Operating in the ‘new normal’ – Are we adequately managing the increased risk of fraud, policy elasticity and error?
A number of recent reports in the finance community have highlighted the potential impact that the ‘new normal’ working conditions can have on our organizations. From an increased fraud risk to simply stretching the bounds of existing policy to expedite payment, organizations are exposed to greater levels of risk as a result of the COVID-19 pandemic.
Remote working, stretched resources, individual financial pressures, changing working conditions, all enhance the risk of error and fraud.
One area of particular risk is Purchasing Cards (PCards). With an increasing number of people working remotely, now is the perfect time to review your existing policies and procedures to ensure they remain fit for purpose. Reports suggest a surge in PCard activity during the pandemic with spend limits being increased to promote their use. PCards remain a cost-efficient and rapid way of procuring goods and services but be aware that the current conditions mean they are also a common source of payment error and in some cases fraudulent activity.
5 red flags of PCard fraud and risk
According to the Association of Certified Fraud Examiners, fraudulent use of PCards is one of the most commonly occurring types of employee fraud. It’s important that you have a clear understanding of the areas of risk, identifying the red flags before they create significant problems, or even financial losses to your business.
So, where do issues usually occur? We’ve listed below the most common findings we have identified whilst carrying out analytics for our customers.
- Duplicate payments. Whether accidentally or with intent, this is a common issue involving the payment for goods or services with both a PCard and via an invoice received by AP.
- Double dipping. An individual pays for the expense with their PCard and also through an expense claim.
- Excessive/inappropriate expenditure. We have found multiple ways in which employees utilize PCards as a means for inappropriate or excessive expenditure.
- Personal expenditure. Financial pressures on individuals have increased during the pandemic. PCards are being used as means to supplement income, whether that’s ‘accidently’ using the PCard at the petrol pump or pulling out the wrong card at the supermarket.
- Pushing the policy envelope. This often manifests itself in employees wanting to avoid any bureaucracy that may be in place to protect organizations. Employees wanting a quick resolution to an urgent payment need can result in existing policies being ignored. Typical examples we have found in our analysis are, purchasing of airline tickets, stationery items, one-off office equipment. The impact is organizations are missing out on leveraging the benefits procurement have sourced in specific buying arrangements, such as cash discounts and quantity-based discounts, directly affecting working capital, which during this pandemic is under significant pressure.
Does your organization need any assistance analyzing your PCard data?
While PCards offer many benefits, they are not without risk for abuse and/or misuse, particularly during a recession. Organizations will likely have a backlog of risks that have built up during the pandemic that need to be found and recovered.
Here at FISCAL, our PCard Risk Sweep Service uses our powerful data analytics solution to monitor and detect misuse or the occurrence of fraud, highlighting any potential risks. In just one area of potential risks – duplicate payments, our studies have identified on average 3% of your PCard spend is high risk.
Our team of trusted experts will be able to advise on all elements of protection and prevention. We can support you to ensure you are getting all the benefits and flexibility from using PCards and keep your organization protected from risk. If you have concerns about PCard expenditure in your organization, want to understand how to better identify and mitigate risk, or simply want to understand your PCard spend in a more robust, digestible format please contact our resident expert John Muggeridge ([email protected]).
