In today’s business world it is important for organizations to take steps towards procurement fraud prevention. Procurement fraud costs businesses millions of dollars every year, and the losses can likely be avoided if certain measures are taken to assist in procurement fraud prevention. The diagram below shows the procurement fraud that can be committed by employees, as well as by vendors.
Procurement Fraud Life Cycle
Procurement fraud is often complex to investigate because it can occur at any stage of the procurement life cycle. Whether a business is small, medium or large, procurement fraud may occur. The fraud occurred most often during the invitation of quotes/bids stages, followed by the vendor selection and the payments process stage.
The procurement fraud life cycle may be illustrated as follows:
Strategies to Consider
Most incidents of procurement fraud can be prevented or detected early if the organization possesses a complete understanding of:
• the procurement framework, which is the policies and procedures
• the risks involved in the procurement life cycle
• how controls and review mechanisms will reduce risks