“Fraud Prevention: Understanding Fraud in Federally Funded Programs Run by the States”
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House Oversight and Government Reform Subcommittee on Government Operations U.S. House of Representatives
Follow its sittingsSpeaker 1
Today's witnesses will help us understand the root causes of state-level fraud and lay the groundwork for additional action to ensure that taxpayer dollars are appropriately used. So today, we will move directly to the opportunity for members of Congress who are finding themselves today stretched as they have their duties done. But I'm going to wave on several members who've asked on a bipartisan basis to be here today, without objection. Representative Bobert, Lauren Bobert of Colorado, and representative Wickenshaw of Virginia, who finds himself here on a regular basis. I think he likes this committee, would be the assumption I would make.
So welcome, on the per committee for the purpose of questioning the witnesses at today's hearing, without objection. So I'm pleased to welcome our witnesses for today's hearing. We spent a good bit of time yesterday in my office listening to you, understanding that the things which you need to bring to us need to be stated. I, mister chairman, you understand that I do not have a quick gavel. I want our witnesses to make their points, to feel like they can engage this committee.
This committee is on a bipartisan basis very close to an association with each other where we believe each other asks good questions. We believe each other is after the same answers. We believe each other have a goal in mind, and that is something that Mister Infume and I have worked at for a number of years. So each of our witnesses today that I'm getting ready to introduce should feel like they are in not just friendly territory, but they are in territory where we are asking them to make sure that their words are clearly understood. So I would first welcome Mister Sethbagnan Ann, who is director for audit services in the US government's accountability office, forensic audits, and investigation service.
At GAO, he leads audits of major federal programs, focusing on a range of programs and the integrity of those programs and risk management, including fraud. We're delighted he's with us. We then welcome doctor OJ Olejah, who is the chair, chief executive officer of the State Financial Officers Foundation, a national organization dedicated to advancing fiscal responsibility for public policy, protecting taxpayer dollars, and promoting economic freedom. Doctor, welcome. We also welcome Allison Ball.
She is the elected auditor of public accounts for the Commonwealth of Kentucky. In this role, she leads an independent office charged with auditing the accounts and financial transactions of all spending agencies of Kentucky and protecting taxpayer dollars from waste, fraud, and abuse. And we add Mr. Robert Westbrooks, who is currently an independent consultant. Until 2022, he served as director of the Pandemic Response Accountability Committee. He previously served as inspector general at the Pension Benefit Guaranty Corporation and the US Small Business Administration.
Welcome, Mr. Westbrooks. We're delighted that you are with us today. So thank you to each of you for joining us. I would now ask that each of you rise, for the administration of the oath to our witnesses raising your right hand. Pursuant to committee rule nine g, the witnesses will raise their right hand and answer the following.
Do you solemnly swear or affirm that the testimony that you're about to give is the truth, the whole truth, and nothing but the truth? So help you, God. Let the record reflect that each of the witnesses may be seated. Each of the witnesses answered in the affirmative, and we welcome each of you, remembering that this subcommittee does mean it when we say all of the truth, so you should not be bound by anything of a time constraint. We want you to make your points.
So we appreciate you being here today. Let me remind the witnesses that while we have read your written testimony, feel free to go well beyond that, because I think that as we get to your oral statements on the record, you will recognize that we are here to listen and learn from you. So please remember that we've got a system here that goes green light, yellow light, red light. As you get to the red light, as you're able to effectively move your comments, I would understand that. So I would now recognize Mister Dagnoya and Miss Bagdoyan for his opening statement.
The gentleman's recognized.
Speaker 3
Thank you, Chairman Comer, Chairman Sessions, distinguished members of the subcommittee. I'm pleased to discuss today, at a high level, the fraud risk landscape facing state-administered, federally funded assistance programs. This landscape has changed significantly and is evolving rapidly, and not in a good way, in the long aftermath of the COVID-19 pandemic. Massive spending during that period exposed significant weaknesses, which persist today, in federal and state capacity to preemptively identify and manage fraud risks in multiple joint programs. Illustrating this, GAO estimated a while ago that up to $135,000,000,000 in pandemic era unemployment insurance benefits, or 15% of the total spending, was lost due to fraud, resulting from poor controls.
Most of these losses were never recovered. Spending on federal assistance programs administered by states exceeds about a trillion dollars annually, rendering them inherently at risk of fraud. In this regard, two such programs, unemployment insurance and Medicaid, are on GAO's high-risk list for significant program integrity weaknesses. Other programs such as SNAP and TANF face substantial fraud risks and have experienced actual fraud. What underscores the present state of the fraud risk landscape is a fundamental failure by federal and state agencies to acknowledge that they are significant and require decisive response.
This mentality must change, and quickly, to mitigate both the present and future risk landscapes. As symptoms of the failure to acknowledge their existence, principal factors contributing to fraud risks at the federal and state levels include absence of leadership priority to drive effective responses, weak fraud risk management capacity such as superficial risk assessments and counter fraud strategies, inadequate preventative front and back end controls, especially regarding verifying identity, determining eligibility, calculating benefit amounts, and tracking their duration, averting duplicate benefits across multiple jurisdictions, and recovering financial losses. As I mentioned, pandemic losses were recouped only at a cents on the dollar rate. Then there is, fund and forget postures regarding federal oversight of state activities, as well as restrictive program design, is very important to make note of, precluding stringent controls or allowing loose rules that exacerbate risk, including the signal bane of auditors' unquestioned program applicant self-attestation and certification. In a landscape that offers numerous opportunities for exploiting risks, fraudsters are innovative and fast-moving.
Taking full advantage of technology, including artificial intelligence, to pursue their schemes. However, due to the aforementioned lack of acknowledgment, federal and state agencies are not keeping up with cascading risk effects. I'll close by stressing that the current fraud risk landscape facing state-administered federal programs involving potentially significant financial losses is of great concern. Of equal concern is the absence of decisive, comprehensive federal and state responses. This must be rectified, beginning with an acknowledgment that this is a significant problem.
Sustained congressional oversight and comprehensive action, such as that contemplated by the oversight committee, are essential to eliciting an effective response. Mister chairman, this concludes my remarks. I look forward to the subcommittee's questions. Thank you.
Speaker 1
Sorry. We're getting used to this. They think I ought to be able to speak into a microphone. Thank you very much. We have much to speak about.
Your presentation opened up a lot of issues.
Speaker 4
Doctor Oka, you're now recognized. Thank you, Mr. Chairman. Chairman Comer, Chairman Sessions, and distinguished members of the subcommittee, thank you for the opportunity to testify today. My name is Doctor OJ Oleka, and I serve as the chief executive officer of the State Financial Officers Foundation. SFOF is a nonpartisan national network of 41 statewide elected financial officers across 28 states, who collectively oversee roughly $1,500,000,000,000 in public assets.
We equip these officers to promote fiscally responsible policy and protect taxpayer dollars. I'm also the son of Nigerian immigrants who came to this country with nothing. Through hard work, faith, and the opportunities that this great country provides, my parents lived the American dream. That dream is why I've dedicated my career to public service and ensuring that government works for the people who pay for it, and that American generosity is not taken advantage of by fraudsters, foreign or domestic. In our inaugural oversight report released on February 27, we showed how state financial officers are already saving taxpayers billions of dollars by stopping waste, fraud and abuse.
Examples include Florida CFO Blaise Ngoliya, who identified $1,860,000,000 in excessive local government spending. North Carolina auditor Dave Bullock, who exposed over $1,400,000,000 in lapsed salaries across 46 state agencies, and Kentucky auditor Allison Ball, who you'll hear from next, who uncovered more than $836,000,000 in wasted Medicaid payments, and Utah auditor Tina Cannon, who uncovered nearly half of $1,000,000,000 in inappropriate hospital payments, these are not isolated successes. State treasurers play a critical role in stopping waste, fraud, and abuse before it occurs. State auditors complement this work by exposing waste, fraud, and abuse after the fact. Together, these elected officials serve as the front-line guardians of public funds.
Fraud and waste in federal and state benefit programs are not abstract problems. They drive up costs for American families. New polling shows that 87% of voters expressed concern about fraud or misuse of taxpayer dollars, and 83% say fraud contributes to higher taxes and rising costs for families. Every dollar lost to fraud is a dollar that could have gone to education, or to infrastructure, or tax relief. Defrauding the American taxpayer has become a multibillion-dollar industry.
It's a feature in our system, not a bug. Thankfully, President Trump's task force to eliminate fraud led by Vice President Pence is fully committed to ending the fraud industrial complex and restoring public trust back in the government benefits system. SFOF and our 41 state financial officers are fully committed to supporting Vice President Vance and the administration's initiative to root out fraud. SFOF stands ready to serve as a resource. I would like to offer five specific recommendations that can help the vice president, the task force, and Congress be as successful as possible.
Number one, state financial officers routinely identify fraud, waste, and abuse in federally funded programs administered at the state level, but there is no formal mechanism to share that information with federal inspectors general. Amend the Inspector General Act to require every federal inspector general to establish standing liaisons with state financial officers, mandatory data sharing protocols, and joint task forces. Number two, federal benefit programs such as Medicaid, SNAP, and unemployment insurance still rely heavily on self-attestation, as was just mentioned, or periodic checks rather than real-time verification of income, residency, and citizenship status before payments are issued. Mandate truly real-time nationwide cross-checking of income, residency, and citizenship status before benefits are issued. Number three, federal agencies are still catching most fraud after payments have been made, rather than preventing it in real time, even though advanced tools already exist.
Accelerate adoption of modern fraud detection technologies across all federal benefit programs. Number four, many federal benefit programs administered by states continue to experience high rates of improper payments and fraud, despite existing federal rules. Under the current system, states receive full federal matching funds regardless of how effectively they verify eligibility, detect fraud, or reduce waste. Expand performance-based funding across federal benefit programs administered by states to help resolve that problem. And number five, taxpayers and elected officials currently lack a single accessible real-time view of fraud, waste, improper payments across federal programs.
Create a single real-time public dashboard so taxpayers can see exactly where their money is going, and how much is lost to fraud and waste. The father of three young children loves this country. I believe we have a moral and fiscal duty to protect American taxpayers and their hard-earned dollars. SFOF stands ready to support this committee, this Congress, the president and the vice president, and the task force to eliminate fraud, and to defend our nation's treasure, defeat corruption, and deliver real results worthy of the American people's trust. Thank you, Mr. Chairman.
Speaker 1
Doctor Olathe, thank you very much. Very nice. We next go to auditor Ball. Welcome.
Speaker 5
Thank you very much, Chairman Comer, Chairman Sessions, Democratic and Republican members of the subcommittee. It's an honor to be here today, and I thank you very much for this invitation. The topic of waste, fraud, and abuse is not necessarily the most pleasant one to discuss, but I hope to set a positive and hopeful tone while speaking about this non-partisan issue. In just a little over two years since I was elected as state auditor, my office has uncovered over $1,000,000,000 of waste, fraud, and abuse within Kentucky's executive branch. Fraud is obviously what makes the headlines, and I'm more than happy to talk about how we discovered fraud such as a state employee's embezzlement of $400,000.
But I also want to make sure that we talk about the more prevalent and, I think, monetarily impactful problem of waste. This is a problem that my office encounters every day, but it's one that is easily fixable. And because unfettered waste ultimately creates an environment where fraud can flourish, we must do all we can to combat both. In August 2023, my predecessor began a special examination at the request of the Biden administration, HHS OIG, in conjunction with three other states. When I took office, I saw this examination through both under the Biden administration and the Trump administration.
This exam revealed that Kentucky paid $836,000,000 to managed care organizations for the same Medicaid beneficiaries whose coverage was also being paid for by another state. To be clear, this is definitely waste because one state's payment to an MCO covers all health care of all Medicaid recipients. So when two or more states are paying MCOs for the same person, only the MCO, not the Medicaid recipient, benefits. But that's not all we found. In conducting the last three audits required by the Single Audit Act, we have revealed a plethora of problems that show Kentucky is a target-rich environment for waste, fraud, and abuse in the executive branch.
These problems include dead people remaining on Kentucky Medicaid, multiple people using the same Social Security number to obtain Medicaid, and ineligible noncitizens receiving Medicaid benefits. An executive branch data system housing Kentucky's taxpayers' personal info was hacked in five minutes during a security test, and Medicaid-funded long term care facilities like nursing homes in Kentucky were not being inspected every 15 months as required by law, and some had not received an inspection since 2019. And that's not all. My office of the Ombudsman unit, which reviews Kentucky's processing of SNAP, Medicaid, Medicare, and TANF benefits, performs a variety of error reviews, one of them being payment error reviews. In just one year, we've been able to assist the Commonwealth in dropping its SNAP payment error rates from 9.1% to 3.5%.
But there is still more work to be done because federal rules for other programs have been more relaxed until the passage of the one big beautiful bill last year. Kentucky's executive branch simply has not paid as much attention to the other programs as it should. That's why Kentucky has a payment error rate of 47.5% for Medicaid long term care program, 28.5% for the Medicare savings program, 9.7% for the TANF program, and 5.3% for the MAGI Medicaid program. These error rates likely implicate 100 millions of dollars in federal funding. I could go on and on about waste, fraud, abuse my office has uncovered, but it's more productive to talk about solutions.
I recognize that auditors across the country are structured differently. In Kentucky, I'm an independent statewide elected official that is constitutionally separate from every other office and branch of government, beholden to no one but the people of Kentucky. In my view, it's crucial for every state auditor to bring this mentality of independence to their job. In doing so, state auditors must go beyond just doing legally mandated audits. To do this, I've instructed my office to complete a number of what we call special examinations, like what we did to uncover the $836,000,000 of Medicaid waste.
Special examinations are essentially investigations that are not bound by traditional auditing rules, as they can be too constraining to root out the problem of waste in particular. As an example, the traditional auditing rule of materiality sometimes allows wasteful expenditures that don't have a material impact on an entity's finances to go undetected. So I have employed a multidisciplinary group of auditors, lawyers, investigators, and analysts who understand how to tackle waste, fraud, and abuse from every angle. And those people need to be well-equipped. That's why my office has an AI task force to determine how to implement the use of AI and all the aspects of our work.
AI can help us look at whole populations of data versus traditional sampling methods and auditing, and we'll drastically cut down the amount of time it takes to audit, allowing us to tackle more issues than ever before. Another part of being well equipped is having the right data access. For the Medicaid capitation exam I discussed earlier, HHS OIG gave us safeguarded special access to a federal database housing far better information than what states normally have access to. And finally, the unfortunate reality is that some people simply won't change their ways unless the harm they are causing to their state is exposed. Congress is well suited to hold accountable the nefarious and incompetent state actors who waste taxpayer money and defraud the American people.
And like today, state auditors' offices can assist Congress in doing so. This is a non-partisan issue. If we take waste, fraud, and abuse seriously, we can ensure that every family gets the needed assistance without breaking the backs of American taxpayers. Thank you very much for your time, and I'm happy to answer any questions the subcommittee has.
Speaker 1
Arter Ball, thank you very much. Mister Westbrooks, welcome to the subcommittee today. The gentleman's recognized.
Speaker 6
Thank you, Mr. Chairman. Chairman Sessions, Chairman Comer, distinguished members. Thank you for this opportunity to testify today. My name is Bob Westbrooks. I've spent the last 30 years in public service investigating fraud cases and auditing fraud controls.
I'm a retired inspector general and the former executive director of the PRAC. I authored the book titled Left Holding the Bag about the pandemic fraud aid experience and the gaps in fraud prevention and detection efforts, and how we could be better prepared for the next emergency crisis. I'd like to highlight a few points from my written testimony. Is there fraud in federally funded state-run programs? Absolutely.
Why? It's because it's where the money is. It's relatively easy to steal, and fraudsters don't sufficiently fear getting caught and punished. The prevalence of fraud and the underlying root cause vary among programs. Is there too much fraud?
Absolutely. But we don't really know, in my view, the true amount of fraud, true amount lost, true amount that we have lost to fraud. Whatever the amount, headlines involving large dollar-loss fraud cases erode public trust and can adversely impact those in need. So, what do we know about this type of fraud? Government benefit fraud, unfortunately, happens in no program, and no state is immune.
My written testimony contains data from the US Sentencing Commission and some illustrative cases. The past few years have given us two prominent case studies. One, of course, the $250,000,000 Minnesota Feeding Our Future scheme, which has resulted in over 60 convictions, and two, the $100,000,000 Mississippi TANF scandal, which has resulted in the conviction of the former executive director of the state Department of Human Resources and others. Unfortunately, federally funded pro state-run programs, like most federal programs, are big soft targets for individuals in international fraud ranks. The Internet has reduced barriers to fraud.
Offenders can find free fraud tutorials online, can purchase stolen identities for the price of a Happy Meal, and can file claims from anywhere in the world. With automation tools, they can simultaneously file multiple claims in multiple states. The prevalence of fraud discussions online normalizes this behavior, in my view, and reduces the fear of getting caught and punished. So what can we do to reduce fraud? It's as simple as making it harder to steal.
We can do that in a couple of different ways. I'm a big supporter of the fact that we don't have all the answers here, and sometimes we can look at the international community for some of the answers. And I'm a big fan of the UK Public Fraud Authority, which is a great model that would need to be adopted in the US. But in terms of consolidating the best practices, guides, and standardization of counter fraud activities, not the enforcement side, but counter fraud activities, I think there's a lot to be gained by looking at that model. We can also employ appropriate controls to deter fraudsters from even attempting to file a fraudulent claim, prevent fraudsters from consummating the claim, promptly detect those claims that successfully pass, and then correct and respond to fraudulent claims through prompt enforcement action, target hardening, disruption, and recovery.
There's no one-size-fits-all solution. Officials must consider relevant risk factors and weigh program objectives and the operating environment to design fit-for-purpose fraud controls. To be frank, it is simply impossible or impracticable to design a 100% fraud-proof program. The cost of controls and the impact on the delivery of public benefits would be too great. Whether you're running a mom and pop store, Amazon, or a government program, fraud risk management always involves very difficult trade-off decisions.
This is not to suggest in any way that we should tolerate fraud. The American public should reasonably expect that public monies are not used to pay dead people. They're not used to paying incarcerated individuals or to paying duplicate claims in the same state or across states, and that public funds are otherwise appropriately safeguarded. Officials should aggressively but responsibly adopt new technology tools in the fight against fraud. Finally, safeguarding public money should be supported by a coordinated and comprehensive risk- and data-driven approach, leveraging our existing inspector general structure and other accountability partners to both reduce losses and restore public trust.
I look forward to your questions. Sure, Stokes.
Speaker 1
Thank you very much. Very interesting. I would move now to the young chairman of the full committee, that gentleman, Mister Commerce, recognized.
Speaker 2
Thank you, mister chairman, for always having good substantive subcommittees here, always bipartisan. This is a very important subject to this committee, wage, fraud, abuse, and mismanagement. I can't think of a better panel. And I'm gonna start with our great auditor in Kentucky, Allison Ball. Auditor Ball, you've done a tremendous job exposing waste and fraud in Kentucky.
Has in your quest to determine all of this Medicaid fraud, which I've been screaming about for years in Kentucky, we support Medicaid in Kentucky. You're from a poor, Medicaid-dependent region in the state just like I am. We wanna support the program, but there's so much fraud and mismanagement, in my opinion, in the Medicaid program in Kentucky. And we're just trying to get the backs of the taxpayers, and your work has been phenomenal. Out of curiosity, has Governor Rashir worked with you at all during your audit?
Were they helpful in turning over information or anything to help come to the conclusions that you came to with respect to the amount of fraud?
Speaker 5
That's a good question because I really do believe these are nonpartisan issues, and we should be able to work together. Unfortunately, I have to say it's not been a great system of cooperation. Boots on the ground, people have been helpful. When it comes to rising levels of leadership, it does get to be more difficult to get information from them, and it's only actually gotten more difficult as time has gone by. So the unfortunate answer is no.
It's actually been disappointing that I've not had good cooperation from the top level of the Bashir administration.
Speaker 2
Has there been any communication between the M Sheriff administration and the auditor's office?
Speaker 5
So that's a good question. Their response was mostly that it's not unique to Kentucky, that this happens in other places as well, which, in my view, and that that's true. It actually does happen in other places as well. But I think that attitude makes it less likely to be addressed. Just because it happened somewhere else doesn't mean that it's not serious or unimportant.
Speaker 2
And you're exactly right. And the governor's right. It's happening everywhere. We're trying to do something about it. We're serious about it.
Doctor Alika mentioned the task force that JD Vance will lead. We're serious about trying to do something about this. And there's just an attitude among a lot of politicians, and I'm not gonna be partisan in here, mister chairman, because you don't want this to be a good bipartisan hearing. But there is just an attitude among a lot of governors and a lot of big city mayors that, well, it's okay. It happens everywhere.
It's no big deal. It's you know, why do you care? It's just government money. It comes down like manna from heaven. I mean, that's the attitude that a lot of these officials have.
So I just wanna publicly thank you for the work you're doing. It's so essential. We have an independently elected auditor in Kentucky. Not every state does. I'm glad that we do.
It's worked out well in this instance. And I hope that the Kentucky general assembly will take some of your findings and work to reform Medicaid in Kentucky because I don't think it's gonna happen administratively at least over the next two years. So, my next question is to doctor Alika, my constituent. Real proud of the work that you do. Your organization, the State Financial Officers Association, can play a huge role in fighting fraud.
Can you give us some examples of how your organization can work with Congress to help not only identify fraud, but to try to hold people accountable for fraudulent behavior?
Speaker 4
Absolutely. Well, one of the things that we try to do, Mister Chairman, is provide good ideas for good public policy. As a 501c3, we provide educational resources.
Speaker 4
And we think that if Congress is able to put some frameworks in place where the state-elected officials, again, Auditor Ball and her colleagues, effectively work directly with inspectors general, work directly with these folks in the federal government, you'll see some real reforms. One of the things that's incredibly important, I think, for a framework, and you touched on it, you need leaders who have good policy information. They also need the statutory authority, but they need the political incentive or, in a word, courage. You need good leadership. We have that leadership obviously in Kentucky with Auditor Ball.
We also have it in other states as well with auditor Foley in Nebraska, auditor Cannon in Utah, and so many different places. If you've got leaders like that who are then able to work with Congress directly, to work with the inspectors general on the executive side, then you can start to see some real reforms. Also, if you've got a transparency website here at the federal level where the American people can see where their taxpayer dollars are going, with fraud, that will help. And one last thing, our financial officers actually have trust among the people. So when they respond to these issues, people listen to them.
Speaker 2
Well, thank you. Don't ever hesitate to reach out to this committee. We're serious about trying to prevent fraud. We would love to claw back money. We'd love to hold people accountable.
But at the end of the day, we've got to reform programs and put more guardrails. When there's duplicate payments in Medicaid, when there are people that have been deceased, that are still, for some reason, getting Medicaid benefits or providers like we're seeing in Los Angeles County with hospitals are still billing people that are no longer alive. I mean, that's a problem. And there's just an attitude that's breathtaking to me among a lot of government officials. They don't care.
Well, some of us do care on this committee, and I know you all care. We thank you for your great work. We look forward to working with you in the future. Mister chairman, I yield back.
Speaker 1
The gentleman yields back. Mister chairman, thank you very much. For the record, I think that we need to make sure that we support you. You have given mister Mfume and I an open hand, an open opportunity with staff, with the opportunities to have hearings. And we're trying to take full advantage of that.
And I believe that your words are matched by the effectiveness of what mister Nfume and I are attempting to do. But thank you. We're going to have to move more legislation. And I sent a note to Mister Womack, our staff director, that is associated with me, and we have to find a way to come together on bipartisan legislation. So expect me to be at your doorstep. Absolutely.
With that, also. And when we do it together, I think that speaks volumes about matching what has happened here. Thank you very much. The gentlewoman, Miss Norman, is recognized.
Speaker 7
Thank you. Millions of Americans rely on Social Security. Net programs like the Supplemental Nutrition Assistance Program and Medicare. We must ensure that these critical programs run efficiently with minimal disruption. To that end, it is crucial that agencies conduct their fraud prevention activities efficiently so that funding and services can reach people without unnecessary delays.
Effective oversight requires highly skilled personnel and adequate resources. Mister Bagdonian, what tools and resources do agencies need to prevent unnecessary delay in benefits?
Speaker 3
Thank you for your question, Miss Norton. That is a tricky proposition, to be frank. You have to thread the needle on this. You can't obviously delay important benefit delivery. But on the other hand, you have to ensure a certain amount of integrity in that delivery.
So, technology is part of this solution. Expedited reviews that fit within the delivery timeline are important. Access to vital data, I think as doctor Oleka mentioned earlier, it has to be done in real or near real time to make sure that deceased individuals, incarcerated individuals, and other ineligible individuals do not receive that payment. But, also, I would go back to a point I made earlier. It is the culture, the acknowledgement that fraud is a problem that has to drive the response and make considerations of fairness and speed of delivery versus the program integrity fraud risk management trade off.
So that would be my high level response to your question. Thank you.
Speaker 7
Inspectors general are a key part of detecting and preventing fraud. However, the Trump administration has fired 19 inspectors general, robbing their offices of leadership, expertise, and institutional knowledge. Mister Westerbrooks, how do these firings harm people who need government assistance the most?
Speaker 6
Well, the firings certainly have an impact on the effectiveness of inspect the offices of inspectors general. With the absence of top-level leadership, you have instances where there may be a lack of strategic direction or commitment to oversee certain programs with the rigor that Congress and the American people should expect. As probably more problematic in my view, just as problematic or more than the firings, is actually the proposed budget cuts, which are crippling. There was a study that was put out, I believe, yesterday from the partnership for public service that the IGs on average are being asked to take a 13% budget cut over FY 2024. GAO similarly had, was facing some budget cuts.
And when you look at the return on investment, I mean, they're the best thing I think the government's got going. I know I'm biased in that regard, but I think on average, IGs have about an 18 dollar to $1 return on investment. And I believe GAO has in the nature of over $100. I think it's $120 per dollar spent for those budgets. So it is money well spent.
So we do need the leadership positions filled with the right people that are independent, in fact, in appearance, and those offices need to be funded to do their job effectively. Thank you.
Speaker 7
We must work together to ensure that inspector general offices are not only fully staffed, but also fully funded. We cannot expect these offices to do the work we need them to do when we do not give them the proper resources. I hope my colleagues will join me in supporting full funding for inspector general officers to ensure that federal assistance goes to those who need it most, and I yield back.
Speaker 1
General Oman yields back your time. Thank you very much. Distinguished gentleman from Tennessee, Mister Burch is recognized.
Speaker 8
Thank you, Mr. Chairman. It just seems to matter who's in charge. Everybody wants to point the finger at the other side, but when they're in charge, this doesn't seem to be the same case. I always have said that if we could just eliminate this fraud and these systems, that it would provide for the least amongst us more of. And so, you know, I've been in, I was mayor of Knox County, and some things didn't go right.
And I had to stand up and take the hit, and admit to it. And, I'm afraid that's kinda what's lacking all over the place up here. And saying that, I want this to just go down the line. What are some issues the state and federal agencies face in addressing fraud risk in their program? And I guess I mean to say what issues stop them from addressing it.
Start with you, sir. How do you say your name?
Speaker 8
Well, you got my name right, sir. Bagdoyan. I got yours right too. There you go. Absolutely.
That's a first for both of us, probably.
Speaker 3
I'm glad we have that understanding. So, as I mentioned, you know, the culture is very important. So that drives whatever happens below. But it is essential to have a robust fraud risk management capacity. You have to have the leadership.
You have to have a strategy. You have to have the controls and execute those effectively. But at this federal state level, many times, as I mentioned in my opening remarks, you have this issue of program design, either statutory or regulatory restrictions on what a state and a federal government can do or a permissive attitude as well, which allows extensive reliance on self-attestation, which as I described as the bane of any auditor. So that is something that really needs to be looked at. I think you have a follow-up question.
Speaker 8
Well, actually, I just go down the line and ask that, and then I'll come back on my follow-up. But thank you for that.
Speaker 4
Yes, sir. I might offer actually the same response. There's a challenge sometimes where state elected officials aren't aware of all the resources available to them. For example, the do-not-pay list. It's a great resource that has the federal government support effectively outlining.
Speaker 8
What is DoNotPay? I know what it is, but I'm sure the rest of the committee does not.
Speaker 4
Well, it's a resource that allows states, it's compiled by the federal government, and it's a resource that allows states to effectively look through folks that they shouldn't give benefits to, that they can actually review it to make sure that there is no implication of fraud if you were to give some folks some resources. You can utilize that tool, and it can be expansive based on the data that is given to it from the states. So you pass data back and forth when you've got a policy response. In that way, it increases, it makes more robust the resources that are available. So if state financial officers in particular had access and knowledge to that, that could help things, as well as the statutory authority.
There's a single audit act for Medicaid that effectively puts state financial officers, auditors in particular, in a position where they've gotta audit Medicaid. If you had once a year. If you had that for every program, then you were more likely to find fraud. So those are some instances as well. Ma'am?
Speaker 5
So I'm gonna piggyback a little bit on the culture issue because we found that on this $836,000,000 of waste that we discovered. Because when we started doing interviews with boots on the ground and then with leadership, we found out that people who were actually doing the work were told, hey. This is not that big of a deal. It's low priority. If you get to checking somebody's residency, you know, that's good, but it's really not that big of a deal.
So it really did expose that the attitude at the top really does make a difference. I think that's why it's really important today that we're here, because you are indicating to all the American people, hey. This really matters, and that has a cultural response and a cultural change. So I would say the culture is important. I also think that we need to be reviewing things at all levels.
So as we've started to get more aggressive on reviewing the error rates, those error rates have begun to go down. We saw that with SNAP. We went from 9.1% to 3.5% error rates. Just because we were actually involved in the process and we were identifying particular errors, I think that has to be part of it. And then another thing, actually, this piggybacks on what OJ was just saying.
The real time review was a serious problem on this particular audit that we did because they were doing what was called Paris alerts. We were getting them from the federal government from a program, but it only happened, like, once a quarter. So it wasn't real time by any means whatsoever. People were also being told, hey. Just ignore it for the most part. So we need a greater level of access to as close to real-time as we can get.
There's a program called Timsis, t m s i s. We were able to use that in our audit. Normally, we can't, but we were permitted to use it. HHS OIG gave us special access, and that gave us much closer to real time, and it was much fuller information. So we were able to look and see do they actually live in Kentucky or not.
That kind of access is a game-changer.
Speaker 8
Ma'am, thank you. Mister chairman, I'm out of time. But if I could yield, let Mister Westbrook say something. I saw him making some notes, and he's sorta got an orange tile on, and I'm from Tennessee. So if I could let him just say something, if that would be alright.
Go ahead, brother.
Speaker 6
A couple of comments from my experience in government generally, and then during the pandemic emergency, is there are eligibility databases that are out there, and it's very frustrating for anybody to say, why aren't we catching dead people, incarcerated individuals, etcetera, and duplicate payments? So food stamps or the SNAP program has the national accuracy center. You have, with unemployment insurance, there is an employment day data hub. The problem is the 50 states and the different territories, they've got different information systems. So it's sometimes very challenging for them for the data systems to talk to each other.
They don't have the funding or the resources to connect in real time that we would like them to have. So that's one of the challenges, is why these tools are not being fully implemented. The other thing I would say is you're, and I don't think this can be overstated, is the level of sophistication with international fraudsters and organized crime rings is a significant drain on states. I give you an example in the pandemic. The one that sticks with me, my home state of Maryland, governor Hogan announced in July 2020 when the heat of the pandemic, when they were completing all these claims, there was an international fraud ring that had submitted 46,000 fraudulent UI claims for $500,000,000.
So while the agency is busy making sure people have unemployment insurance to put food on the table, they're also getting hit by these very sophisticated fraud rings that they have to deal with as well. So that's why I think we really need a much more coordinated approach. Thank you.
Speaker 6
You have both. You've got state-sponsored bad actors, and you've got fraudsters. Yep.
Speaker 8
Thank you, Mr. Chairman, for your indulgence. My friends across the aisle, I appreciate y'all's indulgence. Thank you all.
Speaker 9
Thank you, Mister Chair, and thank you to our witnesses for being here today. Combating fraud where it exists and ensuring proper stewardship of taxpayer funds is a shared responsibility among all elected officials at the state, local, and federal level, and a responsibility I wish was shared by this presidential administration. I'd like to quickly point out that the US is currently spending 1,000,000,000 taxpayer dollars a day for a war in Iran that the president chose to start. Not to mention that Trump has personally profited 4,000,000,000 in his first year back in office through crypto schemes, shady property deals, and selling products like Trump Bibles and watches. Some of my colleagues on the other side of the aisle and this administration are quick to demonize so-called blue states, but it's important for the record to reflect that blue states like Washington are taking fraud issues incredibly seriously.
For example, when it comes to Medicaid improper payments and potential fraud, Washington has moved from a reactive system to a proactive, data-driven integrity model. As a state senator, I voted to codify oversight expectations for the health care authority in their administration of Medicaid, and I also supported funding for Washington's fraud and abuse detection system. This law, combined with elevating program integrity into a dedicated division, established focused leadership and accountability, and integrating audit and program integrity functions, has led to a 178% increase in fraud referrals and over $300,000,000 recovered across two years. Another example of the work Washington state is doing can be seen within the long-term services and supports programs, where the state recovered over 99% of improper payments. When it comes to childcare programs, of the over 63,000 families who received a subsidy in Washington, 2.6 percent of those families who are ultimately investigated.
13 individuals were prosecuted through the state's rigorous audit process. These are just a few examples of how Washington state, a blue state, is being very thorough and intentional in continuously improving and evolving their best practices to make sure that not only is fraud being addressed, but that fraud is also being prevented. An example of 50, like some that we have heard here today, of how our states play such an important role in maintaining the integrity of taxpayer dollars. What I want to make sure we are all very clear about, though, is that when there is an overpayment or an improper payment, that does not automatically equate to fraud. Mister Westbrook, is it fair to say that most improper payments are paperwork issues rather than fraud?
Speaker 6
It varies by program, but, absolutely, that's the very challenging thing about, when we use improper payment is the error rate is that includes overpayment and underpayment. And it includes situations where the claim was actually valid, but there's no documentation in the file. Fraud is part of that. And one of the things that I've that frustrates me in the SNAP program in particular is where we're seeing a lot of the fraud is on the retailer side, retailer trafficking of fraud, and then stolen benefits. Mhmm.
Neither of those are captured in the error rate that we have when we talk about improper payment. Improper payment is just a payment that, on the surface, somebody looks at it, shouldn't have been paid, or is in the improper amount.
Speaker 9
Thank you, Mr. Westbrooks. I've mentioned before in committee that I had a sister with really complex disabilities who relied on Washington State's Medicaid program. And I can think of a number of times where my mom didn't submit paperwork in time because Olivia was in the hospital or had another bout of pneumonia or had any number of health complications that meant that her stack of paperwork on the kitchen counter just got bigger and bigger. And those improper payments sometimes are just a struggling family trying to keep their kid or family member alive and healthy. Mister Westbrook, it seems to me that one of the underlying premises of many of our hearings on fraud is that states are not incentivized to properly oversee federally funded programs.
Given that states share in the cost of improper payments, what evidence suggests that states are not incentivized to oversee their programs?
Speaker 6
You know, I haven't seen any evidence, and I can't say that it does not exist. I will say just frankly, thirty years in government in this business, I don't find many or any state, local, or federal officials that don't seem to care about fraud. They seem to care about fraud. It's the fact that they don't have the tools available, and I think that the federal there's opportunities for the federal government to standardize and make these tools available, whether it's making sure the data systems talk to each other or just providing guidance and enhancing the general workforce and skill set of counter fraud professionals across government, state, and federal.
Speaker 1
Joint woman yields back her time. I'm just might make a note that the gentleman very appropriately has her substance as she chooses to speak, but we're trying to address today federal and state programs not related to any political section necessarily, that we believe this is a nationwide problem, that we believe this is not a blue versus red state, but rather things that we can accomplish by working together. And so I wanna thank the gentlewoman who has a strong record of not only working for that benefit, but today, once again, highlighting some successes that can be made by states that they have in contact.
Speaker 1
And we will continue to do that, and I thank the gentleman very much. We now deal to the distinguished gentleman, the chairman of the rules committee, Miss Fox.
Speaker 10
Thank you very much, Mr. Chairman. Mister Bagojian, am I saying? Bagdoyan. Bagdoyan. It.
Bagdoyan. Got it. Sorry. One of the biggest problems with federally funded programs, funded by the taxpayers, run by the states, is lack of incentives for states to be good stewards of taxpayers' hard earned money, and I'm building on comments that have been made already. It's all too easy, I think, for states to treat the federal government as a piggy bank that pays for the lion's share of programs, which allow states to tolerate a much higher amount of fraud than if their own money was at stake.
And I think this applies to government agencies as well as the individuals involved. It's wrong. These programs are all funded by the same taxpayers. Here we are on tax day, and we're reminded that nobody gets to choose to pay taxes to their state or federal government. The same taxpayers must forfeit their pay to both levels of government.
There's no, quote, federal money or state money, but rather taxpayer money. Therefore, all levels of government have the same obligation to be good stewards of taxpayers' money. So what prevents state agencies from implementing stronger guardrails for detecting and preventing fraud in programs that receive federal funds, such as eligibility and identity checks? What kinds of checks could state agencies implement quickly to help verify eligibility and identify people as part of these programs?
Speaker 3
Yeah. Thank you for your question. So the response is multifold. I think I will keep going back to the culture of accountability, which drives everything else. You can have very elegant fraud risk management systems, but if you don't have the leadership to make that happen, nothing is going to work.
So that's an important thing. The other one, which was manifested during the pandemic, is unemployment insurance where states were just overwhelmed. I think as one of my fellow witnesses mentioned, with massive claims for benefits. They didn't have the systems. They didn't have the expertise.
They didn't have the data to respond to that onslaught. But what happened, unfortunately, after much of the benefits were dispensed, the federal government provided funding as well as expertise, these called tiger teams from the Department of Labor that helped stem some of the more egregious problems, including the self-attestation issue that I mentioned earlier. So that showed success during the pandemic, but I don't think it's being sustained at this present time.
Speaker 10
But we could have had in the law, you couldn't self-attest. We could have put that into legislation.
Speaker 3
You can, but it has to be verified. Right. That's where states fell short. You know, I attested myself as being eligible for unemployment insurance. I sign my name, but, you know, who's going to verify that?
And then, data analytics is very important. Real time data analytics, but you also have to respond to the results of those data analytics. Thank.
Speaker 10
you. Miss Ball, you talked about culture, and I think that is a very important issue. I do think there is a culture of, well, it doesn't matter. So how can we do more here to prevent the improper payments from being made in the first place, without the federal government having to take all the responsibility for making sure that this happens?
Speaker 5
So that's a great question. I really do think there's a partnership element with somebody at the federal level, and then somebody at the state level. So I like to use my example because I think it's worked pretty well. I have myself as the state auditor. I'm responsible to the people of Kentucky.
I am independent, and I am very interested in accountability, transparency, and exposure. So that kind of exposure, that impacts the culture. I think that people who were working on this were embarrassed to find out that suddenly it's reported. There were actually comments made. This is not a high priority.
It's a low priority. You know, if you get to it, great, but it's really not something we're interested in. And once the public becomes aware of that, then there is a desire and incentive for a cultural change. So, I really do think there's gotta be somebody at the state level who is keeping an eye on these things, who's incentivized to do that. I think auditors work well for that.
We have an ombudsman as part of our office, and I think that's really added a lot to us because we're checking error rates all the time, and we check what type of error it is. So I would think it would be a partnership like that.
Speaker 10
One quick question. Excuse me, Mr. Chairman. How many North Carolina has an independently elected auditor. How many states have independently elected auditors who should be held accountable and can be held accountable?
Speaker 5
That's a great question. I know not every state has elected auditors or somebody who functions like that. It's actually probably more a question that doctor Oleka would be more robust to answer than me. I know kinda here and there who it is. He might know the full body if you wanna do it that way.
Speaker 1
Gentleman's recognized. This is why we're here, and the gentleman is actually moving in on a very important subject. So the gentleman's recognized.
Speaker 4
Thank you for the opportunity to answer that question. It is a tricky question in the sense of the names have different titles. You could have a comptroller in Texas, which is extremely powerful but doesn't have the title of auditor. What we've seen in terms of our 41 state financial officers across 28 states, we've got roughly a dozen or so that are auditors, probably a little less than half of that have the type of authority that auditor Ball has, that auditor Bullock has in his state. Pennsylvania has a strong auditor, and auditor general DeFoor.
Utah auditor Tina Cannon is very strong in that regard. So there are a few. One of the things that could make this issue a little bit better is if you had stronger auditors, as you just pointed out. I also quickly wanna touch on the culture issue that you mentioned because while people say this isn't a big deal, obviously, this body knows, this auditor knows. Let me tell you why this is such a big deal in terms of the American people.
When you have a culture that defers to fraud and allows it to stand, then you spend more money. When you spend more money, that then mandates, based on your political philosophy, an increase in taxes. So if you increase taxes on hardworking families, now they're faced with the choice of putting gas in their car, paying for diapers for their children. This is a real cost that families have to go through, all because fraud wasn't detected, and it also shows distrust. Because you have people who are trying to survive on WIC or SNAP or government benefits, and they look to their left, and they see one of their neighbors who's a fraudster riding around in a Benz buying as much food as they can.
So when you don't have a culture of accountability, when you don't have the type of leadership that auditor Ball and her colleagues across the country have, you have distrust, you have discord in the public, and you also have a culture of tax increases which takes money out of the hands of the American people.
Speaker 1
Joe Women yields back the time. Thank you very much. The chairman, Miss Wauke. Ciao.
Speaker 11
Thank you, mister chairman, and thank you for your indulgence again in allowing me to join the subcommittee, and thank you to our witnesses. Mister McDoyan, the GAO testimony includes five principles of fraud. Probably all four of you are familiar with this from the international public sector fraud forum's guide to managing fraud for public bodies. I really wonderful five principles there. I would add a six that I think the chairman has demonstrated today.
A fraud prevention effort has to be apolitical and nonpartisan if it's gonna get the kind of buy-in necessary to succeed. And, doctor Oluck, I really appreciate you and your organization and your commitment to this work, your commitment to working on the vice president's initiative, which I sincerely hope is successful in accomplishing its stated goal. I do think we have to just speak the truth here and say that the president of The United States in describing that initiative, this is a direct quote, said it would, quote, focus primarily on blue states. And I think that would violate the principles of everything that we're discussing here. I hope that's not the direction it goes.
Auditor Ball, you made a very powerful comment. You said that it's crucial for every state auditor to bring their mentality of independence. And you probably would agree that if governor Bashir were here today, he maybe would have a slightly different response to the question that chairman Comer gave about his work, and that's okay. That's good. You're independent.
You have your own perspective. He can't fire you if you say something that he doesn't like. I wanna just reiterate concerns that some of my colleagues have shared about the diminution of the independence of our federal IGs. And one aspect of that that hasn't been specifically addressed is the mass firing of 17 of them. Many have been replaced by acting IGs who don't have the same statutory protections as those fired IGs have.
Three quarters of the federal IG positions are vacant today. So the very people who are helping to do this work, Mr. Westbrook has laid out, the savings are not on the job anymore, and we've talked about the budget. Just the HHS IG is facing in the president's budget a potential $13,700,000 cut. My concern, auditor Ball, is if those kinds of cuts to the HHS IG and others are put into effect, the next time a state auditor like yourself wants to partner with the HHS IG to identify and reduce $800,000,000 of fraud in Kentucky. They won't have the capacity or the resources to partner with you or one of your colleagues around the country.
Mister Westbrooks, based on your experience as a federal IG, what kind of operational impact would it have if you were told that your office was going to face a 12% budget cut in one year? What would you have to do? What would you have to scale back in terms of your work to prevent fraud?
Speaker 6
As an immediate impact. The immediate impact on your audit operations are on prospective engagements. You have to look at what you're going to be able to audit in the future, in the short term. On ongoing engagements, now you have to rescope, potentially, and most likely rescope those audits because you're not gonna have the staffing or resources to do the fieldwork that you need to do. You know, our federal audits, particularly the big agencies, you're doing fieldwork around the country.
It's not, they're not desk audits. And then the really difficult thing and the challenging thing is when you have this disruption in the community, you have very experienced OIG auditors leaving government. And so the brain drain from what we've experienced in the last year, it's very hard to overstate. Some of the most experienced auditors that I've worked with are no longer with us but had still plenty of years left in federal service that they should still be in the job, but now they're in the private sector.
Speaker 11
Thank you. And, mister chairman, I'd this morning, I sent a letter to Cheryl Mason who's the relatively new, I think, chair of Ciggy asking for clarity on how these vacancies, firings, and budget constraints on the IG community are affecting our ability to prevent, detect fraud, waste, and abuse. And without objection, I'd like to submit that letter for the record.
Speaker 11
And thank you, Mr. Chairman. If you'll indulge me, it's just me and you. I wanted to just ask Mister Begdoin one question. Your testimony noted the many recommendations the GAO has made. I think you said that maybe 40% have not are open.
40% of the 215 recommendations you all have made to federal agencies are not open. One of those or maybe this is maybe a number of them are then in this category that an agency designate an entity to lead fraud risk management. You cite that as a recommendation. Maybe that's a recurring recommendation. It is.
I think that would surprise most members of Congress that an agency doesn't have an entity designated to lead fraud risk management. I mean, if the secretary of HHS were here and we asked them that question, would they say no. We don't have any entity that leads fraud and risk fraud risk management?
Speaker 3
Well, for HHS, they do have the Center for Program Integrity. But, again, fraud risk management's a huge agency. It is rather dispersed. But yes, that is a very important thing to have in place. Dedicated entity, that implies dedicated to fraud risk management.
What we do find often is that responsibility is devolved to existing units, based on other duties as assigned.
Speaker 3
They don't necessarily have the expertise, the bandwidth to do true fraud risk management. And that is apparent when I mentioned earlier in my remarks that the capacity to manage fraud risks is on the softer side. That means you don't have the right controls in place, and that in part might explain why some of these agencies are still lagging in implementing our recommendations. So I hope that.
Speaker 1
Gentleman yields back his time. I'm gonna yield to myself now. I wanna thank each of you for being here. Yesterday, we received a rather in-depth and robust opportunity to allow you to speak, and I've thought about this overnight and have, obviously, a number of questions that we do want to make sure we approach by asking questions and getting answers. And moving to that, I do accept the responsibility that primarily this falls on mister Infume and myself to make sure that we talk with each other, that we look at things.
But it is a robust marketplace of ideas of things we don't do. And I think that perhaps we tend to think that we inhibit ourselves based upon either the law or common courtesy. A prime example is perhaps how we identify people. The Internal Revenue Service has a heck of a time knowing who they're talking to, who they are going to meet with. And, of course, you and I don't have to agree, but I think that we have ways to identify people: biometrics, our eyes, our fingerprints.
Look. We've got a lot of other things to get into, but, Mister Westbrooks, tell me about leading edge techniques and some pushback or your view as an auditor about utilizing technology as opposed to just data that's gleaned from a sheet of paper or personal information.
Speaker 6
Yeah. On identity verification, there are a lot of tools out there. And it's not my personal view, but my experience in the community was there's a lot of public debate. There's some privacy issues related to that, where things that might be common sense, people object to. You know, and some European countries have a national digital ID card, which would go a long way if we had a similar concept here in The US.
It'd go a long way to reducing identity fraud, but that was just dead on arrival for whatever reason beyond my comprehension. The other thing it's important to note is, you know, these international fraud rings utilize AI and other tools, and they can afford to make mistakes. Right? The government has less opportunity. There's less forgiveness if the governing government aggressively utilizes AI and makes mistakes, and people's benefits get cut off.
And there was a big scandal in The Netherlands related to this where they very aggressively use this algorithm, and many people were cut off from benefits. Some, included, committed suicide as a result of it. So, now, we talk about ethical or responsible use of these tools. Unfortunately, I think that's the reality. I think government is maybe always a step behind the fraudsters who can afford to make mistakes.
Doesn't cost them anything.
Speaker 1
Well, let's zero in on that. Perhaps, auditor Ball, you can get closer to this. One of the things I learned from you yesterday is I asked the question, how do you find a lot of these problems? And you said, whistleblowers, people call us. No one likes to see that whether they're sitting in a room with other people or that they see things that happen, that they want these things to happen, where fraud would be involved.
But we just vetted out and heard maybe some European models might be something good to look at. What's wrong with requiring or having a database where you have to present your finger? And I know we've talked about this with voting, and that is where we get into the states are responsible for that. But federal benefits, we've got a robust amount of data with fingerprints. What would that seemingly do to this issue?
Speaker 5
So I honestly, I have to say it's not something that I've analyzed very deeply. So that's kind of a brave new world, looking at that kind of information. And from a personal perspective, I get a little bit nervous about presenting biometric information to a database, and it's housed somewhere in the kind of security issues that you have. But,
Speaker 1
You go to the airport, and they take your picture. And it is true that they agree then not to keep the picture.
Speaker 1
But it presented itself as a way to identify yourself. And I think we've got to, I'm asking the questions. Want you to give the answer, but you ought to present evidence who you are right. That is certifiable before you gain these benefits, not show up and self-report.
Speaker 5
Right. I do think there needs to be a secure, reliable identification process. What that is at this point, I don't necessarily have the answer. There are so many technological advances that are occurring rapidly right now, and there are confidentiality and security issues that kinda coexist with those type of situations. I will say for us, in our experience, it's not always proving that somebody is who they say they are.
That's the problem. It's other kinds of breakdowns. So my focus has been on the problems of, well, we know this person is dead, but they're still listed as eligible, and issues like that. So I would say you are correct. That is part of the problem.
But my focus has been on a lot of other problems, duplicative payments for one person, issues like that. And I would say those may be the greater issues of concern right now, rather than someone pretending to be somebody that they aren't.
Speaker 1
Well, we've got to certainly go back and cobble together the information we've got. All four of you, I could just ask a question. I'm not trying to get you to jam into all the answers at the same time. But the prac has some 700,000,000 pieces of data that is not indicative that it is fraud, but it's indicative that you need to ask or gain more information. You need to know that this is maybe the term red flag may or may not be appropriate.
But an indication, please go look at this. And that should be an indication, perhaps, where we would start with wandering into the world. Do we know who you are? Do you need to come and present yourself? And I've just gone through social security issues, and they vetted me to make sure they knew who I was.
It would have been nice if they had said, please come in Waco, Texas to the Social Security office, but not everybody likes that. And there's a line between what is required and what is requested. I just think we've got to get closer to understanding. So talk to me about the use of prac data and information, as this helps itself to get closer. Mr Westbrook?
Speaker 6
Yeah. Thank you for that question. So the Prac has an enormous amount of data, as does the Treasury's Do Not Pay or Payment Integrity Center. The way the system is structured, though, the states would really connect with treasuries do not pay to do. That's where the connection point should be, where you would check eligibility against the various databases. I think the prac needs to be and is working towards being closer aligned with Do Not Pay and the Department of Treasury.
So it's not a pay-and-chase after the fact. It's on a much more real time basis. But I do think it's critical that we have that centralized government data system. The other thing I will say related to this, and it's something you should be thinking about, is as bad of a job as we do in preventing fraud, I submit to you we do just as bad of a job in protecting information. You know, my, like, probably many people in this room and many federal employees, you know, my top secret security clearance information was all stolen by a hostile nation state.
And I was on, you know, credit check monitoring for several years, paid for by the government. So that's one of the things that we need to look at when we balance this idea of centralized repositories for identification is who's going to be holding it and how secure is it, because it can do irreparable harm. That's why we're seeing these international, what's the repercussions? These bad international fraud rings are literally buying personal information for the cost of a happy meal on the dark web because of these hacking of government systems. So that's the thing that concerns me as much as fraud is the information of personal information.
Speaker 3
Yes. I would echo much of what Mister Westbrook said. There are a lot of datasets out there that can be crunched to yield results. We look for indicators of potential fraud. That's how GAO does its data analytics.
But once we present our findings to agencies, we expect them to respond to the results, and many of them, unfortunately, don't do that. So that is a huge problem. And I will use one example from the VA's community care program, where there's a lot of providers from outside the VA who tend to veterans' health needs. And we flagged several thousand of them, several years ago, posed problems based on their background. They were convicted of fraud.
They were convicted of patient neglect and abuse, things that would be disqualifying. We made the referral to the VA, and they promptly lost the referral. So when we followed up with them, they'd never heard of the referral, so they hadn't done anything with it. So that is a huge problem.
Speaker 1
You act like we're busy. I would now yield to the gentleman, mister Wykinshaw, who was requesting this opportunity. Gentlemen, recognized.
Speaker 11
Thank you, Mr. Chairman. Mister Westbrooks, I wanna just ask you to go back to your prac experience, and I apologize for asking a question that perhaps is answered in your book. I'll have to get a copy of it. You know, talk to us about, from your perspective, the future of Prac. Do we still need Prac?
The pandemic is over. What role did Prac's relative independence being constituted of IGs hosted by SIGY play in its success? Is it important that independence continue if we should continue practice? Give us your answers to those questions or thoughts on those, please.
Speaker 6
Thank you for your question. When the prac was created, it was created, you know, the pandemic hit, and in a matter of a couple of days, the senate drafted a bill which included the CARES Act, which included the PRAC provisions. They took the PRAC provisions from the recovery act and just dropped it into the bill. So there's a lot of lessons learned from the experiences that I had from 04/27/2020 when I first got appointed through December 2022. If you look at the CARES Act, there's a lot of things, lessons learned on how we can improve.
It's absolutely critical that we've got a centralized repository for government information that has the legal authorities to share that data with state and local partners. I think that was the secret sauce that we had with the prac was we could aggressively use our legal authorities to share with state and local and federal law enforcement partners data without entering into complex data sharing, matching agreements. So it's critical that there be this repository, that they have the appropriate legal authority, that they have the independence to do their work. They're appropriately funded. They're tied to treasuries, do not pay system.
They don't operate independently. That's not much government value to me. And I think those are the keys for success. I don't know, this is my personal opinion. I'm retired from government, so I can speak freely on it.
I don't know to what extent it needs independent investigative and audit authority. I think the analytic data center of excellence authority is a prominent role. But, unfortunately, it's the investigative authorities that give you the special legal rights to share data with your law enforcement partners. So there needs to be some smart lawyering and legislative counsel thinking on how to write the law on that. But I do think it's critical that there be a center of excellence that can share not just with the feds, but with the state and locals.
And it'd be somewhere where the state and locals feel like they're or GAO feels like referrals are going to be taken seriously and not lost in a file somewhere. Thank you.
Speaker 11
Thank you. I wanna just shift gears to IT systems and IT modernization. And, mister McDoyne, your testimony highlights some of the challenges states face, especially with respect to UI programs being implemented by legacy IT systems or outdated IT systems. And I'm curious, auditor Ball, I mean, is that something you have experienced in Kentucky where maybe you say there's fraud in this program, and we need x, y, and z controls. And you talk to the IT folks, they say sorry.
We have a legacy system that just can't do it. Have you experienced that?
Speaker 5
That's definitely an aspect that we deal with. We actually have a division that deals with IT audits. So we look to see all the time this legacy software program that you have available. Is it up to speed? Does it do the work we can do?
Actually, lately, what we've seen breakdowns, though, has been when they've been eliminating a legacy program and incorporating a new one. It's the switch that has created the opportunities for breakdowns. And we actually just saw this with our Department of Revenue. We've had just all sorts of problems with bringing on our new program at every level. So that's its own problem.
Speaker 11
Okay. Great. And then for mister McDoyan, what is it that the federal government or congress can do to better incentivize or support states who are trying to get their IT systems in a position where they can do fraud prevention in the way it needs to be done?
Speaker 3
Yes. Thanks for your question, Mr. Walkinshaw. Again, going back to the UI experience, we designated that out of cycle as a high-risk area in the midst of the pandemic, in large part driven by data and technology issues, among others like service delivery and so forth. And what worked during that time was that the federal government provided funding and expertise to, among other things, state's technology system upgrades, which relatedly eventually caught up with the integrity issues, and helped mitigate them. But as I mentioned, by the time that happened, most of the money had already been dispersed.
So something like that is, should warrant close consideration, so that, you know, the states can have skin in the game, also have some federal support, to make things happen.
Speaker 11
Thank you. Doctor Oluka, anything? I apologize for going over my time, but if you're literally itching to jump in on this question, I
Speaker 4
could tell there. Well, just to echo what honorable was saying in particular, I think there is an opportunity for states to utilize the new technologies that you were talking about as well, to make sure that they have all the tools and the resources that they need. One of the things that the chairman was mentioning in terms of potential new technologies would offer, if you have a stronger, deeper relationship between state leaders, the state treasurers and auditors in particular. Treasurer's obviously on the front end in terms of verification, eligibility, transparency of how money is being spent, and the auditors on the back end with regard to investigation, examination, and obviously, audits. Then I think you can see a lot of that cooperation.
Also, I wanted to respond earlier mentioning that you hope that the vice president's task force is successful, and, of course, so do I. I was able to meet with some of that leadership last week. Now, again, it wasn't an in-depth conversation. I don't wanna certainly suggest that there was more discussion there than there was, but I can say that team is very serious, very focused on these types of conversations. How do we get better at technology?
How do we get better with cooperation and partnerships between the state and the federal level? And it wasn't from a partisan perspective. So there, I think, is a great deal of opportunity here, from this committee, state leaders, and also this task force led by the vice president to get really good, serious, systemic change done, on the fraud issue.
Speaker 1
Yields back. Before he leaves, I'd like to, if I can, do a follow-up to what the gentleman was asking because I think it's a valid point. So, mister Westbrook, probably I would ask this. We began discussing a little bit more in-depth prac. We discussed a little bit more in-depth about its existence, its seemingly integration into the law, and how it's become effective.
Do we want to keep RAC? Do we want to expand its knowledge and use it, and to make sure it's still and ready to go? Maybe made permanent.
Speaker 6
Thank you for your question, Chairman Sessions. And this is the central premise of my book, quite honestly, was the frustrations in the early days of the pandemic to reinvent the recovery boards data analytics capability. You can't just flip a switch and create something. It needs to be on standby. May not need to be as big as it was during the pandemic, but it was incredibly challenging to get the pay. It's called the PACE, the pandemic analytics center of excellence.
It's an unbelievably challenging to get that stood up in a very short period of time. So I would hate to see that capacity gone because there will not only be another emergency crisis that we'll deal with, but just on normal operations, you need that capacity. We want that capacity. It's a relatively low cost for it. Thank you.
Speaker 1
Well, I think the main point I'd say is it exists day one. And the last part, which I am not here to shill for, but I have a piece of legislation that I'm dropping today that makes it permanent. So thank you very much for amplifying that. And, of course, we need to pass it out to members of this subcommittee also. I will yield back my time.
Now go to the stingless gentleman from Florida, gentleman Mr. Frost.
Speaker 12
Thank you, miss, thank you very much, mister chairman. In the fiscal year 2024, over $10,000,000,000 of federal government spending on SNAP was lost due to improper payments. The One Big Beautiful Bill Act included a SNAP provision that's nicknamed the Alaska carve-out. This was a political move that was made to get the one big beautiful bill passed over in the senate. The Alaska carve-out delays the cost sharing requirement for states with high improper payment rates like my state, the state of Florida.
It makes absolutely no sense. Essentially, it penalizes the states that make good faith efforts to improve integrity and reduce their errors, and it rewards the worst-performing states in the entire nation. We're already seeing people take advantage of this loophole. In Maryland, a whistleblower claimed that senior officials were trying to leave correctable errors uncorrected to keep the error rates up. It also kicked the problem for the worst-performing states down the line by creating a two-year delay.
And this is important to me because I'm from the state of Florida, which has some of the highest rates of improper payments on SNAP in the entire nation. Mister Westbrooks, how does the Alaska carve-out discourage low performing states with high improper payments like my state of Florida from making the necessary improvements and actually fixing the problems?
Speaker 6
Thank you for your question. You know, I can't speak specifically for Florida officials and what any state official might be thinking. You know, I would look at it from an audit perspective. I would look at the effectiveness of any intervention. When we're talking about penalties and incentives, are they closely tied to the behavior to drive the desired results?
Just on a personal level, I'm a proud father of five, and it strikes me as giving my d student, dinging their allowance, my d student, but then letting my f student pass and say, just with a thumb a finger wag to say, well, next year, I'm gonna cut your allowance. So in terms of the direct tie to the behavior, I think that's gonna be a challenge. And I look forward to auditors, GAO, and other officials looking at how effective that carve-out is in practice in reducing fraud, which is the ultimate goal.
Speaker 12
I doubt it's going to be effective. I mean, it wasn't a move made to fix anything. It was a political move. It was, you know, pretty well reported on. We all knew about it when it was going on in the senate.
You know, my state governor, our governor, Governor DeSantis has allowed the program to essentially crash and burn. I mean, the Florida payment error is over 15%. It's unacceptable. And because of carve-outs like the Alaska carve-out, states like Florida are getting rewarded for running a horrible program. There's no reason to believe that even with a delay, states like mine can get their act together and finally turn things around.
And this is important because it really impacts working families and the commitment we've made to them. Do Mr. Westbrook, do you have any indication that states that are receiving this carve-out are actually moving towards compliance? Is there any indication of that?
Speaker 6
No. I can't speak to that now. I haven't seen anything on that. Thank you.
Speaker 12
And how do high error rates impact Floridians and just Americans in general who depend on the vital programs?
Speaker 6
Well, as you know, in the act, depending on the level of the error rates, there's certain percentage of cost sharing that has shifted. I guess some of the criticism that I've seen of it is that, you know, you're relying on an error rate that includes overpayments and underpayments, and includes what we talked about earlier about documentation errors. So there's a cost implication or a penalty associated with a, one could argue an imperfect measurement. It's the best that we have. Right?
The improper payment rates, error rate is the best measure that we have. But when you tie it directly to financial penalties in a different time frame, I think that's where some of the debate has been on, whether it will be effective or not.
Speaker 12
Thank you. What do these errors mean for, like, a working family? I mean, I think we all understand what, like, an underpayment can mean for a family. What does an overpayment mean for somebody?
Speaker 6
Well, an overpayment just means that the state made an error in the calculation, and so they overpaid. And, the way the SNAP program, data quality program works, if the error is under, I think it's $58, then it is deemed as not material, so it's not factored in. So that's so you might have instances where there's a large number of under $58 error, overpayment or underpayment, but there's a systemic issue underneath that will never be addressed because it doesn't meet the error. But, you know, all of the error rates ultimately, like I said, affect, as you know, the state cost share amount. And anytime that there is any government program.
Whenever there are penalties associated with anything, you always have to worry as an auditor that people are gonna game the system in terms of their statistics. And that's always gonna be a risk, data quality is always gonna be a risk in that program, and I think any other federal program. Thank you.
Speaker 1
Jim yields back his time. You've given us not only a laundry list, but I think some good direction that we need to go. I am interested in making sure that I follow up with each of you on not just your ideas, but that I provide you feedback about how we're getting there. We cannot fix this without each of you auditors who see things and the direction we go. But I think that you see some sense of opportunity that lies within the members here that are truly concerned about overpayments and underpayments.
Perhaps an underpayment is very difficult for us to always quantify. I'm not sure we pay as much attention to those, even though our congressional officers have to fight many times with people who wanna be recipients on those matters. We can consume ourselves if we do not fix this problem. We can take away from the availability of money, and we see that when we look at the national debt. This chance that we have, however, I think doctor Oleke needs to be brought front and center to people who are like you, who are auditors, who then openly express their delight or their problems with what we're doing.
I'm very much interested in mister Infume and I and this subcommittee getting closer to this. But we have to start with more than just looking at the prac or looking at making legislation permanent to save it. And I think Mister Westbrook's point that I took under advisement, that I wholly agree with, is why would we do away with the data we have? Why would we not move forward on that? But I think the question is, and we have vetted that here, that this staff and I have spent a great deal of time wondering what is that keyword?
Is it fraud that we need to focus on that says because of a question of fraud, not fraud, but a question of fraud, will that allow us to receive information across the board and other agencies to where they could do business with each other, where they could verify things? And I think it's our hope that weekends. My last question to you today. I think if we were to ask a question, not assuming we know the answer, asking a question, would that mean that the entities, no matter SBA, VA, wherever it is, they could then go and vet that question a little bit better and ask for data to certify who people are. Is that really the answer to where we would ask people and take the 15 and vet them, and then have the tools to where we could go and double check what they said, death certificate, voter registration, license information. There is a lot of information that is out there that they should have access to, even if it's to their own state.
Help lead me down the pathway. Anyone? Miss Westbrooks?
Speaker 6
I can share my experience, as IG of the Pension Benefit Guarantee Corporation. We had, and it's a very imperfect analogy and model, but with death master file data, you have currently existing matching capabilities. Right? And you wanna build a system because that data is very imperfect. Right?
So you build the system so that if there's a match of two or three elements, I think our agreement with them was there are two elements that match. That's a flag. You cannot take action unilaterally on a flag. The flag has to be adjudicated and resolved, but it's at least a flag. What you don't want are agencies taking action, and this is sometimes, I think, folks act too precipitously if they haven't been working on fraud cases.
A flag is just a flag, and there are many false positives. Many false positives. So you want a system and build an environment where the flags are identified very quickly and adjudicated very quickly. You don't want an, you know, an adverse impact on a claimant, but you don't wanna get into a pay and chase situation. So that's how it worked with death master file data.
It has to can't just be one, you know, a misspelling on, you know, you didn't put the s on the end of my last name. It's gotta match two elements, then you adjudicate.
Speaker 1
I think you make my point very eloquently. And this is the point that whether you're going on veterans benefits, whether you're taking out an SBA loan, whether you're going in Social Security, the mistake that if it's not vetted properly upfront over long term becomes a huge issue. Auditor Ball?
Speaker 5
Absolutely. There needs to be a thorough and accurate vetting process. I don't know that it means that you have fifteen minutes with each person who reaches out to you, because a lot of times what we find is it is a red flag. It's a notification. It's an alert that then gets ignored.
When we start to dig into our systems, a lot of times we actually know that someone has passed away. They're a deceased person because it says it in their file, but it also says that they're eligible. So I think a lot of it really does boil down to making sure that you're acting on red flags. There's a good system in place for what you're supposed to do when there is a red flag. It is really having those controls and then following through on those controls.
Speaker 1
Is there a time frame associated with that? Is there a limitation associated with that? Is there one red flag does not indicate something, but it might indicate a question, and you keep going. Certainly, someone who is committing fraud has multiple failures across questions and challenges that would be asked.
Speaker 5
Right. Sometimes that's the case where there are multiple red flags, and sometimes they're not acted upon. So I think you need to have very clear guidelines and controls to ensure that you're treating those things seriously, and you're doing the things in the time frame that you're supposed to do them.
Speaker 5
That's a good question. I think the work that we've done is starting to highlight the breakdowns, and it's gonna be good to see in the next year and the year after that. Okay. We've highlighted the problems at the state level. Are they fixing them?
I don't know that it needs to be spelled out at a greater level at the federal level. In some instances, it may. Sometimes it just needs to be the oversight on the front end to just make sure they're actually doing it.
Speaker 1
Yeah. Because I can envision circumstances where multiple failures were recognized and someone gave up on it thinking maybe they had pushed too hard? We generally expect someone, when challenged, to go, whoops. I got caught. I don't think that happens.
I think that there's a continuation of this. Mister Olathe?
Speaker 4
Yeah. I think what the auditor is saying is exactly correct. There is, obviously, a belief in federalism. I think among this crowd allow the states to figure out what would make the most sense in terms of a lot of the controls. And then potentially, what could happen is that you and your colleagues set a baseline.
And I'll give you an example. In Mississippi, treasurer David McCray was able to figure out an issue regarding citizenship for unclaimed property. Unclaimed property is a financial asset that you can give back to the people if they've lost it. A lot of treasurers have that authority. So he was able to put in some guardrails to effectively make sure that there wasn't a lot of fraud based on citizenship.
So he was able to do that. Now you couple that with a lot of the new technologies that we've been discussing, it becomes iterative. So then when you have continued types of fraud, if it's verification or eligibility, now because of technology, you can actually batch different queries where if the red flag, as you were mentioning, is a set of issues that regards to paperwork, you're able to answer those in a lot different way if it is a couple of red flags that results to very clear out and outright fraud. So based on what auditor Ball and her colleagues are able to do within their states, then, again, working in a congenial relationship with the federal government, the necessary partners, you can figure out a lot of that stuff without having to mandate it. Some things, though, need to be a clear, compelling mechanism, but I think that's where the conversation can go back and forth to figure out what that ought to be.
Speaker 1
And we ought to drive that to a conversation of common sense. Mister McDoyan?
Speaker 3
Yes. Thank you, Mr. Chairman. I would agree with all the comments that we just heard. Data analytics is at the heart of this. You have to look for those red flags.
And as I kept saying, throughout my presence here today, you have to act on the results. Back in December, we issued an interim report on our review of the Affordable Care Act, the federal exchange. We flagged the most egregious flag was a single Social Security number that had 127 ACA policies associated with it. When we presented that example to CMS for an explanation, they told us that they didn't perform that sort of analytics. They were surprised by the result, but they weren't planning on doing anything about it because they were concerned about kicking the wrong person off the policy.
So, you know, that is a pretty significant example of a massive red flag that, at least for now, that particular agency is not going to take any action on. You have to act on those red flags. You can't say, oh, it's a red flag. Well, okay. But, you know, we're good with it.
And that's the temperament that has to change.
Speaker 1
I know you're right because I, early in my career, had an opportunity to have people who collected money, offered service. And if you did not give them the available answers, they quit vetting things. It's no different than a police officer that arrests a criminal, the judge lets them out by the time the nighttime shift is done, and they see them back on the street. There have to be ways that are common sense, cost effective, reasonable, where people can understand the system and the outcomes. But it does mean that I and this subcommittee have to do our job.
And I found out yesterday, Mister Westbrooks, I did not have a chance to meet with you yesterday, but I did with the other three witnesses that are today. I found out that they have placed a great deal of confidence in that we can make progress and work together. I asked Mister Olathe a question yesterday and again this morning about the follow-up, about how we're going to come and actually engage on this issue properly. And, certainly, we recognize the vice president is engaging, walking in this shadow also of making sure that what we do is bipartisan, is not political, is driven by data that can be sustained. And this is where we're moving.
So I wanna thank each of you for taking time, not just to get on a flight and come here, but to take your very important time away from the duties that you have that help save this country. The embarrassment of systems that are frail or do not work properly. I look forward to touching base with each of you on future activities and how we can best work together. So with that, without objection, all members have five legislative days to submit materials and additional written questions for witnesses, which will be forwarded to the witnesses if there's no further business. Without objection, this subcommittee is now adjourned.
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