[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2583 Reported in Senate (RS)]






                                                      Calendar No. 1103
110th CONGRESS
  2d Session
                                S. 2583

To amend the Improper Payments Information Act of 2002 (31 U.S.C. 3321 
  note) in order to prevent the loss of billions in taxpayer dollars.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 31, 2008

 Mr. Carper (for himself and Mrs. McCaskill) introduced the following 
 bill; which was read twice and referred to the Committee on Homeland 
                   Security and Governmental Affairs

            October 1 (legislative day, September 17), 2008

              Reported by Mr. Lieberman, with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 A BILL


 
To amend the Improper Payments Information Act of 2002 (31 U.S.C. 3321 
  note) in order to prevent the loss of billions in taxpayer dollars.

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

<DELETED>SECTION 1. SHORT TITLE.</DELETED>

<DELETED>    This Act may be cited as the ``Improper Payments 
Elimination and Recovery Act of 2008''.</DELETED>

<DELETED>SEC. 2. IMPROPER PAYMENTS ELIMINATION AND RECOVERY.</DELETED>

<DELETED>    (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:</DELETED>
<DELETED>    ``(a) Identification of Susceptible Programs and 
Activities.--</DELETED>
        <DELETED>    ``(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 it administers and identify all such 
        programs and activities that may be susceptible to significant 
        improper payments.</DELETED>
        <DELETED>    ``(2) Annual risk assessment.--</DELETED>
                <DELETED>    ``(A) Definition.--In this paragraph the 
                term `significant' means that improper payments in the 
                program or activity in the preceding fiscal year 
                exceeded--</DELETED>
                        <DELETED>    ``(i) 2.5 percent of all program 
                        or activity payments made during that fiscal 
                        year; or</DELETED>
                        <DELETED>    ``(ii) $10,000,000.</DELETED>
                <DELETED>    ``(B) Risk assessment.--The review under 
                paragraph (1) shall include a risk assessment that 
                includes--</DELETED>
                        <DELETED>    ``(i) a systematic process for 
                        producing a statistically valid estimate of the 
                        level of improper payments being made by the 
                        agency; and</DELETED>
                        <DELETED>    ``(ii) an identification of the 
                        risks for each program and activity resulting 
                        from the estimates made under clause 
                        (i).''.</DELETED>
<DELETED>    (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:</DELETED>
<DELETED>    ``(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 the improper payments, including--
</DELETED>
        <DELETED>    ``(1) a discussion 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;</DELETED>
        <DELETED>    ``(2) in order to reduce improper payments to 
        minimal cost-effective levels, a statement of whether the 
        agency has--</DELETED>
                <DELETED>    ``(A) the internal controls, including 
                information systems;</DELETED>
                <DELETED>    ``(B) the human capital; and</DELETED>
                <DELETED>    ``(C) other infrastructure the agency 
                needs;</DELETED>
        <DELETED>    ``(3) if the agency does not have the internal 
        controls, a description of the resources the agency has 
        requested in its budget submission to establish the internal 
        controls;</DELETED>
        <DELETED>    ``(4) a description of the steps the agency has 
        taken to ensure that agency managers (including the head of the 
        agency) are held accountable for establishing the appropriate 
        internal controls, including an appropriate control 
        environment, that prevent improper payments from occurring and 
        promptly detect and collect improper payments made; 
        and</DELETED>
        <DELETED>    ``(5) a statement of whether or not the agency 
        has--</DELETED>
                <DELETED>    ``(A) conducted annual improper payment 
                risk assessments;</DELETED>
                <DELETED>    ``(B) developed and implemented improper 
                payment control plans; and</DELETED>
                <DELETED>    ``(C) implemented appropriate improper 
                payment detection, investigation, reporting, and data 
                collection procedures and processes.''.</DELETED>
<DELETED>    (c) Reports on Recovery Actions and Governmentwide 
Reporting.--</DELETED>
        <DELETED>    (1) In general.--Section 2 of the Improper 
        Payments Information Act of 2002 (31 U.S.C. 3321 note) is 
        amended--</DELETED>
                <DELETED>    (A) by redesignating subsections (d), (e), 
                and (f) as subsections (f), (g), and (h), respectively; 
                and</DELETED>
                <DELETED>    (B) by inserting after subsection (c) the 
                following:</DELETED>
<DELETED>    ``(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--</DELETED>
        <DELETED>    ``(1) the types of errors from which improper 
        payments resulted;</DELETED>
        <DELETED>    ``(2) a discussion of the methods used by the 
        agency to recover improper payments;</DELETED>
        <DELETED>    ``(3) the amounts recovered, outstanding, and 
        determined to not be collectable; and</DELETED>
        <DELETED>    ``(4) an aging schedule of the amounts 
        outstanding.</DELETED>
<DELETED>    ``(e) Governmentwide Reporting of Improper Payments.--
</DELETED>
        <DELETED>    ``(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.</DELETED>
        <DELETED>    ``(2) Office of management and budget.--The 
        Director of the Office of Management and Budget shall--
        </DELETED>
                <DELETED>    ``(A) coordinate with the Secretary of the 
                Treasury in the preparation of the information to be 
                reported under paragraph (1); and</DELETED>
                <DELETED>    ``(B) prescribe regulations for--
                </DELETED>
                        <DELETED>    ``(i) the information required to 
                        be reported; and</DELETED>
                        <DELETED>    ``(ii) a format of reporting such 
                        information on a governmentwide basis to be 
                        used by agencies.''.</DELETED>
        <DELETED>    (2) Technical and conforming amendment.--Section 
        331(a) of title 31, United States Code, is amended--</DELETED>
                <DELETED>    (A) in paragraph (6), by striking ``and'' 
                after the semicolon;</DELETED>
                <DELETED>    (B) in paragraph (7), by striking the 
                period and inserting ``; and''; and</DELETED>
                <DELETED>    (C) by adding at the end the 
                following:</DELETED>
        <DELETED>    ``(8) the improper payments information required 
        under section 2(e) of the Improper Payments Information Act of 
        2002 (31 U.S.C. 3321 note).''.</DELETED>
<DELETED>    (d) Definitions.--Section 2 of the Improper Payment 
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:</DELETED>
<DELETED>    ``(g) Definitions.--In this section:</DELETED>
        <DELETED>    ``(1) Agency.--The term `agency' means an 
        executive agency, as that term is defined in section 102 of 
        title 31, United States Code.</DELETED>
        <DELETED>    ``(2) Improper payment.--The term `improper 
        payment'--</DELETED>
                <DELETED>    ``(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</DELETED>
                <DELETED>    ``(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.</DELETED>
        <DELETED>    ``(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--</DELETED>
                <DELETED>    ``(A) made by a Federal agency, a Federal 
                contractor, or a governmental or other organization 
                administering a Federal program or activity; 
                and</DELETED>
                <DELETED>    ``(B) derived from Federal funds or other 
                Federal resources or that will be reimbursed from 
                Federal funds or other Federal resources.</DELETED>
        <DELETED>    ``(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.''.</DELETED>
<DELETED>    (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 (h) (as redesignated by 
this section) and inserting the following:</DELETED>
<DELETED>    ``(h) Guidance by the Office of Management and Budget.--
</DELETED>
        <DELETED>    ``(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.</DELETED>
        <DELETED>    ``(2) Contents.--The updated guidance under 
        paragraph (1) shall prescribe--</DELETED>
                <DELETED>    ``(A) the form of the reports on actions 
                to reduce improper payments, recovery actions, and 
                governmentwide reporting; and</DELETED>
                <DELETED>    ``(B) strategies for addressing risks and 
                establishing appropriate prepayment and postpayment 
                internal controls.''.</DELETED>
<DELETED>    (f) Internal Controls.--</DELETED>
        <DELETED>    (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--</DELETED>
                <DELETED>    (A) the Committee on Homeland Security and 
                Governmental Affairs of the Senate;</DELETED>
                <DELETED>    (B) the Committee on Oversight and 
                Government Reform of the House of 
                Representatives;</DELETED>
                <DELETED>    (C) the Director of the Office of 
                Management and Budget; and</DELETED>
                <DELETED>    (D) the Comptroller General.</DELETED>
        <DELETED>    (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.</DELETED>
        <DELETED>    (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--</DELETED>
                <DELETED>    (A) specific criteria as to when an agency 
                should initially be required to obtain an opinion on 
                internal control over financial reporting; 
                and</DELETED>
                <DELETED>    (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.</DELETED>
<DELETED>    (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--</DELETED>
        <DELETED>    (1) conducting an internal recovery audit would be 
        effective; or</DELETED>
        <DELETED>    (2) a prior audit has identified improper payments 
        that can be recouped and it is cost beneficial for a recovery 
        activity to recapture those funds.</DELETED>
<DELETED>    (h) Report on Recovery Auditing.--Not later than 180 days 
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--
</DELETED>
        <DELETED>    (1) jointly conduct a study of the potential costs 
        and benefits of requiring Federal agencies to recover improper 
        payments using the services of--</DELETED>
                <DELETED>    (A) private contractors;</DELETED>
                <DELETED>    (B) agency employees;</DELETED>
                <DELETED>    (C) cross-servicing from other agencies; 
                or</DELETED>
                <DELETED>    (D) any combination of the provision of 
                services described under subparagraphs (A) through (C); 
                and</DELETED>
        <DELETED>    (2) submit a report on the results of the study 
        to--</DELETED>
                <DELETED>    (A) the Committee on Homeland Security and 
                Governmental Affairs of the Senate;</DELETED>
                <DELETED>    (B) the Committee on Oversight and 
                Government Reform of the House of Representatives; 
                and</DELETED>
                <DELETED>    (C) the Comptroller General.</DELETED>

<DELETED>SEC. 3. COMPLIANCE.</DELETED>

<DELETED>    (a) Definitions.--In this section:</DELETED>
        <DELETED>    (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.</DELETED>
        <DELETED>    (2) Compliance.--The term ``compliance'' means 
        that the agency--</DELETED>
                <DELETED>    (A) has published a performance report for 
                the most recent fiscal year and posted that report on 
                the agency website;</DELETED>
                <DELETED>    (B) has conducted a program specific risk 
                assessment for each program or activity that--
                </DELETED>
                        <DELETED>    (i) is in compliance with section 
                        2(a) the Improper Payments Information Act of 
                        2002 (31 U.S.C. 3321 note); and</DELETED>
                        <DELETED>    (ii) is included in the 
                        performance report;</DELETED>
                <DELETED>    (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;</DELETED>
                <DELETED>    (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;</DELETED>
                <DELETED>    (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;</DELETED>
                <DELETED>    (F) publishes the compliance report under 
                subsection (c) in the performance report; and</DELETED>
                <DELETED>    (G) is not subject to the subsection 
                (d)(4).</DELETED>
        <DELETED>    (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.</DELETED>
        <DELETED>    (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.</DELETED>
<DELETED>    (b) Annual Compliance Report by OMB.--</DELETED>
        <DELETED>    (1) In general.--Each year, the Director of the 
        Office of Management and Budget shall prepare a report with an 
        identification of--</DELETED>
                <DELETED>    (A) the compliance status of each agency 
                under this section; and</DELETED>
                <DELETED>    (B) the delinquent programs responsible 
                for that status.</DELETED>
        <DELETED>    (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.</DELETED>
<DELETED>    (c) Annual Compliance Report by Inspector General.--
</DELETED>
        <DELETED>    (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.</DELETED>
        <DELETED>    (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).</DELETED>
        <DELETED>    (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.</DELETED>
<DELETED>    (d) Remediation Assistance.--</DELETED>
        <DELETED>    (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 transfer 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).</DELETED>
        <DELETED>    (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 transfer funds from any available 
        appropriations of that agency to expend on intensified 
        compliance (notwithstanding any appropriations transfer 
        authority limitation in any other provision of law).</DELETED>
        <DELETED>    (3) Remediation rescission.--</DELETED>
                <DELETED>    (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.</DELETED>
                <DELETED>    (B) Continuation of transfers.--The head 
                of an agency shall make transfers under subparagraph 
                (A) until the agency is determined to be in compliance 
                under subsection (b).</DELETED>
        <DELETED>    (4) Stop-loss provision.--If an agency is 
        determined under the Improper Payments Information Act of 2002 
        (31 U.S.C. 3321 note) to have an improper payment rate greater 
        than 15 percent for 3 consecutive fiscal years (regardless of 
        the whether the program is a delinquent program)--</DELETED>
                <DELETED>    (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</DELETED>
                <DELETED>    (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.</DELETED>

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Improper Payments Elimination and 
Recovery Act of 2008''.

SEC. 2. IMPROPER PAYMENTS ELIMINATION AND RECOVERY.

    (a) Susceptible Programs and Activities.--Section 2 of the Improper 
Payments Information Act of 2002 (31 U.S.C. 3321 note) is amended by 
striking subsection (a) and inserting the following:
    ``(a) Identification of Susceptible Programs and Activities.--
            ``(1) In general.--The head of each agency shall, in 
        accordance with guidance prescribed by the Director of the 
        Office of Management and Budget, periodically review all 
        programs and activities that the relevant agency head 
        administers and identify all programs and activities that may 
        be susceptible to significant improper payments.
            ``(2) Frequency.--Reviews under paragraph (1) shall be 
        performed for each program and activity that the relevant 
        agency head administers during the year after which the 
        Improper Payments Elimination and Recovery Act of 2008 is 
        enacted and at least once every 3 fiscal years thereafter.
            ``(3) Risk assessments.--
                    ``(A) Definition.--In this subsection the term 
                `significant' means--
                            ``(i) except as provided under clause (ii), 
                        that improper payments in the program or 
                        activity in the preceding fiscal year may have 
                        exceeded--
                                    ``(I) $10,000,000 of all program or 
                                activity payments made during that 
                                fiscal year reported and 2.5 percent of 
                                program outlays; or
                                    ``(II) greater than $100,000,000; 
                                and
                            ``(ii) with respect to fiscal years 
                        following September 30th of a fiscal year 
                        beginning before fiscal year 2013 as determined 
                        by the Office of Management and Budget, that 
                        improper payments in the program or activity in 
                        the preceding fiscal year may have exceeded--
                                    ``(I) $10,000,000 of all program or 
                                activity payments made during that 
                                fiscal year reported and 1.5 percent of 
                                program outlays; or
                                    ``(II) greater than $100,000,000.
                    ``(B) Scope.--In conducting the reviews under 
                paragraph (1), the head of each agency shall take into 
                account those risk factors that are likely to 
                contribute to a susceptibility to significant improper 
                payments, such as--
                            ``(i) whether the program or activity 
                        reviewed is new to the agency;
                            ``(ii) the complexity of the program or 
                        activity reviewed;
                            ``(iii) the volume of payments made through 
                        the program or activity reviewed;
                            ``(iv) whether payments or payment 
                        eligibility decisions are made outside of the 
                        agency, such as by a State or local government;
                            ``(v) recent major changes in program 
                        funding, authorities, practices, or procedures;
                            ``(vi) the level and quality of training 
                        for personnel responsible for making program 
                        eligibility determinations or certifying that 
                        payments are accurate; and
                            ``(vii) significant deficiencies in the 
                        audit report of the agency or other relevant 
                        management findings that might hinder accurate 
                        payment certification.''.
    (b) Estimation of Improper Payments.--Section 2 of the Improper 
Payments Information Act of 2002 (31 U.S.C. 3321 note) is amended by 
striking subsection (b) and inserting the following:
    ``(b) Estimation of Improper Payments.--With respect to each 
program and activity identified under subsection (a), the head of the 
relevant agency shall--
            ``(1) annually produce a statistically valid or otherwise 
        appropriate estimate of the improper payments made by each 
        program and activity; and
            ``(2) include those estimates in the accompanying materials 
        to the annual financial statement of the agency required under 
        section 3515 of title 31, United States Code, or similar 
        provision of law and applicable guidance of the Office of 
        Management and Budget.''.
    (c) Reports on Actions To Reduce Improper Payments.--Section 2 of 
the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is 
amended by striking subsection (c) and inserting the following:
    ``(c) Reports on Actions To Reduce Improper Payments.--With respect 
to any program or activity of an agency with estimated improper 
payments under subsection (b), the head of the agency shall provide 
with the estimate under subsection (b) a report on what actions the 
agency is taking to reduce improper payments, including--
            ``(1) a description of the causes of the improper payments, 
        actions planned or taken to correct those causes, and the 
        planned or actual completion date of the actions taken to 
        address those causes;
            ``(2) in order to reduce improper payments to a level below 
        which further expenditures to reduce improper payments would 
        cost more than the amount such expenditures would save in 
        prevented or recovered improper payments, a statement of 
        whether the agency has what is needed with respect to--
                    ``(A) internal controls;
                    ``(B) human capital; and
                    ``(C) information systems and other infrastructure;
            ``(3) if the agency does not have sufficient resources to 
        establish and maintain effective internal controls under 
        paragraph (2)(A), a description of the resources the agency has 
        requested in its budget submission to establish and maintain 
        such internal controls;
            ``(4) program-specific and activity-specific improper 
        payments reduction targets that have been approved by the 
        Director of the Office of Management and Budget; and
            ``(5) a description of the steps the agency has taken to 
        ensure that agency managers, programs, and, where appropriate, 
        States and localities are held accountable through annual 
        performance appraisal criteria for--
                    ``(A) meeting applicable improper payments 
                reduction targets; and
                    ``(B) establishing and maintaining sufficient 
                internal controls, including an appropriate control 
                environment, that effectively--
                            ``(i) prevent improper payments from being 
                        made; and
                            ``(ii) promptly detect and recover improper 
                        payments that are made.''.
    (d) Reports on Actions To Recover Improper Payments.--Section 2 of 
the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is 
amended--
            (1) by striking subsection (e);
            (2) by redesignating subsections (d) and (f) as subsections 
        (f) and (g), respectively; and
            (3) by inserting after subsection (c) the following:
    ``(d) Reports on Actions To Recover Improper Payments.--With 
respect to any improper payments identified in recovery audits 
conducted under section 2(h) of the Improper Payments Elimination and 
Recovery Act of 2008, the head of the agency shall provide with the 
estimate under subsection (b) a report on all actions the agency is 
taking to recover improper payments, including--
            ``(1) a discussion of the methods used by the agency to 
        recover improper payments;
            ``(2) the amounts recovered, outstanding, and determined to 
        not be collectable, including the percent such amounts 
        represent of the total improper payments of the agency;
            ``(3) an aging schedule of the amounts outstanding;
            ``(4) a summary of how recovered amounts have been disposed 
        of; and
            ``(5) if the agency has determined under section 2(h) of 
        the Improper Payments Elimination and Recovery Act of 2008 that 
        performing recovery audits for any applicable program or 
        activity is not cost effective, a justification for that 
        determination.
    ``(e) Governmentwide Reporting of Improper Payments and Actions To 
Recover Improper Payments.--
            ``(1) Report.--Each fiscal year the Director of the Office 
        of Management and Budget shall submit a report with respect to 
        the preceding fiscal year on actions agencies have taken to 
        report information regarding improper payments and actions to 
        recover improper payments to--
                    ``(A) the Committee on Homeland Security and 
                Governmental Affairs of the Senate; and
                    ``(B) the Committee on Oversight and Government 
                Reform of the House of Representatives.
            ``(2) Contents.--Each report under this subsection shall 
        include--
                    ``(A) a summary of the reports of each agency on 
                improper payments and recovery actions submitted under 
                this section;
                    ``(B) an identification of the compliance status of 
                each agency to which this Act applies;
                    ``(C) governmentwide improper payment reduction 
                targets; and
                    ``(D) a discussion of progress made towards meeting 
                governmentwide improper payment reduction targets.''.
    (e) Definitions.--Section 2 of the Improper 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, any payment for a good 
                or service not received (except for such payments where 
                authorized by law), and any payment that does not 
                account for credit for applicable discounts.
            ``(3) Payment.--The term `payment' means any transfer or 
        commitment for future transfer of Federal funds such as cash, 
        securities, loans, loan guarantees, and insurance subsidies to 
        any non-Federal person or entity, that is made by a Federal 
        agency, a Federal contractor, a Federal grantee, or a 
        governmental or other organization administering a Federal 
        program or activity.
            ``(4) Payment for an ineligible good or service.--The term 
        `payment for an ineligible good or service' shall include a 
        payment for any good or service that is rejected under any 
        provision of any contract, grant, lease, cooperative agreement, 
        or any other procurement mechanism.''.
    (f) Guidance by the Office of Management and Budget.--Section 2 of 
the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is 
amended by striking subsection (g) (as redesignated by this section) 
and inserting the following:
    ``(g) Guidance by the Office of Management and Budget.--
            ``(1) In general.--Not later than 6 months after the date 
        of enactment of the Improper Payments Elimination and Recovery 
        Act of 2008, the Director of the Office of Management and 
        Budget shall prescribe guidance for agencies to implement the 
        requirements of this section. The guidance shall not include 
        any exemptions to such requirements not specifically authorized 
        by this section.
            ``(2) Contents.--The 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.''.
    (g) 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 of 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.
    (h) Recovery Audits.--
            (1) In general.--
                    (A) Conduct of audits.--Except as provided under 
                paragraph (3), the head of each executive agency shall 
                conduct recovery audits with respect to each program 
                and activity of the agency that expends $1,000,000 or 
                more annually if conducting such audits would be cost-
                effective.
                    (B) Procedures.--In conducting recovery audits 
                under this subsection, the head of an executive 
                agency--
                            (i) shall give priority to the most recent 
                        payments;
                            (ii) shall implement this subsection in a 
                        manner designed to ensure the greatest 
                        financial benefit to the Government; and
                            (iii) may conduct recovery audits directly, 
                        by procuring performance of recovery audits by 
                        contract (subject to the availability of 
                        appropriations), or by any combination thereof.
                    (C) Recovery audit contracts.--With respect to 
                recovery audits procured by an executive agency by 
                contract--
                            (i) subject to subparagraph (B)(iii), the 
                        head of the agency may authorize the contractor 
                        to notify entities (including persons) of 
                        potential overpayments made to such entities, 
                        respond to questions concerning potential 
                        overpayments, and take other administrative 
                        actions with respect to overpayment claims made 
                        or to be made by the agency; and
                            (ii) such contractor shall have no 
                        authority to make final determinations relating 
                        to whether any overpayment occurred and whether 
                        to compromise, settle, or terminate overpayment 
                        claims.
                    (D) Contract terms and conditions.--The executive 
                agency shall include in each contract for procurement 
                of performance of a recovery audit a requirement that 
                the contractor shall--
                            (i) provide to the agency periodic reports 
                        on conditions giving rise to overpayments 
                        identified by the contractor and any 
                        recommendations on how to mitigate such 
                        conditions; and
                            (ii) notify the agency of any overpayments 
                        identified by the contractor pertaining to the 
                        agency or to any other agency or agencies that 
                        are beyond the scope of the contract.
                    (E) Executive agency action following 
                notification.--An executive agency shall take prompt 
                and appropriate action in response to a report or 
                notification by a contractor under subparagraph 
                (D)(ii), including forwarding to other executive 
                agencies any information that applies to such agencies.
            (2) Disposition of amounts recovered.--
                    (A) In general.--Amounts collected by executive 
                agencies each fiscal year through recovery audits 
                conducted under this subsection shall be treated in 
                accordance with this paragraph.
                    (B) Use for financial management improvement 
                program.--Not more than 25 percent of the amounts 
                collected by an executive agency through recovery 
                audits--
                            (i) shall be available to the head of the 
                        agency or the State or local government 
                        administering the program or activity to carry 
                        out the financial management improvement 
                        program of the agency under paragraph (3);
                            (ii) may be credited, if applicable, for 
                        that purpose by the agency head to any agency 
                        appropriations and funds that are available for 
                        obligation at the time of collection; and
                            (iii) shall be used to supplement and not 
                        supplant any other amounts available for that 
                        purpose and shall remain available until 
                        expended.
                    (C) Use for original purpose.--Not more than 25 
                percent of the amounts collected by an executive 
                agency--
                            (i) shall be credited to the appropriation 
                        or fund, if any, available for obligation at 
                        the time of collection for the same general 
                        purposes as the appropriation or fund from 
                        which the overpayment was made; and
                            (ii) shall remain available for the same 
                        period and purposes as the appropriation or 
                        fund to which credited.
                    (D) Use for inspector general activities.--Not more 
                than 5 percent of the amounts collected by an executive 
                agency shall be available to the Inspector General of 
                that agency for--
                            (i) the Inspector General to carry out this 
                        Act; or
                            (ii) any other activities of the Inspector 
                        General relating to investigating improper 
                        payments or auditing internal controls 
                        associated with payments.
                    (E) Remainder.--Amounts collected that are not 
                applied in accordance with subparagraphs (B), (C), or 
                (D) or to meet obligations to recovery audit 
                contractors shall be deposited in the Treasury as 
                miscellaneous receipts.
            (3) Financial management improvement program.--
                    (A) Requirement.--The head of each executive agency 
                shall conduct a financial management improvement 
                program, consistent with rules prescribed by the 
                Director of the Office of Management and Budget.
                    (B) Program features.--In conducting the program, 
                the head of the executive agency--
                            (i) shall, as the first priority of the 
                        program, address problems that contribute 
                        directly to agency improper payments; and
                            (ii) may seek to reduce errors and waste in 
                        other executive agency programs and operations.
            (4) Rule of construction.--Nothing in this section shall be 
        construed as terminating or in any way limiting authorities 
        that are otherwise available to agencies under existing 
        provisions of law to recover improper payments and use 
        recovered amounts.
    (i) Report on Recovery Auditing.--Not earlier than 2 years after 
the date of the enactment of this Act, the Chief Financial Officers 
Council established under section 302 of the Chief Financial Officers 
Act of 1990 (31 U.S.C. 901 note), in consultation with the President's 
Council on Integrity and Efficiency established under Executive Order 
12805 of May 11, 1992 and recovery audit experts, shall jointly conduct 
a study of--
            (1) the implementation of subsection (h);
            (2) the costs and benefits of agency recovery audit 
        activities, including those under subsection (h), 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
            (3) submit a report on the results of the study to--
                    (A) the Committee on Homeland Security and 
                Governmental Affairs of the Senate;
                    (B) the Committee on Oversight and Government 
                Reform of the House of Representatives; and
                    (C) the Comptroller General.

SEC. 3. COMPLIANCE.

    (a) Definitions.--In this section:
            (1) Agency.--The term ``agency'' has the meaning given 
        under section 2(f) of the Improper Payments Information Act of 
        2002 (31 U.S.C. 3321 note) as redesignated by this Act.
            (2) Annual financial statement.--The term ``annual 
        financial statement'' means the annual financial statement 
        required under section 3515 of title 31, United States Code, or 
        similar provision of law.
            (3) Compliance.--The term ``compliance'' means that the 
        agency--
                    (A) has published an annual financial statement for 
                the most recent fiscal year and posted that report and 
                any accompanying materials required under guidance of 
                the Office of Management and Budget on the agency 
                website;
                    (B) has conducted a program specific risk 
                assessment for each program or activity that conforms 
                with section 2(a) the Improper Payments Information Act 
                of 2002 (31 U.S.C. 3321 note); and
                    (C) publishes improper payments estimates for all 
                programs and activities identified under section 2(b) 
                of the Improper Payments Information Act of 2002 (31 
                U.S.C. 3321 note) in the accompanying materials to the 
                annual financial statement;
                    (D) publishes programmatic corrective action plans 
                prepared under section 2(c) of the Improper Payments 
                Information Act of 2002 (31 U.S.C. 3321 note) that the 
                agency may have in the accompanying materials to the 
                annual financial statement;
                    (E) publishes improper payments reduction targets 
                in the accompanying materials to the annual financial 
                statement for each program assessed to be at risk, and 
                is actively meeting such targets;
                    (F) has reported an improper payment rate of less 
                than 15 percent for each program and activity; and
                    (G) publishes the report under subsection (b) in 
                the accompanying materials to the annual financial 
                statement.
    (b) 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 
        and submit a report to the head of the agency on that 
        determination.
            (2) Inclusion in accompanying materials to the annual 
        financial statement.--The head of each agency shall include the 
        report of the agency Inspector General described under 
        paragraph (1) in the accompanying materials to the annual 
        financial statement.
    (c) Remediation.--
            (1) Noncompliance.--
                    (A) In general.--If an agency is determined by the 
                agency Inspector General not to be in compliance under 
                subsection (b) in a fiscal year, the head of the agency 
                shall submit a plan to Congress describing the actions 
                that the agency will take to come into compliance.
                    (B) Plan.--The plan described under subparagraph 
                (A) shall include--
                            (i) measurable milestones to be 
                        accomplished in order to achieve compliance;
                            (ii) the designation of a senior agency 
                        official who shall be accountable for the 
                        progress of the agency in coming into 
                        compliance; and
                            (iii) the establishment of an 
                        accountability mechanism, such as a performance 
                        agreement, with appropriate incentives and 
                        consequences tied to the success of the 
                        official designated under clause (ii) in 
                        leading the efforts of the agency to come into 
                        compliance.
            (2) Noncompliance for 2 fiscal years.--
                    (A) In general.--If an agency is determined by the 
                agency Inspector General not to be in compliance under 
                subsection (b) for 2 consecutive fiscal years and the 
                Director of the Office of Management and Budget 
                determines that additional funding would help the 
                agency come into compliance, the head of the agency 
                shall obligate additional funding, in an amount 
                determined by the Director, to intensify compliance 
                efforts.
                    (B) Funding.--In providing additional funding 
                described under subparagraph (A), the head of an agency 
                shall use any reprogramming or transfer authority 
                available to the agency. If after exercising that 
                reprogramming or transfer authority additional funding 
                is necessary to obligate the full level of funding 
                determined by the Director of the Office of Management 
                and Budget under subparagraph (A), the agency shall 
                submit a request to Congress for additional 
                reprogramming or transfer authority.
            (3) Noncompliance for 3 fiscal years.--
                    (A) In general.--If an agency is determined by the 
                agency Inspector General not to be in compliance under 
                subsection (b) for 3 consecutive fiscal years and the 
                Director of the Office of Management and Budget 
                determines that additional funding would help the 
                agency come into compliance, the head of the agency 
                shall obligate additional funding, in an amount 
                determined by the Director, to intensify compliance 
                efforts.
                    (B) Funding.--Additional funding described under 
                subparagraph (A) may come from any available 
                appropriations administered by the agency 
                notwithstanding any limitation in any other provision 
                of law.
                    (C) Reauthorization proposals.--If an agency is 
                determined by the agency Inspector General not to be in 
                compliance under subsection (b) for more than 3 
                consecutive fiscal years, the head of the agency shall, 
                not later than 30 days after such determination, submit 
                to Congress--
                            (i) reauthorization proposals for each 
                        program responsible for the determination; and
                            (ii) proposed statutory changes necessary 
                        to bring the agency into compliance.
                    (D) Congressional action for discretionary 
                programs.--
                            (i) In general.--Congress shall reauthorize 
                        each discretionary program for which proposals 
                        have been submitted under subparagraph (C) 
                        taking into account the requirements of this 
                        Act and the programmatic changes required to 
                        achieve agency compliance and eliminate 
                        improper payments.
                            (ii) Failure to act.--If Congress fails to 
                        act on any reauthorization proposal submitted 
                        under subparagraph (C) within 2 fiscal years 
                        following the year of a determination made 
                        under that subparagraph and the Director of the 
                        Office of Management and Budget determines that 
                        sufficient changes have not been made to the 
                        program to bring the agency that has submitted 
                        the proposal into compliance by the time the 
                        agency submits its next annual financial 
                        statement under section 3315 of title 31, 
                        United States Code, the authorized level of 
                        funding for the program shall not increase 
                        above the authorized level in the second fiscal 
                        year following the year of that determination 
                        under subparagraph (C) until Congress acts or 
                        the agency comes into compliance.
                    (E) Entitlement programs.--Subparagraph (D) shall 
                not apply to entitlement programs under section 3(9) of 
                the Congressional Budget and Impoundment Control Act of 
                1974 (2 U.S.C. 622(9)).
    (d) Compliance Enforcement Pilot Programs.--
            (1) In general.--The Director of the Office of Management 
        and Budget may establish 1 or more pilot programs which shall 
        test potential accountability mechanisms with appropriate 
        incentives and consequences tied to success in ensuring 
        compliance with this Act and eliminating improper payments.
            (2) Report.--Not later than 5 years after the date of 
        enactment of this Act, the Director of the Office of Management 
        and Budget shall submit a report to Congress on the findings 
        associated with any pilot programs conducted under paragraph 
        (1). Such report shall include any legislative or other 
        recommendations that the Director determines necessary.
                                                      Calendar No. 1103

110th CONGRESS

  2d Session

                                S. 2583

_______________________________________________________________________

                                 A BILL

To amend the Improper Payments Information Act of 2002 (31 U.S.C. 3321 
  note) in order to prevent the loss of billions in taxpayer dollars.

_______________________________________________________________________

            October 1 (legislative day, September 17), 2008

                       Reported with an amendment