According to the Association of Certified Fraud Examiners (ACFE) 3.4% of all reported fraud cases, over a two year period up to December 2011, were attributable to the Construction industry.

The presence of fraud and corruption in Construction can take many forms; from falsely representing the numbers of hours a contractor works, through to collusion when bidding for contracts or paying bribes to secure a contract. These inevitably increase costs and, in the case of bribes, inflate the contract price.

More companies need to wake up and recognise that fraud and corruption costs, in terms of profits and a company’s reputation. It’s a real threat to growth!

By attending this course you will understand fraud undertaken by phase of construction, why it goes undetected and how to assess the risk of construction fraud on your own projects.

Moreover, you will learn practical prevention practices, how to protect you and your organisation from the consequences of corruptive behaviours and you will be able to deal with and address the difficulties related to construction fraud in order to safeguard the assets and resources of your organisation.

• Understanding what fraud is
• Identifying red flags of construction fraud
• Understanding what construction fraud entails at each phase
• How to prevent fraud upon detection: at the procurement phase; at the supply chain phase and the construction and completion phase.
• What processes can be introduced to reduce the threat of construction fraud
• Taking the appropriate steps on risk management and fraud detection
• Strengthening the internal controls and the compliance programmes.

Fraud Principles

• What is Fraud?
• Fraud Detection: Responsibility
• When, How, by Whom fraud was committed?
• Fraud Triangle – Fraud Diamond
• Profile of Fraudsters
• Red Flags

Characteristics of Construction Fraud

• Not necessarily a single department’s problem
• It is more than ‘cooking the books’
• It can be perpetrated via various collusion mixes
• Difficulty in detecting construction fraud
• Need for a construction fraud strategy

Fraud Schemes 

• Non-payment of subcontractors and material suppliers.
• Billing for unperformed work.
• Manipulating the schedule of values (SOV) and contingency accounts.
• Diverting lump-sum cost to time-and-material costs.
• Substituting or removing materials.
• Change order manipulation.
• Falsifying payment applications.
• Subcontractor collusion.
• Diverting purchases and stealing equipment or tools.
• False representations.
• Detection
• Case Studies
• Red Flags of Schemes involving collusion among contractors, sub-contractors and employees

Fraud in the Contract Performance and Administration Phase

• Product Substitution
• Mischarges: Accounting, Material and Labour
• Detection
• The Corrupt Recipient
• The Corrupt Payer.
• Kickbacks Schemes

Work group

• How does construction fraud affect your organisation and the bottom line?
• What are the construction fraud risks in the supply chain process?

Session 1. Fraud Risk Assessment

• Approach to risk management: Definitions
• Risk and culture
• The COSO Framework for Enterprise Risk Management

Risk Management

• The Sarbanes-Oxley Act (SOX)
• Risk identification
• Management of risk

Fraud in Selected Areas

• A model for controlling contracts
• Gifts and entertainment in construction fraud
• Organized crime in construction
• Bid rigging
• Disadvantaged Business Enterprise programs and other set asides

Construction Fraud Detection

• Steps for encouraging fraud detection
• Why managers and auditors don’t detect construction fraud
• Building fraud detection into your audit and management practice
• Exposures and symptoms of fraud occurrence
• Understanding behavioral red flags of construction fraud
• Using data mining to detect construction fraud
• Fraud implications of spreadsheets

Construction Fraud Investigation

• Understanding the investigative process
• Elements of a complete investigation
• Barriers to responding to suspected construction fraud
• Investigative perils and pitfalls and how to avoid them
• Investigation tips and techniques
• Suggestions for proving suspicions and allegations
• Fraud investigation checklist and supplement for contractors and vendors
• Using a personnel spreadsheet
• Proving kickbacks
• Internal Control Review Report Matrix

Monitoring and Review of Construction

• Unannounced audit
• Review of work progress
• Review of completed work
• Review of materials, quality and suppliers
• Cost over-runs, delays and non-compliance

Case study/Work group

• Identifying steps to detect construction fraud in own organisation
• Actions required on fraud detection
• Anti-Fraud and Anti-Corruption Compliance Program