Fraud against the government is staggering. This fraud expanded to astronomically, mind-boggling proportions during the COVID-19 pandemic. In this period, federal, state, local, and tribal agencies were drowning in money lost to fraud – money that comes out of taxpayer pockets and at a loss to real people with real needs. Consider small businesses, parents in need of SNAP benefits, workers seeking unemployment compensation, and more.
Government agencies can learn a lot from the private sector when it comes to preventing fraud. This is a key lesson from an October 2023 report from the Government Accountability Office (GAO). Among the suggestions the GAO offers to prevent fraud: strategic fraud risk management and “enhanc[ed] data analytics.”
Sadly, the government let its guard down in its quest to process massive amounts of benefit payments in a short window of time. The GAO found that “[f]ederal agencies did not strategically manage fraud risks and were not adequately prepared to prevent fraud when the pandemic began… Had agencies already been strategically managing their fraud risks, they would have been better positioned to identify and respond to the heightened risks that emerged during the pandemic. COVID-19: Key Elements of Fraud Schemes and Actions to Better Prevent Fraud, GAO-24-107122, Oct. 19, 2023, at 12.
The GAO noted that “[w]hile eliminating all fraud is not a realistic goal, resources and requirements exist to support strategic fraud risk management. For example, GAO’s Fraud Risk Framework and Antifraud Resource provide leading practices and interactive tools, respectively, to help agencies combat fraud. GAO’s 142 recommendations to agencies to align their efforts with fraud risk management leading practices also provide a roadmap for action.”
One of the areas where agencies failed to prevent fraud was where these agencies “relied on self-attestation or self-certification for individuals to verify their eligibility or identity to receive assistance from some COVID-19 relief programs in order to disburse funds quickly to those in need.” GAO-24-107122, at 8. Verification of identities, documents, and circumstances could have deflected a great deal of pandemic fraud against those in need. But that is not the only vector for fraud.
“Since March 2020, Congress and the Administration have provided trillions of dollars in COVID-19 relief funding to help the nation respond to and recover from the pandemic. Agencies across the federal government acted quickly to stand up new programs and greatly scale up existing programs. Federal COVID-19 relief funds were distributed broadly to tribal, state, local, and territorial governments; businesses; and individuals to combat the effects of the pandemic on the public health system as well as on the economy.” GAO-24-107122, at 1.
“The unprecedented demand for benefits and the need to quickly implement or expand programs increased the risk of fraud during the pandemic…Better understanding the nature of federal fraud schemes and the resources available to combat them can enhance agency efforts to prevent, detect, and respond to fraud risk in normal operations and emergencies.” GAO-24-107122, at 1-2.
“A variety of COVID-19 relief programs were targets in fraud schemes, with some schemes involving multiple programs.” Fraudsters had access to a buffet of COVID-19 programs: the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) or COVID-19 Economic Injury Disaster Loan (COVID-19 EIDL) program or the Department of Labor’s (DOL) unemployment insurance (UI) programs, the Department of the Treasury and the Internal Revenue Service’s economic impact payments, the Treasury’s Emergency Rental Assistance program and Coronavirus Relief Fund, the Department of Agriculture’s federal child nutrition programs and Coronavirus Food Assistance Program, the Department of Education’s Higher Education Emergency Relief Fund, the Department of Health and Human Services’ Health Resources and Services Administration’s COVID-19 Uninsured Program and Provider Relief Fund, and the Centers for Medicare & Medicaid Services’ Accelerated and Advance Payment Program, and the Federal Reserve’s Main Street Lending Program. GAO-24-107122, at 4.
Fraud comes in many forms, but often “[f]raudsters may use considerable skill and innovation when employing mechanisms.” GAO-24-107122, at 8. Some COVID-19 fraud came where individuals misrepresent themselves or their situation to “improperly obtain a benefit for a beneficiary or at their expense.” This is what the GAO calls “beneficiary fraud.” Sometimes fraudsters will commit identity fraud where the perpetrators use someone else’s “personal information in order to fraudulently obtain benefits.” Still other fraudsters engage “in synthetic identity fraud by fabricating an identity using fictitious information in combination with stolen information such as a Social Security number.” GAO-24-107122, at 7. Fraudsters also falsify or manipulate documents to further their fraud. GAO-24-107122, at 8.
The GAO rightly pointed out that “[h]ad agencies already been strategically managing their fraud risks, they would have been better positioned to identify and respond to the heightened risks that emerged during the pandemic. Agencies have the opportunity to learn from the experiences during the pandemic and to ensure that they are strategically managing their fraud risks. Doing so by leveraging available resources and adhering to requirements will enable them to carry out their missions and better protect taxpayer dollars from fraud during normal operations and prepare them to face the next emergency.” GAO-24-107122, at 12.
We hope government agencies learn from the mistakes that happen when we turn a blind eye to fraud. We hope the government will harness the power of data and analytics to verify identities, authenticate transactions, prove up documents, use pattern analysis, and logic. All these tools can help lock the doors to fraud and make sure benefits go into he hands of the eligible and not the criminals.
Source: COVID-19: Key Elements of Fraud Schemes and Actions to Better Prevent Fraud, GAO-24-107122, Oct. 19, 2023 (citing A Framework for Managing Fraud Risks in Federal Programs, GAO-15-593SP, July 28, 2015, and Understand and Combat Federal Fraud).
Eric J. Ellman is Senior Vice President for Public Policy and Legal Affairs at the Consumer Data Industry Association (CDIA) in Washington, DC. He also served for eight months as Interim President and CEO of the Association. More