Purchasing Card Violations and Consequences
The difference between misuse and fraud is intent.
Misuse implies a violation occurred without foreknowledge that the action was incorrect or inappropriate, while fraud involves an awareness of the impropriety and a conscious decision to proceed.
The Purchasing Card represents the institution's trust in the cardholder and an empowerment of that cardholder as a responsible employee of the institution. As such, each cardholder is required to safeguard and protect his/her institution's assets, including the Purchasing Card.
It is against the law to use any governmental funds for personal use. USNH and its member institutions are funded in part by state appropriations. In addition, many areas are funded through state and federal funds as grants and contracts. As a result, any personal use of institutional funds may be construed as a criminal act and subject to prosecution. These statutes apply not only to purchases made on the Purchasing Card, but to any purchases made using institutional funds and regardless of the intent to reimburse.
The following are a few examples of Purchasing Card "misuse". As noted above, the severity of violation will determine the extent of the consequences and as outlined in USNH personnel policy, fraud can result in immediate dismissal and/or criminal prosecution.
There are 6 general violation categories. Refer to Authorized and Unauthorized purchases earlier in this chapter for descriptions of what is allowable and Procedure 9-110, Documentation and Record Retention for a full description of what documentation is required.
1. Personal Purchases
Definition: A personal purchase is any purchase that is not for use and ownership by the institution regardless of the intent to reimburse.
Violation: It is a cardholder violation to make ANY personal purchase or settle any debt with the Purchasing Card or any other purchasing method. It is against the law to use government funds, state or federal, to purchase items for personal use. Even though the cardholder may repay the institution, or may intend to repay the institution for the amount of the purchase, it may be considered a fraudulent act.
Consequence: The institution must be reimbursed immediately for the amount of the personal purchase. The Purchasing Card may also be cancelled or suspended. A letter noting the revocation and a description of the violation will be written per the guidelines above. Any violations of this policy may be investigated and could result in termination and/or criminal prosecution. In the event of willful or negligent default on these obligations, the institution shall take any recovery action deemed appropriate that is permitted by law.
2. Assignment or Transfer of an Individual Card
Definition: Allowing an unauthorized person to make a purchase on a card not designated for that person is a cardholder violation. If a cardholder continues to use a card after the cardholder has terminated/separated from the institution then that is a cardholder violation. Continued use of a card after an authorized person has requested the card's surrender is a cardholder violation. The cardholder is the only authorized individual to use his/her card.
Violation: Allowing use of the card by someone other than the authorized cardholder is a cardholder violation. Refusal to surrender the card upon termination/separation or request is a cardholder violation.
Consequence: If the cardholder allows someone else to use the card, a warning letter will be sent immediately as outlined above. Any future misuse violations will result in the immediate cancellation of the card. If the cardholder is no longer employed at the institution and the card has not already been cancelled, the card will be immediately cancelled and any charges made subsequent to the termination/separation will be referred for collection.
3. Cash or Cash Type Transactions
Definition: Cash, cash in addition to a purchase, cash in lieu of a credit to the cardholder's account, traveler's checks, money orders, gambling, ATM transactions, etc.
Violation: A cash or cash type transaction made using the Purchasing Card, unless specifically endorsed by the USNH Controller in advance, is a cardholder violation. The Purchasing Card is for authorized purchases only.
Consequence: Upon discovery, the cardholder will be subject to immediate repayment (including applicable fees) of any such transactions. In addition, a warning letter, as outlined above will be written. If the incident is determined to be fraudulent, the card will be immediately cancelled and the incident may be investigated further which could result in termination and/or criminal prosecution. In the event of willful or negligent default on these obligations, the institution shall take any recovery action deemed appropriate that is permitted by law.
4. Split Transactions or "Pyramiding"
Definition: Split transactions or "pyramiding" are defined as single items costing more than the cardholder's single purchase limit which are split among multiple transactions to circumvent the cardholder's defined maximum purchase limit.
Violation: Any transaction which is split over more than one transaction and in total exceeds the cardholder's limit and/or the limit established by USNH, whichever is lower, is a cardholder violation.
Consequence: A warning letter will be written as outlined above. Any subsequent violations will require the card to be immediately cancelled or suspended. The cardholder will be required to obtain additional training before any card may be reinstated.
5. Inappropriate Purchases
Definition: Appropriate purchases are listed in this chapter under Authorized Purchases and in the Cardholder's Guide in Procedure 9-103, What Can the PCard be Used For? Any other uses of the Purchasing Card, except as specifically endorsed by the USNH Controller in advance, is considered inappropriate. In addition, when used for a grant or contract, the appropriateness of the purchase may be further restricted by the terms of the grant or contract.
Violation: Purchase of any inappropriate item or for any services, except as specifically endorsed by the USNH Controller in advance, is a cardholder violation.
Consequence: A warning as outlined above will be written immediately. Upon consultation with the Campus Card Administrator, additional training may be recommended. Continued misuse may result in the cancellation or suspension of the card.
6. Lack of Original Documentation
Definition: Detailed descriptions of required documentation, reconciliations and record retention are contained in Procedure 9-110, Documentation and Record Retention. This includes recommended types of documentation and a listing of the requirements any documentation must meet.
Violation: Lack of original documentation for every purchase is a cardholder violation. Transactions where the merchant does not provide original documentation is not considered a violation if there is sufficient supporting evidence to meet the requirements for substantiation outlined in Procedure 9-110, Documentation and Record Retention. In unusual cases, substitute documentation may be used.
Consequences: Any violation of this policy may be investigated and could be subject to repayment, suspension and/or cancellation of the Purchasing Card. Human error and patterns of chronic abuse will also be considered. At a minimum, the cardholder will receive a warning as outlined above. The cardholder may also be required to attend additional training on the use of the Purchasing Card and their role and responsibilities. Chronic abuse may result in the cancellation of the card and will be investigated as personal purchases.
7. Account/Business Manager Responsibilities
Consultation with your campus personnel office is prudent. Prudence will dictate how, when and the severity of consequences to apply to each individual infraction and cardholder. The steps and definitions that follow are designed to be a guide rather than a rule book. Each incident will require the department to determine what appropriate action is appropriate for each event. The general process will involve the following steps:
- Upon initial suspicion, consultation with the cardholder and/or the business manager/supervisor for the department or area.
- If the suspicion is substantiated, and this is the first incident of misuse, a warning letter/email to the cardholder from the Business Manager, indicating the violation and a stipulation that continued misuse will result in a more formal warning and/or possible revocation of the card. A copy of the letter/email will be sent to the Campus Card Administrator to be included in the cardholder's file.
- If the suspicion is substantiated, and this is the second incident of misuse, a formal written warning will be sent to the cardholder by the Campus Card Administrator. The cardholder's immediate supervisor, the appropriate school or center's Dean or Director, the Campus Director of Purchasing, the USNH Controller and the cardholder's personnel file, will all be copied on the letter. The letter will include a detailed description of the violation and a warning that the Purchasing Card may be revoked pending further investigation or continued misuse.
- After a second warning for a misuse violation, or if fraud is suspected, the card will be revoked with notification as listed above. The card may be reinstated only after additional training and consultation between members of the department and the Controller’s Office.
The official version of this information will only be maintained in an on-line web format. Any and all printed copies of this material are dated as of the print date. Please make certain to review the material on-line prior to placing reliance on a dated printed version.