Nadcap defines fraudulent activity as deceitful actions taken intentionally for profit or gain, such as falsifying information or test results. Fraud can occur at any level within a company and endanger safety if it allows defective parts to go undetected. Nadcap addresses fraud by revising policies, training auditors, and requiring companies to implement ethics policies and processes for investigating and reporting fraudulent activity. Committing fraud could lead to loss of Nadcap accreditation, legal penalties, damage to a company's reputation, and increased audit frequency and costs. It is important for individuals and companies to report any suspected fraud through the appropriate channels.

1. Fraudulent Activity
Training for Auditees
April 2023
Note: ITAR/Export Controlled material is prohibited from presentations.
It is the responsibility of the presenter to ensure compliance.

2. Nadcap was created to accredit special processes used to produce
aerospace products to assure aerospace parts are correctly processed to
minimize the issue with said parts. While an audit has the best intention to
vet out poor processing of parts, fraudulent activity has the potential to allow
unsuitable parts into service without any knowledge. Therefore, fraudulent
activity may have significant impact on functionality of the part.
A simple example of this is an NDT Level 2 stamping the traveler that
the part was inspected to the drawing requirement, however in reality
the inspection never took place.
These kinds of situations can allow defects to go undetected where an
appropriately processed part would have identified the defect, stopping the
part from continued processing and from ultimately being utilized on an
aircraft.
Why is it important to address fraudulent activity?
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3. Fraudulent activity is defined as deceit, trickery, sharp practice, or breach of
confidence, intentionally perpetrated for profit or to gain some unfair or
dishonest advantage. This includes but is not limited to falsification of
information, intentional omission, false pretenses, and deliberate misuse of
qualified resources or certification/qualification/authorization.
How does Nadcap define fraudulent activity? Is
there a difference between fraudulent activity and
“unethical behavior”?
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4. Nadcap has made a distinction between fraudulent activity and unethical
behavior. A decision was made to focus attention on fraudulent activity.
What one country/culture may view as “unethical” may be completely
acceptable in another. Example: Personal gifts
Ethical Activity is defined as the rules of conduct recognized in respect to a
particular class of human actions or a particular group, culture, etc. Ethical
activity varies around the world from country to country and culture to culture.
For the Nadcap program, ethical activity is defined as adhering to the
Nadcap Personal Code of Ethics and Conflict.
How does Nadcap define fraudulent activity? Is
there a difference between fraudulent activity and
“unethical behavior”? (cont’d)
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5. Fraudulent activity can occur at any level of an organization:
• Management directed
• Initiated by an individual
Where Does Fraudulent Activity Occur?
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6. Some examples of fraudulent activity:
• Intentional misrepresentation of test results
• Intentional omission of a processing step
• Use of inspection stamps by unauthorized personnel
Examples of Fraudulent Activity
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7. • Accidentally transposing
numbers when reporting data
• Isolated incident of missing a
process step (accidental)
Examples of what would not be considered
fraudulent activity (would most likely be considered
an NCR):
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8. There may be many reasons someone would commit fraud, and we cannot
foresee them all. Some of the more common reasons are that companies
may be under pressure to increase production or cut costs. It may also be
due to a lack of morals or work ethic. Or perhaps individuals or companies
do not fully understand the impact of fraudulent behaviors.
Why would a company or an individual commit
fraud?
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9. Nadcap is actively identifying, communicating, and maintaining awareness.
Nadcap has established this training which is being conducted both at the
Auditee level and the Auditor level.
Task Groups were made aware and initiated various activities regarding
fraudulent activity.
How is Nadcap addressing fraud?
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10. Nadcap has also revised documentation to address fraudulent activity:
• OP 1109 Auditee Advisory – includes steps for handling advisories that
identify fraudulent activity
• OP 1124 Allegations of Wrongdoing, Fraudulent Activity and Unethical
Behavior – includes a process for handling potentially fraudulent activity
• AC 7000 Nadcap General Requirements – includes requirements to help
prevent and detect fraudulent activities
• s-frm-1103 Auditee Agreement and p-frm-1104 Subscriber Agreement –
modified to address fraudulent activity.
How is Nadcap addressing fraud?
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11. Each Task Group addressed the concept of
fraud by identifying areas of concern and
proposing strategies to detect and prevent
fraudulent activity. Some solutions included
the addition or revision of checklist questions,
additions to the Task Group handbook, and
guidance/training of auditors.
How are Nadcap Task Groups addressing fraudulent
activity?
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12. The team working to address fraudulent activity surveyed all Nadcap
stakeholders. The chart on the next slide illustrates the responses we
received when we asked this question:
Where is fraud most likely to occur within the
Nadcap program?
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13. 13

14. As the Auditee you are in the best position to identify potential signs of
fraudulent activity. If you find evidence of fraud, your company should
contain the product affected and report the situation to your customers and
PRI.
What is your role in addressing/reporting fraudulent
activity?
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As an individual, it is your responsibility to report fraud if
you see or suspect it.

15. As part of your participation in the Nadcap program, it is now a requirement
to have an Ethics Policy in place that includes guidance for reporting
fraudulent activity.
If you believe your concerns are not being taken seriously by your company,
Nadcap has a procedure for reporting fraudulent activity, OP 1124 Allegations
of Wrongdoing, Fraudulent Activity and Unethical Behavior, which describes
the process for reporting such allegations.
What is your role in addressing/reporting fraudulent
activity?
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16. All Nadcap accreditations (across all commodities) will be suspended, an
advisory will be sent out to the Nadcap Subscribers, and entry back into the
system will require acceptance from both the Nadcap Management Council
and the relevant Task Groups.
What happens to your Nadcap accreditation if it is
confirmed that your company committed fraud?
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17. The level of fraudulent activity committed by the Auditee’s personnel will be
considered. Is fraud happening on the shop floor by individuals, or is it being
directed by management?
There could be legal ramifications depending on the seriousness and impact
of the fraudulent activity. Companies/individuals could face criminal or civil
penalties.
Individuals committing fraud could face termination from employment.
Companies could face a loss of public trust, and its public image could be
compromised leading to loss of business, paying higher prices for goods and
services, or difficulty gaining oversight approvals.
What are some of the potential consequences of
committing fraud?
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18. Company morale could suffer as result. Association with a company
engaged in fraudulent activity may be troubling and embarrassing to
employees.
Companies who have committed fraud will be audited at higher frequencies
as they will be considered higher risk, leading to increased costs.
What are some of the potential consequences of
committing fraud? (cont’d)
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But most importantly, fraudulent activity could lead to
catastrophic events if defective parts end up on an aircraft.

19. The requirements can be found in sections 8 and 9 of the AC7000 checklist
Rev A, Audit Criteria for Nadcap Accreditation.
Section 8 defines the requirement for having a policy that addresses
fraudulent activity.
Section 9 defines the process requirements for investigating and
reporting fraudulent activities.
What specific requirements must a Nadcap
accredited company implement to address
fraudulent activity?
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20. What specific requirements must a Nadcap
accredited company implement to address
fraudulent activity?
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21. What specific requirements must a Nadcap
accredited company implement to address
fraudulent activity?
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22. You can email any questions to NadcapEthics@p-r-i.org, or contact any PRI
Staff member, who will forward your question(s) to the appropriate person(s).
Where should I direct my questions regarding
fraudulent activity?
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23. Thank you
Nadcap is administered by the Performance Review Institute in partnership with its industry
subscribers. Copyright 2019© Performance Review Institute