Fraud in construction – How to avoid it?

Fraud in Construction – is it possible to avoid it?

Unfortunately, construction fraud is happening more and more as people try to get more for their money without providing anything for the money they earn. This is bad news for construction companies as it means they are missing out on profits that could take them from a successful company to a bankrupt company.

It can also be easy for construction companies to overlook some of the signs of construction fraud because they have multiple job sites, multiple employees, and multiple suppliers. Because homeowners can't be everywhere at once, they may not recognize the signs until it's too late.

Here are three common types of construction fraud:

1. Time Theft

Construction workers who arrive at work late or leave early, or even take too many breaks, are harming the productivity that can be achieved by the company each workday. While this is bad enough and costs the company money, it is when timesheets are changed that the real theft comes into play.

These altered timesheets claim that employees were working when they weren't, meaning they are being paid for work they didn't actually perform. This additional money will cost the company more for the project it is undertaking, which means that the proposal for the project cost that was given will end up being less than the money that is eventually invested.

There aren't many ways for employers to do anything about this type of theft, although security cameras near the clock can help. The camera would capture the clocking in and out time of employees and this recorded information could help prove whether the timesheets are accurate or not.

Most construction companies are required to offer workers' compensation benefits to their employees, which will cover their employees if they are injured on the job. Unfortunately, some employees fake an injury so they can get paid without having to do any work. This can cause companies' workers' compensation benefit rates to increase tremendously, which will cost them even more money.

Security cameras are also the answer to this type of theft because employers can record what happens in the workplace every day. This way, if someone gets hurt on the job, the employer can go back and review the footage to see what happened.

Subcontractors are necessary for any type of work, as there are many specialties that a single contractor cannot carry out alone. While many subcontractors will perform honest work and bill accordingly, there are others who will try to make as much money as possible with as little work as possible.

There are many ways subcontractors can successfully carry out this type of theft, but the most common ways include exaggerating production units, exaggerating work units, and even declaring that equipment was used when it was not.

There's never an easy way to tell when a subcontractor is stealing, but companies can take some precautions during each project. Companies must always have a signed contract with each of their subcontractors, and each must also have a license and proof of insurance. It's also best to use local companies because word of mouth is a great way to find out if a subcontractor has tried to scam another company in the past.

There are some other things that companies can do to prevent construction fraud from occurring and they include the following:

• Conducting background checks on everyone working on the project can be helpful because employers may find clues that might suggest that theft might be an option.
• Every company must have at least two people monitoring business activities for fraud. These people can continually check payroll, bills being received and paid, and even work closely with all contractors on the job.
• Every business should review every invoice they receive to make sure it contains the information it should. Any sign of inflated costs or undue wages must be flagged and investigated immediately.
• Any detailed payment requests should be reviewed because there are times when contractors will charge for Class A materials when they actually used Class D materials for the job. Companies can pay significantly more for a project if these items are not caught immediately.
• False claims are common in the construction field, so written documentation must be received for any claim made. This documentation can then be used during lawsuits if the claims are found to be false and causing theft.

Concluding

While it's amazing how common fraud is in the construction field, this shouldn't surprise any company. That's why every business will want to make sure they have all their bases covered so they don't suffer unnecessarily and lose revenue in the future.