[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 1508 Engrossed in Senate (ES)]
111th CONGRESS
2d Session
S. 1508
_______________________________________________________________________
AN ACT
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,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Improper Payments Elimination and
Recovery Act of 2010''.
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 2010 is
enacted and at least once every 3 fiscal years thereafter. For
those agencies already performing a risk assessment every 3
years, agencies may apply to the Director of the Office of
Management and Budget for a waiver from the requirement of the
preceding sentence and continue their 3-year risk assessment
cycle.
``(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) $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) $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, experience, 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) produce a statistically valid estimate, or an
estimate that is otherwise appropriate using a methodology
approved by the Director of the Office of Management and
Budget, 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 2010 (31 U.S.C. 3321 note), 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 overpayments;
``(2) the amounts recovered, outstanding, and determined to
not be collectable, including the percent such amounts
represent of the total overpayments of the agency;
``(3) if a determination has been made that certain
overpayments are not collectable, a justification of that
determination;
``(4) an aging schedule of the amounts outstanding;
``(5) a summary of how recovered amounts have been disposed
of;
``(6) a discussion of any conditions giving rise to
improper payments and how those conditions are being resolved;
and
``(7) if the agency has determined under section 2(h) of
the Improper Payments Elimination and Recovery Act of 2010 (31
U.S.C. 3321 note) 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 overpayments 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 Payments 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 funding 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 2010, 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 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) Determinations of Agency Readiness for Opinion on Internal
Control.--Not later than 1 year after the date of enactment of this
Act, the Director of the Office of Management and Budget shall
develop--
(1) specific criteria as to when an agency should initially
be required to obtain an opinion on internal control over
improper payments; and
(2) criteria for an agency that has demonstrated a
stabilized, effective system of internal control over improper
payments, whereby the agency would qualify for a multiyear
cycle for obtaining an audit opinion on internal control over
improper payments, rather than an annual cycle.
(h) Recovery Audits.--
(1) Definition.--In this subsection, 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) In general.--
(A) Conduct of audits.--Except as provided under
paragraph (4) and if not prohibited under any other
provision of law, the head of each 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 agency--
(i) shall give priority to the most recent
payments and to payments made in any program or
programs identified as susceptible to
significant improper payments under section
2(a) of the Improper Payments Information Act
of 2002 (31 U.S.C. 3321 note);
(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 using other departments and agencies of the
United States, or by procuring performance of
recovery audits by private sector sources 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 agency by contract--
(i) subject to subparagraph (B)(iii), and
except to the extent such actions are outside
the agency's authority, as defined by section
605(a) of the Contract Disputes Act of 1978 (41
U.S.C. 605(a)), 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.--
(i) In general.--The 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;
(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;
and
(III) report to the agency credible
evidence of fraud or vulnerabilities to
fraud, and conduct appropriate training
of personnel of the contractor on
identification of fraud.
(ii) Reports on actions taken.--Not later
than November 1 of each year, each agency shall
submit a report on actions taken by the agency
during the preceding fiscal year to address the
recommendations described under clause (i)(I)
to--
(I) the Office of Management and
Budget; and
(II) Congress.
(E) Agency action following notification.--An
agency shall take prompt and appropriate action in
response to a report or notification by a contractor
under subparagraph (D)(i)(I) or (II), to collect
overpayments and shall forward to other agencies any
information that applies to such agencies.
(3) Disposition of amounts recovered.--
(A) In general.--Amounts collected by agencies each
fiscal year through recovery audits conducted under
this subsection shall be treated in accordance with
this paragraph. The agency head shall determine the
distribution of collected amounts, less amounts needed
to fulfill the purposes of section 3562(a) of title 31,
United States Code, in accordance with subparagraphs
(B), (C), and (D).
(B) Use for financial management improvement
program.--Not more than 25 percent of the amounts
collected by an agency through recovery audits--
(i) shall be available to the head of the
agency to carry out the financial management
improvement program of the agency under
paragraph (4);
(ii) may be credited, if applicable, for
that purpose by the head of an agency 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 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;
(ii) shall remain available for the same
period and purposes as the appropriation or
fund to which credited; and
(iii) if the appropriation from which the
overpayment was made has expired, shall be
newly available for the same time period as the
funds were originally available for obligation,
except that any amounts that are recovered more
than five fiscal years from the last fiscal
year in which the funds were available for
obligation shall be deposited in the Treasury
as miscellaneous receipts, except that in the
case of recoveries of overpayments that are
made from trust or special fund accounts, such
amounts shall revert to those accounts.
(D) Use for inspector general activities.--Not more
than 5 percent of the amounts collected by an agency
shall be available to the Inspector General of that
agency--
(i) 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; and
(ii) shall remain available for the same
period and purposes as the appropriation or
fund to which credited.
(E) Remainder.--Amounts collected that are not
applied in accordance with subparagraph (A), (B), (C),
or (D) shall be deposited in the Treasury as
miscellaneous receipts, except that in the case of
recoveries of overpayments that are made from trust or
special fund accounts, such amounts shall revert to
those accounts.
(F) Discretionary amounts.--This paragraph shall
apply only to recoveries of overpayments that are made
from discretionary appropriations (as that term is
defined by paragraph 7 of section 250 of the Balanced
Budget and Emergency Deficit Control Act of 1985) and
shall not apply to recoveries of overpayments that are
made from discretionary amounts that were appropriated
prior to enactment of this Act.
(G) Application.--This paragraph shall not apply to
recoveries of overpayments if the appropriation from
which the overpayment was made has not expired.
(4) Financial management improvement program.--
(A) Requirement.--The head of each 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 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 agency programs and operations.
(5) Privacy protections.--Any nongovernmental entity that,
in the course of recovery auditing or recovery activity under
this subsection, obtains information that identifies an
individual or with respect to which there is a reasonable basis
to believe that the information can be used to identify an
individual, may not disclose the information for any purpose
other than such recovery auditing or recovery activity and
governmental oversight of such activity, unless disclosure for
that other purpose is authorized by the individual to the
executive agency that contracted for the performance of the
recovery auditing or recovery activity.
(6) Other recovery audit requirements.--
(A) In general.--(i) Except as provided in clause
(ii), subchapter VI of chapter 35 of title 31, United
States Code, is repealed.
(ii) Section 3562(a) of title 31, United States
Code, shall continue in effect, except that references
in such section 3562(a) to programs carried out under
section 3561 of such title, shall be interpreted to
mean programs carried out under section 2(h) of this
Act.
(B) Technical and conforming amendments.--
(i) Table of sections.--The table of
sections for chapter 35 of title 31, United
States Code, is amended by striking the matter
relating to subchapter VI.
(ii) Definition.--Section 3501 of title 31,
United States Code, is amended by striking
``and subchapter VI of this title''.
(iii) Homeland security grants.--Section
2022(a)(6) of the Homeland Security Act of 2002
(6 U.S.C. 612(a)(6)) is amended by striking
``(as that term is defined by the Director of
the Office of Management and Budget under
section 3561 of title 31, United States Code)''
and inserting ``under section 2(h) of the
Improper Payments Elimination and Recovery Act
of 2010 (31 U.S.C. 3321 note)''.
(7) Rule of construction.--Except as provided under
paragraph (5), 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 later 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 Council of
Inspectors General on Integrity and Efficiency established under
section 7 of the Inspector General Reform Act of 2009 (Public Law 110-
409) and recovery audit experts, shall conduct a study of--
(1) the implementation of subsection (h);
(2) the costs and benefits of agency recovery audit
activities, including--
(A) those activities under subsection (h); and
(B) the effectiveness of using the services of--
(i) private contractors;
(ii) agency employees;
(iii) cross-servicing from other agencies;
or
(iv) any combination of the provision of
services described under clauses (i) through
(iii); 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) if required, 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) if required, 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
established 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 for each program assessed to
be at risk, and is meeting such targets; and
(F) has reported an improper payment rate of less
than 10 percent for each program and activity for which
an estimate was published under section 2(b) of the
Improper Payments Information Act of 2002 (31 U.S.C.
3321 note).
(b) Annual Compliance Report by Inspectors General of Agencies.--
Each fiscal year, the Inspector General of each agency shall determine
whether the agency is in compliance and submit a report on that
determination to--
(1) the head of the agency;
(2) the Committee on Homeland Security and Governmental
Affairs of the Senate;
(3) the Committee on Oversight and Governmental Reform of
the House of Representatives; and
(4) the Comptroller General.
(c) Remediation.--
(1) Noncompliance.--
(A) In general.--If an agency is determined by the
Inspector General of that agency 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 for
each program or activity;
(ii) the designation of a senior agency
official who shall be accountable for the
progress of the agency in coming into
compliance for each program or activity; 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 for each program and activity.
(2) Noncompliance for 2 fiscal years.--
(A) In general.--If an agency is determined by the
Inspector General of that agency not to be in
compliance under subsection (b) for 2 consecutive
fiscal years for the same program or activity, 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 intensified 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) Reauthorization and statutory proposals.--If an agency
is determined by the Inspector General of that agency not to be
in compliance under subsection (b) for more than 3 consecutive
fiscal years for the same program or activity, the head of the
agency shall, not later than 30 days after such determination,
submit to Congress--
(A) reauthorization proposals for each program or
activity that has not been in compliance for 3 or more
consecutive fiscal years; or
(B) proposed statutory changes necessary to bring
the program or activity into compliance.
(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). The report shall include any legislative or other
recommendations that the Director determines necessary.
(e) Report on Chief Financial Officers Act of 1990.--Not later than
1 year after the date of the enactment of this Act, the Chief Financial
Officers Council established under section 302 of the Chief Financial
Officers Act of 1990 (31 U.S.C. 901 note) and the Council of Inspectors
General on Integrity and Efficiency established under section 7 of the
Inspector General Reform Act of 2009 (Public Law 110-409), in
consultation with a broad cross-section of experts and stakeholders in
Government accounting and financial management shall--
(1) jointly examine the lessons learned during the first 20
years of implementing the Chief Financial Officers Act of 1990
(31 U.S.C. 901) and identify reforms or improvements, if any,
to the legislative and regulatory compliance framework for
Federal financial management that will optimize Federal agency
efforts to--
(A) publish relevant, timely, and reliable reports
on Government finances; and
(B) implement internal controls that mitigate the
risk for fraud, waste, and error in Government
programs; and
(2) jointly submit a report on the results of the
examination 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.
Passed the Senate June 23, 2010.
Attest:
Secretary.
111th CONGRESS
2d Session
S. 1508
_______________________________________________________________________
AN ACT
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.