Audit: How some agencies are using commercial data services

The use of commercial data services to detect fraud and improper payments has many cost and time benefits, but also potential flaws and concerns that need addressing, according to a new watchdog report.

The use of commercial data services to detect fraud and improper payments has many cost and time benefits, but also potential flaws and concerns that need addressing, according to a new watchdog report.

The Government Accountability Office reported on the benefits agencies cited to using public-private data partnerships, but also described the challenges they have experienced, like software limitations and partnership problems. The report’s authors interviewed officials from seven federal agencies and five commercial data service providers, to “review issues surrounding federal agencies’ use of commercial data in conducting program integrity activities.”

The GAO did not provide any recommendations in their report, which was published Thursday.

Agencies discussed the way commercial data services help them accomplish their missions. The Internal Revenue Service, for example, uses commercial data services to authenticate taxpayers’ identities online and by phone. The Taxpayer Protection Program includes data from LexisNexis and Equifax Inc.


“Officials from these agencies speculated that relying on these commercial data service providers likely costs their agencies less than if they attempted to provide a similarly extensive data service using only agency resources,” the GAO report says.

But to provide an example of lessons learned from using commercial data services, they also followed up on another 2015 GAO report on the Centers for Medicare and Medicaid Services, which said there were weaknesses in the way CMS verifies provider and supplier practice location and physician licensure status.

“Agency officials may consider the design of software associated with a data service when determining whether commercial data meet their information requirements for conducting program integrity activities,” the GAO authors wrote when referencing the 2015 report.

The most striking finding of the June 2015 report was that 22 percent of the practice location addresses were potentially ineligible, according to the GAO’s examination of 2013 data.

The GAO examined the data using a software that “provides more detailed information on provider practice location addresses” than what CMS uses.


CMS uses the software Finalist, while the GAO used the USPS Address Matching System Application Program Interface, which can flag potential ineligible addresses like vacancies or invalid addresses.

The GAO said CMS should modify their software to incorporate flags like the USPS system.

But since that report, the GAO authors said changes have not yet been made. According to the 2016 report, HHS “has not yet initiated specific actions to implement our recommendations.”

The GAO added that, “If effectively implemented, the actions could prevent ineligible providers from enrolling into the Medicare program and obtaining Medicare funds, thus potentially reducing the amount of improper payments.”

When deciding on using private sector data to accomplish a mission, agencies have several factors they could consider, the GAO writers said in the report, including the data’s timeliness, accuracy, quality, completeness, and application.


The Department of Labor also discussed their successes and challenges with using commercial data services. Officials said state Unemployment Insurance agencies could probably better identify people who have returned to work by using commercial data services.

The DOL conducted in 2012 a pilot program with Accuity and three states to try to do this, by using financial transaction data through a data match with commercial financial institutions. The pilot program resulted in a “more than $80 million increase in the amount of potential improper payments identified during the 15-month period of the pilot project.”

But the program fell apart early last year when Accuity and its partner “informed DOL that it no longer wished to participate in the project, absent legislation compelling the financial institutions to do so.”

Now, DOL officials told the GAO they are working on a new pilot project with another provider to use wage data.

The GAO conducted the audit from September 2015 to June 2016.

Samantha Ehlinger

Written by Samantha Ehlinger

Samantha Ehlinger is a technology reporter for FedScoop. Her work has appeared in the Houston Chronicle, Fort Worth Star-Telegram, and several McClatchy papers, including Miami Herald and The State. She was a part of a McClatchy investigative team for the “Irradiated” project on nuclear worker conditions, which won a McClatchy President’s Award. She is a graduate of Texas Christian University. Contact Samantha via email at, or follow her on Twitter at @samehlinger. Subscribe to the Daily Scoop for stories like this in your inbox every morning by signing up here:

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