Report: As federal spending lessens, risk of fraud, waste and abuse eases

The COVID-19 pandemic has evolved into a new normalcy, and as it has, federal spending has decreased; with it, the potential for fraud, waste and abuse of government resources has likewise lessened. 

Even so, around 60 percent of administrators surveyed for recent study on the subject reported they “still feel that their fraud prevention, detection, and investigation duties have become more challenging, due in large part to an overall increase in fraudulent activity,” reads the “2022 Government Fraud, Waste & Abuse Report: Emerging from the pandemic.” The report is an annual analysis by Thomas Reuters on the state of fraud, waste and abuse of government resources.

Researchers surveyed 182 government employees who regularly use risk and fraud solutions in their work. Sixty five percent were state employees, the rest worked in local or county government. Last year, Reuter’s report coincided with historic federal spending initiatives to address the pandemic, and because of that, concerns about fraud and waste were heightened.

Lacking staff and monetary support, local and state administrators were asked to “execute federal mandates without much additional staff or monetary support,” the report continues, noting that this was in addition to dispersing more than $650 billion in unemployment benefits. Abuse of government resources climbed. And looking ahead, the majority of administrators surveyed said they didn’t think it would decrease anytime soon: “More than one-half (53%) of our survey respondents say they expect the prevalence of FWA [fraud, waste and abuse] to increase over the next two years.”

Along with fraudulent claims for federal programs like Medicare, disaster assistance, unemployment benefits and the Small Business Administration’s Paycheck Protection Program, administrators reported seeing misuse of codes on claims, the use of kickbacks or rebates to receive reward referrals for items reimbursed by government programs, account takeovers, identity or business fraud, and paying for referrals of program beneficiaries.

Other, newer fraud tactics reported by respondents include automated attacks by “bots,” document templates for stolen IDs sold on the Dark Web, numerous email addresses for one account, fake pharmacies trying to obtain prescription drugs, and social media schemes that use payment systems like Venmo or PayPal, the report says. Compiling this, working remotely has made it harder to catch fraud, because there are less face-to-face interactions.

To detect fraud, 70% of respondents said they do so by cross-referencing databases of social benefit recipients. This could look like searching for the same person in prison records, death certificates and unemployment beneficiaries. More than half said they detect fraud through whistleblower complaints or citizen tip lines. Another 25% said they detect fraud by leveraging artificial intelligence.

“In a perfect system, there would be no FWA, because superior prevention measures would make it impossible, rendering detection and investigation unnecessary. Unfortunately, there is no such thing as a perfect system, which is why efforts to improve current systems and procedures are such a high government priority,” the report continues.

On average, respondents estimated they spend nearly 30% of their time on front-end prevention measures, but would like to spend about 10% more time.

“This desire was even more pronounced at the local level, where respondents say they would prefer to spend more than half (53%) of their time on front-end prevention — up from their current level of 41%,” the report says.

After the fact, 71% said they use Google search, 54% said they search public records and 64% use a third-party investigative software produced by companies including LexisNexis or Thomas Reuters, the author of the report.

As administrators across the United States work to reduce fraud, respondents ranked an increasing volume of work as the most difficult challenge to overcome (45%), followed by tight budgets (41%), recruiting (40%), retiring staff (37%), new technologies (37%), and keeping up with emerging issues (36%). Notably, “only 25% of respondents feel that the continuing impact of the pandemic will be a major challenge in 2022, down from 43% in our 2020 survey — yet another sign, perhaps, that the pandemic’s impact is indeed receding,” the report says.

To read the full report, visit Thomas Reuters’ website.