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Fraud costs US millions, reports GAO

By Staff correspondent of The Christian Science Monitor / May 11, 1981



Washington

In a sobering report that is sure to provide ammunition for the Reagan administration's war on waste, the General Accounting Office (GAO) says "fraud against government is widespread."

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Having studied 77,000 cases totaling up to $220 million over a three-year period, the congressional watchdog agency concluded: "The sad truth is that crime against the government often does pay."

At the same time, the GAO report, released May 7, is not totally despairing of the situation. It notes some recent progress in fighting fraud and abuse in the federal government and offers several important suggestions as to how the situation can be improved.

These include tightening internal agency controls, making agency heads personally responsible for the effectiveness of such controls, and giving federal departments the power to assess monetary penalties in cases where the Justice Department does not take civil action against those who defraud the government.

In studying 21 agencies, the GAO found that about 29 percent of the cases of government fraud involved federal employees. Corporations and businesses accounted for 12 percent, 18 percent involved recipients of federal assistance, 8 percent private individuals, and those responsible for 30 percent could not be identified.

Theft, false statements, food-stamp irregularities, and destruction of government property accounted for more than 90 percent of the cases examined by the GAO.

The report points out that, apparently, less than one-half of 1 percent of federal employees defraud the government. It also notes that while large sums are involved, the cost is not just monetary. "It also undermines the integrity of federal programs and makes people lose confidence in public institutions," the report states.

In recent years, Congress has established inspector general offices in 15 federal agencies. These independent watchdogs were set up to detect and prevent fraud and abuse. President Carter two years ago named an "Executive Group to Combat Fraud and Waste in Government" so that the inspectors general could work more closely with the Justice Department, which itself has intensified its efforts to combat "white-collar crime" in the federal government.

While lauding these developments, the GAO says "much more needs to be done."

"Much fraud is detected by chance," the new report states. "Given the poor state of controls in many programs, it is probable that most fraud remains undetected. For those who are caught committing fraud, the chances of being prosecuted and eventually going to jail are slim."

To help correct the situation, the GAO recommends passage of the "Federal Managers' Accountability Act of 1981," legislation now pending on Capitol Hill. The bill would require agency heads to periodically review their internal controls to halt fraud and report the results to Congress and the President.

The GAO also endorses legislation being drafted by the Justice Department that would allow agencies to levy fines in cases of fraud involving sums less than $50,000. These matters will be taken up in congression al hearings scheduled for later this month.