State and local governments face a difficult balancing act: citizens expect high-quality services, transparency, and accountability, while government leaders must navigate workforce shortages, budget constraints, aging infrastructure, evolving technology, and increasingly complex regulatory requirements.
At the same time, governments manage billions of taxpayer dollars through payroll systems, procurement activities, contracts, grants, and public programs–all of which are susceptible to cyber threats or fraud. Even organizations with strong controls are vulnerable to fraud, waste, and abuse (FWA) when operational processes become fragmented, outdated, or insufficiently monitored.
Today’s environment requires a different mindset that shifts from responding to problems to creating organizations that proactively identify risks, strengthen controls, and continuously improve operations. Government leaders tasked with building a fraud-resilient government can shift beyond compliance towards prevention by utilizing one of the most effective tools for such work: an operational assessment.
Strong Operations as the Starting Point
Weak operational processes can be hot spots for fraud. Common examples include a segregation of duties due to workforce shortages, procurement thresholds being unclear or inconsistently enforced, overtime approvals lacking adequate oversight, decentralized vendor management processes across departments, manual and inconsistent monitoring of grant expenditures, and legacy technology systems that limit visibility across teams.
Each of these conditions creates opportunities for errors, inefficiencies, and potentially fraudulent activity. Government leaders should note such operational challenges within a system and work towards improving fraud risk in those specified areas.
Looking Beyond Compliance
Compliance focuses on adherence to laws, regulations, and policies. Fraud resilience focuses on whether those controls are functioning effectively when put into practice.
For example, a government may have a procurement policy requiring competitive bids above a certain dollar threshold. From a compliance perspective, the existence of the policy may satisfy a control requirement. However, a fraud-resilience perspective asks whether purchases are being split to circumvent bidding requirements, if vendor relationships are being monitored effectively, whether exceptions are increasing over time, are employees consistently following established procedures, and considers if procurement data and trends are regularly analyzed.
This shift from checking boxes to evaluating effectiveness represents a significant change in how governments approach risk management. Compliance is not the only factor to consider.
The Role of Operational Assessments
An operational assessment is a structured evaluation of an organization’s processes, systems, controls, and performance with the goal of identifying opportunities for improvement. While operational assessments have traditionally focused on efficiency and effectiveness, they also serve as a powerful tool for identifying vulnerabilities that may contribute to FWA.
Operational assessments help answer critical questions about high-risk processes, where control gaps may exist, if resources are being used effectively, and where errors or inefficiencies occur most often. In addition, these assessments can help determine the data that may identify emerging risks, if departments are operating consistently, and which processes can be strengthened without increasing bureaucracy.
Building Fraud Resilience Through the Operational Assessment Process
A successful operational assessment can serve as a road map for fraud resilience.
1. Initiate: Establish the Right Objectives
Leaders should identify areas where FWA risks may intersect with operational challenges. Procurement, payroll, grants management, cash handling, and technology systems frequently need particular attention given the nature of the systems.
Establishing clear objectives early helps to ensure that fraud prevention becomes part of the assessment framework rather than a reactive afterthought.
2. Assess: Identify Risks & Vulnerabilities
This phase involves gathering and analyzing information to understand current operations. Common assessment activities include process mapping, internal control reviews, stakeholder interviews, data analysis, policy reviews, and performance metric evaluations.
Furthermore, data analytics can play an essential role during this step by identifying unusual patterns, duplicate transactions, abnormal overtime trends, or procurement anomalies that deserve further investigation by leaders.
3. Engage: Create Shared Accountability
Fraud resilience is a team effort. Operational assessments provide opportunities to engage stakeholders and employees in discussions about process improvements, accountability, and organizational culture.
Organizations may be more likely to achieve sustainable improvements from operational assessments when its employees understand the purpose and benefits of stronger controls.
4. Act: Implement Meaningful Improvements
Assessment findings should result in actionable changes. This may be in the form of strengthening approval workflows, automating manual processes, improving vendor monitoring procedures, updating grant oversight practices, revising procurement controls, expanding management reporting, or utilizing continuous monitoring tools.
5. Gauge: Measure Progress & Adapt
Governments operate in constantly changing environments, and new risks may emerge as technology, regulations, funding sources, and operational demands evolve. Thus, the case for ongoing fraud resilience is clear.
Continuous monitoring helps ensure improvements remain effective and allows leadership to address emerging risks before they become significant problems.
Leveraging Technology for Prevention
Many organizations already possess the data necessary to identify vulnerabilities but lack mechanisms to convert information into actionable insights. Modern analytics tools can help governments detect duplicate payments, identify unusual vendor activity, monitor overtime trends, analyze procurement card transactions, review grant expenditures, identify segregation of duties conflicts, and monitor contract compliance.
The ability to continuously monitor large volumes of transactions provides a significant advantage over traditional periodic reviews. Rather than discovering problems months later during an audit, governments can identify warning signs much earlier and take corrective action before substantial losses occur.
However, technology alone is not enough. Analytics should complement strong governance, effective leadership, and well-designed operational processes. When integrated into a broader fraud-resilience strategy, Payment Risk Analytics can serve as an ongoing monitoring tool that helps organizations continuously assess risk, strengthen controls, and safeguard public resources.
A More Resilient Future
Building a fraud-resilient government requires leaders to move beyond a compliance mindset and embrace a prevention-focused approach. Operational assessments provide a practical framework for identifying vulnerabilities, strengthening controls, improving performance, and fostering a culture of accountability. In turn, efficiency, transparency, and accountability improvements made as a result of operational assessments can help strengthen public confidence and increase organizational effectiveness.
How Forvis Mazars Can Help
Forvis Mazars helps state and local governments strengthen operations, enhance internal controls, and proactively address fraud, waste, and abuse risks. Through our Public Sector Advisory Services, we provide operational assessments, fraud risk assessments, process improvement, data analytics, and governance consulting to help organizations improve efficiency, accountability, and public trust. For additional insights into navigating change and preparing for the future, download our Public Sector Priorities report. If you have questions or would like to discuss your organization’s needs, reach out to a professional today.