3001 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) financial policies for the obligation of recovery audits under the Payment Integrity Information Act of 2019 (PIIA).

Key points covered in this chapter:

• VA is authorized by the Audit Recoveries Under the Payment Integrity Information Act of 2019 (PIIA) to perform recovery audits of payments made in order to identify overpayments;
• VA will adhere to OMB Circular A-123, Appendix C for recovery audits;
• VA is required to conduct recovery audits under the Payment Integrity Information Act of 2019, if cost-effective, for each program and activity that expends $1 million or more annually; and
• The use of a miscellaneous vendor code is not permitted for recovery audit obligations. Vendors must be individually vendorized.

3002 Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	New policy	OFP	Reorganized chapter layout	May 2026

3003 Definitions

Improper Payment – Any payment that should not have been made or was made in an incorrect amount, including overpayment or underpayment, under a statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes any payment to an ineligible recipient; any payment for an ineligible good or service; any duplicate payment; any payments for a good and service not received, except for those payments authorized by law; and any payment that does not account for credit for applicable discounts. Improper payments include monetary loss improper payments and non-monetary loss improper payments. The improper payment amounts, and unknown payment amounts will be reported as required by OMB Circular A-123, Appendix C and/or any additional OMB guidance.

Non-Contractual Obligation – Obligations with special statutory authority or other regulatory authority to exempt the obligation from Federal Acquisition Regulations (FAR). There are instances where these obligations may be generally defined as a contract (agreement between two parties), but these obligations do not follow FAR-based procedures.

Obligation – A legally binding agreement that will result in outlays immediately or in the future. An obligation is a legal liability of the Government against available appropriation.

Overpayment – A payment in excess of what is due. When an overpayment occurs, the improper amount is the difference between the amount due, and the amount actually paid.

Recovery Audit –A review and analysis of an agency or program’s accounting and financial records, supporting documentation, and other pertinent information supporting its payments, that is specifically designed to identify overpayments. It is not an audit in the traditional sense covered by Generally Accepted Government Audit Standards (GAGAS). Rather, it is a detective and corrective control activity designed to identify and recover overpayments, and, as such, is a management function and responsibility.

3004 Roles and Responsibilities

Administration and Staff Office Chief Financial Officers (CFOs) are responsible for accurate and complete Payment Oversight Program (POP) testing and reporting in accordance with Payment Integrity Information Act of 2019 (PIIA) regulation and Office of Management and Budget (OMB) guidance. Additionally, they are responsible for assigning Senior Accountable Officials (SAOs) and determining their scope of authority.

Senior Accountable Officials (SAOs) are Senior Executive Service (SES) level staff for each program with annual outlays over $1 million that are responsible for all aspects of POP reporting and compliance with payment integrity activities in their organization in conjunction with respective CFOs.

Financial Services Center (FSC) is responsible for providing improper payment identification and collection that meet OMB and PIIA implementation guidance requirements to its customers for payments made.

3005 Policies

300501 General Policies

1. In accordance with 31 U.S.C. §§ 3351-3358, and 31 U.S.C. § 3562, VA will conduct recovery audits for each program and activity that expends $1 million or more annually, if conducting the audits would be cost effective.
2.  VA will conduct recovery audit activities in accordance with OMB Circular A-123.
3. Senior Accountable Officials (SAOs) will ensure recovery audits are performed if they are cost-effective.  
4. VA is authorized to establish contracts for recovery audits with commercial vendors to identify improper payments.
5. Recovery audit contracts use a contingency-fee compensation structure whereby the contractor is compensated based upon a negotiated percentage of actual funds certified to have been recovered, credited, or realized by VA as a direct result of recovery audit activities.
6. As recovery audit contracts stipulate in the terms of the agreement that the vendor will be paid a percentage of funds collected, an obligation will not be recorded until a VA official certifies the amount collected. Certification will occur based on a timeline specified in the contract (e.g., monthly or quarterly).
7. The obligation amount for recovery audit services will be calculated based upon the terms of the agreement (e.g., a percentage of the certified amount recovered).
8. Documentation required for overpayment audit recovery obligations includes the agreement with the commercial vendor and sufficient documentation to certify the amount collected by VA.
9. Overpayment audit recovery vendors must be individually vendorized and obligated; the use of “Miscellaneous Vendor” is not permitted.
10. Obligations pursuant to this policy must follow the requirements for all government obligations, established in Volume III, Chapter 2 – Obligations Policy.

300502 Integrated Financial and Acquisition Management System (iFAMS)

1. An OSE (Standard Obligation (non-acquisitions obligation)) will be used as the obligation document type when recording overpayment audit recovery obligations in iFAMS.
2. A PAI (Invoice Payment and Processing System (IPPS) standard payment) will be used as the payment document type in iFAMS.

300503 Financial Management System (FMS)

1. When recording an overpayment audit recovery obligation in FMS, a miscellaneous obligation document (e.g., 1358), approved use / authority code “20,” sub-code “A” must be used when recording an obligation in FMS.
2. Invoices approved for payment via FMS will be processed through standard IPPS processing.

3006 Authorities and References

• United States Code (U.S.C.)
  • 31 U.S.C. Ch 33, Subchapter 4, Improper Payments
  • 31 U.S.C. Ch 35, Subchapter 6, Recovery Audits
• Public Law 117-116, Payment Integrity Information Act of 2019 (PIIA)
• OMB Circulars
  • OMB Circular A-123, Management’s Responsibility for Internal Control, Appendix C
• VA Financial Policy Publications
  • Volume III, Chapter 2 – Obligations
  • Volume VII Chapter 3 – Payment Integrity and Fraud Reduction

3007 Rescissions

None.

Appendix A: Previous Policy Revisions

None.