Procurement fraud and corruption risk
Every year, New Zealand’s public sector spends over $51 billion procuring goods and services. This procurement process – from the planning stages through to contract management – remains the government activity most vulnerable to waste, fraud and corruption due to the size of the financial flows involved. From poorly defined requirements and biased bid evaluations to inflated prices or non-compliance with contract terms, these risks can have significant financial implications.
Impacts and challenges
Procurement fraud and corruption is not just a financial crime, it creates a ripple effect of negative consequences that pose serious risks to the public sector, economy, people and the environment. When public funds are illegally diverted from crucial areas such as welfare, health and infrastructure it leads to a decline in service quality and hampers the ability of government agencies to deliver vital services to citizens who need them most.
Identifying fraud and corruption in the procurement lifecycle can be challenging due to the complexity of the process and involvement of multiple stakeholders. Many projects also lack a risk assessment for procurement fraud and corruption, leading to weak fraud and corruption controls and risk mitigation strategies.
Managing procurement risks effectively
A robust and well-structured procurement process is the first line of defence against procurement fraud and corruption. By understanding the conditions that can lead to fraud and corruption and putting in place effective safeguards, organisations can protect public funds and maintain the integrity of their procurement processes.
To raise awareness of procurement fraud and corruption risks in the public sector, Procurement fraud and corruption risk: Building fraud and corruption prevention capability and culture in the public sector [PDF, 614 KB] identifies procurement processes that are vulnerable to fraud and corruption and sets out a range of countermeasures designed to prevent, detect and deter procurement fraud and corruption. By implementing these measures, organisations can significantly reduce their exposure to procurement fraud and corruption.
This guidance is intended for:
- those with financial authority delegations
- those in charge of procurement
- decision makers
- project managers
- contract supervisors
- any employee involved at any stage of procurement.
It will also be useful for risk management, fraud and corruption risk, and procurement professionals who want to learn more about implementing fraud and corruption risk management in procurement.
Resources
Download the full and summary guidance documents.