Fighting Project Fraud

Let’s Get Ready to Rumble!

Rocky Balboa stated that “It’s not how hard you hit, but how hard you can take a hit and keep moving forward”. What you need to know is how to take a hit from fraud and prevent your company from getting a bloody nose. Misrepresentation, Misuse, and Improper dealings all define the outline of Project Fraud. Since there is no true definition of project fraud Richard B. Lanza and Steve Rollins have identified these signs to help us diagnose symptoms.

Signs of Project Fraud

1. Over- reported and unsubstantiated business case

2. Unsubstantiated project decisions

3. Under-reported initial estimates of project lifecycle costs (to get approval)

4. Under-reported initial estimates of project maintenance costs (to get approval)

5. Under-reported costs

6. Over-reported schedule progress

7. Over-reported quality progress

8. Project asset misuse

9. Vendor conflict of interest and kickbacks

10. Vendor “overselling” of their capabilities

11. Inappropriate vendor charges

According to a recent PMI study using data from the U.S Department of Commerce projects now make up over $2.3 trillion in U. S. economy. Projects are perfect for fraud since they are creative and new.

Different from operational process, which is controlled, projects in many instances are completed in an uncontrolled manner.

Richard B. Lanza and Steve Rollins also reported that in their findings the Standish Group reported more than $275 billion relate to application software where these trends were noted:

• Only 16.2% of projects are completed on-time and on-budget

• 31.1% are cancelled

• The average cost overrun was 189% of the original time estimate

Once an organization has understood that projects are the most risky investments a fraud examiner should become more involved. Their control should be extended beyond computer security and verification to better execute a recovery. The two most common fraud symptoms are an over-reported and unsubstantiated business case and under-reported initial estimates of project plan effort required. The over- estimated need of a project is always followed by the under-estimated effort needed to execute the project. The under-estimated time period to execute a project is always followed by a rise in cost. With these common factors monitored and benchmarked prevention of a project from entering fraud is accomplished. Now go get’um Tiger!

For more information visit our website Wainscott Finch Associates.