Fraud awareness is everyone’s responsibility, we all [should] know that. So why is it that numerous cases of fraud are reported on a seemingly too-often basis?
Federal procurement officer indicted in $2.3M fraud scheme – Federal Times
North Carolina couple receives prison term for federal contract fraud – Federal Times
Supreme Group Fined $389 Million for Overcharging Pentagon – Wall Street Journal
Feds: Parking lots owner swindled Los Angeles VA out of $11M – Washington Times
And these are just some of the cases we KNOW about. Which brings to question, how can Asset and Fleet Managers better identify fraud in our daily lives?
I suggest by first identifying weaknesses that allow fraud to take place. As Jamie Wheat, CPPA, Higher Education & Research Chapter member wrote in her UC San Diego NPMA presentation titled Consider Internal Controls When Developing Processes for Your Campus Asset Management System:
Weak Internal Controls Increase Risk of Fraud, Embezzlement and Theft committed by management, employees, customers, vendors, or the public. Fraud costs individuals, taxpayers, businesses and communities billions annually.
Asset and Fleet managers can mitigate risk of fraud through strong controls and procedures. For example, Wheat writes:
Segregating duties among different people to reduce the risk of error or inappropriate action. This reduces the opportunity for an employee to commit and conceal errors (intentional or unintentional) or perpetrate fraud.
While performing physical inventory reconciliation reviews, a company can 
examine transactions, information, and events to verify accuracy, completeness, appropriateness, and compliance.
Sounds great right? But what the heck does that mean? HOW do we ‘examine transactions, information, and events to verify accuracy, completeness, appropriateness, and compliance.’
We’re in luck, someone else with a bunch of audit experience, oversight and data has listed a few fraud indicators we may consider. The Defense Department Inspector General Office has published fraud detention resources for auditors on their site.
10 Government Property Fraud Indicator Examples:
- Inability to account for Government furnished equipment when contract is terminated. In some instances, a contractor may say equipment is at a subcontractor’s location or another facility to delay accountability and turn-in of equipment.
- The Government certifying receipt of goods without performing inspections.
- Government-furnished equipment not disposed of in accordance with the contract. Contractor disposes of Government furnished property without obtaining authorization from the Terminating Contracting Officer.
- Inventory records disclose unusual patterns when compared to physical inventory reviews that cannot be reasonably explained.
- Inventory items marked with incorrect disposal condition codes, such as repairable or scrap, when they should be labeled excellent.
- Invoices that do not have adequate supporting documentation or supporting documentation is incomplete
- Untimely and inappropriate closeout of contracts.
- Cost still charged to the original job order, but no physical inventory is left on the job.
- Posted notices that certain work order numbers may no longer be charged.
- Frequent adjusting of journal entries with descriptions such as charged wrong “work order” or “contract number.”
Becoming aware of potentially weak control points through internal audits can help us identify opportunities to strengthen the company’s controls and procedures and reduce the opportunity for fraud to occur.
What are your tips for identifying, protecting and reporting suspected instances of fraud in conjunction with your asset and fleet management program?