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Home My WebLink About090611 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 10 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 11 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 12 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. 13 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 14 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. 15 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”). 16 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 17 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 18 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 21 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 23 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. 24 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) 25 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. 26 Acknowledgments MLT • Departments • Finance • Patti Phillips – Bill Davis – Donna Vaughan – Cindy Villalpando – 27 Questions? 28