Fraud Fighters Needed to Combat Government Grant Fraud

The federal government awarded almost $811 billion in grants in FY2021. That is up from almost $727 billion in 2020 and $528 billion in 2019 a 53% increase in three years.

The increase in awards over the past few years can be attributed to COVID-related priorities. For instance, the Centers for Disease Control (CDC) made a nearly a ten-fold increase in grants (from $5 billion to almost $50 billion) from 2018, before the pandemic, to 2021, during the public health emergency.

State and federal governments award hundreds of billions of dollars in grants each year. Grants are given to universities, research labs, law enforcement, non-profit organizations, and businesses that are intended to support projects to provide public services and stimulate the economy. They are meant to support critical recovery initiatives, innovative research, and many other programs.

A government grant is not free money, however. Recipients must satisfy government requirements to get the money, and use it for designated purposes. With this much money at stake, fraudsters do attempt to take advantage of the system and grant fraud can take many forms. Often, there is fraud to get the grant award in the first place and fraud in the performance of the grant. These frauds include providing false information on a grant application and using grant funds for purposes or projects that are different than the purpose stated on the grant award. Scientific fraud, such as falsifying the results of grant-funded experiments is a major issue, as is lying about the status of a grant-funded project to continue receiving funds.

With billions of dollars in grants awarded to aide our country’s COVID response, there has been an incentive to commit fraud and some notable enforcement actions. There have been criminal indictments for falsely obtaining grants from the National Institutes of Health for immunology research, enforcement actions for submitting fraudulent applications for loans and non-refundable grant “advances” of up to $10,000 through the Small Business Association (SBA).

There have been prosecutions for people accused of fraudulently obtaining grants for rental assistance through the COVID-19 Emergency Solutions Grant program, falsely obtaining disaster loans and grants from the SBA for businesses that did not exist, and accepting kickbacks in exchange for fraudulently distributing federally funded grants from the local government. However, these relatively easy to prove criminal enforcement actions only hint at the civil fraud cases that are under seal or being litigated and take time to prosecute.

Another key area of potential grant fraud enforcement involves the Department of Justice’s (DOJ) new Civil Cyber-Fraud Initiative. In the press release discussing the initiative, Deputy Attorney General Lisa Monaco specifically mentions grantees as targets of enforcement actions should they fail to maintain sufficient cybersecurity protocols, and DOJ has pledged to “utilize the False Claims Act to pursue cybersecurity related fraud by government contractors and grant recipients.”

Whistleblowers are critical to bringing these large and complex fraud schemes to light.

Even with billions at issue and known schemes that can plague these expenditures, grant fraud cases make up only a tiny fraction of total FCA cases. The government’s task forces and enforcement efforts alone are not nearly enough to ensure the integrity of these critical programs. The government must rely on whistleblowers to come forward with information about falsely obtained and misspent grants.

Written by Jacklyn DeMar of Taxpayers Against Fraud. Edited by Kate Scanlan of Keller Grover LLP and Tony Munter of Price Benowitz. Fact checked by Julia-Jeane Lighten of Taxpayers Against Fraud.