“More comprehensive contract approval policies and processes” are being developed, said Kraft Heinz. © Photo Universal Images/ Getty Images
“More comprehensive contract approval policies and processes” are being developed, said Kraft Heinz. © Photo Universal Images/ Getty Images

Kraft Heinz buyers 'circumvented controls to hit targets'

Will Green is news editor of Supply Management
10 June 2019

Kraft Heinz has provided details of a procurement overhaul taking place in light of an investigation by US authorities.

The Securities and Exchange Commission (SEC) is investigating accounting, procedures and internal controls related to procurement at the firm, and in its latest annual report Kraft Heinz said “multiple employees in the procurement area engaged in misconduct”.

“Certain employees in our procurement organisation engaged in misconduct and circumvented controls that included withholding information or directing others to withhold information related to supplier contracts that affected the accounting for certain supplier rebates, incentives, and pricing arrangements, in an attempt to influence the achievement of internal financial targets that became or were perceived to have become increasingly difficult to attain due to changes in our business environment,” said the company.

This resulted in an understatement of the cost of products sold totalling $208m, said Kraft Heinz. An internal investigation is now complete.

The company said it was developing a “comprehensive global procurement training programme” that will cover supplier contracts and “potential accounting implications”. Mandatory training has already taken place for the global procurement function.

Kraft Heinz said it was developing “more comprehensive contract approval policies and processes”, standardising contract documents and looking to upgrade procurement software.

It is also “augmenting” procurement finance teams with “additional professionals with the appropriate levels of accounting and controls knowledge”.

“A comprehensive disciplinary plan is in the process of being implemented for all employees found to have engaged in misconduct, including termination, written warnings, and appropriate training depending on the severity of the misconduct,” said Kraft Heinz.

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