Treasury Tackles Digital Payment Modernization

Treasury officials believe they can prevent trillions of dollars in improper payments by modernizing agency systems, digitizing payments and utilizing a new database that improves data sharing across government.

A Government Accountability Office (GAO) report found that since 2003, federal agencies have made roughly $2.8 trillion in improper payments.

Curbing this number could potentially be done by improved data sharing between federal agencies. Policymakers touted a Treasury Department database as a means to that end.

“Do Not Pay consolidates much of the data matching agencies have done individually to flag potentially improper or fraudulent payments. Federal agencies and some state programs can and should leverage Do Not Pay to ensure program integrity,” said GAO Managing Director of Financial Management Assurance Kristen Kociolek at a March 11 House Government Operations Subcommittee hearing.

The system enables agencies to use a secure online interface to prevent and detect improper payments. Over 20 agencies use it to help verify payment information for benefits, grants or loans.

The Do Not Pay program operates under the authority of the Payment Integrity Information Act of 2019 (PIIA) and related OMB guidance. It is housed under Treasury’s Bureau of the Fiscal Service. The Improper Payment Elimination and Recovery Improvement Act of 2012 established the initiative.

According to the bureau’s winter 2024 payment integrity journal, Fiscal Service’s Office of Payment Integrity Impact prevented or recovered $652.7 million in improper payments government-wide in fiscal year 2023.

The report highlighted key partnerships, including one with the Social Security Administration (SSA) to prevent $63.2 million in improper payments and another with the Office of Personnel Management to prevent $37 million in improper payments.

The system has buy-in from the House’s DOGE Subcommittee.

“We are going to get more mileage out of these Do Not Pay databases. That means fewer improper payments and less fraud and waste of taxpayer dollars,” said Rep. Marjorie Taylor Greene, the subcommittee’s chair, during its inaugural meeting in February.

The attention on this database and others is part of a larger effort by the White House to modernize digital payment methods.

Improper payments have been a longstanding challenge across government, including at agencies like SSA. The new administration has set its sights on reducing fraud, waste and abuse across government with new executive orders.

A July 2024 Office of the Inspector General report called on SSA to “identify and prevent improper payments through automation and data analytics, expand efforts to collect data from reliable third-party sources, and address the root causes of improper payments to prevent their occurrence.”

Additionally, a March 25 executive order emphasized the inefficiencies of paper-based payments, noting that they “impose unnecessary costs; delays; and risks of fraud, lost payments, theft and inefficiencies.”

According to the order, Treasury-issued paper checks are 16 times more likely to be lost, stolen, returned undeliverable or altered compared to electronic funds transfers. Last year, the U.S. spent $657 million to process and digitize paper records.

Additionally, paper checks issued by the government can be lost or stolen during transit in the mail, making them susceptible to fraud. The order states mail theft complaints have increased substantially since the COVID-19 pandemic.

“This order promotes operational efficiency by mandating the transition to electronic payments for all federal disbursements and receipts, to the extent permissible under applicable law,” the directive states.