Not in my Backyard! North Carolina is Tackling Government Fraud

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Many states are starting to crack down on the serious abuses of government programs, cutting down on outright fraud as well as reducing abuses and errors.  I wanted to highlight one of those, now that they've been on this path for a few years.

North Carolina, where SAS is headquartered, is taking an enterprise approach to analytics, with fraud prevention a key plank in their approach.  Towards this end, they've formed a Government Data Analytics Center, known as GDAC.  GDAC offers a centralized repository that has pulled in data from many different sources in order to help analytics and fraud prevention across many programs and agencies.  Included data ranges from incorporation data from the Secretary of State to driver and vehicle licensing data from the DMV, workers' compensation coverage to unemployment claims and tax filings.  Use of data is restricted to appropriate programs based on the law and data sharing controls.

So what is this approach doing for the citizens of North Carolina?  It's helping to target those businesses that are taking advantage of systems by filing false claims, or avoiding business obligations, undercutting legitimate competitors.  While all the results aren't in yet, this approach, built on the underpinnings of the SAS Fraud Framework, has already started to pay off and gain some positive media attention for the state.

In recent years, the issues of employee misclassification and the underground economy have resulted in law changes, task forces and media attention in North Carolina.  It's also a subject I've covered in recent posts.  The North Carolina Industrial Commission (NCIC) has responded, using GDAC to target businesses that illegally cancel their workers' compensation policies, while continuing to employ workers.  Their system is known as Noncompliant Employer Tracking System, or NETS.  Starting with initial sweeps in counties to target employers, they jumped out to a good start last summer, as covered here, and continue to expand efforts and results.

One of NCIC's partners in these efforts is the Department of Commerce's Division of Employment Security (DES).  DES oversees the unemployment insurance program for North Carolina, and is actively tackling both claims and tax fraud.  An interesting new twist to unemployment fraud that involves both of those areas is fake businesses set up solely to drive false unemployment claims through, which I addressed recently in a post that touched on schemes of unemployment fraud.

DES has been using GDAC and focused investigations to take down 105 fake employers statewide, with 672 fake unemployment claims associated.  Some of the vacant businesses were using vacant lots as their address, and one even used the local television station!  Far be it from me to say, but that may not be the best way to stay under the radar.

This operation is paying off big.  Savings from prevented payments alone hit $5.2 million.  An additional $2.5 million in fraudulent payments is targeted for recovery.  Beyond that, I expect a series of criminal charges to follow.

This approach works, and preventing payments from going out the door is the best way to stop fraud against government and the citizens and business that pay taxes.  Kudos to North Carolina, and kudos to everyone working on GDAC and at the agencies using it to improve results for citizens.  They are speaking up loud and clear and saying "Not in my backyard!".

Want to join the conversation? Add a comment.  Care to follow other fraud news? Follow me on Twitter @carlhammersburg

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Carl Hammersburg

Sr Solutions Architect

Carl Hammersburg manages the SAS Government and Healthcare Risk and Fraud team, and has been with SAS for 5 years. Prior to that, he spent 20 years in anti-fraud activities for Washington State’s exclusive workers’ comp insurer, the Department of Labor and Industries. In 2004, Carl formed that agency’s comprehensive fraud program, covering premium audit, claim investigation, provider fraud and collections. Data sharing and investigative partnerships with other State and Federal agencies, as well as driving public availability of information and awareness served as cornerstones to the anti-fraud activities of the program. During his stewardship, audit and investigative activities doubled and outcomes tripled, based on a focus on data mining and predictive analytics that improved efficiency and case selection. Program success under Carl’s leadership resulted in awards from two successive Governors of Washington State.

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