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Agent Based Fraud Detection And Reporting In Public E-Procurement

Author: 
Sirorei James K. and Elisha Opiyo Omulo
Subject Area: 
Physical Sciences and Engineering
Abstract: 

Procurement fraud remains endemic in most modern economies. E-Procurement fraud may manifest in various ways, including collusion by parties involved in procurement as well as falsification of documents. A procurement officer may be induced, through bribe, to favor a particular supplier. For protection against procurement fraud, organizations have tried to implement some control measures, hoping to discourage fraud that is directed on institutions. Complex fraud does not revolve around the breaching of controls, but bypassing them. We set out to design and implement an e-procurement fraud detection tool for public entities using multi-agent technologies. This is informed by contributions from various government employees who were interviewed, literature reviewed and publications that indicate the presence of fraud in public offices attributable to procurement processes. A prototype of an e-procurement system is developed with the complete procure-to-pay functionality. This provides the implementation environment for the agent-based fraud detection tool. Fraud detection is then simulated using rule set to determine suspicious activities and transactions in the e-procurement system. The agent-based e-procurement fraud detection tool is able to detect and report fraud in situations where inflation of unit cost of items at requisition level and further upward adjustments are done while raising purchase orders. Upward adjustment of quantities on purchase orders after requisition approval is also picked as fraud by the agent detection tool. This is a scenario that requires approvals from approvers who may be compromised or fail to take note of the discrepancies. The proceeds from such fraud may be paid to the participants in the procurement chain as kickbacks (bribes).

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