64% not acting on fraud threat

16 March 2009

16 March 2009

Most organisations are failing to boost anti-procurement fraud measures despite research indicating it is on the rise as the recession bites.

The latest SM100 poll shows just a third of respondents are taking greater steps to mitigate embezzlement connected to their buying function.

Two-thirds said they were not - with one commenting "although maybe we should be thinking about it now!" and another suggesting he wanted to but had met with opposition from his bosses. Several respondents said their company was not increasing measures because robust systems were already in place.

"Same rules apply, recession or not," said Clare Huber, purchasing manager at Varla. The poll followed a report by BDO Stoy Hayward that put the value of procurement fraud in the UK at £273 million last year, up 347 per cent on 2007 (News, 5 February).

Researchers cited the economic downturn as a major factor in encouraging both buyers and suppliers to try and secure money illegally.

Simon Bevan, national head of the fraud services team at BDO Stoy Hayward, said the 2008 study included fraud cases worth more than £50,000 - the same criteria that were applied a year earlier. SM100 respondents who were taking action said measures included signing up to whistleblower initiatives, implementing new purchasing policies, and requiring all procurement staff to sign a statement declaring no financial interest in employer contracts or suppliers.

John Milne, procurement consultant for engineering firm Hampco, said the company had become more vigilant in light of the recession, and drew on past experience.

"We were stung in the 1998 downturn, and detected an account manager who had salted away £150,000 by various devices," he said.

Ian Selden, group purchasing manager at Fidessa, said the company had upped its vigilance with a new purchasing policy, changing sign-off limits and approver numbers, and increasing internal auditing and compliance reporting.

"We have identified areas of potential risk and openness to the organisation, and have 'plugged' these holes," he said.

An SM100 Poll in May 2007 asked if fraud in procurement was a growing problem.

Half the respondents did not think it was, 38 per cent did not know and 12 per cent replied "yes".

At the time, KPMG had released research that indicated procurement staff were responsible for 9 per cent of company fraud worldwide.Whistleblowing experts are dealing with more fraud enquiries. Ethics Point - a company that provides whistleblower services to more than 2,000 organisations in the US, UK and elsewhere - released figures to SM showing a 35 per cent rise last year in reports of misconduct through its telephone and web-based reporting systems.

Giuseppe Falbo, senior director at Kroll Consulting Services Group, credited the rise in reports in part to authorities inviting employees to come forward with their concerns.

SMmar2009

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