An internal audit of credit cards used by Fort Worth employees to make city purchases suggests that tighter controls are needed after finding potentially risky and questionable purchases, including a $1,899 Apple computer that is now missing.
In the two-year period the audit covers, 18 city departments charged $296,291 at restaurants and with caterers, but receipts for the purchases don’t verify that all the purchases were appropriate, the report says. Some were not business-related and included a $3,687 tab for a retirement party. The city was reimbursed for the party, the report says.
The 26-page audit report cites violations of subordinates authorizing manager purchases, city employees paying for $3,450 in car washes for city-owned vehicles when they should have been washed at a city facility, and $12,830 spent to buy gift cards in seven departments, among other things.
Moreover, some former employees still had access to procurement software and former employees’ cards were being used by other employees, the audit found.
The city spends about $12 million a year using the cards, with 40 percent of that spent to buy industrial supplies, the report said. The cards have $3,000 spending limits. The city has used credit cards since 1994 to account for and expedite the business of the city.
Lack of training
The report, though, suggests that some violations may have resulted from a lack of training and from inconsistencies in five documents that spell out how and when the procurement cards can be used. Still, existing policies and procedures were not enforced, the report says.
City auditors found that the documents were “vague and/or outdated,” and they called for the city’s chief financial officer and procurement administrator to review policy and written directives and “develop a single, comprehensive set of guidelines.” That work is underway.
Of the 594 employees issued a procurement card as of April 1, 95 employees, or 16 percent, had received no training at all, according to the report. Employees are also asked annually to sign a statement indicating they know they are liable for the card.
City Manager David Cooke and Assistant City Manager Susan Alanis said that though the report raises concerns over internal controls, it doesn’t provide enough context that actually supports many of the purchases singled out and that there was money from other programs that provided reimbursement in most cases.
None of the purchases were made for personal use and the transactions raised in the report are being looked into, they said. The employee who authorized the computer purchase, which should have been made through the IT Solutions Department and inventoried, has been disciplined.
It does provide us a great opportunity to stress fiscal stewardship again. This gives us another opportunity to look at the policies and risk exposure and decide whether we want to tighten up in some areas.
Fort Worth City Manager David Cooke
“It does provide us a great opportunity to stress fiscal stewardship again,” Cooke said of the report. “This gives us another opportunity to look at the policies and risk exposure and decide whether we want to tighten up in some areas.”
Thorough audit review
A couple of years ago, the mayor and City Council ago began pushing for smaller program performance audits to keep tabs on the city’s fiscal health. The procurement card program was audited in 1998 and again in 2002, but there is no record of audits since. This latest audit is the most thorough.
In the case of the retirement party, the money was donated ahead of time by the Sid Richardson Foundation, but the procurement card was approved for use to secure a caterer, Alanis said. The audit report didn’t reflect that the money was already in hand, she said.
The car wash expense was approved and resulted from the detailing of city vans that transported homeless people from an overflow shelter for 20 days during the harsh cold weather last year, Alanis said. And the bulk of the gift cards, $7,115 worth, was paid for with federal dollars in a job readiness program through the Park & Recreation Department.
Of that, $461 from a Community Services Block Grant was used to buy an eyelash extension kit and manual for a program participant who was training to become a beautician, an allowable expense, Alanis said. The client is now working and has transitioned out of poverty, no longer requiring help in paying utility bills and rent, she said.
“Right or wrong, we’ve had some words about whether that made any sense or not, but through that program it was a valid expense for job readiness,” Alanis said. “It met the guidelines of the program.” She said she was not aware of any other cosmetics being bought with the city credit card.
But $3,450 charged to pay for outside legal fees to help a local board overseeing a private foundation grant for programs for school-age children was not authorized by the legal department or the mayor and council, setting up a potential conflict of interest issue, the report said. The city’s Park & Recreation Department is administering the grant while the board works to register as a nonprofit, and although no city money was involved, it’s an improper use of the card.
The audit reviewed policies and procedures governing card use, analyzed buying and approval processes and inventoried large-value purchases to verify the item purchased, among other things.
It covered $24.6 million worth of purchases made between Feb. 1, 2013, and Jan. 31, 2015. The report was completed a month ago.
$24.6 millionAmount spent by Fort Worth employees using procurement cards in a two-year period
City auditors also called for “more diligence” on the part of department heads, assistant city managers and the city manager in making sure city policy and code are being followed. Also, for assurances that cards are deactivated immediately when employees leave their jobs with the city.
“We are reviewing every cardholder in the city right now,” Alanis said.
During the audit period, four cards were used to make nine purchases after the cardholder was no longer employed by the city, the report says. But the purchases — for industrial supplies, travel and meals — were actually made by employees in the departments where the former employee worked.
In some cases, state sales taxes were paid — cities are exempt from paying sales tax — and in others, purchases were made with vendors without existing purchase orders, meaning the city could be overpaying for items where negotiated prices exist.
The audit also identified the unauthorized computer purchase. The Apple computer was bought by a Park & Recreation Department employee in June 2014, but it still can’t be found. The city has “exhausted efforts to locate” it, and the former employee who bought it says they don’t have it, the report said.
Alanis said “appropriate disciplinary action” was taken and the employee who approved the purchase now knows “that wasn’t great judgment.”
The bulk of the food purchases were within the Park & Recreation Department and were for summer and after-school programs reimbursed by federal programs, and for volunteer appreciation luncheons that are paid for by other organizations, all authorized uses for the card, she said.
But a lawn mower was bought by the Park Department using an employee credit card, when it should have been purchased through a different process.
Alanis said the report contained “several things” to review regarding the procurement card program and its approval process.
“It was good in terms of triggering our thinking,” she said. ““There’s some work to do.”