Does this portray your organization? The P-Card cycle just ended and now one or more people—maybe even you—are consumed with auditing cardholders’ transactions. Time is limited, so the focus is on ensuring there is supporting documentation for each transaction or perhaps the audit is based on a sampling only. A quick match of vendor name and dollar amount, then on to the next transaction. There is little to no time for program metrics, strategy, or expansion. Why, then, don’t more organizations pursue an external auditing solution? Below are three risky examples of things that could be standing in the way. Also included is the surprising benefit the program manager or administrator can achieve when an auditing solution is used.
Reasons Why an Auditing Solution is Not Used
Belief that Manual Efforts are Sufficient
Manual audits, especially when 100% of transactions are included, cannot possibly cover every aspect that could reveal fraud or even modest policy infractions. As indicated above, an organization might have just enough time to check off whether or not a receipt matches transaction information from the card issuer. A lot gets missed. Notable time is expended, but the results are weak.
Belief that Cardholders’ Managers Will Find Any Issues
Some organizations forego a consistent auditing approach altogether and instead rely on the reviews by manager-approvers. Yet, it is common knowledge that many managers do not do a thorough job. Compounding the problem, many organizations do not hold managers accountable. If a cardholder issue is found, there are often no consequences for the manager. Without consequences, why would they bother to do a robust review? Further, managers are often not required to complete training or sign an internal agreement related to their card program role. This increases the risk that they are not prepared.
There is also the risk of collusion between an employee/cardholder and their manager—something that can happen even without a card program. Effective auditing is one of the best controls for combatting this.
Here is a sobering fact: According to the Report to the Nations—2018 Global Study on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE), manager review is the initial detection method (for fraud or abuse) by only 13% of organizations. Tips are far more common, cited by 40% of respondents.
Fear of Job Loss
Just as accounts payable and/or procurement personnel might be anxious about Purchasing Cards taking over their jobs, the P-Card program manager/administrator (PM/PA) might worry that an auditing solution will negatively impact their job. I discussed this with Doug Hindsley, senior partner of Card Integrity, who remarked, “I actually see the opposite happening. A PM/PA often gets promoted because they are able to act on information provided via an auditing solution. Their time is no longer spent wading through transactions and receipts. An auditing solution allows them to be more strategic with the program instead of task oriented.” This makes sense to me; it gives the PM/PA a better chance to shine. Conversely, if most of a PM/PA’s time is currently spent on auditing, then it reinforces the scenario described in the introduction above. They are not doing much in the areas of program metrics, strategy (including training and program promotions), or expansion.
For some organizations, an auditing solution might be appealing, but seem unattainable for more practical reasons like cost and lack of resources to pursue. To this I say, do not give up without at least exploring further. Carving out a little time now can yield big savings in the long run.
If you already have an auditing solution, ensure you are taking full advantage by utilizing the resulting reports to make your card program stronger.
Stop Blaming P-Cards, a 2018 blog post about knee-jerk reactions and what the real problem is when internal fraud occurs
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About the Author
Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…