Sample fraud awareness presentation
Combating Corruption and Fraud
Nigel Savage, JD, CFE
International Fraud Expert and Man of Action
SavageFraud.com
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Categories of corruption and fraud schemes
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Corruption
o
Bribes and kickbacks
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Hidden interests in contractors by project officials
Bid rigging
o
Rigged specifications
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Unbalanced bidding
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Leaking of bid information
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Change order abuse
Fraud
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False statements and claims
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False and inflated invoices
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Failure to meet contract specifications
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Product substitution
Collusive bidding by contractors
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Agreements by bidders to inflate bid prices, rotate winning bidders, divide markets, etc.
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The schemes often are linked…
1.
A BRIBE is offered or demanded in exchange for the promise of a contract
award or other favor, which leads to…
2.
Some form of BID RIGGING to exclude the other, often more qualified and less
expensive bidders, and finally…
3.
FRAUD in by the bribe payer, to cover the cost of the bribe and exploit the
corrupt relationship.
The fraud can take the form of:
False, inflated or duplicate invoices
Failure to meet contract specifications
Substitution of cheaper inferior materials or products
Fraud is the most costly and disruptive stage.
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Corruption
• Bribes & kickbacks
• Conflict of interest
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Bribes and kickbacks
Giving a “thing of value”
1.
2.
3.
4.
5.
6.
7.
“Gifts, travel & entertainment
Sexual favors
“Study tours”
Rental of properties, etc.
Cash payments
Payments thru subs, local partners,
consultants, etc.
Hidden interests
To influence a contract
award or execution:
S
P
Q
Q
D
F
selection
price
quantity
quality
delivery…and
facilitate fraud
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Why were bribes paid?
• To be short listed
• For a contract award
• To expedite the payment of invoices
• For contract amendments and
extensions
• To influence inspectors to accept
sub-par work or goods
• To compromise auditors and NGOs
• To avoid cancellation of the contract
for poor performance
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Conflicts of interest
For example, an employee:
 Secretly owns a supplier or
contractor, or
 Sets up a “shell company”
through which he or she
purchases supplies at an inflated
price, or
 Has an undisclosed interest in
property sales or leases, etc.
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Corruption red flags
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Complaints from losing bidders
“SPQQD” factors
Unjustified sole source awards
Multiple awards just under procurement thresholds
Pressure to select an unknown or unqualified contractor
Pressure to select a particular subcontractor or agent
Long delays in contract negotiations or award
Involvement of unnecessary broker or questionable agent
Undisclosed agent fees and commissions
Questionable contract amendments and extensions
Procurement staff live beyond their means
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Bid rigging
Unbalanced bidding
Rigged specifications
Excluding qualified bidders
Leaking bid data
Manipulation of bids after receipt
Unjustified sole source awards
Split purchases
Change order abuse
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Bid rigging red flags
• Repeat [sole source] awards to the same bidders
• Multiple awards just under thresholds (followed by change
orders or contract extensions)
• Bids just at or close to budget or estimate
• Narrow specifications
• Ambiguous specifications
• Unreasonable pre-qualification procedures
• Short or inadequate notice to bidders
• Fewer than the average or required number of bidders
• Low bid awards followed by change orders
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Collusive bidding
People of the same trade
seldom meet together, even
for merriment and diversion,
but the conversation ends in
a conspiracy against the public,
or in some contrivance to raise
prices.
Adam Smith,
The Wealth of Nations,
1776
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Collusive bidding red flags
• Connections between bidders, e.g., common addresses, fax
numbers or personnel; assignment of contract to losing
bidder, etc.
• Persistent unexplained high prices
• Unusual bid patterns; e.g. bids an exact % apart
• Rotation of winning bidders
• Same bidders bid; new bidders excluded
• Losing bidders become subcontractors
• False or forged bid securities
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Fraud
• Delivery of expired, fake or adulterated
drugs
• Reporting of exaggerated cure rates and
project results
• False CV’s and company histories
• False and plagiarized feasibility studies
and reports
• Forged performance documents
• Forged bid securities & manufacturer’s
certificates
• Delivery of substandard goods or
equipment
• False and inflated invoices
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Aid-financed rural “school”
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New aid-financed hospital
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Fraud red flags
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“Outliers,” “mismatches,” etc.
Poor quality goods or works
Missing or altered supporting documents
Inconsistencies between contractor’s claims
and inspections
• Culture of corruption of inspectors
• No costs booked by contractor for work
claimed
• Complaints from users
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