In this part of the world, occupational fraud accounts for 95% of fraud in the government. This is perpetrated in various ways, and this paper briefly extracts the dangers of occupational fraud.
First, fraud committed against the government is enormous and rarely detected due to the lack of internal controls and anti-fraud policies.
Occupational fraud can be categorised into asset misappropriation, corruption, and financial statement fraud. The latter, financial statement fraud, is not common in the government compared to the first two.
Asset misappropriation occurs when people who are given the power to manage an organisation’s assets steal from them. I know I’m hitting home. You’re probably pointing fingers in your head. But it’s true. Many people who are given positions of trust in the government are prone to committing this kind of occupational fraud.
Corruption is another kind of occupational fraud, generally defined as dishonest and fraudulent behaviour, usually involving bribery or extortion. Bribery, which you already know, is offering money or anything of value to influence the making of a decision or the exercise of one’s discretion.
Conversely, extortion is using one’s authority to demand or obtain something of value, usually by the threat of an unfavourable outcome.
These types of occupational fraud are frequent in government offices and organisations.
The fraud triangle by Donald Cressey, which explains why people commit fraud, can be used to explain the behavioural pattern here. For emphasis, the triangle is produced visually below. It states that people commit fraud because they are under pressure from an inalienable financial need, they have the opportunity to commit the fraud, and they rationalise their actions.
Dave has also not been promoted for the past 8 years, even though he is due for promotion.
Bowing to financial pressure, Dave decides to include, for procurement, pieces of equipment that are not needed in different offices. When money is released to the vendor for the items, Dave intercepts the money from the vendor.
Dave rationalises it by saying the government owes him since he hasn’t been promoted despite his years of work.
There are a lot of people working in government organisations who are prone to the kind of fraud committed by Dave.
This is possible because the government is the least informed about incorporating anti-fraud policies or taking a fraud risk assessment. This is why the government loses millions every year without knowing it. The only reason why it seems that government organisations are oblivious to anti-fraud controls is because we are used to a culture of fraud. Everyone wants to enrich themselves, even at their employer’s expense.
The way forward is to inculcate an ethical culture. In the same way, people learn how to commit fraud; people can learn to be honest and have integrity with the right leadership in place. Anti-fraud cultures thrive only with management backing. If the administration throws its weight behind the policies, it will reward honest behaviour and punish the reverse.
This will also include periodic anti-fraud training so the employees know what to look out for or how to identify when fraud is ongoing. Though robust, the framework for an anti-fraud policy can be achieved with the right shift in mindset.
Author
Enobong Essien, CFE
Fraud Examiner and Prosecutor
enojimmy1@gmail.com
