DoD Fraud, Waste, and Abuse Policy Explained: Best Practices and Risks

The Department of Defense relies on strong, practical safeguards to protect mission readiness and taxpayer funds. This guide explains how fraud, waste, and abuse are defined, how a fraud risk management program operates, and which controls and roles reduce exposure. You will find best practices, Government Accountability Office recommendations, and reporting guidance you can apply today.

Definition of Fraud Waste and Abuse

Key terms

Fraud is a deliberate act to obtain an unauthorized benefit—such as false claims, kickbacks, or product substitution. Waste is the careless or needless use of resources, including inefficient practices or avoidable losses. Abuse is misuse of authority or position for personal gain or to the detriment of the government.

Common schemes in a defense environment

• Procurement fraud: bid rigging, collusion, defective pricing, falsified certifications, or undisclosed conflicts of interest.
• Improper payments: false invoices, duplicate billing, ghost employees, or timesheet inflation.
• Travel and purchase card misuse: personal purchases, split transactions, and unsupported expenses.
• Property and supply chain: theft, diversion, counterfeit parts, and product substitution.
• Information misuse: unauthorized system access, data falsification, or manipulation of records.

Healthcare fraud risk areas

Healthcare fraud risk areas include upcoding, unbundling, billing for non-rendered services, kickbacks, ineligible beneficiary claims, and medically unnecessary procedures. Targeted controls focus on claims analytics, credentialing checks, prior authorization, and post-payment reviews.

Why definitions matter

Clear definitions set expectations for conduct, drive policy design, and enable consistent reporting and enforcement. They help you distinguish intentional misconduct from process weaknesses so corrective actions match the risk.

DoD Fraud Risk Management Program

Governance and accountability

A fraud risk management program establishes leadership commitment, defines roles, and integrates fraud risk into enterprise risk processes. Senior leaders set risk appetite, allocate resources, and hold organizations accountable for outcomes.

Risk assessment cycle

Teams identify, analyze, and prioritize inherent and residual fraud risks across missions, programs, and contracts. Assessments consider incentives, opportunities, and rationalizations, along with potential impact and likelihood, to target the riskiest areas first.

Controls, response, and identity management access

Prevention and detection rely on layered controls: segregation of duties, independent reviews, documentation standards, and automated checks. Identity management access limits privileges to the least necessary, enforces multi-factor authentication, and logs high-risk activities for review.

Data, analytics, and fraud detection resources

Fraud detection resources include anomaly scoring on invoices and claims, vendor risk screening, network analysis to spot collusion, and continuous monitoring dashboards. Combining internal data with open-source information strengthens due diligence and improves investigative leads.

Training and culture

Regular training clarifies red flags, reporting options, and ethical standards. A speak-up culture, reinforced by leadership and non-retaliation policies, surfaces issues early and reduces long-term loss.

GAO Fraud Risk Management Recommendations

Commit to combating fraud

Leadership sets tone at the top, assigns clear responsibility for anti-fraud activities, and aligns resources to priority risks. Written strategies translate intent into measurable actions.

Assess fraud risks

Use structured methods to identify schemes, assess likelihood and impact, and map existing controls. Document assumptions, data sources, and gaps to inform targeted improvements.

Design and implement controls

Tailor control activities to specific schemes—three-way match on invoices, vendor verification, independent cost estimates, and conflict-of-interest disclosures. Automate where feasible and require oversight of high-risk transactions.

Evaluate and adapt

Continuously test control effectiveness, analyze losses and near-misses, and update the approach as threats evolve. Metrics should track both outcomes (recovered funds) and process health (timeliness of reviews, exception rates).

Applying these Government Accountability Office recommendations helps you institutionalize a repeatable, data-informed approach that scales across diverse programs and contracts.

Importance of Internal Controls

Internal controls framework

An internal controls framework builds the control environment, risk assessment, control activities, information and communication, and monitoring. Each component reinforces the others to prevent and detect irregularities before they become losses.

Segregation of duties and oversight

Separate requesting, approving, receiving, and paying functions. Independent reviews, supervisory sign-offs, and documented acceptance strengthen accountability and reduce single points of failure.

Technology-enabled safeguards

Access controls, audit trails, and automated validations reduce manual error and enable swift follow-up. Role-based access bound by identity management access policies minimizes opportunities for unauthorized changes.

Lifecycle coverage

Controls should span planning, solicitation, award, performance, invoicing, and closeout. In healthcare and logistics, add eligibility checks, inventory reconciliations, and utilization reviews to address specialized risks.

Best Practices for Fraud Prevention

Design for prevention

• Embed fraud scenarios into program design and acquisition strategies; set clear acceptance criteria and surveillance plans.
• Require vendor due diligence, beneficial ownership checks, and sanctions screening before award and during performance.
• Use standard data fields and structured invoices to enable automated validations and analytics.

Strengthen detection and response

• Deploy continuous monitoring, exception alerts, and trend analysis across payments, claims, and timesheets.
• Establish a rapid triage process with documented escalation paths, preserving evidence and chain of custody.
• Leverage fraud detection resources such as risk-scored queues, case management tools, and cross-functional review teams.

People and culture

• Provide role-based training for program managers, auditors, and contracting officer representatives.
• Implement job rotation and mandatory leave for sensitive roles to expose hidden issues.
• Reinforce non-retaliation and timely acknowledgement of reports to sustain trust.

Reporting Fraud Waste and Abuse

When and what to report

Report promptly when you see red flags, whether confirmed or suspected. Include who, what, when, where, how, involved organizations, dollar amounts, and available documentation. Avoid alerting suspected parties.

Where to report

Use established channels: the DoD Hotline, Component Inspectors General, your chain of command, contracting officials, or defense criminal investigative organizations. Contractors should also notify their contracting officer under disclosure clauses.

Good reporting practices

Preserve records, capture screenshots, and secure physical evidence. Protect sensitive data by sharing only what is necessary. Keep a personal log of dates, contacts, and reference numbers to support follow-up.

Role of Contracting Officer Representatives

Contract oversight responsibilities

Contracting officer representatives responsibilities include monitoring performance, documenting surveillance, validating deliverables, and recommending acceptance or rejection. CORs review invoices, verify labor categories and hours, track government-furnished property, and document communications.

Controls at the point of performance

CORs deter fraud by comparing work performed to contract terms, checking progress against milestones, and confirming that subcontracting and staffing match proposals. They escalate concerns to the contracting officer and appropriate authorities without directing scope changes.

Integration with the fraud risk management program

COR activities feed the broader fraud risk management program through periodic risk updates, data sharing, and participation in targeted reviews. Following Government Accountability Office recommendations, CORs help evaluate and adapt controls as risks evolve.

Conclusion

Effective prevention blends clear definitions, a disciplined internal controls framework, data-driven detection, and timely reporting. When leaders, program teams, auditors, and CORs act in concert, the DoD reduces exposure and protects mission outcomes.

FAQs.

What constitutes fraud waste and abuse in the DoD?

Fraud is an intentional act to secure an unauthorized benefit, such as false claims or kickbacks. Waste is careless or needless spending, like inefficient processes or unused purchases. Abuse is misuse of position or authority, including favoritism, conflicts of interest, or policy violations that harm the government.

How does the DoD manage fraud risk?

The DoD manages fraud risk through a formal fraud risk management program that sets governance, performs risk assessments, and deploys prevention and detection controls. It uses identity management access, continuous monitoring, analytics, and targeted reviews, supported by training and a strong reporting culture.

What are the GAO recommendations for DoD fraud prevention?

The Government Accountability Office recommends a structured approach: commit to combating fraud, assess fraud risks, design and implement tailored controls, and evaluate and adapt over time. These recommendations emphasize leadership accountability, data-driven decisions, and continuous improvement.

How should DoD employees report suspected fraud waste or abuse?

Report promptly through the DoD Hotline, your Component Inspector General, your chain of command, or contracting officials. Provide specific facts, amounts, dates, and evidence, preserve records, and avoid alerting suspects. Whistleblower protections and non-retaliation policies support those who raise concerns in good faith.