CARES Act Oversight – Mitigating Waste, Fraud and Abuse

Published: April 16, 2020

Federal Market AnalysisCoronavirus (COVID-19) PandemicWaste, Fraud, and Abuse

As the federal government rolls out trillions of dollars to small businesses, Americans, federal agencies, state and local governments, and other organizations to provide economic relief from the COVID-19 pandemic, it becomes imperative to establish processes to stem waste, fraud and abuse.

Key Takeaways:

  • Safeguards for appropriate distribution and use of COVID-19 supplemental funding are imperative.
  • The CARES Act contains a number of provisions to establish transparency, accountability and oversight mechanisms.
  • Some lawmakers fear that oversight mechanisms currently stand unprotected from political and partisan manipulation.

The CARES Act contains several provisions to establish oversight, accountability and transparency for appropriations detailed in the act. Below is a summary of the oversight provisions contained in the legislation:

  • Individual federal agency Offices of Inspector General (OIG) combined are to receive $139M in supplemental funding to provide oversight for the programs within their agencies.
  • A Special Inspector General for Pandemic Recovery (SIGPR) is to be appointed by the president within the Department of Treasury to “conduct, supervise, and coordinate audits and investigations” of the financial assistance programs for businesses including the making, purchasing and management of loans, loan guarantees and other investments. The legislation gives the SIGPR $25M to establish an office and required systems to track such information.
  • A Congressional Oversight Commission is to be created to monitor the implementation of the $500B loan fund by Treasury and the Federal Reserve.
  • GAO is directed to conduct annual studies of the $500B loan fund.
  • A Pandemic Response Accountability Committee (PRAC) is to be created within the existing Council of Inspectors General on Integrity and Efficiency (CIGIE) “to promote transparency and conduct and support oversight of covered funds and the Coronavirus response to prevent and detect fraud, waste, abuse and mismanagement; and mitigate major risks that cut across program and agency boundaries.” The PRAC is to provide oversight for funds disbursed through all COVID-19 response legislation. The CARES Act legislation provides $80M in funding for the PRAC.

Late last week, OMB released implementation guidance for supplemental funding provided by all three coronavirus relief acts.  The guidance is intended to help federal agencies balance speed, mission and stewardship with regards to disbursing coronavirus relief and response funds.  The guidance directs agencies to report monthly to OMB on expenditures greater than $150,000. It also details how agencies should report spending and awards utilizing existing reporting methods within agency financial systems, including reporting to OMB plans to use existing methods and reporting tools for information gathering on contract awards, grants and agency contract spending. The guidance also instructs agency OIGs to develop plans to prevent and detect waste, fraud and abuse related to the distribution of relief funds.

Additionally, lessons from the 2009 Recovery Act could serve as a template for monitoring disbursement and spending of funds for COVID-19 response and relief. The Recovery Act established a Recovery Accountability and Transparency (RAT) Board to provide transparency and oversight for stimulus outlays. In fact, the language in the CARES Act for the PRAC was modeled after the 2009 Stimulus Act.

Earl Devaney, the former chairman of the RAT Board, told Federal News Network in an interview that one of the keys to preventing fraud was creating spending visibility so the public could help deter fraud and mismanagement of funds.  The RAT Board did that with the website, which was built on the notion that “transparency is a force multiplier for fraud prevention,” Devaney said.

Today, visibility into all federal spending has increased due to requirements of the DATA Act, as well as increased agency automation and use of analytics tools. In fact, provisions of the DATA Act were inspired by RAT Board best practices. The current CARES Act legislation requires that the PRAC use existing DATA Act data elements and tools to track federal expenditures and disbursements.

GAO is also urging federal employees, contractors, and the public to report suspected fraud from COVID-19 relief efforts to its hotline. GAO will be required to report on its oversight stimulus funds within 90 days, and then bi-monthly after that.

Although oversight mechanisms are being established, some lawmakers are concerned about the lack of independence for the IGs. On March 30th, the CIGIE named Glenn Fine, Principal Deputy Inspector General and acting IG for DOD, to serve as the Chair of the PRAC. But just a week later, President Trump removed Fine as DOD’s acting IG which in effect made him ineligible to chair the PRAC because he was no longer an IG. House Democrats rapidly responded with a proposed CARES Act amendment that would allow eligibility to senior officials in IG offices, not just IGs themselves.  Additionally, House Democrats are planning legislation to protect the independence of IGs.

As the federal government rolls out $2.2T in funding for government response, and citizen and business relief, it will be imperative that safeguards are established early to thwart waste, fraud and abuse.