Kroll offers a “Contractor’s Guide to Combating Construction Fraud” which drives home the importance of Fraud Prevention for construction companies. As they say, prevention is always better than a cure and a lot less expensive especially when it comes to dealing firsthand with construction fraud. By implementing proactive strategies, one can minimize the risk of fraudulent activities within their construction business. Kroll in their 2015 Global Fraud Report offers some additional steps to help safeguard your business:
Create an anti-fraud culture where integrity and ethical behavior are valued.
Establish strong internal controls, such as segregation of duties and dual approvals.
Commit to regular audits and reviews of internal controls to ensure their effectiveness and identify any vulnerabilities.
Invest in education. Prioritize training sessions and workshops that raise awareness about fuel card fraud and other common fraud types in the construction industry.
Robust internal controls play a crucial role in mitigating construction fraud. This also involves the segregation of duties, which ensures that no single individual has complete control over a process, further minimizing the risk of a fraud scheme from taking place.
Additionally, dual approvals for financial transactions add an extra layer of security and accountability. By implementing access restrictions, you can limit unauthorized access to sensitive systems and information, while regular monitoring and review of internal controls help to identify any gaps or weaknesses and allow you to promptly take corrective action.
Before engaging contractors and suppliers, it’s extremely important to conduct the necessary due diligence to protect yourself from fraudulent activities. This involves:
Verifying contractors’ personal information, credentials, references, and financial stability to ensure you are working with trustworthy partners.
Are they operating from a “brick and mortar” building, do they have a website or other online presence?
Are there independent reviews posted online? Are they favorable?
Inquiring about their past experiences and performance in similar projects.
Vetting contractors and suppliers is one example of reducing the risk of encountering fraud and avoiding potential financial losses and project disruptions.
Ipsen Due Diligence helps construction companies reduce their exposure to fraudulent actions from internal and external sources. These fraudulent and costly actions often include embezzlement and vendor fraud. We do this through vetting assistance, site visits, and periodic audits.
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