Denise Cicchella, CFE, CIA, CCA, PMP
Tishman, Bovis Lend Lease and Structure Tone are companies known around the world for their quality craftsmanship and superior quality of work, but now they are becoming known for other qualities they hope will soon be forgotten. In many construction projects, whether residential or commercial, there is money doled out to a contractor that is not earned. But over the past few years, we in the industry are seeing construction fraud schemes hit the headlines more and more.
Take the following examples:
- City's Construction Giants Face Criminal Probe for Billing Fraud, WNYC News
- Contractor Agrees to Pay $19.6 Million in Fraud Case, The New York Times
- Building Firm Pleads Guilty to Defrauding Its Customers, The New York Times
The benefit, if there can be a benefit from fraud, is that organizations and owners are using this as an opportunity to look for fraud, find errors and more tightly control their projects. It is no longer an environment of, “Yes, I know it is happening but what choice do I have?” It is an environment of, “Yes, I know it is happening, now what can I do to stop it or to minimize my losses?”
Some of the top areas for fraud in construction projects are duplicate payments, conflicts of interest, padded billing, fictitious vendors and payroll fraud in the form of ghost employees. Statistics on fraud versus error might be skewed, as owners are more interested in recovering money than pursuing prosecution. With that said, construction fraud and procurement fraud are still high ranking in the ACFE's Report to the Nations.
I, for one, have taken a stance to educate and train organizations about how to audit capital and construction projects, what to look for to identify a project as a problem, and the next steps to take when recoveries do not go their way. I have seen organizations take a more proactive stance in project involvement, and I have seen auditors, construction auditors or operational auditors take more of a position to question why things happen rather than just blindly accept what is said. With these steps forward, I am hopeful that we can reduce the prevalence of fraud and error in capital projects.
You can learn more about fraud in capital projects and the construction process by attending my upcoming ACFE webinar, Fraud in Capital Projects and the Construction Process, September 25, 2014, at 2 p.m. EST.