Purchase cards remain a high-risk misappropriation tool for governments large and small

Since 2019, the Office of the Washington State Auditor has reported more than $2 million in public funds that were misappropriated through purchase card schemes. Purchase cards are convenient for local governments because they can significantly reduce the volume of purchase orders, invoices, petty-cash transactions and checks that governments need to process. But they also carry a high risk of fraud, waste and abuse. 

Employees with purchase cards have a lot of control over a single transaction, which puts considerable pressure on your government’s review and monitoring processes. Without strong internal controls, your government has a higher risk of staff misappropriating funds through purchase cards. 

Recent investigations show that monitoring and oversight are key 

Some of our recent investigations of purchase card misappropriations are a great reminder that monitoring and oversight are key fraud-prevention controls for governments both large and small: 

• Office of Administrative Hearings: A management analyst misappropriated $878,115 through fraudulent purchase card transactions between 2019 and 2023.  

• Town of Cusick: The clerk-treasurer misappropriated $199,348 through fraudulent purchase card transactions between 2022 and 2023. The purchase cards had a $500 limit, but the clerk-treasurer circumvented this by approving payments from the town’s bank account to its purchase cards, building up large overpaid balances, and then making personal purchases with the cards.  

• City of Kahlotus: The clerk-treasurer misappropriated $4,464 by using a city purchase card for personal transactions between 2019 and 2020.  

A common control weakness in all three cases is that no one performed independent or secondary reviews of their government’s bank statements, purchase card transactions or employees’ reconciliations of these records. Implementing this kind of monitoring and oversight, especially from managers and elected officials, can help governments decrease their risk of experiencing purchase card misappropriations. 

SAO has resources to help you tighten your controls 

We offer several resources that can help governments put fraud-prevention controls in place over their purchase cards:  

• Best Practices for Credit Card Programs – This resource includes several best practices that can help local governments evaluate their credit card program and related internal controls. 

• “Bank statement review is a top-notch fraud-fighting tool. Here’s how to do it” – This article – reprinted in this very edition – explains why it is important for governments to review their bank statements. Our five-part playbook shows governments what to look for when reviewing them. 

• Trust, but verify: A guide for elected officials & appointed boards to prevent fraud  – This guide gives elected officials and other oversight personnel tips for preventing, detecting and responding to fraud in their governments.  

• Segregation of Duties – This guide explains how accounting departments of all sizes can implement appropriate reviews and controls. 

Have questions? 

Remember, the State Auditor’s Office can help. If you have technical questions, submit them using our HelpDesk in the client portal. And if you are looking for more resources or internal controls training, our experts in the Center for Government Innovation are here to help. Just email Center@sao.wa.gov.