In one of the earlier posts, conflicting role assignments in the context of finance function were captured. Today we will cover assigning of conflicting roles to individual users in materials team.
In each case, the cardinal principle of assigning independent roles to different persons as "maker, checker, approval " are getting compromised. This can lead to risks of committing of fraud in case any of the following persons collude amongst each other with malice intensions.
- store person
- finance person
- quality inspector
Potential unethical or fraud prone and suboptimal activities
- Creating purchase orders(PO) on vendors and making changes in purchase orders rates or terms and thereafter approving/releasing PO to vendor without seeking approval from senior hierarchy in purchase (vis a vis approved authority norms) and subsequent vetting by finance
- Approving PO and making GRN (Good Receipt Note) without receipt of material and thereafter passing vendor bill
- Making changes in PO rates and thereafter crediting vendor with revised higher rate (vis a vis approved authority norms) without seeking approval from senior hierarchy in purchase and subsequent vetting by finance
- Making changes in PO quantity and thereafter raising GRN for higher quantities without seeking approval (vis a vis approved authority norms) from senior hierarchy in purchase
- Counting the incoming material him- self mentioning the quantity as complete,(not withstanding shortage or damage) and clearing GRN for full quantity.
- Making GRN and thereafter clearing GRN by same person, even in case of rejection of material received and crediting vendor
- Making GRN and thereafter issuing material directly to manufacturing/cost centres without routing through quality control
- Making GRN and thereafter posting quantities of ok/good material to scrap yard for sale of ok material as scrap
- Issuing materials to job- worker/processor; thereafter raising GRN for semi-processed material (while mentioning it as fully processed) or even without physical receipt of material and crediting full payment to job-worker/processor.
- Requisitioning material despatch (raw or semi or finished) outside company as free of cost/non- returnable and him -self signing the outgoing material gate pass.
- Weighing the scrap quantity being sold (in the sale truck/vehicle) and him-self short mentioning the measured quantity in the weighment slip or scrap sale or despatch document
Materials team professionals can visualise similar scenarios in their respective industries and take counter measures to prevent such occurrences.