How Fraud Prevention Intersects with Governmental Funding | Part II

Dana, we're going to start with you. What are the general potential signs that there may be a fraud or something going wrong with the payment process? 

Dana Daigle: 

Well, during the payment process of a government program, there could be multiple signs that fraud has occurred. Typically, we implement a payment file QC, which helps us to identify any nuances or weird information in the data we've received, and that'll help to look into certain data points. 

Also, while reissuing payments is a typical function in the payment process, there are certain red flags you can look for when you are reissuing payments, and that is maybe continuous requests for reissue, multiple attempts to deposit or cash at different financial institutions. Positive pay exceptions can help you identify some potential fraud going on. And then, also frequent requests for changes to payments, whether it's the payee or the account information or an address. It's just really important in a program that they take steps, when reissuing payments, to vet whatever information is being changed. 

Hubert Klein: 

Wow, sounds like a lot of work. When you work on this stuff and you're designing the plans, how involved is the management of the company or entity you're working with in the planning process with you? 

Dana Daigle: 

The entity we're working with should be very involved in the planning process. We want them to have a major role in making sure we're implementing the controls in place in the beginning of the process to make a proper payment at the end of the process. The management buy-in is very essential and important in this. 

Hubert Klein: 

Very, very good. Louise, I hear about this all the time. When you talk about preventative programs, people always say, "Well, what's the cost? What's the investment? We don't need it. We're good. We're clean." Tell us, what happens if they don't take any action or maintain effective internal controls? 

Louise Gannuch: 

That's a great question. And so, it can be dependent on the requirements that are associated with the funds. Sometimes they can have terms and conditions associated with them. And then, potentially, there could be additional conditions that are imposed. And so, that could look like having the requirement of more detailed financial reports that have to be submitted more frequently. You might also have to get prior approvals before you can take other steps in other areas. 

And then, beyond the financial impact, there's also reputational damage. And so, that can be significant and that can really impact programs and organizations if they don't have effective internal controls and a fraud does occur. And then, fraud also makes it difficult to serve the populations that a lot of these programs are intended to assist. If someone commits fraud, that's money that's not going to go to individuals or maybe other entities that these programs are set up for. 

Hubert Klein: 

That could pretty much erode the public's trust in the program or the entity who's providing the services. Does that also cause a problem with the funding source, the people who provided the money in the first place as well from a regulatory oversight perspective? 

Louise Gannuch: 

Yeah, absolutely. That can create issues with future funding as well. If you're, say, a county that's received funds, you might not receive those funds or be eligible down the road when something else occurs. It certainly could be an outcome for some of this when it occurs. 

Hubert Klein: 

Wow, interesting. Dana, we're going to talk a little bit about clawbacks. When would an organization be subject to a clawback provision of funds and how could it affect them in the future? But I think before you get into that, can you just explain briefly what a clawback is for the audience? 

Dana Daigle: 

Absolutely. A clawback is when there is failure to meet the terms or conditions of the outline funding agreement between the organization running the program and the entity providing the funds. And so, there's multiple reasons a clawback can happen, and that's due to non-compliance, mismanagement or misuse of the funds for ineligible activities or fraudulent activity. It's essentially where you owe the money back to the government entity that provided you the funds in the first place. 

Hubert Klein: 

I guess one final question for the two of you, and I'll let you choose who wants to answer first, but we talked about a lot of good things. We talked about prevention, detection, fraud risk assessments, all good buzzwords. The big thing here really is if someone needs help, where do they go from here if they need help executing or implementing one of these plans? 

Louise Gannuch: 

There's a lot of resources available online, the Association of Certified Fraud Examiners, they have information that can assist you. There's also plenty of organizations, and EisnerAmper can certainly assist. Ultimately, with what we're talking about, the main thing is you want to make sure that when you're developing these programs, that you have people who are knowledgeable about preventing, detecting, responding to fraud, and that what we're talking about is tailored to your organization or program. 

There's no one size fits all approach. And so, having those people in the room at the beginning is really going to set you up for success when we're talking about all these different areas that can happen with fraud. 

Dana Daigle: 

Absolutely. I couldn't agree more with Louise on that. It's important, within your program, that you also design or have a team for anti-fraud waste and abuse, and you also bring them in as well as your finance team in if you identify any potential signs of fraudulent activity, particularly with the payment process. We want to make sure those two teams are involved so they can take actionable steps on the fraud that potentially occurred to, whether it's stop payment or if a payment has already cleared, they implement their recapture programs of the policies and procedures that go along with their recapture programs or report to the proper authorities. 

It's important for the programs to really, if they think fraud has occurred, to understand how it occurred, and then to also put in place the proper controls to prevent it from happening in the future. 

Hubert Klein: 

Great. This is great information. I think people are going to get a lot of it. I want to thank the two of you for taking your time today, all right, to share your knowledge with the audience and thank you very much. 

Louise Gannuch: 

Thank you. 

Dana Daigle: 

Thank you. 

^{Transcribed by Rev.com}