April 9, 2014

Procurement cards (more commonly known as p-cards) have become increasingly popular over the past several years, and interestingly enough the frequency of expense reimbursement fraud has been steadily growing as well.  One of the key objectives of p-cards is to increase visibility and rigor around the “out of pocket” expenses of a company.  The software tools attached to these cards can provide a nice suite of controls for the approval and monitoring of these expenses. So why is it that while the adoption of p-cards has increased that expense reimbursement fraud is also on the rise?

Here are links to a couple of good articles on the subject.  The first relates to an overall investigation of p-card fraud, including risks, common red flags, and good controls to implement.  The second focuses on using data mining as a tool in the investigation of p-card risks and outlines a general risk assessment process fairly well.

The risks highlighted in these pieces are like anything when it comes to internal controls; disciplined execution of simple control processes is critical.  The idea of a reconciliation and review of periodic activity isn’t daunting, but that pivotal control activity can go by the wayside when times get busy.  Would-be perpetrators will observe this breakdown of controls as an opportunity and exploit it.  That’s how it all gets started.  Another effective control highlighted in the first article is the idea of “probation” or “three strikes and you’re out” on these cards.  A lot of companies may have similar policies written into their procurement manuals, but without the discipline to act on those policies and enforce the probation and eventual suspension of p-card privileges those policies will certainly not have the intended effect.

Plan well, execute well, BE well.

© Clark Nuber PS and Focus on Fraud, 2014. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Clark Nuber PS and Focus on Fraud with appropriate and specific direction to the original content.

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