Procurement Fraud: Corruption hides in ineffective processes and oversight

Procurement Fraud: Corruption hides in ineffective processes and oversight

It’s critical that procurement and contracting practices are transparent, accountable, and meet the ethical standards enshrined in legislation, codes and policies. Breaches of these regulations can and do attract serious legal and administrative penalties for organisations and their staff.  Procurement processes in most private and public sector organisations stress the importance of rigour in contract planning, formation and management, but what are public sector organisations actually doing to achieve that objective?

According to a recent report. Risk assessment is important, but currently neglected. Nearly 40% of public sector organisations did not know whether they had performed a fraud risk assessment in the last 24 months”[1].

To assist in focussing attention where it can deliver the most benefit to the organisation, there are common ‘red flags’ which can be assessed to give an indication of the areas of exposure within any organisation. These include:

  • Poor culture of accountability including the absence of accountability and transparency mechanisms
  • Poor management of conflicts of interest
  • Evidence of partiality or favouritism
  • Incidents of dishonest or unethical suppliers
  • Receipt of gifts and benefits
  • Poor security of commercially sensitive or confidential information
  • Poor monitoring and evaluation of contractors’ performance

Exposure analysis and fraud risk profiling can reduce the risk of both financial loss and damage to reputation and public confidence. Is it enough to have documented risk assessments, policies and procedures?  Recent findings indicate the challenge of implementation:

“While the (fraud control) plan is described as current on WA Health’s website and in the Health Accounting Manual, it has not been operational for several years,”[2] the Crime and Corruption Commission found.

The findings highlight failings in the effective implementation of fraud controls that were deemed to be in place.  Understanding the risks is clearly only part of the solution. Organisations need to have appropriate ‘controls’ in place to minimise both the likelihood and the potential consequences of fraudulent events.

It can be a complex area, but how confident are you that you have reasonable controls in place to prevent fraud, and established mechanisms for detection?

For more information on business continuity management, workshop facilitation, procurement and fraud risk management – or any other risk-related matter, please contact admin@riskwest.com.au.


[1]  PWC ‘Fighting Fraud in the Public Sector Report’
[2]  CCC Report‘Report into bribery and corruption in maintenance and service contracts within North Metropolitan Health Service’ 16thAugust 2018