Eckert, AlexandraAlexandraEckertMeyer, MatthiasMatthiasMeyerStindt, ChristianChristianStindt2024-10-232024-10-232024-10Norms and Behavioral Change (NoBeC 2024)https://hdl.handle.net/11420/49779Honesty of government officials and public administrators plays a crucial role in shaping the resilience of democratic institutions against fraud. Their behavior influences citizens' expectations and behaviors regarding integrity and accountability within these institutions. When social norms support honesty by strongly disapproving of fraud, they can reinforce democratic norms, including fair and ethical behavior in the political process, making institutions more resilient to such threats. Conversely, if societal norms are tolerant or even supportive of fraudulent behaviors, this can undermine society’s trust in democratic institutions and their ability to maintain a political level-playing field. In their 2024 ‘Report to the Nations’ the US-based Association of Certified Fraud Examiners (ACFE) found that Government and Public Administration is among the top three sectors most vulnerable to fraud worldwide. In addition, the World Bank’s Centre for Financial Reporting Reform (CFRR) argues that recent transparency and accountability-increasing financial reporting reforms – an integral feature of ongoing New Public Management transformation in many countries – may also increase the risk of financial statement fraud in government-owned enterprises and public administration. Thus, care must be given to strengthen internal controls, but also to prevent overriding such controls. Nourishing a social norm against fraud could be one mechanism to achieve the latter. Our research aims to assess the influence of norm sensitivities on public institutions’ resilience to financial statement fraud over time. Norm sensitivities are essential when studying behavioral change as they indicate individual tipping points for either following or abandoning a social norm. Knowing the distribution of individual tipping points may provide a first indication of the strength of a social norm against fraud in the given institutional context. We deploy a vignette-based survey to measure individual norm sensitivities in the context of financial statement fraud. This enables us to calibrate an agent-based fraud dynamics simulation model with these one-shot measured norm sensitivities to examine the resulting social dynamics over time. We assess the overall institutional resilience to fraud by conducting several virtual experiments: First, we change the initial number of fraudsters. We then compare the resulting number of fraudsters within the institution across different reference network conditions. We vary the reference network conditions between distorted local knowledge about what close colleagues do and perfect global knowledge about what all others in the institution do. These conditions represent different degrees of transparency within the institution. We repeat our simulation experiment 10 times to capture differences in intra-institutional networks. Overall, our results show that average institutional resilience against fraud is very high across all reference network conditions when the initial number of fraudsters is low. The more we increase the initial number of fraudsters, the closer we get to a tipping point where we can see clear differences in average institutional resilience against fraud across reference network conditions. In this scenario, fully transparent institutions on average fare better than closed ones. Above this threshold, institutions on average exhibit very little to no resilience against fraud across all reference network conditions.enhttps://creativecommons.org/licenses/by-nc-sa/4.0/social normsnorm sensitivity measurementABMfinancial statement fraudfraud dynamicsSocial Sciences::360: Social Problems, Social ServicesConference Poster not in Proceedings10.15480/882.1356110.15480/882.13561Conference Poster