This case introduces students to fraud as a legal concept grounded in intent and challenges them to distinguish fraud from broader categories of noncompliance and improper payments. Students analyze government data and case materials to compare two major sources of federal financial loss—taxes legally owed but not paid (the tax gap) and government payments issued improperly, including refundable tax credits and Medicaid payments.  

The case emphasizes that many improper payments arise from errors, missing documentation, or system limitations rather than deliberate fraud, requiring students to evaluate evidence critically rather than assume wrongdoing. It also highlights how large-scale systems can prioritize procedural compliance (“checked boxes”) without verifying underlying facts, allowing both errors and fraud to persist. 

Across multiple parts, students assess how different measurement approaches (e.g., sampling-based estimates vs. targeted investigations) can produce very different conclusions about fraud, and consider what each method captures or obscures. The case develops students’ ability to apply professional skepticism, evaluate intent, and understand the limitations of reported metrics when making judgments about fraud and financial risk. 

Suitable courses: Auditing, forensic accounting, or governmental accounting.

Link to download files (requires login)