$2.8 Billion in False Claims Act (FCA) Judgements in 2018
If you’re a government grantee or contractor, you need to be familiar with the False Claims Act, an important weapon in the government’s arsenal when it comes to battling fraud, waste and abuse in federal awards.
Basically, the FCA states that it’s illegal to knowingly make, use or cause false claim in order to get payment from the government.
A Brief History of the FCA
The FCA was enacted in 1863 under President Lincoln to combat fraud by Civil War contractors.
Over the years, Congress has amended the FCA on three occasions, broadening its reach each time, with the most significant changes happening in 1986 and 2009.
- 1986: FCA was amended to promote incentives for whistleblowing insiders and prevent opportunistic plaintiffs.
- 2009: Congress enacted the Fraud Enforcement Recovery Act (FERA) to combat several court rulings that limited the effectiveness of the FCA, specifically a case that made it possible for subcontractors to avoid FCA liability because they submitted a false claim to the contractor and not directly to the government. FERA closed this loophole by creating subcontractor liability. It also provided protections for whistleblowers.
The False Claims Act – 2018 statistics
In December 2018, the Civil Division of the US Department of Justice (DOJ) announced its fiscal 2018 False Claims Act (FCA) statistics. Here are the highlights:
- $2.8 billion in FCA judgements and settlements in 2018
- 87.25% comes from HHS-related fraud in 2018
- The DOJ received 759 new matters in 2018 (newly received referrals, investigations, and qui tam actions)
- $1.9 billion of the $2.8 billion came from qui tam or whistleblower cases
Enter the Whistleblower
Private citizens can bring qui tam, or whistleblower, actions based on FCA violations. This essentially turns individuals into “private attorney generals.” These actions are not a mere report or alert to the government, it’s a bona fide lawsuit filed with an attorney.
Any persons or entities with evidence of fraud against federal programs or contracts may file a qui tam lawsuit. The following actions are considered violations under the FCAs:
- Knowingly presenting (or causing to be presented) to the federal government a false or fraudulent claim for payment;
- Knowingly using (or causing to be used) a false record or statement to get a claim paid by the federal government;
- Conspiring with others to get a false or fraudulent claim paid by the federal government; and
- Knowingly using (or causing to be used) a false record or statement to conceal, avoid, or decrease an obligation to pay money or transmit property to the federal government.
Whistleblowers are provided with a financial reward if the suit is successful. The reward to the whistleblower is normally between 15% and 25%, but sometimes 30% of the amount recovered.
Contractor and grant fraud are regularly pursued under FCAs
Defense Contractor Fraud
The federal government spends hundreds of billions of dollars each year in defense of the United States. Here are some examples of ways defense contractors may commit FCA violations:
- representing parts are purchased from American companies when they are not
- failing to comply with contract specifications
- misrepresenting qualifications to complete the work
- overbilling or overcharging for goods or services
- billing for services not provided
- utilizing sub-standard goods
- violating the Truth-in-Negotiations Act (TINA)
Research Grant Fraud
Every year, the federal government funds millions of dollars in research in a broad range of fields, from clinical medicine to education to healthcare to nutrition and fitness. Research fraud includes using funds for inappropriate purposes such as:
- siphoning of funds into for-profit ventures
- using funds for other, unrelated projects
- inflating project-related costs
- making misrepresentations in grant proposals to obtain funds
Cases under the FCAs can result in prolonged, complex and expensive litigation. They almost always come with press coverage, which can be highly-damaging to a contractor’s or grantee’s reputation and future funding abilities.
Government Award Accounting & the FCA
We’ve been working in government award accounting for over 30 years; it’s our expertise, our focus, and all we do.
Too frequently we see contractors and grantees unintentionally commit fraud due to financial stress caused from:
- Poor budgeting during the proposal phase, coupled with
- Poor management controls over spending, and
- Poor understanding of the rules
This is why it’s so imperative that you stay compliant. That means knowing and following the rules and regulations, including having a FAR-compliant accounting system and implementing and enforce internal processes.
As a grantee or contractor, you must understand that the government takes this very seriously and that huge monetary audit findings can be very appealing to disgruntled employees.
Our Government Award Accounting Experts are Here to Help
To read the full DOJ Fraud Statistics for 2018 report, go here:
Ed Jameson, CPA, Managing Member
With over 40 years of experience as a government funding award accounting specialist, Ed is a recognized national expert in the field. In addition to helping hundreds of clients navigate FAR Part 31 compliance. he has been an active speaker and panel moderator at Tech Connect's National SRIR/STTR conferences since 2011. presents at the DOD's Mentor Protégé Summit and presents regularly for several state and local organizations.