PO Splitting Overview

Audit Purchase Orders to Find PO Splitting

Finance/Audit

Overview

In most companies, employees with purchasing authority have a monetary limit on how much they can purchase without management authorization. For example, an IT manager may be able to purchase up to $50,000 in software and equipment. Any amount over that would require director approval. In practice, this means that the IT manager requires director approval for any Purchase Order (PO) with a purchase amount over $50,000. If a manager wants to purchase $75,000, they could try to get around this by issuing two POs to the same vendor totaling $75,000 but each being less than $50,000. This is a violation of corporate compliance rules known as “PO Splitting.”

Objective

Create a simple workflow to detect PO splitting. In this case we are looking for multiple POs to the same vendor within a three-day period. At this point we are not checking to see if the same buyer is issuing the POs. (It is possible that there is collusion between employees to hide the splitting so there would need to be further examination of the POs found by our analysis).

Processes

1. The input file has PO line-item detail. The first step is to remove inactive PO’s, eliminate fields specific to the PO line, and retain only one record for each PO.

2. Then identify the vendors to whom multiple POs have been issued.

3. Determine if there are any vendors where the interval between their consecutive transaction dates is 3 days or less.

4. Output this list for further investigation.

Data Dictionary

Purchase Orders.xlsx