The world of fraud is complex and expansive—so much so that doctoral dissertations could be written on the subject. To truly understand fraud, we must examine these four key angles:
The Association of Certified Fraud Examiners (ACFE) recently reported that nearly a third of all fraud cases occur because of a lack of internal controls. When your government has anti-fraud controls in place, you not only increase your ability to detect fraud quicker, but also decrease potential losses resulting from fraud.
The disruptions caused by the COVID-19 pandemic resulted in increased dependence on technology and electronic payment networks. This shift has created new opportunities for bad actors to steal public resources and assets from your government. By using various cyber fraud schemes, such as fake email addresses or compromised email accounts, bad actors are successfully tricking governments into rerouting electronic disbursements to their own accounts. And the fraudsters are raking in a hefty profit.
Elected officials and members of appointed boards have a responsibility to understand their government's operations. They also have a key role to play when it comes to preventing, detecting and responding to employee fraud. Employee fraud often comes as a shock to those charged with oversight of a government, but the reality is that any organization—from a large city government to a small special purpose district—is vulnerable to fraud.
The COVID-19 pandemic required governments and other organizations to adjust their operating structure to a remote environment. For many, this structure became the new norm, and governments continue to operate remotely or in hybrid formats. These structures have significant benefits for employees because they offer flexibility, eliminate commute times and more. However, remote or hybrid environments can also have setbacks because they can amplify distractions that affect productivity, or worse—employees could be committing time theft by not working the time they say they are.
Every year, the Special Investigations Team at the Office of the Washington State Auditor investigates frauds in all types of governments, from large state agencies to small towns and special purpose districts. In 2021, our Office examined 46 reported fraud cases, representing more than $647 million in misappropriated public resources. No matter the type or size of your government, fraud could happen to you and, if left undetected, it could have significant financial implications.
FOR IMMEDIATE RELEASE
Sept. 20, 2022
OLYMPIA – Today the Office of the Washington State Auditor released a fraud report and audit of Mason County Fire District No. 12, showing almost $70,000 in misappropriated public funds, as well as $95,000 in unsupported expenses.
Auditors also documented an overall disregard for state laws at the District in areas including ethics and conflicts of interest, open public meetings and financial transparency.
When your government becomes aware of a known or suspected loss of public funds, state law requires that you immediately report it to the State Auditor's Office. The most effective way to report is through the “How to Report a Concern” page on SAO's website.
Do you remember the Nigerian prince scheme—that long-running internet fraud where the bad actor drains your bank account after obtaining your information? Fraudsters made $703,000 in 2018 alone on that one. While some fraudsters are still working that old scam, others have moved on to impersonating your employees and vendors to redirect Automated Clearing House (ACH) payments meant for payroll direct deposits or vendor payments. In fact, Washington governments reported $4.7 million lost to these schemes in 2020 and 2021.
Wire transfers move money from one bank account to another. They are a fast way to send money and, if a fraudster intervenes, a fast way to lose it. Wire transfer fraud has dramatically increased in recent years, and more local governments are becoming victims of these scams.