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Audit finds unapproved and undocumented purchases in school district charge-card program

  • Author: Tegan Hanlon
  • Updated: September 28, 2016
  • Published March 9, 2015

An audit of an Anchorage School District program that provides some employees with charge cards revealed thousands of unapproved purchases, a $2,500 faculty lunch and a $164 bill from a downtown restaurant that was described as "Chinese Grant Supplies."

Overall, the auditors concluded that ASD's procurement card, or p-card program, "needs improvement."

Mark Foster, ASD chief financial officer, said Monday that the audit's findings did not come as a complete surprise. ASD requested the audit in the 2013-14 school year after employees monitoring the p-card program began flagging questionable and prohibited purchases. The municipality's Internal Audit Department presented its findings last week.

"The auditor went in and selected a few areas that we thought were at risk and found some stuff that we expected would probably be out there," Foster said. "Now we're focusing on cleaning those areas up."

Peter Raiskums, head of the municipality's Internal Audit Department, said that the findings did not raise alarm but did draw attention to a need for some changes.

"It looks like they're doing real good," he said of ASD's p-card program. "It has saved them money and time on small purchases, and that's what it was intended to do. I think once they see this first look-see into their program and tighten up a little bit on procedures, I think it will be great."

ASD implemented the p-card program in August 2012. Hundreds of ASD employees who regularly purchased items on behalf of the school district received a p-card, akin to a debit card, through U.S. Bank. The municipality had run a similar program for about a decade.

Foster said ASD expected the p-card program to save money and streamline purchasing. For example, it allowed an authorized elementary school employee with preapproval from a supervisor to buy the supplies needed to fix a plumbing issue instead of going through a formal and layered procurement process.

During the 2013-14 school year, ASD distributed more than 660 p-cards. It processed more than 41,400 transactions totaling about $8.9 million, according to the audit.

With a few exceptions, the p-cards can be used to purchase items under $2,500, according to ASD's p-card procedures.

Approved items include office and teacher supplies, tools, books and repair parts. Prohibited items include money orders, monetary awards, alcohol, gift cards, parking tickets, rental agreements, personal purchases and maintenance contracts.

"If it's not on the approved list, don't do it," Foster said.

The audit found that in the 2013-14 school year, about $29,200 was spent on food for staff, including the $2,500 spent at one high school for an end-of-year faculty lunch. Food purchases are not explicitly prohibited in the p-card procedures but are labeled as "questionable" in the audit.

"Ironically, when these purchases were made, some schools asked parents to help supply their classrooms with student snacks," the audit said.

Foster said Monday that according to district policy, food purchases at schools are "limited to events where it's required" -- for instance, an event to which parents are invited, he said.

Purchases that auditors labeled as "misleading" included a $630 bill at the Snow Goose Restaurant described as "Staff Support Mid Winter," a $1,575 purchase of two sheds described as "teacher supplies" and a $164 bill at Simon and Seafort's restaurant that was described as "Chinese Grant Supplies."

Foster said grant programs may include money for food, though the purchases should not have been made using p-cards. The audit also found that p-card holders spent $4,200 on gift cards, equipment valued over $500 and rental agreements for facilities -- all prohibited.

While a supervisor is meant to approve all p-card purchases, the audit found that ASD did not have any documented procedures for approval. The school district did not document when p-card purchases should be approved or what supervisors should look for. During the 2013-14 school year, auditors found 2,436 unapproved transactions.

Foster said ASD still pays for those purchases. He said the district will typically not attempt to recoup funds from a cardholder unless he or she makes a large personal purchase, which a municipal auditor said did not occur during the 2013-14 school year.

"Our basic practice is to honor those deals and when people abuse those privileges, we pull those cards so they can no longer use them," Foster said.

Other major findings included:

• Purchases were not always documented: In a review of 255 p-card purchases, auditors found 29 transactions, totaling nearly $17,000, that were not adequately documented. The purchases included hotel deposits, televisions, teaching supplies and in-flight entertainment.

• Cardholders did not always enter purchase descriptions: Of 255 p-card purchases, 12 transactions had blank descriptions. A supervisor approved four of those.

• Mandatory training was not provided: Some staff said p-card training occurred in August 2012 and then never again.

• Receipts were not required for all travel purchases when a per diem allowance was granted.

In ASD comments included in the audit, the school district said it would remind p-card holders of procedures. It would rewrite the procedures to include a section requiring a supervisor's approval on all purchases.?

ASD said it would work with schools to provide a p-card overview to principals at their upcoming division meetings and require receipts for travel expenses that exceed $25. Foster said the school district would likely expand its list of prohibited purchases.

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