Skip to main content
U.S. flag

An official website of the United States government

Dot gov

The .gov means it's official.
Federal Government websites often end in .gov or .mil. Before sharing sensitive information, make sure you're on a Federal Government site.


The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

OPTIMIZING PAYMENT INTEGRITY ACTIVITIES: A Guide for Identifying a Program’s Tolerable Improper Payment Rate

Payment integrity actions seek to cost-effectively reduce fraud, waste, abuse, and mismanagement without negatively affecting program mission, agency efforts to advance equity, efficiency, customer experience, or the overall operations of the agency. Federal agencies and Congress have a shared goal to reduce improper payments through these actions.

Payment integrity risks, including improper payment risks, are considered a part of an agencies’ enterprise-wide risk portfolio. Through an agency’s enterprise risk management program, the program should identify its risk appetite and risk tolerance to inform the level of improper payment risk they are willing to accept. That level is their tolerable rate. According to Appendix C of Circular A-123, the tolerable rate is defined as:

"the improper payment (IP) and unknown payment (UP) estimate achieved with a balance of payment integrity risk and processes to mitigate that risk. The tolerable IP and UP rate for a program is determined by agency senior management and often includes IPs which are unavoidable and beyond the agency's ability to reduce as well as IPs and UPs which are cost prohibitive or sometimes mission prohibitive for the agency to prevent."

In determining whether a component of an improper payment rate must or should be tolerated, this guide can help agencies on two levels: (1) to assess whether mitigation of specific improper payments is possible or desirable; and (2) to calibrate between policy and tolerable error rates in payment processes at an enterprise level. Any determination of whether rates must be tolerated or should be tolerated requires proof. As the federal government generally has a low risk appetite for improper payments, agencies carry the burden to prove some or all of their improper payments must or should be tolerated. This guide provides agencies with the framework needed to analyze their payment processes consistent with principles adopted in Payment Integrity Information Act of 2019 (PIIA) and its implementing guidance in M-21-19, Appendix C to OMB Circular A-123. In order to determine if a program has reached a tolerable rate, this guide defines how improper payments could be justified as tolerable, through evidence-based decision-making.

It is important to note that this guide is optional for agencies to follow and does not supersede any existing guidance in OMB Circular A-123, Appendix C, or A-123. Determining a tolerable rate also does not alter statutory obligations to report improper payments under PIIA.

OPTIMIZING PAYMENT INTEGRITY ACTIVITIES - A Guide for Identifying a Program’s Tolerable Improper Payment Rate

❮   Back to Knowledge Sharing

An official website of the Federal Government

Looking for U.S. government information and services?