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IMPACT OF INFORMATION AND COMMUNICATION TECHNOLOGY ON PROCUREMENT FRAUD

ABSTRACT

The study was purposely to establish the Impact of information and communication technology adoption on procurement fraud, it was conducted at National Social Security Fund. The study objectives were to; identify the causes of procurement irregularities reported at NSSF, identify various ICT systems installed to detect such procurement irregularities at NSSF, suggest ways of minimizing procurement irregularities using ICT systems at NSSF, assess the effects of ICT systems adoption on detection of such procurement irregularities.

The study was a descriptive research design which emphasized both what was raised in the literature and the opinions of respondents about the impact for information and communication technology adoption on procurement fraud and the researcher applied both qualitative and quantitative approaches in the survey for data collection. The data collection instrument employed was questionnaires because it gives firsthand information, it renders wide coverage, enhances confidentiality and eliminates bias.

The findings indicate that causes of procurement irregularity include, conflict of interest, lack of job security, rationalization, poor record keeping, low staff remuneration, influence of politicians, and limited procurement skills , while relationship between procurement ICT, increased productivity, visibility of the spend, promotes e-receipting among others.The study recommends the administration of NSSF to upgrade the systems and keep them update so that they can be able to detect any fraudulent cases, the study further recommends proper management of procurement records, training of procurement personnel on the systems that would be installed, and further more putting to the attention of all employees the challenges of organization and decide on the would be solutions as a team.

CHAPTER ONE

1.0 Introduction

This chapter covers the background of the study, Statement of the problem, purpose of the study, research objectives, research questions and scope of the study, significance of the study and definition of terms.

1.1 General Background to the study

According to Lysons (2000) defines Information and communication technology as automatic acquisition, storage, manipulation, movement, control, display, switching, interchange, transaction or reception of data or information, while Chaffey (2007) Information and communication technology involves the use of computers and telecommunication especially internet to send and receive information,  information technology plays a valuable role throughout the procurement and disposal procurement disposal process, there is not a single  stage in the procurement process which doesn’t benefit from the  effective use of ict, from ordering, supplier evaluation and efficient communication with suppliers this reduces costs and encourages efficiency in the buying process. Information technology resources are frequently the key to the success or failure of the activities in the individual fraud stages and at times to the success or failure of the entire Fraud Management Department (Ernst and Young, 2000). In the past companies were used to traditional buying, which was characterized by high procurement frauds inform of; non-value adding activities, forged documentation, poor trafficking of goods in transit among others. It is due to such inefficiency that many organizations are increasingly recognizing information and communication technology (ICT) in buying to reduce procurement frauds (Australian National Training Authority, 1999).

Procurement fraud occurs when an employee or other person related to a firm unlawfully gains an advantage in purchasing goods or services for that firm. Some of the more common types of procurement fraud are overpaying for products (and receiving kickbacks), creating and falsely paying duplicate vendors, creating and paying fictitious vendors, and paying for over-shipments from vendors (Frank E. Fox, 2010). Fraud as an aspect of corruption normally happens in organizations where the governance structures are weak or have become corrupted themselves. This is a worldwide trend, which cuts across all sectors, (Rene Hansen, Thembile Phute, Killron Dembe, and Synodia Chikanza (2005). Uganda as a country before the period of 2000, the level of fraud was not pronounced like it is happening now where there are many cases of fraud running on the media such as newspapers, radios, televisions and magazines. 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. According to the Public Accounts Committee (PAC) report on the Commonwealth Heads of Government Meeting (CHOGM 2007) Kampala, the committee estimated that CHOGM expenditure almost doubled from the authorized and appropriate budget of two hundred seventy billions shillings (270,000,000,000/=) to over five hundred billions (500,000,000,000/=). According to PAC report (2010), some roads which were designed by the consultants were never worked on yet the designers had already been paid. This led to loss of fund which was used on consultancy.  In relation to procurement fraud, information and communication technology involves the use of electronic means of e-procurement and internet software to place orders and make payments via computer based network (Bessant 1998), Though most of the Ugandan companies have adopted ICT in their organizational activities, these organizations are still faced with numerous challenges, delayed delivery, bribery, bid rigging, missing of products in transit and above all poor customer service. Basing on this background the researcher therefore seeks to investigate into the impact of information and communication technology on procurement fraud.

STATEMENT OF THE PROBLEM

NSSF is a national savings scheme mandated by government through the NSSF Fund Act, cap 222 to provide social services to employees in Uganda, established by an act of parliament in 1985 (NSSF Records 2010). NSSF uses E-procurement for contracts to achieve benefits such as increased efficiency, cost savings, improved transparency in procurement services. Despite this benefits, it is faced with numerous procurement challenges, including the acquisition of 564 acre piece of land at 11 billion shillings NSSF was accused of procurement fraud due to failure to advertise procurement of that value, Apart from that, the PPDA audit report 2012 also questions a number of procurement activities at NSSF including the contract for the supply of fumigation services in which it was marred by irregularities. All these irregularities happen despite the existence of ICT systems at NSSF, This study questions whether the adoption of Information and Communication Technology, (ICT) has an impact on minimizing such irregularities that have been reported in the past.

1.3 Purpose of the study

The purpose of study is to establish the impact of Information and Communication Technology adoption on procurement fraud.

1.4 Specific objectives of the study

The study will be guided by the following objectives:

1. To identify the causes of procurement fraud reported at NSSF.
2. To identify the relationship between ICT and procurement fraud.

• To assess the effects of ICT systems adoption to detect such procurement fraud.

1.5 Research Questions

The following research questions will guide the development of this study:

1. What are the causes of procurement fraud reported at NSSF?
2. What is the relationship between ICT and procurement fraud at NSSF?

• What are the effects of ICT systems adoption to detect such procurement fraud?

1.6 Scope of the study

The study scope will cover the following aspects;

1.6.1Study scope

The study scope will cover the following aspects, the causes of procurement fraud reported at NSSF, relationship between ICT and procurement fraud at NSSF and effects of ICT systems adoption to detect such procurement fraud.

1.6.2 Geographical scope

The study will be conducted at NSSF located at plot95 Kampala road

1.6.3Time scope

The period of investigation will cover 6 years, from 2010-2016,

1.7 Significance of the study

1. It will help the procurement department of NSSF in knowing the benefits of ICT in reduction of procurement irregularities.
2. Since according to Transparency International 2006 Uganda is one of the most corrupt countries in the world. This research will therefore help the government in knowing the causes of procurement fraud.

• This research will also benefit future researchers in enriching their knowledge on the various ICT systems used to reduce procurement fraud /irregularities in an organization hence helping them choose on the pool the best system to use.

1. This research will help academicians with literature regarding causes of procurement fraud in most of Ugandan enterprises.
2. This research will help add on the existing literature with enough data regarding different ICT systems installed to regulate procurement fraud.
3. This research will therefore help the government discover how to save the tax payers money from losses.