By Jo Toon
TINZ Member with Delegated Authority for Procurement
Corruption and fraud are ever present risks in the procurement cycle. From the manipulation of the procurement and supplier selection process, through to the generation of fake invoices, inflating prices or substitution of sub-standard products, bad actors can exploit weaknesses for personal gain. This exposed regularly through Serious Fraud Office prosecutions.
No sector is immune to this risk. In the last few months, we have seen the successful conviction of a wife and husband who used fake invoices to defraud Oranga Tamariki of $2m, an accounts manager who defrauded Waiheke Health Trust and a construction company, and two IT contractors who received over $4m in kickbacks while working for Spark.
In the public sector, the impacts of fraud and corruption are wider than the stealing of money and the betrayal of relationships. If public funds are stolen, either directly or through paying inflated prices, there is less to spend on front-line support for those who need it the most. Sub-standard products and services can impact on safety and the environment, and require additional spending to repair, re-do or replace. Unfair awarding of contracts to fraudulent businesses can distort competition, and even drive legitimate businesses out of the market.
The nature of procurement fraud and corruption is diverse, with many areas where fraudsters can exploit weaknesses in the system. To help raise awareness and support managers, decision makers and employees involved at all stages of the procurement cycle, the Serious Fraud Office Te Tari Hara Tāware and the Counter Fraud Centre Taurārai Hara Tāware have published a guide to preventing and detecting procurement fraud and corruption.
This guide is a “must-read” for everyone who touches the procurement process, or has risk management and audit accountabilities. It provides a systemic look at where fraud and corruption can arise in the process, the tactics used, and red flags to look out for. It finishes with guidance on how to strengthen the system, with policies, procedures, training and appropriate checks and balances.
The recent TINZ submission on the United Nations Convention against Corruption highlighted the risks of corruption occurring in public sector procurement, and the need for additional monitoring and integrity systems to reduce the likelihood of corruption occurring in the first place.
If the recommendations included in this guide are implemented across the public sector, and officials involved in procurement and contract management are trained on the red flags, then this should go a long way to reducing the opportunities for fraud and corruption, and increase the likelihood of those involved being caught and prosecuted.
Jo Toon
Jo Toon FCIS is a procurement professional with over 13 years of expertise in NZ public sector procurement. More recently, she has started her own businesses helping suppliers navigate the competitive procurement process. She is a TINZ Member with Delegated Authority for Procurement.
