Anchorage Daily News

Questionable charges with city credit cards need to stop, Anchorage's new city manager, George Vakalis, is telling employees, after years of audits have highlighted problems.

The credit card transactions "are highly visible and can create a perception of inappropriate activities and lack of oversight by management," Vakalis said in a recent memo to city workers outlining dos and don'ts for the cards.

Vakalis was reacting to the latest audit that found that while most of the credit card charges are fine, some of them stray into gray areas or worse.

"Some of that stuff is truly questionable. If one of my staff's wife gets sick and goes to the hospital, should I use a (city credit card) to buy flowers for my staff's wife?" said city auditor Pete Raiskum. "Do you think that's an appropriate use of public funds? Is this official business?"

The newest audit, which covers charges made during 2008, found that about $4,000 went to purchase "flowers and related items," such as for funerals and hospitalizations, and some $4,700 went to buy coffee and tea. Municipal employees charged nearly $102,000 for food, and another $7,762 went for municipal departments to purchase tables and tickets to the Mayor's Diversity Appreciation and Awards dinner, something allowed at the time but forbidden in an August memo by Vakalis that prohibits charges for charitable purposes.

None of the charges are clear violations of city rules, said Lucinda Mahoney, the city's new chief financial officer. She said the Begich administration, which was in power during the 2008 period covered by the audit, had already moved to restrict using the credit cards for flowers, office decorations and the like -- but those restrictions did not go into place until this summer.

It's been against the rules for employees to use the cards to buy food for themselves or their colleagues. But it's OK to do it when the public is involved, like a meeting with a volunteer city board, and the auditor said it's not certain which charges fall into which category without a lot of investigation.

"If we had lots of time, we could probably go out there and get all the nitty-gritty details but that would take a tremendous amount of audit time to do that. So we just say that it's questionable and let it go at that," Raiskum said.

Raiskum has audited city-employee credit card use for years. Every year his audit has found that for the most part the charges are OK, but there are problems with questionable purchases or fuzzy rules for using the cards.

He said his latest audit showed people using city credit cards to buy gas for municipal vehicles, instead of using the city "fleet cards" that get a better deal at the pump. It's not a lot of money, but it's not allowed, he said. He said he's encouraged by what he sees as the city manager laying out clearer guidelines for what people can do, and "I would imagine next year's audit is going to be pretty bland."

Vakalis's August memo to city workers emphasized the rules in areas like meals, charitable giving and flowers, saying "there shall be no flowers, cards, balloons, decorations, gifts ... for any reason."

He asked department heads to increase oversight.

The state, which gives many of its employees credit cards as well, also does not allow them to be used for flowers, retirements, or regular meals.

Examples of "questionable" city charges identified in the audit include the fire department's purchase of flowers for the funeral of former state medical examiner Franc Fallico, retirement and award plaques by various departments, and lots of purchases of donuts and muffins.

About 560 city employees, those who department heads decide have a need to make purchases for the city, have the cards. They charged $11 million on them in 2008, up from $10 million the year before. They're used for everything from wildfire fighting equipment to office furniture to conference fees. City cardholders aren't allowed to spend more than $2,500 on a single purchase. But the auditor warned of large purchases, like emergency medical kits, put on multiple bills to get around the limit.

The city credit cards started in 2001 under Mayor George Wuerch. Mike Abbott, municipal manager under the subsequent mayor, Mark Begich, said the cards save the city money overall by allowing smaller purchases without as much paperwork and staff time of processing expenses.

But he said there are abuses, most commonly for meals and retirement gifts. Often the meal charges flagged as abuses turned out to be allowed under further investigation, because they were for a public meeting, he said. But at times they were indeed violations of policy, Abbott said.

"We went back and got the employees to reimburse and corrected the behavior," Abbott said.

Find Sean Cockerham online at adn.com/contact/scockerham or call him at 257-4344.

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