Case Study: Why is this Furniture Falling Apart?
It is vital for the government to ensure that tax payers’ money is not wasted by various government agencies. Governments have different control measures that help in detecting the existence of fraudulent financial activities in various government agencies. Government auditors are tasked with the responsibility of ensuring that government agencies engage in sound financial transactions. However, various government agencies formulate innovative methods that enable them to engage in fraudulent financial activities without being detected. This is highlighted by the case on Art Metals U.S.A. Art Metal U.S.A., was a company that manufactured furniture. Art Metals engaged in the manufacture of furniture for GSA. However, the company manufactured substandard furniture. It bribed the GSA inspectors to approve the furniture. Continued complaints by GSA customers and newspaper articles prompted the setting up of a congressional investigation on GSA. This led to the discovery of the fraudulent activities of GSA inspectors and art Metal. The discovery ultimately led to the collapse of the company since GSA was Art Metal’s sole customer.
Q1. Which of the four classifications of corruption schemes were involved in this case? Provide examples to support your answer. Reference each with appropriate citations. (10 points)
The company had sold General Services Administration (GSA) defective furniture worth $200 million. Some of the chairs had some legs that were shorter than others whereas desks collapsed. Federal agencies and GSA clients complained several times without any action being taken. The Washington Post run a series of articles that highlighted the fraud and wastefulness of GSA. The articles prompted the setting up of a congressional investigation. A congressional investigation is usually more thorough than other investigations. It involves the analysis of the all areas of financials and operations of an agency. Therefore, it can discover malpractice regardless of how well-hidden it is (Wells, 2011).
Q2. What measures could have been taken to prevent the fraud committed or detect it earlier? Reference each measure with appropriate citations. (30 points)
The congressional investigation decided to investigate the activities of Art Metal Furniture Company after Phillip J. Kurans, President of the company, appeared at the congressional oversight meetings uninvited. The congressional investigation showed that there was corruption between the top management of Art Metals and GSA inspectors. After reviewing the cancelled checks, the investigation showed that there were unusual payments. Art Metals made payments to a subcontractor, which were cashed instead of being deposited. The payments were made to three different names, I. Spiegel, Spiegel Trucking Company, and Spiegel Trucking Inc. However, Isador Spiegel cashed all the payments. The payments to Spiegel Trucking Co. were made to look as if they were for delivery of furniture to several GSA depots and customers. Art Metals also made several huge payments to ‘Auction Express.’ The above financial data provided enough information for the members of the congressional investigation to look for evidence of bribery. This prompted the members to look into the activities of GSA inspectors. They discovered that the financial life-style of a previous GSA inspector was more than his income. Upon interviewing past bookkeepers of the company, they got evidence that the company bribed GSA inspectors.
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