Don’t Get Tangled Up in Stringing

Reading Time: 2 minutes

Share:

Trust is a solid cornerstone of business. It’s something that’s been a constant since the first person sold the first thing. Also a constant is the fraudsters who like to exploit that fact for personal gain.

There are many layers and levels of fraud, but one scheme that flies under the radar is called “stringing.” It’s a specific type of vendor fraud in which organizations can get all tangled, especially in the public sector.

When some item, product or service hits a specific spending threshold set by government, it puts a competitive bidding process in motion. Stringing avoids that process by incrementally selling parts of a biddable item, thus splitting it up. It might sound like getting around the red tape of bureaucracy, but in reality, it’s a Class 4 felony.

Here is an example of how this fraud scheme works:

  • The City of Anytown, U.S.A. has a law stating any purchase more than $25,000 must be subject to a competitive bidding process.
  • The City of Anytown, U.S.A. is looking for a new machine that repairs potholes.
  • Fraudster, Inc. has a pothole repair machine to sell priced at $100,000.Full priced item not broken up
  • Fraudster, Inc. knows the city needs a new machine and they’ll likely lose on price. So they come up with a scheme to subvert the bidding process and sell their machine. They break up the sale of the machine into parts that don’t trigger a bidding process.
    Strung Purchase fraud case

The problems with vendors trying this fraud tactic could fill countless pages. Rules for competitive bidding are in place for a reason. It holds people accountable before, during and after the purchase. When a fraudster comes in and tries to circumvent the entire process, it puts many people in danger.

To get a better understanding of stringing and how to detect it, read my recent article for the IGFOA newsletter from Fall 2014.

 

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

SIGN-UP FOR INSIGHTS

Join 14,000+ business executives and decision makers

Upcoming Events

Upcoming Events

Latest Insights

About The Author