oversight

DOT's Fiscal Year 2020 Payment Integrity Information Act Compliance Review

Published by the Department of Transportation, Office of Inspector General on 2021-07-14.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

            DOT’s Fiscal Year 2020 Payment Integrity
              Information Act Compliance Review




Report No. FI2021031
July 14, 2021
DOT’s Fiscal Year 2020 Payment Integrity Information Act
Compliance Review
Mandated by the Payment Integrity Information Act of 2019

Department of Transportation | FI2021031 | July 14, 2021




What We Looked At
The Payment Integrity Information Act of 2019 (PIIA) requires agencies to identify, report, and reduce
improper payments in their programs. For fiscal year 2020, the Department of Transportation
reported one program, the Federal Highway Administration’s (FHWA) Highway Planning and
Construction (HPC) Program, as susceptible to significant improper payments and subject to PIIA
reporting requirements. HPC reported total expenditures of over $46 billion and DOT estimated that
about $172 million of those payments were improper. PIIA also requires inspectors general to
annually report on their agencies’ compliance. Our audit objective was to determine whether DOT
complied with PIIA’s requirements as prescribed by the Office of Management and Budget (OMB). We
reviewed the improper payment testing results published in DOT’s fiscal year 2020 Annual Financial
Report (AFR) and posted to the Federal Government’s Payment Accuracy website and used statistical
sampling to test transactions.

What We Found
DOT is in compliance with PIIA. For fiscal year 2020, DOT reported improper payment estimates for
FHWA’s HPC. The payment integrity information in DOT’s 2020 AFR and data posted to the Payment
Accuracy website was accurate and complete. DOT also conducted risk assessments of programs as
the Office of Management and Budget requires. The Department published its planned and
completed corrective actions in its supplemental data call posted to the Payment Accuracy website.
DOT’s corrective action plans appear adequately designed, focused on true root causes, and
effectively implemented and prioritized with an emphasis on reducing improper payments.
Furthermore, for fiscal year 2020, FHWA’s HPC Program surpassed its fiscal year 2020 improper
payment reduction target of 0.85 percent, reporting estimated improper payments of 0.37 percent or
about $172 million—a decrease of $224 million from 2019. Lastly, DOT continues to take steps to
reduce and recapture improper payments through its risk assessments, annual improper payment
testing, and payment recapture audits.

Our Recommendations
We made no recommendations.


All OIG audit reports are available on our website at www.oig.dot.gov.
For inquiries about this report, please contact our Office of Government and Public Affairs at (202) 366-8751.
Contents
     Memorandum                                        1

     Results in Brief                                  3

     Background                                         3

     DOT Is in Compliance with PIIA                     5

     Conclusion                                        11

     Agency Comments                                   11

     Actions Required                                  11

     Exhibit A. Scope and Methodology                  12

     Exhibit B. Organizations Visited or Contacted     14

     Exhibit C. List of Acronyms                       15

     Exhibit D. Status of Prior Year Recommendations   16

     Exhibit E. Major Contributors to This Report      17

     Appendix. Agency Comments                         18




FI2021031
           U.S. DEPARTMENT OF TRANSPORTATION
           OFFICE OF INSPECTOR GENERAL




Memorandum
Date:            July 14, 2021

Subject:         INFORMATION: DOT’s Fiscal Year 2020 Payment Integrity Information Act
                 Compliance Review | Report No. FI2021031

From:            Barry J. DeWeese
                 Principal Assistant Inspector General for Auditing and Evaluation

To:              Assistant Secretary for Budget and Programs/Chief Financial Officer


                 The Payment Integrity Information Act of 2019 1 (PIIA) requires agencies to
                 identify, report, and reduce improper payments in their programs. 2 For fiscal year
                 2020, the Department of Transportation (DOT) reported only one program, the
                 Federal Highway Administration’s (FHWA) Highway Planning and Construction
                 (HPC) Program, as susceptible to significant improper payments and subject to
                 PIIA reporting requirements. 3 HPC reported total expenditures of over $46 billion,
                 and DOT estimated that about $172 million of those payments were improper.

                 PIIA also requires inspectors general to annually report on their agencies’
                 compliance. To comply with PIIA, we conducted this audit. Our objective was to
                 determine whether DOT complied with PIIA’s requirements as prescribed by the
                 Office of Management and Budget (OMB).

                 We conducted this audit in accordance with generally accepted Government
                 auditing standards. We reviewed the improper payment testing results published
                 in DOT’s fiscal year 2020 Annual Financial Report (AFR) and posted to the Federal
                 Government’s Payment Accuracy website, 4 interviewed agency officials, and used
                 statistical sampling to test transactions. To perform our testing, we used the
                 Council of Inspectors General on Integrity and Efficiency (CIGIE) guidance
                 published in November 2020.



1 Pub. L. 116-117.
2 To improve efforts to identify and reduce improper payments, PIIA reorganizes and revises prior improper payment
legislation: Improper Payments Information Act of 2002 (IPIA), Pub. L. 107-300; Improper Payments Elimination and
Recovery Act of 2010 (IPERA), Pub. L. 111-204; and the Improper Payments Elimination and Recovery Improvement
Act of 2012 (IPERIA), Pub. L. 112-248.
3 OMB defines “significant improper payments” as improper payments that exceed 1.5 percent of a program’s outlays

and $10 million or $100 million, regardless of the error rate.
4 https://paymentaccuracy.gov




FI2021031                                                                                                        1
            Exhibit A details our scope and methodology. Exhibit B lists the entities we visited
            or contacted. Exhibit C is a list of acronyms. Exhibit D presents the status of our
            fiscal year 2019 recommendations to the Department.

            We appreciate the courtesies and cooperation of Department of Transportation
            representatives during this audit. If you have any questions concerning this
            report, please call me at (202) 366-1302, or Dory Dillard-Christian, Program
            Director, at (202) 570-6381.


            cc:    The Secretary
                   DOT Audit Liaison, M-1




FI2021031                                                                                     2
Results in Brief
                 DOT is in compliance with PIIA.

                 For fiscal year 2020, DOT reported improper payment estimates for FHWA’s
                 HPC—the only program the Department identified in fiscal year 2019 as
                 susceptible to significant improper payments. Also, the payment integrity
                 information in DOT’s 2020 AFR and data posted to the Payment Accuracy website
                 was accurate and complete. For example, DOT posted an improper payment
                 estimate for FHWA’s HPC, as well as percentages for properly and improperly
                 paid amounts, and reduction targets for fiscal years 2020 and 2021. DOT also
                 conducted risk assessments of programs as OMB requires. The Department
                 published its planned and completed corrective actions in its supplemental data
                 call 5 posted to the Payment Accuracy website. We found that DOT’s corrective
                 action plans appear adequately designed, focused on true root causes, and
                 effectively implemented and prioritized with an emphasis on reducing improper
                 payments. For example, FHWA developed a catalog of improper payment risk
                 factors and incorporated these factors into its annual improper payment training
                 to FHWA division offices. Furthermore, for fiscal year 2020, FHWA’s HPC Program
                 surpassed its fiscal year 2020 improper payment reduction target of 0.85 percent,
                 reporting estimated improper payments of 0.37 percent or about $172 million—
                 an overall decrease of $224 million from 2019. Lastly, DOT continues to take
                 steps to reduce and recapture improper payments through its risk assessments,
                 annual improper payment testing, and payment recapture audits.

                 We are making no recommendations at this time. See exhibit D for the status of
                 prior year recommendations.




Background
                 When enacted, the Improper Payments Elimination and Recovery Act of 2010
                 (IPERA) 6 amended the Improper Payments Information Act of 2002 7 (IPIA) and
                 required agencies to identify and review all programs and activities they
                 administer that may be susceptible to significant improper payments. In 2012,
                 Congress strengthened IPERA with the Improper Payment Elimination and
                 Recovery Improvement Act of 2012 (IPERIA). With the passage of PIIA in 2019, all


5 According to OMB, improper payment information not explicitly required in the AFR should be posted to the Federal
Government’s Payment Accuracy website via the annual data call. Agencies were required to contact OMB to obtain
data call requirements and determine which requirements apply to the agency.
6 Pub. L. 111-204.

7 Pub. L. 107-300.




FI2021031                                                                                                        3
                 prior improper payment acts were repealed. 8 PIIA requires inspectors general to
                 review their agencies’ annual compliance with PIIA and submit reports to their
                 agency heads. 9 While PIIA includes certain provisions from the previous laws, it
                 also introduces new ones. For example, agencies are now required to develop
                 plans to prevent improper payments before they happen. PIIA also includes
                 additional reporting requirements for inspectors general, including an evaluation
                 of agency efforts to prevent and reduce improper payments.

                 PIIA defines a payment as any transfer or commitment for future transfer of
                 Federal funds—including cash, securities, loans, loan guarantees, and insurance
                 subsidies—to a non-Federal person or entity, made by a Federal agency, Federal
                 contractor, Federal grantee, or a governmental or other organization
                 administering a Federal program or activity.

                 PIIA defines an improper payment as one that should not have been made, or
                 that was made in an incorrect amount, including an overpayment or
                 underpayment, based on statutory, contractual, administrative, or other legally
                 applicable requirements. This definition includes any payment made to an
                 ineligible recipient, for an ineligible good or service, for goods or services that
                 were not received, or that does not account for credit for applicable discounts.
                 Duplicate payments are also considered improper. In addition, OMB instructs
                 agencies that are unable—due to insufficient or nonexistent documentation—to
                 determine whether a payment is proper to consider it as improper. Improper
                 payments and estimates of improper payments do not necessarily indicate fraud
                 or monetary loss in programs and activities.

                 OMB Circular A-123, revised in 2021,10 provides guidance to agencies on
                 implementing PIIA. The Circular’s goal is to create a more comprehensive and
                 meaningful set of requirements. These requirements are meant to allow agencies
                 to spend less time complying with low-value activities and more time researching
                 causes of improper payments, balancing payment integrity risks and controls, and
                 building the capacity to help prevent future improper payments.

                 The revised Circular A-123 also requires programs and activities reporting
                 improper payment estimates that exceed the statutory threshold to have
                 corrective action plans to prevent and reduce the improper payments. It also
                 allows agencies to request relief from annual improper payment reporting on
                 programs that reduce their improper payment estimates below the statutory



8 IPIA, IPERA, IPERIA, and the Fraud Reduction and Data Analytics Act of 2015, Pub. L. 114-186 (2016).
9 PIIA also requires inspectors general to submit their reports to the Senate Committee on Homeland Security and
Governmental Affairs, the House Committee on Oversight and Government Reform, the Comptroller General, and the
Controller of OMB.
10 OMB M-21-19, transmittal of appendix C to OMB Circular A-123, Requirements for Payment Integrity Improvement

(March 5, 2021).


FI2021031                                                                                                      4
                 threshold for 2 consecutive years. For fiscal year 2020, DOT did not request OMB
                 approval for relief of any program or activity.

                 OMB Circular A-136, as revised, includes the AFR financial reporting requirements
                 that Federal agencies must follow. The AFR’s Payment Integrity section should
                 include elements such as actions taken to address auditor recovery
                 recommendations and a report on agency efforts to reduce fraud.

                 In February 2018, the President signed into law the Bipartisan Budget Act of
                 2018, 11 which provided $84.4 billion in emergency supplemental appropriations
                 to respond to and recover from recent hurricanes, wildfires, and other disasters.
                 OMB’s implementing guidance 12 states that all programs and activities expending
                 over $10 million are susceptible to significant improper payments and must
                 report improper payment estimates. 13




DOT Is in Compliance with PIIA
                 DOT complied with PIIA’s requirements. Specifically, we found the Department
                 had published accurate and complete payment integrity information in its AFR
                 and to the Payment Accuracy website, had a compliant risk assessment process,
                 and published corrective action plans for FHWA’s HPC. Also, HPC met its 2020
                 PIIA reduction target. Lastly, DOT continues to reduce and recapture improper
                 payments.



             DOT Complied with PIIA’s Agency and
             Program-Specific Requirements
                 DOT complied with PIIA’s requirements for both the Department and FHWA’s
                 HPC—the only program that DOT identified as susceptible to significant
                 improper payments. According to OMB, an agency is in compliance with PIIA’s
                 requirements when it meets the following requirements:

                      1. Published improper payments information with its annual financial
                         statements for the most recent fiscal year and posted the annual financial




11 Pub. L. 115-123.
12 OMB M-18-14, Implementation of Internal Controls and Grant Expenditures for the Disaster-Related Appropriations
(2018).
13 According to a DOT official, beginning in 2021, DOT plans to begin testing improper payments for the Federal

Aviation Administration’s (FAA) Bipartisan Budget Act of 2018 and FTA’s Bipartisan Budget Act of 2018, as these
programs are expected to exceed the $10 million threshold.


FI2021031                                                                                                            5
                           statements and accompanying materials required by OMB guidance on its
                           website;

                       2. Conducted improper payment risk assessments at least once in the last
                          3 years for each program with annual outlays of over $10 million and
                          determined whether the program is likely to make improper payments
                          above or below the statutory threshold;

                       3. Published improper payment estimates for programs susceptible to
                          significant improper payments in its annual financial statements’
                          accompanying materials;

                       4. Published corrective action plans for each program for which an estimate
                          was above the statutory threshold;

                       5. Published improper payment reduction targets for each program for
                          which an estimate was above the statutory threshold, developed a plan
                          and is meeting those targets; and

                       6. Reported an improper payment estimate of less than 10 percent for each
                          program for which an estimate was published.

                  See table 1 for a summary of DOT’s compliance.


Table 1. Summary of DOT’s Compliance With PIIA Requirements in Fiscal Year
2020
                                                                                                Published
                                               Conducted                                        and Met         Reported
                  Overall       Published in   Risk             Published IP    Published       Reduction       IP Rate
    Program       Assessment    AFR            Assessmenta      Estimates       CAPsb           Goals           Below 10%

    DOT overall
    results              Yes             Yes              Yes             Yes             Yes             Yes           Yes

    FHWA HPC             Yes             Yes              N/A             Yes             Yes             Yes           Yes
a
 In fiscal year 2020, DOT conducted 34 risk assessments. FHWA’s HPC program is shown as “N/A” for this requirement
since the Department is already reporting an improper payment estimate.
b
 OMB Circular A-123, appendix C, requires corrective action plans (CAP) for all programs with improper payments
exceeding the statutory threshold of 1.5 percent of program outlays and $10 million or $100 million regardless of the
error rate. Only FHWA’s HPC exceeded the threshold.
Source: OIG analysis




FI2021031                                                                                                           6
             The Payment Integrity Information in
             DOT’s AFR and Posted to the Payment
             Accuracy Website Was Accurate and
             Complete
                  DOT met the requirements in OMB’s Circular A-136 for payment integrity
                  information, completeness, and accuracy by including the required information in
                  its AFR and posting accompanying PIIA compliance information to the Payment
                  Accuracy website. 14 According to OMB, beginning in fiscal year 2020, information
                  previously contained in the “Payment Integrity Information Act Reporting” section
                  of the AFR not explicitly required by OMB A-136 should be reported to the
                  Payment Accuracy website through OMB’s annual payment integrity data call.

                  We found that DOT included its fiscal year 2020 payment accuracy results in the
                  AFR, including estimated amounts and percentages properly and improperly
                  paid, along with reduction targets for FHWA’s HPC program.

                  Also as OMB requires, DOT included a link to the Payment Accuracy website in its
                  AFR. It also posted to the Payment Accuracy website information on its fiscal year
                  2020 risk assessments, reduction target for FHWA’s HPC, corrective action plans,
                  and recapture of improper payments. We found this information to be accurate
                  based on supporting documentation. Lastly, the supplemental data call that DOT
                  posted to the Payment Accuracy website includes supporting information
                  regarding the root causes for improper payments and the Department’s
                  proposed corrective actions with timelines for completion.



             DOT’s Risk Assessment Process Complied
             with OMB and PIIA Requirements
                  OMB Circular A-123, appendix C, requires agencies to conduct an improper
                  payment risk assessment of all programs at least once every 3 years. DOT
                  complied with this requirement for fiscal year 2020. More specifically, DOT
                  conducted 34 risk assessments 15 and applied the following risk factors: (1)
                  whether the program is new to the agency; (2) the complexity of the program
                  reviewed; (3) the volume of payments made through the program reviewed; (4)
                  whether payments or payment eligibility decisions are made outside of the


14https://paymentaccuracy.gov
15DOT reviewed the following programs not on its regular 3-year cycle during fiscal year 2019: (1) FAA’s Airport
Improvement Program, (2) the Federal Railroad Administration’s (FRA) Grants to Amtrak, (3) the Federal Transit
Administration’s (FTA) Formula Grants, and (4) FRA’s Passenger Rail Investment and Improvement Act program.


FI2021031                                                                                                          7
                  agency, such as by a State or local government; (5) recent major changes in
                  program funding, 16 practices, authorities, or procedures; (6) the level, experience,
                  and quality of training for personnel responsible for making program eligibility
                  determinations or certifying that payments are accurate; and (7) significant
                  deficiencies in the audit report or other relevant management findings that might
                  hinder accurate payment certification.

                  DOT also considered the following new factors in its risk assessments to better
                  align with PIIA:

                      •    Similarities (a combination of outlays, mission, payment process, etc.) to
                           other programs that have reported improper payment estimates or been
                           deemed susceptible to significant improper payments;

                      •    The accuracy and reliability of improper payment estimates previously
                           reported for the program, or other indicators of susceptibility to improper
                           payments identified by OIG, the Government Accountability Office (GAO),
                           or other audits;

                      •    Whether the program lacks information or data systems to confirm
                           eligibility or provide for other payment integrity needs; and

                      •    The risk of fraud as assessed by the agency under the Standards for
                           Internal Control in the Federal Government published by GAO.

                  DOT’s fiscal year 2020 risk assessments complied with OMB guidance and the
                  results of the risk assessments the Agency performed provide reasonable support
                  that the programs reviewed are not susceptible to significant improper
                  payments.17 In accordance with OMB A-136, DOT posted its fiscal year 2020 risk
                  assessment information to the Payment Accuracy website.



             DOT Published Corrective Action Plans
             for FHWA’s HPC Program
                  In accordance with OMB, DOT published corrective action plans for FHWA’s HPC
                  because the program’s fiscal year 2020 improper payment estimate was above




16 Recently enacted statutes include significant increases in transportation funding that may impact DOT’s fiscal year
2021 risk assessments. For instance, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Pub. L. 116-
136 (2020) includes $36.1 billion in overall transportation funding to provide relief from the COVID-19 pandemic. The
American Rescue Plan Act, Pub. L. 117-2 (2021) includes $30.5 billion to support the Nation’s transportation systems
as it continues to respond to the COVID-19 pandemic.
17 During fiscal year 2021, DOT plans to review FAA’s CARES Act Program, and FTA’s Emergency Relief Program.




FI2021031                                                                                                            8
                 the statutory threshold. 18 For fiscal year 2020, the Department reported two
                 corrective actions to address a program design problem or a structural issue, 19
                 and further strengthen controls to address administrative or process errors made
                 by State or local agencies. For example, FHWA established a team to review the
                 authorization and obligation process for a specific division office to recommend
                 new procedures and to address weaknesses. 20 FHWA also reported that it would
                 compare improper payments identified in fiscal year 2020 with findings from
                 prior years and address specific issues with the relevant Division offices and grant
                 recipients. FHWA will also recover overpayments, when applicable. This corrective
                 action is currently ongoing.

                 Furthermore, DOT’s corrective action plans are adequately designed, focused on
                 true root causes, and effectively implemented and prioritized with an emphasis
                 on reducing improper payments. For example, during fiscal year 2020, FHWA
                 completed the implementation of three other corrective actions to prevent
                 administrative or process errors made by State agencies (see table 2).


Table 2. Three Corrective Actions That DOT Took in Fiscal Year 2020
                                                                                                Completion Date
 Root Cause for Improper                                                                        for Corrective
 Payments                              Corrective Action Taken                                  Action

 Administrative or Process Errors      FHWA developed a catalog of improper payment risk        Fiscal Year 2020, 3rd
 Made by State Agencies                factors and incorporated it into its annual improper     Quarter
                                       payment training to FHWA division offices.

 Administrative or Process Errors      FHWA developed procedures to identify State DOTs         Fiscal Year 2020, 2nd
 Made by State Agencies                that made improper payments in consecutive years         Quarter
                                       and communicated the findings to Division offices.

 Administrative or Process Errors      FHWA developed guidance for Division offices on          Fiscal Year 2020, 2nd
 Made by State Agencies                reducing improper payments with State partners.          Quarter

Source: DOT’s fiscal year 2020 OMB Supplemental Data Call and OIG analysis.




18 The statutory threshold represents (1) both 1.5 percent of program outlays and $10 million of all program or
activity payments made during the fiscal year reported or (2) $100 million.
19 For example, according to OMB, a scenario in which a program has a statutory (or regulatory) requirement to pay

benefits when due, regardless of whether or not all the information has been received to confirm payment accuracy.
20 According to DOT, FHWA has implemented this corrective action. Relevant Division offices established new

procedures that do not permit the obligation process that caused the improper payments. All projects affected by the
error were reviewed and corrective actions for each have been identified.


FI2021031                                                                                                          9
              FHWA’s HPC Program Surpassed Its 2020
              Reduction Target
                  FHWA’s HPC program achieved a 0.37 percent improper payment rate—0.48
                  percent below its reduction target of 0.85 percent—for fiscal year 2020 overall
                  program expenditures. This rate was appropriately aggressive and realistic given
                  the characteristics of FHWA’s HPC. DOT published the reduction target and fiscal
                  year 2020 payment accuracy results in its AFR.

                  As part of its improper payment testing, FHWA determined that 15 of 303 HPC
                  sample invoice line items had improper payments that totaled $70,052 in
                  absolute value. These sample items projected to an estimated 21 total improper
                  payments of about $172 million, an overall decrease of $224 million from the
                  prior year. 22 The primary causes for these improper payments were administrative
                  or process errors made by State or Local agencies, 23 and program design or
                  structural issues. 24



              DOT Continues To Take Steps To Reduce
              and Recapture Improper Payments
                  DOT continues to take steps to reduce and recapture improper payments. For
                  example, in its FHWA’s HPC Program, actual improper payments have decreased
                  by more than $825 million since 2018. DOT reported improper payments of
                  about $396 million for 2019 and $172 million for fiscal year 2020. For fiscal year
                  2020, DOT reported payment recaptures of $1.95 million. We reviewed the three
                  highest improper payments identified—totaling $1.6 million—and found that the
                  Department had indeed recovered these funds.




21 OIG’s Senior Statistician evaluated the quality of DOT’s improper payment estimates and methodology and
concurred with DOT’s sampling methodology and extrapolation results.
22 For fiscal year 2019, FHWA HPC reported estimated improper payments of $396 million.

23 Such administrative errors may be caused by incorrect data entry, classification, or processing of applications or

payments. For example, one grantee was reimbursed for an ineligible cost belonging to another entity.
24 For example, a grantee billed and was reimbursed for costs; however, funding was not authorized in the grant

agreement at the time the cost was incurred or reimbursed.




FI2021031                                                                                                               10
Conclusion
            The passage of PIIA continues to place agencies’ focus on payment integrity and
            reduction of improper payments. By achieving compliance with PIIA, DOT is well
            positioned to continue meeting improper payment reporting requirements,
            implementing effective corrective actions, and achieving improper payment
            reduction goals.

            We are making no recommendations at this time. See exhibit D for the status of
            prior year recommendations.




Agency Comments
            We provided the Department with our draft report on June 2, 2021 and received
            its response, dated June 29, 2021, which is included as an appendix to this report.




Actions Required
            No action is required.




FI2021031                                                                                   11
Exhibit A. Scope and Methodology
                 We conducted this performance audit between November 2020 and June 2021,
                 in accordance with generally accepted Government auditing standards as
                 prescribed by the Comptroller General of the United States. Those standards
                 require that we plan and perform the audit to obtain sufficient, appropriate
                 evidence to provide a reasonable basis for our findings and conclusions based on
                 our audit objectives. We believe that the evidence obtained provides a
                 reasonable basis for our findings and conclusions based on our audit objectives.

                 We reviewed applicable laws and regulations and interviewed DOT personnel
                 responsible for PIIA’s implementation. To further assess the Department’s
                 compliance with OMB requirements, we: (1) analyzed the source data to ensure
                 accuracy and completeness of payment integrity information in the AFR and
                 accompanying materials posted to https://paymentaccuracy.gov, and DOT’s
                 efforts in reducing and recapturing improper payments; (2) reviewed statistical
                 sampling plans and improper payment rate estimates to determine whether the
                 sampling and estimation plan used is appropriate given program characteristics;
                 (3) evaluated corrective action plans to determine whether the corrective actions
                 are focused on the true root cause; and (4) reviewed internal controls to prevent
                 and reduce improper payments. We evaluated whether DOT complied with OMB
                 Circular A-136’s requirements and reviewed documentation that supports the
                 amounts from the largest three overpayment recoveries. In addition, we
                 evaluated the Department’s efforts to prevent and reduce improper payments.

                 PIIA and OMB’s appendix C to Circular A-123 require reports 25 from inspectors
                 general to include summaries on agencies’ compliance. Specifically, each
                 inspector general must report on whether the agency

                      1. published improper payments information with its annual financial
                         statements for the most recent fiscal year;

                      2. posted the annual financial statements and accompany materials required
                         under guidance of OMB on the agency website;

                      3. conducted improper payment risk assessments for each program with
                         annual outlays greater than $10 million at least once in the last 3 years;

                      4. adequately concluded whether the program was likely to make improper
                         payments above or below the statutory threshold;



25 OMB requires that OIG compliance reports be published within 180 days after the day of publication for the annual
financial statements and accompanying materials, whichever is later. DOT’s supplemental data call went live at the
Federal Government’s Payment Accuracy website on February 3, 2021.


Exhibit A. Scope and Methodology                                                                                 12
               5. published improper payment estimates for programs susceptible to
                  significant improper payments in the accompanying materials to the
                  annual financial statement;

               6. published corrective action plans for each program for which an estimate
                  was above the statutory threshold;

               7. published improper payment reduction targets for each program for
                  which an estimate was above the statutory threshold;

               8. met the improper payment reduction targets (published in fiscal year
                  2019) for each program for which an estimate was above the statutory
                  threshold;

               9. developed a plan to meet the improper payment reduction targets; and

               10. reported an improper payment estimate of less than 10 percent for each
                   program for which an estimate was published.

            We also evaluated DOT’s assessment of the level of risk associated with the 34
            programs or activities reviewed during fiscal year 2020. More specifically, our
            statistician selected a simple random attribute sample of 23 (68 percent) of the
            34 DOT risk assessments to determine whether DOT included the risk factors
            prescribed by OMB. We confirmed that the assessments included all risk factors
            in accordance with PIIA and OMB guidance.

            OIG statisticians evaluated the quality of the improper payment estimates and
            methodology, and concurred with DOT’s sampling methodology and
            extrapolation results. Our senior statistician selected a simple random attribute
            sample of 55 (19 percent) of 288 FHWA invoice line items, totaling $3.7 million
            out of $106.8 million, that the Department and its contractor had tested and
            found to be proper. The sample design would have allowed us to estimate the
            number of invoice line items that should have been classified as improper with
            90-percent confidence and a precision no greater than +/-10 percent. We
            evaluated supporting documentation including summary schedules, grant
            agreements, invoices, checks, and payment vouchers, among other documents,
            to retest the propriety of the DOT contractor’s conclusions and found no
            additional improper payments upon testing the samples.




Exhibit A. Scope and Methodology                                                                13
Exhibit B. Organizations Visited or Contacted

          Department of Transportation Facilities
             Office of the Secretary

             Federal Highway Administration




Exhibit B. Organizations Visited or Contacted       14
Exhibit C. List of Acronyms
             AFR              Agency Financial Report
             CIGIE            Council of the Inspectors General on Integrity and
                              Efficiency
             DOT              Department of Transportation
             FAA              Federal Aviation Administration
             FHWA             Federal Highway Administration
             FRA              Federal Railroad Administration
             FTA              Federal Transit Administration
             HPC              Highway Planning and Construction Program
             OIG              Office of Inspector General
             OMB              Office of Management and Budget
             PIIA             Payment Integrity Information Act of 2019




Exhibit C. List of Acronyms                                                        15
Exhibit D. Status of Prior Year Recommendations
 OIG Report   Fiscal                                                                       Target Action
 Number       Year     Recommendation                                                              Date

 FS2020029    2019     Implement procedures to require FHWA to review about $28,000
                       identified as improper payments and recover as appropriate.        August 1, 2021

 FS2020029    2019     Implement procedures to require that FHWA develop a process to:
                       a. detect grantees that have not reduced improper payments for 3
                       consecutive years or over the 3-year risk assessment cycle, and
                       b. review those grantees’ root causes to implement
                       robust/individual corrective actions. Implementation of this
                       recommendation could put approximately $169 million in funds to
                       better use.                                                        August 1, 2021




Exhibit D. Status of Prior Year Recommendations                                                       16
Exhibit E. Major Contributors to This Report
             DORY DILLARD-CHRISTIAN            PROGRAM DIRECTOR
             BRIAN FRIST                       PROJECT MANAGER
             ZACHARY SCOTT                     SENIOR AUDITOR
             MICHELLE STARKEY                  SENIOR AUDITOR
             CHRISTINA BURGESS                 SENIOR ANALYST
             CELESTE BORJAS                    ATTORNEY ADVISOR
             GEORGE ZIPF                       SUPERVISORY MATHEMATICAL
                                               STATISTICIAN
             MAKESI ORMOND                     STATISTICIAN
             SUSAN NEILL                       WRITER-EDITOR




Exhibit E. Major Contributors to This Report                              17
Appendix. Agency Comments
                                                                   Memorandum
 U.S. Department
 ofTransportation
 Office of the Secretary
 of Transportation


                                               June 29, 2021

   Subject:         Management Response to the Office of Inspector General’s (OIG) Fiscal Year
                    (FY) 2020 Payment Integrity Information Act (PIIA) Compliance Review

   From:            Jennifer Funk
                    Deputy Chief Financial Officer

   To:              Louis King
                    Assistant Inspector General for Financial Audits

   The Department of Transportation (DOT or Department) recognizes the importance of
   maintaining effective internal controls to ensure proper payments as evidenced in the OIG’s
   draft report which found that the Department complied with the Payment Integrity
   Information Act requirements. The Department’s use of standard best practices is necessary
   for prudently awarding, managing, and reporting on contracts, grants, loans, and other forms
   of financial assistance and aids in ensuring the integrity of DOT’s program expenditures. We
   are committed to continuing to enhance our internal controls and proactively reduce improper
   payment risks.

   We appreciate the opportunity to review the OIG draft report. Please contact Dan King,
   Director, Office of Financial Management, at (202) 366-5381, with any questions.




Appendix. Agency Comments                                                                        18
             Our Mission
 OIG conducts audits and investigations on
behalf of the American public to improve the
performance and integrity of DOT’s programs
   to ensure a safe, efficient, and effective
       national transportation system.