Inspector: Standard coding for contract awards will help fight fraud

Agencies now use different alphanumerical schema to track their awards, making it 'unnecessarily arduous' to identify $110 billion in improper payments the government makes every year.

Recovery board chief Earl Devaney says he will work for a single governmentwide award number system. Pablo Martinez Monsivais/AP

The Obama administration is turning to tools typically found in counterterrorism agencies to root out wasteful spending, but one top official said inconsistent code figures for government awards are frustrating efforts to quickly identify overpayments.

Earl Devaney, head of the Recovery Accountability and Transparency Board, an independent agency that oversees stimulus spending, told senators on Tuesday that "the single biggest impediment to the kind of transparency that the Recovery Act envisions" is "the lack of a single, consistent governmentwide award number system." He added conflicting coding systems "make the task of reviewing and checking award data unnecessarily arduous and inefficient for those with oversight responsibility."

A Homeland Security and Governmental Affairs subcommittee had invited Devaney and a White House budget official to testify on how the administration is using software to stem the nearly $110 billion in improper payments made in fiscal 2009.

Last year, the RAT board, which is charged with ensuring about $787 billion in economic recovery payments are disbursed appropriately, acquired data mining technology to identify hard-to-find conflicts of interest between recipients and the contracts they have bid on. For example, the tool might reveal an agency plans to award a construction project near a schoolyard to a company owned by a sex offender.

The Office of Management and Budget now is rolling out the tool governmentwide to nab fraudsters and recapture money that was wrongly paid out.

But every government agency uses a unique alphanumeric coding system to label payouts, which makes it difficult to use the tool governmentwide, Devaney told the Senate Federal Financial Management, Government Information, Federal Services and International Security Subcommittee. "I have therefore decided to dedicate a considerable portion of my remaining time in the government to fixing this problem," he said.

Unlike credit card numbers that are a certain length and do not contain dashes or letters, every agency's coding has a different look, Devaney noted. "We have what we call mismatches where we have to literally almost hand search these awards to make sure that they match up," he said.

A separate, but related, complication that leads to overpayments is the numerous lists agency personnel must consult to check the eligibility of a recipient. Federal auditors reported in June that the Treasury Department's homebuyers' tax credit program had issued millions of dollars to ineligible recipients, including deceased and incarcerated individuals.

Now, OMB is working to provide employees with one online "do-not-pay list," which would tie together multiple databases across government and include the names of people barred from receiving federal contracts, Medicare payments and other financial aid.

The General Services Administration has started creating a Web-based do-not-pay list by combining information on contractors that, for example, have been excluded from bidding on awards and owe a debt, OMB Controller Daniel Werfel told the Senate panel.

In past instances, "individuals or entities on the excluded parties list, which is right there on GSA's website for the whole world to see, were continuing to get payments," he said.

In an interview afterward, Werfel said Social Security currently is merging its systems. "I would expect that a year from now we'll be up and running" he said of the project to build a single website for checking the qualifications of prospective recipients.

Werfel noted that a lack of uniformity, including the incompatible coding Devaney discussed, is pervasive in federal financial management systems. "Some of the standardization that needs to occur is a longer-term project" for the award identification system, he said.

OMB chose to deploy the Recovery Board's analytical technique first at the Centers for Medicare and Medicaid Services, which issued about $65 billion in improper payments last year, nearly 60 percent of the federal government's total erroneous outlays.

When Sen. Mark Pryor, D-Ark., asked how much of the $65 billion the tool is anticipated to reduce, Werfel said he did not know. But he said he expects the technology will help CMS reach the president's goal of cutting improper payments in half in the Medicare fee-for-service program by stopping payments and discouraging would-be criminals.

"The deterrent effect is very important because I think most people who commit Medicare fraud -- they know that there's a pretty small chance they'll get caught," Pryor said. "If you can increase that percentage, I think you'll see a lot fewer people trying to rip off the system."