Procurement & Purchasing
Governmental Procurement and
the Fraud that Accompanies It
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.
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
Non-compliance with The Buy American Act
Lack of paperwork or certifications with respect to goods covered by the Buy American Act.
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.
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.