determine whether the program is likely to have IPs above the statutory threshold. Programs that are not likely to have IPs above the statutory threshold are referred to as being in ‘Phase 1’. (See Section II.A of this guidance)
Reporting an Improper Payment Estimate – If the results of a program’s IP Risk assessment determine that the total annual IPs PLUS the unknown payments (UP) for the program are likely to be above the statutory threshold, the program will report an IP estimate and a UP estimate in the FY following the FY in which the determination was made. Programs that report IP and UP estimates are referred to as being in ‘Phase 2’. (See Section II.B of this guidance)
Causes – Determining the point in the payment process where the payment turned from ‘proper’ to ‘improper’ is important when identifying the root cause of the IP and the UP. All programs reporting in Phase 2 will be required to determine the root cause of each IP and each UP and report accordingly. (See Section III of this guidance)
Prevention – To be effective, programs should prioritize efforts toward preventing IPs and UPs from occurring so that they can avoid operating in a “pay-and-chase” environment. All programs should have a structured and systematic approach to recognizing where the potential for IPs and UPs can arise and subsequently addressing the risk, as appropriate. (See Section IV of this guidance)
Payment Integrity Risk Management: The Enterprise Risk Management framework can be used to assist in the identification and management of payment integrity risks for the agency. A significant risk in managing IP risk is the potential that agencies may make investments in risk controls that negatively affect program mission, efficiency, customer experience or the overall operations of the agency. By including an evaluation of payment integrity risk in the Agency Risk Profile, agencies will identify, assess, prioritize, and respond to payment integrity risks and implement control activities to mitigate identified material payment integrity risks. (See Section IV.A of this guidance)
Corrective Action Plan – All programs in Phase 2 that are reporting estimates above the statutory threshold must have a Corrective Action Plan. The Corrective Action Plan is a combination of both mitigation strategies and corrective actions aimed at reducing the likelihood of an IP and/or a UP occurring during the payment process. (See Section IV.B of this guidance)
Tolerable Rate – All programs in Phase 2 should be mindful of the extent to which applying further payment controls would undercut the program’s mission or resource management. The tolerable rate of a program should be established by the Agency's senior management, taking into consideration thresholds in PIIA that are used to help identify programs that are likely to be susceptible to IPs. (See Section IV.F of this guidance)
Overpayment Identification – Examples of overpayment identification methods Agencies use include but are not limited to reviews, audits, data analytics, reports, and reconciliations. Each agency must determine the most cost-effective method for their particular circumstance. (See Section V.A of this guidance)
