Fraud Prevention Alert–Fraud Triangle Part 3: Rationalization

Throughout the last 25 years, our Office has issued numerous reports on fraud involving Arizona government employees from universities, community college districts, school districts, special taxing districts, counties, and state agencies. Understanding why and how employees commit fraud is crucial to preventing it. As discussed in the prior Fraud Prevention Alerts—Fraud Triangle Part I: Opportunity and Fraud Triangle Part II: Pressure, there are three elements that are present when an individual commits fraud: opportunity, pressure, and rationalization. Public officials can help prevent fraud by diminishing any one of the triangle’s three elements and, ideally, taking steps to diminish all three elements. This alert, the last in a three-part series, will focus on the rationalization element and outline how public officials can minimize an employee’s rationalization to commit fraud by establishing a strong ethical climate.