Authorizes such agencies to conduct recovery audits and activities in any fiscal year if the payment activities for the year total less than $500 million.
Makes amounts collected as a result of recovery audits available for specified purposes, including: (1) payment of audit contractors or agency audit costs; (2) agency management improvement programs; and (3) other agency appropriations. Requires 50 percent of amounts collected to be deposited into the Treasury. Makes provisions regarding collected amounts inapplicable to the extent inconsistent with existing law that authorizes the crediting of such amounts to other funds or accounts.
Directs heads of executive agencies required to conduct recovery audits to conduct management improvement programs. Requires the heads of such agencies, in conducting such programs, to address problems that contribute directly to agency payment errors. Authorizes such agencies to seek to reduce errors and waste in other programs by improving the agency's staff capabilities, information technology, and financial management.
Requires the Director to issue guidance and provide support to the executive agencies for implementation of this Act. Authorizes the Director to exempt agencies from the recovery audit requirement if compliance: (1) would impair the performance of the agency's mission; or (2) would not, or would no longer, be cost-effective. Exempts certain contracts from such requirement.
Authorizes a recovery audit pilot program for payment activities that involve payments to entities providing services or making payments for or on behalf of the Federal Government pursuant to grants, contracts, or other arrangements.
[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 3030 Introduced in Senate (IS)]
106th CONGRESS
2d Session
S. 3030
To amend title 31, United States Code, to provide for executive
agencies to conduct annual recovery audits and recovery activities, and
for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 12, 2000
Mr. Thompson introduced the following bill; which was read twice and
referred to the Committee on Governmental Affairs
_______________________________________________________________________
A BILL
To amend title 31, United States Code, to provide for executive
agencies to conduct annual recovery audits and recovery activities, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. RECOVERY AUDITS.
(a) Recovery Audit Requirement.--(1) 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:
``(1) Amounts collected.--The term `amounts collected'
means monies received or credited, by any means, including
offset, by the United States Government.
``(2) Chief financial officer.--The term `Chief Financial
Officer' means--
``(A) the official appointed or designated under
section 901 of this title; or
``(B) in the case of an executive agency that is
not required to have a Chief Financial Officer under
that section, an official of the agency whose authority
and functions are substantially equivalent to the
authority and functions of an agency Chief Financial
Officer under section 902 of this title.
``(3) Director.--The term `Director' means the Director of
the Office of Management and Budget.
``(4) Disclose.--The term `disclose', with respect to
individually identifiable information on any person, means
release, publish, transfer, provide access to, or otherwise
divulge the individually identifiable information to any other
person.
``(5) Facial-discrepancy payment error.--The term `facial-
discrepancy payment error'--
``(A) means, except as provided in subparagraph
(B), any error in a payment made by an executive agency
for goods or services that is apparent from a review of
the face of an invoice or other payment document that
is presented to the executive agency by the supplier of
the goods or services in the usual and customary
conduct of business or pursuant to a requirement in law
or a contract to substantiate the claim for the
payment, including any such document that is presented
electronically; and
``(B) does not include a payment error identified,
resulting, or supported from a document that is--
``(i) a record of a proprietary nature that
is maintained solely by the supplier of the
goods or services;
``(ii) not specifically required to be
presented to the executive agency by contract,
law, or regulation, or not necessary for the
substantiation of the claim for the payment; or
``(iii) submitted to the executive agency
for evaluative purposes before the award of the
contract under which the payment was made.
``(6) Individually identifiable information.--The term
`individually identifiable information', with respect to a
person, means any information, whether oral or recorded in any
form or medium, that identifies the person or with respect to
which there is a reasonable basis to believe that the
information can be used to identify the person.
``(7) Oversight.--The term `oversight', with respect to a
payment activity, recovery audit, or recovery activity, means
activities by a Federal, State, or local governmental entity to
enforce laws relating to, to investigate, or to regulate such
audit or activity.
``(8) Payment activity.--The term `payment activity' means
an executive agency activity to pay nongovernmental sources for
goods or services acquired from those sources by the agency to
support the performance of the agency's mission.
``(9) Recovery audit.--The term `recovery audit' means a
financial management technique of an executive agency that is
used by the executive agency to perform internal audits of its
records to identify facial-discrepancy payment errors that are
made by the executive agency 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 take advantage of applicable
discounts, rebates, or other allowances.
``(D) Any other similar facial-discrepancy payment
errors resulting in inaccurate payments, including
underpayments identified pursuant to guidance issued
under section 3565(b)(3) of this title.
``(10) Recovery activity.--The term `recovery activity'
means an executive agency activity to attempt to collect, under
the authority of chapter 37 of this title or any other
provision of law, a payment error identified in a recovery
audit.
``(11) Recovery audit contractor.--The term `recovery audit
contractor' means any private sector person who is obligated
under a contract entered into with an executive agency to
perform a recovery audit for the executive agency.
``Sec. 3562. Recovery audit requirement
``(a) In General.--Except as exempted under section 3566 of this
title, the head of each executive agency--
``(1) shall conduct each fiscal year--
``(A) recovery audits of the payment activities of
the agency for the preceding fiscal year if the payment
activities for the fiscal year total at least
$500,000,000 (adjusted by the Director annually for
inflation); and
``(B) the recovery activities determined warranted
with respect to those payment activities; and
``(2) may conduct in any fiscal year--
``(A) recovery audits of the payment activities of
the agency for the preceding fiscal year if the payment
activities for the fiscal year total less than
$500,000,000 (adjusted by the Director annually for
inflation); and
``(B) the recovery activities determined warranted
with respect to those payment activities.
``(b) Request for Exemption.--The head of an executive agency
required to conduct a recovery audit under subsection (a)(1) may
request that the Director exempt a payment activity, in whole or in
part, from that requirement if the head of the executive agency
determines and can demonstrate that the exemption is justified on any
basis described in section 3566(a) of this title.
``(c) Procedures.--
``(1) In general.--The head of each executive agency shall
prescribe procedures for the performance of recovery audits and
recovery activities in the agency that implement this section
in a manner designed to ensure the greatest financial benefit
to the United States.
``(2) Specific procedures.--In conducting recovery audits
and recovery activities under this section, the head of an
executive agency--
``(A) shall consult and coordinate with the Chief
Financial Officer and the Inspector General of the
agency to avoid any duplication of effort;
``(B) may conduct recovery audits and recovery
activities regarding payments by the executive agency
by using personnel of the agency's payment office
without reimbursement or payment for services in
accordance with the standards issued by the Director
under section 3565(b)(2) of this title, by procuring
the performance of recovery audits by contractors, or
by any combination of both methods; and
``(C) shall ensure that the recovery audits and
recovery activities are carried out consistent with the
standards issued by the Director under section
3565(b)(2) of this title.
``(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 head of 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 payment
errors identified by the recovery audit contractor in the
audit.
``(2) Construction.--
``(A) Relationship to other executive
authorities.--A contract for the performance of a
recovery audit shall not affect--
``(i) any authority of the head of an
executive agency, or any other person, under
the Contract Disputes Act of 1978 (41 U.S.C.
601 et seq.) and other applicable laws,
including 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 executive agency resolve disputes,
compromise, or terminate payment of error
claims, collect by offset, and otherwise engage
in recovery activities with respect to payment
errors identified by the recovery audit.
``(B) Contractor authorities and duties.--Nothing
in this subchapter shall be construed to authorize a
recovery audit contractor with an executive agency--
``(i) to require the production of any
record or information by any person other than
an officer, employee, or agent of the executive
agency; or
``(ii) 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.
``(3) Required contract terms and conditions.--The head of
an executive agency shall include in each contract for the
procurement of the performance of a recovery audit the
following requirements:
``(A) That the recovery audit contractor protect
from improper use and from disclosure to any person
inside or outside the recovery audit contractor's firm
who is not directly involved in the identification or
recovery of payment errors--
``(i) any financial information that is
viewed or obtained in the course of carrying
out a recovery audit for an executive agency;
and
``(ii) any other information so viewed or
obtained that has not been released for general
public use by the audited person or an
authorized agent of that person.
``(B) That the recovery audit contractor submit to
the head of the executive agency periodic reports on
conditions giving rise to payment errors identified by
the recovery audit contractor and any recommendations
on how to mitigate such conditions.
``(C) That the recovery audit contractor notify the
head of the executive agency of any payment errors
identified by the contractor pertaining to the
executive agency or to another executive agency that
are beyond the scope of the contract.
``(D) That the recovery audit contractor promptly
notify the head of the executive agency of any
indication of fraud or other criminal activity
discovered in the course of the audit.
``(4) 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 (3),
including forwarding to the head of another executive agency
any information that applies to that agency.
``(5) Contracting requirements.--Before contracting for any
recovery audit, the head of an executive agency shall determine
and compare the cost of using employees of the United States to
perform the audit and the cost of procuring the performance of
the audit from the private sector. The head of the executive
agency shall use the outcome of the cost comparison process to
determine whether to use the employees of the United States or
to procure recovery audit services from the private sector.
``(e) Relationship to Authority of Inspectors General.--Nothing in
this subchapter shall be construed as impairing the authority of an
Inspector General under the Inspector General Act of 1978 or any other
provision of law.
``(f) Relationship to Requirements for Payments for
Transportation.--Nothing in this subchapter shall be construed to
affect the requirements and authorities provided in section 3726 of
this title.
``(g) Privacy Protections.--
``(1) Limitation on disclosure of individually identifiable
information.--
``(A) Restriction.--Any recovery audit contractor
that obtains individually identifiable information on a
person through the performance of a recovery audit or
recovery activity under this subchapter may disclose
that information only for the purpose of such audit or
activity, respectively, and for the oversight of such
audit or activity, unless otherwise authorized by that
person.
``(B) Sanctions.--Any person that violates
subparagraph (A) shall be liable for any damages
(including nonpecuniary damages, costs, and attorneys'
fees) caused by the violation.
``(2) Return of information.--
``(A) Requirement.--Upon the date determined under
subparagraph (B), a recovery audit contractor having
possession of individually identifiable information
disclosed in the course of a recovery audit or recovery
activity that is performed under this subchapter by the
recovery audit contractor shall return it to the person
from whom it was obtained unless another applicable law
requires retention of the information.
``(B) Time for return of information.--The date
referred to in subparagraph (A) is the date of the
conclusion of the matter or need for which the
information was disclosed, except that if, on that
date, the recovery audit contractor has actual notice
of any oversight of the recovery audit or recovery
activity, the date referred to in subparagraph (A) is
the date of the conclusion of such oversight.
``Sec. 3563. Disposition of amounts collected
``(a) In General.--Notwithstanding section 3302(b) of this title,
the total amount collected in a fiscal year by the United States as a
result of recovery audits by an executive agency under this subchapter
shall be disposed of in accordance with this section.
``(b) Use for Recovery Audit Costs.--
``(1) Contractor payments.--Amounts referred to in
subsection (a) shall be available to the executive agency to
pay amounts owed to any recovery audit contractor for
performance of the audit.
``(2) Other costs.--Subject to the limitation in subsection
(e), amounts referred to in subsection (a) shall be available
to the executive agency--
``(A) to reimburse any applicable appropriation for
other recovery audit costs incurred by the executive
agency with respect to the audit; and
``(B) to pay any fees authorized under chapter 37
of this title.
``(c) Use for Management Improvement Program.--Subject to the
limitation in subsection (e), up to a total of 25 percent (as
determined under the guidance issued under section 3565 of this title)
of the amount referred to in subsection (a)--
``(1) shall be available to the executive agency to carry
out the management improvement program of the agency under
section 3564 of this title; and
``(2) may be credited for that purpose by the head of the
executive agency to any agency appropriation that is available
for obligation at the time of the collection and shall be
merged with other amounts in, and shall remain available for
the same period as, the appropriation to which credited.
``(d) Remainder to Treasury.--Subject to the limitation in
subsection (e), there shall be deposited into the Treasury as
miscellaneous receipts a sum equal to--
``(1) 50 percent of the amount referred to in subsection
(a); plus
``(2) any of that amount that remains unallocated after the
application of subsections (b) and (c).
``(e) Limitation on Application.--
``(1) In general.--This section does not apply to amounts
collected through recovery audits and recovery activities to
the extent that such application would be inconsistent with
another provision of law that authorizes the crediting of the
amounts to a nonappropriated fund instrumentality, revolving
fund, working-capital fund, trust fund, or other fund or
account.
``(2) Amounts paid out of currently available funds.--
Subsections (b)(2), (c), and (d) shall not apply to amounts
collected through recovery audits and recovery activities that
were paid out of an appropriation or fund that remains
available for obligation at the time the amounts are collected.
``Sec. 3564. Management improvement program
``(a) In General.--
``(1) Required program.--The head of each executive agency
that is required to conduct recovery audits under section 3562
of this title shall conduct a management improvement program
under this section, consistent with guidelines prescribed by
the Director.
``(2) Discretionary program.--The head of any other
executive agency that conducts recovery audits under section
3562 of this title that meet the standards issued by the
Director under section 3565(b)(2) may conduct a management
improvement program under this section.
``(b) Program Features.--In conducting a management improvement
program under this section, the head of an executive agency--
``(1) shall, as the first priority of the program, address
problems that contribute directly to payment errors of the
executive agency; and
``(2) may seek to reduce errors and waste in other programs
and operations of that executive agency by improving the
executive agency's staff capabilities, information technology,
and financial management.
``(c) Integration With Other Activities.--The head of an executive
agency--
``(1) subject to paragraph (2), may integrate the program
under this section, in whole or in part, with other management
improvement programs and activities of that agency or other
executive agencies; and
``(2) shall retain the ability to account specifically for
the use of amounts available to the executive agency under
section 3563 of this title.
``Sec. 3565. Responsibilities of the Director of the Office of
Management and Budget
``(a) In General.--The Director shall coordinate and oversee the
implementation of this subchapter.
``(b) Guidance.--
``(1) In general.--The Director, in consultation with the
Chief Financial Officers Council and the President's Council on
Integrity and Efficiency, shall issue guidance and provide
support to the executive agencies for the implementation of
this subchapter.
``(2) Recovery audit standards.--The Director shall include
in the guidance standards for the performance of recovery
audits under this subchapter. The Director shall develop the
guidance in consultation with the Comptroller General and
private sector experts on recovery audits, including such
experts who use recovery auditing as part of their financial
management procedures.
``(3) Treatment of underpayments.--The guidance developed
under this subsection shall include specific standards and
procedures for the identification and disposition of facial-
discrepancy payment errors that result in underpayments to
vendors.
``(c) Fee Limitations.--The Director may limit the percentage
amounts that may be paid to recovery audit contractors under section
3562(d)(1) of this title.
``Sec. 3566. Exemptions
``(a) In General.--The Director may exempt an executive agency, in
whole or in part, from the requirement to conduct recovery audits under
section 3562(a)(1) of this title if the Director determines that
compliance with the requirement--
``(1) would impair the performance of the agency's mission;
or
``(2) would not, or would no longer, be cost-effective.
``(b) Report to Congress.--The Director shall promptly report the
basis of any determination made and exemption granted under subsection
(a)(1) to Congress.
``(c) Exemption of Certain Contracts.--The requirements of section
3562(a) of this title shall not apply to any of the following
contracts:
``(1) A contract that provides for periodic audit of
invoices pursuant to section 2313 of title 10 or section 304C
of the Federal Property and Administrative Services Act of 1949
(41 U.S.C. 254d).
``(2) A contract for which cost or pricing data were
required to be provided pursuant to section 2306a of title 10
or section 304A of the Federal Property and Administrative
Services Act of 1949 (41 U.S.C. 254b).
``(3) A contract that is subject to cost accounting
standards issued by the Cost Accounting Standards Board under
section 26 of the Office of Federal Procurement Policy Act (41
U.S.C. 422).''.
(2) The table of sections at the beginning of such chapter 35 is
amended by adding at the end the following:
``SUBCHAPTER VI--RECOVERY AUDITS
``Sec.
``3561. Definitions.
``3562. Recovery audit requirement.
``3563. Disposition of amounts collected.
``3564. Management improvement program.
``3565. Responsibilities of the Director of the Office of Management
and Budget.
``3566. Exemptions.''.
(b) Application to All Executive Agencies.--Section 3501 of title
31, United States Code, is amended by inserting ``and subchapter VI of
this chapter'' after ``section 3513''.
(c) Initial OMB Guidance.--The Director of the Office of Management
and Budget shall issue initial guidance under section 3565(b) of title
31, United States Code (as added by subsection (a)), not later than 180
days after the date of the enactment of this Act. The initial guidance
shall include the standards required by paragraph (2) of such section.
(d) Initial Recovery Audits.--(1) The head of each executive agency
shall begin the first recovery audit under section 3562(a)(1) of title
31, United States Code (as added by subsection (a)), for payment
activities referred to in that section by not later than 18 months
after the date of the enactment of this Act.
(2) The first recovery audit shall cover fiscal year 2001, the
preceding fiscal year, and any additional fiscal years before fiscal
year 2000 that the head of the executive agency determines that it is
practical and cost-effective to conduct, subject to any limitation
regarding the period for recordkeeping that is provided under
applicable law.
(e) Use of Results.--A determination of whether an individual is an
original source for the purposes of section 3730(e)(4) of title 31,
United States Code, may not be based in whole or in part on results of
any recovery audit conducted under section 3562 of such title.
(f) Recovery Audit Pilot Programs.--(1) The Director of the Office
of Management and Budget may designate one or more executive agencies
to carry out a recovery audit pilot program for payment activities not
described in section 3561(8) of title 31, United States Code (as added
by subsection (a)), that involve payments to entities providing
services or making payments for or on behalf of the Federal Government
pursuant to contracts, grants, or other arrangements with the executive
agency or agencies. The Director shall consult with the head of the
executive agency before designating an executive agency to carry out a
pilot program under this subsection.
(2) The purposes of a pilot program of an executive agency under
this subsection are as follows:
(A) To test the feasibility and effectiveness of conducting
recovery audits with respect to payment activities other than
those related to Federal contracts for the procurement of goods
or services to support the performance of the executive
agency's mission.
(B) To develop best practices for conducting recovery
audits with respect to such payment activities.
(3) A recovery audit pilot program conducted under this subsection
shall be subject to the same authorities, conditions, and limitations
as other recovery audits conducted under subchapter VI of chapter 35 of
title 31, United States Code (as added by subsection (a)).
(g) Reports.--(1) Not later than 30 months after the date of the
enactment of this Act, and annually for each of the two years
thereafter, the Director of the Office of Management and Budget shall
submit a report on the implementation of subchapter VI of chapter 35 of
title 31, United States Code (as added by subsection (a)), to the
President and Congress. Each report shall include the following:
(A) A general description and evaluation of the steps taken
by the heads of executive agencies to conduct recovery audits,
including an inventory of the programs and activities of each
executive agency that are subject to recovery audits.
(B) An assessment of the benefits of recovery audits and
recovery activities, including amounts identified and recovered
(including by administrative offset).
(C) An identification of best practices that could be
applied to future recovery audits and recovery activities.
(D) An identification of any significant problems or
barriers to more effective performance of recovery audits and
recovery activities.
(E) A description of executive agency expenditures in the
recovery audit process.
(F) A description of executive agency management
improvement programs under section 3564 of title 31, United
States Code (as added by subsection (a)).
(G) Any recommendations for changes in executive agency
practices or law or other improvements that the Director
believes would enhance the effectiveness of the performance of
executive agency recovery audits.
(H) A description and evaluation of each recovery audit
pilot program conducted under subsection (f).
(2) Not later than 60 days after the submittal of each report under
paragraph (1), the Comptroller General of the United States shall
submit a report on the implementation of subchapter VI of chapter 35 of
title 31, United States Code, to Congress and the Director of the
Office of Management and Budget.
(h) Study.--(1) The Director of the Office of Management and Budget
shall conduct a study of the effects of recovery audits conducted by
the heads of executive agencies. The effects identified in the study
shall include any significant problems relating to the provision of
improper or inadequate notice of recovery audits to persons who are
audited.
(2) The Director shall submit a report on the study to Congress.
The report shall contain the Director's findings, conclusions, and
recommendations resulting from the study.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S8415-8416)
Read twice and referred to the Committee on Governmental Affairs.
Committee on Governmental Affairs. Ordered to be reported without amendment favorably.
Committee on Governmental Affairs. Reported by Senator Thompson without amendment. With written report No. 106-502. Additional views filed.
Committee on Governmental Affairs. Reported by Senator Thompson without amendment. With written report No. 106-502. Additional views filed.
Placed on Senate Legislative Calendar under General Orders. Calendar No. 950.
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