Fraud, Waste, and Abuse

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Defense&budgets&and&procurement&activity&have&risen&dramatically&over&the&years,& increasing&from&$304&billion&in&fiscal&year&2000&to&almost&$700&billion&in&fiscal&year& 2008.&& Why&Do&People&Commit&Fraud?&In&the&1950’s,&famed&criminologist&Donald&R.&Cressey& develK&opted&a&hypothesis&to&explain&why&people&commit&fraud.&Over&the&years,&his& hypothesis&has&become&known&as&the&fraud&triangle.&The&triangle&is&usually&pictured& with&three&common&fraud&elements:&opportunity,&motivation,&and&rationalization.& The&opportunity&to&commit&fraud&occurs&when&employees&have&access&to& organizational&assets&or&information&that&allows&them&to&commit&and&conceal& fraudulent&activity.&In&general,&the&opportunities&to&commit&fraud&increase&when&an& organization&has&a&poorly&designed&system&of&internal&controls,&or&there&are&persons& in&positions&of&authority&who&are&able&to&override&existing&controls.& ! Motivation&is&also&referred&to&as&incentive&or&pressure.&People&are&motivated& to&commit&fraud&for&a&variety&of&reasons,&and&the&quest&for&power&is&often&a&common& motivator.&Pressure&to&commit&fraud&can&be&caused&by&either&internal&physical& stresses&or&stresses&from&outside&parties&such&as&collection&agencies.&Rationalization& occurs&when&the&fraudsters&convince&themselves&that&their&behavior&is&okay&for&a& variety&of&reasons.&Common&rationalizations&a&person&may&have&include:&“I&am&just& borrowing&the&money&and&will&pay&it&back&when&my&situation&changes”;&“The& organization&does¬&reK&ally&need&all&the&money&it&makes”;&or&“The&organization&has& not&treated&me&well,&and&I&am&going&to&get&back&at&them.”& & It&is&important&that&contracting&professionals&understand&DoD’s&definition&of& fraud.&DoD&Instruction&5505.2,&“Criminal&Investigations&of&Fraud&Offenses,”&Feb.&6,& 2008,&defines&fraud&as&follows:&Any&intentional&deception&designed&to&deprive&the& United&States&of&something&of&value&or&secure&from&the&United&States&a&benefit,&...
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