On March 10, 2010, the White House, in its "continued effort to reduc[e] payment errors and eliminat[e] waste, fraud, and abuse in Federal programs," issued President Obama's Memorandum on "Finding And Recapturing Improper Payments" (Memo). The Memo, a follow-up to Executive Order 13520 of November 20, 2009, "Reducing Improper Payments ," directs executive departments and agencies to expand their use of "Payment Recapture Audits" in order to better reclaim wasteful or fraudulent governmental payments.

The Memo defines a Payment Recapture Audit as:

a process of identifying improper payments paid to contractors or other entities whereby highly skilled accounting specialists and fraud examiners use state-of-the-art tools and technology to examine payment records and uncover such problems as duplicate payments, payments for services not rendered, overpayments, and fictitious vendors.

However, the Memo also states that the term "Payment Recapture Audit" is to have the same meaning as "recovery audit" as defined in the Office of Management and Budget (OMB) Circular A-123, Appendix C:

A Recovery Audit is a review and analysis of the agency's books, supporting documents, and other available information supporting its payments that is specifically designed to identify overpayments to contractors that are due to payment errors. It is not an audit in the traditional sense. Rather, it is a control activity designed to assure the integrity of contract payments, and, as such, is a management function and responsibility.

See the memo here.

The Memo suggests that one particularly effective method for Payment Recapture Audits is to hire accountants and auditors on a contingency basis and tie their compensation to the identification of misspent funds-a method that the Memo implies would likely lead to an increase in the finding of "misspent funds" if adopted broadly across the Executive Branch. While the President's Memo offers a large amount of guidance on how to audit government contractors, it fails to address any possible process protections for contractors in response to these audits' findings.

President Obama's Memo orders the Director of OMB to develop guidance within 90 days of March 10 "on actions executive departments and agencies must take to carry out the [Memo's] requirements" and to "coordinate with the Council for Inspectors General on Integrity and Efficiency to identify an appropriate process for obtaining review by Inspectors General of the effectiveness of agency efforts." Wiley Rein will continue to track these implementation efforts, as well as any other initiatives indentified by OMB in an effort to further carry out the Memo's stated goals.