Procurement fraud costs UK more than £5 million

31 January 2012

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31 January 2012 | Angeline Albert

Public and private sector organisations lost more than £5 million in procurement fraud during 2011, based on a number of purchasing-related UK prosecutions last year.

KPMG's Fraud Barometer results, published yesterday, analysed criminal cases in the UK last year and found seven cases of purchasing fraud totalling £5,096,805. The amount of overall fraud last year topped £3.5 billion.

A spokesman for KPMG said: “Criminals have, in some cases, been trying to fool procurement staff by convincing them to change suppliers’ details. However, there have been cases of buyers in the public and private sector appearing in court for alleged procurement fraud.”  

In one case, £2 million was lost by a public sector organisation because organised criminals, pretending to be a legitimate supplier, told the purchasing department that an existing supplier’s bank details had changed. In another case, £117,812 was stolen from an NHS trust after a purchasing employee created a fictitious care home supplier. The buyer linked the care home to a legitimate customer’s details to limit suspicion and made illegal payments their own bank account.

In September, Kent County Council's former head of energy procurement Ross Knowles pleaded not guilty to charges of fraud and transferring criminal property. Knowles was part of local authority energy buying group LASER, which represented 106 local authorities in the south of England. One of the charges against Knowles related to him allegedly negotiating a management fee from an energy supplier. The fraud was worth more than £2 million. He is expected to appear at Maidstone Crown Court on 19 March. The authority told SM: "While Mr Knowles' case is before the courts it would be inappropriate for Kent County Council to make any comment."

The UK government estimates procurement fraud costs the public sector £2.4 billion a year. The figure is based on the government’s annual fraud indicator, which includes fraud occuring at the tender stage as well as during the life of a contract. This is broken down into £1.5 billion from central government department budgets and £855 million from local government.


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