FLORIDA DEPARTMENT OF ENVIRONMENTAL PROTECTION

Transcription

1 FLORIDA DEPARTMENT OF ENVIRONMENTAL PROTECTION Office of Inspector General Report No. A-1112DEP-056 Date: March 30, 2012 Division of Administrative Services Overview The Office of Inspector General (OIG) conducted an audit of the Department of Environmental Protection s (Department) Purchasing Cards (P-Card). The audit included a review of purchasing card practices, transactions, and related activities for the period of July 1, 2010 through December 1, 2011 and related transactions as determined necessary. As a result of the audit, we recommend: The Division of Administrative Services (Division) re-evaluate the requirements for issuing Department P-Cards. The Division improve the current P-Card transaction approval process to ensure every transaction adheres to the P-Card usage policy. Scope & Objectives The scope of this audit included a review of purchasing card practices, transactions, and related activities for the period of July 1, 2010 through December 1, 2011 and related transactions as determined necessary. The objectives were to: determine the number of P-Cards issued compared to the total number of Department employees; determine how many active P-Cards have been used; and evaluate P-Card use of active users. Methodology This audit was conducted under the authority of Section , Florida Statutes (F.S.) and was a component of the Office of Inspector General's Annual Audit Plan. The audit was conducted according to the International Standards for the Professional Practice of Internal Auditing, published by the Institute of Internal Auditors. This audit included tests of P-Card records and procedures, as Page 1 of 7

2 well as interviews. Information provided by the Division of Administrative Services (Division) was used to evaluate P-Card activity. Our audit procedures included the following: Review of Purchasing Card Program Plan and Statewide Purchasing Card Guidelines. Interviews with P-Card Administrator. Review of Directive DEP 300 and Florida Statutes. Review of P-Card transactions and established limits. Background The Division is responsible for overseeing the P-Card program and all of its components. The P-Card Program Administrator (Administrator) coordinates the program for the Department. The Administrator establishes internal controls and ensures that cardholders adhere to program regulations. A corporate account has been established with Bank of America (BoA) for the card program. The P-Card is a tax exempt credit card issued to DEP employees for direct merchant purchases. Payments are made to the vendor by BoA, and the Department reimburses BoA through an electronic process. The P-Card Program was introduced to increase efficiency, cost savings, and reduce paperwork for Department purchases. Currently, employees use their card to purchase commodities costing less than $1,000. The Bureaus of Finance and Accounting and General Services work together in the P- Card purchasing cycle. Each person involved in the cycle has different roles and responsibilities. P-Cards are issued to employees with the Division/District Director s approval. Online training must be completed by the cardholder, and a passing score must be obtained on the test at the end of the training before a card is issued. Once all of the requirements are satisfied, and all of the forms have been completed, a P-Card will be issued to the employee. When purchases are made, the cardholder must provide receipts and supporting documents as required by Department policies. The OIG will be conducting this P-Card audit in two phases, due to the complexity of the program. Phase one included a high level review of current active and unused P-Cards, limits, recent activity, and established Department policies and procedures. Phase two will take an in-depth look at spending limits, internal controls, and specific transactions identified during the phase one audit. Page 2 of 7

3 Results & Conclusions Unused and Active P-Cards The Division/District Director authorizes the issuance of each P-Card that is granted to employees. The P-Card cannot be used by anyone other than the person named on the card. As of December 2011, the Department has about 4,157 filled positions of which 67% or 2,777 have been issued P- Cards. We reviewed Department P-Card records to determine the number of unused P-Cards. As of December 2011, a total of 289 P-Cards have not been used since issuance. The issuance dates for the unused P-Cards ranged from 2001 to We further reviewed P-Cards without activity in The following table shows the number of P-Cards that were unused in Unused P-Cards P-Card Issue Year Number Total 808 **Information prior to 1998 was not available. Based on a review of the P-Card transaction report, 2,488 P-Cards were used during the scope of this audit for total purchases of approximately $14.5 million. The number of transactions varied among cardholders. The transactions ranged from 1 per cardholder to 558. We sampled 200 active cardholder transactions for our audit period. The 200 cardholders had a total of 3,290 transactions for a total of $483, P-Card Activity There are three different P-Card categories; General P-Card (for commodity purchases), Trip P-Card (for travel purchases), and Emergency P-Card (for disaster activation). Each type has subcategories that determine the types of purchases that are allowed. The P-Cards have merchant category codes (MCCs) that identify each purchase. If purchases are not within the parameters, the transactions are declined. Declined transaction notifications are reviewed by the P-Card Administrator in an effort to monitor cardholder activity. If a cardholder continually appears on the reports, the person will be contacted by the P-Card Administrator. A purchasing agent assists the Administrator with monitoring P-Card transactions and related reports. Spending limits are placed on P-Cards. Division/District Directors or designee can adjust the standard P-Card limit. The limits placed on the cards include the following: Charge maximum amount (single transaction), Daily maximum amount, Page 3 of 7

4 Monthly maximum amount, Daily transaction quantity, and Monthly transaction quantity. The limits can be changed at the Division/District Director or designee s request. The P-Card Administrator is authorized to override limits and restrictions, if it is considered necessary. A standard process for overriding limits has not been formally documented. According to the P-Card Administrator, the determination is based on the P-Card Administrator and Purchasing Agent s judgment. The P-Card Administrator works with the Division/District Directors or designee annually to evaluate cardholder limits. Additionally, cardholders must adhere to the Purchasing Card Usage Policy that is available on the Division s web page. The policy includes a list of purchases that are not allowed. Item number 13 on the list of purchases not allowed is third party billing (i.e. PayPal, EBay, Half.com, etc). Based on our review of 3,290 P-Card transactions, 146 purchases were made from Amazon Marketplace, which are considered third party billers and appear to be unallowed purchases. Further review of actual invoices will be included in phase two of this audit. Finding & Recommendation Finding 1: The Department Purchasing Card Usage Policy prohibits the use of third party billing, unless it is a one-time charge. Within the scope of our audit, 146 Amazon Marketplace transactions were identified. In our audit sample of 200 transactions, eight transactions or approximately 4% (8/200) appeared to be third party billers. The eight transactions were purchases made from Amazon Marketplace. In order to ensure accountability for purchases, P-Card policies must be clearly communicated and enforced. Recommendation: The Department, through the Division of Administrative Services, should improve the current P-Card transaction approval process to ensure that all transactions are allowed. If exceptions are made for third party billing, they should be documented by the P-Card user and Supervisor to state the reason and circumstances for the exception as well as Division approvals. In addition, the Purchasing Card Usage Policy should further clarify third party billing to avoid confusion among cardholders. Page 4 of 7

5 Management Comment: The following item came to our attention as areas for improvement, but was not noted as a finding in this report. Based on this review, 67% (2,777/4,157) of Department employees have been issued P- Cards. Of those 2,777 P-Cards, 10% (289/2,777) were unused since issuance and 808 were not used during calendar year Having a large number of unused active P-Cards in circulation exposes the Department to unnecessary risk. We recommend the Department, through the Division of Administrative Services, re-evaluate the requirements for issuing Department P-Cards. To promote accountability, integrity and efficiency in state government, the OIG completes audits and reviews of agency programs, activities, and functions. Our audit was conducted under the authority of section , F.S., and in accordance with the International Standards for the Professional Practice of Internal Auditing, published by the Institute of Internal Auditors, and Principles and Standards for Offices of Inspector General, published by the Association of Inspectors General. The audit was conducted by Carmen Saras and supervised by Valerie Peacock. Please address inquiries regarding this report to the OIG s Audit Director by telephone at (850) Copies of final reports may be viewed and downloaded via the internet at Copies may also be obtained by telephone (850) , by fax (850) , in person or by mail at Department of Environmental Protection, Office of Inspector General, 3900 Commonwealth Boulevard, Mail Station #41, Tallahassee, FL Valerie J. Peacock, Director of Auditing Candie M. Fuller, Inspector General Page 5 of 7

6 Audit Response Division of Administrative Services Report #A-1112DEP-056 March 2012 Finding No. 1 Recommendation: The Department, through the Division of Administrative Services, should improve the current P-Card transaction approval process to ensure that all transactions are allowed. If exceptions are made for third party billing, they should be documented by the P-Card user and Supervisor to state the reason and circumstances for the exception as well as Division approvals. In addition, the Purchasing Card Usage Policy should further clarify third party billing to avoid confusion among cardholders. Finding No. 1 Response: The Division updated the Department Purchasing Card Usage Policy P-Card Not List to identify Amazon Marketplace as a third-party billing provider on March 7, In addition, the P-Card Administrator has contacted the Department of Financial Services (DFS) P-Card Program Administrator regarding the use of third-party billing. DFS responded that third-party billing is not prohibited, however, it is discouraged. We are considering allowing third-party billing on the purchasing card but need to address the procedures to be followed, if allowed. At this time, we are planning on changing the current P-Card Not List to a P-Card Exception List that will be divided into two sections. The first section would contain those items that are prohibited from being purchased using the P-Card. The second section would identify those items that are considered conditionally allowable subject to meeting certain specified requirements. The use of third-party billing would be placed on the allowable list subject to meeting certain requirements. Until then, we are documenting all third-party billing by sending s to the cardholder through the supervisor requesting documentation to support the reason third-party billing was required. Based on this information, we will determine whether it should be allowed or disallowed. Unfortunately, situations will continue to occur when the buyer is unaware that a third-party billing arrangement is being used by a vendor. The ability to recognize a third-party billing provider may be difficult. We will strive to better define and identify third-party billing providers as we make the changes noted above. Page 6 of 7

7 Management Comment: The following item came to our attention as areas for improvement, but was not noted as a finding in this report. Based on this review, 67% (2,777/4,157) of Department employees have been issued P-Cards. Of those 2,777 P-Cards, 10% (289/2,777) were unused since issuance and 808 were not used during calendar year Having a large number of unused active P-Cards in circulation exposes the Department to unnecessary risk. We recommend the Department, through the Division of Administrative Services, re-evaluate the requirements for issuing Department P-Cards. Management Comment Response: The Department has a long standing policy that purchasing cards will be used by staff for certain travel costs (hotel reservations, airplane tickets, rental cars, parking, etc.) that would normally be reimbursed to the employee following each trip. By requiring the employee to use other means to pay these costs, the Department is responsible for the payment of certain taxes that could be avoided by use of the purchasing card and the employee is burdened financially. Of course, each traveler is responsible for using their own credit cards/cash to cover their personal costs associated with meals and other purchases made during the trip. As this process has worked well for the Department, we do not anticipate changing our policy regarding the use of the purchasing card for authorized travel related expenses. The Department s P-Card Administrator has completed a review of information available in the purchasing card module to identify a list of employees who have held a purchasing card for over three years and have no history of using the card. An has been drafted that will be sent to the management for each program area regarding this finding, requesting the permission to cancel the purchasing card. A response from the program area will be required to terminate or continue the purchasing card. The DFS P-Card Program Administrator is working with the DEP on trying to obtain some additional p-card usage monitoring reports to enable us to evaluate the remaining cards, not identified through the above process that may also be candidates for cancellation. We intend to notify program area managers, in a similar process to that described above, regarding the continuation of p-cards for those employees that appear to not need them. Please note that our ability to perform this review is subject to DFS providing additional reports that are currently unavailable. Page 7 of 7