Optimizing P-Card use with internal audit

Utilizing purchasing cards (P-Cards) at your institution can come with a host of benefits. For example, P-Card use can help reduce the time and effort required to complete purchasing transactions from request to payment allowing your procurement function to focus on larger or more complex assignments. Many P-Card providers also offer rebates that further incentivize card use for your institution.

P-Card risks

Despite efficiencies and financial incentives, the unauthorized use and misuse of P-Cards is one of the most common ways in which fraud can be committed both in higher education and across other industries. Key fraud and other risks to be mindful of include:

Fraud risks

• Conflicts of interest, including those between the requester, cardholder, approver and receiver of a purchase
• Splitting transactions (i.e., charging a purchase in two or more parts to avoid single transaction limits, approval requirements and/or receipt thresholds to disguise fraudulent transactions)
• Duplicating transactions or purchasing more than needed with the intent to steal/resell the duplicate or excess goods delivered
• Submitting P-Card purchases for personal reimbursement (i.e., double dipping)
• Purchasing goods or services for personal use

Other risks to consider

• Inability to enforce the P-Card program and consequences for policy violations
• Ineffective cardholder training that leads to the purchase of goods or services not permitted by the institution’s policy governing the use of P-Cards
• Ineffective and/or inefficient transaction review procedures to detect when misuse has occurred
• Using the P-Card or splitting transactions to bypass required approvals in effort to expedite the procurement process

Preventing and monitoring for fraud and P-Card misuse

Most P-Card programs are developed with both preventive and detective controls in mind. For example, spending limits and restrictions to purchase from vendors with specific merchant category codes (MCCs) are common protective controls. While preventative measures are helpful at thwarting fraud or misuse, they are not perfect.