Government Waste, Fraud, and Abuse: How to Spot the Red Flags

  • Posted on - 03/30/2021
  • Author - Gina Pusloski, Special Investigator, Investigations Division

Waste, fraud, and abuse can happen in any organization. Government entities, like their private sector counterparts, are not immune. Government entities are unique, however, in that their funding largely comes from revenue generated from private citizens and companies through taxes and other required fees imposed by those same entities.

Citizens trust that these organizations will do what is in the best interest of their constituents. But unfortunately, that’s not always the case. Whether you work in government, or you’re a resident who cares about government efficiency and accountability, here are some red flags to look out for to help prevent and detect government waste, fraud, and abuse.

Employee Misconduct

One way government employees can commit fraud is through reimbursement schemes. Many governmental bodies allow employees to be reimbursed for certain expenses related to their work. This can include everything from small items, like bagels and coffee for a meeting, to more expensive items like training and travel. If proper internal controls are not put into place, this could become troublesome.

For example, municipalities are exempt from paying sales taxes on goods or services that they purchase. If their employees are not using a tax exempt form or a voucher system for vendors (which removes taxes prior to calculating the purchase amount), then those organizations are wasting money by paying a tax overage. If employees fail to follow this procedure, then they shouldn’t be reimbursed for the taxes they unnecessarily paid due to their own negligence.

Time and attendance can also be an issue. While it’s important to trust your employees and give them flexibility, it is also important to have a set of internal controls and segregation of duties around time management. For instance, leave time and timesheets should be consistent throughout all departments within an agency. A supervisor in the department should review those forms for accuracy and if there is no one above the level of supervisor in one department, then a supervisor in another department should review that person’s time record keeping. Not only can mistakes be found this way – but knowing someone is reviewing this information is a natural deterrent.

Another type of employee misconduct is misuse of government property. An example of this is a government employee using a government vehicle or gas card for personal use. One way this could be remedied is through a specific set of policies and procedures as well as records that are reviewed regularly in accordance with those policies and procedures.


Corruption can often been seen in contract fraud or abuse. Sometimes, government entities will circumvent the contract procurement process to award a contract to a vendor of their choice. This could be done in response to a “handshake deal” in which the vendor then reciprocates by “paying back” the entity or the person representing the entity in some way once the contract is officially awarded (colloquially this is known as “pay-to-play”). Read OSC’s 2011 report on pay-to-play laws in New Jersey.

Contracts can also be written very broadly and beyond the normal scope. While this may not be indicative of fraud, it may require a deeper investigation into why the contract was written in that way, and may be an indicator of abuse of authority.

The ability to identify red flags of potential government waste, fraud, and abuse does not necessarily require advanced investigative training or experience. If something does not seem right, ask questions of your local officials. Be willing to dig deeper.

Waste or Abuse

Report Fraud
Waste or Abuse
Government Waste and Mismanagement Hotline: 1-855-OSC-TIPS (672-8477)