When we read of these cases, we are immediately drawn to consider how something like this could have been prevented in the first place. Conspiracies, according to the Association of Certified Fraud Examiners (ACFE) are usually the most difficult of fraudulent activity to discover. Two or more persons acting in concert can easily override the internal controls that companies have established to prevent fraud from happening.
In this case, there seems to have been a significant purchasing system internal control weakness. The contractor employee was responsible for the repair and upkeep of the facilities. When he needed supplies and services to accomplish the mission, he would prevail upon the Government card-hold to order the items and pay for them with the card. That procedure was probably not sufficient to prevernt the fruad. An adequate purchasing system would have the following minimum requirements.
- Someone initiates a purchase order - the purchase order must include justification for the purchase.
- Someone else reviews and approves the purchase order.
- The order is placed by someone independent of the initiator and approver. The purchasing department is responsible for finding sources and establishing best prices.
- A fourth independent person verifies that materials were received or services rendered.
- Accounts payable makes payment after matching purchase order, invoice, and receiving document.
Note that there are five people involved in the process, not two. It is much more difficult to sustain a conspiracy with five player than it would be with two.
This would be a good time to consider the strength of your own purchasing policies and procedures.