Reduce the risk of fraud at federal agencies

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Help government agencies combat waste, fraud and abuse Benefits of the Framework for Managing Fraud Risks
Establishes a risk-based fraud prevention strategy whereby each agency:
 - leverages best practices to expand its capability to identify and assess fraud risks.
 - implements controls that prevent, detect and respond to fraud.
Grant Thornton supports efforts that help agencies prevent fraud and improper payments. The Fraud Reduction and Data Analytics Act (H.R. 4180 and S. 2133) would improve and standardize the way federal agencies approach fraud prevention. The legislation specifically requires the Office of Management and Budget (OMB) and agencies to adopt the Fraud Risk Management principles outlined by the Government Accountability Office (GAO) in its report, “Framework for Managing Fraud Risks.” To make an impact, the proposed framework emphasizes prevention over recovery.

What we ask of you Co-sponsor the Fraud Reduction and Data Analytics Act and urge Congressional leadership to take up and pass this bipartisan, common sense legislation.

Current status of the legislation:
  • H.R. 4180 introduced by Rep. Mark Meadows (R-NC) and Rep. Gerald Connolly (D-VA).
    • House Oversight and Government Reform Committee passed H.R. 4180 December 2015.
  • S. 2133: The full Senate passed the bill by unanimous consent April 2016.

Current status of agency efforts to reduce fraud Fraud: An intentional deception or misrepresentation, often including things like identity theft, financial kickbacks, or improper billing for services or items not provided.
Waste: Improper payments that are unintentional, often resulting in the mistaken diversion of resources away from their intended beneficiary.
Abuse: Payments for services that are not necessary, often resulting in unnecessary costs.

The federal government’s current approach to fraud reduction is inadequate, relying on after-the-fact review of payments to determine if fraud has occurred. Agencies must devote significant resources to track down and recover improper payments instead of preventing them at the onset.
Fraud creates significant risks for any type of program, but uniquely impacts government programs as they are particularly susceptible to public perceptions of inefficiency and ineffectiveness. The extent of fraud committed against federal agencies is difficult to measure. However, in its most recent tally (FY 2015) of improper payments, the GAO reported agencies paid more than $135 billion incorrectly. Since 2004, improper payments exceed $1 trillion.

Improper payments consist of waste and abuse, in addition to fraud. No matter the cause, collectively, these threats impact the financial, operational and reputational characteristics of an organization.

Federal agencies must balance their missions with the need for oversight and risk assessment. The desire for prompt payment may invite risks of payment inaccuracy, including increased risk of fraud. The most robust fraud prevention programs require a collaborative effort between an integrated team of providers, administrative staff, contractors, program offices, government oversight organizations, and other agencies. Such relationships foster a culture of fraud risk management, and can be further bolstered by analytics which identify and prevent improper payments from occurring.

The GAO Framework: An expanded discussion In order to help agencies more aggressively combat fraud, GAO recommends the adoption of its “Framework for Managing Fraud Risks.” The GAO’s framework defines the objective of fraud risk management as ensuring program integrity by continuously and strategically mitigating the likelihood and impact of fraud. Effective fraud risk management has three objectives: prevent, detect, and respond.

GAO’s Fraud Risk Management Framework hinges on four key elements: leadership commitment, regular assessments of risks, effective design and implementation of mitigation activities, and risk based evaluation of outcomes. GAO makes detailed recommendations within each of these four areas and combined them into a structure that fosters a risk-based fraud prevention effort composed of multiple agency stakeholders:
  1. Executive leadership must communicate the importance of governance, internal control, and transparency to all employees, managers and pertinent stakeholders.
  2. Regular fraud risk assessments should be tailored for individual agencies and programs due to the inherent uniqueness of risks themselves. 
  3. Once risks are identified, management must design and implement the proper level of controls needed to mitigate risk of fraud. 
  4. Finally, agencies must have in place a process for evaluating the outcomes of the program for managing fraud risk.
Adopting GAO’s Framework for Managing Fraud Risks is common sense. Legislation requiring it will create a sense of urgency among agencies; they’ll accelerate efforts to identify and mitigate fraud risks.

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