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Modernizing Oversight of Federal Spending Could Save Taxpayers Billions

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Modernizing Oversight of Federal Spending Could Save Taxpayers Billions

March 19, 2021

Days before Congress passed the $1.9 trillion emergency spending package, the nonpartisan Congressional Budget Office issued a grim snapshot of the nation’s fiscal condition. CBO warned that the “growing debt burden could increase the risk of a fiscal crisis and higher inflation as well as undermine confidence in the U.S. dollar, making it more costly to finance public and private activity in international markets.”

With the current polarization on Capitol Hill, opportunities for bipartisan reforms to improve the nation’s long-term fiscal outlook appear to be limited in the short term.

One promising area of potential consensus is leveraging the nonpartisan Government Accountability Office’s oversight to address waste, fraud, and abuse in federal programs. In fact, the Congressional watchdog agency has expertise in technology and data science that could be applied to deliver tens of billions in new taxpayer savings per year.

Improper Payments: A $175 Billion Problem

Consider what the federal government misspends each year.

Last year, GAO reported that federal agencies made $175 billion in improper payments in FY2019. Of that amount, $75 billion was a monetary loss or “an amount that should not have been paid.” The auditors report that this kind of misspending has cost taxpayers $1.7 trillion between 2003 and 2017.

But the problem may even be much worse than what’s being reported. GAO warns that the federal government doesn’t understand the full scope of the problem and agencies may be under reporting their estimates of misspending.

With Congress awarding trillions in new spending to address the COVID-19 pandemic and its many effects, lawmakers can no longer wait and hope that federal agencies will comply with its laws aimed to stop improper payments. It’s time for a new approach.

Congress should direct the Government Accountability Office to ramp up their oversight of federal spending to prevent this waste by applying data analytics and continuous auditing.

The good news is that the watchdog agency has been developing the capabilities to do this kind of work.

GAO's New Capability to Enhance Auditing Using Data Science

In 2019, GAO created an Innovation Lab with its new Science, Technology Assessment, and Analytics team to be able to use data science to enhance its auditing. The lab has capabilities to analyze multiple large datasets and conduct continuous monitoring. This has the potential to modernize how GAO audits federal spending to identify all improper payments made by the Treasury without relying on statistical sampling or agencies’ self-reporting.

This vision is close to becoming a reality.

In testimony before a House appropriations subcommittee last week, Comptroller General Gene Dodaro announced that the Innovation Lab “initiated a first-of-its-kind collaborative effort across key agencies to enhance payment integrity,” in 2020.

Congress now has an opportunity to require GAO to focus on the $175 billion problem of improper payments, and use its new data science capabilities to conduct continuous auditing of federal spending.

Bipartisan Support for Curbing Improper Payments

There is already bipartisan support on Capitol Hill for preventing improper payments.

In 2020, Congress enacted and President Trump signed into law the “Payment Integrity Information Act of 2019,” sponsored by Senators Tom Carper, Ron Johnson, Gary Peters, and Mike Braun, which updated and harmonized a series of laws passed by Congress since 2002 to prevent improper payments.

The new law requires greater focus and interagency collaboration to stop misspending. For example, it required the establishment of a working group to focus on promoting payment integrity in state-managed benefit programs, such as Medicaid which accounted for $86 billion in improper payments in FY2020. However, the law continues a compliance-based approach to oversight of the problem, including relying on annual Inspector General reviews of whether agencies were conforming with the law, rather than continuous auditing.

Given the scope of the problem, Congress should capitalize on the Government Accountability Office’s new capabilities and require its new Innovation Lab to deploy continuous auditing of key federal government agencies to track and stop misspending as it is occurring.

There is a precedent for Congress to focus GAO on a significant problem like this to achieve significant taxpayer savings. A 2010 law requiring GAO to conduct extensive audits and report annually on duplication across federal government programs has yielded more than $400 billion in savings over the past decade.

Today, our current and long-term fiscal challenges require Congress to do more to make sure that every dollar is spent well. Applying data science and continuous auditing to the $175 billion annual problem of improper payments is a good place to start.

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