As federal enforcement priorities continue to evolve, the U.S. Department of Justice (DOJ) made clear that diversity, equity, and inclusion (DEI) programs will be subject to heightened scrutiny where they intersect with federal funding and civil rights compliance. In 2025, the DOJ formally announced the creation of a Civil Rights Fraud Initiative, signaling a renewed focus on the use of the False Claims Act (FCA) as a primary enforcement tool against entities that certify compliance with civil rights laws while engaging in discriminatory practices with DEI under special focus for discriminatory practices. The DOJ also released guidance regarding the use of DEI programs.
At the core of this initiative is the DOJ’s position that recipients of federal funds—including government contractors, healthcare providers, universities, and other institutions—may face FCA liability if they knowingly violate civil rights statutes and falsely certify compliance as a condition of payment. The DOJ has emphasized that the FCA, with its treble damages and statutory penalties, remains one of the government’s most powerful mechanisms to address fraud, waste, and abuse involving federal dollars.
DEI Programs as a False Claims Act Risk
The DOJ is clearly focusing on DEI programs. If the company uses such DEI programs and initiatives, then it may create FCA exposure where they assign benefits or burdens based on protected characteristics such as race, ethnicity, or national origin. For example, articulated in the DOJ’s Guidance Memorandum is the DOJ’s view that facially neutral criteria with such terms as “cultural competence,” or “lived experience,” are not facially neutral under the DOJ enforcement lens.
Recent Supreme Court precedent has further reinforced this view by underscoring that eliminating racial discrimination requires eliminating all forms of it, including policies framed as preferences or mandates under DEI initiatives. As a result, organizations that rely on federal funding are increasingly expected to ensure that DEI-related programs align with race-neutral compliance requirements.
Increased Emphasis on Qui Tam Enforcement
Looking ahead to 2026, one of the most consequential aspects of the DOJ’s initiative is its explicit encouragement of private whistleblowers to bring qui tam actions. The DOJ has acknowledged that it cannot identify every instance of civil rights fraud on its own and has pointed to the FCA’s qui tam provisions as a means of expanding enforcement efforts.
This emphasis significantly raises the stakes for organizations receiving federal funds. Qui tam actions often originate from current or former employees, contractors, or competitors who allege that internal policies or practices conflict with civil rights obligations that are conditions of federal payment. Even where enforcement ultimately results in no liability, the costs of investigation, document production, and reputational harm can be substantial.
Practical Considerations for Federal Fund Recipients
Organizations that receive federal funds should view this initiative as an opportunity to reassess how DEI programs are structured, documented, and implemented. Key considerations include whether policies are race-neutral in operation, whether compliance certifications accurately reflect actual practices, and whether internal reporting mechanisms allow concerns to be addressed before they escalate into whistleblower actions. This includes hiring practices. The DOJ’s Guidance highlights that preferential hiring or promotion practices from “underrepresented groups” will be under more scrutiny.
For government contractors, WOSBs (women-owned small businesses), ANCs (Alaska Native Contractors), and VOSBs (veteran-owned Small Businesses), will also be under more exacting scrutiny. The Guidance specifically identifies sex-based selection for contracts as one example of unlawful DEI practices:[1]
A federally funded state agency implements a DEI policy that prioritizes awarding contracts to women-owned businesses, automatically advancing female vendors or minority-owned businesses over equally or more qualified businesses without preferred group status. This includes any contract selection process that uses sex or race as a tiebreaker or primary criterion . . .
As DOJ enforcement priorities sharpen in 2026, proactive review of civil rights compliance—particularly where DEI initiatives intersect with federal funding—may help mitigate the risk of costly FCA investigations and qui tam lawsuits.
If you have questions or concerns about civil rights compliance, False Claims Act exposure, or qui tam risk, please contact Allison Riddle at 703-525-4000 or ariddle@beankinney.com. Our firm practices in Virginia and the District of Columbia in addition to various other jurisdictions.
This article is for informational purposes only and does not contain or convey legal advice. Consult an attorney. Any views or opinions expressed herein are those of the author and are not necessarily the views of the firm or any client of the firm.
[1] An article addressing the future of the SBA 8(a) program regarding the status of a social disadvantage narrative was also analyzed by our firm: https://www.beankinney.com/the-sbas-8a-program-interim-guidance-future-directions-and-the-promise-of-economic-growth/