Risk Factors

  • Blanket POs
  • Execution of LOCs
  • PO did not control the purchase
  • Open Credits on the account
  • PO Overpayment
  • Rebates not deducted
  • Prepayments
  • Invoice cancelled, credit applied by vendor and not mailed; hospital paid invoice

Impact on Operational Efficiencies if Not Properly Treated

Allowances - Deal/Promotional/Rebate Found $281,250.00. Vendor sent a rebate check to the hospital for a compliance commitment rebate.  TAG discovered the check was never cashed by the hospital. TAG spoke with the vendor and a new check was issued and received in the accounting department.

Overcharges on Invoices Per Contract - Found $325,598, 66.  Cost plus was applied to a list price instead of the correct price negotiated by the hospital, vendor, and distributor.  

Freight - Found $105,774.42 on freight billed in error. Hospital has two contracts with the vendor for free shipping of orders over a specified size. The soaps and lotions contract calls for no freight on orders over $400. The contract for instrument sterilization says no freight on orders over $750. Many times product from both contracts are shipped and invoiced together. During our audit period, the vendor charged freight on nearly every invoice regardless of size. These charges were paid by the hospital. The vendor issued credit for freight paid in error.

Office Supplies - Found $183,556.34 on various invoices issued by this vendor.   A refund check in that amount was issued for these overcharges.

Duplicate Payments - Found $186,183.50 on a credit open on the accounts as a result of a duplicate payment. The invoice was paid once by a third party leasing company and again by the hospital.  The system has no way of catching the duplicate payment because the invoice was paid by two separate entities.