# Presentation: 525553

## Improper Payments Information Act 

***Improper Payments Information Act ***
***& ***
***Recovery Audit  Legislation ***
*** ***

**May 23, 2006**

- By:  Bruce LaLonde
- Vice President
- 678-641-0158
- BruceLaLonde@prgx.com

## Improper Payments Reporting Act

**Improper Payments Reporting Act**

**P.L. 107-300 - Required for:**
**Federal departments, agencies, instrumentalities**
**With erroneous program payments exceeding 2.5% and $10 million**
**Identify reasons for erroneous payments**
**Plan to reduce erroneous payments**
**Assess whether infrastructure and information systems are needed**

## Recovery Audits - Section 831, FY 2002 Defense Authorization Act

**Recovery Audits - Section 831, FY 2002 Defense Authorization Act**

**Requires program at agencies with over $500 million annual spend**
**Provides for Agencies to recover any associated expense from amounts recovered**
**Provides for Agencies to pay Recovery Auditor from the amounts recovered**
**Requires reporting by December 31, 2004 on:**
**steps to carry out a recovery audit program**
**cost of program**
**amounts recovered**
**management improvement actions**

## Relationship of the Two Acts

**Relationship of the Two Acts**

**Both focus on reducing erroneous payments**
**Have separate requirements**
**Agencies may use Recovery Audit program results to fulfill the reporting requirements of the Improper Payments Reporting Act**

## Specialized, risk-free process introduced by PRG in 1972
Fees are a contingent share of actual amounts recovered  
A process to identify and recover overpayments and under-deductions inadvertently made to suppliers of goods and services that would otherwise remain undetected and lost.

**Specialized, risk-free process introduced by PRG in 1972**
**Fees are a contingent share of actual amounts recovered  **
**A process to identify and recover overpayments and under-deductions inadvertently made to suppliers of goods and services that would otherwise remain undetected and lost.**

**What is recovery auditing?**

## 30 years of program development and refinement
Accepted best business practice
Used by most large companies
Initial focus on disbursement errors
Now comprehensive including contract compliance related errors

**30 years of program development and refinement**
**Accepted best business practice**
**Used by most large companies**
**Initial focus on disbursement errors**
**Now comprehensive including contract compliance related errors**

**Private Sector**

## Newer concept for Federal Agencies and State Governments
Recognized by Congress as an efficiency initiative
Initiated and implemented in a number of agencies
Results vary by agency based on nature of spend and program support

**Newer concept for Federal Agencies and State Governments**
**Recognized by Congress as an efficiency initiative**
**Initiated and implemented in a number of agencies**
**Results vary by agency based on nature of spend and program support**

**Public Sector**

## Recovery Audit Program Components

**Recovery Audit Program Components**

**Identify annual spend & categories**
**Establish Agency champion**
**Set stage for success internally**
**Preliminary Program Assessment to prioritize program elements and scope**

## Recovery Audit Program Components (cont.)

**Recovery Audit Program Components (cont.)**

**Provide purchase and payment transaction information to service provider**
**Includes procurement records, contracts, modifications, vendor correspondence**
**Payment transaction records, vendor master files, paid history files, purchase orders and invoice files, etc.**
**Provide requisite oversight, claim approval, vendor settlements, etc.**
**Recoup identified and validated overpayments through normal administrative processes ****(Administrative offsets & checks)**

## Categories of Overpayment

**Categories of Overpayment**

**Disbursement Related Errors****	****	****	**
- Accounting Errors
- Discount and No Discount Invoice
- Incorrect Vendor
- Paid Invoice and Other Vendor Document
- Paid Invoice and Check Request
- Credit Memo Paid not Deducted
- Paid Voided Invoice
- Paid Invoice on Closed PO
- Interest Penalty Paid at Wrong Rate
- Cash/Trade Discount Earned not Taken
- Cash/Trade Discount Deducted at Wrong Rate
- Cash/Trade Discount Repaid on Return
- Cash/Trade Discount Repaid in Error
- Cash/Trade Discount Repaid Credit Memo
- Sales Tax Paid to Wrong State
- Sales Tax Paid on Foreign shipments
- Sales Tax Paid at Wrong Rate
- Restocking Charge Paid in Error
- Credits Due
- Unauthorized Charges on Invoices
- Interest Penalty Paid in Error

**Contract Related Errors**
- Uncollected Contract Financing
- Uncollected Gov't Furnished Mat'l
- Uncollected Gov't Furnished Equip
- Industrial Based Maint. Contract Reimbursement
- Price Warranty
- Uncollected Warranty
- Late Delivery Penalty
- EDI Allowances
- Blanket PO
- Pricing Date errors
- Price Overcharge Errors
- Volume Rebates
- Inventory Returns Not Credited
- Price Errors on Returns
- Freight Paid on Returns
- Freight Collect
- Freight Allowances
- Freight Double Billed
- Shortage/Quantity Discrepancies
- Defective Allowance

## What’s In It For You?

**What’s In It For You?**

**The money  **
**Common sense business practice**
**No risk & No cost**

## Government Agency Lessons Learned

**Government Agency Lessons Learned**

**Results vary based on:**
**Order of magnitude**
**Scope **
**Volatility **
**Complexity **
**Spend type**
**Data quality & timeliness**
**Agency support**

## Experience Matters

**Experience Matters**

**First developed concept in 1972**
**Initially focused on private sector**
**Gained wide acceptance as a best business practice**
**Serve majority of Fortune 500 across 48 countries with 3,500 staff**
**$2.3 billion recovered last year alone**
**Massive data mining and analytical capability **
**Limited but growing application in Federal Agencies**
**$182 million recovered to date **

## Agencies Participating In Recovery Review With PRG

**Agencies Participating In Recovery Review With PRG**

**Social Security**
**General Services Administration**
**Department of Justice**
**Department of Agriculture**
**Department of State**
**Department of Transportation**
**Army & Air Force Exchange Service (AAFES)**
**Navy Exchange Service Command (NEXCOM)**

## Department of Interior -Participating Bureaus

**Department of Interior -****Participating Bureaus**

**Bureau of Reclamation**
**Bureau of Land Management**
**Office of Fish and Wildlife **
**National Parks Service**
**Minerals Management Service**
**Office of Surface Mining**
**Office of the Secretary**
**Bureau of Indian Affairs**
**Geological Services**

## Recovery Review Challenges at Department of Interior

**Recovery Review Challenges at Department of Interior**

**Access to data**
**Contracting Officer Files**
**Contracting Officer’s Intent**
**Procurement/Financial System Interface**

## Summary

**Summary**

**The legislation recognizes the value of Recovery Auditing**
**Program results can be used to fulfill the reporting requirements of the Improper Payments Information Act**
**Good for the taxpayer and Agency**
**Provides ongoing financial benefits and insights for improved control**
**No Risk**
**Streamlined acquisition vehicles available**