U.S. Department of State Fiscal Year 2019 Agency Financial Report

Payment Integrity and Other Laws and Regulations I mproper P ayments I nformation A ct , as A mended O ver the past decade, laws and regulations governing the identification and recovery of improper payments have evolved to strengthen improvements in payment accuracy and raise public confidence in Federal programs. The Improper Payments Information Act of 2002 (IPIA), as amended and expanded by other related laws, collectively requires agencies to periodically review all programs and activities to identify those susceptible to significant improper payments, to conduct payment recapture audits, and to leverage Government-wide Do Not Pay initiatives. In FY 2018, OMB issued memo M-18-20 – a revised OMB Circular A-123 Appendix C, Requirements for Payment Integrity Improvement, to transform the improper payment compliance framework to create a more unified, comprehensive, and less burdensome set of requirements. IPIA defines significant improper payments as annual improper payments in a program that exceed both 1.5 percent of program annual payments and $10 million, or that exceed $100 million, regardless of the error rate. Once those highly susceptible programs and activities are identified, agencies are required to estimate and report the annual amount of improper payments. Generally, an improper payment is any payment that should not have been made or that was made in an incorrect amount under a statutory, contractual, and administrative or other legally applicable requirement. Payment Integrity Reporting Details The Department defines its programs and activities in alignment with the manner of funding received through appropriations, as further subdivided into funding for operations carried out around the world. Risk assessments over all programs are done every three years. In the interim years, risk assessments evaluating programs that experience any significant legislative changes and/or significant increase in funding will be done to determine if the Department continues to be at low risk for making significant improper payments at or above the threshold levels set by OMB. The Department conducted a risk assessment of all programs and activities in 2013, 2016, and again in 2019. Risk assessments of Department programs and activities involve an evaluation of the risk factors described in OMB Circular A-123 Appendix C including whether the program or activity reviewed is new to the Department; the complexity of the program or activity reviewed, particularly with respect to determining correct payment amounts; the volume of payments made annually; whether payments or payment eligibility decisions are made outside of the Department; recent major changes in program funding, authorities, practices, or procedures; the level, experience, and quality of training for personnel responsible for making program eligibility determinations or certifying that payments are accurate; inherent risks of improper payments due to the nature of Department programs; significant deficiencies in the audit reports on the Department including OIG, GAO, and the Special Inspector General for Afghanistan Reconstruction audit report findings; results from the prior year improper payment recapture work; and the percentage increase in funding. Additional risk factors are considered as needed. Further, risks and results from the work performed in compliance with OMB Circular A-123 Appendix A, other internal Department reviews, and other relevant information are considered. Based on this series of internal control review techniques performed in 2019, the Department determined that none of its programs were risk-susceptible for making significant improper payments at or above the threshold levels set by OMB. The 38 programs assessed were: American Compensation; Foreign Locally Employed Staff Compensation; Foreign Service Annuities; Voluntary Contributions; Assessed 2019 A gency F inancial R eport U nited S tates D epartment of S tate | 137 PAYMENT INTEGRITY AND OTHER LAWS AND REGULATIONS | OTHER INFORMATION