NCJ Number
60912
Date Published
1979
Length
26 pages
Annotation
COST-BENEFIT, COST-EFFECTIVENESS, AND RISK ANALYSIS ARE PRESENTED AS BASIC APPROACHES FOR USE BY ENFORCEMENT OFFICIALS IN COMBATTING FRAUD AND GOVERNMENT-BENEFIT PROGRAM ABUSE.
Abstract
BENEFIT PROGRAM ADMINISTRATORS AND OTHER OFFICIALS HAVE A VARIETY OF ENFORCEMENT STRATEGIES AVAILABLE FOR COMBATTING FRAUD AND ABUSE. COST-BENEFIT ANALYSIS MAY ENABLE DECISIONMAKERS TO CHOOSE AMONG ALTERNATIVE ENFORCEMENT STRATEGIES BY COMPARING THE EXPECTED COSTS OF ALTERNATIVE STRATEGIES WITH THEIR EXPECTED BENEFITS. THE THREE BASIC ELEMENTS OF COST-BENEFIT ANALYSIS FOR PROPOSED ALTERNATIVE STRATEGIES INCLUDE DETERMINING COSTS, DETERMINING BENEFITS AND DISCOUNTING PROCEDURES OR EVALUATING THE 'TIME VALUE' OF THE RESOURCES TO BE USED FOR EACH STRATEGY. TO FIND COSTS, BENEFITS, AND DISCOUNT RATES FOR STRATEGIES IN AN ORDERLY WAY, IT IS USEFUL TO FOLLOW FOUR STEPS. FIRST, DEFINE THE OBJECTIVES OF EACH STRATEGY AS CLEARLY AS POSSIBLE. SECOND, IDENTIFY ALTERNATIVES FOR ACHIEVING OBJECTIVES. THIRD, SELECT EFFECTIVENESS MEASURES, AND FINALLY, DETERMINE COST ESTIMATES; COST-ACCOUNTING PROVIDES AN EFFECTIVE METHOD FOR COST SEPARATION. COST-BENEFIT ANALYSIS, THEREFORE, EXPLICITLY DEALS WITH THE ISSUE OF TRADE-OFFS BETWEEN COSTS AND EFFECTIVENESS. COSTS AND BENEFITS ARE EXPRESSED PROPORTIONATELY TO EACH OTHER. COST-EFFECTIVENESS IS MERELY A SHORTENED VERSION OF COST-BENEFIT ANALYSIS; TWO VALID CRITERIA FROM WHICH TO CHOOSE ARE EITHER MAXIMIZING BENEFITS AT A GIVEN COST, OR MINIMIZING COST WHILE ATTAINING A GIVEN LEVEL OF EFFECTIVENESS. UNDER IDEAL CONDITIONS, THE APPLICATION OF COST-BENEFIT AND COST-EFFECTIVENESS METHODS SHOULD ALLOW A DECISIONMAKER TO ARRANGE STRATEGIES ALONG AN S-CURVE OF UTILITY. RISK ANALYSIS PROVIDES STILL ANOTHER METHOD FOR SELECTING AMONG COMPETING ENFORCEMENT STRATEGIES, AFFORDING THE DECISIONMAKER A MEANS OF ORDERING THE RELATIVE IMPORTANCE OF VARIOUS OFFENSE THREATS TO A BENEFIT PROGRAM. THREE DATA COMPONENTS ARE REQUIRED FOR ITS IMPLEMENTATION. THREATS TO THE PROGRAM MUST BE IDENTIFIABLE, THE PROBABILITY THAT A CASE WILL MANIFEST A PARTICULAR OFFENSE PATTERN MUST EXIST, AND THE ANNUAL DOLLAR LOSS INCURRED WHEN EACH OFFENSE WAS COMMITTED MUST BE KNOWN. FOOTNOTES, TABULAR DATA, AND STATISTICAL FORMULAS ARE INCLUDED. (LWM)