Internal Controls in Government--Are They Good Enough To Prevent Fraud?

The extent of fraud against the Federal Government is not known. Opportunities for fraud are tremendous, considering the number of Federal programs, the inadequate contols in place, and the size of the annual budget. As important as detection of fraud and abuse may be, detection should not be the primary concern of managers. Management efforts should be devoted to constructing systems of internal control that will prevent fraud and abuse and decrease the likelihood of error and waste. The benefits of prevention include reduced expenditures and a reduction of the toll in human suffering that occurs when fraud and abuse are discovered. Opportunities to commit fraud and abuse are present when internal controls that should eliminate them have fallen into disuse or have not been established. Departmental and agency written procedures usually provide for adequate controls, but managers frequently do not require employees to follow those controls, so the result is the same as if no controls existed. Recently, the Federal Government has taken several steps to improve internal controls. These include the establishment of Offices of Inspector General in 14 major departments and agencies; the President's requirement that departments and agencies assess their vulnerablilty to fraud, waste, and error; and the GAO-wide study of the causes of fraud and abuse. While many positive steps have been taken and are planned for improving internal controls in the Federal Government, much remains to be done. Present internal controls still cannot prevent or really minimize the opportunity for fraud and abuse. The temptation to employees to violate the system must be removed. Top management must instill in its employees an awareness of the need to adhere to good internal control procedures, maintain high ethical standards as an example to employees, and take the lead in ensuring that its auditors concentrate on internal controls.