Recovery auditing is the systematic process of reviewing
disbursement A disbursement is a form of payment from a public or dedicated fund. Alternatively, it means a payment made on behalf of a client to a third party for which reimbursement is subsequently sought from the client.
It is a term most commonly used by so ...
transactions and the related supporting data to identify and recover various forms of over payments and under-deductions to suppliers. In other words, it is the recovery of lost money.
History
Recovery auditing was at first primarily for retail based companies. It was developed in the 1970s as a result of companies losing millions of dollars annually because of unpaid
invoice
An invoice, bill or tab is a commerce, commercial document issued by a sales, seller to a buyer relating to a sale transaction and indicating the product (business), products, quantities, and agreed-upon prices for products or Service (economic ...
s, duplicate payments, discounts and allowances not received and general overpayments. Before recovery auditing, this "lost money" was too difficult to identify due to the large amount of transactions processed every year. Companies began investigating deeper into their
accounting
Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...
and found errors in their favor. T
In the United States, two of the largest contributions made by this industry was the Improper Payments Act of 2002 (IPIA) spearheaded by Paul Dinkins and the Medicare Modernization Act of 2003.
Types of Recovery Audit Services
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Accounts Payable
Accounts payable (AP) is money owed by a business to its suppliers shown as a liability on a company's balance sheet. It is distinct from notes payable liabilities, which are debts created by formal legal instrument documents. An accounts payable ...
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Contract
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
compliance issues
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Currency
A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins.
A more general def ...
mistakes
* Duplicate payments
* Licensing compliance
* Paid credit memos
* Fictitious vendors
* Improperly applied taxes
* Missed cash discounts
* Overpayments
* Pricing errors
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Risk Management
* Shipping errors
* Unclaimed checks
See also
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Recovery Audit Contractor
The Recovery Audit Contractor, or RAC, program was created through the Medicare Modernization Act of 2003 (MMA) to identify and recover improper Medicare payments paid to healthcare providers under fee-for-service (FFS) Medicare plans. The Unit ...
References
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External links
Improper Payments Act of 2002*
Medicare Modernization Act of 2003.
Types of auditing