Our procurement fraud series began with the premise that procurement fraud is an issue for public AND private enterprises although we read more about it in the public sector. As one CPO recently told me, “procurement fraud remains an issue for all CPOs.”  Last time, we offered 12 Top Tips to Limit Procurement Fraud. Today, we offer 15 more tips; this time focused on he area of payments. You will note that some tips are applicable to both groups and are, therefore, on both lists.

15 Top Tips for Payment Groups

1. Conduct regular audits (In general, audits should focus on the design of the process controls and how the controls are monitored but we have included a few audit tips below)
2. When testing transactions, use advanced sampling strategies like Benford’s Law, which can help auditors to hone in on the most likely areas of fraud
3. Occasionally change the dollar value threshold for audits and/or randomly test payments below that threshold
4. Announce that payments below the audit threshold may be tested
5. Test duplicate payment patterns by supplier but also by business unit, region, or any way that employees are assigned to an organization
6. Remember too, that the threat of an audit is one of the most effective mechanisms enterprises have to prevent fraud
7. Ensure that more than one staffer is involved in approving and then making disbursements above a certain dollar threshold
8. Red flag: Watch for round dollar payments (common fraudster mistake)
9. Red flag: Watch for invoice number patterns submitted over time have a close numerical sequence – 1001, 1002, 1003, etc – (common fraudster mistake)
10. Red flag: Watch for payments that were mailed to PO boxes
11. Sample canceled check endorsements
12. Verify canceled check destination accounts
13. Include audit clauses in supplier contracts; conduct an occasional supplier audit
14. Make sure that AP/payment employees take their vacations and that other staff cover their payment duties while they are gone
15. Establish an anonymous whistleblower program

Next week, we will round out the series by looking at how procurement groups can leverage technology to reduce, catch, or eliminate fraud. I also recommend that you review the related articles below.

RELATED ARTICLES

Shhhhhhhhh! – (Tricks) To Catch a Fraudster

Twelve Top Tips to Limit Procurement Fraud

Examples of Procurement Fraud

Key Fraud Risks across Procurement Phases (Courtesy of the UN)

Procurement Fraud – An Issue for Public and Private Enterprises

(Procurement) Fraud Prevention (3) – Why It’s Important

Fraud Prevention (2) – CPO Strategies

How eSourcing Can Help Limit Procurement Fraud

Procurement Fraud Prevention – The Expert (Part 1)

Procurement Fraud Prevention – The Expert (Part 2)

Procurement Fraud Prevention – Two More Strategies

Tagged in: P2P, People, Process, Procurement Fraud