Contract and procurement fraud


Labour mischarges can be detected by engaging in the following activities



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Supply Chain Forensics Notes
Labour mischarges can be detected by engaging in the following activities:

  • Examine labour cost records for the presence of red flags.

  • Review audit reports, reimbursement requests, construction reports, engineering reports, and so on.

  • Conduct site visits to verify that selected employees’ labour costs are being properly charged to the work actually being performed.

  • Examine time cards and total the hours expended on the contract, comparing them to the hours billed.

  • Note, in particular, repeated instances or a pattern of labour charges that increase the cost of cost-plus contracts.

  • Review journal entries used to transfer labour costs.

  • Compare labour costs over a specific period to identify any unusual changes and determine the reason for the changes.

  • Review the standard and actual labour rates to determine if there are any significant differences between the two.

  • Calculate the percentage of total direct labour charged to each contract to determine which had the highest percentage of direct labour charges.

  • Review and compare the labour distribution summaries with payroll records to determine whether the total labour distributions agree with the total labour charges.

  • Compare the direct and indirect labour account totals from the prior year to the current year and note the percentage change.

  • Determine the percentage of total direct labour charged to each contract/work order to reveal which charge numbers had the highest percentage of direct labour charges.

  • Analyse the labour charges to determine if there were any shifts in charging patterns.

  • Prepare a schedule of salary or wage changes and compare it to contract award dates and labour rates.

  • Look for terminated employees who are charged to contracts.

  • Compare employee personnel records to contract position qualification requirements.

  • Interview individuals who changed their charging patterns during the year.

  • Search and review external records (e.g., court records, prior complaints, audit reports, investigative reports, media sources, etc.) to find any history of misconduct.




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