An Act Relating to Recovery Audits for Government Overpayments of Tax Dollars Exposed

An Act Relating to Recovery Audits for Government Overpayments of Tax Dollars was adopted by ALEC's Tax and Fiscal Policy Task Force on July 31, 2008, approved by the ALEC Board of Directors on September 11, 2008. (Accessed on 1/22/2016).

ALEC Bill Text

Model Language

Intent Section

The Legislature finds that overpayments are a serious problem for state agencies given the magnitude and complexity of state operations. Overpayments waste tax dollars and detract from the efficiency and effectiveness of state operations by diverting resources from their intended uses. An overpayment occurs when an individual, vendor or other entity receives a government payment in error or in excess of the legal amount entitled. In order to improve the economy and efficiency of government operations, the state shall contract for recovery audits to recoup any overpayments made of state or federal tax dollars. The Legislature recognizes that recovery audits are a nationally recognized best practice for disbursements management and will provide insight for improving operational efficiency and internal controls in the state’s disbursement of tax dollars.

Additionally, recovery audits will not cost the state any resources as the contractor’s costs are deducted from any dollars recovered, making the recovery audits self-funding.

Definitions

(1) “Consultant” means a private contractor with recovery audit expertise.

(2) “Director” means the Director of the [state budget office].

(3) “Overpayment” includes

a. failure to meet eligibility requirements;

b. duplicate payments;

c. invoice and pricing errors;

d. failure to apply discounts, rebates, or other allowances;

e. failure to comply with purchasing agreements; and

f. any other inadvertent errors resulting in overpayments.

(4) “Recovery audit” means a financial management technique used to identify overpayments made by a state agency with respect to individuals, vendors, and other entities in connection with a payment activity.

(5) “Shall” means the obligation or duty to do and does not mean discretionary or has the option.

(6) “State agency” means a department, office, board commission, bureau, division, institution, or institution of higher education. This includes individual state agencies and programs, as well as those programs and activities that cross agency lines. State agency includes all elective offices in the Executive Branch of government and the Legislature.

Contracting for Recovery Audits

(1) The Director shall contract with private consultants to conduct recovery audits of payments made by state agencies to individuals, vendors, and other entities.

(2) A contract under this section:

a. may provide for reasonable compensation for services provided under the contract, including compensation determined by the application of a specified percentage of the total amount recovered because of the consultant’s audit activities;

b. may permit or require the consultant to pursue a judicial action in a court inside or outside this state to recover an overpaid amount; and

c. to allow time for the performance of existing state payment auditing procedures, may not allow a recovery audit of a payment during the 90-day period after the date the payment was made.