CATL stands for Contemporary Amperex Technology Co., Limited. It is now the world’s largest EV battery manufacturer. CATL and BYD are not private companies in any sense Americans would recognize. They’re fused with the Chinese government and receive billions in subsidies, required by law to seat CCP members on their boards and to advance Beijing’s agenda. CATL’s founder serves as vice-chairman of the All-China Federation of Industry and Commerce, an organization led by the CCP and responsible for “fully implementing” the Xi Jinping agenda. BYD has received $3.7 billion in direct government subsidies and multiple state-owned equity funds hold stakes in the company. There is no separation between these companies and the Chinese state. It’s all one apparatus.

Both companies are Trojan horses for Beijing’s strategic expansion. The Hungary battery plant was the single largest Belt and Road Initiative investment of 2022 at $7.6 billion. BYD and CATL are now among the largest annual BRI investors of all Chinese companies. Hungary wasn’t a random choice. It was the first EU member state to sign a Belt and Road contract with China and became Beijing’s most reliable political ally inside the EU. Hungary has repeatedly used its EU veto to block measures unfavorable to Beijing. China got a 2 for 1. It bought a factory and a vote inside the European Union. Orbán has since lost power and Hungary’s new government has pledged a different course. But the factories are built, the supply chains are set, and no change in government reverses that. BYD followed with a vehicle assembly plant in Szeged capable of producing 300,000 vehicles annually, sold tariff-free across all 27 EU member states.

What looks like an affordable consumer choice is something entirely different. BYD EVs are Trojan horses on wheels. Cybersecurity researchers found that driver data is being transmitted on an ongoing basis from BYD vehicles to Chinese servers via a pre-installed modem. The bipartisan Connected Vehicle Security Act of 2026 put it plainly: connected vehicles controlled by foreign adversaries create risks of surveillance, espionage, cyber intrusion, and disruption of critical infrastructure. The same CCP legal apparatus that forced Huawei to build backdoors into telecommunications networks applies to every BYD on European roads today.

CATL’s role is different, but equally critical. CATL supplies batteries to BMW, Mercedes-Benz, Stellantis, and Volkswagen. Its Battery Management System tracks charge cycles, temperature, voltage, and degradation while streaming that data back to Chinese cloud infrastructure. It’s the software layer and cloud architecture, not the battery itself, that carries the espionage risk. The Foundation for Defense of Democracies documented that by compromising internet-connected public charging infrastructure, CATL could install malware on EVs, monitor vehicles, and gather sensitive owner information. Whether a kill switch could be deployed remotely through that same infrastructure remains unanswered, particularly given that one in threeEVs worldwide runs on a CATL battery. But the fact that it’s even an open question should send a chill down the spine of anyone reading this.

Canada has already opened the BYD door in a lackadaisical and clumsy strategic error. In January 2026, Prime Minister Carney signed a trade arrangement cutting tariffs on Chinese EVs from 100 percent to 6.1 percent, allowing 49,000 Chinese-built vehicles annually. The U.S. Senate responded with the bipartisan Connected Vehicle Security Act of 2026, which would ban Chinese vehicles and embedded technology from American roads entirely. BYD passenger vehicles cannot be purchased by American consumers today, blocked by a 100 percent import tariff and a Commerce Department rule banning Chinese connected vehicles on national security grounds. BYD is pushing back, with four U.S. subsidiaries filing suit in January 2026 arguing the tariffs exceed the government’s legal authority.

The battery plant in Hungary was the shot across the bow. The warning was visible in 2022. This is the first in a series examining how China deploys technology as a strategic weapon. The CCP’s ambition is a global surveillance network feeding its artificial intelligence machine, one that wants to be in our driveways, on our phones, in our skies, and inside our networks. The question Striking Flint will keep asking is the same one nobody asked when CATL broke ground in Debrecen: who was watching, and why didn’t they say something?

In January 2026, the White House announced the creation of a new DOJ Division for National Fraud Enforcement. That announcement came with teeth. In April, Acting Attorney General Todd Blanche formally established the National Fraud Enforcement Division (NFED) as a stand-alone DOJ litigating division, consolidating the Criminal Division’s Tax Section, Health Care Fraud Unit, and Market, Government, and Consumer Fraud Unit under one umbrella. Every U.S. Attorney’s Office was directed to assign a dedicated prosecutor to the division within 21 days.

In March, President Trump signed an executive order establishing a Task Force to Eliminate Fraud, chaired by Vice President Vance, with a 30-60-90-day timeline requiring agencies to identify vulnerabilities, adopt minimum anti-fraud controls, and submit measurable implementation plans. The task force includes Cabinet secretaries from DOJ, Treasury, HUD, Labor, Veterans Affairs, HHS, and others. Agencies must identify their highest-risk transactions within 30 days, implement minimum anti-fraud controls within 60, and deliver measurable enforcement plans within 90. Anyone who has prosecuted a case knows that deadlines without consequences are suggestions. The order also puts teeth into False Claims Act enforcement by directing the Attorney General to promote pursuit of actions by private citizens. Whistleblowers with financial incentives will find fraud that investigators miss. Full stop.

The early results don’t lie. In its first week of operations, the NFED announced arrests, convictions, and sentencings in schemes targeting over $340 million in taxpayer funds, spanning Medicare, Medicaid, COVID relief, unemployment benefits, PPP loans, and Social Security. In late April, DOJ stood up a West Coast Health Care Fraud Strike Force, utilizing ten additional federal prosecutors to work alongside HHS-OIG, FBI, and DEA. By May 8th, DOJ was reporting sentencings and indictments in schemes exceeding $1 billion.

But here’s what I’m watching. Enforcement actions against individual fraudsters, however satisfying, don’t fix a system that keeps producing them. I’ve written about two structural problems that Congress has yet to touch. The first is the Inspector General problem. IGs are embedded inside the agencies they audit, funded by the agencies they investigate, and report to the agency heads they’re supposed to hold accountable. That’s not independence. The second is the Use It or Lose It budgeting system that punishes agencies for exposing waste by giving Congress a reason to cut their budget the following year. Both problems create a powerful incentive to look the other way. Until Congress addresses them, the fraud pipeline stays open regardless of how many cases DOJ brings. Let the task force chase the criminals. Congress has to fix the conditions that keep generating them.

The administration built a credible response to the industrial scale fraud taxpayers are witnessing. Now we’ll see if Congress has the will to make it permanent.

Congress has established permanent select committees to examine issues that we can foresee will be longstanding. The House established its Permanent Select Committee on Intelligence in 1977, and the Senate established its Select Committee on Intelligence in 1976. A Permanent Select Committee on Fraud can be created by a vote. This has been done before.

The way it works will be simple. The committee will be charged with investigating fraud across the federal government. It will have subpoena authority and permanent rules. This issue is too big and too important for partisan interference. Now here’s where the teeth come in.

It’s completely unacceptable for any Member of Congress to not support fighting fraud. There is no constituency for fraud. There is no defensible reason for silence. Therefore, every member will participate in doing so. Each Congress the Committee will be reauthorized by a vote at the beginning of the year. Any member who votes against reauthorization goes on record opposing it. Voters will know.

The Permanent Select Committee on Fraud’s work will be supplemented by annual reports from congressional delegations. Each delegation will work with its member offices to identify fraud in their districts/states to prepare their report. Any office refusing to participate will be immediately reported to the Committee on Ethics. Moreover, upon a referral, before any determination on refusal to participate is established, a member of Congress will have their pay reduced by ten percent, along with their office budget.

Once a delegation produces its report, the delegation’s members of the House and Senate will present their findings in a closed door briefing to the Select Committee on Fraud. No staff running interference. No communications directors spinning messages. The member walks in, presents their delegation’s findings, and answers questions. Members must be directly responsible for their work. Accountability matters and this system closes the loop.

If this sounds rigid, that’s the intent. The industrial scale fraud being uncovered in this country is staggering and fundamentally unfair to American taxpayers. Some members of Congress have shown a resolve to deal with the issue, while others pay it lip service or sit in silence. That must end with an unwavering generational commitment to rooting out fraud. Anything less shouldn’t be tolerated. The question is simple: will they commit?

Hurricane Katrina produced $1.4 billion in fraud of emergency relief funds. One scheme involved people stealing $5.3 million in FEMA relief by providing PO boxes as damaged residences. Hurricane Harvey ravaged Houston in 2017 with torrential flooding. A Houston man fraudulently received a newly built house worth $314,000.

The COVID-19 emergency hit the U.S. in March 2020. As a Senate chief of staff, I had a front row seat to the government’s efforts to stave off financial disaster. This resulted in passage of the CARES Act providing $2 trillion in economic relief to Americans.

After Hurricane Katrina, Congress worked to address disaster relief fraud by passing the Emergency and Disaster Assistance Fraud Penalty Enhancement Act. The act amended the criminal code to increase punishments for theft of disaster funds by setting a maximum thirty-year prison sentence and $1 million fine. It hasn’t worked. CARES Act fraud is estimated to be $300 billion for the largest programs, which include the Paycheck Protection Program (PPP), COVID-19 Economic Injury Disaster Loan Program, and unemployment insurance programs. The response from Congress has been tepid, extending the statute of limitations for PPP fraud from 5 to 10 years.

Extraordinary events require extraordinary responses. A powerful tool Congress has not deployed is mandatory minimum sentencing for theft of taxpayer funds dedicated to emergency relief and protection of vulnerable populations. There is much discussion of criminal justice reform and the appropriateness of such sentencing. It cannot be applied as a one size fits all fix to a system at large. That approach was tried with the Rockefeller drug laws and failed. However, fraudsters are in a completely different category. Their actions are premeditated, morally repugnant, and harm the most vulnerable populations. So what would mandatory minimum sentencing look like?

Federal fraud sentencing is governed by Sentencing Guidelines Section 2B1.1, which uses a tiered loss table to determine recommended sentences based on the amount stolen. The table is advisory. Judges have full discretion to sentence below it, and they do. The U.S. Sentencing Commission reports that the average recommended guideline minimum for healthcare fraud is 50 months, but the average sentence imposed is 27 months. 57 percent of all sentences are under guidelines! That deviation weakens deterrence. As a former state prosecutor, I can tell you that criminals pay attention. Judges see paper crimes different than acts involving guns and knives. I believe it’s psychological and part of the reason judges go soft on these offenders, especially if they’re able to make restitution. That’s a big mistake. Fraudsters know they won’t go inside or if they do, it won’t be much incarceration. And they talk. Birds of a feather flock together. People in different jurisdictions always know where the weak spots are in the system, whether it’s a judge, prosecutor or law enforcement agency.

The fix is simple. Establish mandatory minimum sentencing for individuals convicted of stealing taxpayer funds from vulnerable populations. The 2007 Katrina legislation set a 30-year maximum for disaster fraud. Nobody serves 30 years for fraud. What’s needed is a mandatory floor. A mandatory minimum of 3 years for theft of disaster relief of vulnerable population funds that scales to 10 years based primarily on the amount stolen (other factors such as criminal history and facts of the case would be considered as well). That would establish deterrence that discretionary sentencing hasn’t provided. That will get the attention of fraudsters. Most think that if they make restitution they’ll skip out on prison time. Guaranteed consequences will change behavior.

Congress has the authority to act. Katrina produced $1.4 billion in fraud and COVID-19 escalated to at least $300 billion. The victims are hurricane survivors who lost everything, seniors on Medicare, special needs children and more. A mandatory minimum of 3 to 10 years, tied to the amount stolen, changes that calculation permanently. It’s aggressive, but it’s the obvious next step. The industrial scale that we are witnessing simply cannot continue. It’s eroding Americans trust in government and resulting in up to ten percent of the federal budget being lost to fraud each year. The question is whether Congress has the will to act.

The California hospice numbers tell the story. A 1,500 percent increase in hospice providers in Los Angeles County between 2010 and 2022. 197 hospices registered to a single address. 89 more at another. Los Angeles County now has more hospice agencies than 36 states combined. Operation Never Say Die, the FBI’s active investigation, has already produced arrests of doctors, nurses, and a psychologist who allegedly turned end-of-life care into a cash-producing operation, billing Medicare for patients who were incarcerated or dead. One doctor ran 126 hospices and billed the government $71 million in a single year. Another fraudster stole $270 million in eleven months.

Taxpayers are outraged and rightfully so. But the real question is at what point does the conversation move from bureaucratic incompetence to a discussion about culpability. As a former prosecutor, I don’t believe industrial scale fraud like this occurs without some level of government failure that goes beyond carelessness. I’m speaking about negligence, perhaps as the floor.

When I was a state prosecutor I tried a manslaughter case before a jury. To convict, I had to prove the defendant acted with a wanton disregard for the life of another, conduct that crossed from negligence into criminal territory. The defendant had driven with his girlfriend on the hood of a car and slung her off. The evidence was difficult. We lost. But I know exactly where that line sits between carelessness and criminal conduct because I’ve had to argue it in front of a jury.

What I see in California feels familiar. Not identical, but close enough that a harder question has to be asked. Federal law recognizes a standard called willful blindness, sometimes called the “ostrich instruction,” which holds that deliberately avoiding knowledge you are obligated to act on is treated the same as actual knowledge. It is a criminal standard. The facts here deserve the same scrutiny.

California’s own state auditor flagged hospice fraud in a 2022 report, warning specifically about clustering of hospices at shared addresses, patients listed as terminal who were later discharged alive, and overbilling by at least $105 million in a single year. The House Oversight Committee has confirmed the Newsom administration was aware of these warnings for at least four years. California’s deadline to adopt emergency hospice regulations was January 1, 2026. The state missed it.

This is not speculation. This is not political narrative. Warned in 2022. Warned repeatedly that Medi-Cal eligibility has been “high risk” since 2007. A deadline set. A deadline missed. Meanwhile $3.5 billion disappeared. At some point, the question stops being whether officials were incompetent and starts being whether they deliberately avoided knowing what they were obligated to act on. Those are different things. The law treats them differently. And it’s a question nobody in Sacramento appears to be asking.

The FBI is asking it. IRS Criminal Investigation is asking it. The House Oversight Committee is asking it. Federal prosecutors have called California a “kingdom of fraud.” The people whose job it was to prevent this, the state officials who received the audits, set the deadlines, and looked the other way, have not been asked to answer for it. That silence left taxpayers on the hook for billions of dollars. That silence is unacceptable.

First, industrial scale fraud of this magnitude cannot occur without some level of complicity by government officials. It’s too big to miss. The numbers shock the conscience and even the most mundane government bureaucrat would notice 197 hospices located at one address. Before we get to who knew what and when, the numbers demand context.

L.A. County reached 6.8 hospice agencies per 10,000 beneficiaries against a national rate of 0.78, an 800% deviation hiding in plain sight. It experienced a 1,500 percent increase in hospice companies from 2010-2022. That number dwarfs the national average by a factor of six relative to the county’s elderly population. Multiple news outlets have reported that 89 hospice providers were registered in a single building (prior to the 197 figure coming to light). CMS Administrator Dr. Oz alleged there was $3.5 billion in hospice and home care fraud in LA County. CMS later clarified the figure represents total billing under investigation. The distinction matters less than you’d think. 18 percent of all hospice billing in the U.S. comes from LA county alone. Even a YouTube journalist with a camera found what regulators missed. Hospice organizations in empty offices and parking lots full of sports cars.

I don’t want to review the numbers at length because while astonishing, clearly, they’re far from final. We need to address how this happened, which begins with vetting. Experienced fraudsters engage in stacking. Stacking refers to a process whereby they create several entities to bill Medicare. When one has its billing privileges stripped, which happened with three-fifths of newly enrolled California hospice enrollees, the fraudsters rotate in a new entity. They know some schemes won’t pass muster, but they play the percentages. The more sham entities they can create, the more likely it is that some will get through and they’ll hit pay dirt.

The objective is to overwhelm the Medicare system by flooding it with applications. Vetting is the first line of defense, but it’s easily abused by fraudsters.

The other end of the equation is oversight. How were these companies allowed to operate and bill Medicare for years? There are documented occurrences of 89 hospices being registered to the same address and 197 in a nearby location. How that anomaly raised no eyebrows should frighten every taxpayer because it means government is literally asleep at the wheel. But, and here’s what’s inexplicable, the Auditor of the State of California issued an 87 page report in March 2022 on hospice oversight with this subtitle:

“The State’s Weak Oversight of Hospice Agencies Has Created Opportunities for Large-Scale Fraud and Abuse.”

The California Auditor’s report is striking. Among the fraud indicators it listed were “excessive geographic clustering of hospices with sometimes dozens of separately licensed agencies located in the same building.” That means California was warned and did nothing. It’s a stone-cold indictment of California’s administration. This report was prepared at the direction of the joint legislative audit committee, addressed to the Governor, and delivered to the Speaker of the Assembly and President Pro Tempore of the Senate. In my experience, that means every member saw it. The failure here was a failure to act. For this there is no excuse.

This week, the House Oversight Committee sent Governor Newsom a formal letter demanding documents on the state’s oversight and internal controls for its federally funded hospice programs, with a deadline of April 6. Congress is now asking the same question the California Auditor asked four years ago. The only difference is that this time someone may actually have to answer it.

The lesson here is that the system failed on the front end. There are absolutely no vetting standards being applied to Medicare enrollment for hospice funds in California. None. However, the system worked on the back end because four years ago the California state auditor flagged the exact hospice issue lighting up the news cycle now. Someone sounded the alarm on a billion-dollar fraud scheme. The Governor got the report. The legislature got the report. The fraud kept going. They knew.

In Danger Invites Fraud, we covered how emergencies have become the great incubator for theft of taxpayer dollars. The cycle is simple: disasters create suffering, suffering forces the government to move fast, and speed destroys guardrails. I watched it happen in real time as a Senate chief of staff during COVID-19. The government was moving faster than it ever had. What nobody could fully appreciate was what that speed would cost us.

The CARES Act remains the largest emergency spending bill in U.S. history at $2 trillion and was passed in a matter of weeks. Time was of the essence. We are just now beginning to understand the scope of fraud which is estimated at $300 billion for the largest programs, but will likely never be known. For example, the former Speaker of the Missouri state house was just sentenced to 21 months in prison for wire fraud involving misuse of pandemic funds. John Diehl stole $380,000 dollars of relief money intended for business operations and instead used it for personal expenses such as country club dues and vehicle and mortgage payments. As a former prosecutor, 21 months for stealing $380,000 from disaster victims isn’t a deterrent. Not even close.

Congress tried this before. In 2007, it passed the Emergency and Disaster Assistance Fraud Penalty Enhancement Act in response to Hurricane Katrina. The act amended the criminal code to increase punishments for theft of disaster funds by setting a maximum thirty-year prison sentence and $1 million fine. Congress thought it had solved the problem. It didn’t. Those penalties are discretionary meaning that judges can, and do, impose far lighter sentences. Real deterrence requires greater penalties. Congress should attach mandatory minimum sentencing enhancements to theft of emergency relief funds. A mandatory consequence changes the equation in a way that a discretionary one can’t.

Criminal penalties alone won’t fix a system structurally wired to enable fraud. The second reform targets the watchdogs themselves. We must amend the Inspector General Act of 1978 to establish true independence for agency watchdogs. IG’s are currently funded by the very agencies they’re responsible for auditing, which is a conflict of interest. And while independent on paper, as we broke down in Use It or Lose It, these IGs must report to agency heads. The budgetary pressure within agencies to maintain funding is extraordinary and exposing fraud not only makes an agency look bad, but it becomes more difficult to justify future discretionary spending requests (which Congress must approve). IGs understand this.

Second, Congress should pass zero based budgeting legislation similar to that proposed by Senator Risch. Agencies face maximum pressure to spend every discretionary dollar (I break down discretionary vs. mandatory spending in greater detail in Use It or Lose It). It’s Washington’s worst kept secret and one of the biggest drivers of wasteful spending. Zero-based budgeting reverses the incentive. Instead of rewarding agencies for burning through money, it requires them to justify every dollar starting from nothing. Take away the pressure to spend and you take away a major driver of the problem.

The fourth reform addresses the federal workforce itself. In Too Big to Manage, I wrote about how agency bureaucrats stall investigations by “running out the shot clock”, waiting out congressional and administration inquiries until the political winds shift and the investigation quietly dies. I’ve seen it firsthand. An EPA matter on Capitol Hill. Ten agency employees with impressive titles dialed into a call, their sole purpose to misdirect, delay, and obstruct. It worked. It’s the playbook.

Bureaucrats know how to manipulate a system that has millions of federal civilian employees and over 400 federal agencies. Complex organizational hierarchies make it difficult to attribute decisions to individuals, and employees learn quickly how to operate inside the web. Add public sector labor unions to the mix and you have an impenetrable fortress that makes consistent accountability unachievable.

Industrial scale fraud doesn’t happen by accident. It’s the predictable outcome of a system with no real deterrence, watchdogs without true independence, and a bureaucracy with no real accountability. That’s how the dots connect. Now comes the real question: will Congress act on all three after watching at least $300 billion lost to fraud as a result of COVID-19? The American people are paying attention and running out of patience.

There is no greater incubator for fraud than emergency situations. History teaches that when the government is forced to marshal resources quickly to its citizens, criminals are waiting to take advantage. Covid-19 provides countless examples (which we’ll get to), but history shows it’s a longstanding pattern.

In 2005, Hurricanes Katrina and Rita tore apart the Gulf Coast in biblical fashion. True to form, fraudsters saw an opportunity and took advantage by stealing up to $1.4 billion in government assistance. One scheme involved people stealing $5.3 million in FEMA relief by providing PO boxes as damaged residences. Hurricane Harvey was another disaster that ravaged the Gulf Coast in 2017 with torrential rains flooding Houston. A Houston man took advantage by fraudulently receiving a newly rebuilt house worth $314,000.

These examples reveal that there is a clear causal link between tragedy and fraud. Katrina. Rita. Harvey. The pattern is the same: suffering creates urgency, urgency creates opportunity, and opportunity invites criminals. Former Supreme Court Justice Benjamin Cardozo famously said that “danger invites rescue” in a New York Court of Appeals opinion (Wagner v. International Railway Co., 232 N.Y. 176 (1921)). The saying (not doctrine) could be applied to our examples. Disaster strikes and the federal government comes charging to help. Except society has evolved into one where danger not only invites rescue, but now fraud. Enter COVID-19.

There has been no greater emergency in the history of the United States than COVID-19. As a Senate chief of staff at the time, I had a front row seat to the federal government’s efforts to stave off financial disaster. This resulted in passage of the CARES Act in March 2020 providing $2 trillion in economic relief to Americans. Six years later we’re only now beginning to understand the scope of fraud tied to the pandemic. It was the Super Bowl of disasters for fraudsters and they suited up to play. Again, danger invited fraud.

What I witnessed from inside the Capitol was the government moving faster than it ever had. What nobody could fully appreciate at the time was how that speed would cost us. The full scope of pandemic era fraud will likely never be known according to the Government Accountability Office. Losses from the biggest funds, which include the Paycheck Protection Program (PPP), COVID-19 Economic Injury Disaster Loan Program (COVID-19 EIDL), and unemployment insurance programs are estimated to be $300 billion. Have there been consequences? According to GAO, of the 2,143 individuals found guilty of fraud related to pandemic era funds and sentenced, 1,741(81 percent) received prison sentences as of December 31, 2024 (a number that is rising).

The fraud is staggering and a critical question is what will Congress do? Measures have been taken to extend the statute of limitations for PPP fraud from 5 to 10 years and the Pandemic Analytics Center of Excellence, a joint effort by the Justice Department and the Office of Management and Budget to deter improper payments, was established to assist in identifying improper payments and fraud. However, it is not enough to combat the industrial scale abuse we are witnessing.

Congress should act to implement strict mandatory minimum sentencing guidelines for any theft of disaster relief funds. Individuals who use tragedies involving tremendous suffering to steal taxpayer money and enrich themselves must be met with the most severe consequences. Government is too large to properly vet all applicants in emergency situations where time is of the essence. As we’ve seen in prior issues, a government too big to oversee itself and watchdogs compromised by the agencies they audit cannot be our first line of defense. Deterrence must come from stronger criminal penalties. Otherwise, danger will invite more fraud.

What do you think it will take for Congress to act? Reply and let me know. If you want to understand accountability failures and why they keep happening, subscribe to Striking Flint. New pieces every two weeks.

The scale of waste is staggering. The Department of Transportation spent over $600,000 on unused mobile devices. The IRS made over $21 billion in improper payments in FY2024 in violation of the Payment Integrity Information Act’s guidelines. $9 billion in Minnesota social services fraud. Secretary Bessent revealed that up to 10% of our budget is lost to fraud every year, according to GAO.

To understand the problem, you need to understand how government spending works. Our government spent $7.01 trillion in FY2025, comprised of mandatory spending (two-thirds) and discretionary spending (one-third). Mandatory spending includes programs like Medicare and Social Security that account for 36% of the budget. This discussion focuses on the discretionary side where Congress votes on spending in the annual appropriations process and where decisions can actually be made.

Inspectors General are up against a “Use It or Lose It” system where agencies face maximum pressure to spend every discretionary dollar. Agency leadership must justify annual appropriations requests to Congress, and bureaucrats who fail to spend their full allocation risk leadership’s wrath when Congress cuts the budget the next fiscal year. This creates an incentive to ignore fraud rather than expose it.

The Inspector General Act of 1978 established Inspector General offices embedded within the agencies they oversee, run by presidentially appointed and Senate-confirmed officials. Their purpose is to “conduct and supervise audits” and to “prevent and detect fraud” in programs. But here’s the conflict: their offices rely on discretionary agency funding from the very agencies they’re supposed to audit. You can’t investigate fraud objectively when your paycheck depends on the agency you’re investigating.

There are guardrails to protect the integrity of an IG’s work. But the budgetary pressure within agencies to maintain funding is immense, and IGs aren’t immune just because they operate independently. IGs must report to agency heads (and Congress), and while an agency head cannot impede an IG investigation, IGs know the reality: exposed fraud in discretionary programs gives Congress a reason to cut the agency’s budget. But the problem is deeper. The “Use It or Lose It” culture infects the entire agency, not just discretionary programs. Agency leadership knows that any exposed waste makes them look bad to Congress, whether it’s in programs they control or not. This raises a question about the pressure on IGs to look the other way across the board.

There are two solutions to address the conflict of interest posed by the “Use It or Lose It” system. First, remove IGs from the agencies and establish them as freestanding entities funded separately by Congress. An IG charged with finding fraud in an agency should not be embedded within that agency. Second, Congress could move to a zero-based budgeting model requiring federal agencies to submit zero-based budgets to the Office of Management and Budget and congressional committees. Senator Risch has proposed such legislation. These reforms would root out the “Use It or Lose It” system that has been wasting taxpayer money for decades, but only if Congress has the political will to act. The question is whether Washington will choose accountability over the status quo.

Recent reports of billions of dollars in Minnesota social services fraud prompted the Treasury Department to announce an investigation and launch of an IRS task force. Secretary Bessent revealed that as much as 10 percent of federal spending, over $500B annually, is lost to fraud. That number shocks the conscience. We’ll see how industrial scale fraud is a failure of accountability within a workforce designed to nurture it.

Federal bureaucrats are insulated from accountability because of a structure with millions of civilian employees and 441 agencies. They know how to work the system to their advantage. Complex organizational hierarchies make it difficult to attribute decisions to individuals, and bureaucrats learn quickly how to operate inside the web.

For example, I recall a discussion with EPA staff about unannounced flyovers they were conducting with a small aircraft in our congressional district. I had just begun working on Capitol Hill. The plane was flying hundreds of feet overhead and scaring constituents. I scheduled a conference call with the EPA and two oversight staff. The EPA dialed-in approximately ten employees with fancy titles to distract, divert and throw out red herrings. Their goal was to frustrate and delay. It worked. After 30 minutes the call ended and I realized a different approach was needed. Eventually, our oversight efforts stalled out.

The episode represents another tactic the bureaucratic machine employs to protect itself called “running out the shot clock.” It’s used when federal employees attempt to wait out a congressional or executive investigation in hopes a new body will drop the inquiry. No investigation, no consequences.

Public sector unions are another issue. I worked with an oversight subcommittee on the Federal Workforce, Postal Service and Labor Policy. Our focus was negotiating postal reform because the service was bleeding money. However, I was surprised to learn that postal workers are represented by four unions. The union presence further complicates the resolution of misconduct.

The federal workforce behemoth is critical to examine because it nurtures a lack of accountability and transparency, thereby creating an environment ripe for fraud. Bureaucrats have little fear of consequences or incentive to work efficiently on behalf of taxpayers. We need stronger mechanisms to ensure organizational hierarchies can be pierced, bureaucrats cannot run out the shot clock on investigators, and unions do not stifle efforts to resolve misconduct. Despite our inability to slow the growth of government, we must remain committed to accountability because Americans see a system that’s not working for them.

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