3 minute read 2 Feb 2023
Modern Offices Building in the city

US pandemic response and relief funding – proactively mitigating fraud, waste and abuse

Authors
Allen Melton

EY Americas Forensic & Integrity Services Government & Public Sector Leader

Helping clients recover financially after disasters. Extensive experience with commercial insurance claims and federal disaster grants.

Jeffrey Sallet

Investigations & Compliance, Forensic & Integrity Services, Crisis Management Leader

Former federal investigator. C-suite leader. CPA. Boston native. 5x Boston Marathon finisher. Devoted to family.

Robert Reeves

US State, Local and Education Leader, Forensic & Integrity Services, Ernst & Young LLP

Passionate about providing outstanding support to governments and businesses. Committed to building diverse and inclusive teams. Devoted to family.

Reena Panchal

EY Americas Insurance & Federal Claims Services Principal, Forensic & Integrity Services, Ernst & Young LLP

Helping clients recover financially and increase their resiliency after disasters through federal disaster grants and commercial insurance.

Scott Nemeroff

EY Americas Forensic & Integrity US Federal Government Leader

Collaborative leader. Committed to finding people-driven solutions with the right blend of innovation. Family first. Do the right thing.

3 minute read 2 Feb 2023
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  • US pandemic response and relief funding services M&A

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Developing an effective fraud mitigation strategy is key for government agencies.

In brief

  • Pandemic programs are reporting high fraud rates
  • Agencies can put controls in place to combat these attempts
  • An effective risk mitigation strategy has the capacity to evolve

To respond to the COVID-19 crisis, the US government made available $5 trillion in relief measures in an effort to keep businesses open and households afloat.

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  • Download full brochure on: US pandemic response and relief funding

    pdf (753 KB)

More than two years after the first relief funds became available, hundreds of billions of dollars of federal funds have been subject to misappropriation through improper spending, waste, suspicious activity and outright fraud. Some pandemic programs have reported fraud rates ranging from 10%–41%, which adds up to hundreds of billions of taxpayer dollars.1,2

US government watchdogs are on the lookout for misuse of funds across these programs and have established the Pandemic Response Accountability Committee (PRAC) to provide independent oversight and support to the Inspectors General community. Agencies found to be misusing funds or noncompliant with program requirements face funding reductions and clawbacks. The EY Forensic & Integrity Services team can help government agencies understand the program risks, put controls in place to comply with regulatory funding requirements and to monitor for/or detect fraud, waste and abuse.

Preparing for the challenges that increase the risk of fraud

Government agencies have experienced a significant increase in fraud risk driven by an influx of federal funding, combined with pressure to issue funds quickly. In response, many agencies have relaxed or removed controls completely, which significantly increases the risk of fraud. The nature of operating a federally funded program in the current environment has created several challenges for agencies that amplify fraud risk even further.

Common operational challenges facing governments

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    Common operational challenges facing governments:

    • There is a lack of capacity and resources to support a temporary program surge.
    • Complexity of subrecipient and third-party relationships require enhanced scrutiny.
    • Siloed technology environment limits data sharing and effective oversight.
    • Minimal documentation to support compliance, controls and decisions leads to audit challenges.
    • There is a lack of infrastructure and experience responding to inquiries from state and federal oversight bodies.

Fraud risk management for federally funded programs

Government agencies are facing a constant state of change when combating fraud in federally funded programs. Developing an effective fraud mitigation strategy is imperative to maximize the value of federal funds while maintaining the public trust. An effective fraud risk mitigation strategy should constantly evolve with the ever-changing program requirements, expectation of oversight bodies and adaptation of fraudsters. No matter the state of your federal funded program, assessing the agency’s ability to fight today’s fraud risk with a full suite of techniques is imperative.

Technology enablement

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    Technology enablement [Streamlined reporting dashboards]

    Protect

    • Program implementation
    • Program design
    • Program risk assessment

    Detect

    • Integrity monitoring
    • Forensic audits
    • Audit readiness assessment

    Fraud data analytics

    Protect

    • Integrity monitoring
    • Forensic audits
    • Audit readiness assessment

    Detect

    • Audit/investigation support
    • Investigation services
    • Stakeholder reporting support

    Workflow case management

    Respond

    • Audit/investigation support
    • Investigation services
    • Stakeholder reporting support

    Remediate

    • Outcome measurement
    • Remediation planning
    • Control design/implementation

    Third-party data integration

    Remediate

    • Outcome measurement
    • Remediation planning
    • Control design/implementation

    Protect

    • Program implementation
    • Program design
    • Program risk assessment
EY COVID-19 disaster relief experience

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    EY COVID-19 disaster relief experience

    37 states and territories assisted

    • Grants management, financial management, internal controls
    • Risk assessment and program design
    • Forensic data analytics and investigation support
    • Insurance claims and recovery
    • Integrity monitoring services

Now

  • Identify key risk areas and eligibility requirements
  • Data exploration and collection
  • Develop analytics to identify fraud risks
  • Set up policies and procedures
  • Capacity assessment
  • Add scalable/temporary resources

Next

  • Enhance fraud analytics solution through automation and advanced analytics
  • Deploy case management and workflow solution
  • Develop reporting on eligibility and fraud for regulators and executives
  • Identify potential third-party data sets of interest
  • Monitor planning/implementation

Beyond

  • Risk-based prioritization of fraud investigations and reviews
  • Machine learning to train analytics based on confirmed eligibility or fraud cases
  • Integrate with third-party data
  • Streamline reporting, investigations and reviews
  • React to audit findings
  • Investigate potential fraud, waste and abuse

How EY can help

Investigations & Compliance

Our dedicated global team of investigators, forensic accountants, compliance and technology professionals help organizations respond rapidly to instances of alleged fraud, bribery and other misconduct, as well as law enforcement and regulatory inquiries.

Read more

  • Show references #Hide references

    1 “Fraud in unemployment insurance,” Pandemic Oversight, https://www.pandemicoversight.gov/news/articles/ fraud-unemployment-insurance, 2021.

    2 “Inspection of Small Business Administration’s Initial Disaster Assistance Response to the Coronavirus Pandemic,” sba.gov, https://www.sba.gov/document/report-21-02-inspection-small-business-administrations-initial-disaster-assistance-response-coronavirus-pandemic, 2021.

Summary

Government agencies must try to stay a step ahead of fraudsters in administering federally funded programs.

About this article

Authors
Allen Melton

EY Americas Forensic & Integrity Services Government & Public Sector Leader

Helping clients recover financially after disasters. Extensive experience with commercial insurance claims and federal disaster grants.

Jeffrey Sallet

Investigations & Compliance, Forensic & Integrity Services, Crisis Management Leader

Former federal investigator. C-suite leader. CPA. Boston native. 5x Boston Marathon finisher. Devoted to family.

Robert Reeves

US State, Local and Education Leader, Forensic & Integrity Services, Ernst & Young LLP

Passionate about providing outstanding support to governments and businesses. Committed to building diverse and inclusive teams. Devoted to family.

Reena Panchal

EY Americas Insurance & Federal Claims Services Principal, Forensic & Integrity Services, Ernst & Young LLP

Helping clients recover financially and increase their resiliency after disasters through federal disaster grants and commercial insurance.

Scott Nemeroff

EY Americas Forensic & Integrity US Federal Government Leader

Collaborative leader. Committed to finding people-driven solutions with the right blend of innovation. Family first. Do the right thing.

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