Lies, damned lies and procurement fraud statistics

"Fraudsters better at bypassing procurement" was the headline on the Supply Management website on Friday. They were reporting on a KPMG Fraud barometer report which reported “the value of supply chain fraud went up from less than £1 million in the first half of 2012 to around £61 million in the equivalent period of 2013”.

So, a few comments on this.

Does anyone believe that supply chain fraud was only £1 million in the first half of 2102? No?  The existence of fairies or a stable government in Egypt by Christmas are significantly more likely that that. I’d stake my house on the global value of supply chain fraud being in the billions if we include bribery, over-billing, fake invoicing, insider fraud and so on. Even in the UK, it must be into hundreds of millions, if not more.

Then we find that £55 million of the increase reported was down to one event – the sale of fake bomb detectors to the Iraqi authorities that we reported on here.  So 95% of the increase was down to one event – hardly a statistically valid trend that means we can draw conclusions about fraudsters “getting better” at anything. (And of course, the bomb detector man is now in prison so he wasn’t exactly a big success).

Thes weaknesses are because of how the information is compiled. “KPMG’s Fraud Barometer has been running for 24 years, and considers major fraud cases being heard in the UK’s Crown courts where the charges are in excess of £100,000”.  So that is at best only a small sample of cases, which isn't surprising.

For instance, KPMG couldn’t disclose anything they found in their clients’ businesses for obvious reasons of confidentiality, and indeed the vast majority of procurement fraud never gets reported because it is embarrassing and / or commercially sensitive.

So the only point of this report is to get some headlines and – to be more charitable – to draw attention to the problems of fraud. And that’s not a bad thing to do, so let’s end on that more positive note. Most organisations don’t look hard enough at how vulnerable their systems and processes are to procurement fraud, so anything that encourages them to focus harder does serve some useful purpose.

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Voices (2)

  1. Trevor Black:

    Call me cynical if you wish but I stopped believing any figures put out by the public sector many years ago and even more so from central government. Closer examination of most of these figures reveal that they are usually plucked from thin air to support a political point. Since the banking crisis the media have lost interest in anything that mentions millions – billions is what gets everyone’s attention. Even members on the Commons Public Accounts Committee now seem baffled and have problems working out the difference. But really does anyone really care?

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