Two cardholders from a university are facing federal charges in conjunction with internal card fraud, but, as always, I keep thinking about the reviewers/approvers in this case. They are supposed to be the first line of defense against cardholder fraud and misuse, but we all know that managers’ vigilance can be hit or miss. This reality means the auditing process better be sound to catch anything missed at the cardholder and manager levels. Keep reading to see more about the fraud case, obtain six audit recommendations, and learn about a May virtual workshop for auditors.
About the Case
The two employees, who both held research-related positions at the University of New Hampshire (UNH), allegedly used their P-Cards to make thousands of dollars in personal purchases, including Amazon gift cards, and then falsified receipts. As reported by fosters.com, a service of seacoastonline.com:
- The cards were intended for expenses incurred through research covered by federal grants.
- They were required to provide receipts and written justification for their purchases.
- Another UNH department reviewed and approved their transactions, seeking reimbursement from the appropriate grants.
- A federal grand jury recently indicted both men on 31 counts of theft of government funds.
Read the complete article published by fosters.com. It indicates that the fraud was caught via a random audit, but the exact details are unknown.
“Since managers’ vigilance (in overseeing cardholders’ activity) can be hit or miss, the auditing process better be sound...”
Audit Recommendations
- Do not rely solely on random transaction audits. Be strategic; see examples.
- Ensure every cardholder is thoroughly audited at least once per year.
- If your organization does not already have it, seriously consider an auditing solution/technology. It covers more ground than what a human can do and is less prone to errors.
- For suppliers with whom your organization has an ongoing relationship, obtain reports showing what cardholders have purchased. This can help uncover falsified receipts.
- If purchases from Amazon are allowed, audit a high percentage of these transactions every month (audit 100% if using technology). Better yet, switch to Amazon Business, which offers various controls.
- Occasionally verify the presence/location of purchased items to ensure the goods are not somehow “missing,” especially those that might be tempting for personal use.
See also recommendations related to manager-approvers and how to help them be successful. I wish I knew what the aftermath was for the department that approved the two cardholders’ transactions! Accountability is critical.
P-Card eWorkshop for Auditors
Purchasing Card Audits—Best Strategies for Internal Audit
In early May, I will be delivering a four-hour virtual training course for The Institute of Internal Auditors/American Center for Government Auditing. Targeted at auditors in the public sector, but still suitable for all sectors, the content will help auditors better understand Purchasing Cards and what should be audited. Learn more about this event...
About the Author
Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…
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