Mismanagement of School District Credit Cards

The Washington State Auditor's Office recently issued an audit finding on weaknesses in the Seattle School District's management of District issued credit cards.  The June 21, 2010 audit report covers activity during 2009.

Issues noted in the audit finding include the following:

• Late Fees:  The District was assessed with late payment fees for failure to pay the credit card bills on time.  There were inadequate records by cardholder to track the late fees.  In addition, the District charged the late fees to an "other supplies" account, rather than to an account to track penalties and fees.
• No Receipts:  Receipts for three credit card transactions totaling $5,172 were not in the file.
• Inappropriate Use of Cards:  In violation of the District's policies, the audit found instances where the credit cards were used to pay for hotel and food.
• Authority to Use Cards:  The audit found that not all employees issued a credit card had signed the required "Memorandum of Understanding" outlining the permitted uses and expectations for cardholders.  In addition, some cards were issued to departments, rather than individuals, raising questions about who is responsible for the cards.
• Non-Compliance with Dollar Limits:  According to the audit report, "District personnel may charge up to $1,000 per procurement card transaction and make up to five transactions each day.  Five transactions we examined were over the $1,000 limit." 

Issues Not Resolved From Prior Years:  In the auditor's 2005 and 2006 audit reports, the auditor "communicated weaknesses in procurement card controls to District management and emphasized the need to monitor credit card charges to prevent noncompliance with District policy."  The District has apparently not resolved the issues.

Audit Report:  Click here to read the audit report and finding, on pages 23 and 24.

Lessons Learned:  Government issued credit cards are an effective procurement tool.  However, they must be managed and monitored carefully by supervisors and managers, consistent with an agency's established policies and procedures.  Without such monitoring, they can be subject to abuse.  Other public agencies often find themselves in the headlines when it is revealed that agency credit cards have been used for purchasing personal items for government employees.

Conduct A Pre-Audit:  If your agency currently uses credit cards, you should consider conducting your own pre-audit of your compliance with your own policies.  Do you have the necessary systems in place to monitor the usage of the cards?  If you would like assistance in either structuring a pre-audit that you can conduct, or having me conduct such a pre-audit, please contact me.