Strengthening Government Fraud Enforcement: Administrative False Claims Act Empowers Agencies to Combat Fraud

Federal agencies gain expanded powers to combat fraud through a significant overhaul of anti-fraud legislation, as the Administrative False Claims Act (AFCA) replaces the long-underutilized Program Fraud Civil Remedies Act of 1986.

The AFCA, signed into law as part of the 2025 National Defense Authorization Act in December 2024, substantially strengthens federal agencies’ ability to directly prosecute cases of fraud involving government funds without going through the Department of Justice.

Among the most significant changes is a dramatic increase in the maximum claim amount from $150,000 to $1 million, adjusted for inflation. This higher threshold expands the pool of cases federal agencies can pursue independently, addressing a key limitation of the previous legislation.

The reform comes after years of minimal utilization of the original Program Fraud Civil Remedies Act. A 2012 Government Accountability Office study revealed that between 2006 and 2010, only five civilian agencies had used the law, with the Department of Housing and Urban Development accounting for 96 percent of all cases.

“This represents a fundamental shift in how the federal government can address fraud cases,” said legal expert Catherine Roberts, who specializes in government compliance. “The higher claim ceiling alone will bring thousands more cases within agencies’ direct jurisdiction.”

The AFCA broadens the definition of false claims beyond those involving direct requests for payment. Now, statements that conceal or improperly avoid financial obligations to the government are explicitly included, mirroring provisions in the False Claims Act, which has been one of the government’s most effective anti-fraud tools.

Another key provision allows agencies to recover investigation costs, including court and hearing expenses, from amounts collected in successful cases. This financial incentive may significantly increase agencies’ willingness to pursue fraud allegations that previously would have been considered too expensive to investigate relative to the potential recovery.

The legislation also extends the statute of limitations, allowing the government to notify alleged violators within six years of the violation or three years after discovery of material facts, with an overall cap of ten years from the violation date.

Unlike the False Claims Act, however, the AFCA does not include qui tam provisions that would allow private whistleblowers to file lawsuits on behalf of the government and receive a portion of recovered damages. This omission has drawn criticism from whistleblower advocacy groups who argue it removes a crucial incentive for insiders to report fraud.

Federal agencies now face a June 23, 2025 deadline to promulgate regulations and procedures for implementing the AFCA. They must also begin providing semiannual reports on AFCA enforcement, including data on the number of cases reported, actions taken, and instances where officials declined to proceed.

The reform comes at a time when questions about administrative enforcement are being raised at the highest levels. In its 2024 decision in Securities and Exchange Commission v. Jarkesy, the Supreme Court vacated a civil monetary penalty imposed in an administrative law judge proceeding, finding it violated the defendant’s Seventh Amendment right to a jury trial.

Legal experts note this ruling could potentially impact the constitutionality of administrative proceedings under the AFCA, particularly regarding monetary penalties.

“The Jarkesy decision creates some uncertainty about how AFCA cases will proceed,” noted government contracts attorney James Wilson. “We’ll likely see constitutional challenges to the administrative procedures outlined in the Act.”

The AFCA represents part of a broader push to reduce government fraud and waste. Its expanded scope covers false statements even without associated payment claims, potentially giving the administration another tool in regulatory enforcement across various sectors including healthcare, defense contracting, and federal grant programs.

Affected industries and federal contractors should prepare for increased scrutiny as agencies begin implementing this expanded authority in the coming months.