[Senate Report 112-181]
[From the U.S. Government Publishing Office]
112th Congress } { Report
2d Session } SENATE { 112-181
_______________________________________________________________________
Calendar No. 449
IMPROPER PAYMENTS ELIMINATION AND RECOVERY IMPROVEMENT ACT OF 2011
__________
R E P O R T
of the
COMMITTEE ON HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
to accompany
S. 1409
TO INTENSIFY EFFORTS TO IDENTIFY, PREVENT, AND RECOVER PAYMENT ERROR,
WASTE, FRAUD, AND ABUSE WITHIN FEDERAL SPENDING
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
July 12, 2012.--Ordered to be printed
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska JERRY MORAN, Kansas
Michael L. Alexander, Staff Director
Beth M. Grossman, Deputy Staff Director and Chief Counsel
Kenya N. Wiley, Counsel
Peter P. Tyler, Professional Staff Member, Subcommittee on Federal
Financial Management,
Government Information, Federal Services, and International Security
Nicholas A. Rossi, Minority Staff Director
J. Kathryn French, Minority Deputy Staff Director
Trina Driessnack Tyrer, Chief Clerk
Calendar No. 449
112th Congress } { Report
2d Session } SENATE { 112-181 =======================================================================
IMPROPER PAYMENTS ELIMINATION AND RECOVERY IMPROVEMENT ACT OF 2011
_______
July 12, 2012.--Ordered to be printed
_______
Mr. Lieberman, from the Committee on Homeland Security and Governmental
Affairs, submitted the following
R E P O R T
[To accompany S. 1409]
The Committee on Homeland Security and Governmental
Affairs, to which was referred the bill (S. 1409) to intensify
efforts to identify, prevent, and recover payment error, waste,
fraud, and abuse within Federal spending, having considered the
same, reports favorably thereon with an amendment in the nature
of a substitute and recommends that the bill, as amended, do
pass.
CONTENTS
Page
I. Purpose and Summary..............................................1
II. Background and Need for the Legislation..........................2
III. Legislative History..............................................4
IV. Section-by-Section Analysis.....................................4
V. Evaluation of Regulatory Impact..................................7
VI. Congressional Budget Office Estimate.............................8
VII. Changes in Existing Law Made by the Bill, as Reported...........10
I. Purpose and Summary
Each year, the Federal government makes billions of dollars
in ``improper payments''--funds sent to the wrong recipient,
checks written for the wrong amount, or government money going
for an improper purpose. S. 1409 seeks to prevent the loss of
these taxpayer dollars by intensifying agencies' efforts to
prevent, identify, and recover improper payments. The Act
directs the Office of Management and Budget (OMB) to issue new
guidance to agencies to enable them to better estimate and
thereby understand the scope of the improper payment problem.
The Act also establishes a ``Do Not Pay Initiative'' to help
federal agencies easily identify entities to which it should
not make payments, and it directs OMB to work with other
agencies and stakeholders to curb improper payments made to
deceased individuals. Finally, the Act requires the federal
government to establish a set of Recovery Audit Contracting
pilot programs through which private companies will help
identify improper payments made by agencies.
II. Background and Need for the Legislation
Federal agencies began to deal comprehensively with
improper payments following the enactment of the Improper
Payments Information Act of 2002 (IPIA),\1\ which required each
agency subject to the requirements of the Chief Financial
Officers Act of 1990\2\ to annually review all programs and
activities that it administers, identify all such programs and
activities that may be susceptible to significant improper
payments, develop improper payments estimates for those
programs deemed susceptible, and report the estimates annually.
Congress revisited the issue in July 2010, with the enactment
of the Improper Payments Elimination and Recovery Act of 2010
(IPERA).\3\ This law amended IPIA by expanding on the previous
requirements for identifying, estimating, and reporting on
programs and activities susceptible to significant improper
payments, and expanding requirements for recovering
overpayments across a broad range of federal programs.
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\1\Pub. Law 107-300.
\2\Public Law 101-576. Section 901 of the CFO Act specifies the
agencies subject to its mandate.
\3\Pub. Law 111-204.
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As with IPIA, IPERA requires agencies to identify programs
that are susceptible to significant improper payments and, for
those programs, estimate the annual amount of improper payments
and submit those estimates to the Congress and the public.
IPERA also added a requirement that any program with estimated
improper payments exceeding specific dollar amounts and error
rate thresholds set out in the law must report on the actions
the agency is taking to reduce improper payments. The law also
requires improper payment recovery audits for all programs with
annual expenditures greater than $1 million. The law specifies
that agencies can direct recovered funds to pay for a variety
of efforts aimed at ensuring better administration of its
programs. IPERA also includes incentives and budgetary
penalties for programs that fail to comply with the
requirements of the law over a reasonable number of years.
According to the Government Accountability Office (GAO),
federal agencies reported an estimated $125.4 billion in
improper payments in fiscal year 2010, an increase of about $16
billion over the fiscal year 2009 estimate of $109.2
billion.\4\ The fiscal year 2010 estimate represents about 5.5
percent of the $2.3 trillion of reported outlays for the
related programs. The $125.4 billion in improper payments in
fiscal year 2010 comes from over 70 programs spread among 20
federal agencies. An overwhelming majority of the $125.4
billion of reported improper payments came from just 10
programs, which account for about $118 billion or 94 percent of
the total estimated improper payments reported for fiscal year
2010.\5\ It is worth noting that these figures probably
underestimate the problem; seven high risk programs, which
almost certainly make some improper payments, still are not
reporting improper payment estimates.\6\
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\4\GAO, Status of Fiscal Year 2010 Federal Improper Payments
Reporting, GAO-11-443R, March 25, 2011.
\5\The ten programs are: Federal Student Aid-Pell Grants, National
School Lunch Program, Supplemental Nutrition Assistance Program, Old
Age and Survivor's Insurance, Supplemental Security Income Program,
Medicare Advantage, Earned Income Tax Credit, Unemployment Insurance,
Medicaid, Medicare Fee-For-Service.
\6\The seven high risk programs not reporting improper payment
estimates are: Department of Education--Federal Family Education Loan
Program; Department of Health and Human Services--Temporary Assistance
for Needy Families; Department of Health and Human Services--Medicare
Prescription Drug Benefit; Department of Health and Human Services--
Children's Health Insurance Program; Federal Communications
Commission--High-Cost Support Program; Federal Communications
Commission--Low-Income Program; Federal Communications Commission--
Schools and Libraries.
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Although the existing statutes and executive actions have
made important strides in addressing improper payment rates,
federal agencies continue to make a substantial amount of
improper payments. Further, not all agencies are making robust
and complete estimates of improper payments. For example, the
DOD Office of Inspector General completed an audit describing
the Department's need for improved estimates.\7\ The GAO made
similar comments regarding DOD.\8\
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\7\``DOD Needs to Improve High Dollar Overpayment Review and
Reporting,'' D-2011-050, March 16, 2011, DOD Office of Inspector
General.
\8\``Improper Payments: Progress Made but Challenges Remain in
Estimating and Reducing Improper Payments,'' GAO, April 22, 2009.
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On May 25, 2011, the Committee's Federal Financial
Management Subcommittee held a hearing to examine the improper
payments issue and to explore whether additional measures are
needed to address the problem.\9\ Daniel I. Werfel, OMB's
Comptroller, discussed the Administration's improper payments
estimates and offered the Administration's view on the root
causes of the improper payment problem. He also described the
implementation of IPERA. Mr. Werfel, along with Richard L.
Gregg, Fiscal Assistant Secretary from the Department of
Treasury, detailed an Administration initiative, outlined in an
Executive Memorandum, to screen all federal payments before
they are made.\10\ Calvin L. Scovel III, Vice Chairman of the
Recovery Accountability and Transparency Board (an entity
established as part of the American Recovery and Reinvestment
Act to examine Recovery Act spending) testified about the
Board's history in detecting and preventing fraudulent
payments. Kelly Croft, Deputy Commissioner for Systems at the
Social Security Administration, and Robert F. Hale, Comptroller
of DOD, described improper payments issues arising in their
respective agencies, as well as opportunities for improving the
detection, prevention, and recovery of improper payments.
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\9\``Assessing Efforts to Eliminate Improper Payments, May 25th,
2011; http://hsgac.senate.gov/public/
index.cfm?FuseAction=Hearings.Hearing&Hearing_id=7dd2c4ec-1fee-4117-
8efd-f0.277206607
\10\``Presidential Memorandum--Enhancing Payment Accuracy Through a
`Do Not Pay List','' The White House, June 18th, 2010, http://
www.whitehouse.gov/the-press-office/presidential-memorandum-enhancing-
payment-accuracy-through-a-do-not-pay-list.
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S. 1409 reflects the lessons learned through the May 2011
hearing, as well as the Committee's other ongoing oversight in
the area. The bill directs the OMB to issue new guidance to
agencies to enable them to better estimate and thereby
understand the scope of the improper payment problem. The Act
also establishes a ``Do Not Pay Initiative'' to help federal
agencies more easily identify entities to which it should not
make payments, and it directs OMB to work with other agencies
and stakeholders to curb improper payments made to deceased
individuals. Finally, the Act requires the federal government
to establish a set of Recovery Audit Contracting pilot programs
through which private companies will help identify improper
payments made by agencies.
III. Legislative History
S. 1409 was introduced by Senators Carper, Collins,
Lieberman, and Scott Brown on July 22, 2011, and referred to
the Committee.
The Committee considered S. 1409 at a business meeting on
October 19, 2011. The Committee adopted by voice vote a
substitute amendment offered by Senators Carper, Collins,
Lieberman, and Brown. Members present for the vote on the
substitute were Senators Lieberman, Akaka, Carper, Pryor,
McCaskill, Begich, Collins, Brown, and Johnson. The Committee
then voted to report the bill, again by voice vote. Members
present for the vote on the bill were Senators Lieberman,
Akaka, Carper, Pryor, McCaskill, Begich, Collins, Brown, and
Johnson.
The substitute amends S. 1409 to make several substantive
improvements. Some of the definitions of Section 2 were
clarified. The language in Section 3 that requires more
consistent estimates of improper payments was modified for
purposes of clarity, and to more closely address the
recommendations of both the Government Accountability Office
and Inspectors General. The requirement of the original
language to develop a database of incarcerated individuals was
changed to become a requirement to report on recommendations
for such a database. The requirement for a plan by OMB to
develop potential statutory recommendations for implementing
the ``Do Not Pay Initiative'' was modified to, in addition,
place in statute allowing multilateral data use agreements.
Finally, there were some small modifications to the description
of databases and types of Recovery Audit Contracts.
IV. Section-by-Section Analysis
Section 1. Short title
This section titles the bill as the ``Improper Payments
Elimination and Recovery Improvement Act of 2012''.
Section 2. Definition
This section defines the term ``agency'' used in the bill
by reference to 5 U.S.C. Sec. 105, part of the Chief Financial
Officers Act laying out the major agencies covered under
current statutes defining executive branch agencies.
Section 3. Improving the determination of improper payments by Federal
agencies
Subsection (a) amends the IPIA of 2002 by strengthening the
identification and reporting of agency improper payments,
including codifying an existing Executive Order on improper
payments estimating and reporting.\11\
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\11\Executive Order 13520, Reducing Improper Payments, November 20,
2009.
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It requires the Director of the OMB annually to identify
high-priority programs for greater oversight and review based
on those that have the highest dollar value or percentage of
improper payments on a government-wide basis, or for which
there is high risk of improper payments. For these programs,
OMB, in conjunction with the agency identified as having a
high-priority program or programs, would establish annual
targets, and semi-annual or quarterly actions, for reducing
improper payments.\12\
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\12\Executive Order 13520, Sec. 2(a).
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In addition, agencies would be 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.\13\ This public disclosure would occur in compliance
with existing privacy policies and would not include referrals
to the Department of Justice. These reports would also include
action planned or taken by the agency to recover improper
payments and would be made public by OMB on a central, publicly
available website. Upon submission of these reports, the
Inspector General would (1) review the risk level associated
with the program, including the quality of the improper
payments estimates and the methodology used by the agency; 2)
assess the adequacy of financial controls to identify and
prevent improper payments; and 3) make recommendations to the
agency, including those regarding the improper payments
determination and estimation methodology.
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\13\Executive Order 13520, Sec. 3(f).
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Subsection (b) would require 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 is intended to strengthen the estimation process by
having OMB set standards to ensure the underlying validity of
sampled payments, including by: 1) instructing agencies to give
persons or entities performing improper payments estimates
access to all necessary payment data, including relevant
documentation; 2) explicitly barring agencies from basing
estimates solely on self-reporting by the sub-agencies that
made the payments or outside contractors who received the
payments; 3) reporting all overpayments regardless of whether
they have been recovered; 4) capturing payments to employees,
including salary, locality pay, travel pay, purchase card use,
and other employee payments, subjecting them to risk
assessments and including them in the improper payment
estimation where appropriate; and 5) requiring agencies to
tailor corrective action for high-priority programs to better
reflect the unique procedures, processes, and risks of each
program.
Subsection (c) provides for technical and conforming
amendments to IPERA.
Section 4. Improper payments information
This section would provide for a technical correction to
IPERA that has already been addressed in guidance by OMB.\14\
This correction would require that, beginning in fiscal year
2014 and in each fiscal year thereafter, agencies subject to
IPERA are required to report programs with improper payments of
$10 million annually or that represent 1.5 percent of program
outlays, or programs with improper payments over $100 million.
The date in the enacted legislation was incorrect, and the
technical correction conforms IPERA to Congressional intent.
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\14\M-11-16, Part I (A).
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Section 5. Do Not Pay Initiative
Subsection (a) establishes the Do Not Pay Initiative, which
would require prepayment and contract award screening against
databases containing relevant information on payees to verify
eligibility and prevent improper payments. The subsection
requires that each agency review its prepayment and pre-award
procedures and ensure a thorough review of available databases
containing relevant information on payee eligibility in order
to determine payment or award eligibility and prevent improper
payments. At a minimum, before payment and award, agencies
would check as appropriate the: (1) Social Security
Administration's Death Master File; (2) General Services
Administration's Excluded Parties List System; (3) Debt Check
Database of the Department of the Treasury; (4) Credit Alert
System or Credit Alert Interactive Voice Response System of the
Department of Housing and Urban Development; and (5) List of
Excluded Individuals/Entities of the Office of Inspector
General of the Department of Health and Human Services.
Subsection (b) requires OMB to establish a Do Not Pay
Initiative comprised of the databases above, and other
databases as designated by the OMB Director, which may assist
in preventing improper payments. Each agency would have access
to and use the Do Not Pay Initiative for pre-payment and pre-
award screening once the OMB Director determines its
appropriateness for use by the agency. When using the Do Not
Pay Initiative, agencies should recognize that there may be
circumstances under law that require payment(s) or award(s) be
made to a recipient, irrespective of whether that recipient is
on the Do Not Pay Initiative.
Subsection (c) requires that within 60 days of enactment,
the OMB Director must 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 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
investigation activities for fraud and systemic improper
payment detection through analytic technologies, which may
include commercial database use or access. Each agency would be
required to review all of its payments and awards through the
Do Not Pay Initiative no later than January 1, 2013.
Subsection (e) requires that within 60 days of enactment,
OMB shall establish a plan for executing multilateral data use
agreements for the Do Not Pay Initiative, including access to
the New Hires Database (a database maintained by the U.S.
Department of Health and Human Services and that includes
specific employment information) and other databases. The
subsection amends the Privacy Act to allow for the multilateral
data use agreements between and among federal agencies.
Currently, that Act only allows bilateral agreements between
two 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. The OMB Director would be required to consult
with the Council of Inspectors General on Integrity and
Efficiency, the Secretary of Health and Human Services, the
Social Security Administrator, and other agency heads as
appropriate.
Subsection (f) requires that within one year of enactment,
the Attorney General would submit to Congress recommendations
for increasing the use of, access to, and technical feasibility
of using Federal, State, and local conviction and incarceration
databases to determine the incarceration status of individuals
in order to identify and 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. It must also provide for
improved electronic means of accessing and providing data. The
plan must also address potential proactive steps for
identifying improper payments to deceased individuals, as well
as address specific issues relevant to federal retirement
programs. 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.
Subsection (b) requires the OMB Director, within 90 days of
enactment, to establish and implement a plan for no fewer than
ten recovery audit contracting programs at ten agencies. The
ten programs must represent programs of varying size, payment
types, and recipient types. These programs must become
operational within one year of the plan establishment and be
conducted for three years. Within two years of establishment,
the agency head conducting the program would be required to
report to Congress regarding the program's impact on savings
and recoveries, and provide recommendations to extend or expand
the program.
V. Evaluation of Regulatory Impact
Pursuant to the requirement of paragraph 11(b)(1) of rule
XXVI of the Standing Rules of the Senate, the Committee has
considered the regulatory impact of this bill and has
determined that the bill will have no regulatory impact within
the meaning of the rule. The Committee agrees with CBO's
statement that the bill contains no intergovernmental or
private-sector mandates as defined in the Unfunded Mandates
Reform Act and would impose no costs on state, local, or tribal
governments.
VI. Congressional Budget Office Cost Estimate
S. 1409--Improper Payments Elimination and Recovery Improvement Act of
2011
Summary: S. 1409 would amend federal law to require federal
agencies to expand their efforts to identify, recover, and
prevent improper payments (including overpayments,
underpayments, payments that were not adequately documented,
and fraudulent payments). The legislation would require the
Office of Management and Budget (OMB) to provide guidance,
oversight, and review of agencies' efforts to manage improper
payments. S. 1409 also would establish additional
responsibilities for agencies and require them to operate
Recovery Audit Contracting (RAC) programs.
Based on information from federal agencies, CBO estimates
that implementing S. 1409's new requirements to identify,
recover, and prevent improper payments would cost $735 million
over the 2013-2017 period, subject to appropriation of the
necessary funds. CBO expects that conducting RAC programs would
lead to net recoveries that would exceed the costs of operating
the programs, with net savings for the federal government that
would probably be several million dollars. However, the savings
cannot be attributed to S. 1409 because of long-standing rules
established by the Congress for estimating the effects of
proposed legislation that could generate programmatic savings
stemming from new authority for administrative activity.
Enacting S. 1409 would not affect direct spending or revenues;
therefore, pay-as-you-go procedures do not apply.
S. 1409 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local, or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 1409 is shown in the following table.
The costs of this legislation fall within most budget
functions.
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------
2013 2014 2015 2016 2017 2013-2017
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CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level........................... 50 245 245 195 0 735
Estimated Outlays....................................... 45 225 245 200 20 735
----------------------------------------------------------------------------------------------------------------
Basis of estimate: For this estimate, CBO assumes that S.
1409 will be enacted in fiscal year 2012, that the necessary
funds will be provided for each year, and that spending will
follow historical patterns for similar programs.
S. 1409 would expand upon current law, Executive Order
13520, and two Presidential memoranda to require federal
agencies to expand their efforts to identify, recover, and
prevent improper payments. The legislation would require that
10 RAC pilot programs be initiated for three years. (Recovery
auditing is a process of using contractors to review payment
transactions and supporting data to identify and recover
overpayments and respond to underpayments.) In addition, the
legislation would require additional reporting by agencies and
an expansion of the federal government's ``Do Not Pay List'' (a
database to prevent the government from paying benefits,
contracts, grants, and loans to ineligible people or
organizations).
Improper payments include payments of an incorrect amount
(both overpayments and underpayments), to the wrong recipient,
made without proper documentation, or for unauthorized or
inappropriate purposes. Not all improper payments involve fraud
or result in a loss to the federal government. The Government
Accountability Office has reported that federal agencies
estimate they made $115.3 billion in improper payments during
fiscal year 2011. Just 10 federal programs accounted for 93
percent of those improper payments.\1\
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\1\Those programs were: Medicare fee-for-service, Medicaid, Earned
Income Tax Credit, Unemployment Insurance, Medicare Advantage,
Supplemental Security Income, Old Age Survivors and Disability
Insurance, Supplemental Nutrition Assistance, National School Lunch,
and Medicare Prescription Drug Benefit.
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In 2005, the Centers for Medicare and Medicaid Services
(CMS) started a RAC demonstration program. As part of the
demonstration, CMS made available to recovery audit contractors
claims from 2001 through 2007, and the contractors identified
and corrected errors in about 0.3 percent of those claims. The
demonstration program cost about $200 million to operate and
returned about $695 million to the Medicare trust funds. A RAC
program was subsequently implemented nationwide for fee-for-
service claims: over the 2008-2011 period, CMS spent about $570
million to develop the Recovery Audit Contractor Data
Warehouse, to improve data collection and analysis, and to pay
for recurring costs of the contract. As a result, it recovered
overpayments of $873 million and corrected underpayments of
almost $160 million, for a net savings of about $140 million.
In 2012 and subsequent years, net recoveries should exceed the
recurring costs of the program by a larger margin as the
nonrecurring expenditures to establish the program continue to
produce savings.
Assuming other agencies would have similar costs for
establishing RAC programs, CBO expects that implementing 10 RAC
programs would cost $735 million over the 2013-2017 period.
This would include about $1 million annually to implement each
of several smaller RACs and about $50 million annually per RAC
for larger programs with improper payments, including health
care, taxes, Social Security, unemployment, and nutrition.
CBO also expects that, over time, net recoveries from RACs
would exceed payments to contractors for program management
costs. That is, net recoveries would probably exceed $735
million. Based on the current program operated by CMS, CBO
expects that the new RACs would incur net costs over the first
few years for development, implementation, and administration,
but would have net gains in later years. Net savings over time
would depend upon the programs reviewed. CBO expects that such
savings would likely total several million dollars over the
2013-2017 period, but would likely be significantly less than
the RAC program run by CMS. The current program recoups
payments from institutions such as hospitals, skilled nursing
facilities, and other providers, including physicians and
suppliers of durable medical equipment. Amounts can be
recovered by reducing future program payments to those
institutions or by seeking reimbursement from their assets. In
contrast, many of the new RACs would seek to recover
overpayments to many individual beneficiaries of income support
programs such as Disability Insurance and Supplemental
Nutritional Assistance. Agencies may face limits on the amount
that they can garnish from subsequent payments to such
individuals, who are also less likely to have savings or other
income with which to repay the federal government.
For this cost estimate, however, CBO cannot attribute
savings to S. 1409's RAC provisions because any such savings
would either be contingent on future legislation or would be
subject to Scorekeeping Guideline 14 (as established by the
Congress and explained below). While S. 1409 would authorize
and direct agencies to operate RAC programs, this bill would
not provide any funds to operate those new programs. In some
cases, the amounts necessary to operate such programs would
stem from subsequent appropriation acts; thus, S. 1409 cannot
be credited for achieving those savings itself. In other cases,
a mandatory spending program might directly fund the
administrative costs of a RAC program, but Scorekeeping
Guideline 14 states that: ``No increase in receipts or decrease
in direct spending will be scored as a result of provisions of
a law that provides direct spending for administration or
program management activities.'' Therefore, any savings that
may result from additional spending on administrative
activities aimed at achieving operational efficiencies cannot
be counted (for Congressional scorekeeping purposes) as a
direct result of the legislation providing such a funding
source. If enacted, any expected savings attributable to the
creation of new RAC programs would ultimately be included in
baseline budget projections, and any savings achieved would be
reflected in the budget data.
Pay-As-You-Go considerations: None.
Intergovernmental and private-sector impact: S. 1409
contains no intergovernmental or private-sector mandates as
defined in UMRA and would impose no significant costs on state,
local, or tribal governments.
Estimate prepared by: Federal costs: David Newman, Matthew
Pickford, and Lara Robillard; Impact on state, local, and
tribal governments: Elizabeth Cove Delisle; Impact on the
private sector: Paige Piper/Bach.
Estimate approved by: Peter H. Fontaine, Assistant Director
for Budget Analysis.
VII. Changes to Existing Law Made by the Bill, as Reported
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 1409 as reported are shown as follows (existing law proposed
to be omitted is enclosed in brackets, new matter is printed in
italic, and existing law in which no change is proposed is
shown in roman):
TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES
* * * * * * *
PART I--THE AGENCIES GENERALLY
* * * * * * *
CHAPTER 5--ADMINISTRATIVE PROCEDURE
* * * * * * *
Subchapter II--Administrative Procedure
* * * * * * *
SEC. 552A. RECORDS MAINTAINED ON INDIVIDUALS.
* * * * * * *
MATCHING AGREEMENTS
(o) Matching Agreements.--
(1) No record which is contained in a system of
records may be disclosed to a recipient agency or non-
Federal agency for use in a computer matching program
except pursuant to a written agreement between the
source agency and the recipient agency or non-Federal
agency or an agreement governing multiple agencies'
specifying--
(A) the purpose and legal authority for
conducting the program;
* * * * * * *
TITLE 31--MONEY AND FINANCE
Subtitle III--Financial Management
CHAPTER 33--DEPOSITING, KEEPING, AND PAYING MONEY
Subchapter II--Payments
Improper Payments Information Act of 2002. Act Nov. 26,
2002, P.L. 107-300, 116 Stat. 2350; July 22, 2010, P.L. 111-
204, 2(a)-(f), 124 Stat. 2224, provides:
SECTION 1. SHORT TITLE.
* * * * * * *
SEC. 2. ESTIMATES OF IMPROPER PAYMENTS AND REPORTS ON ACTIONS TO REDUCE
THEM.
(a) Identification of Susceptible Programs and
Activities.--
(1) * * *
(2) * * *
(3) Risk assessments.
(A) * * *
(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--
* * * * * * *
(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 frequency 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--
(i) review--
(I) the assessment of the
level of risk associated with
the applicable program, and the
quality of the improper payment
estimates and methodology of
the agency; and
(II) the oversight or
financial controls to identify
and prevent improper payments;
and
(ii) provide recommendations, for
modifying any plans of the agency,
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) 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] (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)] (c), the
head of the agency shall provide with the estimate under
subsection [(b)] (c) 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)] (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)] (c) 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] (f) 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.
[f] (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, 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.
[g] (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 2010 [enacted July 22, 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.''.
* * * * * * *
Recovery audits.--Act July 22, 2010, P.L. 111-204, 2(h),
124 Stat. 2228, provides:
(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).
* * * * * * *
Compliance.--Act July 22, 2010, P.L. 111-204, 3, 124 Stat.
2232, provides:
(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) * * *
(B) * * *
(C) if required, publishes improper payments
estimates for all programs and activities
identified under section [2(b)] 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)] 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)] 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)] 2(c) of the Improper
Payments Information Act of 2002 (31 U.S.C.
3321 note).