Fraud can impact any type of organization and cause severe damage. Governments in particular are prime targets for fraud. Knowing what to look for and ways to prevent fraud before it happens are essential to the well-being of any governmental agency, regardless of size.
Why are governments so vulnerable to fraud?
Governments can be highly susceptible to fraud for many reasons:
These types of situations allow fraud to occur within governments. This fraud can come in the form of unauthorized payroll payments or expense payments, shortage of cash, false vendors, ghost employees, kickbacks, bid rigging, bribery and extortion, to name a few common schemes. With the longevity of employees, these schemes can take years before they are discovered.
Did you know?
The average fraud scheme lasts 16 months.
The Role of the Council, Audit Committee and Board
If you find yourself on a council, audit committee or government board, it’s important to understand your roles and responsibilities. These positions typically include a duty of care regarding oversight for the government’s operations as well as an understanding of fraud risk and the task of establishing committees for managing fraud risk.
These duties become even more all-encompassing if you find yourself on the audit committee. Responsibilities can include such roles as overseeing audit functions, monitoring internal controls, code of conduct compliance, investigating/initiating the investigation of allegations of fraud and monitoring adequacy of insurance protection.
Sharing your time and talents isn’t all recognition and roses. There’s also a level of personal liability. Ignorance to fraud risks without action can include removal from the position and damage to a reputation. In some circumstances, there may be civil damages for negligence.
Fraud Prevention Tips for Your Government
While you can’t eliminate fraud in your government entity entirely, there are steps you can take to prevent it before it starts or at least catch it early on.
The Importance of Understanding Fraud’s Impact
Government organizations have several factors, which make them more highly susceptible to fraud. By understanding major risk areas and developing preventative policies and procedures early on, you can work to reduce the fraud risk to your organization.
The key way to prevent fraud from occurring is to begin with the right tone at the top, followed by prevention mechanisms that allow for segregation of duties, regular review of processes and swift, documented action if misconduct occurs.
What do you do if fraud does occur?