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Project Fraud: Conceptualization, Determinants and Schemes

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By Isaac Odhiambo Abuya

Homa Bay, Kenya

 


Introduction

Project fraud is a complex problem. It covers a wide range of fraud schemes perpetrated by those inside and outside of a project or project based organization (PBO). This type of fraud may be difficult to detect, due to its myriad schemes and players, most of whom are well connected. The time limitations in projects makes it challenging and at times difficult to institute litigations against project fraud, in view of the long duration that the criminal justice systems takes. Project fraud has not been given enough attention in project management research.

However, studies have examined cost overruns in projects without attempting to correlate these overruns with fraudulent practices in projects and in project organizations. As most firms and governments turn to projects to deliver critical products and services, and in view of the massive focus in the corporate organizations on the pervasive effect of corporate fraud on the bottom line and success of these organizations, attention has started being focused on understanding project fraud, its nature, correlates and why it is a persistent problem in projects and in project based organizations.

In this paper, an attempt is made to conceptualize project fraud, and Cressey’s Fraud Triangle is used to explicate the determinants of project fraud. A review of some of the critical fraud schemes prevalent in projects (irrespective of their type, size and location) is made. Lastly, recommendations are offered for theoretical and empirical research on project fraud.

Conceptualization of Project Fraud

Organizational fraud has been studied from a corporate governance perspective, without little attempt at understanding how the projects that corporate organizations implement are likely to exacerbate fraudulent deals in these organizations. While the challenge of cost overruns has been at the heart of project research, little attention been devoted to understanding how cost overruns in projects are contributed by project fraud. Moreover, as a result of the growing influence of projects in the delivery of critical organizational products and services, and the emerging media attention on possible leakages in projects and project organizations, attention is being focused on the potential and actual contribution of projects in exacerbating organizational fraud.

The pioneering work of Rollins and Lanza (1950) brought to the fore the problem of project fraud. Following the high flying corporate frauds in the US and other western countries, attention was focused on understanding the nature of organizational fraud, and specifically project fraud. Rollins and Lanza (1950) posited that fraud is rampant in projects, and that project fraud inhibits transparent reporting of organizational and project activities, especially now that projects are becoming the norm in the public and corporate organizations. In their view, project fraud is becoming a disease that must be eradicated as quickly as possible as it negatively affects the success of projects, irrespective of their nature, size and locations.

Based on their interactions with projects of different types in most parts of the world, and having an intimate understanding of how fraudulent dealings are designed and executed in projects and project based organizations, Rollins and Lonza (1950, 2005) define project fraud as the misrepresentation of project’s mission or progress to secure project financing, misuse of project resources, and or improper dealings with project vendors, for personal enrichment.

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About the Author

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Isaac Odhiambo Abuya

Homa Bay, Kenya

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Isaac Odhiambo Abuya
has over 10 years’ experience in designing, planning and implementing high impact development projects in Kenya. Before joining Kenya’s county government of Homa Bay in 2013 as the county’s Chief of Staff responsible for coordinating the executive office of the Governor and the county government’s development policies, Isaac served as World Vision Kenya’s Project Director, and was responsible for designing and implementation of a high impact social determinants of health project for vulnerable communities, families and children in Kenya. Isaac also coordinated the first multi-county USAID/ PEPFAR HIV and AIDS prevention and care project that targeted over 1 million youth in Kenya and Tanzania with behavioral change and care interventions.

Isaac provided high level project leadership in the roll out of voluntary medical male circumcision interventions in non-circumcising communities in Kenya, and served as one of the principal consultants to USAID’s effort in promoting voluntary medical male circumcision programming in the Royal Kingdom of Swaziland. He has provided technical support to a number of county governments and non-governmental organizations in Kenya on performance based management and contracting and currently serves as the national chairman of the Performance Management Association of Kenya.

Isaac Abuya holds a Bachelor of Education degree from Egerton University, Master of Arts in Counselling Psychology from Kenyatta University, Master of Arts degree in Project Planning and Management from the University of Nairobi, and is waiting to graduate with a PhD in Project Planning and Management from the University of Nairobi, with a specialization in Project Design, Planning and Implementation. He is pursuing a second PhD in Public Administration and Public Policy at Kisii University.

Mr. Abuya can be contacted at: [email protected]

To view other works by this author, visit his author showcase in the PM World Library at http://pmworldlibrary.net/authors/isaac-odhiambo-abuya/