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.
Because employees are on the frontline to observe suspicious acts by their fellow staff members, employee anti-fraud education is the cornerstone of an effective fraud prevention program. Without training about how fraud hurts the organization and it’s staff, what constitutes fraud, how to identify the red flags of fraud, how to report any suspected wrongdoing, and the consequences of fraudulent actions, many employees might miss; or even willingly turn a blind eye to the warning signs of theft and misconduct. To be most effective, such training should be based on the realities of the organization, rather than on generic anti-fraud messagesthat provide no real applicable value, and should be ongoing with refresher training held at least annually. Additionally, while employees at all levels should be required to participate in the anti-fraud training program, managers and executives should be provided with supplemental training that addresses the added fraud prevention and detection responsibility provided by their positions of authority.
The last thing a small business needs now is fraud.
Moderately-sized companies are already struggling enough in the fragile economy. Getting ripped off by a dishonest employee can be a crippling blow.
Fraud of American companies isn’t pocket change: a 2008 survey by the Association of Certified Fraud Examiners estimated that U.S. organizations lose 7% of their annual revenues to fraud — nearly $100 billion in 2008. The damage is the worst among small businesses, where the median loss suffered by organizations with fewer than 100 employees was $200,000.
True, the time and funds it takes to prevent fraud can seem intimidating. But taking basic precautions and making a small investment early on can pay big dividends.
Even though time and resources are scarce when you’re a small business owner, you should make fighting fraud a priority because, in a tough economy, you literally cannot afford to fall prey to scammers.
Preventing and deterring fraud is much more effective than trying to recover losses after the fact. The economy is showing signs of recovery, but damaging fraud schemes can compound the financial woes of a struggling organization.