The Securities and Exchange Commission today announced that Irving, Texas-based Fluor Corporation will pay $14.5 million to settle charges stemming from the company’s improper accounting on two large-scale, fixed-price construction projects. Five former and current officers and employees also agreed to settle related charges for causing Fluor’s violations.
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The SEC’s order found that Fluor, a global engineering, procurement, and construction company, bid on the two projects relying on overly optimistic cost and timing estimates and subsequently experienced cost overruns that worsened over time. Fluor then failed to sufficiently maintain internal controls to account for the projects in accordance with the percentage of completion accounting method under U.S. generally accepted accounting principles (GAAP). According to the SEC’s order, Fluor failed to include all anticipated costs that were known or should have been known in each project’s respective forecasts—thereby delaying loss recognition on each. Additionally, Fluor improperly incorporated revenue from unapproved change orders in the forecasts of one of the projects, including change orders that had not yet been submitted to, or had already been rejected by, the customer.
Source: SEC Charges Fluor Corp. for Accounting Improprieties
