significantly reducing Federal overpayment rates and
other waste and error in Federal programs.
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) DIRECTOR.—The term ‘Director’ means the
Director of the Office of Management and Budget.
‘‘(2) 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.
‘‘(3) 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.
‘‘(4) 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, in-
vestigate, or regulate payment activities, recovery ac-
tivities, and recovery audit activities.
‘‘(5) PAYMENT
ACTIVITY.—The term ‘payment
activity’ means an executive agency activity that en-
tails making payments to vendors or other nongovern-
mental entities that provide property or services for
the direct benefit and use of an executive agency.
‘‘(6) RECOVERY
AUDIT.—The term ‘recovery
audit’ means a financial management technique used
to identify overpayments made by executive agencies
with respect to vendors and other entities in connec-
tion with a payment activity, including overpay-
ments that result from any of the following:
‘‘(A) Duplicate payments.
‘‘(B) Pricing errors.
‘‘(C) Failure to provide applicable dis-
counts, rebates, or other allowances.
‘‘(D) Inadvertent errors.
‘‘(7) RECOVERY ACTIVITY.—The term ‘recovery
activity’ means activity otherwise authorized by law,
including chapter 37 of this title, to attempt to collect
an identified overpayment—
‘‘(A) within 180 days after the date the
overpayment is identified; and
‘‘(B) through established professional prac-
tices.
‘‘§ 3562. Recovery audit requirement
‘‘(a) IN GENERAL.—Except as exempted by the Direc-
tor under section 3565(d) of this title, the head of each exec-
utive agency—
‘‘(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); and
‘‘(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 (adjusted
by the Director annually for inflation).
‘‘(b) PROCEDURES.—In conducting recovery audits
and recovery activity under this section, the head of an ex-
ecutive agency—
‘‘(1) shall consult and coordinate with the Chief
Financial Officer and the Inspector General of the
agency;
‘‘(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) Each recovery audit of
a payment activity under this section shall cover payments
made by the payment activity in a fiscal year, except that
the first recovery audit of a payment activity shall cover
payments made during the 2 consecutive fiscal years pre-
ceding the date of the enactment of the Government Waste
Corrections Act of 1999.
‘‘(2) The head of an executive agency may conduct re-
covery audits of payment activities for additional preceding
fiscal years if determined by the agency head to be practical
and cost-effective.
‘‘(d) RECOVERY AUDIT CONTRACTS.—
‘‘(1) AUTHORITY
TO
USE
CONTINGENCY
CON-
TRACTS.—Notwithstanding section 3302(b) of this
title, as consideration for performance of any recovery
audit procured by an executive agency, the executive
agency may pay the contractor an amount equal to
a percentage of the total amount collected by the
United States as a result of overpayments identified
by the contractor in the audit.
‘‘(2) ADDITIONAL FUNCTIONS OF CONTRACTOR.—
(A) In addition to performance of a recovery audit,
a contract for such performance may authorize the
contractor (subject to subparagraph (B)) to—
‘‘(i) notify any person of possible overpay-
ments made to the person and identified in the
recovery audit under the contract; and
‘‘(ii) respond to questions concerning such
overpayments.
‘‘(B) A contract for performance of a recovery
audit shall not affect—
‘‘(i) the authority of the head of an execu-
tive agency 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 disputes, compromise or ter-
minate overpayment claims, collect by setoff, and
otherwise engage in recovery activity with re-
spect to overpayments identified by the recovery
audit.
‘‘(3) LIMITATION
ON
AUTHORITY.—Nothing in
this subchapter shall be construed to authorize a con-
tractor with an executive agency to require the pro-
duction of any record or information by any person
other than an officer, employee, or agent of the execu-
tive agency.
‘‘(4) REQUIRED CONTRACT TERMS AND CONDI-
TIONS.—The head of an executive agency shall include
in each contract for procurement of performance of a
recovery audit requirements that the contractor
shall—
‘‘(A) protect from disclosure otherwise con-
fidential business information and financial in-
formation;
‘‘(B) provide to the head of the executive
agency and the Inspector General of the executive
agency periodic reports on conditions giving rise
to overpayments identified by the contractor and
any recommendations on how to mitigate such
conditions;
‘‘(C) notify the head of the executive agency
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 execu-
tive agency and the Inspector General of the ex-
ecutive agency of any indication of fraud or
other criminal activity discovered in the course
of the audit.
‘‘(5) EXECUTIVE AGENCY ACTION FOLLOWING NO-
TIFICATION.—The head of an executive agency shall
take prompt and appropriate action in response to a
notification by a contractor pursuant to the require-
ments under paragraph (4), including 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 ex-
ecutive agency shall conduct a public-private cost
comparison process. The outcome of the cost compari-
son process shall determine whether the recovery audit
is performed in-house or by a 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) 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 authorized
by the individual that is the subject of the informa-
tion.
‘‘(B) Any person that violates subparagraph (A)
shall be liable for any damages (including nonpecu-
niary damages, costs, and attorneys fees) caused by
the violation.
‘‘(2) DESTRUCTION
OR
RETURN
OF
INFORMA-
TION.—Upon the conclusion of the matter or need for
which individually identifiable information was dis-
closed in the course of recovery auditing or recovery
activity under this chapter performed by a non-
governmental entity, the nongovernmental entity shall
either destroy the individually identifiable informa-
tion or return it to the person from whom it was ob-
tained, unless another applicable law requires reten-
tion of the information.
‘‘§ 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 executive agency
under this subchapter shall be treated in accordance with
this section.
‘‘(b) USE FOR RECOVERY AUDIT COSTS.—Amounts re-
ferred to in subsection (a) shall be available to the executive
agency—
‘‘(1) to pay amounts owed to any contractor for
performance of the audit; and
‘‘(2) to reimburse any applicable appropriation
for other recovery audit costs incurred by the execu-
tive agency with respect to the audit.
‘‘(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
‘‘(2) such other amounts as remain after the ap-
plication 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 ac-
count.
‘‘(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 appropriation
or fund that remains available for obligation 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.
‘‘(2) DISCRETIONARY PROGRAMS.—The head of
any other executive agency that conducts recovery au-
dits 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 executive agency programs and operations by
improving the executive agency’s staff capacity, infor-
mation 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 activi-
ties of that agency or other executive agencies; and
‘‘(2) must retain the ability to account specifi-
cally for the use of amounts made available under sec-
tion 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 consultation
with the Chief Financial Officers Council and the
President’s Council on Integrity and Efficiency, shall
issue guidance and provide support to agencies in im-
plementing the subchapter. The Director shall issue
initial guidance not later than 180 days after the
date of enactment of the Government Waste Correc-
tions Act of 1999.
‘‘(2) RECOVERY AUDIT STANDARDS.—The Direc-
tor 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.
‘‘(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 re-
quirement 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 be cost-effective.
‘‘(2) REPORT TO CONGRESS.—The Director shall
promptly report the basis of any determination and
exemption under paragraph (1) to the Committee on
Government Reform of the House of Representatives
and the Committee on Governmental Affairs of the
Senate.
‘‘(e) REPORTS.—
‘‘(1) IN GENERAL.—Not later than 1 year after
the date of the enactment of the Government Waste
Corrections Act of 1999, 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 Reform of the House of
Representatives, the Committee on Governmental Af-
fairs of the Senate, and the Committee on Appropria-
tions of the House of Representatives and of the Sen-
ate.
‘‘(2) CONTENTS.—Each report shall include—
‘‘(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 recov-
ery 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 man-
agement improvement programs under section
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 recov-
ery auditing.
‘‘§ 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 implemen-
tation of this subchapter to the Committee on Government
Reform of the House of Representatives, the Committee on
Governmental Affairs of the Senate, the Committee on Ap-
propriations of the House of Representatives and of the Sen-
ate, 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 ‘‘sec-
tion 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 those sections 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 VI—RECOVERY AUDITS
‘‘3561. Definitions.
‘‘3562. Recovery audit requirement.
‘‘3563. Disposition of amounts collected.
‘‘3564. Management improvement program.
‘‘3565. Responsibilities of the Office of Management and Budget.
‘‘3566. General Accounting Office reports.’’.
Amend the title so as to read: ‘‘A bill to improve the
economy and efficiency of Government operations by re-
quiring the use of recovery audits and recovery activity
by Federal agencies.’’.