[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 1508 Enrolled Bill (ENR)]
S.1508
One Hundred Eleventh Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Tuesday,
the fifth day of January, two thousand and ten
An Act
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,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Improper Payments Elimination and
Recovery Act of 2010''.
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 2010 is enacted and at least once
every 3 fiscal years thereafter. For those agencies already
performing a risk assessment every 3 years, agencies may apply to
the Director of the Office of Management and Budget for a waiver
from the requirement of the preceding sentence and continue their
3-year risk assessment cycle.
``(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) $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) $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, experience, 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) produce a statistically valid estimate, or an estimate
that is otherwise appropriate using a methodology approved by the
Director of the Office of Management and Budget, 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 2010 (31 U.S.C. 3321 note), 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
overpayments;
``(2) the amounts recovered, outstanding, and determined to not
be collectable, including the percent such amounts represent of the
total overpayments of the agency;
``(3) if a determination has been made that certain
overpayments are not collectable, a justification of that
determination;
``(4) an aging schedule of the amounts outstanding;
``(5) a summary of how recovered amounts have been disposed of;
``(6) a discussion of any conditions giving rise to improper
payments and how those conditions are being resolved; and
``(7) if the agency has determined under section 2(h) of the
Improper Payments Elimination and Recovery Act of 2010 (31 U.S.C.
3321 note) 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 overpayments 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 Payments 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 funding
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
2010, 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 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) Determinations of Agency Readiness for Opinion on Internal
Control.--Not later than 1 year after the date of enactment of this
Act, the Director of the Office of Management and Budget shall
develop--
(1) specific criteria as to when an agency should initially be
required to obtain an opinion on internal control over improper
payments; and
(2) criteria for an agency that has demonstrated a stabilized,
effective system of internal control over improper payments,
whereby the agency would qualify for a multiyear cycle for
obtaining an audit opinion on internal control over improper
payments, rather than an annual cycle.
(h) Recovery Audits.--
(1) Definition.--In this subsection, 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) In general.--
(A) Conduct of audits.--Except as provided under paragraph
(4) and if not prohibited under any other provision of law, the
head of each 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 agency--
(i) shall give priority to the most recent payments and
to payments made in any program or programs identified as
susceptible to significant improper payments under section
2(a) of the Improper Payments Information Act of 2002 (31
U.S.C. 3321 note);
(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 using
other departments and agencies of the United States, or by
procuring performance of recovery audits by private sector
sources 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 agency by contract--
(i) subject to subparagraph (B)(iii), and except to the
extent such actions are outside the agency's authority, as
defined by section 605(a) of the Contract Disputes Act of
1978 (41 U.S.C. 605(a)), 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.--
(i) In general.--The 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;
(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; and
(III) report to the agency credible evidence of
fraud or vulnerabilities to fraud, and conduct
appropriate training of personnel of the contractor on
identification of fraud.
(ii) Reports on actions taken.--Not later than November
1 of each year, each agency shall submit a report on
actions taken by the agency during the preceding fiscal
year to address the recommendations described under clause
(i)(I) to--
(I) the Office of Management and Budget; and
(II) Congress.
(E) Agency action following notification.--An agency shall
take prompt and appropriate action in response to a report or
notification by a contractor under subparagraph (D)(i)(I) or
(II), to collect overpayments and shall forward to other
agencies any information that applies to such agencies.
(3) Disposition of amounts recovered.--
(A) In general.--Amounts collected by agencies each fiscal
year through recovery audits conducted under this subsection
shall be treated in accordance with this paragraph. The agency
head shall determine the distribution of collected amounts,
less amounts needed to fulfill the purposes of section 3562(a)
of title 31, United States Code, in accordance with
subparagraphs (B), (C), and (D).
(B) Use for financial management improvement program.--Not
more than 25 percent of the amounts collected by an agency
through recovery audits--
(i) shall be available to the head of the agency to
carry out the financial management improvement program of
the agency under paragraph (4);
(ii) may be credited, if applicable, for that purpose
by the head of an agency 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 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;
(ii) shall remain available for the same period and
purposes as the appropriation or fund to which credited;
and
(iii) if the appropriation from which the overpayment
was made has expired, shall be newly available for the same
time period as the funds were originally available for
obligation, except that any amounts that are recovered more
than five fiscal years from the last fiscal year in which
the funds were available for obligation shall be deposited
in the Treasury as miscellaneous receipts, except that in
the case of recoveries of overpayments that are made from
trust or special fund accounts, such amounts shall revert
to those accounts.
(D) Use for inspector general activities.--Not more than 5
percent of the amounts collected by an agency shall be
available to the Inspector General of that agency--
(i) 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; and
(ii) shall remain available for the same period and
purposes as the appropriation or fund to which credited.
(E) Remainder.--Amounts collected that are not applied in
accordance with subparagraph (A), (B), (C), or (D) shall be
deposited in the Treasury as miscellaneous receipts, except
that in the case of recoveries of overpayments that are made
from trust or special fund accounts, such amounts shall revert
to those accounts.
(F) Discretionary amounts.--This paragraph shall apply only
to recoveries of overpayments that are made from discretionary
appropriations (as that term is defined by paragraph 7 of
section 250 of the Balanced Budget and Emergency Deficit
Control Act of 1985) and shall not apply to recoveries of
overpayments that are made from discretionary amounts that were
appropriated prior to enactment of this Act.
(G) Application.--This paragraph shall not apply to
recoveries of overpayments if the appropriation from which the
overpayment was made has not expired.
(4) Financial management improvement program.--
(A) Requirement.--The head of each 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 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
agency programs and operations.
(5) Privacy protections.--Any nongovernmental entity that, in
the course of recovery auditing or recovery activity under this
subsection, obtains information that identifies an individual or
with respect to which there is a reasonable basis to believe that
the information can be used to identify an individual, may not
disclose the information for any purpose other than such recovery
auditing or recovery activity and governmental oversight of such
activity, unless disclosure for that other purpose is authorized by
the individual to the executive agency that contracted for the
performance of the recovery auditing or recovery activity.
(6) Other recovery audit requirements.--
(A) In general.--(i) Except as provided in clause (ii),
subchapter VI of chapter 35 of title 31, United States Code, is
repealed.
(ii) Section 3562(a) of title 31, United States Code, shall
continue in effect, except that references in such section
3562(a) to programs carried out under section 3561 of such
title, shall be interpreted to mean programs carried out under
section 2(h) of this Act.
(B) Technical and conforming amendments.--
(i) Table of sections.--The table of sections for
chapter 35 of title 31, United States Code, is amended by
striking the matter relating to subchapter VI.
(ii) Definition.--Section 3501 of title 31, United
States Code, is amended by striking ``and subchapter VI of
this title''.
(iii) Homeland security grants.--Section 2022(a)(6) of
the Homeland Security Act of 2002 (6 U.S.C. 612(a)(6)) is
amended by striking ``(as that term is defined by the
Director of the Office of Management and Budget under
section 3561 of title 31, United States Code)'' and
inserting ``under section 2(h) of the Improper Payments
Elimination and Recovery Act of 2010 (31 U.S.C. 3321
note)''.
(7) Rule of construction.--Except as provided under paragraph
(5), 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 later 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 Council of
Inspectors General on Integrity and Efficiency established under
section 7 of the Inspector General Reform Act of 2009 (Public Law 110-
409) and recovery audit experts, shall conduct a study of--
(1) the implementation of subsection (h);
(2) the costs and benefits of agency recovery audit activities,
including--
(A) those activities under subsection (h); and
(B) the effectiveness of using the services of--
(i) private contractors;
(ii) agency employees;
(iii) cross-servicing from other agencies; or
(iv) any combination of the provision of services
described under clauses (i) through (iii); 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) if required, 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) if required, 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
established 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 for each program assessed to be at risk, and is
meeting such targets; and
(F) has reported an improper payment rate of less than 10
percent for each program and activity for which an estimate was
published under section 2(b) of the Improper Payments
Information Act of 2002 (31 U.S.C. 3321 note).
(b) Annual Compliance Report by Inspectors General of Agencies.--
Each fiscal year, the Inspector General of each agency shall determine
whether the agency is in compliance and submit a report on that
determination to--
(1) the head of the agency;
(2) the Committee on Homeland Security and Governmental Affairs
of the Senate;
(3) the Committee on Oversight and Governmental Reform of the
House of Representatives; and
(4) the Comptroller General.
(c) Remediation.--
(1) Noncompliance.--
(A) In general.--If an agency is determined by the
Inspector General of that agency 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 for each program or activity;
(ii) the designation of a senior agency official who
shall be accountable for the progress of the agency in
coming into compliance for each program or activity; 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 for each
program and activity.
(2) Noncompliance for 2 fiscal years.--
(A) In general.--If an agency is determined by the
Inspector General of that agency not to be in compliance under
subsection (b) for 2 consecutive fiscal years for the same
program or activity, 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 intensified 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) Reauthorization and statutory proposals.--If an agency is
determined by the Inspector General of that agency not to be in
compliance under subsection (b) for more than 3 consecutive fiscal
years for the same program or activity, the head of the agency
shall, not later than 30 days after such determination, submit to
Congress--
(A) reauthorization proposals for each program or activity
that has not been in compliance for 3 or more consecutive
fiscal years; or
(B) proposed statutory changes necessary to bring the
program or activity into compliance.
(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). The report shall
include any legislative or other recommendations that the Director
determines necessary.
(e) Report on Chief Financial Officers Act of 1990.--Not later than
1 year 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 Council of Inspectors
General on Integrity and Efficiency established under section 7 of the
Inspector General Reform Act of 2009 (Public Law 110-409), in
consultation with a broad cross-section of experts and stakeholders in
Government accounting and financial management shall--
(1) jointly examine the lessons learned during the first 20
years of implementing the Chief Financial Officers Act of 1990 (31
U.S.C. 901) and identify reforms or improvements, if any, to the
legislative and regulatory compliance framework for Federal
financial management that will optimize Federal agency efforts to--
(A) publish relevant, timely, and reliable reports on
Government finances; and
(B) implement internal controls that mitigate the risk for
fraud, waste, and error in Government programs; and
(2) jointly submit a report on the results of the examination
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.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.