The American Dilemma and How We Can Fix It


If you start your own business or work for one that someone else just began, the importance of individual accountability moves out of classroom theory into real world fact.  When you’re doing the work, paying the bills, trying to develop new customers, your life is literally on the line.  And if you have one or two employees helping you it is pretty obvious who is pulling his weight and who is not.

Things go well and a few years later you’ve been able to add a few more employees, and then yet more.  All of a sudden it’s harder for you to monitor how your employees are meeting their goals – and it is easier for them to shirk some of their responsibilities because a larger staff means greater anonymity.  This is a case where size really does matter.

Speaking from experience, the larger the staff size grows arithmetically, the number the problems increase geometrically.   So how do we address this issue?

The normal procedure is that we move from being a hands on supervisor and we start developing policies and procedures.  We take from our experience and write down ways that can enhance the good ones and we look to avoid repeating those that led to poor results.

Then we start to build an infrastructure of employees whom we trust to be able to oversee certain parts of our business to which we cannot devote our full attention.  The successful business owner/manager will, as part of this process develop ways to measure how effectively his employees, both supervisors and those she supervises are doing.

Accountability is essential in this process.

But what if you have an organization that does not have accountability?  What if your employees get paid their regular check whether they do an exceptional or poor job in performing their duties?  In private industry you ultimately have a company that is going to lose market share and if the problem grows large enough, you have a company that ceases to exist.

In government you have the IRS.

A recent story in Yahoo News describes how a huge organization like the IRS can let Billions of dollars get refunded through an identity theft scheme.  Apparently, this is not all that complicated to concoct as their estimate is that 1.5 million fraudulent claims for refunds are going to be processed by that agency.  The story suggests that the IRS may have paid out more than $5 Billion in fraudulent refund requests in 2011 alone.

When people are motivated they will always find ways to “game” the system.  Sadly, that is the nature of some of us and probably always will be.  I do not expect that the IRS, any other government agency or even for-profit corporations will be able to detect and catch all fraud.  But look at these examples of how egregious some of these refund requests were.  Even a novice bookkeeper should have caught some of these.

“In one example, investigators found a single address in Lansing, Mich., that was used to file 2,137 separate tax returns. The IRS issued more than $3.3 million in refunds to that address. Three addresses in Florida, the epicenter of the identity theft crisis, filed more than 500 returns totaling more than $1 million in refunds for each address.”

“In another troubling scenario, hundreds of refunds were deposited into the same bank account — a red flag for investigators searching for ID thieves who may be filing for refunds for multiple people. In one instance, the IRS deposited 590 refunds totaling more than $900,000 into one account.”

“We found multiple reasons for the IRS’s inability to detect billions of dollars in fraud,” J. Russell George, the Treasury Department’s inspector general for tax administration, said in a statement. “At a time when every dollar counts, these results are extremely troubling.”

For a real life look at how inefficiency runs rampant within this tax collection agency, I refer you to an earlier post.  Everything described in that post happened exactly as I described, (because I am not sufficiently creative to make any of it up).

This story gives new meaning to the old phrase, “Hi, I’m with the IRS and I’m here to help you.”  From the size and amount of the fraudulent refunds being issued, I guess they are fulfilling their mission – at your expense and mine.

Comments on: "SIZE MATTERS" (13)

  1. What bugs me (and yes, I agree with all your points here) is that this type of systematic fraud is very simple for a computer system to pick out and call to somebody’s attention. if the IRS’s don’t, then I would say were defrauded in the software purchase (or were too dumb to think of it, I suppose).

    We’ll never kill fraud as long as there are people who want easy money but, there’s no reason to make it this simple!

    • I’ve referred to my two years working for the State of Illinois which was my first full time job. After a few months, it was obvious to me that there were ways we could greatly reduce the costs of our operation and do our jobs more efficiently. I prepared a report (which I wrote and typed up on my own time) and couldn’t wait to present it to my boss. I even purchased the little clear plastic binder out of my own money to make it look professional.

      When I asked to speak with him to show him what I had done he looked at me and said, “Look you’re new here and don’t know how things works. It doesn’t matter what you have to say in this (sneer) report. We’re not going to change how we operate. Do you want your report back – or should I just put it in the circular file?”

      And it is just that sort of mentality that explains the situation at the IRS and other government agencies.

      • Yes it is. And I’ll have to say at least he was honest. It also shed a lot of light on why anything done by the government (at any level) could be done at least twice as well for one fourth of the cost by a contractor. I still say the best thing that could happen to this country is 75% unemployment in Washington, and Springfield, and Lincoln and all the rest.

        And it’s been that way since Joseph invented bueaucrats.

      • Well, if they’d add me as a signator to the account, I’d be happy to sign the unemployment checks.

      • Can I countersign, Please, please…

      • That is disgusting! How are government workers supposed to become motivated to perform at a higher level if their efforts are dismissed in this way? This pisses me off! 😡

      • Sadly, when you have a lifetime guarantee of employment, there is no need either for excellence or for motivation. Until the paychecks stop coming. (See Greece).

  2. Great essay. I see that someone else has already jumped on the bandwagon with, essentially, “It ain’t just the IRS, kids”. Who was twiddling their thumbs while the real estate market was overheating? Government regulators — all the danger signs were there. The waste I saw while in the military is also what leads me to believe that all this talk about damaging our Defense Department’s response ability by cutting $50 billion a year from the defense budget is just baloney. All they need is for someone to better audit contracts, do some labor studies, and hold the overruns down.

    • Thank you.

      I don’t know if you’re familiar with the CNBC series, “American Greed.” One of the episodes dealt with two sisters whose only account was the U. S. Air Force. They sold small parts and an invoice generally was less than $20. One day instead of charging $3 for shipping, they accidentally typed in $30 – and got paid. So they began escalating the shipping charges and made off with almost $2 Million. They only got caught because they inadvertantly duplicated an invoice number. The fact that they would bill for goods $30 and shipping for $1500 never raised an eyebrow.

  3. Believable and tragic.

  4. Not to mention the plethora of citizens dragged into court & jails based on IRS error. I mean, if the IRS can’t even detect their own victimization, how is it that we are asked – excuse me, commanded – to trust that they are qualified to manage – excuse me, commandeer – our personal income??

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