“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…

Avenues to Fraud

Purchasing Card FraudTheft of EquipmentTravel Reimbursement FraudPayroll Abuse

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

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.”

Show me the money!

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.

Reckoning…

Lost job at BYUProsecuted for $53,000 of theft

Plead guilty to all charges (felony)

Required to pay back the loss

I bought too much…

Cardholder purchases computers, toner cartridges, etc.

Sells the equipment on e-Bay™

Items sell quickly because of the low price.

Inventory Control

Reckoning…

Lost jobProsecuted for $200,000 in theftPlead guilty to multiple felony counts

To be sentenced in March 2010Will be required to make restitution

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™.

Transparency and Accountability

Reckoning…

Turned over to police and county prosecutor

Likely will be charged with multiple felony counts.

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.

Two Sets of Eyes

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.

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.

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.

What Problems Do You See?

CES Audit Committee…

Where was the controller?How are we disciplining the approvers?

Traditional Controls

Receiving

AccountsPayable

Purchasing

User

Placing in

Service

P-Card Controls

Approval

Purchasing

Receiving/

Placing in Service

User

P-Card Controls

PurchasingReceiving/Placing in Service

Approval by default

User

The key…

Management awareness and involvement.

Hotline

BYU.edu: Hotlinehttps://secure.ethicspoint.com/domain/e

n/report_custom.asp?clientid=17652

Ethicspoint.com

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?"