The $100K Problem Hiding in Plain Sight: How Municipalities Can Stop Supplier Fraud Before It Starts

Supplier fraud is a growing problem for municipalities and it is often invisible until it is too late. 

Across the public sector, fraud schemes can go 12 to 18 months undetected, draining valuable taxpayer dollars that were meant to support local infrastructure, schools, and community programs. The average municipal loss can easily exceed $100,000, not because of poor intent, but because outdated processes leave finance and procurement teams exposed. 

With AI-enabled scams becoming faster and more convincing, every manual approval or email-based supplier update creates a potential weak point. 

Modernization is essential for protecting public funds. 

The Growing Risk of Supplier Fraud 

Municipalities face a combination of challenges that make them prime targets for supplier fraud. 

• Limited staffing and resources: Many finance and procurement teams manage hundreds of suppliers with small teams and manual systems. 

• Email-based communications: Supplier payment details are often shared or updated through unsecured channels. 

• Slow fraud detection cycles: Without automated checks, fake suppliers or altered bank details can go unnoticed for months. 

According to the Association of Certified Fraud Examiners (ACFE), organizations lose approximately 5 percent of revenue to fraud each year, and the public sector is no exception. 

The result is not just financial loss but reputational damage and erosion of public trust, consequences that can take years to repair. 

Where Manual Controls Fall Short 

Most municipalities already have internal controls in place, but these controls were not built for the speed and sophistication of modern fraud. 

• Vendor changes via email: A fraudster posing as a legitimate supplier requests a bank account update. The finance team, following standard verification by phone or email, approves the change and the next payment goes to a fraudulent account. 

• Limited supplier verification: Many systems confirm a supplier’s tax ID or registration status but do not verify the validity of their bank account. 

• Siloed data: Supplier information lives in different systems, making it difficult to verify consistency or detect anomalies. 

By the time discrepancies surface during audit, reconciliation, or complaint, the funds are already gone. 

How Automation Closes the Gap 

The fastest way to reduce fraud exposure is to replace manual checks with automated verification and continuous monitoring. 

Modern supplier management platforms such as Trust Your Supplier (TYS) give municipalities confidence that each supplier in their network is legitimate, verified, and compliant before any payment is made. 

Here is how TYS helps prevent supplier fraud: 

1. Real-Time Bank Account Validation 

TYS connects to integrated risk and validation partners to confirm supplier banking details in real time. This reduces the risk of payments being diverted to fraudulent accounts. 

2. Centralized Supplier Data 

Instead of relying on email or spreadsheets, TYS provides a single, secure environment for supplier onboarding and maintenance. Every update is tracked and auditable, ensuring full transparency. 

3. Automated Compliance Checks 

TYS automates KYC, OFAC, and sanction screenings as part of the onboarding process. This helps municipalities stay compliant with procurement regulations and reduces manual review workloads. 

4. Risk Visibility at Scale 

Municipal teams can monitor supplier viability and ownership risks continuously rather than just during initial onboarding. This visibility helps prevent both fraud and operational disruption. 

The Value for Municipal Procurement and Finance Teams 

Municipal finance and procurement teams are not just managing payments. They are managing public trust. Implementing supplier verification and compliance automation through TYS provides measurable benefits: 

Digitizing supplier onboarding and risk management helps municipalities save time, reduce errors, and create a reliable process that scales as their supplier base grows. 

Protecting Public Funds Starts with Process Integrity 

Every fraud headline begins with one preventable mistake, such as a missed verification, a manual entry, or an unchecked update. 

TYS helps municipalities close those gaps with automated validation and trusted supplier data. Every dollar goes where it is intended. 

Municipalities can use TYS to: 

• Verify supplier identities and bank accounts automatically 

• Maintain continuous compliance with procurement standards 

• Reduce exposure to fraud and supplier risk 

• Strengthen audit readiness and reporting confidence 

The goal is not just to stop fraud. It is to build a resilient supplier ecosystem that supports community goals over the long term. 

Conclusion: Turn Blind Trust into Verified Confidence 

Municipalities operate under high public scrutiny and tight budgets. Supplier fraud creates financial loss and erodes the confidence citizens place in local leadership. 

With Trust Your Supplier, small and mid-sized municipalities can modernize supplier management without overburdening their teams. 

By combining real-time validation, compliance automation, and risk monitoring, TYS gives procurement and finance leaders the tools to protect every transaction and every taxpayer dollar. 

Learn more about how TYS helps municipalities prevent supplier fraud and strengthen supplier integrity. Explore TYS Essentials.