Georgia’s Purchasing Card (P-card) Program was established by the Department of Administrative Services (DOAS) in 1996. P-cards function just like credit cards and enable designated state employees to make limited — in terms of type and cost — purchases on behalf of their agencies. While DOAS oversees the P-card program, each of the 129 participating state agencies is responsible for ensuring control over the purchases made with their agency’s P-cards.
A study by the Federal Office of Management and Budget (OMB) conducted in 1994 found that P-card programs saved 60 percent in administrative costs versus a traditional purchase order system. DOAS receives a rebate on card use which has totaled more than $4 million per year.
Problems with the P-Card Program
However, an October 2007 performance audit by the Department of Audits and Accounts uncovered not only performance issues with P-card program but also serious criminal activity. The audit found that:
• The weakness of internal controls at the agency level left the P-card program vulnerable to fraudulent and improper purchases. The weaknesses highlighted by the audit included:
• A lack of policies and procedures at agencies
• A lack of training for P-card users
• Issuing P-cards to individuals or locations with little or no use for them
• Approving officials having too many cards to review
The systemic weaknesses identified led to significant fraud. The October 2007 audit identified four P-card users who were charged with fraud. Cardholder 1, as identified in the audit, purchased $13,000 in American Express gift cards and prepaid Visa debit cards, and $5,700 in Wal-Mart gift cards that were used for personal purchases. Cardholder 1 also bought $4,000 of computer equipment and a $1,300 diamond for personal use. Cardholder 2 purchased $4,500 in Visa debit cards that were then used to make car payments and $9,180 in Wal-Mart gift cards which were used for household items, fuel and groceries.
In addition, the Department of Audits and Accounts identified certain P-card users to their universities whose accounts had suspicious activities. This identification led to subsequent prosecutions, terminations and fund recoveries.
Three statewide steps have been taken to ensure better handling of P-cards in the future. First, the Legislature passed HB 1113, which does the following:
• Requires receipts (duh)
• Limits purchases to $5,000 without contract
• Prohibits alcohol, tobacco, gift cards, related personal items
• Requires department/agency review of usage and elimination of low usage cards
Second: SB 548 provides stronger penalties for P Card abuse
• Misuse under $500 is a misdemeanor
• Misuse over $500 is now a felony
Third: DOAS updated the Statewide Purchasing Card Policy to reflect the changes made by the legislature. The updated policy went into effect on July 1. In addition, DOAS has started using the Works application from Bank of America, which allows P-card program managers to view transaction-level data in order to analyze any suspicious purchases.
Agencies large and small have evaluated their P-card usage and are reporting they have taken the steps needed to improve internal controls. The University System of Georgia (USG), which employed all four cardholders identified by the Department of Audits, initiated its own audit of P-card usage by USG employees. The audit, published in February, highlights 22 individual instances of fraud or misuse of P-cards. Of these 22 cases within the University System, the Attorney General’s office reports that:
• One case being prosecuted by the federal government involving $336,000 has resulted in a guilty plea with sentencing set for Aug. 19.
• Four are being pursued by local district attorneys.
• The remaining 17 are being handled by the Attorney General’s office.
• Four of the 17 cases have been resolved with one guilty plea, one case prosecuted, and two not pursued due to a lack of wrongdoing.
• The remaining 13 cases are in various stages of prosecution.
In addition to the identification and prosecution of those suspected of committing fraud, the Board of Regents has implemented numerous changes to ensure that similar problems do not occur in the future. The Regents has rewritten its business procedures manual to reflect changes made by DOAS due to HB 1113. In addition, chief business officers, presidents and student affairs leaders have all been trained on the changes made to P-card policy. The chancellor also has charged the USG’s chief audit officer with creating a compliance function within USG’s Office of Internal Audits.
The Legislature will be requesting an updated audit of P-card use or abuse in the next year.
I may be reached at
234 State Capitol, Atlanta, GA 30334
(404) 656-5038 (phone)
(404) 657-7094 (fax)
E-mail at Jack.Hill@senate.ga.gov
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