Home » Management Discussion and Analysis » Performance Section » Financial Section » Other Accompanying Information » Appendices »
	Message from the CFO Independent Auditor's Report Financial Statements and Notes Introduction Balance Sheet Net Cost Changes in Net Position Budgetary Resources Statement of Financing Notes Required Supplementary Stewardship Information Required Supplementary Information Other Accompanying Information
	Advanced search... Search USAID Personnel... Search USAID Documents...

Improper Payment Information Act (IPIA) Reporting Details

Although the 2006 risk assessment concluded that all programs are at a low risk for improper payment and the declining error rate remains far below the OMB guidance thresholds, the Agency continues to conduct various levels of internal improper payment reviews and samplings for all programs and payment activities throughout the year. Additionally, all new programs, high profile programs, and high dollar programs are considered risk-susceptible and subject to further analysis and review.

As in past years, the Agency continues to rely heavily on the OIG post-audit reviews as one of the primary methods of sampling and estimating the improper payment rate for the cooperative agreement, grant and contract programs. All nonprofit U.S.-based organizations that expend $500,000 or more in Federal awards are subject to an OMB Circular A-133 financial audit which is reviewed by the Agency’s OIG. All foreign nonprofit organizations that expend $300,000 during their fiscal year in USAID awards are subject to a recipient-contracted audit (RCA) performed by approved Certified Public Accountant (CPA) firms which are reviewed by the respective USAID Regional Inspector General (RIG) overseas. All USAID commercial vendor contracts with incurred-cost submissions are subject to an annual Defense Contract Audit Agency (DCAA) audit. The Agency’s procurement office also reviews the OIG recommendations for ongoing audits to ensure payments to recipients are accurate and proper. The OIG tracks audit review activities in the Consolidated Audit Tracking System (CATS) while the Office of the CFO reviews and calculates the improper payment rate for these programs. Currently, the Office of the CFO and the OIG are reviewing the process for capturing audit activities and formulating questioned costs, error and recovery rates to ensure that the CATS is a reliable tool for providing IPIA activity information.

Additionally, all payments processed through the Agency’s financial and accounting system, Phoenix, are subject to a series of monthly internal reviews by CFO staff who analyze and compare data outputs/reports, cross-reference and compare this data to ensure that payment data is accurate, and monitor the improper payment rate on an ongoing basis. The sampling of the financial systems review includes setting report parameters to identify all potential duplicate payments by vendor, invoice number and dollar value. Each potential improper payment that is identified is investigated regardless of the dollar value. The monthly reports reviewed include the Phoenix Disbursement, Metric Tracking System (MTS) Indicator, Schedule of Disbursements and Credits (SF1098), Cash Management and Payment Metrics and the Penalty Interest reports.

OMB Circular A-133 requires the auditor to audit the entire universe of federal awards, including sub-awards. Therefore, any excess billing or amount that is unallowable will be questioned by the auditor. The auditor’s report is sent to the Clearinghouse for submission to the Office of the Inspector General (OIG). Upon review, the audit report is sent to the Agency’s procurement office for follow-up.

OMB Circular A-133, Sub-part C, Section 310(1)(2)(3) Financial Statements, states:

1. List individual Federal programs by Federal agency. For Federal programs included in a cluster of programs, list individual Federal programs within a cluster of programs. For research and development (R&D), total Federal awards expended shall be shown either by individual award or by Federal agency and major subdivision within the Federal agency. For example, the National Institutes of Health (NIH) is a major subdivision in the Department of Health and Human Services (DHHS).
2. For Federal awards received as a sub-recipient, the name of the pass-through entity and identifying number assigned by the pass-through entity shall be included.
3. Provide total Federal awards expended for each individual program and Catalog of Federal Domestic Assistance (CFDA) number or other identifying number when the CFDA information is not available.

Upon receiving the A-133 audit reports from the recipients, the Agency’s procurement office sends a letter to the recipient and, if the recommendation involves questioned costs, the Agency requests payment. If the findings are procedural, the Agency asks the recipient to provide a corrective action plan with a timeline for correcting the deficiencies. The Agency follows up on the action plan until the deficiencies are corrected and asks the audit firm to include a follow-up on the implementation of the corrective action plan to ascertain if the deficiencies were corrected appropriately.

Source of Data:

• 2005 and 2006 Net Outlays
• CFO/CMP Internal Control reports
• OIG’s Consolidated Audit Tracking System
• Washington Disbursements equal approximately 75% of total outlays

¹ 2005: The Cash Transfers, Grant/Contracts programs were identified as risk susceptible due to the fact that they represent 88% (22% & 66% respectively) of total outlays for the year.
¹ 2006: The Cash Transfers, Grant/Contracts programs were identified as risk susceptible due to the fact that they represent 77% (9% & 68% respectively) of total outlays for the year. (back to table)

USAID grant and contract program payment activities have been labeled risk-susceptible due to the high-dollar value of these programs and they continue to be closely monitored to ensure compliance with the provisions of the IPIA.

The Iraq Reconstruction and the Afghanistan Assistance and Reconstruction programs are large-dollar value and high-profile procurement and payment activities and additional controls are in place to monitor these activities. The Office of the CFO monitors and reports monthly on these financial activities as well as compiles individual expenditure reports for the reconstruction and assistance program activities in Afghanistan and Iraq. This information is consolidated into monthly reports and is disseminated to stakeholders, internal and external clients, including USAID Missions and Bureaus, as a tool to monitor their program and payment activities and to increase overall transparency of these high-profile programs. Although we have high confidence in the internal controls in place for making cash transfers to foreign governments and foreign bank accounts, we have included this payment activity as risk-susceptible due to the large-dollar volume of these activities. These activities are also subject to the series of monthly internal reviews conducted by CFO staff that analyze and compare data outputs/reports, cross-reference and compare this data to ensure that payment data is accurate, and monitor the improper payment rate on an ongoing basis.

Earlier this year, the Office of the CFO explored the feasibility of using various professional recovery auditor services to assist in the identification and recovery of potential erroneous payments and have engaged the services of Horn & Associates, Inc. /Recovery Auditors. The contract is in place, most of the security clearance processes have been completed, and some of the recovery auditors are on board. The recovery auditors are scheduled to start their internal recovery audit review in November 2006 and they expect to issue their first report of findings with 60-90 days. These findings will be reported in the 2007 PAR. In the interim, the Agency has been using Phoenix to monitor, sample and analyze payment data and activity.

In 2006, USAID started data-mining in Phoenix, abstracting and identifying data that may be indicative of an improper payment. Thousands of payment records that fell within the erroneous payment parameters set for warranting further scrutiny were reviewed. Upon final analysis and review, it was determined that almost all of these payments were indeed proper. The few payments that remained suspect were further investigated and the funds were collected and/or previously collected and the items closed.

A noteworthy accomplishment that was crucial to enhancing internal financial controls was the completion of the rollout of Phoenix overseas. As a result of the completed unified systems implementation, the Office of the CFO now has the capability to monitor, sample and analyze USAID’s financial and payment activities worldwide.

The following chart reflects recoveries for grant and contract programs:

During 2006, CFO staff were actively engaged in the ongoing review, sampling, identification and the implementation of the necessary internal controls. In addition, training was provided to staff on meeting the President’s goal to eliminate improper payments. In 2007, Cash Management and Payment (CMP) staff within the Office of the CFO will be submitting reports on regular intervals to the CMP Division Chief who will monitor progress on the reduction and recovery of improper payments and report results to the Deputy CFO and CFO. Agency managers will be working closely with the professional recovery auditors on reducing and recovering improper payments. Additionally, work objectives related to reducing improper payments will be incorporated in relevant CMP staff 2007 work plans to further ensure compliance with IPIA.

The information systems and infrastructure are in place to reduce improper payments with the recent completion (August 2006) of the overseas rollout of Phoenix, enabling access to worldwide financial and payment activity.

Now that USAID in Washington has the capability to access and review the financial payments activities worldwide through Phoenix, future IPIA review efforts to minimize the risk of making erroneous or improper payments will be more streamlined, yielding enhanced effectiveness, efficiency and results.

Back to Top ^ | < Previous Page | Next Page >