A New Era in Federal Payment Security: How the Government is Stopping Improper Disbursements Before They Happen
Government chief financial officers can now have greater confidence that their agencies are directing funds to the correct citizens. This shift is the result of a multi-year effort to overhaul how the government secures federal payments, moving from a reactive model to a proactive one.
A newly activated payment verification system, built over four years, recently transitioned into full production this summer. The system utilizes a three-step process to confirm the accuracy of every disbursement. It pulls daily data feeds from the national master death index, ensures each taxpayer identification number meets strict validation rules, and confirms whether each bank account is legitimate and genuinely associated with the intended recipient.
The federal financial authority is now screening disbursements against federal and commercial data sources in near-real time before funds are released. This marks a significant paradigm shift away from the traditional “pay and chase” model—where agencies send money and then try to recover it later—and into a “detect and stop” model that prevents improper payments at the outset.
Since the beginning of last year, the system has screened over 885 million payments totaling approximately $2.77 trillion. This screening identified more than 4,900 payments valued at roughly $104 million that were linked to deceased recipients, allowing agencies to review and recover those funds before disbursement. The effort to prevent improper payments dates back to 2011 with the introduction of a precursor “do not pay” list. However, it wasn’t until recently that the current administration supercharged the initiative, clearing systemic barriers that had hindered efforts to prevent over $186 billion in improper payments.
Previously, the government relied on a process called payment adjudication, where agencies submitted files for processing and were only notified after the money had already been sent if a payment was going to a deceased individual. The new verification process changes this sequence entirely. Now, screening occurs as files are submitted. If there is a high-confidence match for a deceased person, a payment return is generated, the specific transaction is routed back to the agency, and the remaining payments are processed.
Congress initially provided the central payments bureau with pilot access to the national master death index—which holds over 142 million records dating back to 1899—and later made this access permanent through legislation signed into law earlier this year. Despite this victory, the bureau still faces legal hurdles. While it can validate certain individual identification numbers against authoritative sources for programs like the Supplemental Nutrition Assistance Program (SNAP), laws currently prevent it from validating employer identification numbers for corporate vendors. A recent collaboration with the national tax agency revealed that under 5% of submitted corporate IDs did not match official records, highlighting a potential gap in due diligence. Bureau officials are hoping lawmakers will recognize the success of the death index pilot and grant similar access to corporate data sources.
To accelerate agency adoption, the Office of Management and Budget has authorized the central payments bureau to waive some of the most burdensome requirements under the Computer Matching and Privacy Protection Act. The bureau aims to have all 23 chief financial officer agencies fully onboarded by the end of the fiscal year. So far, a handful have completed the process, though roughly 80% of agencies are making substantial progress. To facilitate this, a new cross-government working group has been established, drawing hundreds of participants weekly who are actively working through the technical and compliance requirements.
Looking ahead, the bureau plans to introduce new data sources into the system in the coming years. One recent addition includes a commercial database that tracks corporate registrations across the United States, a tool designed to prevent the type of fraud seen during the pandemic where companies falsely claimed to exist to secure funds. The bureau is continuously evaluating what data is missing from the system to further strengthen federal payment integrity.
Conclusion
The transition to a proactive, real-time verification system represents a monumental leap forward for federal fiscal management. By shifting the focus from recovering funds to preventing improper disbursements, the government is protecting taxpayer dollars and ensuring vital benefits reach the intended recipients. As the system expands to include new data sources and more agencies adopt the technology, the foundation for a more secure and efficient federal payment infrastructure is firmly in place.
Frequently Asked Questions (FAQ)
Q: What is the “pay and chase” model, and how has the government moved away from it?
A: The “pay and chase” model involves sending out payments and then attempting to recover funds if they are found to be improper or sent to the wrong person. The government has shifted to a “detect and stop” model by implementing real-time verification tools that screen payment files before disbursement, intercepting improper payments upfront.
Q: How does the payment verification tool confirm a recipient’s identity?
A: The tool uses a three-step verification process. It cross-references the recipient against a national master death index, validates the taxpayer identification number against regulatory rules, and confirms that the provided bank account is real and belongs to the individual or business receiving the payment.
Q: Why can’t the government verify all types of taxpayer identification numbers?
A: Current legal restrictions prevent the central payments bureau from validating employer identification numbers (EINs) used by corporate vendors. While they can verify individual Social Security numbers for certain benefit programs, accessing the authoritative databases required to validate EINs remains legally restricted, a challenge officials hope to overcome through future legislative action.
Q: What role does Congress play in improving federal payment security?
A: Congress plays a critical role by granting the government access to essential data sources, such as the national master death index, and by passing laws that make such access permanent. Lawmakers are also being encouraged to approve access to additional data sources, like corporate registration databases, to further enhance the verification tool’s capabilities.
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