Assessing Internal Controls to Detect Risk of Fraud and Minimize Asset Thefts Regarding conducting examination activities, the office of Federal, State and Local Governments (FSLG) and the Advisory Committee on Tax Exempt and Government Entities (ACT) are considering how to better address issues of fraud that may occur within state and local governments. Governments are susceptible to fraud committed by employees, contractors, and benefit recipients. Fraud involves any intentional or deliberate act to deprive another of property or money by guile, deception, or other unfair means. For example, employees can also skim receipts when collecting fees from the public. In addition, governments may be defrauded by citizens falsely claiming eligibility for certain benefits.
work collaboratively with these entities on fraud issues, and ultimately improve tax administration.
FSLG is currently assessing its strategy for addressing fraud as an examination issue with state and local governments. Since 2012, new guidance to field employees has been provided both through a “Fraud Job Aid” and additions to the Internal Revenue Manual. We plan to continue to seek ways to address this issue, so that we can leverage the internal controls of these entities to better identify fraud,
Key findings included the following: j The typical organization loses an estimated five percent of its revenues to fraud each year. The median loss caused by the occupational fraud cases was $140,000. More than one-fifth of these cases caused losses of a least $1 million.
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There is considerable evidence that this is a significant problem for government entities. Every two years, the Association of Certified Fraud Examiners publishes a report to the nations. The latest such report is the “Report to the Nations on Occupational Fraud and Abuse 2012 Global Fraud Study,” available at www.acfe.com. Occupational fraud is defined as the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.
SOUTH DAKOTA MUNICIPALITIES
