One of the biggest issues facing any contractor or construction company is the prevalence of fraud. Fraud can occur in any industry, but the complexity of the construction industry presents numerous opportunities for fraud to occur. And it’s not always outsiders conning unsuspecting business owners out of their money. Typically, it’s a person within the company that understands the organization’s business and financial processes that commits the crime.
Our Lakeland construction attorneys have worked with countless companies over the years and, unfortunately, many have had to deal with fraud. Those who have dealt with fraud often share a common issue within their organizations- a lack of internal control. Many of these companies have someone in charge of bookkeeping duties, but don’t have any way to ensure that this person is performing their job properly. Also, these companies don’t have systems in place to double check expenditures or ensure that equipment and materials are always in the right place.
Types of Fraud
Regardless of who commits it, fraud can take on numerous forms. Here’s a few of the most common:
- False payment (fictitious line items, fake invoices, roll-forward errors)
- Billing for incomplete work
- Stolen inventory or inventory used for non-work related activities.
How to Detect and Prevent Fraud
Preventing fraud in your company starts with you. As the leader of your company, you set the tone by handling all business functions in an honest fashion, informing employees that fraud will not be tolerated, and putting measures in place to detect and prevent fraud before it starts. A Lakeland construction attorney can also provide guidance how to best deal with fraudulent activity in your company. Consider the following tips:
- Pay close attention to all business expenses. Review your budget regularly and make sure that line items and expenses always correspond with each other. Additionally, financial statements should be reviewed periodically.
- Track equipment. One of the most common forms of fraud is the use of construction equipment for personal activities. Continually monitor the location of equipment and materials using cameras. GPS tracking technology may be used as well.
- Make multiple people responsible for financial tasks. Doing this ensures that one person is not in control of your company’s finances. These duties can be split in a way that makes sense for your company.
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.