Key Takeaways
- •Rep. Sessions (R, TX-17) announced the Fraud Prevention and Accountability Act to transition federal agencies from "pay and chase" models to real-time fraudulent payment prevention.
- •Allison Ball (Auditor of Public Accounts for the Commonwealth of Kentucky) testified that her office uncovered over $836 million in Medicaid waste involving payments for out-of-state beneficiaries.
- •Rep. Comer (R, KY-1) pressed Ball on state cooperation, leading her to reveal that Kentucky’s executive branch leadership has been unhelpful in addressing identified program integrity issues.
- •Republicans advocated for stricter eligibility verification and performance-based funding, while Rep. Randall (D, WA-6) argued that many improper payments result from paperwork errors rather than intentional fraud.
- •Robert Westbrooks (Independent Consultant) urged Congress to make the Pandemic Response Accountability Committee’s data analytics capacity permanent to ensure the government remains prepared for future emergency spending.
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Hearing Analysis
Overview
This hearing examined the systemic vulnerabilities and rising rates of fraud within federally funded, state-administered assistance programs such as Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and Unemployment Insurance (UI). The discussion focused on the transition from a "pay and chase" model of recovery to a proactive prevention framework, particularly in the wake of the COVID-19 pandemic, during which the U.S. Government Accountability Office (GAO) estimated that up to $135 billion in UI benefits were lost to fraud. Members explored the balance between rapid benefit delivery and program integrity, the role of data sharing between state and federal entities, and the impact of recent legislative changes on state accountability.
Key Testimony & Policy
Witnesses highlighted a significant "culture of non-acknowledgment" regarding fraud risks at both the federal and state levels. Seto Bagdoyan, Director of Audit Services at the GAO, testified that UI and Medicaid remain on the GAO’s High-Risk List due to persistent integrity weaknesses. He identified "self-attestation"—where applicants certify their own eligibility without immediate verification—as a primary driver of fraud. Bagdoyan argued that federal oversight often follows a "fund-and-forget" posture, leaving states overwhelmed by sophisticated international fraud rings that utilize artificial intelligence to exploit outdated IT systems.
Allison Ball, the State Auditor of Kentucky, provided a case study of state-level oversight, noting that her office uncovered $836 million in Medicaid waste involving duplicate payments for beneficiaries covered in multiple states. She emphasized the use of "special examinations" that bypass traditional auditing constraints to investigate specific programs. Dr. OJ Oleka, CEO of the State Financial Officers Foundation (SFOF), proposed five policy recommendations: amending the Inspector General Act to mandate liaisons between federal Inspectors General (IGs) and state financial officers, implementing real-time nationwide cross-checking of residency and citizenship, accelerating the adoption of modern fraud detection tools, expanding performance-based funding for states, and creating a public "real-time" fraud dashboard.
Robert Westbrooks, former Executive Director of the Pandemic Response Accountability Committee (PRAC), advocated for the permanent establishment of a "Center of Excellence" for data analytics. He noted that while the PRAC’s Pandemic Analytics Center of Excellence (PACE) was effective, it was stood up reactively. He suggested the U.S. look toward the United Kingdom’s Public Sector Fraud Authority (PSFA) as a model for standardizing counter-fraud activities across government branches.
Notable Exchanges & Partisan Dynamics
A significant portion of the hearing involved a partisan debate over the status of federal Inspectors General. Rep. Eleanor Norton (D-DC) and Rep. James Walkinshaw (D-VA-11) expressed alarm over the "mass firing" of 19 IGs and the fact that three-quarters of IG positions remain vacant or filled by acting officials. They argued that proposed 13 percent budget cuts to IG offices would cripple the "return on investment" these offices provide. Mr. Westbrooks confirmed that such cuts would force offices to rescope audits and lead to a "brain drain" of experienced investigators to the private sector.
Partisan tension also emerged regarding the "Alaska Carveout" within the "One Big Beautiful Bill Act." Rep. Maxwell Frost (D-FL-10) criticized the provision for allowing states with high improper payment rates, such as Florida, to delay cost-sharing penalties. He argued this rewards poor performance and penalizes states that make good-faith efforts to reduce errors. Conversely, Republicans, led by Rep. Pete Sessions (R, TX-17) and Rep. James Comer (R, KY-1), focused on the lack of cooperation from state executive branches. Auditor Ball testified that while "boots-on-the-ground" staff were helpful, leadership in the Kentucky Governor’s administration had been uncooperative during her Medicaid investigations.
Rep. Emily Randall (D, WA-6) defended the performance of "blue states," citing Washington’s proactive data-driven model that resulted in a 178 percent increase in fraud referrals. This was a direct response to concerns raised by Rep. Walkinshaw that the administration’s new fraud task force might focus disproportionately on Democratic-led states.
Organizations Mentioned
- Pandemic Response Accountability Committee (PRAC): Discussed as the primary model for data-driven fraud detection; witnesses argued for making its analytic capabilities permanent. - U.S. Government Accountability Office (GAO): Provided the foundational data for the hearing, including the $135 billion UI fraud estimate and the High-Risk List designations. - State Financial Officers Foundation (SFOF): Represented by Dr. Oleka, the organization advocates for increased statutory authority for state treasurers and auditors to oversee federal funds. - U.S. Department of Health and Human Services (HHS): Criticized for its high error rates in Medicaid and SNAP; its IG office faces potential budget cuts. - U.S. Department of the Treasury: Mentioned as the host of the "Do Not Pay" list, which witnesses suggested should be more integrated with state eligibility systems. - Council of the Inspectors General on Integrity and Efficiency (CIGIE): Identified as the body overseeing the IG community during a period of high vacancies and leadership turnover. - U.S. Small Business Administration (SBA): Cited by Mr. Westbrooks regarding past fraud vulnerabilities in pandemic-era loan programs.
What's Next
Rep. Pete Sessions (R, TX-17) announced the introduction of the Fraud Prevention and Accountability Act, which aims to create a permanent "Inspector General for Fraud Accountability and Recovery" to house the analytic capacities developed by the PRAC. Rep. James Walkinshaw (D-VA-11) submitted a formal letter to the chair of CIGIE requesting a detailed report on how current IG vacancies and budget constraints are affecting fraud detection. The subcommittee indicated it would continue to monitor the implementation of the Vice President’s task force to eliminate fraud, with a focus on ensuring the initiative remains nonpartisan and technically focused.
Transcript
Subcommittee on Government Operations will come to order and I'd like to welcome everyone. This is a room that we have been without for about a year and so this is the first subcommittee or committee meeting that we have held and I would like to say, Mr. Chairman, great job.
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