COUNTY AUDITOR
115 S. Andrews Avenue, Room 520, Ft. Lauderdale, FL 33301 • 954-357-7590 • FAX 954-357-7592
Date:
January 8, 2004
To:
The Mayor and Members, Board of County Commissioners
From :
Evan A. Lukic, County Auditor
Subject:
Executive Summary – Purchasing Card Program Review – Project 3025PC
____________________________________________________________________________
We have completed a review of the Broward County purchasing card program for the six month
period ended March 31, 2003. The objective of our review was to evaluate the control activities
performed by the Accounting and Purchasing Divisions. We did not review the control activities
or compliance with the established procedures for receipt and authorization of purchasing card
transactions at the procuring division level. Reviews of the control activities at the division level
are scheduled to begin in the near future.
Based upon our review, the control activities performed by the Accounting and Purchasing
Divisions, for the program during the six month period ended March 31, 2003, are designed to
provide reasonable, but not absolute, assurance that management=s directives and procedures
are being followed. Our review disclosed no significant instances of non-compliance.
Our report includes recommendations to refine and improve the control activities for the program.
The County Administrator has been responsive and has agreed to address each of our
recommendations.
Our final report and the County Administrator=s response is submitted for your perusal.
EAL/MD/ng
cc:
County Administrator
County Attorney
Broward County Board of County Commissioners
Josephus Eggelletion, Jr. • Ben Graber • Sue Gunzburger • Kristin D. Jacobs • Ilene Lieberman • Lori Nance Parrish • John E. Rodstrom, Jr. • Jim Scott • Diana Wasserman-Rubin
www.broward.org
PURCHASING CARD PROGRAM REVIEW
For the Six Months Ended March 31, 2003
Purchasing Division
Project 3025PC
Prepared by
OFFICE OF COUNTY AUDITOR
BROWARD COUNTY, FLORIDA
December 22, 2003
TABLE OF CONTENTS
TOPIC
PAGE
OBJECTIVE AND SCOPE ................................................................................................................... 3
METHODOLOGY ................................................................................................................................... 3
BACKGROUND ..................................................................................................................................... 3
FINDINGS AND RECOMMENDATIONS ............................................................................................ 4
CONCLUSION........................................................................................................................................ 7
2
OBJECTIVE AND SCOPE
We have conducted a review of the Broward County purchasing card program for the six
month period ended March 31, 2003. The objective of the review was to evaluate
established internal controls for the program.
METHODOLOGY
The review consisted of an examination of the accounts, records, and reports maintained
by the Purchasing and Accounting Divisions, a sample of the transactions, and the
program's internal control activities, which are the policies, procedures, techniques, and
mechanisms that enforce management=s directives. Control activities in a purchasing card
program include approvals, authorizations, verifications, reconciliations, reviews, and the
creation and maintenance of related records that provide evidence of the execution of
these activities.
BACKGROUND
The County’s Purchasing Card Program is authorized under Section 21.15.c. of the
Broward County Procurement Code
As of May 19, 2003, 708 purchasing cards were issued to county employees assigned to
sixty-five county organizations. For the six month period ended March 31, 2003 there were
15,833 transactions totaling $2,707,125.
The Purchasing and Accounting Divisions administer the purchasing card program and
have developed a Purchasing Card User Manual which details the program objectives,
individual and divisional responsibilities, and County policies and procedures. The manual
is part of the Purchasing Division Internal Control Handbook and is the basis for the
mandatory training of all prospective cardholders and supervisory approvers.
The purchasing cards are issued pursuant to an agreement between NationsBank, N. A.
and the Department of Management Services of the State of Florida. As a participating
entity under the agreement, the County is liable for all employee charges except for those
charges from fraudulent use or qualifying disputes.
The County has the ability to place electronic expenditure limits on the purchasing cards.
Generally, the procurement cards have a $1,000 transaction limit, a $3,000 daily and a
3
$10,000 aggregate monthly limit. Travel cards have higher limits of $2,000 per transaction,
$5,000 per day and $10,000 aggregate per month. In addition, the County may
electronically restrict the use of individual cards by blocking certain merchant codes and
restricting procurement-only cardholders from accessing travel-related vendors.
The Purchasing Card Administrator (PCA) in the Accounting Division oversees and
monitors the program, issues and approves cards, approves summary statements for
payment, and activates and deactivates cards. In addition, the PCA reviews 100% of the
transactions to monitor transactions for splits, inappropriate vendors, capital purchases,
sales tax, and lack of approvals. Selected transactions are also reviewed by the
Purchasing Division to monitor splits and compliance with the County=s procurement rules.
FINDINGS AND RECOMMENDATIONS
Finding One: Assessment of Controls over the Purchasing Card Program
Our review indicates that the control activities performed by the Purchasing and Accounting
Divisions, for the program during the six month period ended March 31, 2003, are
designed to provide reasonable, but not absolute, assurance that management=s directives
and procedures are being followed.
These activities include mandatory training of cardholders and their supervisors prior to
issuance of purchasing cards and monitoring of transactions to identify instances of noncompliance with the purchasing card user manual. The monitoring activity has resulted in
the revocation of forty-eight (48) purchasing cards since inception of the program in 1999.
Recommendation:
No recommendation needed.
Finding Two: Two Administrative Matters Need Attention
Two administrative matters should be addressed:
A.
Two wire transfers to the Bank of America Charlotte, North
Carolina in the amounts of $340,426 and $536,819 were
recorded in the LGFS records five working days after the date
of the transaction. This delay affects the interest allocation to
the various county funds.
4
B.
The credit card limit was raised by the Purchasing Card
Administrator to enable a Fire Rescue Division employee to
charge travel expenses for numerous employees for certain
planned business conferences. The limits were not reduced by
the Purchasing Card Administrator subsequent to the
completion of the conferences. The tracking of credit card
limits was an issue raised in our prior review of this program.
Recommendations:
A.
The Director of Accounting should establish a goal of recording
wire transfers in the LGFS records within one working day.
B.
To improve efficiency, the individual cardholder credit card limits should be
monitored by the Department/Division Coordinators rather than by the
Purchasing Card Administrator.
Finding Three: Additional Control Activities Should be Considered to Refine the
Program.
The United States General Accounting Office (GAO) has issued an Audit Guide titled
AAuditing and Investigating the Internal Control of Government Purchase Card Programs@ to
provide practical guidance for consideration in performance audits and investigations of
government purchasing card programs. Although this guide is primarily an audit and
investigative guide, it can also be applied by program management oversight personnel in
assessing the adequacy of policies, procedures, and internal control activities.
The GAO audit guide contains concepts and recommendations that are applicable to the
County=s purchasing card program, including the following.
Span of Control - refers to the extent of the review responsibilities placed on a single
approving official for the purchasing card transactions of one or more cardholders. In
establishing the reasonableness of this responsibility, consideration must be given to the
number of cardholders assigned, the number and complexity of purchasing card
transactions being reviewed each billing period, and the demands of other responsibilities
assigned to the approving official. The span of control ratio for the County=s program, as a
whole, for the period under review was an acceptable 3.8 cardholders per approver.
However, it was noted that eleven (11) approvers exceeded three times this average,
including two (2) approvers with the review responsibility for thirty-one (31) and thirty-four
(34) cardholders.
5
Screening - Screening refers to requiring cardholders to use vendors that have been pre
approved by the Purchasing Division whenever possible. This requirement is designed to
ensure compliance with the procurement policies and improve internal controls. Presently,
County guidance on which vendors may or should be used is limited to a subsection in the
Purchasing Card Manual that states that ACounty Price Agreements and items in the Central
Warehouse should be checked, if at all possible, prior to open market purchasing.@
Cardholders should be required to purchase goods and services from pre approved
vendors and a policy should be developed for exceptions based on practicality and
availability.
Abusive Purchases - Abusive purchases are defined in the GAO guide as purchases of
authorized goods or services at terms (e.g., price, quantity) that are excessive, or are for a
questionable governmental need. Examples of such transactions include purchases of
items such as $300 day planners and unusually large purchases at year-end. Currently, the
Purchasing and Accounting Divisions monitor transactions for splits, inappropriate vendors,
capital purchases, sales tax, and lack of approvals. The reviews by the Accounting and
Purchasing Divisions may not be effective at identifying the abusive purchases defined
above. Reviews for such transactions would be best performed by the approving official
within the procuring agency; however there is no specific requirement for such review.
Receipt and Acceptance - For the purchasing card program, as a whole, there must be a
policy of independent receipt and acceptance of purchases (e.g., someone other than the
cardholder must receive the goods or services). This critical basic internal control provides
reasonable assurance that the County actually received what it is paying for. Independent
receipt and acceptance of purchased goods must be included in the manual for the
purchasing card program and emphasized in training.
Property Accountability - The establishment of a policy for the purchasing card program
of property accountability (e.g., all items purchased must be adequately safeguarded). The
safekeeping of purchased goods must be included in the purchasing card program manual
and emphasized in training.
Approving Official Review - The approving official’s review of the cardholder's
reconciliation process provides a basis for the approving official to accept responsibility
that the purchases are appropriate, legitimate government purchases. In evaluating the
effectiveness of this critical control activity, an auditor considers the extent of the approving
official's review of the supporting documentation for a cardholder's individual transactions
and the extent of the documentation (e.g., tick marks, system notes) of that review.
Currently, the approver’s review of transactions is, for the most part, only evidenced by the
approver=s signature. The use of tick marks or notes evidencing approver review of the
transactions must be stressed in the training.
6
Financial Exposure - As noted in the GAO guide, financial exposure in a government
purchasing card program can become excessive when management does not exercise
judgment and restraint in issuing purchasing cards and in determining single purchase and
monthly credit limits. By limiting the number of purchasing cards and related credit limits to
the levels necessary to meet operational requirements, the County can better manage and
control its purchasing card program. For this control activity there should be a periodic
review of each cardholder's purchase history, including the number of transactions and
dollars purchased (very few purchase transactions in the previous year might indicate the
lack of a need for the card, while lower than expected dollar volume of purchases might
indicate a lower reasonable cardholder monthly credit limit). Supervisory review of
cardholder purchase history is not currently a County requirement.
Recommendation:
To refine purchasing card program=s control activities, the Directors of the Purchasing and
Accounting Divisions should consider these and other pertinent concepts and
recommendations contained in the GAO audit guide.
CONCLUSION
The control activities performed by the Purchasing and Accounting Divisions, for the
program during the six month period ended March 31, 2003, are designed to provide
reasonable, but not absolute, assurance that management=s directives and procedures are
being followed and our review disclosed no significant instances of non-compliance.
However, opportunities exist to improve the program and the Directors of the Purchasing
and Accounting Divisions should consider implementing the pertinent concepts and
recommendations contained in the GAO audit guide.
7