Audit: Schools’ purchase cards not properly utilized

Terry Webster

Wednesday, Nov. 21, 2001 | 9:36 a.m.

Clark County School District employees using purchasing cards failed to follow proper procedures or kept sloppy records while ringing up $17 million worth of spending last year, auditors said.

School officials used the cards, which work like credit cards, to buy everything from paper clips to airline tickets for district-related activities.

The district began using the cards in 1996 as a way to eliminate paperwork for purchase orders less than $500 and to make it faster for employees to receive needed items.

Kafoury, Armstrong & Co., the Las Vegas firm that conducted the annual audit, found no misuse of the cards, but their report concluded there are not enough controls to prevent misappropriations from happening.

According to the firm's audit report, most employees fail to follow the district's guideline manual for using the cards. One of the most common violations is not adhering to the daily purchasing limit, officials said.

The auditing firm also pointed to the need for more oversight and more security in handling the cards.

One person in accounting oversees all of the purchase card reports for the district's 262 schools. It's up to individual school administrators to sign-off on the reports, or approve them, and to keep backup information and receipts, officials said.

"The real control is at the individual school," said Lynette Vinson, director of the school district's internal audit department.

Another concern is security of the cards.

Last year as many as 281 -- or 18 percent of the 1,521 cards issued -- were reported lost or stolen.

"Some schools are absolutely meticulous about the way they keep their records," said Gloria Sizemore, budget director."But there are just as many schools that aren't."

Officials would not name schools that have lost cards, but a Sun random survey of transaction records from two high schools found that both of the schools had 11 purchase cards and both lost four of them. The schools, Palo Verde and Green Valley, presently each have seven purchase cards.

In its report, the accounting firm suggests taking cards away from employees who either repeatedly lose cards or don't follow proper procedures.

"Some people have had cards taken away from them," said Vinson. "Normally, it is for avoiding the spending limits, even though they still may be legitimate expenses."

In another case, a department was sanctioned for buying what appeared to be too many lunches or dinners.

"Generally speaking, the cards are not supposed to be used for buying food items," said Vinson.

Following the recent release of the audit, School Board members said they also were concerned about how the cards were being monitored and called for tighter controls and better accounting practices.

School Board member Sheila Moulton said the system needs to have as much control as possible.

"You have to have control, and there is none," School Board member Shirley Barber said. "It's like a candy store."

The amount of buying power a card has depends on the administrator's position and the job duties, officials said. And the cards also are programmed to restrict purchases by not accepting certain vendor codes.

District staffers who go to other parts of the country to recruit teachers, for example, would be able to use the cards for traveling and expenses, while other card users would not have those privileges, said Walt Rulffes, chief financial officer for the district.

The cards also are programmed so they can't be used in certain locations, such as casinos, liquor stores or beauty salons, officials said.

Despite concerns raised by auditors, the district recently raised the daily spending limit from $500 a day to $1,000 a day. The total monthly limit on some cards can be as high as $20,000 a month, auditors said.

"I'm not too comfortable with a $20,000 limit," said School Board member Denise Brodsky. "I think it's a little high. Ten-thousand dollars would be a better limit."

Sizemore said the limits were upped to accommodate the purchasing department, which buys higher priced items, such as textbooks.

But scores of other district employees, including administrators and teachers, also have access to the cards.

A single school, depending on its size, can have more than 10 purchase cards. Principals and other administrators oversee the cards, which can be lent to teachers to make purchases.

Last year some card users failed to follow proper procedures and got around the spending limits by "splitting" costs, said Tami Miramontes, a certified public accountant with Kafoury, Armstrong & Co.

For example, employees would have a vendor charge the card for part of the total amount due on one day, then charge for the remainder of the amount on the next day.

Purchase card bills from Clark County schools come into the accounting department twice a month, and a lump-sum check is sent to the company that issues the cards, Sizemore said.

Schools are responsible for breaking down their own bills into separate categories -- such as travel or office supplies, for example -- so there is a record of how much is being spent on what. That's where the record-keeping often breaks down, officials said.

"Some administrative departments are not dedicating the necessary time required to submit accurate follow-up reports, nor ensure correct account coding," auditors wrote in a recent report to the School Board.

District officials defended the $16.8 million purchase card bill for the 2000-2001 school year, saying it is just a small portion of an accounts payable budget that totals some $150 million. It's also less than 1 percent of the district's $1.4 billion budget.

"You have to remember this is all of the expenses for all of the schools," said Sizemore.

Auditors said the number of purchase cards issued by the district is in line with corporations of similar size. No comparisons were drawn with other school districts.

Douglas Thunder, the Nevada Department of Education's deputy superintendent for administrative and financial services, said companies have approached the Nevada Department of Education about using purchase cards, but they are still doing purchase orders "the old-fashioned way."

"We just feel that our accounting is complicated enough without having to reconcile a bunch of bank statements," said Thunder.

The state receives a copy of the school district's annual audit, a requirement under state law.

Generally, the state will get involved if a criticism in an audit relates to a program the state administers, Thunder said. The state has not yet received this year's copy of the audit.

According to district records, spending on purchase cards increased from $15,000 to $16.8 million over the past five years.

Accounting director Jim McIntosh Jr., explained the increase, saying "it took a while for the program to get implemented. Some people kept using purchase orders because they were more familiar with them."

Officials also said the money would have been spent one way or the other, it was just shifted to the purchase cards from other areas of the budget.

"Schools can't spend more than what they were budgeted to spend," said Rulffes.

Sample transactions on purchase cards at high schools show items such as $420.37 at Charleston Auto Parts; $500 at Austin Hardwoods and $128.82 at T.J. Maxx.

While some purchases may initially raise eyebrows, they are usually explained as being part of the academic program, such as auto body repair or wood shop, Vinson said.

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