Spotting warning signs in purchasing
Purchasing patterns that can point to fraud in a non-profit, such as linked quotes or a supplier paid into a staff account, and how to follow them up.
By Achekam · · 5 min read · For Non-profit businesses in South Africa, Nigeria, Kenya
Small organisations run on trust. The finance officer has been there for years, the programme staff are committed to the cause, and the board meets a few times a year. That trust is usually deserved. It is also exactly what makes purchasing fraud in non-profits hard to see, because nobody is looking for it.
When fraud does happen in a charity, a trust or an NGO, it tends to follow familiar patterns: competition that was never real, suppliers that are fronts for someone inside, and purchases shaped to avoid scrutiny. None of these needs a clever scheme. They need someone who knows the controls and a quiet corner where nobody compares the records. The ACFE's Report to the Nations, a global study of occupational fraud cases, describes schemes such as billing and procurement fraud, how frauds are detected and which controls work.
This article describes the warning patterns worth watching, how Achekam's procurement integrity review raises them, and how to follow one up fairly.
The patterns the review raises
Achekam sells a procurement integrity review as its own add-on. It looks across your purchasing records and raises questions about warning patterns. Among the patterns it looks for are these two:
- competing quotations that share contact details or bank details;
- a supplier paid into an employee's bank account.
The important word is questions. The review does not decide that anyone has done wrong. It points a person at records that deserve a second look.
Competing quotes that share details
Comparing several quotations only protects you if the suppliers are genuinely separate. A common trick is the cover quote: a buyer who wants a particular supplier to win arranges for two other quotes, slightly higher, from businesses that are really the same people, or friends doing a favour.
The giveaway is often in the details. Two "competing" caterers quoting for a community event list the same cellphone number. Two printing firms have the same bank account. Three quotations for building repairs arrive from e-mail addresses on the same personal account.
When the review raises shared details, look at the quotations side by side, then at the suppliers' records. Sometimes there is an innocent explanation, such as two small businesses in the same family using the same bookkeeper. Often there is not, and the original choice of supplier needs to be revisited.
A supplier paid into an employee's account
The second pattern is more direct. A supplier's bank details match the bank account of someone on your staff. That can mean a fictitious supplier created by an employee to pay themselves, or a real business owned by a staff member that nobody declared.
Either way, it needs to be understood. An employee who also runs a business is not automatically doing wrong; many organisations allow it with a declaration and board approval. What is not acceptable is an undeclared interest in a supplier the employee can influence.
Split purchases need a threshold first
Purchases split into smaller pieces to stay under an approval or quotation limit are another classic pattern, and the review has a check for it. That check, however, does nothing until a threshold is set, and a rule requiring a number of quotations above an amount cannot currently be switched on from the app. In practice the split-purchase check is not working for anyone today.
Until thresholds can be set, look for splitting by hand. Once a quarter, list purchases by supplier and look for several orders to the same supplier on or around the same day, each comfortably below the amount your own policy uses.
A flag is a question, not a verdict
How you follow up matters as much as what you find. A careless accusation can damage a good employee and the organisation's culture, while a careful enquiry protects both. A fair approach:
- Let someone independent of the purchase look first. The finance lead or a board member reviews the flagged records, not the person who made the purchase.
- Gather the records before talking to anyone. The requisition, the quotations and their reasons, the order and the payments.
- Ask an open question. "Can you help me understand why these two quotes have the same phone number?" invites an explanation.
- Record the answer and the conclusion. Whatever the outcome, write down what was found and what was decided.
- Escalate when the explanation fails. If the answer does not hold up, take it to the board and get professional advice before acting.
Clean supplier records make the review sharper
The review can only compare what the records hold. Achekam keeps one supplier list for the business, with duplicate checks by name or VAT number, and quotations, orders and bills all pick suppliers from it. Insist that suppliers are added with their real contact and bank details, and that no supplier is created twice to get round a check.
The quotation records help too. When a quotation that is not the cheapest is selected, Achekam keeps the written reason, so a reviewer can see why the decision was made at the time rather than reconstructing it later.
A quarterly integrity routine
Put these on the finance calendar, with a board member as the owner:
- Read and close every question the integrity review has raised.
- List new suppliers added in the quarter and who added them.
- Compare supplier bank details with staff bank details for anything the review may not cover.
- Look for clusters of purchases to one supplier just under your own limits.
- Report a short summary to the board or finance committee.
How to document a fair choice of supplier in the first place is covered in showing funders how a supplier was chosen. If your accountant keeps your books for you, read when your accountant sets up and pays for your books to see who can see what.
Ask your board this month who owns purchasing oversight, and give that person the first quarterly review.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
