Eliminating capital projects cost flow fraud


using distributed ledger technology (DLT)



By Dr Lalamani Budeli

South Africa


It is estimated that organizations loss 5% of their annual revenue to capital project cost flow fraud performed by employee, consultants, auditors, and suppliers. During project execution, completion certificates are used to trigger payments of suppliers’ consultants and contractors signed by internal parties involved in a specific work package completed. A completion certificate is a document that is awarded, after the inspection of a project task (work package), stating that it has been constructed according to the approved plan and that it meets all the necessary standards set by the organization, authority, or municipal corporation. Cost flow is commonly defined as an internal flow of money within the organization until the money is paid out of the organization which is referred to as cash flow. In most organization capital projects, cost flow happens daily while cash flow happened after 30 days.

In this article, Distributed ledger technology (DLT) was compared to traditional governance tools aimed to prevent cost flow fraud to determine the best method that can be used in capital projects. The result indicates that distributed ledger technologies (DLT) outperformed other traditional methods and governance requirements put in place by the organization to combat cost flow fraud. Its advantage is the transparency of payments to stakeholders directly involved with the task and activities performed other than all other methods centralized to a project coordinator. This will prevent all completion certificates that are fraudulent not being processed by finance as due diligence is performed by technical teams involved in the specific work package. This approach will assist project organizations to save billions of money per annum.

Keywords: Capital project, Cost flow Fraud, Distributed ledger technology (DLT)


Project cost fraud and corruption especially in the procurement systems is one of the major contributors of annual losses for both private companies and governments throughout the world. Stolfo et al (2000:130) said that this fraud is mostly routed to project monitoring and control where progress misrepresentations are made to sign the work package completion certificate which triggers cash flow to the organization who performed the task. Bach et al (2020:81) indicated that this differs significantly from one country to another as it is also dependent on contract type, culture, religion, societal norms, and values. Donegan et al (2017:170) alleged that When project owners, both in the public and private sector, fail to impose the right policies and procedures to deter fraud on their projects, they are indirectly encouraging those involved in their projects to commit actions that would lead to project fraud. Van Eenennaam et al (2021:92) whispered that these actions would increase the chances of project failure because they will increase the project cost, delaying the project completion, reducing the project quality, failing to meet stakeholders’ objectives among others. Hu et al (2019:1140) specified that, while cost management is viewed as a continuous process, the function is normally split into four steps which are resource planning, estimation, budgeting, and control.


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How to cite this paper: Budeli, L. (2021). Eliminating capital projects cost flow fraud using distributed ledger technology (DLT), PM World Journal, Vol. X, Issue VI, June. Available online at https://pmworldlibrary.net/wp-content/uploads/2021/06/pmwj106-Jun2021-Budeli-Eliminating-capital-projects-cost-flow-fraud-using-distributed-ledger-technology2.pdf

About the Author

Dr Lalamani Budeli

South Africa


Dr Lalamani Budeli obtained his degree in Electrical Engineering at the Vaal University (VUT), BSc honors in Engineering Technology Management at University of Pretoria (UP), Master in engineering development and Management at North West University (NWU), Master of business administration at Regent Business School (RBS) and a Doctor of Philosophy in Engineering Development and Management at North West University (NWU), Potchefstroom, South Africa. Currently, he is a managing director of BLIT, an engineering, research, and project management company based in South Africa.

His research interests include project portfolio management, agile project management, plant life cycle management, advanced systems analytics, project early warning system, and the use of artificial intelligence in project management. Currently, he is spending most of the time on research that is looking at the development of system and application that uses the latest technology like block chain, internet of things (IoT), Big data, and artificial intelligence. Lalamani Budeli can be contacted at budelil@blit.co.za.

To view other works by Dr. Budeli, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/lalamani-budeli/