What is Government Fraud?
Funds
of the Federal government are considered to be a restricted resource. This money is limited to the benefit of
special areas such as homeland security, national defense, natural disaster
relief and various social issues. Over
the last few years, federal contracts were a significant part of the country's
discretionary budget. Between the years
of 2000 and 2005, procurement spending increased 86%, nearly double that of the
discretionary spending which increased by 43%.
According
to the United States DOJ (Department of Justice), reported statistics for the
fiscal year which ended on September 30, 2005 declared that the U.S. redeemed
well over 1.4 billion dollars in the way of judgements and settlements
involving allegations of fraud. This
number increased to nearly 3.1 billion dollars for the fiscal year ending on
September 30, 2006.
Government
related fraud such as illicit procurement spending, not only takes money from
the country, but also threatens our safety and national defense, cheats hard
working taxpayers, and reduces consumer ability to obtain important goods and
services. What has proceeded this
disturbing fallout is much discussion about the various types of government
fraud and what is currently being done to detect and prevent it.
Contract
Fraud
One
of the most common types of fraud involves the misuse of government issued
contracts. The probability is strong in
areas such as defective pricing, cost mis-charging schemes, antitrust
violations and process payment scams.
The
practice of defective pricing consists of knowingly using inaccurate or
outdated cost data to inflate prices. As
declared by the Truth in Negotiations Act, contractors are required to submit
cost data before negotiations begin.
They must also certify that this data is correct, complete and
current. When a contractor is found
submitting defective cost data, the government is then entitled to a price
reduction under the contract clause.
This makes the contractor responsible for the overpayment as well as
interest calculated from the date of the over overpayment up to the date the
government is reimbursed.
Telltale signs of Government Fraud
Fraudulent
signs in defective pricing include the following:
• the submission or alteration of cost
data
• the failure to update pricing data
when prior activity indicates a price deflation
• failure to disclose any data known to
assigned contractor personnel
• alteration
of baseline data or overhead accounts by transferring accounts or charges that have a direct impact on government issued
contracts
• a
protracted delay in the release of information to the government to preclude
probable cost reductions
• submitting
any fraudulent documentation
• the
failure to disclose any relative vendor discounts or internal documents
• the
failure to disclose the actual costs associated with follow-up contracts
The increased spending on government contracts has greatly
magnified the threat of procurement fraud and many other schemes. Due to the large amount of funds being
misused, taxpayers are well deserving of a solution that puts a stop to this
issue, one the government has responded to. The attention given to methods able
to detect and prevent government fraud is rather justifiable considering that
money spent on federal contracts has drastically increased over the years. The successful recovery in judgements and
settlements from cases involving fraud has provided incentive for the U.S.
government and civilians as well.
