TWIN PANDEMICS: COVID-19 AND PROCUREMENT FRAUD

Introduction

The coronavirus pandemic has taught us all to be on high alert at a time of uncertainty. The key to dealing with this instability is adaptability. In many respects, the COVID-19 epidemic is unparalleled in our lives as it impact individual lives, governments, and the global economy (Dorris, 2020). While nations scramble to control the infection and safeguard their populations, worldwide markets are plummeting at an alarming rate. The impending economic slump will have a number of long-term consequences (ACFE, 2020). One major one is an increase in fraud in the future years, for which businesses must prepare. The pandemic has had an influence on all organisations, whether it's changes in internal management caused by remote working or a reduction in operations during the peak of the outbreak. When many businesses switched to remote operations, the risk of fraud may have increased (Thorps and Hardin, 2020).

As the COVID-19 pandemic continues to create turbulence throughout the global economic system. ?Globally the COVID-19 crisis is causing huge financial implications for many organisations, as well as exposing them to a variety of other emerging risks related to virtual operations, cybersecurity, and changes in relationships with customers and suppliers that put pressure on operations and service delivery. This new environment creates a heightened risk of fraud and improper financial reporting, as new opportunities and pressures can arise for both internal employees and external parties. In addition, In response to the current crisis, many organisations have had to quickly change working practices and protocols to enable remote working, which presents an increased risk of fraud if internal controls can be bypassed as a result. Incentives to commit fraud may also be heightened with organisations and individuals facing unprecedented economic challenges. In desperate times, individuals under significant work-related or personal pressures can exhibit and rationalise uncharacteristic behaviours such as enhanced risk-taking and unethical decision-making. They may also deliberately present a rosier picture of current reality through financial statement and disclosure manipulation (Gould?and Leka, 2020).

It is widely acknowledged that corruption thrives in times of crisis because of the favourable conditions created by chaos and uncertainty. The COVID-19 epidemic has spawned a slew of crises that are wreaking havoc on people all across the planet. Because of the pandemic's severe and abrupt character, governments were obliged to implement urgent restrictive measures, which halted economic activity and resulted in the infusion of unprecedented amounts of economic aid to help the most affected and vulnerable. The outbreak of the COVID-19 pandemic, as well as the resulting government shutdowns, has put a number of businesses under a lot of stress. This situation opens the door to a slew of integrity infractions and might exacerbate fraud and corruption, particularly procurement. Organizations and their workers are increasingly exposed to more fraud, and new compliance issues have arisen as a result. Rapid developments have an impact on organizations' control environments, creating new possibilities for internal and external fraudsters. There is little doubt that employees are under more pressure than ever before, and they may be given with simpler justifications for their non-compliant behaviour (Deloitte, 2020).

Government and corporate entities since the inception of the pandemic were making massive payments to respond to the “new normal” operational requirements. COVID-19 Personal Protective Equipment (PPE) and vaccines are in high demand. During this time of crisis, fraudsters have surfaced to take advantage of payments intended make these purchases. There is overwhelming evidence that fraudulent activities increase during crisis. Following the 2008 recession, the ACFE polled hundreds of anti-fraud experts to determine if the economic downturn had any influence on fraud in their businesses. The majority of respondents reported seeing an increase in the number of fraud, with 80 percent believing that fraud levels rise during times of crisis. Many of the reasons that were present then are likely to apply today, given the unprecedented reductions in markets throughout the world owing to the coronavirus epidemic (ACFE, 2020). Further, The COVID-19 epidemic has caused many disruptions, supply chain breakdowns, job losses, and financial distress all across the world. As a result, organisations and their stakeholders are facing financial, operational, and human challenges (IESBA, 2020).?Due to the constraints and uncertainties surrounding the epidemic, businesses are looking for ways to stay afloat, maintain operational stability, and achieve long-term sustainability and development. Those channels might open the door to unlawful and fraudulent operations. The pandemic's unusual environment may offer additional chances for fraud to go undetected over lengthy periods of time, creating significant financial hardship for its victim organisation.

Causes of fraudulent activities during COVID-19 pandemic in Zimbabwe

Government and entities in Zimbabwe did not have neither policy relating to the procurement during crisis nor the crisis management team mandated to manage crisis response. Further, most governments and?companies did not have documented and approved terms of reference which would have provided guidance on crisis management team meetings, their frequency, decisions, decision making process and reports to the board expected from the COVID-19 Crisis Team. Few governments and companies with the crisis management team were not well constituted. In some instances, duties of committee member were overlapping. There were inconsistencies in the execution of duties and responsibilities. In some companies, the purchases were made by the human resources or clinical department without the involvement of the procurement department. In government, the ministry of health were responsible for the purchase without the involvement of the finance or the state procurement boards. The reason cited was these since PPE naturally fell within the purview of items to do with individual health, the Human Resources and Clinical Departments picked up the purchases of PPE at company level. At government level, most governments mandate the ministry of health to procure the vaccines and PPE. This create leeway due to lack of?laid down proper procurement procedures used for procurement of vaccines and PPE.

Furthermore, there were very few companies who were providing COVID-19 PPE. Some fraudsters were capitalizing by purchasing PPE unregistered companies not on company supplier or vendor listing. There may be no subsequent due diligence after supplier acceptance and approval on the harbour of crisis response. ?Other companies were purchasing from companies whose core business is neither protective ware nor clinical equipment. The author noted that entities not traditionally in the PPE business became emergent suppliers for limited periods if they had access to the supply sources both within the county and from abroad. Corporates personnel were circumventing the laid down procurement policies and procedures.

Some specialised equipment like medical gases were procured from single suppliers. The disadvantage of single sourcing is that this increase collusion chances between corporate employees and the suppliers. The supplier would connive with the procurement official to charge exorbitant prices above the normal as there will be no other quotations obtained for comparative analysis. Most companies incurred extra agent cost during the procurement of ?COVID-19 PPE due to fraud. ?

In most instances there were not contract signed by governments and companies with the companies providing PPE and COVID-19 vaccine. These are newly invented products and there is need for contracts as they may be cause health problems and after effects. in addition, some purchases made from the companies not approved by Standard Association of Zimbabwe (SAZ), Medicine Control Authority, Ministry of Health or ISO certified. PPE are health items are sensitive items and they should be certified before being used by people. Most of entities were purchasing from uncertified suppliers citing that these purchases were procured in response to the crisis and ?dealings with the supplier was for the fulfilment of their orders as per request from several departments. In addition, several companies did not have Infectious Diseases Control Specialist and Consultant contracted Consultant contracted for provision of COVID - 19 consultancy work. Most of the companies did not check and confirm the quality of the delivered PPE.

Conclusion

The coronavirus outbreak has taught us all to be on high alert in these unpredictable times. The key to dealing with this unpredictability is adaptability.

Recommendation

The following strategies were proffered based on the research findings to help and prevent procurement fraud during pandemics or crisis:

1.??????Governments and corporates should have approved general procurement policies relating to crisis management or response. This will give guidance to the procurement or delegated function on how to execute duties and responsibility during the pandemics or other crisis affecting the nation or individual entity. The policies?and standard operating procedure manuals should include the procurement of goods during emergence situations, specialised equipment and services among other issues

2.??????Governments and entities should appoint a crisis management or response team as soon as they are aware of a crisis or pandemic. They consider all major stakeholders to reduce leeway and reduce vulnerability to fraud

3.??????Crisis management team should be given clear terms of reference and there should be no inconsistences in the duties and responsibilities of members. Each crisis management team member should strive to answer the requirements of the laid down terms of references. Terms of references are yardsticks on which crisis management team performance can be assessed

4.??????Crisis management team should formulate crisis protocol document specifically for the crisis at hand that guide the organisation during the crisis response

5.??????Governments and entities should enforce adherence to the approved crisis management policies, procedures, protocol documents

6.??????Governments and corporates should engage a crisis management specialist for the provision of crisis consultancy work. The PPE purchases and crisis management will be conducted on the advice of the Crisis Response Specialist. The specialist may proffer guidance on minimum quantity levels of inventory held for contingencies during pandemics or crisis