Fraud triangle in public procurement: evidence from Indonesia

2019 ◽  
Vol 26 (4) ◽  
pp. 951-968 ◽  
Author(s):  
Ni Wayan Rustiarini ◽  
Sutrisno Sutrisno ◽  
Nurkholis Nurkholis ◽  
Wuryan Andayani
Keyword(s):  
Negative Affect ◽  
Conflicts Of Interest ◽  
Detection System ◽  
Public Procurement ◽  
Fraud Triangle ◽  
Effective Prevention ◽  
Content Type ◽  
The Government ◽  
The Relationship ◽  
Procurement Fraud

Purpose This study aims to examine the effects of fraud triangle (pressure, opportunity and rationalization) on individual fraudulent behavior in Indonesian public procurement. Empirical research in this area is relatively sparse. Design/methodology/approach Data were collected using laboratory experiments. Findings The results revealed that fraudulent behavior is higher when an individual has high pressure and high opportunity. These factors play an important role in determining individual rationalization. Most of participants used “displacing responsibility” to rationalize their actions. This study also demonstrated that negative affect mediates the relationship between fraudulent behavior and rationalization. Research limitations/implications First, fraudulent behavior research cannot be separated from social desirability bias. Second, the experiments only involved individual decision-making, not in groups. Finally, this study did not examine the effectiveness of rationalization in reducing negative affect. Practical implications Over the years, the government has only focused on the identification of pressure and reduction of opportunities, but ignored individual psychological reasons. Considering that procurement fraud is always increasing, the government must more focus on individual reasons to design an effective prevention and detection system. Social implications There are various conflicts of interest in public procurement budgeting. These conflicts can distort resource allocation and causes budget leakage. As a result, the government is incapacitated to achieve social and economic goals of the community. Originality/value There is limited research about fraud in public procurement budgeting, especially in developing countries. In addition, the fraud triangle research, which focuses on rationalization is still limited.

Reforms will strengthen policy implementation in China

2018 ◽  
Keyword(s):  
Local Government ◽  
Policy Implementation ◽  
Local Governments ◽  
Conflicts Of Interest ◽  
Balance Of Power ◽  
Content Type ◽  
Debt Burden ◽  
Key Policy ◽  
The Government ◽  
The Relationship

Subject Reforms to the relationship betwen central and local government in China. Significance The government last month issued two blueprints for a sweeping reorganisation of the country's bureaucracy (here and here, links in Chinese). They include policies that significantly alter the balance of power between central and local government institutions. These aim to overcome foot-dragging and poor policy implementation at local levels by improving incentives and supervision, and eliminating overlapping responsibilities and conflicts of interest. Impacts With the backing of an increasingly powerful Xi, much of the agenda is likely to be implemented. In key policy areas such as the environment, local bureaus should have more reliable access to funding. New taxes and constraints on borrowing should strengthen local government finances and help reduce their debt burden. Local governments may have less leeway to offer business incentives such as tax breaks and other regulatory incentives.

Price and quality: relationship between bid rate and construction performance rating ranking

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Koki Arai
Keyword(s):  
Panel Data ◽  
Public Procurement ◽  
Order Term ◽  
Public Works ◽  
Performance Rating ◽  
Content Type ◽  
The Government ◽  
The Relationship ◽  
Construction Works

PurposeThe purpose of this paper is to try to understand the relationship between price and quality in public procurement by using data on the quality of civil engineering works and prices in tenders. By doing so, it tries to conduct a comprehensive examination of the quality of construction works, which has been difficult to recognize and evaluate.Design/methodology/approachThe methodology of this analysis is to collect data on the quality of construction works from the rankings of construction performance evaluations revealed by public procurement authorities. In addition, the prices of bids of the providers in public procurement are also collected from the available data and analyzed. The relationship between the two was statistically analyzed in an objective and verifiable way.FindingsWhat the study found was that the price of the work measured by the bid rate had a positive and significant relationship with the quality of the work measured by the construction performance rating. Furthermore, the panel data were analyzed using panel data for 51 firms that all appeared in the construction performance evaluation for 12 years and participated in at least three bids in each year, and the first-order term of the bid rate was negative and the second-order term was positive and was 10% significant, which is a U-shaped relationship.Research limitations/implicationsThis study is one of the investigations focused on public procurement construction work. One of the limitations of this study is that it is a study of one industry in the Asian region. However, this study focuses on the incentives of business operators. As such, the analysis is applicable to all situations faced by those running businesses.Practical implicationsThe managerial implications of this study include the following: although, improving the quality of construction results is costly, competitive firms are also steadily improving their quality as it is a factor of competition. However, there will come a point where their efforts come to a halt at a certain level. It is necessary to operate the business with this situation in mind. In addition to the company's efforts, it is necessary to lobby the government.Social implicationsAs a policy implication for this analysis, it was possible to evaluate that steady improvement in construction results was confirmed, but the correlation between the relaxation of the competition and the increase in the bid rate was correlated with the decrease in the total amount of public works. This highlights the problem of having to think about measures for the efficient use of the. In addition to this, the fact that the competition situation has been eased can be considered as a problem that it will adversely affect the innovation stimulation of operators, and that it will become necessary to pay more attention to competition limiting acts.Originality/valueThe uniqueness of this paper is firstly that unique data representing the quality of public procurement, which had been difficult to analyze, were collected, organized and used in the study. In addition, not only did we find a positive relationship between quality and price but we also found a U-shaped relationship between them using panel data.

Why people commit public procurement fraud? The fraud diamond view

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ni Wayan Rustiarini ◽  
Sutrisno T. ◽  
Nurkholis Nurkholis ◽  
Wuryan Andayani
Keyword(s):  
Literature Review ◽  
Internal Control ◽  
Public Procurement ◽  
Risk Area ◽  
High Risk Area ◽  
Content Type ◽  
The Public ◽  
The Government ◽  
The One ◽  
Procurement Fraud

Purpose This paper aims to discuss the factors that cause individuals to commit fraud, especially in the public procurement context. All this time, an empirical review of public procurement fraud has only focused on the macro and micro level, as well as its losses on the country's economy. This paper highlights individuals’ fraudulent behavior from the four elements of the fraud diamond theory, namely, pressure, opportunity, rationalization and capability. Design/methodology/approach This paper is a literature review that discusses the fraudulent behavior of bureaucrat as a procurement official in the context of public procurement. This review uses fraud diamond theory as its theoretical framework to explain the attributes to do fraud. Findings Public procurement is a high-risk area for fraud (corruption), particularly in the government institution. It cannot be denied that the situation factor (pressure and opportunity) will interact with psychological aspects (rationalization) and individual capability to direct the individuals to commit fraud. This study discusses how existing pressure (motivation) and opportunities are used by individuals who have the capability to rationalize their actions. This literature review also endeavors to shed light on the strategy to prevent, detect and control the causes of fraud. Practical implications This paper provides an understanding of regulators, auditors and other employees in recognizing the characteristics and nature of fraud antecedents. This understanding can help prevent various forms of procurement fraud that occur within their organizations. This paper also can be a guideline to assist public sector organizations in designing effective internal control systems to prevent fraud in the process and practice of public procurement. Social implications Public procurement has a central role that enables the government to allocate the budget effectively and efficiently. Compliance in implementing procurement rules and procedures will improve the quality of public services. Originality/value There exists relatively little study outlining the factors underlying of bureaucrats’ (procurement official) opportunistic behavior on procurement activities. The authors focused on bureaucrats’ behavior because they have unique positions of power and responsibility of the procurement process. On the one hand, they have a crucial role in serving the public and safeguarding public assets. On the other hand, they have the ability to collaborate with politicians and business actors in corrupt procurement practices. Therefore, the discussion on this topic is very relevant and interesting.

The framework of data-driven and multi-criteria decision-making for detecting unbalanced bidding

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Huimin Li ◽  
Limin Su ◽  
Jian Zuo ◽  
Xiaowei An ◽  
Guanghua Dong ◽  
...  
Keyword(s):  
Decision Making ◽  
Distance Measure ◽  
Public Procurement ◽  
Unit Price ◽  
Data Driven ◽  
Relative Distance ◽  
Multi Criteria Decision Making ◽  
Ideal Solution ◽  
Content Type ◽  
The Government

PurposeUnbalanced bidding can seriously imposed the government from obtaining the best value for the taxpayers' money in public procurement since it increases the owner's cost and decreases the fairness of the competitive bidding process. How to detect an unbalanced bid is a challenging task faced by theoretical researchers and practical actors. This study aims to develop an identification method of unbalanced bidding in the construction industry.Design/methodology/approachThe identification of unbalanced bidding is considered as a multi-criteria decision-making (MCDM) problem. A data-driven unit price database from the historical bidding document is built to present the reference unit prices as benchmarks. According to the proposed extended TOPSIS method, the data-driven unit price is chosen as the positive ideal solution, and the unit price that has the furthest absolute distance measure as the negative ideal solution. The concept of relative distance is introduced to measure the distances between positive and negative ideal solutions and each bidding unit price. The unbalanced bidding degree is ranked by means of relative distance.FindingsThe proposed model can be used for the quantitative evaluation of unbalanced bidding from a decision-making perspective. The identification process is developed according to the decision-making process. The finding shows that the model will support owners to efficiently and effectively identify unbalanced bidding in the bid evaluation stage.Originality/valueThe data-driven reference unit prices improve the accuracy of the benchmark to evaluate the unbalanced bidding. The extended TOPSIS model is applied to identify unbalanced bidding; the owners can undertake objective decision-making to identify and prevent unbalanced bidding at the stage of procurement.

Critical criteria for enhancing consumption intention in restaurants during COVID-19

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sheng-Fang Chou ◽  
Chih-Hsing Sam Liu ◽  
Jun-You Lin
Keyword(s):  
Structural Equation ◽  
Consumer Behaviour ◽  
Mediating Effect ◽  
Sufficient Information ◽  
Content Type ◽  
Consumption Intentions ◽  
The Government ◽  
Media Channels ◽  
The Impact ◽  
The Relationship

PurposeThe purpose of this study is to illustrate the different systems controlling coronavirus disease 2019 (COVID-19) and curbing the impact of the virus on the hospitality economy. The author’s clarified the critical attributes of the government, organization management system and consumer behaviour using mediation-moderation models and demonstrated how those critical attributes influenced customer consumption intention during COVID-19 in Taiwan.Design/methodology/approachDue to the impact of the COVID-19 pandemic, this research is mainly distributed through online questionnaires through Facebook and other social media channels to recruit volunteers. Second, the pre-test survey used 100 questionnaires collected from juniors and seniors from a university in northern Taiwan to make predictions. Third, this study also conducted a questionnaire validity analysis, which identified 9 criteria and 34 items. Fourth, the questionnaire collected samples for a total of three months. Structural equation modelling was used to test the hypotheses in a sample of 1,098 consumers in Taiwan.FindingsThis study considers government, enterprise and consumer levels and conducts relevant factor analysis from consumers’ perspectives to understand the changes in consumer behaviour under COVID-19 influence. Regarding mediation, this study finds that information and communication mediate the relationships between crisis management and COVID-19 impact. Regarding moderation, this study exposes the critical moderating part of human resources, that hygiene and safety strengthen the relationships between COVID-19 impact and attitude towards life and that perceived anxiety strengthens the relationship between attitude towards life and consumption intention.Practical implicationsDuring COVID-19, restaurants should cooperate with the government to reduce the risk of community infection. Therefore, the government also needs to cooperate with restaurant companies to enhance the industrial economy, actively communicate with consumers and provide correct and sufficient information. At the same time, restaurant enterprises also need to have sufficient human resource arrangements, hygiene and safety planning to eliminate consumers’ doubts.Originality/valueThese findings indicate that consumers’ consumption intention to eat out is affected by the COVID-19 impact and attitude towards life. This research also confirms that perceived anxiety has a mediating effect on the relationship between consumer attitudes towards life and consumption intentions. To improve the restaurant economic process, they should consider solutions to reduce consumers’ perception of the COVID-19 impact and fear of eating out.

Tourism public-private partnership (PPP) projects: an exploratory-sequential approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Marwa Ghanem ◽  
Ibrahim Elshaer ◽  
Samar Saad
Keyword(s):  
Interpersonal Relationships ◽  
Service Providers ◽  
Stakeholder Management ◽  
Comprehensive Overview ◽  
Sequential Approach ◽  
Essential Information ◽  
Content Type ◽  
The Government ◽  
The Relationship

Purpose This study aims to address the absence of a thorough understanding of commitment in tourism public-private partnerships (PPP) by exploring antecedents of PPP commitment and their underpinning relationships in regard to the destination management system (DMS). Design/methodology/approach An empirical investigation of the case of the Egyptian DMS, a PPP which was forsaken by the government partner and which subsequently failed. Qualitative and quantitative approaches are used for a comprehensive overview of the researched phenomena pertaining to external and internal stakeholders. Findings The results indicated that stakeholder management, relational capital, perceived benefits and stakeholder capabilities could influence intentions to commit to a tourism PPP project. Also, the latter three factors were found to mediate the relationship between stakeholder management and long-term PPP commitment. The results also shed light on the important aspects of non-contractual, interpersonal relationships between internal and external PPP stakeholders. Originality/value This research pioneers inquiries on the commitment of Tourism PPP/DMS projects and its possible drivers in a non-Western context. Also, this study contributes to knowledge by exploring the relationship within and between internal (partners) and external (e.g. local service providers) stakeholder groups and provided evidence on the crucial role of both on long-term PPP commitment and success. The current study has a few significant contributions to the PPP literature regarding the commitment and success of PPP in the complicated environments in which tourism PPP projects are operated. Moreover, this study offers essential information and practices for improving partner relationships with external stakeholders.

Psychological capital and career commitment: the mediating effect of subjective well-being

2018 ◽  
Vol 56 (2) ◽  
pp. 458-473 ◽  
Author(s):  
Hansika Singhal ◽  
Renu Rastogi
Keyword(s):  
Life Satisfaction ◽  
Negative Affect ◽  
Positive Affect ◽  
Psychological Capital ◽  
Career Commitment ◽  
Well Being ◽  
Subjective Well Being ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this paper is to discover the role of psychological capital (PsyCap) as a predictor of subjective well-being (SWB) and career commitment (CC). Further, it aims to analyze the mediating role of SWB in the relationship between PsyCap and CC in the Indian manufacturing sector. Design/methodology/approach A quantitative survey-based research design employing data from 300 employees in the National Capital Region (NCR) of India was used in the present research. Findings The results demonstrated that PsyCap acted as a predictor for SWB and CC. Additionally, SWB partially mediated the relationship between PsyCap and CC. Research limitations/implications The limitations of the present research would have to do with the purposive sample set chosen during the data collection. The sample consisted of middle- and upper-middle-class Indian employees working in the NCR having knowledge of English language and computer skills. Perhaps, future research works should take into account a wider sample in terms of the regions across India and not only the NCR. Although the findings showed that SWB reduced the relationship between PsyCap and CC, still that relationship was significant statistically. Further research studies might also explore various moderators while simultaneously studying SWB. In the research, SWB acted as a significant mediator of the relation between PsyCap and CC, yet at the same time, it may be the scenario that employees who are committed toward their career would be more inclined to espouse a greater sense of SWB (i.e. mediator is caused by the outcome). Hence, the authors duly recognize the need to test this substitute model. Since, SWB places chief emphasis on respondent’s own experiences and perspectives; it does not denote a consummate understanding of their mental health as people may have psychological disorders even if they experience happiness. Hence, the use of other measures in addition to SWB in comprehending a person’s psychological health is desirable (Diener et al., 1997). Practical implications This study suggests that in order for organizations to have a workforce committed to their career and hence, their profession, the supervisors will need to train the employees having a higher incidence of PsyCap to increase their SWB. Consequently, the supervisors will, in turn, need to recruit employees already having the four dimensions of PsyCap, i.e. hope, efficacy, resilience and optimism at the workplace in order for them to have a higher life satisfaction, positive affect, reduced negative affect (three components of SWB) and increased CC. Social implications Employees who develop within themselves a state of being hopeful, efficacious, resilient and optimistic will also be strongly oriented toward having greater life satisfaction, positive affect and lower levels of negative affect. This, in part, would help them achieve the required commitment toward their career and hence, help them in sticking with their jobs. Originality/value The present study advances the existing work on positive organizational behavior by exhibiting the noteworthy role of PsyCap in predicting SWB and CC. Further, it helps in demonstrating the inevitable role of SWB in partially mediating the relationship between PsyCap and CC.

scholarly journals The hierarchy of public project governance frameworks

2018 ◽  
Vol 11 (1) ◽  
pp. 174-197 ◽  
Author(s):  
Gro Holst Volden ◽  
Bjorn Andersen
Keyword(s):  
Portfolio Management ◽  
Qualitative Assessment ◽  
Public Project ◽  
Content Type ◽  
Investment Projects ◽  
Project Governance ◽  
Internal Focus ◽  
Management Literature ◽  
The Government ◽  
The Relationship

Purpose The purpose of this paper is to study public project governance frameworks in various ministries and agencies in Norway, following the introduction of such a framework on the topmost level (i.e. the cabinet) which applies to the very largest projects. Design/methodology/approach The study is methodologically designed as a qualitative assessment of project governance frameworks that apply to state-funded investment projects in selected sectors, based on data gathered through document reviews and interviews. Findings The study finds that all of the agencies have introduced their own project governance frameworks, which are basically consistent with the recommendations from the project management literature and with the cabinet’s overall requirements in Norway. By contrast, only one ministry has taken a formalized role as a project owner. Governance tasks thus seem to be extensively delegated to the subordinate agencies. This even includes strategic tasks such as project selection and portfolio management, and implies there is a risk that public project governance has a narrow and internal focus. Originality/value The paper is a first step toward a better understanding of public project governance as a hierarchical system and the relationship between project owners on three levels, the cabinet, the sectoral ministry, and the government agency.

Fraud prevention initiatives in the Nigerian public sector

2018 ◽  
Vol 25 (2) ◽  
pp. 527-544 ◽  
Author(s):  
Rabiu Abdullahi ◽  
Noorhayati Mansor
Keyword(s):  
Public Sector ◽  
Structural Equation ◽  
Equation Modeling ◽  
Control Mechanisms ◽  
Fraud Triangle ◽  
Fraud Prevention ◽  
Content Type ◽  
The Public ◽  
The Government ◽  
Triangle Theory

Purpose Detecting and preventing fraud are challenging and risky tasks, especially in a fast developing economy such as Nigeria. The efforts become crucial in the government sectors, as they involve public’s trust and resources. The purpose of this study is to examine the relationships between the fraud incidence and the elements of fraud triangle theory (FTT) with the aim of combating current fraud outrages in the Nigerian public sector. Design/methodology/approach A survey was conducted and 302 questionnaires were distributed to the staff of the departments of accounting, internal auditing and investigation of ten selected ministries, departments and agencies of Kano State, Nigeria. Structural equation modeling (SEM) was used to analyze the data. Findings The study reveals a significant relationship between three elements of FTT and fraud incidences in the Nigerian public sectors (p-value < 0.001 for pressure and opportunity and p-value = 0.024 for rationalization). Practical implications The findings of the study are useful for forensic accountants and the Nigerian anti-graft bodies to enhance existing control mechanisms in fraud prevention initiatives. The research also contributes to bridge the gap in academic theory and empirical study related to FTT. Social implications Fraud scandals can cause public’s frustration, damage the reputation and integrity of the ruling government and result in negative image of the public sector. Originality/value Accordingly, the study suggests a salary scale reform (SSR) in the Nigerian public sector and improvement in fringe benefits to increase employees’ standard of living. The study concludes with recommendations to enhance fraud awareness and training programs to the government employees.

Scoring the financial distress and the financial statement fraud of Garuda Indonesia with «DDCC» as the financial solutions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ryan Aviantara
Keyword(s):  
Financial Distress ◽  
Stock Exchange ◽  
Univariate Analysis ◽  
Strong Relationship ◽  
Safe Zone ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Financial Statement Fraud ◽  
Content Type ◽  
The Government

Purpose PT Garuda Indonesia (GIAA) Persero Tbk is the one only pride airline of Indonesian sovereignty. Although the bird achieved abundant international awards and certifications, the bird is dying and needs a remedy immediately. The frequent annual turnover of board executives did not make impact to the financial performance; this seems to be tip of the iceberg, peculiar with the number of restatement over the past decade. Therefore, this paper aims to address the issue through the function of five red flags model which known as Altman Z-score, Sprigate S-score, Grover G-score, Beneish M-score and Dechow F-score. Design/methodology/approach This is exploratory study of univariate analysis using financial distress and fraudulent financial statement approach, while the type of data is secondary taken from Indonesia Stock Exchange during 12 years observation from 2007 to 2018. Findings Altman, Springate and Grover produce strong indication of GIAA’s financial distress; all models score the same distress indication by 14 times. All distress models agreed that only 2011 and 2012 classify to the safe zone when GIAA performed the corporate actions. Beneish scores fraud indication by eight times. Dechow scores slightly higher by nine times. The number of fraud predictions in this research are in line with the number of restatement, which proves the assumption that restatement can be used as a signal of the financial statement fraud. When GIAA categorized in safe zone, both Beneish and Dechow score no to fraud, this indicates the fraud occurence during health period is lower. Research limitations/implications The motivation behind the financial statement fraud is not discuss through this research but from the primary theory of the fraud triangle. Financial distress possesses strong relationship with pressure factor; therefore, exit from financial crisis is one of the best solution to mitigate the financial statement fraud. Practical implications The average of Beneish score is −2,26, slightly above the manipulator threshold which is −2,22. This must be marked as an ample conjecture of GIAA’s fraud inclination and been a highlight for the auditor both internal and external when performing control testing, attestation and other assurance services. Social implications All models in this study can apply to any other corporate issues, especially for evaluating the government company who has loosen the public trust recently in Indonesia such as PT Asuransi Jiwasraya and PT Asabri. Moreover, the pandemic COVID-19 has brought the world to the new unprecedented risk, especially the economic turmoil which lead the possibilities of corporate distress and fraud. By applying these scores, public might have tools as pre-elemenary assessment to serve a decision where to put trust in a company. Originality/value This paper reveals a combination from various models of financial distress and financial statement fraud in order to generate the financial solutions named « DDCC » Debt Restructuring, Debt Conversion, Capex Management and Cost Cutting.

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