That’s what an executive order meant to curb the government’s rate of erroneous payments will say, Peter Orszag, Office of Management and Budget director, told reporters during a Nov. 17 briefing on the value of improper payments made by the government in 2009.

Currently, contractors face no penalties when the government discovers an improper payment was made. All contractors have to do is pay back the sum without interest or penalty. The executive order, which will be issued in the coming week, will change that by allowing agencies to suspend, debar and fine contractors that fail to report these payments. That will create strong incentive for contractors to be vigilant in monitoring their government payments, said Danny Werfel, the controller of OMB’s Office of Federal Financial Management.

Werfel said:

The way it works today is if we give a contractor money that they have not earned and they never report it to us, but we just so happen to find it through an audit, all they have to do is make us whole. There are no additional damages on top of that. And that’s what the executive order would pursue as a way of incentivizing contractors to immediately tell us where we made an error, so they’re part of the solution and not part of the problem.”

In sum, agencies misapplied $98 billion in federal funding in 2009, up from $72 billion in 2008. The payments were made on a variety of programs, such as Medicare, Social Security, veterans benefits, school nutrition programs, education grants, homeland security grants, unemployment insurance and other social programs.

The 36 percent, $26 billion jump is due to improved detection, stricter reporting rules and the increase in federal payments made in response to the economic downturn, Orszag said. All told, that’s an error rate of 5 percent on the nearly $2 trillion worth of programs measured in fiscal 2009. Not all of the improper payments resulted from fraud, however. In addition to government errors, other causes may be as innocent as a doctor’s illegible signature on a Medicare form, Orszag said.

In addition to penalizing contractors that fail to return improper payments, the pending executive order will curb improper payments by demanding agencies:

• Establish a Web site to disclose and track the total amount of improper payments on a program. The Web site will include error rates by agency and program, and an email address for the public to report suspected waste, fraud and abuse.
• Report on errors more than once a year (the current practice).
• Designate a Senate-confirmed official to be accountable for meeting improper payment reduction targets. If the agency misses targets two years in a row, the agency’s head, chief financial officer and inspector general must give OMB a plan describing why the agency failed to meet its goals and what it will do to meet targets going forward.
• Employ new management techniques, such as forensic auditing, to detect and prevent improper payments.
• Share data with other agencies about entities or individuals that received improper payments because they weren’t eligible for the benefits. This will prevent that entity or person from receiving improper payments from other programs.
• Establish plans to reduce program errors that do not interfere with payments to legitimate beneficiaries.
• Create incentives for states, agencies, and recipients to report payment errors.

Thoughts to come later this morning once I’ve actually had a chance to read it…

Federal employees have submitted more than 10,000 money-saving tips to the Office of Management and Budget’s SAVE Award contest in the last week, OMB director Peter Orszag announced today.

OMB launched the SAVE Award contest on Sept. 23 to gather cost-cutting and performance-improving ideas from the people who know government best: the employees.

So far, you have responded with 10,266 entries. And that number is growing as we speak.

If you haven’t submitted an idea yet, don’t delay. The contest ends on Oct. 14. You can enter at www.SaveAward.gov.

Once submissions close, an OMB panel will review the ideas and select a handful of finalists for President Barack Obama to choose from. The winning idea, which will be announced in November, will be included in the 2011 budget. The idea’s author will also get to meet Obama, the man with whom the buck stops.

Photo: Wikipedia.

OMB Director Peter Orszag launched the “OMB Pedometer Challenge” today to improve employee health by having everyone wear a pedometer to track their physical activity throughout the day.

Employees will enter their daily steps on an internal Web site and compare their activity levels to Orszag’s activity levels and their division’s levels. They’ll also be able to enter health statistics like body mass index, blood pressure and heart rate to help track improvements in their health.

The employee with the highest activity level each month wins lunch with Orszag and the highest performing team wins a “health happy hour.” Free lunch and/or a free happy hour? That’s inspiration enough for me.

Orszag said:

This challenge will make all of us more aware of our current activity levels and help inspire us to increase our physical activity. Evidence shows that pedometers are one of the most cost-effective ways to increase physical activity. And in true OMB fashion, we like to walk down the path cleared by the best data.”

The challenge is part of a larger effort to improve the health and productivity of the federal workforce, while reducing health care and disability costs, OMB said in the news release.

One interesting point: OMB director Peter Orszag just gave a quick speech, and he said this about the survey results:

We will be looking to include the results in the fiscal year 2011 budget process, because we should not just let this be a report that generates a one-day news story. It needs to be something that is built into the way we run government.

Orszag went on to say that OMB will ask the poorly-performing agencies to come up with a plan for improving their scores.

“We want to make sure that the systems are in place to handle what everyone expects will be an unprecedented number of grant applications,” Orszag said.

I wonder, though, if some agencies will be reluctant to invest a lot of time and money in adding new capacity to their grants systems — because that will be excess capacity after the stimulus spending is done.

How is your agency preparing? We’d love to hear — either via e-mail or in the comments section.

Among other things, the guidance outlines the steps agencies must take to report their spending and program performance data to the Recovery.gov website that’s been created to track how every stimulus dollar is spent and how many jobs are created.

The guidance also establishes requirements for agencies to meet the White House’s accountability objectives, OMB Director Peter Orszag said.

Additional OMB guidance is forthcoming, Orszag said.

We’re camped out on Capitol Hill all week covering the transition hearings — and we thought you’d like a central place to follow our confirmation coverage. We’ll update this list as the week goes on. The full list is after the jump, and it’s sorted alphabetically by agency.

Senators focused mostly on government management issues, and Orszag made a few notable statements. First, though, a word about the budget. Orszag reiterated, once again, that the Obama administration will release a 2010 budget in “mid-to-late February.”

One new detail: He said the budget will include “some program eliminations.” No word on which programs, though.

On the management side, Orszag said the government’s procurement problems are largely caused by an underfunded acquisition workforce:

It is absolutely OMB’s responsibility to provide oversight and guidance on procurement issues… When you double the procurement budget and the number of acquisition officers stays flat, unless you think their productivity has doubled in that time, it’s no surprise they get sloppy.

He had some harsh words for the Program Assessment and Rating Tool (PART), the Bush administration’s performance management system:

It is not particularly effective. Frankly, most federal officials don’t even know about it; only a quarter of senior government officials have even heard of PART. And most who are knowledgeable don’t use it. There’s a lot of going through the motions, filling out forms.

It was developed without consultation with Congress and the agencies, and it’s too focused on process rather than outcome.

Orszag said the metrics for the IRS were a good example of PART’s problems. The agency is evaluated based on the number of audits it conducts — which Orszag called a focus on “process, rather than outcomes.”

I would like to see a performance measurement system that says, hit this compliance rate for the tax code. Don’t just tell me what your audit rate is, because I don’t care about that.

Budget reform is not an option. It’s a necessity. We can’t sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness. We simply can’t afford it.

12:00 PM: On top of yesterday’s economic team announcements, the president-elect made two more official nominations today:

• As expected, Congressional Budget Office director Peter Orszag will take over as head of the Office of Management and Budget;
• Rob Nabors, the staff director of the House Appropriations committee, will be Orszag’s deputy at OMB.

Obama is holding a press conference at noon ET; we’ll update with any interesting comments.