Federal agencies will have to redouble efforts to identify and recover billions of dollars lost annually to wasteful spending under a bill President Barack Obama is set to sign into law Thursday.
He also was announcing a goal of reducing improper payments by $50 billion by 2012.
With the federal debt mounting along with people's worries about government red ink, the bill marked the latest effort by the Obama administration to get a tighter handle on Washington spending.
Obama said in a statement released before he signed the bill that the new law "will help ensure that our government serves as a responsible steward for the tax dollars of the American people, and builds on the efforts we're taking to cut wasteful spending."
Improper payments - from outright fraud to checks issued to the wrong person or for the wrong amount because of something as simple as a typo - reached a high of nearly $110 billion last year, according to the White House. Federal auditors found that hundreds of millions of dollars in benefits were issued to dead people, fugitives or others not eligible for them.
Key elements of the new law will require more agencies to report waste and to produce audited, corrective action plans with targets to reduce the errors that lead to improper payments. The bill also requires agencies that spend more than $1 million to conduct recovery audits on their programs.
The measure, sponsored by Sen. Thomas Carper (D-Del.), and Rep. Patrick Murphy (D-Pa.) also gives agency heads authority to use any recovered money for purposes not currently allowed, including improving their financial management, supporting the agency's inspector general or for the original intent of the funding.
Agencies would face penalties for failing to comply with the law.
Since taking office, Obama has taken steps to cut wasteful spending in part by reducing improper payments. Last month, he ordered creation of a federal Do Not Pay List, a database that agencies ultimately must search before cutting checks to individuals and contractors.
Toward the broader goal of trimming federal spending overall, Obama has proposed a three-year freeze in spending not tied to national security. He also has instituted changes in how government contracts are awarded to save billions in such costs, and has directed agencies to sell excess or underused real estate.
Obama also has established a special commission that is due to report after the November midterm elections on what spending cuts, higher taxes or combination of the two are needed to control future budget deficits.