Procurement managers have quite a lot of responsibility on their shoulders, with strategising and finding the most cost-effective & efficient deals and suppliers. It is very easy to understand why fraud can be overlooked.
Procurement fraud can be one of the more complex frauds to investigate; there are numerous ways it can be committed and, when investigating it, all options need to be considered.
Therefore to make things a little easier we have compiled a list of some of the more common types of fraud that can be found:
- Kickbacks and Bribes
When thinking about bribes most think of the passing on of money. However, a bribe is usually the giving or receiving of a “thing” of value to corruptly influence the actions of another person or organisation.
Types of Bribes:
- Kickback – A kickback is a type of bribe paid by the contractor after they have received payment for the project
- Corrupt Payment – Any benefit given with the intent of influencing the recipient. Things of value can include:
- Gifts – Travel, entertainment etc.
- Loans – To be repaid or not
- Credit Cards
- Sexual Favours
- Purchase overpayment
- Fees & Commissions
- Corrupt Influence – can include:
- Paying too much for or buying too many of an item/s
- Qualifying an untested/unqualified company/vendor
- Improper contract awards
- Knowingly accepting low quality goods/services
- Exclusion of other, qualified, bidders
- Leaking tenders from other bidders
- Specification’s narrowed to ensure that only 1 bidder can win the tender
- Bidding collusion – Bidders may collude and agree to submit complimentary bids to allows each other to win contracts on a rotating schedule. Alternatively this system may be used to divide territories or to ensure other vendors cannot be selected for projects. Another name for Collusive Bidding is ‘bid-rigging.’ In many cases collusive bidding is used in conjunction with kickbacks.
- Bid Manipulation – Procurement executives can manipulate bids and the bidding process to favour a specific contractor/supplier.
- Variation Abuse
A contractor will, in collusion with a procurement executive, win a project with a low bid and then submit multiple variations to the project to increase price and profit.
A contractor will submit multiple invoices for works/expenses that were only incurred once. A dishonest procurement executive may aid in this process by associating the different invoices to different projects.
Another type of billing fraud is false invoicing. In which a contractor/supplier will submit a invoice that is either false or inflated. In some cases a dishonest procurement executive may participate.
Another scenario is that a procurement executive can submit invoices from a fictitious vendor.
- Undisclosed Interest
Procurement executives can, at times, have vested interests in a contractor/supplier. An issue arises when the procurement executive does not disclose this interest, engages in unapproved discussions, or accepts gifts, kickbacks etc.
- Contract Specifications
Contractors/suppliers may deliver items/work, or substitute items/work for an alternative, knowing that they do not meet contract specifications and deliberately conceal the fact or make false representations of the quality of the items/work.
- Personal interest
An employee may purchase items through their agency/organisation, and billed to a project, that are intended for their own private use.
Frausec by Whispli can help procurement professionals with keeping visibility throughout suppliers, partners and own teams. It does this be empowering people to safely, securely and anonymously report wrongdoing so that it can be assessed, managed and acted upon before it becomes too costly.
To start your risk free 14 day trial please click here.
Whispli is the secure, anonymous communications company. Created by a former whistleblower, Whispli is a company with a mission to let people speak up anonymously and safely. Whispli opens and secures the flow of information between people with sensitive information and the organisations which need it. Read more here: https://whispli.com/about/