[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2583 Reported in Senate (RS)]
Calendar No. 1103
110th CONGRESS
2d Session
S. 2583
To amend the Improper Payments Information Act of 2002 (31 U.S.C. 3321
note) in order to prevent the loss of billions in taxpayer dollars.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 31, 2008
Mr. Carper (for himself and Mrs. McCaskill) introduced the following
bill; which was read twice and referred to the Committee on Homeland
Security and Governmental Affairs
October 1 (legislative day, September 17), 2008
Reported by Mr. Lieberman, with an amendment
[Strike out all after the enacting clause and insert the part printed
in italic]
_______________________________________________________________________
A BILL
To amend the Improper Payments Information Act of 2002 (31 U.S.C. 3321
note) in order to prevent the loss of billions in taxpayer dollars.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
<DELETED>SECTION 1. SHORT TITLE.</DELETED>
<DELETED> This Act may be cited as the ``Improper Payments
Elimination and Recovery Act of 2008''.</DELETED>
<DELETED>SEC. 2. IMPROPER PAYMENTS ELIMINATION AND RECOVERY.</DELETED>
<DELETED> (a) Susceptible Programs and Activities.--Section 2 of the
Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is
amended by striking subsection (a) and inserting the
following:</DELETED>
<DELETED> ``(a) Identification of Susceptible Programs and
Activities.--</DELETED>
<DELETED> ``(1) In general.--The head of each agency shall,
in accordance with guidance prescribed by the Director of the
Office of Management and Budget, annually review all programs
and activities that it administers and identify all such
programs and activities that may be susceptible to significant
improper payments.</DELETED>
<DELETED> ``(2) Annual risk assessment.--</DELETED>
<DELETED> ``(A) Definition.--In this paragraph the
term `significant' means that improper payments in the
program or activity in the preceding fiscal year
exceeded--</DELETED>
<DELETED> ``(i) 2.5 percent of all program
or activity payments made during that fiscal
year; or</DELETED>
<DELETED> ``(ii) $10,000,000.</DELETED>
<DELETED> ``(B) Risk assessment.--The review under
paragraph (1) shall include a risk assessment that
includes--</DELETED>
<DELETED> ``(i) a systematic process for
producing a statistically valid estimate of the
level of improper payments being made by the
agency; and</DELETED>
<DELETED> ``(ii) an identification of the
risks for each program and activity resulting
from the estimates made under clause
(i).''.</DELETED>
<DELETED> (b) Reports on Actions To Reduce Improper Payments.--
Section 2 of the Improper Payments Information Act of 2002 (31 U.S.C.
3321 note) is amended by striking subsection (c) and inserting the
following:</DELETED>
<DELETED> ``(c) Reports on Actions To Reduce Improper Payments.--
With respect to any program or activity of an agency with estimated
improper payments under subsection (b), the head of the agency shall
provide with the estimate under subsection (b) a report on what actions
the agency is taking to reduce the improper payments, including--
</DELETED>
<DELETED> ``(1) a discussion of the causes of the improper
payments identified, actions planned or taken to correct those
causes, and the planned or actual completion date of the
actions taken to address those causes;</DELETED>
<DELETED> ``(2) in order to reduce improper payments to
minimal cost-effective levels, a statement of whether the
agency has--</DELETED>
<DELETED> ``(A) the internal controls, including
information systems;</DELETED>
<DELETED> ``(B) the human capital; and</DELETED>
<DELETED> ``(C) other infrastructure the agency
needs;</DELETED>
<DELETED> ``(3) if the agency does not have the internal
controls, a description of the resources the agency has
requested in its budget submission to establish the internal
controls;</DELETED>
<DELETED> ``(4) a description of the steps the agency has
taken to ensure that agency managers (including the head of the
agency) are held accountable for establishing the appropriate
internal controls, including an appropriate control
environment, that prevent improper payments from occurring and
promptly detect and collect improper payments made;
and</DELETED>
<DELETED> ``(5) a statement of whether or not the agency
has--</DELETED>
<DELETED> ``(A) conducted annual improper payment
risk assessments;</DELETED>
<DELETED> ``(B) developed and implemented improper
payment control plans; and</DELETED>
<DELETED> ``(C) implemented appropriate improper
payment detection, investigation, reporting, and data
collection procedures and processes.''.</DELETED>
<DELETED> (c) Reports on Recovery Actions and Governmentwide
Reporting.--</DELETED>
<DELETED> (1) In general.--Section 2 of the Improper
Payments Information Act of 2002 (31 U.S.C. 3321 note) is
amended--</DELETED>
<DELETED> (A) by redesignating subsections (d), (e),
and (f) as subsections (f), (g), and (h), respectively;
and</DELETED>
<DELETED> (B) by inserting after subsection (c) the
following:</DELETED>
<DELETED> ``(d) Reports on Actions To Recover Improper Payments.--
With respect to any improper payments identified in recovery audits
conducted under section 2(g) of the Improper Payments Elimination and
Recovery Act of 2008, the head of the agency shall provide with the
estimate under subsection (b) a report on what actions the agency is
taking to recover improper payments, including--</DELETED>
<DELETED> ``(1) the types of errors from which improper
payments resulted;</DELETED>
<DELETED> ``(2) a discussion of the methods used by the
agency to recover improper payments;</DELETED>
<DELETED> ``(3) the amounts recovered, outstanding, and
determined to not be collectable; and</DELETED>
<DELETED> ``(4) an aging schedule of the amounts
outstanding.</DELETED>
<DELETED> ``(e) Governmentwide Reporting of Improper Payments.--
</DELETED>
<DELETED> ``(1) Department of the treasury.--The Secretary
of the Treasury shall include in each report submitted under
section 331(a) of title 31, United States Code, the improper
payment information reported by the agencies on a
governmentwide basis.</DELETED>
<DELETED> ``(2) Office of management and budget.--The
Director of the Office of Management and Budget shall--
</DELETED>
<DELETED> ``(A) coordinate with the Secretary of the
Treasury in the preparation of the information to be
reported under paragraph (1); and</DELETED>
<DELETED> ``(B) prescribe regulations for--
</DELETED>
<DELETED> ``(i) the information required to
be reported; and</DELETED>
<DELETED> ``(ii) a format of reporting such
information on a governmentwide basis to be
used by agencies.''.</DELETED>
<DELETED> (2) Technical and conforming amendment.--Section
331(a) of title 31, United States Code, is amended--</DELETED>
<DELETED> (A) in paragraph (6), by striking ``and''
after the semicolon;</DELETED>
<DELETED> (B) in paragraph (7), by striking the
period and inserting ``; and''; and</DELETED>
<DELETED> (C) by adding at the end the
following:</DELETED>
<DELETED> ``(8) the improper payments information required
under section 2(e) of the Improper Payments Information Act of
2002 (31 U.S.C. 3321 note).''.</DELETED>
<DELETED> (d) Definitions.--Section 2 of the Improper Payment
Information Act of 2002 (31 U.S.C. 3321 note) is amended by striking
subsection (g) (as redesignated by this section) and inserting the
following:</DELETED>
<DELETED> ``(g) Definitions.--In this section:</DELETED>
<DELETED> ``(1) Agency.--The term `agency' means an
executive agency, as that term is defined in section 102 of
title 31, United States Code.</DELETED>
<DELETED> ``(2) Improper payment.--The term `improper
payment'--</DELETED>
<DELETED> ``(A) means any payment that should not
have been made or that was made in an incorrect amount
(including overpayments and underpayments) under
statutory, contractual, administrative, or other
legally applicable requirements; and</DELETED>
<DELETED> ``(B) includes any payment to an
ineligible recipient, any payment for an ineligible
good or service, any duplicate payment, payments for
services not received, and any payment that does not
account for credit for applicable discounts.</DELETED>
<DELETED> ``(3) Payment.--The term `payment' means any
transfer or commitment for future transfer of cash, in-kind
benefits, goods, services, loans and loan guarantees, insurance
subsidies, and other items of value between Federal agencies
and their employees, vendors, partners, and beneficiaries, and
parties to contracts, grants, leases, cooperative agreements,
or any other procurement mechanism, that is--</DELETED>
<DELETED> ``(A) made by a Federal agency, a Federal
contractor, or a governmental or other organization
administering a Federal program or activity;
and</DELETED>
<DELETED> ``(B) derived from Federal funds or other
Federal resources or that will be reimbursed from
Federal funds or other Federal resources.</DELETED>
<DELETED> ``(4) Payment for an ineligible good or service.--
The term `payment for an ineligible good or service' shall
include a payment for any good or service that is in violation
of any provision of any contract, grant, lease, cooperative
agreement, or any other procurement mechanism, including any
provision relating to quantity, quality, or
timeliness.''.</DELETED>
<DELETED> (e) Guidance by the Office of Management and Budget.--
Section 2 of the Improper Payments Information Act of 2002 (31 U.S.C.
3321 note) is amended by striking subsection (h) (as redesignated by
this section) and inserting the following:</DELETED>
<DELETED> ``(h) Guidance by the Office of Management and Budget.--
</DELETED>
<DELETED> ``(1) In general.--Not later than 6 months after
the date of enactment of the Improper Payments Elimination and
Recovery Act of 2008, the Director of the Office of Management
and Budget shall prescribe updated guidance to implement and
provide for full compliance with the requirements of this
section. The guidance shall not include any exemptions not
specifically authorized by this section.</DELETED>
<DELETED> ``(2) Contents.--The updated guidance under
paragraph (1) shall prescribe--</DELETED>
<DELETED> ``(A) the form of the reports on actions
to reduce improper payments, recovery actions, and
governmentwide reporting; and</DELETED>
<DELETED> ``(B) strategies for addressing risks and
establishing appropriate prepayment and postpayment
internal controls.''.</DELETED>
<DELETED> (f) Internal Controls.--</DELETED>
<DELETED> (1) Report on effectiveness of a-123
implementation.--The President's Council on Integrity and
Efficiency shall conduct a study of the effectiveness of
implementation of the Office of Management and Budget's
Circular No. A-123 (revised), Management's Responsibility for
Internal Control at preventing improper payments or addressing
internal control problems that contribute to improper payments,
and not later than 1 year after the date of enactment of this
Act, submit a report on the study to--</DELETED>
<DELETED> (A) the Committee on Homeland Security and
Governmental Affairs of the Senate;</DELETED>
<DELETED> (B) the Committee on Oversight and
Government Reform of the House of
Representatives;</DELETED>
<DELETED> (C) the Director of the Office of
Management and Budget; and</DELETED>
<DELETED> (D) the Comptroller General.</DELETED>
<DELETED> (2) Consultation and cooperation.--The President's
Council on Integrity and Efficiency shall consult and cooperate
with the committees and director described under paragraph (1)
to ensure the nature and scope of the study under paragraph (1)
will address the needs on those committees and the Director of
the Office of Management and Budget, including how the
implementation of Circular No. A-123 (revised) has helped to
identify, report, prevent, and recover improper
payments.</DELETED>
<DELETED> (3) Determination of agency readiness for opinion
on internal control.--Not later than 1 year after the date of
enactment of the Improper Payments Elimination and Recovery Act
of 2008, the Director of the Office of Management and Budget
shall develop--</DELETED>
<DELETED> (A) specific criteria as to when an agency
should initially be required to obtain an opinion on
internal control over financial reporting;
and</DELETED>
<DELETED> (B) criteria for an agency that has
demonstrated a stabilized, effective system of internal
control over financial reporting, whereby the agency
would qualify for a multiyear cycle for obtaining an
audit opinion on internal control over financial
reporting, rather than an annual cycle.</DELETED>
<DELETED> (g) Recovery Audits.--An agency with outlays of $1,000,000
or more in any fiscal year shall conduct a recovery audit (as that term
is defined by the Director of the Office of Management and Budget under
section 3561 of title 31, United States Code) of all programs and
activities, if the agency determines that--</DELETED>
<DELETED> (1) conducting an internal recovery audit would be
effective; or</DELETED>
<DELETED> (2) a prior audit has identified improper payments
that can be recouped and it is cost beneficial for a recovery
activity to recapture those funds.</DELETED>
<DELETED> (h) Report on Recovery Auditing.--Not later than 180 days
after the date of the enactment of this Act, the Chief Financial
Officers Council established under section 302 of the Chief Financial
Officers Act of 1990 (31 U.S.C. 901 note) and the President's Council
on Integrity and Efficiency established under Executive Order 12805 of
May 11, 1992, in consultation with recovery audit experts, shall--
</DELETED>
<DELETED> (1) jointly conduct a study of the potential costs
and benefits of requiring Federal agencies to recover improper
payments using the services of--</DELETED>
<DELETED> (A) private contractors;</DELETED>
<DELETED> (B) agency employees;</DELETED>
<DELETED> (C) cross-servicing from other agencies;
or</DELETED>
<DELETED> (D) any combination of the provision of
services described under subparagraphs (A) through (C);
and</DELETED>
<DELETED> (2) submit a report on the results of the study
to--</DELETED>
<DELETED> (A) the Committee on Homeland Security and
Governmental Affairs of the Senate;</DELETED>
<DELETED> (B) the Committee on Oversight and
Government Reform of the House of Representatives;
and</DELETED>
<DELETED> (C) the Comptroller General.</DELETED>
<DELETED>SEC. 3. COMPLIANCE.</DELETED>
<DELETED> (a) Definitions.--In this section:</DELETED>
<DELETED> (1) Agency.--The term ``agency'' has the meaning
given under section 2(f) of the Improper Payments Information
Act of 2002 (31 U.S.C. 3321 note) as redesignated by this
Act.</DELETED>
<DELETED> (2) Compliance.--The term ``compliance'' means
that the agency--</DELETED>
<DELETED> (A) has published a performance report for
the most recent fiscal year and posted that report on
the agency website;</DELETED>
<DELETED> (B) has conducted a program specific risk
assessment for each program or activity that--
</DELETED>
<DELETED> (i) is in compliance with section
2(a) the Improper Payments Information Act of
2002 (31 U.S.C. 3321 note); and</DELETED>
<DELETED> (ii) is included in the
performance report;</DELETED>
<DELETED> (C) publishes program specific improper
payments estimates for all programs and activities
identified under section 2(b) of the Improper Payments
Information Act of 2002 (31 U.S.C. 3321 note) in the
performance report;</DELETED>
<DELETED> (D) publishes programmatic corrective
action plans prepared under section 2(c) of the
Improper Payments Information Act of 2002 (31 U.S.C.
3321 note) that the agency may have in the performance
report;</DELETED>
<DELETED> (E) publishes Office of Management and
Budget approved improper payments reduction targets in
the performance report for each program assessed to be
at risk, and is determined by the Office of Management
and Budget to be actively meeting such
targets;</DELETED>
<DELETED> (F) publishes the compliance report under
subsection (c) in the performance report; and</DELETED>
<DELETED> (G) is not subject to the subsection
(d)(4).</DELETED>
<DELETED> (3) Delinquent program.--The term ``delinquent
program'' means a program which is partially or wholly
responsible for the determination of an agency being not in
compliance.</DELETED>
<DELETED> (4) Performance report.--The term ``performance
report'' means the performance and accountability report
referred to under section 3516(b) of title 31, United States
Code, or a program performance report under section 1116 of
that title.</DELETED>
<DELETED> (b) Annual Compliance Report by OMB.--</DELETED>
<DELETED> (1) In general.--Each year, the Director of the
Office of Management and Budget shall prepare a report with an
identification of--</DELETED>
<DELETED> (A) the compliance status of each agency
under this section; and</DELETED>
<DELETED> (B) the delinquent programs responsible
for that status.</DELETED>
<DELETED> (2) Inclusion in budget submission.--The Director
of Office of the Management and Budget shall include the report
described under paragraph (1) in the annual budget submitted
under section 1105 of title 31, United States Code.</DELETED>
<DELETED> (c) Annual Compliance Report by Inspector General.--
</DELETED>
<DELETED> (1) In general.--Each fiscal year, the Inspector
General of each agency shall determine whether the agency is in
compliance with the Improper Payments Information Act of 2002
(31 U.S.C. 3321 note) and this Act and submit a report to the
head of the agency on that determination.</DELETED>
<DELETED> (2) Preparation of report.--The Inspector General
of each agency may enter into contracts and other arrangements
with public agencies and with private persons for the
preparation of financial statements, studies, analyses, and
other services in preparing the report described under
paragraph (1).</DELETED>
<DELETED> (3) Inclusion in performance report.--The head of
each agency shall include the report of the agency Inspector
General described under paragraph (1) in the performance
report.</DELETED>
<DELETED> (d) Remediation Assistance.--</DELETED>
<DELETED> (1) Voluntary remediation assistance.--If an
agency is determined by the agency Inspector General not to be
in compliance under subsection (c) in a fiscal year, the head
of the agency may transfer funds from any available
appropriations of that agency for expenditure on intensified
compliance for any delinquent program (notwithstanding any
appropriations transfer authority limitation in any other
provision of law).</DELETED>
<DELETED> (2) Required remediation assistance.--If an agency
is determined by the agency Inspector General not to be in
compliance under subsection (c) for 2 consecutive fiscal years,
the head of the agency shall transfer funds from any available
appropriations of that agency to expend on intensified
compliance (notwithstanding any appropriations transfer
authority limitation in any other provision of law).</DELETED>
<DELETED> (3) Remediation rescission.--</DELETED>
<DELETED> (A) In general.--If an agency is
determined by the agency Inspector General not to be in
compliance under subsection (c) for a period of 3
consecutive fiscal years and any delinquent program is
included in the report under that subsection for 2
consecutive years during that 3-fiscal year period, the
head of the agency shall transfer 5 percent of the
available appropriations for each of those delinquent
programs, as determined by the head of the agency, to
miscellaneous receipts of the United States
Treasury.</DELETED>
<DELETED> (B) Continuation of transfers.--The head
of an agency shall make transfers under subparagraph
(A) until the agency is determined to be in compliance
under subsection (b).</DELETED>
<DELETED> (4) Stop-loss provision.--If an agency is
determined under the Improper Payments Information Act of 2002
(31 U.S.C. 3321 note) to have an improper payment rate greater
than 15 percent for 3 consecutive fiscal years (regardless of
the whether the program is a delinquent program)--</DELETED>
<DELETED> (A) not later than 30 days after that
determination, the head of agency shall submit to
Congress proposals for statutory changes or other
relevant actions determined necessary to stop the
financial loss by the program; and</DELETED>
<DELETED> (B) no further appropriations for such
program shall be authorized until such time as the
inspector general of that agency submits a
certification to Congress that sufficient changes in
the program (whether those proposed by agency or
otherwise) have been implemented to warrant resumed
authorization of appropriations.</DELETED>
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Improper Payments Elimination and
Recovery Act of 2008''.
SEC. 2. IMPROPER PAYMENTS ELIMINATION AND RECOVERY.
(a) Susceptible Programs and Activities.--Section 2 of the Improper
Payments Information Act of 2002 (31 U.S.C. 3321 note) is amended by
striking subsection (a) and inserting the following:
``(a) Identification of Susceptible Programs and Activities.--
``(1) In general.--The head of each agency shall, in
accordance with guidance prescribed by the Director of the
Office of Management and Budget, periodically review all
programs and activities that the relevant agency head
administers and identify all programs and activities that may
be susceptible to significant improper payments.
``(2) Frequency.--Reviews under paragraph (1) shall be
performed for each program and activity that the relevant
agency head administers during the year after which the
Improper Payments Elimination and Recovery Act of 2008 is
enacted and at least once every 3 fiscal years thereafter.
``(3) Risk assessments.--
``(A) Definition.--In this subsection the term
`significant' means--
``(i) except as provided under clause (ii),
that improper payments in the program or
activity in the preceding fiscal year may have
exceeded--
``(I) $10,000,000 of all program or
activity payments made during that
fiscal year reported and 2.5 percent of
program outlays; or
``(II) greater than $100,000,000;
and
``(ii) with respect to fiscal years
following September 30th of a fiscal year
beginning before fiscal year 2013 as determined
by the Office of Management and Budget, that
improper payments in the program or activity in
the preceding fiscal year may have exceeded--
``(I) $10,000,000 of all program or
activity payments made during that
fiscal year reported and 1.5 percent of
program outlays; or
``(II) greater than $100,000,000.
``(B) Scope.--In conducting the reviews under
paragraph (1), the head of each agency shall take into
account those risk factors that are likely to
contribute to a susceptibility to significant improper
payments, such as--
``(i) whether the program or activity
reviewed is new to the agency;
``(ii) the complexity of the program or
activity reviewed;
``(iii) the volume of payments made through
the program or activity reviewed;
``(iv) whether payments or payment
eligibility decisions are made outside of the
agency, such as by a State or local government;
``(v) recent major changes in program
funding, authorities, practices, or procedures;
``(vi) the level and quality of training
for personnel responsible for making program
eligibility determinations or certifying that
payments are accurate; and
``(vii) significant deficiencies in the
audit report of the agency or other relevant
management findings that might hinder accurate
payment certification.''.
(b) Estimation of Improper Payments.--Section 2 of the Improper
Payments Information Act of 2002 (31 U.S.C. 3321 note) is amended by
striking subsection (b) and inserting the following:
``(b) Estimation of Improper Payments.--With respect to each
program and activity identified under subsection (a), the head of the
relevant agency shall--
``(1) annually produce a statistically valid or otherwise
appropriate estimate of the improper payments made by each
program and activity; and
``(2) include those estimates in the accompanying materials
to the annual financial statement of the agency required under
section 3515 of title 31, United States Code, or similar
provision of law and applicable guidance of the Office of
Management and Budget.''.
(c) Reports on Actions To Reduce Improper Payments.--Section 2 of
the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is
amended by striking subsection (c) and inserting the following:
``(c) Reports on Actions To Reduce Improper Payments.--With respect
to any program or activity of an agency with estimated improper
payments under subsection (b), the head of the agency shall provide
with the estimate under subsection (b) a report on what actions the
agency is taking to reduce improper payments, including--
``(1) a description of the causes of the improper payments,
actions planned or taken to correct those causes, and the
planned or actual completion date of the actions taken to
address those causes;
``(2) in order to reduce improper payments to a level below
which further expenditures to reduce improper payments would
cost more than the amount such expenditures would save in
prevented or recovered improper payments, a statement of
whether the agency has what is needed with respect to--
``(A) internal controls;
``(B) human capital; and
``(C) information systems and other infrastructure;
``(3) if the agency does not have sufficient resources to
establish and maintain effective internal controls under
paragraph (2)(A), a description of the resources the agency has
requested in its budget submission to establish and maintain
such internal controls;
``(4) program-specific and activity-specific improper
payments reduction targets that have been approved by the
Director of the Office of Management and Budget; and
``(5) a description of the steps the agency has taken to
ensure that agency managers, programs, and, where appropriate,
States and localities are held accountable through annual
performance appraisal criteria for--
``(A) meeting applicable improper payments
reduction targets; and
``(B) establishing and maintaining sufficient
internal controls, including an appropriate control
environment, that effectively--
``(i) prevent improper payments from being
made; and
``(ii) promptly detect and recover improper
payments that are made.''.
(d) Reports on Actions To Recover Improper Payments.--Section 2 of
the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is
amended--
(1) by striking subsection (e);
(2) by redesignating subsections (d) and (f) as subsections
(f) and (g), respectively; and
(3) by inserting after subsection (c) the following:
``(d) Reports on Actions To Recover Improper Payments.--With
respect to any improper payments identified in recovery audits
conducted under section 2(h) of the Improper Payments Elimination and
Recovery Act of 2008, the head of the agency shall provide with the
estimate under subsection (b) a report on all actions the agency is
taking to recover improper payments, including--
``(1) a discussion of the methods used by the agency to
recover improper payments;
``(2) the amounts recovered, outstanding, and determined to
not be collectable, including the percent such amounts
represent of the total improper payments of the agency;
``(3) an aging schedule of the amounts outstanding;
``(4) a summary of how recovered amounts have been disposed
of; and
``(5) if the agency has determined under section 2(h) of
the Improper Payments Elimination and Recovery Act of 2008 that
performing recovery audits for any applicable program or
activity is not cost effective, a justification for that
determination.
``(e) Governmentwide Reporting of Improper Payments and Actions To
Recover Improper Payments.--
``(1) Report.--Each fiscal year the Director of the Office
of Management and Budget shall submit a report with respect to
the preceding fiscal year on actions agencies have taken to
report information regarding improper payments and actions to
recover improper payments to--
``(A) the Committee on Homeland Security and
Governmental Affairs of the Senate; and
``(B) the Committee on Oversight and Government
Reform of the House of Representatives.
``(2) Contents.--Each report under this subsection shall
include--
``(A) a summary of the reports of each agency on
improper payments and recovery actions submitted under
this section;
``(B) an identification of the compliance status of
each agency to which this Act applies;
``(C) governmentwide improper payment reduction
targets; and
``(D) a discussion of progress made towards meeting
governmentwide improper payment reduction targets.''.
(e) Definitions.--Section 2 of the Improper Payment Information Act
of 2002 (31 U.S.C. 3321 note) is amended by striking subsections (f)
(as redesignated by this section) and inserting the following:
``(f) Definitions.--In this section:
``(1) Agency.--The term `agency' means an executive agency,
as that term is defined in section 102 of title 31, United
States Code.
``(2) Improper payment.--The term `improper payment'--
``(A) means any payment that should not have been
made or that was made in an incorrect amount (including
overpayments and underpayments) under statutory,
contractual, administrative, or other legally
applicable requirements; and
``(B) includes any payment to an ineligible
recipient, any payment for an ineligible good or
service, any duplicate payment, any payment for a good
or service not received (except for such payments where
authorized by law), and any payment that does not
account for credit for applicable discounts.
``(3) Payment.--The term `payment' means any transfer or
commitment for future transfer of Federal funds such as cash,
securities, loans, loan guarantees, and insurance subsidies to
any non-Federal person or entity, that is made by a Federal
agency, a Federal contractor, a Federal grantee, or a
governmental or other organization administering a Federal
program or activity.
``(4) Payment for an ineligible good or service.--The term
`payment for an ineligible good or service' shall include a
payment for any good or service that is rejected under any
provision of any contract, grant, lease, cooperative agreement,
or any other procurement mechanism.''.
(f) Guidance by the Office of Management and Budget.--Section 2 of
the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is
amended by striking subsection (g) (as redesignated by this section)
and inserting the following:
``(g) Guidance by the Office of Management and Budget.--
``(1) In general.--Not later than 6 months after the date
of enactment of the Improper Payments Elimination and Recovery
Act of 2008, the Director of the Office of Management and
Budget shall prescribe guidance for agencies to implement the
requirements of this section. The guidance shall not include
any exemptions to such requirements not specifically authorized
by this section.
``(2) Contents.--The updated guidance under paragraph (1)
shall prescribe--
``(A) the form of the reports on actions to reduce
improper payments, recovery actions, and governmentwide
reporting; and
``(B) strategies for addressing risks and
establishing appropriate prepayment and postpayment
internal controls.''.
(g) Internal Controls.--
(1) Report on effectiveness of a-123 implementation.--The
President's Council on Integrity and Efficiency shall conduct a
study of the effectiveness of implementation of the Office of
Management and Budget's Circular No. A-123 (revised),
Management's Responsibility for Internal Control at preventing
improper payments or addressing internal control problems that
contribute to improper payments, and not later than 1 year
after the date of enactment of this Act, submit a report on the
study to--
(A) the Committee on Homeland Security and
Governmental Affairs of the Senate;
(B) the Committee on Oversight and Government
Reform of the House of Representatives;
(C) the Director of the Office of Management and
Budget; and
(D) the Comptroller General.
(2) Consultation and cooperation.--The President's Council
on Integrity and Efficiency shall consult and cooperate with
the committees and director described under paragraph (1) to
ensure the nature and scope of the study under paragraph (1)
will address the needs of those committees and the Director of
the Office of Management and Budget, including how the
implementation of Circular No. A-123 (revised) has helped to
identify, report, prevent, and recover improper payments.
(3) Determination of agency readiness for opinion on
internal control.--Not later than 1 year after the date of
enactment of the Improper Payments Elimination and Recovery Act
of 2008, the Director of the Office of Management and Budget
shall develop--
(A) specific criteria as to when an agency should
initially be required to obtain an opinion on internal
control over financial reporting; and
(B) criteria for an agency that has demonstrated a
stabilized, effective system of internal control over
financial reporting, whereby the agency would qualify
for a multiyear cycle for obtaining an audit opinion on
internal control over financial reporting, rather than
an annual cycle.
(h) Recovery Audits.--
(1) In general.--
(A) Conduct of audits.--Except as provided under
paragraph (3), the head of each executive agency shall
conduct recovery audits with respect to each program
and activity of the agency that expends $1,000,000 or
more annually if conducting such audits would be cost-
effective.
(B) Procedures.--In conducting recovery audits
under this subsection, the head of an executive
agency--
(i) shall give priority to the most recent
payments;
(ii) shall implement this subsection in a
manner designed to ensure the greatest
financial benefit to the Government; and
(iii) may conduct recovery audits directly,
by procuring performance of recovery audits by
contract (subject to the availability of
appropriations), or by any combination thereof.
(C) Recovery audit contracts.--With respect to
recovery audits procured by an executive agency by
contract--
(i) subject to subparagraph (B)(iii), the
head of the agency may authorize the contractor
to notify entities (including persons) of
potential overpayments made to such entities,
respond to questions concerning potential
overpayments, and take other administrative
actions with respect to overpayment claims made
or to be made by the agency; and
(ii) such contractor shall have no
authority to make final determinations relating
to whether any overpayment occurred and whether
to compromise, settle, or terminate overpayment
claims.
(D) Contract terms and conditions.--The executive
agency shall include in each contract for procurement
of performance of a recovery audit a requirement that
the contractor shall--
(i) provide to the agency periodic reports
on conditions giving rise to overpayments
identified by the contractor and any
recommendations on how to mitigate such
conditions; and
(ii) notify the agency of any overpayments
identified by the contractor pertaining to the
agency or to any other agency or agencies that
are beyond the scope of the contract.
(E) Executive agency action following
notification.--An executive agency shall take prompt
and appropriate action in response to a report or
notification by a contractor under subparagraph
(D)(ii), including forwarding to other executive
agencies any information that applies to such agencies.
(2) Disposition of amounts recovered.--
(A) In general.--Amounts collected by executive
agencies each fiscal year through recovery audits
conducted under this subsection shall be treated in
accordance with this paragraph.
(B) Use for financial management improvement
program.--Not more than 25 percent of the amounts
collected by an executive agency through recovery
audits--
(i) shall be available to the head of the
agency or the State or local government
administering the program or activity to carry
out the financial management improvement
program of the agency under paragraph (3);
(ii) may be credited, if applicable, for
that purpose by the agency head to any agency
appropriations and funds that are available for
obligation at the time of collection; and
(iii) shall be used to supplement and not
supplant any other amounts available for that
purpose and shall remain available until
expended.
(C) Use for original purpose.--Not more than 25
percent of the amounts collected by an executive
agency--
(i) shall be credited to the appropriation
or fund, if any, available for obligation at
the time of collection for the same general
purposes as the appropriation or fund from
which the overpayment was made; and
(ii) shall remain available for the same
period and purposes as the appropriation or
fund to which credited.
(D) Use for inspector general activities.--Not more
than 5 percent of the amounts collected by an executive
agency shall be available to the Inspector General of
that agency for--
(i) the Inspector General to carry out this
Act; or
(ii) any other activities of the Inspector
General relating to investigating improper
payments or auditing internal controls
associated with payments.
(E) Remainder.--Amounts collected that are not
applied in accordance with subparagraphs (B), (C), or
(D) or to meet obligations to recovery audit
contractors shall be deposited in the Treasury as
miscellaneous receipts.
(3) Financial management improvement program.--
(A) Requirement.--The head of each executive agency
shall conduct a financial management improvement
program, consistent with rules prescribed by the
Director of the Office of Management and Budget.
(B) Program features.--In conducting the program,
the head of the executive agency--
(i) shall, as the first priority of the
program, address problems that contribute
directly to agency improper payments; and
(ii) may seek to reduce errors and waste in
other executive agency programs and operations.
(4) Rule of construction.--Nothing in this section shall be
construed as terminating or in any way limiting authorities
that are otherwise available to agencies under existing
provisions of law to recover improper payments and use
recovered amounts.
(i) Report on Recovery Auditing.--Not earlier than 2 years after
the date of the enactment of this Act, the Chief Financial Officers
Council established under section 302 of the Chief Financial Officers
Act of 1990 (31 U.S.C. 901 note), in consultation with the President's
Council on Integrity and Efficiency established under Executive Order
12805 of May 11, 1992 and recovery audit experts, shall jointly conduct
a study of--
(1) the implementation of subsection (h);
(2) the costs and benefits of agency recovery audit
activities, including those under subsection (h), and including
the effectiveness of using the services of--
(A) private contractors;
(B) agency employees;
(C) cross-servicing from other agencies; or
(D) any combination of the provision of services
described under subparagraphs (A) through (C); and
(3) submit a report on the results of the study to--
(A) the Committee on Homeland Security and
Governmental Affairs of the Senate;
(B) the Committee on Oversight and Government
Reform of the House of Representatives; and
(C) the Comptroller General.
SEC. 3. COMPLIANCE.
(a) Definitions.--In this section:
(1) Agency.--The term ``agency'' has the meaning given
under section 2(f) of the Improper Payments Information Act of
2002 (31 U.S.C. 3321 note) as redesignated by this Act.
(2) Annual financial statement.--The term ``annual
financial statement'' means the annual financial statement
required under section 3515 of title 31, United States Code, or
similar provision of law.
(3) Compliance.--The term ``compliance'' means that the
agency--
(A) has published an annual financial statement for
the most recent fiscal year and posted that report and
any accompanying materials required under guidance of
the Office of Management and Budget on the agency
website;
(B) has conducted a program specific risk
assessment for each program or activity that conforms
with section 2(a) the Improper Payments Information Act
of 2002 (31 U.S.C. 3321 note); and
(C) publishes improper payments estimates for all
programs and activities identified under section 2(b)
of the Improper Payments Information Act of 2002 (31
U.S.C. 3321 note) in the accompanying materials to the
annual financial statement;
(D) publishes programmatic corrective action plans
prepared under section 2(c) of the Improper Payments
Information Act of 2002 (31 U.S.C. 3321 note) that the
agency may have in the accompanying materials to the
annual financial statement;
(E) publishes improper payments reduction targets
in the accompanying materials to the annual financial
statement for each program assessed to be at risk, and
is actively meeting such targets;
(F) has reported an improper payment rate of less
than 15 percent for each program and activity; and
(G) publishes the report under subsection (b) in
the accompanying materials to the annual financial
statement.
(b) Annual Compliance Report by Agency Inspectors General.--
(1) In general.--Each fiscal year, the Inspector General of
each agency shall determine whether the agency is in compliance
and submit a report to the head of the agency on that
determination.
(2) Inclusion in accompanying materials to the annual
financial statement.--The head of each agency shall include the
report of the agency Inspector General described under
paragraph (1) in the accompanying materials to the annual
financial statement.
(c) Remediation.--
(1) Noncompliance.--
(A) In general.--If an agency is determined by the
agency Inspector General not to be in compliance under
subsection (b) in a fiscal year, the head of the agency
shall submit a plan to Congress describing the actions
that the agency will take to come into compliance.
(B) Plan.--The plan described under subparagraph
(A) shall include--
(i) measurable milestones to be
accomplished in order to achieve compliance;
(ii) the designation of a senior agency
official who shall be accountable for the
progress of the agency in coming into
compliance; and
(iii) the establishment of an
accountability mechanism, such as a performance
agreement, with appropriate incentives and
consequences tied to the success of the
official designated under clause (ii) in
leading the efforts of the agency to come into
compliance.
(2) Noncompliance for 2 fiscal years.--
(A) In general.--If an agency is determined by the
agency Inspector General not to be in compliance under
subsection (b) for 2 consecutive fiscal years and the
Director of the Office of Management and Budget
determines that additional funding would help the
agency come into compliance, the head of the agency
shall obligate additional funding, in an amount
determined by the Director, to intensify compliance
efforts.
(B) Funding.--In providing additional funding
described under subparagraph (A), the head of an agency
shall use any reprogramming or transfer authority
available to the agency. If after exercising that
reprogramming or transfer authority additional funding
is necessary to obligate the full level of funding
determined by the Director of the Office of Management
and Budget under subparagraph (A), the agency shall
submit a request to Congress for additional
reprogramming or transfer authority.
(3) Noncompliance for 3 fiscal years.--
(A) In general.--If an agency is determined by the
agency Inspector General not to be in compliance under
subsection (b) for 3 consecutive fiscal years and the
Director of the Office of Management and Budget
determines that additional funding would help the
agency come into compliance, the head of the agency
shall obligate additional funding, in an amount
determined by the Director, to intensify compliance
efforts.
(B) Funding.--Additional funding described under
subparagraph (A) may come from any available
appropriations administered by the agency
notwithstanding any limitation in any other provision
of law.
(C) Reauthorization proposals.--If an agency is
determined by the agency Inspector General not to be in
compliance under subsection (b) for more than 3
consecutive fiscal years, the head of the agency shall,
not later than 30 days after such determination, submit
to Congress--
(i) reauthorization proposals for each
program responsible for the determination; and
(ii) proposed statutory changes necessary
to bring the agency into compliance.
(D) Congressional action for discretionary
programs.--
(i) In general.--Congress shall reauthorize
each discretionary program for which proposals
have been submitted under subparagraph (C)
taking into account the requirements of this
Act and the programmatic changes required to
achieve agency compliance and eliminate
improper payments.
(ii) Failure to act.--If Congress fails to
act on any reauthorization proposal submitted
under subparagraph (C) within 2 fiscal years
following the year of a determination made
under that subparagraph and the Director of the
Office of Management and Budget determines that
sufficient changes have not been made to the
program to bring the agency that has submitted
the proposal into compliance by the time the
agency submits its next annual financial
statement under section 3315 of title 31,
United States Code, the authorized level of
funding for the program shall not increase
above the authorized level in the second fiscal
year following the year of that determination
under subparagraph (C) until Congress acts or
the agency comes into compliance.
(E) Entitlement programs.--Subparagraph (D) shall
not apply to entitlement programs under section 3(9) of
the Congressional Budget and Impoundment Control Act of
1974 (2 U.S.C. 622(9)).
(d) Compliance Enforcement Pilot Programs.--
(1) In general.--The Director of the Office of Management
and Budget may establish 1 or more pilot programs which shall
test potential accountability mechanisms with appropriate
incentives and consequences tied to success in ensuring
compliance with this Act and eliminating improper payments.
(2) Report.--Not later than 5 years after the date of
enactment of this Act, the Director of the Office of Management
and Budget shall submit a report to Congress on the findings
associated with any pilot programs conducted under paragraph
(1). Such report shall include any legislative or other
recommendations that the Director determines necessary.
Calendar No. 1103
110th CONGRESS
2d Session
S. 2583
_______________________________________________________________________
A BILL
To amend the Improper Payments Information Act of 2002 (31 U.S.C. 3321
note) in order to prevent the loss of billions in taxpayer dollars.
_______________________________________________________________________
October 1 (legislative day, September 17), 2008
Reported with an amendment