Today, I submitted written testimony to the Senate Appropriations Committee’s Subcommittee on Financial Services and General Government.
Chairman Hagerty, Ranking Member Reed, and members of the Subcommittee:
Thank you for the opportunity to submit written testimony about reducing fraud and improper payments in government spending programs. I am a senior fellow at the Foundation for American Innovation, an organization that champions the technology, talent, and ideas essential to American prosperity, security, and flourishing.
I write to respectfully recommend two reporting requirements for the Treasury Department and the Pandemic Response Accountability Committee to identify opportunities for Congress to reduce fraud and misspending in federal and state spending programs. First, I suggest that the Subcommittee include report language directing the department to publish a report on state governments’ current use of the Do Not Pay (DNP) system and present a plan for intergovernmental collaboration to encourage more states to incorporate DNP into their oversight of government spending programs. Second, I recommend that the Subcommittee include report language directing the Pandemic Response Accountability Committee (PRAC) to publish a report describing its Fraud Prevention Engine and provide Congress, if appropriate, with legislative recommendations to incorporate this or other fraud prevention systems into other federal or state government financial management systems to prevent fraud.
Every year, the government loses hundreds of billions of dollars to fraud and misspending in government programs. In 2024, the Government Accountability Office estimated that the U.S. government lost “$233 billion to $521 billion annually to fraud” between 2018 and 2022. Beyond fraud, the federal government consistently reports making significant amounts of “improper payments,” which include payments that “should not have been made or were made in incorrect amounts.” In FY2025, federal agencies reported $186 billion in improper payments across 64 programs; 82 percent of these payments were overpayments. These alarming estimates are likely only the tip of the iceberg of what the nation loses annually to fraud and misspending in government programs. While it’s unclear how much the nation loses to fraud in state-managed programs, states administer well over $1 trillion annually in federally funded benefit programs, including through programs that have proven vulnerable to fraud.
For decades, Congress has enacted bipartisan laws aimed at preventing fraud and misspending in federal programs. Watchdogs like GAO and Inspectors General have audited federal programs and provided recommendations to strengthen program integrity. One of the most promising federal initiatives to prevent fraud and misspending is the Treasury Department’s DNP system, which has maintained strong bipartisan support from Republican and Democratic administrations. In addition, Congress formed the Pandemic Response Accountability Committee to conduct critical oversight during the COVID-19 national emergency. The PRAC has since developed expertise and sophisticated tools to identify and prevent fraud and misspending, including a Fraud Prevention Engine. In the report accompanying the FY2026 Financial Services and General Government funding bill, I respectfully recommend that the Subcommittee include the following reporting requirements to leverage Treasury’s DNP system and the PRAC’s Fraud Prevention Engine to prevent fraud and misspending in government programs.
First, the Subcommittee should include report language directing the Treasury Department to publish a report describing state governments’ utilization of Do Not Pay. Created by President Obama, DNP is a Treasury-managed data system that helps government agencies screen payments and verify eligibility before federal payments are disbursed. President Trump has prioritized strengthening DNP and increasing its use across federal departments and agencies through several executive actions. The Treasury Department recently estimated that increased use of DNP helped prevent nearly $12 billion in improper payments last year. A 2019 law authorized all state governments to use DNP. According to the Treasury Department, “all Do Not Pay services are available at no cost to federal agencies and state governments administering federal programs and spending federal dollars.”
Several states have achieved substantial savings by using DNP. For example, the Oregon Secretary of State’s office reported:
As of June 2024, the Office of Payment Accuracy and Recovery estimates the state has saved over $11 million in payments that would have been made to ineligible recipients or providers, and about $4 million in recovered improper payments. For every $1 spent on staff time, the agency realizes savings of $126, an extremely high return on investment.
A 2025 National State Auditors Association highlighted how several state auditors are using the DNP system to verify beneficiary information and improve program integrity. In 2022, the Tennessee Comptroller of the Treasury reported that the state identified more than $400,000 in improper payments paid to people claiming benefits on behalf of deceased individuals by conducting a review using Treasury’s Do Not Pay system. However, it is unclear to what extent state government agencies are using the DNP system in state-managed programs (including to oversee federal expenditures).
Learning from Tennessee’s Experience
I recently contacted the Tennessee Comptroller of the Treasury’s office to learn about the state’s experience using Do Not Pay. A state audit manager explained that the state benefitted from accessing federal death data via DNP during the pandemic when the state was processing a high number of unemployment claims. The state audit manager told me the following:
- “Working with Do Not Pay was an excellent experience. One thing I think it is important for states considering the program to understand is that the Do Not Pay team itself was highly organized, prepared, and very responsive.”
- “In hindsight, I would have done more preparation before engaging the Do Not Pay team, such as coordinating approvals in advance, ensuring we had all the data elements Do Not Pay would need, and making sure the data was properly formatted. The Do Not Pay team was professional, supportive, and communicative throughout the process. If there is one area where the process could perhaps be streamlined for states, it would be having access to resources like a checklist, preparation guide, sample agreement template, data formatting requirements, etc before getting started.”
- “Another point I want to mention is that the Do Not Pay service itself is free to use (a huge benefit) but it is still an investment in terms of staff time needed to get established with the program, coordinate approvals, and manage the data sharing process. There is also the cost of working with the results. I’m glad we intentionally narrowed the scope of our work to deceased individuals found through the state cross match only. For states considering using Do Not Pay in a time sensitive context (like for an audit), I would encourage them to be very intentional and targeted about how they plan to use the service.”
The Subcommittee could include the following report language to establish transparency about states’ utilization of DNP (including a 50-state overview) and to require Treasury to publish an action plan to increase states’ utilization:
Do Not Pay State Utilization Report
The Committee directs the Bureau of the Fiscal Service, within 180 days of enactment of this Act, to submit to the Committees on Appropriations of the House and Senate a report on state governments’ current utilization of the Do Not Pay (DNP) system. The report shall include: (1) statistics and data on how states are currently accessing DNP data matching services (including a 50-state analysis), the specific programs for which DNP is being used, and the volume of transactions screened; (2) an assessment of barriers preventing broader state adoption, including legal, administrative, technical, and resource constraints; and (3) a plan for greater intergovernmental collaboration to encourage greater state participation in DNP, including any recommended changes to Treasury's outreach, technical assistance, or cost-sharing arrangements. The Bureau’s report should include feedback from state government partners. The Bureau shall also publish the report publicly on its website. The Committee believes that expanding DNP access to state-administered federal programs represents a meaningful opportunity to reduce improper payments and strengthen program integrity across all levels of government.
Second, the Subcommittee should include report language directing the Pandemic Response Accountability Committee to describe the Fraud Prevention Engine and, if appropriate, provide recommendations for legislation to allow federal and state government departments and agencies to use it to improve program integrity. In recent Congressional testimony, PRAC Executive Director Kenneth R. Dieffenbach stated that the “PRAC has also developed an artificial intelligence-enabled ‘Fraud Prevention Engine’ that can review approximately 20,000 applications for federal funds per second to identify anomalies, trends, and patterns before funds are disbursed.” He further stated that had this tool been available during the pandemic, the government would have saved hundreds of billions of dollars. Executive Director Dieffenbach has also testified that the PRAC’s work on dynamic oversight is complementary to and in coordination with the Treasury Department’s DNP system. Congress should request more information from the PRAC about this tool to understand how it can be used more broadly to increase program integrity and prevent fraud. The committee should consider including the following report language:
Fraud Prevention Engine Report
The Committee directs the Pandemic Response Accountability Committee (PRAC) to submit and publicly release a report describing the design, capabilities, and results of its Fraud Prevention Engine (FPE). The report should explain the data sources used by the system, the types of fraud schemes it has identified, the results achieved, and the privacy and civil liberties safeguards built into its operation. The report should also examine whether the FPE, or similar capabilities, could be incorporated into other federal financial management systems and, where appropriate, into state oversight of federally funded spending programs. If PRAC determines that legislative changes would help support broader use of these tools, the report should include recommendations for Congress. The Committee recognizes the potential for the Fraud Prevention Engine and similar data analytic tools to curb improper payments and fraud in government programs.
Thank you again for the opportunity to submit written testimony.
