[House Report 112-698]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-698

======================================================================



 
   IMPROPER PAYMENTS ELIMINATION AND RECOVERY IMPROVEMENT ACT OF 2012

                                _______
                                

 November 30, 2012.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

   Mr. Issa, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 4053]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Oversight and Government Reform, to whom 
was referred the bill (H.R. 4053) to intensify efforts to 
identify, prevent, and recover payment error, waste, fraud, and 
abuse within Federal spending, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
Committee Statement and Views....................................     6
Section-by-Section...............................................     8
Explanation of Amendments........................................     9
Committee Consideration..........................................    10
Application of Law to the Legislative Branch.....................    10
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................    10
Statement of General Performance Goals and Objectives............    10
Federal Advisory Committee Act...................................    10
Unfunded Mandate Statement.......................................    10
Earmark Identification...........................................    10
Committee Estimate...............................................    10
Budget Authority and Congressional Budget Office Cost Estimate...    11
Changes in Existing Law Made by the Bill as Reported.............    12

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Improper Payments Elimination and 
Recovery Improvement Act of 2012''.

SEC. 2. DEFINITIONS.

  In this Act--
          (1) the term ``agency'' means an executive agency as that 
        term is defined under section 102 of title 31, United States 
        Code;
          (2) the term ``improper payment'' has the meaning given that 
        term in section 2(g) of the Improper Payments Information Act 
        of 2002 (31 U.S.C. 3321 note), as redesignated by section 
        3(a)(1) of this Act; and
          (3) the term ``State'' means each State of the United States, 
        the District of Columbia, each territory or possession of the 
        United States, and each federally recognized Indian tribe.

SEC. 3. IMPROVING THE DETERMINATION OF IMPROPER PAYMENTS BY FEDERAL 
                    AGENCIES.

  (a) In General.--Section 2 of the Improper Payments Information Act 
of 2002 (31 U.S.C. 3321 note) is amended--
          (1) by redesignating subsections (b) through (g) as 
        subsections (c) through (h), respectively;
          (2) by inserting after subsection (a) the following:
  ``(b) Improving the Determination of Improper Payments.--
          ``(1) In general.--The Director of the Office of Management 
        and Budget shall on an annual basis--
                  ``(A) identify a list of high-priority Federal 
                programs for greater levels of oversight and review--
                          ``(i) in which the highest dollar value or 
                        highest rate of improper payments occur; or
                          ``(ii) for which there is a higher risk of 
                        improper payments; and
                  ``(B) in coordination with the agency responsible for 
                administering the high-priority program, establish 
                annual targets and semi-annual or quarterly actions for 
                reducing improper payments associated with each high-
                priority program.
          ``(2) Report on high-priority improper payments.--
                  ``(A) In general.--Subject to Federal privacy 
                policies and to the extent permitted by law, each 
                agency with a program identified under paragraph (1)(A) 
                on an annual basis shall submit to the Inspector 
                General of that agency, and make available to the 
                public (including availability through the Internet), a 
                report on that program.
                  ``(B) Contents.--Each report under this paragraph--
                          ``(i) shall describe--
                                  ``(I) any action the agency--
                                          ``(aa) has taken or plans to 
                                        take to recover improper 
                                        payments; and
                                          ``(bb) intends to take to 
                                        prevent future improper 
                                        payments; and
                          ``(ii) shall not include any referrals the 
                        agency made or anticipates making to the 
                        Department of Justice, or any information 
                        provided in connection with such referrals.
                  ``(C) Public availability on central website.--The 
                Office of Management and Budget shall make each report 
                submitted under this paragraph available on a central 
                website.
                  ``(D) Availability of information to inspector 
                general.--Subparagraph (B)(ii) shall not prohibit any 
                referral or information being made available to an 
                Inspector General as otherwise provided by law.
                  ``(E) Assessment and recommendations.--The Inspector 
                General of each agency that submits a report under this 
                paragraph shall, for each program of the agency that is 
                identified under paragraph (1)(A)--
                          ``(i) review--
                                  ``(I) the assessment of the level of 
                                risk associated with the program, and 
                                the quality of the improper payment 
                                estimates and methodology of the agency 
                                relating to the program; and
                                  ``(II) the oversight or financial 
                                controls to identify and prevent 
                                improper payments under the program; 
                                and
                          ``(ii) submit to Congress recommendations, 
                        which may be included in another report 
                        submitted by the Inspector General to Congress, 
                        for modifying any plans of the agency relating 
                        to the program, including improvements for 
                        improper payments determination and estimation 
                        methodology.'';
          (3) in subsection (d) (as redesignated by paragraph (1) of 
        this subsection), by striking ``subsection (b)'' each place 
        that term appears and inserting ``subsection (c)'';
          (4) in subsection (e) (as redesignated by paragraph (1) of 
        this subsection), by striking ``subsection (b)'' and inserting 
        ``subsection (c)''; and
          (5) in subsection (g)(3) (as redesignated by paragraph (1) of 
        this subsection), by inserting ``or a Federal employee'' after 
        ``non-Federal person or entity''.
  (b) Improved Estimates.--
          (1) In general.--Not later than 180 days after the date of 
        enactment of this Act, the Director of the Office of Management 
        and Budget shall provide guidance to agencies for improving the 
        estimates of improper payments under the Improper Payments 
        Information Act of 2002 (31 U.S.C. 3321 note).
          (2) Guidance.--Guidance under this subsection shall--
                  (A) strengthen the estimation process of agencies by 
                setting standards for agencies to follow in determining 
                the underlying validity of sampled payments to ensure 
                amounts being billed, paid, or obligated for payment 
                are proper;
                  (B) instruct agencies to give the persons or entities 
                performing improper payments estimates access to all 
                necessary payment data, including access to relevant 
                documentation;
                  (C) explicitly bar agencies from relying on self-
                reporting by the recipients of agency payments as the 
                sole source basis for improper payments estimates;
                  (D) require agencies to include all identified 
                improper payments in the reported estimate, regardless 
                of whether the improper payment in question has been or 
                is being recovered;
                  (E) include payments to employees, including salary, 
                locality pay, travel pay, purchase card use, and other 
                employee payments, as subject to risk assessment and, 
                where appropriate, improper payment estimation; and
                  (F) require agencies to tailor their corrective 
                actions for the high-priority programs identified under 
                section 2(b)(1)(A) of the Improper Payments Information 
                Act of 2002 (31 U.S.C. 3321 note) to better reflect the 
                unique processes, procedures, and risks involved in 
                each specific program.
  (c) Technical and Conforming Amendments.--The Improper Payments 
Elimination and Recovery Act of 2010 (Public Law 111-204; 31 U.S.C. 
3321 note.) is amended--
          (1) in section 2(h)(1), by striking ``section 2(f)'' and all 
        that follows and inserting ``section 2(g) of the Improper 
        Payments Information Act of 2002 (31 U.S.C. 3321 note).''; and
          (2) in section 3(a)--
                  (A) in paragraph (1), by striking ``section 2(f)'' 
                and all that follows and inserting ``section 2(g) of 
                the Improper Payments Information Act of 2002 (31 
                U.S.C. 3321 note).''; and
                  (B) in paragraph (3)--
                          (i) by striking ``section 2(b)'' each place 
                        it appears and inserting ``section 2(c)''; and
                          (ii) by striking ``section 2(c)'' each place 
                        it appears and inserting ``section 2(d)''.

SEC. 4. IMPROPER PAYMENTS INFORMATION.

  Section 2(a)(3)(A)(ii) of the Improper Payments Information Act of 
2002 (31 U.S.C. 3321 note) is amended by striking ``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'' 
and inserting ``with respect to fiscal year 2014 and each fiscal year 
thereafter''.

SEC. 5. DO NOT PAY INITIATIVE.

  (a) Prepayment and Preaward Procedures.--
          (1) In general.--Each agency shall review prepayment and 
        preaward procedures and ensure that a thorough review of 
        available databases with relevant information on eligibility 
        occurs to determine program or award eligibility and prevent 
        improper payments before the release of any Federal funds.
          (2) Databases.--At a minimum and before issuing any payment 
        and award, each agency shall review as appropriate the 
        following databases to verify eligibility of the payment and 
        award:
                  (A) The Death Master File of the Social Security 
                Administration.
                  (B) The General Services Administration's Excluded 
                Parties List System.
                  (C) The Debt Check Database of the Department of the 
                Treasury.
                  (D) The Credit Alert System or Credit Alert 
                Interactive Voice Response System of the Department of 
                Housing and Urban Development.
                  (E) The List of Excluded Individuals/Entities of the 
                Office of Inspector General of the Department of Health 
                and Human Services.
  (b) Do Not Pay Initiative.--
          (1) Establishment.--There is established the Do Not Pay 
        Initiative which shall include--
                  (A) use of the databases described under subsection 
                (a)(2); and
                  (B) use of other databases designated by the Director 
                of the Office of Management and Budget in consultation 
                with agencies and in accordance with paragraph (2).
          (2) Other databases.--In making designations of other 
        databases under paragraph (1)(B), the Director of the Office of 
        Management and Budget shall--
                  (A) consider any database that substantially assists 
                in preventing improper payments; and
                  (B) provide public notice and an opportunity for 
                comment before designating a database under paragraph 
                (1)(B).
          (3) Access and review by agencies.--For purposes of 
        identifying and preventing improper payments, each agency shall 
        have access to, and use of, the Do Not Pay Initiative to verify 
        payment or award eligibility in accordance with subsection (a) 
        when the Director of the Office of Management and Budget 
        determines the Do Not Pay Initiative is appropriately 
        established for the agency.
          (4) Payment otherwise required.--When using the Do Not Pay 
        Initiative, an agency shall recognize that there may be 
        circumstances under which the law requires a payment or award 
        to be made to a recipient, regardless of whether that recipient 
        is identified as potentially ineligible under the Do Not Pay 
        Initiative.
          (5) Annual report.--The Director of the Office of Management 
        and Budget shall submit to Congress an annual report, which may 
        be included as part of another report submitted to Congress by 
        the Director, regarding the operation of the Do Not Pay 
        Initiative, which shall--
                  (A) include an evaluation of whether the Do Not Pay 
                Initiative has reduced improper payments or improper 
                awards; and
                  (B) provide the frequency of corrections or 
                identification of incorrect information.
  (c) Database Integration Plan.--Not later than 60 days after the date 
of enactment of this Act, the Director of the Office of Management and 
Budget shall provide to the Congress a plan for--
          (1) inclusion of other databases on the Do Not Pay 
        Initiative;
          (2) to the extent permitted by law, agency access to the Do 
        Not Pay Initiative; and
          (3) the data use agreements described under subsection 
        (e)(2)(D).
  (d) Initial Working System.--
          (1) Establishment.--Not later than 90 days after the date of 
        enactment of this Act, the Director of the Office of Management 
        and Budget shall establish a working system for prepayment and 
        preaward review that includes the Do Not Pay Initiative as 
        described under this section.
          (2) Working system.--The working system established under 
        paragraph (1)--
                  (A) may be located within an appropriate agency;
                  (B) shall include not less than 3 agencies as users 
                of the system; and
                  (C) shall include investigation activities for fraud 
                and systemic improper payments detection through 
                analytic technologies and other techniques, which may 
                include commercial database use or access.
          (3) Application to all agencies.--Not later than June 1, 
        2013, each agency shall review all payments and awards for all 
        programs of that agency through the system established under 
        this subsection.
  (e) Facilitating Data Access by Federal Agencies and Offices of 
Inspectors General for Purposes of Program Integrity.--
          (1) Definition.--In this subsection, the term ``Inspector 
        General'' means any Inspector General described in subparagraph 
        (A), (B), or (I) of section 11(b)(1) of the Inspector General 
        Act of 1978 (5 U.S.C. App.) and any successor Inspector 
        General.
          (2) Computer matching by federal agencies for purposes of 
        investigation and prevention of improper payments and fraud.--
                  (A) In general.--Except as provided in this 
                paragraph, in accordance with section 552a of title 5, 
                United States Code (commonly known as the Privacy Act 
                of 1974), each Inspector General and the head of each 
                agency may enter into computer matching agreements with 
                other inspectors general and agency heads that allow 
                ongoing data matching (which shall include automated 
                data matching) in order to assist in the detection and 
                prevention of improper payments.
                  (B) Review.--Not later than 60 days after a proposal 
                for an agreement under subparagraph (A) has been 
                presented to a Data Integrity Board established under 
                section 552a(u) of title 5, United States Code, for 
                consideration, the Data Integrity Board shall respond 
                to the proposal.
                  (C) Termination date.--An agreement under 
                subparagraph (A)--
                          (i) shall have a termination date of less 
                        than 3 years; and
                          (ii) during the 3-month period ending on the 
                        date on which the agreement is scheduled to 
                        terminate, may be renewed by the agencies 
                        entering the agreement for not more than 3 
                        years.
                  (D) Multiple agencies.--For purposes of this 
                paragraph, section 552a(o)(1) of title 5, United States 
                Code, shall be applied by substituting ``between the 
                source agency and the recipient agency or non-Federal 
                agency or an agreement governing multiple agencies'' 
                for ``between the source agency and the recipient 
                agency or non-Federal agency'' in the matter preceding 
                subparagraph (A).
                  (E) Cost-benefit analysis.--A justification under 
                section 552a(o)(1)(B) of title 5, United States Code, 
                relating to an agreement under subparagraph (A) is not 
                required to contain a specific estimate of any savings 
                under the computer matching agreement.
          (3) Guidance by the office of management and budget.--Not 
        later than 6 months after the date of enactment of this Act, 
        and in consultation with the Council of the Inspectors General 
        on Integrity and Efficiency, the Secretary of Health and Human 
        Services, the Commissioner of Social Security, and the head of 
        any other relevant agency, the Director of the Office of 
        Management and Budget shall--
                  (A) issue guidance for agencies regarding 
                implementing this subsection, which shall include 
                standards for--
                          (i) reimbursement of costs, when necessary, 
                        between agencies;
                          (ii) retention and timely destruction of 
                        records in accordance with section 
                        552a(o)(1)(F) of title 5, United States Code; 
                        and
                          (iii) prohibiting duplication and 
                        redisclosure of records in accordance with 
                        section 552a(o)(1)(H) of title 5, United States 
                        Code;
                  (B) review the procedures of the Data Integrity 
                Boards established under section 552a(u) of title 5, 
                United States Code, and develop new guidance for the 
                Data Integrity Boards to--
                          (i) improve the effectiveness and 
                        responsiveness of the Data Integrity Boards;
                          (ii) ensure privacy protections in accordance 
                        with section 552a of title 5, United States 
                        Code (commonly known as the Privacy Act of 
                        1974); and
                          (iii) establish standard matching agreements 
                        for use when appropriate; and
                  (C) establish and clarify rules regarding what 
                constitutes making an agreement entered under paragraph 
                (2)(A) available upon request to the public for 
                purposes of section 552a(o)(2)(A)(ii) of title 5, 
                United States Code, which shall include requiring 
                publication of the agreement on a public website.
          (4) Corrections.--The Director of the Office of Management 
        and Budget shall establish procedures providing for the 
        correction of data in order to ensure--
                  (A) compliance with section 552a(p) of title 5, 
                United States Code; and
                  (B) that corrections are made in any Do Not Pay 
                Initiative database and in any relevant source 
                databases designated by the Director of the Office of 
                Management and Budget under subsection (b)(1).
          (5) Compliance.--The head of each agency, in consultation 
        with the Inspector General of the agency, shall ensure that any 
        information provided to an individual or entity under this 
        subsection is provided in accordance with protocols established 
        under this subsection.
          (6) Rule of construction.--Nothing in this subsection shall 
        be construed to affect the rights of an individual under 
        section 552a(p) of title 5, United States Code.
  (f) Development and Access to a Database of Incarcerated 
Individuals.--Not later than 1 year after the date of enactment of this 
Act, the Attorney General shall submit to Congress recommendations for 
increasing the use of, access to, and the technical feasibility of 
using data on the Federal, State, and local conviction and 
incarceration status of individuals for purposes of identifying and 
preventing improper payments by Federal agencies and programs and 
fraud.
  (g) Plan To Curb Federal Improper Payments to Deceased Individuals by 
Improving the Quality and Use by Federal Agencies of the Social 
Security Administration Death Master File.--
          (1) Establishment.--In conjunction with the Commissioner of 
        Social Security and in consultation with relevant stakeholders 
        that have an interest in or responsibility for providing the 
        data, and the States, the Director of the Office of Management 
        and Budget shall establish a plan for improving the quality, 
        accuracy, and timeliness of death data maintained by the Social 
        Security Administration, including death information reported 
        to the Commissioner under section 205(r) of the Social Security 
        Act (42 U.S.C. 405(r)).
          (2) Additional actions under plan.--The plan established 
        under this subsection shall include recommended actions by 
        agencies to--
                  (A) increase the quality and frequency of access to 
                the Death Master File and other death data;
                  (B) achieve a goal of at least daily access as 
                appropriate;
                  (C) provide for all States and other data providers 
                to use improved and electronic means for providing 
                data;
                  (D) identify improved methods by agencies for 
                determining ineligible payments due to the death of a 
                recipient through proactive verification means; and
                  (E) address improper payments made by agencies to 
                deceased individuals as part of Federal retirement 
                programs.
          (3) Report.--Not later than 120 days 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 plan 
        established under this subsection, including recommended 
        legislation.

SEC. 6. IMPROVING RECOVERY OF IMPROPER PAYMENTS.

  (a) Definition.--In this section, the term ``recovery audit'' means a 
recovery audit described under section 2(h) of the Improper Payments 
Elimination and Recovery Act of 2010 (31 U.S.C. 3301 note).
  (b) Review.--The Director of the Office of Management and Budget 
shall determine--
          (1) current and historical rates and amounts of recovery of 
        improper payments (or, in cases in which improper payments are 
        identified solely on the basis of a sample, recovery rates and 
        amounts estimated on the basis of the applicable sample), 
        including a list of agency recovery audit contract programs and 
        specific information of amounts and payments recovered by 
        recovery audit contractors; and
          (2) targets for recovering improper payments, including 
        specific information on amounts and payments recovered by 
        recovery audit contractors.

                     Committee Statement and Views


                          PURPOSE AND SUMMARY

    Improper payments are ``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.''\1\ 
They are the most visible and tangible byproduct of poor 
Federal financial management. Programs are particularly 
vulnerable to improper payments when agencies fail to maintain 
effective internal controls, adequate financial management 
systems, or sufficient oversight.
---------------------------------------------------------------------------
    \1\31 U.S.C. 3321 note.
---------------------------------------------------------------------------
    H.R. 4053, the Improper Payments Elimination and Recovery 
Improvement Act of 2012, was introduced on February 16, 2012, 
by Representative Edolphus Towns (D-NY) and referred to the 
Committee on Oversight and Government Reform. The bill expands 
requirements for Federal agencies to identify, prevent and 
recover improper payments. It requires the Office of Management 
and Budget (OMB) to identify and report on Federal programs at 
high risk for improper payments and create a standardized 
methodology for estimating improper payments, in order to 
achieve consistent reporting across the government. The bill 
modifies the Privacy Act of 1974 to allow for multilateral data 
sharing between agencies, and mandates a government-wide ``Do 
Not Pay Initiative'' to require prepayment and contract award 
screening against databases containing relevant payee 
eligibility information. It also requires OMB to determine a 
plan for curbing improper payments to deceased individuals.

                  BACKGROUND AND NEED FOR LEGISLATION

    Waste and abuse of taxpayer dollars is a severe problem. 
Federal agencies made an estimated $115.3 billion in improper 
payments in FY 2011.\2\ Improper payments constituted nearly 5 
percent of the $2.5 trillion in program spending in fiscal year 
2011.\3\ To better address this problem, agencies must take 
advantage of new technologies and data sharing capabilities. 
H.R. 4053 brings improper payment detection and prevention into 
the 21st century by encouraging the use of technology to allow 
agencies to easily share data to achieve increased payment 
accuracy and accountability. The provisions in H.R. 4053 build 
upon the Improper Payments and Elimination Recovery Act of 
2010, which expanded reporting frequency and established 
methodologies for estimating the risk of improper payments.
---------------------------------------------------------------------------
    \2\GAO, ``Improper Payments: Remaining Challenges and Strategies 
for Governmentwide Reduction Efforts,'' GAO-12-573T, March 28, 2012.
    \3\Ibid.
---------------------------------------------------------------------------
    The full Committee and the Subcommittee on Government 
Organization, Efficiency and Financial Management held a series 
of hearings this Congress on the issuance of improper payments. 
The hearings included testimony from leaders at OMB, the 
Government Accountability Office (GAO), the Department of 
Health and Human Services (HHS) and several policy experts 
about the challenge of preventing improper payments. On 
February 17, 2011, the full Committee examined the issue of 
Federal misspending during a hearing entitled, ``Waste and 
Abuse: The Refuse of the Federal Spending Binge.''
    On April 15, 2011, the Subcommittee on Government 
Organization, Efficiency and Financial Management heard from 
agency officials from GAO and OMB about agency internal 
controls and common sense solutions to tighten Federal 
financial management, including the use of advanced information 
technology to prevent wasteful spending.
    A July 28, 2011, hearing of the Subcommittee focused on the 
Federal program with the highest volume of improper payments--
Medicare. The Committee learned that Medicare funds are often 
paid to ineligible recipients, a problem that can be prevented 
via the use of data-matching technology.
    On February 7, 2012, the Subcommittee heard from agency 
experts from OMB, GAO and the Recovery Accountability and 
Transparency Board at a hearing entitled, ``Solutions Needed: 
Improper Payments Total $115 Billion in Federal Misspending.'' 
The Subcommittee discussed the Administration's recent efforts 
to reduce improper payments, and suggestions for effective 
strategies to reduce improper payments.
    H.R. 4053 reflects the lessons learned from these hearings 
and the Committee's ongoing oversight into Federal financial 
management.

                          LEGISLATIVE HISTORY

    H.R. 4053 builds on prior legislation to reduce and prevent 
improper payments. A decade ago, the Improper Payments 
Information Act of 2002 was signed into law (P.L. 107-300), 
compelling agencies to identify payment errors in specific 
programs. That 2002 law was updated in 2010 by the Improper 
Payments and Elimination Recovery Act (P.L. 111-204), which 
required better identification and estimation of improper 
payments.
    H.R. 4053 was introduced by Representative Towns on 
February 16, 2012. The bill was referred to the Oversight and 
Government Reform Committee. A companion bill, S. 1409, was 
introduced by Senator Carper on July 22, 2011. S. 1409 was 
referred to the Senate Homeland Security and Governmental 
Affairs Committee, and subsequently reported favorably with an 
amendment in the nature of a substitute on October 19, 2011. It 
was then placed on the Senate Legislative Calendar on July 12, 
2012, and passed under Unanimous Consent on August 1, 2012.

                           Section-by-Section


Section 1. Short title

    This section titles the bill as the ``Improper Payments 
Elimination and Recovery Improvement Act of 2012''.

Section 2. Definitions

    This section defines the terms ``agency'', ``improper 
payment'' and ``State'' for purposes of the Act.

Section 3. Improving the determination of improper payments by federal 
        agencies

    Subsection (a) requires the OMB Director to annually 
identify high-priority programs, and to establish annual 
targets, and intermediate actions to achieve the targets, for 
reducing improper payments. Agencies are required to report 
annually to their Inspectors General and make available to the 
public a report on any high-dollar improper payments identified 
by the agency. These reports are to be made accessible by OMB 
on a central, publicly available website. The Inspector General 
of each agency is to review the quality and the risk level 
associated with the programs.
    Subsection (b) requires the OMB Director to provide 
guidance to Federal agencies for improving agency estimates of 
improper payments not later than 180 days after enactment. This 
requirement strengthens the estimation process by having OMB 
set standards to ensure the underlying validity of sampled 
payments.
    Subsection (c) makes technical and conforming amendments to 
IPERA.

Section 4. Improper payments information

    This section makes a technical correction to IPERA in 
conformance with OMB guidance.

Section 5. Do Not Pay Initiative

    Subsection (a) requires agencies to conduct prepayment 
procedures, including screening against databases containing 
relevant information on payees, to verify eligibility and 
prevent improper payments.
    Subsection (b) requires OMB to establish a Do Not Pay 
Initiative comprised of the databases used by agencies in 
subsection (a), and other databases as designated by the OMB 
Director. This subsection also requires that OMB evaluate the 
Do Not Pay Initiative in an annual report to Congress.
    Subsection (c) requires that within 60 days of enactment, 
the OMB Director provide Congress with a plan for including 
other databases in the Do Not Pay Initiative, establishing 
lawful agency access to the databases, and creating a 
multilateral data use agreement setting parameters for database 
access between relevant agencies.
    Subsection (d) requires OMB to establish a prepayment 
review system that includes the initial Do Not Pay Initiative 
system within 90 days of enactment. The initial system may be 
located within an appropriate agency, shall include at least 
three participating agencies, and must include investigative 
activities for fraud and systemic improper payment detection 
through analytic technologies. Each agency is required to 
review all of its payments and awards through the Do Not Pay 
Initiative no later than June 1, 2013.
    Subsection (e) requires that within 60 days of enactment, 
OMB establish a plan for executing multilateral data use 
agreements for the Do Not Pay Initiative. The subsection amends 
the Privacy Act to allow for the multilateral data use 
agreements between and among Federal agencies. The subsection 
requires multilateral data use agreements to include 
regulations and guidelines that ensure data access, as well as 
transfer and storage of data in a manner consistent with 
relevant privacy, security, and disclosure laws.
    Subsection (f) requires that within one year of enactment, 
the Attorney General submit to Congress recommendations for 
using Federal, State, and local conviction and incarceration 
databases to determine the incarceration status of individuals, 
in order to prevent improper payments.
    Subsection (g) requires the OMB Director, in consultation 
with stakeholders, States, and the Social Security 
Administrator, to establish a plan for improving the quality 
and timeliness of death data maintained by the Social Security 
Administration. The plan must include actions to increase the 
quality and frequency of access by agencies, including a goal 
of at least once-daily access. Within 120 days of enactment, 
the OMB Director must report to Congress on the plan.

Section 6. Improving recovery of improper payments

    Subsection (a) requires the OMB Director to determine 
current and historical rates and amounts of improper payment 
recovery by audit contractors, and identify numerical or 
percentage targets for recovering improper payments.

                       Explanation of Amendments

    The Section-by-Section above is a summary explanation of 
the provisions of Chairman Issa's amendment in the nature of a 
substitute (ANS), which was adopted during the Committee 
Business Meeting.

                        Committee Consideration

    On September 20, 2012, the Committee met in open session 
and ordered reported favorably the bill, H.R. 4053, as amended, 
by roll unanimous consent, a quorum being present.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. 
This bill expands requirements for Federal agencies to 
identify, prevent and recover improper payments. As such this 
bill does not relate to employment or access to public services 
and accommodations.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandate Reform Act, P.L. 104-4) requires a statement as to 
whether the provisions of the reported include unfunded 
mandates. In compliance with this requirement the Committee has 
received a letter from the Congressional Budget Office included 
herein.

                         Earmark Identification

    H.R. 4053 does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 4053. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause 3(c)(3) of rule XIII of the Rules of 
the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 4053 from the Director of 
the Congressional Budget Office:

                                                  October 11, 2012.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4053, the Improper 
Payments Elimination and Recovery Improvement Act of 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 4053--Improper Payments Elimination and Recovery Improvement Act 
        of 2012

    H.R. 4053 would amend federal law to require agencies to 
make additional efforts to identify, recover, and prevent 
improper payments. Improper federal payments include several 
kinds of erroneous disbursements, such as overpayments, 
underpayments, payments that were not adequately documented, 
and fraudulent payments. Under the legislation, the Office of 
Management and Budget (OMB), federal agencies, and their 
inspector generals would have additional responsibilities to 
better manage payment practices and reduce the incidence of 
improper payments. In addition, H.R. 4053 would make changes to 
the data-sharing protocols among federal agencies to facilitate 
the identification of improper payments.
    CBO estimates that implementing H.R. 4053 would have no 
significant cost over the next five years. The bill could 
affect direct spending by agencies not funded through annual 
appropriations; therefore, pay-as-you-go procedures apply. CBO 
estimates, however, that any net increase in spending by those 
agencies would not be significant. Enacting H.R. 4053 would not 
affect revenues.
    Most of the provisions of the bill would codify and expand 
current practices of the federal government. Executive Order 
13520 and various Presidential memorandums have directed OMB 
and agencies to take steps to reduce improper payments. OMB has 
already drafted guidance on improper payments and created a Do-
Not-Pay list. Consequently, CBO estimates that the additional 
responsibilities and reporting requirements to implement this 
bill would neither significantly increase administrative costs 
to federal agencies nor generate any significant incremental 
savings.
    H.R. 4053 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    On April 20, 2012, CBO transmitted a cost estimate for S. 
1409, the Improper Payments and Recovery Improvement Act of 
2011, as ordered reported by the Senate Committee on Homeland 
Security and Governmental Affairs on October 19, 2011. Both 
pieces of legislation address improper payments but have 
different provisions. The Senate bill includes a requirement 
for agencies to operate Recovery Audit Contracting programs, 
but that provision is not included in H.R. 4053.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by Peter H. Fontaine, 
Assistant Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

IMPROPER PAYMENTS INFORMATION ACT OF 2002

           *       *       *       *       *       *       *


SEC. 2. ESTIMATES OF IMPROPER PAYMENTS AND REPORTS ON ACTIONS TO REDUCE 
                    THEM.

  (a) Identification of Susceptible Programs and Activities.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Risk assessments.--
                  (A) Definition.--In this subsection the term 
                ``significant'' means--
                          (i) * * *
                          (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] with respect to 
                        fiscal year 2014 and each fiscal year 
                        thereafter, that improper payments in 
                        the program or activity in the 
                        preceding fiscal year may have 
                        exceeded--
                                  (I) * * *

           *       *       *       *       *       *       *

  (b) Improving The Determination Of Improper Payments.--
          (1) In general.--The Director of the Office of 
        Management and Budget shall on an annual basis--
                  (A) identify a list of high-priority Federal 
                programs for greater levels of oversight and 
                review--
                          (i) in which the highest dollar value 
                        or highest rate of improper payments 
                        occur; or
                          (ii) for which there is a higher risk 
                        of improper payments; and
                  (B) in coordination with the agency 
                responsible for administering the high-priority 
                program, establish annual targets and semi-
                annual or quarterly actions for reducing 
                improper payments associated with each high-
                priority program.
          (2) Report on high-priority improper payments.--
                  (A) In general.--Subject to Federal privacy 
                policies and to the extent permitted by law, 
                each agency with a program identified under 
                paragraph (1)(A) on an annual basis shall 
                submit to the Inspector General of that agency, 
                and make available to the public (including 
                availability through the Internet), a report on 
                that program.
                  (B) Contents.--Each report under this 
                paragraph--
                          (i) shall describe--
                                  (I) any action the agency--
                                          (aa) has taken or 
                                        plans to take to 
                                        recover improper 
                                        payments; and
                                          (bb) intends to take 
                                        to prevent future 
                                        improper payments; and
                          (ii) shall not include any referrals 
                        the agency made or anticipates making 
                        to the Department of Justice, or any 
                        information provided in connection with 
                        such referrals.
                  (C) Public availability on central website.--
                The Office of Management and Budget shall make 
                each report submitted under this paragraph 
                available on a central website.
                  (D) Availability of information to Inspector 
                General.--Subparagraph (B)(ii) shall not 
                prohibit any referral or information being made 
                available to an Inspector General as otherwise 
                provided by law.
                  (E) Assessment and recommendations.--The 
                Inspector General of each agency that submits a 
                report under this paragraph shall, for each 
                program of the agency that is identified under 
                paragraph (1)(A)--
                          (i) review--
                                  (I) the assessment of the 
                                level of risk associated with 
                                the program, and the quality of 
                                the improper payment estimates 
                                and methodology of the agency 
                                relating to the program; and
                                  (II) the oversight or 
                                financial controls to identify 
                                and prevent improper payments 
                                under the program; and
                          (ii) submit to Congress 
                        recommendations, which may be included 
                        in another report submitted by the 
                        Inspector General to Congress, for 
                        modifying any plans of the agency 
                        relating to the program, including 
                        improvements for improper payments 
                        determination and estimation 
                        methodology.
  [(b)] (c) Estimation of Improper Payments.--With respect to 
each program and activity identified under subsection (a), the 
head of the relevant agency shall--
          (1) * * *

           *       *       *       *       *       *       *

  [(c)] (d) Reports on Actions To Reduce Improper Payments.--
With respect to any program or activity of an agency with 
estimated improper payments under [subsection (b)] subsection 
(c), the head of the agency shall provide with the estimate 
under [subsection (b)] subsection (c) a report on what actions 
the agency is taking to reduce improper payments, including--
          (1) * * *

           *       *       *       *       *       *       *

  [(d)] (e) 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)] subsection (c) a report on all actions the 
agency is taking to recover improper payments, including--
          (1) * * *

           *       *       *       *       *       *       *

  [(e)] (f) Governmentwide Reporting of Improper Payments and 
Actions To Recover Improper Payments.--
          (1) * * *

           *       *       *       *       *       *       *

  [(f)] (g) Definitions.--In this section:
          (1) * * *

           *       *       *       *       *       *       *

          (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 
        or a Federal employee, 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.

           *       *       *       *       *       *       *

  [(g)] (h) Guidance by the Office of Management and Budget.--
          (1) * * *

           *       *       *       *       *       *       *

                              ----------                              


IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT OF 2010

           *       *       *       *       *       *       *


SEC. 2. IMPROPER PAYMENTS ELIMINATION AND RECOVERY.

  (a) * * *

           *       *       *       *       *       *       *

  (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.] section 
        2(g) of the Improper Payments Information Act of 2002 
        (31 U.S.C. 3321 note).

           *       *       *       *       *       *       *


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.] section 2(g) of the Improper 
        Payments Information Act of 2002 (31 U.S.C. 3321 note).

           *       *       *       *       *       *       *

          (3) Compliance.--The term ``compliance'' means that 
        the agency--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) if required, publishes improper payments 
                estimates for all programs and activities 
                identified under [section 2(b)] section 2(c) 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)] section 
                2(d) 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)] 
                section 2(d) 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)] section 2(c) of the 
                Improper Payments Information Act of 2002 (31 
                U.S.C. 3321 note).

           *       *       *       *       *       *       *


                                  
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