What is Fraud, Waste, and Abuse?
A variety of situations may be considered fraud, waste, or abuse in State government operations. The following are definitions and common examples:
A dishonest and deliberate course of action that results in obtaining money, property, or an advantage to which a State employee or an official committing the action would not normally be entitled. Fraud is also intentional misleading or deceitful conduct that deprives the State of its resources or rights. A mere mistake or error generally will not constitute fraud unless made with negligent disregard for the truth.
There are three categories of fraud: financial statement fraud, misappropriation of assets, and corruption.
- Falsifying financial records to cover up theft.
- Theft or misuse of State money, equipment, supplies, or other materials.
- Intentionally misrepresenting the costs of goods or services provided.
- Falsifying payroll information.
- Use of State equipment or property for personal gain.
- Submitting false claims for reimbursements.
- Soliciting or accepting a bribe or kickback.
- Intentional use of false weights or measures.
The needless, careless, or extravagant expenditure of State funds, incurring of unnecessary expenses, or mismanagement of State resources or property. Waste does not necessarily involve private use or personal gain but likely signifies poor management decisions, practices, or controls.
- Purchase of unneeded supplies or equipment.
- Purchase of goods at inflated prices.
- Failure to reuse or recycle major resources or reduce waste generation.
The intentional, wrongful, or improper use or destruction of State resources or seriously improper practice that does not involve prosecutable fraud. Abuse can include the excessive or improper use of an employee’s or official’s position in a manner other than its rightful or legal use.
- Failure to report damage to State equipment or property.
- Using one’s position in one State department to gain an advantage over another State resident when conducting personal business in another State department.
- Serious abuse of State time, such as significant unauthorized time away from work or significant use of State time for personal business.
- Abusing the system of travel reimbursement.
- Receiving favors for awarding contracts to certain vendors.
Financial Statement Fraud
Intentional misstatements, omissions, or disclosures in financial statements designed to deceive financial statement users. Fraudulent financial reporting often involves management override of controls that otherwise may appear to be operating effectively. Common examples include overstating revenues and understating liabilities or expenses.
- Manipulation, falsification, or alteration of accounting records or supporting documents from which financial statements are prepared.
- Misrepresentation in or an intentional omission from the financial statements of events, transactions, or other significant information.
- Intentional misapplication of accounting principles relating to amounts, classification, manner of presentation, or disclosure.
Misappropriation of Assets
The theft of an entity’s assets that causes the financial statements not to be presented in conformity with generally accepted accounting principles. Misappropriation of assets can involve false or misleading records or documents, possibly created by circumventing controls that may accompany misappropriation of assets.
- Embezzling funds.
- Stealing assets.
- Causing an entity to pay for goods and services that have not been received.
- Skimming revenues.
- Committing payroll fraud.
Employees or officials wrongfully using their influence in a business transaction to procure some benefit for themselves or another person, contrary to their duty to their employer or the rights of another.
- Accepting kickbacks.
- Engaging in conflicts of interest.
- Bid rigging.
- Economic extortion.
- Illegal gratuities.