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





                                                 Union Calendar No. 270

106th CONGRESS

  1st Session

                               H. R. 1827

                          [Report No. 106-474]

_______________________________________________________________________

                                 A BILL

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

_______________________________________________________________________

                           November 17, 1999

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed





                                                 Union Calendar No. 270
106th CONGRESS
  1st Session
                                H. R. 1827

                          [Report No. 106-474]

   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

                           November 17, 1999

   Additional sponsors: Mr. Sessions, Mr. Goode, Mr. Doolittle, Mr. 
McHugh, Mr. Terry, Mr. Souder, Mr. English, Mrs. Myrick, Mr. Shays, Mr. 
    Walden of Oregon, Mr. Goodling, Mr. LaTourette, Mrs. Kelly, Mr. 
  Schaffer, Mr. Lazio, Mr. Sam Johnson of Texas, Mr. Knollenberg, Mr. 
 Gilman, Mr. Ryan of Wisconsin, Mr. Metcalf, Mr. Calvert, Mr. Stearns, 
                       Mr. Turner, and Mr. Foley

                           November 17, 1999

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
[For text of introduced bill, see copy of bill as introduced on May 17, 
                                 1999]

_______________________________________________________________________

                                 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) 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) Director.--The term `Director' means the Director of 
        the Office of Management and Budget.
            ``(2) 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.
            ``(3) 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.
            ``(4) 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.
            ``(5) 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.
            ``(6) Recovery audit.--The term `recovery audit' means a 
        financial management technique used to identify overpayments 
        made by executive agencies with respect to vendors and other 
        entities in connection with a payment activity, including 
        overpayments that result from any of the following:
                    ``(A) Duplicate payments.
                    ``(B) Pricing errors.
                    ``(C) Failure to provide applicable discounts, 
                rebates, or other allowances.
                    ``(D) Inadvertent errors.
            ``(7) Recovery activity.--The term `recovery activity' 
        means activity otherwise authorized by law, including chapter 
        37 of this title, to attempt to collect an identified 
        overpayment--
                    ``(A) within 180 days after the date the 
                overpayment is identified; and
                    ``(B) through established professional practices.
``Sec. 3562. Recovery audit requirement
    ``(a) In General.--Except as exempted by the Director 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); and
            ``(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).
    ``(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;
            ``(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) Each recovery audit of a payment 
activity under this section shall cover payments made by the payment 
activity in a fiscal year, except that the first recovery audit of a 
payment activity shall cover payments made during the 2 consecutive 
fiscal years preceding the date of the enactment of the Government 
Waste Corrections Act of 1999.
    ``(2) 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.
    ``(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 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 contractor.--(A) In addition 
        to performance of a recovery audit, a contract for such 
        performance may authorize the 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) A contract for performance of a recovery audit shall 
        not affect--
                    ``(i) the authority of the head of an executive 
                agency 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 contractor with an executive 
        agency to require the production of any record or information 
        by any person other than an officer, employee, or agent of the 
        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 disclosure otherwise 
                confidential business information and financial 
                information;
                    ``(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 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 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 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) 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.--Upon the 
        conclusion of the matter or need for which individually 
        identifiable information was disclosed in the course of 
        recovery auditing or recovery activity under this chapter 
        performed by a nongovernmental entity, the nongovernmental 
        entity shall either destroy the individually identifiable 
        information or return it to the person from whom it was 
        obtained, unless another applicable law requires retention of 
        the information.
``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 contractor for performance 
        of the audit; and
            ``(2) to reimburse any applicable appropriation for other 
        recovery audit costs incurred by the executive agency with 
        respect to the audit.
    ``(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 
        executive agency programs and operations 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 1999.
            ``(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.
    ``(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 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.
    ``(e) Reports.--
            ``(1) In general.--Not later than 1 year after the date of 
        the enactment of the Government Waste Corrections Act of 1999, 
        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 those sections 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 VI--RECOVERY AUDITS

``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.''.
            Amend the title so as to read: ``A bill to improve the 
        economy and efficiency of Government operations by requiring 
        the use of recovery audits and recovery activity by Federal 
        agencies.''.