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Union Calendar No. 270
106th CONGRESS
1st Session
H. R. 1827
[Report No. 106-474]
_______________________________________________________________________
A BILL
To improve the economy and efficiency of Government operations by
requiring the use of recovery audits by Federal agencies.
_______________________________________________________________________
November 17, 1999
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
Union Calendar No. 270
106th CONGRESS
1st Session
H. R. 1827
[Report No. 106-474]
To improve the economy and efficiency of Government operations by
requiring the use of recovery audits by Federal agencies.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 17, 1999
Mr. Burton of Indiana (for himself, Mr. Armey, and Mr. Ose) introduced
the following bill; which was referred to the Committee on Government
Reform
November 17, 1999
Additional sponsors: Mr. Sessions, Mr. Goode, Mr. Doolittle, Mr.
McHugh, Mr. Terry, Mr. Souder, Mr. English, Mrs. Myrick, Mr. Shays, Mr.
Walden of Oregon, Mr. Goodling, Mr. LaTourette, Mrs. Kelly, Mr.
Schaffer, Mr. Lazio, Mr. Sam Johnson of Texas, Mr. Knollenberg, Mr.
Gilman, Mr. Ryan of Wisconsin, Mr. Metcalf, Mr. Calvert, Mr. Stearns,
Mr. Turner, and Mr. Foley
November 17, 1999
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on May 17,
1999]
_______________________________________________________________________
A BILL
To improve the economy and efficiency of Government operations by
requiring the use of recovery audits 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
1999''.
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) Director.--The term `Director' means the Director of
the Office of Management and Budget.
``(2) 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.
``(3) 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.
``(4) 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.
``(5) 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.
``(6) Recovery audit.--The term `recovery audit' means a
financial management technique used to identify overpayments
made by executive agencies with respect to vendors and other
entities in connection with a payment activity, including
overpayments that result from any of the following:
``(A) Duplicate payments.
``(B) Pricing errors.
``(C) Failure to provide applicable discounts,
rebates, or other allowances.
``(D) Inadvertent errors.
``(7) Recovery activity.--The term `recovery activity'
means activity otherwise authorized by law, including chapter
37 of this title, to attempt to collect an identified
overpayment--
``(A) within 180 days after the date the
overpayment is identified; and
``(B) through established professional practices.
``Sec. 3562. Recovery audit requirement
``(a) In General.--Except as exempted by the Director 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); and
``(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).
``(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;
``(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) Each recovery audit of a payment
activity under this section shall cover payments made by the payment
activity in a fiscal year, except that the first recovery audit of a
payment activity shall cover payments made during the 2 consecutive
fiscal years preceding the date of the enactment of the Government
Waste Corrections Act of 1999.
``(2) 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.
``(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 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 contractor.--(A) In addition
to performance of a recovery audit, a contract for such
performance may authorize the 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) A contract for performance of a recovery audit shall
not affect--
``(i) the authority of the head of an executive
agency 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 contractor with an executive
agency to require the production of any record or information
by any person other than an officer, employee, or agent of the
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 disclosure otherwise
confidential business information and financial
information;
``(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 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 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 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) Privacy Protections.--
``(1) Limitation on disclosure of individually identifiable
information.--(A) Any nongovernmental entity that obtains
individually identifiable information through performance of
recovery auditing or recovery activity under this chapter may
disclose that information only for the purpose of such auditing
or activity, respectively, and oversight of such auditing or
activity, unless otherwise authorized by the individual that is
the subject of the information.
``(B) Any person that violates subparagraph (A) shall be
liable for any damages (including nonpecuniary damages, costs,
and attorneys fees) caused by the violation.
``(2) Destruction or return of information.--Upon the
conclusion of the matter or need for which individually
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