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Sources of fraud and corruption

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EMPIRICAL evidence suggests that most procurement fraud is committed by non-procurement staff. Most high-profile procurement fraud and corruption cases involved senior officials as reported by various local newspapers. Very few involved procurement staff. To say the least, procurement staff only ratify procurement decisions made by corrupt senior officials and users in organisations. Why do we find ourselves in that situation?
Report by Nyasha Chizu

Some of the answers lie in the remits of good corporate governance when ownership and control, policing or regulation and operation need to be separated to enhance controls. In short, majority of procurement fraud and corruption problems arise from faulty procurement structures.

Many organisations do not regard procurement as critical. The lack of recognition of the significance of procurement activities influences the misalignment of the activity in most organisations and even in the government. Most procurement staff report to finance or administration. For that reason, most procurement decisions are not based on procurement principles allowing manipulation of the system to pursue fraudulent transactions. This misalignment also influences the power senior staff and technical personnel have over procurement decisions.

Procurement fraud is high in the management of emergencies. Some of the emergencies could be natural or artificial. Both natural and artificial crisis create opportunities for fraud and corruption because the focus will be on mitigating the problem, overshadowing procurement fundamentals. Ordinarily, people get away with it and they are motivated to do more at the expense of scarce national or organisational resources.

The greatest challenge for procurement activity is the lack of standards. Standards define a systematic way in which a process must be performed. Some best practices exist and their adoption is voluntary. This is the major reason why procurement audit is difficult to perform. Accounting standards are limited on the oversight of procurement. The remedy is to simply undertake a compliance audit to check if procedures were followed, and value for money audit, to assess the economic concepts of opportunity cost in the goods or services bought against the capital outlay.

Since most procurement responsibilities are clerical, even though positions of a procurement manager exist in some organisations, very few have a procurement strategy. Those that are lucky to have one omit procurement fraud in their procurement strategy. To sum it up, there is a shortage of procurement skills to tackle the problem. Most staff responsible for procurement is from other disciplines and lack the background training in procurement.

Procurement is at a stage of development and as such, skill availability is very limited. Training and education is therefore required to professionalise procurement activities for the benefit of organisations and the country. It is critical at this point in time where citizens require transformation from the hyperinflationary environment style that promoted fraud and corruption, to professional, fair and transparent business practice.

A paradigm shift is required and to aid to other national activities of procurement reforms being undertaken, regulation of the procurement profession cannot be overemphasised.

Faulty procurement structures generate fraud

FUEL procurement has not constantly followed tender procedures in the past, leading to erratic supplies

  • Nyasha Chizu is a Fellow of CIPS and CIPS Zimbabwe branch chairman writing in his personal capacity. Feedback: chizunyasha@yahoo.com

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