New National Fraud Detection Center Increases Scrutiny of Federal Funding Recipients

The Department of Justice (DOJ) is significantly expanding its fraud enforcement infrastructure, signaling a new era of scrutiny for organizations that receive federal funds. Through the creation of a dedicated National Fraud Enforcement Division and a new National Fraud Detection Center, DOJ is investing substantial resources in identifying, investigating, and prosecuting fraud involving federal programs. Federal grant recipients, health care providers, and contractors should expect heightened oversight and enforcement activity in the months ahead.

DOJ’s August 24 announcement establishing the National Fraud Detection Center (NFDC) further underscores the Department’s intensified focus on fraud enforcement and follows its earlier announcement this month creating the National Fraud Enforcement Division.

Fraud Division Enforcement Priorities

DOJ is dedicating significant resources to expanding its fraud enforcement capabilities. In an August 13 memorandum, the Department announced that approximately 500 attorneys and staff would be assigned to the newly established National Fraud Enforcement Division by the end of August 2026, with additional growth planned over the next two years.

The newly created National Fraud Detection Center (NFDC) will complement those efforts by serving as a prosecutor-led, multi-agency operation focused on identifying and investigating fraud affecting federal programs. Matters developed through the NFDC may be referred to the Fraud Division for prosecution, creating a coordinated framework for detecting, investigating, and pursuing fraud cases.

DOJ has identified fraud involving public trust and financial integrity, health care, tax, global trade and commerce, and corporate misconduct as key enforcement priorities. Of particular relevance to organizations that receive federal funding, DOJ specifically highlighted fraud involving government benefit and grant programs, including childcare programs, as well as government procurement fraud.

Health care fraud also remains a major focus area. DOJ has indicated it will prioritize investigations involving home health and hospice services, telemedicine, controlled substances, and Medicare and Medicaid funds. To support these efforts, the Department plans to expand its use of data science, advanced analytics, and other technology-driven investigative tools. This emphasis is consistent with DOJ’s broader efforts to leverage data mining and artificial intelligence to identify potential False Claims Act violations and other federal initiatives using technology to monitor compliance with grant and funding requirements.

The memorandum further reaffirmed DOJ’s commitment to incentivizing voluntary self-disclosure. Organizations that promptly disclose misconduct, fully cooperate with government investigations, and implement appropriate remedial measures may receive favorable consideration in charging and resolution decisions.

Final Rule Establishing the National Fraud Enforcement Division

DOJ issued a Final Rule, effective August 24, 2026, formally establishing the Fraud Division and defining its functions and authority. The rule gives the Division responsibility for criminal proceedings involving several categories of fraud, including fraud involving federal funds and health care programs.

The rule also gives the Fraud Division authority that extends beyond those specified areas. Under 28 C.F.R. § 0.70(j), when the Division brings a criminal case within one of its assigned areas, it may prosecute other federal crimes charged in the same case.

The Fraud Division may also pursue civil remedies related to matters within its jurisdiction, including:

• Injunctive relief;
• Restitution;
• Seizure or forfeiture of property;
• Damages;
• Enforcement of final judgments; and
• Civil penalties.

Key Takeaways for Federal Funding Recipients

DOJ’s increased investment in fraud detection and enforcement means that federal funding recipients should be prepared for greater scrutiny. Organizations should evaluate their compliance practices and consider whether their documentation, recordkeeping, and internal reporting processes are sufficient to identify and address potential issues.

In particular, federal funding recipients should consider:

• Reviewing documentation to ensure that it is current and adequately demonstrates compliance with applicable federal requirements;
• Maintaining relevant records and information in an organized manner so they can be readily located and produced when necessary;
• Identifying federal funding streams and determining which programs or lines of business are supported, in whole or in part, by federal funds; and
• Evaluating internal compliance and reporting systems to ensure that potential issues can be identified, investigated, and corrected promptly.

Feldesman is continuing to monitor developments related to the National Fraud Enforcement Division, National Fraud Detection Center, and other DOJ initiatives affecting federal funding recipients and health care entities. If you have any questions about these developments or their potential impact on your organization, please contact Jesi J. Carlson or Brendan M. Tyler.