The wide variety of goods and services required in managing property brings with it an equivalent range of fraud and corruption risks. Below are some of the risks in more detail:
- A person requesting/identifying requirements could:
- deliberately draft a vague specification allowing a favoured contractor to be paid for work not done or work done but not required, usually in return for cash or other advantages;
- include ‘ghost’ jobs which will be paid for but never undertaken.
- The contractor on site could deliberately damage equipment or property to create additional work.
- A person setting the limit of expenditure could:
- inflate the limit to allow the subcontractor to overcharge, in return for cash or other advantages;
- unbundle/split one job into several to avoid full competition and to direct work to a favoured party.
Pre-qualification questionnaire (PQQ) and invitation to tender (ITT) stages
- A person setting the specification could:
- tailor the specification in an exclusive manner to ensure a preferred contractor was successful in winning. This can often be the case if a contractor is asked to draft the specification.
Receipt, evaluation and award stages
- A person involved in the processes could ‘fix’ them to restrict or exclude competition.
Goods and services
- A person involved in these stages could:
- Fail to include a submitted bid to favour others in the competition
- bypass other bidders to direct work to a favoured contractor
- give favoured contractors information on the limits of expenditure to allow them to make excess profits
What can be done to prevent this?
- A contractor could:
- use materials of lower quality or a smaller quantity than specified but charge the full price;
- carry out poor quality work to ensure further repairs are required;
- invoice for the full price of materials without passing on discounts obtained as required by contract;
- deliberately invoice for work not completed or invoice for goods/labour not provided or used;
- invoice for works to buildings not owned by the organisation;
- submit duplicate invoices.
Management should ensure that controls are operated to the depth and frequency necessary to provide the assurance the organisation needs, in particular:
- that all requests for work have an adequate statement of requirement, are adequately specified and that requests are authorised and cost estimates are reliable, to monitor what work is done and how much is paid for it;
- that appropriately qualified/trained staff inspect work and that the nature and outcome of inspections is properly recorded;
- that an approved supplier list is maintained and appropriate checks are carried out to ensure contracts are awarded to authorised suppliers. It is, however, important to perform regular due diligence on the list to ensure that those on it still meet the criteria.
- spot checks, plus validation of expenditure/quality of services delivered should be undertaken to identify if work has been sub-contracted without your permission;
- that basic financial checks on invoicing are conducted to prevent over-charging, under-provision or duplicate payments;
- that checks are completed (and evidenced/minuted) on time, and that any issues or areas of concern are tackled swiftly.
It’s important to think objectively about your risk of fraud in order to develop appropriate defences. You can never be 100% secure, but you can reduce your vulnerability.
10 questions to ask yourself
How we can help
- When did you last undertake a fraud and/or bribery risk assessment (strategic and/or operational)?
- Do you have the expertise to undertake investigations (criminal, civil, disciplinary, regulatory) or do you require training or external support?
- Is your counter-fraud/bribery strategy properly designed, up-to-date, and working d how often are your key controls evaluated for relevance and effectiveness?
- How effective are your whistleblowing arrangements?
- Has your organisation undergone, or is planning, any major changes in personnel, structures and/or systems? If so, have the fraud risks and controls been re-visited or considered?
- What is your anti-fraud/bribery culture and, if provided, what is the quality of the fraud awareness training provided to your staff?
- Would your staff know what to look for and how to respond to suspicions of fraud?
- How effective are your pre-employment and enrolment screening systems?
- How does your organisation respond to allegations of fraud?
- Do you capture intelligence and does it have a systematic means of learning from past fraud incidents, whether or not they occurred in your organisation?
Our services are tailored to meet your specific needs. We can:
- conduct comprehensive fraud/bribery risk assessments reviews at strategic and operational levels;
- review your policies, controls and procedures to ensure they are ‘fit for purpose’ and fraud-proofed;
- provide training to staff, members, key post-holders and raise awareness with all staff within your organisation;
- undertake criminal, civil, disciplinary and regulatory investigations to the necessary standards.
For further information, please view our factsheet
or contact us to discuss how we can assist you.