Kickbacks involve a vendor paying an employee a portion of the contract value in exchange for being awarded the business. Because the payment happens between the vendor and the employee’s private accounts, the “smoking gun” is rarely in the company’s books. Instead, we look for correlative data.
Analytical Testing:
- Price Variance Analysis: Comparing the price paid to a specific vendor against the market average for the same SKU or service. A “kickback” is usually funded by an overcharge.
- Vendor Loyalty Ratios: Calculating the percentage of a department’s total spend that goes to a single vendor.
- Employee/Vendor Linkage: Using Social Network Analysis (SNA) to find links between employee home addresses, phone numbers, or social media connections and the owners of the vendor companies.
Kickback Probability = (Price Variance > 15%) + (Sole Source % > 80%) + (Manual Override Count)
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