Pcards are a convenient and cost-effective way to facilitate high-volume small-dollar purchases. But without proper control and oversight, pcards provide a convenient avenue for big-time fraud as well.
As mentioned in Tone at the Top - Part 3, one would have thought Georgia Tech’s ethics radar would have been high because it had previously suffered multiple high-profile procurement card frauds in recent years.
Unfortunately, that wasn't the case as once again conditions there provide a case study in the lengths unscrupulous employees will go to defraud a university and cover their tracks.
The defendants in this case were successful members of the scientific and research communities who allegedly allowed their judgment to be clouded by greed.
U. S. Attorney John Horn
Department of Justice News Release
The DOJ news release explains that the three defendants were employed by Georgia Tech and were members of the research faculty at Georgia Tech Research Institute (GTRI), where they were assigned to the Advanced Concepts Laboratory. There were several aspects to the fraud, but in sum it entailed using a pcard to:
- Purchase personal consumer goods totaling more than $250,000.
- Pay for remodeling and maintenance expenses for six rental properties.
- Make PayPal payments to friends and relatives with kickbacks to the cardholder.
In addition to the pcard fraud, the defendants moonlighted as consultants on various projects for which they were paid more than $600,000, diverting revenue from GTRI for their personal benefit. Situations like this result from inadequate segregation of duties and poor oversight.
Essential Pcard Protocols
WSU (in concert with State of Kansas requirements) has good pcard protocols. In particular, the role of the card coordinator is essential for ensuring segregation of duties and providing the first independent review of pcard transactions. Card coordinators are the first line of defense against fraud. An effective card coordinator:
- Understands what was purchased and follows up with the cardholder when supporting documents are unclear or incomplete.
- Explains on transaction logs how an item will be used by the department if it’s not apparent given departmental operations.
- Is alert to altered or forged invoices or receipts.
- Is willing to express professional skepticism if something just doesn't look right.
As evidenced in the Georgia Tech example, PayPal transactions warrant extra scrutiny. Legitimate online vendors typically provide PayPal as a payment option, but it’s easy for anyone to establish a professional sounding PayPal account and the receipts generated may lack detail.