How fraud, waste, and abuse management can drive mission success

Fraud, waste, and abuse are headline-grabbing topics in any industry—whether you’re talking about the public or the private sector. In their 2021 audit report, the Government Accountability Office reported that the government lost more than $662 billion to improper payments and tax fraud.

Sometimes, fraud, waste, and abuse can take the form of relatively minor infractions. Other times, they can be multi-million dollar scams that are exposed after months, or sometimes years, of careful investigation. Regardless, having a strategy in place to monitor for fraud, waste, and abuse is critical if organizations want to manage risks that can interfere with mission effectiveness.

From the government to the commercial sector, we’re examining the already existing strategies that agencies can put in place to counter these mission-critical risks, as well as the ones that agencies might not be thinking about. But first, it’s important to understand the many different forms that fraud, waste, and abuse can take.

How do fraud, waste, and abuse work?

The Office of Inspector General defines fraud as “wrongful or criminal deception intended to result in financial or personal gain.” This can include false representation of fact, making false statements, or concealing information. Waste, on the other hand, is the “thoughtless or careless expenditure, mismanagement, or misuse of resources.” This includes incurring unnecessary costs that result from inefficient or ineffective practices, systems, or controls. Finally, abuse (whether financial or non-financial) is the “excessive, improper, or illegal use of a thing. “

All of these infractions have a tangible impact on the government and taxpayers’ dollars, but there is an intangible cost as well. Agencies that experience fraud, waste, and abuse scandals often suffer reputational damage and a loss of credibility—making it difficult for the public to trust their services moving forward.

It’s also important to recognize the leading causes of fraud, waste, and abuse. These can range from something as fundamental as human greed to more complex issues like administrative shortcomings or operational inefficiencies. Particularly when it comes to waste, it’s important for federal agencies to streamline their resource management, clearly define roles and responsibilities, and accurately document operations wherever possible.

As more and more agencies achieve their digital transformation goals, some of these issues will naturally resolve themselves. This is largely due to strong data collection, robust analytics, and widespread data sharing to consolidate federal resources. However, agencies also have a number of more targeted fraud, waste, and abuse management strategies at their disposal.

Taking inspiration from the private sector

The private sector can be a great source of inspiration when it comes to looking for new ways to manage fraud, waste, and abuse. When you examine the most ethical commercial companies, they’re often judged on factors such as risk management, oversight, detection and auditing assessments, enforcement, and more. Many of these organizations have well-documented procedures for ensuring proper conduct, and accountability and transparency play a huge role in that process.

Federal agencies have begun to take note. Take nudge thinking, for example. Nudge thinking is a behavioral theory that involves manipulating choice environments to encourage people to make a particular decision. Initially made popular in the commercial sector in 2008, the US government has increasingly adopted nudge thinking to encourage people to make better decisions in areas like personal health and financial well-being. But what if those same strategies could be applied to fraud, waste, and abuse management?

In New Mexico, the state’s Department of Workforce Solutions combined nudge thinking principles with machine learning to encourage unemployment insurance claimants to more accurately disclose their earnings and other personal information. The result was a nearly 75% reduction in insurance overpayments and an annual savings of almost $7 million.

Leading with accountability and transparency

Sometimes, the problem can be more complex than an easily-addressed case of incentivizing desired behavioral changes. This begs the question: how should federal agencies respond when accused of more serious fraud, waste, or abuse allegations? One solution is to bring that management in-house. This can be particularly helpful if the agency already has the internal resources needed to address concerns and doing so would be more cost-effective than outsourcing the work. However, it’s not as effective when agencies are looking to rehabilitate their image.

Working with a third party, on the other hand, is effective when agencies need to mitigate potential conflicts of interest and become more accountable in the public eye. The right partner should have a comprehensive plan supported by robust analytics and fraud detection technology. They should also have a proven track record of success in identifying and mitigating fraud, waste, and abuse. Additionally, agencies should look for partners with the ability to provide comprehensive training and education on fraud, waste, and abuse prevention measures moving forward.

Fraud, waste, and abuse are serious concerns in the federal sector, but recent advances in technology have given us a number of tools to more accurately monitor ongoing activities and identify opportunities for new efficiencies. Contact MDC today to learn how we can help you evaluate your current processes and make improvements going forward.