Short title

This Act may be cited as the

Improper Payments Elimination and Recovery Act of 2008

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 it 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 risks for each program and activity resulting from the estimates made 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 the improper payments, including— (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; (2)in order to reduce improper payments to minimal cost-effective levels, a statement of whether the agency has— (A)the internal controls, including information systems; (B)the human capital; and (C)other infrastructure the agency needs; (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; (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 (5)a statement of whether or not the agency has— (A)conducted annual improper payment risk assessments; (B)developed and implemented improper payment control plans; and (C)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 redesignating subsections (d), (e), and (f) as subsections (f), (g), and (h), respectively; and (B)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; 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 subsection (g) (as redesignated by this section) and inserting the following:

(g)

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 (h) (as redesignated by this section) and inserting the following:

(h)

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— (1)conducting an internal recovery audit would be effective; or (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. (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— (1)jointly conduct a study of the potential costs and benefits of requiring Federal agencies to recover improper payments 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; (F)publishes the compliance report under subsection (c) in the performance report; and (G)is not subject to the subsection (d)(4). (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 Inspector 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 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). (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). (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 under subparagraph (A) until the agency is determined to be in compliance under subsection (b). (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)— (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.

Short title

This Act may be cited as the

Improper Payments Elimination and Recovery Act of 2008

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

(g)

Internal Controls

(1)

Report on effectiveness of A-123 implementation

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

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.

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.

October 1 (legislative day, September 17), 2008

Reported with an amendment