Fraud Doesn’t Have to Be a Cost of Doing Business


Zach Capers, CFE
ACFE Research Specialist

As a fraud examiner, I often see occasions when it seems that others do not recognize the seriousness of the threat posed by fraud. While Certified Fraud Examiners (CFEs) are trained to be familiar with many of the underlying causes of fraud and associated prevention strategies, fraud is too often dismissed by others as an acceptable loss or casually labeled as a cost of doing business. Moreover, management at many organizations would simply prefer to ignore these problems and absorb losses from fraud rather than open the company up to scrutiny and risk reputational harm. This frustrating attitude not only breeds an environment of indifference, but can often exacerbate the very factors that lead to fraud in the first place.

Few other industries are reputed to treat the problem of fraud with more apathy than that of construction. According to the ACFE’s 2014 Report to the Nations, 3.1 percent of all reported fraud cases occurred within the construction industry, resulting in a median loss of $245,000. Additionally, a recent Grant Thornton report found that approximately 10 percent of the global construction industry’s profits are lost to fraud — a staggering amount totaling an estimated $860 billion.

While the ACFE’s new online self-study course, Construction Fraud, might seem suited only for those people either directly or indirectly involved in the construction industry, it has been designed to be of use to CFEs of all backgrounds. One of the most interesting aspects of fraud in the construction industry specifically is the fact that, from the inception of a project to its completion, virtually every type of scheme imaginable can take place, including corruption, bid rigging and fraudulent disbursements. Furthermore, the intricacy of most construction projects requires the inclusion of numerous parties, including government officials, corporate executives, contractors, suppliers and procurement specialists to name only a few. These factors combine to form a veritable microcosm of fraud from which everyone can learn.

Perhaps it is this overwhelming complexity that causes people to view fraud as an inevitable consequence of business in not only the construction industry, but countless others as well. However, all CFEs know that the only people benefiting from fraud in any industry are the fraudsters themselves.

Fraud affects the bottom line of all companies, which in turn affects every employee, whether in the form of a decrease in benefits, a salary increase put on hold, or any number of other negative consequences. For this reason, we should never accept fraud merely as a cost of doing business and should instead endeavor to change the permissive attitudes that enable fraud at the expense of everyone else.