| Home > 106th Congressional Bills > H.R. 1827 (rh) To improve the economy and efficiency of Government operations by requiring the use of recovery audits by Federal agencies. [Reported in House] ...
H.R. 1827 (rh) To improve the economy and efficiency of Government operations by requiring the use of recovery audits by Federal agencies. [Reported in House] ...
106th CONGRESS 2d Session H. R. 1827 _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES March 9, 2000 Received; read twice and referred to the Committee on Governmental Affairs _______________________________________________________________________ AN ACT To improve the economy and efficiency of Government operations by requiring the use of recovery audits and recovery activity by Federal agencies. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION. 1. SHORT TITLE. This Act may be cited as the ``Government Waste Corrections Act of 2000''. SEC. 2. FINDINGS AND PURPOSES. (a) Findings.--The Congress finds the following: (1) Overpayments are a serious problem for Federal agencies, given the magnitude and complexity of Federal operations and documented and widespread financial management weaknesses. Federal agency overpayments waste tax dollars and detract from the efficiency and effectiveness of Federal operations by diverting resources from their intended uses. (2) In private industry, overpayments to providers of goods and services occur for a variety of reasons, including duplicate payments, pricing errors, and missed cash discounts, rebates, or other allowances. The identification and recovery of such overpayments, commonly referred to as ``recovery auditing and activity'', is an established private sector business practice with demonstrated large financial returns. On average, recovery auditing and activity in the private sector identify overpayment rates of 0.1 percent of purchases audited and result in the recovery of $1,000,000 for each $1,000,000,000 of purchases. (3) Recovery auditing and recovery activity already have been employed successfully in limited areas of Federal activity. They have great potential for expansion to many other Federal agencies and activities, thereby resulting in the recovery of substantial amounts of overpayments annually. Limited recovery audits conducted by private contractors to date within the Department of Defense have identified errors averaging 0.4 percent of Federal payments audited, or $4,000,000 for every $1,000,000,000 of payments. If fully implemented within the Federal Government, recovery auditing and recovery activity have the potential to recover billions of dollars in Federal overpayments annually. (b) Purposes.--The purposes of this Act are the following: (1) To ensure that overpayments made by the Federal Government that would otherwise remain undetected are identified and recovered. (2) To require the use of recovery audit and recovery activity by Federal agencies. (3) To provide incentives and resources to improve Federal management practices with the goal of significantly reducing Federal overpayment rates and other waste and error in Federal programs. SEC. 3. ESTABLISHMENT OF RECOVERY AUDIT REQUIREMENT. (a) Establishment of Requirement.--Chapter 35 of title 31, United States Code, is amended by adding at the end the following: ``SUBCHAPTER VI--RECOVERY AUDITS ``Sec. 3561. Definitions ``In this subchapter, the following definitions apply: ``(1) Amounts collected.--The term `amounts collected' means monies received or credited, by any means, including setoff, by the United States Government. ``(2) Chief financial officer.--The term `Chief Financial Officer' means the official established by section 901 of this title, or the functional equivalent of such official in the case of any agency that does not have a Chief Financial Officer under that section. ``(3) Director.--The term `Director' means the Director of the Office of Management and Budget. ``(4) Disclose.--The term `disclose' means to release, publish, transfer, provide access to, or otherwise divulge individually identifiable information to any person other than the individual who is the subject of the information. ``(5) Facial-discrepancy payment error.--The term `facial- discrepancy payment error'-- ``(A) except as provided in subparagraph (B), means any payment error that results from, is substantiated by, or is identified as a result of information contained on any invoice, delivery order, bill of lading, statement of account, or other submission given to the Government by a supplier of goods or services in the usual and customary conduct of business, or as required by law or contract to substantiate payment for such goods or services, including any such document submitted electronically; and ``(B) does not include payment errors identified, resulting, or supported from documents that are-- ``(i) records of a proprietary nature, maintained solely by the supplier of goods or services; ``(ii) not specifically required to be provided to the Government by contract, law, regulation, or to substantiate payment; or ``(iii) submitted to the Government for evaluative purposes prior to the award of a contract, as part of the evaluation and award process. ``(6) Individually identifiable information.--The term `individually identifiable information' means any information, whether oral or recorded in any form or medium, that identifies the individual or with respect to which there is a reasonable basis to believe that the information can be used to identify the individual. ``(7) Oversight.--The term `oversight' means activities by a Federal, State, or local governmental entity, or by another entity acting on behalf of such a governmental entity, to enforce laws relating to, investigate, or regulate payment activities, recovery activities, and recovery audit activities. ``(8) Payment activity.--The term `payment activity' means an executive agency activity that entails making payments to vendors or other nongovernmental entities that provide property or services for the direct benefit and use of an executive agency. ``(9) Recovery audit.--The term `recovery audit' means a financial management technique applied internally by Government employees, or by private sector contractors, and used by executive agencies to audit their internal records to identify facial-discrepancy payment errors made by those executive agencies to vendors and other entities in connection with a payment activity, including facial-discrepancy payment errors that result from any of the following: ``(A) Duplicate payments. ``(B) Invoice errors. ``(C) Failure to provide applicable discounts, rebates, or other allowances. ``(D) Any other facial-discrepancy errors resulting in inaccurate payments. ``(10) Recovery activity.--The term `recovery activity' means executive agency activity otherwise authorized by law, including chapter 37 of this title, to attempt to collect an identified overpayment. ``(11) Recovery audit contractor.--The term `recovery audit contractor' means any person who has been hired by an executive agency to perform a recovery audit pursuant to a recovery audit contract. ``Sec. 3562. Recovery audit requirement ``(a) In General.--Except as exempted under section 3565(d) of this title, the head of each executive agency-- ``(1) shall conduct for each fiscal year recovery audits and recovery activity with respect to payment activities of the agency if such payment activities for the fiscal year total $500,000,000 or more (adjusted by the Director annually for inflation); ``(2) may conduct for any fiscal year recovery audits and recovery activity with respect to payment activities of the agency if such payment activities for the fiscal year total less than $500,000,000 (adjusted by the Director annually for inflation); and ``(3) may request that the Director exempt a payment activity, in whole or in part, from the requirement to conduct recovery audits under paragraph (1) if the head of the executive agency determines and can demonstrate that compliance with such requirement-- ``(A) would impede the agency's mission; or ``(B) would not, or would no longer be, cost- effective. ``(b) Procedures.--In conducting recovery audits and recovery activity under this section, the head of an executive agency-- ``(1) shall consult and coordinate with the Chief Financial Officer and the Inspector General of the agency to avoid any duplication of effort; ``(2) shall implement this section in a manner designed to ensure the greatest financial benefit to the Government; ``(3) may conduct recovery audits and recovery activity internally in accordance with the standards issued by the Director under section 3565(b)(2) of this title, or by procuring performance of recovery audits, or by any combination thereof; and ``(4) shall ensure that such recovery audits and recovery activity are carried out consistent with the standards issued by the Director under section 3565(b)(2) of this subchapter. ``(c) Scope of Audits.-- ``(1) In general.--Each recovery audit of a payment activity under this section shall cover payments made by the payment activity in the preceding fiscal year, except that the first recovery audit of a payment activity shall cover payments made during the fiscal year in which the Government Waste Corrections Act of 2000 is enacted, and payments made in the preceding fiscal year. ``(2) Additional fiscal years.--The head of an executive agency may conduct recovery audits of payment activities for additional preceding fiscal years if determined by the agency head to be practical and cost-effective subject to any statute of limitations constraints regarding recordkeeping under applicable law. ``(d) Recovery Audit Contracts.-- ``(1) Authority To Use Contingency Contracts.-- Notwithstanding section 3302(b) of this title, as consideration for performance of any recovery audit procured by an executive agency, the executive agency may pay the recovery audit contractor an amount equal to a percentage of the total amount collected by the United States as a result of overpayments identified by the contractor in the audit. ``(2) Additional functions of recovery audit contractor.-- ``(A) In general.--In addition to performance of a recovery audit, a contract for such performance may authorize the recovery audit contractor (subject to subparagraph (B)) to-- ``(i) notify any person of possible overpayments made to the person and identified in the recovery audit under the contract; and ``(ii) respond to questions concerning such overpayments. ``(B) Limitation.--A contract for performance of a recovery audit shall not affect-- ``(i) the authority of the head of an executive agency, or any other person, under the Contract Disputes Act of 1978 and other applicable laws, including the authority to initiate litigation or referrals for litigation; or ``(ii) the requirements of sections 3711, 3716, 3718, and 3720 of this title that the head of an agency resolve disputes, compromise, or terminate overpayment claims, collect by setoff, and otherwise engage in recovery activity with respect to overpayments identified by the recovery audit. ``(3) Limitation on authority.--Nothing in this subchapter shall be construed to authorize a recovery audit contractor with an executive agency-- ``(A) to require the production of any record or information by any person other than an officer, employee, or agent of the executive agency; and ``(B) to establish, or otherwise have a physical presence on the property or premises of any private sector entity as part of its contractual obligations to an executive agency. ``(4) Required contract terms and conditions.--The head of an executive agency shall include in each contract for procurement of performance of a recovery audit requirements that the contractor shall-- ``(A) protect from improper use, and protect from disclosure to any person who is internal or external to the firm of the recovery audit contractor and who is not directly involved in the identification or recovery of overpayments, otherwise confidential or proprietary business information, and any financial information, that may be viewed or obtained in the course of carrying out a recovery audit for an executive agency; ``(B) provide to the head of the executive agency and the Inspector General of the executive agency periodic reports on conditions giving rise to overpayments identified by the recovery audit contractor and any recommendations on how to mitigate such conditions; ``(C) notify the head of the executive agency and the Inspector General of the executive agency of any overpayments identified by the contractor pertaining to the executive agency or to another executive agency that are beyond the scope of the contract; and ``(D) promptly notify the head of the executive agency and the Inspector General of the executive agency of any indication of fraud or other criminal activity discovered in the course of the audit. ``(5) Executive agency action following notification.--The head of an executive agency shall take prompt and appropriate action in response to a notification by a recovery audit contractor pursuant to the requirements under paragraph (4), including forwarding to other executive agencies any information that applies to them. ``(6) Contracting requirements.--Prior to contracting for any recovery audit, the head of an executive agency shall conduct a public-private cost comparison process. The outcome of the cost comparison process shall determine whether the recovery audit is performed in-house or by a recovery audit contractor. ``(e) Inspectors General.--Nothing in this subchapter shall be construed as diminishing the authority of any Inspector General, including such authority under the Inspector General Act of 1978. ``(f) Relationship to Other Audit Authority.--Nothing in this subchapter shall be construed as diminishing the authority granted under section 3726 of this title.
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