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[111th Congress Public Law 204]
[From the U.S. Government Printing Office]

[[Page 2223]]

         IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT OF 2010

[[Page 124 STAT. 2224]]

Public Law 111-204
111th Congress

                                 An Act

 
 To amend the Improper Payments Information Act of 2002 (31 U.S.C. 3321 
       note) in order to prevent the loss of billions in taxpayer 
             dollars. <<NOTE: July 22, 2010 -  [S. 1508]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Improper 
Payments Elimination and Recovery Act of 2010.>> 
SECTION 1. <<NOTE: 31 USC 3301 note.>> SHORT TITLE.

    This Act may be cited as the ``Improper Payments Elimination and 
Recovery Act of 2010''.
SEC. 2. IMPROPER PAYMENTS ELIMINATION AND RECOVERY.

    (a) Susceptible Programs and Activities.--Section 2 of the Improper 
Payments Information Act of 2002 (31 U.S.C. 3321 note) is amended by 
striking subsection (a) and inserting the following:
    ``(a) Identification of Susceptible Programs and Activities.--
            ``(1) In general.-- <<NOTE: Guidelines.>> The head of each 
        agency shall, in accordance with guidance prescribed by the 
        Director of the Office of Management and Budget, periodically 
        review all programs and activities that the relevant agency head 
        administers and identify all programs and activities that may be 
        susceptible to significant improper payments.
            ``(2) Frequency.-- <<NOTE: Deadline.>> Reviews under 
        paragraph (1) shall be performed for each program and activity 
        that the relevant agency head administers during the year after 
        which the Improper Payments Elimination and Recovery Act of 2010 
        is enacted and at least once every 3 fiscal years thereafter. 
        For those agencies already performing a risk assessment every 3 
        years, agencies may apply to the Director of the Office of 
        Management and Budget for a waiver from the requirement of the 
        preceding sentence and continue their 3-year risk assessment 
        cycle.
            ``(3) Risk assessments.--
                    ``(A) Definition.--In this subsection the term 
                `significant' means--
                          ``(i) except as provided under clause (ii), 
                      that improper payments in the program or activity 
                      in the preceding fiscal year may have exceeded--
                                    ``(I) $10,000,000 of all program or 
                                activity payments made during that 
                                fiscal year reported and 2.5 percent of 
                                program outlays; or
                                    ``(II) $100,000,000; and
                          ``(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

[[Page 124 STAT. 2225]]

                      and Budget, that improper payments in the program 
                      or activity in the preceding fiscal year may have 
                      exceeded--
                                    ``(I) $10,000,000 of all program or 
                                activity payments made during that 
                                fiscal year reported and 1.5 percent of 
                                program outlays; or
                                    ``(II) $100,000,000.
                    ``(B) Scope.--In conducting the reviews under 
                paragraph (1), the head of each agency shall take into 
                account those risk factors that are likely to contribute 
                to a susceptibility to significant improper payments, 
                such as--
                          ``(i) whether the program or activity reviewed 
                      is new to the agency;
                          ``(ii) the complexity of the program or 
                      activity reviewed;
                          ``(iii) the volume of payments made through 
                      the program or activity reviewed;
                          ``(iv) whether payments or payment eligibility 
                      decisions are made outside of the agency, such as 
                      by a State or local government;
                          ``(v) recent major changes in program funding, 
                      authorities, practices, or procedures;
                          ``(vi) the level, experience, and quality of 
                      training for personnel responsible for making 
                      program eligibility determinations or certifying 
                      that payments are accurate; and
                          ``(vii) significant deficiencies in the audit 
                      report of the agency or other relevant management 
                      findings that might hinder accurate payment 
                      certification.''.

    (b) Estimation of Improper Payments.--Section 2 of the Improper 
Payments Information Act of 2002 (31 U.S.C. 3321 note) is amended by 
striking subsection (b) and inserting the following:
    ``(b) 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) Reports on Actions To Reduce Improper Payments.--Section 2 of 
the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is 
amended by striking subsection (c) and inserting the following:
    ``(c) Reports on Actions To Reduce Improper Payments.--With respect 
to any program or activity of an agency with estimated improper payments 
under subsection (b), the head of the agency shall provide with the 
estimate under subsection (b) 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

[[Page 124 STAT. 2226]]

        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) Reports on Actions To Recover Improper Payments.--Section 2 of 
the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is 
amended--
            (1) by striking subsection (e);
            (2) by redesignating subsections (d) and (f) as subsections 
        (f) and (g), respectively; and
            (3) by inserting after subsection (c) the following:

    ``(d) 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) 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

[[Page 124 STAT. 2227]]

            ``(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) 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.''.

    (e) Definitions.--Section 2 of the Improper Payments Information Act 
of 2002 (31 U.S.C. 3321 note) is amended by striking subsections (f) (as 
redesignated by this section) and inserting the following:
    ``(f) 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

[[Page 124 STAT. 2228]]

        provision of any contract, grant, lease, cooperative agreement, 
        or any other funding mechanism.''.

    (f) Guidance by the Office of Management and Budget.--Section 2 of 
the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) is 
amended by striking subsection (g) (as redesignated by this section) and 
inserting the following:
    ``(g) Guidance by the Office of Management and Budget.--
            ``(1) In general.-- <<NOTE: Deadline.>> Not later than 6 
        months after the date of enactment of the Improper Payments 
        Elimination and Recovery Act of 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.''.

    (g) <<NOTE: 31 USC 3321 note.>> Determinations of Agency Readiness 
for Opinion on Internal Control.-- <<NOTE: Deadline. Criteria.>> Not 
later than 1 year after the date of enactment of this Act, the Director 
of the Office of Management and Budget shall develop--
            (1) specific criteria as to when an agency should initially 
        be required to obtain an opinion on internal control over 
        improper payments; and
            (2) criteria for an agency that has demonstrated a 
        stabilized, effective system of internal control over improper 
        payments, whereby the agency would qualify for a multiyear cycle 
        for obtaining an audit opinion on internal control over improper 
        payments, rather than an annual cycle.

    (h) <<NOTE: 31 USC 3321 note.>> 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.
            (2) In general.--
                    (A) Conduct of audits.--Except as provided under 
                paragraph (4) and if not prohibited under any other 
                provision of law, the head of each agency shall conduct 
                recovery audits with respect to each program and 
                activity of the agency that expends $1,000,000 or more 
                annually if conducting such audits would be cost-
                effective.
                    (B) Procedures.--In conducting recovery audits under 
                this subsection, the head of an agency--
                          (i) shall give priority to the most recent 
                      payments and to payments made in any program or 
                      programs identified as susceptible to significant 
                      improper payments under section 2(a) of the 
                      Improper Payments Information Act of 2002 (31 
                      U.S.C. 3321 note);
                          (ii) shall implement this subsection in a 
                      manner designed to ensure the greatest financial 
                      benefit to the Government; and

[[Page 124 STAT. 2229]]

                          (iii) may conduct recovery audits directly, by 
                      using other departments and agencies of the United 
                      States, or by procuring performance of recovery 
                      audits by private sector sources by contract 
                      (subject to the availability of appropriations), 
                      or by any combination thereof.
                    (C) Recovery audit contracts.--With respect to 
                recovery audits procured by an agency by contract--
                          (i) subject to subparagraph (B)(iii), and 
                      except to the extent such actions are outside the 
                      agency's authority, as defined by section 605(a) 
                      of the Contract Disputes Act of 1978 (41 U.S.C. 
                      605(a)), the head of the agency may authorize the 
                      contractor to notify entities (including persons) 
                      of potential overpayments made to such entities, 
                      respond to questions concerning potential 
                      overpayments, and take other administrative 
                      actions with respect to overpayment claims made or 
                      to be made by the agency; and
                          (ii) such contractor shall have no authority 
                      to make final determinations relating to whether 
                      any overpayment occurred and whether to 
                      compromise, settle, or terminate overpayment 
                      claims.
                    (D) Contract terms and conditions.--
                          (i) In general.--The agency shall include in 
                      each contract for procurement of performance of a 
                      recovery audit a requirement that the contractor 
                      shall--
                                    (I) <<NOTE: Reports.>> provide to 
                                the agency periodic reports on 
                                conditions giving rise to overpayments 
                                identified by the contractor and any 
                                recommendations on how to mitigate such 
                                conditions;
                                    (II) <<NOTE: Notification.>> notify 
                                the agency of any overpayments 
                                identified by the contractor pertaining 
                                to the agency or to any other agency or 
                                agencies that are beyond the scope of 
                                the contract; and
                                    (III) report to the agency credible 
                                evidence of fraud or vulnerabilities to 
                                fraud, and conduct appropriate training 
                                of personnel of the contractor on 
                                identification of fraud.
                          (ii) Reports on actions taken.--Not later than 
                      November 1 of each year, each agency shall submit 
                      a report on actions taken by the agency during the 
                      preceding fiscal year to address the 
                      recommendations described under clause (i)(I) to--
                                    (I) the Office of Management and 
                                Budget; and
                                    (II) Congress.
                    (E) Agency action following notification.--An agency 
                shall take prompt and appropriate action in response to 
                a report or notification by a contractor under 
                subparagraph (D)(i)(I) or (II), to collect overpayments 
                and shall forward to other agencies any information that 
                applies to such agencies.
            (3) Disposition of amounts recovered.--
                    (A) In general.--Amounts collected by agencies each 
                fiscal year through recovery audits conducted under this 
                subsection shall be treated in accordance with this 
                paragraph. <<NOTE: Determination.>> The agency head 
                shall determine the distribution of collected amounts, 
                less amounts needed to fulfill the

[[Page 124 STAT. 2230]]

                purposes of section 3562(a) of title 31, United States 
                Code, in accordance with subparagraphs (B), (C), and 
                (D).
                    (B) Use for financial management improvement 
                program.--Not more than 25 percent of the amounts 
                collected by an agency through recovery audits--
                          (i) shall be available to the head of the 
                      agency to carry out the financial management 
                      improvement program of the agency under paragraph 
                      (4);
                          (ii) may be credited, if applicable, for that 
                      purpose by the head of an agency to any agency 
                      appropriations and funds that are available for 
                      obligation at the time of collection; and
                          (iii) shall be used to supplement and not 
                      supplant any other amounts available for that 
                      purpose and shall remain available until expended.
                    (C) Use for original purpose.--Not more than 25 
                percent of the amounts collected by an agency--
                          (i) shall be credited to the appropriation or 
                      fund, if any, available for obligation at the time 
                      of collection for the same general purposes as the 
                      appropriation or fund from which the overpayment 
                      was made;
                          (ii) shall remain available for the same 
                      period and purposes as the appropriation or fund 
                      to which credited; and
                          (iii) if the appropriation from which the 
                      overpayment was made has expired, shall be newly 
                      available for the same time period as the funds 
                      were originally available for obligation, except 
                      that any amounts that are recovered more than five 
                      fiscal years from the last fiscal year in which 
                      the funds were available for obligation shall be 
                      deposited in the Treasury as miscellaneous 
                      receipts, except that in the case of recoveries of 
                      overpayments that are made from trust or special 
                      fund accounts, such amounts shall revert to those 
                      accounts.
                    (D) Use for inspector general activities.--Not more 
                than 5 percent of the amounts collected by an agency 
                shall be available to the Inspector General of that 
                agency--
                          (i) for--
                                    (I) the Inspector General to carry 
                                out this Act; or
                                    (II) any other activities of the 
                                Inspector General relating to 
                                investigating improper payments or 
                                auditing internal controls associated 
                                with payments; and
                          (ii) shall remain available for the same 
                      period and purposes as the appropriation or fund 
                      to which credited.
                    (E) Remainder.--Amounts collected that are not 
                applied in accordance with subparagraph (A), (B), (C), 
                or (D) shall be deposited in the Treasury as 
                miscellaneous receipts, except that in the case of 
                recoveries of overpayments that are made from trust or 
                special fund accounts, such amounts shall revert to 
                those accounts.
                    (F) Discretionary amounts.-- 
                <<NOTE: Applicability.>> This paragraph shall apply only 
                to recoveries of overpayments that are made from 
                discretionary appropriations (as that term is defined

[[Page 124 STAT. 2231]]

                by paragraph 7 of section 250 of the Balanced Budget and 
                Emergency Deficit Control Act of 1985) and shall not 
                apply to recoveries of overpayments that are made from 
                discretionary amounts that were appropriated prior to 
                enactment of this Act.
                    (G) Application.--This paragraph shall not apply to 
                recoveries of overpayments if the appropriation from 
                which the overpayment was made has not expired.
            (4) Financial management improvement program.--
                    (A) Requirement.-- <<NOTE: Regulations.>> The head 
                of each agency shall conduct a financial management 
                improvement program, consistent with rules prescribed by 
                the Director of the Office of Management and Budget.
                    (B) Program features.--In conducting the program, 
                the head of the agency--
                          (i) shall, as the first priority of the 
                      program, address problems that contribute directly 
                      to agency improper payments; and
                          (ii) may seek to reduce errors and waste in 
                      other agency programs and operations.
            (5) Privacy protections.--Any nongovernmental entity that, 
        in the course of recovery auditing or recovery activity under 
        this subsection, obtains information that identifies an 
        individual or with respect to which there is a reasonable basis 
        to believe that the information can be used to identify an 
        individual, may not disclose the information for any purpose 
        other than such recovery auditing or recovery activity and 
        governmental oversight of such activity, unless disclosure for 
        that other purpose is authorized by the individual to the 
        executive agency that contracted for the performance of the 
        recovery auditing or recovery activity.
            (6) Other recovery audit requirements.--
                    (A) In general.-- <<NOTE: Repeal.>> (i) Except as 
                provided in clause (ii), subchapter VI of chapter 35 of 
                title 31, <<NOTE: 31 USC 3561 
                et seq.>> United States Code, is repealed.
                    (ii) Section 3562(a) of title 31, United States 
                Code, shall continue in effect, except that references 
                in such section 3562(a) to programs carried out under 
                section 3561 of such title, shall be interpreted to mean 
                programs carried out under section 2(h) of this Act.
                    (B) Technical and conforming amendments.--
                          (i) Table of sections.--The table of sections 
                      for chapter 35 of title 31, United States Code, is 
                      amended by striking the matter relating to 
                      subchapter VI.
                          (ii) Definition.--Section 3501 of title 31, 
                      United States Code, is amended by striking ``and 
                      subchapter VI of this title''.
                          (iii) Homeland security grants.--Section 
                      2022(a)(6) of the Homeland Security Act of 2002 (6 
                      U.S.C. 612(a)(6)) is amended by striking ``(as 
                      that term is defined by the Director of the Office 
                      of Management and Budget under section 3561 of 
                      title 31, United States Code)'' and inserting 
                      ``under section 2(h) of the Improper Payments 
                      Elimination and Recovery Act of 2010 (31 U.S.C. 
                      3321 note)''.
            (7) Rule of construction.--Except as provided under 
        paragraph (5), nothing in this section shall be construed as

[[Page 124 STAT. 2232]]

        terminating or in any way limiting authorities that are 
        otherwise available to agencies under existing provisions of law 
        to recover improper payments and use recovered amounts.

    (i) Report on Recovery Auditing.-- <<NOTE: Study.>> Not later than 2 
years after the date of the enactment of this Act, the Chief Financial 
Officers Council established under section 302 of the Chief Financial 
Officers Act of 1990 (31 U.S.C. 901 note), in consultation with the 
Council of Inspectors General on Integrity and Efficiency established 
under section 7 of the Inspector General Reform Act of 2009 (Public Law 
110-409) and recovery audit experts, shall conduct a study of--
            (1) the implementation of subsection (h);
            (2) the costs and benefits of agency recovery audit 
        activities, including--
                    (A) those activities under subsection (h); and
                    (B) the effectiveness of using the services of--
                          (i) private contractors;
                          (ii) agency employees;
                          (iii) cross-servicing from other agencies; or
                          (iv) any combination of the provision of 
                      services described under clauses (i) through 
                      (iii); and
            (3) submit a report on the results of the study to--
                    (A) the Committee on Homeland Security and 
                Governmental Affairs of the Senate;
                    (B) the Committee on Oversight and Government Reform 
                of the House of Representatives; and
                    (C) the Comptroller General.
SEC. 3. <<NOTE: 31 USC 3321 note.>> 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.
            (2) Annual financial statement.--The term ``annual financial 
        statement'' means the annual financial statement required under 
        section 3515 of title 31, United States Code, or similar 
        provision of law.
            (3) Compliance.--The term ``compliance'' means that the 
        agency--
                    (A) has published an annual financial statement for 
                the most recent fiscal year and posted that report and 
                any accompanying materials required under guidance of 
                the Office of Management and Budget on the agency 
                website;
                    (B) if required, has conducted a program specific 
                risk assessment for each program or activity that 
                conforms with section 2(a) the Improper Payments 
                Information Act of 2002 (31 U.S.C. 3321 note); and
                    (C) if required, publishes improper payments 
                estimates for all programs and activities identified 
                under section 2(b) 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) of the Improper Payments 
                Information Act of 2002 (31 U.S.C. 3321 note) that the

[[Page 124 STAT. 2233]]

                agency may have in the accompanying materials to the 
                annual financial statement;
                    (E) publishes improper payments reduction targets 
                established under section 2(c) 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) of the 
                Improper Payments Information Act of 2002 (31 U.S.C. 
                3321 note).

    (b) Annual Compliance Report by Inspectors General of Agencies.-- 
<<NOTE: Determination.>> Each fiscal year, the Inspector General of each 
agency shall determine whether the agency is in compliance and submit a 
report on that determination to--
            (1) the head of the agency;
            (2) the Committee on Homeland Security and Governmental 
        Affairs of the Senate;
            (3) the Committee on Oversight and Governmental Reform of 
        the House of Representatives; and
            (4) the Comptroller General.

    (c) Remediation.--
            (1) Noncompliance.--
                    (A) In general.-- <<NOTE: Plans.>> If an agency is 
                determined by the Inspector General of that agency not 
                to be in compliance under subsection (b) in a fiscal 
                year, the head of the agency shall submit a plan to 
                Congress describing the actions that the agency will 
                take to come into compliance.
                    (B) Plan.--The plan described under subparagraph (A) 
                shall include--
                          (i) measurable milestones to be accomplished 
                      in order to achieve compliance for each program or 
                      activity;
                          (ii) the designation of a senior agency 
                      official who shall be accountable for the progress 
                      of the agency in coming into compliance for each 
                      program or activity; and
                          (iii) the establishment of an accountability 
                      mechanism, such as a performance agreement, with 
                      appropriate incentives and consequences tied to 
                      the success of the official designated under 
                      clause (ii) in leading the efforts of the agency 
                      to come into compliance for each program and 
                      activity.
            (2) Noncompliance for 2 fiscal years.--
                    (A) In general.-- <<NOTE: Determination.>> If an 
                agency is determined by the Inspector General of that 
                agency not to be in compliance under subsection (b) for 
                2 consecutive fiscal years for the same program or 
                activity, and the Director of the Office of Management 
                and Budget determines that additional funding would help 
                the agency come into compliance, the head of the agency 
                shall obligate additional funding, in an amount 
                determined by the Director, to intensified compliance 
                efforts.
                    (B) Funding.-- <<NOTE: Transfer authority.>> In 
                providing additional funding described under 
                subparagraph (A), the head of an agency

[[Page 124 STAT. 2234]]

                shall use any reprogramming or transfer authority 
                available to the agency. If after exercising that 
                reprogramming or transfer authority additional funding 
                is necessary to obligate the full level of funding 
                determined by the Director of the Office of Management 
                and Budget under subparagraph (A), the agency shall 
                submit a request to Congress for additional 
                reprogramming or transfer authority.
            (3) Reauthorization and statutory proposals.-- 
        <<NOTE: Deadline.>> If an agency is determined by the Inspector 
        General of that agency not to be in compliance under subsection 
        (b) for more than 3 consecutive fiscal years for the same 
        program or activity, the head of the agency shall, not later 
        than 30 days after such determination, submit to Congress--
                    (A) reauthorization proposals for each program or 
                activity that has not been in compliance for 3 or more 
                consecutive fiscal years; or
                    (B) proposed statutory changes necessary to bring 
                the program or activity into compliance.

    (d) Compliance Enforcement Pilot Programs.--
            (1) In general.--The Director of the Office of Management 
        and Budget may establish 1 or more pilot programs which shall 
        test potential accountability mechanisms with appropriate 
        incentives and consequences tied to success in ensuring 
        compliance with this Act and eliminating improper payments.
            (2) Report.--Not later than 5 years 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 findings 
        associated with any pilot programs conducted under paragraph 
        (1). The report shall include any legislative or other 
        recommendations that the Director determines necessary.

    (e) Report on Chief Financial Officers Act of 1990.--Not later than 
1 year after the date of the enactment of this Act, the Chief Financial 
Officers Council established under section 302 of the Chief Financial 
Officers Act of 1990 (31 U.S.C. 901 note) and the Council of Inspectors 
General on Integrity and Efficiency established under section 7 of the 
Inspector General Reform Act of 2009 (Public Law 110-409), in 
consultation with a broad cross-section of experts and stakeholders in 
Government accounting and financial management shall--
            (1) jointly examine the lessons learned during the first 20 
        years of implementing the Chief Financial Officers Act of 1990 
        (31 U.S.C. 901) and identify reforms or improvements, if any, to 
        the legislative and regulatory compliance framework for Federal 
        financial management that will optimize Federal agency efforts 
        to--
                    (A) <<NOTE: Publication.>> publish relevant, timely, 
                and reliable reports on Government finances; and
                    (B) implement internal controls that mitigate the 
                risk for fraud, waste, and error in Government programs; 
                and
            (2) jointly submit a report on the results of the 
        examination to--
                    (A) the Committee on Homeland Security and 
                Governmental Affairs of the Senate;
                    (B) the Committee on Oversight and Government Reform 
                of the House of Representatives; and

[[Page 124 STAT. 2235]]

                    (C) the Comptroller General.

    Approved July 22, 2010.

LEGISLATIVE HISTORY--S. 1508 (H.R. 3393):
---------------------------------------------------------------------------

CONGRESSIONAL RECORD, Vol. 156 (2010):
            June 23, considered and passed Senate.
            July 14, considered and passed House.
DAILY COMPILATION OF PRESIDENTIAL DOCUMENTS (2010):
            July 22, Presidential remarks.

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