Teesside University academic to help tackle multi-billion pound fraud

Procurement fraud cost the public sector in excess of £2.3 billion last year – and with concerns the current economic climate could see that figure rise this year, a Teesside University expert has been drafted in to help tackle the problem.

Rob McCusker, Reader in Fraud and Financial Crime, is part of the Chartered Institute of Purchasing and Supply (CIPS) and British Standards Institute (BSI) team putting together the first British standard designed to mitigate procurement fraud.

He is among a six-strong panel of experts from organisations across the country which will pool together its knowledge over an intensive 12 month period in order to produce the standard.

Rob, who is also director of Teesside University’s centre for fraud and financial crime, was asked to assist on the committee after working closely with the global procurement fraud advisor to CIPS, Paul Guile, and helping to build the University’s reputation as a leading centre for expertise in fraud and financial crime.

He said: “Procurement fraud has always been a concern and our aim is to produce a British standard, the first of its kind, which will assist organisations in dealing with procurement fraud risk mitigation.”

Procurement fraud is any fraud relating to the purchasing of goods and services. Examples include price fixing, bid rigging, cover pricing, false invoicing, overpayments, false payments, altered payment details and diverted payments and the delivery of inferior or sub-standard products. Procurement fraud is particularly complex and difficult to detect.

Research undertaken for the Annual Fraud Indicator revealed almost one in ten companies had suffered procurement fraud in the last year and over 40 per cent of firms said that spend on construction is at greatest risk from procurement fraud.

The research also revealed that procurement fraud is enabled by a perceived lack of accountability and controls, and that it could be prevented from happening in the first place through greater auditing and fraud awareness and training.

In 2012 procurement fraud cost the public sector £2.3 billion, based on the one per cent at risk figure relating to the total £230 billion of procurement across both central and local government. Though there is no estimate of procurement fraud loss for the private sector, if the one per cent at risk figure was applied to estimated private sector procurement expenditure of £2 trillion, this could equate to £20 billion lost.

With the current economic climate continuing to put people under financial pressure, procurement fraud is estimated to rise further in 2013.

Rob added: 'Procurement fraud is costing billions of pounds and can be committed by people inside or outside an organisation. With companies under increasing financial pressure, it could trigger a surge in this type of fraud which can be particularly complex and difficult to measure.

'Our aim in formulating the first British standard is to mitigate procurement fraud and assist organisations with fraud risk management procedures.'

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