Global procurement fraud amounts to at least US$1tn annually. Its seriousness is recognised by the United Nations which has a convention against corruption. Nearly all African nations have signed up to it. Requirements on signatories include creating a body to oversee prevention of corruption, an independent judiciary a merit based civil service and transparent procurement. Bribery, embezzlement and money laundering must be criminalised. Whilst in many countries fall well short of requirements, it provides a benchmark at which to aspire. This and the increasing recognition of the debilitating impact of corruption are leading countries to take the topic more seriously.

Corruption kills people. It destroys jobs, economies and motivation. It can reduce investment from other countries and set-back economic hopes. Infrastructure can fail. Living standards and life expectancy can be badly reduced. The amount of procurement fraud in individual countries is difficult to assess. However, Transparency International reports annually on corruption in the public sector and rates countries on a scale of 0 to 100. The least corrupt countries include New Zealand and Denmark, which score 90 points. Singapore follows closely behind with 86 points. The UK is 17th in the international league, with 74 points and the USA is 18th, with 73 points.  These are not figures of which to be proud and show how far the UK and USA have to go to reduce procurement corruption to more satisfactory levels. Most other countries are much worse, though there are signs that some governments are beginning to take the problem more seriously

Defence and construction are the industries in which corruption is most likely, which is where most growing economies are likely to invest.

There are many ways to commit procurement fraud, ranging from awarding contracts unfairly to contractors failing to deliver goods, services or construction, e.g. new roads, in accordance with specification. Some huge contracts have been let solely to enable someone to obtain ‘commission’. Corruption is 6 times as likely after contracts have been let, partly because many organisations fail to invest adequately in contract management.

There are many ways to detect that fraud may be taking place. However, internal audit is often understaffed or lacks the competence to address this. Finance systems are a good place to start, checking the proportion of orders that are ‘urgent’ and which will therefore by-pass normal controls, suppliers with different names but with the same address, many contracts/procurements just within a person’s authorisation limit, too many payments to one vendor and payments not in line with company business trends. There are many indicators for different stages of the tender process.

Prevention is better than cure. This can be achieved through creating an anti-fraud culture. However, fraud is committed by people, not systems. Yet too many organisations focus on improving their systems if fraud is discovered or suspected and often fail to put people controls in place such as a whistle blowing programme – which can be the most effective fraud deterrent there is. A further effective approach is to create a first class procurement organisation. This provides a huge range of benefits as well as deterring fraud and the presentation will address this. 

Finally, organisations need to create an anti-fraud plan.

This webinar will describe the most frequent types of fraud, the possible impact, how to identify frauds and how to minimise risk of fraud. It will describe how most organisations, when confronted with evidence of fraud, introduce the wrong preventative measures.