oversight

Audit Of The U.S. Office of Personnel Management's Fiscal Year 2011 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 2012-03-14.

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

                                                        U.S. OFFICE OF PERSONNEL MANAGEMENT
                                                              OFFICE OF THE INSPECTOR GENERAL
                                                                               OFFlCE OF AUDITS




Final Audit Report
Subject:


                      AUDIT OF 

   THE U.S. OFFICE OF PERSONNEL MANAGEMENT'S 

       FISCAL YEAR2011 IMPROPER PAYMENTS 

      REPORTING FOR COMPLIANCE WITH THE 

      IMPROPER PAYMENTS ELIMINATION AND 

               RECOVERY ACT OF 2010 




                                             Report No. 4A-RI-00-12-009


                                             Date: March 14, 2012




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releasi n~ the report to th e genera l public as it may contain pro prietary information that was redacted from the publicly distributed copy.
                                          UNITED STATES
                              OFFICE OF PERSONNEL MANAGEMENT
                                     WASHINGTON. DC 20415· 11.00


      OFFICE OF
'T1iE INSPEcrDR GENERAL



                                        AUDIT REPORT




              AUDIT OF THE U.S. OFFICE OF PERSONNEL MANAGEMENT'S 

              FISCAL YEAR 2011 IMPROPER PAYMENTS REPORTfNG FOR 

             COMPLIANCE WITH THE IMPROPER PAYMENTS ELIMINATION 

                           AND RECOVERY ACT OF 2010 





                      Report No. 4A-Rl-00-12-009      Date: March 14, 2012




                                                             Michael R. Esser
                                                             Assistant Inspector General
                                                               for Audits




                                                                                            OIG-01
                                                                                           May 1999
                                             UNITED STA"l'ES
                               OFFICE O F PER SONNEL MANAGEMEN T
                                       WASHINGTON , D C   20415- 1. 1 00


      OFFl CEOF
THE INSPECTOR GENERAL




                                          EXECUTIVE SUMMARY



             AUDIT OF THE U.S. OFFICE OF PERSONNEL MANAGEMENT' S 

             FISCAL YEAR 2011 IMPROPER PAYMENTS REPORTING FOR 

            COMPLIANCE WITH THE IMPROPER PAYMENTS ELIMINATION 

                          AND RECOVERY ACT OF 2010 




                      Report No. 4A-Rl-00-12-009            Dak:March 14, 2012


        The Office of the Inspector General has completed a performance audit of the Office of
        Personnel Managemenrs (OPM) FiscaJ Year (FY) 20 I I lmproper Payments Reporting for
        Compliance with the Improper Payments Elimination and Recovery Act of201 0 (1PERA). Our
        primary objective was to determine ifOPM ' s improper payment reporting in the Agency
        Financial Report (AFR) was compliant with the requirements oflPERA. Tn order to make this
        determination, our audit included the fo ll owing specific objectives:

           l . 	 Detennine if OPM conducted specific risk assessments of all programs and activities to 

                 identify those that are susceptible to significant improper payments; 

           2. 	 Determine if OPM reported improper payment estimates of risk susceptible programs in 

                 the AFR and verified the accuracy and completeness of the reported amounts; 

           3. 	 Determine if OPM included a discussion of improper payment estimates and 

                 methodologies in the AFR~ 

           4. 	 Determine if the AFR discussed corrective action plans for reducing improper payments 

                 where estimates exceed $10 million; 

           5. 	 Determine if OPM documented improper payment reduction targets and time frames for 

                 reaching them ; 

           6. 	 Determine if OPM reported on its etTorts to recapture improper payments: and,
           7. 	 Evaluate OPM' s controls over improper payments reporting in the AFR.

       Our audit was conducted from December 1, 20 11 through January 26, 2012 at OPM headquarters
       in Washington, D.C. We determined that OPM is not in compliance with two of the seven
       IPERA reporting requirements and lacks adequate controls to ensure compliance with these
       requirements. Our audit identified fow· areas requiring improvement.


                                                                                                              OIG-Ot
                                                                                                            May 11199
A.   IPERA Reporting Requirements

     1.   Non-Compliance                                                         Procedural

          OPM is not compliant with the IPERA reporting requirements
          because it did not include a discussion in its AFR on accountability
          for reducing and recovering improper payments and did not discuss
          its efforts under its recapture audit program.

B.   Controls over OPM’s Improper Payments Reporting

     1.   Lack of an Updated Agency Plan for Improper Payments                   Procedural
          Reporting

          OPM does not have an updated plan for preventing, reducing,
          recapturing, and reporting on improper payments under IPERA
          requirements.
     2.   Poor Controls over the Improper Payments Reporting Process             Procedural

          OPM does not have policies and procedures at the program level for
          the collection, documentation, and review of reportable data for
          improper payments reporting.

     3.   Inadequate Reporting on Root Causes of Improper Payments               Procedural
          and Corrective Actions

          OPM did not address specific corrective actions to correct specific
          root causes of improper payments in the AFR.




                                            ii
                               CONTENTS 



                                                                           Page

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


  I. INTRODUCTION AND BACKGROUND .......................................    1


 II. OBJECTIVE, SCOPE, AND METHODOLOGY ...........................          3


III. AUDIT FINDINGS AND RECOMMENDATIONS .........................           5


      A.	 IPERA Reporting Requirements
          1. 	 Non-Compliance………………………………………….....                          5


      B. 	Controls over OPM’s Improper Payments Reporting
         1. 	 Lack of an Updated Agency Plan for Improper Payments

              Reporting…………………………………………………….                                6

         2. 	 Poor Controls over the Improper Payments Reporting

              Process……………………………………………………….                                 7

         3. 	 Inadequate Reporting on Root Causes of Improper Payments

              and Corrective Actions………………………………………                         8


IV.   MAJOR CONTRIBUTORS TO THIS REPORT………….………...                          10



      APPENDIX
         OPM’s consolidated response, dated February 24, 2012
                    I. INTRODUCTION AND BACKGROUND


Introduction

This final report details the findings, conclusions, and recommendations resulting from our
performance audit of the U.S. Office of Personnel Management’s (OPM) Fiscal Year (FY) 2011
Improper Payments Reporting for compliance with the Improper Payments Elimination and
Recovery Act of 2010 (IPERA). The audit was performed by OPM’s Office of the Inspector
General (OIG) as authorized by the Inspector General act of 1978, as amended.

Background

On July 22, 2010 the President signed into law IPERA, which amends the Improper Payments
Information Act of 2002, to prevent the loss of billions of taxpayer dollars. Implementing
guidance for IPERA was issued by the Office of Management and Budget (OMB) via
Memorandum M-11-16 on April 14, 2011. Under the guidance, a program is deemed
susceptible to significant improper payments if the total amount of overpayments plus
underpayments in the program exceeds both 2.5 percent of program outlays and $10,000,000
of all program or activity payments made during the fiscal year reported, or $100,000,000
regardless of improper payment percentage of total program outlays.

Each agency inspector general is required to review improper payments reporting in the Agency
Financial Report (AFR) to determine compliance with IPERA beginning with FY 2011 annual
reporting. The inspector general should submit a report of its findings within 120 days of the
agency publication of the AFR.

Under IPERA, agencies must do the following with respect to improper payments reporting:
   •	 publish an AFR for the most recent fiscal year and post it on the agency website;
   •	 conduct a program-specific risk assessment for each program or activity that conforms
       with Section 3321 of Title 31 U.S.C.;
   •	 publish improper payment estimates for all programs and activities identified as

       susceptible to significant improper payments under its risk assessment;

   •	 publish programmatic corrective action plans in the AFR;
   •	 publish and meet annual reduction targets for each program assessed to be at risk and
       measured for improper payments;
   •	 report a gross improper payment rate of less than 10 percent for each program and
       activity for which an improper payment estimate was obtained and published in the AFR;
       and,
   •	 report information on its efforts to recapture improper payments.

If an agency does not meet one or more of these requirements, it is not compliant with IPERA.



                                               1

Two of OPM’s earned benefit programs, the Civil Service Retirement and Disability Fund and
the Federal Employees Health Benefits Program, are by definition susceptible to significant
improper payments. OPM has also designated payments to contractors under the Background
Investigations Program administered by the Federal Investigative Services and benefits paid
under its Federal Employees’ Group Life Insurance Program as susceptible to improper
payments. OPM’s reported improper payments for FY 2011 are summarized in the following
table.

                                FY 2011 Improper Payments Summary 1

                                        Gross Improper
                       Total Outlays                       Overpayments    Underpayments     2011 Improper
                                           Payments
                        ($ millions)                        ($ millions)     ($ millions)     Payment %
                                          ($ millions)


      Retirement             69,792.4             235.9            183.6              52.3            0.34%


    Health Benefits          40,493.0             151.7            151.7               0.0           0.375%


    Life Insurance            2,582.3                0.5             0.3               0.2            0.04%


     Background
                                695.4              10.8              9.8               1.0                1.6%
    Investigations




1
    Data collected from Table 13 “Improper Payment Reduction Outlook” on page 130 of OPM’s FY 2011 AFR.
                                                      2
                II. OBJECTIVE, SCOPE, AND METHODOLOGY

Objective

The objective of our audit was to determine if OPM’s improper payments reporting in the AFR
was compliant with IPERA requirements. Specifically, we:

   •	 Determined if OPM conducted specific risk assessments of all programs and activities to
      identify those that are susceptible to significant improper payments;
   •	 Determined if OPM reported improper payment estimates of risk susceptible programs in
      the AFR and verified accuracy and completeness of the reported amounts;
   •	 Determined if OPM included a discussion of improper payment estimates and 

      methodologies in the AFR;

   •	 Determined if the AFR discussed corrective action plans for reducing improper payments
      where estimates exceed $10 million;
   •	 Determined if OPM documented improper payment reduction targets and timeframes for
      reaching them;
   •	 Determined if OPM reported on its efforts to recapture improper payments; and,
   •	 Evaluated OPM’s controls over improper payments reporting in the AFR.

The recommendations included in this final report address these objectives.

Scope and Methodology

We conducted this performance audit in accordance with generally accepted government
auditing standards as established by the Comptroller General of the United States. Those
standards required 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.

The scope of our audit covered OPM’s FY 2011 improper payments reporting in the AFR.
We performed our audit fieldwork from December 1, 2011 through January 26, 2012 at OPM
headquarters located in Washington, D.C.

To accomplish the audit objectives noted above, we:

   •	 Reviewed the improper payments section of OPM’s FY 2011 AFR to assess compliance
      with IPERA;
   •	 Reviewed applicable Federal laws;
   •	 Reviewed applicable OMB guidance;
   •	 Verified source documentation for all numerical data on improper payments as

      documented in the AFR tables;



                                                3

   •	 Verified source documentation for narrative discussion on improper payments made in
      the AFR; and,
   •	 Interviewed program representatives from the Chief Financial Officer, Healthcare and
      Insurance, and Retirement Services.

In planning our work and gaining an understanding of the internal controls over OPM’s improper
payments reporting process, we considered OPM’s internal control structure to the extent
necessary to develop our audit procedures. These procedures were mainly substantive in nature,
although we did gain an understanding of management procedures and controls to the extent
necessary to achieve our audit objectives. The purpose of our audit was not to provide an
opinion on internal controls but merely to evaluate controls over improper payments reporting.
We determined that OPM is not in compliance with the improper payments reporting
requirements as specified by IPERA and does not have effective controls in place over its
improper payments reporting as detailed in the Audit Findings and Recommendations section of
this report.

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




                                               4

             III. AUDIT FINDINGS AND RECOMMENDATIONS


A)     IPERA Reporting Requirements

     1. Non-Compliance

       IPERA requires agencies to publish their efforts to reduce improper payments in their
       AFR. Agencies must meet all reporting requirements for compliance with IPERA. Our
       audit disclosed that OPM did not meet all of the requirements. The following highlights
       the areas of non-compliance.

       Accountability for Reducing and Recovering Improper Payments

       OPM did not include discussions on plans to hold managers accountable for reducing and
       recovering improper payments for its programs in its AFR.

       OMB Memorandum M-11-16 Part I, A(7)-Step 4(b)(vi) states that agencies must have a
       description of steps (including timeline) it has taken and plans to take to ensure that
       agency managers, accountable officers, programs, and program officials are held
       accountable for reducing and recovering improper payments.

       Based on the results of our audit procedures, we concluded that OPM lacks an
       understanding of the complete reporting requirements of IPERA, and thus did not report
       on accountability for reducing and recovering improper payments in the AFR.

       Recapture Audit Program

       Table 12 of the AFR documents the results of OPM’s recapture audit program activities;
       however, the AFR does not include a discussion on its recapture audit program, including
       actions and methods used by the agency to recoup overpayments.

       OMB issued guidance to agencies in Memorandum M-11-04 on efforts to recapture
       payment errors and strategies for strengthening current payment recapture audit activities
       under IPERA. OPM produced a response to OMB on February 8, 2011, summarizing its
       current payment recapture activities by program. In the response, OPM said it believes
       that the current benefit payment recapture processes are efficient and effective, make
       strategic use of highly skilled personnel, and remain the most cost effective means for
       erroneous benefit payment recapture.

       OMB Memorandum M-11-16 Part I, B(18) requires agencies to provide a description in
       the AFR of the steps taken to carry out a payment recapture audit program, including a
       discussion of the methods used by the agency to identify and recapture overpayments.

       OPM has a recapture audit program in place, however, it did not discuss its efforts in the
       AFR.

                                                5

        Recommendation 1

        We recommend that OPM develop internal controls to ensure that its reporting on
        improper payments in the AFR meets all IPERA requirements, including a discussion on
        its recapture audit efforts and holding program managers accountable for reducing and
        recovering improper payments.

        OPM’s Response:

        “We concur with Recommendation 1 as it relates to including a discussion of its payment
        recapture program in the Agency Financial Report (AFR). OPM does not currently have
        an external payment recapture audit program under the definition of payment recapture
        set forth by the Office of Management and Budget (OMB). Instead, OPM has an
        extensive internal recapture program to recapture improper payments, which was detailed
        in our February 2011 payment recapture plan sent to OMB and OIG at that time. …

        The second part of the recommendation concerning holding program managers
        accountable for reducing and recovering improper payments is more difficult to address,
        as written. OPM included a section in the FY 2011 AFR on accountability, but, as
        reported by OIG, did not detail the specific actions it is taking to make managers and
        program officials accountable for reducing and recovering improper payments. OPM
        will provide an improved description of its accountability efforts in the FY 2012 AFR.
        Improper payment rates are already below the thresholds set in IPERA and OMB
        guidance and OPM will continue to aggressively pursue all cost-effective means to
        reduce improper payments further within each reportable program.”

        OIG Comment:

        OMB’s IPERA guidance states that agencies must publish programmatic corrective
        action plans in the AFR. OMB guidance identifies accountability as one of the elements
        of the corrective action plans that agencies must report. We acknowledge that OPM’s
        AFR did include a topic of discussion on accountability; however, OMB guidance
        specifically states that agencies must ensure that that their managers are held accountable
        for reducing improper payments. The section in the AFR on accountability did not
        include this discussion as required under the reporting requirements. Therefore, OPM is
        not in compliance with this reporting requirement.

B)      Controls over OPM’s Improper Payments Reporting

     1. Lack of an Updated Agency Plan for Improper Payments Reporting

        OPM does not have a current agency plan for preventing, reducing, recapturing, and
        reporting on improper payments per IPERA requirements. OPM’s most current plan on
        improper payments is dated March 23, 2006, with an approved action plan for
        eliminating improper payments dated March 29, 2006.
                                              6

   OMB Memorandum M-11-16 Part I, A(19) states that agencies “have several plans
   related to their improper payment efforts, which should describe their current efforts to
   prevent, reduce, and recapture improper payments.” For example, agencies have
   measurement and corrective action plans that were developed under the Improper
   Payments Information Act of 2002 and which will be updated per IPERA. Agencies also
   have their payment recapture plans that were completed per OMB Memorandum
   M-11-04.

   Not having a current agency plan for improper payments reporting may have led to
   OPM’s non-compliance with IPERA. See the first finding of this report.

   Recommendation 2

   We recommend that OPM create an updated comprehensive improper payments plan that
   meets the requirements of IPERA and that identifies and coordinates their efforts to
   measure, reduce, prevent, and recapture improper payments.

   OPM’s Response:

   “We concur with the recommendation. We will complete a comprehensive improper
   payments plan and transmit it to OMB in FY 2012.”

2. 	 Poor Controls over the Improper Payments Reporting Process

   OPM does not have policies and procedures at the program office level, including the
   Office of the Chief Financial Officer (OCFO), for the collection, documentation, and
   review of reportable data for improper payments reporting. We found that there are no
   documented policies and procedures detailing the program personnel involved, the
   sources of the improper payments data, and detailed work instructions for compiling,
   reporting, and reviewing improper payments data. Each program group collects and
   reports numerical and narrative data on an informal and independent basis with no
   guidance or review from the OCFO, who is responsible for the publication of the final
   AFR.

   We observed numerous instances of inaccurate or unsupported improper payments data
   reported in the AFR. Specifically, we found that:

      •	 OPM did not identify the portion of actual improper payments in the AFR. The
         improper payments reported in Table 13 of the AFR include both actual and
         estimated amounts. The narrative on improper payments only discusses estimates.
      •	 For the Retirement Program, OPM reported that data-matching activities identified
         more than $52 million in overpayments in FY 2011. The actual amount of
         identified overpayments was $76,754,340.

                                           7

      •	 For the Retirement Program, OPM reported that data-matching activities
         prevented an additional $14 million in overpayments. The actual amount of
         prevented overpayments was $16,175,996.
      •	 OPM reported in Table 13 of the AFR that the improper payment rate for the Life
         Insurance Program was .04 percent. We recalculated the rate and determined the
         improper payment rate was .01 percent, using the figures OPM reported in the
         table. However, we also determined that OPM inaccurately reported $500,000 in
         improper payments for the Life Insurance Program in Table 13 of the AFR. The
         total improper payments for FY 2011 were $1.9 million, raising the improper
         payment rate to .07 percent.
      •	 OPM reported in Table 13 of the AFR that the FY 2011 total underpayments for
         the Health Benefits Program’s Experience Rated Carriers were $0. The actual
         amount of underpayments was $2.2 million. The reported overpayments are
         overstated by $2.2 million. The correct overpayment should be $149.5 million.

   The Government Accountability Office Standards for Internal Control in the Federal
   Government, November 1999 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 for the collection, documentation, and review of reportable data
   on improper payments, OPM’s risk of reporting inaccurate and unsupported data
   increases.

   Recommendation 3

   We recommend that OPM improve internal controls over its improper payments

   reporting process to ensure the integrity of improper payments data. 


   OPM’s Response:

   “We concur with this recommendation.”

3. 	 Inadequate Reporting on Root Causes of Improper Payments and Corrective
     Actions

   OPM did not address specific corrective actions to correct the root causes of improper
   payments in the AFR. We found that the corrective actions identified have been in place
   for many years and are still being identified as current initiatives to reduce improper
   payments. In addition, many of the corrective actions identified do not help reduce
   improper payments but help increase detection of improper payments. Specifically, we
   found that:

                                           8

   •	 OPM’s causes of improper payments identified in the AFR lack details to describe
      the root causes of improper payments for the Health Benefits Program, Life
      Insurance Program, and its Background Investigations Program.
   •	 OPM did not document the results of specific actions taken to address the causes
      of improper payments.
   •	 OPM did not address the portion of improper payments that was attributable to
      insufficient or lack of documentation.

OMB Memorandum M-11-16 Part I, A(7) Step 4(b)(ii) states that agencies shall include
in the AFR “a discussion of the causes of the improper payments identified, actions
planned or taken to correct those causes, the planned or actual completion date of those
actions, and the results of the actions taken to address those causes. Part of this
discussion shall include the portion of improper payments attributable to insufficient or
lack of documentation, if applicable.”

OMB Memorandum M-11-16 Part I, A(14) states that “Agencies should … implement
corrective actions to prevent and reduce improper payments associated with the root
causes of improper payments. … Agencies should annually review their existing
corrective actions to determine if any existing action can be intensified or expanded,
resulting in a high-impact, high return-on-investment in terms of reduced or prevented
improper payments.”

Recommendation 4

We recommend that OPM develop internal controls to ensure its discussions on root
causes and corrective actions identify specific root causes of its improper payments,
along with specific corrective actions to address the root causes and meet the
requirements of IPERA. The discussion should show a direct correlation between the
root causes, the corrective actions, and the reduction in improper payments.

OPM’s Response:

“We concur with this recommendation and will take steps to more closely link the
planned corrective actions to the specific root causes identified in the AFR. We will also
attempt to link specific causes and planned corrective actions to actual or planned
reductions. This will be challenging because there is not always a one-for-one link
between the causes and planned actions and because they represent our best judgments of
actions needed to reduce improper payments. In other words, we do not always have
scientifically based cause and effect data on all of our improper payments to guarantee
that a specific corrective action will result in a specific dollar reduction in improper
payments. We will attempt to estimate actual and planned reductions when feasible.”




                                         9

             IV. MAJOR CONTRIBUTORS TO THIS REPORT

Internal Audits Group

                , Auditor-In-Charge
                  , Auditor
                  , Auditor
                     , Auditor
              , Senior Team Leader
                     Chief
________________________________________________________________________




                                     10

We also recognize that even the best run programs can benefit from external evaluations.
Your audit is an important facet to improving our program and reporting efforts. We
greatly appreciate your work over the past few months under the tight time constraints
mandated for you by IPERA. We concur with 4 of the 5 recommendations in the draft
report as discussed below. We are also providing technical comments on some of the
factual information set forth in your draft report and ask that those changes be
incorporated in your final report.

As noted in your draft report, you assessed OPM compliance under seven specific criteria
set forth in IPERA and subsequent OMB guidance. You also reported on internal
controls over improper payments. The draft report determines we are non-compliant
based on not meeting one of those criteria. IPERA requires the OIG to report agencies as
non-compliant if they do not meet, in their entirety, all seven criteria. This standard is a
high bar set for agencies in the first year of compliance with the new law and guidance.
We request your final report more explicitly state that OPM met 6 of the 7 criteria. This
report is likely to have a wide distribution. Including that information will provide a
more complete assessment of our actual compliance with these requirements.

Responses to the individual recommendations and technical comments follow:

Recommendation 1

We recommend that OPM develop internal controls to ensure that its reporting on
improper payments in the AFR meets all the requirements of IPERA, including a
discussion on its payment recapture audit efforts and holding program managers
accountable for reducing and recovering improper payments.

Response to Recommendation 1

We concur with Recommendation 1 as it relates to including a discussion of its payment
recapture program in the Agency Financial Report (AFR). OPM does not currently have
an external payment recapture audit program under the definition of payment recapture
set forth by the Office of Management and Budget (OMB). Instead, OPM has an
extensive internal recapture program to recapture improper payments, which was detailed
in our February 2011 payment recapture plan sent to OMB and OIG at that time.
Specifically, OPM’s internal recapture program recovers approximately 90 percent of the
cumulative identified improper payments as a result of extensive internal efforts over the
past several years. Our recovery rate exceeds the 85-percent goal of recoveries set forth
by IPERA and OMB. OPM will provide a better explanation of our payment recapture
efforts in the FY 2012 AFR so that we can meet the specific compliance criteria.

The second part of the recommendation concerning holding program managers
accountable for reducing and recovering improper payments is more difficult to address,
as written. OPM included a section in the FY 2011 AFR on accountability, but, as
reported by OIG, did not detail the specific actions it is taking to make managers and
program officials accountable for reducing and recovering improper payments. OPM



                                             2

will provide an improved description of its accountability efforts in the FY 2012 AFR.
Improper payment rates are already below the thresholds set in IPERA and OMB
guidance and OPM will continue to aggressively pursue all cost-effective means to
reduce improper payments further within each reportable program.

Finally, we note that while accountability for managers is a requirement of the OMB
guidance it was not included as one of the seven criteria for OIG to assess compliance as
spelled out by IPERA and the OMB guidance. Therefore, we believe this finding should
be included in the internal controls section of the report and any recommendation should
be listed separately in that section.


Recommendation 2

We recommend that OPM create an updated comprehensive improper payments plan that
meets the requirements of IPERA and that identifies and coordinates their efforts to
measure, reduce, prevent, and recapture improper payments.

Response to Recommendation 2

We concur with the recommendation. We will complete a comprehensive improper
payments plan and transmit it to OMB in FY 2012.

Recommendation 3 - We recommend that OPM improve internal controls over its
improper payments reporting process to ensure the integrity of improper payments data.

Response to Recommendation 3

We concur with this recommendation.

                                   Deleted by OIG

                              Not Relevant to Final Report


Also, we note that OIG did not find any major discrepancies in the reporting tables in our
FY 2011 AFR.

                                   Deleted by OIG

                              Not Relevant to Final Report


Nevertheless, we agree that OPM needs improved controls over AFR reporting and will
strive to improve those in FY 2012. OPM has already initiated a lessons learned process
for the entire FY 2011 AFR, including the section on improper payments. Additionally,
we have initiated a new improper payments working group that meets on a bi-weekly
basis to discuss various improper payments issues and how to improve our internal
controls. This new group will provide an excellent forum for OPM managers and staff to
provide additional reviews of the FY 2012 AFR and therefore reduce or eliminate


                                            3

inaccuracies. OPM can provide additional information on these improvements
throughout FY 2012 to help prepare OIG for its audit of the FY 2012 improper payments
reporting.




                                  Deleted by OIG

                             Not Relevant to Final Report





                                          4

Recommendation 5 [4] - We recommend that OPM develop internal controls to ensure
its discussions on root causes and corrective actions identify specific root causes of its
improper payments along with specific corrective actions to address the root causes and
meet the requirements of IPERA. The discussion should show a direct correlation
between the root causes, the corrective actions and the reductions in improper payments.

Response to Recommendation 5 [4]

We concur with this recommendation and will take steps to more closely link the planned
corrective actions to the specific root causes identified in the AFR. We will also attempt
to link specific causes and planned corrective actions to actual or planned reductions.
This will be challenging because there is not always a one-for-one link between the
causes and planned actions and because they represent our best judgments of actions
needed to reduce improper payments. In other words, we do not always have
scientifically based cause and effect data on all of our improper payments to guarantee
that a specific corrective action will result in a specific dollar reduction in improper
payments. We will attempt to estimate actual and planned reductions when feasible.

Other Technical Comments

None




                                             5