'Urgent mid-week purchase orders point the way to procurement fraud'

Will Green is news editor of Supply Management
11 August 2014

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12 August 2014 | Will Green

A procurement expert in Zambia has said he always examines urgent purchase orders raised just before the weekend when looking for fraudulent practices.

Jones Kalyongwe, managing consultant at JESTC Business Consultants and a member of the Zambia Public Procurement Authority, told SM buyers raised orders on a Wednesday afternoon or a Thursday morning because “they need money for the weekend”.

He explained how engineering parts that were not actually needed would be ordered from compliant suppliers who would provide a kickback, but by describing the order as “urgent” normal checks could be bypassed.

“The first thing I ask is do you have items that were bought urgently? Friday is coming, they need to party, they need money in their pocket,” said Kalyongwe.

“They know if it’s urgent they won’t have to go to so many people.

“The true issue is did they need the service or product which they ordered?

“The whole of this pattern shows you the guys who do financial audit miss this because they are looking for procedures that marry, and the procedures are all followed. What I’m looking for are gaps in the procedures.”

Kalyongwe said sometimes a “cartel” involving procurement, engineering and finance existed to allow the purchase of unnecessary parts from firms, who in return provide kickbacks.

He said quotes would be obtained from a number of companies, but they would be dummies all owned by the same person.

“Sometimes there are cartels. Between the procurement guys, the guys in engineering, they work together, sometimes with guys in finance. It can be a triangle. When you look at the financial audits everything is super,” he said.

Kalyongwe said he would ask engineers for information on the longevity of parts to discern whether they really needed replacing. “When I go to do a procurement audit I ask for a maintenance card from the engineer and that card shows me the performance of the machine,” he said.

He said during an audit his first port of call would be the stores, where he would often find piles of goods that were ordered urgently but have not been collected.

“Because of that you have redundant materials in the store. You have piles and piles of stock in the stores because they are of no use to the company,” said Kalyongwe.

“Inventory is the backbone of the organisation. You have rubbish sitting in the store, thousands of pounds sitting in the store, because the material is surplus to their needs.”

He said practices such as these were “rampant” in Zambia.

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