Government said lagging on anti-fraud technologies

Federal agencies should adopt forensics, analytics, open source and error triangulation tools

Agencies lag behind the private sector in deploying sophisticated analytical tools for identifying fraud and improper payments, according to Daniel Werfel, controller of the Office of Federal Financial Management in the Office of Management and Budget.

With respect to use of forensic technologies, analytics, open-source data, and triangulation techniques, government is still “in the embryonic stage,” Werfel said June 15 at the SAS Institute Inc. Government Leadership Summit.

“I feel this is an important moment, and deployment of these technologies will set government on a new path,” he said.

The Obama administration has estimated that in fiscal 2010 federal agencies made about $125 billion in improper payments, defined  as payments made to the wrong person, for the wrong amount, the wrong reason or with incomplete documentation. Some of the wrongful payments are due to fraud, while many are due to errors or incomplete data. The administration intends to reduce such payments by $50 billion by fiscal 2012.


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Some of the errors are rooted in naming conventions, such as allowing a federal check to be sent to "John Smith," who is dead, but whose death is listed in an index as "John L. Smith." In those cases, triangulation techniques, where several independent sources of identifying data are used, should be used to confirm the identifies of people getting federal payments, he said.

Werfel said transparency and fraud detection have advanced tremendously by the oversight board for the American Recovery and Reinvestment Act of 2009. The board is headed by Earl Devaney, a former inspector general at the Interior Department.

Werfel said he was extremely impressed when he visited the Recovery Accountability and Transparency Board’s fraud detection operation for the first time last year. The investigators use analytic tools, software, mapping tools and business intelligence databases.

“I have been in government since the 1990s, and I had never seen anything like it in government,” Werfel said. “My jaw dropped.”

The board was able to demonstrate to Werfel how to quickly identify suspicious activities in several states, such as money going to debarred contractors or to contractors with felony convictions. The cases that raised red flags were either prosecuted or are undergoing further investigation.

Werfel said he encouraged the Centers for Medicare and Medicaid Services to try the recovery board’s analytical tools on a trial basis and it is experiencing good results. The new tools were used to help identify a fraud ring and several cases of identity theft in the Medicare files, he said.

“Medicare is very good about finding certain kinds of fraud,” Werfel. “The recovery board also found those frauds, as well as more errors…It turns out that [Medicare] was not as good at catching identity thefts.”

Werfel said his mission is to persuade other federal agencies to apply the forensic tools.

“Agencies are skeptical, but so far the experience has been eye opening,” Werfel said.

Although agencies should be aggressive in reducing improper payments, policy decisions will need to be made to balance the risk of wrongful payments against the risk of delaying a payment to a needy person who relies government benefits, Werfel said.

For example, a portion of the improper Social Security payments are made to dead people. The problem is that the Social Security Administration does not receive immediate notice of all deaths. The solution might involve delaying all payments to ensure that all beneficiaries are living, but that would have a negative effect on needy recipients who are dependent on receiving checks on a regular schedule, Werfel said.

“I had one [federal] executive say to me, ‘I would rather allow 100 payments to dead people than to hold up one payment to a living person,' ” Werfel said, adding that he questioned if that is a good business rule for governments that operate under budgetary constraints.

“The point is, there needs to be an equilibrium,” Werfel said. “The big elephant in the room is, ‘What business rules are we willing to live under?’ ”


About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

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