They would catch a lot more cheaters if they would get out of the office and see for themselves. If someone's playing it, they sure aren't going to tell the truth. Really, the only way a cheater gets caught (if someone doesn't drop a dime) is when they do something different.
Does the system work? If you happen onto a worker who cares ... it does. If you can manage to pay the bills and still eat on the meagre payments, you can get by - without extras (ie no movies, beer and pizza and if you're single - you better get to like it)