Report text available as:

  • TXT
  • PDF   (PDF provides a complete and accurate display of this text.) Tip ?

114th Congress   }                                     {        Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                     {       114-419

======================================================================



 
             FRAUD REDUCTION AND DATA ANALYTICS ACT OF 2015

                                _______
                                

February 9, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Chaffetz, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 4180]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Oversight and Government Reform, to whom 
was referred the bill (H.R. 4180) to improve Federal agency 
financial and administrative controls and procedures to assess 
and mitigate fraud risks, and to improve Federal agencies' 
development and use of data analytics for the purpose of 
identifying, preventing, and responding to fraud, including 
improper payments, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Committee Statement and Views....................................     2
Section-by-Section...............................................     2
Committee Consideration..........................................     3
Roll Call Votes..................................................     4
Application of Law to the Legislative Branch.....................     4
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     4
Statement of General Performance Goals and Objectives............     4
Duplication of Federal Programs..................................     4
Disclosure of Directed Rule Makings..............................     4
Federal Advisory Committee Act...................................     4
Unfunded Mandate Statement.......................................     5
Earmark Identification...........................................     5
Committee Estimate...............................................     5
Budget Authority and Congressional Budget Office Cost Estimate...     5

                     Committee Statement and Views


                          PURPOSE AND SUMMARY

    H.R. 4180, the Fraud Reduction and Data Analytics Act of 
2015, is a bipartisan bill that would strengthen agency fraud 
protection and detection efforts by requiring agencies to adopt 
more proactive measures. The Act requires the U.S. Office of 
Management and Budget (OMB) to establish fraud detection and 
prevention guidelines that incorporate anti-fraud best 
practices identified by the U.S. Government Accountability 
Office (GAO).

                  BACKGROUND AND NEED FOR LEGISLATION

    Currently, the Federal government relies on fraud detection 
and prevention systems that are based on after-the-fact reviews 
of transactions to determine if fraud occurred. This system 
identified $124 billion in improper payments in fiscal year 
2014, nearly $19 billion more than the previous year. The 
current system also requires agencies to spend time and 
resources tracking down and recovering these dollars after they 
have been expended, rather than ensuring the improper payments 
are never made in the first place. H.R. 4180 will help to 
address this flawed improper payment and fraud prevention 
system by establishing a proactive approach. This bill requires 
agencies to review and implement continuously evolving anti-
fraud measures, thereby ensuring better protection of taxpayer 
dollars.

                          LEGISLATIVE HISTORY

    H.R. 4180 was introduced by Congressman Mark Meadows (R-NC) 
on December 3, 2015, and referred to the Committee on Oversight 
and Government Reform. On December 9, 2015, H.R. 4180 was 
favorably reported without amendment by unanimous consent. H.R. 
4180 is co-sponsored by Congressman Gerald Connolly (D-VA), 
Congressman Mick Mulvaney (R-SC), and Congresswoman Tammy 
Duckworth (D-IL).
    H.R. 4180 is the House companion to S. 2133, the Fraud 
Reduction and Data Analytics Act of 2015. S. 2133 was 
introduced on October 5, 2015 by Senator Tom Carper (D-MO) and 
referred to the Committee on Homeland Security and Government 
Affairs. The Committee favorably reported the bill without 
amendment on October 7, 2015. S. 2133 is co-sponsored by 
Senators Thom Tillis (R-NC), Claire McCaskill (D-MO), Ron 
Johnson (R-WI), Tammy Baldwin (D-WI), and Kelly Ayotte (R-NH).

                           Section-by-Section


Section 1. Short title

    Designates the short title of the bill as the ``Fraud 
Reduction and Data Analytics Act of 2015''.

Section 2. Definitions

    Defines agency as it is used in 5 U.S.C. 551. Defines 
improper payment as used in section 2(g) of the Improper 
Payments Information Act of 2002.

Section 3. Establishment of financial and administrative controls 
        relating to fraud and improper payments

    Subsection (a) of the Act requires that, within 90 days of 
enactment, the Director of OMB, in consultation with the 
Comptroller General, establish guidelines for agencies 
regarding fraud. Agencies are to use the guidelines to create 
controls to identify and assess, and prevent and respond to, 
fraud. The guidelines shall incorporate GAO best practices. The 
OMB Director, consulting with Comptroller General, upon a 
determination of necessity, may modify these guidelines 
periodically.
    Subsection (b) states that the required controls shall 
include: (1) evaluating fraud risk and using risk-based 
approach to design and implement controls; (2) use of data from 
known fraud to monitor trends and improve prevention controls; 
(3) use of results from fraud investigations, and (4) ways to 
improve future anti-fraud measures.
    Subsection (c) requires agencies to submit to Congress, as 
part of the annual financial report of the agency, a report for 
each of the first three fiscal years following enactment. The 
report shall include progress made in implementing the 
following: financial and administrative controls, the fraud 
risk principle found in the Standards for Internal Control in 
the Federal Government, and OMB's circular on leading practices 
for managing fraud risks. The subsection also requires the 
report to outline the progress the agency has made in 
identifying risks and vulnerabilities in areas where fraud may 
occur such as payroll, grants, and contracts. Finally, the 
subsection requires agencies to include in each of the annual 
reports progress made in establishing strategies, procedures, 
and other steps to curb fraud. If the bill is enacted less than 
180 days before the next annual financial report is due from an 
agency; the agency may submit the report as part of the 
following annual financial report.

Section 4. Working group

    Requires OMB, within 180 days of enactment of this Act, to 
establish a working group to improve the sharing of controls 
and other best practices and techniques among agencies and the 
sharing and development of analytic techniques.
    The composition of the working group shall be: the Director 
of OMB, who will be the chair; agency Chief Financial Officers; 
and any other party determined appropriate by director of OMB, 
including agency Chief Information Officers, Chief Procurement 
Officers, and Chief Operating Officers.
    This section also requires that within 270 days of 
enactment the working group submit a plan on the establishment 
and use of an interagency data and analytics library to 
facilitate fraud detection, prevention, and recovery.

                        Committee Consideration

    On December 9, 2015, the Committee met in open session and 
ordered reported favorably the bill, H.R. 4180, by unanimous 
consent, a quorum being present.

                            Roll Call Votes

    There were no recorded votes during Full Committee 
consideration of H.R. 4180.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. 
This bill improve Federal agency financial and administrative 
controls and procedures to assess and mitigate fraud risks, and 
to improve Federal agencies' development and use of data 
analytics for the purpose of identifying, preventing, and 
responding to fraud, including improper payments. As such this 
bill does not relate to employment or access to public services 
and accommodations.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goal or objective of the bill is to improve Federal agency 
financial and administrative controls and procedures to assess 
and mitigate fraud risks, and to improve Federal agencies' 
development and use of data analytics for the purpose of 
identifying, preventing, and responding to fraud, including 
improper payments.

                    Duplication of Federal Programs

    No provision of this bill establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that enacting this bill does not 
direct the completion of specific rule makings within the 
meaning of 5 U.S.C. 551.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement as to 
whether the provisions of the reported include unfunded 
mandates. In compliance with this requirement the Committee has 
received a letter from the Congressional Budget Office included 
herein.

                         Earmark Identification

    This bill does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                           Committee Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
this bill. However, clause 3(d)(2)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for this bill from the Director of 
Congressional Budget Office:

H.R. 4180--Fraud Reduction and Data Analytics Act of 2015

    H.R. 4180 would require federal agencies to report on their 
efforts to assess and combat fraud and improper payments in 
each of the next three years. In addition, the legislation 
would require the Office of Management and Budget (OMB) to set 
up a working group to establish best practices for preventing 
fraud and improper payments and for sharing analytical 
information among federal agencies.
    The Federal Managers' Financial Integrity Act requires 
agencies to establish and maintain internal controls to ensure 
that federal programs operate efficiently, effectively, and in 
compliance with relevant laws. The Government Accountability 
Office (GAO) issues financial control standards for the federal 
government in the Standards for Internal Control in the Federal 
Government (known as the Green Book). Additionally, OMB 
establishes specific requirements for assessing and reporting 
on financial controls used by the federal government. The 
standards in the most recent Green Book include methods for 
assessing the risk of fraud.
    Based on information from GAO and OMB, CBO expects that 
implementing the bill would increase the administrative costs 
of each major federal agency by roughly $50,000 annually, 
primarily to prepare reports for the Congress for three years. 
Because there are about 25 major agencies, CBO estimates that 
implementing H.R. 4180 would cost about $4 million over the 
2016-2020 period, including funds to operate the proposed 
working group. Such spending would be subject to the 
availability of appropriated funds.
    Under H.R. 4180, some agencies would increase their efforts 
to detect fraud and improper payments. Such efforts could 
result in cost savings to those agencies, but could also lead 
to additional costs to improve their financial systems. CBO has 
no basis for estimating the magnitude of either increases in 
the recovery of fraudulent payments or costs to improve 
financial systems.
    Enacting H.R. 4180 also could affect direct spending by 
some agencies (such as the Tennessee Valley Authority) because 
they are authorized to use receipts from the sale of goods, 
fees, and other collections to cover their operating costs. 
Therefore, pay-as-you-go procedures apply. Because most of 
those agencies can make adjustments to the amounts collected as 
operating costs change, CBO estimates that any net changes in 
direct spending by those agencies would not be significant. 
Enacting the bill would not affect revenues.
    CBO estimates that enacting H.R. 4180 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2026.
    H.R. 4180 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    On January 12, 2016, CBO transmitted a cost estimate for S. 
2133, the Fraud Reduction and Data Analytics Act of 2015, as 
ordered reported by the Senate Committee on Homeland Security 
and Governmental Affairs on October 7, 2015. The two pieces of 
legislation are similar, and CBO's estimates of their budgetary 
effects are the same.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

                                  [all]