Undertaking due diligence, especially before entering into a contract, contributes significantly to informed decision making. It does this by enhancing the amount and quality of information available to decision makers and by ensuring that this information is systematically used to deliberate on the decision at hand and all its costs, benefits and risks.
When people think about due diligence they generally think of financial due diligence – ensuring a company has the appropriate financial strength to complete the contract. Due Diligence, especially in a government setting, should be much more than this.
Due diligence should also include an assessment of any reputational risk that might exist – including previous poor business practices. There are a number of free resources that can help you do this.
The following tips provide you with some of the resources you can use to conduct due diligence.
A negative finding in any due diligence does not necessarily mean that you can’t contract with the supplier in question – you just need to ensure you are comfortable with the risk these findings represent.
If you are witness to fraud or corruption in a procurement, the section on reporting fraudulent or corrupt procurement practices provides information on reporting any evidence of procurement fraud.
Due diligence tips and checksShow more
Check the business is legitimate
Many companies involved in corrupt or fraudulent practices are shell companies, organised solely for the purpose of obtaining fraudulent contracts, without any staff or permanent business premises. The following checks will help identify them:
- Does the business have a web presence?
- Are the business details listed on the Australian Securities and Investment Commission
- If the business is a charity or not for profit, is it on the ACNC Charity register. If the business details are on these websites, does the name match the ABN and/or ACN?
- Is the company listed on any business directories?
- Are the company’s listed address and telephone numbers correct? Do reverse address and telephone searches to identify the real persons or companies listed at the address or telephone number.
- Use map and satellite photo sites where available to view the purported premises.
- For smaller businesses, not listed on the internet:
- call and visit purported business location
- check local telephone, business and corporate directories.
Check the business is conducting its operations appropriately
- Do a google search on the name of the business and the directors – has there been any adverse media?
- Check if the business has been the subject of any court proceedings - Federal or national (for example eCourts Portal of Western Australia).
- The Workplace Gender Equality Act 2012 requires businesses with 100 or more employees to submit a report to the Workplace Gender Equality Agency. Has the business, if required to do so, completed their reporting? What have they reported? Check the Public Reports.
- The Modern Slavery Act 2018 requires businesses with an annual consolidated revenue of at least $100 million to report on their modern slavery risks. Has the business, if required to do so, completed their reporting? Search the Online register. Note: The first reporting cycle ends on 31 December 2020 so no reports are not yet required.
- If the business has been debarred or suspended in other jurisdictions, you can have a look at the World Bank Listing of Ineligible Firms and Individuals and the Canadian Integrity Regime.
Find out if the business is financially secure
- Large companies generally post their annual reports publicly.
- There are a number of paid sites, including the Australian Securities and Investment Commission website, that provide financial information, and other due diligence assessment. The Department of Finance has an Audit and Financial Advisory Services Common Use Arrangement for these services.
Reporting fraudulent or corrupt procurement practicesShow more
If you suspect or observe any fraudulent or corrupt procurement practices, then you should report them in line with your departmental/agency policy and procedures.
Notifying authorities have a duty to report serious misconduct to the Corruption and Crime Commission (CCC) and minor misconduct to the Public Sector Commission PSC) as soon as reasonably practicable after becoming aware of the matter.
Should you wish to remain anonymous, or believe the matter is not being appropriately addressed, you can also choose to report your suspicions:
Training for agency staffShow more
Controls for the prevention of fraud in procurement, in the form of procurement training, are already available.
There are a number of training opportunities for public sector employees involved in purchasing goods and services on behalf of agencies. There is also procurement training for the community services sector.
The training covers a variety of procurement topics and are available most of the year.
One specific to procurement fraud is Identifying and preventing corruption in procurement.