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Internal Controls for Small Businesses - Part II: Purchasing Cards and Time & Expense Reimbursem


Internal Controls, small business

If your company uses procurement cards (p-cards) and has staff that submits time and expense (T&E) claims for reimbursement, you should be aware that these are two primary avenues for employee fraud.

According to the Association of Certified Fraud Examiners (ACFE) 2014 “Report to the Nations on Occupational Fraud and Abuse,” expense reimbursement fraud accounts for 16.7 percent of all fraud uncovered for small organizations (small is defined as an organization with fewer than 100 employees). For large organizations (an organization with more than 100 employees), expense reimbursement fraud account for 13.9 percent of all fraud. The median time it takes to discover expense reimbursement fraud schemes is 24 months.

Detection:

How are procurement card and T&E fraud detected? According to the ACFE study, fraud detection methods used by small organizations differ from those used by large organizations. For small organizations, fraud primarily is detected through management review, account reconciliation, accident, external audit and document examination. For a large organization, fraud is detected primarily through tips received internally from employees or external sources (such as customers, vendors, or competitors) and through work performed by the internal audit department.

Prevention:

[if !supportLists]· Proper tone at the top.

[if !supportLists]· Review expense reimbursement requests for

reasonableness.

[if !supportLists]· Implement a whistleblower policy and hotline.

[if !supportLists]· Communicate T&E, purchasing, and whistleblower policies