From DeseretNews.com, 09/21/2006
By Jennifer Toomer-Cook
Deseret Morning News
State employees racked up nearly $11 million in state-issued credit card purchases — an increase of nearly five times in the past seven years — and the state isn't paying close enough attention to make sure the purchases are necessary, appropriate and reasonable in cost, a state audit found.
"Inadequate oversight of important controls ... exposes the state to the risk of misuse and fraud," the audit report said.
The audit, conducted by the Office of the Legislative Auditor General, was presented Wednesday to legislative management's Audit Subcommittee.
Richard Ellis, executive director of the Department of Administrative Services, agreed with the audit findings and said steps already are being taken to improve controls.
"We agree (the purchasing card) is a great tool, an efficient tool for purchasing," he said. "We will be doing the recommendations ... and will fill a position that will help us to ensure compliance."
P-cards, or state-issued credit cards intended for relatively low-ticket items, are issued to 1,450 employees in 36 agencies and offices, the audit said. They were introduced in 1998 as a way to save the state money — more than a half-million dollars in the 2005 fiscal year — through rebates and by eliminating the need to prepare purchase orders and cut checks.
P-card purchases rose from $2.2 million in the 1999 fiscal year to $10.7 million in the 2006 fiscal year.
The auditors didn't find any evidence of fraud or abuse but did note that checks weren't adequate to prevent it, either.
Workers are supposed to follow general purchasing policies, maintain a monthly log of purchases, back them with receipts, reconcile logs to bank statements, verify charges are accurate, and dispute inappropriate ones, the report said.
But of the 185 cardholders from 17 reviewed state agencies, auditors found purchase logs were kept just 64 percent of the time between October 2005 and February 2006. Six agencies didn't require cardholders to maintain logs, and the Division of Purchasing wasn't monitoring to ensure controls were implemented. In some cases, supervisors were not signing off on purchases.
The cards often are used for office supplies, mail and phone expenses. They can't be used for capital, rental or attorney fees, or travel. Yet more than $400,000 overall purchased in fiscal 2006 was from travel expenses, the report said.
Also, three cards in the sample were issued to employees who had retired. And discipline for card misuse also was found to be lacking.
"Cardholders are informed that violating P-card policies could result in revoking their card, disciplinary actions, or termination of employment," the report said. "However, in reality there are few penalties for violating policy. In fact, one cardholder was only transferred to another division after misusing his card."
But the audit also found agencies aren't using the P-cards to their potential, and therefore are missing out on potential cost savings and rebates.
Auditors recommended that the purchasing division tighten controls and P-card program oversight, assess credit limits based on usage, and encourage P-card use by agencies that underutilize them to boost state savings.