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

F raud R eduction R eport Government leaders are under increasing pressure, with limited resources and more public scrutiny, to reduce or eliminate fraud, waste, abuse, misconduct, and improper payments in Federal programs and operations. Fraud in the Federal Government is a serious problem that wastes taxpayer dollars, prevents Federal programs from carrying out their intended purpose and serving target populations, and creates potential national security risks. Congress and Federal agencies have been working to combat fraud and reduce improper payments by creating policies and legislation that will give agencies the tools that they need to target and prevent fraud. The Fraud Reduction and Data Analytics Act (FRDAA) of 2015 (Public Law No. 114-186) required OMB to establish guidelines for Federal agencies to establish financial and administrative controls to identify and assess fraud risks and design and implement control activities in order to prevent, detect, and respond to fraud, including improper payments. Agencies are required to report on their progress to implement financial and administrative controls in compliance with the OMB guidelines, GAO’s Standards for Internal Control in the Federal Government (Green Book), and the OMB Circular A-123. To help managers combat fraud and preserve integrity in government agencies and programs, GAO identified leading practices for managing fraud risks and organized them into the Framework for Managing Fraud Risk in Federal Programs. This framework, and other leading practice materials, provided a foundation for the Department’s fraud reduction program. In 2019, an Internal Controls Fraud Working Group continued to improve implementation efforts to develop a robust fraud program. The Department engaged industry experts to provide guidance in designing a new fraud risk exposure analysis methodology that comparatively scores bureaus throughout the Department, to effectively assist the Department in making informed fraud risk management decisions. Additionally, the Department completed a pilot of a new fraud risk assessment methodology on the Bureau of International Narcotics and Law Enforcement Affairs and is actively engaged in further refining and implementing this expanded fraud risk assessment methodology on a Department-wide basis. Beyond this new centralized and consistent approach to fraud risk assessment, bureaus and posts continued to engage in their existing fraud risk identification programs, as well as various data analytic techniques to identify and prevent fraud. Progress in Implementing Financial and Administrative Controls The Department has a strong management controls program in place, and performs extensive work to provide value beyond complying with the myriad of laws and regulations applicable to the Department. The following are examples and highlights from a few of our accomplishments in 2019. P rompt P ayment A ct Timeliness of Payments The Prompt Payment Act (PPA) requires Federal agencies to pay their bills on time. PPA assesses an interest penalty against Federal agencies that do not pay their vendors timely as required by law. In 2019, the Department timely paid 98 percent of the 611,063 payments subject to PPA regulations. The “Timeliness of DOS Payments” bar chart reflects the timeliness of the Department’s payments from 2017 through 2019. During 2019, the Department paid $975,895 in interest penalties out of $10.8 billion in payments that were subject to PPA, compared to $407,685 in 2018. 144 | U nited S tates D epartment of S tate 2019 A gency F inancial R eport OTHER INFORMATION | PAYMENT INTEGRITY AND OTHER LAWS AND REGULATIONS