Hearing Wrap Up: Preventing Fraud in Government Payment Systems Through Bipartisan, Commonsense Solutions

“Actual data and actual solutions are what today’s hearing is going to be about”

WASHINGTON—The Subcommittee on Government Operations held a hearing today titled “Shifting Gears: Moving from Recovery to Prevention of Improper Payments and Fraud” to continue a multi-year long investigation into flaws in federal government payment systems. Subcommittee Chairman Pete Sessions (R-Texas), Ranking Member Kweisi Mfume (D-Md.), and many Subcommittee members showed immense enthusiasm for preventing further fraudulent and improper payments through bipartisan action. Expert witnesses outlined practical and easily implementable solutions to root out fraud in payment systems. These solutions include the elimination of the “pay and chase” model, an emphasis on data sharing, and the modernization of payment systems.

Key Takeaways:

More must be done to enable widespread data sharing across federal agencies. By preventing improper payments on the front end instead of recovering wasted taxpayer dollars on the back end, federal government agencies can dramatically reduce fraud and abuse.

• Ms. Kristen Kociolek, the Managing Director of Financial Management Assurance at the U.S. Government Accountability Office, explained how federal agencies can work with Congress to improve data sharing and prevent fraudulent and improper payments before they occur: “The best way to reduce improper or fraudulent payments is to not make them. Preventive controls, as their name implies, are meant to stop improper and fraudulent payments before they occur. One key government wide preventive control is the use of Treasury’s Do Not Pay System. Do Not Pay consolidates much of the data matching agencies have done individually to flag potentially improper or fraudulent payments. Federal agencies and some state programs can and should leverage Do Not Pay to ensure program integrity.”

• Mr. Ken Dieffenbach, the Executive Director of the Pandemic Response Accountability Committee (PRAC), detailed specific loopholes that must be closed in order to prevent improper payments and described the importance of sharing data across all levels of government: “We must address obvious anomalies such as Social Security numbers that have never been issued or issued to people who are now deceased. Dates of birth, indicating an applicant is ten or 110 years old. Applicants who have already applied in five other states or applicants who use names like Charlie Chaplin, Abraham Lincoln or Foghorn Leghorn, as at least three people did in pandemic programs. Those three were stopped before the money was dispersed, let me assure you. The government must pause and more closely review suspect claims before money is dispersed. We must look across multiple programs for red flags as fraudsters do not follow our government organizational charts. They steal from wherever it is easiest to steal. We must also responsibly leverage more data, especially data already in the possession of the government to identify suspicious patterns and trends indicative of fraud schemes.”

The Subcommittee will work with the Trump Administration and the Department of Government Efficiency (DOGE) to continue its bipartisan work investigating and eliminating fraudulent and improper payments.

• Rep. Brandon Gill (R-Texas) critiqued the U.S. federal payment system as a “bureaucratic administrative leviathan” that does not hold agency heads accountable. He also emphasized the importance of this Subcommittee and DOGE’s work to rectify the payment system deficiencies: “It seems to me that we’ve got an overextended bureaucratic administrative leviathan that is mailing out American taxpayer dollars fraudulently with virtually no accountability at all, bankrupting the American people with impunity. And this is from a federal government that ostensibly works in the interest of American citizens, is instead wasting our taxpayer dollars on a scale that is difficult to fathom. I think this is precisely why we need DOGE so badly to get this nonsense under control.”

• Rep. Gary Palmer (R-Texas) praised the efforts of the newly established Department of Government Efficiency in leveraging modernized technology to implement solutions recommended by the Oversight Committee: “Which brings me to Mr. Musk and I know there’s a lot of consternation about what they’re doing, but literally he’s brought in some computer experts with 21st century technology and done better oversight of the federal government in the last six weeks than we’ve done within the last 40 years. I mean, isn’t that one of the biggest problems we have with improper payments is we’ve got antiquated data systems? We don’t have the 21st century technology we need to do oversight, proper oversight.”

Member Highlights:

Subcommittee on Government Operations Chairman Pete Sessions (R-Texas) opened the hearing by emphasizing the need for improved data collection and data sharing efforts across federal and state government payment systems.

Subcommittee Chairman Sessions: “But the bottom line is that we need to know what data agencies need, who has that data—be it another federal agency, a state, or some other entity—and whether they have the ability to access it. And if not, why not? In order better prevent fraud and improper payments, expanded access to and use of personal data will be necessary. We must weigh privacy concerns against the overwhelming need to verify payments.

“And we cannot forget about the key role played by states and localities. They implement significant federal programs such as Unemployment Insurance, Temporary Assistance for Needy Families, and the Supplemental Nutrition Assistance Program. It will have diminished effect if we ensure federal agencies run a tight ship while not assessing state and local programs and how we can partner with them to stop the flow of improper payments.”

Rep. Virginia Foxx (R-N.C.) examined strategies federal agencies can implement to prevent fraudulent payments before disbursement and explored the potential of AI as a solution.

Rep. Foxx: “What investments could agencies take to prevent improper payments? Could investments in artificial intelligence help lower the improper payment rate? Well, again, what we want to do is not have the payment go out to begin with by using what’s available to the agencies now…”

Mr. Dieffenbach: “So technology is part of the solution. Another piece of it is culture, is ownership. And the Inspector General Act was passed in 1978 to create this community of watchdogs to prevent fraud. However, before 1978 and today, the agencies have the primary responsibility to do those things, to resource things properly, to exploit technology, as you just mentioned, and to ensure that they’re doing good risk assessments and following through on those to make sure they’re mitigating the biggest risks in the programs.”

Ms. Kociolek: “Yeah, as he mentioned, prevention is really the key in this and having the right data. So artificial intelligence can be helpful if you have the right data in the system. So we do have recommendations to encourage agencies to collect all the necessary information that is needed to ensure the databases are complete, that they’re accurate. If you’re using artificial intelligence and other data mining tools, but you have inaccurate or unreliable data in the systems, that is not going to be very helpful.”

Rep. Brandon Gill (R-Texas) slammed the federal government’s inability to hold agency heads accountable for disseminating billions of dollars in improper and fraudulent payments.

Rep. Gill: “What are the consequences for agency heads as they’re mailing out American taxpayer dollars without verifying who they’re going to?”

Ms. Kociolek: “The consequence is that any time there’s improper payments or fraud or money going out for not the intended purpose, that’s money that could be going to rightful recipients and used for other purposes.”

Rep. Gill: “Right. But I mean, from an incentive standpoint on the agency level, is there any consequence for either employees at the agency or agency heads for mailing out checks fraudulently?”

Ms. Kociolek: “Agencies are supposed to have an accountable official to oversee.”

Rep. Gill: “But what is the accountability structure? Do they receive less bonuses, for instance? Are they fired? What is that? What’s holding them accountable?”

Ms. Kociolek: “I think that is determined by the agency as to how that mechanism is set up. But certainly Congress can have accountability mechanisms.”

Rep. Gill: “What do you see? Have you ever seen an agency head get fired, for instance, for mailing out billions of dollars in fraudulent checks?”

Ms. Kociolek: “I have not seen that.”

Rep. Brian Jack (R-Ga.) criticized the federal government for fighting “today’s fraud issues with yesterday’s tools.” He argued that by examining the root causes behind the surge in improper payments, the government could identify long-term, modern solutions

Rep. Jack: “Trying to understand the history of how this ramped up. Is it something that was happening in the 40s, 50s, 60s? Have you seen it just really skyrocket as governments grown and government programs have grown? I’d love for you to just offer some thoughts on the history of how we got here.”

Ms. Kociolek: “Yeah, I think certainly some of the challenges and as we mentioned, the importance of having really foundational good internal controls is critical so that over the years as emergencies are going to arise, you have those foundational controls in place, you have plans and controls ready to go.”

Mr. Dieffenbach: “The threat is always evolving. The friction for getting public benefits is gone. Anyone with a computer anywhere in the world can apply for public benefits. Some of those programs have a lot of protections in place, as we found with the pandemic from our work, many did not. So it really takes a big data approach using all the tools available to find the hidden connections that you can’t find manually. We’re aware of 142,000 known pandemic fraud cases and they have a fingerprint, and we’ve been able to figure out that fingerprint. And our hope is that we continue our work to help people proactively defend against these things and prevent them early, because you cannot fight today’s fraud issues with yesterday’s tools.”

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