Contract and procurement fraud
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- Here are some common methods contractors use to mischarge costs
- RED FLAGS OF COST MISCHARGING SCHEMES
| Cost Mischarging Schemes
Cost mischarging schemes, which take place during the performance stage of the procurement process, occur when a contractor charges the procuring entity for costs that are not allowable, not reasonable, or cannot be allocated to the contract directly or indirectly. Often, contractors will contend that a cost mischarge was merely a mistake, and the issue as to whether a mischarge was a mistake or a crime often depends on the contractor’s intent. Thus, when investigating cost mischarging schemes, fraud examiners should investigate the issue of intent. Here are some common methods contractors use to mischarge costs: Charging the same cost to more than one contract Charging nonexistent costs or costs at inflated amounts Charging unallowable costs (e.g., entertainment or advertising) to the contract Charging costs to the wrong category or contract Failing to disclose discounts and credits Using outdated standard costs Colluding with contractors directly to charge high prices and rebating part of the price increase without disclosure Using phantom suppliers to inflate costs Falsifying supporting documentation RED FLAGS OF COST MISCHARGING SCHEMES Red flags of cost mischarging schemes include: Contractor refuses, delays, or is unable to provide complete supporting data Contractor’s supporting documents are missing or unavailable for review Contractor’s supporting documents are of poor quality Contractor provides different supporting documents for the same item, and unit prices vary widely Evidence of falsifications or alterations to supporting data Contractor fails to submit cost or pricing data that is current, accurate, and complete Contractor fails to disclose internal documents on vendor discounts Cost estimates are not consistent with contractor’s prices Repeated non-compliance with the contractor’s disclosed bidding or estimating practices Old, outdated standards used to support proposals Contractor fails to disclose information regarding significant cost issues that will reduce proposal costs Contractor uses unqualified personnel to develop cost or pricing data used in estimating process Contractor uses vendors or subcontractors other than those listed in proposal Contractor repeatedly fails to comply with their disclosed bidding/estimating practices Download 0.62 Mb. Share with your friends:
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