Internal fraud is a common issue among large businesses. Implementing and maintaining an effective continuous controls monitoring program is an effective way to detect and prevent fraudulent behavior. A vital aspect of an internal controls program includes utilizing a purchasing card software that continuously monitors transactions. To better understand the benefits that this software can bring, we wanted to share the success that a client experienced by monitoring their purchasing card.
Why Implement a Purchasing Card Software?
As a large international offshore drilling company with almost two dozen offices, more than 50 rigs, and annual revenues above USD $5 billion, this client has a purchasing card (P-Card) program that processes tens of thousands of transactions every year.
It used to be that P-Card purchases were reviewed manually and only a small percentage of transactions were audited annually. This made it difficult to determine if P-Cards were being used improperly or for fraudulent purchases.
Due to the international and varied nature of the business, there is also an exceptionally broad range of transactions that can occur based on each employee’s role, which made it difficult to determine if certain transactions were out of policy.
In addition, employees frequently changed positions and locations, and the company had no easy way to track this information since human resources (HR) data was not integrated into the P-Card system.
Benefits of Software Monitoring
The P-Card manager of the drilling company needed a platform that would automatically review all p-card transactions, allow transactions to be reviewed according to rules-based policies for different employee categories, and pull data from various company departments (including HR) to identify exceptions.
The company selected Alessa, a continuous controls monitoring platform, to provide these capabilities and more. With this solution, P-Card program analytics are reviewed around the clock; alerts are pushed to personnel for remediation; and data from HR is reviewed against P-Card transactions.
An assessment uncovered more than 85 risks across five activity points: Administrative and Analysis, Card Insurance, Program Performance, Spending Pattern and Transaction Policy Violations. The company chose to start by initially monitoring 20 key risks, resulting in the Alessa team identifying almost $30 million in anomalies in seven key areas:
- $20 million of potential savings from cards with elevated liability compared to transaction and spending profile
- $7 million of transaction splitting to circumvent spend limit policies
- $1.5 million of high-risk personal purchases
- $1 million of out-of-policy computer purchases
- $150,000 of expenditures from 11 terminated or on-leave employees
- 75 active cards assigned to inactive employees
- 32 employees had not repaid personal purchases
Through initial risks and controls documentation process, Alessa’s P-Card Monitoring Solution revealed approximately 6,000 exceptions, and identified the likely root cause of those alerts.
Causes included inadequate spending controls that allowed some employees to make high-risk personal purchases; employee status change not being updated, with a number of inactive employees being found to have made transactions after leaving the company; non-compliance with company policies; lower single transaction limit; reimbursement method not being applied correctly; and excessive liability available, with many cards having much higher limits than required.
With the help of the solution, the client began to proactively address and remediate the identified exceptions. It reduced its liability by setting lower limits on company P-Cards, and is now able to effectively identify out-of-policy purchases because the platform analyzes the company’s HR data. The client has saved tens of millions in potential future losses, helping to ensure the success of its P-Card program going forward.
Software Solutions for Your Business
At Alessa we pride ourselves in providing software solutions for the financial industry. This includes software for AML compliance and fraud detection and prevention. To learn more about our purchasing card software, or other products, contact us today, or request a free demo below.