Fraud is not specific to any industry and it becomes even more prominent in construction industry. What stats reveal is not surprising as we constantly hear about frauds related to the construction domain. Whatever stage you consider, fraud has found its place everywhere. From bidding to the project execution, no where you can expect a scam free transition.
As per the Kroll’s 2015/16 Global Fraud Report, three-quarter of the construction companies considered faced one or the other kind of fraud. If you further investigate about the numbers, you will find that this industry has the highest rate of compliance breaches (18%). In addition, it stands second for theft of physical assets with 36% and vendor or procurement fraud with 24%.
Most alarming part is its highest increase in fraud exposure as compared to any sector which has been recorded to be 92%.
As the fraud is not ready to decline, we need to increase our effort into identifying and preventing these frauds before they can create havoc.
It may seem to have the minimal effect but tends to cause the highest damages. On time delivery saves you from lot of external and enduring cost. However, time theft is the most common and easiest fraud to commit. For instance, a worker can align a co-worker to help him manage to leave and avoid later consequences. This impact the productivity and in turn can increase the final budget cost.
Recently, a renowned company based in New York was found altering time sheets to charge for time that was not worked. This company charged for the time when the workers were not there and subcontracted with other companies without client’s approval. Client was alert and provided the evidence of their fraud and they ended up paying 7 million dollars.
To avoid such incidence, we can install security cameras at the construction sites and can use thumb scanners to count the number of hours for each worker. Today, technology allow us to integrate these data to the project management software for remote access.
False injuries and negligence
There have been incidents when workers get injured while working at the construction sites. Hence, law requires the management team to insure all the workers at the site. However, there are cases when a worker claim that insurance money when injured somewhere else. This is a typical fraud and can be avoided through maintaining proper surveillance at these sites. In these cases, cameras can be handy and cheap way out.
Contractors are responsible for getting the material to the site. They often bill for higher grade material and provide a lower grade material. This hampers the firm reputation through poor quality and firms end up paying surged charges for the material that is way more expensive than the actual cost. There are also times when a contractor charges the bill for a material at two different projects.
It becomes vital to make every detail noted through video recording. A real-time inspection can help avoid such fraud. Inspection combined with video recording of arrival and removal of material from job site can prevent these thefts from occurring or can minimize it to a greater extent.
Incorrect assessment and representation
You hire contractors to help you assess the exact workforce you would need to complete the task in given time frame. They take advantage of their expertise and bill you for 10 labour when you required only 7. You end up paying unnecessary cost.
Similarly, they also send unregistered labours and pay them less as per the asked price to profit their firm with extra income. You can also get into legal trouble if you get into contract with a firm that does not fulfil the required regulation.
Therefore, make sure you have all the paper work properly read and signed. Signed documents can help mitigate the risk associated with these kinds of fraud.
There is no running away from the fact that these frauds are likely to happen at almost every job site. So, you can take these necessary measures and keep an eye on day to day activities. Do not depend entirely on any third party to be loyal to your job. You are the one who will be paying for these frauds, so better be alert than sorry.