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MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES SUBJECT: Finding and Recapturing Improper Payments My Administration is committed to reducing payment errors and eliminating waste, fraud, and abuse in Federal programs — a commitment reflected in Executive Order 13520 of November 20, 2009, Reducing Improper Payments. Executive departments and agencies should use every tool available to identify and subsequently reclaim the funds associated with improper payments. Thorough identification of improper payments promotes accountability at executive departments and agencies; it also makes the integrity of Federal spending transparent to taxpayers. Reclaiming the funds associated with improper payments is a critical component of the proper stewardship and protection of taxpayer dollars, and it underscores that waste, fraud, and abuse by entities receiving Federal payments will not be tolerated. Today, to further intensify efforts to reclaim improper payments, my Administration is expanding the use of "Payment Recapture Audits," which have proven to be effective mechanisms for detecting and recapturing payment errors. A Payment Recapture Audit is a process of identifying improper payments paid to contractors or other entities whereby highly skilled accounting specialists and fraud examiners use state-of-the-art tools and technology to examine payment records and uncover such problems as duplicate payments, payments for services not rendered, overpayments, and fictitious vendors. (A Payment Recapture Audit as used in this memorandum shall have the same meaning as the term "recovery audit" as defined in Appendix C to Office of Management and Budget Circular A-123.) One approach that has worked effectively is using professional and specialized auditors on a contingency basis, with their compensation tied to the identification of misspent funds. Therefore, I hereby direct executive departments and agencies to expand their use of Payment Recapture Audits, to the extent permitted by law and where cost-effective. The Director of the Office of Management and Budget (OMB) shall develop guidance within 90 days of the date of this memorandum on actions executive departments and agencies must take to carry out the requirements of this memorandum. The guidance may require additional actions and strategies designed to improve the recapture of improper payments, including, as appropriate, agency-specific targets for increasing recoveries. The Director of the OMB shall further coordinate with the Council for Inspectors General on Integrity and Efficiency to identify an appropriate process for obtaining review by Inspectors General of the effectiveness of agency efforts under this memorandum. The agencies’ expanded use of Payment Recapture Audits does not preclude Offices of Inspectors General from performing any activities to identify and prevent improper payments. Nothing in this memorandum shall be construed to require the disclosure of classified information, law enforcement sensitive information, or other information that must be protected in the interests of national security. This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person. The Director of the OMB is hereby authorized and directed to publish this memorandum in the Federal Register. BARACK OBAMA

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Presidential Memorandum Regarding Finding and Recapturing Improper Payments

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WASHINGTON—President Barack Obama today will announce a new effort to crack down on waste and fraud in Medicare, Medicaid, and other government programs through the expanded use of payment recapture audits. The initiative is the latest component in President Obama’s commitment to embrace the best ideas – from both parties – in advancing reform. In his remarks on health insurance reform in St. Charles, Missouri, President Obama will discuss a new effort to recoup taxpayer dollars through the use of payment recapture audits, which offer specialized private auditors financial incentives to root out improper payments, and have been demonstrated through pilot programs to be highly effective. In fact, expanded use of payment recapture audits could return at least $2 billion in taxpayer money over the next three years– double the current amount of projected recovered costs. The President will sign a presidential memorandum today that directs all federal departments and agencies to expand and intensify their use of payment recapture audits under their current authority.  He will also announce his support for the Improper Payments Elimination and Recovery Act, bipartisan legislation to expand the ability of government agencies to fund the audits with recaptured payments. “The fact is, Washington is a place where tax dollars are often treated like Monopoly money, bartered and traded, divvied up among lobbyists and special interests.  And it has been a place where waste – even billions of dollars in waste – is accepted as the price of doing business,” said President Obama. “Well, I don’t accept business as usual.  And the American people don’t accept it either, especially when one of the most pressing challenges we face is reining in long-term deficits with threaten to leave our children a mountain of debt.” The President’s health insurance reform proposal builds on an unprecedented array of aggressive new authorities to fight waste, fraud and abuse in the House and Senate bills with a number of additional proposals proposed by Democrats and Republicans alike.  President Obama, in a March 2 letter to Congressional leaders, also expressed interest in a proposal suggested by U.S. Sen. Tom Coburn (R-OK) at the bipartisan health care meeting on February 25 to use undercover investigations to further combat fraud. A fact sheet on today’s announcement appears below: FACT SHEET:  CUTTING DOWN ON WASTE AND FRAUD THROUGH PAYMENT RECAPTURE AUDITS Each year, the federal government wastes billions of American taxpayers’ dollars on improper payments to individuals, organizations, and contractors.  These are payments made in the wrong amounts, to the wrong person, or for the wrong reason.  In 2009, improper payments totaled $98 billion, with $54 billion stemming from Medicare and Medicaid.  We cannot afford nor should we tolerate this waste of taxpayer dollars and in our health care system. Today, the President is announcing a new effort to improve accountability and cut down on this waste and fraud through the use of payment recapture audits.  These are investigations in which specialized private sector auditors use cutting-edge technology and tools to scrutinize government payments and then find and reclaim taxpayer funds made in error or gained through fraud.  These auditors can be compensated based on the amount of improper payments they identify and are reclaimed – providing a powerful incentive to find every error.  A pilot program run by Medicare in three large states – California, New York, and Texas – from 2005 to 2008 recaptured $900 million for taxpayers. Currently, using reclaimed funds to pay for recapture audits is only possible for the Medicare Fee-for-Service program payments and for government contracts at the 20 out of 24 major government agencies that do more than $500 million in government contracting.  This leaves out contract payments made by numerous other agencies as well as grants and other forms of federal benefit payments made to organizations such as state and local governments, colleges and universities, banks, and non-profit organizations.  That is why the President today is announcing two key steps to intensify and expand the use of payment recapture audits: Presidential Memorandum on Payment Recapture Audits.  The President will sign a presidential memorandum today that directs all federal departments and agencies to expand and intensify their use of payment recapture audits under the authority they currently have.  It is anticipated that using the payment recapture audits will return at least $2 billion over the next three years to American taxpayers – double the current amount of projected recovered costs. Support the bipartisan Improper Payments Elimination and Recovery Act.  Since government agencies can only use recaptured fund to pay for these audits in specific situations, the President today is announcing his support for the Improper Payments Elimination and Recovery Act, a bipartisan bill that would expand the ability of government agencies to fund these specialized audits with recaptured payments.  The bill has been offered by Senators Tom Carper, D-Del., Claire McCaskill, D-Mo., Joseph Lieberman, I.D.-Conn., Tom Coburn, R-Okla., Susan Collins, R-Maine, and John McCain, R-Ariz.  Similar legislation has been introduced in the House by Representatives Patrick Murphy, D-Penn., and Brian Bilbray, R-Calif. These actions build on the Executive Order the President issued on improper payments in November 2009.  There, the President focused on reducing improper payments, which totaled $98 billion in Fiscal Year 2009, with three categories of action:  boost transparency, hold agencies accountable, and create strong incentives for compliance. Boost transparency.  The Administration is moving forward with an Improper Payment Dashboard, launching this spring, to allow the public to see details on improper payments, view payment error rates by agency and program, and see a list of bad actors (e.g., registered fraud offenders or contractors with pervasive over or duplicate billing issues that have gone through appropriate due process). Hold agencies accountable for waste.  The Administration has required each agency to designate a Senate-confirmed appointee to be accountable to the President for meeting improper payment reduction targets and consolidating program integrity activities.  The Administration also is increasing data-sharing among agencies so once a mistake is caught, it is not repeated. Create incentives for compliance.  The federal government is creating incentives for states and other entities to reduce improper payments and increase penalties for contractors who fail to timely disclose improper payments. In addition, the Administration has been moving aggressively to crack down on waste and fraud: Dramatically reduce unnecessary costs and minimize waste in the Medicare, Medicaid and CHIP programs.  The President’s FY2011 Budget devoted more than $1.8 billion for program integrity – an increase of $225 million (or 14 percent) over FY2010 – to combat waste, fraud and abuse in these health programs.  This robust approach, including the Budget’s program integrity legislative proposals, will save taxpayers an estimated $23 billion over 10 years. Cut programs that are broken, duplicative, or just not needed.  In his FY 2010 Budget, the President proposed more than 120 program terminations or reductions, for a potential one-year savings of $20 billion.  Congress approved 60 percent of the proposed cuts to discretionary programs – a high-water mark for any recent administration.  The Fiscal Year 2011 Budget outlined more than $20 billion in terminations and reductions, streamlining programs that work and cutting ones that do not. Reduce contracting costs, increase accountability, and eliminate high-risk contracts.  The federal government spends more than $500 billion annually on federal contracts.  Because of a lack of oversight, these contracts too often are directed to projects we don’t need or can’t afford, executed inefficiently, and done in ways that force the government to bear too much risk and not realize savings.  The Administration is committed to reducing contract spending by $40 billion by the end of 2011, cutting sole-source or no-bid contracts, and strengthening the federal acquisition workforce to improve agencies’ capacity to manage contracts and ensure value for the taxpayers’ dollars.

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President Obama Announces New Effort to Crack Down on Waste and Fraud

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WASHINGTON – Today, President Barack Obama named the following individuals to serve on the bipartisan National Commission on Fiscal Responsibility and Reform being co-chaired by former White House Chief of Staff Erskine Bowles and former Republican Senate Whip Alan Simpson: David Cote, Member, National Commission on Fiscal Responsibility and Reform Ann Fudge, Member, National Commission on Fiscal Responsibility and Reform Alice Rivlin, Member, National Commission on Fiscal Responsibility and Reform Andy Stern, Member, National Commission on Fiscal Responsibility and Reform President Obama said, “For far too long, Washington has avoided the tough choices necessary to solve our fiscal problems.  I am proud that these distinguished individuals have agreed to work to build a bipartisan consensus to put America on the path toward fiscal reform and responsibility.  I know they’ll take up their work with the sense of integrity and strength of commitment that the American people deserve and America’s future demands.” The bipartisan National Commission on Fiscal Responsibility and Reform will make recommendations to Congress by December 1, 2010 to put the budget in primary balance so that all operations and programs for the federal government are paid for (achieving deficits of about 3 percent of GDP) by 2015 and to meaningfully improve the long-term fiscal outlook.  With today’s appointments the President has named 6 bipartisan appointees to the commission.  The remaining 12 members of the commission will be appointed by Senate and House leaders (3 each by the Republican and Democratic leaders of both chambers). President Obama named the following individuals as members of the National Commission on Fiscal Responsibility and Reform: Dave Cote has served since 2002 as chairman, chief executive officer, and president of Honeywell, a diversified technology and manufacturing leader. Under Cote’s leadership, Honeywell has delivered strong performance in sales, earnings per share, segment profit, and cash flow.  He has served on the U.S.-India CEO Forum since 2005 and was named co-chair by President Obama in 2009.  Previously, he was chairman, chief executive officer, and president of TRW.  He joined TRW from General Electric, where he served 25 years in various manufacturing, finance, and management positions.  He received the Corporate Social Responsibility Award from the Foreign Policy Association in 2007.  He is a graduate of the University of New Hampshire. Ann Fudge served as chairman and chief executive officer of Young & Rubicam Brands from 2003 to 2006.  Prior to joining Young & Rubicam Brands, she worked at General Mills and Kraft, where she served in a number of senior executive positions.  Fudge is not only a proven business leader, but also an engaged civic voice having served on the boards of the Gates Foundation, the Rockefeller Foundation, and the Boys and Girls Clubs of America.  She is a graduate of Simmons College and Harvard Business School. Alice Rivlin is a senior fellow in the Economic Studies Program at the Brookings Institution and visiting professor at Georgetown University.  Before returning to Brookings, she served in a variety of senior public policy roles including vice chair of the Federal Reserve Board, director of the White House Office of Management and Budget, chair of the District of Columbia Financial Management Assistance Authority, and founding director of the Congressional Budget Office.  She is a graduate of Bryn Mawr College and received her Ph.D. in economics from Harvard University. Andy Stern, president of the Service Employees International Union, represents 2.2 million healthcare workers, janitors, security officers, public employees, and other hardworking women and men in the United States, Canada, and Puerto Rico.  As both a labor leader and an activist, he is a leading voice and aggressive advocate for practical solutions to achieve economic opportunity and justice for workers.  Stern began working as a social service worker and member of SEIU Local 668 in 1973 and rose through the ranks before his election as SEIU president in 1996.  He is a graduate of the University of Pennsylvania. 

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President Obama Names Members of Bipartisan National Commission on Fiscal Responsibility and Reform

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