Contract and procurement fraud
Additionally, to detect non-conforming schemes, the fraud examiner should
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- Change Order Abuse
| Additionally, to detect non-conforming schemes, the fraud examiner should:
Review correspondence and contract files for indications of non-compliance. Request assistance from outside technical personnel to conduct after-the-fact tests. Inspect or test questioned goods or materials, examining packaging, appearance, and description to determine if the items appropriate. Segregate and identify the source of the suspect goods or materials. Review inspection reports to determine whether the work performed and materials used in a project were inspected and considered acceptable. Review the contractor’s books, payroll, and expense records to see if they incurred necessary costs to comply with contract specifications. Review the inspection and testing reports of questioned goods or materials. Conduct routine and unannounced inspections and tests of questioned goods or materials. Examine the contractor’s books and manufacturing or purchase records for additional evidence, looking for discrepancies between claimed and actual costs, contractors, etc. Interview procurement personnel about the presence of any red flags or other indications of noncompliance. Search and review external records (e.g., court records, prior complaints, audit reports, investigative reports, media sources, etc.) to determine if there is any history of misconduct. Change Order Abuse A change order is a written agreement between the procuring entity and the contractor to make changes in a signed contract. Change order abuse is a performance scheme that involves collusion between the contractor and personnel from the procuring entity. In change order abuses, a corrupt contractor submits a low bid to ensure that they win the contract award, but after the procuring entity awards the contract, the corrupt contractor increases their price with subsequent change orders. If successful, these schemes will, at the very least, cause the procuring entity to lose any advantage received through the competitive bidding process. Similarly, a dishonest contractor, acting in collusion with contract personnel, can use the change order process to improperly extend or expand contracts and avoid re-bidding. Change orders generally receive less scrutiny than the process used to acquire the underlying contract, making them a popular way to fraudulently access funds or generate funds for kickbacks. Even though change orders are inevitable and can develop for various reasons (e.g., design error, ambiguous specifications or omissions in specifications, change in scope, weather delays, improvement in time or cost, building code changes, etc.), fraud examiners should view all contract change orders carefully. Download 0.62 Mb. Share with your friends:
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