Clear the cloud around contractor fraud

loans can also be vulnerable to many types of fraud, Larimore said. Each year, the federal government has been awarding about $450B in grants just for infrastructure programs and scientific research — but, since the COVID-19 pandemic, that figure has ballooned to more than $600B. Cases of embezzlement, theft, bribery, false claims and wire fraud have been tied to government grants.

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Often, there’s a lot of flexibility in implementing the grants, so that can prompt questions about where to draw the line, Larimore said. “We’re working with an agency now to perform a proactive transaction review and help them identify and correct issues of non-compliance created by confusion due to fiscal flexibilities and changing program rules. Ultimately, these types of proactive reviews can help agencies gain valuable insight into areas of confusion and frustration that grantees are experiencing.”

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Fraud’s harrowing impact

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Fraud can have major consequences on participants, and its impact can result in more than just financial losses.

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In one case known as the Fat Leonard scandal, a Malaysian businessman was charged with bribing U.S. Navy officials with more than $500,000 cash, as well as prostitutes and expensive cars and meals, to get classified information about the movements of Navy vessels so that the man’s company would have its goods and services at the forefront when the ships arrived. More than 30 people were charged in the scheme, including more than a dozen Navy officers.

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“Senior officials were accepting these bribes, which allowed the more junior officers to say, ‘Well, gosh, I didn’t think this was okay — but look, he’s doing it, so I guess it is okay,’” Miller said.

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“Some of the very characteristics that make a former civil servant attractive to the private sector could be cause for ethical concern.”

Linda Miller

Grant Thornton Head of Risk Advisory Services

“In many cases, there’s a very good reason to hire a former government employee,” Miller said. The employee may have significant subject matter expertise or knowledge of how the agency operates. “But some of the very characteristics that make a former civil servant attractive to the private sector could be cause for ethical concern,” she said.

The mere appearance of a conflict of interest is “probably one of the grayest areas that can exist,” said Taylor Larimore, senior director of public sector advisory services at Grant Thornton. “It is not enough that there is necessarily actual fraud, but if there is just the perception that bias has influenced the procurement process, it can have significant implications,” he said. “There has to be an arm’s length transaction when you work with government – or really, in any business transaction.”

Corruption and Confusion

Corruption is the most common type of fraud, Larimore said. Corruption occurs when an employee uses corporate influence to gain direct or indirect advantage. “He is responsible for about half of all fraud schemes,” he said. Some industries particularly prone to corruption are nonprofits and the healthcare sector, according to the Association of Certified Fraud Examiners (ACFE).

Federal grants and loans can also be vulnerable to many types of fraud, Larimore said. Each year, the federal government awards about $450 billion in grants just for infrastructure programs and scientific research — but, since the COVID-19 pandemic, that figure has soared to more than $600 billion. Cases of embezzlement, theft, corruption, misrepresentation and electronic fraud have been linked to government grants.

Often there is a lot of flexibility in implementing grants, which can raise questions about where to draw the line, Larimore said. “We are currently working with an agency to proactively review transactions and help them identify and correct non-compliance issues created by confusion due to tax flexibilities and changing program rules. Ultimately, these types of proactive reviews can help agencies gain valuable insight into areas of confusion and frustration that recipients are experiencing. »

The heartbreaking impact of fraud

Fraud can have major consequences for participants, and its impact can result in more than just financial loss.

In a case known as the Fat Leonard scandal, a Malaysian businessman was accused of bribing US Navy officials with more than $500,000 in cash, as well as prostitutes and cars and meals costly, to obtain classified information on the movements of navy ships so that the company’s man would have their goods and services front and center when the ships arrived. More than 30 people have been charged in connection with the scheme, including more than a dozen naval officers.

“Senior officials would accept these bribes, which allowed junior officers to say, ‘Well, gosh, I didn’t think that was right – but look, he does, so I guess that going,'” Miller said.

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