Insight

Fighting against fraud, waste and abuse during the pandemic

Investigations Insider

Thomas Stanton

Thomas Stanton

Advisory Managing Director, Forensic, KPMG US

+1 212-872-7758

Since March 2020, the U.S. Congress has authorized more than $5 trillion in spending in response to the economic fallout from the COVID-19 pandemic. Public spending at this level, in such a short time frame, undoubtedly increases the risk of fraud, waste and abuse, and the federal and state governments have launched numerous efforts to mitigate the problems that could arise.

In 2020, for example, the federal government established the Pandemic Response Accountability Committee (PRAC) to provide oversight of the government’s pandemic response programs. Reporting to a designated group of Inspectors General, PRAC is focused on promoting transparency on how funds are spent and rooting out fraud and abuse in any program receiving pandemic relief funds. From October 2020 through March 31, 2021, the PRAC reports it has brought 288 indictments resulting in 75 convictions for wrongdoing related to these programs.

On May 21, 2021 the Department of Justice established another fraud enforcement effort, the COVID-19 Fraud Enforcement Task Force, to “bring to justice those who seek to profit unlawfully from the pandemic,” according to Attorney General Merrick Garland. The task force will coordinate and strengthen other federal efforts underway, helping agencies administering relief programs to increase their fraud prevention efforts, and it will “bolster efforts to investigate and prosecute the most culpable domestic and international criminals, prevent the exploitation of government assistance for personal and financial gain, and recover stolen funds,” according to a government statement.

Helping states protect COVID-19 relief funds

KPMG is focusing its efforts on a state-level initiative known as the Coronavirus Relief Fund (CRF), which initially designated $150 billion in direct assistance for state, territorial and tribal governments. The 2021 American Rescue Plan will amplify the effort, delivering an additional $350 billion for these governments.

In 2020, our firm established a special team to help monitor the states’ use of those funds. Our goal is two-fold: To help prevent fraud and abuse by the businesses and individuals who receive the funds, and to advise that the states distributing the funds are doing it properly, in compliance with the guidelines and rules set forth by the various departments and the Inspectors General overseeing the program.

Identifying and monitoring for risk

When a state engages our team, we typically start by conducting a risk assessment, which includes interviewing the key stakeholders to identify potential risks, including the risks for fraud and abuse and mitigating controls. Next, we design a monitoring plan, which guides us as we monitor the transactions related to the state’s use of the CRF funds. We test transactions to validate they have the appropriate supporting documentation, verify that funds are eligible and allowable under the funding programs, and identify any anomalies that might suggest fraudulent activity.

Earlier this year, we did find an anomaly in an invoice related to a healthcare facility and were able to help the state prevent a fraud from occurring.  Specifically, the healthcare facility address and the ship-to address on the invoice did not align. In this particular case, we uncovered a potential scam in which masks and other personal protective equipment were being shipped to a third-party location and then resold on the open market. We helped put a stop to the potential scam and ensured the PPE was getting to the healthcare facility for which it was intended.

Since 2020, we have worked with several states and local governments that were due to receive multi-billion-dollar CRF grants. The governments recognized it did not have adequate controls in place to account for the proper distribution of those funds, nor was it prepared for an audit that a federal agency might eventually conduct. In these cases, we worked with the local governments to make sure they would meet the highest audit standards and that the funds were not at risk of being reclaimed by the federal government.

Since the pandemic began in 2020, we’ve not only served our state and local government clients. We’ve served the American taxpayer, making sure their money is going where it’s needed.

Takeaways:

  • KPMG is working with state and local governments, monitoring the use of funding they receive from the Coronavirus Relief Fund.
  • We’re serving a dual purpose: preventing fraud, waste and abuse by recipients of the funds and helping to validate that the states are distributing the money properly.
  • We’re working with the states to safeguard their CRF funds.
  • We’re also safeguarding the taxpayers’ money. 

On-Call Investigation Services

Fraud allegations require a swift response and skilled resources. When fraud occurs in a global setting, it is essential to perform a thorough investigation.

Fraud allegations require a swift response and skilled resources. When fraud occurs in a global setting, it is essential to perform a thorough investigation.