Understand False Claims Act Risk
K-12 schools, colleges, and universities that receive federal funds face potential compliance risk under the False Claims Act (FCA). Submitting a false claim, making inaccurate certifications, or signing under-supported funding-related representations to the federal government can open institutions to substantial exposure.
In addition to false monetary claims, recent Department of Justice (DOJ) guidance indicates the agency intends to use the FCA to pursue certain alleged violations of federal civil rights laws by federal funding recipients. For institutions, that raises the stakes for compliance certifications, internal reporting, and responses to employee concerns.
What Is the FCA?
The FCA is a federal anti-fraud statute applicable to any educational institution or contractor that seeks, receives, uses, or certifies eligibility for federal funds. An institution may face a claim if it knowingly either:
- Submits, or causes someone else to submit, to the federal government a false claim for payment
- Makes a false statement that is material to a claim
- Avoids an obligation to repay money to the government
The statute permits the federal government to recover treble damages and substantial penalties, making it a potent enforcement tool.
How Does an FCA Claim Proceed?
An FCA claim may begin as an internal complaint. If those concerns are ignored or inadequately addressed, the complainant may pursue the matter externally.
The law enables private whistleblowers to initiate lawsuits — known as qui tam actions — in the name of the government to recover damages and penalties for the allegedly false or fraudulent claim. These individual “relators” in an FCA claim initially file the lawsuit under seal alleging that an institution is defrauding the government or a federal program.
The DOJ then investigates whether to pursue the case further on the government’s behalf. If the government does not intervene, the relator still may pursue the case because the law allows relators to keep a percentage of any recovery.
At any time, the DOJ also may initiate its own investigation by issuing a civil investigative demand (CID), requiring the recipient to produce documents or provide responses under oath.
Why it Matters
For institutions, FCA risk often arises in familiar places. In higher education, that may include research grants and sponsored programs, student aid certifications, foreign support disclosures, or academic medical center billing. In K-12 settings, it may include use of grant funds, reimbursement requests, program certifications, or other statements made to obtain or keep federal funding.
FCA exposure for institutions recently expanded to include compliance with federal anti-discrimination statutes, particularly related to diversity, equity, and inclusion (DEI) programs or initiatives. Your institution should look closely at certifications, assurances, and representations it made in connection with federal funding. If the government argues that an institution knowingly made a false statement about compliance with federal law, and that statement affected payment or continued funding, the FCA may apply.
Work closely with legal counsel to assess funding-related certifications, civil rights compliance obligations, and any complaints that may implicate both.
Reduce Risk of a Complaint
Ensure you have strong internal compliance structures and methods for receiving reports of financial and potential fraud concerns. Focus on:
- Policies that tell employees where to go, what to report, and what will happen next
- Reporting channels that are easy to find and use and are trusted by employees
- Procedures for escalating concerns to appropriate legal, compliance, or senior administrators
- Communicating widely your policies and reporting procedures
- Anti-retaliation protections for employees who raise concerns
Train managers, human resources, compliance personnel, and other staff who may receive a complaint on how to respond if someone complains to them. Exercise caution when considering whether to place a complainant on leave; consult with legal counsel before taking employment actions against a complainant.
Consider conducting an internal cross-functional review, particularly if compliance and certification responsibilities are decentralized. Identify where your institution receives federal funds and where it makes representations tied to those funds, including grants, contracts, student aid participation, research submissions, reimbursements, and compliance certifications.
Questions to ask include:
- Who reviews representations before submission?
- What facts support the representations or certifications?
- Are the right offices involved in the review process?
- Do employees have a clear way to raise concerns when the facts do not match the certification?
Respond to Concerns
If your institution identifies a possible FCA issue or receives an internal complaint, it is important to:
- Preserve documents.
- Involve legal counsel early.
- Investigate the facts promptly.
- Decide whether the issue is isolated or systemic.
- Review whether any claim, certification, or representation may have been inaccurate.
- Keep the investigation separate from employment decisions involving the person who raised the concern unless counsel has assessed retaliation risk.
More From UE
Report: Beware Retaliation Against Whistleblowers
Recent Executive Orders and Actions Impacting Education
Additional Resources
U.S. Department of Justice Memo on Civil Rights Fraud Initiative, May 19, 2025
About the Author
-
Lindsey Dunn
Senior Risk Management Counsel
Lindsey joined UE's Risk Management department in September 2024. Prior to that, she spent about six years as a Resolutions Counsel in the South Region for the Specialty Group. Before UE, Lindsey practiced labor and employment law. She is admitted to practice law in Florida and before the U.S. District Courts in Florida and the U.S. Court of Appeals for the Eleventh Circuit.