There is still a lack of profile in many boardrooms around the risk procurement fraud presents despite the National Fraud Authority highlighting figures of substantial losses attributed to procurement fraud.
Bribery and corruption has substantial visibility, but the same does not seem apply to procurement fraud. In this instance, this makes it a higher risk purely for the reason it cannot be dealt with if it hasn’t been identified.
If you look at the definition of bribery – to regain, retain and obtain and unfair
business advantage (typically through a contract) – this could also be included under the procurement fraud banner as a contract forms part of the purchasing process.
Many organisations now have anti-bribery policies, yet most do not have anti-procurement fraud policies. The question we are often asked is “how do we begin our anti-procurement fraud programme?”.
An approach is to initiate a procurement fraud training and awareness programme to staff involved in the procurement process including the end-user. If staff are aware what to look out for, they are another pair of eyes and ears to help you tackle the problem. We have found that following training sessions, even just with basic awareness, staff have identified irregularities or issues within company processes and rectified them.
We have also found many organisations are not enforcing their procurement processes. Bid splitting (where contracts are divided into smaller deals to avoid transparency) is known to occur, but for operational reasons or ease of delivery, it is sometimes allowed to continue.
Of the most concern is that many organisations are not aware exactly who is not following the procurement process, and – more importantly – they are not asking why. It might be that not everybody understands the process, or the reasons could be more sinister, such as fraud.
Every organisation carries out some form of purchasing activity and as such procurement fraud is a risk that affects all sectors. Many might be reading this thinking procurement fraud will not affect us or may not happen to us. Many organisations have said this, and ultimately get caught up in negative publicity.
What happens if the organisation in question is yours? If in doubt, ensure you check.
☛ Paul Guile is CIPS global procurement fraud advisor. This is the first of a series of 12 blogs that will look at fraud risks and common practices.
CIPS is holding a two day Procurement Fraud MasterClass, presented by Guile, on 5-6 March in London. For more details please call 01780 756777 or click here to book online