Special Edition July 2010
ProCurement Card - The Importance of Strong Internal Controls
With the recent revelation of our first significant incidence of ProCard fraud, we wanted to take this opportunity to emphasize the importance of internal controls and their role in reducing the risk of fraud or potential fraud in units with not only ProCards, but also other key financial processes and activities.
Establishing appropriate separation of duties is critical in reducing the possibility of fraudulent activities. No one person should ever have the sole control over the lifespan of a transaction. Ideally, no one person should be able to initiate, record, authorize and reconcile a transaction. For smaller units, this may mean the establishment of additional reports for review, e.g., by including others not typically involved in the financial processes, but who may be in a position to “spot” potential red flags.
Departmental managers are responsible for maintaining an adequate system of internal control , which includes establishing the proper control environment, identifying areas in which the greatest risk of loss exist, and monitoring and reviewing of transactions. Managers are responsible for communicating the expectations and duties of staff as part of a control environment, and the best method of doing so is with a written policy detailing departmental responsibilities and procedures and then ensuring those procedures are consistently followed.
A department ProCard policy should identify and document:
• Who is authorized to purchase
• Who reviews monthly ProCard transactions
• Who reconciles transactions to MyFD
• Who are the primary and backup reviewers and MyFD reconcilers
• What supporting documentation is required (in some cases specific to the department)
• Who signs the “UW Transaction Detail with Notes & Accounting Codes” report as evidence of a transaction review for accuracy and validity and demonstrating separation of duty
• Any other controls or information specific to a departments unique requirements
ProCurement Card Services wants to do everything in our capacity to assist departments with their internal controls and to provide reporting tools to support this effort. JPMorgan Chase’s PaymentNet has a number of reports that are beneficial in these reviews, such as:
• UW Transaction Detail With Notes & Account Codes Report (required for retention)
• Transaction Summary Report (summarizes the number of transactions and total dollar amount)
• Transactions by Industry/Vendor Report (used to analyze account usage within T&E industries)
• Cardholder Status Report (used to identify account limits and status)
We also monitor monthly transactions based on a variety of risk factors and purchasing patterns. In addition, we will continue to develop additional analytical tools to use and share with the campus. These tools can be helpful in assessing risk, however, a high level central office analysis can never replace the effectiveness of a strong departmental control structure where there is more familiarity with needs, priorities and types of purchases necessary to support activities.