P-Card Audit Shows Room for Improved Controls
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The document summarizes a P-Card audit presented at a January 25, 2018 City Council meeting. It provides details on credit limits, number of cards issued, appropriate and prohibited purchases, the approval process, and findings from the audit including recommendations to improve controls and prevent misuse.
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P-Card Audit Shows Room for Improved Controls
- 1. P-Card Audit City Council Meeting January 25, 2018
- 2. Monthly Credit Limit Single Transaction Limit Number of Cards $10,000 $2,999 145 $ 5,000 $1,500 117 $ 3,000 $1,000 90 $ 1,000 $ 500 34 FY16 Procurement Card Levels
- 3. Appropriate Purchases Prohibited Purchases
- 4. TimeofPurchase System Entry: 2 Days Coding and Documentation Conversion and Payment Department Approval: 8 Days Department Review Approved Rejected Accounting Approval: 1 Day Accounting Review Approved Rejected Approval Process
- 5. Risk Level Count Amount High 36 $7,311 Medium 70 $6,887 Low 270 $42,658 Total 376 $56,856 Approval Findings Summary
- 6. 1. Restructure internal controls to better ensure that transactions are appropriately reviewed. 2. Adjust the current process to ensure the procurement cards of terminated employees are closed as quickly as possible. 3. Investigate JP Morgan system controls that would prevent split purchases. 4. Prevent employees from exceeding highest approved single and monthly transaction limits. 5. Work with departments annually to reassign cardholders into appropriate spending categories. Recommendations
Hinweis der Redaktion
- So to begin, how do employees get a P-Card? The City has an application process through which employees are approved by their department director. Employees are assigned to certain spending categories as shown in the table. If it is deemed necessary by the City a spending limit can be temporarily changed when requested in writing and approved by the Finance Director.
- Next the cardholder decides what to buy. This can include operational supplies, training registrations, travel expenses, and office supplies. The City has opted to control purchases with a combination of single transaction, monthly credit, and merchant category code limit, and is also protected through JP Morgan Chaseâs fraud detection program. We believe that these combination of controls are generally effective and set appropriately.
- Purchases are then imported from the JP Morgan Chase system every day in an effort to keep the Cityâs financial system as accurate as possible. The cardholder then submits their receipts to entry personnel, who attach the receipt to the proper transaction and code the expenditure to the correct budget account. This generally takes about two days. After a purchase is coded, it is sent to the appropriate department or division staff member for review. This approver then reviews the purchase for appropriateness, accurate coding and adequate documentation. On average, it takes about 8 days for a department or division to complete their approval. The purchase is then reviewed once more by accounting for adequate documentation. The transaction is then converted into a journal entry and paid to the creditor. It is important to note that even if the purchase is deemed inappropriate during this process, the transaction must be converted into a journal entry and paid to the bank. We found that generally, this approval process is effective and appropriate - however, some approvals were not adequate.
- Department or division reviews are the strongest form of p-card detective controls. For this reason, the transaction approver should be of sufficient independence and rank to question the cardholder when additional information is needed. Through a review of 376 sampled transactions, we found 15 instances where a cardholder approved their own purchase and 21 instances where a transaction did not receive department or division review. These two types of approvals were deemed high risk and would be a major deficiency if compensating controls were not in place and working effectively. Additionally, we identified 70 instances where an approver was of lower or similar rank to the purchaser. While this means about 71% of purchases are adequately approved â and thus low risk â we believe the financial system could be adjusted further mitigate the Cityâs risk.