Stop Fraud From Getting a Foothold in Procurement Processes

12/1998

IOMA Supplier Selection & Management Report
Stop Fraud From Getting a Foothold in Procurement Processes

Are supplier partnerships spawning grounds for potential fraud activities?  Robert Lindquist, in Washington D.C., a leading authority in forensic accounting, believes "familiarity" between a company and its suppliers can lead it to relax prudent internal controls.  "In a partnering environment, where both sides face constant pressures to survive and succeed, the combination of weaker controls and intense business pressure can create both the opportunity and motivation for fraud," he asserts.

“The awareness and management of this potential exposure is significant to effective fraud prevention,” Lindquist maintains.  Two solutions he suggests include:

  • For partnering relationships, supplier pre-qualification is required whether it be sole-source or subject to tender.  The essential control should be done by someone other than the manager of the process.
  • All supplier agreements must include a broad-based right-to-access audit clause and such audits should be undertaken in the normal course.