Some of the core internal controls and practices that should be in place to help reduce exposure to procurement fraud across gaming organizations focus on creating consistency throughout the operations, such as establishing standards, leveraging technology for controls, and consolidated reporting. Other leading practices can not only help enhance consistency, but promote more frequent use of approved suppliers and drive value, including using:
•An electronic procurement catalogue;
• Purchasing cards;
• Commodity spend simplification;
• Process automation and workflow management;
• Integration of enterprise systems;
• Real-time spend data visibility; and
• Management by exception
Close socialization with government officials, with gifts, expenses, etc., incurred A losing bidder being hired by a winning bidder, suggesting collusion or lack of winning bidder's ability part to deliver the product or service
A losing bidder that is not listed in business directories, suggesting the bidder was fictitious and only included in the dealings to make the process appear competitive
A low initial bid but many change orders, suggesting collusion with the buyer
Continued acceptance of high-priced, low-quality goods, suggesting problems with the Quality Assurance department and the existence of kickbacks
A vendor whose address is a mail drop box, as well as multiple purchase orders of small amounts, unnecessary middlemen in the procurement process, or a losing bid that cannot be located or for which there is minimal documentation.
Vital Technology Tools
One of the key technology tools to detect procurement fraud and abuse is forensic data analysis, which seeks to identify potential fraud misconduct and waste through sophisticated analysis testing, cross matching, and non-obvious relationship identification. Moreover, data analysis includes reviewing often overlooked sources of information that can extract additional value, such as itemized phone call listings, access control logs for offices, and other publicly available databases.
A skilled analyst can also implement rules-based analysis, using the knowledge of how a business process should be conducted to develop and implement tests, which can then help identify deviations from the norm. Tests can be developed to determine, for example, whether invoices were received after payment had been made, and even if orders appear to have been split, to defeat the limits on delegation.
Procurement is where the money is and, therefore, an area ripe for fraud and misconduct in any industry. Gaming organizations need to ensure they’re taking the right steps to tighten existing controls and use proactive data analysis to help manage these risks, so they can get the value they want out of their procurement department.
Jérôme Thirion (firstname.lastname@example.org) is an Associate Partner, Advisory Services, Business Effectiveness services.
Silvia Montefiore (smontefiore@kpmg. ca) is an Audit Partner and the Gaming Sector Lead for KPMG in Canada.