US pandemic response and relief funding – proactively mitigating fraud, waste and abuse

Developing an effective fraud mitigation strategy is key for government agencies.

In brief

• Pandemic programs are reporting high fraud rates
• Agencies can put controls in place to combat these attempts
• An effective risk mitigation strategy has the capacity to evolve

To respond to the COVID-19 crisis, the US government made available $5 trillion in relief measures in an effort to keep businesses open and households afloat.

More than two years after the first relief funds became available, hundreds of billions of dollars of federal funds have been subject to misappropriation through improper spending, waste, suspicious activity and outright fraud. Some pandemic programs have reported fraud rates ranging from 10%–41%, which adds up to hundreds of billions of taxpayer dollars.¹,²

US government watchdogs are on the lookout for misuse of funds across these programs and have established the Pandemic Response Accountability Committee (PRAC) to provide independent oversight and support to the Inspectors General community. Agencies found to be misusing funds or noncompliant with program requirements face funding reductions and clawbacks. The EY Forensic & Integrity Services team can help government agencies understand the program risks, put controls in place to comply with regulatory funding requirements and to monitor for/or detect fraud, waste and abuse.

Preparing for the challenges that increase the risk of fraud

Government agencies have experienced a significant increase in fraud risk driven by an influx of federal funding, combined with pressure to issue funds quickly. In response, many agencies have relaxed or removed controls completely, which significantly increases the risk of fraud. The nature of operating a federally funded program in the current environment has created several challenges for agencies that amplify fraud risk even further.

Fraud risk management for federally funded programs

Government agencies are facing a constant state of change when combating fraud in federally funded programs. Developing an effective fraud mitigation strategy is imperative to maximize the value of federal funds while maintaining the public trust. An effective fraud risk mitigation strategy should constantly evolve with the ever-changing program requirements, expectation of oversight bodies and adaptation of fraudsters. No matter the state of your federal funded program, assessing the agency’s ability to fight today’s fraud risk with a full suite of techniques is imperative.

Now

• Identify key risk areas and eligibility requirements
• Data exploration and collection
• Develop analytics to identify fraud risks
• Set up policies and procedures
• Capacity assessment
• Add scalable/temporary resources

Next

• Enhance fraud analytics solution through automation and advanced analytics
• Deploy case management and workflow solution
• Develop reporting on eligibility and fraud for regulators and executives
• Identify potential third-party data sets of interest

Beyond

• Risk-based prioritization of fraud investigations and reviews
• Machine learning to train analytics based on confirmed eligibility or fraud cases
• Integrate with third-party data
• Streamline reporting, investigations and reviews
• React to audit findings
• Investigate potential fraud, waste and abuse

• Monitor planning/implementation