RD385 - Annual Report on the Commonwealth's Recovery Audit Program


Executive Summary:
In accordance with section 2.2-1822.1 of the Code of Virginia the Department of Accounts entered into a contract with PRG-Schultz USA, Inc. in early 2005 for recovery audit services. On December 30, 2005 a report regarding the status of these services as of that date was presented to the respective Chairs of the Senate Finance and House Appropriation Committees.

In December, 2005, the PRG-Schultz auditors were primarily involved in the beginning stages of audit field work for fiscal years 2002 through 2004. At that time approximately $280,000 in potential duplicate payments were identified and in various stages of validation. A minor amount was at the point of actual presentation to a vendor with the request to repay the Commonwealth, and the Department of Accounts had not received any repayments. Actual receipt of the repayments began in January, 2006.

As of December, 2006 the auditors have largely completed their field work and have presented the claims to most vendors for repayment to the Commonwealth. As of December, 2006 collections total $454,892. The majority of these recoveries represent duplicate payment claims. Approximately $130,000 of these collections represent payments originally made from the general fund. The remaining amount of collections approximating $325,000 represent disbursements originally made from various nongeneral funds including federal funds. Net of the auditor contingency fee of 20% all collections with the exception of general funds will be returned to the agencies. Agencies receiving a return of federal funds will coordinate the proper disposition of these funds with their federal cognizant agency.

The auditors remain involved in the review of payments executed under contracts between state agencies and vendors and will continue these efforts until all payments have been evaluated. Efforts to collect claims identified and validated are ongoing. The disposition of disbursements approximating $420,000 that have been identified as potentially erroneous remains unresolved. Validation efforts regarding these potential claims are continuing.

The PRG Schultz USA, Inc. contract provided for an optional extension of fiscal years to be audited. Accordingly, DOA has entered into an agreement with PRG Schultz to audit fiscal years 2005 and 2006. The payment files for these fiscal years have been provided to the auditors who have begun the preliminary analysis of this data. Communication from DOA regarding the continuation of this audit process will be sent to state agencies in early 2007 at which time the auditors will commence contacting agencies to begin the validation process for potential erroneous payments.