Click here to view the photo gallery...

More than 400 government accountability professionals gathered in Atlanta this week for AGA's First National Internal Control and Fraud Conference. With the theme "Fraud Prevention & Detection: The Newest Tools & Techniques," AGA's latest educational offering brought together the best in the business to discuss an issue of pressing concern to governments at all levels.

The conference began Monday morning with an address from the nation’s top accountability officer, Comptroller General of the United States David M. Walker, CPA, who heads the U.S. Government Accountability Office. Walker talked about the dramatic changes the world has undergone in recent years and noted that the federal government has not kept up. The government, he said, makes changes in response to crisis or after the private sector and the states make changes.

“We can no longer afford to sit still,” Walker said, echoing a central theme of his eight years in office. “Our country is a great country, but it is at risk.”

He mentioned his involvement in the Concord Coalition’s Fiscal Wake Up Tour as an example of something he’s personally involved in that aims to bring the message directly to the people. AGA is a cosponsor of the Fiscal Wake Up Tour, which is going to cities around the country in an effort to shine the light on the country’s significant and growing fiscal crisis.

Walker said that no matter who is elected president in 2008—whether it is a Republican or Democrat—the new chief executive must recognize the need for major change and an entire reengineering of the federal government. Walker believes it will take 20 years to bring about the necessary change “because we are that far out of balance.”

He mentioned his February 2001 testimony to Congress in which he went on record as saying the current situation was sustainable for 40 years. Since then our country was attacked, we’ve gone to war on two fronts and we’ve spiraled back into budget deficits that will take decades to overcome.

The government’s unfunded liability, he said, is going to equal the entire net worth of every American by the end of next fiscal year. “We can’t do it the old fashioned way and wait for a crisis because the stakes are too high,” he said. Many of the country’s programs and policies were created between 1940 and 1970, and remain in place today. The definition of disability, for example, comes from 1947. The Medicare program was fashioned after Blue Cross/Blue Shield of 1965. Many of our weapons systems are based on Cold War needs. “That is going to have to change,” he said.

We are the only super power on Earth and yet we are below average on a number of major economic indicators, Walker said. And, 90 percent of Americans have no idea how bad our financial situation is or that we are below average compared to most other industrialized nations.

In fighting fraud, waste, abuse and mismanagement, Walker points to GAO’s High Risk List, which shines the light on the government services and programs most at risk. “In the federal government, (fraud) will never be zero.” The biggest instance of waste is the interest we are paying on the federal debt, he said. “We’re paying for past excesses.”

He acknowledges that change will be hard and there will be tremendous resistance. “We need to transform what we’re doing and how we measure success,” he said. To do that we must maximize value, manage risk and address three elements in every area of government. The first is incentives for people to do the right thing. The second is transparency so that people know there is someone watching. Third, there must be accountability measures in place so there are consequences when numbers one and two don’t happen.

He talked about “tone at the top” and the critical example set by organization leaders. “You have to integrate appropriate checks and balances into performance management systems from the top down,” he said.

Improper payments is another area of grave concern. He noted the large payments being made to government contractors that are grossly delinquent in paying their federal taxes. “We may need to change the law to allow for the maximum use of mining and matching capabilities,” he said.

The biggest challenge in changing the culture of fraud, waste, abuse and mismanagement, he said, is that when something goes wrong, “people are just flat out not held accountable.” We must promote and reward outstanding performance, but we must also deal with people who just don’t do their jobs.

“We live in a great country,” he said. “We do many things well, but we have many challenges.”

After lunch on Monday, AGA Executive  Director Relmond P. Van Daniker, DBA, CPA, discussed “Citizen Centric Reporting.” He talked about AGA’s work in the effort to engage the citizens in the process of government. “If AGA isn’t going to do something about this, who will?” he asked. He pointed to the Association’s 14,000 members, 89 chapters and representation in “all walks of life” as the central focus of the grass roots effort to spark an interest in financial results and the means by which we report those results.

AGA has developed a four-page prototype report that Van Daniker envisions as the future of government performance reporting. Who reads the financial statements? he asked. Who reads the six-inch-thick performance and accountability reports? “It’s a sad commentary that no one reads these things,” he said, adding, “We’re providing the information so people can make decisions.”

With 88,000 government entities in the United States, Van Daniker believes that AGA must promote the concept of a simple four-page report published in local newspapers that tells the citizens what they need to know about their government and how their tax dollars are being spent. This little bit of information will go a long way toward jump-starting citizen involvement in government, Van Daniker believes.

The prototype report, based on information provided by the city of Virginia Beach, VA, will be sent to every AGA member with the Winter issue of the Journal of Government Accountability. Page one of the report spells out the strategic objectives—what are we required to do? Page two reports notable accomplishments. Page three contains revenue and expenditure pie charts, and page four details future challenges. Interspersed on all four pages are photographs and other visuals to make the report pleasing to the eye and easy to read.

So, how do we bring something like this to the 88,000 governmental entities out there? Van Daniker asked. “One at a time,” he said.

The Tuesday morning program began with an in-depth discussion of the Iraq Oil-for-Food program, which resulted in $69 billion in fraud over a seven-year period. Forensic auditing expert David T. Wolfe, founder of Glasgow Forensic Group, detailed the missteps by the United Nations that led to the massive fraud. The $35 million inquiry into what went wrong was massive in its scale, he said. Twelve million pages of documents were scanned into a database, 1,100 interviews were done on six continents and eight reports were issued.

From this it was learned that the United Nations allowed Iraq to play too large a role in the program’s design and implementations, as well as deciding who got the oil. They learned that often the oil was being resold to third parties at great profit to the original buyer and that no one at the U.N. took responsibility for what became the most massive program in the organization’s history. The U.N. was poorly equipped to handle a program of this magnitude and there was a grievous absence of auditing and management controls. In addition, they found that there was an inability to track expenditures and a lack of uniform accounting.

Wolfe said the inquiry resulted in four broad recommendations:

• The Security Council should have stepped in to clarify the program’s purpose
• The U.N. needs a chief operating officer who is a strong manager
• The U.N. needs a strong central oversight body
• The U.N. needs to ramp up its organization when multiple U.N. bodies are involved in humanitarian programs (the need for this was again on display after the tsunami in Asia)

One of the downfalls of the program, Wolfe said, was that it operated on six-month contingencies, which meant that no one wanted to invest in long-term systems that might be rendered unnecessary should the program be discontinued at the end of the current six-month period.

The program was not without its successes, too, Wolfe said. For one, it kept weapons of mass destruction out of Saddam Hussein’s hands and fed 27 million Iraqis.

He briefly covered some of the forensic auditing tools used by investigators. One thing they looked at, he said, was changes in spending habits by principal players. For instance, if someone was in the habit of taking $200 from their ATM every Monday morning and then suddenly stopped doing that, that can be taken as a signal to investigators that the subject has received a large influx of cash. By connecting these dots, investigators are able to piece together who was involved, how the fraud was perpetrated and where the money went.

David L. Brandt, the former director of the Naval Criminal Investigative Service (NCIS) and current director with Deloitte Consulting, began his luncheon presentation on Tuesday by showing a clip of his walk-on role on the popular television series, NCIS. He said that when first approached with the idea for the series, the Pentagon brass was not in favor of it. But the producers made the pilot anyway and won over their detractors. Brandt said the show has been great for the NCIS because it has shown the depth and breath of the agency’s work on behalf of the Department of the Navy.

After watching the show, people often asked, “You do all that?” He praised the show’s executive producer Don Bellisario and the show’s star, Mark Harmon (a “non-Hollywood guy—a good guy”), for creating a quality representation of the NCIS. He joked that he’s waiting for an episode to focus on a really juicy fraud investigation—which is one aspect of the agency’s charge, albeit a less sexy function than the criminal investigations that make up the show’s storylines.

Brandt talked about how the focus changed throughout his 30-year government career. The 1970s were all about the war on drugs. The eighties were the decade of the spy, and the nineties were all about the $200 toilet seats in the Department of Defense and procurement fraud. “In the early ‘90s, things were flat in the way of new techniques, especially in the area of fraud. We were waiting for the phone to ring. We were kind of flat lined.”

After the U.S.S. Cole was bombed in 1997 that changed, but what also changed was the number of people devoted to fighting fraud in the Navy—down from a high of 600 to a low of 50 after 9-11. This was because resources were rightfully redirected toward the war on terror, even before it was called that.

Shifting resources was “the right thing to do,” Brandt said. “But what it did was create gaps that, quite frankly, still exist today.”

In 2005, the Secretary of the Navy expressed a concern about the growing problem with fraud within the department. He suggested, “trending the other way,” saying, “Let’s get proactive.” With that in mind, the Navy’s Acquisition Integrity Office was created. Made up of 25 to 30 people, the office brings together investigators, inspectors and auditors to strategize together and to make sure they are sharing information. “As a career investigator,” Brandt said. “I didn’t know what the auditors were doing unless it was something criminal.”

He left the Department of the Navy just as the Acquisition Integrity Office was being formed, but said he is hearing great things about its success.

In the area of fraud, he concluded, organizations need to keep a watchful eye on their own people. “The insider threat is absolutely the most significant threat.”

Johnnie E. Frazier, inspector general at the U.S. Department of Commerce, and James A. Kissko, deputy inspector general at the Social Security Administration, concluded the two-day program with an entertaining presentation called “Fraud Alert: Let the Whistles Blow,” detailing the techniques used by the IG community to find and adjudicate fraud.

Frazier began by showing the Time Magazine 2002 Persons of the Year—celebrated whistleblowers Cynthia Cooper of WorldCom, Sherron Watkins of Enron, and Coleen Rowley of the FBI. “These three women should be considered champions to all people who care about fair play,” Frazier said.

Finding fraud, he said, “is all about the money. If you follow the money, you’ll find the fraud. If there’s money involved, there’s fraud.”

We must send the message that if you commit fraud, you will be fired, he said, adding that on average six percent of every organization’s budget is lost to fraud, which is committed largely by men. “But there’s good news ladies,” he said. “You’re catching up with us.”

Frazier talked about the “Together Everyone Achieves More—TEAM” concept employed  by the federal IG community to share best practices and learn from each other’s successes and failures. The problems and challenges in common areas such as purchase cards are the same across government. He cited the big problem with worker’s compensation fraud and said that his agency has worked with the Department of Labor. Together, he said, “We’ve got a lot of people back to work.” In all, eight federal IGs are now looking into fraudulent worker’s compensation claims within their agencies. “We found someone who was out on worker’s comp who was running another business,” Frazier said, adding that the perpetrator is now reimbursing $195,000 to the federal government.

“It’s us against the bad guys,” he said. “We have to tear down the walls and work together for the benefit of the federal government.”

He noted that the inspector general offices are employing more and more subject area experts, such as environmentalists, farmers, meteorologists and others who know best how things are supposed to be and are best suited to sound the alarm when something is off. “We understand that the bad guys are getting smarter,” Frazier said. “We’ve got to outwit them.”

Kissko delivered an entertaining presentation, focused primarily on the area of disability fraud. He showed a video taken by investigators of people who are receiving long-term disability benefits. As Kissko recited the perpetrator’s list of so-called physical maladies, they were shown climbing ladders, cutting down trees and putting on a sling outside of a claims office and then using the injured arm for everything from closing the car door to lighting up a cigarette.

Because the SSA’s resources have not kept pace with the explosion in disability benefit fraud, the OIG has had to become more creative in its anti-fraud efforts. The agency’s fraud hotline received more than 80,000 allegations in the last year, 80 percent of them in the area of disability fraud, he said.

One of the problems he said his agency has encountered is that auditors and investigators speak a different language. In a tongue-in-cheek delivery, Kissko said, what investigators call a “clue,” auditors refer to as an “indicator”; what investigators call a “way,” auditors call a “methodology”; and what investigators call a “handbook,” auditors refer to as “Generally Accepted Government Audit Standards.”

SSA’s Disability Detection Project identified 1,532 recipients who were then investigated. Of that pool, 81 percent were found to be receiving the wrong amount of disability or were found to be ineligible. With improved practices, Kissko said, the agency could generate an additional $5 billion in new resources.

By: Marie S. Force