[Congressional Record (Bound Edition), Volume 145 (1999), Part 7]
[Extensions of Remarks]
[Page 9839]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 9839]]

        INTRODUCING THE GOVERNMENT WASTE CORRECTIONS ACT OF 1999

                                 ______
                                 

                            HON. DAN BURTON

                               of indiana

                    in the house of representatives

                          Monday, May 17, 1999

  Mr. BURTON of Indiana. Mr. Speaker, today I am introducing the 
Government Waste Corrections Act of 1999.
  One of my highest priorities as chairman of the Committee on 
Government reform is to attack the widespread fraud, waste, and error 
in many federal programs and activities that cost taxpayers billions of 
dollars every year. Already this year, the Government Reform Committee 
has held several hearings and received reports from GAO and agency 
Inspectors General on this subject. Just a few examples from the GAO 
and IG reports show outright waste that amounts to over $30 billion 
annually. This $30 billion figure only scratches the surface, no one 
knows the total cost to the federal government each year from waste and 
error.
  One of the most troubling aspects of waste and error is that the 
problems tend to persist year after year. Many problems just grow 
worse. GAO, IGs and others already have fully and repeatedly documented 
these problems. They don't need more general discussion; they need 
solutions.
  The bill I introduce today will go a long way toward solving one of 
the most serious areas of waste and error--overpayments to vendors and 
others that provide goods and services to federal agencies. The bill 
deals with the problem by applying a proven practice from the private 
sector known as ``recovery auditing.''
  The bill requires agencies to conduct recovery auditing to identify 
and collect back erroneous payments for programs that spend $10 million 
or more annually. This should result in recoveries to the taxpayers of 
at least $1 billion each year. The bill also provides agencies the 
means and incentives to make lasting improvements in their financial 
management that will reduce future overpayments, and other forms of 
waste and error.
  The practice of recovery auditing is actually quite simple. Here's 
how it works:
  Recovery auditors review payment transactions to uncover errors such 
as vendor pricing mistakes, missed discounts, duplicate payments, and 
so forth. The vast majority of payment transactions are correct. But 
inevitably, some errors occur because of communication failures between 
purchasing and payment departments, complex pricing arrangements, 
personnel turnover, and changes in information and accounting systems.
  Once an error is identified and verified through the review of 
transactions, a notification letter is sent to the vendor for review. 
Monetary recoveries are usually accomplished through administrative 
offsets.
  Recovery auditing has been used successfully by private sector firms 
for over 30 years. It began with major retailers and is now an accepted 
business practice among Fortune 1000 companies. It has helped even 
well-managed companies recover millions of dollars annually in 
overpayments to their vendors. It clearly has the potential to recover 
billions annually in federal overpayments, given the magnitude and 
complexity of federal payment programs coupled with the serious 
financial management problems that plague most agencies.
  In places where recovery auditing has been tested in government, it 
has proven effective. The Army Air Force Exchange System (AAFES) has 
contracted with a recovery auditing firm since 1991. AAFES makes 
purchases of approximately $6.5 billion annually. Over the last 7 
years, $108 million has been recovered.
  In another example, the Defense Department has been conducting a 
recovery auditing demonstration program at several of its locations. 
Roughly $6 billion in purchase transactions are being reviewed in this 
audit. This program is nearing completion and has identified over $24 
million in overpayments. These results were achieved despite the fact 
that most of the payments audited were 4 to 6 years old and agency 
records were incomplete.
  The potential financial benefits to the federal government from 
recovery auditing are enormous, and can conservatively be estimated at 
well over $1 billion annually. Experience thus far with recovery 
auditing in the federal government shows an error rate of about 0.4 
percent, of four times the private sector error rate. Given that 
federal procurements total about $170 billion per year, recoveries from 
procurement dollars alone could average at least $680 million annually.
  Here's what my bill does:
  It establishes a general mandate that all Executive branch agencies 
use recovery auditing for all of their activities that involve 
recurring payments totaling at least $10 million per year to vendors 
and other service providers. The scope of this mandate is very broad. 
It covers not only payments under procurement contracts, but also 
payments to fiscal agents, like consultants, who perform services on 
behalf of the federal government and are reimbursed from federal funds.
  Exceptions from the bill's coverage could only be made by the 
Director of the Office of Management and Budget (OMB) in cases where he 
determines that recovery auditing would be impractical.
  In addition to its general mandate for recovery auditing, the bill 
requires OMB to designate at least five agency recovery auditing model 
programs to receive particular attention and provide best practice for 
other federal recovery auditing programs.
  If OMB provides strong leadership, and if agencies vigorously 
implement the bill's requirements as intended, recoveries to the 
federal government should amount to billions of dollars each year. This 
in itself will go a long way toward mitigating the effects of the 
pervasive waste and error that now occurs in federal payment programs. 
However, requiring agencies to identify and recoup overpayments is only 
one of the bill's key objectives. The other is to remedy the root 
causes that gave rise to the overpayments in the first place.
  The bill contains two remedial measures. One requires that recovery 
auditing contractors periodically report to agencies on the conditions 
they find to have caused overpayments and provide recommendations for 
fixing them. The agency must take prompt action in response to these 
reports.
  The second remedial measure is to dedicate up to 50 percent of 
overpayment recoveries to invest in management improvement programs 
that each agency must undertake. These programs will improve the 
agency's staff capacity, information technology, and financial 
management in order to prevent overpayments and reduce other problems 
of waste and error.
  One particular feature of agency management improvement programs 
deserves special note. The bill provides for cash incentive awards of 
up to $150,000 for federal employees who make extraordinary 
contributions that result in concrete savings to their agencies from 
reductions in waste or error. One specific condition is that the 
employee or employees must be directly responsible for documented 
savings of at least twice the amount of their awards. Dedicated federal 
employees can be valuable front line soldiers in combating waste and 
error. When they accomplish major results, they deserve major rewards.
  In addition to the 50 percent reserved for management improvement 
programs, the bill allows agencies to use up to 25 percent of 
collections from recovery audits to finance their recovery auditing 
costs, including making payments to contractors. Agencies can return 
another 25 percent of collections to the programs and activities from 
which the overpayments originated. Any collections not used for these 
purposes will be returned to the Treasury.
  Mr. Speaker, my bill lays out an ambitious program of immediate and 
aggressive action to recover wasted tax dollars and achieve large 
annual savings for the federal government through application of the 
private sector business practice of recovery auditing. It also ensures 
a long-term investment in the fundamental management reforms so badly 
needed to achieve lasting improvements in the way the federal 
government does business. It includes bold and innovative measures such 
as unprecedented incentives for federal employees to combat waste.
  The bill also contains controls and safeguards to ensure that its 
system of incentives is applied most effectively and is not abused. It 
assigns OMB substantial authority and responsibility to provide 
guidance and oversight. It provides for periodic reporting by both OMB 
and GAO. It envisions that Congress will likewise provide active 
oversight, including reviewing and, if necessary, modifying funding 
levels through reprogramming actions and other means.
  I believe that this bill holds great potential to achieve substantial 
cost benefits for the government and the American taxpayers, as well as 
major improvements in the efficiency and effectiveness of agency 
operations throughout the government.




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