Fraud is an unfortunate part of business. It’s especially prevalent in the construction industry where the average fraud case costs companies $245,000, according to a study by the Association of Certified Fraud Examiners (ACFE). The pace of a construction site, the number of people involved, and volume of paperwork, at times, makes construction companies ripe for fraud, especially among employees. The ACFE study also indicates a direct correlation between the length an employee has worked with a company and incidents of fraud.
Fraud can have an enormous impact on construction companies. Protecting your interests is key. That’s why the Miami construction lawyers at Trent Cotney, PA. have created this two-part guide identifying the types of fraud plaguing the construction industry. We also have provided a separate guide with tips for reducing incidences of fraud in your company.
Construction fraud examples include:
False payments can come in the form of inaccurate totals on invoices, false invoices for fake materials or services,
fictitious expense report reimbursements, or improper corporate credit card use. Regardless of the method, the money typically ends up in the account of a shell company or being used for personal items.
Billing for More Work Than What Was Actually Performed
In this scenario, contractors charge for work that has not actually been completed. Without a connection between billing and what actually happens on a site, this can easily happen. Typically, the discrepancy is small but adds up over the course of the project.
Charging for High-Quality Materials While Using Lower-Quality Materials
Once again, a disconnect between billing and the construction site can lead to this occurrence. The fraudster pockets the difference in price for the materials. This is a dangerous type of fraud because the result of using lower-quality materials can compromise the integrity of the structure.
Stealing Materials, Tools, and Equipment
Unfortunately, theft is prevalent on construction sites. Construction sites are busy. Missing items aren’t always noticed. Tools and equipment are used all the time on a construction site, so some workers feel that taking these items home is not a big deal.
For more examples of construction fraud, visit part two 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.