P-card fraud is committed by both external and internal parties. An external party may counterfeit or copy pertinent information from valid p-cards. This type of fraud is very similar to consumer credit card fraud in which valid cardholder information is used to create a counterfeit card to make purchases at merchants or the p-card information is used to make internet purchases.
Best practice: Implementing a purchase order and p-card policy
As a best practice, many organizations have instituted corporate policies pertaining to both the use of p-cards and purchase orders. Such policies mandate the use of a purchase order if the transaction amount is over a specified spending level. These policies also enforce that all suppliers have contracts in place to ensure that the best pricing is obtained.
The amount of spending requiring a purchase order will vary depending on the size of the organization and may range anywhere from $2,500.00 to $10,000. Any transaction less than the designated spending levels will require a p-card. The diagram below depicts the benefits that be achieved by organizations with purchase order and p-card policies.
Benefits of a p-card program
- Improve supplier relations from quicker payments
- Improve efficiency in accounts payable by reducing the amount of invoices processed
- Can restrict types of purchases by Merchant Category Code or (MCC)
- Reduce the number of checks processed
- Reduce amount of purchase orders created
- Reduce number of suppliers maintained in the supplier master file
- Provides visibility to purchases made by utilizing the reporting provided by the issuing financial institution
The red flags of p-card fraud
- Unusual purchases made with a p-card
- Unusual number of purchases for amounts just below an organization-set minimum requiring management approval
- Late reconciliations or incomplete reconciliations
- Photocopied receipts instead of originals are submitted with expense reports
- Split payments (an indicator of an attempt to circumvent purchase limit rules)
- Sudden unusual patterns in a particular employee’s monthly p-card purchases
- Forged receipts
P-card internal controls program
Download the chart of internal controls developed for a P-card program. It specifies the internal controls, designates the type of control, and highlights the types of risks prevented.
Invoice processing program
Download the chart of internal controls developed for invoice processing. It specifies the internal controls, designates the type of control, and highlights the types of risks prevented.
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