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Remedies to procurement fraud


The throbbing truth is that regardless of whatever effort, system, determination or aspiration, no one can eradicate fraud and corruption in any system, let alone in procurement.

Report by Nyasha Chizu

This blunt fact does not mean that we have to sit back and watch the rot of corruption eat away the society. The best moral citizens can do is to reduce the prevalence of fraud and corruption in society and in procurement.

Procurement fraud is linked to an organisation’s inside elements.

This results in future costs being built in existing contracts pushing up inflation on future projects.

Most fraud in procurement is done through shelve companies or false companies. The only hope is derived from a good system. An effective system will make it easy to spot the rot before the whole system is rotten.

The banking sector introduced “know your customer” policy to limit the effects of fraud and corruption in the financial sector.
Banks hold information relating to the physical location of their customers, signatures, national identity numbers and images of their customers.

This implies that banks can effectively identify and trace the roots of their clients. The same is necessary in procurement. Buyers must employ “know your suppliers” policy.

Banks insist on proof of residence. Why is this important? Since most crime in procurement is committed through shelve companies and false companies, proof of residence of such institutions will be difficult to forge.

Buyers must insist on credible proof that a supplier indeed has a verifiable place of operation.

Buyers must insist and demand proof of utility bills, verifiable lease agreements and confirmation letters from bankers that the supplier operates a credible bank account.

As part of the supplier evaluation process, buyers must not sit back and get comfort from well presented company profiles. Buyers need to verify physically important issues about a supplier. Depending on the level of engagement, documents verification alone is not enough, physical inspection is necessary.

As a strategy to reduce the effects of fraud and corruption in procurement, buyers must value the process of supplier appraisal. Supplier appraisal is the process of evaluating suppliers’ capacity before they are engaged.

Benchmarking with the banking sector reveals that supplier assessment process is more than just verifying paperwork, it implies a full understanding of all issues regarding your supplier.

The issues might include knowing who your supplier and who his suppliers are, where he operates from and who the bankers are.
Nyasha Chizu is a Fellow of CIPS and the CIPS Zimbabwe branch chairman writing in his personal capacity. Email: chizunyasha@yahoo.com

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