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, annually review all programs and activities that the relevant agency head administers and identify all such programs and activities that may be susceptible to significant improper payments. (2)

Annual Risk Assessment

(A)

Definition

In this paragraph the term significant means that improper payments in the program or activity in the preceding fiscal year exceeded— (i)2.5 percent of all program or activity payments made during that fiscal year; or (ii)$10,000,000. (B)

Risk assessment

The review under paragraph (1) shall include a risk assessment that includes— (i)a systematic process for producing a statistically valid estimate of the level of improper payments being made by the agency; and (ii)an identification of the factors contributing to each assessment under clause (i).

(b)

Reports on actions To reduce improper payments

Section 2 of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is amended by striking subsection (c) and inserting the following:

(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 any improper payments, including— (1)a description of the causes of the improper payments identified, actions planned or taken to correct those causes, and the planned or actual completion date of the actions taken to address those causes; (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)the internal controls, including information systems; (B)the human capital; and (C)other infrastructure; (3)if the agency does not have sufficient internal controls under paragraph (2)(A), a description of the resources the agency has requested in its budget submission to establish such internal controls; (4)a description of the steps the agency has taken to ensure that agency managers are held accountable for establishing sufficient internal controls, including an appropriate control environment, that prevent improper payments from occurring and promptly detect and recover improper payments made; and (5)a statement of whether or not the agency has— (A)developed and implemented improper payment control plans; and (B)implemented appropriate improper payment detection, investigation, reporting, and data collection procedures and processes.

(c)

Reports on Recovery Actions and Governmentwide Reporting

(1)

In General

Section 2 of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is amended— (A)by striking subsection (e); (B)by redesignating subsections (d) and (f) as subsections (f) and (g), respectively; and (C)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(g) of the Improper Payments Elimination and Recovery Act of 2008, the head of the agency shall provide with the estimate under subsection (b) a report on what actions the agency is taking to recover improper payments, including— (1)the types of errors from which improper payments resulted; (2)a discussion of the methods used by the agency to recover improper payments; (3)the amounts recovered, outstanding, and determined to not be collectable, including the percent these amounts represent of the total improper payments of the agency; and (4)an aging schedule of the amounts outstanding. (e)

Governmentwide Reporting of Improper Payments

(1)

Department of the Treasury

The Secretary of the Treasury shall include in each report submitted under section 331(a) of title 31, United States Code, the improper payment information reported by the agencies on a governmentwide basis. (2)

Office of Management and Budget

The Director of the Office of Management and Budget shall— (A)coordinate with the Secretary of the Treasury in the preparation of the information to be reported under paragraph (1); and (B)prescribe regulations for— (i)the information required to be reported; and (ii)a format of reporting such information on a governmentwide basis to be used by agencies.

(2)

Technical and conforming amendment

Section 331(a) of title 31, United States Code, is amended— (A)in paragraph (6), by striking and after the semicolon; (B)in paragraph (7), by striking the period and inserting ; and; and (C)by adding at the end the following:

(8)the improper payments information required under section 2(e) of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note).

(d)

Definitions

Section 2 of the Improper Payment Information Act of 2002 (31 U.S.C. 3321 note) is amended by striking subsections (f) (as redesignated by this section) and inserting the following:

(f)

Definitions

In this section: (1)

Agency

The term agency means an executive agency, as that term is defined in section 102 of title 31, United States Code. (2)

Improper payment

The term improper payment— (A)means any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements; and (B)includes any payment to an ineligible recipient, any payment for an ineligible good or service, any duplicate payment, payments for services not received, 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 cash, in-kind benefits, goods, services, loans and loan guarantees, insurance subsidies, and other items of value between Federal agencies and their employees, vendors, partners, and beneficiaries, and parties to contracts, grants, leases, cooperative agreements, or any other procurement mechanism, that is— (A)made by a Federal agency, a Federal contractor, or a governmental or other organization administering a Federal program or activity; and (B)derived from Federal funds or other Federal resources or that will be reimbursed from Federal funds or other Federal resources. (4)

Payment for an ineligible good or service

The term payment for an ineligible good or service shall include a payment for any good or service that is in violation of any provision of any contract, grant, lease, cooperative agreement, or any other procurement mechanism, including any provision relating to quantity, quality, or timeliness.

(e)

Guidance by the Office of Management and Budget

Section 2 of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is amended by striking subsection (g) (as redesignated by this section) and inserting the following:

(g)

Guidance by the office of management and Budget

(1)

In general

Not later than 6 months after the date of enactment of the Improper Payments Elimination and Recovery Act of 2008, the Director of the Office of Management and Budget shall prescribe updated guidance to implement and provide for full compliance with the requirements of this section. The guidance shall not include any exemptions not specifically authorized by this section. (2)

Contents

The updated guidance under paragraph (1) shall prescribe— (A)the form of the reports on actions to reduce improper payments, recovery actions, and governmentwide reporting; and (B)strategies for addressing risks and establishing appropriate prepayment and postpayment internal controls.

(f)

Internal Controls

(1)

Report on effectiveness of A–123 implementation

The President’s Council on Integrity and Efficiency shall conduct a study of the effectiveness of implementation of the Office of Management and Budget’s Circular No. A–123 (revised), Management’s Responsibility for Internal Control at preventing improper payments or addressing internal control problems that contribute to improper payments, and not later than 1 year after the date of enactment of this Act, submit a report on the study to— (A)the Committee on Homeland Security and Governmental Affairs of the Senate; (B)the Committee on Oversight and Government Reform of the House of Representatives; (C)the Director of the Office of Management and Budget; and (D)the Comptroller General. (2)

Consultation and cooperation

The President's Council on Integrity and Efficiency shall consult and cooperate with the committees and director described under paragraph (1) to ensure the nature and scope of the study under paragraph (1) will address the needs on those committees and the Director of the Office of Management and Budget, including how the implementation of Circular No. A–123 (revised) has helped to identify, report, prevent, and recover improper payments. (3)

Determination of agency readiness for opinion on internal control

Not later than 1 year after the date of enactment of the Improper Payments Elimination and Recovery Act of 2008, the Director of the Office of Management and Budget shall develop— (A)specific criteria as to when an agency should initially be required to obtain an opinion on internal control over financial reporting; and (B)criteria for an agency that has demonstrated a stabilized, effective system of internal control over financial reporting, whereby the agency would qualify for a multiyear cycle for obtaining an audit opinion on internal control over financial reporting, rather than an annual cycle. (g)

Recovery audits

An agency with outlays of $1,000,000 or more in any fiscal year shall conduct a recovery audit (as that term is defined by the Director of the Office of Management and Budget under section 3561 of title 31, United States Code) of all programs and activities, if the agency determines that a prior audit has identified improper payments that can be recouped and it is cost beneficial for a recovery activity to recapture those funds. (h)

Report on Recovery Auditing

Not earlier 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 President’s Council on Integrity and Efficiency established under Executive Order 12805 of May 11, 1992, in consultation with recovery audit experts, shall— (1)jointly conduct a study of the costs and benefits of agency recovery audit activities, including those under subsection (g), and including the effectiveness of using the services of— (A)private contractors; (B)agency employees; (C)cross-servicing from other agencies; or (D)any combination of the provision of services described under subparagraphs (A) through (C); and (2)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.

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)

Compliance

The term compliance means that the agency— (A)has published a performance report for the most recent fiscal year and posted that report on the agency website; (B)has conducted a program specific risk assessment for each program or activity that— (i)is in compliance with section 2(a) the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note); and (ii)is included in the performance report; (C)publishes program specific improper payments estimates for all programs and activities identified under section 2(b) of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) in the performance report; (D)publishes programmatic corrective action plans prepared under section 2(c) of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) that the agency may have in the performance report; (E)publishes Office of Management and Budget approved improper payments reduction targets in the performance report for each program assessed to be at risk, and is determined by the Office of Management and Budget to be actively meeting such targets; and (F)publishes the compliance report under subsection (c) in the performance report. (3)

Delinquent program

The term delinquent program means a program which is partially or wholly responsible for the determination of an agency being not in compliance. (4)

Performance report

The term performance report means the performance and accountability report referred to under section 3516(b) of title 31, United States Code, or a program performance report under section 1116 of that title. (b)

Annual compliance report by OMB

(1)

In general

Each year, the Director of the Office of Management and Budget shall prepare a report with an identification of— (A)the compliance status of each agency under this section; and (B)the delinquent programs responsible for that status. (2)

Inclusion in budget submission

The Director of Office of the Management and Budget shall include the report described under paragraph (1) in the annual budget submitted under section 1105 of title 31, United States Code. (c)

Annual compliance report by Agency Inspectors General

(1)

In General

Each fiscal year, the Inspector General of each agency shall determine whether the agency is in compliance with the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) and this Act and submit a report to the head of the agency on that determination. (2)

Preparation of report

The Inspector General of each agency may enter into contracts and other arrangements with public agencies and with private persons for the preparation of financial statements, studies, analyses, and other services in preparing the report described under paragraph (1). (3)

Inclusion in performance report

The head of each agency shall include the report of the agency Inspector General described under paragraph (1) in the performance report. (d)

Remediation assistance

(1)

Voluntary remediation assistance

If an agency is determined by the agency Inspector General not to be in compliance under subsection (c) in a fiscal year, the head of the agency may reprogram funds from any available appropriations of that agency for expenditure on intensified compliance for any delinquent program (notwithstanding any appropriations transfer authority limitation in any other provision of law). (2)

Required remediation assistance

If an agency is determined by the agency Inspector General not to be in compliance under subsection (c) for 2 consecutive fiscal years, the head of the agency shall reprogram funds from any available appropriations of that agency necessary to achieve full compliance (notwithstanding any appropriations transfer authority limitation in any other provision of law). (3)

Remediation rescission

(A)

In general

If an agency is determined by the agency Inspector General not to be in compliance under subsection (c) for a period of 3 consecutive fiscal years and any delinquent program is included in the report under that subsection for 2 consecutive years during that 3-fiscal year period, the head of the agency shall transfer 5 percent of the available appropriations for each of those delinquent programs, as determined by the head of the agency, to miscellaneous receipts of the United States Treasury. (B)

Continuation of transfers

The head of an agency shall make transfers at least once annually under subparagraph (A) until the agency is determined to be in compliance under subsection (b). (4)

Stop-loss provision

If an agency has a program that reports under section 2(b) of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) an improper payment rate greater than 15 percent for 3 consecutive fiscal years (regardless of the whether the program is a delinquent program)— (A)not later than 30 days after that determination, the head of agency shall submit to Congress proposals for statutory changes or other relevant actions determined necessary to stop the financial loss by the program; and (B)no further appropriations for such program shall be authorized until such time as the inspector general of that agency submits a certification to Congress that sufficient changes in the program (whether those proposed by agency or otherwise) have been implemented to warrant resumed authorization of appropriations.