Thursday, November 18, 2010

Payment Recapture Audits

Here's an update on our post from last March regarding the Administration's "Payment Recapture Audits". By way of background, you can read that post here.

Earlier this week, the Office of Management and Budget (OMB) issued a memorandum to all executive departments and agencies challenging them to increase their efforts to recapture improper payments by intensifying and expanding payment recapture audits. The memorandum makes some astonishing assertions such as "One of the biggest sources of waste and inefficiency is the nearly $110 billion in improper payments made in Fiscal Year (FY) 2009 it individuals, organizations, and contractors." Now that's a lot of money. The goal for this year is to reduce that amount by $50 billion.

All agencies are now required to submit a payment recapture audit plan to the OMB that describes current and planned efforts. If an agency does not have a plan, they need to submit a timetable and plan for implementing such a program.

According to OMB, a payment recapture audit is a review and analysis of the agency's books, supporting documents, and other available information supporting its payments that is specifically designed to identify overpayments due to payment errors. Also, according to OMB, effective payment recapture audits are investigations in which specialized auditors use cutting-edge technology and tools to scrutinize government payments and then find and reclaim taxpayer funds made in error or gained through fraud.

These audits are definitely going to affect contractors. $110 billion is a significant part of the Federal budget and agencies will be scurrying around to show progress toward the $50 billion target. Of course they'll be going after the "low-hanging" fruit first which probably means they be looking at contractors receiving the most Federal dollars. This is probably a good time for contractors to assess the adequacy of their own billing systems to ensure that requests for payments (public vouchers, progress payments, commercial invoices, etc) are prepared consistent with the terms and conditions of its contracts, grants, or agreements.

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