10 ways to detect and prevent procurement fraud

BribesProcurement fraud is rising sharply and it may be affecting your entire organisation.  According to the 2015 Kroll Global Fraud Report, 75% of companies experienced a fraud incident in the past year. 81% of companies affected by fraud reported insider perpetrators.

Despite its impact on business, very few people know what it is.  In short, procurement fraud is:

“Inducing any course of action by deceit or other dishonest conduct, involving acts or omissions or the making of false statements, orally or in writing, with the object of obtaining money or other benefit from, or of evading a liability to, the organisation.”

Awareness of this issue is required right across the mid to senior level of the organisation, not exclusively within the procurement department. Which begs the question:

How well does your organisation manage fraud?

Here are ten ways to check your procurement fraud detection and prevention capabilities:

  1. Have you clearly identified procurement fraud indicators/red alerts?
  2. Are you aware of common corruption and fraudulent practices, such as schemes, bribes and kickbacks, false, inflated or duplicative invoices?
  3. Have you adopted techniques for fraud detection, prevention, and evaluation and move from reactive fraud investigation to proactive anticipation, detection, prevention and deterrence of fraud risk?
  4. How well do you deal with collusion among contractors and between contractors and employees,  such as collusive bidding (bid rigging), bid rotation, or bid suppression?
  5. What are your methodologies for detection of collusion?
  6. Are you well aware of fraudulent activities in tenders and contracts such as bid manipulation, unbalanced bidding, leaking of bid data, bid splitting and unjustified Sole Source Awards?
  7. Do you know how to manage a fraud investigation?
  8. Have you developed fraud and corruption control guidelines?
  9. Do you have a fraud prevention policy?
  10. Do you have a framework for a Procurement Code of Conduct?

If you would like to improve your organisation’s knowledge and capabilities in this area, consider a two day course like this one: “Procurement Fraud – “Identification, Detection and Prevention” held at our National office next month.

Dr Pieter Nagel is CEO at apicsAU – Australasia’s Premier Professional Supply Chain Community

With a working career spanning over 30 years in Logistics, Procurement and Supply Chain Management, Dr Nagel commenced his career in his birth country, South Africa. He developed an international reputation as a leader in Supply Chain Strategy and facilitates courses in Procurement Fraud across Asia Pacific.

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