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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 3030 Introduced in Senate (IS)]

106th CONGRESS
  2d Session
                                S. 3030

    To amend title 31, United States Code, to provide for executive 
agencies to conduct annual recovery audits and recovery activities, and 
                          for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 12, 2000

 Mr. Thompson introduced the following bill; which was read twice and 
           referred to the Committee on Governmental Affairs

_______________________________________________________________________

                                 A BILL

 
    To amend title 31, United States Code, to provide for executive 
agencies to conduct annual recovery audits and recovery activities, and 
                          for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. RECOVERY AUDITS.

    (a) Recovery Audit Requirement.--(1) Chapter 35 of title 31, United 
States Code, is amended by adding at the end the following:

                    ``SUBCHAPTER VI--RECOVERY AUDITS

``Sec. 3561. Definitions
    ``In this subchapter:
            ``(1) Amounts collected.--The term `amounts collected' 
        means monies received or credited, by any means, including 
        offset, by the United States Government.
            ``(2) Chief financial officer.--The term `Chief Financial 
        Officer' means--
                    ``(A) the official appointed or designated under 
                section 901 of this title; or
                    ``(B) in the case of an executive agency that is 
                not required to have a Chief Financial Officer under 
                that section, an official of the agency whose authority 
                and functions are substantially equivalent to the 
                authority and functions of an agency Chief Financial 
                Officer under section 902 of this title.
            ``(3) Director.--The term `Director' means the Director of 
        the Office of Management and Budget.
            ``(4) Disclose.--The term `disclose', with respect to 
        individually identifiable information on any person, means 
        release, publish, transfer, provide access to, or otherwise 
        divulge the individually identifiable information to any other 
        person.
            ``(5) Facial-discrepancy payment error.--The term `facial-
        discrepancy payment error'--
                    ``(A) means, except as provided in subparagraph 
                (B), any error in a payment made by an executive agency 
                for goods or services that is apparent from a review of 
                the face of an invoice or other payment document that 
                is presented to the executive agency by the supplier of 
                the goods or services in the usual and customary 
                conduct of business or pursuant to a requirement in law 
                or a contract to substantiate the claim for the 
                payment, including any such document that is presented 
                electronically; and
                    ``(B) does not include a payment error identified, 
                resulting, or supported from a document that is--
                            ``(i) a record of a proprietary nature that 
                        is maintained solely by the supplier of the 
                        goods or services;
                            ``(ii) not specifically required to be 
                        presented to the executive agency by contract, 
                        law, or regulation, or not necessary for the 
                        substantiation of the claim for the payment; or
                            ``(iii) submitted to the executive agency 
                        for evaluative purposes before the award of the 
                        contract under which the payment was made.
            ``(6) Individually identifiable information.--The term 
        `individually identifiable information', with respect to a 
        person, means any information, whether oral or recorded in any 
        form or medium, that identifies the person or with respect to 
        which there is a reasonable basis to believe that the 
        information can be used to identify the person.
            ``(7) Oversight.--The term `oversight', with respect to a 
        payment activity, recovery audit, or recovery activity, means 
        activities by a Federal, State, or local governmental entity to 
        enforce laws relating to, to investigate, or to regulate such 
        audit or activity.
            ``(8) Payment activity.--The term `payment activity' means 
        an executive agency activity to pay nongovernmental sources for 
        goods or services acquired from those sources by the agency to 
        support the performance of the agency's mission.
            ``(9) Recovery audit.--The term `recovery audit' means a 
        financial management technique of an executive agency that is 
        used by the executive agency to perform internal audits of its 
        records to identify facial-discrepancy payment errors that are 
        made by the executive agency in connection with a payment 
        activity, including facial-discrepancy payment errors that 
        result from any of the following:
                    ``(A) Duplicate payments.
                    ``(B) Invoice errors.
                    ``(C) Failure to take advantage of applicable 
                discounts, rebates, or other allowances.
                    ``(D) Any other similar facial-discrepancy payment 
                errors resulting in inaccurate payments, including 
                underpayments identified pursuant to guidance issued 
                under section 3565(b)(3) of this title.
            ``(10) Recovery activity.--The term `recovery activity' 
        means an executive agency activity to attempt to collect, under 
        the authority of chapter 37 of this title or any other 
        provision of law, a payment error identified in a recovery 
        audit.
            ``(11) Recovery audit contractor.--The term `recovery audit 
        contractor' means any private sector person who is obligated 
        under a contract entered into with an executive agency to 
        perform a recovery audit for the executive agency.
``Sec. 3562. Recovery audit requirement
    ``(a) In General.--Except as exempted under section 3566 of this 
title, the head of each executive agency--
            ``(1) shall conduct each fiscal year--
                    ``(A) recovery audits of the payment activities of 
                the agency for the preceding fiscal year if the payment 
                activities for the fiscal year total at least 
                $500,000,000 (adjusted by the Director annually for 
                inflation); and
                    ``(B) the recovery activities determined warranted 
                with respect to those payment activities; and
            ``(2) may conduct in any fiscal year--
                    ``(A) recovery audits of the payment activities of 
                the agency for the preceding fiscal year if the payment 
                activities for the fiscal year total less than 
                $500,000,000 (adjusted by the Director annually for 
                inflation); and
                    ``(B) the recovery activities determined warranted 
                with respect to those payment activities.
    ``(b) Request for Exemption.--The head of an executive agency 
required to conduct a recovery audit under subsection (a)(1) may 
request that the Director exempt a payment activity, in whole or in 
part, from that requirement if the head of the executive agency 
determines and can demonstrate that the exemption is justified on any 
basis described in section 3566(a) of this title.
    ``(c) Procedures.--
            ``(1) In general.--The head of each executive agency shall 
        prescribe procedures for the performance of recovery audits and 
        recovery activities in the agency that implement this section 
        in a manner designed to ensure the greatest financial benefit 
        to the United States.
            ``(2) Specific procedures.--In conducting recovery audits 
        and recovery activities under this section, the head of an 
        executive agency--
                    ``(A) shall consult and coordinate with the Chief 
                Financial Officer and the Inspector General of the 
                agency to avoid any duplication of effort;
                    ``(B) may conduct recovery audits and recovery 
                activities regarding payments by the executive agency 
                by using personnel of the agency's payment office 
                without reimbursement or payment for services in 
                accordance with the standards issued by the Director 
                under section 3565(b)(2) of this title, by procuring 
                the performance of recovery audits by contractors, or 
                by any combination of both methods; and
                    ``(C) shall ensure that the recovery audits and 
                recovery activities are carried out consistent with the 
                standards issued by the Director under section 
                3565(b)(2) of this title.
    ``(d) Recovery Audit Contracts.--
            ``(1) Authority to use contingency contracts.--
        Notwithstanding section 3302(b) of this title, as consideration 
        for performance of any recovery audit procured by an executive 
        agency, the head of the executive agency may pay the recovery 
        audit contractor an amount equal to a percentage of the total 
        amount collected by the United States as a result of payment 
        errors identified by the recovery audit contractor in the 
        audit.
            ``(2) Construction.--
                    ``(A) Relationship to other executive 
                authorities.--A contract for the performance of a 
                recovery audit shall not affect--
                            ``(i) any authority of the head of an 
                        executive agency, or any other person, under 
                        the Contract Disputes Act of 1978 (41 U.S.C. 
                        601 et seq.) and other applicable laws, 
                        including authority to initiate litigation or 
                        referrals for litigation; or
                            ``(ii) the requirements of sections 3711, 
                        3716, 3718, and 3720 of this title that the 
                        head of an executive agency resolve disputes, 
                        compromise, or terminate payment of error 
                        claims, collect by offset, and otherwise engage 
                        in recovery activities with respect to payment 
                        errors identified by the recovery audit.
                    ``(B) Contractor authorities and duties.--Nothing 
                in this subchapter shall be construed to authorize a 
                recovery audit contractor with an executive agency--
                            ``(i) to require the production of any 
                        record or information by any person other than 
                        an officer, employee, or agent of the executive 
                        agency; or
                            ``(ii) to establish, or otherwise have, a 
                        physical presence on the property or premises 
                        of any private sector entity as part of its 
                        contractual obligations to an executive agency.
            ``(3) Required contract terms and conditions.--The head of 
        an executive agency shall include in each contract for the 
        procurement of the performance of a recovery audit the 
        following requirements:
                    ``(A) That the recovery audit contractor protect 
                from improper use and from disclosure to any person 
                inside or outside the recovery audit contractor's firm 
                who is not directly involved in the identification or 
                recovery of payment errors--
                            ``(i) any financial information that is 
                        viewed or obtained in the course of carrying 
                        out a recovery audit for an executive agency; 
                        and
                            ``(ii) any other information so viewed or 
                        obtained that has not been released for general 
                        public use by the audited person or an 
                        authorized agent of that person.
                    ``(B) That the recovery audit contractor submit to 
                the head of the executive agency periodic reports on 
                conditions giving rise to payment errors identified by 
                the recovery audit contractor and any recommendations 
                on how to mitigate such conditions.
                    ``(C) That the recovery audit contractor notify the 
                head of the executive agency of any payment errors 
                identified by the contractor pertaining to the 
                executive agency or to another executive agency that 
                are beyond the scope of the contract.
                    ``(D) That the recovery audit contractor promptly 
                notify the head of the executive agency of any 
                indication of fraud or other criminal activity 
                discovered in the course of the audit.
            ``(4) Executive agency action following notification.--The 
        head of an executive agency shall take prompt and appropriate 
        action in response to a notification by a recovery audit 
        contractor pursuant to the requirements under paragraph (3), 
        including forwarding to the head of another executive agency 
        any information that applies to that agency.
            ``(5) Contracting requirements.--Before contracting for any 
        recovery audit, the head of an executive agency shall determine 
        and compare the cost of using employees of the United States to 
        perform the audit and the cost of procuring the performance of 
        the audit from the private sector. The head of the executive 
        agency shall use the outcome of the cost comparison process to 
        determine whether to use the employees of the United States or 
        to procure recovery audit services from the private sector.
    ``(e) Relationship to Authority of Inspectors General.--Nothing in 
this subchapter shall be construed as impairing the authority of an 
Inspector General under the Inspector General Act of 1978 or any other 
provision of law.
    ``(f) Relationship to Requirements for Payments for 
Transportation.--Nothing in this subchapter shall be construed to 
affect the requirements and authorities provided in section 3726 of 
this title.
    ``(g) Privacy Protections.--
            ``(1) Limitation on disclosure of individually identifiable 
        information.--
                    ``(A) Restriction.--Any recovery audit contractor 
                that obtains individually identifiable information on a 
                person through the performance of a recovery audit or 
                recovery activity under this subchapter may disclose 
                that information only for the purpose of such audit or 
                activity, respectively, and for the oversight of such 
                audit or activity, unless otherwise authorized by that 
                person.
                    ``(B) Sanctions.--Any person that violates 
                subparagraph (A) shall be liable for any damages 
                (including nonpecuniary damages, costs, and attorneys' 
                fees) caused by the violation.
            ``(2) Return of information.--
                    ``(A) Requirement.--Upon the date determined under 
                subparagraph (B), a recovery audit contractor having 
                possession of individually identifiable information 
                disclosed in the course of a recovery audit or recovery 
                activity that is performed under this subchapter by the 
                recovery audit contractor shall return it to the person 
                from whom it was obtained unless another applicable law 
                requires retention of the information.
                    ``(B) Time for return of information.--The date 
                referred to in subparagraph (A) is the date of the 
                conclusion of the matter or need for which the 
                information was disclosed, except that if, on that 
                date, the recovery audit contractor has actual notice 
                of any oversight of the recovery audit or recovery 
                activity, the date referred to in subparagraph (A) is 
                the date of the conclusion of such oversight.
``Sec. 3563. Disposition of amounts collected
    ``(a) In General.--Notwithstanding section 3302(b) of this title, 
the total amount collected in a fiscal year by the United States as a 
result of recovery audits by an executive agency under this subchapter 
shall be disposed of in accordance with this section.
    ``(b) Use for Recovery Audit Costs.--
            ``(1) Contractor payments.--Amounts referred to in 
        subsection (a) shall be available to the executive agency to 
        pay amounts owed to any recovery audit contractor for 
        performance of the audit.
            ``(2) Other costs.--Subject to the limitation in subsection 
        (e), amounts referred to in subsection (a) shall be available 
        to the executive agency--
                    ``(A) to reimburse any applicable appropriation for 
                other recovery audit costs incurred by the executive 
                agency with respect to the audit; and
                    ``(B) to pay any fees authorized under chapter 37 
                of this title.
    ``(c) Use for Management Improvement Program.--Subject to the 
limitation in subsection (e), up to a total of 25 percent (as 
determined under the guidance issued under section 3565 of this title) 
of the amount referred to in subsection (a)--
            ``(1) shall be available to the executive agency to carry 
        out the management improvement program of the agency under 
        section 3564 of this title; and
            ``(2) may be credited for that purpose by the head of the 
        executive agency to any agency appropriation that is available 
        for obligation at the time of the collection and shall be 
        merged with other amounts in, and shall remain available for 
        the same period as, the appropriation to which credited.
    ``(d) Remainder to Treasury.--Subject to the limitation in 
subsection (e), there shall be deposited into the Treasury as 
miscellaneous receipts a sum equal to--
            ``(1) 50 percent of the amount referred to in subsection 
        (a); plus
            ``(2) any of that amount that remains unallocated after the 
        application of subsections (b) and (c).
    ``(e) Limitation on Application.--
            ``(1) In general.--This section does not apply to amounts 
        collected through recovery audits and recovery activities to 
        the extent that such application would be inconsistent with 
        another provision of law that authorizes the crediting of the 
        amounts to a nonappropriated fund instrumentality, revolving 
        fund, working-capital fund, trust fund, or other fund or 
        account.
            ``(2) Amounts paid out of currently available funds.--
        Subsections (b)(2), (c), and (d) shall not apply to amounts 
        collected through recovery audits and recovery activities that 
        were paid out of an appropriation or fund that remains 
available for obligation at the time the amounts are collected.
``Sec. 3564. Management improvement program
    ``(a) In General.--
            ``(1) Required program.--The head of each executive agency 
        that is required to conduct recovery audits under section 3562 
        of this title shall conduct a management improvement program 
        under this section, consistent with guidelines prescribed by 
        the Director.
            ``(2) Discretionary program.--The head of any other 
        executive agency that conducts recovery audits under section 
        3562 of this title that meet the standards issued by the 
        Director under section 3565(b)(2) may conduct a management 
        improvement program under this section.
    ``(b) Program Features.--In conducting a management improvement 
program under this section, the head of an executive agency--
            ``(1) shall, as the first priority of the program, address 
        problems that contribute directly to payment errors of the 
        executive agency; and
            ``(2) may seek to reduce errors and waste in other programs 
        and operations of that executive agency by improving the 
        executive agency's staff capabilities, information technology, 
        and financial management.
    ``(c) Integration With Other Activities.--The head of an executive 
agency--
            ``(1) subject to paragraph (2), may integrate the program 
        under this section, in whole or in part, with other management 
        improvement programs and activities of that agency or other 
        executive agencies; and
            ``(2) shall retain the ability to account specifically for 
        the use of amounts available to the executive agency under 
        section 3563 of this title.
``Sec. 3565. Responsibilities of the Director of the Office of 
              Management and Budget
    ``(a) In General.--The Director shall coordinate and oversee the 
implementation of this subchapter.
    ``(b) Guidance.--
            ``(1) In general.--The Director, in consultation with the 
        Chief Financial Officers Council and the President's Council on 
        Integrity and Efficiency, shall issue guidance and provide 
        support to the executive agencies for the implementation of 
        this subchapter.
            ``(2) Recovery audit standards.--The Director shall include 
        in the guidance standards for the performance of recovery 
        audits under this subchapter. The Director shall develop the 
        guidance in consultation with the Comptroller General and 
        private sector experts on recovery audits, including such 
        experts who use recovery auditing as part of their financial 
        management procedures.
            ``(3) Treatment of underpayments.--The guidance developed 
        under this subsection shall include specific standards and 
        procedures for the identification and disposition of facial-
        discrepancy payment errors that result in underpayments to 
        vendors.
    ``(c) Fee Limitations.--The Director may limit the percentage 
amounts that may be paid to recovery audit contractors under section 
3562(d)(1) of this title.
``Sec. 3566. Exemptions
    ``(a) In General.--The Director may exempt an executive agency, in 
whole or in part, from the requirement to conduct recovery audits under 
section 3562(a)(1) of this title if the Director determines that 
compliance with the requirement--
            ``(1) would impair the performance of the agency's mission; 
        or
            ``(2) would not, or would no longer, be cost-effective.
    ``(b) Report to Congress.--The Director shall promptly report the 
basis of any determination made and exemption granted under subsection 
(a)(1) to Congress.
    ``(c) Exemption of Certain Contracts.--The requirements of section 
3562(a) of this title shall not apply to any of the following 
contracts:
            ``(1) A contract that provides for periodic audit of 
        invoices pursuant to section 2313 of title 10 or section 304C 
        of the Federal Property and Administrative Services Act of 1949 
        (41 U.S.C. 254d).
            ``(2) A contract for which cost or pricing data were 
        required to be provided pursuant to section 2306a of title 10 
        or section 304A of the Federal Property and Administrative 
        Services Act of 1949 (41 U.S.C. 254b).
            ``(3) A contract that is subject to cost accounting 
        standards issued by the Cost Accounting Standards Board under 
        section 26 of the Office of Federal Procurement Policy Act (41 
        U.S.C. 422).''.
    (2) The table of sections at the beginning of such chapter 35 is 
amended by adding at the end the following:

                    ``SUBCHAPTER VI--RECOVERY AUDITS

``Sec.
``3561. Definitions.
``3562. Recovery audit requirement.
``3563. Disposition of amounts collected.
``3564. Management improvement program.
``3565. Responsibilities of the Director of the Office of Management 
                            and Budget.
``3566. Exemptions.''.
    (b) Application to All Executive Agencies.--Section 3501 of title 
31, United States Code, is amended by inserting ``and subchapter VI of 
this chapter'' after ``section 3513''.
    (c) Initial OMB Guidance.--The Director of the Office of Management 
and Budget shall issue initial guidance under section 3565(b) of title 
31, United States Code (as added by subsection (a)), not later than 180 
days after the date of the enactment of this Act. The initial guidance 
shall include the standards required by paragraph (2) of such section.
    (d) Initial Recovery Audits.--(1) The head of each executive agency 
shall begin the first recovery audit under section 3562(a)(1) of title 
31, United States Code (as added by subsection (a)), for payment 
activities referred to in that section by not later than 18 months 
after the date of the enactment of this Act.
    (2) The first recovery audit shall cover fiscal year 2001, the 
preceding fiscal year, and any additional fiscal years before fiscal 
year 2000 that the head of the executive agency determines that it is 
practical and cost-effective to conduct, subject to any limitation 
regarding the period for recordkeeping that is provided under 
applicable law.
    (e) Use of Results.--A determination of whether an individual is an 
original source for the purposes of section 3730(e)(4) of title 31, 
United States Code, may not be based in whole or in part on results of 
any recovery audit conducted under section 3562 of such title.
    (f) Recovery Audit Pilot Programs.--(1) The Director of the Office 
of Management and Budget may designate one or more executive agencies 
to carry out a recovery audit pilot program for payment activities not 
described in section 3561(8) of title 31, United States Code (as added 
by subsection (a)), that involve payments to entities providing 
services or making payments for or on behalf of the Federal Government 
pursuant to contracts, grants, or other arrangements with the executive 
agency or agencies. The Director shall consult with the head of the 
executive agency before designating an executive agency to carry out a 
pilot program under this subsection.
    (2) The purposes of a pilot program of an executive agency under 
this subsection are as follows:
            (A) To test the feasibility and effectiveness of conducting 
        recovery audits with respect to payment activities other than 
        those related to Federal contracts for the procurement of goods 
        or services to support the performance of the executive 
        agency's mission.
            (B) To develop best practices for conducting recovery 
        audits with respect to such payment activities.
    (3) A recovery audit pilot program conducted under this subsection 
shall be subject to the same authorities, conditions, and limitations 
as other recovery audits conducted under subchapter VI of chapter 35 of 
title 31, United States Code (as added by subsection (a)).
    (g) Reports.--(1) Not later than 30 months after the date of the 
enactment of this Act, and annually for each of the two years 
thereafter, the Director of the Office of Management and Budget shall 
submit a report on the implementation of subchapter VI of chapter 35 of 
title 31, United States Code (as added by subsection (a)), to the 
President and Congress. Each report shall include the following:
            (A) A general description and evaluation of the steps taken 
        by the heads of executive agencies to conduct recovery audits, 
        including an inventory of the programs and activities of each 
        executive agency that are subject to recovery audits.
            (B) An assessment of the benefits of recovery audits and 
        recovery activities, including amounts identified and recovered 
        (including by administrative offset).
            (C) An identification of best practices that could be 
        applied to future recovery audits and recovery activities.
            (D) An identification of any significant problems or 
        barriers to more effective performance of recovery audits and 
        recovery activities.
            (E) A description of executive agency expenditures in the 
        recovery audit process.
            (F) A description of executive agency management 
        improvement programs under section 3564 of title 31, United 
        States Code (as added by subsection (a)).
            (G) Any recommendations for changes in executive agency 
        practices or law or other improvements that the Director 
        believes would enhance the effectiveness of the performance of 
        executive agency recovery audits.
            (H) A description and evaluation of each recovery audit 
        pilot program conducted under subsection (f).
    (2) Not later than 60 days after the submittal of each report under 
paragraph (1), the Comptroller General of the United States shall 
submit a report on the implementation of subchapter VI of chapter 35 of 
title 31, United States Code, to Congress and the Director of the 
Office of Management and Budget.
    (h) Study.--(1) The Director of the Office of Management and Budget 
shall conduct a study of the effects of recovery audits conducted by 
the heads of executive agencies. The effects identified in the study 
shall include any significant problems relating to the provision of 
improper or inadequate notice of recovery audits to persons who are 
audited.
    (2) The Director shall submit a report on the study to Congress. 
The report shall contain the Director's findings, conclusions, and 
recommendations resulting from the study.
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