Audit Report on the Use of Purchasing Cards by the New York City Fire Department

EXECUTIVE SUMMARY

This audit was conducted to determine whether the Fire Department of New York City (FDNY) has adequate controls over its use of purchase cards (P-cards).  P-cards are credit cards issued by the City to agency staff, generally for small purchases, that enable agencies to speed up transaction processing times and reduce administrative costs through the reduction of paperwork and the elimination of some intermediate steps required by the City’s traditional procurement processes.

The Comptroller’s Office and the Department of Citywide Administrative Services (DCAS) have issued guidelines and procedures governing City agencies’ authorization and use of P-cards.  Among other things, in accordance with those guidelines, agencies must establish internal procedures that govern the use and control of P-cards.

In Calendar Year 2014, the FDNY had approximately 130 authorized P-card holders with single transaction limits ranging from $5,000 to $20,000.  During the same year, the FDNY’s P-card users made 4,802 P-card purchases (totaling $4.3 million), the second highest amount of P-card purchases of all agencies with P-card use that year.

Audit Findings and Conclusions

The audit found that the FDNY lacked sufficient evidence to show that the P-card holders’ monthly logs and supporting documentation were promptly reviewed and reconciled with the monthly P-card transaction statements.  In addition, we found that the FDNY does not appropriately segregate duties and require that a person other than the P-card holder (the purchaser) receive the purchased goods upon delivery or require the routine use of receiving reports to document receipt of goods purchased with P-cards.  By foregoing the proper segregation of duties between purchaser and receiver of goods and the routine use of receiving reports the FDNY increased the potential for fraud and inappropriate P-card use.

The audit also noted that cardholders did not consistently comply with P-card use requirements.  This weakness indicates that management should strengthen its efforts to ensure cardholders’ compliance with FDNY P-card policies and procedures across the agency as well as ensure that agency personnel follow Comptroller’s Memorandums #1-01 and 14-1, governing procurement, including P-cards.

With the exception of these deficiencies, the audit concluded that the FDNY had implemented adequate controls over the use of P-cards.  Specifically, the FDNY implemented policies and procedures governing the authorization, use, approval, and accountability over P-cards.  Further, these policies and controls incorporate key provisions of Comptroller’s Memorandum and DCAS’ Citywide P-card policies and guidelines.  If consistently applied, the FDNY policies and procedures will help ensure that: (1) goods and services purchased using P-cards are appropriate; (2) transactions are made by authorized cardholders and are paid for promptly; and (3) P-card transactions are not used to circumvent established City and agency procurement requirements and regulations.

Audit Recommendations

To address the findings raised in this audit, the audit makes 10 recommendations, including:

• The FDNY should ensure that cardholder monthly P-card/credit card logs be promptly reconciled with the monthly statements prior to payment.
• The FDNY should require appropriate segregation of duties, so that designated individuals other than the purchaser receive the ordered goods upon delivery.
• The FDNY should require the use of receiving reports or suitable alternative documentation (e.g., invoices or packing slips), sign and date the documentation, and note the quantity and condition of goods received.  Any shortages, discrepancies and/or damage to the goods on delivery should be documented.
• The FDNY should require that when a service is purchased via a P-card, a department head co-sign a statement acknowledging that the service was satisfactorily completed.  Any problems or deficiencies with the service should be noted as well.
• The FDNY should ensure that its P-card holders obtain price quotes and appropriately document them on the P-card tabulation sheets when procuring goods valued in excess of $5,000 with a P-card or purchases that are grant-funded, as required by FDNY procedures.
• The FDNY should remind all of its P-card holders that, as a government agency, the FDNY should not be charged sales tax for any goods and/or services procured for agency use with a P-card.

Agency Response

FDNY officials agreed or partially agreed with nine of the audit’s 10 recommendations and disagreed with the recommendation that it reconcile cardholders’ monthly P-card/credit card logs with monthly statements prior to payment.