Heard about fraud lately?
I sure have. At CCCMA in February this year, Charles Jones, Professor at the University of Kansas taught The Shape of Ethics: Two Columns, Three Triangles. In his presentation he said “ethics and policy have a human face.” He urged city and county managers to open a conversation with staff to share stories of “ethical failure” to raise awareness while illustrating the human consequences of fraud. Jones shared “The Fraud Triangle: Rationalization, Pressure, Opportunity” noting that to protect against fraud, managers must recognize the first two, and put systems in place to remove the third. His whopper of a personal story ended up with highly respected family members going to prison. His life was never the same.
It is no surprise to CIRSA how many of us are touched by fraud which is why CIRSA, or your in-house systems guru will gladly help with templates. The resulting checks and balances may not be popular with employees eager to disprove the public perception of how inefficient they are.
We talked fraud in our last two NWCCOG staff meetings, explaining why so many policies & procedures have recently been updated, and why separation of duties, awkward as they seem in such a small organization—40 employees—can feel like the classic public works joke. How many COG employees does it take to cut a check? Four … who are never in the office on the same day.
Doug Jones, our Energy Program Manager shared how an employee a few years back was observed filling up a 5-gallon gas can. Turned out mileage data showed he had been doing so on the company fuel card each time he filled the company truck for quite some time. He was let go.
We underscored why directors and I both review credit card statements before the fiscal office processes them. When I was an Eagle County Commissioner, I shared that in the attorney’s office a young office manager was quietly let go for purchasing groceries for her family on a weekly basis with the attorney office card. She was a single mother who was proud of her job. That is what Jones means by “pressure.” Jones would say (brutal as it may sound) that potential rationalization and pressure should have been a noted risk which her director might have anticipated. Instead, the review of credit card statements was delegated to her. That is opportunity. My memory is fuzzy, but I recall someone in finance joking to the attorney—”you guys sure do eat a lot up there.” During that same time a longtime female employee in the Clerks office went to prison on felony theft charges for stealing from a cash account. I’m sure she had a whole host of internal rationalizations to justify why she needed the money more than the clerks office did—who doesn’t feel that they are paid enough or that the world is entirely fair. As it is in many such cases, many colleagues reflected at the time about how much they really liked her. More recently, a male Sheriff’s Deputy was charged for using his company vehicle for personal business. This is not to pick on Eagle County, but to illustrate that systems of oversight cannot be delegated to the finance department, or assumed to be performed by others.
I remember as an elected official assuming the annual audit was a decisive scan of potential fraud. Wrong. If you believe that a clean audit “proves” there is no fraud in the organization, then you need to ask more questions. Fraud can become another dog whistle for the self-appointed government watchdogs.
This past NWCCOG staff meeting, we watched All the Queens Horses, a riveting documentary about how one municipal employee in Dixon, Illinois stole $53M over 20 years with a hidden account and a whole lot of fake invoices. No one had questioned her extravagant purchases over the years – a motorhome, horses, trips. For anyone in a position of public trust, that film is scarier than anything produced by Hollywood. If you need to be scared into action to review your systems, I suggest you watch it.
Local governments need to be the bulwarks of public trust today with Washington D.C. an open sewer pipe flowing with investigations, indictments, and daily stories about those appointed to positions of power openly leveraging the public trust for personal gain. Some apparently have been appointed to override public protections to benefit the industry they were recently paid to represented. No doubt they will exit the revolving door and be rewarded. I predict that we are in a time that will be remembered for this extravagant fraud that we have become accustomed to at a national level, and hopefully history will tell of how it was followed by a series of significant reforms. This is not just a government problem, Marketplace on Public Radio recently reported out a ten-year recap of the 2008 financial crisis and explained why so executives who profited from fleecing American consumers didn’t end up in jail. Basically the Attorney General in the Obama administration chose steep fines for companies instead of criminal indictments. Boo. Paying fines is not justice. The public understands that. Alexandria Ocasio-Cortez, like her or not, is proving why we need leadership from different backgrounds and generations. She has been calling out the structural corruption in Congress—whose officials are supposed to be protecting us. It will be interesting if reforms gain a foothold in the den of thieves. I’m not holding my breath, but I believe in the healing power of our governance.
With fraud and abuse of power in the news every day, local government managers must work doubly hard to focus on ethics systematically as they once learned to manage safety. It is becoming more challenging to earn the public trust and overcome skepticism. This has consequences when you want to get voters to pass the next ballot measure. Don’t think it is inconsequential to your citizens when The Washington Post reports that the President averaged 15 false claims (lies) per day in 2018. He succeeded wildly in business as his lawyer said as a con artist, and now is gaming all of us. Be aware that the swamp in D.C. provides an instant rationalization recipe for employees. Just add opportunity.
Ask yourself what effect the fraud, lies and waste your employees and citizens hear about on a large scale has employees as they confront “minor” opportunities for fraud on a daily basis. Today the news is a heap of rationalizations in waiting, and coverage of how costs for the average worker are rising just add to that. Are more reams of paper disappearing from offices these days? Fraud, like an entry drug can start small.
Jones would suggest you talk about ethics with your team, share stories if you have them, let everyone be aware that it is on the radar screen, and for goodness sake, assess how your systems are diminishing the opportunities for someone might be thinking about how unfair the world is today. Or not. Just because “everyone is doing it” from college admissions to Congressional insider trading, as a manager, what your people do is on you.
