Monday: Fraud Awareness Basics

Fraud Prevention Starts with You. Protecting State resources begins with everyday actions: follow procedures, stay alert to red flags, report suspicious behavior, report concerns, and follow internal controls. Every day presents an opportunity to protect State resources.

Defining Fraud

Under Minn. Stat. §13.357, "fraud" means an intentional or deliberate act to deprive another of property or money or to acquire property or money by deception or other unfair means. Fraud includes intentionally submitting false information to a federal, state, or local government entity for the purpose of obtaining a greater compensation or benefit than that to which the person is legally entitled. Fraud is something done with intention, not by accident. It’s usually done to benefit the person doing it and involves hiding the truth or breaking trust. In short, it’s a dishonest act for personal gain.

Fraud Awareness Basics

Fraud can occur in any environment, workplace, or community, and even in our personal lives. The Fraud Diamond Theory created by David Wolfe and Dana Hermanson helps explain why individuals may commit fraud by outlining four key factors:

  • Pressure – The person feels stress or need (like financial trouble or job demands).
  • Opportunity – Weak controls or oversight make it easier to commit fraud.
  • Rationalization – The person convinces themselves it’s okay (“I deserve this”).
  • Capability – They have the access, skills, or position to carry it out. 

Understanding these basics helps us spot red flags, strengthen controls, and protect public resources.

Table 1: Fraud Diamond Elements and Examples.

Element

Internal Fraud Example

External Fraud Example

Pressure

The employee feels stressed, like dealing with money problems or job demands.

The scammer needs quick money or is facing financial trouble.

Opportunity

Controls are weak or missing, making it easier to take advantage of the system.

Weak monitoring or lack of oversight.

Rationalization

The person convinces themselves it's okay, such as thinking "I'm underpaid" or "I'll fix it later."

The scammer thinks, "It's a big agency, they won't miss it."

Capability

The employee knows the systems well and can work around the protections in place.

The scammer has the skills or access to exploit weaknesses in controls or oversight.

While opportunity and capability often look different between internal and external actors, the core idea remains: fraud usually involves some combination of these four elements. When considering external fraudsters, the motivation may shift from personal pressure to financial gain, requiring only opportunity, rationalization, and capability. Regardless of the actor, strong internal controls, ethical culture, and vigilant monitoring remain essential in preventing both internal and external fraud.

How do we prevent fraud and what can we do to protect State resources?

  • Participate in fraud training and raise awareness
  • Be aware of fraud indicators and trust your instincts
  • Report irregularities
  • Fix known internal control weaknesses
  • Employ program integrity measures to safeguard State resources

By strengthening internal controls, promoting transparency, and paying attention in our daily work, we reduce the chance for potential fraud.

Why do we have Fraud Awareness and Prevention Week?

Fraud doesn’t just cost money. It can have a wide range of impacts and costs. Fraud can disrupt the delivery of services, damage reputations, and prevent money from going to those who need it. We dedicate this week to understanding fraud awareness and prevention because protecting public resources starts with each and every one of us. Setting aside time to focus on fraud awareness and prevention will reinforce the following concepts:

  • Identify potential fraud risks
  • Strengthen internal controls and preventive measures
  • Empower employees to act
  • Share resources, tools, and training
  • Understanding internal controls through real-world examples 

Resources

Table 2: Short video clips, video length, and video description.

Video Sequence

Video Length

Video Link and Description of Video

V 1.1

1:50

What does fraud mean to you? (ACFE)

V 1.2

2:01

The Fraud Triangle: Why People Commit Fraud (ACFE)

V 1.3

7:14

An introduction to Internal Control: The 2025 Green Book (GAO)

V 1.4

1:47

How Internal Control Weaknesses Contribute to Fraud (ACFE)

About ICA

Minnesota Management and Budget’s Internal Control and Accountability Unit (ICA) offers resources, training, and consultation for executive agencies to prioritize and document their internal control systems. The unit offers content for Fraud Awareness and Prevention Week for the twelfth consecutive year, aligning with the Association of Certified Fraud Examiners (ACFE) annual International Fraud Awareness Week.