Recovery Auditing

Legislation passed in 2002 requires agencies that enter into contracts worth more than $500 million in a FY to complete a cost-effective program for identifying errors made in paying contractors and recovering any improper payments.  For FY 2012's audit, we performed a sample review of $7,890 million (out of $8,157 million total) administrative payments.  As shown in the chart below, we identified 0.07 percent ($5.723 million) of administrative payments as improper and collected 50 percent ($2.843 million) in FY 2012 . This validated the agency's current processes for prevention, detection, and collection of improper payments.

FY 2012 Payment Recapture Audit Reporting Administrative Payments (dollars in millions)
Type of Payment Payroll and Benefits Vendor and Travel
Amount Subject to Review for Current Year (CY) Reporting $6,422 $1,735
Actual Amount Reviewed and Reported CY $6,422 $1,468
Amount Identified for Recovery CY $4.564 $1.159
Amount Recovered CY $1.772 $1.071
Percent of Amount Recovered out of Amount Identified CY 39% 92%
Amount Outstanding CY $2.792 $0.088
Percent of Amount Outstanding out of Amount Identified CY 61% 8%
Amount Determined Not to be collectable CY $1.322 $0.0
Percent of Amount Determined Not to be Collectable out of Amount Identified CY 29% 0%
Amounts Identified for Recovery Prior Years (PY) $5.744 $11.929
Amounts Recovered PYs $2.954 $11.624
Cumulative Amounts Identified for Recovery (CY + PYs) $10.308 $13.087
Cumulative Amounts Recovered (CY + PYs) $4.726 $12.783
Cumulative Amounts Outstanding (CY + PYs) $5.582 $0.304
Cumulative Amounts Determined Not to be Collectable (CY + PYs) $1.750 $0.0
  1. The payroll and benefits amounts include overpayments from current and separated employees.  The amounts for current employees include overpayments that we identified in FY 2012 but could have occurred in a prior year.
  2. Cumulative Amounts Recovered (CY + PYs) for Vendor and Travel includes $0.088 million of amounts recovered in the current year for amounts identified in prior years.
  3. We may compromise, suspend, or terminate collection activity in accordance with the authority granted by the United States Code and the Federal Claims Collection Standards based on the following criteria:
  • The cost of collection does not justify the enforced collection of the full amount;
  • The debtor is unable to repay the debt considering age and health, present and potential income, and availability of assets realized;
  • The debt has been discharged in bankruptcy; or
  • The debtor has requested a waiver or review of the debt and the agency determines that such request is credible.

We achieve these results by maintaining our commitment to not only identify and recover improper payments, but to avoid them as well. A memorandum from President Obama (Presidential Memorandum Regarding Finding and Recapturing Improper Payments, issued on March 10, 2010) speaks to these efforts, challenging agencies to continue working along the path toward developing stronger practices. Furthermore, on July 22, 2010, President Obama strengthened this challenge by signing the Improper Payments Elimination and Recovery Act (IPERA) into law, which:

  • Amends the Improper Payments Information Act of 2002 (IPIA);
  • Requires agency heads to conduct recovery audits for agency programs that expend $1 million or more annually, if such audits would be cost-effective;
  • Reinforces many of the initiatives we are currently implementing to address improper payments; and
  • Further increases our transparency, accountability, and reporting for improper payments from the existing requirements of the IPIA and Executive Order 13520.

We support this legislation and began reporting on the IPERA legislative requirements in the FY 2011 Performance and Accountability Report.