How to Prevent and Report Fraud, Waste, and Abuse: Best Practices

You can significantly reduce risk by combining strong internal controls, modern technology, and a speak-up culture. This guide distills practical steps on how to prevent and report fraud, waste, and abuse while aligning with expectations from the Office of Inspector General and similar oversight bodies.

Implement Robust Internal Controls

Design a risk-based control environment

Start with a structured risk assessment that maps your high-value processes—procurement, payroll, grants, billing, and Electronic Health Records—to specific threats and controls. Document owners, decision points, and handoffs so accountability is clear and measurable.

Apply Segregation of Duties (SoD)

Separate initiation, approval, custody, and recording. For example, no single person should set up vendors, approve purchase orders, and release payments. In care settings, keep EHR order-entry, coding, and billing roles distinct to prevent unauthorized changes and upcoding.

Strengthen approvals and reconciliations

Use threshold-based approvals, three-way matching, and independent bank reconciliations. Review vendor master changes and exception reports weekly, and require documented justification for overrides and emergency purchases.

Formalize policies and testing

Publish clear procedures, refresh them annually, and test controls through internal audit and management self-assessments. Track remediation to closure and brief leadership and your compliance committee on gaps and progress.

Establish Anonymous Reporting Mechanisms

Offer multiple, confidential channels

Provide a 24/7 hotline, a web portal, and a physical drop box to maximize accessibility. Allow anonymous and named reports, and explain how you protect confidentiality and prohibit retaliation.

Standardize intake and triage

Use a case-management workflow with severity ratings, service-level targets, and clear escalation paths. Capture who, what, when, where, and how; request documents but instruct reporters not to conduct their own investigations.

Connect internal and external reporting

Inform staff and the public that serious concerns can also be reported to the relevant Office of Inspector General. Make it easy to find those options while encouraging internal reporting first so you can act quickly and preserve evidence.

Leverage Technology and Data Analytics

Deploy Fraud Detection Analytics

Continuously analyze transactions for anomalies, conflicts of interest, and suspicious patterns. Techniques like risk scoring, peer-group benchmarking, Benford’s Law, and network analysis can surface schemes early.

Enable continuous monitoring

Automate checks for duplicate payments, split purchases, unusual refunds, and weekend or late-night activity. Feed alerts into your case-management system to prioritize investigations and reduce false positives over time.

Integrate with Electronic Health Records

In healthcare, link EHR audit logs to claims and coding data to catch unauthorized access, cloning, or upcoding. Monitor provider productivity outliers, high-risk modifiers, and medically unlikely edits to reduce waste and abuse.

Harden the environment

Support analytics with secure data pipelines, encryption, and access controls consistent with a Zero-Trust Architecture. Validate data quality and maintain model governance to keep results reliable and explainable.

Invest in Identity Management

Adopt least privilege and role-based access

Grant only the access users need and align roles to Segregation of Duties policies across ERP, EHR, and finance systems. Review high-risk privileges monthly and remove stale or shared accounts.

Strengthen authentication

Require multi-factor authentication—preferably phishing-resistant—for all privileged users and remote access. Monitor privileged sessions and use just-in-time access to limit standing admin rights.

Implement Zero-Trust Architecture principles

Verify explicitly, assume breach, and micro-segment critical systems. Continuously assess device posture and user risk to block anomalous behavior before it leads to fraud or data exfiltration.

Preserve Comprehensive Audit Logs

Log the events that matter

Capture authentication, privilege changes, configuration edits, data exports, financial postings, and EHR record views and edits. Tie logs to unique user IDs to support attribution and accountability.

Prioritize Audit Trail Preservation

Store logs immutably with write-once retention and synchronized time stamps. Protect integrity with hashing and chain-of-custody procedures so evidence stands up during investigations and potential litigation.

Set retention and review cadences

Align log retention to regulatory requirements and litigation holds. Review dashboards and exception reports routinely, and ensure your SIEM alerts are tuned to the highest-risk events.

Conduct Regular Staff Training

Deliver targeted Compliance Training

Provide onboarding and annual refreshers plus role-specific modules for approvers, coders, buyers, and clinicians. Include clear definitions of fraud, waste, and abuse and how to report concerns.

Use scenarios and simulations

Teach with realistic case studies—gifts and gratuities, vendor conflicts, upcoding, and asset misuse. Reinforce through phishing tests, microlearning, and quick-reference guides.

Measure and improve

Track completion rates, assessment scores, reporting volume, and time-to-resolution. Use metrics to refine content and demonstrate program effectiveness to leadership and auditors.

Foster an Ethical Organizational Culture

Lead with tone at the top

Executives should model integrity, communicate expectations, and engage directly with employees about ethical dilemmas. Tie goals and incentives to compliant behavior, not just output.

Encourage speak-up behavior

Make non-retaliation real by responding promptly, sharing outcomes when appropriate, and recognizing those who raise concerns. Regularly remind teams how to access reporting channels.

Strengthen third-party integrity

Assess vendors for ethics, sanctions, and performance risks. Include audit rights, data protections, and corrective-action clauses to deter fraud and waste in your supply chain.

Conclusion

An integrated strategy—robust controls, identity management, audit trail preservation, analytics, training, and culture—gives you a durable defense against fraud, waste, and abuse while enabling swift, credible reporting.

FAQs

How can individuals report fraud, waste, or abuse?

Use your organization’s hotline or web portal first so investigators can act quickly and protect evidence. Provide specific facts—who, what, when, where, how—and attach documents if safe to do so. You may also report to the appropriate Office of Inspector General or law enforcement for serious misconduct, especially if internal channels are compromised or unresponsive.

What internal controls help prevent fraud and abuse?

Start with Segregation of Duties, documented approvals, reconciliations, vendor and grantor due diligence, and access controls aligned to least privilege. Add continuous monitoring, exception reporting, and periodic internal audits to validate that controls operate effectively.

How does technology aid in detecting fraud and waste?

Fraud Detection Analytics flag anomalies across payments, payroll, and procurement, while continuous monitoring automates checks for duplicate or suspicious activity. In healthcare, linking Electronic Health Records logs with claims data exposes unauthorized access and upcoding. Strong identity management and a Zero-Trust Architecture further reduce the attack surface.

What role does staff training play in compliance?

Effective Compliance Training builds awareness, clarifies responsibilities, and encourages timely reporting. Role-specific, scenario-based modules help employees recognize red flags, while metrics and refresher sessions sustain knowledge and improve your overall program performance.