Oct 29 2021

4 Ways Agencies Can Curb Waste and Abuse for Pandemic Relief Funds

State and local government and IT leaders should take concrete steps to establish governance rules and monitoring for federal funding.

Since the passage of the $1.9 trillion American Rescue Plan Act in March, state and local government officials have been mulling their spending priorities. Where will the $350 billion in direct aid to state and local agencies go?

But perhaps the bigger challenge is limiting and monitoring the fraud, waste, and abuse that has plagued other agencies. For example, in Maryland, an estimated $500 million was paid out in fraudulent unemployment claims during the pandemic.

As states and localities study their wish lists, here are four steps they can take to ensure funds are delivered to individuals, businesses and programs that truly need them.

1. Agencies Should Identify Gaps and Align Priorities

State and local governments have an opportunity to repair the damage created by the pandemic, bolster their economies, improve education and more — if they use those funds wisely. While it’s tempting to spend the money quickly, decisions made now may come back to haunt them.

A use-it-or-lose-it mentality can trigger frivolous and unnecessary spending sprees, squandering money as agencies rush to buy what they might not need. Even meaningful investments can go awry. For instance, it may seem logical to put dollars toward bold new programs, IT infrastructure or facilities. But what happens when the federal money for those initiatives stops? States and localities will need the budget to sustain ongoing expenses.

To curb wasteful spending, balance conflicting priorities and ensure sustainable outcomes, states must be strategic about evaluating their needs. This means identifying gaps where funds are needed most and validating their proposals with internal stakeholders and constituents.

Click the banner below to get access to a customized content experience and exclusive articles.

2. Leaders Must Ensure Oversight and Accountability

Because relief funds are allocated separately at the state, local and municipal levels, there’s a real risk of overlap and waste. While government leaders should make every effort to coordinate spending to avoid duplicate programs by state, county and city officials, controls must be put in place to ensure oversight and accountability.

States and localities should consider establishing an independent, nonpartisan commission to monitor and administer federal funds.

Such a commission’s main goal is to develop policies, procedures and reporting systems to distribute money wisely. Still, its primary charter is the efficient and timely release of funds. Keeping the commission lightweight and free of bureaucracy will ensure a happy medium between ensuring funds have a real, sustainable impact and minimizing wasteful spending.

EXPLORE: How can tech help state and local agencies contain costs?

3. Governments Should Establish Spending Guidelines

Although there’s greater flexibility in how funding from the American Rescue Plan Act can be spent than previous aid packages, it’s not a free-for-all.

To ensure alignment with spending priorities and federal parameters, clear and stringent spending guidelines are needed. These guidelines can help officials set limits on the types of products and services that can be procured and approved, aiding with compliance reporting and ensuring everyone is marching in the same direction.

There will be exceptions, of course, and allowances must be made for the priorities of individual municipalities. If a request for funds falls outside the guardrails, leeway must be factored into the approvals process so cities get the funds they urgently need.

RELATED: How can agencies use this moment to modernize?

4. Agencies Must Monitor for Waste and Fraud

Even with these checks and balances in place, wasteful and unauthorized spending unaligned with pandemic recovery priorities is inevitable — and hard to detect.

Siloed legacy systems don’t always provide the transparency needed to track and monitor each pandemic relief-related purchase, and states and localities simply don’t have the staffing capacity to comb through everything.

A better approach is to leverage artificial intelligence and machine learning to detect anomalous behavior. These combined technologies look for unusual events or deviations from the norm that might merit a follow-up investigation. Models can be created to detect larger expenditures, multiple smaller purchases from the same vendor, credit card purchases and the use of unauthorized vendors. The same technology can be used to identify and deny fraudulent unemployment and benefits claims.

Agencies can also apply data analytics to automatically scan funding requests and purchase orders for keywords such as “COVID” or “pandemic response” and flag them for closer scrutiny to determine if they represent an acceptable use of funds.

MORE FROM STATETECH: What are lessons IT leaders have learned during the pandemic?

Wish Lists Require Structure and Control

The American Rescue Plan Act provides a rare opportunity for state and local governments to repair the damage caused by the pandemic and create a more prosperous future.

But while states are making plans for the influx of federal money, it behooves them to develop a framework to ensure appropriate planning, oversight and visibility.

More than just working against fraud and wasteful spending, this framework is about transparency. It’s what keeps governments accountable, and constituents informed.

Chalirmpoj Pimpisarn/Getty Images