Fraud in the Government

Government and Public Administration is the second most represented sector victimized by fraud.[1]  Corruption, billing and expense reimbursement schemes are the most common types of fraud in this sector.  Billing and expense reimbursement schemes are similar, where the perpetrators of these frauds produce false documents that cause the victim organization to make a fraudulent disbursement.  What are these fraud schemes and what can be done by the Government and Public Administration sector to help prevent them?

Billing schemes generate fraudulent cash by an employee either creating false vouchers and invoicing via a shell company or submitting false invoices to an employer via a non-accomplice vendor.  Billing schemes also include purchasing schemes where an employee makes personal purchases with organization funds, including credit cards and p-cards.

Expense reimbursement schemes produce false expense reports to generate fraudulent cash.  The major difference between these frauds and billing schemes is that an expense reimbursement fraud involves disbursements directly to employees rather than to an external party used by an employee as the source of cash.

There are various internal controls that the Government and Public Administration sector can establish to help prevent these types of fraud.  Internal controls should focus on potential areas of weaknesses and could include:

  • Documented policies and procedures for procurement and spending, such as bids and quotes, purchase orders, invoicing and payments.
  • Separation of duties between authorization, purchasing, receiving, shipping and accounting, if possible.
  • Periodic review of the master vendor list, vendor purchases and credit card statements for irregularities.
  • Budgeting and detailed review of actual spending.
  • Expense reports submitted with detailed supporting information, including receipts, explanation of expense, time period, place and amount.  Detailed reports must not only be submitted, but they also need to be independently reviewed.

Contact us if you have concerns that fraud is occurring or has occurred at your governmental entity and visit our Business Advisory webpage to learn more about other services that the Schneider Downs Business Advisors offer.

[1] According to the 2016 Report to the Nations on Occupational Fraud and Abuse, published by the Association of Certified Fraud Examiners (ACFE)

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2022 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Shared Assessment SIG Questionnaire – What’s New for 2023?
FTX Filed for Chapter 11 Bankruptcy
International Fraud Awareness Week 2022
Perceived Opportunity: The Insider Threat
Fraud at Wells Fargo: The Pressure to Perform
The Rationalization Leg of The Fraud Triangle
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.