The $236 Billion Problem: Why Improper Payments Remain the Defining Challenge of Federal Financial Management

Reston, Virginia — June 2026

The federal government reported $236 billion in improper payments in FY2023. The number has remained stubbornly high for more than a decade despite the Payment Integrity Information Act of 2019, despite agency-level reduction targets, and despite significant investment in financial management systems. The problem is not lack of attention. It is structural.

At DEVAL LLC, we have spent 23 years working inside the federal financial management environment advising agencies on loan portfolios, financial controls, regulatory compliance, and program administration. What we have seen repeatedly is that agencies that reduce improper payment rates sustainably do not simply add controls at the point of payment. They redesign the eligibility determination process, modernize data matching capabilities, and build monitoring functions that catch errors before disbursement, not after.

The Three Root Causes

• Eligibility errors — The most common driver of improper payments is not fraud, it is eligibility determination errors at the point of application. Recipients who do not qualify receive payments because intake systems lack real-time data matching against authoritative federal databases.
• Documentation failures — Payments are made without required supporting documentation or documentation is collected but not verified. The gap between document collection and document verification is where most improper payments originate.
• Post-payment monitoring gaps — Most agencies focus controls at the point of payment approval. Improper payments that result from changes in recipient circumstances, income changes, household changes, including death,  require continuous monitoring, not one-time approval controls.

What Actually Works

Agencies and programs that have reduced improper payment rates most effectively share three characteristics: real-time eligibility verification against federal data sources, automated documentation completeness checks before payment approval, and continuous post-payment monitoring with clear remediation workflows.

DEVAL’s work across HUD, FDIC, VA, Treasury, and state government clients has shown that technology-enabled continuous monitoring rather than point-in-time audits is the single most effective tool for sustainable improper payment reduction. The technology exists. The challenge is implementation.

For HUD Project Based Housing

Improper payments in HUD Project Based Section 8 programs are driven by the same three root causes including eligibility errors, documentation failures, and post-payment monitoring gaps. DEVAL’s technology affiliate DEVAL Solutions has developed PHASE specifically to address all three in one centralized compliance platform for property owners and managers.

DEVAL LLC provides financial advisory, regulatory compliance, and management consulting services to federal and state agencies. For more information contact information@deval.us or visit deval.us.