Supplier fraud in the public sector up by 19 per cent

18 January 2012

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18 January 2012 | Adam Leach

The amount of fraud carried out by suppliers to the public sector has increased from 13 per cent to 32 per cent in two years, accountancy firm PwC has found.

Fighting fraud in government, published by accountancy firm PwC, said it was imperative public sector organisations stay alert to suppliers’ conduct as they face an increased risk of being cheated by third parties.

Ian Elliott, a partner in forensic services at PwC, said: “As the public service market becomes more open in many countries, suppliers more diverse, and more voluntary and private sector organisations become involved in delivering services, procurement departments will face a raft of new challenges to ensure the quality and cost-efficiency of services are not compromised.”

The report was based on responses from 184 public sector workers in 36 countries including 27 UK respondents. It revealed that fraudulent activities such as false invoicing schemes and unauthorised changes of supplier details are on the rise. It suggested one of the reasons for the increase could be the lack of action by public sector organisations once corruption is detected.

According to the findings, just a quarter of organisations that had been defrauded by a third party terminated the relationship once detected. While conceding that in some cases this may be unavoidable as a result of contract terms, the report highlighted the need for all organisations to keep a close eye on those they do business with. The top three fraud detection methods in 2011, according to the findings, were suspicious transaction reporting, internal audits, and internal tip offs.

Earlier this month, research from professional services firm BDO revealed that fraud across the UK had hit an all-time high of more than £2 billion.

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