29–006 

112TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 112–698 

IMPROPER PAYMENTS ELIMINATION AND RECOVERY 

IMPROVEMENT ACT OF 2012 

NOVEMBER 30, 2012.—Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 

Mr. ISSA, from the Committee on Oversight and Government 

Reform, submitted the following 

R E P O R T 

[To accompany H.R. 4053] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Oversight and Government Reform, to whom 

was referred the bill (H.R. 4053) to intensify efforts to identify, prevent, and recover payment error, waste, fraud, and abuse within 

Federal spending, having considered the same, report favorably 

thereon with an amendment and recommend that the bill as 

amended do pass. 

CONTENTS 

Page 

Committee Statement and Views ........................................................................... 6 

Section-by-Section .................................................................................................... 8 

Explanation of Amendments ................................................................................... 9 

Committee Consideration ........................................................................................ 10 

Application of Law to the Legislative Branch ....................................................... 10 

Statement of Oversight Findings and Recommendations of the Committee ...... 10 

Statement of General Performance Goals and Objectives .................................... 10 

Federal Advisory Committee Act ............................................................................ 10 

Unfunded Mandate Statement ............................................................................... 10 

Earmark Identification ............................................................................................ 10 

Committee Estimate ................................................................................................ 10 

Budget Authority and Congressional Budget Office Cost Estimate .................... 11 

Changes in Existing Law Made by the Bill as Reported ...................................... 12 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

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


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SEC. 2. DEFINITIONS. 

In this Act— 

(1) the term ‘‘agency’’ means an executive agency as that term is defined 

under section 102 of title 31, United States Code; 

(2) the term ‘‘improper payment’’ has the meaning given that term in section 

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

as redesignated by section 3(a)(1) of this Act; and 

(3) the term ‘‘State’’ means each State of the United States, the District of 

Columbia, each territory or possession of the United States, and each federally 

recognized Indian tribe. 

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

(a) IN GENERAL.—Section 2 of the Improper Payments Information Act of 2002 (31 

U.S.C. 3321 note) is amended— 

(1) by redesignating subsections (b) through (g) as subsections (c) through (h), 

respectively; 

(2) by inserting after subsection (a) the following: 

‘‘(b) IMPROVING THE DETERMINATION OF IMPROPER PAYMENTS.— 

‘‘(1) IN GENERAL.—The Director of the Office of Management and Budget shall 

on an annual basis— 

‘‘(A) identify a list of high-priority Federal programs for greater levels of 

oversight and review— 

‘‘(i) in which the highest dollar value or highest rate of improper payments occur; or 

‘‘(ii) for which there is a higher risk of improper payments; and 

‘‘(B) in coordination with the agency responsible for administering the 

high-priority program, establish annual targets and semi-annual or quarterly actions for reducing improper payments associated with each high-priority program. 

‘‘(2) REPORT ON HIGH-PRIORITY IMPROPER PAYMENTS.— 

‘‘(A) IN GENERAL.—Subject to Federal privacy policies and to the extent 

permitted by law, each agency with a program identified under paragraph 

(1)(A) on an annual basis shall submit to the Inspector General of that 

agency, and make available to the public (including availability through the 

Internet), a report on that program. 

‘‘(B) CONTENTS.—Each report under this paragraph— 

‘‘(i) shall describe— 

‘‘(I) any action the agency— 

‘‘(aa) has taken or plans to take to recover improper payments; and 

‘‘(bb) intends to take to prevent future improper payments; 

and 

‘‘(ii) shall not include any referrals the agency made or anticipates 

making to the Department of Justice, or any information provided in 

connection with such referrals. 

‘‘(C) PUBLIC AVAILABILITY ON CENTRAL WEBSITE.—The Office of Management and Budget shall make each report submitted under this paragraph 

available on a central website. 

‘‘(D) AVAILABILITY OF INFORMATION TO INSPECTOR GENERAL.—Subparagraph (B)(ii) shall not prohibit any referral or information being made 

available to an Inspector General as otherwise provided by law. 

‘‘(E) ASSESSMENT AND RECOMMENDATIONS.—The Inspector General of 

each agency that submits a report under this paragraph shall, for each program of the agency that is identified under paragraph (1)(A)— 

‘‘(i) review— 

‘‘(I) the assessment of the level of risk associated with the program, and the quality of the improper payment estimates and 

methodology of the agency relating to the program; and 

‘‘(II) the oversight or financial controls to identify and prevent 

improper payments under the program; and 

‘‘(ii) submit to Congress recommendations, which may be included in 

another report submitted by the Inspector General to Congress, for 

modifying any plans of the agency relating to the program, including 

improvements for improper payments determination and estimation 

methodology.’’; 

(3) in subsection (d) (as redesignated by paragraph (1) of this subsection), by 

striking ‘‘subsection (b)’’ each place that term appears and inserting ‘‘subsection 

(c)’’; 


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(4) in subsection (e) (as redesignated by paragraph (1) of this subsection), by 

striking ‘‘subsection (b)’’ and inserting ‘‘subsection (c)’’; and 

(5) in subsection (g)(3) (as redesignated by paragraph (1) of this subsection), 

by inserting ‘‘or a Federal employee’’ after ‘‘non-Federal person or entity’’. 

(b) IMPROVED ESTIMATES.— (1) IN GENERAL.—Not later than 180 days after the date of enactment of this 

Act, the Director of the Office of Management and Budget shall provide guidance to agencies for improving the estimates of improper payments under the 

Improper Payments Information Act of 2002 (31 U.S.C. 3321 note). 

(2) GUIDANCE.—Guidance under this subsection shall— 

(A) strengthen the estimation process of agencies by setting standards for 

agencies to follow in determining the underlying validity of sampled payments to ensure amounts being billed, paid, or obligated for payment are 

proper; 

(B) instruct agencies to give the persons or entities performing improper 

payments estimates access to all necessary payment data, including access 

to relevant documentation; 

(C) explicitly bar agencies from relying on self-reporting by the recipients 

of agency payments as the sole source basis for improper payments estimates; 

(D) require agencies to include all identified improper payments in the reported estimate, regardless of whether the improper payment in question 

has been or is being recovered; 

(E) include payments to employees, including salary, locality pay, travel 

pay, purchase card use, and other employee payments, as subject to risk assessment and, where appropriate, improper payment estimation; and 

(F) require agencies to tailor their corrective actions for the high-priority 

programs identified under section 2(b)(1)(A) of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) to better reflect the unique 

processes, procedures, and risks involved in each specific program. 

(c) TECHNICAL AND CONFORMING AMENDMENTS.—The Improper Payments Elimination and Recovery Act of 2010 (Public Law 111–204; 31 U.S.C. 3321 note.) is 

amended— 

(1) in section 2(h)(1), by striking ‘‘section 2(f)’’ and all that follows and inserting ‘‘section 2(g) of the Improper Payments Information Act of 2002 (31 U.S.C. 

3321 note).’’; and 

(2) in section 3(a)— 

(A) in paragraph (1), by striking ‘‘section 2(f)’’ and all that follows and 

inserting ‘‘section 2(g) of the Improper Payments Information Act of 2002 

(31 U.S.C. 3321 note).’’; and 

(B) in paragraph (3)— 

(i) by striking ‘‘section 2(b)’’ each place it appears and inserting ‘‘section 2(c)’’; and 

(ii) by striking ‘‘section 2(c)’’ each place it appears and inserting ‘‘section 2(d)’’. 

SEC. 4. IMPROPER PAYMENTS INFORMATION. 

Section 2(a)(3)(A)(ii) of the Improper Payments Information Act of 2002 (31 U.S.C. 

3321 note) is amended by striking ‘‘with respect to fiscal years following September 

30th of a fiscal year beginning before fiscal year 2013 as determined by the Office 

of Management and Budget’’ and inserting ‘‘with respect to fiscal year 2014 and 

each fiscal year thereafter’’. 

SEC. 5. DO NOT PAY INITIATIVE. 

(a) PREPAYMENT AND PREAWARD PROCEDURES.— 

(1) IN GENERAL.—Each agency shall review prepayment and preaward procedures and ensure that a thorough review of available databases with relevant 

information on eligibility occurs to determine program or award eligibility and 

prevent improper payments before the release of any Federal funds. 

(2) DATABASES.—At a minimum and before issuing any payment and award, 

each agency shall review as appropriate the following databases to verify eligibility of the payment and award: 

(A) The Death Master File of the Social Security Administration. 

(B) The General Services Administration’s Excluded Parties List System. 

(C) The Debt Check Database of the Department of the Treasury. 

(D) The Credit Alert System or Credit Alert Interactive Voice Response 

System of the Department of Housing and Urban Development. 

(E) The List of Excluded Individuals/Entities of the Office of Inspector 

General of the Department of Health and Human Services. 

(b) DO NOT PAY INITIATIVE.— 


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(1) ESTABLISHMENT.—There is established the Do Not Pay Initiative which 

shall include— 

(A) use of the databases described under subsection (a)(2); and 

(B) use of other databases designated by the Director of the Office of 

Management and Budget in consultation with agencies and in accordance 

with paragraph (2). 

(2) OTHER DATABASES.—In making designations of other databases under 

paragraph (1)(B), the Director of the Office of Management and Budget shall— 

(A) consider any database that substantially assists in preventing improper payments; and 

(B) provide public notice and an opportunity for comment before designating a database under paragraph (1)(B). 

(3) ACCESS AND REVIEW BY AGENCIES.—For purposes of identifying and preventing improper payments, each agency shall have access to, and use of, the 

Do Not Pay Initiative to verify payment or award eligibility in accordance with 

subsection (a) when the Director of the Office of Management and Budget determines the Do Not Pay Initiative is appropriately established for the agency. 

(4) PAYMENT OTHERWISE REQUIRED.—When using the Do Not Pay Initiative, 

an agency shall recognize that there may be circumstances under which the law 

requires a payment or award to be made to a recipient, regardless of whether 

that recipient is identified as potentially ineligible under the Do Not Pay Initiative. 

(5) ANNUAL REPORT.—The Director of the Office of Management and Budget 

shall submit to Congress an annual report, which may be included as part of 

another report submitted to Congress by the Director, regarding the operation 

of the Do Not Pay Initiative, which shall— 

(A) include an evaluation of whether the Do Not Pay Initiative has reduced improper payments or improper awards; and 

(B) provide the frequency of corrections or identification of incorrect information. 

(c) DATABASE INTEGRATION PLAN.—Not later than 60 days after the date of enactment of this Act, the Director of the Office of Management and Budget shall provide 

to the Congress a plan for— 

(1) inclusion of other databases on the Do Not Pay Initiative; 

(2) to the extent permitted by law, agency access to the Do Not Pay Initiative; 

and 

(3) the data use agreements described under subsection (e)(2)(D). 

(d) INITIAL WORKING SYSTEM.— 

(1) ESTABLISHMENT.—Not later than 90 days after the date of enactment of 

this Act, the Director of the Office of Management and Budget shall establish 

a working system for prepayment and preaward review that includes the Do 

Not Pay Initiative as described under this section. 

(2) WORKING SYSTEM.—The working system established under paragraph 

(1)— 

(A) may be located within an appropriate agency; 

(B) shall include not less than 3 agencies as users of the system; and 

(C) shall include investigation activities for fraud and systemic improper 

payments detection through analytic technologies and other techniques, 

which may include commercial database use or access. 

(3) APPLICATION TO ALL AGENCIES.—Not later than June 1, 2013, each agency 

shall review all payments and awards for all programs of that agency through 

the system established under this subsection. 

(e) FACILITATING DATA ACCESS BY FEDERAL AGENCIES AND OFFICES OF INSPECTORS GENERAL FOR PURPOSES OF PROGRAM INTEGRITY.— 

(1) DEFINITION.—In this subsection, the term ‘‘Inspector General’’ means any 

Inspector General described in subparagraph (A), (B), or (I) of section 11(b)(1) 

of the Inspector General Act of 1978 (5 U.S.C. App.) and any successor Inspector 

General. 

(2) COMPUTER MATCHING BY FEDERAL AGENCIES FOR PURPOSES OF INVESTIGATION AND PREVENTION OF IMPROPER PAYMENTS AND FRAUD.— 

(A) IN GENERAL.—Except as provided in this paragraph, in accordance 

with section 552a of title 5, United States Code (commonly known as the 

Privacy Act of 1974), each Inspector General and the head of each agency 

may enter into computer matching agreements with other inspectors general and agency heads that allow ongoing data matching (which shall include automated data matching) in order to assist in the detection and prevention of improper payments. 

(B) REVIEW.—Not later than 60 days after a proposal for an agreement 

under subparagraph (A) has been presented to a Data Integrity Board esVerDate Mar 15 2010 02:39 Dec 04, 2012 Jkt 029006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6621 E:\HR\OC\HR698.XXX HR698

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tablished under section 552a(u) of title 5, United States Code, for consideration, the Data Integrity Board shall respond to the proposal. 

(C) TERMINATION DATE.—An agreement under subparagraph (A)— 

(i) shall have a termination date of less than 3 years; and 

(ii) during the 3-month period ending on the date on which the agreement is scheduled to terminate, may be renewed by the agencies entering the agreement for not more than 3 years. 

(D) MULTIPLE AGENCIES.—For purposes of this paragraph, section 

552a(o)(1) of title 5, United States Code, shall be applied by substituting 

‘‘between the source agency and the recipient agency or non-Federal agency 

or an agreement governing multiple agencies’’ for ‘‘between the source agency and the recipient agency or non-Federal agency’’ in the matter preceding 

subparagraph (A). 

(E) COST-BENEFIT ANALYSIS.—A justification under section 552a(o)(1)(B) 

of title 5, United States Code, relating to an agreement under subparagraph (A) is not required to contain a specific estimate of any savings under 

the computer matching agreement. 

(3) GUIDANCE BY THE OFFICE OF MANAGEMENT AND BUDGET.—Not later than 

6 months after the date of enactment of this Act, and in consultation with the 

Council of the Inspectors General on Integrity and Efficiency, the Secretary of 

Health and Human Services, the Commissioner of Social Security, and the head 

of any other relevant agency, the Director of the Office of Management and 

Budget shall— 

(A) issue guidance for agencies regarding implementing this subsection, 

which shall include standards for— 

(i) reimbursement of costs, when necessary, between agencies; 

(ii) retention and timely destruction of records in accordance with 

section 552a(o)(1)(F) of title 5, United States Code; and 

(iii) prohibiting duplication and redisclosure of records in accordance 

with section 552a(o)(1)(H) of title 5, United States Code; 

(B) review the procedures of the Data Integrity Boards established under 

section 552a(u) of title 5, United States Code, and develop new guidance for 

the Data Integrity Boards to— 

(i) improve the effectiveness and responsiveness of the Data Integrity 

Boards; 

(ii) ensure privacy protections in accordance with section 552a of title 

5, United States Code (commonly known as the Privacy Act of 1974); 

and 

(iii) establish standard matching agreements for use when appropriate; and 

(C) establish and clarify rules regarding what constitutes making an 

agreement entered under paragraph (2)(A) available upon request to the 

public for purposes of section 552a(o)(2)(A)(ii) of title 5, United States Code, 

which shall include requiring publication of the agreement on a public 

website. 

(4) CORRECTIONS.—The Director of the Office of Management and Budget 

shall establish procedures providing for the correction of data in order to ensure— 

(A) compliance with section 552a(p) of title 5, United States Code; and 

(B) that corrections are made in any Do Not Pay Initiative database and 

in any relevant source databases designated by the Director of the Office 

of Management and Budget under subsection (b)(1). 

(5) COMPLIANCE.—The head of each agency, in consultation with the Inspector 

General of the agency, shall ensure that any information provided to an individual or entity under this subsection is provided in accordance with protocols 

established under this subsection. 

(6) RULE OF CONSTRUCTION.—Nothing in this subsection shall be construed to 

affect the rights of an individual under section 552a(p) of title 5, United States 

Code. 

(f) DEVELOPMENT AND ACCESS TO A DATABASE OF INCARCERATED INDIVIDUALS.— 

Not later than 1 year after the date of enactment of this Act, the Attorney General 

shall submit to Congress recommendations for increasing the use of, access to, and 

the technical feasibility of using data on the Federal, State, and local conviction and 

incarceration status of individuals for purposes of identifying and preventing improper payments by Federal agencies and programs and fraud. 

(g) PLAN TO CURB FEDERAL IMPROPER PAYMENTS TO DECEASED INDIVIDUALS BY

IMPROVING THE QUALITY AND USE BY FEDERAL AGENCIES OF THE SOCIAL SECURITY

ADMINISTRATION DEATH MASTER FILE.— 


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1 31 U.S.C. 3321 note. 

(1) ESTABLISHMENT.—In conjunction with the Commissioner of Social Security 

and in consultation with relevant stakeholders that have an interest in or responsibility for providing the data, and the States, the Director of the Office of 

Management and Budget shall establish a plan for improving the quality, accuracy, and timeliness of death data maintained by the Social Security Administration, including death information reported to the Commissioner under section 205(r) of the Social Security Act (42 U.S.C. 405(r)). 

(2) ADDITIONAL ACTIONS UNDER PLAN.—The plan established under this subsection shall include recommended actions by agencies to— 

(A) increase the quality and frequency of access to the Death Master File 

and other death data; 

(B) achieve a goal of at least daily access as appropriate; 

(C) provide for all States and other data providers to use improved and 

electronic means for providing data; 

(D) identify improved methods by agencies for determining ineligible payments due to the death of a recipient through proactive verification means; 

and 

(E) address improper payments made by agencies to deceased individuals 

as part of Federal retirement programs. 

(3) REPORT.—Not later than 120 days after the date of enactment of this Act, 

the Director of the Office of Management and Budget shall submit a report to 

Congress on the plan established under this subsection, including recommended 

legislation. 

SEC. 6. IMPROVING RECOVERY OF IMPROPER PAYMENTS. 

(a) DEFINITION.—In this section, the term ‘‘recovery audit’’ means a recovery audit 

described under section 2(h) of the Improper Payments Elimination and Recovery 

Act of 2010 (31 U.S.C. 3301 note). 

(b) REVIEW.—The Director of the Office of Management and Budget shall determine— 

(1) current and historical rates and amounts of recovery of improper payments (or, in cases in which improper payments are identified solely on the 

basis of a sample, recovery rates and amounts estimated on the basis of the applicable sample), including a list of agency recovery audit contract programs 

and specific information of amounts and payments recovered by recovery audit 

contractors; and 

(2) targets for recovering improper payments, including specific information 

on amounts and payments recovered by recovery audit contractors. 

COMMITTEE STATEMENT AND VIEWS

PURPOSE AND SUMMARY

Improper payments are ‘‘any payment that should not have been 

made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements.’’ 1 They are the 

most visible and tangible byproduct of poor Federal financial management. Programs are particularly vulnerable to improper payments when agencies fail to maintain effective internal controls, 

adequate financial management systems, or sufficient oversight. 

H.R. 4053, the Improper Payments Elimination and Recovery Improvement Act of 2012, was introduced on February 16, 2012, by 

Representative Edolphus Towns (D–NY) and referred to the Committee on Oversight and Government Reform. The bill expands requirements for Federal agencies to identify, prevent and recover 

improper payments. It requires the Office of Management and 

Budget (OMB) to identify and report on Federal programs at high 

risk for improper payments and create a standardized methodology 

for estimating improper payments, in order to achieve consistent 

reporting across the government. The bill modifies the Privacy Act 

of 1974 to allow for multilateral data sharing between agencies, 


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2GAO, ‘‘Improper Payments: Remaining Challenges and Strategies for Governmentwide Reduction Efforts,’’ GAO–12–573T, March 28, 2012. 3 Ibid. 

and mandates a government-wide ‘‘Do Not Pay Initiative’’ to require prepayment and contract award screening against databases 

containing relevant payee eligibility information. It also requires 

OMB to determine a plan for curbing improper payments to deceased individuals. 

BACKGROUND AND NEED FOR LEGISLATION

Waste and abuse of taxpayer dollars is a severe problem. Federal 

agencies made an estimated $115.3 billion in improper payments 

in FY 2011.2 Improper payments constituted nearly 5 percent of 

the $2.5 trillion in program spending in fiscal year 2011.3 To better 

address this problem, agencies must take advantage of new technologies and data sharing capabilities. H.R. 4053 brings improper 

payment detection and prevention into the 21st century by encouraging the use of technology to allow agencies to easily share data 

to achieve increased payment accuracy and accountability. The provisions in H.R. 4053 build upon the Improper Payments and Elimination Recovery Act of 2010, which expanded reporting frequency 

and established methodologies for estimating the risk of improper 

payments. 

The full Committee and the Subcommittee on Government Organization, Efficiency and Financial Management held a series of 

hearings this Congress on the issuance of improper payments. The 

hearings included testimony from leaders at OMB, the Government 

Accountability Office (GAO), the Department of Health and Human 

Services (HHS) and several policy experts about the challenge of 

preventing improper payments. On February 17, 2011, the full 

Committee examined the issue of Federal misspending during a 

hearing entitled, ‘‘Waste and Abuse: The Refuse of the Federal 

Spending Binge.’’ 

On April 15, 2011, the Subcommittee on Government Organization, Efficiency and Financial Management heard from agency officials from GAO and OMB about agency internal controls and common sense solutions to tighten Federal financial management, including the use of advanced information technology to prevent 

wasteful spending. 

A July 28, 2011, hearing of the Subcommittee focused on the 

Federal program with the highest volume of improper payments— 

Medicare. The Committee learned that Medicare funds are often 

paid to ineligible recipients, a problem that can be prevented via 

the use of data-matching technology. 

On February 7, 2012, the Subcommittee heard from agency experts from OMB, GAO and the Recovery Accountability and Transparency Board at a hearing entitled, ‘‘Solutions Needed: Improper 

Payments Total $115 Billion in Federal Misspending.’’ The Subcommittee discussed the Administration’s recent efforts to reduce 

improper payments, and suggestions for effective strategies to reduce improper payments. 

H.R. 4053 reflects the lessons learned from these hearings and 

the Committee’s ongoing oversight into Federal financial management. 


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LEGISLATIVE HISTORY

H.R. 4053 builds on prior legislation to reduce and prevent improper payments. A decade ago, the Improper Payments Information Act of 2002 was signed into law (P.L. 107–300), compelling 

agencies to identify payment errors in specific programs. That 2002 

law was updated in 2010 by the Improper Payments and Elimination Recovery Act (P.L. 111–204), which required better identification and estimation of improper payments. 

H.R. 4053 was introduced by Representative Towns on February 

16, 2012. The bill was referred to the Oversight and Government 

Reform Committee. A companion bill, S. 1409, was introduced by 

Senator Carper on July 22, 2011. S. 1409 was referred to the Senate Homeland Security and Governmental Affairs Committee, and 

subsequently reported favorably with an amendment in the nature 

of a substitute on October 19, 2011. It was then placed on the Senate Legislative Calendar on July 12, 2012, and passed under Unanimous Consent on August 1, 2012. 

SECTION-BY-SECTION

Section 1. Short title 

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

Section 2. Definitions 

This section defines the terms ‘‘agency’’, ‘‘improper payment’’ and 

‘‘State’’ for purposes of the Act. 

Section 3. Improving the determination of improper payments by 

federal agencies 

Subsection (a) requires the OMB Director to annually identify 

high-priority programs, and to establish annual targets, and intermediate actions to achieve the targets, for reducing improper payments. Agencies are required to report annually to their Inspectors 

General and make available to the public a report on any high-dollar improper payments identified by the agency. These reports are 

to be made accessible by OMB on a central, publicly available 

website. The Inspector General of each agency is to review the 

quality and the risk level associated with the programs. 

Subsection (b) requires the OMB Director to provide guidance to 

Federal agencies for improving agency estimates of improper payments not later than 180 days after enactment. This requirement 

strengthens the estimation process by having OMB set standards 

to ensure the underlying validity of sampled payments. 

Subsection (c) makes technical and conforming amendments to 

IPERA. 

Section 4. Improper payments information 

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

Section 5. Do Not Pay Initiative 

Subsection (a) requires agencies to conduct prepayment procedures, including screening against databases containing relevant 


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information on payees, to verify eligibility and prevent improper 

payments. 

Subsection (b) requires OMB to establish a Do Not Pay Initiative 

comprised of the databases used by agencies in subsection (a), and 

other databases as designated by the OMB Director. This subsection also requires that OMB evaluate the Do Not Pay Initiative 

in an annual report to Congress. 

Subsection (c) requires that within 60 days of enactment, the 

OMB Director provide Congress with a plan for including other 

databases in the Do Not Pay Initiative, establishing lawful agency 

access to the databases, and creating a multilateral data use agreement setting parameters for database access between relevant 

agencies. 

Subsection (d) requires OMB to establish a prepayment review 

system that includes the initial Do Not Pay Initiative system within 90 days of enactment. The initial system may be located within 

an appropriate agency, shall include at least three participating 

agencies, and must include investigative activities for fraud and 

systemic improper payment detection through analytic technologies. Each agency is required to review all of its payments and 

awards through the Do Not Pay Initiative no later than June 1, 

2013. 

Subsection (e) requires that within 60 days of enactment, OMB 

establish a plan for executing multilateral data use agreements for 

the Do Not Pay Initiative. The subsection amends the Privacy Act 

to allow for the multilateral data use agreements between and 

among Federal agencies. The subsection requires multilateral data 

use agreements to include regulations and guidelines that ensure 

data access, as well as transfer and storage of data in a manner 

consistent with relevant privacy, security, and disclosure laws. 

Subsection (f) requires that within one year of enactment, the Attorney General submit to Congress recommendations for using Federal, State, and local conviction and incarceration databases to determine the incarceration status of individuals, in order to prevent 

improper payments. 

Subsection (g) requires the OMB Director, in consultation with 

stakeholders, States, and the Social Security Administrator, to establish a plan for improving the quality and timeliness of death 

data maintained by the Social Security Administration. The plan 

must include actions to increase the quality and frequency of access 

by agencies, including a goal of at least once-daily access. Within 

120 days of enactment, the OMB Director must report to Congress 

on the plan. 

Section 6. Improving recovery of improper payments 

Subsection (a) requires the OMB Director to determine current 

and historical rates and amounts of improper payment recovery by 

audit contractors, and identify numerical or percentage targets for 

recovering improper payments. 

EXPLANATION OF AMENDMENTS

The Section-by-Section above is a summary explanation of the 

provisions of Chairman Issa’s amendment in the nature of a substitute (ANS), which was adopted during the Committee Business 

Meeting. 


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COMMITTEE CONSIDERATION

On September 20, 2012, the Committee met in open session and 

ordered reported favorably the bill, H.R. 4053, as amended, by roll 

unanimous consent, a quorum being present. 

APPLICATION OF LAW TO THE LEGISLATIVE BRANCH

Section 102(b)(3) of Public Law 104–1 requires a description of 

the application of this bill to the legislative branch where the bill 

relates to the terms and conditions of employment or access to public services and accommodations. This bill expands requirements 

for Federal agencies to identify, prevent and recover improper payments. As such this bill does not relate to employment or access 

to public services and accommodations. 

STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS OF

THE COMMITTEE

In compliance with clause 3(c)(1) of rule XIII and clause 2(b)(1) 

of rule X of the Rules of the House of Representatives, the Committee’s oversight findings and recommendations are reflected in the 

descriptive portions of this report. 

STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

In accordance with clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee’s performance goals and 

objectives are reflected in the descriptive portions of this report. 

FEDERAL ADVISORY COMMITTEE ACT

The Committee finds that the legislation does not establish or 

authorize the establishment of an advisory committee within the 

definition of 5 U.S.C. App., Section 5(b). 

UNFUNDED MANDATE STATEMENT

Section 423 of the Congressional Budget and Impoundment Control Act (as amended by Section 101(a)(2) of the Unfunded Mandate 

Reform Act, P.L. 104–4) requires a statement as to whether the 

provisions of the reported include unfunded mandates. In compliance with this requirement the Committee has received a letter 

from the Congressional Budget Office included herein. 

EARMARK IDENTIFICATION

H.R. 4053 does not include any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

COMMITTEE ESTIMATE

Clause 3(d)(2) of rule XIII of the Rules of the House of Representatives requires an estimate and a comparison by the Committee of the costs that would be incurred in carrying out H.R. 

4053. However, clause 3(d)(3)(B) of that rule provides that this requirement does not apply when the Committee has included in its 

report a timely submitted cost estimate of the bill prepared by the 


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Director of the Congressional Budget Office under section 402 of 

the Congressional Budget Act. 

BUDGET AUTHORITY AND CONGRESSIONAL BUDGET OFFICE COST

ESTIMATE

With respect to the requirements of clause 3(c)(2) of rule XIII of 

the Rules of the House of Representatives and section 308(a) of the 

Congressional Budget Act of 1974 and with respect to requirements 

of clause 3(c)(3) of rule XIII of the Rules of the House of Representatives and section 402 of the Congressional Budget Act of 1974, the 

Committee has received the following cost estimate for H.R. 4053 

from the Director of the Congressional Budget Office: 

OCTOBER 11, 2012. 

Hon. DARRELL ISSA, 

Chairman, Committee on Oversight and Government Reform, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4053, the Improper Payments Elimination and Recovery Improvement Act of 2012. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Matthew Pickford. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

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

H.R. 4053 would amend federal law to require agencies to make 

additional efforts to identify, recover, and prevent improper payments. Improper federal payments include several kinds of erroneous disbursements, such as overpayments, underpayments, payments that were not adequately documented, and fraudulent payments. Under the legislation, the Office of Management and Budget (OMB), federal agencies, and their inspector generals would 

have additional responsibilities to better manage payment practices 

and reduce the incidence of improper payments. In addition, H.R. 

4053 would make changes to the data-sharing protocols among federal agencies to facilitate the identification of improper payments. 

CBO estimates that implementing H.R. 4053 would have no significant cost over the next five years. The bill could affect direct 

spending by agencies not funded through annual appropriations; 

therefore, pay-as-you-go procedures apply. CBO estimates, however, that any net increase in spending by those agencies would not 

be significant. Enacting H.R. 4053 would not affect revenues. 

Most of the provisions of the bill would codify and expand current practices of the federal government. Executive Order 13520 

and various Presidential memorandums have directed OMB and 

agencies to take steps to reduce improper payments. OMB has already drafted guidance on improper payments and created a DoNot-Pay list. Consequently, CBO estimates that the additional responsibilities and reporting requirements to implement this bill 

would neither significantly increase administrative costs to federal 

agencies nor generate any significant incremental savings. 


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H.R. 4053 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of state, local, or tribal governments. 

On April 20, 2012, CBO transmitted a cost estimate for S. 1409, 

the Improper Payments and Recovery Improvement Act of 2011, as 

ordered reported by the Senate Committee on Homeland Security 

and Governmental Affairs on October 19, 2011. Both pieces of legislation address improper payments but have different provisions. 

The Senate bill includes a requirement for agencies to operate Recovery Audit Contracting programs, but that provision is not included in H.R. 4053. 

The CBO staff contact for this estimate is Matthew Pickford. The 

estimate was approved by Peter H. Fontaine, Assistant Director for 

Budget Analysis. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

IMPROPER PAYMENTS INFORMATION ACT OF 2002 

* * * * * * * 

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

(a) IDENTIFICATION OF SUSCEPTIBLE PROGRAMS AND ACTIVITIES.— (1) * * * 

* * * * * * * 

(3) RISK ASSESSMENTS.— 

(A) DEFINITION.—In this subsection the term ‘‘significant’’ means— 

(i) * * * 

(ii) øwith respect to fiscal years following September 

30th of a fiscal year beginning before fiscal year 2013 

as determined by the Office of Management and Budget¿ with respect to fiscal year 2014 and each fiscal year 

thereafter, that improper payments in the program or 

activity in the preceding fiscal year may have exceeded— 

(I) * * * 

* * * * * * * 

(b) IMPROVING THE DETERMINATION OF IMPROPER PAYMENTS.— 

(1) IN GENERAL.—The Director of the Office of Management 

and Budget shall on an annual basis— 

(A) identify a list of high-priority Federal programs for 

greater levels of oversight and review— 

(i) in which the highest dollar value or highest rate 

of improper payments occur; or 

(ii) for which there is a higher risk of improper payments; and 

(B) in coordination with the agency responsible for administering the high-priority program, establish annual 


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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 GEN- ERAL.—Subparagraph (B)(ii) shall not prohibit any referral 

or information being made available to an Inspector General as otherwise provided by law. 

(E) ASSESSMENT AND RECOMMENDATIONS.—The Inspector 

General of each agency that submits a report under this 

paragraph shall, for each program of the agency that is 

identified under paragraph (1)(A)— 

(i) review— 

(I) the assessment of the level of risk associated 

with the program, and the quality of the improper 

payment estimates and methodology of the agency 

relating to the program; and 

(II) the oversight or financial controls to identify 

and prevent improper payments under the program; and 

(ii) submit to Congress recommendations, which may 

be included in another report submitted by the Inspector General to Congress, for modifying any plans of the 

agency relating to the program, including improvements for improper payments determination and estimation methodology. 

ø(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) * * * 

* * * * * * * 

ø(c)¿ (d) REPORTS ON ACTIONS TO REDUCE IMPROPER PAY- MENTS.—With respect to any program or activity of an agency with 

estimated improper payments under øsubsection (b)¿ subsection (c), 


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the head of the agency shall provide with the estimate under øsubsection (b)¿ subsection (c) a report on what actions the agency is 

taking to reduce improper payments, including— 

(1) * * * 

* * * * * * * 

ø(d)¿ (e) REPORTS ON ACTIONS TO RECOVER IMPROPER PAY- MENTS.—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 øsubsection (b)¿ subsection (c) a report on all actions the agency is taking to recover improper payments, including— 

(1) * * * 

* * * * * * * 

ø(e)¿ (f) GOVERNMENTWIDE REPORTING OF IMPROPER PAYMENTS

AND ACTIONS TO RECOVER IMPROPER PAYMENTS.— (1) * * * 

* * * * * * * 

ø(f)¿ (g) DEFINITIONS.—In this section: 

(1) * * * 

* * * * * * * 

(3) PAYMENT.—The term ‘‘payment’’ means any transfer or 

commitment for future transfer of Federal funds such as cash, 

securities, loans, loan guarantees, and insurance subsidies to 

any non-Federal person or entity or a Federal employee, that 

is made by a Federal agency, a Federal contractor, a Federal 

grantee, or a governmental or other organization administering 

a Federal program or activity. 

* * * * * * * 

ø(g)¿ (h) GUIDANCE BY THE OFFICE OF MANAGEMENT AND BUDGET.— 

(1) * * * 

* * * * * * * 

IMPROPER PAYMENTS ELIMINATION AND RECOVERY 

ACT OF 2010 

* * * * * * * 

SEC. 2. IMPROPER PAYMENTS ELIMINATION AND RECOVERY. 

(a) * * * 

* * * * * * * 

(h) RECOVERY AUDITS.— 

(1) DEFINITION.—In this subsection, the term ‘‘agency’’ has 

the meaning given under øsection 2(f) of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note) as redesignated by this Act.¿ section 2(g) of the Improper Payments Information Act of 2002 (31 U.S.C. 3321 note). 

* * * * * * * 

SEC. 3. COMPLIANCE. 

(a) DEFINITIONS.—In this section: 


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(1) AGENCY.—The term ‘‘agency’’ has the meaning given 

under øsection 2(f) of the Improper Payments Information Act 

of 2002 (31 U.S.C. 3321 note) as redesignated by this Act.¿ section 2(g) of the Improper Payments Information Act of 2002 (31 

U.S.C. 3321 note). 

* * * * * * * 

(3) COMPLIANCE.—The term ‘‘compliance’’ means that the 

agency— 

(A) * * * 

* * * * * * * 

(C) if required, publishes improper payments estimates 

for all programs and activities identified under øsection 

2(b)¿ section 2(c) of the Improper Payments Information 

Act of 2002 (31 U.S.C. 3321 note) in the accompanying materials to the annual financial statement; 

(D) publishes programmatic corrective action plans prepared under øsection 2(c)¿ section 2(d) of the Improper 

Payments Information Act of 2002 (31 U.S.C. 3321 note) 

that the agency may have in the accompanying materials 

to the annual financial statement; 

(E) publishes improper payments reduction targets established under øsection 2(c)¿ section 2(d) of the Improper 

Payments Information Act of 2002 (31 U.S.C. 3321 note) 

that the agency may have in the accompanying materials 

to the annual financial statement for each program assessed to be at risk, and is meeting such targets; and 

(F) has reported an improper payment rate of less than 

10 percent for each program and activity for which an estimate was published under øsection 2(b)¿ section 2(c) of the 

Improper Payments Information Act of 2002 (31 U.S.C. 

3321 note). 

* * * * * * * 

Æ 


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