MEMORANDUM NO. 990011
 

TO:	Chief Financial Officers
	Vice Chancellors
FROM:	Edward Renfrow
	State Controller

SUBJECT: Recovery of Overpayments Audit

The Office of the State Controller (OSC) recently notified your department head in a letter dated March 30, 1999 about the statewide audit project that the Office of the State Controller (OSC) has begun at the direction of the 1998 General Assembly. This contract and audit is being performed in accordance with 1998 Session Law 212, Section 26.1 which provided that "the State Controller shall negotiate a contract with a third party to perform an audit and collection process of inadvertent overpayments by State agencies to vendors as the result of pricing errors, neglected rebates and discounts, miscalculated freight charges, unclaimed refunds, erroneously paid excise taxes and related errors. The third party shall be compensated only from funds recovered as a result of the audit." The OSC has contracted with the Profit Recovery Group International, Inc. (PRG) to perform this audit. This company has over 30 years experience in this industry and proven success with overpayment recoveries in other governmental environments.

The first audit shall cover payments made by State agencies and universities during fiscal years 1995-1996, 1996-1997, and 1997-1998. Excluded from this audit and recovery are purchases of medical services and/or the payments used to reimburse or otherwise pay for health services and any invoices or payments in dispute on or before March 15, 1999. The first audit shall be completed by March 15, 2000.
 
 

The OSC will be central administrator for the recovery of overpayments project. As the central administrator, OSC is responsible for (1) overseeing the contract with PRG to ensure proper accountability to the State for this contract (2) providing PRG with proper direction and knowledge of the State environment (3) administering the collection of funds and accounting for these funds in the Recovery of Overpayments Special Reserve Fund (4) resolving any disputed savings identified by this audit and (5) making compensation payments to PRG in accordance with the compensation arrangements provided by the contract.

Funds recovered from overpayments may take the form of either an actual cash reimbursement from a vendor or a credit toward future anticipated purchases from a vendor. In the case of an actual cash recovery, the vendor will submit its payment directly to the OSC, which will record the funds in the Special Reserve Fund.

In order for a State agency to accept a credit from a vendor in lieu of an actual cash reimbursement, all the following criteria must be met: (1) the vendor must be in good standing with the State of North Carolina and (2) the vendor must have transacted business with the State agency under audit within the twelve (12) months immediately preceding the date upon which PRG begins its audit of a State agency. A credit received by a State agency in lieu of an actual cash reimbursement must be applied by the State agency against an actual purchase within sixty (60) days after the date of notification of the overpayment is received from PRG. If after sixty (60) days a credit has not been utilized by a State agency, the credit then becomes an outstanding receivable from the vendor to the State of North Carolina and is thereafter subject to the collection statutes, policies and procedures of the State of North Carolina. If a State agency under audit utilizes a credit it has accepted in lieu of an actual cash payment within sixty (60) after the notification of the overpayment by PRG, the State agency will be required to transfer an amount equal to the amount of the credit to the Special Reserve Fund.

The OSC will notify you in writing prior to beginning an audit of its vendor payments. Your cooperation and support of this effort is appreciated. Should you have any questions, please feel free to call Zeke Partin, Assistant State Controller at 919-981-5420.
 
 

ER/ZKP