The 12 Red Flags of Contract and Procurement Fraud
- Repeated awards to the same company.
- Competitive bidder complaints and protests.
- Complaints about quality and quantity.
- Multiple contracts awarded below the competitive threshold.
- Abnormal bid patterns.
- Agent fees.
- Questionable bidders.
- Awards to non-lowest bidder.
- Contract scope changes.
- Numerous post-award contract change orders.
- Urgent need or sole source.
- Questionable minority or disabled ownership.
Below are the top behavioral red flags of fraud perpetrators, ranked from highest to lowest:
- Living beyond means
- Having financial difficulties
- Having an unusually close relationship with a vendor or customer
- Having control issues and an unwillingness to share duties
- Having divorce or family issues
- Having a wheeler-dealer attitude
- Being irritable, suspicious or having a defensive attitude
- Having addiction problems
- Having a history of employment problems
- Constant complaints of inadequate pay
- Refusing to take vacations
- Having a history of legal problems
- Experiencing excessive pressure for success
As we are already well into 2013, I look back and reflect upon the experiences that I had in 2012. I think what continues to surprise me the most, is the cavalier attitude that so many organizations have when the subject of fraud is broached. You would think that, with as much media attention that fraud and embezzlement get, businesses, organizations, and those charged with fiduciary duties would “get it”, but in many cases, far too many cases, they do not. I still hear, over and over, “that would never happen to us”. It almost sounds like a cliche to me anymore and I almost come to expect it. I almost want to respond by saying, “what would it take for you to see it differently, somebody stealing hundreds of thousands of dollars from your organization”? In any case, I continue to forge on, preaching the gospel that “fraud happens”. Maybe I should get bumper stickers and t-shirts with that slogan. Now that is a novel idea!