ÐÔÊÓ½çAPP

Atlanta — March 3, 2008

While the overwhelming majority of transactions reviewed were legitimate, problems with the Purchasing, or P-Card, program can be traced to a lack of managerial oversight and control at every level. That is the overall observation by ÐÔÊÓ½çAPP (USG) auditors in a report released today of an audit of P-Card transactions in the state’s public higher education system.

The report noted that while there existed an appropriate and needed focus on financial risk, this focus did not extend to compliance and operational risk. As a result, this internal audit and a prior audit by the State of Georgia Audit Department found that the lack of such focus and appropriate controls contributed to 22 identified cases of fraud out of the 8,435 P-Cards in use by the University System’s 40,000 employees. The report also found that the majority of problems with the program were the result not of fraud, but a lack of understanding of and training in the appropriate procedures for use of the cards by both managers and employees.

Key recommendations put forward in the report are the need to establish appropriate P-Card procedures, to enforce compliance with applicable rules and regulations, and to improve monitoring of P-Card activity.

The report was requested by Gov. Sonny Perdue and is based upon an internal audit of 611,586 P-Card transactions during the Fiscal Year 2007 at 33 of the System’s 35 institutions that utilize P-Cards, as well as Skidaway Institute of Oceanography and the University System Office. Two USG institutions do not participate in the P-Card program.

Auditors from the System Office, as well as auditors at Georgia Institute of Technology, Georgia State University, the Medical College of Georgia, and the University of Georgia, conducted the review of the P-Card transactions beginning in early Nov. 2007 and concluding in Feb. 2008.

“This report highlights the urgency to take all necessary steps to create a more effective risk management culture within the University System,” said USG Chancellor Erroll B. Davis Jr. “We cannot expect the public to support the great work we do in teaching, research and service if they cannot depend upon us to handle the mundane responsibilities well.”

While the report did find a number of structural problems with the System’s management of the P-Card program, auditors also found that a number of “significant changes” and new controls had been put in place subsequent to the fiscal year covered in the audit. Additional controls and processes will be implemented, said University System officials in response to the chancellor’s call for increased oversight of the program.

The audit report recommends that the executive leadership at each USG institution incorporate P-Card risk management into an overall institutional risk management framework. The audit’s recommendations were grouped into the four general observations of the program. These observations and the recommendations are:

• Supervisory review, approval and management were lacking. The audit found of the transactions sampled, nine percent lacked an approving official signature. Recommendations include the need to strengthen the approval and monitoring process for P-Cards, to review the issuance of P-Cards to ensure only appropriate personnel are provided cards, to limit the number of cardholders for which an approving official is responsible, and to mandate initial and refresher training in P-Card procedures.
• Documentation was inadequate or insufficient. The audit found that six percent of the transactions sampled lacked either a receipt or itemized receipt. Recommendations include the need to record transactions consistently and to maintain accountability for “give-away” items for students.
• Both institutional and USG policies were often lacking in detail, did not provide sufficient guidance to cardholders and approving officials, or did not address applicable purchasing guidelines. The audit found that only 13 USG institutions stated in their policy that Georgia Department of Administrative Services (DOAS) guidelines are mandatory. Recommendations include the need to update the USG “Business Policy Manual” to be consistent with DOAS policy, to expand the Business Policy Manual to address the proper application of various state laws, rules, and regulations to common purchases in support of student activities, to clarify the Business Policy Manual to address permitted “agency account” purchases and the appropriateness of using a P-Card for such purchases, to coordinate with DOAS to update and clarify the DOAS P-Card policy, and to have each USG institution review its own P-Card policy to ensure these policies fully address DOAS P-Card policy and the USG Business Policy Manual.
• Other governing policies and regulations often were not integrated with P-Card policies. The audit found that out of 12 USG institutions where P-Cards were being used to purchase cell phones or pay cell phone charges, 11 institutions either did not have a cell phone policy, were not enforcing the existing policy, or had a policy inconsistent with state rules. Recommendations include the need to ensure that P-Card purchases are consistent with other governing regulations and should adhere to competitive procurement requirements when making P-Card purchases.

The 22 cases of identified fraud, which ranged from a low of $20 to a high of $318,324, resulted in the termination of 10 employees, the resignation of 11 employees, and reprimands for 5 employees. Supervisors of employees misusing P-Cards were included in the number of individuals disciplined. Funds were either fully recovered or reimbursed to the institution in 10 of the cases. A number of the 22 cases are part of ongoing investigations by the Georgia Bureau of Investigations or federal agencies.

P-Cards are credit cards used by personnel for purchasing goods and services and are used for small, low-dollar-value purchases. The cards can be used by purchasing personnel at an institution’s central procurement department or by other employees with day-to-day procurement responsibilities. The P-Card program was designed to decrease the cost of doing business through a reduction in the use of purchase orders, check requests and petty cash. Employees of all state agencies utilize P-Cards.

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