Last week, the Audit Commission released its report into the impact of fraud on local councils.
Alarming as the report is - in particular the fact that procurement fraud was the fastest growing element in 2010/11 - I believe fraud by professional procurement officers is still relatively low. However, that does not preclude us from assuring, as far as we possibly can, that we identify all risks with regard to fraud in the procurements we are responsible for.
We should endeavour as we proceed through the process to identify the opportunity for fraud internally as well as externally. Here’s a list of things we can do (although it is not exhaustive):
- Specifications should be written in such a way as to eliminate the opportunity for abuse by for example, not providing the potential for the supply of inferior goods or services or the ability to build in extra costs over and above those originally agreed
- Care should be taken at the business case stage to address all eventualities including identifying the risk of fraud and how that will be mitigated
- Effective market research and improved category management should highlight the potential risk of illegal collusion or the creation of cartels and result in preventative actions being taken to reduce the opportunity of this occurring
- Increased vigilance and scrutiny during the period of contract award and due diligence should highlight and reduce any pitfalls and risks with regard to the recommended supplier
- The allocation of the appropriate resources to create effective contract and performance management should provide the appropriate controls to reduce the potential to address other key areas in the report, for example non-compliance with standards and legislation and inflated or false performance data
It has also been suggested that greater transparency brought about by the government’s insistence on publicising spend data has itself created opportunities for fraud. I have no doubt this is the case but I again emphasise the need for better risk management in the development of legislation and guidance. While not against greater transparency, a little less haste and greater consideration of the downside may result in a safer method of applying such policies. The same applies to the reduction in so called red tape, the wider markets policy and greater use of the third sector. While they create opportunities for the honest majority they also open the door of opportunity for those who are less scrupulous. We need to be mindful of this.
These things need to be managed as part of our role and responsibility. Perhaps the powers that be, might want to think how they can provide the resources and training to enable all procurements to be carried out by a professional, after all accounts are finalised by accountants and legal advice given by lawyers. Perhaps procurement being carried out by qualified procurement officers, equipped with the right resource might eliminate a large amount of procurement fraud and add substantially to achieving greater value for money. Now there’s a thought.
☛ Peter Howarth is CEO of the Society of Procurement Offices in Local Government (SOPO) and CEO of SBV Ltd.