Indicators – Purchase/recieve
Fraud Risks and Prevention Indicators
Purchase and Accounts Payable
Risks
- Wasteful expenditure
- Short supply of goods
- Supply of inferior goods
- Payment for services and goods not supplied
- Purchase of goods for private use
- Kickbacks for biased selection of suppliers
- Payments to ‘bogus’ vendors for false claims
- Cheques written for cash only
- Cheques not properly authorised
- Cost of tyres, repairs, fuel received and paid for by company funds.
Causes
- Poor supervisory review
- Systems controls either inadequate or bypassed
- Exercise of delegation not monitored
- Inadequate review of claims for payments
- Inadequate segregation of duties
- Close relationship between employees and suppliers resulting in bias
- Inducements from suppliers (eg gifts)
- Inexperienced purchasing officers inconsistent interpretation
- Improper delegation of authority to personnel to commit, incur and approved expenditure
- No supervisory / independent check over processing, receipting and payment function for expenditure
- Lack of documentation / information supporting expenditure
- Payments made on photocopies or facsimiles of original invoice
Prevention Measures
- Acknowledgment for receipt of goods and services promptly forwarded
- Quarterly and random audits of petty cash purchases be performed
- At least 10% of daily direct payments (li>Regular follow-up must be maintained by receipting areas of all non-receipted items
- Employees performing accounts payable and stores functions receive appropriate training to ensure compliance with policies
- Segregation of duties to exist between purchasing, receipting, and paying functions
- Exercise of delegations be monitored by supervisory staff
- Managers to monitor compliance with policy and procedures
- Ensure expenditure is authorised by a senior officer and is not outside of approved limits / expenditure guidelines
- Ensure that expenditure is supported by required appropriate documentation, ie: original invoice, order number details, original delivery docket
- Ensure that accounts have not been previously paid
- Cheques are not written for cash
Petty Cash, Advance Accounts
Risks
- Use of petty cash for private purposes
- Submission of fraudulent petty cash claims
- Theft of cash
Causes
- Claims not adequately reviewed by supervisors
- Payment of claims without authorisation
- Payment of claims without receipts
- Advance accounts not regularly reconciled by independent officers
- Petty cash claims and receipts not stamped as ‘paid’ following reimbursement
- Nature or volume of purchases not shown on claims
- Large volume of small transactions
- Poor security of cash holdings
- Excessive cash kept on hand
Prevention Measures
- Petty cash approval closely reviewed and suspect items challenged
- All cheques signed by two independent officers
- Claim payments properly acquitted to avoid multiple payments
- Complete details of expenditure involved including receipts
- Adequate security of cash holdings including limiting access to safe, procedures re: regular banking etc.
- Quarterly and random audits.
See Something, Hear Something, Say Something!
Call Crime Stoppers
1800 333
Call Crime Stoppers
1800 333