Materials Fraud and How it can occur!

[Marlon Balogh]

As a forensic accountant and fraud examiner, I have dealt with numerous cases in which a land owner and general contractor face disputes with one another 1. Over the amounts of materials actually purchased and used for the project, and 2. disputes over the type of materials used but paid for by the land owner. (wanted marble but quartz was installed instead.  

These types of materials fraud can be minor or become quite excessive making plenty of renovation projects over budgeted and expensive.  

There are several things you can do to protect yourself - 1. always obtain receipt of the products and purchases. 2. be on site or employ a project manager to observe materials and/or installation of products. 3. approve a budget ahead of renovation and review any change orders that include manual labor and materials. 

In a particular case, the general contractor and even the project manager approved of additional materials, but were not utilized within the property renovation, but instead GC had such materials sent to another location for a separate and personal project of their own.  

Please always take note of addresses of invoices and receipts, and consider the timing of each project when comparing data.

Would love to continue the conversation!! Let me know if i should continue posting more about possible fraud schemes in RE.