Definitions of Fraud, Waste & Abuse

Acts of fraud, waste, and abuse impact the resources of state government and its agencies. Such acts may occur through an unintentional act or by a deliberate action. Regardless of the intent, fraud, waste, and abuse should not be tolerated.

Fraud
A dishonest and deliberate course of action that results in the obtaining of money, property, or an advantage to which state employees or an official committing the action would not normally be entitled. Intentional misleading or deceitful conduct that deprives the state of its resources or rights. There are three categories of fraud: financial statement fraud, misappropriation of assets, and corruption.

Examples:

Falsifying financial records to cover up theft

Theft or misuse of state money, equipment, supplies, and/or other materials

Intentionally misrepresenting the costs of goods or services provided

Falsifying payroll information

Use of state equipment or property for personal gain

Submitting false claims for reimbursements

Soliciting or accepting a bribe or kickback

Intentional use of false weights or measures

Waste
The needless, careless, or extravagant expenditure of state funds, incurring of unnecessary expenses, or mismanagement of state resources or property. Waste does not necessarily involve private use or personal gain, but almost always signifies poor management decisions, practices, or controls.

Examples:

Purchase of unneeded supplies or equipment

Purchase of goods at inflated prices

Failure to reuse or recycle major resources or reduce waste generation

Abuse
The intentional, wrongful, or improper use or destruction of state resources, or seriously improper practice that does not involve prosecutable fraud. Abuse can include the excessive or improper use of an employee's or official's position in a manner other than its rightful or legal use.

Examples:

Failure to report damage to state equipment or property

Using one's position in one state department to gain an advantage over another state resident when conducting personal business in another state department

Serious abuse of state time such as significant unauthorized time away from work or significant use of state time for personal business

Abusing the system of travel reimbursement

Receiving favors for awarding contracts to certain vendors

Financial Statement Fraud
Intentional misstatements, omissions, or disclosures in financial statements designed to deceive financial statement users. Fraudulent financial reporting often involves management override of controls that otherwise may appear to be operating effectively. Common examples include overstating revenues and understating liabilities or expenses.

Examples:

Manipulation, falsification, or alteration of accounting records or supporting documents from which financial statements are prepared

Misrepresentation in or an intentional omission from the financial statements of events, transactions, or other significant information

Intentional misapplication of accounting principles relating to amounts, classification, manner of presentation, or disclosure

Misappropriation of Assets
The theft of an entity's assets that causes the financial statements not to be presented in conformity with GAAP. False or misleading records or documents, possibly created by circumventing controls, that may accompany misappropriation of assets.

Examples:

Embezzling funds

Stealing assets

Causing an entity to pay for goods and services that have not been received

Skimming revenues

Payroll fraud

Corruption
Employees or officials wrongfully using their influence in a business transaction in order to procure some benefit for themselves or another person, contrary to their duty to their employer or the rights of another.

Examples:

Accepting kickbacks

Engaging in conflicts of interest

Bid rigging

Economic extortion

Illegal gratuities