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The Department of Defense have introduced <br><br>Fraud indicators or fraud “Red Flags” as it conducts its audits <br><br>across all agencies to indicate the presence of fraud <br><br>within the organization, departments, or programs. Fraud <br><br>indicators would mean that fraud has occurred, occurring or <br><br>simply to increase the auditors' awareness of potential fraud <br><br>schemes.
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5/3/2015 DoD IG Fraud Red Flags & Indicators Contact Us | FOIA | The Honorable Jon T. Rymer Search Site You Are Here » Home » Resources » Fraud Investigation Resources » Fraud Red Flags Fraud Red Flags & Indicators Auditor Fraud Resources Home Fraud indicators or fraud “Red Flags” may indicate the presence of fraud within a DoD organization, department, or program. However, the presence of fraud indicators does not always mean that fraud has occurred or is occurring. Instead, auditors should consider fraud indicators as clues that increase their awareness of potential fraud schemes. The fraud indicators and schemes presented are not intended to be all inclusive. With continued advances in technology, changing business practices, and declines in most areas of Government spending, individuals are always developing new methods to defraud DoD programs and operations. As a result, fraud indicators and schemes are constantly evolving, becoming more sophisticated, and sometimes harder to detect. Auditors are encouraged to refer to the lists of fraud indicators and schemes when conducting their work, training new auditors about fraud, or conducting fraud training for other DoD personnel. Fraud, Waste, and Abuse Defined Fraud Guidance Fraud Red Flags & Indicators Fraud Overview Video APO Fraud Risk Assessment Report The webpage contains information about fraud schemes and indicators for the following areas: Contract Audit Fraud Scenarios and Resources Bribery and Kickbacks False Statements Contract Financial Management AntiKickback Statute of 1986 Progress Payment Fraud Retail Environment Fraud Other Fraud Scenarios and Indicators Conflict of Interest Rigged Specifications Skimming Fraud Schemes and Related Terms Collusive Bidding Cross Charging (Comingling of Contracts) Cash Larceny Procurement Fraud Toolkit Leaking Bid Data False, Inflated, or Duplicate Invoices Billing Manipulation Excluding Qualified Bidders Fictitious Vendors Check Tampering Test Your Fraud IQ Manipulation of Bids Failure to Meet Contract Specifications Purchasing and Billing Back to: Unbalanced Bidding Change Order Abuse Payroll Subpoena Program Resources Policy and Oversight Home Unjustified Sole Source Split Purchases Expense Reimbursement Schemes Source Selection BaseLevel Construction Purchases for Personal Use or Resale Defective Pricing Government Furnished Equipment Credit Card Fraud Truth In Negotiations Act of 1962 Contract Requirements Medical Facilities Cost Mischarging Contract Documentation Federal Employees Compensation Act Labor Substitution/Labor Cost Mischarging Contract Pricing Property Accountabilty Fraud Product Substitution Fraud Contract Oversight and Surveillance Rigged Specifications: An employee with procurement responsibilities, probably in collusion with a supplier or contractor, drafts a request for bids or proposals that contain specifications that are either too narrow or too broad. Unduly narrow specifications allow only a favored contractor to qualify, and unduly broad specifications can be used to qualify an otherwise unqualified contractor to bid. Broad specificiations can also be used in connection with later contract amendments and change orders to facilitate a corruption scheme. (Source: International AntiCorruption Resource Center, 2014) Fraud indicators related to rigged specifications include, but are not limited to: Similarity between specifications and winning contractor’s product or services. Specifications are significantly narrower or broader than similar previous requests for bids. Unusual or unreasonable specifications for the type of goods or services being procured. Unexplained changes in contract specifications from prior request for proposals or similar items. http://www.dodig.mil/resources/fraud/redflags.html#tabs 1/2
5/3/2015 DoD IG Fraud Red Flags & Indicators High number of change orders with one contractor. Splitting requirement into two or more purchase orders or contracts, each below upper level review or competitive bidding thresholds, to avoid review or competitive selection. Only one or a few bidders respond to request for bids. Requirement specifies brand name rather than generic description. Including items or services in requests for bids that will not actually be required. Inadequate analysis or documentation to support the need to acquire goods in the quantities purchased. « To Previous Red Flag To Next Red Flag » Go back to Home ABOUT US REPORTS NEWSROOM DISCLAIMERS OPEN GOV WEBSITES OTHER LINKS Mission Organization Leaders Locations IG Emblem Contact Us Careers Reports Search for Reports Recent Reports Announced Projects Get Reports by Email FOIA Reading Room Information Releases Testimony Monthly Newsletter Contacts for Media News Archives Privacy and Security Link Disclaimer Website Policies Social Media User Agreement Accessibility / Section 508 White House Department of Defense A Z Index Auditor Fraud Resources Whistleblower Ombudsman DoD IG Speakers Bureau USA.Gov GobiernoUSA.gov You are entering a Department of Defense interest computer system. Please read this Privacy and Security Notice. Office of Inspector General, United States Department of Defense, 4800 Mark Center Drive, Alexandria, VA 223501500 Integrity | Efficiency | Accountability | Excellence http://www.dodig.mil/resources/fraud/redflags.html#tabs 2/2