According to Robert Louis Becker, who appears not to mince words, provides this example for why construction audits are needed. “For every dollar spent on Time and Material (T&M) jobs, the contractor can recover all of his direct costs plus all of his indirect overhead costs plus fees (profits). If all costs are recovered plus a fee for their overhead and profit, the contractor has little incentive to save the owner’s money and expedite the work in the most prudent manner. The longer a project is delayed, the longer the contractor’s equipment can be rented, the more field and office staff can be billed, and more overtime that is worked all contributes to more profits.”
My thoughts:
Project owners who fail to exercise proper oversight need to realize that at some point the once projected bottom line will no longer be attainable. However, periodic examinations (audits) may produce findings that turn into recoveries, putting once lost money back into their pocket.
On the same note, contractors need to understand that a lack of internal controls or enforcement thereof may lead one to become a victim of embezzlement or theft. Choosing this course often leads to wishful thinking believing you’re going to recover most or all that was taken. According to the ACFE's 2022 report, only 13% of those surveyed recovered all of their losses.
Ipsen Due Diligence specializes in construction fraud to include detecting acts of misrepresentation, embezzlement, false or misleading invoices and speaks to the prevention and theft of material and equipment.
Comments