On the Frontlines: P-Card Fraud Detection

P-Card Fraud Detection

More and more, companies have moved beyond the old school method of auditing p-card activity by randomly sampling cardholder expense reports. There are many software solutions on the market that allow for comprehensive spend analysis and the identification of red flag transactions. That said, if budgets are tight and there is not an appetite to invest in one of these software solutions, there are other methods that can be used to efficiently detect p-card fraud at little to no additional cost to the organization. 

Downloading p-card transaction activity into a data visualization tool such as Power BI can help auditors quickly and easily identify red flags. The ability to filter and sort p-card transaction activity is a simple and powerful way to detect fraud and misuse. Examples of data field filters that can provide meaningful results and identify red flags for fraud include:

• Purchaser Name: Identifies the top spenders in the company. Does the top spender list make sense based on their role or department or are there any surprises requiring further review?
• Purchaser Title: Identifies the top spenders with a specific title or job code. Are there any significant outliers within a given title? For example, is there one regional director with significantly more spend than all the others? If so, further research may be necessary to determine the root cause of the excess spend and confirm the legitimacy of the spend.
• Vendor: Identifies employees who have spent the most with a specific vendor. Does it make sense that a particular employee has more spend at a given retailer or supplier than all other employees? Are there excessive payments made to vendors using PayPal or Square or similar payment platforms?
• Business Purpose: Most expense reporting tools require cardholders to enter a business purpose for each transaction. Filtering on this field can identify transactions with vague or repetitive business purposes. Does it make sense that a particular cardholder has more transactions listed as “office supplies” than anyone else in the company? Additionally, key words such as gift, award, or incentive can be helpful in identifying questionable spend. 
• Weekend Spend: Identifies employees with the most spend on the weekends, which may be an indicator of personal use.

After a red flag activity is identified, investigators should then obtain access to the company’s travel and entertainment (T&E) or spend management software to perform a more detailed review of expense report activity. Red flags to look for when reviewing expense reports include:

• Lack of itemized receipts or frequent instances of missing receipt forms. The easiest way to cover up personal use of a p-card is by not turning in detailed receipts. Missing receipts from a vendor such as Amazon, where receipts are always available within the cardholder’s online account, are significant red flags. Tip: Walmart has an online receipt lookup tool that allows investigators to see what was purchased by entering the purchase location, purchase date, type of card, last four digits of the credit card, and the receipt total.
• Heavy use with retail vendors, such as Amazon, Walmart, and grocery stores. If a cardholder has a high volume of transactions at these locations, it could indicate personal use and it may be worth validating the business purpose of the transactions.
• Receipts that are not clear or legible. This may be intentional on the part of the cardholder to hide what was purchased, in the hope the reviewer will not ask follow-up questions.
• Receipts that look homemade. If a receipt looks like it could have been created by anyone using basic word processing software, further research may be warranted.
• Use of repetitive business purposes within a given expense report. For example, if an employee enters “Office Supplies” as the business purpose for all transactions, are they really buying office supplies?
• Timing of expense report submissions. Employees committing p-card fraud tend to be late submitters.
• Round dollar amount transactions. These may be indicative of fictitious invoices or vendors.
• Gift card purchases lacking tracking or documentation of recipient and purpose.

The ability to detect p-card fraud can be greatly enhanced using data visualization tools combined with access to the T&E application.