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/ BUILDING DIALOGUE / DECEMBER 2014
Is Your Company a Target for Fraud?
Would You Know Where to Look?
W
ould you know if your company was the
target of a fraud scheme? What if an
employee was taking lavish vacations or
enjoying extravagant dinners and having your
company pick up the check? Or what if a general
contractor was overbilling your projects, submit-
ting invoices for materials that had never been de-
livered or for labor that had never been provided?
Or, perhaps most dangerous of all, what if your proj-
ect managers were organizing kickback schemes,
awarding sweetheart projects to contractors in ex-
change for under-the-table payments? Would you
know? Would you know where to start looking?
These situations may seem far-fetched but, accord-
ing to the 2014 Report to the Nations on Occupation-
al Fraud and Abuse, prepared by the Association of
Certified Fraud Examiners, these frauds may be taking
place at your company while you’re reading this arti-
cle. In fact, the report estimates your company may be
losing 5 percent of its annual revenues to fraud and
abuse. If you have a $50 million real estate or con-
struction company, that means $2.5 million may be
bleeding out of your company every year, benefitting
no one but the fraud perpetrator who is stealing it.
The report says expense reimbursement schemes
make up nearly 28 percent of construction and real
estate company frauds. These frauds include such
items as mischaracterized expenses, fictitious ex-
penses and multiple reimbursements. Remember
that lavish vacation your employee enjoyed? Imag-
ine if your employee was creating fake invoices for
fictitious project materials to cover their vacation
expenses, submitting them to your company for re-
imbursement. It’s always more fun to vacation with
someone else’s money, isn’t it?
Billing schemes make up an even greater por-
tion of construction and real estate company fraud,
comprising nearly 35 percent of reported fraud cas-
es. These types of schemes may involve internal
schemes, such as the creation of fictitious vendors,
created by company employees and then paid for
services, which were never actually performed. Or
they can include external schemes, such as a con-
tractor overbilling for materials or labor provided on
a project or billing for services never performed.
Finally, corruption schemes comprise the most
frequent type of fraud experienced by construction
companies. Corruption schemes include bribery,
Rand Gambrell
Director,
BKD
Colorado’s trusted leader for complex
construction projects since 1952
More than 60 years of building relationships
with great partners across the region
Corporate Office
5995 Greenwood Plaza Blvd.
Greenwood Village, CO 80111
303.571.5377
Colorado Springs, Colorado
496 Nevada Mesa View
Colorado Springs, CO 80907
719.633.4673
Fort Collins, Colorado
4800 Innovation Drive
Fort Collins, CO 80525
970.776.5500
Laramie, Wyoming
3840 Fort Misner Lane
Laramie, WY 82073
307.745.4866
1-877-5PHIPPS
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