Fraud in Government Programs:

How Extensive Is It and How Can It Be Controlled (Volume I)

AFMD-81-57: Published: May 7, 1981. Publicly Released: May 7, 1981.

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GAO made a statistical analysis of over 77,000 cases of fraud and other illegal activities reported in 21 federal agencies during the period of October 1, 1976, through March 31, 1979.

The loss to the government on the 77,000 cases would total between $150 and $220 million. This loss is only what is attributable to known fraud. It does not include the cost of undetected fraud which is probably much higher, because weak internal controls allow fraud to flourish. It also does not include cases involving federal funds where state and local jurisdictions had primary investigatory responsibility. Losses due to fraud and related illegal activities are seldom recovered. Fraud erodes public confidence in the government, undermines program effectiveness, and in some cases, affects public health and safety. Government employees committed about 29 percent of the frauds included in the GAO study. Federal employees also detected the majority of the reported frauds. Four areas were especially prone to fraud: financial assistance to individuals, inventory control and property management, mail service, and personal property management. For a variety of reasons, the Justice Department declined to prosecute 61 percent of almost 13,000 cases referred by federal agencies. Although Justice got a conviction or guilty plea in the majority of cases it did prosecute, the courts often suspended large portions of the sentences or granted probation. Agencies did not always take administrative action against individuals who committed fraud, or took action which was ineffective. Since 1978, progress has been made in combating fraud by the establishment of offices of inspectors general and Justice Department reorganizations.

Matters for Congressional Consideration

  1. Status:

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should consider the merits of enacting legislation to allow agencies to assess civil monetary penalties against persons who defraud federal programs. The authority to assess such a penalty should be effective when the Department of Justice declines to take criminal or civil action on the case.

  2. Status:

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should enact the Federal Managers' Accountability Act of 1981.

Recommendation for Executive Action

  1. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Department of Justice should expedite completion of its draft legislation to give agencies the authority to levy civil monetary penalties and should submit the legislation to Congress for its consideration.

    Agency Affected: Department of Justice


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