Key insights:

• • • Fraud prevention presents systems challenges 鈥� In the current advanced tech-enabled environment, AI-driven tools in the public sphere need human coordination and oversight to be employed properly.

    • The intangible cost of fraud is public trust 鈥� When public programs that are designed to support vulnerable populations fall victim to exploitation, confidence in the ability of government-administered programs falters.

    • The full scope of fraud is unknown 鈥� Many improper payments from government programs aren鈥檛 criminal. It鈥檚 that we need better data, clearer definitions, and a stronger understanding around what fraud truly is.

As public programs and the scale of fraud become the subject of national and state political discourse, more state governments and public sector agencies are evaluating the potential of data analytics and AI tools to curb fraud. As these institutions are realizing, effective fraud prevention is easier said than done, and investment in new detection tools will fail to keep pace with fraud if they don鈥檛 address structural, cultural, and coordination challenges.

Early fraud detection

Early detection of fraudulent activity, aided by AI tools and systems, may still be the most effective way to deter future problems. For example, California Community Colleges, the largest higher education system in the United States, currently serves more than two million students and has in two-thirds of its institutions in order to detect fake students. With open access for enrollment, the system is a magnet for fake students who apply, enroll, and fill seats in virtual classes that real students should be occupying, while fraudulently collecting federal and state student aid.

In 2024, it was estimated that nearly one-third (31%) of financial aid applicants at California Community Colleges were fraudulent, resulting in approximately $13 million in state and federal aid dollars being disbursed to fake students.

California Community Colleges employed a three-phased approach seeks to catch fraudsters who may slip through at the time of application, when they register for courses, and when they apply for financial aid. The system engaged in cross-agency collaboration with the California Department of Motor Vehicles and deployed a mobile ID system to authenticate student identity. Further, its data analytics looked at factors such as students鈥� IP addresses, time zones, age, and contact information to flag those patterns that could indicate a fake applicant. An AI tool analyzed course registration patterns, as well, identifying whether applicants have illogical or unusual patterns in the courses they are taking.

Then, system educators integrated into their virtual courses early on, requiring students to submit an introductory video, for example. This allows educators to cut non-participating students (presumed to be fake) before financial aid is disbursed.

These early detection tools, paired with human judgment, showed how a proactive approach can stop fraud before funds are lost.

Gaming government systems

While fake students illustrate small-scale exploitation in California, provider fraud is where large dollar amounts and case complexity arise. When fraudsters illegally obtain Medicaid funds for services they never rendered, for example, individuals in need of services suffer.

Minnesota鈥檚 now-shuttered Housing Stabilization Services program intended to help move individuals who were experiencing housing insecurity into transitional and then permanent housing solutions. According to a , the well-intentioned program enriched sophisticated fraudsters, who formed business entities and falsified employee hours, reimbursement claims, and patient identities 鈥� even going so far as to manufacture false case notes as a precaution against their records ever being audited. Not surprisingly, illegally gained reimbursements were used to fund high living expenses, luxury shopping, and cars.

Similar fraudulent providers have been charged by the U.S. Attorney’s Office for the Northern District of Texas as part of . Four individuals fraudulently billed around $20 million to federally funded programs and other insurers.

In another case that showed that fraudsters sometimes can come from inside the house, a group of were ruled against by a federal judge in a whistleblower lawsuit alleging that four insurers and six health systems routinely, improperly billed the state鈥檚 Medicaid program. Part of the reason for the judgment was because the disputed claims were still paid by the Indiana Medicaid program, despite it being aware of alleged issues. In this case, oversight gaps and a consistent pattern of not flagging improper payments revealed a structural weakness within the state office.

Different approaches for data analytics

Some agencies are employing different methods to leverage advanced tech to help in the fight against fraud. For example, the Louisiana Department of Health is using AI to scrutinize Medicaid recipients and their eligibility. A developed at the University of Louisiana at Lafayette will allow the Louisiana Department of Health to share data with the state鈥檚 Office of Motor Vehicles. By analyzing whether individuals have duplicate licenses in other states, their eligibility to receive benefits in Louisiana may be rescinded.

Focusing on a different tack and target, the Center for Medicaid and Medicare will deploy a six-year pilot program of the across six states: New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington. The pilot program will specifically target low-value services with little to no clinical, evidence-based benefits and will expedite review of those services that are at a higher risk for provider fraud, waste, or abuse. This heightened scrutiny of providers seeking Medicaid reimbursement is in alignment with recommendations from the around program integrity.

These varying approaches raise a difficult question: Is it better to risk inefficiency by targeting providers, or it better to risk inequity by targeting recipients?

Understanding the measures of fraud, waste, and abuse

The total cost of fraud is difficult to calculate, as there are countless incidents of fraudulent reimbursement requests, overbilling, or unnecessary medical treatment that cannot be counted. Two data measures that we have to understand to truly gauge the efficacy of public health systems’ financial health are the payment error rate and the dollars recovered through fraud controls.

are those payments that fail to meet statutory, regulatory, or administrative requirements. They may be for non-eligible services, be inappropriately or inaccurately coded, or may exceed program maximum amounts 鈥� but their common denominator is that they represent funds that were misspent or out of step with fund guidelines.

Improper payments are calculated and reported to Congress annually across all federal healthcare programs. The dollar recovery rate calculates the amount of inappropriate reimbursements recovered from fraudulent actors each year, usually through the pursuit of civil or criminal damages. However, it鈥檚 important to remember that not all improper payments are lost to fraud. For example, within the Medicaid program were most often tied to missing appropriate documentation for individuals receiving care.

Understanding these definitions determines how we measure success, design large government systems, and allocate enforcement dollars across states. Such preventative measures, especially now aided by AI and other advanced tech, will help the next generation of fraud detection professionals who will come to rely on the tools and platforms that we design now.

And as more state governments and public sector agencies seek to leverage AI tools and platforms, they would be wise to focus on efforts that collect and analyze real-time participant data and incorporate ethical AI oversight, while balancing an investment in prevention as well as prosecution.

You can learn more about the challenges that government agencies face today here

In fact, climate change worries dominated the top shareholder votes at several major restaurant chains during proxy season, which traditionally occurs in Spring. The Accountability Board, a newly formed shareholder advocacy group focusing on the food industry, submitted resolutions addressing climate concerns at and received at least 50% support.

At the same time, proxy trend expert , Special Counsel at Sullivan & Cromwell, coordinates the firm鈥檚 ESG practice and is part of the team that was drafting the firm鈥檚 12th annual proxy season review, which looks at shareholder proposal across the S&P Composite 1500. In her work, Hu cites other significant developments, including that in Environmental issues, there was a differentiation in proposals with those focusing on only Scope 1 and 2 emissions receiving more support than those that included Scope 3, which focuses on supply chain emissions.

Further, under the Social rubric, Hu points out how the Supreme Court鈥檚 2023 decision in Students for Fair Admissions v. Harvard, in which the court held that race-based affirmative action programs in college admissions processes were unconstitutional, has impacted shareholder proposals around diversity, equity & inclusion (DEI). And from the Governance angle, a recent decision by the Delaware Supreme Court has impacted shareholder proposals around advancing notice bylaws and the director nomination process.

New tactics emerge during 2024 proxy season

Beyond these significant developments concerning ESG-related issues, Hu says she sees two noteworthy themes from the 2024 proxy season that are likely to impact shareholder proposals and company-to-investor engagement going forward. The first is how investors are experimenting with new types of proposals and ways to bring issues to the table. Hu notes how unions led the way with the labor coalition, , for example, launching an effort to replace three Starbucks board members, but withdrawing after progress was made during engagement.

The second, yet less noticed, theme focused on working around Securities and Exchange Commission (SEC) Rule 14a-8, which only allows one proposal per shareholder and聽provides a framework to allow a shareholder to request that a proposal be included in the company’s proxy statement, to be voted upon at the company’s shareholder meeting.

鈥淭he divide between pro- and anti-ESG actions by some states will continue unless there is a Supreme Court decision that restricts state laws.鈥�

Unions submitted five proposals to mining company Warrior Met Coal, and the company voluntarily included all five shareholder proposals on the ballot. When the proposals went to vote, they achieved notable results. The successes at the Warrior Met Coal engagement point to proponents of proposals using a new method to get more than one issue up for a vote and potentially having more success than the typical SEC 14a-8 engagement.

Factors driving reduction of shareholder proposals

Some argue the reduction of ESG-related shareholder proposals in 2024 is evidence of decreased support for ESG issues among investors, but this is not completely accurate, Hu explains, adding that there are other factors influencing this reduction, including:

Increases in regulatory developments 鈥� In fact, ESG-related regulations are on the rise. In situations in which investors are asking a company to do more beyond the regulatory requirement, the company could be exposing itself to greater legal liability. As a result, some investors were more willing to let companies off the hook, given the expanded legal risk exposure.

Ongoing polarization increases uncertainty 鈥� The multifaceted nature of diverging approaches to ESG-related regulation between the United States and the European Union, and among the US federal government and various US states has left some investors hesitant to lean on either side of an issue.

Scrutiny on investors and diverging state laws 鈥� Interestingly, this lack of certainty is forcing more private engagement between companies and their investors. This increase in one-on-one dialogue has focused on whether the board and management could properly oversee companies鈥� courses of action.

To be sure, these emerging ESG issues and new trends and engagement tactics are driving changes in the corporate governance landscape. To manage through the complexity, Hu suggests that in-house counsel stay focused on the material and relevant issues that most impact the company while staying apprised of new legal and regulatory requirements, as well as case law that could impact the organization.

Staying informed is certainly easier said than done, of course. The combined complexity and uncertainty of the environment is making this process more difficult and time consuming. For example, the diverging regulatory approaches between the US and EU create differing regimes of mandatory requirements, Hu explains. In addition, there are emerging issues on the horizon, such as nature, biodiversity, and human rights in the supply chain that have yet to enter the mainstream in the US but are gaining traction in shareholder proposals in the EU.

Looking beyond the US election

As Hu looks out a few months into the post-election environment in the US, she does not expect the uncertainty to subside. 鈥淭he divide between pro- and anti-ESG actions by some states will continue unless there is a Supreme Court decision that restricts state laws,鈥� Hu says.

Yet, as the ESG landscape continues to evolve, companies and investors alike must navigate an increasingly complex and polarized environment. The future of corporate governance and shareholder engagement will likely be shaped by a combination of regulatory changes, emerging issues, and the need for more nuanced, private dialogues between management and stakeholders that requires adaptability and vigilance from all parties involved.

You can find more on , here.

Training for police recruits should be centered on critical thinking and values-based decision-making rather than being centered on technical skills such as firearm operation, according to a . The report suggests that stress-based, para-military approaches to recruit training reflect low-frequency, high-risk scenarios, but do less to inform recruits about more common scenario-based exercises that they will more likely encounter in the field. The stress-based bootcamp approach conflicts with training that is more frequently requested of officers to demonstrate, such as skills in de-escalation, critical thinking, and communications.

Emphasizing soft skills with VR

To this end, the increased affordability and accessibility of virtual reality (VR) technology has helped shape scenario-based experience training for recruits and officers. VR training scenarios 鈥� such as 鈥� utilize immersive video technology and natural language processing. Much like a video game, this technology allows for as characters in training scenarios are able to respond to questions and commands in real-time, varying according to the participant鈥檚 language and behavior.

In an example of public-private partnership, Ohio University students worked with local law enforcement agencies in the development of their beginning in 2021. The program made use of affordable 360-degree cameras and VR headsets to develop training that was focused on active listening and neutral responding for Appalachian law enforcement agencies. The FBI National Academy recognized the Cine-VR training program with the Science and Innovation Award last year.

Using brain science & design to promote workplace wellness

After the COVID-19 pandemic, conversations about the physical impact of stress on first responders have become more commonplace. Alarming statistics have for some time pointed to the among first responders as well as .

To help combat this, the Police Executive Research Forum recommended bringing families of recruits into law enforcement training early in the process to help build the recruits鈥� support system and to give families a better understanding of the nature of the field.

Interestingly, there also is a growing effort to leverage environmental design to help first responders to counteract the impact that high stress has on their nervous systems. For example, worked with brain scientist Dr. Joel Robertson to integrate sensory components in the design of the . This facility houses Sheriff鈥檚 department operations and the 911 dispatch center which serves 14 counties. The quiet room incorporates chromotherapy (colored lights), soundscapes, and diffused essential oils to reduce stress levels among first responders, especially after repeated exposure to high-stress interactions.

While these environmental improvements may remind some of a spa-like atmosphere 鈥� the Marietta (Ga.) Police Department jokingly calls their 鈥� science has found that tunable lighting that can shift the color temperature of light can significantly impact an individual鈥檚 overall mood and lower stress levels. These environmental changes are one way that police administration officials hope to address that impact emergency all centers.

Taken together, all these initiatives are placing a needed focus on officers鈥� community interaction and physical and mental well-being. However, technology is also bringing other tools to the table to improve police work.

Real-time crime centers strive for more efficient policing

For example, tech-empowered real-time crime centers have become a way to improve efficiency and effectiveness in crime investigation and prevention. And while real-time crime centers are by no means new 鈥� the first one was launched by the New York Police Department after the September 11 terrorist attacks more than two decades ago 鈥� their growth and rapid adoption of emerging technology has .

Real-time crime centers allow law enforcement officers to more efficiently and effectively police their jurisdiction by capitalizing on a wide and expanding range of technology, according to the . These centers can then synthesize surveillance data across the internet and by using devices such as surveillance camera networks, body-worn cameras, residential video doorbells, audio recording devices designed to pick up explosive sounds like gunshots, as well as license plate readers and facial recognition software. The makes use of a network of 750 surveillance cameras throughout the city, as well as user-generated information such as social media posts, to solve crimes more quickly. Their department has found that lead to an increase in solvability, and the department has subsequently seen their homicide resolution rate increase in recent years.

The Springfield (Mass.) also makes use of body-worn cameras, , , , and a third-party investigative platform to enhance policing efficiency and effectiveness. The department was able to through use of the investigative platform and information gathered from social media posts, while going off of limited data points including a first name and an erroneous street name. The Springfield Police Department empowers residents to be more informed through their use of .

The future of policing is certain to make use of these advanced-tech tools and innovative work processes to further enhance officers鈥� ability to serve the public more effectively while at the same time providing ways for officers to reduce their stress and take care of their own mental health.

You can find more blog posts on here.

And while the term has been used loosely to cover all developments in the area, Gen AI does have many specific variations, including programs that fall under the Large Language Model (LLM) technology umbrella. Indeed, LLM technology is capable of understanding large amounts of data and generating human-like text responses even while learning and developing basic patterns.

ChatGPT is arguably the most famous of all the LLM technologies and already has a large number of adaptations that are used to solve problems and complete repetitive tasks. While these adaptations are seen all over the private sector, the government sector has not historically been the quickest to adopt new technology. However, there is at least some appetite among government agencies to move in in the direction of LLM programs, like ChatGPT and chatbots, with organizationally specific adaptations.

As this technology develops, it moves into a space that has little to no regulation. Developers can use their imaginations to see problems in new ways in order to provide efficient and effective resolution, and on the surface that seems very beneficial. However, it is important to keep in mind that government organizations have an obligation to balance efficiency with protecting the resources they鈥檝e been allocated and preserving individuals鈥� privacy and other rights.

As ChatGPT was progressing in the private sector and the government was considering its options, there was an important stand taken. On October 30, 2023, the Biden Administration released an . The Executive Order describes eight policy areas and directs more than 50 federal entities to engage in more than 100 specific actions to implement the guidance in those areas.

The United States鈥� Government Accountability Office (GAO) in December that found while AI can be used to make the federal government more efficient, the technology needs regulation to prevent misuse. Fully 20 of 23 agencies reported about 1,200 current and planned AI use cases, citing specific challenges or opportunities that AI may be able to solve.

The GAO study also found that government agencies are currently using AI in various areas, including agriculture, financial services, healthcare, internal management, national security, law enforcement, public services and engagement, science, telecommunications, and transportation.

Yet, it is important that in all of the excitement surrounding Gen AI, LLM adaptations, and their applications that we consider the risks and how to protect people from them. While there is an Executive Order in place, it does not completely solve the problem at hand 鈥� and while it gives some standards and requirements, it is a long way away from policing this arena fully.

鈥淭he current Executive Order is a good placeholder. It serves as a starting point for future regulation in the area of AI and Gen AI,鈥� says Ron Picard, a trained engineer and former military contractor who is now a director at , a company that develops autonomous technologies. 鈥淩egulation for AI is probably going to progress like the regulation of air travel. When the technology starts developing, you don鈥檛 know what regulations you need. As we learn what the technology can do, we wind up with an organization like the Federal Aviation Administration that can design the proper regulations, enabling the use of powerful technology while protecting the safety of individuals.鈥�

However, the type of development that Picard is referencing does not come overnight. It comes only after development, implementation, practical action, policy, and then regulation.

With more than 500 agencies in the planning phase, and more than 200 in production, it is clear that the AI initiated processes will be coming to fruition soon. As the development of Gen AI programs continues, it will be imperative to have some guidance as to how to handle this new and powerful tool.

鈥淥ver the next 12 months, there will likely be more internal policy changes than actual government regulations,鈥� Picard says. 鈥淭he technology is evolving rapidly, and we are still learning to enable the benefits and avoid the pitfalls.鈥� These policy changes should cover the initial development of the programs, he adds.

Picard鈥檚 personal prediction is that in the next 12 to 18 months LLMs will get some regulation, and he believes there needs to be some guidance around ethical and allowable uses. For instance, to what extent will software engineers for defense companies be allowed to use LLMs to write software for the products they are delivering for the U.S. Department of Defense? And what type of human interaction is required to do proper quality control on that software?

The old adage that slow and steady wins the race may not seem to fit in a rapidly moving technology-driven world. And yet, even the slow and steady have to keep up the pace. It will be important for government organizations to continue to watch the private sector, and then roll out their own policies and prepare for the regulatory action to come.

Yet, the partners who engage there often find that these areas are ripe with opportunities for more corporate investment to lift economic prosperity and community well-being. Indeed, companies are more likely to have the bandwidth and resources to convene representatives from community organizations, members of state and local government, and small-to-medium-size enterprises (SMEs) to better pool expertise and investment to create a greater return on investment than if these companies were acting alone.

At the same time, there are players operating within ex-urban settings from which we can learn, especially from those social innovation players now working in rural areas to help increase the economic welfare of rural communities.

Community capital creates thriving rural communities

Social innovation provides two primary ways of convening partners and resources to provide holistic benefits in rural areas. , Co-Founder and President of HomeStake.com, which is using finance to drive entrepreneurship and community resilience, says his goal is to connect people and ideas to use catalytic capital to transform the investment marketplace and the ways finance can work to create opportunity, build equity, and distribute power. He pools 鈥渃ommunity capital鈥� through financial vehicles from local investors or locally minded community investors in a given bioregion to invest in SMEs that earn between $1 million to $10 million in revenue and are situated for growth.

SMEs in rural communities are starved for multiple options of financial resources, in particular for growth equity capital, explains Stoddart, adding that SMEs in third-tier cities or rural areas receive less than 1% of the overall pool of venture capital.

The consolidation of state and local community banks 鈥� which historically has been the dominant way small businesses have received financing, usually through Small Business Administration loans 鈥� has shrunk the industry from 10,000 institutions to less than 1,000 institutions over the last 40 years. While such consolidation may be positive in theory, it has left a significant gap in the lack of capital that is critical for small business growth in rural areas and a critical aspect of a thriving middle class outside of major metro areas in the U.S.

Stoddart鈥檚 theses is that community economic development and community well-being are centered on this idea of providing growth capital and equity, as well as investment from financial sources that don鈥檛 seek to control the businesses or demand an exit at a certain period of time to satisfy investor needs. Instead, the capital that Stoddart鈥檚 group provides grows along with the businesses, while still providing a return to investors. It is not something that is targeted to an investor鈥檚 timeline or a fund鈥檚 timeline per se, but rather is more in-line with the organic growth of the business itself.

Using public-private partnerships for prosperous rural communities

Another way to benefit rural communities through social innovation is by bringing together local and regional players from the public and private sectors to collaborate collectively for the benefit of a particular rural community. , CEO at Next Stage Consulting, is a key player doing just this in North Carolina, and he documents his methodology and case studies in the firm鈥檚 .

Next Stage operates at the intersection of nonprofit organizations, municipalities, faith institutions, philanthropic groups, and community-based organizations to generate social impact in rural communities. It also specializes in building investments through social innovation and partnership with community-based organizations by acting as a trust broker to attract resources outside of the immediate area by within the regional geographic area across counties. These catalytic public-private partnerships enable a multiplier effect by pooling resources that can be quantified by measuring how much activity is generated for every $1 spent.

Next Stage鈥檚 typical clients are single-employer companies in a rural setting usually within the mining, energy, agriculture, and advanced manufacturing sectors. These companies are an essential foundation for economic prosperity within an ex-urban community and oftentimes have challenging environmental impacts because of the industry in which they operate.

Jacobson says he sees growing demand by mid-size companies operating in ex-urban areas that want to help build a community-based strategy that looks beyond their isolated efforts. This demand is driven by public companies鈥� efforts to extend their influence in the environmental, social & governance (ESG) space to their suppliers, which include other mid-sized companies operating in rural areas. There is no playbook, Jacobson says, noting that working in rural areas in this way 鈥渋s a new space, and we are learning as we go.鈥� Next Stage鈥檚 lessons from working in rural communities were documented in the of its recent report.

Capitalism and taxation are the two big mechanisms to making a better world, especially for people who are less well-off financially, Jacobson explains, and collaboration that leverages a local community鈥檚 resources is really the force-multiplier for driving higher returns on each $1 of public money spent.

Likewise, Stoddart says he believes a strong, viable middle class is central to a functioning democracy, and he sees the deep connection between people who are able to provide for themselves and their families and their ability to work with each other as community members as part of a that middle class. 鈥淲e’re trying to fill a gap by working with one community at a time to try to develop locally owned and driven community capital,鈥� Stoddart states.