Agenda. P-Card Misuse and Fraud 9/18/2017

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1 P-Card Misuse and Fraud Presenter Victor Griego, CPA Internal Auditor 3 University of New Mexico Agenda What is a P Card? Advantages of P Cards Risks of P Cards Internal Controls for P Cards Red Flags for Fraud and Misuse Audit Procedures for Detecting P Card Misuse and Fraud Case Studies 1

2 What is a P Card? Payment mechanism assigned to University employees (with restrictions on use) Used for the purchase of goods and services on behalf of department or program Used to simplify purchasing process (No need for PO) University of New Mexico P Card Use Approximately 165,000 annual transactions (4 year average) Approximately 1,500 P Cardholders $73,000,000 in P Card purchases during FY

3 Advantages of P Cards Simplicity Convenience Emergency purchases Cost Savings and processing efficiencies Rebates/discounts offered by bank Risks of P Cards Personal Use/Unallowable Purchases Circumventing procurement process for convenience Purchases recorded to incorrect expense account Sharing of P Card information Lost or stolen P Cards 3

4 Internal Controls for P Card Use P Card Policies and Procedures Required trainings Reconciliations Timely reviews (by Supervisors and/or Department Heads) Limits on daily and monthly transactions Anonymous tip line Strict consequences for misuse and abuse Red Flags for Misuse and Fraud Late or no reconciliations Lack of receipts and/or business justifications Lack of timely reviews ATM Cash withdrawals Cash advances 4

5 Audit Procedures for Detecting P Card Misuse and Fraud Review of supporting documentation Trend Analysis Data Mining Software (i.e., IDEA, ACL) Interviews E mail Review Confirmation of payment with vendors Case Studies Men s Basketball Food Nutrition Program LGBTQ Resource Center 5

6 Men s Basketball Position: Director of Basketball Operations Tenure: October 2014 December 2015 Responsibilities: Travel and Team Meals P-Card Misuse: Cash Advances, Personal Purchases, Falsifying Documentation 6

7 Schedule of P Card reconciliations Late reconciliations since P Card was issued No supporting documentation for any transactions from July 6, 2015 through January 5, 2016 P Card transactions for period are reviewed and approved 7

8 $7,400 in cash withdrawals in May 2015 $4,800 withdrawn Memorial Day weekend in Las Vegas, NV Audit Procedures Performed Obtain missing receipts and other supporting documentation from vendors Test documentation for 100% of P Card transactions, including cash advances, during employee s tenure Confirm use of cash advances with vendors Interviews with men s basketball coaches Review e mail 8

9 Falsified Documentation Invoice submitted from vendor Falsified Documentation Falsified receipt 9

10 Falsified Documentation Vendor communication of non payment for services Unallowable P Card Charges Over $63,000 in Unallowable charges on P Card 10

11 Internal Control Deficiencies and Breakdowns P Card reconciliations not completed in a timely manner or not completed at all Poor restrictions on cash advances Inadequate reviews Failure to enforce submission of valid documentation Failure to suspend P Card Outcomes Reported to UNM Police department to conduct criminal investigation Turned over to District Attorney s office for criminal prosecution Placed on Do Not Hire list Increased restrictions on cash advances and ATM withdrawals 11

12 Food Nutrition Program Position: Program Manager Tenure: July 2004 October 2015 Primary Responsibilities: Managing Food Nutrition Program P-Card Misuse: Personal Food Purchases $587 food purchase Incomplete/partial receipt Questionable purchases 12

13 Approximately $800 $1,000 purchased per month Audit Procedures Performed Obtain original receipts from Smith s Food and Drug Store Utilize IDEA data mining software to determine missing items from altered receipts Interviews with key management and target employee Management assessment of allowable food purchases 13

14 Example of missing purchases from altered receipt $13,193 in missing/altered receipts and unallowable food purchases Unallowable amounts based on management assertion 14

15 Internal Control Deficiencies and Breakdowns Lack of adequate reviews Insufficient management oversight Segregation of duties Outcomes Reported to UNM Police department to conduct criminal investigation Partial recovery of insurance claim filed with Risk Management Termination and placed on Do Not Hire list Increased restrictions for food purchases Reorganization of program operations and management oversight 15

16 LGBTQ Resource Center Position: LGBTQ Resource Center Program Specialist Tenure: October 2010 June 2017 Responsibilities: Management of LGBTQ Resource Center P-Card Misuse: Travel, personal purchases, purchases for non-university employees and staff, sharing P-card Schedule of events & travel for Calendar Year 2016 Travel Request form submitted for only one event 16

17 Audit Procedures Performed Test documentation for 100% of P Card transactions during 2016 Test per diem reimbursements received for travel Revenue, expense, and budget analysis Interviews with key management, Center staff, student employees, and target employee Unallowable/Questioned Costs Purchased travel for Non UNM Employee Cash advance for $3,000 Personal trip to resort and spa Unapproved trips to Standing Rock, ND (No business purpose, personal purchases) 17

18 Internal Control Deficiencies and Breakdowns Lack of management oversight Failure to enforce established travel procedures Lack of adequate P card reviews Segregation of duties Failure to suspend P card Outcomes Reported to UNM Police department to conduct criminal investigation Termination and placed on Do Not Hire list Strengthened internal controls over financial management and oversight 18

19 Changes in UNM P Card Processes Implementation of Chrome River Payment System Tight restrictions for cash advances and ATM withdrawals Strict enforcement of P Card suspensions Trainings for P Card reviewers Questions? 19