The holiday shopping season is nearly here. This is always an extremely busy time of the year. Detecting and preventing employee expense fraud in your department is probably a priority year-round. However, right now it’s important to strengthen your internal controls even more to detect expense fraud.
The weeks leading up to December can be a tempting time for some cardholders to run the risk of using their corporate credit cards for personal purchases. While this is never acceptable, it does make a card manager’s job that more challenging when conducting an expense audit.
Bulking up your internal controls is the best way to detect fraud sooner and prevent it. Here are 5 internal controls that can help you detect expense fraud this holiday season.
1. Have a Policy In Place and Update It Regularly
Having a clear and updated policy for your card program is your first line of defense to deter expense fraud. Your policy should clearly explain how P-Cards, T&E cards, and other cards in your program should be used. A list of approved suppliers should also be included.
You may want to consider including clear examples of what expense fraud would look like as well as expense categories and items that cardholders are prohibited from buying. For example, gift cards are always a hot topic this time of year. They are convenient to use but also very easy for a cardholder to purchase for personal reasons as well.
Decide if you want to prohibit the purchase of gift cards during the holiday season. Or, explore which controls can be put in place to ensure they are purchased for the correct purposes. Every six to 12 months, plan to update your card policy to adapt to industry changes, company goals, and anything you’ve uncovered during expense audits.
2. Provide Adequate Training on the Card Policy
How often are employees receiving training on the company’s card policy? Now is the perfect time to offer refresher cardholder training. You’ll be able to share any updates or just remind cardholders of rules and regulations to keep their spending compliant.
Sometimes, employees may unknowingly commit fraud or misuse their P-Cards. This is especially true if they aren’t properly trained on the card policy so you’ll want to avoid allowing this to happen. In other cases, offering refresher training can also help remind employees that card program managers are actively looking for spending compliance and detect expense fraud. A training session could also be a great time to remind employees how to properly submit receipts and business reasons to speed up the auditing process later on.
Consider offering your training online to limit scheduling conflicts and to avoid having to reserve a meeting room. Another option is to outsource online training to a third-party company like Card Integrity if you’re looking to free up time without sacrificing the quality of the training.
3. Establish a Clear Separation of Duties
Watching out for expense fraud around the holidays should not just be one person’s responsibility. It takes a team effort. One of the best ways to strengthen your controls is to establish a clear separation of duties.
Even if your department is smaller, the purchaser and expense approver should not be the same person. This just opens the door to opportunities for fraud to occur regularly. Instead, realize that two (or three) pairs of eyes are better than one.
Card managers should consider working with a P-Card expense review company to receive analytics and regular reporting on spend along with fraud alerts. These reports can come in handy when it’s time to share data and information with the rest of the department as well as leaders in the company. With more accountability, timely and accurate reporting, and a firm separation of duties, it will be much harder for internal expense fraud to exist and thrive.
4. Start Analyzing Expense Data More Closely
It’s essential to take your fraud control efforts to the next level as the holidays approach, and it often goes undetected until much later. According to the Association of Certified Fraud Examiners (ACFE)’s 2024 Report to the Nations, it takes at least 12 months on average to detect occupational fraud. Data analytics can help detect expense fraud among employees and even help you improve your overall card program. With a large card program, gathering all the expense data manually is daunting and nearly impossible.
This is why you might want to work with a third-party company that can help you gather the data and get to the root of potential and existing fraud. By data mining expense information, the details found in transactions or other forms of financial data can be collected and prepared for analysis to determine patterns of behavior. Because it examines transactions in a more comprehensive matter, data mining is less limiting in terms of the types of fraud it can uncover.
5. Communication
Deterring employee expense fraud is a team effort so clear and effective communication is key. As you implement strong expense monitoring controls like data mining systems and thorough card training, don’t let any sign of potential fraud slide until the next time or the following month. Establish protocols so that employees and department heads are notified when inappropriate spending occurs.
Then, discuss how the incident will be handled and which disciplinary actions should be taken. Having a clear system of communication that’s timely can deter expense fraud in the future.
Taking the Next Step
Expense fraud does not have to be inevitable in your organization or card program. The solution is to fine-tune your internal controls. This will reduce opportunities for employees to misuse their P-Card or inaccurately report their spending on purpose.
Card Integrity can help you deter expense fraud and increase visibility within your department. Our flagship service, DataWISE, is set up to automatically and accurately monitor monthly spend for all your cardholders and provide fraud alerts. DataWISE utilizes data mining to discover behaviors, transaction types, and even specific cardholders that you should be aware of to detect expense fraud.
As the holidays approach, now is a great time to start strengthening your fraud detection systems with proven methods. Also, be sure to sign up for our newsletter to receive more helpful fraud detection tips.
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Prohibited categories and debarred suppliers are important considerations when it comes to card misuse, abuse, and fraud. View the recording below for our Fighting Corporate Credit Card Fraud: A Back-to-Basics Overview webinar. We highlighted fraud, misuse, and abuse in corporate credit card fraud, but with tools, tips, and tricks at your disposal to get ahead of it, along with examples of what we’ve seen over the years in the industry.
