Frequent Frauds Found in Governments and Not-for-Profits

Chapter 11 CASE 11: PROCUREMENT CARDS

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

•     Identify characteristics of effective procurement card policies for a fictitious governmental organization.

•     Determine how procurement card policies can be circumvented and lead to fraud in a fictitious governmental organization.

BEFORE WE START

Today a number of state and local governments use procurement cards to streamline the purchasing and payables cycle associated with relatively small, routine, and frequent purchases of operating supplies. Examples of controls over procurement cards that are effective if properly designed and performed include the following:

•     Prohibiting the use of procurement cards for the purchase of gift cards.

•     Blocking the cash and counter checks options on all procurement cards.

•     Having written policies and procedures relating to the issuance and use of procurement cards.

•     Requiring employees with procurement cards to execute a cardholder’s agreement prior to being issued a procurement card. The agreement should specifically state the

–     employee’s responsibilities with respect to the use of the card,

–     consequences if the procurement card is used fraudulently.

•     Requiring the submission of receipts for every item on the procurement card statement and a review of the receipts and statement by a responsible and appropriate party.

•     Prompt processing of card statements ...