As the owner of a construction company, you know that fraud is one of the most damaging things you can encounter. Unfortunately, it’s also one of the most common. Most fraud deals with employees falsely appropriating funds to their own accounts or charging for work that was not done. However, fraud can be as simple as using company materials for personal use.
Whatever the fraud, the impact can be devastating to companies. According to a study by the Association of Certified Fraud Examiners, the average fraud case costs construction companies $245,000.
In part two of our guide to construction fraud, our Miami construction attorneys, will give you several more examples of fraud that we’ve seen in our years of working with construction professionals.
Change Order Fraud
Change orders can be a bone of contention on a construction site and can lead to fraud. The issue centers around the accuracy of the change order itself. If the change order does not have a scope description or design specifications, it should be questioned. Change orders may also have additional charges that aren’t in keeping with the scope of work. This should be questioned as well. If you are having issues with change orders, a Miami construction attorney can provide the guidance necessary to protect your interests.
Smaller construction companies that do cash transaction are in particular danger for this type of fraud. When cash comes in, fraudsters take money from it before it’s recorded. To the company, it simply appears as if less cash came from the transaction.
Charging for Items That Have Already Been Budgeted
Certain costs are included in lump sum accounts. Fraudsters in turn may charge for those same items. This way, not only is the item provided to them, but they can also be paid for the cost of the item.
This is simply forging a signature or writing a check on a company account. If proper controls aren’t put in place to prevent this activity, it can happen often.
For more examples of construction fraud, visit part one of this series.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.