[Congressional Record Volume 154, Number 16 (Thursday, January 31, 2008)]
[Senate]
[Pages S544-S547]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CARPER (for himself and Mrs. McCaskill):
  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; to the Committee on Homeland Security and 
Governmental Affairs.
  Mr. CARPER. Mr. President, I rise today to introduce the Improper 
Payments Elimination and Recovery Act of 2008.
  At first glance, a bill with a name like that might not seem too 
exciting. But I can assure my colleagues that it addresses a serious, 
largely unknown problem that is a real threat to our fiscal well being.
  Each year, agencies are required to look at all of their programs and 
activities and determine which are susceptible to significant improper 
payments. For those that are deemed at risk, agencies must produce 
estimated error rates that are included in their year-end financial 
statements. They must also come up with action plans for reducing their 
errors.
  In fiscal year 2007, agencies are estimated to have made nearly $55 
billion in improper payments. That is an astounding number, Mr. 
President.
  We spend so much time around here throwing around numbers like $55 
billion that they begin to lose their meaning. So I want to take a 
minute or so to put that number in perspective.
  I was surprised to learn that $55 billion is more than the total 
budget for the Department of Homeland Security. It is also twice as 
much as we're projected to spend to protect the vehicles our soldiers 
are using in Iraq against roadside bombs.
  To illustrate further the amount of money we are talking about, $55 
billion is just a little bit less than the total GDP of Vietnam. It is 
a little bit more than the GDPs of Croatia and Slovakia. Most 
astoundingly, $55 billion equals the combined GDPs of 44 of the smaller 
countries in the world.
  So our Federal Government is likely wasting more money than the total 
populations of many countries produce in a given year.
  But $55 billion is not even a real number. It is likely just the tip 
of the iceberg. It includes no error estimates for massive programs 
like TANF, SCHIP, and the Medicare Prescription Drug Program. So I 
expect that we will see more than $55 billion in improper payments next 
year and the year after.
  My colleagues and I on the Homeland Security and Governmental Affairs 
Committee's Subcommittee on Federal Financial Management have held six 
hearings focused on this issue now, including one this afternoon. What 
we

[[Page S545]]

have learned is that, in some cases, agencies are just not taking their 
responsibility to deal with and address their problems with improper 
payments and the management weaknesses that can cause them. The bill I 
am bringing forward today addresses just about all of the failures and 
deficiencies we've learned about through our oversight.
  My bill starts by improving transparency. OMB right now has set the 
reporting threshold for improper payments too low, meaning millions of 
errors go unreported--and potentially unaddressed--each year. I want to 
lower the reporting threshold so that Congress and the general public 
have a better picture of the problem we face.
  My bill would also help to prevent improper payments from happening 
in the first place by requiring that agencies come up with stronger 
corrective action plans and aggressive error reduction targets. It 
would also implement a recent recommendation from GAO that called on 
OMB to develop a process whereby agencies would receive regular audited 
opinions on the financial controls used to prevent improper payments 
before they happen.
  My bill would also force agencies to be more aggressive in recovering 
improper payments they make. Some agencies--and most private sector 
firms--regularly go over their books to identify payment errors and get 
back overpayments made to contractors and others they do business with. 
We haven't done that enough in the Federal Government. Even as the 
agencies are reporting more and more improper payments, the amount 
recovered remains miniscule. I want to change this by requiring that 
all agencies with outlays of $1 million or more perform recovery audits 
on all of their programs and activities if doing so is cost effective.
  Finally--and perhaps most importantly--my bill would hold agencies 
accountable. Today, as I mentioned, some agencies do not appear to be 
taking improper payments very seriously. I want to force agencies to 
hold top managers accountable for their progress--or lack of progress--
in doing something to take better care of the tax dollars we entrust 
them with.
  I look forward to working with my colleagues to get these important 
reforms enacted. I am sure we can all agree that allowing this level of 
waste to continue unchecked is reckless and unacceptable.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2583

       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 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, 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--

[[Page S546]]

       ``(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.

     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) 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

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     (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.
                                 ______