GUIDE: Construction Anti-Fraud Checklist

Jan 24, 2022Construction & Real Estate, Guides

Enron. WorldCom. AIG. Lehman Brothers. Thanks to their massive fraud cases that made front-page news, these company names are familiar. Their stories have made us more aware of fraud and how it can affect businesses. 

Unfortunately, fraud is not something that occurs only in large public companies; it can just as easily be perpetrated at small local businesses.    

In 2020, the Association of Certified Fraud Examiners (ACFE) published Report to the Nations, a global study on occupational fraud that used data from real fraud cases to explore the costs, schemes, victims, and perpetrators of fraud. The ACFE surveyed more than 2,000 small businesses and organizations and found that the median loss per fraud case was $125,000. Of those 2,000 entities surveyed, 77 were in the construction industry, and the median loss for those companies was $200,000. With all this in mind, construction business owners and other leaders must be aware of the warning signs of fraud and employee theft.

HERE SOME OF THE MOST COMMON TYPES OF CONSTRUCTION FRAUD:

  1. Materials & Expense Reimbursement Fraud 
  2. Change Order Fraud
  3. False Representation
  4. Collusion
  5. Internal Fraud
  6. Financial Statement Fraud 
  7. Billing Fraud

While the above list may seem overwhelming, there are several things you can do to help prevent and detect fraud within your construction company. 

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