Audit Report On The Department Of Education’s Controls Over The Use Of Procurement Cards At Schools Supported By Children’s First Network 106

AUDIT REPORT IN BRIEF

The audit determined whether the Department of Education (DOE) had adequate controls in place to ensure that the schools supported by Children’s First Network (CFN) 106 complied with the policies and procedures governing the procurement card (p-card) program as set forth in DOE’s Standard Operating Procedures (SOP).

In 2003, DOE adopted the use of p-cards for select categories of purchases in an effort to expedite processing times, eliminate out-of-pocket expenses for staff, and lower transaction costs for small purchases. P-cards can only be used by authorized staff for business-related purchases in compliance with DOE’s procurement policies. There are 63 CFNs which provide support to approximately 25 schools each. P-card spending for Fiscal Year 2011 amounted to $17,202,173. CFN 106 provided support to 24 schools, which had 2,787 p-card transactions totaling $516,667– the highest volume and amount of p-card transactions among all CFNs.

Audit Findings and Conclusions

The audit found that DOE does not have adequate controls in place to ensure that the schools supported by CFN 106 complied with p-card policies and procedures. Our audit sample consisted of five schools and 541 transactions totaling $133,173. Of the 541 transactions, we identified 390 transactions totaling $85,551 that had one or more deficiencies; these transactions represent 64 percent of the total dollar amount reviewed. The following deficiencies were identified in the audit:

• Required bids were not obtained
• Lack of evidence of receipt for goods and services
• Missing supporting documentation
• No justification for purchases
• Questionable food purchases
• Inappropriate payment of sales tax

The audit also found that cardholders routinely loaned their p-cards to other staff members and the required reconciliation of purchases was not consistently performed.

At the exit conference for this audit, DOE provided us with additional documentation in support of the aforementioned questionable transactions. However, our examination of these documents revealed that some appear to have been fraudulently created. We have referred this matter to the Special Commissioner of Investigation (SCI) for the New York City School District for possible further investigation. A copy of our referral was also sent to the Chancellor. Consequently, we are unable to place audit reliance on any of the documentation provided by DOE at the exit conference.

Audit Recommendations

Based on our findings, we make 13 recommendations, including that DOE should:

• Ensure that the cardholder obtains at least three bids for all purchases over $250 and documents them using the DOE Telephone Bid Summary Form.
• Require schools to ensure that p-card purchases are appropriately supported by receipts, agendas and attendance sheets (when required), evidence of receipt, and justification of the educational need for the purchases.
• Investigate food purchases without required support, food purchases that exceeded the allowable limit, and purchases for which the educational need is not identified to determine whether they were appropriate. Recoup the funds for any purchases deemed inappropriate.
• Require the schools to recoup the sales taxes that were incorrectly paid and remind cardholders that tax-exempt certificates should be submitted for all future purchases.
• Enforce the policy that only authorized cardholders make purchases using the p-cards.
• Ensure that independent p-card reconciliations are performed and evidenced by the signature and date of the reviewer.

Agency Response

In their response, DOE officials agreed with 10 of the report’s 13 recommendations and disagreed with the remaining three pertaining to independent p-card reconciliations and allowing only authorized cardholders to make purchases with p-cards.