Sinning: Five steps to prevent waste and abuse

LaDonna Sinning

Oct 10, 2022

The intentional misuse of funds can happen in businesses large and small. Do you know how to prevent them?

The intentional misuse of funds can happen in businesses large and small. Discovering these problems and, more importantly, preventing them is every employer’s responsibility in the private and public sector.

While fraud is often hidden, waste and abuse may be more obvious in daily operations. Waste is defined as an excessive or unnecessary expenditure, while abuse is more egregious: an unacceptable use of money, equipment or power.

Determining where lines are drawn centers on knowledge of the services to be provided and how a prudent person might expend resources available to provide that service. However, there is no uniform answer when it comes to defining what a prudent person would or should do. Determining what situations constitute waste or abuse may be less than clear cut because certain actions may seem to be part of company culture or appear to be the way business is done.

Despite the challenging nature of determining waste and abuse, they can be controlled or minimized with thoughtful policies, reinforcement and oversight.

Determine ownership: Every employee has a role to play in preventing fraud and abuse. However, a member of senior management should assume primary responsibilities, including the enforcement of policies and procedures.

Set a tolerance level for expenditures: Set boundaries on expenses, be clear about expectations and put policies in writing.

Make expectations known: Once policies are established, make them available to management and staff with annual training for all managers and new employees.

Monitor compliance: Encourage a culture of responsibility. Empower personnel to monitor expenditures for waste and abuse and discuss concerns without fear of retaliation. Consider a whistleblower hotline or other anonymous method.

Investigate issues and decide how to proceed: Suspected infractions merit investigation and appropriate action. Define acceptable tolerance for risk and consult with your peers for determinations on a case-by-case basis.

LaDonna Sinning, CPA, CFE, is a partner at Arledge, an Oklahoma-based public accounting firm. Arledge is a recognized leader in the accounting industry with practical solutions in the areas of tax planning, auditing, consulting, and advisory services.