Fall 2015 Issue of Horizons

CONSTRUCTION

Fraud In the Construction Industry by Ken Van Bree, CPA, CGMA

H ere’s a statistic that will keep you up at night…a typical case of fraud within the construction industry has a median loss of $245,000. This is based on the 2014 Report to the Nations issued by the Association of Certified Fraud Examiners (ACFE) on occupational or internal fraud. This report further showed that the construction industry’s median loss is approximately $90,000 higher than the average fraud losses across all industries. Construction companies are most at risk for fraud related to corruption (bribes and kickbacks), billing related schemes, theft of materials, check tampering and expense reimbursements.

What are the fraud schemes most likely to affect your company?

And how can you keep your company from experiencing these types of fraud?

What is the profile of a fraudster? The threat of fraud can never be wholly removed; however, companies should take steps to identify likely fraud schemes they might face. Below are a number of schemes frequently used to defraud construction companies. Billing Schemes The ACFE report indicates that billing schemes account for 35% of the fraudulent activity within construction companies.

page 38 | horizons Fall 2015