Contract and procurement fraud
THREE MAIN TYPES OF COST MISCHARGING SCHEMES
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- ACCOUNTING MISCHARGES
- MATERIAL MISCHARGES
- Common methods used to mischarge material costs include
| THREE MAIN TYPES OF COST MISCHARGING SCHEMES
Generally, contractors commit one of three types of mischarges: Accounting mischarges Material mischarges Labour mischarges ACCOUNTING MISCHARGES Accounting mischarges occur when a contractor knowingly charges unallowable costs to the buyer, concealing or misrepresenting them as allowable costs, or hiding them in accounts, such as office supplies, that are not usually closely audited. A variation of this type of scheme involves charging bid and proposal costs or independent research and development costs, which are usually cost-based but limited to a fixed amount, to other cost categories. MATERIAL MISCHARGES Material is physical inventory and component deliverables. It includes raw material and purchased parts, as well as subcontractor and intercompany transfers. Occasionally, material costs are mischarged, both as to their reasonableness and their allocability. In most cases, material cost mischarging is confined to instances involving raw material or interchangeable parts. Mischarges of finished materials are infrequent because the nature of he material items limits their use on other contracts. Similarly, mischarging of specialised material is infrequent because the special character of such items makes it impossible for them to go undetected Common methods used to mischarge material costs include: Charging material costs incurred on a fixed-price contract to a cost-type contract Applying inappropriate indirect rates to material costs Charging at standard rather than actual rates Making unrecorded transfers of materials to another contract Purchasing excessive materials on one contract and using them on another contract Purchasing materials from a subsidiary or affiliated company at inflated prices Manipulating inventory pricing methods to inflate material values Charging materials from inventory at current high prices rather than the actual lower purchase prices Using small quantity costs to price large quantity purchases Obtaining vendor quotes from high-priced suppliers and purchasing cheaper items elsewhere Download 0.62 Mb. Share with your friends:
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