Most people know that the federal government does not operate as a traditional business that generates revenue through sales or profits. Instead, its primary source of income comes from taxation. Here’s how it works:
Taxation as Income
The federal government raises money primarily through taxes imposed on individuals, businesses and other entities. These taxes come in several forms, including:
- Income Taxes: Taxes on wages, salaries and other income paid by individuals and corporations.
- Payroll Taxes: Taxes collected from employees and employers to fund Social Security and Medicare.
- Excise Taxes: Taxes on specific goods like gasoline, alcohol and tobacco.
- Tariffs and Customs Duties: Taxes on imported goods.
Why the Government Doesn’t “Make” Money
Unlike businesses that produce goods or services for profit, the federal government doesn’t engage in profit-making activities. Its “income” comes from transferring wealth from the private sector (taxpayers) to fund public programs, infrastructure and other services. When it needs more money to fund new initiatives, address deficits or cover rising expenses, it increases cash intake by:
- Raising Taxes: Increasing the tax rates on income, capital gains, corporate earnings or other taxable activities.
- Expanding the Tax Base: Broadening the range of activities or transactions that are subject to taxation (e.g., introducing new taxes on digital goods or carbon emissions).
Construction and real estate development play a significant role in expanding the tax base for local, state and federal governments by increasing property taxes, generating sales tax from materials and consumer spending, creating jobs, attracting businesses and fostering long-term economic growth. This influx of tax revenue allows governments to fund public services and infrastructure improvements, creating a positive cycle of development and prosperity. Click “How Construction and RE Development Help Expand the Tax Base for Local, State and Federal Governments” to get an expanded version.
Whether government, private business or individual households, not understanding how money is generated—and the intake vs outlay of money—can lead to the destruction of a thriving entity.
Implementing Financial Stewardship Practices in Construction Management
I often speak with individuals who are under financial pressure at home, and they believe the solution is to ask their boss for a raise or switch companies to earn more. However, if they don’t learn to manage their money wisely and live within their means, they risk facing the same financial difficulties down the road. Without addressing the root issue—spending habits and stewardship—the problem will persist, regardless of their income. Others are excellent stewards of their own money yet have a different mindset with the companies’ resources. Whichever mindset you have, there are ways you can help your place of business survive and thrive, ultimately creating higher chances for stability and increased income for yourself. Checking to make sure you do not have OPM syndrome is extremely important as it can be fatal in the long term.
How Irresponsibility with “Other People’s Money” Leads to Financial Mismanagement in Construction
OPM Syndrome stands for “Other People’s Money Syndrome.” It refers to a mindset or behavior where individuals or organizations are more reckless or irresponsible with resources, particularly financial ones, when they are not personally responsible for the consequences. This often leads to poor decision-making, inefficiency or waste because the person spending or managing the resources does not feel the impact of the losses as they would with their own money. This syndrome is commonly seen in corporate settings, government projects or any scenario where there is a separation between the people making financial decisions and those who ultimately bear the costs.
Here are some ways a construction team might abuse an owner’s money:
- Inflating Costs:
The team may artificially inflate the cost of materials, labor or subcontractors, charging the owner more than necessary and pocketing the difference. - Unnecessary Change Orders:
Initiating or approving unnecessary change orders to generate additional work and increase billing, even when such changes aren’t critical to the project. - Overbilling for Labor Hours:
Submitting inflated timesheets, charging for hours not worked or overstaffing the project to bill more labor than is actually needed. - Using Inferior Materials:
Purchasing lower-quality or cheaper materials than specified while charging the owner for premium materials, thus increasing profit margins at the expense of the project’s quality. - Kickbacks from Subcontractors or Suppliers:
Accepting bribes or kickbacks from subcontractors or suppliers in exchange for giving them the job, even if they are not the most qualified or cost-effective option for the owner. - Padding Expense Reports:
Submitting inflated or fabricated expense reports, such as charging for luxury travel, meals or accommodations that are unnecessary or beyond what was agreed upon. - Project Delay for Financial Gain:
Deliberately slowing down the work to trigger additional charges, such as delay penalties, extended project timelines or increased overhead costs that the owner is then required to cover.
These actions can severely damage the trust between the owner and the construction team, leading to potential legal and financial repercussions, as well as compromised project outcomes.
Here are several ways an employee might abuse an employer’s money:
- Falsifying Expense Reports:
Submitting inflated or fabricated expenses for reimbursement, such as claiming personal meals, travel or entertainment as business-related expenses. - Time Theft:
Misrepresenting hours worked by falsifying timesheets, logging overtime not worked or using work hours for personal activities while still getting paid. - Misuse of Company Credit Cards:
Using a company credit card for personal purchases, such as shopping, dining or entertainment, that are unrelated to business purposes. - Over-ordering Supplies for Personal Use:
Ordering more supplies or materials than needed for the job and then taking the excess for personal use or resale. - Unauthorized Purchases:
Using company funds to buy unnecessary or unauthorized items, such as electronics, furniture or other non-essential goods that benefit the employee personally. - Manipulating Vendor Relationships:
Colluding with vendors to inflate invoices or receiving kickbacks in exchange for favorable contracts, leading to the company overpaying for goods or services. - Personal Use of Company Resources:
Using company assets, such as vehicles, equipment or facilities, for personal projects or side businesses without permission, costing the company in maintenance, wear and tear or lost productivity. - Fraudulent Reimbursement Claims:
Claiming reimbursement for travel or other business expenses that were never incurred or providing fake receipts to justify reimbursements.
These actions not only result in financial losses for the employer but can also erode trust and negatively impact workplace culture. After all, an individual’s behavior and actions, good or bad, affect the family you are connected to—home or workplace.
5 Key Questions to Prevent OPM Syndrome and Ensure Financial Responsibility in Construction
To help ensure you avoid OPM Syndrome and cultivate responsible financial stewardship at work, ask yourself or others these questions:
- Am I treating company resources with the same care and responsibility as I would my own?
Reflect on how your decision-making would change if you were personally affected by the financial outcomes.
- Do I fully understand the impact of my financial decisions on the company’s long-term health and stability?
Consider whether short-term gains could lead to long-term consequences for the business.
- Am I using resources in a way that aligns with the company’s values and goals?
Ensure your actions support the overall mission and objectives of the business rather than personal gain.
- Have I explored all cost-effective and ethical alternatives before making financial commitments?
Before committing company funds, assess whether you’re choosing the most efficient and responsible option.
- Am I promoting transparency and accountability in all financial dealings?
Encourage open communication and ensure that all expenses and financial decisions can be justified and tracked clearly.
By consistently asking these questions, you can help prevent OPM Syndrome and contribute to a culture of trust, integrity and long-term success within your organization.
