๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ญ๐ข๐จ๐ง ๐๐ซ๐๐ฎ๐ ๐๐๐ง ๐๐ ๐๐จ๐ฆ๐ฆ๐ข๐ญ๐ญ๐๐ ๐๐ฒ ๐๐ง๐ฒ๐จ๐ง๐ ๐ญ๐ก๐๐ญ ๐ก๐๐ฌ ๐ ๐๐ข๐ซ๐๐๐ญ ๐ซ๐๐ฅ๐๐ญ๐ข๐จ๐ง๐ฌ๐ก๐ข๐ฉ ๐ญ๐จ ๐ญ๐ก๐ ๐ฉ๐ซ๐จ๐๐ข๐ญ๐ฌ ๐จ๐ซ ๐ญ๐ก๐ ๐ฅ๐จ๐ฌ๐ฌ ๐จ๐ง ๐ญ๐ก๐ ๐ฉ๐ซ๐จ๐ฃ๐๐๐ญ.
๐ช๐๐๐๐๐๐๐๐๐๐๐ ๐๐๐๐๐๐๐๐ ๐๐๐ ๐๐ ๐๐ ๐๐๐ ๐๐๐๐ ๐๐๐๐ ๐๐๐๐ ๐๐๐๐๐๐๐๐๐ ๐๐๐ ๐๐๐ ๐ ๐๐๐๐๐ ๐๐๐๐. ๐ป๐๐๐๐ ๐๐ ๐ ๐๐๐๐๐๐ ๐๐๐๐๐ ๐๐๐๐๐๐๐, ๐ ๐๐๐๐๐๐๐ ๐๐๐๐๐๐๐๐ ๐๐๐ ๐๐๐๐๐๐๐ ๐๐๐๐๐๐ ๐๐๐๐ ๐๐๐ ๐๐๐๐๐ ๐๐๐๐๐๐๐๐๐๐. ๐ป๐๐๐๐ ๐๐๐ ๐๐๐๐ ๐๐๐๐๐๐๐ ๐๐๐๐ ๐๐๐ ๐๐๐๐๐๐๐๐ ๐๐๐ ๐๐๐๐๐๐๐๐๐๐ ๐๐ ๐๐๐๐๐ .
Most frauds start small and get bigger until someone notices unusual changes. Construction fraud has red flags that can be detected when you have the right controls in place or outsource to a consultant that maintains a neutral position.
๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ญ๐ข๐จ๐ง ๐๐ซ๐๐ฎ๐ ๐๐๐ง ๐๐ ๐๐จ๐ฆ๐ฆ๐ข๐ญ๐ญ๐๐ ๐๐ฒ ๐๐ง๐ฒ๐จ๐ง๐ ๐ญ๐ก๐๐ญ ๐ก๐๐ฌ ๐ ๐๐ข๐ซ๐๐๐ญ ๐ซ๐๐ฅ๐๐ญ๐ข๐จ๐ง๐ฌ๐ก๐ข๐ฉ ๐ญ๐จ ๐ญ๐ก๐ ๐ฉ๐ซ๐จ๐๐ข๐ญ๐ฌ ๐จ๐ซ ๐ญ๐ก๐ ๐ฅ๐จ๐ฌ๐ฌ ๐จ๐ง ๐ญ๐ก๐ ๐ฉ๐ซ๐จ๐ฃ๐๐๐ญ.
Some flags to look out for are:
1. Missing subcontractor lien releases
2. Unauthorized changes or change orders
3. Missing supporting pay app documentation
4. Changes to the SOV (Schedule of Values)
5. Using float or contingency funds without explanation
6. Submission of a Pay Application that doesnโt tie or make sense
7. Use of subcontractors not previously approved
8. Subcontractors complaining about payment delays
Mitigating the risk of being defrauded can begin with placing some basic controls on the project; controls begin with the initial input of the project into the accounting software all the way through the creation of a pay application checklist before any check payments leave the office.
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