Real Frauds Found in Governments

Chapter 2Case 2: Misappropriation of Assets

Learning objectives

• Identify how procurement policies of a fictitious governmental organization can be circumvented and lead to possible fraud.
• Determine the effect technical expertise plays in the development and execution of procurement policies in a fictitious governmental organization.

Before we start

Governmental organizations typically focus controls more on cash receipts than on cash disbursements in order to prevent, deter, or detect the misappropriation of cash. Fraud schemes to misappropriate cash also can occur when an entity pays for goods or services it does not receive. Factors contributing to this particular situation include the following:

• Highly technical transactions
• Insufficient number of trained personnel
• Lack of personnel, or lack of trained personnel, in support functions

Typical situations that might indicate the existence of procurement or contracting fraud include the following:

• Unusual vendor names and addresses
• Copies of invoices, purchase orders, or receiving documents rather than original documents
• Missing paper or electronic supporting documentation such as invoices, purchase orders, or receiving documents
• Orders for materials and supplies already on hand in sufficient quantities, scheduled for disposal, or no longer used due to obsolescence
• Orders for materials and supplies not consistent with the operations or mission of the organization
• Delivery addresses not part of the purchaser’s physical locations ...