Fraud detection has taken a hit. As we are all painfully aware, COVID-19 changed just about everything and this includes the ability to spot anomalies in card activity. For years I have recommended that P-Card program managers/administrators, as well as cardholders’ manager-approvers, use P-Card spend history reports to become familiar with typical suppliers, purchase frequency, transaction amounts, etc. Knowledge is power until it no longer applies; 2020 is anything but typical. This makes fraud harder to spot. Additional challenges are noted below, along with tips to keep your preventative and detective controls strong.

Policies

In the rush to get applicable employees set up to work from home, many different kinds of purchases likely occurred. If your organization did not have a policy about allowed and prohibited purchases, then individual managers were left to make the decisions. Maybe cardholders took matters into their own hands. In any case, you are left with nothing to audit against. How do you know that your organization did not ultimately pay for extravagant home offices?

Even now that the initial buying rush is over, your organization needs clear policies about what it will and will not pay for going forward, especially since many employees will remain at home. We’re in a new world and policies must reflect this reality. Further, strong policies are worthless unless employees know about them. Do not rely on email alone to communicate what has changed. A new world calls for a special training effort to get the word out.

Cardholders

Identifying potential internal fraud is also harder to do if you do not know which cardholders should have been active once the pandemic hit. Should some cardholders have basically become inactive? Were there new “emergency cardholders” to take over the procurement activity and/or make unique purchases? Just because “Lisa” has always spent around $1,000 each month does not mean this should have continued in the second quarter. Spend history is irrelevant.

If possible, generate a list of cardholders who should and should not have been active since the BCP went into effect, and audit from there. Close any card accounts that are no longer needed and ensure card controls (e.g., spend limits, MCC restrictions) are appropriate for the current environment.

Auditing Approach

Now is not the time to rely on a percentage-based random sample for auditing transactions. (I would never recommend this as the sole auditing approach). With the help of basic technology or a third-party audit solution, I suggest taking a close look at all transactions since March 1. If there was not an organization policy about “emergency purchases” to audit against, then there should be documentation of a manager’s approval.

Historical card spend reports can play a role here, but in a different way. For most organizations, there should be a difference between 2019 and 2020 in various spend categories; for example, little to no travel expenses in 2020. When auditing office supply purchases, which could be a big source of card misuse and abuse, enlist the help of your office supply vendor. They should be able to provide detailed reports of what has been purchased, including year-to-year comparisons.

Are personal purchases hiding among your emergency business purchases?

Final Thoughts

If you can catch up on reviewing the spend that has already happened this year, then you can be proactive for what lies ahead. Gain a better understanding of what the P-Card activity should look like as your organization continues to transition to a new normal. Stay abreast of any notable changes that could once again impact the program. New knowledge helps restore power, enabling you to maintain a well-controlled card program.

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About the Author

Blog post author Lynn Larson, CPCP, launched Recharged Education in 2014. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…