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Audit details credit-card abuse by state workers

By Dave Williams

dave.williams@graypub.com

ATLANTA - Georgia lawmakers reacted with dismay Monday to a recent audit that uncovered widespread abuse of credit cards issued to state and university system employees.

The report found employees using taxpayer-funded "p-cards" to make purchases for themselves, from groceries to car insurance premiums to even a diamond ring.

And the audit, aimed at systemic flaws rather than individual fraud, only examined seven of more than 100 state agencies whose workers have access to the cards.

"I think we've got an elephant out there," said Rep. John Heard (R-Lawrenceville), chairman of a House subcommittee that launched hearings on the issue on Monday.

"We need to address it."

The audit focused on a program that began in 1997 with just a handful of state employees using credit cards to buy several thousand dollars worth of office supplies.

It has grown exponentially since then to approximately 20,000 cards making some $300 million a year in purchases.

David Arner, of the state's Performance Audits Operations Division, who conducted the audit, said purchasing cards have become popular in business and government because the electronic transactions are less expensive than using purchasing orders.

According to the Georgia Department of Administrative Services, it costs an average of $140 to process a purchasing order, but just $40 for the average card purchase.

"There are less people involved in the process," Arner said. "It's more automated."

But the audit found inadequate safeguards in place to guard against abuse of p-cards.

Arner said the DOAS, which oversees the program, didn't set up adequate guidelines for the agencies using the cards.

More important, he said, the agencies themselves weren't doing enough oversight on their employees.

"What really needs improving is the day-to-day management of the cards," he said. "What was actually occurring in the field was not up to where it ought to be."

Arner said that while the audit focused only on seven agencies, they represented a good cross-section.

He said three of the seven were state colleges or universities because the university system is a large user of p-cards.

As it turned out, the audit uncovered the worst abuses at two of those three schools, Georgia Tech and Georgia Perimeter College.

Arner said a Georgia Tech professor's administrative assistant ran up about $40,000 in suspected fraudulent purchases, including $13,000 in American Express gift cards and Visa debit cards bought from CVS and the UPS Store, and a $1,300 diamond ring purchased from Amazon.com.

The audit also highlighted purchases by three employees at Georgia Perimeter, including a $340 Visa debit card used to reserve a hotel room in Hawaii for a personal vacation.

The names of the employees were redacted from the audit.

However, Arner said, the information concerning the workers has been turned over to the state attorney general's office for possible prosecution.

In all, suspected fraud occurred in six of the seven agencies the audit examined, suggesting that the abuse is widespread.

"Maybe we just got lucky," Arner said. "Or maybe there were problems."

After the audit was published early this month, Gov. Sonny Perdue asked leaders of every state agency to review credit-card use within their departments.

Also, university system Chancellor Erroll Davis asked school presidents to examine their procedures for handling p-cards.

On Monday, Rep. Ed Rynders (R-Leesburg), suggested that closer monitoring of p-cards, as the audit recommends, might drive up the costs of the program to that point that it loses its current advantage over purchasing orders.

"I'm a little skeptical that it costs $140 to issue a purchasing order," he said.

But Heard said no purchasing system could completely prevent abuse."A crook that wants to be a crook is going to be a crook, regardless of the process," he said.