[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1827 Referred in Senate (RFS)]

  2d Session
                                H. R. 1827


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 9, 2000

  Received; read twice and referred to the Committee on Governmental 
                                Affairs

_______________________________________________________________________

                                 AN ACT


 
   To improve the economy and efficiency of Government operations by 
 requiring the use of recovery audits and recovery activity 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 
2000''.

SEC. 2. FINDINGS AND PURPOSES.

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

SEC. 3. ESTABLISHMENT OF RECOVERY AUDIT REQUIREMENT.

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

                    ``SUBCHAPTER VI--RECOVERY AUDITS

``Sec. 3561. Definitions
    ``In this subchapter, the following definitions apply:
            ``(1) Amounts collected.--The term `amounts collected' 
        means monies received or credited, by any means, including 
        setoff, by the United States Government.
            ``(2) Chief financial officer.--The term `Chief Financial 
        Officer' means the official established by section 901 of this 
        title, or the functional equivalent of such official in the 
        case of any agency that does not have a Chief Financial Officer 
        under that section.
            ``(3) Director.--The term `Director' means the Director of 
        the Office of Management and Budget.
            ``(4) Disclose.--The term `disclose' means to release, 
        publish, transfer, provide access to, or otherwise divulge 
        individually identifiable information to any person other than 
        the individual who is the subject of the information.
            ``(5) Facial-discrepancy payment error.--The term `facial-
        discrepancy payment error'--
                    ``(A) except as provided in subparagraph (B), means 
                any payment error that results from, is substantiated 
                by, or is identified as a result of information 
                contained on any invoice, delivery order, bill of 
                lading, statement of account, or other submission given 
                to the Government by a supplier of goods or services in 
                the usual and customary conduct of business, or as 
                required by law or contract to substantiate payment for 
                such goods or services, including any such document 
                submitted electronically; and
                    ``(B) does not include payment errors identified, 
                resulting, or supported from documents that are--
                            ``(i) records of a proprietary nature, 
                        maintained solely by the supplier of goods or 
                        services;
                            ``(ii) not specifically required to be 
                        provided to the Government by contract, law, 
                        regulation, or to substantiate payment; or
                            ``(iii) submitted to the Government for 
                        evaluative purposes prior to the award of a 
                        contract, as part of the evaluation and award 
                        process.
            ``(6) Individually identifiable information.--The term 
        `individually identifiable information' means any information, 
        whether oral or recorded in any form or medium, that identifies 
        the individual or with respect to which there is a reasonable 
        basis to believe that the information can be used to identify 
        the individual.
            ``(7) Oversight.--The term `oversight' means activities by 
        a Federal, State, or local governmental entity, or by another 
        entity acting on behalf of such a governmental entity, to 
        enforce laws relating to, investigate, or regulate payment 
        activities, recovery activities, and recovery audit activities.
            ``(8) Payment activity.--The term `payment activity' means 
        an executive agency activity that entails making payments to 
        vendors or other nongovernmental entities that provide property 
        or services for the direct benefit and use of an executive 
        agency.
            ``(9) Recovery audit.--The term `recovery audit' means a 
        financial management technique applied internally by Government 
        employees, or by private sector contractors, and used by 
        executive agencies to audit their internal records to identify 
        facial-discrepancy payment errors made by those executive 
        agencies to vendors and other entities in connection with a 
        payment activity, including facial-discrepancy payment errors 
        that result from any of the following:
                    ``(A) Duplicate payments.
                    ``(B) Invoice errors.
                    ``(C) Failure to provide applicable discounts, 
                rebates, or other allowances.
                    ``(D) Any other facial-discrepancy errors resulting 
                in inaccurate payments.
            ``(10) Recovery activity.--The term `recovery activity' 
        means executive agency activity otherwise authorized by law, 
        including chapter 37 of this title, to attempt to collect an 
        identified overpayment.
            ``(11) Recovery audit contractor.--The term `recovery audit 
        contractor' means any person who has been hired by an executive 
        agency to perform a recovery audit pursuant to a recovery audit 
        contract.
``Sec. 3562. Recovery audit requirement
    ``(a) In General.--Except as exempted under section 3565(d) of this 
title, the head of each executive agency--
            ``(1) shall conduct for each fiscal year recovery audits 
        and recovery activity with respect to payment activities of the 
        agency if such payment activities for the fiscal year total 
        $500,000,000 or more (adjusted by the Director annually for 
        inflation);
            ``(2) may conduct for any fiscal year recovery audits and 
        recovery activity with respect to payment activities of the 
        agency if such payment activities for the fiscal year total 
        less than $500,000,000 (adjusted by the Director annually for 
        inflation); and
            ``(3) may request that the Director exempt a payment 
        activity, in whole or in part, from the requirement to conduct 
        recovery audits under paragraph (1) if the head of the 
        executive agency determines and can demonstrate that compliance 
        with such requirement--
                    ``(A) would impede the agency's mission; or
                    ``(B) would not, or would no longer be, cost-
                effective.
    ``(b) Procedures.--In conducting recovery audits and recovery 
activity under this section, the head of an executive agency--
            ``(1) shall consult and coordinate with the Chief Financial 
        Officer and the Inspector General of the agency to avoid any 
        duplication of effort;
            ``(2) shall implement this section in a manner designed to 
        ensure the greatest financial benefit to the Government;
            ``(3) may conduct recovery audits and recovery activity 
        internally in accordance with the standards issued by the 
        Director under section 3565(b)(2) of this title, or by 
        procuring performance of recovery audits, or by any combination 
        thereof; and
            ``(4) shall ensure that such recovery audits and recovery 
        activity are carried out consistent with the standards issued 
        by the Director under section 3565(b)(2) of this subchapter.
    ``(c) Scope of Audits.--
            ``(1) In general.--Each recovery audit of a payment 
        activity under this section shall cover payments made by the 
        payment activity in the preceding fiscal year, except that the 
        first recovery audit of a payment activity shall cover payments 
        made during the fiscal year in which the Government Waste 
        Corrections Act of 2000 is enacted, and payments made in the 
        preceding fiscal year.
            ``(2) Additional fiscal years.--The head of an executive 
        agency may conduct recovery audits of payment activities for 
        additional preceding fiscal years if determined by the agency 
        head to be practical and cost-effective subject to any statute 
        of limitations constraints regarding recordkeeping under 
        applicable law.
    ``(d) Recovery Audit Contracts.--
            ``(1) Authority To Use Contingency Contracts.--
        Notwithstanding section 3302(b) of this title, as consideration 
        for performance of any recovery audit procured by an executive 
        agency, the executive agency may pay the recovery audit 
        contractor an amount equal to a percentage of the total amount 
        collected by the United States as a result of overpayments 
        identified by the contractor in the audit.
            ``(2) Additional functions of recovery audit contractor.--
                    ``(A) In general.--In addition to performance of a 
                recovery audit, a contract for such performance may 
                authorize the recovery audit contractor (subject to 
                subparagraph (B)) to--
                            ``(i) notify any person of possible 
                        overpayments made to the person and identified 
                        in the recovery audit under the contract; and
                            ``(ii) respond to questions concerning such 
                        overpayments.
                    ``(B) Limitation.--A contract for performance of a 
                recovery audit shall not affect--
                            ``(i) the authority of the head of an 
                        executive agency, or any other person, under 
                        the Contract Disputes Act of 1978 and other 
                        applicable laws, including the authority to 
                        initiate litigation or referrals for 
                        litigation; or
                            ``(ii) the requirements of sections 3711, 
                        3716, 3718, and 3720 of this title that the 
                        head of an agency resolve disputes, compromise, 
                        or terminate overpayment claims, collect by 
                        setoff, and otherwise engage in recovery 
                        activity with respect to overpayments 
                        identified by the recovery audit.
            ``(3) Limitation on authority.--Nothing in this subchapter 
        shall be construed to authorize a recovery audit contractor 
        with an executive agency--
                    ``(A) to require the production of any record or 
                information by any person other than an officer, 
                employee, or agent of the executive agency; and
                    ``(B) to establish, or otherwise have a physical 
                presence on the property or premises of any private 
                sector entity as part of its contractual obligations to 
                an executive agency.
            ``(4) Required contract terms and conditions.--The head of 
        an executive agency shall include in each contract for 
        procurement of performance of a recovery audit requirements 
        that the contractor shall--
                    ``(A) protect from improper use, and protect from 
                disclosure to any person who is internal or external to 
                the firm of the recovery audit contractor and who is 
                not directly involved in the identification or recovery 
                of overpayments, otherwise confidential or proprietary 
                business information, and any financial information, 
                that may be viewed or obtained in the course of 
                carrying out a recovery audit for an executive agency;
                    ``(B) provide to the head of the executive agency 
                and the Inspector General of the executive agency 
                periodic reports on conditions giving rise to 
                overpayments identified by the recovery audit 
                contractor and any recommendations on how to mitigate 
                such conditions;
                    ``(C) notify the head of the executive agency and 
                the Inspector General of the executive agency of any 
                overpayments identified by the contractor pertaining to 
                the executive agency or to another executive agency 
                that are beyond the scope of the contract; and
                    ``(D) promptly notify the head of the executive 
                agency and the Inspector General of the executive 
                agency of any indication of fraud or other criminal 
                activity discovered in the course of the audit.
            ``(5) Executive agency action following notification.--The 
        head of an executive agency shall take prompt and appropriate 
        action in response to a notification by a recovery audit 
        contractor pursuant to the requirements under paragraph (4), 
        including forwarding to other executive agencies any 
        information that applies to them.
            ``(6) Contracting requirements.--Prior to contracting for 
        any recovery audit, the head of an executive agency shall 
        conduct a public-private cost comparison process. The outcome 
        of the cost comparison process shall determine whether the 
        recovery audit is performed in-house or by a recovery audit 
        contractor.
    ``(e) Inspectors General.--Nothing in this subchapter shall be 
construed as diminishing the authority of any Inspector General, 
including such authority under the Inspector General Act of 1978.
    ``(f) Relationship to Other Audit Authority.--Nothing in this 
subchapter shall be construed as diminishing the authority granted 
under section 3726 of this title.
    ``(g) Privacy Protections.--
            ``(1) Limitation on disclosure of individually identifiable 
        information.--(A) Any nongovernmental entity that obtains 
        individually identifiable information through performance of 
        recovery auditing or recovery activity under this chapter may 
        disclose that information only for the purpose of such auditing 
        or activity, respectively, and oversight of such auditing or 
        activity, unless otherwise authorized by the individual that is 
        the subject of the information.
            ``(B) Any person that violates subparagraph (A) shall be 
        liable for any damages (including nonpecuniary damages, costs, 
        and attorneys fees) caused by the violation.
            ``(2) Destruction or return of information.--(A) Upon the 
        date described in subparagraph (B), a nongovernmental entity 
        having possession of individually identifiable information 
        disclosed in the course of a recovery audit or recovery 
        activity under this chapter performed by the nongovernmental 
        entity shall destroy the information or return it to the person 
        from whom it was obtained, unless another applicable law 
        requires retention of the information.
            ``(B)(i) Except as provided in clause (ii), the date 
        referred to in subparagraph (A) is the date of conclusion of 
        the matter or need for which the information was disclosed.
            ``(ii) If on the date referred to in clause (i) the 
        nongovernmental entity has actual notice of any oversight of 
        the recovery auditing or recovery activity, the date referred 
        to in subparagraph (A) is the date of the conclusion of such 
        oversight.
``Sec. 3563. Disposition of amounts collected
    ``(a) In General.--Notwithstanding section 3302(b) of this title, 
the amounts collected annually by the United States as a result of 
recovery audits by an executive agency under this subchapter shall be 
treated in accordance with this section.
    ``(b) Use for Recovery Audit Costs.--Amounts referred to in 
subsection (a) shall be available to the executive agency--
            ``(1) to pay amounts owed to any recovery audit contractor 
        for performance of the audit;
            ``(2) to reimburse any applicable appropriation for other 
        recovery audit costs incurred by the executive agency with 
        respect to the audit; and
            ``(3) to pay any fees authorized under chapter 37 of this 
        title.
    ``(c) Use for Management Improvement Program.--Of the amount 
referred to in subsection (a), a sum not to exceed 25 percent of such 
amount--
            ``(1) shall be available to the executive agency to carry 
        out the management improvement program of the agency under 
        section 3564 of this title;
            ``(2) may be credited for that purpose by the agency head 
        to any agency appropriations that are available for obligation 
        at the time of collection; and
            ``(3) shall remain available for the same period as the 
        appropriations to which credited.
    ``(d) Remainder to Treasury.--Of the amount referred to in 
subsection (a), there shall be deposited into the Treasury as 
miscellaneous receipts a sum equal to--
            ``(1) 50 percent of such amount; plus
            ``(2) such other amounts as remain after the application of 
        subsections (b) and (c).
    ``(e) Limitation on Application.--
            ``(1) In general.--This section shall not apply to amounts 
        collected through recovery audits and recovery activity to the 
        extent that such application would be inconsistent with another 
        provision of law that authorizes crediting of the amounts to a 
        nonappropriated fund instrumentality, revolving fund, working 
        capital fund, trust fund, or other fund or account.
            ``(2) Subsections (c) and (d).--Subsections (c) and (d) 
        shall not apply to amounts collected through recovery audits 
        and recovery activity, to the extent that such amounts are 
        derived from an appropriation or fund that remains available 
        for obligation at the time the amounts are collected.
``Sec. 3564. Management improvement program
    ``(a) Conduct of Program.--
            ``(1) Required programs.--The head of each executive agency 
        that is required to conduct recovery audits under section 3562 
        of this title shall conduct a management improvement program 
        under this section, consistent with guidelines prescribed by 
        the Director.
            ``(2) Discretionary programs.--The head of any other 
        executive agency that conducts recovery audits under section 
        3562 that meet the standards issued by the Director under 
        section 3565(b)(2) may conduct a management improvement program 
        under this section.
    ``(b) Program Features.--In conducting the program, the head of the 
executive agency--
            ``(1) shall, as the first priority of the program, address 
        problems that contribute directly to agency overpayments; and
            ``(2) may seek to reduce errors and waste in other programs 
        and operations of that executive agency by improving the 
        executive agency's staff capacity, information technology, and 
        financial management.
    ``(c) Integration With Other Activities.--The head of an executive 
agency--
            ``(1) subject to paragraph (2), may integrate the program 
        under this section, in whole or in part, with other management 
        improvement programs and activities of that agency or other 
        executive agencies; and
            ``(2) must retain the ability to account specifically for 
        the use of amounts made available under section 3563 of this 
        title.
``Sec. 3565. Responsibilities of the Office of Management and Budget
    ``(a) In General.--The Director shall coordinate and oversee the 
implementation of this subchapter.
    ``(b) Guidance.--
            ``(1) In general.--The Director, in consultation with the 
        Chief Financial Officers Council and the President's Council on 
        Integrity and Efficiency, shall issue guidance and provide 
        support to agencies in implementing the subchapter. The 
        Director shall issue initial guidance not later than 180 days 
        after the date of enactment of the Government Waste Corrections 
        Act of 2000.
            ``(2) Recovery audit standards.--The Director shall include 
        in the initial guidance under this subsection standards for the 
        performance of recovery audits under this subchapter, that are 
        developed in consultation with the Comptroller General of the 
        United States and private sector experts on recovery audits, 
        including such experts who currently use recovery auditing as 
        part of their financial management procedures.
    ``(c) Fee Limitations.--The Director may limit the percentage 
amounts that may be paid to contractors under section 3562(d)(1) of 
this title.
    ``(d) Exemptions.--
            ``(1) In general.--The Director may exempt an executive 
        agency, in whole or in part, from the requirement to conduct 
        recovery audits under section 3562(a)(1) of this title if the 
        Director determines that compliance with such requirement--
                    ``(A) would impede the agency's mission; or
                    ``(B) would not, or would no longer be cost-
                effective.
            ``(2) Report to congress.--The Director shall promptly 
        report the basis of any determination and exemption under 
        paragraph (1) to the Committee on Government Reform of the 
        House of Representatives and the Committee on Governmental 
        Affairs of the Senate.
            ``(3) Exemption of major defense system acquisition 
        programs.--
                    ``(A) In general.--Unless determined otherwise by 
                the head of the agency authorized to conduct a 
                Department of Defense major system acquisition program, 
                the requirements of section 3562(a) of this title shall 
                not apply to such a program procured with a cost-type 
                contract until the contract has become a closed 
                contract.
                    ``(B) Department of defense major system 
                acquisition program defined.--In this paragraph, the 
                term `Department of Defense major system acquisition 
                program' has the meaning that term has in Office of 
                Management and Budget Circular A-109, as in effect on 
                the date of the enactment of the Government Waste 
                Corrections Act of 2000.
    ``(e) Reports.--
            ``(1) In general.--Not later than 30 months after the date 
        of the enactment of the Government Waste Corrections Act of 
        2000, and annually for each of the 2 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) an assessment of the benefits of recovery 
                auditing and recovery activity, including amounts 
                identified and recovered (including by administrative 
                setoffs);
                    ``(C) an identification of best practices that 
                could be applied to future recovery audits and recovery 
                activity;
                    ``(D) an identification of any significant problems 
                or barriers to more effective recovery audits and 
                recovery activity;
                    ``(E) a description of executive agency 
                expenditures in the recovery audit process;
                    ``(F) a description of executive agency management 
                improvement programs under section 3564 of this title; 
                and
                    ``(G) 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. 3566. General Accounting Office reports
    ``Not later than 60 days after issuance of each report under 
section 3565(e) 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 audit under section 
3562(a)(1) title 31, United States Code, as amended by this section, 
for each payment activity referred to in that section by not later than 
18 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 V--RECOVERY AUDITS

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

SEC. 4. STUDY.

    (a) In General.--The Director of the Office of Management and 
Budget shall conduct a study of the effects of recovery audits 
conducted by executive agencies, including any significant problems 
relating to the provision of improper or inadequate notice of recovery 
audits to persons who are the subjects of such audits.
    (b) Report.--The Director shall report to the Congress the 
findings, conclusions, and recommendations of the study under this 
section.

            Passed the House of Representatives March 8, 2000.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.