Fraud Fact Finds

In: Business and Management

Submitted By offodile
Words 290
Pages 2
Problem
Fraudulent Disbursements
Fraudulent disbursements are schemes which result in a building owner making payments to the contractor based on false pretenses. Here are just a few:

Falsified wages
Falsifying wages involves invoicing labor in excess of actual cost and/or submitting falsified payroll information. In addition to hours not worked, individuals may be invoiced at the incorrect labor classification rate. For example,

Corrupt Practices
In the ACFE report, the most common instances of fraud involved corruption, which occurred in 27 percent of all cases. Corruption typically includes two bribery schemes: kickbacks and bid rigging. Both are avoidable with preventive controls.

Kickbacks
Kickbacks are undisclosed payments the contractor makes to an employee of the building owner. In the construction industry, this may include approval of a change order as part of the overbilling

With respect to bid rigging the main concern is not the type of bidding process that is used, but whether there is an aggregate segregation of roles so that the project manager is not the one receiving and opening bids, as well as receiving information on the contract.

Controlling Risk at all Stages
To ensure building owners are only paying for the goods and services that were specified, internal auditors need to ensure implementation of key controls has occurred. The following controls should be implemented for each stage of the six stages of the construction life cycle to provide clear direction for contractors and to reduce the potential for conflict during construction.

Stage 1: Awarding Construction Contracts—Ensure the award process has adequate internal controls for requesting, receiving and evaluating bids and proposals. The process also should ensure the project team has the experience and the technical and financial capabilities to provide the…...

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