Three ways to miss a fraud

A lot of construction is taking place on a remote site. The programme manager doesn't visit the site and signs procurement requests on the basis of complex documents including a bill of quantities that he doesn't understand. He trusts the construction manager. An independent report on the construction says that little progress has been made. The budget-versus-actual report tells him that the entire materials budget has been spent. He raises this discrepancy with the construction manager who says that the budget is wrong, that most of the materials are in the store on site, and that he needs to make more large purchases. The programme manager then approves them too.

The auditors discover a year later that the budget was right, the bill of quantities was right and there was no store on site. Had the programme manager checked any of these things he might have discovered that most of the materials were being stolen by the construction team and the 'community leaders'.