‘‘(A) means any payment that should not 
have been made or that was made in an incor-
rect amount (including overpayments and un-
derpayments) under statutory, contractual, ad-
ministrative, or other legally applicable require-
ments; and 
‘‘(B) includes any payment to an ineligible 
recipient, any payment for an ineligible good or 
service, any duplicate payment, payments for 
services not received, and any payment that 
does not account for credit for applicable dis-
counts. 
‘‘(3) PAYMENT.—The term ‘payment’ means 
any transfer or commitment for future transfer of 
cash, in-kind benefits, goods, services, loans and loan 
guarantees, insurance subsidies, and other items of 
value between Federal agencies and their employees, 
vendors, partners, and beneficiaries, and parties to 
contracts, grants, leases, cooperative agreements, or 
any other procurement mechanism, that is— 
‘‘(A) made by a Federal agency, a Federal 
contractor, or a governmental or other organi-
zation administering a Federal program or ac-
tivity; and 
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‘‘(B) derived from Federal funds or other 
Federal resources or that will be reimbursed 
from Federal funds or other Federal resources. 
‘‘(4) PAYMENT FOR AN INELIGIBLE GOOD OR 
SERVICE.—The term ‘payment for an ineligible good 
or service’ shall include a payment for any good or 
service that is in violation of any provision of any 
contract, grant, lease, cooperative agreement, or any 
other procurement mechanism, including any provi-
sion relating to quantity, quality, or timeliness.’’. 
(e) GUIDANCE BY THE OFFICE OF MANAGEMENT 
AND BUDGET.—Section 2 of the Improper Payments In-
formation Act of 2002 (31 U.S.C. 3321 note) is amended 
by striking subsection (g) (as redesignated by this section) 
and inserting the following: 
‘‘(g) GUIDANCE BY THE OFFICE OF MANAGEMENT 
AND BUDGET.— 
‘‘(1) IN GENERAL.—Not later than 6 months 
after the date of enactment of the Improper Pay-
ments Elimination and Recovery Act of 2008, the 
Director of the Office of Management and Budget 
shall prescribe updated guidance to implement and 
provide for full compliance with the requirements of 
this section. The guidance shall not include any ex-
emptions not specifically authorized by this section. 
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‘‘(2) CONTENTS.—The updated guidance under 
paragraph (1) shall prescribe— 
‘‘(A) the form of the reports on actions to 
reduce improper payments, recovery actions, 
and governmentwide reporting; and 
‘‘(B) strategies for addressing risks and 
establishing 
appropriate 
prepayment 
and 
postpayment internal controls.’’. 
(f) INTERNAL CONTROLS.— 
(1) REPORT ON EFFECTIVENESS OF A–123 IM-
PLEMENTATION.—The President’s Council on Integ-
rity and Efficiency shall conduct a study of the ef-
fectiveness of implementation of the Office of Man-
agement and Budget’s Circular No. A–123 (revised), 
Management’s Responsibility for Internal Control at 
preventing improper payments or addressing internal 
control problems that contribute to improper pay-
ments, and not later than 1 year after the date of 
enactment of this Act, submit a report on the study 
to— 
(A) the Committee on Homeland Security 
and Governmental Affairs of the Senate; 
(B) the Committee on Oversight and Gov-
ernment Reform of the House of Representa-
tives; 
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(C) the Director of the Office of Manage-
ment and Budget; and 
(D) the Comptroller General. 
(2) CONSULTATION
AND
COOPERATION.—The 
President’s Council on Integrity and Efficiency shall 
consult and cooperate with the committees and di-
rector described under paragraph (1) to ensure the 
nature and scope of the study under paragraph (1) 
will address the needs on those committees and the 
Director of the Office of Management and Budget, 
including how the implementation of Circular No. 
A–123 (revised) has helped to identify, report, pre-
vent, and recover improper payments. 
(3) DETERMINATION
OF
AGENCY
READINESS 
FOR OPINION ON INTERNAL CONTROL.—Not later 
than 1 year after the date of enactment of the Im-
proper Payments Elimination and Recovery Act of 
2008, the Director of the Office of Management and 
Budget shall develop— 
(A) specific criteria as to when an agency 
should initially be required to obtain an opinion 
on internal control over financial reporting; and 
(B) criteria for an agency that has dem-
onstrated a stabilized, effective system of inter-
nal control over financial reporting, whereby the 
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agency would qualify for a multiyear cycle for 
obtaining an audit opinion on internal control 
over financial reporting, rather than an annual 
cycle. 
(g) RECOVERY AUDITS.—An agency with outlays of 
$1,000,000 or more in any fiscal year shall conduct a re-
covery audit (as that term is defined by the Director of 
the Office of Management and Budget under section 3561 
of title 31, United States Code) of all programs and activi-
ties, if the agency determines that a prior audit has identi-
fied improper payments that can be recouped and it is cost 
beneficial for a recovery activity to recapture those funds. 
(h) REPORT ON RECOVERY AUDITING.—Not earlier 
than 1 year after the date of the enactment of this Act, 
the Chief Financial Officers Council established under sec-
tion 302 of the Chief Financial Officers Act of 1990 (31 
U.S.C. 901 note) and the President’s Council on Integrity 
and Efficiency established under Executive Order 12805 
of May 11, 1992, in consultation with recovery audit ex-
perts, shall— 
(1) jointly conduct a study of the costs and 
benefits of agency recovery audit activities, including 
those under subsection (g), and including the effec-
tiveness of using the services of— 
(A) private contractors; 
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(B) agency employees; 
(C) cross-servicing from other agencies; or 
(D) any combination of the provision of 
services described under subparagraphs (A) 
through (C); and 
(2) submit a report on the results of the study 
to— 
(A) the Committee on Homeland Security 
and Governmental Affairs of the Senate; 
(B) the Committee on Oversight and Gov-
ernment Reform of the House of Representa-
tives; and 
(C) the Comptroller General. 
SEC. 3. COMPLIANCE. 
(a) DEFINITIONS.—In this section: 
(1) AGENCY.—The term ‘‘agency’’ has the 
meaning given under section 2(f) of the Improper 
Payments Information Act of 2002 (31 U.S.C. 3321 
note) as redesignated by this Act. 
(2) COMPLIANCE.—The term ‘‘compliance’’ 
means that the agency— 
(A) has published a performance report for 
the most recent fiscal year and posted that re-
port on the agency website; 
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(B) has conducted a program specific risk 
assessment for each program or activity that— 
(i) is in compliance with section 2(a) 
the Improper Payments Information Act of 
2002 (31 U.S.C. 3321 note); and 
(ii) is included in the performance re-
port; 
(C) publishes program specific improper 
payments estimates for all programs and activi-
ties identified under section 2(b) of the Im-
proper Payments Information Act of 2002 (31 
U.S.C. 3321 note) in the performance report; 
(D) publishes programmatic corrective ac-
tion plans prepared under section 2(c) of the 
Improper Payments Information Act of 2002 
(31 U.S.C. 3321 note) that the agency may 
have in the performance report; 
(E) publishes Office of Management and 
Budget approved improper payments reduction 
targets in the performance report for each pro-
gram assessed to be at risk, and is determined 
by the Office of Management and Budget to be 
actively meeting such targets; and 
(F) publishes the compliance report under 
subsection (c) in the performance report. 
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(3) DELINQUENT PROGRAM.—The term ‘‘delin-
quent program’’ means a program which is partially 
or wholly responsible for the determination of an 
agency being not in compliance. 
(4) PERFORMANCE REPORT.—The term ‘‘per-
formance report’’ means the performance and ac-
countability report referred to under section 3516(b) 
of title 31, United States Code, or a program per-
formance report under section 1116 of that title. 
(b) ANNUAL COMPLIANCE REPORT BY OMB.— 
(1) IN GENERAL.—Each year, the Director of 
the Office of Management and Budget shall prepare 
a report with an identification of— 
(A) the compliance status of each agency 
under this section; and 
(B) the delinquent programs responsible 
for that status. 
(2) INCLUSION IN BUDGET SUBMISSION.—The 
Director of Office of the Management and Budget 
shall include the report described under paragraph 
(1) in the annual budget submitted under section 
1105 of title 31, United States Code. 
(c) ANNUAL COMPLIANCE REPORT BY AGENCY IN-
SPECTORS GENERAL.— 
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(1) IN GENERAL.—Each fiscal year, the Inspec-
tor General of each agency shall determine whether 
the agency is in compliance with the Improper Pay-
ments Information Act of 2002 (31 U.S.C. 3321 
note) and this Act and submit a report to the head 
of the agency on that determination. 
(2) PREPARATION OF REPORT.—The Inspector 
General of each agency may enter into contracts and 
other arrangements with public agencies and with 
private persons for the preparation of financial 
statements, studies, analyses, and other services in 
preparing the report described under paragraph (1). 
(3) INCLUSION
IN
PERFORMANCE
REPORT.— 
The head of each agency shall include the report of 
the agency Inspector General described under para-
graph (1) in the performance report. 
(d) REMEDIATION ASSISTANCE.— 
(1) VOLUNTARY REMEDIATION ASSISTANCE.—If 
an agency is determined by the agency Inspector 
General not to be in compliance under subsection (c) 
in a fiscal year, the head of the agency may repro-
gram funds from any available appropriations of 
that agency for expenditure on intensified compli-
ance for any delinquent program (notwithstanding 
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any appropriations transfer authority limitation in 
any other provision of law). 
(2) REQUIRED REMEDIATION ASSISTANCE.—If 
an agency is determined by the agency Inspector 
General not to be in compliance under subsection (c) 
for 2 consecutive fiscal years, the head of the agency 
shall reprogram funds from any available appropria-
tions of that agency necessary to achieve full compli-
ance (notwithstanding any appropriations transfer 
authority limitation in any other provision of law). 
(3) REMEDIATION RESCISSION.— 
(A) IN GENERAL.—If an agency is deter-
mined by the agency Inspector General not to 
be in compliance under subsection (c) for a pe-
riod of 3 consecutive fiscal years and any delin-
quent program is included in the report under 
that subsection for 2 consecutive years during 
that 3-fiscal year period, the head of the agency 
shall transfer 5 percent of the available appro-
priations for each of those delinquent programs, 
as determined by the head of the agency, to 
miscellaneous receipts of the United States 
Treasury. 
(B) CONTINUATION OF TRANSFERS.—The 
head of an agency shall make transfers at least 
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once annually under subparagraph (A) until the 
agency is determined to be in compliance under 
subsection (b). 
(4) STOP-LOSS PROVISION.—If an agency has a 
program that reports under section 2(b) of the Im-
proper Payments Information Act of 2002 (31 
U.S.C. 3321 note) an improper payment rate great-
er than 15 percent for 3 consecutive fiscal years (re-
gardless of the whether the program is a delinquent 
program)— 
(A) not later than 30 days after that de-
termination, the head of agency shall submit to 
Congress proposals for statutory changes or 
other relevant actions determined necessary to 
stop the financial loss by the program; and 
(B) no further appropriations for such pro-
gram shall be authorized until such time as the 
inspector general of that agency submits a cer-
tification to Congress that sufficient changes in 
the program (whether those proposed by agency 
or otherwise) have been implemented to warrant 
resumed authorization of appropriations. 
Æ 
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