Investigators tap data, tech, tipsters to root out fraudsters

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While prevention is the best defense against fraud, waste and abuse, the majority of state and local government analysts say they have the tools and resources they need to unravel complex webs of fraud, a recent survey says.

Thanks to the work of skilled investigators and prosecutors, the Department of Justice this week charged 47 defendants with defrauding the federally funded Child Nutrition Program in Minnesota. According to the charging documents, the defendants took advantage of pandemic-related changes to the program to siphon off $250 million for themselves.

The COVID-19 pandemic created many opportunities for fraudsters – and the government employees who work to prevent, detect and investigate their actions. Besides the recently uncovered fraud in Minnesota, DOJ fraud enforcement efforts (as of March 10) resulted in charges against more than 1,000 defendants and alleged losses exceeding $1.1 billion. In September 2020, the DOJ Criminal Division Fraud Section’s Health Care Fraud Unit identified $4.5 billion in allegedly false and fraudulent claims related to telemedicine fraud.

While most fraud against state and local government agencies does not approach that scale, they still rely on technology and experienced staff to unravel complex webs of fraud. A majority of state and local government employees who work in preventing, detecting and investigating fraud, waste and abuse say they are confident that they have the tools and resources they need, according to a new study.

Sixty-three percent of respondents to a survey that informed the third annual “Thomson Reuters 2022 Government Fraud, Waste, & Abuse Report” said they have what they need, up 14% since 2020. But based on the fact that most respondents said they would rather spend time on prevention than on detection or post-incident investigation, the report concludes that respondents feel prevention is the best defense.

Specifically, respondents said they spend an average of 27% of their time on prevention, but would like to spend 37%. This attitude was even stronger at the local level, where respondents said they currently spend 41% of their time on prevention, but would prefer to spend 53%.

“In a perfect system, there would be no [fraud, waste and abuse], because superior prevention measures would make it impossible, rendering detection and investigation unnecessary,” the report states. “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.”

Respondents who work in detection identify fraud in various ways. The most common – with 70% reporting using it – is by cross-referencing state databases of social benefits recipients, such as prison records and death benefits. The second most-used method (58%) is encouraging whistleblowing through an anonymous tip line. Rounding out the top three at 25% is use of artificial intelligence and other new technologies to identify anomalous billing and other activities.

When it comes to investigating fraud, 71% of respondents said their go-to source for searching public records is Google, while 64% said they also use government websites and more than half use investigative software.

As a result of recent, unprecedented fraud investigations, 60% of survey respondents report feeling that their work has become more challenging, and more than half expect that fraud, waste and abuse will continue to grow in the next two years. One reason for that is that some pandemic-related fraud schemes “exposed unknown systemic vulnerabilities,” one-in-five respondents said. Those include automated bot attacks, fraud “kits” sold on the Dark Web and social media schemes using payment platforms such as Venmo and PayPal.

The most common types of fraud, waste and abuse stem from the submission of false claims or using forged or fake documents to obtain benefits, the report states. Other common forms include billing for unnecessary items or services, overcharging for items or services and misusing codes on a claim.

The top three challenges that respondents say they face in fighting fraud, waste and abuse include the growing volume of work (45%), lack of budget or resources (41%) and recruiting of new talent (40%). To help, many respondents (62%) said their agencies have added cybersecurity measures to mitigate data breaches to proactively fight fraud, waste and abuse. Additionally, 87% said their agency has a process by which someone can lodge a fraud tip or complaint.

The study, conducted in the spring, involved 182 employees from state and local governments, all of whom regularly search public records and use other forms of investigative research as part of their job. Sixty-five percent of survey respondents were government employees at the state level, and the rest were county or city/municipal employees.

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