The crop of "questionable" charge card purchases by Anchorage city employees in 2016 included flu vaccinations, workplace appliances, food for meetings, employee gifts, Christmas cards and premium satellite television subscriptions, according to a recent annual review by the internal auditor's office.
Auditors also found instances of employees splitting up purchases to circumvent daily transaction limits designed to control abuse.
Overall, however, most city employees followed city policies for the use of procurement cards, known as "p-cards," and the prohibited or questionable purchases didn't stand out as unusual or criminal in nature, auditors said.
"In my opinion, it was pretty much the same as other years," said Scott Lee, the internal auditor who worked on the report. "We didn't notice anything that really went out of the contrary."
Procurement cards took the place of paper checks to pay for the vast majority of low-cost goods, services and business and travel expenses. The program saves the city tens of thousands, if not hundreds of thousands, of dollars annually, by dramatically cutting back on the time, labor and human error associated with paper checks, said city manager Mike Abbott.
The tradeoff, Abbott said, is giving hundreds of people individual decision-making power over small-time purchases.
"You lose some of the centralized control over some of that decision-making," said Abbott, who has also previously worked as chief operating officer for the Anchorage School District. "Every year I've watched any large organization's p-card program, there are non-compliant purchases from time to time."
With the approval of supervisors, city employees made about 48,000 transactions in 2016, an increase of about 3,000 transactions over the prior year. The value of the transactions increased from $16.5 million in 2015 to $18 million, according to the auditor's report.
The "non-compliant" transactions — spending city money in ways that don't serve the public interest — typically arise from a misunderstanding of what can be charged to the cards, Abbott said. Gifts generally aren't allowed, or food for meetings or trainings.
In some cases of questionable purchases in 2016, employees and supervisors simply needed to provide more justification for the expense, Lee said.
"It's not totally prohibited, it's just we need to follow up with more questions," Lee said.
The Anchorage Assembly is scheduled to approve the auditor's report, which was completed in late July, at its meeting next Tuesday.
The internal auditor's office typically does not release full audit reports prior to Assembly approval, when the report is considered final. A copy of the 2016 procurement card review was provided by Assembly Chair Dick Traini, with the Assembly audit committee set to discuss the review at a Friday meeting.
Beyond summarized examples, Lee declined to elaborate on the exact number or amount of questionable or prohibited transactions before next week's Assembly meeting. His report stated the "magnitude of the transactions was not significant."
During the review, the auditors also uncovered instances of splitting expenses to get around daily purchase limits — in all, 24 purchases totaling $119,000, according to the report.
Employees bought items such as furniture, computer monitors, vehicle batteries and vehicle repairs. The most split transactions, 10, came from the Municipal Light & Power department, according to the report.
While the actual purchases were legitimate, the method of acquiring the goods violated city policy, according to Lee. He said the auditors noticed more issues with purchase limits after changing the review method to look at vendors, and found, for instance, one purchase that was made using three different cards.
Lee said employees should have asked permission to exceed the permit limits, instead of splitting the purchases, and auditors have recommended suspending privileges to employees who try to get around transaction limits.
For curbing "questionable" or prohibited transactions, the auditors recommended agencies be well-versed in city policies for the cards. City management provided additional training with the issuance of new chip cards in July, based on the findings in the audit, according to the report.