Purchasing Card Fraud

April 10, 2007
While P-cards streamline order and payment processes, and in doing so save companies a fair amount of money, caution is still necessary.

At the Eisenhower Army Medical Center in Fort Gordon, Ga., an employee equipped with a purchasing card bought a computer game station, computer, digital camera and a surround sound system. The total purchase cost an estimated $100,000. The problem: It was for personal use.

According to a Congressional report that revealed the fraud at the Army Medical Center, the U.S. General Accounting Office found that purchase cards leave the U.S. Army vulnerable to fraud, waste and abuse.

If the Army is vulnerable, you can be sure manufacturers are vulnerable as well.

So what can you do to prevent a personal shopping spree at the company's expense?

According to Tom Wissel, operations manager for UPS Capital Corp. and the featured speaker on a recent audio conference from IOMA Inc., there are several things you can do:

  • Embed fraud prevention devices in P-card programs. Some suggested program controls: intended distribution and required approvals, reporting, card design, testing controls, and internal audit involvement.
  • Management should approve the issuance of each card. At the time the card is issued, key controls can be established, including spending limits and Merchant Category Code restrictions.
  • The individual cardholder should not be able to alter the billing statement or its Web-based equivalent. Also, receipts required to support the purchase should be maintained if they are necessary for the IRS or to support sales and use tax calculations.
  • It is imperative that cards of employees who are leaving the company are cancelled on a timely basis. This seemingly obvious piece of advice is often overlooked.

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