Improper Payment vs. Fraud
What's the difference?
You may have seen recent headlines stating that $191 billion in pandemic unemployment insurance was lost to fraud. Well...not exactly. According to Department of Labor OIG, $76 billion of that is classified as fraud. The rest of those funds are referred to as improper payments.
Improper payments are any payments that should not have been made or were made in an incorrect amount, such as overpayments and underpayments. All fraud is an improper payment (since it should not have been paid out), but not all improper payments are fraud - it may be a mistake by an agency or a result of confusion about payment guidance.
At the PRAC we're always on the lookout for misuse of funds in any form. Below are some examples of the differences between improper payments and fraud.
Fraud
A Portland man was convicted after successfully obtaining over $884,000 in PPP loans based on falsified information in his loan applications. He used the PPP loan to pay for gambling, vacations, and other personal expenses. He's been sentenced to federal prison for committing bank fraud and wire fraud.
Improper Payment
TIGTA found that the IRS issued more than 4.4 million Economic Impact Payments totaling nearly $5.5 billion to potentially ineligible people, including deceased people. The IRS put a notice on their website asking taxpayers to voluntarily return the money, and this helped recover more than $80 million in improper payments.
Fraud
A New York man pled guilty to obtaining nearly $4.9 million in pandemic relief loans for four businesses he controlled. He included false corporate documents and later admitted that none of his companies actually had a payroll or employees. He's been sentenced to federal prison for conspiring to commit bank fraud and conspiring to commit wire fraud.
Improper Payment
The Federal Aviation Administration managed a $9.1 billion pandemic relief grant program for airports nationwide. The agency reimbursed funds to grantees based on incorrect amounts (including overpayments and underpayments) that had insufficient or lack of documentation, resulting in $3.3 million in improper payments. This included paying for expenses from 2019, when only expenses incurred in 2020 were eligible.
In pandemic programs, any dollar that went to improper payments (duplicate payments, payments to deceased individuals, or fraud) is money that didn’t reach someone it could have helped. Reducing improper payments across government programs ensures taxpayer dollars are used more effectively and efficiently. Programs must have proper controls in place to reduce improper payments, and detect and prevent fraud.
Read more about our work fighting fraud as well as cases of improper payments in our reports library at PandemicOversight.gov.
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