How to Avoid Fraud in Your Construction Business
(October 30, 2019)
- A lot of the fraud associated with construction comes via corruption, which damages a company and its affiliates, and often ends up as attractive headlines for media platforms – which can add further damage to your brand. After that: billing and/or accounts-payable-related scams. Between the three, they comprise around 80 percent of construction fraud cases.
What can we do to prevent it – or at least get in the way of it?
Establish and enforce controls:
Controls include surveillance and monitoring, internal audits and management reviews. Utilize an evaluation committee with objective members for the bidding process. Segregate duties when handling sensitive information. Enforce an anti-fraud culture with training, support and consequences if needed.
Define work costs:
Within the contract, include a provision that defines all costs compensated for by the owner, including what is allowable and what is not.
Identify insurance costs:
You should clearly understand what is being charged and why. It’s a complicated issue – and both parties can find themselves overpaying.
Make sure all negotiated costs and contracts include a right-to-audit clause (external and internal). Internal audits should be conducted by either experienced internal audit staff or outsourced auditors with experience in construction audits.
Modern fraud-detection software tools like Viewpoint, Textura, TradeTapp, Assemble and PlanGrid provide extra layers of internal systems protection that will ultimately save you time, money and, perhaps, reputation if you find yourself on the wrong side of a racket.