By Charles Tan
Purchasing & Engineering
Controlling expenditure and critical maintenance, this department handles high-value contracts making it susceptible to large-scale fraud.
- Fake Quotations
Common Schemes:
- Creating dummy companies for comparative quotes while ensuring favored supplier victory
- Using legitimate company names but forging quotes to appear more expensive than preferred suppliers
Warning Signs:
- All three quotations exhibit similar formatting or fonts
- High-bidding companies lack internet presence or recent incorporation
- Pricing differentials appear significant without logical justification
Prevention Measures:
- Verify company credentials through Department of Business Development
- Call bidding companies to confirm quotation authenticity
- Employ transparent e-bidding systems or sealed bids
- Establish multi-departmental purchasing committees
- Grade Substitution
Common Schemes:
- Ordering premium-grade equipment but receiving lower grades, splitting price differentials
- Using counterfeit or secondhand parts instead of genuine items
Warning Signs:
- Equipment failures unusually frequent despite recent replacement
- Parts expensive yet quality below expected standards
- Suppliers unable to provide certificates or warranties
Prevention Measures:
- Define clear, detailed technical specifications
- Engage independent experts or engineers to inspect received equipment
- Maintain warranties, certificates, and product documentation
- Tag all assets with barcodes or asset registry numbers
- Service Contract Fraud
Common Schemes:
- Renewing annual maintenance contracts with incumbent vendors without market price comparison
- Accepting commissions from contractors in exchange for contract renewals
Prevention Measures:
- Review contracts annually, comparing market rates with alternative providers
- Establish contract value ceilings requiring executive approval
- Incorporate performance reviews in renewal considerations
- Bid Information Leakage
Common Schemes:
- Sharing competitor pricing with preferred suppliers enabling underbidding
- Exchanging internal information with suppliers for personal gain
Prevention Measures:
- Execute Non-Disclosure Agreements (NDAs) with all suppliers
- Utilize e-bidding systems preventing competitor price visibility
- Separate teams managing different suppliers to avoid overlap
Human Resources & Accounting
As the organizational heartbeat controlling payments, revenue collection, and personnel management, fraud here creates massive repercussions.
- Ghost Employees
Common Schemes:
- Creating fictitious employee records in payroll systems, collecting salaries
- Failing to remove resigned employees from system, continuing salary transfers
Warning Signs:
- Employees nobody has physically encountered
- Multiple salaries transferring to identical bank accounts
- No time attendance records or documentation-only presence
Prevention Measures:
- Monthly physical headcount verification against payroll lists
- Require departmental confirmation of actual employee rosters
- Audit salary-receiving bank accounts for duplicates
- Deploy biometric time attendance systems
- Outsource Bias
Common Schemes:
- Selecting security, housekeeping, or service companies offering personal referral fees to decision-makers
- Collecting commissions from outsourcing firms
Prevention Measures:
- Announce transparent, open bidding processes
- Establish multi-departmental evaluation committees
- Conduct quarterly contractor performance assessments
- Credit Adjustments Fraud
Common Schemes:
- Reducing accounts receivable balances for overdue clients without justification in exchange for kickbacks
- Prematurely writing off bad debts, later splitting recovered collections
Prevention Measures:
- Require C-suite approval for all debt write-offs
- Maintain comprehensive debt collection documentation
- Monitor aging reports consistently
