Procurement & Purchasing

"Goverment Procurement and the Fraud that Accompanies It"

Procurement

Procurement is central to governmental operations. In addition to contractors, vendors and their employees, perpetrators of procurement fraud include procurement, purchasing, receiving, program administration, contract administration, accounting and management personnel.

Bid Rigging, Bid Rotation, false certifications and “pay-to-play” schemes are all aspects of procurement fraud.

Purchasing

Once the contract is awarded, purchasing fraud may occur. Excess materials may be ordered under a perfectly valid contract from an entirely honest contract. The ordering employee may then divert the materials ordered to personal use. Sometimes, the employee and contractor cooperate in these types of schemes. At other times, employees from purchasing and receiving, with or without the knowledge of the vendor, enrich themselves at the public’s expense.

Risks Risks Risks
General Guidance

Increasing number of complaints about products or service

Increase in purchasing inventory but no increase in sales

Abnormal inventory shrinkage

Lack of physical security over assets/inventory

Charges without shipping documents

Payments to vendors who aren’t on an approved vendor list

High volume of purchases from new vendors

Purchases that bypass the normal procedures

Vendors without physical addresses

Vendor addresses matching employee addresses

Excess inventory and inventory that is slow to turnover

Purchasing agents that pick up vendor payments rather than have it mailed

Unnecessary purchases

U. S. Department of Defense: Office of the Deputy Inspector General for Policy and Oversight - Procurement Fraud Toolkit
Non-compliance with The Buy American Act Lack of paperwork or certifications with respect to goods covered by the Buy American Act. National Association of State Controllers (NASC) Controls Questionnaire for Buy American Act
P-Cards

Inappropriate segregation of duties.

Purchase/payment limits higher than required.

Refusal of cardholders to accept transfers or promotions.

Increasing costs of supplies from year to year.

Controls over vendor type non-existent.

Industry Week Article: Purchasing Card Fraud

Federal Times Article: New Tactics Reduce Purchase Card Fraud

My Purchasing Center: Purchasing Card Fraud Can be Prevented

National Association of Purchasing Card Professionals (NAPCP)'s Fraud Prevention and Detection: Establishing and Maintaining a Purchasing Card Program with Adequate Management Controls to Prevent Fraud, Misuse, and Abuse

SAS Knowledge Exchange

P-Cards

Inappropriate segregation of duties.

Purchase/payment limits higher than required.

Refusal of cardholders to accept transfers or promotions.

Increasing costs of supplies from year to year.

Controls over vendor type non-existent.

Industry Week Article: Purchasing Card Fraud

My Purchasing Center: Purchasing Card Fraud Can be Prevented

National Association of Purchasing Card Professionals (NAPCP)'s Fraud Prevention and Detection: Establishing and Maintaining a Purchasing Card Program with Adequate Management Controls to Prevent Fraud, Misuse, and Abuse

SAS Knowledge Exchange