Is Fraudulent Spend Happening in Your business? Here Are Two Real World Examples
In the world of procurement and expense management, P-Cards and T&E Cards are hailed for their convenience. However, without the right checks and balances, these tools can become avenues for fraud. The following real-life examples shed light on the need for regular oversight and sometimes, even a re-evaluation of card policies.
Flying Under the Radar: The Case of Low Dollar Purchases: One company's spend analysis revealed a startling pattern. Over a three-year period an employee made over 700 purchases, all under $50. That's like a purchase every working day for three years. Why does it matter that the purchases were under $50? Because the company's policy didn’t require receipts for purchases under $50. That policy, coupled with a lack of regular T&E card audits, allowed this employee to exploit the system unnoticed, for years. The loophole provided him an opportunity, and the absence of oversight gave him the time to, well let’s call it what it is, steal over $35,000 from his employer, less than $50 at a time.
The Dangers of Overlooking 'Minor' Expenses: Cases like this underline the risks associated with seemingly minor expenses. A few dollars here and there might not raise eyebrows, but they add up. While setting a threshold for receipt submission can reduce administrative burdens, it can also open doors for fraudulent activities if not paired with regular checks, which can act as a deterrent to this type of behavior. What’s that saying, an ounce of prevention is worth a pound of cure?”
The Lavish Lifestyle: The $5 Million Deception: On the ‘go big or go home’ end, a finance planning manager at HP exploited P-Card policies to misappropriate over $5 million. Using multiple P-Cards, she channeled funds to personal accounts, making lavish purchases, from luxury cars like Teslas and Porsches to high-end jewelry and designer bags. How did she get away even submitting such obviously non-business expenses? She created false invoices. Her elaborate scheme, spanning several years, underscores the importance of vigilance in P-Card management. For an in-depth look at this case, read the full article here.
Building a Robust Defense Against Fraud:
Regular Audits: Periodic checks can identify unusual patterns, like the high frequency of low-dollar transactions.
Re-evaluate Policies: While policies are set to simplify processes, it's essential to ensure they don't inadvertently create vulnerabilities.
Educate Employees: Awareness campaigns can deter potential fraudsters and encourage others to report suspicious activities.
Leverage Technology: Analytics tools can flag unusual spending patterns, providing an additional layer of security.
P-Card and T&E Card fraud can be subtle and, at times, creatively hidden within the confines of company policies. Regular oversight, combined with a proactive approach to policy design and employee education, can go a long way in ensuring that these convenient tools are used appropriately and securely.
Take the first step toward identifying and eliminating fraudulent spend in your organization and talk with a Spend Analyst at Procurement Intel today.