Late last year, President Biden signed the annual National Defense Authorization Act (NDAA) for fiscal year 2025. This alone is not newsworthy, as this has happened every year since the NDAA was introduced in 1961. Generally speaking, the NDAA governs Department of Defense appropriations and related issues.
This NDAA, however, contained a provision that was overlooked by most, but that could be significant for government fraud enforcement moving forward. The provision — called the “Administrative False Claims Act” or “AFCA” — changes the law to empower the Department of Justice (DOJ) and other federal agencies to pursue administrative monetary claims for alleged fraud.
The AFCA — which was introduced in 2023 by Iowa Senator Chuck Grassley (who is known as the “father” of the modern False Claims Act) — amends the Program Fraud Civil Remedies Act (“PFCRA”), which was originally passed in 1986. The PFCRA — which is sometimes referred to as the “Baby False Claims Act” — is an administrative statute which allows federal agencies to pursue actions for false claims of $150,000 or less after receiving approval from the DOJ.
The idea behind the PFCRA — which was co-sponsored by Senator Grassley along with various other senators including future Vice President Al Gore — was that it would give federal agencies the ability to independently pursue False Claims matters that were too small for the DOJ itself to pursue. Despite these intentions, the PFCRA has been rarely utilized and, when it has, mainly only by one government agency–the Department of Housing and Urban Development (HUD).
The 2025 NDAA amends the PFCRA in various ways, including:
- Changing the name of the statute to the Administrative False Claims Act (“AFCA”);
- Raising the ceiling for claims that can be handled administratively from $150,000 to $1,000,000 and codifying annual inflation-adjustments to this cap;
- Allowing agencies to recoup costs associated with investigating and prosecuting such cases (“any amount collected under this chapter shall be credited first to reimburse the authority or other Federal entity that expended costs in support of the investigation or prosecution of the action, including any court or hearing costs”).
As with the pre-amended PFCRA, AFCA actions must be heard before an agency Administrative Law Judge (ALJ) using a preponderance of the evidence (more likely than not) standard. Unlike the civil False Claims Act, the AFCA does not permit qui tam (whistleblower) actions.
Similar to the civil FCA, defendants face liability under the AFCA if they knowingly submit false or fraudulent claims to government agencies. As with the FCA, “knowingly” is defined to include actual knowledge and recklessness. Violations can be punished with per claim penalties and double damages. If a defendant is found liable after an ALJ hearing, that defendant may seek judicial review, but such review is limited and the ALJ’s. decision can only be vacated if the district court finds that the decision is “unsupported by substantial evidence.”
The AFCA can be found at 31 U.S.C. 3801 et seq.
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The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with government investigations and False Claims Act litigation. If you need assistance with such a matter, please contact us today.