CHAMBERSBURG, PA - April 12, 2010
-- Fraud hurts more than an organization's bottom line. It will
tarnish, even destroy, an organization's reputation. Fighting fraud in
the workplace, however, is a daunting task because thanks to
ever-improving technology fraud perpetrators are becoming increasingly
more sophisticated.
As the most common and most costly of all
white-collar crimes, procurement fraud, or contract fraud as it also is
known, costs businesses in the United States billions in losses each
year. Federal government estimates are that close to $50 billion a year
are lost to procurement fraud and that is just fraud associated with
government work. Several times that much occurs when non-government
related fraud is included, but the exact amount is not known
Since
the U. S. National Procurement Fraud Task Force (NPFTF) was created in
2006 to combat public and private sector fraud, more than 400 criminal
convictions have been pursued. The NPFTF's work has resulted in 300
plus convictions and hundreds of millions of dollars in civil
settlements and judgments. This, though, is just the tip of the
iceberg.
According to recent PricewaterhouseCoopers (PwC)
research, corporations and other organizations have greater exposure to
procurement fraud than most senior managers and board members realize,
especially during economic downturns. Areas that are most vulnerable
include bidding processes, information management systems, vendor
maintenance, and invoice and payment processing. Here are some red
flags that PwC says you should watch for:
Information
management
- Inconsistent data compiled across procurement-related
systems
- Significant data quality issues relating to spend data and
vendor data
Procurement process
- Lack of controls around use of preferred vendors, negotiated contracts
- Low compliance with corporate preferred buying guidelines
Vendor
maintenance
- Multiple instances of the same vendor within master data
- Inconsistent vendor payment terms across the organization
Invoice
and payment processing
- Duplicate payments
- Inefficient invoice processing
To
effectively combat fraud, organizations must become more sophisticated
than the perpetrators. That means tighter controls and 100%
transparency. It also means being open to change. PwC recommends using
tools that qualify vendors and streamline procurement processes. IT
systems also must be strengthened by focusing on the set up and
maintenance of vendor master files and other support systems. The
system deployed also must provide data about procurement trends,
payment patterns, and changes in the mix of products and services
procured to find indications of wasteful or collusive behavior.
These
levels of control are available with new approaches to procurement,
according to William Gindlesperger, chief executive officer of e-LYNXX
Corporation. New procurement methodology and technology make it
possible to attain 100% transparency, full accountability and
reporting, tight control, greater efficiencies, detailed task
management and thorough information archiving -- all via a web-based
communications and workflow system that eliminates e-mails and other
communications that can be manipulated, hidden or destroyed.
"This
is how it works," Gindlesperger explained: From the moment a project is
conceived, the idea is entered into the system's database. Suppliers
are identified by the buyer and entered into the buyer's database of
pre-qualified suppliers, and this is where they are stored until the
buyer makes a change. Each supplier is thoroughly vetted to determine
capabilities, location, equipment, staffing and special attributes such
as being environmentally compliant. Detailed job specifications are
then entered. Based on new procurement methodology, the computer
matches the job specifications with only those suppliers capable of
doing the work. The purpose of the new procurement method is to
establish a fair competitive pricing environment so only qualified
suppliers are asked to bid. The bids are made, and the supplier is
chosen. All of this happens in minutes, and the process can be repeated
for subsequent jobs eliminating negotiated rates that could become
suspect.
Once the supplier is chosen by the buyer, both buyer
and supplier responsibilities are assigned to establish timelines and
project accountabilities. Who can access the system and when also is
entered to make sure only those with a need to know have access at any
given time. Then, every detail about the project -- from changes
through production to delivery and invoicing -- is entered and
recorded. Everything is archived and nothing can be modified or erased.
A permanent record is established for future reference.
This
level of reporting and documentation consolidates vendors and
streamlines the procurement process, as recommended by
PricePricewaterhouseCoopers. The transparency, compliance, consistency
and accountability that it creates protect against fraud.
"Even
better, the new competitive pricing methodology reduces the procured
costs of goods and services," Gindlesperger said. In the print
industry, for example, this new process is reducing procured print
costs by 25% to 50% with no upfront investments for the web-based
system." Reductions occur because the suppliers know that the way to
win work is to bid low with deeply discounted prices, and this is
typically done to fill production downtime. All know that filling
downtime is the key to success. Suppliers also know that when used
consistently to keep work and revenue flowing, this approach will
increase their bottom-line profitability by about 10% of their
revenues. The supplier wins, and the buyer wins. There is no incentive
for fraud.
About e-LYNXX Corporation e-LYNXX
Corporation, the North American procurement authority, is exclusively
endorsed by Printing Industries of America (PIA) and Educational and
Institutional Cooperative Purchasing (E&I) and recognized as a top
100 procurement firm by Supply & Demand Chain Executive. Founded in
1975, e-LYNXX has three divisions.
- American Print Management provides
enterprise print procurement solutions and patented competitive methods
to reduce costs for direct mail, marketing materials, packaging and
other procured print.
- Patented Procurement Method grants patent
licenses for supply chain optimization.
- Government Print Management
offers U.S. GPO bid services, access and assistance. www.e-LYNXX.com -
888-876-5432
Contact:Joseph Patterson
Communications Director
Joseph.Patterson@e-LYNXX.come-LYNXX Corporation1051 Sheffler Drive
Chambersburg, PA 17201
717-709-0990 Office
717-709-0991 Fax
888-876-5432 Toll Free
www.e-LYNXX.com The North American procurement authority