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Shortage of digital tools hampering efforts to tackle procurement fraud, report warns

A shortage of digital procurement tools is hampering efforts to stem a tide of fraud and corruption in local government that costs taxpayers up to £2.75bn a year, the government has warned.

In a new review of corruption in local government procurement, officials call on councils to adopt technology to analyse spend data to preempt and investigate fraudulent transactions.

Despite the advantages of using such software, a survey commissioned for the review revealed that fewer than one in four councils always carried out spend analysis and only 54 per cent sometimes did.

“Councils reported carrying out spend analysis as part of core systems audits, carrying out monthly monitoring of ‘off-contract’ spend and carrying out routine analysis on ‘top 50’ contracts by value,” the report states. “Some councils reported that this was expected of contract managers, but that there was no central visibility of spend analysis.”

Writing a foreword for the report, Simon Clarke, the minister for regional growth and local government, said: “Public procurement can be attractive to organised criminals and, given the four services councils provide, this carries significant risk for both councils and their communities.

“I believe that the effective management of fraud and corruption risks is a critical part of an effective, modern council, one that manages its resources efficiently to secure value for money outcomes.”

Alex Saric, chief marketing officer of the procurement specialists Ivalua, said: “Smart procurement technology provides the visibility and automation needed to reduce risk and potential for fraud.

“Automatic flow of data from contracts to orders to invoices ensure compliant purchasing and effective savings tracking. Integration of data from internal sources, suppliers and third parties can help avoid risky suppliers and predict potential failures. Predictive analytics can spot anomalies – such as similar goods being purchased at vastly different prices – faster.

“By digitising, councils will not only save time and better calculate savings, they can also prevent funds from getting into the wrong hands.”