Lead pandemic watchdog urges lawmakers to extend COVID anti-fraud tool to all federal spending

The chairman of the PRAC argues a big-data system set up to investigate pandemic fraud could help prevent improper payments across all federal spending.

The lead watchdog overseeing more than $5 trillion in pandemic-related spending says Congress should expand a data analytics platform, currently used to investigate COVID relief fraud, to help prevent improper payments across all federal spending.

The Pandemic Analytics Center of Excellence (PACE) was established under the American Rescue Plan to combat fraud using a combination of public, non-public, and commercial data sources.

Michael Horowitz, chairman of the Pandemic Response Accountability Committee and inspector general at the Justice Department, said the PRAC has used the analytics system, among other things, to uncover $5.4 billion in pandemic loans that were obtained using “questionable” social security numbers.

The PACE system has supported more than 600 pandemic-related investigations across more than 40 law enforcement and inspector general organizations, according to Horowitz’s testimony before the Senate Homeland Security and Governmental Affairs Committee on Tuesday.

With funding for the PACE set to expire in 2025, Horowitz urged Congress to consider legislation that would extend the system and expand its authorities, arguing it’s central to shifting from a “pay-and-chase” model to one of fraud prevention.

“Congress should make it applicable across the board to all federal spending,” Horowitz said. “There’s no reason it should only be limited to pandemic funding.”

He also argued the extension would not create a “super IG” that seeks to duplicate the existing audit, investigative, and oversight responsibilities of inspectors general. Like the PRAC itself, PACE is run out of the Council of the Inspectors General on Integrity and Efficiency (CIGIE).

“Rather, it would simply ensure that IGs continue to have access to this critical fraud prevention tool,” Horowitz said.

The Government Accountability Office earlier this year recommended agencies adopt stricter anti-fraud controls to help prevent improver payments on the heels of the historic pandemic-related fraud. GAO’s report also recommended Congress create a permanent analytics center of excellence to help the oversight community identify improver payments and fraud.

Rebecca Shea, director of the forensic audits and investigative service at GAO, said PACE has helped build up a cadre of data analytics expertise within the PRAC. It’s also coordinated 95 data-sharing agreements, which watchdogs say are critical to combatting fraud.

“There’s a significant upfront investment that was made in the PACE, and we think it’s cost effective to continue that,” Shea said. “The capability exists there with CIGIE to be able to carry forward those [memoranda of understanding] and those data analytic capabilities.”

Officials also argued Congress should avoid a repeat of 2015, when it didn’t reauthorize the Recovery and Accountability Transparency Board, known as the RAT Board, created to oversee the 2009 stimulus spending package. Horowitz said it was the “first-ever inspector general community-wide data analytics effort.”

Six years after the RAT Board expired, Congress include $40 million in the American Rescue Plan to fund PACE so it could fulfill a similar role overseeing COVID relief spending.

“It would be, I think, an awful outcome if the taxpayers again in two years ended up with nothing to show for that, when it could save literally billions of dollars,” Horowitz said.

The PACE crunches records from more than 59 datasets, with specific rules governing their use and how they can be shared, according to Horowitz’s testimony.

For instance, the center shares “nonpublic loan level data sets” from the Small Business Administration with 44 offices of inspectors general and law enforcement agencies investigating fraud in the Paycheck Protection Program and the COVID-19 Economic Injury Disaster Loan (EIDL) program.

Hannibal Ware, inspector general at SBA, said data-sharing agreements are key to preventing fraud.

“I understand the Privacy Act concerns, I get that, but it can be for key reasons at key times,” Ware said. “I feel like [COVID] would have been a key time would have allowed us to set up controls in the beginning and not end up in the pay and chase model that we’re in currently.”

While agencies prioritized speed in their COVID relief programs, especially during the initial months of the pandemic, Horowitiz disputed the notion that anti-fraud controls would considerably slow down relief spending.

“It doesn’t require this notion that we had two choices, which I’ve heard over and over again at the outset of the pandemic: either get the money out today, or wait weeks and weeks and weeks and weeks to verify,” he said. “That was nonsense. There’s always an alternative choice.”

He added that once money is sent to fraudster, it’s difficult to get it back, as they often send it overseas, into cryptocurrency, or to other places that are difficult to track and access.

“We have to work with executive branch agencies, OMB leadership, and Congress to make sure agencies use an analytics platform to prevent fraud before it happens,” Horowitz said.

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