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.