Learning from the Oil for Food program and the Development Fund for Iraq

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Learning from the Oil for Food program and the Development Fund for Iraq

When the massive amount of fraud and waste associated with the Oil For Food program was discovered, there was a predictable outcry, with a number of people saying that this showed how useless and corrupt the United Nations had become.

When the massive amount of fraud and waste associated with the Defense Fund for Iraq was discovered, there was a predictable outcry, with a number of people saying that this showed how useless and corrupt the United States had become.

In fact, although there is a lesson to be learned from both the Oil for Food program and the Development Fund for Iraq (and Enron and WorldCom, ad nauseum), the lesson has to do with fraud, not with either the U.N. or the U.S.

When we speak of fraud, we generally need to look at the fraud triangle, which consists of Opportunity, Pressure, and Rationalization. The only item you as an employer or business owner control is Opportunity. Pressure and Rationalization are internal to the perpetrator and beyond your influence.

Opportunity is just that: The opportunity to steal, in which we carelessly or thoughtlessly present a potential thief with the active temptation to steal. Opportunity is the easiest piece to control, and large-scale fraud is usually a response to little thought having been given up-front to its avoidance.

We know from long and sad experience that when there is an opportunity for fraud – particularly fraud on the scale seen in Iraq – it should serve as a reminder to make sure that programs contain adequate management controls and oversight to reduce, as much as possible, the opportunity to steal.

It is, thus, a sad truth that fraud is largely not a matter of politics, but of lack of common sense and prudence. It might be said that fraud is a choice on the part of management, either through malfeasance or misfeasance. Avoidance of fraud should be a matter of forethought and policy, both public and private, to prevent ongoing victimization and waste.

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