Proposed bill would fund financial systems

Rep. Dan Burton (R-Ind.) last week introduced a bill that would fund improvements in agencies' financial management computer systems with the recovery of billions of dollars in overpayments made to government contractors.

The proposed legislation, called the Government Waste Corrections Act, would require agencies to follow a common commercial practice known as recovery auditing. It would entail reviewing their financial records to uncover such mistakes as overlooked discounts for government buyers, vendor pricing errors and duplicate payments that result in overpayments to contractors.

The bill would allow agencies to spend up to 50 percent of the recovered money on improving management programs, including programs for new information technology. "These programs will improve the agencies' staff capacity, information technology and financial management in order to prevent overpayments and reduce other problems of waste and error," Burton said on the House floor last week. He is chairman of the Government Reform Committee.

Based on General Accounting Office reports and agency inspectors general, annual government waste amounts to more than $30 billion, according to Burton.

Over the past year, Congress has increased pressure on federal agencies to improve their ability to track the billions of dollars they spend each year. In the first-of-its-kind audit of consolidated government financial records, GAO last year found billions of dollars in discrepancies and said such problems were due in part to weaknesses in agency financial management systems.

Bob Zarrilli, contracting officer at the Defense Supply Center in Philadelphia, said the ability to invest recovered money in improving management systems, rather than sending it all back to the Treasury Department, provides a good incentive. "There's got to be an incentive for federal government agencies to say, 'Hey, I want to do this, and I want to cut my overpayments to a minimum,' " he said.

The center, which spends about $3.5 billion a year, has identified close to $25 million in overpayments made during a three-year period as part of an audit recovery program. The center's overpayments are partly attributable to old computer systems that cannot handle some of the new pricing schemes or payment plans that have emerged in the contracting community, Zarrilli said.

"If you look at our systems here, they're legacy systems, and they're 30 years old," he said. Problems with the systems include a difficulty with overriding rules built into software or changing some payment functions to accommodate such situations as seasonal price changes.

Harry Barschdorf, a vice president at federal contractor American Management Systems Inc., said overpayments sometimes occur because an agency has two sets of stovepiped systems - one for ordering or procuring goods and services and one for managing finances - that were developed independently and cannot share information easily. He said commercial off-the-shelf software products that can share information across the two types of systems can help alleviate overpayment woes.

The information-sharing and overpayment problems become more complex in larger agencies. "The more systems you have and the more stovepiped you are, the more opportunities you have for these types of problems," Barschdorf said.

House leadership has referred the bill to the Government Reform Committee.