Rule 1-1

RECOVERY AUDITS

Issued by the Office of the State ControllerDate Issued: 12/15/2010

Recovery Audit Rule 1-1

Page 1 of 2

  1. Authorities
  2. Definitions
  3. Rule
  4. Responsibilities of OSC and State Agencies
  5. Disbursement of Collected Amount
  6. Exemptions to Rule

Issued by the Office of the State ControllerDate Issued: 12/15/2010

Recovery Audit Rule 1-1

Page 1 of 2

  1. AUTHORITIES

CRS §24-30-202(1-4) and (5)(a) (State Controller Authority)

CRS §24-30-203.5 (Recovery Audits)

  1. DEFINITIONS
  2. Collected Amountmeans the amount of Overpayments collected by a Recovery Audit Contractor from Vendors and Other Entities as a result of a Recovery Audit and deposited into a State account.
  3. Contingency Feemeans the fee charged by a Recovery Audit Contractorset forth in a Recovery Audit contract and expressed as a percentage of the Collected Amount.
  4. Costsmeans the documented outflow of resources, accrued or paid, related to OSC’s administration of the State’s Recovery Audit program, State Agency responses to the Recovery Audit process, and the Recovery Audit Contractor’s Contingency Fee.
  5. OSC means the Office of the State Controller.
  6. Other Entity means any person or organization that receives a payment from a State Agency.
  7. Overpayment means a payment by a State Agency to a Vendor or Other Entity that is made in error or is in excess of the amount to which the recipient is entitled, including, but not limited to:
  8. A payment to a Vendor or Other Entity who does not meet applicable eligibility requirements for receiving the payment;
  9. A duplicate payment;
  10. A payment resulting from:
  11. an invoice or pricing error;
  12. a failure to apply an applicable discount, rebate or other allowance;
  13. a failure to comply with the agreement, award, program or other documents authorizing the payment; or
  14. an inadvertent error.
  15. Recovery Auditmeans a financial management technique used to identify overpayments made by a State Agency to Vendors or Other Entities.
  16. Recovery Audit Contractormeans a company or consultant that is engaged by the OSC to conduct a Recovery Audit.
  17. State Agency or State Agencies means one or more agencies of the State of Colorado as set forth in CRS §24-3-101, but does not include a State institution of higher education.
  18. Vendor means a payee of the State of Colorado for goods or services provided to the State.
  19. RULE
  20. All State Agencies shall comply with §4of this Recovery Audits Rule.
  21. RESPONSIBILITIES OF OSC AND STATE AGENCIES

4.1OSC Responsibilities. OSC shall:

4.1.1Determine the data that shall be required from aState Agencyfor the Recovery Audit Contractor to conduct the Recovery Audit;

4.1.2Negotiate overpayment disputes resulting from the Recovery Audit that occur betweena Vendor or Other Entity and a State Agency. If not resolved, a Vendor may follow the dispute process in the Vendor’s contract with the State Agency, and an Other Entity may follow the dispute process in the award, program, or other document used to processthe payment;

4.1.3Develop a process to determine exemptions fromthe Recovery Audit process;

4.1.4Manage the Recovery Audit Contractor and Recovery Audit process;

4.1.5Review and approve or deny State Agency reimbursement requests for administrative Costs; and

4.1.6Require Recovery Audit Contractorsto collect all Overpayments, unless waived by OSC.

4.2State Agency Responsibilities. Each State Agency shall:

4.2.1Confirm or dispute Overpayments identified by the Recovery Audit Contractor and make a report of such confirmation or dispute to OSC within 14 days of receiving the Overpayments identified by the Recovery Audit Contractor;

4.2.2Pay a Vendor or Other Entity if the Recovery Audit Contractor identifies an underpayment; and

4.2.3Submit administrative Costs incurred to OSC on a quarterly basis, and include adequate documentation of Costs incurred.

  1. DISBURSEMENT OF COLLECTED AMOUNT

5.1Costs. The Costs of a State Agency shall be reimbursed by OSC only from the Collected Amount from that State Agency’s Overpayments. If a Collected Amount is not recovered as a result of a Recovery Audit, the State Agency shall not be entitled to reimbursement.

5.2Priority for Non-Federal Funds. OSC shall disburse the Collected Amount for non-federal funds in the following priority:

5.2.1Administrative Costs of OSC for the management of the Recovery Audit program at 15% of the Collected Amount, not to exceed the annual appropriation;

5.2.2Administrative Costs of the State Agency for providing audit support to the Recovery Audit Contractor at 10% of the Collected Amount, not to exceed documented direct audit support Costs.State Agencies shall pay their administrative Costs from their share of the Collected Amount;

5.2.3Contingency Fee of the Recovery Audit Contractor; and

5.2.4Amounts remaining after the disbursements in §5.2.1 through §5.2.3 shall be returned to the fund from which the overpayment was made, unless otherwise directed by the General Assembly.

5.3Priority for Federal Funds

5.3.1If an Overpayment was made using federal funds, OSC, the State Agency, and the Recovery Audit Contractor shall share, on a pro rata basis,the overhead allowed by the federal government.Pro ratashall equal the amounts calculated in §5.2.1 through §5.2.3 for the OSC, the State Agency and the Recovery Audit Contractor applied to the allowable overhead.

5.3.2A State Agency shall contact the funding federal agency to determine if any of the Collected Amount in excess of the allowable overhead may be retained by the State or must be returned to the federal agency.

  1. EXEMPTIONS TO RULE

The State Controller may exempt a State Agency from the Recovery Audit Process if the State Controller determines that that subjecting the State Agency to a Recovery Audit is not likely to yield significant net benefits to the State or that the State Agency already is subject to recovery audits under federal law or regulation or State law, rule, or policy. The State Controller shall provide the State Auditor and the Legislative Audit and Joint Budget Committees with a report by March 1, 2011 that detailsthe proposed exemptions from the Recovery Audit process. The Legislative Committees may veto any exemption by a majority vote of the members of each Committee taken on or before May 1, 2011.

Issued by the Office of the State ControllerDate Issued: 12/15/2010

Recovery Audit Rule 1-1

Page 1 of 2