While there are many types of employee fraud schemes, the most common types affecting construction companies include the following:
Creating fictitious vendors — dummy companies from which nonexistent services or materials are being purchased
Check tampering — altering payee, altering amount, forging signature, forging endorsement
Taking kickbacks, inflating invoices from subcontractors
Stealing job materials, tools and equipment or making unauthorized scrap sales
Payroll — creating ghost employees and overstating hours worked
Making personal purchases as well as abusing expense reimbursements
Listed here are several fraud prevention (oversight) techniques that construction companies should implement.
Bank statements should be mailed directly to someone not involved in bank transactions (check writing, deposits, transfers, etc.), such as an owner, who should review the statements and canceled checks
Bank reconciliations should be performed timely, preferably by a trained employee not involved in bank transactions
Segregating duties, such as the responsibility for authorizing transactions, recording transactions, and maintaining custody of assets should be assigned to different employees
Requiring periodic job rotation and mandatory vacations
Requiring authorization and approval of transactions with appropriate dollar limits — check signing, purchase orders, credit cards, etc.
Physical controls over documents and records – storing blank checks in locked cabinets, use of password protection of computer files
Physical safeguards over assets — security measures, consider surveillance cameras to monitor materials, tools, and equipment
Create a whistleblower program
Preparation of timely, detailed, monthly financial statements which need to be reviewed by management
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