Statement of Michael E. Horowitz, Chair, Pandemic Response Accountability Committee — March 25, 2021
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Statement of Michael E. Horowitz, Chair, Pandemic Response Accountability Committee and Inspector General, U.S. Department of Justice, before the Select Subcommittee on the Coronavirus Crisis, dated March 25, 2021, concerning the committee's role in combating fraud in pandemic relief and small business programs. It says the PRAC was created as part of the CARES Act in March 2020 and comprises 22 federal Inspectors General overseeing more than $5 trillion in federal pandemic-relief emergency spending. It says the IGs have issued 170 oversight reports related to pandemic spending. It also describes the PandemicOversight.gov website and the February 2021 Top Challenges in Pandemic Relief and Response report.
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“Statement of Michael E. Horowitz, Chair, Pandemic Response Accountability Committee — March 25, 2021.”
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Statement of Michael E. Horowitz
Chair, Pandemic Response Accountability Committee
Inspector General, U.S. Department of Justice
before the
U.S. House of Representatives
Committee on Oversight and Government Reform
Select Subcommittee on the Coronavirus Crisis
concerning
“The Pandemic Response Accountability Committee’s Role in
Combating Fraud in Pandemic Relief and Small Business
Programs”
March 25, 2021
Mr. Chairman, Ranking Member Scalise, and Members of the Subcommittee:
Thank you for inviting me today to discuss the work of the Pandemic
Response Accountability Committee (PRAC) since its creation as part of the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020. In
addition to serving as the Inspector General of the Department of Justice since
2012, for the past year I have served as acting Chair of the PRAC and permanent
chair since January 2021.
The PRAC is a Committee of the Council of the Inspectors General on Integrity
and Efficiency (CIGIE) and is comprised of 22 federal Inspectors General (IGs) who
are working collaboratively to oversee the more than $5 trillion in federal pandemic-
relief emergency spending. Our primary mission at the PRAC is to work with Offices
of the Inspector General (OIG) to ensure that taxpayer money is used effectively
and efficiently to address the pandemic-related public health and economic needs
that were funded through the various COVID-19 relief bills. My testimony today will
focus on the PRAC’s role in coordinating oversight of the pandemic response,
particularly in the area of small business programs.
The PRAC was established to serve the American public by promoting
transparency and facilitating coordinated oversight of the Federal Government’s
COVID-19 pandemic response and associated spending with the goal to identify and
mitigate major risks that cross program and agency boundaries, and to prevent and
detect fraud, waste, abuse, and mismanagement. We also seek to provide the
public with accessible, timely, accurate, and comprehensive data about the over $5
trillion in COVID-19 relief spending. To date, the 22 PRAC IGs, as well as other IGs
whose agencies received emergency pandemic funding, have issued 170 oversight
reports related to pandemic spending and the government’s response to the
pandemic. Recognizing the need to provide policymakers with insights now, the IGs
have issued many agile oversight products, including inspections conducted
remotely, flash reports, agency program funding snapshots, management alerts,
and white papers. These reports have included specific reviews of the Small
Business Administration loan programs, the Paycheck Protection Program and the
Economic Injury Disaster Loan program, which are covered in detail in Inspector
General Ware’s remarks.
PRAC’s Work to Date
In response to the COVID-19 outbreak, Congress authorized historic
levels of emergency funding for federal agencies to provide relief to individuals,
businesses, state and local governments, and public services. Since last March, the
PRAC has worked with member IGs to conduct oversight that seeks to identify and
mitigate programmatic and systemic risks, and to develop recommendations for
program improvements, refer matters for criminal and civil investigations, and
identify misspent covered funds for recovery. I will briefly mention a few examples
of the PRAC’s work over the past year to fulfill this mission and its plans for the
future.
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Launch of PandemicOversight.gov
The PRAC fosters greater transparency of the government’s pandemic-related
spending through our robust, publicly accessible website, PandemicOversight.gov.
The website includes important information about the PRAC and makes publicly
available a wide range of data related to how emergency pandemic funds have been
spent. For example, the website includes pandemic spending data from
USASpending, Paycheck Protection Program (PPP) data from the Small Business
Administration (SBA), and an updated list of all ongoing work from member IGs
related to the pandemic. In addition, our website provides direct access to recipient
and sub-recipient level reporting and the expenditures made using Coronavirus
Relief Funds. Our website is currently the only place where this data is available to
the public. The website also contains accountability information, including findings
from OIGs, such as completed audits and inspections, as well as Government
Accountability Office (GAO) reports. We also track recommendations that IGs have
made to agencies to help them improve the operations of government programs
related to the pandemic.
We are continuing to update PandemicOversight.gov with additional datasets
and are presenting the data in ways to make it more accessible. We are also
working to incorporate Provider Relief Fund data from hospitals and healthcare
providers from HHS into our website. Further, since PandemicOversight.gov’s
launch, we have been designing and developing new content and features that will
further enhance the site’s effectiveness as a transparency tool for Congress, the
public, and other key stakeholders. For example, as a result of our outreach effort
to our oversight partners at the state and local levels, we have begun to highlight
their work by sharing their reports on our homepage and through a feature on our
webpage on fraud in UI programs. We also have worked closely with GAO and its
leadership to ensure that federal oversight efforts are well coordinated. We look
forward to continuing to work closely with GAO, as well as our state and local
oversight partners, as we continue our independent oversight efforts.
Report on Cross-Cutting Issues that Transcend Federal Agencies
In February 2021, the PRAC issued a “Top Challenges in Pandemic Relief and
Response” report, which updated a similar June 2020 report by the PRAC, and
highlighted the major management challenges facing federal agencies during the
pandemic. The PRAC report also highlighted cross-cutting issues that policymakers
should consider as they implement the relief funding in the American Recovery Plan.
Three of these challenges incorporate elements related to small business fraud:
1. Grants and Guaranteed Loan Management. The CARES Act and related
legislation rely on grants and loans to provide assistance to state and local
governments, individuals, businesses, and other entities impacted by the pandemic.
The substantial increases in funding for grants under the CARES Act and related
legislation heighten the existing challenges agencies face in processing and
monitoring of grant payments, and in developing metrics to effectively evaluate their
impact. The CARES Act’s primary guaranteed loan programs, the Paycheck
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Protection Program (PPP) and expansion of Economic Injury Disaster Loans (EIDL),
present similar management challenges, with the SBA attempting to balance timely
economic relief while ensuring that funds are provided only to intended beneficiaries.
As SBA Inspector General Mike Ware will address in detail, the SBA OIG has
identified potentially fraudulent loans and duplicative loans made to applicants under
both programs.
2. Preventing and Detecting Fraud against Government Programs. Over
the last year, numerous OIGs have found that speed compromised internal controls,
as agencies rushed billions of dollars in urgent relief out the door. After SBA
launched the PPP, within 14 days lenders approved more than 1.6 million PPP loans
totaling nearly $342.3 billion. SBA received more EIDL loan applications and
approved and disbursed more EIDLs than for all other disasters combined since the
agency was founded in 1953. Both SBA OIG and Department of Labor (DOL) OIG
identified self-certification of eligible recipients as a top fraud vulnerability for the
pandemic assistance programs. For DOL, that vulnerability puts $26 billion in
taxpayer funds at a higher risk of fraud and improper payment.
3. Informing and Protecting the Public from Pandemic-Related Fraud.
PRAC member OIGs have also found that Americans are being targeted in greater
numbers by dishonest people taking advantage of the crisis to harm individuals and
businesses through scams and harassment. Identity theft is on the rise and has
been exploited across PPP, EIDL, unemployment insurance (UI) fraud, healthcare
programs, and more. Additionally, as noted in the February 2021 report, some
medical labs targeted retirement communities claiming to offer COVID-19 tests, only
obtained blood samples, and then, falsely billed health care programs for their
services. In another example, fraudsters hacked social media accounts to obtain
individuals’ personal information and personal health information to commit medical
insurance fraud. In addition, OIG work has continued to identify instances when
unscrupulous actors have used misleading information for financial gain, such as
enticing individuals and businesses to purchase defective or ineffective personal
protective equipment or to pay for advanced access to the COVID-19 vaccine.
Report on Data Gaps
A fourth challenge ties to another critical issue in oversight of the pandemic
response, data transparency and completeness. The PRAC included this challenge in
its updated challenges report and also commissioned a separate study with MITRE
which identified key gaps in data sources and potential opportunities to close the
gaps. The PRAC is actively reviewing federal data sets to identify areas where high
impact programs contain reporting gaps effecting the ability of agencies, OIGs, and
the PRAC to properly oversee their use of pandemic response funds. We have been
working with OMB, the Chief Financial Officers Council, OIGs and agencies on these
gaps and are working to improve data quality and transparency.
An important result from these recent discussions was OMB Memorandum M-
21-20, Promoting Public Trust in the Federal Government through Effective
Implementation of the American Rescue Plan Act and Stewardship of the Taxpayer
Resources, issued on March 19, 2021. This guidance addresses some of the
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concerns PRAC leadership and staff have been discussing with OMB this past year,
particularly the need for detailed and accurate award descriptions, enhanced
transparency of spending through use of disaster and emergency funding codes and
working with the PRAC and IGs to strengthen payment integrity. The guidance
specifically mentions the Administration’s commitment to working with the PRAC and
agency IGs to strengthen payment integrity to minimize the risk of waste, fraud,
and abuse. Additionally, the guidance notes that “OMB anticipates continued
collaboration with the PRAC to include joint communications on issues related to ARP
relief that will raise awareness on specific challenges and opportunities for payment
integrity.”
We will continue its work with partner IGs and OMB to address program level
data gaps and opportunities to promote public trust and enhance payment integrity.
Coordinating Oversight Across the PRAC IGs
The PRAC serves as an effective forum for coordination and collaboration
among OIGs and other oversight partners, including GAO and state and local
auditors, evaluators, and inspectors, to minimize duplication of effort and support
high-impact oversight of covered funds and the coronavirus response. To facilitate
this coordination and collaboration, we have established five subcommittees and
three issue groups for healthcare, financial institutions, and data sharing—chaired by
PRAC members—to share ongoing oversight and accountability efforts, best
practices, and lessons learned. These efforts include:
• ongoing reviews of multi-dipping, or recipients of pandemic funds using
multiples sources of funds for the same purpose,
• GAO, state and local coordination and sharing among the group and with the
federal community on high risks and areas of concern to help find solutions,
such as challenges completing Single Audit Act requirements, fraud risks
associated with the unemployment programs, and sharing reports or
methodologies used for similar oversight activities.
• a PPP working group that is discussing outcomes related from oversight and
inspections of PPP fraud and misuse, and
• sharing of data analytics and data across the pandemic response community to
create a more cohesive response to pandemic oversight.
More specifically, the PRAC shares best practices with OIG members and state
and local partners through the working group structure on issues such as data
analytics, investigative techniques, and health care. The PRAC Audit Subcommittee
issued the Agile Products Toolkit to assist members in providing expeditious
oversight of federal response in a crisis like the pandemic. The PRAC Healthcare
issue group recently released a report on COVID-19 testing, a risk area the group
identified that cuts across agencies, and collaborated to create a data brief on
COVID-19 testing administered between February 2020 and August 2020 in six
select federal health care programs. This report highlights critical areas for
policymakers should consider to improve testing for Americans, including
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availability, accessibility, and cost effectiveness of tests. The PRAC Financial
Institutions issue group brought together expert stakeholders to gather their insights
concerning the Federal government’s pandemic response efforts in small business
and housing relief programs. The group released a series of videos highlighting
those perspectives of lenders, small business and borrowers, and housing
stakeholders.
Meanwhile, OIGs and our law enforcement partners at the Department of
Justice and elsewhere have been aggressively pursuing fraud cases. The
investigative workload for a number of PRAC IGs has been substantial and,
regrettably, continues to grow. The PRAC is working to assist these IGs, including
through the development of a pandemic fraud task force, which I discuss below.
Those who engage in fraud and other wrongdoing in connection with pandemic-
related programs will be held accountable, and we hope that these efforts will have
the necessary and important deterrent effect.
To date, there are 185 publicly announced criminal investigations which have
resulted in indictments and criminal complaints issued on the numerous alleged
perpetrators. The first civil settlement to resolve allegations of fraud against the
Paycheck Protection Program (PPP) occurred on January 12, 2021 in the Eastern
District of California. Additionally, regulatory agencies like the Food and Drug
Administration, have issued 7 civil injunctions and restraining orders against
companies and individuals who are falsely claiming to have treatments or cures for
the coronavirus.
The Offices of Inspectors General are actively engaged in combating this
criminal behavior and have led or participated in investigations leading to over 240
indictments or complaints, 190 arrests, and 36 convictions thus far. PPP and EIDL
fraud continue to trend as the largest number of publicly announced investigations
with 98, followed by Unemployment Insurance fraud at 31, and investigations
related to testing supplies/treatments/vaccines at 18.
The PRAC is also continuing to track scam and fraud alerts issued by our
member agencies, to ensure the broadest dissemination on our website and social
media platforms. Most recently, the PRAC worked with HHS OIG to publish an alert
on the vaccine scams that have begun targeting the public.
Shared Services Support to OIGs
The PRAC is seeking to use the resources and tools that Congress have given
us to enhance shared services across the IG community, and to fill gaps to help our
partners meet the challenge of overseeing this pandemic spending. For example,
we are working with data science programs at leading academic institutions to
recruit data science fellows and build a talent pipeline for the OIG community. The
PRAC is also providing resources to PRAC members to combat fraud in pandemic
relief programs, including PPP and EIDL fraud. Additionally, the PRAC is hosting an
educational Loan Fraud Forum on April 22, 2021, that will highlight activities in the
oversight community related to PPP and EIDL fraud schemes. This will allow OIG
investigators to hear from SBA OIG, FDIC OIG, and FHFA OIG about their
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experiences in pursuing PPP and EIDL cases; as well from the Department of Justice
and the Special Inspector General for Pandemic Relief (SIGPR) related to their
ongoing efforts in this area. Further, the PRAC Data Sharing workgroup coordinates
regular meetings of OIGs to discuss data sharing opportunities to identify potential
cross cutting initiatives, to share lessons learned from OIG data-related oversight
work, and to consider ways to prevent and detect fraud, waste, and abuse through
the use of data analytics.
The PRAC also launched a hotline complaint site on its webpage
(https://www.pandemicoversight.gov/contact/abouthotline) to enable whistleblowers
and the public to report alleged wrongdoing related to federal pandemic programs
without having to determine which OIG office has primary responsibility for a
particular government program. All of the complaints made to the PRAC hotline are
reviewed by staff and then forwarded to the appropriate OIG. As of March 12, 2021,
the PRAC has received 888 complaints, and has made 1,284 referrals to OIGs (since
some hotline complaints impact multiple programs and offices). Separately, the
PRAC provided the SBA OIG with 10 detailees to assist the SBA OIG in responding to
the enormous influx of PPP and EIDL-related complaints to the SBA OIG’s own
hotline.
PRAC Initiatives
Having highlighted some of the work of the IG community and PRAC to date,
let me briefly discuss some of the initiatives that the PRAC is currently undertaking
or planning to initiate going forward.
Pandemic Analytics Center of Excellence
We greatly appreciate Congress’s continued support of the PRAC, including
the $40 million provided in the American Rescue Plan Act of 2021. Fulfilling the
PRAC’s mission of rooting out waste, fraud, and abuse in COVID response spending
requires better technological tools, including the use of advanced data analytics that
can be used to identify and stop fraudulent payments before they are made, to
strengthen compliance and audit efforts, and detect fraud and support efforts to
recover any ill-gotten gains. To that end, the PRAC has established and will operate
the Pandemic Analytics Center of Excellence (PACE) to: (1) conduct data analysis
and visualization of all pandemic response funds; (2) provide fraud-fighting tools
and central shared services to the IG community; (3) enable the broad sharing of
data, analytics and leading practices across the oversight and law enforcement
community; and (4) assist investigations and audits of pandemic relief programs
with expanded data for open source investigative intelligence.
The PACE will provide the enhanced capacity needed to ensure that pandemic
response funds are used for their intended purpose, and not wasted or misused.
The PACE is comprised of three primary functional capabilities (IT & Data
Management; Analytics Visualization & Reporting; and Investigative Support) that
will execute and operate its mission:
• Analytic support tools will include data matching, anomaly detection, risk
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modeling, social network analysis, robotic process automation, geospatial
analysis, link analysis, business intelligence, and open-source intelligence.
• Data science staff will utilize the tools to identify trends, patterns and
anomalies and generally develop insights to detect and prevent potential or
suspected fraud, waste, abuse and mismanagement of covered funds based
upon best available data and analytic techniques.
• Development of capabilities necessary to identify, acquire, and curate data
that can be used for pandemic oversight to allow for a flexible and adaptable
cloud-based platform to analyze data. This should include capabilities to
support data governance, data quality, data policies and standards, data
inventory, and data security.
Cross-Cutting Oversight Work
The PRAC has three ongoing cross-cutting oversight projects. One of the
projects is reviewing the spend rate data across six federal pandemic response
programs that provided a large majority of their funds to states for expenditure,
such as the Coronavirus Relief Fund, and identifying programs where multi-dipping
has occurred, or there is a risk of it occurring. Additionally, we are examining first-
time contractors that received a sole source contract related to the COVID-19
pandemic response. Further, with the Audit Subcommittee, the PRAC is developing
an acquisition and grant workforce survey to assess qualifications of personnel and
resources provided, as required by Section 15110(d)(1)(B)(vii-viii) of the CARES
Act.
Our staff is also working on deconfliction with OIGs and GAO, as well as the
tracking of all work in the community to identify cross-agency trends and patterns,
as required by our authorization in the CARES Act 151109d)(1)(B)(i) through our
strategic plan to ensure coordinated, efficient, and effective comprehensive
oversight. Some examples of these efforts include the development of a systematic
coordination and deconfliction tracker that is regularly updated, distribution of a
monthly report that provides a list of all ongoing pandemic response oversight
projects to all pandemic OIGs and GAO, and monthly meetings with GAO to share
key activities and priorities.
PRAC Fraud Task Force
The PRAC is standing up a Fraud Task Force to serve as a deconfliction and
coordination tool to assist OIGs in their investigative efforts; to serve as a
coordinating body with Department of Justice prosecutors, the Federal Bureau of
Investigation, and other federal law enforcement agencies; and to allow OIGs to tap
into available criminal investigators and analysts from across the OIG community in
handling pandemic fraud cases. Further, the PRAC will use its funding to retain and
provide contract and staff support to the Fraud Task Force, as well as to assist OIGs
with pursuing administrative remedies such as suspension and debarment.
Additionally, the PRAC has a draft subpoena policy in the clearance process
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with our Committee members. The policy, when adopted, will directly support the
Fraud Task Force and our member IGs, and contribute to the IG community’s efforts
to stop the large-scale fraud we are seeing in pandemic response programs, like
PPP.
Program Fraud Civil Remedies Act
Too often those who fraudulently divert tax dollars in amounts below what is
typically accepted by prosecutors are not fully held accountable, impacting agency
programs and leaving the taxpayer footing the bill. In light of this challenge, the
PRAC’s and the IG Community’s efforts to fight fraud in pandemic related spending
would be enhanced by congressional support for a long-standing CIGIE legislative
priority to reform amend the Program Fraud Civil Remedies Act (PFCRA). As my
fellow PRAC member and CIGIE Legislation Committee Chair Kathy Buller has
testified before the House Oversight and Reform Committee:
PFCRA is often referred to as the "mini False Claims Act" because it provides
administrative remedies for smaller false and fraudulent claims against the
government that the Department of Justice (DOJ) declines to enforce.
Unfortunately, because of problems in the original legislation, passed over 3 decades
ago in 1986, PFCRA remains a relatively underutilized tool.
CIGIE has suggested raising the jurisdictional limit for administrative
recoveries of “smaller” false or fraudulent claims against the government from
$150,000 to $500,000 extending PFCRA’s coverage as a fraud-fighting tool to cover
approximately $50 billion in government expenditures. This estimate was developed
in 2018, two years before passage of the CARES Act, which exponentially increased
the total amount of “small” payments to recipients of pandemic-related funds, and
could further increase PFCRA’s reach, if CIGIE’s proposal were to pass, by tens of
billions of dollars. CIGIE and the PRAC look forward to working with the
subcommittee and the full committee to enact this important legislation.
Conclusion
Thank you again for your strong support for our work, and we look forward to
working with the Congress and the Administration as the PRAC and our IG partners
continue to fulfill our crucial oversight mission. This concludes my prepared
statement, and I would be pleased to answer any questions that you may have.
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