Contract and procurement fraud
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| Need Recognition
Generally, procurement actions begin with the procuring entity making a determination of its general needs. These initial determinations include assessments of the types and amounts of goods or services required to meet the entity’s needs. And in need recognition schemes, a procurement employee convinces his employer that it needs excessive or unnecessary products or services. Accordingly, need recognition schemes occur in the presolicitation phase. Often, in need recognition schemes, the purchasing entity employee receives a bribe or kickback for convincing his employer to recognise a need for a particular product or service. There are several red flags that might indicate a need recognition fraud. An organisation with unusually high requirements for stock and inventory levels might reveal a situation in which a corrupt employee is seeking to justify unnecessary purchases from a certain supplier. Likewise, if an organisation’s materials are not being ordered at the optimal reorder point, this should raise a red flag. An employee might also justify unnecessary purchases of inventory by writing off large numbers of surplus items to scrap. As these items leave the inventory, they open up spaces to justify additional purchases. Another indicator of a need recognition scheme is a “need” that is defined in a way that can only be met by a certain supplier or contractor. In addition, the failure to develop a satisfactory list of backup suppliers might reveal an unusually strong attachment to a primary supplier—an attachment that is explainable by the acceptance of bribes from that supplier. Other common red flags of need recognition schemes include: A procuring entity’s assessment of needs is not adequately or accurately developed. There is no list of backup suppliers for items, spare parts, and services continually purchased from a single source. Estimates are either not prepared or are prepared after solicitations are requested. Items, parts, and services are obtained from a single source. A suspect employee displays sudden wealth, pays down debts, or lives beyond his means. A suspect employee has an outside business. Multiple purchases that fall below the threshold limit are present. Purchases are made without a receiving report produced. Download 0.62 Mb. Share with your friends:
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