Audit of County Procurements (pCard)
Maui County Auditor's Report 16-01, June, 2017 (excerpts)
…A procurement card or “pCard” is a County‑issued credit card that can be used by County employees to buy the goods and services needed to perform their job. Over the 13-month period which was audited, 369 pCards were used by all levels of County employees to make $4.38 million of purchases.
While using pCards inherently improved efficiency and brought in just under $80,000 of cash rebates to the County, we found that some of the County’s pCard use may have been fraudulent, wasteful, or abusive.
The Office of the County Auditor set out to determine if Maui County’s pCards were exposed to similar issues like those reported by local news agencies which claimed that Hawaii County pCards were used to pay for a tab at a hostess bar in Honolulu, an expensive bicycle, surfboard, and other personal use.
Of the nearly 25,000 separate transactions, we observed no instances of pCards being used at hostess bars. However, testing revealed that some hostess bars are categorized as “restaurants”. This creates a loophole that would allow some pCards to be used at hostess or other types of bars. As such, we recommend that this loophole be addressed by finding alternative ways to pay for authorized meals.
We also observed that some pCard purchases were parceled--or broken up into multiple smaller transactions--to avoid the $500 single purchase limits, obtaining price quotes, or other rules meant to safeguard taxpayer funds. To remedy this, we recommend the County make pCard training a priority, monitor and document instances where parceling continues to occur, and when appropriate discipline employees who do not comply. In addition, we also made recommendations relating to improving transparency by requiring Cardholders to disclose pers
onal businesses or “side job” work performed outside of their employment with the County and controlling pCard credit limits in order to reduce financial exposure to the County.
Subsequent Event - personal use of taxpayer funds by someone entrusted to protect it. Near the completion of our audit, we observed an instance where a County pCard was used to purchase round-trip airline tickets to the mainland for the wife and college-aged child of the Director of Finance. Although the Director reimbursed the County, using a County pCard to pay for family members’ travel is personal use. Personal use of a County pCard is explicitly prohibited. County taxpayers deserve better.
This personal use begs the question: can the County realistically expect its employees to follow rules meant to safeguard taxpayer money when those rules are being broken by the person making them?
Because of the serious nature of this matter, we brought this to the attention of the Managing Director on May 5, 2017. …
The Director’s travel was presumed to be to attend an Association of Certified Fraud Examiners in Nashville, TN, relating to “bribery and corruption”. However, neither the Director’s wife nor his college-aged daughter are County employees. (p17)
Active Criminal Investigation -- During the course of our audit, we observed irregularities in some of the pCard transactions which may indicate fraud, waste, or abuse may have occurred. We have been in contact with law enforcement and have provided them with certain summaries and analyses related to these matters. As such, it is our understanding that the transactions of one employee were under active criminal investigation and the transactions of another employee were being investigated internally by the employing department….
P-Cards Pay for Side Businesses --During the course of the audit, we observed instances where Cardholders appeared to be registrants of--or affiliated with‑‑outside businesses. While the extent of these relationships is not known at this time, the fact that many of the items purchased by pCards are theft sensitive and Cardholders could readily use the items in their personal businesses or on “side job” type work, is cause for concern. …
PDF: Audit Report