“Well, either you're closing your eyes to a situation you do not wish to acknowledge, Or you are...
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“Well, either you're closing your eyes to a situation you do not wish to acknowledge,
Or you are not aware of the caliber of disaster indicated by the presence of a pool
table fraud in your community.”With apologies: Harold Hill – The Music Man
YA GOT TROUBLE…
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Avenues to Fraud
Purchasing Card FraudTheft of EquipmentTravel Reimbursement FraudPayroll Abuse
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Avenues to Fraud
Cardholder abuse and fraudDiversion of goods to personal use.Purchase from vendors with
conflict of interest.Sale of goods to others (generally
via internet)Purchase from cardholder’s own
“store” at a markup
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Oops…a mistake!?Employee makes a personal purchase on-line.Inadvertently selects the institution’s P-card
as the method of payment.Notes the error and indicates in the
explanation that it was a mistaken personal purchase and will be reimbursed.
Fails to reimburse the institution.
“I say, first, medicinal wine from a teaspoon,
Then beer from a bottle. An' the next thing ya know, Your son is playin' for money
In a pinch-back suit.”
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Show me the money!
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The plot thickens…Noticing that the approver never questions
her P-Card purchases, an employee buys items for personal use.
Employee provides fictitious explanation for purchase.
If supporting detail is requested, employee “doctors” the invoice to reflect a valid business purpose.
Employee sells goods through her internet store which gets great ratings for service and value.
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Reckoning…
Lost job at BYUProsecuted for $53,000 of theft
Plead guilty to all charges (felony)
Required to pay back the loss
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I bought too much…
Cardholder purchases computers, toner cartridges, etc.
Sells the equipment on e-Bay™
Items sell quickly because of the low price.
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Inventory Control
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Reckoning…
Lost jobProsecuted for $200,000 in theftPlead guilty to multiple felony counts
To be sentenced in March 2010Will be required to make restitution
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BYU Examples cont…Manager “can’t be bothered with the
mundane activities associated with approval of purchasing card activity,” so delegates it to the cardholder.
Over four years, the cardholder purchases over $150,000 in merchandise and sells it via e-Bay™.
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Transparency and Accountability
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Reckoning…
Turned over to police and county prosecutor
Likely will be charged with multiple felony counts.
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BYU Examples cont…Professor buys books, equipment, supplies
needed for his class and for “course development.”
Items include Nintendo Wii, video games, children’s books, how to books, etc.
Items are gift-wrapped and given to professor’s children as Christmas gifts.
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Two Sets of Eyes
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Purchasing Card…No detailed receipt.Inadequate explanation in “notes” box.
Name of bookBusiness purposeNames of personnel being hosted
Unusual level of purchasing activity.Purchases noted “personal-to reimburse.”Items appear to lack a good business
purpose.
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Travel Reimbursements…No travel plans and/or expense reports.Duplicate reimbursement claims.Missing receipts.Personal travel claimed as university
business.Upgraded rental vehicles while claiming
standard.Lack of detailed explanation of business
purpose.Absence of names of persons hosted.
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Payroll ….Frequent pattern of edits (corrections for not
using time clock)Shifting time between pay period to avoid
overtime (create comp. time)Routine or excessive overtime without prior
approval.No documentation to support time-card edits.“Pat-my-back” approvers.Pattern of not using time-clock nearest to
work station.
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What Problems Do You See?
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CES Audit Committee…
Where was the controller?How are we disciplining the approvers?
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Traditional Controls
Receiving
AccountsPayable
Purchasing
User
Placing in
Service
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P-Card Controls
Approval
Purchasing
Receiving/
Placing in Service
User
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P-Card Controls
PurchasingReceiving/Placing in Service
Approval by default
User
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The key…
Management awareness and involvement.
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Hotline
BYU.edu: Hotlinehttps://secure.ethicspoint.com/domain/e
n/report_custom.asp?clientid=17652
Ethicspoint.com
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YA GOT TROUBLE…
Heed the warning before it's too late!Watch for the tell-tale sign of corruption!The moment your son leaves the house,
Does he rebuckle his knickerbockers below the knee?
Is there a nicotine stain on his index finger?A dime novel hidden in the corn crib?Are certain words creeping into his
conversation?Words like 'swell?"