CGF ARTICLES, OPINIONS & EDITORIALS
Procurement fraud: The bitter truth (2012-01-27)
February 19,
2015 3481 3481 
In many countries, government and large businesses is dependant upon suppliers and contractors to provide various services and products, as a critical support to their operations.
Having a reliable and robust procurement system is therefore not only paramount for the organisation’s good governance measures and smooth functioning of their internal operations, but indeed it is also the very ‘food-chain’ upon which many external businesses may depend upon for their own survival.
Needless to say, staying in a larger business’ or government’s procurement supply chain can become -- certainly for most smaller companies -- a matter of either making ends meet, or not, as the case may be. Clearly then, one assumes that those who remain in the corporate’s supply chain, are those who are legitimately providing good services and or products? Moreover that the delivery and pricing of these services and products are above board, where the rules of engagement are fairly and transparently applied amongst all those who operate in the corporate’s supply chain.
What would happen if the supplier was in cahoots with an insider of the corporate, and both parties could benefit by the same supplier who frequently wins the bids, by manipulating the procurement system and or its information? The response is quite obvious; the same supplier is then unfairly enriched, whilst someone on the inside -- who tweaked the system or undermined the information -- scores another secretive kickback from the devious supplier. Of course, the other suppliers are left in the cold.
Whilst there are varying opinions to the annual growth rate of an organisation’s procurement spend, according to the Association of Certified Fraud Examiners (ACFE), a typical organisation may lose up to 6% of its annual revenue to occupational fraud, and much of this is directly related to procurement fraud. As the statistics relating to procurement fraud in South Africa are somewhat vague, there is little consolation for our local companies and their stakeholders especially when one considers that ACFE reported that corporate America had lost a whopping $600bn in 20041 due to fraud.
