Question

What special controls on procurment cards are necessary to make the procedure work?

Answer 1

Special controls on procurement cards that are necessary to make the procedure work

There are two types of special control on procurement cards that can make the procedure work, they are

1- Preventive conrols

• Background checks: All cardholders should undergo a background check. Giving an employee a p-card is tantamount to providing the cardholder access to one of the organization's most liquid assets: cash.
• Dollar limits: An individual's p-card should have a reasonable monetary limit based on both daily and monthly use. Some organizations set limits at a standard level for all cardholders or for employees with similar jobs. By tailoring the limits to each cardholder, the total dollars at risk can be reduced. If a special situation arises in which a dollar limit is too low and a higher dollar amount is required, the p-card limit can be increased for the specific transaction and then returned to the original level.
• Merchant Classification Codes: MCC should be used to prohibit transactions at various establishments, such as cash advances, liquor stores, big box stores and movie theaters. This can be somewhat of an issue, especially when the p-card is used at a big box store where non-business-related items can be interspersed with legitimate items.
• Probation: If an employee is placed on probation for a performance issue, place the p-card on hold status until the person is off probation.
• Education: Educate all p-card holders, administrators and supervisors on their card-related roles and responsibilities on an annual basis. This training should include a clear definition of roles, timing, type of documentation required, approvals and specific consequences if not performed in a timely manner. At the conclusion of the education, all p-card holders must sign an updated cardholder acceptance form that reiterates the appropriate uses of a p-card.

2- Detective controls

• Reconciliation review: Perform reviews of transactions, explanations and receipts in a timely manner. The receipts should be reviewed with a specific focus on each receipt's date and time, items purchased and the reasonableness of the expenses.
• Placing p-card on hold status: If the reconciliation is not completed by the due date or there are missing receipts, place the p-card on hold status (not allowed to make purchases) until the reconciliation has been completed, reviewed and approved by the appropriate supervisor. The approver should send an email requesting the card be reactivated only after all processes are completed. Track the number of times a person is late or has an incomplete reconciliation (missing receipts).
• Three-strike rule: If a person repeatedly abuses the p-card (for example, routine tardiness in reconciliation or charging personal items), cancel the p-card and do not allow the person to get it reinstated.
• Monthly reports: The overall p-card administrator should generate a monthly report and forward it to the appropriate manager. The report should include spending trends, potential split transactions and dollars by merchant. This will provide additional oversight regarding appropriate use.
• Strong policy: The policy should state clearly what the p-card can and cannot be used to purchase. The policy also should identify the disciplinary action for accidental misuse versus intentional misuse.
• Anonymous tip line: As outlined in the ACFE's 2010 Report to the Nations, most frauds are discovered as the result of a tip. A tip line allows employees to report suspected p-card misuse.