Expect More Programs Like Recovery Audit Contractors

President Obama signed a presidential memorandum directing all federal departments and agencies to “expand and intensify their use of payment recapture audits under their current authority,” on March 10. No additional legislation is needed, therefore, for the agencies to enact programs similar to CMS’s Recovery Audit Contractors program.  The President also announced his support for the Improper Payments Elimination and Recovery Act, new bipartisan legislation being proposed to expand the ability of government agencies to fund future audits with recaptured payments.

A Payment Recapture Audit, as defined in the memorandum, is “a process of identifying improper payments paid to contractors or other entities whereby highly skilled accounting specialists and fraud examiners use state-of-the-art tools and technology to examine payment records and uncover such problems as duplicate payments, payments for services not rendered, overpayments, and fictitious vendors.”

It is not clear why the administration has coined this new phrase, “Payment Recapture Audit,” but the memorandum does make clear that it has the same meaning as the term “recovery audit.” That term was previously defined in Appendix C to Office of Management and Budget Circular A-123, a document which consolidates three memoranda (M-03-07 of January 16, 2003, “Programs to Identify and Recover Erroneous Payments to Contractors”; M-03-12 of May 8, 2003, “Allowability of Contingency Fee Contracts for Recovery Audits”; and M-03-13 of May 21, 2003, “Improper Payments Information Act of 2002, Public Law No: 107-300″).

This new effort to recoup taxpayer dollars through the use of specialized private auditors with contracts giving them financial incentives to root out improper payments has been readily demonstrated through pilot programs such as the Recovery Audit Contractors Pilot Program, which was so successful ($900 Million recovered) in just a few states that half way through its authorized duration, Congress made it a permanent program, now running in all 50 states.

This new and expanded use of “payment recapture audits” is expected to return at least $2 billion in taxpayer money over the next three years, according to a White House press release.

Find links to documents, memoranda and White House Press Releases on this subject HERE.