0901 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) policies and procedures relating to Payment Integrity and Fraud Reduction.

Key Points:

  • VA will follow the pre-payment and pre-award procedures defined in PIIA legislation and OMB Circular A-123, Appendix C to minimize the issuance of improper and unknown payments.
  • Senior Accountable Officials (SAOs) will complete a comprehensive Fraud and Improper Payment Risk Assessment Survey annually. VA must comply with the PIIA requirements to use a risk-based approach.
  • Programs deemed susceptible to significant improper and unknown payments in one fiscal year, are required to project improper and unknown payment estimates the following fiscal year using a developed sampling and estimation methodology plan based on statistically valid sampling.
  • Programs identified as being susceptible to significant improper and unknown payments and reporting improper and unknown payments above statutory threshold are responsible for developing corrective actions or mitigation strategies that will focus on remediating improper and unknown payments.
  • SAOs will identify reduction targets annually for programs reporting improper and unknown payments with oversight from the Administration and Staff Office Chief Financial Officers (CFOs). Program reduction targets will be submitted to Improper Payment and Remediation Oversight (IPRO) for inclusion in annual reporting to the Director of OMB.
  • VA is required to conduct recovery audits, if cost-effective, for each program and activity that expends $1 million or more annually. SAOs are responsible for recovery audits, and determining if recovery audits are cost-effective, with oversight from the Administration or Staff Office CFOs. The Financial Services Center (FSC) provides recovery audits as a service available to its customers.
  • VA will report annually on Payment Oversight Program (POP) activities per OMB guidance. VA will report to Congress and other external entities per PIIA legislation and implementation guidance from OMB.

0902 Revisions

See changelog.

0903 Definitions

Abuse – Involves behavior that is deficient or improper when compared with behavior that a prudent person would consider reasonable and necessary in operational practice given the facts and circumstances.

Annual Data Call – In depth payment integrity information provided by the agency to OMB for publication. The data is collected and subsequently published on paymentaccuracy.gov to fulfill multiple statutory reporting requirements in PIIA for both the agency and OMB.

Baseline – A starting point or benchmark against which future progress can be assessed or comparisons made. If a program had a 24-month reporting cycle where no significant changes occur in the sampling and estimation methodology plan, the program will most likely be considered to have established a baseline.

Compliance – A term used to indicate whether an agency has fulfilled specific statutory requirements.

Computer Matching Agreement – A written agreement between a recipient agency and a source agency (or a non-Federal agency) that is required by the Privacy Act for parties engaging in a matching program. See 5 U.S.C. § 552a(o) as modified by 31 U.S.C. § 3354(d)(1).

Confidence Interval – The range of values for a given confidence level n into which repeated future samplings are expected to fall n% of the time. For PIIA testing, this is used as the estimate for the improper payment and unknown payment error rate of the population.

Corrective Action – Action to eliminate the cause of an improper or unknown payment and to prevent recurrence.

Corrective Action Plan (Action Plan) – Strategy put in place by a program to prevent and reduce the improper and unknown payment amount(s). It is responsive to the root causes of the improper and unknown payments and proportional to the severity of the associated amount and rate of the root cause. It typically contains multiple mitigation strategies and corrective actions.

Cost Benefit Analysis – A systematic approach to estimating the strengths and weaknesses of alternatives used to determine options which provide the best approach to achieving benefits while preserving savings.

Cost-Effective Recovery Audits and Activities Program – A recovery audits and activities program in which the benefits (i.e., recovered amounts) exceed the costs (e.g., staff time and resources, or payments for the payment recovery audit contractor) associated with implementing and overseeing the program.

Do Not Pay (DNP) Initiative – An initiative supporting Federal agencies in identifying and preventing improper payments. DNP encompasses multiple resources that are designed to help Federal agencies review payment eligibility for purposes of identifying and preventing improper and unknown payments.

Fraud – Obtaining something of value through willful misrepresentation.

High-Priority Program – Programs with improper payments resulting in monetary loss that exceed $100,000,000 annually. OMB may determine that a program is high priority for reasons other than exceeding the dollar threshold established above. If this occurs, OMB will notify the agency. Current OMB guidance or inquiries to the IPRO office can provide the thresholds and/or VA programs currently designated High Priority. These programs require additional reporting.

Improper Payment – Any payment that should not have been made or was made in an incorrect amount, including overpayment or underpayment, under a statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes any payment to an ineligible recipient; any payment for an ineligible good or service; any duplicate payment; any payments for a good and service not received, except for those payments authorized by law; and any payment that does not account for credit for applicable discounts. Improper payments include monetary loss improper payments and non-monetary loss improper payments. The improper payment amounts, and unknown payment amounts will be reported as required by OMB Circular A-123, Appendix C and/or any additional OMB guidance.

Improper and Unknown Payment Estimate – The improper payment estimates plus the unknown payment estimate. A statistically valid estimate of the total improper payments made annually in a program plus a statistically valid estimate of the total unknown payments made annually in a program. The collective amount in improper payments and unknown payments divided by the amount in program outlays for a given program in a given fiscal year. It is based on dollars rather than number of occurrences. The improper payment estimate will be reported as both a percentage and a dollar amount. The improper payment and unknown payment estimate will be reported as required by OMB Circular A-123, Appendix C and/or any additional OMB guidance.

Improper and Unknown Payment Rate – The degree of improper payments and unknown payments measured against the outlays.

Improper and Unknown Payment Reduction Target – The estimated improper payment and unknown payment level the program predicts they will achieve in the following fiscal year. A reduction target may be lower, constant, or higher than the current year improper payment and unknown payment estimate.

Improper and Unknown Payment Reduction Target Rate – The reduction target improper payment and unknown payment percentage.

Improper Payment Estimate –. A statistically valid estimate of the total improper payments made annually in a program. The amount in improper payments divided by the amount in program outlays for a given program in a given fiscal year. It is based on dollars rather than number of occurrences. The improper payment estimate will be reported both as a percentage and a dollar amount.

Insufficient or Lack of Documentation – A situation in which an agency, or the entity performing all or part of the payment process on behalf of the agency (i.e., states, local governments, etc.), is conducting a review, for the purposes of producing an improper payment and unknown payment estimate, and is unable to obtain the documentation needed for the reviewer to determine whether the payment was made to the right recipient and/or for the right amount. When this occurs, the payment is considered an ‘unknown’ payment and is not considered an improper payment for purposes of producing an improper payment estimate. However, it is treated as an improper payment in the sense that it will be accounted for and reported in conjunction with, but separately from, the improper and unknown payment estimate. If there is sufficient documentation to determine that the payment was made to the right recipient, for the right amount, and in accordance with applicable regulation and statute, despite failure to comply with all agency policies, procedures, and/or documentation requirements surrounding the payment, the payment may be considered a proper payment.

Mitigation Strategy – Action designed to reduce or lessen the likelihood or size of an improper or unknown payment.

Monetary Loss – A loss to the Federal Government is an amount that should not have been paid and in theory should/could be recovered. A monetary loss type improper payment is an overpayment.

Non-Monetary Loss –Non-Monetary loss to the Federal Government is either an underpayment or a payment to the right recipient for the correct amount where the payment process fails to follow applicable regulations and/or statutes (referred to as technically improper payment).

Overpayment – A payment in excess of what is due. When an overpayment occurs, the improper amount is the difference between the amount due and the amount of which was actually paid. Overpayments are monetary loss type of improper payments.

Payment –Any transfer of Federal funds (including a commitment for future transfer, such as cash, securities, loans, loan guarantee, and insurance subsidies) to any non-Federal person, non-Federal entity, or Federal employee, that is made by a Federal agency, Federal contractor, a Federal grantee, or a governmental or other organization administering a Federal program.

Paymentaccuracy.gov – A website established to create a centralized location to publish information about improper payments. This website includes current and historical information about improper and unknown payments made under Federal programs that have been determined to be susceptible to significant improper and/or unknown payments based on assessments of all government programs, including quarterly scorecards for the Government’s high-priority programs. This website also provides a centralized place where the public can report suspected incidents of fraud, waste, and abuse. OMB may also require the reporting of other payment types or estimates.

Phase 1 – The first of two stages in the process of review for improper and unknown payments. During this stage an improper payment risk assessment is conducted at least once every three years to determine whether a program is likely to be susceptible to significant improper and unknown payments.

Phase 2 – The second of two stages in the process of review for improper and unknown payments. During this stage a program will use a statistically valid sampling and estimation methodology to report an annual improper and unknown payment estimate. Phase 2 is not required if the results of Phase 1 indicate that the program is not likely to be susceptible to significant improper and unknown payments.

Pre-Payment Review – Analyzing payment data for indicators that a payment is being made in error or is vulnerable to abuse prior to issuing the payment.

Program – Includes activities or sets of activities administered by the head of the agency. The term “program” in this guidance implies “program or activity.” The agency is authorized to determine the most appropriate grouping of activities to create a “program” for purposes of this guidance. The grouping should be in a manner that most clearly identifies and reports IPs for their agency. When determining how agency activities should be grouped, agencies should not put activities into groupings that may mask significant IP estimates by the large size or scope of a grouping. In addition, agencies should not intentionally group activities in an effort to reduce the size and fall below the statutory thresholds.

Proper Payment – A payment made to the right recipient for the right amount that has met all program specific legally applicable requirements. If there is sufficient documentation to determine that the payment was made to the right recipient, for the right amount, and in accordance with applicable regulation and statute, despite failure to comply with all agency policies, procedures, and/or documentation requirements surrounding the payment, the payment may be considered a proper payment.

Recovery – When a monetary loss type improper payment is returned to the agency. This can occur as a result of recovery audits or recovery activities.

Recovery Activities – Any non-recovery audit mechanism used by an agency to identify and recapture overpayments. Recovery activities include but are not limited to review of Single Audit reports; self-reported overpayments, statistical samples conducted under PIIA, and agency post-payment reviews.

Recovery Audit –A review and analysis of an agency or program’s accounting and financial records, supporting documentation, and other pertinent information supporting its payments, that is specifically designed to identify overpayments. It is not an audit in the traditional sense covered by Generally Accepted Government Audit Standards (GAGAS). Rather, it is a detective and corrective control activity designed to identify and recover overpayments, and, as such, is a management function and responsibility.

Reduction Target – The estimated improper payment and unknown payment level the program predicts they will achieve in the following fiscal year. A reduction target may be lower, constant, or higher than the current year improper payment estimate(s) plus unknown payment estimate.

Risk Assessment – A process by which the Department assesses the risks facing the entity regarding fraud, improper and unknown payments. The assessment provides the basis for establishing well defined goals and objectives for reducing fraud, improper and unknown payments.

Root Cause – A root cause is something that would directly lead to an improper payment/unknown payment, and if corrected, would prevent the improper payment/unknown payment. This is also referred to as cause of error.

Sampling and Estimation Methodology Plan – The statistical sampling and estimation method designed and implemented by the program to produce a statistically valid improper and unknown payment amount estimate. When calculating a program’s annual improper and unknown payment amount, agencies should only utilize the known amount paid improperly (i.e., overpayments, underpayments, and technically IPs).

Significant Improper Payment – Annual improper and unknown payments (i.e., the sum of monetary loss improper payments, non-monetary loss improper payments, and unknown payments) in the program exceeding (1) both 1.5 percent of program outlays and $10,000,000 of all program payments made during the fiscal year reported or (2) $100,000,000 (regardless of the improper payment percentage of total program outlays).

Statutory Threshold – A threshold involving a program exceeding improper and unknown payments of (1) both 1.5 percent of program outlays and $10,000,000 of all program payments made during the fiscal year reported or (2) $100,000,000 (regardless of the improper payment percentage of total program outlays).

Technically Improper Payment – A payment that was made to an otherwise qualified recipient for the right amount, but the payment failed to meet all regulatory and/or statutory requirements. A technically improper payment is a non-monetary loss type improper payment.

Tolerable Improper and Unknown Payment Rate – The improper and unknown payment estimate achieved with a balance of payment integrity risk and controls. The tolerable improper and unknown payment rate for a program is determined by agency senior management and often includes improper payments which are unavoidable and beyond the agency’s ability to reduce as well as improper and unknown payments which are cost prohibitive or sometimes mission prohibitive for the agency to prevent.

Treasury Working System (TWS) – Centralized data and analytic services performed at Treasury as part of the DNP Initiative functions for all Federal payments. The Treasury Working System includes databases defined by Congress as well as those designated by OMB or a designee and allows agencies to perform pre-payment reviews as well as other activities such as investigation activities for fraud and systemic improper payments detection through analytic technologies and other techniques.

Underpayment – A payment that is less than what is due. When an underpayment occurs, the improper amount is the difference between the amount due and the amount which was actually paid. An underpayment is a non-monetary loss type of improper payment.

Unknown Payment – A payment that could be either proper or improper, but the agency is unable to discern whether the payment was proper or improper insufficient or lack of documentation. If there is sufficient documentation to determine that the payment was made to the right recipient, for the right amount, and in accordance with applicable regulation and statute, despite failure to comply with all agency policies, procedures, and/or documentation requirements surrounding the payment, the payment may be considered a proper payment. Unknown payments are not improper payments however, unknown payments are included in the improper payment risk assessment in Phase 1. Unknown payments are reported in Phase 2 but are reported separately from the improper payment estimate.

Unknown Payment Estimate – A statistically valid estimate of the total unknown payments made annually in a program. The amount in unknown payments is divided by the amount in program outlays for a given program in a given fiscal year. It is based on dollars rather than number of occurrences. The unknown payment estimate will be reported as both a percentage and a dollar amount. The improper payment estimate plus the unknown payment estimate will be reported as required by OMB Circular A-123, Appendix C and/or any additional OMB guidance.

Waste – The act of using or expending resources carelessly, or to no purpose.

0904 Roles and Responsibilities

Under Secretaries, Assistant Secretaries, and Other Key Officials are responsible for ensuring compliance with the policies set forth in this chapter.

Administration and Staff Office Chief Financial Officers (CFOs) are responsible for accurate and complete Payment Oversight Program (POP) testing and reporting in accordance with Payment Integrity Information Act of 2019 (PIIA) regulation, Office of Management and Budget (OMB) guidance, and ensuring compliance with the policies and procedures set forth in this chapter. Additionally, they are responsible for assigning Senior Accountable Officials (SAOs) and determining their scope of authority. If a program’s Senior Executive Service (SES) is not available to perform their duties as SAO due to unforeseen circumstances, written justification to delegate responsibilities will be reviewed and approved on a case-by-case basis by the Administration and Staff Office CFO with concurrence from the Office of Business Oversight (OBO) Executive Director. Administration and Staff Office CFOs will coordinate activities with OBO through the Improper Payments Remediation and Oversight Office (IPRO) and the Payment Integrity Office (PIO) and are accountable for working with programs to ensure SAOs have accurate testing results and remediation activities that will reduce improper and unknown payments and address fraud risks. Administration and Staff Office CFOs will ensure SAOs respond promptly and completely to requests outlined in the Schedule for Required PIIA Activities (Appendix B) as required to comply with other OMB or Office of Management (OM) requests.

Assistant Secretary for Management, and Chief Financial Officer (ASM/CFO) The Department of Veterans Affairs (VA) Secretary has delegated the Department’s activities and role of the Agency Accountable Official for payment integrity to the Assistant Secretary for Management and CFO. The ASM/CFOoversees all financial management activities relating to the direction, management, and administration of the Department’s required payment integrity reporting and compliance and serves as the Agency Accountable Official. The ASM/CFO chairs the VA CFO Council, which will address payment integrity topics either as part of regular meetings or addressed as special sessions of the Council.

Executive Director, Office of Business Oversight (OBO) is responsible for establishing policies and procedures required to manage fraud risks and reduce improper and unknown payments as part of VA’s POP. The Executive Director, OBO is also responsible for reviewing and approving all required payment integrity reporting and providing guidance, as needed, to ensure consistent and accurate reporting across the Department. In addition, the Executive Director, OBO is the main point of contact responsible for coordinating, consolidating, and providing comments/data as requested by OMB. Within OBO, IPRO and PIO work to provide oversight and consolidate required external reporting. Generally, IPRO focuses on identifying programs, assessing risk of, testing for, estimating, identifying programs susceptible to improper and unknown payments. In addition, IPRO ensures that effective mitigation strategies and corrective actions are in place to address improper and unknown payments, while PIO focuses on addressing PIIA requirements for fraud risk identification.

Senior Accountable Officials (SAOs) are designated by Administration and Staff Office CFO for each program with annual outlays over $10 million and are responsible for all aspects of POP reporting and compliance with payment integrity activities in their organization in conjunction with respective CFOs and are accountable for reducing improper and unknown payments. The Executive Director, OBO is delegated authority from the ASM/CFO to designate appropriate SAOs for VA’s payroll and travel (excluding beneficiary travel) programs since these programs encompass payroll and travel for all VA Administrations and Staff Offices. SAOs will be at the SES level.

VA Financial Services Center (FSC) is the operational lead, also known as the Do Not Pay (DNP) Initiative Coordinator, for the management of VA’s use of the Treasury’s Working System (TWS), providing support, guidance, and troubleshooting for VA. The FSC also provides improper payment prevention and recovery audit services that meet OMB and PIIA implementation guidance requirements to its customers for payments made.

0905 Policies

090501 General Policies

  1. The Department of Veterans Affairs’ (VA) goal is to reduce improper and unknown payments by implementing cost effective corrective actions and mitigation strategies that reduce payment errors and the risk of Fraud, Waste and Abuse (FWA) in the major programs administered by the Department, while continuing to ensure that Federal programs serve and provide access to their intended beneficiaries in accordance with the Payment Integrity Information Act of 2019 (PIIA), Office of Management and Budget (OMB) Circular A-123, Appendix C, and OMB Circular A-136.
  2. The VA Payment Oversight Program (POP) provides oversight for Payment Integrity and Fraud Reduction policy. The Office of Management (OM) serves as the lead for the VA’s POP via the Improper Payments Remediation and Oversight Office (IPRO) in the Office of Business Oversight (OBO), ensuring a consistent, enterprise approach to the POP.
  3. VA will focus on:
    • Identifying and reducing improper and unknown payments, prioritizing compliance with applicable PIIA legislation and executive guidance without impeding access to care and benefits;
    • Accountability for payment integrity and reducing improper and unknown payments;
    • Implementing pre-payment activities that prevent monetary loss and nonmonetary loss payments from occurring;
    • Ensuring recovery audits occur when cost-effective for programs; and
    • Reducing FWA to achieve cost savings and improved services to Veterans and beneficiaries.
  4. The VA Assistant Secretary for Management and Chief Financial Officer (ASM/CFO) or Executive Director of Office of Business Oversight (OBO), may provide guidance via memo or other communication methods to ensure consistent testing and reporting of improper and unknown payments. Due to the dynamic nature of addressing questions and VA’s programs, this guidance may not always be incorporated into financial policy. This allows increased flexibility for ensuring that guidance is current and updated as needed.
  5. Responsible program officials will continue to ensure their programs serve and provide access to their intended beneficiaries while instituting strong Fraud, Waste and Abuse (FWA) prevention and improper and unknown payment reduction activities.

090502 Schedule of Activities and Noncompliance Reporting

  1. VA will complete all required reporting timely and will undergo an annual legislatively required OIG audit.
  2. VA will submit one coordinated response to the VA Office of Inspector General (OIG) regarding the annual audit of payment integrity compliance in response to the OIG’s draft report. Under Secretaries, Assistant Secretaries or Other Key Officials that are the recipient of a recommendation in the annual audit must prepare a response that addresses requirements from the OIG and provide to IPRO for consolidation into the coordinated response. Any subsequent status updates on open recommendations requested by the OIG should be coordinated directly with the responsible Under Secretary, Assistant Secretary, or Other Key Official.
  3. Required reporting includes reporting on paymentaccuracy.gov through OMB as well as additional reporting required for programs deemed high priority or noncompliant by OIG in its annual audit (Programs will follow the guidance in Appendices B, O, P, and Q).

090503 Program Identification

  1. Annually, VA will identify its programs via a program identification template, which provides programs’ annual outlays from the previous fiscal year.
  2. Programs included on the identification template will be required to comply with recovery audit, Phase 1, and/or Phase 2 requirements (Programs will follow the guidance in Appendix C to meet this requirement).

090504 Risk Assessment (Phase 1) & Testing (Phase 2)

  1. VA programs in Phase 1 and Phase 2 will complete a comprehensive Fraud and Improper Payment Risk Assessment Survey annually certified by Senior Accountable Officials (SAOs) (Programs will follow the guidance in Appendix D to meet this requirement).
  2. The annual Fraud and Improper Payment Risk Assessment Survey responses will be used to generate an improper and unknown payment risk assessment rating for programs in the years required, as set forth in PIIA and OMB guidance. The survey also determines whether the program is susceptible to significant improper and unknown payments and will need to move to Phase 2 If a program is determined not at high risk of significant improper and unknown payments, it will remain in Phase 1 as long as outlays exceed $10 million, and the program continues to not be determined at high risk. In addition, all programs will receive a separate rating for susceptibility to fraud annually. To meet the PIIA requirement for VA to use a risk-based approach to design control activities to mitigate fraud risk.
  3. Programs identified as high risk for fraud will be required to conduct a fraud risk assessment to identify specific fraud schemes, their likelihood of occurrence and impact to program operations, and corresponding action plans if the program’s risk response includes mitigation.The survey also determines whether the program is susceptible to significant improper and unknown payments and will need to move to Phase 2 If a program is determined not at high risk of significant improper and unknown payments, it will remain in Phase 1 as long as outlays exceed $10 million, and the program continues to not be determined at high risk. In addition, all programs will receive a separate rating for susceptibility to fraud annually. To meet the PIIA requirement for VA to use a risk-based approach to design control activities to mitigate fraud risk.
  4. Programs deemed susceptible to significant improper and unknown payments by the Fraud and Improper Payment Risk Assessment Survey analysis results or due to prior year payment integrity testing, are required to develop a statistically valid sampling and estimation methodology plan and produce a statistically valid estimate of the annual amount of improper and unknown payment, as defined in OMB Circular A-123, Appendix C, the following fiscal year (Programs will follow the guidance in Appendices E and F to meet this requirement). Programs that are required to report improper and unknown payment estimates are referred to as being in Phase 2.
  5. Administration or Staff Office CFOs, in coordination with SAOs, will test and report annually on programs that are in Phase 2 (Programs will follow the guidance in Appendix G to meet this requirement). Programs that are in Phase 2 and have reported error rates below statutory threshold will coordinate with the Improper Payments Remediation and Oversight Office (IPRO) to revert to risk assessments (Phase 1) in accordance with OMB guidance (Programs will follow the guidance in Appendix R to meet this requirement).

090505 Corrective Action Plan and Template

  1. Programs in Phase 2 will develop corrective actions or mitigation strategies appropriate to the amount of improper and unknown payments to address each root cause identified during testing and identify reduction targets to reduce these payments and document these within a Corrective Action Plan (CAP).
  2. SAOs, with oversight from Administration and Staff Office CFOs, are responsible for the development and implementation of effective corrective actions and mitigation strategies (Programs will follow the guidance in Appendix H to meet this requirement).

090506 Reduction Targets

  1. VA will identify a reduction target for future improper and unknown payment levels for programs in Phase 2. SAOs, with appropriate oversight from the Administration or Staff Office CFO, will identify reduction targets and submit to IPRO annually (Programs will follow the guidance in Appendix I to meet this requirement).
  2. VA program reduction targets may require approval by the Director of OMB via means identified by OMB.

090507 Tolerable Rate

  1. VA will establish a tolerable improper and unknown payment rate for programs in Phase 2 if the SAO, with concurrence from their Administration or Staff Office CFO, has determined the following:
    • Improper and unknown payments are unavoidable and beyond the program’s ability to reduce;
    • Reduction would be cost prohibitive; and/or
    • Mission prohibits the program from preventing.
  2. Establishment of a tolerable improper and unknown payment rate must be coordinated with IPRO (Programs will follow guidance in Appendix J to meet this requirement).

090508 Corrective Action Plan Effectiveness Reviews

  1. VA will review program corrective actions and mitigation strategies in Phase 2 to determine the effectiveness of remediating improper and unknown payments and assess if corrective actions are aligned and appropriately prioritized based on the severity of the root cause(s).
  2. VA will perform the first CAP effectiveness review two years after a program begins reporting improper and unknown payments to allow for identification of causes of errors and development of CAPs unless otherwise approved by IPRO.
  3. VA will update CAP effectiveness determinations annually while the program remains in Phase 2 (Programs will follow the guidance in Appendix K to meet this requirement).

090509 Do Not Pay Initiative

  1. VA will follow the pre-payment and pre-award procedures defined in PIIA legislation and OMB Circular A-123, Appendix C to minimize the issuance of improper payments prior to making a payment.
  2. VA programs will review pre-payment and pre-award procedures and ensure that a thorough review of available databases with relevant information on eligibility occurs, as appropriate, to determine program or award eligibility and prevent improper payments before the release of any federal funds (Programs will follow the guidance in Appendix L to meet this requirement).

090510 Recovery Audit

  1. VA is required to consider conducting recovery audits for each program and activity that expends $1 million or more annually, if conducting such audits would be cost-effective.
  2. The Financial Services Center (FSC) provides required recovery audit services in accordance with PIIA and OMB guidance for each program the FSC services. FSC will coordinate with the Administration CFOs and IPRO on annual reporting of these activities.
  3. SAOs, in consultation with Administrative and Staff Office CFOs, will determine if additional recovery audits or recovery activities are required to ensure payment integrity in their programs.
  4. Administrative and Staff Office CFOs are responsible for providing required reporting as well as documenting determinations that recovery audits will not be cost-effective. Programs will follow the guidance in Appendices L and M to meet this requirement.

0906 Authorities and References

0907 Rescissions

Volume VII, Chapter 9, Payment Integrity and Fraud Reduction, August 2021.

0908 Policy Approval

This policy was approved by the VA Chief Financial Officers’ Council on Date September 6, 2023.

Appendix A: Revision History

See changelog.

Appendix B: Schedule of Activities with Estimated Timelines

The below schedule of activities provides an outline of the annual requirements and mandated deadlines for finalized reporting. Internal deadlines and tasks are created in line with overall roles and responsibilities defined in this Chapter to ensure overall compliance with mandated deadlines but should be considered notional and varies depending on Departmental activities. PIIA introduced a new requirement for VA to begin reporting, per OMB guidance, deceased individual’s data by March 2, 2021. OMB determined that VA is not required to report death data. To coordinate all annual activities, the Executive Director, OBO will issue an annual memo addressing known requirements and notional milestones to ensure VA accomplishes all required activities and reporting timely.

Mandated Activities – Recovery Auditing
AuthorityActionFromToDue
Payment Integrity Information Act of 2019 (PIIA) and Office of Management and Budget (OMB)
Circular A- 123,
Appendix C
Recovery Audit InformationImproper Payments Remediation and Oversight Office (IPRO) on behalf of Department of Veterans Affairs (VA) Assistant Secretary of Management (ASM) and Chief Financial Officer (CFO)OMBAnnually
Mandated Activities – Do Not Pay Initiative
AuthorityActionFromToDue
PIIA and,
OMB Circular A-123, Appendix C
Do Not Pay (DNP) InitiativeIPRO on behalf of ASM/ CFOOMBAnnually
Mandated Activities – Program Testing
AuthorityActionFromToDue
OMB Circular A-123,
Appendix C; OMB Circular A-136
Submission of of final payment integrity reporting included in either the Agency Financial Report (AFR) or via OMB’s Annual Data Call (includes reporting on the following tasks)
·         Risk Assessment
·         Testing Results
·         Estimated Improper Payments
·         Corrective Action Plan
·         Reduction Targets, and
·         Recovery Efforts
·         High Priority Programs
IPRO on behalf of ASM/ CFOOMBAnnually
Mandated Activities – High Priority Program Reporting
AuthorityActionFromToDue
OMB Circular A-123,
Appendix C;
Executive Order 13520, Reducing Improper Payments and Eliminating Waste in Federal Programs, dated November 23, 2009
High-Priority Program Reporting RequirementsIPRO on behalf of Senior Accountable Official (SAO) and Administration/ Staff Office CFOOMBQuarterly

At a minimum, programs and personnel involved in PIIA activities should be aware of the following potential requirements (note deadlines are final product, not interim drafts and may change based on OMB direction:

  • June 30th – Sampling and estimation plan submission (See Appendices D and E);
  • 180 days after the day the publication date for the Annual Financial Statement of the agency and the Accompanying Materials to the Annual Financial Statement of the Agency, whichever is later. (Reference current OMB guidance) – Agency Inspector General annual review of VA’s compliance with payment integrity requirements;
  • All Years of Non-Compliance – Agency submits actions at the next OMB Annual Data Call;
  • 2nd Year Non-Compliant – Agency submits actions at the next Budget submission after publication of the Office of Inspector General (OIG) Compliance Report;
  • 30 days after the publication of the OIG Compliance report for programs with three or more consecutive fiscal years of non-compliance will require VA to submit response actions in accordance with OMB guidance and legislation. (Follow the guidance in Appendix Q to meet this requirement);
  • November 15th – Annual year end reporting (Follow the guidance in Appendix O to meet this requirement);
  • Varies – OMB ad hoc data requests; and
  • Quarterly and Annually – High-priority program reporting requirements (Follow the guidance in Appendix P to meet this requirement).

For questions related to the Schedule of Activities with Estimated Timelines, contact IPRO at 045IPROallEmployees@va.gov.

Appendix C: Program Identification

  1. Annually, the Department of Veterans Affairs (VA) performs a program identification to identify all programs within VA and ensure VA’s total fiscal year outlays and disbursements are accounted for by appropriation fund code. This review includes formal identification of any new Payment Oversight Program (POP) programs. Currently, VA travel and payroll activities are assessed as POP programs due to the agency-wide guidance/implementation/internal controls related to these activities. Administrations submit completed program identification templates to the Improper Payments Remediation and Oversight Office (IPRO) by the dates established on the annual memo, for final approval to ensure consistency with the agency.
  2. IPRO completes the program identification for VA Central Office Staff Offices and VA-Wide programs for travel (excluding beneficiary travel) and payroll. The program identification indicates programs that will be required to comply with recovery audit, Phase 1, and/or Phase 2 requirements. New programs identified during the program identification process need to complete the annual comprehensive Fraud and Improper Payment Risk Assessment Survey (Appendix D) starting the following year if annual outlays exceed the $10 million threshold. Guidance for completing the program identification can be found at POP Policies (https://dvagov.sharepoint.com/sites/VACOVACOOBOIPERA/POLICY).

For questions related to the Program Identification, contact IPRO at 045IPROallEmployees@va.gov.

Appendix D: Risk Assessment (Phase 1)

  1. In an effort to reduce duplication, alleviate administrative burden associated with multiple assessments, and streamline activities, the Office of Business Oversight (OBO) developed a comprehensive Fraud and Improper Payment Risk Assessment Survey comprised of both qualitative and quantitative risk factors which, when utilized annually by the Department of Veterans Affairs’ (VA) programs, satisfies the requirements of both the Payment Integrity Information Act of 2019 (PIIA) and Office of Management and Budget (OMB) Circular A-123, Appendix C for assessing payment integrity risks.
  2. OBO utilizes the responses to the survey to generate a risk rating for improper and unknown payments during the years a risk assessment is required per OMB Circular A-123, Appendix C guidance and a risk rating for fraud annually. The Fraud and Improper Payment Risk Assessment Survey provides a systematic method of reviewing a program and identifying if the program is susceptible to significant improper and unknown payments and/or fraud by identifying a program’s overall risk. Further, the survey provides Senior Accountable Officials (SAOs) and other program officials the ability to track progress in mitigating risks from several vantage points. The survey utilizes SharePoint and provides some insight into risks identified by multiple programs which can be utilized by the Office of Enterprise Integration in its charge to implement Enterprise Risk Management at VA. While existence of an enterprise risk may not result in a risk of significant improper and unknown payments within a single program, Administration and Staff Office Chief Financial Officers (CFOs) are required to notify OBO if they identify an enterprise risk that may conflict with individual risk ratings within programs. Guidance for the Fraud and Improper Payment Risk Assessment Survey can be found in the desk guide at Payment Oversight Program (POP) Policies (https://dvagov.sharepoint.com/sites/VACOVACOOBOIPERA/POLICY).
  3. OBO, through the Improper Payments Remediation and Oversight Office (IPRO) and Payment Integrity Office (PIO), oversees the annual risk assessment activities, including:
    • Maintaining a SharePoint site that contains a comprehensive Fraud and Improper Payment Risk Assessment Survey that consists of questions that incorporate all risk factors outlined in current legislative and OMB Circular A-123, Appendix C requirements. Fraud and improper and unknown payment risk factors are also listed in the Fraud and Improper Payment Risk Assessment Survey Desk Guide which can be found at POP Policies; (https://dvagov.sharepoint.com/sites/VACOVACOOBOIPERA/POLICY);
    • Adding new programs to the risk assessment SharePoint site in the year following their establishment in the Program Identification (Follow the guidance in Appendix C to meet this requirement). This ensures requirements of newly established programs are assessed after the first 12 months in accordance with OMB guidance;
    • Establishing and distributing annual deadlines, instructions, and granting access to the SharePoint site to appropriate program personnel and SAOs. This includes granting management review access to the SharePoint site to parties with a need for reviewing risk assessment results. For example, Administration and Staff Office CFOs, and offices serving as the fraud hub, are granted read-only access for reviewing fraud and POP risk ratings and rankings across programs;
    • Identifying programs with significant changes that require an improper payment risk rating in the following risk assessment year and notifying SAOs and Administration or Staff Office CFOs that an improper payment risk rating is being generated;
    • Providing support to program personnel and Administration staff with any questions or technical issues within the SharePoint site through the “045fwa_iperaRiskAssessmentTeam@va.gov” mail group;
    • Reviewing risk assessment responses for completeness and reasonableness and working with programs to resolve discrepancies;
    • Using the annual risk ratings for fraud, PIO works with the highest risk programs who, as a result of their high-risk rating, are required to perform a risk assessment to identify specific fraud schemes; their likelihood of occurrence and impact to program operations; and corresponding action plans if the program’s risk response includes mitigation. PIO leads this effort to ensure VA’s compliance with the PIIA requirement to evaluate fraud risks periodically. Generating required program risk ratings subsequent to obtaining SAO signatures and providing finalized ratings to administrations and program Points of Contact (POCs). When the SAO signs the risk assessment survey in the SharePoint site, the survey automatically routes to OBO and is considered submission of the survey; and
    • Identifying programs that are likely to be above statutory threshold for improper and unknown payments based on results in Phase 1 and notifying the SAO and other key program personnel that the program will move from Phase 1 to Phase 2 the following year per PIIA and OMB Guidance.
  4. Administrations and Staff Office CFOs are responsible for the following risk assessment activities:
    • Providing any non-concurrences to the Director, IPRO no later than January 31 of the year that IPRO identifies programs required to generate an improper and unknown payment risk assessment rating in the current year due to significant legislative or programmatic changes identified in the prior year or a significant increase in funding;
    • Providing IPRO a current POC list for programs completing a Fraud and Improper Payment Risk Assessment Survey prior to launching the annual risk survey;
    • Approving any changes to SAOs and validating that they are at the Senior Executive level; and
    • Continually monitoring the progress of the Fraud and Improper Payment Risk Assessment Survey and following up with programs that have not made significant progress.
  5. SAOs are responsible for reviewing all program’s Fraud and Improper Payment Risk Assessment Survey responses for accuracy, and electronically signing within SharePoint by the deadline established by OBO. SAOs can contact OBO to request the survey be returned for edits if prematurely submitted; however, this should be a rare occurrence as edits cannot be made to responses solely to reduce a risk assessment rating.
  6. Program personnel identified as contributors and/or reviewers in SharePoint are responsible for the following risk assessment activities:
    • Gathering information and documentation to accurately complete the program Fraud and Improper Payment Risk Assessment Survey(s);
    • Responding to all questions except for select OBO pre-populated responses (The data for these responses is maintained centrally within OBO);
    • Reviewing all responses, notes and attachments for accuracy and completeness;
    • Submitting the Fraud and Improper Payment Risk Assessment Survey to the next review level timely to ensure the SAO has ample time to review and sign off by the deadline established by OBO; and
    • Working with OBO personnel to answer any follow-up questions regarding survey responses, if applicable.

For questions related to Risk Assessments contact the PIO and Program Analysis and Risk Assessment Team at 045fwa_iperaRiskAssessmentTeam@va.gov.

Appendix E: Statistically Valid Sampling and Estimation Methodology Plans

  1. Programs in Phase 2 are required to develop a statistically valid sampling and estimation methodology plan (S&EMP) and produce a statistically valid estimate of improper and unknown payments in the following fiscal year. The Office of Management and Budget (OMB) may also determine on a case-by-case basis that certain programs may still be subject to the annual improper and unknown payment reporting requirements. If this occurs, OMB will notify VA. Programs in Phase 2 will work with a statistician to design and implement an appropriate S&EMP to produce a statistically valid improper and unknown payment estimate. Updates to an S&EMP may result in the submission of an updated sampling plan to OMB through the Improper Payments Remediation and Oversight Office (IPRO); however, a determination that changes were or were not significant is not required for a determination that a submission of the updated S&EMP to OMB is necessary.

    The requirements for statistically valid S&EMPs, as stated in OMB Circular A-123, Appendix C, are summarized below.
  2. Step 1: Process – Programs in Phase 2 will design and implement appropriate statistical S&EMPs to produce a statistically valid improper and unknown payment estimate.
    1. Annual Estimated Amount – Programs in Phase 2 will determine an annual improper and unknown payment estimate made in those programs. When calculating the annual improper and unknown payment estimated amounts, programs should only utilize the amount improperly paid and unknown amounts. Programs are required to include in their estimated amount allunknown payments and improper payments (regardless of whether the improper payment has been or is being recovered). Note, the process for determining the annual estimated amount should be clearly outlined in the S&EMP (see Step 4 below).
    2. VA Administrations and Staff Offices Chief Financial Officers (CFOs) provide testing details on all primary improper and unknown payment errors to the program’s statistician. The statistician determines the annual estimated amount of improper and unknown payment errors based on the testing results as well as a breakout by required reporting categories and cause of errors to enable the program to make fully informed decisions when developing corrective actions and mitigation strategies (refer to Appendix F for guidance in meeting this requirement). The annual estimated improper and unknown payment rates and amounts along with the detailed analysis of the testing results are submitted to the Administration and Staff Office CFOs, and to IPRO for review.
    3. Statistical Sampling and Estimation Methodology Plans – Programs are responsible for designing and documenting their S&EMPs and producing a statistically valid estimate of improper and unknown payments. When developing the S&EMP, errors identified in one payment should never exceed the amount of the payment. S&EMPs will be considered statistically valid if they produce point estimates and confidence intervals around those estimates. Each plan is prepared by a statistician and submitted to OMB no later than June 30 of the fiscal year for which the estimate is being produced (e.g., the sampling methodology to be used for Fiscal Year (FY) 2022 reporting cycle was submitted by June 30, 2022). The Administrations and Staff Offices CFOs also include details related to their S&EMP per OMB Annual Data Call requirements. The sampling and estimation plan is accompanied by a document certifying “that the methodology will yield a statistically valid improper and unknown payment estimate” (see Step 5 below).
    4. Certification – The Payment Integrity Information Act of 2019 (PIIA) requires agencies to produce statistically valid estimates of improper and unknown payments, and therefore each S&EMP is accompanied by a signed certification stating, “that the methodology will produce a statistically valid estimate.” The statistician is required to sign the S&EMP as evidence that a statistician was involved in the development of the plan and that the proposed plan should be designed for compliance with OMB guidance for testing precision. The Administration or Staff Office CFO or Senior Accountable Official (SAO) will also sign the S&EMP as evidence they have reviewed the plan, have provided all pertinent knowledge needed to develop an appropriate precision-level, and agree the plan meets the requirements per the PIIA legislation and OMB guidance. The Office of Business Oversight (OBO) Executive Director reviews the plan to determine whether the plan requires submission to OMB, states the determination, and signs the plan. Additionally, an OMB S&EMP checklist must accompany all S&EMPs submitted to OMB. The OMB S&EMP checklist must be signed by the Administration or Staff Office CFO or SAO as certification that the S&EMP will produce a statistically valid estimate. Programs submitting a S&EMP should contact IPRO to obtain the most current OMB S&EMP checklist or obtain a copy via the PIIA Required Submissions to OMB Max page (https://community.max.gov/display/Finance/Payment+Integrity+Information+Act+Required+Submissions+to+OMB). If an S&EMP requires submission to OMB, IPRO will submit the plan. OMB does not provide a formal approval for S&EMPs. It is the agency’s responsibility to produce a statistically valid S&EMP or document why it is not feasible. However, OMB reserves the right to raise questions about the methodology. The time stamp on the Max site will serve as documentation and evidence of the submission date.
  3. Step 2 – Content of S&EMP – Statisticians, Administration and Staff Office CFOs, and SAOs clearly and concisely describe the statistical methods used to design and draw the sample and produce an improper and unknown payment estimate for the program in question. The plan explains and justifies why the proposed methodology is appropriate for the program in question. This explanation is supported by accurate statistical formulas, tables, and any additional materials to demonstrate how the sampling and estimation is conducted and the appropriateness of those statistical methods for the program. The S&EMP should have a mechanism for identifying, accounting for, and estimating the annual improper and unknown payments separate. If a program is unable to develop a statistical S&EMP that produces a point estimate and confidence interval around that estimate, then it must include in their S&EMP a detailed explanation as to why it is not possible. Administration and Staff Office CFOs and SAOs should be prepared to provide an additional information or documentation if they are unable to fulfill the requirements of OMB Circular A-123, Appendix C.

    The S&EMP will cover a 12-month period only. The 12-month timeframe represented in the reported estimate should be documented in the S&EMP. For consistency, the program should use the same timeframe for subsequent reporting years. If the timeframe needs to change for subsequent reporting years, then the program should re-submit their S&EMP and accompanying OMB S&EMP checklist with certification with the updated 12-month timeframe.
    1. Updates and Changes to Agency Plans – Administrations and Staff Office CFOs and SAOs should update their S&EMPs as needed, to reflect the current design and methods being used and incorporate refinements based on previous results, consultations with others, and/or recommendations from VA Office of Inspector General (OIG), Government Accountability Office (GAO), or OMB. Updates do not necessarily equate to significant changes. The program’s statistician should be able to justify a determination as to why or why not changes were significant, if needed. Any updated plans need to be submitted to OMB by IPRO no later than June 30 of the fiscal year for which the estimate is being produced (e.g., the sampling methodology to be used for FY 2022 reporting cycle was submitted by June 30, 2022). The plans include all the components described in Steps 1 and 2 above. A S&EMP that is being updated or changed should include language explaining why the plan is changing, how the plan is different from the previous plan submitted, and the impact (if applicable). If the impact (such as misclassified samples) is not identified or determined at the time the S&EMP is finalized or submitted to OMB, the Administration or Staff CFOs and SAO should document the impact once testing has been completed.

For questions on Statistically Valid Sampling and Estimation Methodology Plans contact IPRO at 045IPROallEmployees@va.gov.

Appendix F: Statistical Extrapolation and Development

  1. The Department of Veterans Affairs (VA) relies on a qualified statistician to develop the estimation methodology and perform the extrapolation and analysis of test results. Administrations and Staff Offices extract all data and sends testing results to its statistician for estimation/projection of annual improper and unknown payments. Detailed results, including extensive calculations, are submitted to Administration and Staff Office Chief Financial Officers (CFOs), Senior Accountable Officials (SAOs), and the Improper Payments Remediation and Oversight Office (IPRO) by the statistician to demonstrate the statistical validity.
  2. B. All testing results to include categories required for reporting and those needed for accurately assessing effectiveness of corrective actions or mitigation strategies to reduce improper and unknown payments are included in projections (Follow the guidance in Appendix O to meet this requirement). For additional discussion on effectiveness of corrective actions see Appendix K.

For questions on Statistical Extrapolation and Development contact IPRO at 045IPROallEmployees@va.gov.

Appendix G: Testing (Phase 2)

  1. Programs in Phase 2 are tested to adequately estimate the amount of improper and unknown payments the program may issue within a 12-month period. Senior Accountable Officials (SAOs) are responsible for developing test plans that appropriately identify attributes needed to determine the appropriateness of payments in accordance with Office of Management and Budget (OMB) Circular A-123, Appendix C and the Department of Veterans Affairs (VA) direction. Administration and Staff Office Chief Financial Officers (CFOs) need to verify program testing is accurate to ensure projected results truly represent the improper and unknown payments in programs, in accordance with the OMB definitions. To ensure confidence in annual testing results, Administration and Staff Office CFOs confirm proper segregation of duty in the testing of payments from the SAO. When subject matter experts from program offices are required to ensure accurate testing, Administration and Staff Office CFOs provide appropriate oversight for testing integrity. It is the segregation of duty which places accountability for the testing of programs on the Administration and Staff Office CFOs and the accountability for reducing improper and unknown payments on the SAOs with proper oversight from the CFOs to ensure testing results are appropriately addressed.
  2. At a minimum, test plans should contain criteria to be applied in determining whether a payment is proper at the time the payment was made and should be categorized by program to detail the necessary attributes under each of the high-level topics below or as appropriate for unique program characteristics:
    • Eligibility;
    • Correct Vendor, Veteran or Beneficiary;
    • Correct Amount;
    • Valid supporting documentation; and
    • Appropriate Delegations of Authorities.
  3. Testing criteria should align with and identify program statutory and regulatory requirements and should be clearly documented within the test plan.
  4. Test plans should also include criteria to identify unknown payments. An unknown payment is a payment that could be either proper or improper, but the agency is unable to discern whether the payment was proper or improper as a result of insufficient or lack of documentation. When establishing documentation requirements for payments, agencies should ensure that all documentation requirements are necessary and should refrain from imposing additional burdensome requirements. OMB Circular A-123, Appendix C clarifies that if there is sufficient documentation to determine that a payment was made to the right recipient, for the right amount, and in accordance with applicable regulation and statute, despite failure to comply with all agency policies, procedures, and/or documentation requirements surrounding the payment, the payment may be considered a proper payment. Unknown payments are not considered improper payments; however, the unknown payments estimate plus the improper payment estimate will be reported as required by OMB Circular A-123, Appendix C and/or any additional OMB guidance.
  5. VA will review payments at the time payment was made to determine if the payment is proper, improper, or unknown based on the statutory or regulatory conditions for the payment. A payment may become an overpayment later, if additional documentation is available during subsequent administrative review or testing, but it should not be considered an improper payment for Payment Integrity Information Act of 2019 (PIIA) reporting purposes. Payments identified during testing that are considered overpayments but do not meet the definition of an improper payment should be elevated to the appropriate Administration or Staff Office CFO who will coordinate with Improper Payments Remediation and Oversight Office (IPRO) to ensure accuracy and consistency across all programs.
  6. Improper payments can have multiple causes of errors; however, VA will adhere to guidance set forth in OMB Circular A-123, Appendix C and report payments as single payments with one payment type error for projection and reporting purposes. However, all errors should be noted and documented during testing to ensure SAOs have a complete understanding of all causes of errors when determining appropriate corrective actions and mitigation strategies. Please refer to additional VA testing guidance in the Payment Integrity: VA Payment Classification Guidance memorandum at Payment Oversight Program (POP) Policies (https://dvagov.sharepoint.com/sites/VACOVACOOBOIPERA/POLICY).
  7. For payments identified as improper or unknown, Administration and Staff Office CFOs will identify the cause categories as outlined in OMB Circular A-123, Appendix C or the OMB Annual Data Call. The Administration and Staff Office CFO, in coordination with SAOs, will also identify the cause of error at the program level for each improper and unknown payment identified. Program causes of errors may change based on updates or improvements to testing, however, Administration and Staff Office CFOs are responsible for documenting changes in causes of errors from year to year to adequately track the progress of improper and unknown payments based on established corrective actions and mitigation strategies.
  8. Administration and Staff Office CFOs and SAOs develop, and, in coordination with IPRO, review test plans for each program. The test plan will provide a list of criteria to be tested based on program design, processes, and procedures.
  9. Annually, Administration and Staff Office CFOs, in coordination with SAOs, are responsible to review and update the electronic review checklists (test plans) used for sample testing prior to submitting to IPRO for review. Administrations or Staff Office CFOs will review the results of any Office of Inspector General (OIG) or Government Accountability Office (GAO) reports identifying improper or unknown payments in their programs and update testing, as appropriate, to validate the
  10. accuracy of improper and unknown payment estimates.
  11. In addition to estimated amounts required for OMB reporting, Administration and Staff Office CFOs and SAOs will also provide annual total actual amounts of unknown payments identified and reported in prior years if/when programs were in Phase 2 that were determined to be proper or improper during the current FY.
  12. Administration and Staff Office CFOs notify IPRO no less than annually that testing procedures have not been updated or provide updated test plans to IPRO in accordance with milestones established annually by the Executive Director, OBO.

For questions related to test plans and testing contact IPRO at 045IPROallEmployees@va.gov.

Appendix H: Corrective Action Plan and Template

  1. Programs in Phase 2 and reporting improper and unknown payments above statutory threshold are responsible for developing a corrective action plan (CAP) that identifies corrective actions or mitigation strategies that will focus on the true causes of errors of the improper and unknown payments and adequately address the causes of errors. A thorough understanding of payment integrity testing results is needed to identify the causes of errors of improper and unknown payments and what steps are necessary to address the weakness or weaknesses causing the improper and unknown payments. A corrective action or mitigation strategy should be proportional to the severity of the associated amount and rate of the causes of errors. Additionally, Senior Accountable Officials (SAO), in coordination with the Administration or Staff Office Chief Financial Officer (CFO), should be mindful of burden when developing internal controls to serve as improper and unknown payment corrective actions or mitigation strategies during the payment process so that the efficiency of the payment process is not compromised.
  2. When developing corrective actions or mitigation strategies, SAOs should identify annual benchmarks that can be used to demonstrate the progress of the CAP implementation as well as the impact on improper and unknown payment prevention or remediation. The connection between the proposed steps and the expected impact shall be identified in the CAP. For example, if “no documentation available” is the cause of error being addressed by a corrective action or mitigation strategy and it accounted for 20 errors identified during testing, then the expected impact may be a reduction to 10 errors for “no documentation available” in the year following the closure of the corrective action or mitigation strategy.
  3. The CAP will include all corrective actions or mitigation strategies the program is developing/implementing that impact improper and unknown payments, to include unfunded system enhancements or other automation.
  4. The CAP will include the necessary details to fully understand the causes of errors, milestones, and tasks. Corrective actions or mitigation strategies must have an owner and due date, and be measurable, attainable, and quantifiable and will also include the details necessary to meet OMB Annual Data Call requirements.
  5. SAOs, in coordination with the Administration or Staff Office CFO, may need to summarize/shorten corrective actions or mitigation strategies for external reporting; this does not eliminate the requirement to have all details of corrective actions or mitigation strategies documented within a CAP.
  6. SAOs will review and update their CAPs no less than quarterly based on results of payment integrity testing to ensure that causes of errors of improper and unknown payments are addressed as quickly as possible.
  7. CAP updates will be submitted quarterly to the Administration or Staff Office CFO and to the Improper Payments Remediation and Oversight Office (IPRO) via the CAP SharePoint site (https://dvagov.sharepoint.com/sites/VACOVACOOBOIPERA/default.aspx). A current template of the CAP can also be found at Payment Oversight Program (POP) Policies SharePoint site (https://dvagov.sharepoint.com/sites/VACOVACOOBOIPERA/POLICY). Prior to submission, updates should be reviewed to ensure corrective actions or mitigation strategies are still appropriate or if additional/alternative actions are needed.
  8. Administration and Staff Office CFOs and SAOs are responsible for effectively implementing and prioritizing their corrective actions and mitigation strategies to prevent the largest amount of improper and unknown payments. The programs should be able to demonstrate corrective actions and mitigation strategies are effectively implemented and how they are prioritized within the agency. Programs should be able to demonstrate how corrective actions are preventing or reducing improper and unknown payments and will measure the effectiveness and progress of each individual corrective action or mitigation strategy on an annual basis (Programs will follow guidance in Appendix K to meet this requirement).

For questions on Corrective Action Plans and Templates contact IPRO at 045IPROallEmployees@va.gov.

Appendix I: Reduction Targets

  1. Reduction targets identify a program’s future estimated annual decrease of improper and unknown payments. Senior Accountable Officials (SAO), in coordination with the Administration and Staff Office Chief Financial Officer (CFO) with programs in Phase 2 and reporting above designated statutory threshold, are required to establish an improper and unknown payment reduction target rate for the following fiscal year. The discussion below presents a standard methodology to develop reduction targets.
  2. Upon obtaining the final, approved error rate for a program in the current year, the improper and unknown payments identified during testing are analyzed to determine the root cause of the errors. When establishing reduction targets, program offices should consider the following:
    • Identification of the error type and its root cause;
    • The effect of each error type identified on the most recent error rate calculation for that program. (e.g., How much lower would the error rate have been if errors from this source were eliminated or reduced?);
    • A measurable target reduction for each error type identified (this information is identified when corrective actions or mitigation strategies for the Corrective Action Plan (CAP) are developed); and
    • Estimated effect on the current error rate if all reduction targets were achieved.
  3. Reduction targets should be a balance between being aggressive and realistic. If a reduction target is set at the current improper and unknown payment rate or higher, SAOs should be able to clearly discuss in either required reporting or informally within the Department of Veterans Affairs (VA) why this is the appropriate target for the following year. This may also be an indication that a program has reached a tolerable improper and unknown payment rate (refer to Appendix J for more information and guidance in meeting this requirement).
  4. Programs reporting for the first year do not have a reduction target rate. OMB does not expect a program to publish an improper and unknown payment reduction target rate until a baseline has been established and reported.
  5. SAOs may not always be able to meet reduction targets; however, in these situations, SAOs should be able to discuss and provide documentation supporting improvements that have been made during the year. Generally, the improvements can encompass any incremental progress that can be validated, to include but not limited to, reduction in improper and unknown payments, reduction in errors, progress in implementing corrective actions or mitigation strategies, etc.

For questions on reduction targets contact IPRO at 045IPROallEmployees@va.gov.

Appendix J: Tolerable Rate

  1. According to Office of Management and Budget (OMB) Circular A-123, Appendix C, the tolerable improper payment and unknown payment rate is the improper payment and unknown payment estimate achieved with a balance of payment integrity risk and controls. The tolerable improper payment and unknown payment rate for a program is determined by agency senior management for programs in Phase 2 and often includes improper payments which are unavoidable and beyond the agency’s ability to reduce as well as improper payments and unknown payments which are cost prohibitive or sometimes mission prohibitive for the agency to prevent. Administration and Staff Office Chief Financial Officers (CFO), in coordination with Senior Accountable Officials (SAO), are responsible for determining when a program has achieved a tolerable rate. However, OMB Circular A-123, Appendix C and the OMB annual Payment Integrity Data Call do not prescribe a timeframe in which programs should establish a tolerable rate; therefore, VA does not require tolerable rates be established for all programs until appropriate. This guidance; however, is a tool to help Administration and Staff Office CFOs, in coordination with SAOs, determine if a tolerable rate should and/or can be established.
  2. The Chief Financial Officers Council (CFOC) is an organization composed of the CFOs and Deputy CFOs of the largest Federal agencies, senior officials of OMB, and the Department of the Treasury who work collaboratively to improve financial management in the U.S. Government. The CFOC developed an optional ‘Guide for Identifying a Program’s Tolerable Improper Payment Rate’ to provide agencies with the framework necessary to analyze their payment processes consistent with the principles adopted in the Payment Integrity Information Act (PIIA) of 2019 and OMB Circular A-123, Appendix C. To help determine if a program has reached a tolerable rate, this guide defines how different categories of improper payments and unknown payments could be justified as tolerable, through evidence‐based decision making. It is important to note that this guide does not supersede any existing guidance in OMB Circular A‐123, Appendix C. Determining a tolerable rate also does not alter statutory obligations for testing and reporting improper payments and unknown payments under PIIA. The CFOC Guide for Identifying a Program’s Tolerable Rate can be found on the CFO website. (https://www.cfo.gov/assets/files/TolerableRateGuide_final.pdf)
  3. The CFOC tolerable rate guidance identifies several factors that should be considered and analyzed prior to determining whether a program has reached a tolerable rate. For example, a Cost Benefit Analysis (CBA) framework and methodology can evaluate the cost‐effectiveness and practicality of potential unconstrained Corrective Action Plans to address overpayments for existing programs that have not significantly changed in the last three years. The guidance also provides methods to address underpayments, technically improper payments, and unknown payments.
  4. Before conducting a CBA and additional analysis to determine whether a program has potentially reached a tolerable rate, the CFOC Guide for Identifying a Program’s Tolerable Rate recommends programs determine whether they have significantly changed in the last three years and whether they have established ‘a baseline of a historically stable improper payment rate’. Note that the meaning of the phrase ‘baseline of a historically stable improper payment rate’ for the purposes of determining a tolerable rate, differs from the meaning of the singular term ‘baseline’ in OMB Circular A-123, Appendix C for the purposes of moving from Phase 2 to Phase 1 (refer to the Definitions section for the meaning of the term ‘baseline’ and refer to Appendix R for more information on moving from Phase 2 to Phase 1).
  5. According to the CFOC Guide for Identifying a Program’s Tolerable Rate, a program that has sufficiently established ‘a baseline of a historically stable improper payment rate’ will:
    • Be within Phase 2 of assessment
    • Have established and maintained a baseline
    • Be in the 3rd consecutive year of reporting
    • Report a relatively stable improper payment estimate
    • Have exhausted all practical mitigations
  6. The CFOC Guide for Identifying a Program’s Tolerable Rate provides the following questions and information that can assist programs to determine whether they have established ‘a baseline of a historically stable improper payment rate’:
    • Has the improper payment rate remained “relatively constant” for the past three years? Defining a ”relatively constant” improper payment estimate is up to each agency. However, an improper payment rate that has improper payment estimates from the previous three years less than one standard deviation from the average is a good benchmark.
    • Has the program’s exposure to improper payments risk changed, as it relates to the risk factors identified in PIIA of 2019? PIIA provides risk factors that can be used to determine if a program is at significant risk of improper payments. These should be used as a starting point, and programs should determine whether any unique risk factors exist for their program. If these factors indicate a program may now be susceptible to a higher improper payment rate compared to the last three years, they have not maintained a baseline.
    • Has the program exhausted all reasonable mitigation strategies? To validate a program has exhausted all practical mitigations, they should:
      • Document the corrective actions implemented and their inability to further reduce the improper payment rate through improper payment rate data;
      • Justify why any unutilized corrective actions do not adequately address the root cause; or
      • Conduct analysis to provide evidence of the cost‐effectiveness and program mission impact of corrective actions.
  7. The Department of Veterans Affairs (VA) is committed to remediating improper payments and working toward establishing tolerable rates when appropriate. If a program’s reported improper payment estimate plus the unknown payment estimate is above the statutory threshold, the program is required to test and report improper payment and unknown payment estimates regardless of whether a program has established a tolerable rate. If a program establishes a tolerable rate, the Office of Inspector General (OIG) may evaluate this in the annual Review of VA’s Compliance with PIIA of 2019.
  8. Initial Tolerable Rate Questionnaire: For the purposes of implementing the preceding guidance, and to be responsive to the OMB annual Payment Integrity Data Call, VA requires Administration and Staff Office CFOs, in coordination with SAOs, complete an initial tolerable rate questionnaire at least once every three years beginning in FY 2023 for all programs in Phase 2. The Administration or Staff Office CFO as well as the SAO should sign and date the completed questionnaire and a copy should be provided to the Improper Payments Remediation Oversight Office (IPRO). The purpose of the questionnaire is to determine whether a program meets the initial criteria for establishing ‘a baseline of a historically stable improper payment rate’. The initial tolerable rate questionnaire can be found on the POP Policies SharePoint site. (https://dvagov.sharepoint.com/sites/VACOVACOOBOIPERA/POLICY)
  9. If a program meets the initial criteria for establishing ‘a baseline of a historically stable improper payment rate’ based on the results of the initial tolerable rate questionnaire, contact IPRO for information on the next steps to potentially determine a tolerable rate, including determining whether the program has exhausted all practical mitigation strategies.

For questions related to Tolerable Rate, contact IPRO at 045IPROallEmployees@va.gov.

Appendix K: Corrective Action Plan Effectiveness Reviews

  1. The Payment Integrity Information Act of 2019 (PIIA), Section 3353(a)(4) states annual compliance determinations made by the Inspector General include an evaluation of corrective actions (CA) and mitigation strategies and whether the planned actions are adequate and focused on the true causes of improper and unknown payments, including whether actions are reducing improper and unknown payments , effectively implemented, and prioritized within the Executive Agency. In addition, PIIA requires documentation that CA or mitigation strategy implementation efforts meet the severity of the root cause.
  2. PIIA testing results are critical to identifying and assessing root causes, or process or control weaknesses (i.e., causes of error), causing improper and unknown payments. The Department of Veterans Affairs’ (VA) programs update CAPs annually as payment integrity testing results are made available, and no less than quarterly throughout the fiscal year (FY), to ensure corrective actions or mitigation strategies are designed to mitigate risks of improper and unknown payments and to report on progress and results. The Office of Management and Budget (OMB), Circular A-123, Appendix C requires programs to measure the overall effectiveness of CAPs on an annual basis by monitoring and measuring the effectiveness and progress of each CA and mitigation strategy on a continuous basis. The results will inform whether the overall CAP is effective, whether the annual benchmark is met, and provide insight into which components of the CAP may need to be modified to improve effectiveness. The first CAP effectiveness review is performed two years after a program begins reporting improper and unknown payments to allow for identification of causes of errors and development of CAPs unless otherwise approved by Improper Payments Remediation and Oversight Office (IPRO). The CAP effectiveness determinations are then updated annually by either the Administration or Staff Office Chief Financial Officer (CFO) and Senior Accountable Official (SAO) or IPRO. Administration or Staff Office CFOs must notify IPRO no later than the end of the first quarter of the fiscal year whether they are performing or updating effectiveness reviews and are providing quarterly briefings and year end results/documentation to IPRO or if the program is relying on IPRO to perform the review.

    The below represents a methodology for evaluating effectiveness of corrective actions and mitigation strategies. Administration and Staff Office CFOs, in coordination with SAOs) may deviate from this methodology but must document their processes/procedures within the administration policies. 
  3. CAP Effectiveness Review
    1. A CAP effectiveness review measures if a CA or mitigation strategy has reduced or is properly designed to reduce improper and unknown payments for a specific root cause, or group of root causes, against a set benchmark or pre-established set of criteria. The type of effectiveness analysis that can be performed is dependent on the status of the CA or mitigation strategy. Open or delayed CAs or mitigation strategies undergo a design effectiveness review and closed or ongoing CAs undergo an operating effectiveness review.
    2. Design effectiveness assessments can be performed for CAs or mitigation strategies that have been developed with defined tasks and detailed descriptions of the efforts required to implement the CA or mitigation strategy. This type of analysis relies on qualitative measures. Additional inquiries, observations, demonstrations, or example documentation may be required to determine if the CA or mitigation strategy is properly designed to reduce improper and unknown payments. A design effectiveness assessment results in one of the following conclusions:
      1. Designed Effectively – The CA or mitigation strategy is well defined and easily understood based on the description and planned tasks, and the timelines and overall Estimated Completion Date (ECD) of the CA appear reasonable. These factors together with any supporting evidence, if applicable and available, indicate the CA or mitigation strategy appears properly designed to mitigate the risk associated with the root cause(s) and reduce improper and unknown payments to the established benchmark or pre-established set of criteria.
      2. Designed Ineffectively – The CA or mitigation strategy description, tasks, or supporting evidence indicate the risk of improper and unknown payment related to the root cause(s) still exists to the extent that the established benchmark or pre-established set of criteria would not be expected to be met when implemented.
  4. An operating effectiveness assessment can be performed for CAs or mitigation strategy that have been fully implemented and may or may not be performed on a recurring basis (ex. a control implemented for a daily pre-payment review). This type of analysis relies on quantitative measures. A benchmark must be set by the SAO for a CA or mitigation strategy that identifies the number (count) of improper and unknown payments expected to be remediated once the CA or mitigation strategy is fully implemented and is clearly defined and can be tracked to show the success and measure the effectiveness of the CA or mitigation strategy in reducing improper and unknown payments. The operating effectiveness analysis considers the defined benchmark and effectiveness metric to determine if the CA or mitigation strategy was effective in reducing improper and unknown payments, and meeting or exceeding the benchmark. An operating effectiveness assessment results in one of the following conclusions:
    • Effective – The effectiveness metric is clearly defined and can be tracked in a manner that allows evidence to be assessed against the pre-established benchmark to determine if the benchmark was achieved in reducing improper and unknown payments; or
    • Ineffective – The effectiveness metric is not clearly defined, cannot be tracked, or evidenced through supporting documentation, or the pre-established benchmark for reducing improper and unknown payments was not achieved.
  5. If a CA or mitigation strategy is determined to be designed ineffectively or is ineffective at remediating improper and unknown payments, programs should determine if the existing CA or mitigation strategy can be updated to address the area of weakness or if a new CA or mitigation strategy is needed to fully address the underlying root cause(s). A revised or new CA or mitigation strategy should be developed timely, within two (2) quarters from when the effectiveness results were provided to the program. Once a CA or mitigation strategy has been updated or a new CA or mitigation strategy has been created, a new design or operating effectiveness analysis is performed. Programs are encouraged to work with IPRO to identify solutions to remediate identified areas of weakness in their CAPs.

For questions related to CAP effectiveness reviews contact IPRO at 045IPROallEmployees@va.gov.

Appendix L: Do Not Pay Initiative

  1. The Do Not Pay (DNP) Initiative assists agencies with making informed decisions in the identification, mitigation, and elimination of improper payments. The DNP Initiative is comprised of the Treasury’s Working System (TWS) and other activities designed to prevent improper payments. Payment Integrity Information Act of 2019 (PIIA) requires agencies review databases within the TWS. Office of Management and Budget (OMB) establishes guidance for the DNP Initiative and the use of the PIIA databases and other databases required by OMB in the TWS. The Department of Treasury determines which databases agencies will have access to in the TWS. The TWS provides a secure online interface to check various data sources to verify eligibility of a vendor, grantee, loan recipient, or beneficiary to receive federal payments.
  2. For the use of the TWS, each Administration Chief Financial Officer (CFO) and the Financial Services Center (FSC) reviews payments identified by the TWS prior to payment to determine if the payment should have been made. Administration CFOs and the FSC should have documented policies and procedures for determining whether data matches represent improper payments. This includes verifying matches against a secondary data source and providing individuals an opportunity to contest the matching results prior to taking adverse action when required. Administration CFOs and the FSC should document any concerns with data matching within the TWS that leads to a high risk of false positives creating significant burden on VA personnel to review and adjudicate within the TWS and provide documentation to the FSC for elevation to Treasury. Administration CFOs and the FSC should also document any legislative or regulatory requirement which prevents stopping a payment due to a match.
  3. To assist in the detection and prevention of improper payments, agencies may enter into Computer Matching Agreements (CMAs) with other agencies that allow ongoing matching, which excludes automatic matching. Agencies may be able to operate matching programs that assist in the detection and prevention of improper payments that vary from standard matching programs. Follow VA Handbook 6502.4 when utilizing matching with other agency data/CMAs.
  4. DNP reporting required annually by OMB refers to the agency use of the TWS only. The Improper Payments Remediation and Oversight Office (IPRO) will prepare draft responses to agency level responses to the OMB Annual Data Call DNP Initiative specific questions based on supporting documentation from the TWS. According to the Department of the Treasury, the Payment Activity Report (PAR) and Adjudication Summary Report (ASR) are the only reports available to download in the TWS to assist agencies with responses to the OMB Annual Data Call DNP Initiative questions. The PAR summarizes the agencies Payment Automation Manager (PAM) payments, matches, and adjudication statuses by Agency Location Code (ALC) by month, quarter, current and prior fiscal year (FY). The ASR provides high-level summary results of the agencies adjudication statuses by month. Administration CFOs and the FSC will need to concur on the proposed Agency-level responses or provide other supporting documentation outside the ASR and PAM for which VA can rely on regarding its use of the TWS.
  5. Administration and Staff Office CFOs, Senior Accountable Officials, and the FSC should determine and implement additional cost-effective pre-payment processes (such as automated edit checks) meant to identify and stop improper payments outside the TWS to maximize VA’s overall efforts to prevent improper payments. 

For questions related to the TWS and/or access of DNP Initiative data, contact the FSC Fraud Awareness group, FSCFraudAwareness@va.gov.

Appendix M: Recovery Audit

  1. Department of Veterans Affairs (VA) programs expending over $1 million annually are required to conduct a recovery audit. The Financial Services Center (FSC) provides required recovery audit services in accordance with PIIA and Office of Management and Budget (OMB) guidance for each program the FSC services. FSC will coordinate with the Administration Chief Financial Officers (CFOs) and Improper Payments Remediation and Oversight Office (IPRO) on annual reporting of these activities. Senior Accountable Officials (SAOs), in coordination with Administration and Staff Office CFOs, are responsible for determining if additional recovery audits or recovery activities are required to ensure payment integrity in their programs. The methods used to identify and recover overpayments must be cost-effective regardless of whether the recovery audits and activities program utilizes a recovery audit or other mechanisms to identify and recover overpayments. SAOs are responsible for determining if recovery audits are cost-effective for their programs. A cost-effective recovery audit and activities program is onein which the benefits (i.e., recovered amounts) exceed the costs (e.g., staff time and resources, or payments for the payment recovery audit contractor) associated with implementing and overseeing the program.
  2. To meet reporting requirements in PIIA and OMB guidance, IPRO collects information and data from Administration and Staff Office CFOs and the FSC by program.
    1. Information pertaining to recommendations made by any external contractors performing recovery audits to prevent overpayments, and the programs’ efforts to implement those recommendations. Administration and Staff Office CFOs, SAOs, and/or FSC must notify IPRO if they expect to receive recommendations from an external recovery audit contractor on how to prevent overpayments and then coordinate with IPRO on documenting required information and data. This data must be published in the Agency Financial Report.
    2. The following information and data is collected annually via the OMB Annual Data Call in relation to all programs with over $1 million in outlays during the prior fiscal year:
      • Recovery target rate. Offices conducting recovery audits, to include the FSC, are required to establish annual recovery targets to drive annual performance. These targets must be based on the rate of recovery;
      • Dollar amounts of overpayments identified and recovered via recovery audits;
      • Information about the disposition of funds recovered through recovery audits;
      • Information about the aging of amounts remaining outstanding from overpayments identified in recovery audits; and
      • Information about any determinations that it is not cost-effective to perform a recovery audit (Follow the guidance in Appendix N to meet this requirement).
    3. The following information and data is collected annually via the OMB Annual Data Call in relation to all programs conducting recovery activities with over $1 million in outlays during the prior fiscal year:
      • Dollar amounts of overpayments identified and recovered via recovery activities
      • Identifying the methods used to recover overpayments:
        • Treasury’s Invoice Payment Processing (IPP) Payment off‐set
        • Treasury’s reclamation process
        • Mailed notice/letterElectronic notice/letterLegal/judgement
        • Contract Suspension
        • In‐person collection
  3. General Recovery Audit Guidelines
    1. Recovery audits may be performed by the VA employees, by another department or agency of the Federal government acting on behalf of the VA, by non-Federal entities expending awards, by contractors performing services under contracts awarded by VA, or any combination thereof. Programs using a contractor should consult OMB Circular A-123, Appendix C for additional guidance.
    2. Recovery audits should be designed to ensure the greatest financial benefit for the government and prioritize categories of payments that have a higher potential for overpayments and recoveries. Programs should give priority to recent payments and to activities highly susceptible to significant improper payments.
  4. Disposition of Funds Recovered – VA’s disposition of funds collected in a recovery audit program depends on the type of fund from which the original payment was made and complies with the guidelines provided in OMB Circular A-123, Appendix C. Administration and Staff Office CFOs and the FSC will follow OMB’s guidance when distributing recoveries of overpayments identified during recovery audits.

For questions related to recovery audits contact IPRO at 045IPROallEmployees@va.gov.

Appendix N: Recovery Audit Cost-Benefit Analysis (CBA)

  1. The Payment Integrity Information Act of 2019 (PIIA) allows programs to be excluded from the requirement to conduct a recovery audit if the program determines that recovery audits are not a cost-effective method for identifying and recovering improper payments. This determination must be made by the Senior Accountable Official in coordination with the Administration or Staff Office CFO. Programs already conducting or planning recovery audits are not required to complete a recovery audit CBA. Guidance for completing the CBA Analysis template can be found at Payment Oversight Program (POP) Policies (https://dvagov.sharepoint.com/sites/VACOVACOOBOIPERA/POLICY).
  2. If the SAO determines upon accomplishing the recovery audit CBA, that the costs exceed the collections expected to be identified/recovered