fraud detection


4 ways government program managers can solve the fraud Catch-22

With fraud, waste and abuse depriving public-sector agencies of hundreds of millions of dollars each year, government must be 100% dedicated to fighting the problem. Yet while agencies may be committed, fighting fraud can create a dilemma for government program managers.

If program managers fight fraud, they confirm it exists in their program, which can provide political fodder for those attacking social benefit programs. Fraud is rampant in every industry, yet  government is held to transparency standards not required in the private sector. Public fraud prosecutions could discourage voters from renewing related program tax levies, which would further hurt the program.

If program managers don’t fight fraud, there is no deterrent. In my experience, criminal fraud rings target government programs with weak fraud controls and regulatory policy gaps.

For example, a Medicare scheme involving sober homes, kickbacks and fraudulent billing was seemingly born in South Florida. Several big prosecutions took place, and investigators shut down the perpetrators.  The scheme seemed to have migrated north as Ohio battled its opioid epidemic with increased treatment funding, with the fraudsters taking advantage of substance-use disorder patients and health care insurers. The Ohio Attorney General 's Office recently indicted Medicaid provider Braking Point Recovery Centers and related conspirators in a $48 million alleged fraud case.

This lose/lose situation can confound government program managers.  On one hand, they may get attacked for doing the right thing and tracking down fraud. On the other, shying away from confronting fraud results in wasted program dollars. Both approaches run the risk that an audit will identify overpayments and result in recovery from the government agency.  I call this the “double whammy,”  but I believe those who might ignore fraud are more likely to feel its pain. Taxpayers expect more accountability and transparency in government, including social benefit programs.

The fraud that you know

Brave fraud-fighting program managers face another challenge. They may use data and analytics to identify potential fraud but lack the resources to act on the results.

If it gets out that a government program had information about possible fraud and abuse and did nothing, then the manager gets the blame.  Even worse, the agency chief can become a punching bag in the media and with legislators.

The problem may be out of the program manager’s control.  Frequent employee turnover and a slow civil service hiring process can overwhelm a short-staffed fraud unit. The reporting and analytics function may be flawed and produce too many false positives. Even good program managers may struggle with how deep to dig for fraud, waste and abuse.

When I was leading audits, a wise senior manager told me, “Don’t turn over rocks faster than I can kill what slithers out from under them.”  She knew negative press coverage meant a trip to the statehouse for uncomfortable questions from the legislature, governor or reporters. She wanted to fight fraud, waste and abuse but had limited resources to investigate or fix identified problems.  This manager refused to turn away but understood her team’s limitations. She needed to strike a balance.

Taxpayer watchdogs should carefully consider their tactics and messages to ensure they're not unwittingly encouraging government employees to avoid seeking fraud. Government managers may get by with plausible deniability. However, I have seen more people demoted or fired for not knowing or doing enough. I recommend being proactive and fighting fraud.

Regulators and legislators with oversight responsibilities may need to ask more questions of program administrators.  If a program has few fraud recoveries, it’s worth inquiring about what fraud detection activities are underway. Consider reported recoveries relative to the overall size of the program. For example, 10% is widely considered a conservative estimate of fraud and abuse in government health care programs.  A program uncovering a $50 million fraud problem sounds great. However, using the 10% estimate, a $20 billion program should have lost $200 million. Is identifying only 25% of the fraud problem enough?

Not fraud, but waste and error

Government program managers must fight waste and error as well.  Siloed systems are a breeding ground for data errors. When systems can’t talk to each other, data errors can persist and multiply.  An automated error that violates policy can replicate many times in a short period. In the end, millions of dollars can be lost before it is discovered and remedied.  

When issues boil over and become public, stakeholders don’t care who or what is actually to blame. The senior leader has ultimate responsibility for risk management, which includes fighting fraud, waste abuse. While staff points fingers, leaders may find themselves subject to subpoenas in lawsuits by advocate groups or service providers.  One of the interesting side effects of term limits is how a problem can fester for years only to jump up and bite a new administration. Don’t get blindsided.

Putting technology to work

What can government program managers do to fight fraud and limit risk?

  1. Assess and improve current controls. Look for incremental ways to improve performance. Start with detection and recovery, and with insights gained move toward prevention and cost avoidance.
  2. Be data-driven. Employ data analytics to help accurately identify and assess issues. Use these insights to inform strategic and operational decisions.
  3. Implement an enterprise approach and break down data silos. Using data from multiple programs can help identify issues faster since program eligibility requirements often overlap. Also, providers may serve multiple programs and stealing from one means stealing from all of them.
  4. Incorporate advanced analytics. Hybrid analytics using artificial intelligence and machine learning can provide more complete insights faster. Built off an enterprise platform, advanced analytics can be operationalized to ensure business rules are applied correctly. More accurate fraud alerts promote efficiency and faster return on investment.

Government managers who wish fraud away will suffer the risk of not acting. These four actions can help in the fight. Using trusted analytics can help governments do the right thing and get the right results. Data-driven insights are the best defense and put governments on the offensive against fraud. 

About the Author

John Maynard is a fraud and risk solutions specialist for analytics provider SAS.


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