Foundations and building blocks in the fight against procurement fraud


The fight against procurement fraud may be a continuing worldwide challenge, but recent developments have shown it can be tackled with major success.

A new e-procurement system developed by a team of tech experts, business people and civil servants to help combat widespread corruption in Ukraine’s public procurement has started to deliver impressive results.

In recent years, it has been conservatively estimated that 20% of Ukraine’s public expenditure has been lost through corrupt practices, with the media reporting on park benches bought for the price of a car and government departments spending $75 US dollars per cleaning mop.

The new open source, transparent e-procurement system was launched last year and by November 2016 had already saved the country $233 million US dollars, with more than 15,000 buyers and 47,000 commercial shoppers on board.

Although transparency was the driving force behind its conception, with state information about public contracts easily accessible online for anyone to see, other benefits have included increased competition, less time and money spent on contracting processes and better decision making for buyers.

E-procurement systems such as these are an important foundation for fighting procurement fraud, but they will only ever be one part of the story. From company culture to spotting warning signs, all wise organisations are arming themselves against fraud in a range of ways. Here are just five:

1. Ethical culture

An ethical culture sets an expectation for all employees and contractors. By recruiting the right people at all levels and ensuring that everyone, particularly management, communicates with each other openly, honestly and fairly, it should be evident that poor conduct is not accepted.

As well as living up to your expectations in behavioural terms, there should be an explicit, written code of conduct stating how the organisation does business, makes its decisions and deals with different situations.

2. Trusting instincts

Buyers who don’t take leave for long periods of time, employees having personal contact with suppliers by text or out of hours, generous gifts from suppliers or people reluctant to have their work audited at short notice. These are all potential red flags.

All team members should be trained to look out for these signs and be aware that it’s their responsibility to raise concerns in confidence with an appropriate senior colleague.

3. Access denied

People switch roles or move to different teams fairly often, so it’s vital to remember to remove their access rights to any systems that they no longer need to use, as well as change passwords or pin codes on any shared programmes or devices.

4. It takes two

Although it’s a well recognised security procedure to assign two people to authorise and make any changes to supplier lists or supplier details, such as bank accounts, it is worth checking often that this process is being enforced.

5. Who’s on board?

Do you know who all your contractors and sub-contractors are? While you may well have completed a thorough checking process on your main suppliers, it is not unheard of for sub-contractors to fall through the net. A sub-contractor’s behaviour can impact on your organisation heavily, so knowing who they are and vetting their businesses before authorising their involvement is key.

It can be a contractual condition that your contractors have to inform you of any proposed sub-contractors, or you could award a contract on the basis that it is fully carried out by the main contractor and no sub-contractors will be authorised without written permission.

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