Does Top Management Competencies, Internal Control Systems, and E-procurement Contributes to Procurement Fraud Prevention

Abstract

Government is always the biggest spending agency in many countries, and this signifies a huge opportunity for government procurement fraud. Failure to implement strong measures for fraud prevention may lead to financial losses and a bad reputation for the country. In Indonesia, procurement fraud has been classified as one of the major components of fraud. Therefore, there is a crucial need for extensive studies to understand factors that may contribute to the fraud prevention strategy among government agencies in Indonesia. This paper examines three factors that may promote procurement fraud prevention among government agencies in Palembang City. The three factors are top management competencies, e-procurement and internal control system. Questionnaires were distributed to employees in the procurement department of 51 government agencies in Palembang, the most reported procurement fraud cases in Indonesia. Data were thoroughly analysed using multiple regression analysis with the SPSS analysis tool. The finding revealed that internal control systems and e-procurement significantly contributed to fraud prevention programs. However, the top management competencies showed a negative relationship with procurement fraud prevention. In addition, this study found the implementation of e-procurement and internal control systems was an important tool in to fight against fraud. This study contributes to the literature by providing empirical support in confirming the critical role of the internal control system and e-procurement in enhancing fraud mitigation mechanisms.