It's a problem of incentives.

Governments have a limited (although large) budget, and no incentive to spend it well[1]. You don't get promoted as a government administrator if you approve a Nobel-prize-winning grannt.

If you don't get rewarded for good work but may get punished for taking risks, you optimize for risk minimization, even if this means a lot of potentially-good work not getting done.

Nobody blames the FDA when millions of people die from the-medicine-hasn't-been-invented-yet-itis, everybody blames the FDA when ten or so people die from a side effect nobody saw. This impacts FDA policy.

This person has the best incentive there is in the world, the incentive to live. He didn't care whether the people getting his money correctly filled form 437-F, or whether they have the relevant paperwork that verifies their legitimacy in a way which can be described by legal rules.

[1] Incidentally, finance has (had?) the opposite problem. If your bonus is calculated as min(0, percentage * profit_generated), you will maximize risk, optimizing for bets that give you great returns most of the time, but wipe you out completely some of the time, as your losses are clamped to 0.

> If your bonus is calculated as min(0, percentage profit_generated)*

I assume you meant `max(...)`? Otherwise you will at best get zero dollars in bonus, and at worst owe your employer money. ;)

(I get min/max backward all the time too.)