[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1827 Introduced in House (IH)]





106th CONGRESS
  1st Session
                                H. R. 1827

   To improve the economy and efficiency of Government operations by 
       requiring the use of recovery audits by Federal agencies.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 17, 1999

Mr. Burton of Indiana (for himself, Mr. Armey, and Mr. Ose) introduced 
 the following bill; which was referred to the Committee on Government 
                                 Reform

_______________________________________________________________________

                                 A BILL


 
   To improve the economy and efficiency of Government operations by 
       requiring the use of recovery audits by Federal agencies.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Government Waste Corrections Act of 
1999''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds the following:
            (1) In private industry, overpayments to providers of goods 
        and services occur for a variety of reasons, including 
        duplicate payments, pricing errors, and missed cash discounts, 
        rebates, or other allowances. The identification and recovery 
        of such overpayments, commonly referred to as ``recovery 
        auditing'', is an established private sector business practice 
        with demonstrated large financial returns. On average, recovery 
        audits in the private sector identify payment error rates of 
        0.1 percent of purchases audited and result in the recovery of 
        $1,000,000 for each $1,000,000,000 of purchases.
            (2) Overpayments are a serious problem for Federal 
        agencies, given the magnitude and complexity of Federal 
        operations and documented and widespread financial management 
        weaknesses. Federal agency overpayments waste tax dollars and 
        detract from the efficiency and effectiveness of Federal 
        operations by diverting resources from their intended uses.
            (3) Recovery auditing already has been employed 
        successfully in limited areas of Federal activity. It has great 
        potential for expansion to many other Federal agencies and 
        activities, thereby resulting in the recovery of substantial 
        amounts of overpayments annually. Limited recovery audits 
        conducted to date have identified errors averaging 0.4 percent 
        of Federal payments audited, or $4,000,000 for every 
        $1,000,000,000 of payments. If fully implemented within the 
        Federal Government, recovery auditing has the potential to 
        recover billions of dollars in Federal overpayments annually.
    (b) Purposes.--The purposes of this Act are the following:
            (1) To require the use of recovery audits by Federal 
        agencies.
            (2) To provide incentives and resources to improve Federal 
        management practices with the goal of significantly reducing 
        Federal overpayment rates and other waste and error in Federal 
        programs.

SEC. 3. ESTABLISHMENT OF RECOVERY AUDITS REQUIREMENT.

    (a) Establishment of Requirement.--Chapter 35 of title 31, United 
States Code, is amended by adding at the end the following:

                    ``SUBCHAPTER VI--RECOVERY AUDITS

``Sec. 3561. Definitions
    ``In this subchapter, the following definitions apply:
            ``(1) Director.--The term `Director' means the Director of 
        the Office of Management and Budget.
            ``(2) Payment activity.--The term `payment activity' means 
        an executive agency activity that entails making payments to--
                    ``(A) vendors or other entities that provide 
                property or services for the direct benefit or use of 
                an executive agency; or
                    ``(B) entities that provide services or make 
                payments on behalf of the Federal Government pursuant 
                to contractual arrangements with an executive agency.
            ``(3) Recovery audit.--The term `recovery audit' means an 
        auditing process to identify overpayments made by executive 
        agencies to vendors and other commercial entities in connection 
        with a payment activity, including overpayments that result 
        from duplicate payments, pricing errors, failure to provide 
        applicable discounts, rebates, or other applicable allowances, 
        or charges or payments that are not authorized by law, 
        regulation, or other applicable requirements.
``Sec. 3562. Recovery audit requirement
    ``(a) In General.--Except as provided in subsection (d), the head 
of each executive agency--
            ``(1) shall conduct recovery audits with respect to each 
        payment activity of the executive agency that expends 
        $10,000,000 or more annually; and
            ``(2) may conduct recovery audits for any other payment 
        activity of the executive agency.
    ``(b) Procedures.--In conducting recovery audits under this 
section, the head of an executive agency--
            ``(1) shall give priority to the most recent payments;
            ``(2) shall implement this section in a manner designed to 
        ensure the greatest financial benefit to the Government; and
            ``(3) 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.--
            ``(1) Executive agency authorities.--With respect to 
        recovery audits procured by an executive agency by contract--
                    ``(A) notwithstanding section 3302(b) of this 
                title, the executive agency head may pay the contractor 
                an amount not to exceed 25 percent of the total amount 
                recovered by the executive agency, through setoff and 
                otherwise, solely on the basis of information obtained 
                as a result of audits performed by the contractor under 
                the contract;
                    ``(B) the executive agency head may authorize the 
                contractor (subject to subparagraph (C)) to notify 
                entities of potential overpayments, to respond to 
                questions concerning potential overpayments, and to 
                take other administrative actions with respect to 
                overpayment claims; and
                    ``(C) subject to section 3711 of this title, the 
                executive agency head shall have final authority to 
                resolve disputes, to compromise or terminate 
                overpayment claims, to collect by setoff, and to 
                initiate litigation or referrals for litigation.
            ``(2) Contract terms and conditions.--The head of an 
        executive agency shall include in each contract for procurement 
        of performance of a recovery audit a requirement that the 
        contractor shall--
                    ``(A) provide to the executive agency periodic 
                reports on conditions giving rise to overpayments 
                identified by the contractor and any recommendations on 
                how to mitigate such conditions; and
                    ``(B) notify the executive agency of any 
                overpayments identified by the contractor pertaining to 
                the executive agency or to another executive agency 
                that are beyond the scope of the contract.
            ``(3) Executive agency action following notification.--The 
        head of an executive agency shall take prompt and appropriate 
        action in response to a notification by a contractor under 
        subparagraph (A) or (B) of paragraph (2), including forwarding 
        to other executive agencies any information that applies to 
        them.
    ``(d) Exemptions.--The Director may exempt any executive agency 
payment activity from the requirement of subsection (a)(1) if the 
Director determines that conducting recovery audits for that payment 
activity would not be practical or cost-effective.
``Sec. 3563. Recovery audit model programs
    ``(a) In General.--The Director, after consulting with executive 
agency heads, shall designate not less than five recovery audit model 
programs. The designated model programs shall--
            ``(1) reflect a representative range of executive agencies, 
        program activities, and payment practices; and
            ``(2) continue for a period of at least one year.
    ``(b) Purpose.--The purpose of the model programs designated under 
this section is to stimulate and enhance recovery audits in the Federal 
Government by developing best practices and otherwise identifying ways 
to make recovery audits more effective. In designating the model 
programs, the Director shall ensure that the designated programs 
complement, and in no way preempt or delay, other Federal recovery 
audit activities.
``Sec. 3564. Disposition of amounts collected
    ``(a) In General.--Notwithstanding section 3302(b) of this title, 
amounts an executive agency collects, by setoff and otherwise, each 
fiscal year through recovery audits conducted under this subchapter 
shall be treated in accordance with this section.
    ``(b) Use for Recovery Audit Costs.--Not more than one quarter of 
the amounts collected by an executive agency through recovery audits 
shall be available to meet obligations to recovery audit contractors 
and to reimburse applicable appropriations for other recovery audit 
costs incurred by the executive agency.
    ``(c) Use for Management Improvement Program.--Not more than one 
half of the amounts collected by an executive agency through recovery 
audits--
            ``(1) shall be available to the head of the executive 
        agency to carry out the management improvement program of the 
        agency under section 3565 of this title;
            ``(2) may be credited for that purpose by the agency head 
        to any agency appropriations and funds that are available for 
        obligation at the time of collection; and
            ``(3) shall remain available for the same period as the 
        appropriation or fund to which credited.
    ``(d) Use for Original Purpose.--Not more than one quarter of the 
amounts collected--
            ``(1) 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
            ``(2) 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 subsection (b), (c), or (d) shall be deposited in the 
Treasury as miscellaneous receipts.
    ``(f) Limitation of Amounts.--In accordance with section 1512(d) of 
this title, the Director may reserve amounts made available to an 
executive agency under subsections (b) through (d) to the extent the 
Director determines that the full amounts otherwise available cannot be 
used productively for the purposes for which they are made available.
``Sec. 3565. Management improvement program
    ``(a) In General.--
            ``(1) Requirement.--The head of each executive agency shall 
        conduct a management improvement program, consistent with rules 
        prescribed by the Director.
            ``(2) Program features.--In conducting the program, the 
        head of the executive agency--
                    ``(A) shall, as the first priority of the program, 
                address problems that contribute directly to agency 
                overpayments; and
                    ``(B) may seek to reduce errors and waste in other 
                executive agency programs and operations by improving 
                the executive agency's staff capacity, information 
                technology, and financial management.
            ``(3) Integration with other activities.--The head of an 
        executive agency--
                    ``(A) subject to subparagraph (B), may integrate 
                the program under this section, in whole or in part, 
                with other executive agency management improvement 
                programs and activities; and
                    ``(B) must retain the ability to account 
                specifically for the use of amounts made available 
                under section 3465(b) of this title.
    ``(b) Awards.--
            ``(1) In general.--The head of an executive agency may, 
        under the program under this section and subject to the 
        availability of appropriations, pay cash awards to career 
        employees of the executive agency who have made extraordinary 
        contributions to improving the executive agency's operations in 
        a way that demonstrably and substantially reduces waste and 
        error by the executive agency.
            ``(2) Terms and conditions.--An award under this subsection 
        shall be subject to the following terms and conditions:
                    ``(A) An award may be granted to an individual 
                employee or to a group of employees, in any amount not 
                exceeding $150,000 for any individual.
                    ``(B) The award must be based on a written 
                determination by the executive agency head that the 
                awardee (or the group of awardees, collectively) was 
                directly and primarily responsible for actions that 
                result in tangible cost savings to the executive agency 
                of at least double the amount of the award.
                    ``(C) The Director must concur in any award that 
                exceeds $50,000 to any individual.
                    ``(D) The awards shall be in addition to any pay 
                and allowances to which an employee is otherwise 
                entitled, and shall not affect an employee's 
                eligibility for other bonuses and awards.
                    ``(E) The award shall be subject to such additional 
                terms and conditions as may be prescribed by the 
                Director.
            ``(3) Career employee defined.--In this subsection the term 
        `career employee' means any employee of an executive agency, 
        other than--
                    ``(A) a noncareer appointee, limited term 
                appointee, or limited emergency appointee (as such 
terms are defined in section 3132(a) of title 5) in the Senior 
Executive Service; and
                    ``(B) an employee in a position that has been 
                excepted from the competitive service by reason of its 
                confidential, policy-determining, policy-making, or 
                policy-advocating character.
``Sec. 3566. Responsibilities of the Office of Management and Budget
    ``(a) In General.--The Director shall be responsible for 
coordinating and overseeing the implementation of this subchapter.
    ``(b) Guidance.--In addition to the Director's specific 
responsibilities under this subchapter, the Director shall issue rules 
and provide support to agencies in implementing the subchapter. The 
Director shall issue initial rules not later than 90 days after the 
date of enactment of this subchapter.
    ``(c) Reports.--
            ``(1) In general.--Not later than one year after the date 
        of the enactment of this subchapter, and annually for each of 
        the two years thereafter, the Director shall submit a report on 
        implementation of the subchapter to the President, the 
        Committee on Government Reform of the House of Representatives, 
        the Committee on Governmental Affairs of the Senate, and the 
        Committee on Appropriations of the House of Representatives and 
        of the Senate.
            ``(2) Contents.--Each report shall include--
                    ``(A) a general description and evaluation of the 
                steps taken by 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) a description of any exemptions from recovery 
                audits made under section 3562(d) of this title;
                    ``(C) a description and evaluation of the recovery 
                audit model programs conducted under section 3563 of 
                this title, that shall include--
                            ``(i) an assessment of the benefits of the 
                        programs;
                            ``(ii) an identification of best practices 
                        from the programs that could be applied to 
                        other recovery audit activities; and
                            ``(iii) an identification of any 
                        significant problems or barriers to more 
                        effective recovery audits that were experienced 
                        in the model programs;
                    ``(D) a description of executive agency management 
                improvement programs under section 3565 of this title, 
                including a description of any awards under section 
                3565(b) of this title; and
                    ``(E) any recommendations for changes in executive 
                agency practices or law or other improvements that the 
                Director believes would enhance the effectiveness of 
                executive agency recovery auditing.
``Sec. 3567. General Accounting Office reports
    ``Not later than 60 days after issuance of each report under 
section 3566(c) of this title, the Comptroller General of the United 
States shall submit a report on the implementation of this subchapter 
to the Committee on Government Reform of the House of Representatives, 
the Committee on Governmental Affairs of the Senate, the Committee on 
Appropriations of the House of Representatives and of the Senate, and 
the Director.''.
    (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) Deadline for Initiation of Recovery Audits.--The head of each 
executive agency shall begin the first recovery auditing under section 
3562 of title 31, United States Code, as amended by this section, by 
not later than 6 months after the date of the enactment of this Act.
    (d) Clerical Amendment.--The analysis at the beginning of chapter 
35 of title 31, United States Code, is amended by adding at the end the 
following:

                    ``SUBCHAPTER VI--RECOVERY AUDITS

``3561. Definitions.
``3562. Recovery audit requirement.
``3563. Recovery audit model programs.
``3564. Disposition of amounts collected.
``3565. Management improvement program.
``3566. Responsibilities of the Office of Management and Budget.
``3567. General Accounting Office reports.
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