[House Report 106-506]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-506
======================================================================
PROVIDING FOR THE CONSIDERATION OF H.R. 1827, GOVERNMENT WASTE
CORRECTIONS ACT 1999
_______
February 29, 2000.--Referred to the House Calendar and ordered to be
printed
_______
Mr. Sessions, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 426]
The Committee on Rules, having had under consideration
House Resolution 426, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
summary of provisions of the resolution
The resolution provides for the consideration of H.R. 1827,
the Government Waste Corrections Act of 1999, under an open
rule. The rule provides one hour of general debate divided
equally between the chairman and ranking minority member of the
Committee on Government Reform.
The rule provides that, in lieu of the amendment
recommended by the Committee on Government Reform and printed
in the bill, the amendment in the nature of the substitute
printed in this report be considered as original text for the
purpose of amendment. The rule also waives clause 4 of rule XXI
(prohibiting appropriations in a legislative bill) against
provisions included in the amendment in the nature of the
substitute. The rule further provides that the amendment in the
nature of a substitute shall be open for amendment at any
point.
Members who have pre-printed their amendments in the
Congressional Record prior to their consideration will be given
priority in recognition to offer their amendments if otherwise
consistent with House rules. The rule allows the Chairman of
the Committee of the Whole to postpone votes during
consideration of the bill, and to reduce voting time to five
minutes on a postponed question if the vote follows a fifteen
minute vote. Finally, the rule provides for one motion to
recommit, with or without instructions.
The waiver of clause 4 of rule XXI (prohibiting
appropriations in a legislative bill) against provisions
included in the amendment in the nature of the substitute is
necessary because the amendment in the nature of a substitute
contains a provision relating to the disposition of funds. This
provision constitutes an appropriation of funds.
summary of amendment in the nature of a substitute made in order as
original text for the purpose of amendment
(1) Recovery audit requirement:
Mandates recovery audits for agencies that spend
$500,000,000 or more per year on the purchase of goods
and services for the direct use of the agency (bill
would not apply to payment activities of Medicare,
Education, or other entitlement programs or grants);
Requirement wouldn't apply to DOD major weapons
systems contracts until those contracts are closed;
Allows agency head to request an exemption from OMB
if requirement would impede agency's mission or not be
cost-effective;
Agency would have to consult first with IG and CFO to
avoid duplication of effort;
Agency could perform audit in-house or by contract,
as long as OMB standards for recovery audit (to be
produced in accordance with this bill) are met;
If contracted out, the recovery audit contractor
could be paid on a contingency fee basis;
The authority of any person under the Contract
Disputes Act, or any other applicable laws would not be
affected;
The recovery audit contractor would only be able to
audit agency records;
The recovery audit contractor would not be able to
physically establish presence for purposes of carrying
out the recovery audit for the agency;
The recovery audit contractor would have to protect
from improper use or disclosure otherwise confidential
information;
The recovery audit contractor would have to report
and give recommendations to the agency on the
conditions giving rise to the overpayments;
The recovery audit contractor would have to notify
agency head of overpayments or other problems beyond
the scope of the recovery audit;
The agency would have to undergo a cost-comparison
analysis before determining whether to contract for
recovery auditing;
There is a limitation on the disclosure of
individually-identifiable information.
(15) Disposition of amounts collected:
Amounts collected back may be used for the recovery
audit costs;
No more than 25% may be used by the agency for
management improvements directed at the overpayment
problems in the agency;
At least 50% must be returned to the General
Treasury;
These requirements would not apply with regard to
NAFI's, revolving funds, working capital funds, trust
funds;
Requirements to spend collected money on management
improvement program or return money back to the
Treasury wouldn't apply to open appropriation.
(21) Management Improvement Program:
Head of the agency must prioritize problems that
contribute to overpayments;
Can do other things to reduce error and waste;
Can work this program with other agencies;
Must account for spending and activities in the
Program.
(26) Responsibilities of OMB and GAO:
Director of OMB will coordinate and oversee
implementation;
OMB to issue guidance 180 days after enactment;
OMB to issue recovery audit standards as part if
guidance;
OMB may limit recovery audit contingency fees;
OMB may make exemptions if requirements go against
agency mission or aren't cost-effective;
DOD's major weapons systems contracts are exempted
until they are closed;
OMB must report to Congress on exemptions;
OMB must report to President and Congress on
implementation;
GAO will report on implementation.
Comparison between bill as reported and amendment
Efforts have been made to clarify the bill's original
intent by adding three definitions and making technical
clarifications in other parts of the bill.
The bill originally contained a provision allowing OMB to
make exemptions for payment activities if it goes against the
agency's mission or wouldn't be cost-effective. The manager's
amendment expands on this to explicitly authorize agency heads
to request exemptions based on these same criteria.
The bill originally prohibited a recovery audit contractor
from auditing anything but the agency's records. The manager's
amendment expands on this issue by prohibiting a recovery
auditor to establish a physical presence--to set up shop--at an
entity that's the subject of the recovery audit. This addresses
concerns by vendors that the recovery auditors can barge into
the offices as part of the recovery audit.
The manager's amendment also stipulates that recovery
auditing will apply to DOD's major weapons systems programs
only after these contracts have been closed. This change
addresses concerns by Rep. Bateman and others, that recovery
auditing on major defense weapons systems procured with a cost-
type contract would be problematic due to the ``moving target''
nature of progress payments and other complexities that might
appear as overpayments one month, but then be reconciled in
later months.
(Amendment Summary Provided By Staff at the Committee on
Government Reform)
TEXT OF AMENDMENT IN THE NATURE OF A SUBSTITUTE MADE IN ORDER AS
ORIGINAL TEXT FOR THE PURPOSE OF AMENDMENT
Strike all after the enacting clause and insert the
following:
SECTION. 1. SHORT TITLE.
This Act may be cited as the ``Government Waste Corrections
Act of 2000''.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds the following:
(1) Overpayments are a serious problem for Federal
agencies, given the magnitude and complexity of Federal
operations and documented and widespread financial
management weaknesses. Federal agency overpayments
waste tax dollars and detract from the efficiency and
effectiveness of Federal operations by diverting
resources from their intended uses.
(2) In private industry, overpayments to providers of
goods and services occur for a variety of reasons,
including duplicate payments, pricing errors, and
missed cash discounts, rebates, or other allowances.
The identification and recovery of such overpayments,
commonly referred to as ``recovery auditing and
activity'', is an established private sector business
practice with demonstrated large financial returns. On
average, recovery auditing and activity in the private
sector identify overpayment rates of 0.1 percent of
purchases audited and result in the recovery of
$1,000,000 for each $1,000,000,000 of purchases.
(3) Recovery auditing and recovery activity already
have been employed successfully in limited areas of
Federal activity. They have great potential for
expansion to many other Federal agencies and
activities, thereby resulting in the recovery of
substantial amounts of overpayments annually. Limited
recovery audits conducted by private contractors to
date within the Department of Defense have identified
errors averaging 0.4 percent of Federal payments
audited, or $4,000,000 for every $1,000,000,000 of
payments. If fully implemented within the Federal
Government, recovery auditing and recovery activity
have the potential to recover billions of dollars in
Federal overpayments annually.
(b) Purposes.--The purposes of this Act are the following:
(1) To ensure that overpayments made by the Federal
Government that would otherwise remain undetected are
identified and recovered.
(2) To require the use of recovery audit and recovery
activity by Federal agencies.
(3) To provide incentives and resources to improve
Federal management practices with the goal of
significantly reducing Federal overpayment rates and
other waste and error in Federal programs.
SEC. 3. ESTABLISHMENT OF RECOVERY AUDIT REQUIREMENT.
(a) Establishment of Requirement.--Chapter 35 of title 31,
United States Code, is amended by adding at the end the
following:
``SUBCHAPTER VI--RECOVERY AUDITS
``Sec. 3561. Definitions
``In this subchapter, the following definitions apply:
``(1) Amounts collected.--The term `amounts
collected' means monies actually received by the United
States Government.
``(2) Chief financial officer.--The term `Chief
Financial Officer' means the official established by
section 901 of this title, or the functional equivalent
of such official in the case of any agency that does
not have a Chief Financial Officer under that section.
``(3) Director.--The term `Director' means the
Director of the Office of Management and Budget.
``(4) Disclose.--The term `disclose' means to
release, publish, transfer, provide access to, or
otherwise divulge individually identifiable information
to any person other than the individual who is the
subject of the information.
``(5) Facial-discrepancy payment error.--The term
`facial-discrepancy payment error'--
``(A) except as provided in subparagraph (B),
means any payment error that results from, is
substantiated by, or is identified as a result
of information contained on any invoice,
delivery order, bill of lading, statement of
account, or other document submitted to the
Government by a supplier of goods or services
in the usual and customary conduct of business,
or as required by law or contract to
substantiate payment for such goods or
services, including any such document submitted
electronically; and
``(B) does not include payment errors
identified, resulting, or supported from
documents that are--
``(i) records of a proprietary
nature, maintained solely by the
supplier of goods or services;
``(ii) not specifically required to
be provided to the Government by
contract, law, regulation, or to
substantiate payment;
``(iii) submitted to the Government
for evaluative purposes prior to the
award of a contract, as part of the
evaluation and award process.
Records, documents, price lists, or other vendor
material published and available in the public domain
shall not be considered sources of facial-discrepancy
payment errors, but may be used to substantiate,
clarify, or validate facial-discrepancy payment errors
otherwise identified.
``(6) Individually identifiable information.--The
term `individually identifiable information' means any
information, whether oral or recorded in any form or
medium, that identifies the individual or with respect
to which there is a reasonable basis to believe that
the information can be used to identify the individual.
``(7) Oversight.--The term `oversight' means
activities by a Federal, State, or local governmental
entity, or by another entity acting on behalf of such a
governmental entity, to enforce laws relating to,
investigate, or regulate payment activities, recovery
activities, and recovery audit activities.
``(8) Payment activity.--The term `payment activity'
means an executive agency activity that entails making
payments to vendors or other nongovernmental entities
that provide property or services for the direct
benefit and use of an executive agency.
``(9) Recovery audit.--The term `recovery audit'
means a financial management technique applied
internally by Government employees, or by private
sector contractors, and used by executive agencies to
audit their internal records to identify facial-
discrepancy payment errors made by those executive
agencies to vendors and other entities in connection
with a payment activity, including facial-discrepancy
payment errors that result from any of the following:
``(A) Duplicate payments.
``(B) Invoice errors.
``(C) Failure to provide applicable
discounts, rebates, or other allowances.
``(D) Any other facial-discrepancy errors
resulting in inaccurate payments.
``(10) Recovery activity.--The term `recovery
activity' means executive agency activity otherwise
authorized by law, including chapter 37 of this title,
to attempt to collect an identified overpayment.
``(11) Recovery audit contractor.--The term `recovery
audit contractor' means any person who has been hired
by an executive agency to perform a recovery audit
pursuant to a recovery audit contract.
``Sec. 3562. Recovery audit requirement
``(a) In General.--Except as exempted under section 3565(d)
of this title, the head of each executive agency--
``(1) shall conduct for each fiscal year recovery
audits and recovery activity with respect to payment
activities of the agency if such payment activities for
the fiscal year total $500,000,000 or more (adjusted by
the Director annually for inflation);
``(2) may conduct for any fiscal year recovery audits
and recovery activity with respect to payment
activities of the agency if such payment activities for
the fiscal year total less than $500,000,000 (adjusted
by the Director annually for inflation); and
``(3) may request that the Director exempt a payment
activity, in whole or in part, from the requirement to
conduct recovery audits under paragraph (1) if the head
of the executive agency determines and can demonstrate
that compliance with such requirement--
``(A) would impede the agency's mission; or
``(B) would not, or would no longer be, cost-
effective.
``(b) Procedures.--In conducting recovery audits and recovery
activity under this section, the head of an executive agency--
``(1) shall consult and coordinate with the Chief
Financial Officer and the Inspector General of the
agency to avoid any duplication of effort;
``(2) shall implement this section in a manner
designed to ensure the greatest financial benefit to
the Government;
``(3) may conduct recovery audits and recovery
activity internally in accordance with the standards
issued by the Director under section 3565(b)(2) of this
title, or by procuring performance of recovery audits,
or by any combination thereof; and
``(4) shall ensure that such recovery audits and
recovery activity are carried out consistent with the
standards issued by the Director under section
3565(b)(2) of this subchapter.
``(c) Scope of Audits.--
``(1) In general.--Each recovery audit of a payment
activity under this section shall cover payments made
by the payment activity in the preceding fiscal year,
except that the first recovery audit of a payment
activity shall cover payments made during the 2
consecutive fiscal years preceding the date of the
enactment of the Government Waste Corrections Act of
2000.
``(2) Additional fiscal years.--The head of an
executive agency may conduct recovery audits of payment
activities for additional preceding fiscal years if
determined by the agency head to be practical and cost-
effective subject to any statute of limitations
constraints regarding recordkeeping under applicable
law.
``(d) Recovery Audit Contracts.--
``(1) Authority to use contingency contracts.--
Notwithstanding section 3302(b) of this title, as
consideration for performance of any recovery audit
procured by an executive agency, the executive agency
may pay the recovery audit contractor an amount equal
to a percentage of the total amount collected by the
United States as a result of overpayments identified by
the contractor in the audit.
``(2) Additional functions of recovery audit
contractor.--
``(A) In general.--In addition to performance
of a recovery audit, a contract for such
performance may authorize the recovery audit
contractor (subject to subparagraph (B)) to--
``(i) notify any person of possible
overpayments made to the person and
identified in the recovery audit under
the contract; and
``(ii) respond to questions
concerning such overpayments.
``(B) Limitation.--A contract for performance
of a recovery audit shall not affect--
``(i) the authority of the head of an
executive agency, or any other person,
under the Contract Disputes Act of 1978
and other applicable laws, including
the authority to initiate litigation or
referrals for litigation; or
``(ii) the requirements of sections
3711, 3716, 3718, and 3720 of this
title that the head of an agency
resolve disputes, compromise, or
terminate overpayment claims, collect
by setoff, and otherwise engage in
recovery activity with respect to
overpayments identified by the recovery
audit.
``(3) Limitation on authority.--Nothing in this
subchapter shall be construed to authorize a recovery
audit contractor with an executive agency--
``(A) to require the production of any record
or information by any person other than an
officer, employee, or agent of the executive
agency; and
``(B) to establish, or otherwise have a
physical presence on the property or premises
of any private sector entity as part of its
contractual obligations to an executive agency.
``(4) Required contract terms and conditions.--The
head of an executive agency shall include in each
contract for procurement of performance of a recovery
audit requirements that the contractor shall--
``(A) protect from improper use, and protect
from disclosure to any person who is internal
or external to the firm of the recovery audit
contractor and who is not directly involved in
the identification or recovery of overpayments,
otherwise confidential or proprietary business
information and financial information that may
be viewed or obtained in the course of carrying
out a recovery audit for an executive agency;
``(B) provide to the head of the executive
agency and the Inspector General of the
executive agency periodic reports on conditions
giving rise to overpayments identified by the
recovery audit contractor and any
recommendations on how to mitigate such
conditions;
``(C) notify the head of the executive agency
and the Inspector General of the executive
agency of any overpayments identified by the
contractor pertaining to the executive agency
or to another executive agency that are beyond
the scope of the contract; and
``(D) promptly notify the head of the
executive agency and the Inspector General of
the executive agency of any indication of fraud
or other criminal activity discovered in the course
of the audit.
``(5) Executive agency action following
notification.--The head of an executive agency shall
take prompt and appropriate action in response to a
notification by a recovery audit contractor pursuant to
the requirements under paragraph (4), including
forwarding to other executive agencies any information
that applies to them.
``(6) Contracting requirements.--Prior to contracting
for any recovery audit, the head of an executive agency
shall conduct a public-private cost comparison process.
The outcome of the cost comparison process shall
determine whether the recovery audit is performed in-
house or by a recovery audit contractor.
``(e) Inspectors General.--Nothing in this subchapter shall
be construed as diminishing the authority of any Inspector
General, including such authority under the Inspector General
Act of 1978.
``(f) Privacy Protections.--
``(1) Limitation on disclosure of individually
identifiable information.--(A) Any nongovernmental
entity that obtains individually identifiable
information through performance of recovery auditing or
recovery activity under this chapter may disclose that
information only for the purpose of such auditing or
activity, respectively, and oversight of such auditing
or activity, unless otherwise authorized by the
individual that is the subject of the information.
``(B) Any person that violates subparagraph (A) shall
be liable for any damages (including nonpecuniary
damages, costs, and attorneys fees) caused by the
violation.
``(2) Destruction or return of information.--Upon the
conclusion of the matter or need for which individually
identifiable information was disclosed in the course of
recovery auditing or recovery activity under this
chapter performed by a nongovernmental entity, the
nongovernmental entity shall either destroy the
individually identifiable information or return it to
the person from whom it was obtained, unless another
applicable law requires retention of the information.
``Sec. 3563. Disposition of amounts collected
``(a) In General.--Notwithstanding section 3302(b) of this
title, the amounts collected annually by the United States as a
result of recovery audits by an executive agency under this
subchapter shall be treated in accordance with this section.
``(b) Use for Recovery Audit Costs.--Amounts referred to in
subsection (a) shall be available to the executive agency--
``(1) to pay amounts owed to any recovery audit
contractor for performance of the audit;
``(2) to reimburse any applicable appropriation for
other recovery audit costs incurred by the executive
agency with respect to the audit; and
``(3) to pay any fees authorized under chapter 37 of
this title.
``(c) Use for Management Improvement Program.--Of the amount
referred to in subsection (a), a sum not to exceed 25 percent
of such amount--
``(1) shall be available to the executive agency to
carry out the management improvement program of the
agency under section 3564 of this title;
``(2) may be credited for that purpose by the agency
head to any agency appropriations that are available
for obligation at the time of collection; and
``(3) shall remain available for the same period as
the appropriations to which credited.
``(d) Remainder to Treasury.--Of the amount referred to in
subsection (a), there shall be deposited into the Treasury as
miscellaneous receipts a sum equal to--
``(1) 50 percent of such amount; plus
``(2) such other amounts as remain after the
application of subsections (b) and (c).
``(e) Limitation on Application.--
``(1) In general.--This section shall not apply to
amounts collected through recovery audits and recovery
activity to the extent that such application would be
inconsistent with another provision of law that
authorizes crediting of the amounts to a
nonappropriated fund instrumentality, revolving fund,
working capital fund, trust fund, or other fund or
account.
``(2) Subsections (c) and (d).--Subsections (c) and
(d) shall not apply to amounts collected through
recovery audits and recovery activity, to the extent
that such amounts are derived from an appropriation or
fund that remains available for obligation, or that
remain available for recording, adjusting, and
liquidating obligations properly chargeable to that
appropriation or fund at the time the amounts are
collected.
``Sec. 3564. Management improvement program
``(a) Conduct of Program.--
``(1) Required programs.--The head of each executive
agency that is required to conduct recovery audits
under section 3562 of this title shall conduct a
management improvement program under this section,
consistent with guidelines prescribed by the Director.
``(2) Discretionary programs.--The head of any other
executive agency that conducts recovery audits under
section 3562 that meet the standards issued by the
Director under section 3565(b)(2) may conduct a
management improvement program under this section.
``(b) Program Features.--In conducting the program, the head
of the executive agency--
``(1) shall, as the first priority of the program,
address problems that contribute directly to agency
overpayments; and
``(2) may seek to reduce errors and waste in other
programs and operations of that executive agency by
improving the executive agency's staff capacity,
information technology, and financial management.
``(c) Integration With Other Activities.--The head of an
executive agency--
``(1) subject to paragraph (2), may integrate the
program under this section, in whole or in part, with
other management improvement programs and activities of
that agency or other executive agencies; and
``(2) must retain the ability to account specifically
for the use of amounts made available under section
3563 of this title.
``Sec. 3565. Responsibilities of the Office of Management and Budget
``(a) In General.--The Director shall coordinate and oversee
the implementation of this subchapter.
``(b) Guidance.--
``(1) In general.--The Director, in consultation with
the Chief Financial Officers Council and the
President's Council on Integrity and Efficiency, shall
issue guidance and provide support to agencies in
implementing the subchapter. The Director shall issue
initial guidance not later than 180 days after the date
of enactment of the Government Waste Corrections Act of
2000.
``(2) Recovery audit standards.--The Director shall
include in the initial guidance under this subsection
standards for the performance of recovery audits under
this subchapter, that are developed in consultation
with the Comptroller General of the United States and
private sector experts on recovery audits, including
such experts who currently use recovery auditing as
part of their financial management procedures.
``(c) Fee Limitations.--The Director may limit the percentage
amounts that may be paid to contractors under section
3562(d)(1) of this title.
``(d) Exemptions.--
``(1) In general.--The Director may exempt an
executive agency, in whole or in part, from the
requirement to conduct recovery audits under section
3562(a)(1) of this title if the Director determines
that compliance with such requirement--
``(A) would impede the agency's mission; or
``(B) would not, or would no longer be cost-
effective.
``(2) Report to congress.--The Director shall
promptly report the basis of any determination and
exemption under paragraph (1) to the Committee on
Government Reform of the House of Representatives and
the Committee on Governmental Affairs of the Senate.
``(3) Exemption of major defense system acquisition
programs.--
``(A) In general.--Unless determined
otherwise by the head of the agency authorized
to conduct a Department of Defense major system
acquisition program, the requirements of
section 3562(a) of this title shall not apply
to such a program procured with a cost-type
contract until the contract has become a closed
contract.
``(B) Department of defense major system
acquisition program defined.--In this
paragraph, the term `Department of Defense
major system acquisition program' has the
meaning that term has in Office of Management
and Budget Circular A-109, as in effect on the
date of the enactment of the Government Waste
Corrections Act of 2000.
``(e) Reports.--
``(1) In general.--Not later than 1 year after the
date the Director issues initial guidance under
subsection (b), and annually for each of the 2 years
thereafter, the Director shall submit a report on
implementation of the subchapter to the President, the
Committee on Government Reform of the House of
Representatives, the Committee on Governmental Affairs
of the Senate, and the Committee on Appropriations of
the House of Representatives and of the Senate.
``(2) Contents.--Each report shall include--
``(A) a general description and evaluation of
the steps taken by executive agencies to
conduct recovery audits, including an inventory
of the programs and activities of each
executive agency that are subject to recovery
audits;
``(B) an assessment of the benefits of
recovery auditing and recovery activity,
including amounts identified and recovered
(including by administrative setoffs);
``(C) an identification of best practices
that could be applied to future recovery audits
and recovery activity;
``(D) an identification of any significant
problems or barriers to more effective recovery
audits and recovery activity;
``(E) a description of executive agency
expenditures in the recovery audit process;
``(F) a description of executive agency
management improvement programs under section
3564 of this title; and
``(G) any recommendations for changes in
executive agency practices or law or other
improvements that the Director believes would
enhance the effectiveness of executive agency
recovery auditing.
``Sec. 3566. General Accounting Office reports
``Not later than 60 days after issuance of each report under
section 3565(e) of this title the Comptroller General of the
United States shall submit a report on the implementation of
this subchapter to the Committee on Government Reform of the
House of Representatives, the Committee on Governmental Affairs
of the Senate, the Committee on Appropriations of the House of
Representatives and of the Senate, and the Director.''.
(b) Application to All Executive Agencies.--Section 3501 of
title 31, United States Code, is amended by inserting ``and
subchapter VI of this chapter'' after ``section 3513''.
(c) Deadline for Initiation of Recovery Audits.--The head of
each executive agency shall begin the first recovery audit
under section 3562(a)(1) title 31, United States Code, as
amended by this section, for each payment activity referred to
in that section by not later than 18 months after the date of
the enactment of this Act.
(d) Clerical Amendment.--The analysis at the beginning of
chapter 35 of title 31, United States Code, is amended by
adding at the end the following:
``SUBCHAPTER V--RECOVERY AUDITS
``Sec.
``3561. Definitions.
``3562. Recovery audit requirement.
``3563. Disposition of amounts collected.
``3564. Management improvement program.
``3565. Responsibilities of the Office of Management and Budget.
``3566. General Accounting Office reports.''.
Amend the title so as to read: ``A bill to improve the
economy and efficiency of Government operations by requiring
the use of recovery audits and recovery activity by Federal
agencies.''.