More than half of the respondents (52 percent) chose solicitation/negotiation as the procurement lifecycle activity that posed the greatest risk for fraud.  Almost one-quarter of respondents (24 percent) separately thought contract performance was the procurement lifecycle activity presenting the greatest risk for fraud. 

 

"Instances of fraud and corruption in the procurement cycle can be difficult to detect, prove or prosecute, but opportunities for fraud exist throughout the cycle, and factors leading to procurement fraud are often exacerbated during challenging economic times," said Bill Pollard, partner, Deloitte Financial Advisory Services LLP (Deloitte FAS). "While the risk of supply chain fraud cannot be eliminated entirely, companies can take steps designed to reduce the risks, including company-level anti-fraud controls and risk-specific anti-fraud controls."

 

Respondents were divided on which activity of an effective procurement fraud compliance program they think is most often overlooked by companies; 27 percent pointed to monitoring the procurement process, 21 percent indicated assessing/monitoring controls and 19 percent said hiring the right people and establishing the right company culture were most overlooked.

 

Almost three-quarters of respondents (72 percent) said their companies have an effective whistleblower program in place so employees and/or vendors can report concerns about potential procurement fraud. 

 

"The repercussions of procurement fraud can be severe, including not only impact on cash flows but also damage to an organization's reputation and brand. Working in tandem with employees and having a whistleblower system in place can be critical in helping to identify and mitigate procurement fraud risk," said Pat Nigro, director, Deloitte FAS.

 

Approximately 1,675 business professionals from the banking and securities, consumer business, energy and resources, financial services, health care providers, health sciences and government, insurance, life sciences and health care, manufacturing, retail, wholesale, and distribution, technology, media and telecommunications industries responded to the online polling questions during an April 2010 Deloitte webcast, "Procurement Fraud: A Multi-Faceted Challenge."