Wednesday: Spotting Red Flags Before It’s Too Late

Fraudsters are becoming more and more sophisticated, targeting government agencies with schemes designed to exploit trust and procedural gaps. As state employees, we are on the front lines of public service — and that makes us a prime target. Recognizing the red flags of fraud is key to protecting public resources.

Today’s Daily Content will discuss common red flags and how understanding fraud indicators can help identify potential issues early, preventing financial losses and other impacts of fraud. (More to come in Friday’s daily content!)

Common Red Flags

Being familiar with red flags can help ensure you act effectively when needed. These can apply in the workplace and in our personal life.

Here are some common external red flags to keep in mind:

• Unsolicited Contact: Be wary of unexpected emails, calls, or messages from individuals, contractors, or vendors claiming to represent legitimate organizations. Fraudsters often impersonate trusted entities to gain access or information.
• Questionable or Altered Documentation: Watch for documentation that appears to be a copy, has been visibly altered, has mismatched or incomplete information, or features low-resolution, marked up, or inconsistent logos and branding.
• Unusual Payment Requests: Be very cautious of requests to change payment methods or reroute funds. Always verify the authenticity of the requester through official channels before acting on it.
• Vague or Unexplained Budget Changes: Any significant alterations to the approved budget without a clear explanation or justification makes it difficult to verify that the funds are used as intended.
• “Too good to be true” offers: As the saying goes, if it sounds too good to be true, it probably is. Deep discounts, guaranteed returns, or exclusive deals from unfamiliar vendors should raise suspicion.
• Pressure to Act Quickly: Scammers frequently create a false sense of urgency, such as, “We need immediate payment to avoid penalties.” Legitimate businesses rarely demand rushed decisions without proper documentation.
• Requests for Confidential Information: Do not provide login credentials, personal data, or financial information via an unsolicited email, text, or phone call.
• Suspicious Email Addresses: Bad actors will often send emails that appear to come from trusted sources but may contain subtle clues—like misspelled names, extra characters, or incorrect domains. When in doubt, do not click links or respond—report it and verify directly through the organization’s official contact information.

Here are some common internal red flags to keep in mind:

• Unusual increases in program costs or spending: Watch for significant or repeated increases without clear justification or supporting documentation.
• Incomplete or inconsistent documentation: Be alert to missing approvals, altered documents, copies of original documents, or inability to provide supporting documentation when requested.
• Transactions that deviate from normal patterns: Watch for unusually large payments, frequent transfers to unknown accounts, or payments to unfamiliar vendors.
• Unjustified expenses: Pay attention to expenses that seem excessive, unnecessary, or unsupported by proper documentation.
• Unauthorized access attempts: If an employee tries to gain access to restricted areas without proper identification or clearance, report it.
• Resistant to oversight or review: Pay attention to someone who resists reviews of their work, discourages inquiries, or is uncooperative with auditors.

Staying Vigilant

Verify before you trust. Independently confirm identities and claims by using official contact information and not what is provided in the suspicious message. Report suspicious activity. If something feels off, report it immediately. Each agency has their own designated reporting channels and mechanisms. It is important to familiarize yourself with your agency’s reporting processes in place. Early reporting can prevent major losses. Stay informed. Regularly attend fraud awareness and prevention trainings and review internal policies. Knowledge is your best defense.

Remember to be aware of red flags and trust your instincts. If you observe something that doesn’t seem right, evaluate the situation. Then, if you still have suspicions or doubts, act. Fraud prevention is a shared responsibility. By staying alert and informed, you help safeguard taxpayer dollars and uphold the public’s trust. Together we can stay one step ahead of the fraudsters.

Resources

Review these for more information on fraud red flags and creating a fraud-aware culture.

• 2024 ACFE Report to the Nations
• Code of Ethical Conduct Policy

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.