A few facts on Fraud, Waste, and Abuse in U.S. Government Spending from Joe From Texas
We often hear about fraud, waste, and abuse (or FWA), in the U.S. Government. Joe From Texas was curious about how the government defines these terms and just how much FWA is there in U.S. government spending, so he decided to investigate these issues.
The Office of Inspector General of U.S. AID defines fraud, waste, and abuse (FWA) as follows:
➢ Fraud is defined as the wrongful or criminal deception intended to result in financial or personal gain. Fraud includes false representation of fact, making false statements, or by concealment of information.
➢ Waste is defined as the thoughtless or careless expenditure, mismanagement, or abuse of resources to the detriment (or potential detriment) of the U.S. government. Waste also includes incurring unnecessary costs resulting from inefficient or ineffective practices, systems, or controls.
➢ Abuse is defined as excessive or improper use of a thing, or to use something in a manner contrary to the natural or legal rules for its use. Abuse can occur in financial or non-financial settings.
Now that we have defined FWA, let’s put the amount of money with which the government operates into understandable terms. We often hear the term billions, and even trillions, when discussing government spending. These are big numbers that we normally don’t think about, but let’s try to put into context what it would be like if we owed someone a billion dollars or even a trillion dollars. Joe From Texas has a couple of examples to help us understand just how much money each of these amounts represent.
Suppose your goal is to accumulate a billion dollars and you decide to save $100 per day toward this goal. How long would it take you? Assuming you earned no interest on the money, it would take you 27,387.26 years. In other words, you would never get remotely close to obtaining your goal in your lifetime. According to UC Berkeley, “Nor would your children, grandchildren, or great grandchildren. If you, and one descendent per generation, saved $100 every day, and each of you lived for 90 years, it would take you and 304 generations of your descendants to save up one billion dollars.”
If you think a billion is a big number, a trillion is 1000 times more. The following from CNBC.com puts this into perspective. “Here’s one way to think of it: a trillion is a million million. If you paid out $1 per second, to settle a $1 million debt, it would take less than 12 days. To pay off $1 billion would take 32 years. Paying off $1 trillion at a dollar per second? Nearly 32,000 years.”
The General Accounting Office (GAO) generally lumps fraud in with waste and abuse, rather than looking at each separately when they compile reports. The Treasury Department breaks federal spending down into three areas: mandatory, discretionary, and interest payments. Of these, mandatory is by far the largest category of spending, which is about two-thirds of the budget. It is made up of what are commonly called “entitlement” programs. Some of the programs that fall under mandatory spending are: Social Security, Medicare, food stamps (SNAP), welfare (TANF), and Medicaid.
Back in 2014, the Congressional Research Service estimated that the federal government allocated about $2.1 trillion for mandatory expenditures for that year. In 2015, the White House estimated that about $137 billion of that amount was lost through improper payments, another way of saying fraud, waste, and abuse. According to Deloitte, “some expenditures, such as those for health programs, may be particularly prone to fraud, waste, and abuse. The most rigorous available assessments of overall waste in health spending have placed it in the range of 30 percent.”
U.S. Representative James Comer suggests fraud, waste and abuse totaled at least $1.9 trillion dollars over the last 18.5 years. However, that might just be the tip of the iceberg because the GAO maintains that it is unable to “determine the full extent to which improper payments occur.” As you may have heard, President Biden recently signed a bill into law known as the “Inflation Reduction Act.” There is much doubt as to whether the bill will decrease inflation; however, it has been widely reported that it will fund the hiring of 87,000 additional IRS agents. Although Democrats who passed the bill claim that these agents will only target the rich, Joe From Texas believes that working class Americans will also be audited more frequently as a result of these new agents. Why, you may ask, do Democrats want to hire more IRS agents? The answer is because they want more money for their spending programs. Joe From Texas has a better idea than hiring more IRS agents. He believes they should instead use one-third of this money to eliminate fraud, waste, and abuse. This will give them more money to spend without coming after working families. Joe From Texas believes the remaining two- thirds of the money that they intend to use to hire IRS agents could instead be split evenly to hire more agents to secure the border and more security officers to secure schools to make them safe for our children and grandchildren.
McKinsey and Company estimates that most government programs detect less than half of monetary loss due to fraud, waste, and abuse (FWA). Further, they estimate FWA costs taxpayers about $148 billion per annum comprised of $57 billion known FWA and an estimated $91 billion of unmeasured FWA loss. Further breakdowns by various function are:
➢ Health: $25.7 billion of FWA known and $13.9 billion estimated unmeasured FWA loss
➢ Social Services: $27.6 billion of FWA known and $23.6 billion estimated unmeasured FWA loss
➢ Procurement: $.7 billion of FWA known and $13.6 billion estimated unmeasured FWA loss
➢ Grants & Loans: $2.6 billion of FWA known and $10.4 billion estimated unmeasured FWA loss
➢ Payroll: $.2 billion of FWA known and $3.3 billion estimated unmeasured FWA loss
➢ Other: $.2 billion of FWA known and $.7 billion estimated unmeasured FWA loss
The following are a few real examples of fraud, waste, and abuse (FWA):
➢ One PPP fraud Department of Justice Inspector General and Pandemic Response Accountability Committee (PRAC) Chair Michael Horowitz told Fox News, “I can't rule out that the fraud could be not only in the tens of billions, but maybe, as some have estimated, upwards of $100 billion, but it's too early for me to tell you how high that number is going to go. I know it's in the billions."
➢ Home health care, which provides skilled nursing care to home-bound patients, has been ripe for fraud because of the relaxed eligibility requirements for in-home care, limited oversight of the care provided, and weaknesses in the home health provider certification process. In one case, Medicare certified an agency owned by an individual with no home health experience who turned out to be a convicted drug felon and who later pled guilty with an associate to having defrauded Medicare of over $2.5 million. In another case, the owner of two home health agencies was sentenced for making false statements in Medicare cost reports and funneling the proceeds into a personal bank account. The owner was sentenced to 42 months in prison, ordered to pay $2.26 million, and fined over $100,000.
➢ In fiscal year 2020, more than 21% of Medicaid’s federal program spending was the result of improper spending. That means one-fifth of taxpayer dollars, intended to help roughly 77 million low-income and medically needy individuals, has been lost without helping those Americans. Medicare was similarly disastrous, with $43 billion in improper payments – money that should have helped provide health care for the 63 million elderly and disabled currently receiving Medicare benefits.
➢ The Social Security Administration Inspector General found that the Chula Vista California Field Office performed a home residency verification study and determined that 63 recipients of its targeted population were overpaid more than $385,000 because SSI was unaware that they were not U.S. residents and, therefore, ineligible for SSI payments.
As you will note, some of the examples above clearly constitute fraud on the part of recipients while another example appears to be waste resulting from an inept and bureaucratic system. The remedy for fraud cases is usually very straight forward, those who commit fraud can be prosecuted. Unfortunately, the path forward on a remedy for waste is not as clear. Waste generally does not result from criminal intent; it usually results from human error or either a breakdown of, or lack of systems designed to prevent such waste.
So, what are some answers on how to eliminate fraud, waste, and abuse? When it comes to fraud and abuse, the best remedy likely entails the Department of Justice aggressively and publicly prosecuting those who are found to have engaged in such practices. If people believe they will be caught and there will be a substantial criminal penalty, they may think twice before engaging in fraud.
When it comes to stopping waste, putting in place good, competent leaders and managers that provide excellent training programs for employees would be a good start. Leadership must identify goals for cutting fraud and looking at the resources at their disposal to achieve these goals. Once the goals are in place, agencies can consider adding experts with real world, relevant experience to jump-start the effort--possibly private-sector leaders from the finance or high-tech sectors. In addition, a strategy that focuses on delivering—and measuring—quick wins from analytics is important for building momentum and support. Aiming to deliver value in the first three or four months can help secure funding for future phases of a program designed to cut back on fraud.
In short, if government agencies have the right leadership, the right training programs, the right data analytics tools, and a new mindset with a determination to combat fraud, there is every reason to believe that they can prevent billions of dollars in losses annually.
Another entity that has the potential to help stem fraud is congress. By definition, a Presidential Administration is responsible for oversight of government programs and agencies; however, as the branch of government that provides the funds, congress also has oversight responsibilities. Many believe that congress has been increasingly lax in its oversight duties for the last several decades, choosing instead to let the executive branch handle these functions. If congressional leaders were to aggressively re-establish their efforts at oversight, this could be a huge step toward reigning in waste.
Joe From Texas believes the level of fraud, waste, and abuse within government programs is yet another reason that President Biden’s attempts to continually expand the programs and amount of money the government spends is misguided. There is no evidence that his administration is making any effort to combat FWA, yet he and Democrats in congress want to continually spend more money which will translate into more FWA.
One thing is crystal clear: The social safety net can’t be fixed by making it bigger and expanding the government’s reach as Democrats want to do. It would be like taking a leaky bucket and adding more water to it thinking the hole will fix itself. It’s unrealistic and irresponsible.
Fraud, waste, and abuse are unlikely to be discussed much in the upcoming election because the topic, although important, is not one that people focus on regularly. One thing that is clear is that the government spending more money will certainly not help to eliminate this problem. Democrats stand for more spending so the only chance to reign things in and give all of us a collective break for the next couple of years will be to vote Republican in the upcoming election. In this case, a recent quote from political commentator and former Secret Service agent Dan Bongino comes to mind. He said, “Republicans may not be the solution to your problems, but Democrats are certainly the cause of all your problems right now.”
A quick look at a different type of fraud from Joe From Texas
While still in office as President, George W. Bush once said of then Senator Joe Biden: “If bull**** was currency, Joe Biden would be a billionaire.” His point then, and Americans now see it on display on a regular basis, is that Joe Biden has a propensity to stretch the truth. Ronald Reagan had a similar, very eloquent, way of saying the same thing of many of his Democratic opponents while he was President. Reagan said: “It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so.”
We all know that politicians, at least most politicians, lie from time to time. Some lie most of the time. It seems as if some are so committed to lying that they would rather climb a tree to lie than stand on the ground and tell the truth. This seems to be especially true at campaign time. If candidates don’t have something negative on their opponent, it seems that many times they just make something up.
Joe From Texas has often wondered how they get away with this and whether this is within the limits of the law, so he decided to look into it. It turns out the answer to this question is complicated, as illustrated by the case below.
In 2010, Iowa senator Rick Bertrand filed a defamation suit against his opponent, Rick Mullin, and the Democratic Party for a TV ad that claimed Bertrand was once a "salesman for the most unethical company in the world" (the pharmaceutical company Takeda). It claimed the company sold a dangerous sleeping drug for children. Bertrand claimed the ad lied in tying him to a drug he "did not carry in a division of the company [he] never worked for." He won the case in 2012 — $31,000 from Mullin and $200,000 from the Democratic Party. In 2014, however, the Iowa Supreme Court overruled the decision on the grounds of free speech. Chief Justice Mark Cady said the case did not meet the threshold for actual malice.
That's why defamation suits among public figures are rare, and between politicians even more so. Perhaps crafty politicians know how to work the court of public opinion even if there is no benefit to citizens.
In short, today’s judicial framework that…generally speaking…. allows politicians to lie, absent very specific criteria that are hard to prove, makes ferreting out what a candidate is all about that much more difficult for the voter.