Purchasing cards are an excellent option for businesses wanting to streamline payment processes and reduce paper volumes. However, as with all AP tools, they can be misused by employees. The key is to have strong controls in place.
One policy companies must enforce is that a p-card only be used by the individual cardholder. Simply stated, the person making purchases should always be whose name is on the card. End of discussion.
A prime example of what can happen when this isn’t the case was seen recently at the University of Michigan Health System, where an administrative assistant misused her boss’s company p-card to the tune of $19,000.
According to an article published in The Anne Arbor News, the assistant was responsible for reconciling her boss’s university-issued p-card. She pled guilty to using his card to purchase gift cards from major retailers such as Target and Wal-Mart. She forged her boss’s name on several occasions.
The assistant was able to hide the purchases by grouping them with the university hospital’s customer outreach program, which provided gift cards to customers who experienced inconveniences such having their appointments rescheduled.
University officials noticed something was wrong when the gift card program’s expenses began far exceeding the total $2,000 allotted for the program. Not only did the assistant purchase an additional $19,000 in gift cards over 7 months, but she purchased them from retailers that weren’t a part of the original program.
As a result of this fraud, the hospital had to discontinue the popular gift card program. Auditors have provided a wide range of recommendations for securing the p-card program, including requiring all p-card expenses be documented by receipts and allowing only cardholders to use the cards.
The unfortunate truth is that if these controls were in place from the beginning, the fraud would most likely not have happened. Businesses need to be more proactive when it comes to developing and enforcing controls. It’s better to lose a little money implementing controls than to lose a lot of money at the hands of a fraudster.
Read the full article in The Ann Arbor News.
