Independent oversight of capital projects through integrity monitoring

Part 2 of 3 in a series that focuses on how to mitigate business risks

As we discussed in Part 1, fraud, waste and abuse are big issues in construction and real estate. In fact, the median loss due to fraud is $254,000 in the real estate industry and $200,000 in the construction industry. The consequences can be steep and go well beyond money, including clawbacks of funding, corporate and personal reputational damage, increased regulatory scrutiny and even jail time.

Private sector capital projects need attention, too

Integrity monitoring is not just for public sector construction and real estate projects anymore. In the 1980s, a number of public capital projects faced intense scrutiny after incurring multimillion-dollar cost overruns due to corruption and fraud. The concept of integrity monitoring was born in response.

Integrity monitors are independent third parties brought in to watch over capital projects and report fraud, waste and abuse. In recent years, as private sector capital projects have become larger and are often managed globally, the need for — and interest in — integrity monitoring has grown in the private sector.

But project owners and managers often cannot provide enough oversight to all of a capital project’s aspects, particularly if the project owners and managers are not on-site at the location of the capital project. Many companies do not have the resources to effectively monitor and supervise the various third parties needed to complete capital projects or the right controls in place to minimize fraud, waste and abuse.