ASD INTERNAL AUDIT REPORT

ASD INTERNALAUDIT REPORT
2015-01
ProcurementCardPurchases
AnchorageSchoolDistrict
February25,20L5
MIJMCIPALITY OF ANCHORAGE
InternalAudit Department
632W 6th Avenue,Suite600
P.O.Box 196650
Anchorage,Alaska995I 9-6650
www.muni.org/departmentMntornal-audit
INTERNAL AUDIT DEPARTMENT
CLA,CFE,CGFM
PeterRaiskums,
Director
(907)343-M38
Phone:
Fax:(907)343-4370
@muni.org
E-Mail:raiskumspw
M UNICIPALITYOF AruCHORAGE
Internal
AuditDepartment
632W. 6tnAve.,Suite600
Phone: 907-343-4438
Fax: 907-343-4370
MayorDan Sullivan
Februarv
25.2015
AnchorageSchoolDistrict Superintendentand Membersof the School Board:
I am pleasedto presentASD Internal Audit Report 2015-01,ProcurementCard Purchases,
An'chorageSchoolDistrict for your review.A brief summaryof the reportis presentedbelow.
We have completedan audit of the AnchorageSchool District's ProcurementCard Purchases.The
objective of this audit was to determine whether cardholdersadheredto the Anchorage School
District's policiesand proceduresregardingProcurementCard use.We also determinedwhether
purchaseswere for official Anchorage School District business. This was our first audit of
ProcurementCardpurchases.Our audit includeda review of purchasesmadefrom July l, 2013 to
June30, 2014.
The ProcurementCard programneedsimprovement.Our review of ProcurementCard transactions
purchasesthat
revealedinstancesof questionablepurchasesincludingsomeprohibitedpurchases,
were not always approved, and purchasesmade with ProcurementCards that were not always
allocated to the appropriate account code within three business days. We also found that
documentationfor the purchaseswas not always maintained, users did not always record the
descriptionof their purchasesand somedescriptionsdid not adequatelydescribethe itemspurchased.
Further,proceduresdid not require detailedreceiptsfor ProcurementCard purchasesmade during
official travel when per diem was paid anddid not includesupervisoryresponsibilitiesfor approvalof
purchases.Finally, mandatoryProcurementCardtraining hadnot alwaysbeenprovidedto employees
with ProcurementCards.
Therewere ten findings in connectionwith this audit. Managementwas generallyresponsiveto the
findingsand recommendations.
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CGFM
C[A, CFE,
PeterRaiskumS,
Director,IntemalAudit
E
M u NICIPALITYOF AI,ICHORAG
Internal
AuditDepartment
632W. 6tnAve..Suite600
Phone: 907-343-4438
Fax: 907-343-4370
MayorDan Sullivan
February
25,2015
ASD Internal Audit Report 2015-01
ProcurementCard Purchases
AnchorageSchoolDistrict
Introduction. The Finance Department (Finance), in collaboration with the Purchasing
Department,implementedthe ProcurementCard (P-Card)program in August 2012 toprovide for
the purchaseand payment of goods and services,while reducing the need for petty cash funds,
employeereimbursements,low dollar purchaseorders,and vendor payments.The P-Cardprogram
is administeredby the Controller, who is part of Finance.The Chief Academic Officer assistsin
the P-Card administration by disseminating guidance to the schools. The P-Card Cardholder
Procedures(P-Card Procedures)were implementedto provide guidelinesfor the appropriateuses
of P-Cards.The AnchorageSchool District (District) usesU.S. Bank for its credit card services.
wereprocessedfor
Accordingto Finance,during the 2013-14schoolyearover 41,400transactions
about$8.9 million. tn addition, there were over 660 active P-Cardsduring the sameschoolyear.
Obiective and Scope.The objectiveof this audit was to determinewhethercardholdersadhered
to the District's policies and proceduresregardingP-Card use. We also determinedwhether
purchaseswere for official District business.This was our first audit of P-Card purchases.Our
auditincludeda review of purchasesmadefrom July 1,2073 to June30,2014.
The audit was conductedin accordancewith generally acceptedgovernment auditing standards,
exceptfor the requirementof an externalquality control review, and accordingly,includedtestsof
accounting records and such other auditing procedures as we considered necessaryin the
circumstances.The audit was performed during the period of August through October 2014. The
audit was requestedby the AnchorageSchoolDistrict Budget and Audit Committee.
ASD IntemalAudit Report2015-01
Procurement
CardPurchases
AnchorageSchoolDistrict
February
25,2015
Overall Evaluation. The P-Cardprogram needsimprovement.Our review of P-Cardtransactions
revealedinstancesof questionablepurchasesincluding someprohibited purchases,purchasesthat
were not alwaysapproved,and purchasesmadewith P-Cardsthat were not always allocatedto the
appropriateaccount code within three businessdays. We also found that documentationfor the
purchaseswas not always maintained, users did not always record the description of their
purchasesand some descriptions did not adequately describe the items purchased.Further,
proceduresdid not requiredetailedreceiptsfor P-Cardpurchasesmade during offrcial travel when
per diem was paid and did not include supervisory responsibilitiesfor approval of purchases.
Finally, mandatoryP-Cardtraining had not alwaysbeenprovided to employeeswith P-Cards.
FINDINGS AI{D RECOMMENDATIONS
l.
OuestionablePurchases.
Findine. Our review of P-Card transactionsrevealed instancesof questionable
purchases. For example, schools purchased about $29,200 in food for staff
meetings, staff training, staff breakfasts,staff lunches, staff appreciation, staff
holiday celebrations,and beginning of school and year-endmeals for staff. In one
case,a high school spent$2,500 for an "End of Year Faculty Lunch" using general
funds. Ironically, when thesepurchaseswere made, some schoolsaskedparentsto
help supply their classroomswith studentsnacks.The P-Card Proceduresstatethat
purchasesmust be only for district businesspurposes,provide the district value and
quality, and be necessary.In addition, the Budget PreparationManual statesthat,
"Meals and food purchasesfor adults should be moderate and justified as to
operationalneed."
Other questionablepurchasesinclude about $3,200 for staff gifts which were
funded by studentactivity funds. Thesestaff gifts included $120 for staff gift cards,
$1,210 for staff shirts, and a $200 purchasefor a staff holiday party at the Beach
Lake Lodge which was described as "Staff Holiday Site". In addition, we
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ASD IntemalAudit Report2015-01
Procurement
CardPurchases
Anchorage
SchoolDistrict
Februarv
25.2015
identified severalpurchasesmade from specialtystoressuch as Alaska Wild Berry
Products,funded by grant funds, and Natural Pantry, funded by student activity
funds. Items purchasedfrom these storescould have easily been purchasedfrom
lessexpensivestores.
b.
Recommendation. The Controller and the Chief Academic Officer shouldremind
all P-Card holders of the P-Card Proceduresand the Budget PreparationManual
requirements.In addition, the Controller should establishadditional guidanceand
progmm policy to define what may or may not be an appropriateexpenditureof
public funds and studentactivity funds.
Management Comments. The Controller stated, "Management agrees and
states, 'All P-Card holders will be reminded of the P-Card Proceduresand the
Budget
Preparation Manual
requirements. Additionally,
the
Finance
Department will be reviewing and revising the current P-Card Proceduresand
will clearly define what may or may not be an appropriate expenditure of
public funds and student activity funds .' "
The Chief Academic Officer agreedand stated," The Chief Academic Officer will
meet with the controller to develop an overview of P-Card procedwes and
purchase requirements. This will include examples of inappropriate P-Card
purchases. The Chief Academic Officer will then work with the Executive
Directors of Elementaryand SecondaryEducation to provide the overview to all
principalsduring their divisionmeetingson March 31, April 1, and April2."
d.
Evaluation of Management Comments. Managementcommentswere responsive
to the audit finding and recommendation.
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ASD InternalAudit Report2015-01
Procurement
CardPurchases
Anchorage
SchoolDistrict
25,2015
February
)
PurchasesNot Alwavs Documented.
Findine. Documentation for P-Card purchaseswas not always maintained. We
reviewed 255 P-Card purchasesand found 29 transactions,totaling $16,985,that
were not supportedby adequatedocumentation.Purchaseswithout documentation
included hotel deposits,teachingsupplies,and televisions,funded by studentand
generalfunds, and in-flight entertainment,funded by glant funds. According to the
P-Card Procedures, "The cardholder is responsible for maintaining adequate
receipts for p-card purchases.The documentationretained should include sales
receipts,packing lists (if applicable)and credit card transactionsreceipts."
b.
Recommendation. The Controller and the Chief Academic Officer shouldremind
all P-Card holders to adhereto the P-Card Proceduresby maintaining adequate
documentationfor P-Cardpurchases.
c.
Management Comments. The Controller stated, "Management concurred and
states, 'All P-Card holders will be reminded to adhere to the P-Card
Proceduresby maintaining adequatedocumentation for all P-Card purchases."'
The Chief Academic Offrcer agreedand stated,"The Chief Academic Officer will
meet with the controller to develop an overview of P-Card procedures,
requirementsand the need to maintain adequatedocumentationof all purchases.
This will include examplesof P-Card documentationconcernsfrom the past. The
Chief Academic Officer will then work with the Executive Directors of
Elementary and SecondaryEducation to provide the overview to all principals
during their division meetingson March 31, April 1, and April2."
d.
Evaluation of Management Comments. Managementcommentswere responsive
to the audit findinq and recommendation.
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ASD InternalAudit Report2015-01
Procurement
CardPurchases
Anchorage
SchoolDistrict
Februarv
25.2015
3.
Prohibited Purchases.
a.
Findine. Our review of P-Card transactionsrevealedsome prohibited purchases.
For example,prohibited purchasesincludednearly $4,200 in gift cards,equipment
valued over $500, and rental agreementsfor facilities. According to the P-Card
Procedures, prohibited purchases include rental payments, payments to
independent contractors, payments for maintenance contracts, gift cards, and
equipment $500 or greater (due to assettagging requirements).Public trust and
public funds are at risk if prohibited purchasesare made.
b.
Recommendation. The Controller and the Chief Academic Officer shouldremind
P-Card holders of prohibited purchases.Additionally, the Controller should
continuesuspendingprivileges for P-Cardholderswho purchaseprohibited items.
c.
Management Comments. The Controller stated,"Management agrees and will
continue current practices. P-Card holders will continue to be notified of all
prohibited purchases by formal notice. Additionally,
privileges may be
suspendedfor P-Card holders who purchaseprohibited items."
The Chief Academic Officer agreedand stated,"The Chief Academic Officer will
meet with the controller to develop an overview of P-Card procedures,
requirements and prohibited purchases.This will include examples of P-Card
prohibited purchasesthat have occurredin the past. The Chief Academic Oflicer
will then work with the Executive Directors of Elementary and Secondary
Educationto provide the overview to all principals during their division meetings
on March 31, April l, and Apil2."
d.
Evaluation of Management Comments. Managementcommentswere responsive
to the audit finding and recommendation.
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ASD IntemalAudit Report2015-01
Procurement
CardPurchases
Anchorage
SchoolDistrict
February
25,2015
4.
Unapnroved Purchases.
a.
Findine. P-Card purchaseswere not always approved. Specifically, we found
2,436 transactionsthat were not approved.While someof thesewere recentP-Card
purchases,many of them have been pending approval for many months and
sometimesmore than a year. For example,in November 2013 a P-Card was used
to purchasepizza.ln anothercase,in July 2013 a P-Card was usedto purchase
firewood. At the time of our audit, thesepurchasesstill had not yet beenapproved.
By not showing evidencethat the supervisorreviewed the purchases,there is a risk
that unauthorizedpurchaseswill be madeand that overspendingwill occur.
b.
Recommendation. The Controller and the Chief Academic Officer should revise
P-CardProceduresto requiresupervisorsto review and approveP-Cardpurchases.
c.
Management Comments. The Controller stated, 'oManagement agrees and
states, 'The revision of the P-Card Procedureswill include a section regarding
the requirement of Supervisor approvals of all P-Card purchases.'"
The Chief Academic Officer agreedand stated,"The Chief Academic Officer will
meet with the controller to consider changes to P-Card proceduresregarding
supervisorapproval and the need to approveall purchasesthrough US Bank. The
Chief Academic Officer will then work with the Executive Directors of
Elementary and Secondary Education to provide any changes in approval
proceduresto all principals during their division meetings on March 31, April l,
andApril2."
d.
Evaluation of Management Comments. Managementcommentswere responsive
to the audit findins and recommendation.
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ASD IntemalAudit Report2015-01
Procurement
CardPurchases
Anchorage
SchoolDistrict
Februarv
25.2015
t.
PurchasesNot Alwavs Coded Within Three BusinessDavs.
Findine. Purchases made with P-Cards were not always allocated to the
appropriateaccount code within three businessdays. Our testing of 255 P-Card
transactionsrevealedthat delaysin allocatingchargesrangedfrom 4 to 86 days.As
noted in the P-Card Procedures,"Cardholders are required to allocate their
transactionsto the appropriateaccount code within three businessdays of the
transactiondate." The short time for allocating transactionskeeps the timeframe
betweenpurchasespostedwith U.S. Bank againstthe District's financial systemto
a minimum. This is intendedto keep the District's reporting activity as up to date
as possible.
b.
Recommendation. The Controller should continue suspendingprivileges for PCard holders who do not allocatetheir transactionsto the appropriateaccountcode
within three businessdavs.
Management Comments. The Controller stated, "Management agrees and
states, 'Management will continue to audit allocations on a monthly basis and
will continue suspending privileges for P-Card holders who do not allocate
their transactionsto the appropriateaccount code within three businessdays.' "
d.
Evaluation of Manaqement Comments. Managementcommentswere responsive
to the audit finding and recommendation.
6.
PurchaseDescrintionsNot Alwavs Entered.
Findine. P-Card users did not always record descriptionsof their purchases.For
example, our testing of 255 P-Card transactionsidentified 12 transactionswith
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ASD InternalAudit Report2015-01
Procurement
CardPurchases
Anchorage
SchoolDistrict
February25,2015
blankdescriptions.
Fourof thesetransactions
wereapprovedby the supervisor.
PCardProcedures
requiretheP-Carduserto entera brief descriptionof thepurchase
to assistthe approverin theirreview.
Additionalanalysisrevealed27 P-Cud transactions
in IFAS with no descriptions.
Moreover,whenwe revieweddatafrom the U.S. Bank websitewe found 440of
40,824transactions
containedblankdescriptions.
We askedFinancestaffwhy the
U.S. Bank websitehadmoretransactions
withoutdescriptions
comparedto IFAS.
Accordingto Financestaff,theytry to addmissingdescriptions
for P-Cardusers.
b.
Recommendation.
The Controllerandthe ChiefAcademicOfficershouldremind
all P-Card cardholdersto adhereto the P-Card Proceduresrequiring a description
ofthe purchase.
Management Comments. The Controller stated, "Management agrees and
states, 'Management will remind all P-Card holders to adhere to the P-Card
Procedureswhich require a description of the purchase. Supervisors will also
be reminded that descriptions should be checked during their approval
process."'
The Chief Academic Officer agreedand stated,"The Chief Academic Officer will
meet with the controller to develop an overview of P-Card procedures and
requirements,including the need to provide a description of all purchases.The
Chief Academic Officer will then work with the Executive Directors of
Elementary and SecondaryEducation to provide the overview to all principals
during their division meetingson March 3 I, April 1, and April 2."
d.
Evaluation of Management Comments. Managementcommentswere responsive
to the audit finding and recommendation.
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ASD IntemalAudit Report2015-01
Procurement
CardPurchases
Anchorage
SchoolDistrict
February
25,2015
1
PurchaseDescriptionsSometimesMisleadins.
Findine. Some P-Card transaction descriptions did not appear to adequately
describe the purchases. For example, a $630 purchase at the Snow Goose
Restaurant,funded by generalfunds,was describedas "Staff SupportMid Winter."
Also fi.rndedby generalfunds, a $1,575 puchase for two shedswas describedas
"teacher supplies" and a $27.95 pruchasefor basketballsand 4-squareballs was
described as "art supplies". Moreover, a $164 purchase made at the Simon &
Seafort's restaurant was described as "Chinese Grant Supplies" and $309 of
purchases at Little Caesars Pizza and Papa John's Pizza were described as
"program supplies", which were funded by grant funds. Finally, other purchases
were simply described as "Welcome Back Staff', "Welcome Back Meeting",
"teaching supplies/activity",or "teachingsupplies/writeak".VendorsincludedFred
Meyer, Carrs, Moose's Tooth, Peppercini'sDeli & Catering, and Golden Donuts.
The P-Card Proceduresstate that the ". . . description should provide additional
information to what alreadyappearson the transaction.The additionalinformation
shouldprovide detailsto assistthe approverin their review."
b.
Recommendation. The Controller and the Chief Academic Officer shouldremind
all P-Cardcardholdersto adequatelydescribetheir purchases.
c.
Manaqement Comments. The Controller stated, "Management agrees and
states, 'Management will remind all P-Card holders to adhere to the P-Card
Procedureswhich require that a description provides additional information to
what already appearson the transaction. Supervisors will also be reminded that
descriptions should be checked during their approval process.' "
The Chief Academic Offrcer agreed and stated, "The Chief Academic Officer
will meet with the controller to develop an overview of P-Card proceduresand
requirements, including the need to provide accurate descriptions of all
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ASD IntemalAudit Report2015-01
Procurement
CardPurchases
Anchorage
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Februarv
25.2015
purchases.Examplesof misleadingpurchasedescriptionsfrom the pastwill be
included. The Chief Academic Officer will then work with the Executive
Directorsof Elementaryand SecondaryEducationto provide the overviewto
all principalsduring their division meetingson March 31, April 1, and April
2;',
d.
wereresponsive
Evaluationof ManagementComments.Management
comments
to theauditfindins andrecommendation.
8.
ReceiptsNot Required for All Travel Purchases.
Findine. Proceduresdo not require receipts for P-Card purchasesmade during
travel activities when per diem allowancesare granted. As a result, the District
cannot determineif unallowablepurchases,such as alcohol, were made during the
cardholders'travel activities.
b.
Recommendation.The Controllershouldrequirereceiptsfor all P-Cardpurchases
or consider discontinuing the use of P-Cardsfor items purchasedusing per diem
allowances.
c.
Management Comments. The Controller stated,"Management agreespartially
and wishes to continue using P-Cards for meals purchased using per diem
allowances. Management will adopt the State of Alaska's AAM 60.220 Travel
Expenses- RequiredReceiptsand Document (01-12): and requirereceiptsfor
expensesexceeding$25.00.
"Management will remind all employees traveling on behalf of the district of
the need to adhere to the P-Card Procedures. Management will also revise
travel policy and will include a P-Card section to further reiterate policy."
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ASD InternalAuditReport2015-01
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CardPurchases
Anchorage
SchoolDistrict
February
25,2015
d.
Evaluation of Management Comments. Managementcomments were partially
responsiveto the audit finding and recommendation.Without receiptsthere is no
assurancethat funds are not spentfor unauthorizedpurchasessuchas alcohol.
9.
MandatorvTrainins Not Provided.
Findine. Mandatory P-Card training has not been provided. Staff from the
ProfessionalLearning Departmentstatedthat P-Card training occurredin August
2012, when the P-Card program began.Sincethat time, no other training has been
provided. The P-CardProcedwesrequiremandatorytraining prior to receivinga PCard and every l8 months thereafter.
b.
Recommendation. The Controller should ensure that the mandatory training
requiredby the P-CardProceduresis provided.
c.
Management Comments. The Controller stated,"Management agrees partially
and states, 'The P-Card Procedures will be rewritten. The current mandatory
training requirement at 18 months will be replaced with more concise
directions for employees to undergo training at their discretion on an as needed
basis using the ASD-Tube instructional videos. As the district has employees
at 90+ locations this method will allow users to train in their own office
locations at a time that works well with their schedule.Management feels that
training every 18 months is no longer necessary as the majority of P-Card
holders have been actively involved in the program since inception and are
comfortable with the instructions that the training videos provide.' "
d.
Evaluation of Management Comments. Managementcommentswere generally
responsiveto the audit finding and recommendation.
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AuditReport201541
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CardPurchases
Anchorage
SchoolDistrict
February
25,2015
10.
No DocumentedProceduresfor Apnrovinq Purchases.
a.
Findine P-CardProceduresdo not includesupervisoryresponsibilitiesregarding
the approvalof P-Cardtransactions.For example,no proceduresexist specifring
when P-Card tansactions should be approved and what to look for when
approvingP-Cardtansactions.Someof the audit findings identifiedin this repo4
suchasallocatingchargesandprovidingtansactiondescriptions,couldhavebeen
addressedby supervisorsif they had beentold what to look for in the P-Card
Procedures.
b.
Recommendation. The Conholler should revise the P-Card Proceduresto
establishthe appropriateprocessto approveP-Cardpurchases.
c.
Manaqement Comments. The Contoller state4 "Management agrees and
states, 'The P-Card Procedure will be revised to include and establish an
appropriateprocessand timeline for Supervisorapprovals.o'o
d.
Evaluation of ManasementComments.Managementcommentswereresponsive
to theardit finding andrecommendation.
Discussion\ilith ResponsibleOfiicials. The resultsof this audit werediscussedwith appropriate
Distictofficials.
Audit Staff:
BrendaPefla,CFE
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