Procurement fraud refers to the misuse of funds or abuse of power during the procurement process. It can occur at any stage of the procurement cycle, from planning to contract award and performance evaluation.
Whilst often notoriously difficult to detect, some of the red flags of procurement fraud include:
Unusual bid patterns:
When a vendor consistently wins bids without competition or at prices significantly lower than market rates, it can be a red flag of collusion.
When procurement documents lack details, or there are missing documents, it may indicate fraudulent activities. It is essential to have proper documentation of the procurement process, including specifications, quotations, and contracts.
Inappropriate vendor selection:
When a vendor is selected without a competitive bidding process or when the selected vendor is not qualified, it may be a sign of procurement fraud.
When goods or services are purchased without proper authorisation or outside of the procurement process, it can indicate fraudulent activities.
Conflicts of interest:
When procurement officials have a personal interest in a particular vendor or supplier, or when they have relationships with suppliers outside of their official duties, it can be a red flag of procurement fraud.
Overpriced goods or services:
When goods or services are priced significantly higher than the market rates, it may be a sign of collusion or kickbacks.
Kickbacks or bribes:
When vendors provide kickbacks or bribes to procurement officials in exchange for awarding contracts, it is a clear sign of procurement fraud.
It is essential to establish strong internal controls and policies to prevent procurement fraud. Organisations should regularly review their procurement processes, documents, and financial records to identify potential fraud and take corrective action if necessary.
To support organisations in detecting procurement fraud, Intqual-pro and Forensic Procurement Partnership (FPP) partnered to deliver Procurement Fraud Awareness Training through a unique e-learning course.
The e-learning course from Intqual-pro and FPP provides an opportunity for those working in the procurement cycle to gain an in-depth understanding of recognising red flag situations, the different types of fraud and how a company is exposed to them, how to mitigate the risk of bribery and corruption, and much more
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