Research proposal
2.1 Definitions of information and communication technology
Information and communication technology refers to the use of automated machines especially computers in dealing with transactions that require interaction electronically between the sender and the receiver (Chaffey, 2007).
Information and communication technology is the process of automatic acquisition, storage, manipulation, movement, control, display, switching, interchange, transaction or reception of data or information ( Lysons, 2000).
Information and communication Technology works in the same way like e-procurement, and is defined as the use of internet to operate the transactional aspects of requisitioning, authorizing ordering, receiving and payment process, for the required service or product.
2.2 Overview of the concepts of procurement.
Procurement refers to the acquisition of goods, services or works through purchase, rent, lease, franchise or any other legal means considering the 3 Rs like from the Right: place, time, price, quantity, and quality by use of shareholder’s money. (Farrington et al, 2006)
2.2.1 Overview of procurement irregularities
This is where procurement process is marred by mistakes i.e. Violation of procurement procedures, the use of high –ranking officials to influence procurement decision making and bribery-induced violations of procurement procedures by the government officials in collaboration with providers.(Basheka 2009)
Procurement Fraud is a practice which includes the offering, giving, receiving, or soliciting of anything of value to influence the action of a public official in the procurement or disposal process or in contract execution. (The Public Procurement and Disposal of Public Assets Act 2003
2.3 THE EFFECTS OF ICT SYSTEMS ADOPTION ON PREVENTION OF PROCUREMENT FRAUD
Procurement fraud, can be defined as dishonestly obtaining an advantage, avoiding an obligation or causing a loss to public property or various means during procurement process by public servants, contractors or any other person involved in the procurement process
The following are the effects of procurement fraud according to different scholars;
ICT enables the organization in implementation of the e-catalogue systems which enables an organization to have an efficient system of analyzing supplies capability, Electronic catalogues can be understood as electronic documents, describing the offered products/services of a supplier for a specific call for competition (e.g. prospectuses). Therefore, the content and format of catalogues must enable suppliers to easily and unambiguously present/describe their offered products, including pricing details. In order to fully benefit from the use of catalogues, it is desirable that their content and format, as well as the way catalogue data is exchanged between parties, be standardized, so as to enable their automated processing. Therefore, cross-border interoperability of catalogues is fundamental, (Aberdeen group, 2006).
Cost Reduction, Information and Communication Technology not only reduces the cost of transactions, it also improves process efficiency and can reduce administrative and other costs. Manual (phone and fax) communications are reduced or eliminated, as are paper invoices and their associated costs , most of these costs in procurement include , costs of communication with the supplies this therefore will minimize the chances of the procurement management in organization to commit procurement irregularities, (Clarke, 1998).
Information and communication technology has increased on the Productivity of the organizations procurement staff and minimized on the chances of procurement irregularity, Enterprises that implement e-procurement report that procurement, accounting, and other corporate functions are more productive now than with traditional buying methods. E-procurement systems provide a standardized approach to rolling out efficient processes to not only procurement but all departments involved in transaction processing and financial recordkeeping. Increased Spend under Management One of the most compelling findings in the 2004 Aberdeen benchmark survey was the ability of procurement users to bring more spends under management of the procurement organization. Increasing spend under management helps ensure the enterprise achieves maximum spending lever, (Accenture, 2006).
Visibility of spend, information and communication technology enables Centralized tracking of transactions enables full reporting on requisitions, items purchased, orders processes and payments made. Information And Communication Technology therefore enables an organization in tracking of its expenditure and ensuring that they comply with approved budge, (Lysons, 2006).
Visibility of spend, information and communication technology enables Centralized tracking of transactions enables full reporting on requisitions, items purchased, orders processes and payments made . Procurement staff can be released from processing orders and handling low value transactions to concentrate on strategic sourcing and improving supplier relationships, (Lysons, 2006).
Monitoring and controlling of the procurement process, ICT enables the organization to be in position to analyze the entire procurement process and be able to eliminate the procurement costs associated with the procurement system by creating Standardized approval processes and formal workflows ensure that the correct level of authorization is applied to each transaction and that spend is directed to draw off existing contracts. Compliance to policy is improved as users can quickly locate products and services from preferred suppliers and are unable to create maverick purchases, (Chaffey, 2006).
ICT enables an organization to be able to use e-receipting techniques in its payment systems which will enable an organization to eliminate over and under payment during the transactions The paperless receipt is becoming more commonplace in most retail companies across the globe as a cost sever and also in fighting against fraud involved in the payment of different suppliers retail; and that’s good for retailers, the environment and consumers. Some consumers can be wary of opening themselves up to digital promotions, so it’s up to retailers to allay those fears and present e-receipts as a customer benefit as well as a convenience, (Lysons, 2006).
Using ICT increases speed in the procurement process since request for proposal is easily obtained in the procurement systems in electronic request for proposal becomes so easy for an organization this therefore enables an organization in the fight against fraud since it’s able to reduce on the chances of fraud in the process of procurement especially at the stage of the request for proposal, (Chaffey, 2006).An adequate, fully integrated ICT system approach is needed for overall success. Additional programs provide the framework for the supplier databases and spend management as well as holding key vendor information and being an electronic repository for contracts. All these facilities cost money and a clear business case must be made for procurement efficiency. In most cases this is fairly clear that cost savings are possible, it pays for companies to spend money on information and communication technology, this investment will boost efficiency. The longer term reduction in costs will enable companies to direct their resources to more strategic initiatives.
Low staff remuneration, According to, (Rene Hansen et al, 2005), payment can influence fraud in several ways; Staff and external suppliers can be involved in this fraud when obtaining refunds for cancelled workshops, membership and subscriptions, or overpayment for services. Employees can design schemes whereby they duplicate payments to vendors and only deliver one cheque, converting the other to cash. This involves cheque forgery, altering payee amounts or creating duplicate or counterfeit cheques.
Chikanza et al, (2005) asserts that poor payment of employees leads to employee revenge against the organization due to being overlooked for advancement, overworked, in order for them to gain from other sources making them to act in fraudulent manner, leading to fraud.
According to Luway Mongie and Bowman Gilfillan (2009), civil society organizations, believe that they are activists who are not concerned about monetary gain. Employees of organization are engaged with changing the social status of human kind and empowering them with human rights education so that they make informed decisions and choices. With the current change in the economies and political dispensation of many countries, the cost of living is soaring and the risk associated with human rights activism is now too great so that staff feel the need for market related remuneration. Unfortunately most organizations in developing countries are unable to pay attractive salaries, particularly to local staff. Weakens the financial position of organization, as programs are abandoned midway and in some instances staff can go without salaries.
Influence of politicians, in procurement is to blame for procurement fraud in most organization, According to the Global integrity report 2008, it has been noted that although there are penalties, Procurement process especially big procurement contracts tend to involve high profile politicians, who influence the process & therefore usually protect the individuals who may be implicated. The regulations are in place but not effective due to the influence assumed by procurement personnel and how they manipulate the system to attain their own ends (IGG reports, 2010). According to report on the newspaper (Daily Monitor Monday 23 may 2011), Uganda revenue authority (URA) noted that the government is losing revenue as a result of organized crime between staff of the institution and officials of clearing and forwarding firms. Ms Sarah Kasheka.
Corruption, is one of the main proposed causes of procurement fraud, The government of Uganda in its National Strategy to fight corruption and rebuild ethics and integrity in Public Office (2004–2007) launched in July 2004, recognizes that corruption in public procurement and service delivery poses a serious obstacle to economic and social development in Uganda.
Limited procurement skills, amongst the procurement staffs, has led to fraud in most parts of the world , procurement profession is a relatively new profession unlike accountancy , medicine , law and so most parts of the world still lack qualified procurement profession , this limited skill has caused fraud in most institutions around the world, (lysons, 2006).
Ntayi (2005) has noted that procurement operations require experts to carry out public procurement at the private and public sector levels. The PPDA as the regulatory public procurement body should provide enough personnel to carry out the function. Besides, there should be training to provide knowledge and skills of the scope and dynamics of public procurement as required by the (PPDA Act, 2003)
Weak punishment, given to culprits, is normally the reason why most of the culprits continue practicing fraud since the value of fraud is greater than the punishment to be given to the offenders, in Singapore and china the punishment to fraud criminals is normally by death penalty this helped Singapore eliminate corruption completely and china’s score in the scale of 1-10 also improved greatly (transparency international, 2006).
Weak laws by the government, is to blame for the rampant fraud , most government across African continent have weak laws governing procurement , since procurement department in most countries is seen as a new field so the government have not taken much responsibility in developing it. (Transparency international, 2006).
Lack of role models, Most of African leaders are corrupt and they have amassed a lot of wealth from corruption, therefore this has made even the organizational workers to be corrupt themselves. According to (national fraud authority, 2004) billions of taxpayers’ money in African continent is lost in corruption.
Motives, According to Thembile et al, (2005), an employee may come under extreme financial stress, if she or he has health problems or family members are chronically ill. An employee may desire to solve a need or seek to attain a certain lifestyle. Possibly there may be gambling or alcohol-related problems. Unfortunately the manager cannot do much about such motives, but it is important that they are identified. Internal motives emanate from the workplace if an employee feels they are being underpaid, are unfairly treated in an appraisal interview, are given high volumes of work, leading to stress, and an employee perceiving that promotions are based on work politics and not performance, this may lead to fraudulent act.
According to Joseph R. Dervaes (2006), internal motives emanate from the workplace if an employee feels they are being underpaid, are unfairly treated in an appraisal interview, are given high volumes of work, leading to stress, and an employee perceiving that promotions are based on work politics and not performance, this may lead to fraudulent act.
Motivation and revenge, Motivation is another critical element. It includes financial need, challenge, and revenge. When the trusted employee has a financial need in their life, the motivation factor kicks in to permit the individual to perform an illegal act (Joseph R. Dervaes 2006). Joseph R. Dervaes (2006) asserts that, the financial need can be either real or perceived (i.e.; greed). They become desperate and see no other alternative to solve their financial crisis. Sometimes this is the most visible element of change in a person’s life actually observed by fellow employees in the office. But, sometimes the individual commits fraud by exploiting the organization’s computers, accounting systems, and internal controls as a challenge. Breaking the organization’s codes and passwords is perceived as a game. The most dangerous person is one who seeks revenge against the organization. This wayward employee seeks to financially destroy the organization in retaliation for the poor treatment they’ve received in the past. Employees who have lost their jobs, been passed-over for promotions, or who did not receive a raise fall into this category.
Opportunity, According to Chikanza et al, (2005) Opportunity, and Motives are translated into action when there is an opportunity to commit fraud. If that opportunity is not there, temptation is removed. Opportunity can present itself if a cheque book is kept in an unlocked office drawer, or a manager travels often and signs blank cheques for activities or purchases whose actual amounts are not yet available. This presents a great opportunity for the staff to tamper with the cheque book or the signed cheques. A manager can establish “opportunity” through studying the organization and searching for weaknesses. An employee can omit a procedure once, and on realizing that no one has noticed, can skip the procedure in future, which can be used by colleagues to commit fraud. Other examples of “opportunity” include someone working for an organization with weak controls, such as only requiring one signature on a check, those who use an organization’s credit card but also approve all credit card purchase. All these prevail opportunities for fraudulent act.
2.4 THE VARIOUS ICT SYSTEMS INSTALLED TO DETECT PROCUREMENT FRAUD AT NSSF
The information and communication technology has been adopted in organizations in the following ways. Electronic Fund Transfer (EFT) EFT is based non-electronic transmission of receipts and payments between banks and their customers or the purchasers and suppliers, (Farrington et al, 2006). It enables paperless payments to be made to suppliers “here money travels not paper”. EFT involves automated digital transmission of money between organizations and banks. The buying organization will make payment to the supplier using EFT, in a more convenient and accurate. ( Lysons et al, 2006).
Electronic Fund Transfer (EFT), is associated with the following advantages; Reduction of costs due to elimination of cheque writing receipt canceling, Increased speed of fund transmission. This is fast, accurate and safe. (Chaffey, 2006).
Electronic Mail (e-mail) E-mail is a process by which letters, orders or other documents are sent by a computer along telecommunication lines to appear on the Visual Display Unit (VDU) at their destination. They emphasize that incase buyers use this technique in the process of buying, sending and receiving of messages can take minutes instead of days. (Leanders et-al, 1998).
E-mail is categorized into two categorizes e-mail broadly into in-bound and outbound. Inbound e-mail is received from outside the organization such as from suppliers. Outbound email is sent from the organization to another an example is from the buyer to the supplier, email reduces on costs associated with movement thus resulting to efficiency on procurement activities. (Kennedy ,2000),
Electronic Data Interchange (EDI) EDI is a technique based on agreed standards, which enables computers in different organizations to successfully send business information of transaction from one to another. They emphasize that EDI reduces on the lead-time simply because transactions are faster and more accurate (Lysons et al, 2006).
EDI involves business transactions like, placing orders, invoices, delivery and payment transactions. EDI works according to standards implying that the organizations using it have to agree on the systems and the software that they are to use (Chaffey, 2007).
EDI. Works as follows, (Sollish et-al 2007); Company A sets a purchase order using its internal business software
- EDI software transforms the order from the internal format to a standard 850-purchase order document format.
- Company A sends the 850 standard purchase orders to company B over a third party value added network.
- Company B receives 850 purchase order document and will translate it from EDI to its proprietary format.
Typically, company A will send an acknowledgement to company B According to (Clarke ,1998), EDI will replace paper based purchase order with electronic one and sites the following as advantages that are associated with the use of EDI in reducing procurement fraud. Reduction of paper work, reduced errors, Reduction of inventory levels, Supports just in time (JIT) inventory policies, Facilitates global purchasing, and Promotes long term buyer supplier relationships.
Smart Cards. Smart cards are integrated circuit chips used to store customer specific information including electronic money. They have ability to provide intelligence and store significant amount of information of up to 20 pages of text. Smart cards will be used to purchase goods or services, store information, and above all, they can be availed to all potential users, (Enslow, 2006)
Smart cards have numerous benefits and this includes;
- They provide confidentiality and security of information
- They are economical and thus reduce on the handling fraud.
- They offer convenience since they are of the same size like credit cards. They store reasonable amount of information and thus will be easier to be accessed by the organization for use at any time. Smart cards provide effective and efficient means of storage and compatibility, especially with EDI, which facilitates easy movement and exchange of information, (Farrington et al, 2006)
Electronic Hubs (E-hubs)
This device connects several networks together. As used in e-business it means a central repository exchange such as the star network. In the network, a server is a control computer that holds database and programs and programs for many computers (Thompson et al, 2005).
Using electronic hubs the buyers PCs will be connected together with the suppliers PCs and information regarding business transactions will be conducted, since all the information is kept in the server computer.(Herper et al, 2005),
E-Market place E-Market is a web site that enables procurement officers to select the best suppliers in the market electronically. In this situation, a procurer is in control especially in open market places. This enables procurer to evaluate all potential suppliers for a particular product or service and make informed buying decisions regarding what and where to buy, (Lysons et al, 2006).
E-Market is applicable where; the market is large enough, product specification and information are subject to rapid changes, suppliers have difficulties in comparing similar products from different vendors, the cost of locating, appraising and evaluating suppliers is high. (Chaffey, 2007),
Electronic- catalogs E-catalogs are web pages that provide information on products and services offered and sold by the vendors and they mainly include; sell side catalogs; buy side catalogs and third party catalogs, E-catalogs support online transactions especially ordering and payment capabilities (Farrington et al, 2006).
E-Catalogs, reduces procurement fraud by providing easy communication and the real product in the market. (Accenture (2006),
The advantages of e-catalogs includes; facilitation of real time communication between buyers and sellers; Allows room for the development of closer buyer-supplier relationship due to improved vendor services. Enables suppliers, respond quickly to market conditions by adjusting repackaging (Lysons, 2006).
Material Requirement Planning (MRP) MRP processes involve forecasting demand for individual parts so that they will be ordered in advance of receiving actual customer orders. This complex process is generally handled by computer software program through decision support models, using calculated algorithms to predict future requirements (Sollish, et-al, 2007).
According to Chaffey (2007), MRP system helps to reduce procurement fraud in a number of ways which include; Assists in forecasting demand about the future among others, the level of stock kept is reduced and this reduces on the costs associated with holding stock and missing of items in the inventory, Proper planning on when to order and receive goods. On the other hand however other ICT systems installed to detect procurement irregularities at NSSF include;
Installation of cameras for easy survey and monitoring of the organization.
Use of hub systems like the one used in the invoicing, mailing among others.
2.5 THE CHALLENGES OF ADOPTING ICT SYSTEM TO PREVENT PROCUREMENT FRAUD
Creation of Unemployment, Crake Richard, (1998) emphasized that while information and communication technology may have streamlined the business process, it will also create job redundancies, downsizing and outsourcing. This means that many lower and middle level jobs will be done away with, causing more people to become unemployed.
Limiting Privacy of the organization, Simon Harper & Lora Thompson (2007) assert that though information and communication technology may make communication quicker, easier and more convenient, it will also bring along privacy issues. From cell phone signal interceptions to e-mail hacking, people are now worried about their once private information becoming public knowledge.
Lack of job security, Industry experts believe that the internet will make job security a big issue, since technology keeps on changing with each day. This means that one has to be in a constant learning mode, if he or she wishes for their job to be secure (Crake Richard, 1998).
Information and communication technology may make the world a global village, it will also contribute to one culture dominating another weaker one. For example, it is now argued that US influences how most young teenagers all over the world now act, dress and behave. Languages too have become overshadowed, with English becoming the primary mode of communication for business and everything else (Chaffey, 2007).
Conflict of interest, Hansen et al, (2005) noted that during Purchasing. An employee might not disclose a conflict of interest concerning a certain service provider. For example, the employee might award a contract to a relative’s company. This hidden interest is not in the interests of the organization. An employee might receive kickbacks from suppliers in exchange for approval to either order from or make a payment to them, when goods have not been fully supplied or are charged at a higher price. They added that Staff from the donor organization can be bribed by an entity manager, so that during the monitoring process some instances of non-compliance are ignored.
Lack of job security, in some countries working for an organization is an admirable and attractive occupation, but in others it is no longer as gratifying as it used to be. There are a number of reasons for this, ranging from restrictive legislation targeted at organization, single party autocratic government, donor fatigue and the presence of civil strife. Most employees working in such environments are tempted to engage in fraudulent activities, as they cannot make personal plans beyond the next two years at most. Most organizations operating in difficult environments have strategic plans ranging from six months to a year, and so the staff contracts may vary with the organization’s planning strategies. Organizations generally employ younger people who may be starting families, or who have young families, and need financial security, (Daveas, 2006).
Rationalization, According to Chikanza et al, (2005) Rationalization also leads to fraud. An employee may commit fraud but still invent a rational explanation as to why the fraud has been committed. This “rationalization factor” encourages the perpetrator to continue committing the fraud. These are some ways in which individuals may rationalize their actions:- “Some people do it, so why should I not do it too.” “I will pay back the organization later or I will stop soon since this is only temporary.” “I get so little, but I work so hard, this organization owes Me.” leading to fraudulent acts in the organization
Poor record keeping, This is to blame for most of procurement fraud in the developing countries, maintaining a proper records of providers is vital and when organizations do not maintain a record of their providers they are prone to fraud (Farrington et al, 2006).Procurement officers should be encouraged to maintain proper record keeping and management to provide bases for tracking fraudulent procurement and procurement entities should provide conducive environment that should be supported by trained skilled and professional experts. The reports add that non-compliant officials should be prosecuted in courts of law. (PAC Reports, 2009-10).
2.7 Conclusion
The chapter reveals the views of scholars on the causes of procurement irregularities, the various ICT systems installed to detect procurement irregularities at NSSF, effects of ICT systems adoption on detection of procurement irregularities, ways of minimizing procurement irregularities using ICT systems at NSSF,
The literature shows that procurement is caused by conflict of interest, lack of job security, poor record keeping, low staff remuneration, influence of politicians in procurement process, limited procurement skills, weak punishment to the culprits, lack of role models among many others, the literature widely highlighted on the various ICT systems installed to detect procurement irregularities at NSSF, effects of ICT systems adoption on detection of procurement irregularities.
In spite of the knowledge and presence of actors, however, the literature does not address the specifics of institutions like NSSF, there by presenting a knowledge gap to be filled by this study.
