oversight

Audit of the U.S. Office of Personnel Management's Fiscal Year 2014 Improper Payments Reporting for Compliance with the Improper Payments Elimination and Recovery Act of 2010

Published by the Office of Personnel Management, Office of Inspector General on 2015-05-15.

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

         U.S. OFFICE OF PERSONNEL MANAGEMENT 

            OFFICE OF THE INSPECTOR GENERAL 

                     OFFICE OF AUDITS 





          Audit of the U.S. Office of Personnel Management' s
          Fiscal Year 2014 Improper Payments Reporting for
         Compliance with the Improper Payments Elimination
                       and Recovery Act of 2010

                                          R eport Number 4A-CF-00-15-025 

                                                                May 15,2015 





                                                              --CAUTION -­
This audit r epot·t has been distributed to Federal officials who are n sponsible for the administration of the audited program. T his audit report may
contain pt·opl'ietat·y data which is protected by Federal law (18 U.S.C. 1905). Therefot·e, while this audit report is available undet· the Freedom of
Information Act and made available to the public on the OIG webpage (http:lhmmv.opm.govl our-iuspector-geuernl), caution needs to be exer cised
before releasing the t·epot·t to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
             EXECUTIVE SUMMARY 

          Audit ofthe US. Office ofPersonnel Management's Fiscal Year 2014 Improper Payments 

         Reporting/or Compliance with the Improper Payments Elimination and Recovery Act of2010 

Report ~o. 4A-CF-00-15-025                                                                   l.\lay 15, 2015




Why Did We Conduct the Audit?           What Did We Find?

The objective of our audit was to      We detennined that OPM's rep01iing of improper payments is in
detennine ifthe U.S. Office of         complian ce with IPERA; however, OPM can improve on its
Persollllel Management's (OPM)         oversight controls over improper payments rep01iing.
improper payments reporting in the
fiscal year (FY) 2014 Annual           1. 	 Improper Payments lnf01m ation in the AFR was Inaccurately
Financial Report (AFR) was                  Rep01ied
compliant with the Improper               • 	 For Retirement Services (RS) an d the Healthcare and
Payments Elimination Recovety Act             Insurance offices there were several inaccuracies between
(IPERA) requirements.                         what was rep01ied in the FY 2014 AFR and the supp01iing
                                              documentation that we obtained from the program offices.
What Did We Audit?
                                       2. 	 Improper Payments lnf01m ation in the AFR was Insufficient
The Office of the Inspector General         or Unsupp01ied.
(OIG) has completed a perf01m ance        •   RS 's supp01iing documentation to show that Benefits
audit on OPM's FY 2014 improper               Officer Training w as provided during FY 2014 was
payments reporting for compliance             insufficient.
with IPERA. Our audit fieldwork
was conducted from Januaty 20             • 	 RS could not provide supp01iing documentation for five
through April 14, 201 5 at OPM                statements in the FY 2014 AFR.
headquarters, located in Washington,
D .C.




 Michael R. Esser
Assistant Inspector General
for Aut/its
        ABBREVIATIONS



AFR       Agency Financial Report
FEHBP     Federal Employees Health Benefits Program
FY        Fiscal Year
GAO       U.S. Government Accountability Office
HI        Healthcare and Insurance Office
IP        Improper Payments
IPERA     Improper Payments Elimination and Recovery Act of 2010
OCFO      Office of the Chief Financial Officer
OIG       Office of the Inspector General
OMB       U.S. Office of Management and Budget
OPM       U.S. Office of Personnel Management
PAR       Performance and Accountability Report
PIC       Policy and Internal Control
RS        Retirement Services Office
DMF       Death Master File




                   ii
                          TABLE OF CONTENTS



                                                                                                                                   Page 

         EXECUTIVE SUMMARY ......................................................................................... i 


         ABBREVIATIONS ..................................................................................................... ii 


I.		     BACKGROUND ..........................................................................................................1 


II.		    OBJECTIVE, SCOPE, AND METHODOLOGY ....................................................4 


III.		   AUDIT FINDINGS AND RECOMMENDATIONS.................................................6

         1.		 Improper Payments Information in the AFR was Inaccurately 

              Reported...................................................................................................................6 

         2.		 Improper Payments Information in the AFR was Insufficient or 

              Unsupported.............................................................................................................9 


IV.		    MAJOR CONTRIBUTORS TO THIS REPORT ..................................................12 


         APPENDIX (OPM’s response to our draft report, dated April 30, 2015) 


         REPORT FRAUD, WASTE, AND MISMANAGEMENT


                                 I. BACKGROUND 

This final audit report details the findings, conclusions, and recommendations resulting from om
perfonnance audit of the U.S . Office of Personnel Management's (OPM) Fiscal Year (FY) 2014
Improper Payments Rep01ting for compliance with the Improper Payments Elimination and
Recove1y Act of2010. The audit was perf01m ed by OPM's Office of the Inspector General
(OIG), as authorized by the Inspector General Act of 1978, as amended.

On July 22, 2010an d Janumy 10, 2013, the President signed into law th e Improper Payments
Elimination and Recove1y Act of2010 (IPERA) an d the Improper Payments Elimination and
Recove1y Improvement Act of2012, respectively, which amended the Improper Payments
Inf01m ation Act of 2002 . Implementing guidance for IPERA was issued by the U.S. Office of
Management and Budget (OMB) via Memorandum M-11-16 on April1 4, 2011, an d was
updated via Memorandum M-15-02 on October 20, 2014. Under the guidance, a program is
deemed susceptible to significant improper payments 1 if the total amount of overpayments plus
underpayments in the program exceeds both 1.5 percent of program outlays an d $10,000,000 of
all program or activity payments made dming th e fiscal year rep01ted or, $100,000,000
regardless of improper payments percentage of total program outlays.

Each agency Inspector General is required to review improper payments rep01ting in the Agency
Financial Rep01t (AFR) or Perfon nance and Accmmtability Rep01t (PAR) to dete1mine
comp lian ce with IPERA. The Inspector General should submit a rep01t of its findings within
180 days of th e agency publication of the AFR or PAR.

Under IPERA, agencies must do the following with respect to improper payments rep01ting:
   • 	 publish an AFR or PAR for the most recent fiscal year an d post that rep01t on the agency
       website;
   • 	 conduct a program-specific risk assessment for each program or activity that conf01m s
       with Section 3321 ofTitle 31 United States Code;
       • 	 publish improper payments estimates for all programs an d activities identified as 

           susceptible to significant improper payments lmder its risk assessment; 

       • 	 publish programmatic conective action plans in the AFR or PAR;
       • 	 publish an d meet annual reduction targets for each program assessed to be at risk an d
           measm ed for improper payments; an d
       • 	 rep01t a gross improper payments rate of less than 10 percent for each program an d
           activity for which an improper payments estimate was obtained and published in the AFR
           or PAR.

1 Animproper payment is any payment that should not have be.e n made or that was made in an inconect amount
under statutory, contractual, administrative, or other legally applicable requirements.



                                                       1	                            Report No. 4A-CF-00-15-025
If an agency does not meet one or more of these requirements, it is not compliant with IPERA.

Two of OPM’s earned benefit programs, the Retirement and the Federal Employees Health
Benefits Program (FEHBP), are by definition susceptible to significant improper payments.
OPM’s reported improper payments and overpayments recaptured for FY 2014 are summarized
in the following tables.


                                   FY 2014 Improper Payments Summary2

                 Total Outlays     Gross Improper           Overpayments         Underpayments                2014
                                      Payments                                                              Improper
                  ($ millions)       ($ millions)            ($ millions)             ($ millions)         Payments %

Retirement          78,816.4              303.3                   243.0                  60.3                0.38%


    FEHBP           45,839.5              104.8                   101.0                   3.8                0.23%




                               FY 2014 Overpayments Recaptured Summary3
                                              (in millions)

                  Improper          IP Amounts        IP Amount            Amounts         Cumulative       Cumulative
                Payments (IP)        Recovered       Identified for       Recovered in       Amounts         Amounts
                   Amount            in FY 2014       Recovery in         Prior Years      Identified in    Recovered
                Identified for                        Prior Years                          Prior Years       in Prior
                 Recovery in                                                                 and FY         Years and
                  FY 2014                                                                     2014           FY 2014




Retirement            233.1             189.3           1,504.1             1,231.4             1,737.2       1,420.7
    FEHBP4            101.0             100.6            792.6               830.1              893.6         930.7




2
  Data collected from Table 12 “Improper Payments Reduction Outlook” on page 124 of OPM’s FY 2014 AFR.


3
  Data collected from Table 13 “Overpayments Recaptured Outside of Payments Recapture Audits” on page 124 of 

OPM’s FY 2014 AFR.


4
  Based on records that were available, to develop the ‘Prior Years’ and ‘Cumulative Years’ figures, there were


‘recovered amounts’ with no corresponding ‘identified amounts’.





                                                        2                                Report No. 4A-CF-00-15-025
        Implementation of the Do Not Pay Initiative to Prevent Improper Payments5




                 Number (#)        Dollars($) of     Number       Dollars ($)    Number (#)       Dollars ($)
                 of Payments        Payments          (#) of          of              of              of
                 Reviewed for       Reviewed        Improper      Improper        Improper        Improper
                  Improper              for         Payments      Payments        Payments        Payments
                  Payments          Improper         Stopped       Stopped           Not             Not
                                    Payments                                       Stopped         Stopped



  Between
 October 1,
  2013 and
 September             10             $31,546              0           $0              0               $0
30, 2014 for
     All
 Databases
  Reviews
 with SSA’s
   Death                6             $12,245              0           $0              0               $0
 Master File
(DMF) Only


Status of Previous Audit Recommendation

This is the fourth audit of OPM’s improper payments reporting. During the audit on OPM’s FY
2013 Improper Payments Reporting for Compliance with the Improper Payments Elimination
and Recovery Act of 2010 Audit, Report # 4A-CF-00-14-009, we determined that OPM’s
reporting of improper payments was in compliance with IPERA. However, in that report we
issued a finding relating to inaccuracies found between the information reported in the AFR and
the support that was provided. We recommended that OPM strengthen its oversight controls
over the improper payments data reported in the AFR to ensure that it accurately reflects the
supporting data. Based on the results of our audit, as outlined in the Findings and
Recommendations section of this report, the recommendation remains open.



5
 Data collected from Table 14 “Implementation of the Do Not Pay Initiative to Prevent Improper Payments” on
page 130 of OPM’s FY 2014 AFR.



                                                       3                             Report No. 4A-CF-00-15-025
II. OBJECTIVE, SCOPE, AND METHODOLOGY 


Objective
The objective of our audit was to detennine ifOPM 's improper payments rep01ting in the AFR
was compliant with the IPERA requirements . Specifically, we detennined if:

    • 	 OPM published an AFR or PAR for the most recent fiscal year and posted that rep01t
        and any accompanying materials required by OMB on the agency website;
    • 	 OPM conducted a program specific risk assessment fo r each program or activity;
    • 	 OPM published improper payments estimates for each program and activity
        identified as susceptible to significant improper payments under its risk assessment;
    • 	 OPM published programmatic conective action plans in the AFR or PAR;
    • 	 OPM published an d met, annual reduction targets for each program assessed to be at
        risk and estimated for improper payments; an d,
    • 	 OPM rep01ted a gross improper payments rate ofless than 10 percent for each 

        program and activity for which an improper payments estimate was obtained and 

        published in the AFR or PAR. 


The recommendations included in this fmal rep01t address this objective.

Scope and Methodology
We conducted this perfon nance audit in accordan ce with generally accepted govem ment
auditing stan dards as established by the Comptroller General of the United States. These
standar ds require that we plan and perfon n the audit to obtain suffi cient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit objective.

The scope of our audit covered OPM's FY 2014 improper payments rep01ting in OPM 's AFR.
We perf01med our audit fieldwork fr om Janmuy 20 through April 14, 2015 at the OPM
headqmuters, located in Washington, D.C.

To accomp lish our audit objective noted above, we:

     • 	 Reviewed the improper payments section of OPM 's FY 2014 AFR to assess compliance
         with iPERA;
     •	   Reviewed our prior year's audit fmding an d obtained the status of con ective actions;
     •	   Reviewed applicable Federal laws;
     •	   Reviewed applicable OMB guidan ce;
     •	   Verified source documentation for all numerical data on improper payments as
          documented in the AFR tables;


                                                  4	                          Report N o. 4A-CF-00-15-025
       Verified source documentation for numerical amounts stated in the narrative discussion
        on improper payments made in the AFR; and
       Interviewed program representatives from the Office of the Chief Financial Officer
        (OCFO), and the Healthcare and Insurance (HI) and Retirement Services (RS) offices.

In planning our work and gaining an understanding of the internal controls over OPM’s improper
payments reporting process, we considered, but did not rely on, OPM’s internal control structure
to the extent necessary to develop our audit procedures. These procedures were mainly
substantive in nature. We gained an understanding of management procedures and controls to
the extent necessary to achieve our audit objective. The purpose of our audit was not to provide
an opinion on internal controls but merely to evaluate controls over the improper payments
reporting process.

Our audit included such tests and analysis of OPM’s supporting documentation provided for the
AFR as we considered necessary under the circumstances. The results of our review and tests
indicate that with respect to the items tested, OPM is in compliance with the improper payments
reporting requirements; however, OPM needs to strengthen its controls over the AFR reporting
process.

We did not sample improper payments for testing and did not evaluate the effectiveness of the
general and application controls over computer processed data.

The preliminary results of our audit were discussed with OPM officials at an exit conference
held on April 14, 2015 and were presented in a draft audit report, dated April 16, 2015. OPM’s
comments in response to the draft report were considered in preparing our final report and are
included as an Appendix.




                                                5                         Report No. 4A-CF-00-15-025
Ill. AUDIT FINDINGS AND RECOMMENDATIONS 

  The sections below detail the results of om audit on the FY 2014 Improper Payments Rep01iing
  for complian ce with the IPERA Act of 2010. Recommendation 1 was issued last year and is
  rolled f01ward from the audit of OPM 's FY 2013 Improper Payments Rep01iing for compliance
  with IPERA (Rep01i No. 4A-CF-00-14-009, issued April10, 2014).

1. 	 Improper Payments Information in the AFR was Inaccurately Reported

  Dming om audit we identified several inaccm acies between what was reported in the FY 2014
  AFR an d the supp01iing documentation th at we obtained fr om the
  program offices. Specifically, we noted the following:
                                                                                   Improper
  Retirement Services Office                                                       payments
         AFR Table 13, Ovetpayments Recaptmed Outside of Payments                information
         Recaptme Audits:                                                       reported in the
                                                                                   AFRwas
            • 	 The IP Amount Identified for Recovery in Prior Years
                                                                                  inaccurate.
                amount was inaccmately rep01i ed as $1 ,504 .1 million, 

                when it should have been rep01ied as $1 ,682 million. 

                Through discussions with RS we detennined that RS 

                understated the IP Amount Identifiedfor Recovery in Prior Years by $177.9 

                million. 

            • 	 RS's Amounts Recovered in Prior Years was understated by $159.5 million.
            • 	 The Cumulative Amount Identified for Recove1y in Prior Years FY 2014 was
                understated by $177.9 million.
            • 	 RS 's Cumulative Amounts Recovered in Prior Years FY 2014 was lmderstated by
                $159.5 million.

         AFR Table 14, Implementation of the Do Not Pay Initiative to Prevent Improper
         Payments:
            • 	 OPM overstated the Number (#) ofpayments reviewed for improper payments for
                all do not pay data between October 1, 2013 and September 31{sic}, 2014 all
                databases by 4 an d overstated Dollars ($) ofpayments reviewed for improper
                payments by $13,558.
            • 	 OPM overstated the Number (#) ofpayments reviewed for improper payments for
                the Reviews with the DMF only {SSA 's Death Master File} by 3 and overstated
                the Dollars ($) ofpayments reviewed for improper payments by $8,490.




                                                6	               Rep01i No. 4A-CF-00-1 5-025
       Death Match Statistics Table:
          		 RS stated that the Percent of total Population in the Death Match Statistics table
              reported in the FY 2014 AFR was incorrectly reported as 15.4 percent when it
              should have been 1.54 percent. We were not able to verify the validity of this
              error because supporting documentation was not provided.

       The accuracy rate for the FY 2014 retirement application submissions (October 1,
       2013 - July 31, 2014) was inaccurately reported at 94 percent, when it should have
       been reported as 84 percent.

Healthcare and Insurance Office
       AFR Table 12, Improper Payments Reduction Outlook:
           		 HI reported $43,583.6 million as the 2013 outlays in FY 2014 AFR table 12.
               However, this number was reported in FY 2013 AFR as $43,583.7, a difference of
               $0.1 million.

       AFR Table 13, Overpayments Recaptured Outside of Payments Recapture Audits:
          The Cumulative Amounts Identified in Prior Years FY 2014 table 13 for FEHBP
            was understated by $23.5 million due to an uncorrected error from 2008.

In addition, the following two inaccuracies were identified in our FY 2013 report, Improper
Payments Reporting for Compliance with the Improper Payments Elimination and Recovery Act
of 2010, which should have been corrected in the FY 2014 AFR. We noted that the information
is still inaccurately reported in the AFR.

          		 The amount identified by RS for recovery in prior years was understated by $0.6
              million in the FY 2013 AFR Table 13, Overpayments Recaptured Outside of
              Payments Recapture Audits.
          		 The amounts recovered by RS in prior years were overstated by $18 million in the
              FY 2013 AFR Table 13, Overpayments Recaptured Outside of Payments
              Recapture Audits.

OPM requires its programs to submit improper payments information to OCFO for inclusion in
the AFR. The OCFO’s Work Instruction for Reporting Improper Payments for the Agency
Financial Report states the following:

          		 “The RM [Resource Management] Chief and the Deputy Assistant Director [for
              RS] are ultimately responsible for the collection and reporting of the data
              [reported in the AFR].”


                                                7	                         Report No. 4A-CF-00-15-025
           		 “PIC [Policy and Internal Control] reviews the narrative information to ensure it
               aligns with OMB A-136 instructions for reporting and OMB A-123, Appendix C
               and provides feedback accordingly to respective offices.”

           		 “PIC also reviews the tables to ensure that the numbers and percentages tally.
               Additionally, PIC will have a second reviewer verify that the information being
               reported from RS and HI on the supporting spreadsheet reconciles to the
               information recorded in the AFR. Furthermore, PIC will provide feedback
               accordingly to RS and HI. Once the data has been verified and accepted as
               accurate.”

The U.S. Government Accountability Office (GAO) Standards for Internal Control in the Federal
Government states that “Control activities are the policies, procedures, techniques, and
mechanisms that enforce management’s directives … Control activities are an integral part of an
entity’s planning, implementing, reviewing, and accountability for stewardship of government
resources and achieving effective results.”

Without proper controls over its improper payments reporting process, OPM may continue to
report incomplete and inaccurate improper payments data in its AFR.

Recommendation 1 (Rolled-Forward from FY 2013):

We recommend that OPM strengthen its oversight controls over the improper payments data
reported in the Agency Financial Report to ensure that it accurately reflects supporting data.

OPM’s Response:

“We note that the actual total received from CFO in 2013 was $43,583,675,857.13, which rounds
up to $43,583.7 million. However, the number reported in the FY 2014 AFR was truncated to
$43,583.6 million. The difference between the 2014 reported number and the actual number was
$75,857.13, or less than 0.0002% of total outlays.”

“We do not have support to explain why the number reported in the 2008 AFR differs from the
number OIG provided to HI in 2008. However, we obtained clarification from the Office of
Management and Budget (OMB) that the guidance is not clear how many years back the
“cumulative” amounts should include. OMB also stated that it would be reasonable to go as far
back as FY 2011. The Improper Payment Working Group will determine the number of years to
include in the cumulative column going forward. Additionally, OMB provided draft changes to
OMB Circular A-136 which have changed this table and removed the cumulative columns all
together. If this change is made final, this will be inconsequential in the FY 2015 AFR.

We are implementing changes in the processes to capture and resolve inaccuracies in supporting
data. OPM expects to complete the corrective actions for this recommendation by September 30,
2015.”



                                                 8	                         Report No. 4A-CF-00-15-025
   OIG Comment:

   When prior year data is presented in the current year AFR, the data should remain consistent
   from year to year. If the data is not reported in a consistent manner due to corrections or
   reporting changes, it should be notated and an explanation should be provided in the AFR.

   Recommendation 2:

   We recommend that in the FY 2015 AFR, OPM correct all the errors identified in the FY 2014
   AFR tables 12, 13, 14, and the Death Match Statistics table.

   OPM’s Response:

   “Errors identified will be corrected in the FY 2015 AFR Tables 12, 13, 14 and the Death Match
   Statistics table.

   OPM expects to complete the corrective actions for this recommendation by November 15, 2015
   which is the required date for OPM to complete its AFR.”


2.		 Improper Payments Information in the AFR was Insufficient or Unsupported

   We found that the documentation provided for the following RS improper payments 

   information reported in OPM’s FY 2014 AFR was insufficient: 


       		 OPM did not provide documentation for three Benefits Officer Training sessions
           provided during FY 2014, listed on page 119.

   In addition, during our review, RS could not provide supporting 

   documentation for the following data reported in the AFR: 


       		 $24 million in cost savings through the Retirement Services                    Improper
           Disability Earnings Match, listed on page 118;                                 payments
       		 The most recent FY 2014 audit of all agency retirement                   information in the
           packages that were used to report improper payments, listed on                 AFR was
           page 120;                                                                   insufficient or
       		 The 300 military call up cases and the total of seven cases 
                unsupported.
           reissued with increased annuities, listed on page 119; 

       		 The 22 percent of all frequent errors that represent the retiree’s 

           eligibility to continue health insurance coverage is the same in the 

           FY 2013 AFR and FY 2014 AFR, listed on page 120; and, 

       		 The $11,878 in cost savings associated with the Marital Survey conducted in FY 2014
           that was part of the $600 thousand total cost savings reported in the AFR, listed on page
           118.



                                                   9	                        Report No 4A CF 00 15 025
OMB memorandum M-15-02, dated October 20, 2014 states that it is the agency’s
responsibility for maintaining documentation that demonstrates the review of all programs and
activities to identify those that are susceptible to significant improper payments and to
implement a plan to reduce improper payments.

OPM requires its programs to submit improper payments information to the OCFO for inclusion
in the AFR. The OCFO’s Work Instructions for Reporting Improper Payments for the Agency
Financial Report states the following:

       “The RM [Resource Management] Chief and the Deputy Assistant Director [for RS] are
        ultimately responsible for the collection and reporting of the data [reported in the
        AFR].”
       “PIC reviews the narrative information to ensure it aligns with OMB A-136 instructions
        for reporting and OMB A-123, Appendix C and provides feedback accordingly to the
        respective offices.”

GAO’s Standards for Internal Control in the Federal Government states that, “Internal control
and all transactions and other significant events need to be clearly documented, and the
documentation should be readily available for examination. The documentation should appear in
management directives, administrative policies, or operating manuals and may be in paper or
electronic form. All documentation and records should be properly managed and maintained.”

RS’s internal controls are inadequate for maintaining documentation to support the improper
payments information reported in OPM’s AFR.

As a result of RS not having sufficient supporting documentation, the improper payments
information reported in OPM’s FY 2014 AFR may be erroneous.

Recommendation 3:

We recommend that RS develop policies and procedures that include a discussion of sufficient
documentation retention to support the improper payments data reported in OPM’s AFR.

OPM’s Response:

“The CFO Work Instruction will be revised to include processes for Retirement Services
personnel to ensure that personnel have the supporting documentation, descriptions, and details
on the information being reported in the AFR, and we will put into place additional steps to
ensure that the documentation is retained in file.

OPM expects to complete the corrective action for this recommendation by September 30,
2015.”




                                                10                        Report No. 4A-CF-00-15-025
Recommendation 4:

We recommend that OCFO strengthen their procedures to ensure that the improper payments
information reported in OPM’s AFR is supported, reviewed, and validated for accuracy prior to
the information’s inclusion in the AFR.

OPM’s Response:

“The CFO Work Instruction has been revised to address information reported in the AFR. Data
reported must be accompanied with the supporting documentation. Unsupported data cannot be
reported in the AFR.

OPM expects to complete the corrective action for this recommendation by September 30,
2015.”




                                               11                        Report No. 4A-CF-00-15-025
IV. MAJOR CONTRIBUTORS TO THIS REPORT

INTERNAL AUDITS GROUP

        , Auditor

        , Auditor

         , Auditor

          , Auditor

            , Auditor

           , Auditor-in-Charge



                , Senior Team Leader

                    , Group Chief




                                       12   Report No. 4A-CF-00-15-025
                                               APPENDIX 





                        UNITE:O STATES OFFICE OF PERS ONNEL M ANAGEMENT 

                                              Washington, DC 20415 


Olicf Financial
                                              APR 3 0 2015
   O fficer

       MEMORANDUM FOR: 	 MICHAEL ESSER 

                         Assistant Inspector General for Audits 





       FROM:



       DENNIS D. COL                                         KENNETH ZAWODNY/ 

       ChiefFinancial ORir.as-"'7                            Associate Director 

                                                             Retirement Services 



       JOHN       O'BRIEN ~
       Associate Director 

       Healthcare and In · ce 



        SUBJECT 	     010 DRAFT AUDIT REPORT
                      Audit ofthe U.S. Office ofPersonnel Management's FY 2014 Improper
                      Payments Reporting for Compliance with the Improper Payments Elimination and
                      Recovery Act of2010 (IPERA) Audit Report Number- 4A-CF-00-15-025, dated
                      April 16, 201 S


       Thank you for the opportunity to respond to your review of OPM' s reporting on improper
       payments under IPERA. Reducing improper payments is an important priority for the
       Administration ~U;~d OPM is finnly committed to this priority. We are pleased that 010 has found
       OPM is compliant with IPERA based on our FY 2014 Agency Financial Report (APR).

        OPM has prioritized reducing improper payments as one of its key efforts to reduce waste, fraud,
        abuse and inefficiencies in Federal programs. OPM continues to make progress in efforts to
        reduce the extent and rate of improper payments and to recover an increasing percentage of
        improper payments. The C)1ief Financial Officer (CFO), Retirement Services (RS) and
        Healthcare and Insurance (HI) organi2'Jltions believe its cumulative efforts over the past few
        years have improved the OPM improper payments program. The Improper Payment Working
        Group (IPWG) is the focal-point for coordinating improvements in our program and for ensuring
        that our reporting is accurate and in compliance with IPERA and associated Office of
        Management and Budget (OMB) guidance.




                                                        13 	                  Rep01i N o. 4A-CF -00-15-025
 We concur with the recommendations but believe Recommendation I should be rescinded since
 it is the same recommendation as FY 2013. We wiJl address our corrective action below for
 Recommendation 1.

 Recommendation 1

We recommend that OPM strengthen its oversight controls over the improper payments data
reported In lhe Agency Financial Report to ensure that it accurately reflects supporting data.

Mana2ement Response to Rteommendotloo 1

OrG noted inaccuracies between the information rqxmed in the AFR and the support that was
provided. As a result, the recommendation from the previous audjt remains open. Tbc previous
recommendation is the same recommendation from last fiscal year, therefore we propose that the
cumnt recoounendat.ion be rescinded.




0/G Finding: OJG noted that the Health lllSUJ'IIIICe Table 12- AFR Table 12,lmproper Payment
Reduction Outlook: H1 reported S43,583.6 million as the 2013 outlays in FY 2014 AFR. Table
12. However, this number was reported in FY 2013 AFR as $43,583.7, a differenceofSO.l
million.

Mllllagement Rflponse: We note that the actual total rcocivcd &om CFO in 2013 was
$43,583,675,857. I3, which rounds up to $43.583.7 million. However,lbe number reported in the
FY 2014 AFR was truncated to $43,583.6 million. The difference between th.e 2014 reported
number and the actual number was S75,8S7.13, or Jess than 0.0002% oftO(aJ outlays.




                                                                                                 2




                                                 14                      Rep01i No. 4A-CF-00-1 5-025
 0/G Finding: 010 indicated in Table 13, Overpayments Recaptured Outside ofPayrnent
 Rec11pture Audits: for the CumulotiJ!e Amounts Identified In Prior Yea1·s FY 2014 FEHB was
 understated by $23.5 million due to an uncorrected error from 2008.

Management Roponse: We do nOI have support to explain why the number reported in the
2008 AFR differs from the number OlG provided to Hl in 2008. However, we obtained
clarification from the Office of Management and Budget (OMB} that the guidance is not clear
how many yea.rs back the "cumulative" amounts should include. OMB also stated that it would
be reasonable to go as far back as FY 2011. The Improper Payment Woricing Group will
detennlne the number ofyears to include in the cumulative column going forward. Additionally,
OMB provided draft changes to OMB Circular A-136 which have changed this table and
removed the cumulative columns all together. Ifthis change is made final, this will be
inconsequential in the FY 2015 AFR.

We are implementing changes in the processes to capture and resolve ina~uracies in supporting
data. OPM expects to complete the co.rrective actions for this recommendation by September 30,
2015.

Recommeodallon 2

We recommend that in the FY20IS AFR, OPM correct all the errors identified in the FY 2014
AFR Tables 12, 13, 14, Md the Death Match Statistics table.

Mana.:emat Rupoase to Recommeadatlon 2

                                   REDACTED BY OIG 

                         ~OT RELEYA~T    TO FI~AL REPORT 

However. we recognize after the fact that errors did occur Md as DOled above. we self-reported
them to the OIG during the survey phase of the audit Furthermore, errors identified will be
corrected in the FY 20J 5 AFR Tables 12, 13, 14 and the Death Match Statistics table.

OPM expects to complete the corrective at:tions for this recommendation by November 15, 201 S
which is the required date for OPM to complete its APR.

Recommendation 3

We recommend that RS develop poHcies and procedures that include a discussion ofsufficient
documentation retention to support the improper payments data reported in OPM's AFR.

Management Response to Recornmcodalion 3

OIG notes that RS's internal controls are Inadequate for maintaining documentation to support
the improper payments information repot1ed in OPM's AFR.. The CFO Work Instruction will be
revised to include processes for Retirement Services persomel to ensure that personnel have the
supporting documentation, clescripcions, and details on the information being reported In the

                                                                                                 3




                                                15                       Report No. 4A-CF-00-1 5-025
AFR, and we will put into place additional steps to ensure that the documentation is retained in
file.

OPM expects to complete the corrective action for this recommendation by September 30, 2015.

Recommendation 4

We recommend that CFO strengthen their procedures to ensure that the improper payments
infonnation reported in the OPM's AFR is supported, reviewed and validated for accuracy prior
to the infonnation inclusion in the AFR.

Management Response to Recommendation 4

The CFO Work Instruction has been revised to address information reported in the AFR. Data
reported must be accompanied with the supporting documentation. Unsupported data cannot be
reported in the AFR.

OPM expects to complete the corrective action for this recommendation by September 30, 2015.




                                                                                                   4




                                                  16                    Report No. 4A-CF-00-15-025
                                                                                                                         



                                       Report Fraud, Waste, and 

                                           Mismanagement 

                                                  Fraud, waste, and mismanagement in
                                               Government concerns everyone: Office of
                                                   the Inspector General staff, agency
                                                employees, and the general public. We
                                              actively solicit allegations of any inefficient
                                                    and wasteful practices, fraud, and
                                               mismanagement related to OPM programs
                                              and operations. You can report allegations
                                                          to us in several ways:

                        By Internet:              http://www.opm.gov/our-inspector-general/hotline-to-
                                                  report-fraud-waste-or-abuse


                         By Phone:                Toll Free Number:                               (877) 499-7295
                                                  Washington Metro Area:                          (202) 606-2423

                           By Mail:               Office of the Inspector General
                                                  U.S. Office of Personnel Management
                                                  1900 E Street, NW
                                                  Room 6400
                                                  Washington, DC 20415-1100
                     
                                                                                                                         
                                                                                                                         




                                                             -- CAUTION --
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit report may
contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://www.opm.gov/our-inspector-general), caution needs to be exercised
before releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.


                                                                           17                          Report No. 4A-CF-00-15-025