Stopping Fraudulent Payments Act

Summary of Bill: S.4747 (Stopping Fraudulent Payments Act)

Purpose and intent

• The bill, titled the Stopping Fraudulent Payments Act, seeks to amend title 31 of the United States Code to authorize federal agencies to pause, condition, or segment disbursement payments that are suspected of fraud or potential improper payments.
• It aims to give the Treasury and agency heads a formal mechanism to halt or limit payments while additional review is conducted to verify eligibility and prevent financial losses to the government.

Key provisions and changes

• Creation of Section 3337 (Authority to pause payments for further review and corrective action):
  • Allows agency heads to temporarily delay, condition, or segment a disbursement request before certification of a payment voucher when there is an elevated fraud risk or potential improper payment, based on:
  • Fraud-risk indicators or estimated financial loss under program requirements.
  • Notifications from State/local governments for federally funded, state-administered programs.
  • Orders issued by the Secretary of the Treasury under the new framework.
  • Treasury obligations:
  • The Secretary must notify the relevant certifying official of a corrective action order and issue such order to the agency head within 2 days of determining elevated risk.
  • Agency obligations:
  • Actions must be based on objective fraud-risk indicators, narrowly applied to the high-risk portion, and limited in duration to the minimum necessary to verify eligibility or program requirements.
  • Payee notification and review window:
  • Agencies must notify payees (and, for state-administered programs, the corresponding state/local official) within 2 days, explaining the pause/condition/segmentation, the fraud-risk indicator, and the review period.
  • Payees may contest factual inaccuracies during a corrective-action review period.
  • Payments, if contest procedures show no elevated risk, must be issued within 30 days (not later than 7 days after a payee contests the action, if applicable).
  • Segmentation of low-risk payments:
  • Agencies should allow routine, historically consistent payment amounts to proceed where possible, while holding high-risk portions for review.
  • Exemptions for law enforcement:
  • Agencies may waive provisions in case of ongoing investigations or legal proceedings, upon consultation with the Secretary and the Attorney General.
  • Liability and due process:
  • No officer or employee is personally liable for good-faith actions under this section.
  • A payment action under this section is not a final determination of eligibility or liability of the payee.
  • Regulations and implementation:
  • The Secretary, with the Director, must publish regulations within 180 days and annually thereafter detailing procedures, minimum seniority for designated officials, Do Not Pay integration, dispute/appeal processes, and notification requirements.
  • Reporting requirement:
  • A report must be submitted at least 18 months after enactment and annually thereafter detailing:
    • Number of orders to return vouchers and corrective-action orders issued.
    • Proportion of payments upheld after contestation and recommended mitigations.
    • Total savings from prevented fraudulent payments.
    • Policy/regulatory or legislative recommendations.

Affected entities and context

• Federal agencies that disburse payments, and the heads of those agencies.
• Certifying officials who approve vouchers.
• Payees receiving federal payments, including those in state-administered, federally funded programs (where state officials are involved).
• Treasury, particularly the Do Not Pay system (used for risk assessment and fraud detection).

Timeline and effective date

• Effective date: The amendments take effect one year after enactment.
• Regulatory framework to be established: Regulations and procedures to administer the section must be published within 180 days of enactment and annually thereafter.
• Annual reporting requirement begins after enactment (initial reporting due 18 months after enactment, then annually).

Overall impact

• Aims to reduce improper and fraudulent payments by enabling targeted pauses and segmentation of disbursements pending verification.
• Balances risk mitigation with due process for payees, including clear notice, opportunities to contest, and time-limited actions.
• Introduces oversight through mandatory reporting on effectiveness, savings, and policy needs.