The Safeguarding the Transparency and Efficiency of Payments Act (STEP Act) would strengthen how the federal government prevents improper payments—payments that are erroneous, improper, or fraudulent. The bill revises definitions and expands reporting and oversight requirements across federal agencies. Key changes include clarifying who is considered a chief financial officer (CFO) for agencies, mandating the identification of new programs that are likely to have significant improper payments, requiring statistically valid (or appropriately approved) estimates of improper payments, and mandating CFO-certified, integrated annual reports on progress implementing internal controls and fraud-risk management. The act also heightens the GAO/OMB-aligned framework agencies must follow to manage fraud risk and requires annual updates to Congress through the agency’s financial statements. No new funding is authorized by the measure; any changes would be carried out within existing appropriations. In short, the STEP Act aims to improve transparency, accountability, and control over payments by enforcing stricter risk assessments, standardized measurement of improper payments, and CFO-led reporting and oversight aligned with established federal standards.
Key Points
- 1Redefined CFO role and terminology: Expands and clarifies who counts as the chief financial officer for agencies, ensuring clear responsibility for financial management and related controls.
- 2New program susceptibility threshold: Agencies must annually identify any new programs or activities that are likely to incur significant improper payments if they have or are expected to have outlays exceeding $100 million in any of the first three fiscal years, provided the program is within its first four years of operation. There is an exception if a review determines the program is not susceptible to significant improper payments.
- 3Requirements for improper payment estimates: For programs subject to improper payments reporting, agencies must produce a statistically valid estimate (or an otherwise appropriate estimate) of improper payments using a methodology approved by both the Director of the Office of Management and Budget (OMB) and the agency CFO, and report these estimates under the appropriate statute.
- 4Annual CFO-certified reports: The bill adds a requirement that annual agency reports include a CFO certification of the reliability of identifying programs susceptible to significant improper payments and describe actions to monitor corrective action plans.
- 5Expanded fraud risk reporting and alignment with standards: Agencies would report on progress implementing internal controls, GAO’s fraud-risk principles, and OMB Circular A-123 leading practices for managing fraud risk. Agencies must also report on the status of implementing the 11 leading practices identified by GAO in its 2015 Framework for Managing Fraud Risks in Federal Programs.
- 6Integrated reporting with no new funding: All required reports would be included with the agency’s annual financial statements (or appropriate accompanying materials), and the act does not authorize new funding to carry out its provisions.