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DEPARTMENT OF THE AUDITOR GENERAL
BUREAU OF SCHOOL AUDITS
NEED FOR PROCUREMENT CARD POLICIES
PASBO CONFERENCE - HERSHEY, PA
MARCH 12, 2004
Use of procurement cards or “purchasing with plastic” has not
been a current audit focus of the Bureau. However, this should not be viewed as
an invitation to let your guard down. While all the literature stresses the
potential cost savings from the use of these cards, there seems to be little
emphasis placed on the need for strong internal controls to avoid the potential
for misuse of the cards.
While the Public School Code does not specifically address the use of
procurement cards, it does address purchasing and requirement for competitive
bids or Board Policies. Section 807.1 and 751 of the Public School Code provides
for competitive bidding of purchases over $10,000. Additionally, these sections
require the obtaining of written or telephonic quotes for purchases between
$4,000 and $9999.99. Finally, these sections provide that the Board may
authorize the secretary of the board or other executive to act as purchasing
agent with authority to purchase items costing less than $10,000.
When the Board grants purchasing authority to individual(s), it should also
provide guidance as to what would be proper and appropriate use of taxpayer
funds. This guidance is provided in the form of purchasing policies. Since the
use of procurement cards is commonly used for small dollar items, the Board’s
purchasing policies should address the use of procurement cards.
Board policy for procurement cards may include the following areas:
• restrict the obtaining of cash;
• monthly credit or usage limit;
• single transaction limit;
• daily usage limit;
• merchant category code (MCC);
• cardholder report of account activity to management;
• assignment of cards to individuals; departments, or cost centers;
• employee reconciliation of purchases to billing statements;
• statement/sales receipts storage;
• supervisor review/sign off approval; and
• cardholder misuse insurance.
The areas listed above come from a review of literature obtained
from various PASBO training sessions. Each LEA should review the list and
consider these as well as any other controls that it deems necessary in
developing its individual procurement card policy.
NEED FOR PROCUREMENT CARD POLICIES
To date the Bureau of School Audits has audited only one LEA’s
procurement card operations and this was as the result of a citizen’s inquiry.
The results of that review disclosed four areas of noncompliance with that LEA’s
own board policy. The four areas of noncompliance were:
1. two administrators made personal purchases (Lane Bryant
department store and personal car repair);
2. purchases of meals, travel and gas which were prohibited by the LEA’s
3. purchases over $5,000 were made with the procurement card instead of
using a purchase order as required; and
4. during a three month period a total of2l purchases were identified as
being made by someone other than the cardholder. The cardholder had allowed
someone else to use his/her card.
These violations of policy were believed to have occurred due to
employee’s lack of familiarity/training regarding the procurement card policy
and the failure of the LEA’s administration to provide adequate oversight/review
of procurement card purchases.
While cost savings may be obtained by implementing a procurement card process,
the success of the program will ultimately rest with the adequacy of the
policy/control structure implemented to safeguard the program’s operations.