State agencies could withhold program payments during fraud investigations

State agency heads would be allowed to withhold payments from participants facing verified fraud allegations under investigation. Participants are people or organizations receiving, distributing, or holding public program money or resources. An agency could stop payments in any program it runs based on an investigation involving its programs or another agency head’s finding. Federal law must permit withholding, and other laws authorizing withholding would still apply. Further action after the stopping conditions are met would require separate legal authority and compliance with that law. Withholding would end when the agency head finds insufficient evidence of fraud or related legal proceedings finish, unless lawful further action applies.

Agencies would send notice after withholding payments and allow written requests for review by the agency head. Providers, vendors, individuals, and associated people or organizations could request review. The temporary withholding would not qualify for a formal appeal under the state administrative appeals law. Notice would explain the reasons, the conditions for ending withholding, and the right to submit evidence. Investigation details could be withheld. When practical, agencies would notify affected people not implicated in fraud about their rights to continued benefits or services and provide a contact. Review requests would need written reasons and supporting documents. The agency head would review the request within 60 days after receiving it.

Agencies would keep fraud allegation and payment withholding records from public access during withholding. These rules cover records about verified fraud allegations and withheld payments. The identity of the person reporting suspected fraud would remain private. An agency head could disclose that payments are withheld if doing so would not compromise an ongoing investigation. Agencies could share protected records with government or law enforcement agencies to help prevent fraud or support law enforcement. Public access would begin after the agency determines withholding must end because evidence is insufficient or related legal proceedings have finished.