More on Recouping Improper Payments

Four senators have introduced legislation intended to improve the Government's ability to recoup money that it has erroneously to Government contractors. The proposed legislation adds several features to the existing law on recouping improper payments.

First, it would prevent agencies from relying only on voluntary disclosure of improper payments by contractors. In various hearings, these senators concluded that the government's estimates of improper payments were anemic and superficial.

Secondly, it would mandate that each agency set up an audit coordinator for recovery audits.

Thirdly, it would require a nationwide "do not pay" list.

And finally, it would require agencies to produce documentation to prove a payment was correct.

Many contractors have already been subjected to one or more "payment recapture audits". From our limited perspective, it does not seem like the Government is getting "bang for the buck" in these audits. No contractor that we know of has had to refund erroneous payments.

Payment Recapture Audits

We have discussed "payment recapture audits" quite a bit in this blog. Last December, we highlighted DCAA's activities in support of OMB's payment recapture audit initiative. Now the OMB (Office of Management and Budget) has just issued a revision to Parts I and II of OMB Circular A-123, Appendix C. The purpose of the revision is to implement IPERA (Improper Payments Elimination and Recovery Act), Public Law 111-204. OMB contends that the Federal Government wastes billions of taxpayer dollars on improper payments to individuals, organizations, and contractors each year. These payments are made in the wrong amount, to the wrong entity, or for the wrong reasons. Federal agencies reported an estimated $125 billion in improper payments during fiscal year 2010. "Whether these payments resulted from inadequate record keeping, inaccurate eligibility determinations, inadvertent processing errors, the lack of timely and reliable information to confirm payment accuracy, or fraud, the amount of improper payments is simply unacceptable."

The revised document is lengthy and we will be studying it in the next few days to assess the potential impact on Government contractors. Since it applies to all executive departments and agencies, it will no doubt affect many contractors. Significant components of OMB's guidance include:

• Describing alternative improper payment measurements;
• Expanding payment recapture audits to all types of payments and activities with more than $1 million in annual outlays (if cost-effective).
• Improving corrective action plans and incorporating lessons learned from the Recovery Act implementation.
• Distributing funds recovered through payment recapture audits for authorized purposes.
• Establishing compliance reviews and requirements for agencies deemed non-compliant.

This guidance is effective immediately.