IIB
106TH CONGRESS
2D SESSION
H. R. 1827
IN THE SENATE OF THE UNITED STATES
MARCH 9, 2000
Received; read twice and referred to the Committee on Governmental Affairs
AN ACT
To improve the economy and efficiency of Government oper-
ations by requiring the use of recovery audits and recov-
ery activity by Federal agencies.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
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SECTION. 1. SHORT TITLE.
This Act may be cited as the ‘‘Government Waste
Corrections Act of 2000’’.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress finds the following:
(1) Overpayments are a serious problem for
Federal agencies, given the magnitude and com-
plexity of Federal operations and documented and
widespread financial management weaknesses. Fed-
eral agency overpayments waste tax dollars and de-
tract from the efficiency and effectiveness of Federal
operations by diverting resources from their intended
uses.
(2) In private industry, overpayments to pro-
viders of goods and services occur for a variety of
reasons, including duplicate payments, pricing er-
rors, and missed cash discounts, rebates, or other al-
lowances. The identification and recovery of such
overpayments, commonly referred to as ‘‘recovery
auditing and activity’’, is an established private sec-
tor business practice with demonstrated large finan-
cial returns. On average, recovery auditing and ac-
tivity in the private sector identify overpayment
rates of 0.1 percent of purchases audited and result
in 
the 
recovery 
of 
$1,000,000 
for 
each
$1,000,000,000 of purchases.
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(3) Recovery auditing and recovery activity al-
ready have been employed successfully in limited
areas of Federal activity. They have great potential
for expansion to many other Federal agencies and
activities, thereby resulting in the recovery of sub-
stantial amounts of overpayments annually. Limited
recovery audits conducted by private contractors to
date within the Department of Defense have identi-
fied errors averaging 0.4 percent of Federal pay-
ments 
audited, 
or 
$4,000,000 
for 
every
$1,000,000,000 of payments. If fully implemented
within the Federal Government, recovery auditing
and recovery activity have the potential to recover
billions of dollars in Federal overpayments annually.
(b) PURPOSES.—The purposes of this Act are the fol-
lowing:
(1) To ensure that overpayments made by the
Federal Government that would otherwise remain
undetected are identified and recovered.
(2) To require the use of recovery audit and re-
covery activity by Federal agencies.
(3) To provide incentives and resources to im-
prove Federal management practices with the goal
of significantly reducing Federal overpayment rates
and other waste and error in Federal programs.
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SEC. 3. ESTABLISHMENT OF RECOVERY AUDIT REQUIRE-
MENT.
(a) ESTABLISHMENT
OF REQUIREMENT.—Chapter
35 of title 31, United States Code, is amended by adding
at the end the following:
‘‘SUBCHAPTER VI—RECOVERY AUDITS
‘‘§ 3561. Definitions
‘‘In this subchapter, the following definitions apply:
‘‘(1) 
AMOUNTS
COLLECTED.—The 
term
‘amounts collected’ means monies received or cred-
ited, by any means, including setoff, by the United
States Government.
‘‘(2) CHIEF
FINANCIAL
OFFICER.—The term
‘Chief Financial Officer’ means the official estab-
lished by section 901 of this title, or the functional
equivalent of such official in the case of any agency
that does not have a Chief Financial Officer under
that section.
‘‘(3) DIRECTOR.—The term ‘Director’ means
the Director of the Office of Management and Budg-
et.
‘‘(4) DISCLOSE.—The term ‘disclose’ means to
release, publish, transfer, provide access to, or other-
wise divulge individually identifiable information to
any person other than the individual who is the sub-
ject of the information.
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‘‘(5) FACIAL-DISCREPANCY PAYMENT ERROR.—
The term ‘facial-discrepancy payment error’—
‘‘(A) except as provided in subparagraph
(B), means any payment error that results
from, is substantiated by, or is identified as a
result of information contained on any invoice,
delivery order, bill of lading, statement of ac-
count, or other submission given to the Govern-
ment by a supplier of goods or services in the
usual and customary conduct of business, or as
required by law or contract to substantiate pay-
ment for such goods or services, including any
such document submitted electronically; and
‘‘(B) does not include payment errors iden-
tified, resulting, or supported from documents
that are—
‘‘(i) records of a proprietary nature,
maintained solely by the supplier of goods
or services;
‘‘(ii) not specifically required to be
provided to the Government by contract,
law, regulation, or to substantiate pay-
ment; or
‘‘(iii) submitted to the Government for
evaluative purposes prior to the award of a
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contract, as part of the evaluation and
award process.
‘‘(6) INDIVIDUALLY
IDENTIFIABLE
INFORMA-
TION.—The term ‘individually identifiable informa-
tion’ means any information, whether oral or re-
corded in any form or medium, that identifies the in-
dividual or with respect to which there is a reason-
able basis to believe that the information can be
used to identify the individual.
‘‘(7) OVERSIGHT.—The term ‘oversight’ means
activities by a Federal, State, or local governmental
entity, or by another entity acting on behalf of such
a governmental entity, to enforce laws relating to,
investigate, or regulate payment activities, recovery
activities, and recovery audit activities.
‘‘(8) PAYMENT ACTIVITY.—The term ‘payment
activity’ means an executive agency activity that en-
tails making payments to vendors or other non-
governmental entities that provide property or serv-
ices for the direct benefit and use of an executive
agency.
‘‘(9) RECOVERY
AUDIT.—The term ‘recovery
audit’ means a financial management technique ap-
plied internally by Government employees, or by pri-
vate sector contractors, and used by executive agen-
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cies to audit their internal records to identify facial-
discrepancy payment errors made by those executive
agencies to vendors and other entities in connection
with a payment activity, including facial-discrepancy
payment errors that result from any of the following:
‘‘(A) Duplicate payments.
‘‘(B) Invoice errors.
‘‘(C) Failure to provide applicable dis-
counts, rebates, or other allowances.
‘‘(D) Any other facial-discrepancy errors
resulting in inaccurate payments.
‘‘(10) RECOVERY ACTIVITY.—The term ‘recov-
ery activity’ means executive agency activity other-
wise authorized by law, including chapter 37 of this
title, to attempt to collect an identified overpayment.
‘‘(11) RECOVERY
AUDIT
CONTRACTOR.—The
term ‘recovery audit contractor’ means any person
who has been hired by an executive agency to per-
form a recovery audit pursuant to a recovery audit
contract.
‘‘§ 3562. Recovery audit requirement
‘‘(a) IN GENERAL.—Except as exempted under sec-
tion 3565(d) of this title, the head of each executive
agency—
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‘‘(1) shall conduct for each fiscal year recovery
audits and recovery activity with respect to payment
activities of the agency if such payment activities for
the fiscal year total $500,000,000 or more (adjusted
by the Director annually for inflation);
‘‘(2) may conduct for any fiscal year recovery
audits and recovery activity with respect to payment
activities of the agency if such payment activities for
the fiscal year total less than $500,000,000 (ad-
justed by the Director annually for inflation); and
‘‘(3) may request that the Director exempt a
payment activity, in whole or in part, from the re-
quirement to conduct recovery audits under para-
graph (1) if the head of the executive agency deter-
mines and can demonstrate that compliance with
such requirement—
‘‘(A) would impede the agency’s mission;
or
‘‘(B) would not, or would no longer be,
cost-effective.
‘‘(b) PROCEDURES.—In conducting recovery audits
and recovery activity under this section, the head of an
executive agency—
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‘‘(1) shall consult and coordinate with the Chief
Financial Officer and the Inspector General of the
agency to avoid any duplication of effort;
‘‘(2) shall implement this section in a manner
designed to ensure the greatest financial benefit to
the Government;
‘‘(3) may conduct recovery audits and recovery
activity internally in accordance with the standards
issued by the Director under section 3565(b)(2) of
this title, or by procuring performance of recovery
audits, or by any combination thereof; and
‘‘(4) shall ensure that such recovery audits and
recovery activity are carried out consistent with the
standards issued by the Director under section
3565(b)(2) of this subchapter.
‘‘(c) SCOPE OF AUDITS.—
‘‘(1) IN GENERAL.—Each recovery audit of a
payment activity under this section shall cover pay-
ments made by the payment activity in the preceding
fiscal year, except that the first recovery audit of a
payment activity shall cover payments made during
the fiscal year in which the Government Waste Cor-
rections Act of 2000 is enacted, and payments made
in the preceding fiscal year.
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‘‘(2) ADDITIONAL FISCAL YEARS.—The head of
an executive agency may conduct recovery audits of
payment activities for additional preceding fiscal
years if determined by the agency head to be prac-
tical and cost-effective subject to any statute of limi-
tations constraints regarding recordkeeping under
applicable law.
‘‘(d) RECOVERY AUDIT CONTRACTS.—
‘‘(1) AUTHORITY TO USE CONTINGENCY CON-
TRACTS.—Notwithstanding section 3302(b) of this
title, as consideration for performance of any recov-
ery audit procured by an executive agency, the exec-
utive 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 overpay-
ments identified by the contractor in the audit.
‘‘(2) ADDITIONAL
FUNCTIONS
OF
RECOVERY
AUDIT CONTRACTOR.—
‘‘(A) IN
GENERAL.—In addition to per-
formance of a recovery audit, a contract for
such performance may authorize the recovery
audit contractor (subject to subparagraph (B))
to—
‘‘(i) notify any person of possible over-
payments made to the person and identi-
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fied in the recovery audit under the con-
tract; and
‘‘(ii) respond to questions concerning
such overpayments.
‘‘(B) LIMITATION.—A contract for per-
formance of a recovery audit shall not affect—
‘‘(i) the authority of the head of an
executive agency, or any other person,
under the Contract Disputes Act of 1978
and other applicable laws, including the
authority to initiate litigation or referrals
for litigation; or
‘‘(ii) the requirements of sections
3711, 3716, 3718, and 3720 of this title
that the head of an agency resolve dis-
putes, compromise, or terminate overpay-
ment claims, collect by setoff, and other-
wise engage in recovery activity with re-
spect to overpayments identified by the re-
covery audit.
‘‘(3) LIMITATION ON AUTHORITY.—Nothing in
this subchapter shall be construed to authorize a re-
covery audit contractor with an executive agency—
‘‘(A) to require the production of any
record or information by any person other than
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an officer, employee, or agent of the executive
agency; and
‘‘(B) to establish, or otherwise have a
physical presence on the property or premises
of any private sector entity as part of its con-
tractual obligations to an executive agency.
‘‘(4) REQUIRED CONTRACT TERMS AND CONDI-
TIONS.—The head of an executive agency shall in-
clude in each contract for procurement of perform-
ance of a recovery audit requirements that the con-
tractor shall—
‘‘(A) protect from improper use, and pro-
tect from disclosure to any person who is inter-
nal or external to the firm of the recovery audit
contractor and who is not directly involved in
the identification or recovery of overpayments,
otherwise confidential or proprietary business
information, and any financial information, that
may be viewed or obtained in the course of car-
rying out a recovery audit for an executive
agency;
‘‘(B) provide to the head of the executive
agency and the Inspector General of the execu-
tive agency periodic reports on conditions giving
rise to overpayments identified by the recovery
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audit contractor and any recommendations on
how to mitigate such conditions;
‘‘(C) notify the head of the executive agen-
cy and the Inspector General of the executive
agency of any overpayments identified by the
contractor pertaining to the executive agency or
to another executive agency that are beyond the
scope of the contract; and
‘‘(D) promptly notify the head of the exec-
utive agency and the Inspector General of the
executive agency of any indication of fraud or
other criminal activity discovered in the course
of the audit.
‘‘(5) EXECUTIVE AGENCY ACTION FOLLOWING
NOTIFICATION.—The head of an executive agency
shall take prompt and appropriate action in response
to a notification by a recovery audit contractor pur-
suant to the requirements under paragraph (4), in-
cluding forwarding to other executive agencies any
information that applies to them.
‘‘(6) CONTRACTING REQUIREMENTS.—Prior to
contracting for any recovery audit, the head of an
executive agency shall conduct a public-private cost
comparison process. The outcome of the cost com-
parison process shall determine whether the recovery
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audit is performed in-house or by a recovery audit
contractor.
‘‘(e) INSPECTORS GENERAL.—Nothing in this sub-
chapter shall be construed as diminishing the authority
of any Inspector General, including such authority under
the Inspector General Act of 1978.
‘‘(f) RELATIONSHIP
TO OTHER AUDIT AUTHOR-
ITY.—Nothing in this subchapter shall be construed as di-
minishing the authority granted under section 3726 of this
title.
‘‘(g) PRIVACY PROTECTIONS.—
‘‘(1) LIMITATION ON DISCLOSURE OF INDIVID-
UALLY IDENTIFIABLE INFORMATION.—(A) Any non-
governmental entity that obtains individually identi-
fiable information through performance of recovery
auditing or recovery activity under this chapter may
disclose that information only for the purpose of
such auditing or activity, respectively, and oversight
of such auditing or activity, unless otherwise author-
ized by the individual that is the subject of the infor-
mation.
‘‘(B) Any person that violates subparagraph
(A) shall be liable for any damages (including non-
pecuniary damages, costs, and attorneys fees)
caused by the violation.
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‘‘(2) DESTRUCTION OR RETURN OF INFORMA-
TION.—(A) Upon the date described in subpara-
graph (B), a nongovernmental entity having posses-
sion of individually identifiable information disclosed
in the course of a recovery audit or recovery activity
under this chapter performed by the nongovern-
mental entity shall destroy the information or return
it to the person from whom it was obtained, unless
another applicable law requires retention of the in-
formation.
‘‘(B)(i) Except as provided in clause (ii), the
date referred to in subparagraph (A) is the date of
conclusion of the matter or need for which the infor-
mation was disclosed.
‘‘(ii) If on the date referred to in clause (i) the
nongovernmental entity has actual notice of any
oversight of the recovery auditing or recovery activ-
ity, the date referred to in subparagraph (A) is the
date of the conclusion of such oversight.
‘‘§ 3563. Disposition of amounts collected
‘‘(a) 
IN
GENERAL.—Notwithstanding 
section
3302(b) of this title, the amounts collected annually by
the United States as a result of recovery audits by an exec-
utive agency under this subchapter shall be treated in ac-
cordance with this section.
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‘‘(b) USE FOR RECOVERY AUDIT COSTS.—Amounts
referred to in subsection (a) shall be available to the execu-
tive agency—
‘‘(1) to pay amounts owed to any recovery audit
contractor for performance of the audit;
‘‘(2) to reimburse any applicable appropriation
for other recovery audit costs incurred by the execu-
tive agency with respect to the audit; and
‘‘(3) to pay any fees authorized under chapter
37 of this title.
‘‘(c) USE FOR MANAGEMENT IMPROVEMENT PRO-
GRAM.—Of the amount referred to in subsection (a), a
sum not to exceed 25 percent of such amount—
‘‘(1) shall be available to the executive agency
to carry out the management improvement program
of the agency under section 3564 of this title;
‘‘(2) may be credited for that purpose by the
agency head to any agency appropriations that are
available for obligation at the time of collection; and
‘‘(3) shall remain available for the same period
as the appropriations to which credited.
‘‘(d) REMAINDER TO TREASURY.—Of the amount re-
ferred to in subsection (a), there shall be deposited into
the Treasury as miscellaneous receipts a sum equal to—
‘‘(1) 50 percent of such amount; plus
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‘‘(2) such other amounts as remain after the
application of subsections (b) and (c).
‘‘(e) LIMITATION ON APPLICATION.—
‘‘(1) IN GENERAL.—This section shall not apply
to amounts collected through recovery audits and re-
covery activity to the extent that such application
would be inconsistent with another provision of law
that authorizes crediting of the amounts to a non-
appropriated fund instrumentality, revolving fund,
working capital fund, trust fund, or other fund or
account.
‘‘(2) SUBSECTIONS (c) AND (d).—Subsections
(c) and (d) shall not apply to amounts collected
through recovery audits and recovery activity, to the
extent that such amounts are derived from an ap-
propriation or fund that remains available for obliga-
tion at the time the amounts are collected.
‘‘§ 3564. Management improvement program
‘‘(a) CONDUCT OF PROGRAM.—
‘‘(1) REQUIRED PROGRAMS.—The head of each
executive agency that is required to conduct recovery
audits under section 3562 of this title shall conduct
a management improvement program under this sec-
tion, consistent with guidelines prescribed by the Di-
rector.
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‘‘(2) DISCRETIONARY PROGRAMS.—The head of
any other executive agency that conducts recovery
audits under section 3562 that meet the standards
issued by the Director under section 3565(b)(2) may
conduct a management improvement program under
this section.
‘‘(b) PROGRAM FEATURES.—In conducting the pro-
gram, the head of the executive agency—
‘‘(1) shall, as the first priority of the program,
address problems that contribute directly to agency
overpayments; and
‘‘(2) may seek to reduce errors and waste in
other programs and operations of that executive
agency by improving the executive agency’s staff ca-
pacity, information technology, and financial man-
agement.
‘‘(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
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‘‘(2) must retain the ability to account specifi-
cally for the use of amounts made available under
section 3563 of this title.
‘‘§ 3565. Responsibilities of the Office of Management
and Budget
‘‘(a) IN GENERAL.—The Director shall coordinate
and oversee the implementation of this subchapter.
‘‘(b) GUIDANCE.—
‘‘(1) IN GENERAL.—The Director, in consulta-
tion with the Chief Financial Officers Council and
the President’s Council on Integrity and Efficiency,
shall issue guidance and provide support to agencies
in implementing the subchapter. The Director shall
issue initial guidance not later than 180 days after
the date of enactment of the Government Waste
Corrections Act of 2000.
‘‘(2) RECOVERY AUDIT STANDARDS.—The Di-
rector shall include in the initial guidance under this
subsection standards for the performance of recovery
audits under this subchapter, that are developed in
consultation with the Comptroller General of the
United States and private sector experts on recovery
audits, including such experts who currently use re-
covery auditing as part of their financial manage-
ment procedures.
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‘‘(c) FEE LIMITATIONS.—The Director may limit the
percentage amounts that may be paid to contractors under
section 3562(d)(1) of this title.
‘‘(d) EXEMPTIONS.—
‘‘(1) IN GENERAL.—The Director may exempt
an executive agency, in whole or in part, from the
requirement to conduct recovery audits under section
3562(a)(1) of this title if the Director determines
that compliance with such requirement—
‘‘(A) would impede the agency’s mission;
or
‘‘(B) would not, or would no longer be
cost-effective.
‘‘(2) REPORT
TO
CONGRESS.—The Director
shall promptly report the basis of any determination
and exemption under paragraph (1) to the Com-
mittee on Government Reform of the House of Rep-
resentatives and the Committee on Governmental
Affairs of the Senate.
‘‘(3) EXEMPTION OF MAJOR DEFENSE SYSTEM
ACQUISITION PROGRAMS.—
‘‘(A) IN
GENERAL.—Unless determined
otherwise by the head of the agency authorized
to conduct a Department of Defense major sys-
tem acquisition program, the requirements of
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section 3562(a) of this title shall not apply to
such a program procured with a cost-type con-
tract until the contract has become a closed
contract.
‘‘(B) DEPARTMENT
OF
DEFENSE
MAJOR
SYSTEM ACQUISITION PROGRAM DEFINED.—In
this paragraph, the term ‘Department of De-
fense major system acquisition program’ has
the meaning that term has in Office of Manage-
ment and Budget Circular A–109, as in effect
on the date of the enactment of the Government
Waste Corrections Act of 2000.
‘‘(e) REPORTS.—
‘‘(1) IN GENERAL.—Not later than 30 months
after the date of the enactment of the Government
Waste Corrections Act of 2000, and annually for
each of the 2 years thereafter, the Director shall
submit a report on implementation of the subchapter
to the President, the Committee on Government Re-
form of the House of Representatives, the Com-
mittee on Governmental Affairs of the Senate, and
the Committee on Appropriations of the House of
Representatives and of the Senate.
‘‘(2) CONTENTS.—Each report shall include—
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‘‘(A) a general description and evaluation
of the steps taken by executive agencies to con-
duct 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 re-
covery auditing and recovery activity, including
amounts identified and recovered (including by
administrative setoffs);
‘‘(C) an identification of best practices that
could be applied to future recovery audits and
recovery activity;
‘‘(D) an identification of any significant
problems or barriers to more effective recovery
audits and recovery activity;
‘‘(E) a description of executive agency ex-
penditures in the recovery audit process;
‘‘(F) a description of executive agency
management improvement programs under sec-
tion 3564 of this title; and
‘‘(G) any recommendations for changes in
executive agency practices or law or other im-
provements that the Director believes would en-
hance the effectiveness of executive agency re-
covery auditing.
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‘‘§ 3566. General Accounting Office reports
‘‘Not later than 60 days after issuance of each report
under section 3565(e) of this title the Comptroller General
of the United States shall submit a report on the imple-
mentation of this subchapter to the Committee on Govern-
ment Reform of the House of Representatives, the Com-
mittee on Governmental Affairs of the Senate, the Com-
mittee on Appropriations of the House of Representatives
and of the Senate, and the Director.’’.
(b) APPLICATION TO ALL EXECUTIVE AGENCIES.—
Section 3501 of title 31, United States Code, is amended
by inserting ‘‘and subchapter VI of this chapter’’ after
‘‘section 3513’’.
(c) DEADLINE FOR INITIATION OF RECOVERY AU-
DITS.—The head of each executive agency shall begin the
first recovery audit under section 3562(a)(1) title 31,
United States Code, as amended by this section, for each
payment activity referred to in that section by not later
than 18 months after the date of the enactment of this
Act.
(d) CLERICAL AMENDMENT.—The analysis at the be-
ginning of chapter 35 of title 31, United States Code, is
amended by adding at the end the following:
‘‘SUBCHAPTER V—RECOVERY AUDITS
‘‘Sec.
‘‘3561. Definitions.
‘‘3562. Recovery audit requirement.
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‘‘3563. Disposition of amounts collected.
‘‘3564. Management improvement program.
‘‘3565. Responsibilities of the Office of Management and Budget.
‘‘3566. General Accounting Office reports.’’.
SEC. 4. STUDY.
(a) IN GENERAL.—The Director of the Office of
Management and Budget shall conduct a study of the ef-
fects of recovery audits conducted by executive agencies,
including any significant problems relating to the provi-
sion of improper or inadequate notice of recovery audits
to persons who are the subjects of such audits.
(b) REPORT.—The Director shall report to the Con-
gress the findings, conclusions, and recommendations of
the study under this section.
Passed the House of Representatives March 8,
2000.
Attest:
JEFF TRANDAHL,
Clerk.