Improper Payments: A New 2025 Green Book Risk Category

Improper Payments

Imagine this: A mom (we’ll call her Sandra) proudly wires $12,000 to her son Trevor for the spring semester at State U. Except Trevor’s been academically disqualified since October. He’s not in school. Instead, he’s “finding himself” in a beach town, learning acoustic guitar and cultivating a man bun.

Poor Sandra just made an improper payment. She meant well, but she wanted to teach Trevor autonomy. She didn’t ask for documentation, and, well, she trusted Trevor a little too much.

Improper payments in government programs might not involve Trevor, a surfboard, and a tragically misused 529 plan, but the principles are the same. And lucky for us, the 2025 GAO Green Book is here to help! Sections 8.11–8.13 ask government entities to actively prevent improper payments.

What is an improper payment, anyway?

According to Green Book 8.11: Improper payments are any payments that should not have been made or that were made in an incorrect amount. Payments are also considered improper when there is insufficient or lack of documentation.

In other words, if you pay someone who wasn’t supposed to get paid, pay too much, pay too little, or don’t have the receipts to prove you were supposed to pay anything… Congratulations! You made an improper payment.

Improper payments can stem from:

• Fraud
• Mismanagement
• Errors
• Good, old-fashioned lack of oversight

Types of improper payments

Let’s break it down like a beachfront cafe menu.

1. Overpayments

A little too generous, eh?

These are payments where you handed out more money than you should have. Maybe you paid someone twice or you bought 300 ergonomic chairs for a department with 25 employees. Perhaps you reimbursed an employee for business-class airfare and “client entertainment” expenses from a weekend in Vegas. (Spoiler: The client was their cousin. The entertainment was Viva Elvis.)

This category also includes:

• Payments for goods/services not received
• Payments to ineligible recipients
• Payments for imaginary services
• Fraudulent shenanigans (naturally)

2. Underpayments

Thanks for nothing. Literally.

These occur when someone doesn’t receive what they’re owed. And yes, underpaying is also considered improper. So, before you start patting yourself on the back for “saving taxpayer money,” remember shortchanging vendors, grantees, or citizens can lead to just as many headaches as overspending.

Not just fraud

Although it tends to sound like it, keep in mind that improper payments are not just about fraud. Sometimes, it’s just someone used the wrong spreadsheet tab or forgot the intern can’t approve a $2 million infrastructure project.

Risk factors

According to Green Book 8.12, management should consider improper payment risk factors, both internal and external.

Here are a few red flags straight from the Green Book, plus a little commentary:

• New programs: If your agency just launched something shiny and new, chances are no one knows how it works yet. Mistakes are practically baked in.
• Complexity: If your grant program requires a PhD in intergovernmental funding formulas and a spirit medium to decipher eligibility rules, you’re asking for payment trouble.
• High volume: The more payments flying out the door, the easier it is for one (or a hundred) to go rogue.
• Third-party processors: Outsourcing payment decisions to people who don’t report to you? What could possibly go wrong? (Answer: A lot.)
• Personnel inexperience: When Brenda from Accounting is still figuring out where the “approve” button is, maybe don’t assign her the emergency relief fund distribution.
• Self-certification: Letting applicants check a box saying, “Yes, I am totally eligible and honest.” Bold strategy.
• Lack of eligibility databases: If you verify eligibility using sticky notes, vibes, or expired spreadsheets, go directly to improper payments jail.
• Known fraud risk: If the program sounds like a scam your aunt would post about on Facebook, tighten up those controls.

What’s an auditor to do?

The GAO’s Green Book is primarily written for government entities creating and establishing controls over government programs. Auditors use the Green Book to evaluate payments and controls, and ask questions like:

• Did we really get those supplies?
• Why was this invoice paid twice?
• Who approved a $3,000 massage chair labeled as ‘ergonomic support’?

What should we do with this guidance?

• Make sure the auditee includes improper payment risk in their risk assessment.
• Ask for documentation. Then ask again when you’re handed a pizza receipt and told it’s a training expense.
• Validate the eligibility of vendors and recipients like your reputation depends on it (because it does).
• Maintain a friendly relationship with finance staff to make your audits easier.

Remember: Not all improper payments involve bad intentions. But all of them can create problems for agencies, citizens, and public trust.

Final thoughts: Trust but verify

Whether you monitor a federal stimulus program or trying to figure out why Trevor is still “in college” but posting concert selfies on a Tuesday afternoon, the classic ‘trust but verify’ rule for auditors always applies.

So audit on, professional skeptics. And remember: Before you approve a $12,000 tuition reimbursement, maybe ask to see the transcript.

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