Fraud, Waste, Abuse, and Corruption power point show Week 1 slide presentation

1. 9/4/2014 @Copyright 2014 1

2. Introduction
The Maladies that plaque society:
1. Fraud
2. Waste
3. Abuse
4. Corruption
Dr. Tarwacki
Your Narrator
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3. The Impact upon Government
1. FWAC undermines the legitimacy of
government institutions.
2. FWAC diminishes individual well-being.
a) Unnecessary taxation
b) Violations of civil liberties and rights
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4. Basic Definitions
• These maladies are discussed in terms of actions, not
thoughts or intentions, but concrete actions (or
absence of action).
• Although each definition is rooted in individual
action, this is not meant to imply that institutional
settings do not influence individual actions.
• Nor are these labels mutually exclusive sets;
corruption nearly always involves an abuse of
authority and often requires frauds to perpetrate or
cover-up the corrupt act.
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5. Waste
• Waste is the underutilization of resources;
inefficiency. For example, a person who is sleeping
on the job is clearly wasteful. But so is a person who
continues to work, but at a pace below the
expectations set by the organization.
• Identifying waste becomes a subjective exercise.
Many worker-employer conflicts involve setting
expectations for the rate of work
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6. Abuse
• Abuse is the use of some form of power (physical,
psychological, statutory, hierarchical, etc.) to improve the
abuser’s well being at the expense of another’s well being.
• In many respects abuse is a catch-all phrase that covers all
kinds of actions that most people would describe as “wrong.”
• Examples of abuse include racial, religious, gender and sexual
orientation discrimination; verbal castigation; managers who
vindictively assign undesirable work times and tasks to those
they do not like.
• Not all abuses are illegal.
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7. Fraud
• Fraud is lying for personal gain.
• Fraud is a crime of deception.
• Fraud can involve falsified documents, forgeries and
even the intentional withholding of information.
• While simple in concept, frauds can be difficult to
adjudicate in both criminal and civil courts.
• As with abuse, we can safely assume that people
commit frauds for a reason, but we cannot always
discern what that reason is.
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8. Corruption
• Corruption is any break-down from the original.
• A corrupt action is when an individual benefits from
acting against the interests in which they were
entrusted to uphold.
• Bribery is the classic form of political and public
managerial corruption.
• Other kinds of corruption include influence peddling,
nepotism, cronyism and other cases where officials
act in their interest and not the public interest.
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9. Multi-Mission Government
• One of the distinctive features of democratic and semi-democratic
governments is that they serve multiple missions.
• This stands in stark contrast to for-profit business
organizations that exist only to maximize profits.
• Governments serve multiple missions such as providing safety,
liberty, prosperity and so on. These missions often conflict
with each other creating a need for balance among the
different missions.
• One of the themes of this class will be that finding the right
balance of missions is aided by finding the right balance of
how governments react to fraud, waste, abuse and
corruption.
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10. Persistence of FWAC in Gov’t.
• One of the significant differences between private
and public sector organizations is the consequence of
FWAC on the existence of the organization.
• A business that insufficiently deals with FWAC will go
out of existence, replaced by competitors.
• Since governments do not, for the most part, have
competitors, the prevalence of FWAC can persist
longer than in businesses or can lead to either a coup
or popular revolution.
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11. Measuring Public Perception
• Multiple mission organizations usually suffer
from the fact that the missions’ objectives are
not easily measured.
• The crime rate can be measured, but the true
feeling of safety cannot.
• When social scientists try to construct proxy
measures it often gives rise to motivations for
FWAC by self-interested governments agents.
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12. Market Failure
• In the 21st century, the most successful societal relation is a
mixture of free-market enterprise and central control through
democratic or semi-democratic government.
• Governments often intervene in the economy to remedy
“market failures.”
• In the absence of market failure, self-interested actions by
individuals lead to results that can be considered best for
society. This is, in essence, Adam Smith’s concept of the
“invisible hand” guiding individuals into actions that benefit
all of society.
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13. Public Goods
• Public Goods represent the clearest case for
government intervention in the economy.
• Most goods and services that people derive utility
(usefulness) from are considered to be “private”
goods in that consumption by one person precludes
consumption by another.
• Public goods differ in that the consumption by one
person does not diminish another’s utility and when
one person consumes it others cannot be kept from
also gaining utility.
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14. Externalities
• When two parties make a mutually beneficial
transaction both parties are better off or else they
would not have voluntarily entered into the
exchange.
• Some transactions create consequences for third-parties.
These consequences are known as positive
or negative externalities.
• They erode the connection between what is best for
private individuals and what is good for society.
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15. Concentration of Market Power
• For markets to channel individuals optimal actions
into socially optimal results, all actors, all buyers and
sellers, are required to be inconsequential to the
market.
• Markets fail to deliver when there are lots of buyers
and sellers but none of them can possess a
significant share of the market.
• Should any buyer or seller capture a significant
portion of the market, they can use that market
power to their advantage to the detriment of society.
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16. Asymmetric Information
• When one side of a transaction has an
informational advantage it can cause markets
to behave oddly and we have the market
failure.
• There is a rich debate about how far the
government should go in trying to fix
problems of asymmetric information.
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17. Redistribution of Wealth
• Governments are called upon to redistribute both
income and wealth.
• The stated aim may be to foster greater equity, to
provide a safety net for the unfortunate or to provide
an equality of opportunity.
• Clearly this is where we see the tensions between
individuals’ goals of well-being and society’s interest
in promoting the whole species.
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18. Gov’t as Arbiter of Disputes
• Markets and “free behavior” also tend not to serve
well in settling disputes for the benefit of society as a
whole.
• Individuals would attempt to rectify perceived
injustices in ways that harm society.
• As the arbiter of disputes governments usually assert
a monopoly over the use of force. Civil courts exist as
a way for individuals to borrow the government’s
monopoly of force.
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19. Macroeconomic Instability
• The final market failure is Macroeconomic instability.
• People generally want stable and low inflation as well
as low unemployment, but disagree on how to
achieve these often conflicting goals.
• Those who prefer government intervention are
classified as “liberal” or Keynesian.
• Those who oppose government intervention are
classified as “classical.”
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20. Government Failure
• Government failures can be placed into four
categories: under action, over action,
unintended consequences and corruption.
• Corruption is the most straight forward
government failure and obviously we will
study it in great detail in this class.
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21. Conclusion
• While the concept of FWAC is an organizational and systemic
phenomenon; fraud, waste, abuse and corruption are defined
as actions of individuals (or conspiracies of groups of
individuals).
• This class will be concerned with individuals at all levels of
government.
• FWAC can come from those whom government is intended to
serve, those who are the line operators for government
agencies, public managers, political appointees and elected
officials.
• The ability to engage in an act of FWAC is determined by the
position and circumstance of the individual.
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22. Introduction to FWAC
is authored by
Professor Jay Hamilton
This PowerPoint Presentation
was prepared and narrated by
Professor Robert Tarwacki
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