The engineer, in collusion with the contractor, cheated the government of a lot of money.
"Cheat of" does not sound entirely natural to me. The idiomatic expression is "cheat out of". "Cheat of" is certainly possible in some dialects, but I couldn't tell you which ones.
Otherwise, the sentence is fine but could be better written:
The engineer colluded with the contractor to cheat the government out of a lot of money.
Additionally, the phrase, "a lot of money" is fine in informal conversation, but probably would not be used in something like a newspaper. A journalist would either state the amount ("over a million dollars", etc.) or qualify by explaining why they don't know ("a substantial amount of money, but the police are still investigating the full extent of the fraud").