Last week the full House passed two bills of interest to defense financial managers: an overhaul of the Defense acquisition process and the requirement to eliminate and recover improper payments. The “Implementing Management for Performance and Related Reforms to Obtain Value in Every IMPROVE) Acquisition Act of 2010” requires four key reforms: 1) build a better accountability systems; 2) provide military and civilian acquisition personnel more training and better tools; 3) make the financial system more auditable; and 4) expand the industrial base. Of specific interest to financial managers, the bill directs the Under Secretary of Defense (Comptroller) to give preferential treatment to any component determined to have financial statements that are validated ready for audit earlier than September 30, 2017. Such treatment could include 1) priority in the release of appropriated funds; 2) relief from some non-statutory reporting; and 3) relief from departmental obligation and expenditure thresholds. For those components failing to achieve a financial statement validated as ready for audit by the 2017 date, the bill requires the Secretary of Defense to take corrective measures. Such measures could include: 1) developing a one-year remediation plan; (2) submitting additional financial reports; 3) delaying the release of appropriated funds; and 4) setting specific consequences for key personnel to ensure accountability. Other details are available in the section-by-section analysis. The bill now goes to the Senate for action. The House also passed the “Improper Payments Elimination and Recover Act of 2010.” This Act requires the government to recover payments determined to be made for an incorrect amount, to an ineligible recipient, for a good or service not received, or was a duplicate payment. Supporters of the bill estimate that this could bring in more than $100 billion government-wide. The bill requires agencies to conduct recovery audits for every program or activity spending over $1 million annually. Of the amounts recovered, agency heads can use 25 percent of the recovered funds for financial management improvement programs or credited to agency appropriations. Agencies can credit another 25 percent to agency programs for which the overpayment was made. Five percent of recovered funds will be given to the agency’s Inspector General to carry out investigations of improper payments. The remaining recovered amounts will be deposited in the Treasury’s miscellaneous receipts accounts or trust fund account, if appropriate. The bill also requires agency Inspectors General to determine if the agency is in compliance with the bill. Agencies determined not to be in compliance will have to submit a corrective action plan. The bill now goes to the Senate. The White House issued a statement strongly supporting this bill and has previously issued an executive order and OMB guidance on dealing with improper payments (discussed in Highlights, March 12, and March 26).
House passes bills overhauling defense acquisition and requiring action on improper payments
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I don’t think past recovery audits have proven productive in DoD. I’d be interested in hearing from others about their experiences with recovery audits.