Zambia’s health and education sectors still remain the highest risk and most vulnerable to both procurement fraud and misappropriation of cash, with junior officers cited as the worst culprits of the vice, a new PriceWaterHouse Coopers (PwC) Survey reveals.
And the Survey disclosed that kickbacks from suppliers remained the biggest problem fuelling fraud in Zambia.
According to the inaugural PwC Donor & Implementing Partners (IPs) 2019 Fraud Survey in Zambia, the country’s health and education sectors remain the highest risk and most vulnerable to both procurement fraud and misappropriation of cash, with junior officers cited as the worst culprits of the vice.
Data from the Survey, which was conducted between October 1 and 21, 2019, and consisted of a questionnaire that was sent out to donors and IPs, cited the country’s health and education sectors as being medium to high risk and the most prone to procurement and misappropriation of cash fraud.
The advocacy, agriculture sectors, among others, were cited as low to medium risk.
Procurement fraud involves abrogating the laid-down procurement rules and processes in engaging suppliers/vendors for goods and services with the intention of benefiting from the procurement activity.
“Further, the majority of the respondents believe that sectors with significant monetary Donor investments, especially those relating to basic necessities (e.g. Health, Education and Agriculture) are more prone to risk of fraud. In the Health and Education sectors, the risk of fraud was assessed as medium to high risk due to the significant amount of grant refunds that have been requested by Donors from the Government institutions serving as IPs. The refunds are largely triggered by breach of grant agreements/funding requirements, especially cases of unsupported and unauthorised expenditure. The Donors also base their assessment on reports issued by the Office of the Auditor General,” the Survey, released this month, revealed.
And it explained that kickbacks from suppliers in the two high-risk sectors characterised the most prominent form of fraud still being perpetuated by various officers from boardroom to junior-level.
“A further analysis of the Survey responses shows that kickbacks from suppliers is the most prominent source of procurement fraud (43 per cent), with the least being payment of personal expenses from donor funds (five per cent). We also noticed that the health sector recorded the greatest number of procurement fraud incidents (31 per cent),” it disclosed.
“The Survey results indicated that 33 per cent of IPs who moved cash to remote places identified incidents of misappropriation of cash. This was due to the fact that the handling of cash increased the opportunity of fraud and therefore requires close monitoring of internal controls. One specific type of misappropriation of cash reported by the Donor respondents was theft and skimming. This is also known as ‘off-book’ fraud, which is the theft of cash from an organisation before it is recorded into any records or an accounting system.”
A glance at the main perpetrators of fraud revealed that junior-level officers comprised of the main perpetrators of fraud, according to the Survey’s findings.
“About 64 per cent of respondents, who had experienced fraud stated that the perpetrators of the fraud incidents, were junior staff. The remainder of the cases that were reported by the respondents at more senior levels are a cause for concern, especially given that nine per cent of these cases represented fraud committed at board-level. The Board of Directors is required to set the right tone at the top in order to ensure that controls are properly implemented and adhered to,” read the Report.
The PwC’s Donors and Implementing Partners Survey focused on the prevalence of fraud in Zambia. The survey was conducted between October 1, 2019, and October 21, 2019, and consisted of a questionnaire that was sent, out to Donors and IPs.
In total, 42 questionnaires were sent to Donors and 73 to IPs. 23 Donors (54 per cent) and 27 (37 per cent) IPs responded. The composition of respondents included 63 per cent from executive management, 20 per cent middle-management and 17 per cent junior-level staff.
The Survey identified procurement and misappropriation of cash as the main areas where fraud arises, while also analysed how fraud incidents were discovered, who the typical perpetrators of fraud are, what actions are being taken when fraud is discovered and the risk mitigation measures undertaken to manage fraud risk.
According to the Survey internal controls have brought a false sense of security owing human factors, such as collusion, which is the ability of management to override controls, meaning that no system can fully prevent fraud.