By Disha Dhawan

PGDRM Batch Jan’20-21

What is a Split Purchase Order (PO)?

Split PO is an attempt from the procurement function to split the PO in 2 or more to surpass the authorization process. ​

Example:​ Suppose a PO is of Rs 2,00,000 and it is getting split into two Rs.1,00,000 POs, It could have been done to bypass the authorization or DOA matrix.

Risks in Split Purchase Order

1. Large quantities are procured without the information of senior management.​
2. Favoritism can occur by giving orders to preferred vendors.​
3. Identical items purchased in different amounts simultaneously or within a short period of time (false positive)​
4. Multiple POs to one vendor in the same or similar amounts from the same requesting group​
5. Bypassing the authorization process /DOA process​
6. Incorrect or fraudulent purchase transactions resulting in possible financial loss.​

​

Analytics while Splitting a PO

Analytic Logic: Extracts all approved purchased orders for the period under review to determine potential split purchase orders where the order is for the same vendor for the same material by the same creator within a determinable number of days of each order. The quantity may differ between orders. Nature of transactions needs to be reviewed before analyzing data. ​

​These can also be linked to the same PR no. but PO is split to avoid DOA approvals.

Data Set Required: PR Dump, PO dump, invoice dump & DOA authorization matrix.

Example:

Variable: Number of Days​

​DOA will be on Amounts, not Quantity

Controls put to avoid Split PO

1. Analytics Identifies Split PO’s where the same material was ordered from the same vendor by the same creator within a configurable number of days then it should go through Authorization Level Matrix.​
2. Link POs to PRs.​

​

Example of Split PO

​​

​

Disclaimer

This report has been produced by students of Global Risk Management Institute for their own research, classroom discussions and general information purposes only. While care has been taken in gathering the data and preparing the report, the student’s or GRMI does not make any representations or warranties as to its accuracy or completeness and expressly excludes to the maximum extent permitted by law all those that might otherwise be implied. References to the information collected have been given where necessary.

GRMI or its students accepts no responsibility or liability for any loss or damage of any nature occasioned to any person as a result of acting or refraining from acting as a result of, or in reliance on, any statement, fact, figure or expression of opinion or belief contained in this report. This report does not constitute advice of any kind.