090611 PROCUREMENT CARD AUDITReview of Citywide Procurement Card
Program
Office of the City Auditor
Audit Report
September 6, 2011
City Council Resolution
Directing the City Auditor to
Conduct an Audit of the City
of Virginia Beach
Procurement Card Program
Ordinance Dated:
September 10, 2010
Objectives
DeterminewhethereachDepartmentor
•
Officehasestablisheddocumentedinternal
controlprocedures
Determine whether the procedures address
•
the approval function,
accounting/reconciling function and any
proposed card custody function
3
Objectives
Determine whether proper review and
•
approval is performed before payment of
ProCard
Determine whether transactions made were
•
in accordance with the Small Purchase/Travel
Procedures Manual
4
Background
ProCardProgram established in 2002
•
Designed to streamline acquisition and
•
payment process for low-dollar value goods
and business travel
Reduction of paperwork and administrative
•
costs
Alternative payment vehicle to use at
•
authorized vendors/suppliers
5
Background
Comptroller and Purchasing Divisions of the
•
Finance Dept administer the program
Cards imprinted with VB name and seal along
•
with cardholder’s name
Each card associated with City budget unit for
•
billing purposes
Among other items cards may not be used for
•
cash advances, convenience checks, capital
outlay or personal purchases
6
Most Active Cardholders
as of June 30, 2011
There are 409 active ProCardholders. Top ten Departments
•
are listed below:
Parks & Recreation
113
65
Human Services
31
Fire
30
Convention & Visitors' Bureau
25
Libraries
23
Public Works
17
Human Resources
16
Museums & Cultural Arts
11
Police
10
Sheriff's Office
7
AuditScope
Total
Depts/DivisionsReviewed42
Transactions Reviewed20,267
Cardholders Reviewed451
Dollar Amount of
Transactions Reviewed$3,643,915.31
After conducting our review of each department and applicable
divisions, our findings and recommendation(s) were summarized in a
memorandum to the Department/Office Director with a copy to the
Comptroller’s Division, ProCardProgram Manager(s) and City Manager
or Deputy City Manager.
8
Finding 1: General Findings
Generally, about 2% of the transactions lacked
•
complete documentation or did not follow
administrative policies.
Not explaining fully the purpose of the transaction
–
Not signing the billing statement and/or
–
transaction log
Not ensuring that the transaction log matched the
–
supporting documentation
Missing transaction logs
–
Not fully following administrative procedures
–
Summary of Audit Exceptions
Non compliance with Number of Number of Number of Net Amount
TransactionsCardholdersDepartments
ProCardProcedures:
Billing statementand/or n/a7511n/a
transactions log not
signed
Transaction missing 1626216$28,790.24
receipt or required details
Business purpose not fully 1364612$34,562.97
explained on transaction
log
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Summary of Audit Exceptions
Non compliance with Number of Number of Number of Total
TransactionsCardholdersDepartmentsDollar
ProCard Procedures:
Value
Transaction not 964$690.77
recorded in transaction
logs
Transaction log &111$229.82
statement did not match
Transaction amount did 822$819.17
not match supporting
document
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Summary of Audit Exceptions
Non compliance with Number of Number of Number of Total
TransactionsCardholdersDepartmentsDollar
ProCard Procedures:
Value
Monthly Cardholder n/a125n/a
Transaction log missing
Internal Control n/an/a2n/a
Procedures document
not completed as
required by ProCard
manual
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Summary of Audit Exceptions
Non compliance with City Number of Number of Number of Total Dollar
TransactionsCardholdersDepartmentsValue
Policy:
Sales Taxespaid on 40168$124.31
exempt items
Hotel nightly rate deemed 211$3,610.75*
excessive for Metropolitan
area
Transactions fragmented 211$2,790.47
to override established
singletransaction limit
*Transactionamount reflects multiple number of lodging nights.
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Summary of Audit Exceptions
Non compliancewith City Total Dollar Total Dollar Total Dollar Total Dollar
ValueValueValueValue
Policy
Software purchase not 111$535.00
approvedby ComIT
City contracted vendors 1161$1,492.27
not used
Cardholder did not obtain111$1,883.80
required 3 quotes for
purchase over $1,000
Commercial gasstation in 631$245.13
lieu of City-owned gas
pumps
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Finding 2: Systemic Findings
•Program Managers are assigned the
responsibility to review and approve
ProCardtransactions prior to payment.
However, the ProCardManager may not
Departmental
necessarily know if ProCardtransactions
ProCard
are legitimate or reasonable.
Program
•Program Manager may not have the
expertise or be in a position to evaluate
Manager
appropriateness of purchases.
•Program Manager may not be in same
physical location as the cardholder.
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Finding 2: Systemic Findings
Travel
Reimbursement
vs.
ProCard
Voucher
Expenses
Purchases for meals or lodging made with
ProCardand also claimed and paid on Travel
Reimbursement Voucher (“double –dipping”).
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Finding 3: Other Issues
Frequency of ProCardUsage
FY11 Transactions per Card
14, 3%
51, 13%
52, 13%
292, 71%
None1 to 56 to 10More than 10
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Finding 3: Other Issues
Timely Cancellation Bank of America
of ProCardWorks Data Fields
•As of June 30, •Cardholder info
2011 –4 active has database fields
cards issued to not consistent and
former City contain inaccurate
employeesDept/Division data
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Recommendations
1.1 Ensure audit recommendations specified in issued 1.1 Ensure audit recommendations specified in issued
Department memos are fully implemented Department memos are fully implemented
2.1 Require immediate supervisor of cardholder to review & sign 2.1 Require immediate supervisor of cardholder to review & sign
off on transactions log & billing statement. Update the Internal off on transactions log & billing statement. Update the Internal
Control Procedures to reflect specific arrangementsControl Procedures to reflect specific arrangements
2.2 Develop a process to ensure expenses paid utilizing the 2.2 Develop a process to ensure expenses paid utilizing the
ProCard are not also claimed on Travel Reimbursement VoucherProCard are not also claimed on Travel Reimbursement Voucher
Recommendations
3.1 Review all active 3.1 Review all active ProCardsProCardswith minimal usage an determine with minimal usage an determine
if there is a need for the ProCard to remain activeif there is a need for the ProCard to remain active
3.2 Ensure a process is developed for accountability and control 3.2 Ensure a process is developed for accountability and control
of of ProCardProCarddeactivation of employees and former employeesdeactivation of employees and former employees
3.3 Ensure all data fields in the Bank of America Works database 3.3 Ensure all data fields in the Bank of America Works database
are consistently entered and the data entered is correctare consistently entered and the data entered is correct
Procurement Spending by Fiscal Year
$3,280,206.86
$3,360,369.23
$3,500,000
$3,041,845.44
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
FY2009
FY2010
FY2011
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City of Virginia Beach
Number of Transactions by Fiscal Year
NCumber of Transactions per Fiscal Year
17,926
18,412
20000
17,314
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
FY2009
FY2010
FY2011
22
Top Ten Vendors for FY 2011
RankingVendorAmountNumber of Transactions
1WalMart$146,783.691,155
2BJ Wholesale$73,125.46415
3Marriott$71,237.91224
4US Airways$50,330.54177
5Hilton$42,605.44134
6Southwest Air$42,200.10207
7Hyatt$41,508.35101
8Turf& Garden$40,621.24 88
9Amazon$40,297.22435
World Class
10$38,075.18 59
Marketing, Inc
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Top 5 Spending by MCC in FY11
MCC DescriptionAmountTransactions
LODGING--HOTELS,MOTELS,AND
1$365,746.32 1,123
RESORTS (ALL MCC CODES)
EATING PLACES AND
2$215,721.22 2,057
RESTAURANTS (ALL MCC CODES)
GROCERY STORES AND
3$205,178.88 2,012
SUPERMARKETS
4AIRLINES (ALL MCC CODES)$152,763.42 728
MEMBERSHIP ORGANIZATIONS--
5$117,147.60420
NOT ELSEWHERE CLASSIFIED
The Merchant Category Code (MCC) is a four-digit number
assigned to a business by MasterCard or VISA when the business
first starts accepting one of these cards as a form of payment.
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Top Ten ProCardUsers for FY 2011
AMOUNTDEPARTMENTTITLE AND CLASS CODE
$88,545.73Library CollectionAccount Clerk III (0015)
$64,861.43Economic DevelopmentDirector (5070)
Business Development
$47,342.69Economic Development
Coordinator (2678)
$40,055.57Fire DepartmentMaster Firefighter (1605)
Convention And Tourism
$34,366.53Convention And Visitor’s
Representative I (2021)
Administrative Assistant
$33,804.05Public Utilities
(0195)
Administrative Assistant
$33,321.39MHSAMR Supportive Living
(0195)
$33,264.96Parks And RecreationAccount Clerk III (0015)
$33,121.94Human ServicesAccount Clerk II (0010)
$32,631.07Parks And RecreationStorekeeper II (0215)
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Conclusion
In our opinion, except where noted,
•
internal controls are in place and
operating as intended to ensure
ProCard expenditures are proper.
However, we did note that internal
controls could be enhanced through
the implementation of our audit
recommendations.
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Acknowledgments
MLT
•
Departments
•
Finance
•
Patti Phillips
–
Bill Davis
–
Donna Vaughan
–
Cindy Villalpando
–
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Questions?
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