When most people hear the word ‘corruption,’ they picture some sleezy politician stuffing cash into a Samsonite briefcase or a movie villain with slicked-back hair saying, “It’s just business.”
But we government auditors know corruption isn’t always obvious. It’s hard to spot the procurement officer awarding contracts to his college roommate’s landscaping firm. It’s difficult to prove special interest industry groups bribed corrupt politicians to dismantle regulations or controls that keep their industry in check.
What exactly is corruption?
The Oxford Dictionary definition of corruption includes ‘decay’ and ‘putrefaction.’
I think about corruption as rust eating away at the steel underpinnings of a government program. If left unchecked, the corruption will eventually eat away at – or completely bypass – critical systems.
Think of that metal patio set your aunt tried to give you when you got your first apartment. If she kept it painted with Rust-o-leum, it might be worth having. Instead, it is pock-marked and unstable. The only cure is to throw it away and start all over again with entirely new furniture.
In the case of corrupt government programs (think of pharmaceutical and insurance companies’ profiting from our medical system) the only cure is setting new goals and creating new systems and controls. And, man, sweeping change is painful! So painful, in fact, we’d rather just keep hobbling along with that junky patio set.
Four subcategories of corruption
The Corruption Branch of the Association of Certified Fraud Examiner’s Fraud Tree helps us dissect what can go wrong when fraudsters seek to influence government policy and decisions.
The ACFE breaks the corruption branch into a tidy set of sub-categories:
- Conflicts of interest: when someone’s personal relationships steer official decisions
- Bribery: giving ‘gifts’ in search of favor
- Illegal gratuities: bribery’s more forward-thinking cousin
- Economic extortion: the “Nice contract you’ve got there; shame if something happened to it” approach
Think of corruption as the “You scratch my back, I’ll approve your inflated invoice” category of fraud.
Conflicts of interest
Conflicts of interest is the most relatable branch for government auditors because we see it everywhere.
“Sure, my brother-in-law’s company can bid. He’s great at drywall!” Next thing you know, he’s billing the city for $50,000 of ‘consulting services,’ and his only contribution was, “Yeah, that wall looks straight.”
And don’t you just love it when corporations get to write the laws and regulations their industry is subject to?
Bribery
Bribery is a classic corrupt move, the Sinatra of corruption, if you will. It’s been around forever, and it still packs a punch.
Sometimes it’s overt: “Here’s an envelope for your trouble.” Sometimes it’s subtle: “Would you like to ‘borrow’ my beach house for the weekend?” And sometimes, it’s hidden under layers of ‘networking events,’ where the drinks are free, the golf is comped, and the registration is gratis.
The tricky part? In government, bribery rarely looks like stacks of cash. It looks like sponsorships, partnerships, or special appreciation luncheons. Translation: free shrimp with a side of ethical hazard.
Illegal gratuities
Illegal gratuities are less about a one-time payoff and more about a slow, patient investment in influence. Think of them as paying forward for favors that haven’t happened yet or may never be formally requested.
They’re the polite, long-game cousin of bribery. Instead of slipping an envelope under the table the day a contract is signed, a fraudster cultivates goodwill over time with donations, speaking fees, ‘consulting’ retainers, recurring sponsorships, or a steady stream of ‘thank-you’ lunches that add up.
It’s the same playbook special interests use with legislators: build relationships, send campaign contributions, host fundraising events, and one day the favor the special interest hoped for looks less like corruption and more like “well, that’s just the way policy works.”
For government auditors, finding illegal gratuities can be slippery because the transaction doesn’t always line up neatly with a single decision. The gift arrives before the favor, sometimes in small, plausible increments which makes the paper trail faint if present at all.
Economic extortion
Economic extortion is the dark, gritty cousin of bribery. Instead of offering a benefit, someone demands one.
Picture this: a city inspector tells a contractor, “Your project could really use another inspection next week. Unless, of course, you can find a way to make this worth my while to wrap this up today.”
For auditors, extortion is harder to recognize. It often lives in whispers, not invoices. Look for unexplained expediting fees, facilitation charges, or extra inspections that exist only in someone’s imagination.
Tragic and costly
Yes, corruption stories are often absurd and sometimes comical: the mayor who took bribes in Chick-Fil-A gift cards; the clerk who ‘won’ a bass fishing trip every time a contract renewed; the purchasing officer who accidentally cc’d Internal Audit as he arranged for delivery of his kickback from a vendor.
But it’s not so funny when corruption impacts critical government programs. Every dollar diverted to someone’s personal accounts is a pothole unfilled, a clinic understaffed, or a public service delayed.
The Association of Certified Fraud Examiners point out that corruption is the costliest of all of the categories of fraud because it works at the highest levels of an organization where major decisions are made. In government, corruption alters laws and regulations and impacts the way programs are executed. And that’s far from funny, it’s tragic.
Looking for high-quality and convenient CPE?
We have you covered! Our live webinars are a great choice if you want the learning to come to you. Just log on at the scheduled time and enjoy wherever you are! Here are a few of our upcoming courses:
- Nov 5: Excel Pivot Tables & Advanced Data Analysis (2 CPE Hours)
- Nov 6: Integrating IT Objectives into Your Audit (4 CPE Hours)
- Nov 12-13: Mastering AI for Government Audits (8 CPE Hours)
- Nov 17: When Findings Meet Friction: Navigating Pushback with Confidence (3 CPE Hours)
- Nov 19: GAGAS 2024: The New Quality Management System (2 CPE Hours)
Need to do things at your own speed, but still get all your credits? Plan your CPE around your life, not the other way around! Yellowbook-CPE.com has dozens of self-study e-book and video courses, including the popular Jumbo Bundle. This bundle provides access to all of our self-study courses for one full year at the low price of only $680, over a $3500 value!
Yellowbook-CPE.com is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: