Controversial P-Card Spend Due to Lack of Policy

Another organization landed in the news concerning frivolous P-Card spend. Namely, food purchases and various gifts created the biggest stir. Is your organization at risk, too? Are your policies and procedures explicit enough about prohibited P-Card purchases and practices? It is not enough to say “Use your P-Card wisely to make business purchases.” Keep reading to see tips on what to convey, as well as an overview of the controversial spend situation.

About the Controversial Spend

As reported by The News-Gazette in Illinois a couple months ago, employees of Champaign Community Unit School District No. 4 (“Unit 4”) used their Purchasing Cards to buy “scores of catered meals, working lunches and snacks, a $200 retirement print from the Larry Kanfer Gallery, flowers for funerals, and thousands of dollars in gift cards…” There was no written policy—and, I assume, little to no training—to direct cardholders on appropriate and inappropriate purchases. When concerns about P-Card usage were brought to the superintendent’s attention nearly a year ago, she failed to properly address the issue.

One employee had over 100 personal purchases with Smoothie King, which she documented with receipts, but no one ever questioned until recently. Food purchases occurred throughout Unit 4 by employees at various job levels, including school principals. Many transactions were over $500, which is not necessarily bad depending on the event, but there were no parameters or rules.

What About Your Organization?

Do your policies (P-Card or other) specifically address food and gifts, including flowers, balloons, gift cards, and charitable donations? If not, you are risking more than frivolous purchases and possible budget issues. It could be hard to terminate an employee for improper purchases unless the policy is clear and you can prove there was a violation.

What to Include in Your Policies

The Circumstances

Under what circumstances will the organization pay for food and gifts? For example:

  • The purchase of funeral flowers are only allowed if the deceased person was a current employee.

  • Purchasing flowers/plants for decoration purchases are prohibited except for approved landscaping projects managed by the Maintenance Department.

  • Charitable contributions of any kind or any dollar amount are prohibited (e.g., allowing a vendor to add a $5 donation for a local food shelf).

  • The organization will not pay for food/beverages for onsite organization meetings, celebrations, etc. except when an event is intended for all employees and planned by Human Resources.

What are the dollar limits for allowed purchases? For example:

  • Funeral flowers cannot exceed $X.

  • Food for a working lunch should not exceed $X per person.

Purchasing Authority

Is any employee/cardholder allowed to purchase food, flowers, and/or gifts? Or is this privilege granted to only certain employees? Monetary gifts like gift cards have tax implications and must be tracked appropriately, such as by Human Resources.

The Process

Are pre-purchase approvals required? If yes, by whom? What information must be documented within the request and approval? What other supporting documentation is required? Are there any related approved/preferred vendors?

Final Thoughts

Just when I think nothing will surprise me, I was surprised to read that Unit 4 did not have a written P-Card policy and the people in power allowed it to be this way for years. Policies and procedures are the foundation of any P-Card program. As a best practice, review yours annually and update when needed.

Related Guide Available

How to Revitalize Your Purchasing Card Policies and Procedures, $29.99

Related Webinar This Week

  • What: Creating a Robust P-Card Policy and Procedures Manual

  • When: Thursday, July 25, 2019

  • Hosted by AP Now; delivered by Lynn Larson, Recharged Education

    For more information and to register, please visit AP Now.

Ensure your policies explicitly address when food purchases are prohibited and allowed.

Ensure your policies explicitly address when food purchases are prohibited and allowed.



Subscribe to the Blog

Receive notice of new blog posts.


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

Topics Every P-Card P&P Manual Should Include

Even if your Purchasing Card policies and procedures (P&P) manual is current, it could be lacking in other ways, resulting in repeated questions and compliance issues. Have you evaluated the manual’s topics and related content recently? It might be missing key information. Yet, reviewing and updating P&P often fall to the bottom of someone’s to-do list. According to AP Now’s AP Practices Survey Results, fewer than 20% of respondents update their accounts payable P&P at least annually. I assume the same could be true for P-Card P&P. To help you gauge whether you are covering the right material, following are 12 broad topics along with example sub-topics for some.

Primary Topics

1. P-Card Overview

Relay what P-Cards are, why the organization has a program, what P-Cards are used for, etc.

2. Roles and Responsibilities

3. How to Obtain a P-Card

4. Card Security and Limits

Be sure to provide insight on common scams/external frauds and how to combat.

5. Card Usage

This broad category spans many sub-topics, such as:

  • Allowed and prohibited purchases, including parameters describing “necessary” versus “extravagant” business purchases
  • Preferred/approved vendors
  • Placing an order—the P-Card purchase-to-pay (P2P) process
  • Supporting documentation requirements
  • Returning an order and receiving credit
  • Accidental usage for a personal purchase
  • What constitutes card misuse/abuse

6. Transaction Declines

Explain why this might happen and what to do in response.

7. Transaction Reconcilement and Review

One relevant sub-topic is how cardholders should address a problematic transaction; see the previous blog post for tips

8. Ongoing Training Requirements

9. Card Expiration and Renewal

10. About Program Auditing 

While you do not need to give away any secrets, you do want program participants to know that transactions are monitored.

11. Card Cancellation

12. Reference Materials

Examples include a glossary, user guide for the P-Card technology, relevant forms, etc.

Concluding Thoughts

While it is nearly impossible within the P&P to address every unique situation that could arise, think about what you experience on a regular basis, such as frequently asked questions and common mistakes. Respond to these experiences by planning to make the related content clearer, more prominent, and easier to find. Taking the time to make your P&P more robust can pay off.

Additional Resources

See more content on P-Card policies and procedures from Recharged Education, including a related guide available for purchase for just $29.99.

For more information about AP Now’s AP Practices Survey Results referenced in the introduction above, visit http://www.ap-now.com/products/item142.cfm.

Two Upcoming Events

  1. July 24 Public Sector Virtual Symposium: Preparing Public Sector Auditors for Tomorrow’s Terrain
  2. July 25 Webinar: P-Card Fraud Prevention and Detection Best Practices (additional tips about P-Card P&P will be shared)

Visit the Events page for more information.



Subscribe to the Blog

Receive notice of new blog posts.

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

What Card Transaction Disputes Might Be Telling You

Is a cardholder hiding something? Commercial Card transactions may be disputed for a variety of reasons, such as the charge represents an unauthorized purchase. While you want cardholders to be diligent in their transaction reviews, the dispute privilege can also be abused. On one end of the spectrum is the serious issue of so-called “friendly fraud” whereby the cardholder disputes a transaction through the card issuer that is actually a prohibited personal purchase they are trying to disguise. On the less serious side, a cardholder might jump the gun and dispute something that could be resolved by working directly with the offending vendor. As a card program manager, there are several things you can do to help combat such problems. See the action items below, as well as tips for what to include within your policies and procedures manual.

Action Items

  1. Verify with your card issuer the legitimate reasons for disputing a transaction, how to do so, and the allowed time frame (e.g., 60 days from the transaction date).
  2. Ensure the policies and procedures (P&P) adequately address this topic. Also cover this within cardholder training.
  3. Regularly review the disputes initiated/in progress to look for anything unusual, such as a high number in a particular month.
  4. Track the dispute history for your program to identify any trends by cardholder and/or by vendor. Names that keep popping up warrant further research and, as needed, appropriate action. “Friendly fraud” should be grounds for termination.

Your Policies & Procedures

Cardholders need to understand the importance of their review process and how to handle a problematic transaction. For example, your P&P could say:

As a cardholder, your transaction review/reconciliation process is critical to identifying possible fraud and vendor errors. Each transaction should accurately represent goods and/or services you have purchased and received, in accordance with the guidelines herein for allowed business purchases. To minimize risk to the organization, swiftly address any problematic transactions, as described below.

[Insert procedures for transaction review/reconciliation] 

The procedures should specify what constitutes a problematic transaction, such as the dispute reasons provided by your issuer, and what they should do about it. Unauthorized transactions typically justify using the card issuer’s dispute process right off the bat, but other issues, like a duplicate charge, can be corrected with a timely credit from the vendor. Help cardholders make the right decisions. Here is a sample decision matrix for the P&P:

Problematic Transaction Decision Matrix.PNG

If you are seeking more insight about how to strengthen your P&P manual, consider purchasing the related guide for $29.99.

July 25 Webinar: P-Card Fraud Prevention and Detection Best Practices

Check out this upcoming webinar, designed to help you maximize your fraud fighting efforts.

Are cardholders disguising personal purchases by disputing the related transactions? Take a closer look at anyone who seems to abuse the dispute process.

Are cardholders disguising personal purchases by disputing the related transactions? Take a closer look at anyone who seems to abuse the dispute process.



Subscribe to the Blog

Receive notice of new blog posts.

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