Avoid Construction Fraud

By John Croy

The Association of Certified Fraud Examiners (ACFE) just released its white paper providing current statistics on fraud. Fraud, waste, and abuse still are prevalent in construction. Based on my experience, it may be even more common in school capital improvement programs.

As school board members, your primary responsibility is to provide quality education to your students. School districts may spend substantial amounts of funds on their capital improvement programs. You may not have the experience, expertise, and resources to ask the right questions regarding the process around capital improvement programs.

Also, many school districts do not have internal audit resources with the experience to provide an independent assessment of the capital improvement programs. All of this combined increases the risk for fraud.

The primary fraudulent schemes in the construction industry are corruption and billings. Of the fraud reported,
47 percent of the instances were due to corruption and 35 percent were related to billings. The median loss was $245,000. 

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