During an audit of a major contract, an auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?
During an audit of a major contract, an auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?
One typical indication of cost mischarging is when an auditor notices that the actual hours and dollars billed are consistently at or near the budgeted amounts. This is because cost mischarging involves inflating bills by charging for more hours or costs than were actually incurred, or mischaracterizing costs to align them with the authorized budget. This fraudulent alignment with the budget can appear as consistent billing close to budgeted figures, raising a red flag for this particular type of fraud. Other options like defective pricing, fictitious vendor, and bid rotation do not directly relate to the described condition as they pertain to different procurement fraud schemes.
Cost mischarging (intentional).
"Mischarging occurs when a contractor inflates its bills to the Government by charging for labor, parts or other costs that are greater than those the contractor actually incurred, or mischaracterizing its costs, or charging for things that are unallowable under the terms of the contract". It's a fraud scheme.