Auditor Fraud Resources

Fraud, Waste, and Abuse Defined

Photo man holding a dollar signFraud – has been defined in various ways.  Generally Accepted Government Auditing Standards describes fraud as:

A type of illegal act involving the obtaining of something of value through willful misrepresentation.  Whether an act is, in fact, fraud is a determination to be made through the judicial or other adjudicative system and is beyond the auditor’s professional responsibility. 

Paraphrasing Black’s Law Dictionary, fraud is described as:

A false representation of a material fact, whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives another so that he/she acts, or fails, to act to his/her detriment.

Waste – involves the taxpayers not receiving reasonable value for money in connection with any government funded activities due to an inappropriate act or omission by actors with control over or access to government resources (e.g. executive, judicial, or legislative branch employees, grantees, or other recipients).  Importantly, waste goes beyond fraud and abuse and most waste does not involve a violation of law.  Rather, waste relates primarily to mismanagement, inappropriate actions, and inadequate oversight.

Abuse – involves behavior that is deficient or improper when compared with behavior that a prudent person would consider reasonable and necessary business practice given the facts and circumstances.  Abuse also includes misuse of authority or position for personal financial interests or those of an immediate or close family member or business associate.  Abuse does not necessarily involve fraud, violation of laws, regulations, or provisions of a contract or grant agreement. 

Illegal Acts – are violations of laws or government regulations.  For example, applicable laws and regulations may affect the amount of revenue accrued under government contracts.  However, the auditors considers such laws or regulations from the perspective of their known relation to audit objectives derived from financial statement assertions rather than from the perspective of legality per se.  Whether a particular act is, in fact, illegal may have to await final determination by a court of law or other adjudicative body.  Disclosing matters that have led auditors to conclude that an act is illegal and is likely to have occurred, is not a final determination of illegality. 

Source – Government Accountability Office
                Black’s Law Dictionary