Follow-Up Audit Report on the Use of Procurement Cards by the Department of Parks and Recreation

AUDIT REPORT IN BRIEF

This follow-up audit determined whether the Department of Parks and Recreation (Parks) has implemented the 13 recommendations made in a previous audit entitled Audit Report on the Use of Procurement Cards by the Department of Parks and Recreation (Audit No. MH05-126A, issued February 8, 2006).

The previous audit evaluated whether the Parks has adequate internal controls over the use of procurement cards (p-cards) and follows the guidelines set forth in Comptroller’s Memorandum #01-1. The audit found that the Parks had inadequate internal controls over its use of p-cards. These weaknesses can allow for the inappropriate use of p-cards and duplicate payments. Also, the audit found that Parks lacked adequate internal written procedures for the correct use of p-cards and did not sufficiently train new cardholders in their use. Further, Parks allowed individuals other than the cardholders to use the cards. The Accounts Payable Unit could not adequately review p-card purchases because of incomplete documentation (especially the lack of receipts and receiving reports). Also, there were problems with approvals and an absence of a log of purchases.

These internal control weaknesses resulted in split purchases, thereby allowing transaction limits to be exceeded, sales taxes from being incorrectly paid, and purchases being made without checking requirement contracts. In addition, the agency failed to inventory items purchased with p-cards. Finally, the lack of integration between the p-card program and City’s Financial Management System allowed an invoice to be paid twice.

Audit Findings and Conclusions

The current follow-up audit disclosed that of the 13 recommendations made in the previous audit, Parks implemented seven recommendations, partially implemented four, and did not implement two. Parks provided written procedures that specified the guidelines for the use of p-cards and provided training to the cardholders. Our review of a sample of 251 p-card transactions found that the cardholders stayed within their transaction limits and that there were no evidence of splitting purchases in order to circumvent the transaction limits for both the individual purchase and the monthly limit. In addition, each cardholder maintained a monthly purchase log and a file with monthly receipts and receiving reports. Both the log and the file are submitted to the Account Payables unit for review.

Parks partially addressed the issue of missing receiving reports, credit card purchases being signed by a person other than the cardholder, two instances of p-card purchase approval forms submitted beyond the designated date, and six instances of sales taxes inappropriately being paid. In addition, Parks did not implement the recommendation to maintain an inventory record for equipment purchased through p-cards and to ensure that cardholders document that DCAS Requirements Contracts are checked prior to making purchases.

Audit Recommendations

To address the outstanding issues from the previous audit that still exist, we recommend that Parks officials should:

1. Ensure that only cardholders use the p-cards.
2. Ensure that cardholders submit receipts, receiving reports, and approval forms for all purchases. If a receipt or receiving report is not available, a note indicating the reason should be attached to the approval form.
3. Ensure that cardholders submit signed and dated p-card approval forms within one week of receiving the monthly MasterCard statement.
4. Remind cardholders of their responsibility to avoid making sales tax payments.
5. Ensure that cardholders document that DCAS Requirements Contracts are checked before purchases are made with p-cards.
6. Maintain inventory records of equipment purchased with p-cards.