyone in this room knows, we’ve faced record budget deficits in recent years. Our national debt stands at about $15.4 trillion, well over double what it was just ten years ago. The last time the debt was this high was at the end of World War II. That level of debt was not sustainable then, and it is not sustainable today.

“In order to address the burden this debt places on our country, we need to establish a different kind of culture in Washington when it comes to spending. As I’ve said repeatedly at hearings like this one, we need to establish a culture of thrift to replace what some would call a culture of spendthrift.

“This culture change must involve a willingness to look in every nook and cranny of federal spending and ask this question, “Is it possible to get better results for less money?” We need to examine every federal program closely, focus on what works, and stop putting scarce resources into initiatives that have outlived their usefulness or that can’t show results. We also need to get smarter in how we manage the money taxpayers entrust to federal programs.

“Across the federal government, programs managers need to sharpen their pencils and stop making the kind of expensive, avoidable mistakes that lead to improper payments. Before going any further, I think it is important first to explain what it means for a federal agency to make improper payments. An improper payment occurs when an agency pays a vendor for something it didn’t receive or, maybe even pays them twice. It can occur when a recipient has died and is no longer eligible for payment, or when a vendor owes the government money and legally should not be getting a payment until this debt is repaid. And, of course, sometimes people or companies receive payments that are actually fraudulent.

“According to the Government Accountability Office, the federal government made an estimated $121 billion in improper payments in fiscal year 2010. This was a record high. I was encouraged to learn that the early data for fiscal year 2011 shows a slight drop in the level of improper payments to approximately $115 billion, even though more agencies have begun reporting their improper payments. For example, the 2011 estimate includes improper payments for the Medicare prescription drug program for the first time.

“Federal agencies have estimated improper payments of more than $100 billion for three years running now. These payments come from over 70 programs at more than 20 agencies and include programs like Medicare and Medicaid, civilian and military pay at the Department of Defense; and the Federal Emergency Management Agency, to name just a few.

“Despite some progress that has been made, error rates – and the amount of money lost to avoidable errors – still clearly remain at unacceptably high levels. And what disturbs me most about this problem is that we seem to make these kinds of mistakes at a rate much higher than a business or the average family would tolerate or could afford. And we keep making them over and over again.

“Very often, we know what we need to do to fix this problem. The testimony we’ll hear today shows that we’re making important progress. But more needs to be done. Fortunately, there are several very real and effective tools available to curb wasteful and fraudulent payments that agencies have yet to make full use of.

“In 2010, Congress passed and President Obama signed into law the Improper Payments Elimination and Recovery Act, which I co-authored with Senators Coburn, Senator Lieberman, and others. This new law aims to make agencies and agency leadership far more accountable for the expensive mistakes they make and represents a bipartisan and bicameral success in preventing waste and fraud. It does four things:

It forces federal agencies to make a more honest accounting of the errors they make; requires agencies to take steps to stop making errors; requires agencies to try and recover improper payments they do make; and finally, it directs that top managers be evaluated in part by how well their agency complies with the new law.

“A wide variety of ideas have been put forward since the enactment and implementation of this new law on how to further curb improper payments, and in the process, reduce our budget deficit and begin whittling down our debt, as well. For example, recognizing that more than half of all federal improper payments estimates are from the Medicare and Medicaid program, last year Senator Coburn and I teamed up to introduce legislation to curb waste and fraud in both programs. The bipartisan legislation – S. 1251, the Medicare and Medicaid Fighting Fraud and Abuse to Save Taxpayer Dollars Act - would take a series of common sense steps to identify and prevent waste and fraud. It drills down into specific waste and fraud challenges within health care, such as physician identify theft, the need for improved fraud data sharing between the federal government and state agencies, and quicker identification of improper payments to medical providers.

“Our bipartisan legislation has attracted 35 sponsors and cosponsors in the Senate. There is now a companion bill in the House led by Congressmen Peter Roskam and John Carney. Our legislation has garnered the support of a wide range of organizations, including the National Taxpayer’s Union, Citizens Against Government Waste, and AARP. Most of the provisions of these bills are based on Government Accountability Office and inspector general recommendations.

“Today, I would like to focus on an important new measure that would help all federal agencies prevent, detect and recover improper payments. Bipartisan legislation that I co-authored with Senators Collins, Brown and Lieberman, S. 1409, the Improper Payments Elimination and Recovery Improvement Act, is now making its way through the Senate. This measure builds upon the 2010 improper payments law.

“Our new bill recently passed by Unanimous Consent in the Homeland Security and Government Affairs Committee. And last month, the bill was introduced in the House, led by the witnesses of our first panel, the Honorable Mr. Platts and Mr. Towns. Let me now talk about just a few of the provisions in the bill:

“Too often, federal agencies make improper payments to individuals who could easily be identified as ineligible. Some of these individuals are applying for benefits using a false address. Others may not meet the criteria for eligibility. Let’s take, for example, a person with a job applying for unemployment benefits using the name of someone who may actually be deceased. Of course, those watching this hearing may ask the obvious question of why a federal agency would ever pay unemployment benefits to an individual who has died or to someone who is trying to commit fraud?

“Unfortunately, the answer is that, all too often, agencies simply don’t do a very good job of coordinating their efforts to prevent improper payments or communicating about best practices. Many also have antiquated databases and computer systems for tracking basic payment information. And all too often, we simply don’t allow agencies to access the information they need to avoid giving scarce taxpayer dollars to the wrong people.

“To their credit, the Obama Administration, through executive action, is establishing a “Do Not Pay Initiative.” This effort involves screening recipients of federal funds against a list of those ineligible to receive those funds before we cut a check. For example, before an agency could award a contract to a company, the agency would have to cross check against the “Do Not Pay” database, which will include a central, comprehensive database of companies and entities that are no longer allowed to do work with the Federal government because of a fraud conviction or for some other reason. S. 1409 would establish the Do Not Pay Initiative in law throughout the federal government, make several important improvements to the initiative, and add some tools and procedures to help agencies access data.

“The legislation would also address what is called “death fraud” and other improper payments to deceased individuals. In too many instances, agencies pay benefits to individuals who are deceased and are, therefore, no longer eligible for payments under program rules. For example, the Office of Personnel Management Inspector General reported that $601 million in improper payments were made to federal retirees found to have already died during the past five years. However, such payments to dead people were not unique to this one program. Last year, one of my home state newspapers reported that, 28 years after a Delaware woman had died one of her relative was still fraudulently collecting and cashing her Social Security checks. Improving the collection, verification, and use by federal agencies of data on individuals who have died will help curb hundreds of millions, if not billions of dollars, in improper payments.

“Our legislation would require that the office of Management and Budget, in consultation with other agencies and stakeholders, identify specific solutions and report back to Congress 180 days after passage. The legislation also includes provisions that would strengthen and make more consistent the methods used by agencies to estimate improper payments. This has been an issue identified by both the Government Accountability Office and the inspector general community.

“Finally, the bill would establish a series of recovery audit contracts to ensure that agencies actually recover overpayments. Recovery Audit Contracting has proven very successful in the private sector as well as in several federal agencies, including within the Medicare program. There, we have witnessed recoveries of improperly spent taxpayer dollars approaching $2 billion in recent years, and we expect those recoveries to continue to grow. I anticipate that the both the Senate and House will look as favorably on S. 1409 just as they did on the original Improper Payments Elimination and Recovery Act.

“There are additional initiatives that agencies are undertaking, and that the witnesses will describe. I am especially interested in initiatives that we will hear about today that address improper payments by federal program that are run by state agencies, such as Medicaid and Unemployment Insurance.

“Let me conclude by noting that we are here today in large part because we believe that we have a moral imperative to ensure that the scarce resources we put into federal programs are well spent. We must use every tool available to put our fiscal house back in order and give the American people the government they expect and deserve. It is the right thing to do on behalf of the taxpayers of this country who entrust us with their hard-earned money. By working together on this latest in a series of common sense initiatives, we can take another important step forward in earning their trust once again.”

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