Senate Bill 2741

AN ACT TO PROVIDE FOR RECOVERY AUDITS FOR GOVERNMENT OVERPAYMENTS OF TAX DOLLARS; TO DEFINE CERTAIN TERMS; TO AUTHORIZE THE STATE AUDITOR TO CONTRACT WITH PRIVATE CONSULTANTS TO CONDUCT RECOVERY AUDITS OF PAYMENTS MADE BY STATE AGENCIES TO INDIVIDUALS, VENDORS AND OTHER ENTITIES; TO REQUIRE MANDATORY RECOVERY AUDITS ON PAYMENTS TO INDIVIDUALS, VENDORS AND OTHER ENTITIES MADE BY CERTAIN AGENCIES; TO REQUIRE THE STATE AUDITOR TO PROVIDE TO CERTAIN STATE OFFICIALS COPIES OF ANY RECOVERY AUDIT REPORTS RECEIVED FROM THE PRIVATE CONSULTANTS; TO AUTHORIZE THE STATE AUDITOR TO PROMULGATE RULES AND REGULATIONS NECESSARY TO IMPLEMENT THIS ACT; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. 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 if 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.

SECTION 2. Definitions. As defined in this act:

(a) "Consultant" means a private contractor with recovery audit expertise.

(b) "Overpayment" includes:

(i) Failure to meet eligibility requirements;

(ii) Duplicate payments;

(iii) Invoice and pricing errors;

(iv) Failure to apply discounts, rebates or other allowances;

(v) Failure to comply with purchasing agreements; and

(vi) Any other inadvertent errors resulting in overpayments.

(c) "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.

(d) "Shall" means the obligation or duty to do and does not mean discretionary or has the option.

(e) "State Auditor" means the State Auditor of the State of Mississippi.

(f) "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.

SECTION 3. Contracting for recovery audits. (1) The State Auditor 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 ninety-day period after the date the payment was made.

(3) The State Auditor or a state agency whose payments are being audited shall provide a person acting under a contract authorized by this section with any confidential information in the custody of the State Auditor or state agency that is necessary for the performance of the audit or the recovery audit of an overpayment, to the extent the State Auditor and state agency are not prohibited from sharing the information under an agreement with another state or the federal government. A person acting under a contract authorized by this section, and each employee or agent of the person, is subject to all prohibitions against the disclosure of confidential information obtained from the state in connection with the contract that apply to the State Auditor or applicable state agency or an employee of the State Auditor or applicable state agency. A person acting under a contract authorized by this section or an employee or agent of the person who discloses confidential information in violation of a prohibition made applicable to the person under this subsection is subject to prosecution for a gross misdemeanor.

SECTION 4. State agencies subject to mandatory recovery audits. (1) The State Auditor shall require that recovery audits be performed on the payments to individuals, vendors, and other entities made by each state agency that has total expenditures (all funds) during a state fiscal biennium in an amount that exceeds Fifty Million Dollars ($50,000,000.00). Each state agency described by this subsection shall provide the recovery audit consultant with all information necessary for the audit.

(2) In addition, the State Auditor shall require recovery audits for any state agency that receives an audit finding by the State Auditor for internal control weaknesses concerning agency payments and contracts. Each state agency described by this subsection shall provide the recovery audit consultant with all information necessary for the audit.

(3) The State Auditor may exempt from mandatory recovery audit process a state agency that has a low proportion of its expenditures made to individuals, vendors, and other entities, according to criteria the State Auditor adopts by rule after consideration of the likely costs and benefits of performing recovery audits for agencies that make relatively few or small payments to vendors.

(a) The State Auditor shall provide the Executive Director of the Department of Finance and Administration and the Joint Legislative Budget Committee with a report by December 31 of each year detailing any exemptions from subsections (1) and (2) of this section.

(b) The Joint Legislative Budget Committee may veto any exemption claimed by the State Auditor with a simple majority vote of the committee.

SECTION 5. Payment to consultants. (1) The State auditor shall adopt by rule reasonable compensation for services provided under recovery audit contracts based on a specified percentage of the total amount recovered because of a consultant's audit activities.

(2) A state agency shall expend or return to the federal government any federal money that is recovered through a recovery audit conducted under this act. The state agency shall expend or return the federal money in accordance with the rules of the federal program through which the agency received the federal money.

SECTION 6. Recovery audit reports. (1) The State Auditor shall provide copies, including electronic form copies, of any reports received from a consultant contracting under this act to:

(a) The Governor;

(b) The Executive Director of the Department of Finance and Administration; and

(2) The State Auditor shall provide the copies required by subsection (1) of this section not later than the seventh business day after the date the State Auditor receives the consultant's report.

(3) Not later than December 31 of each year, the State Auditor shall issue a report to the Legislature summarizing the contents of all reports received under this act during the past fiscal year. This report shall also be posted on the Department of Audit's website.

SECTION 7. The State Auditor is authorized to promulgate rules and regulations necessary to implement this act.

SECTION 8. This act shall take effect and be in force from and after July 1, 2012.