Program Fraud Civil Remedies Act: Observations on Implementation

What GAO Found

According to information provided by the Department of Justice (DOJ) and our survey of the Inspectors General (IG), five civilian agencies, the Department of Housing and Urban Development (HUD), the Department of Health and Human Services (HHS), Department of Energy, the Corporation for National and Community Service, and the Nuclear Regulatory Commission used the Program Fraud Civil Remedies Act's (PFCRA) authorities to refer 141 cases to DOJ for approval by the Attorney General during fiscal years 2006 through 2010. Of the 141 cases, 135, or 96 percent, were referred by HUD. The remaining four agencies referred a total of 6 cases during this period.

We asked HUD IG officials to identify factors that facilitated HUD’s use of PFCRA. They told us that HUD’s use of PFCRA was the result of several factors; including the support of HUD’s top management, applying PFCRA penalties to already successful criminal prosecutions, proactive HUD IG office involvement, coordination within HUD and with DOJ, use of standardized PFCRA case documentation, and a PFCRA case tracking system. In contrast, officials from other agencies that did not use PFCRA’s administrative remedies identified several factors that limited their ability to use PFCRA. These factors included available alternative mechanisms to PFCRA that agency officials found more useful in addressing false claims and related fraud, and a PFCRA requirement for their agency to use Administrative Law Judges (ALJ), which are not available at DOD, to preside over PFCRA cases. On average, DOJ’s reviews of PFCRA cases took 211 days rather than 90-days as prescribed by PFCRA. DOJ officials told us this was due to several factors including (1) other high-dollar cases that often took precedence over PFCRA cases and (2) time for DOJ follow-up with the referring agencies to obtain necessary information. In their comments identifying factors that limited the use of PFCRA, DOJ officials also cited the requirement for PFCRA cases to be approved by the Attorney General or a designated Assistant Attorney General, instead of a director-level official who may approve other fraud cases involving similar dollar amounts. In our May 2011 survey, 39 IGs included these and additional factors that limited use of PFCRA. The IGs most often cited the use of alternative mechanisms to address false claims and resource constraints as factors limiting PFCRA use. The other limiting factors they identified included that penalty amounts recovered by the agencies, with few exceptions, are to be sent to the U.S. Treasury rather than retained by the agency; the false claims ceiling and penalty amounts are too low; the PFCRA process is too cumbersome; and there is a lack of available ALJs. Further, the IGs noted that regulatory agencies have few issues with false claims.

Most IGs who responded to our May 2011 survey with an opinion agreed with the National Procurement Fraud Task Force recommendations for reforming PFCRA. For the recommendation that agencies be allowed to retain their PFCRA-related monetary recoveries, 51 of the 53 IGs in our survey who had an opinion agreed with this reform. While the support for the remaining recommendations was not as strong, the IGs who provided an opinion generally supported the other five proposals as well.

Why GAO Did This Study

This letter is in response to a Congressional request for information about federal executive agencies' recent use of the Program Fraud Civil Remedies Act of 1986. PFCRA provides an administrative remedy available to federal executive branch agencies to address false, fictitious, or fraudulent claims and statements (false claims). PFCRA can be used for false claims where the alleged liability is less than $150,000 (claim ceiling). It also provides for monetary penalties up to $5,000 (a cap that most agencies are to adjust upward for inflation) and allows for an assessment of up to two times the amount of the fraudulent claim. In addition to PFCRA, federal agencies also use other mechanisms to address false claims, such as the False Claims Act, suspension and debarment processes, and statutes that address Medicaid and Medicare false claim frauds through the Social Security Act, as amended.

In 1991, we reported that federal agencies did not use PFCRA extensively. Congress asked us to provide recent information on federal agencies’ use of PFCRA. Our objectives were to present information on (1) the extent to which federal agencies have used PFCRA in recent years, (2) factors reported by agency officials and inspectors general (IG) that either facilitated or limited the use of PFCRA, and (3) views of federal agency IGs on prior recommendations made by the National Procurement Fraud Task Force on possible PFCRA reforms.

For more information, contact Susan Ragland at (202) 512-8486 or raglands@gao.gov.