AUSTIN INDEPENDENT SCHOOL DISTRICT

Transcription

1 PURCHASING CARD GENERAL: The purchasing card ("p-card") program was implemented several years ago to establish a more efficient, cost-effective method of purchasing and paying for small dollar transactions as well as high volume, repetitive purchases. The program was designed as an alternative to the traditional purchasing process (departmental purchase orders) for supplies, materials and travel. Because purchases are made directly by the cardholder, certain added responsibilities come with the use of the purchasing Card. It is necessary to ensure that the District s purchasing policies are being followed and that purchases are made within established purchasing procedures. AUDIT OBJECTIVES: 1) To determine that current, clear policies and procedures are in place over purchasing cards. 2) To ensure the District is in compliance with Federal, State, Local and District policies, procedures and Laws; 3) 4) 5) To evaluate whether controls are sufficient to prevent or detect purchase card abuse and misuse. To verify that the purchasing card transactions are appropriate and properly approved and reviewed. To determine whether appropriate documentation is maintained to support transactions. AUDIT PROCEDURES: 1) General Obtain: i. Policies and Procedures ii. Prior Audit Reports iii. External Auditor Management Records

2 PURCHASING CARD iv. Regulatory Examination Reports v. Job Descriptions and Organizational Chart vi. Related Information of Laws and Regulations Review policies and procedures to determine adequacy. c) Review prior reports to determine whether corrective action has been implemented for noted deficiencies. Review job descriptions of relevant employees. Review a copy of the Purchasing Card Agreement or contract agreement with the issuing financial institution and ensure that the contractual obligations undertaken by the responsible entities are being fulfilled. 2) Flowcharts & Diagrams Map flow of processes and documents for the areas audited 3) Introductory Analysis c) Inspect journal entry reports to determine the total amount of p-card transactions. Compare with prior years if data is available. Inspect a listing of cardholders for the year and compare the amount of cardholders to the total amount of purchases made. Compare with prior years if data is available. Determine what credit limits and transaction limits are in place and how those limits have changed over time. Inquire from management and p-card users if the p-card process has undergone significant changes in the following within the last 10 years: Required approval Credit card or bank companies involved Method of payment to the bank Method of reconciliation, including timeliness requirements Documentation required for purchases

3 PURCHASING CARD 4) Issuance and Administration Inquire about the type of training provided to cardholders and approvers and ensure that training is provided prior to issuance of the card. Obtain a listing of active cardholders from the bank. Select a random sample: i. ii. iii. Review the cardmember agreement and trace to approval from Finance department for card issuance. Confirm a signed cardholder use agreement on file for each cardholder. Validate to Human Resources records that each cardholder is an active employee. c) Inquire about procedures used for card deactivation. i. Obtain a listing of cardholders during the period and an HR list of employees terminated during the period. For each employee terminated with a p-card, determine if activation was timely. ii. Obtain a listing from Human Resource of employees who would be expected to have a p-card (bookkeepers, admin assistants, etc.) and were transferred from one department to another. Determine if they had a p-card, and that p- card administrators retrieved the p-card in a timely and orderly manner. Obtain the list of replacement cards issued in the last year from the card-issuer and select a sample of cardholders. Determine the following: i. Was the lost card reported in a timely manner? ii. Who notified the card-issuer? iii. Were law enforcement authorities notified? iv. If the cardholder has lost their card more than twice, what remedial or disciplinary action has taken place? Inquire of management in Finance and Procurement, as well as the treasurer, and secretary to the Superintendent, Finance management, and Board of Trustees, to determine if special credit cards are issued to high-level executives. Executives are sometimes given credit cards with less restrictions to allow for purchases and travel spending on one card, with no forms necessary.

4 PURCHASING CARD i. Inquire of management to determine if such cards exist, the requirements for any such cards, and the monitoring process attached to them. 5) Approval and Documentation Utilizing the cardholder listing previously obtained, select a judgmental sample of transactions from monthly cardholder statements. i. Document approving signature and compare to supervisor or budget manager on file with Human Resource department. ii. Ensure that supporting documentation is sufficient for purchases (itemized receipts are available, dollar amounts correspond to transaction amounts, etc.). iii. Determine whether charges are reallocated to the correct budget code in a timely manner or if journal entries must be prepared by Finance personnel. (If charges are not reallocated prior to the general ledger download, Finance personnel must manually prepare the entry. Control risk is increased and efficiency is lost.) iv. Agree the transaction amounts to the cardholder s specified general ledger accounts. If any deviations occur, trace to a correcting entry. If an adjusting entry has not been performed, this may indicate that charges are not being reconciled to general ledger accounts and additional procedures are necessary. v. Determine if the transactions selected were for a card that should have been closed due to employee termination or transfer. vi. Determine if the transactions selected were for a person other than the card member for which the card was issued. vii. Determine if the transactions selected were inappropriate. P-cards may not be used for: Purchase of items for personal use Employee travel expenses Contracted Services Gift card purchases Cash refunds or advances Fixed Assets (Approved Supplier Lists might be used for specific purchases)

5 PURCHASING CARD viii. Determine if sales tax was paid for purchases inappropriately. ix. Spot check transactions for suspicious vendors. x. Determine if transactions were above the individual transaction limit. For each transaction above this limit, determine if it was allowed via prior approval or other dealings. xii. Analyze total p-card purchases by vendor to determine if "strategic partner" vendors are being underutilized in comparison to similar companies. If so, inspect the samples tested for such underutilization. xiii. Inquire of management and obtain documents to determine if transactions for grants are appropriate, and reviewed appropriately. xiv. Inspect the date stamps for p-card files in the document management system, looking specifically for when they were created and when they were last modified, to determine if p-card invoices and statements are uploaded and reviewed timely. Inquire about procedures in place to identify users who have not submitted adequate documentation. c) Determine if there are procedures in place to prevent a cardholder from making partial payments on a p-card and using a Purchase Requisition for the remainder of the costs. Are such procedures necessary and if so, adequate? Obtain the prior monthly invoice reconciliations prepared by the Finance department. Conduct an independent reconciliation and agree the aggregate general ledger totals to the card-issuer billing report. i. For each month inspected, additionally determine that monthly spending limits were not breached. If p-cards can be used for purchasing services, document and evaluate what the provisions are for ensuring 1099 tax reporting f) Test a sample of specially issued executive cards or the transactions of such cards to determine the accuracy and appropriateness of the processes for them.

6 PURCHASING CARD 6) Controls to Prevent Misuse c) Determine if adequate controls exist to prohibit one employee from controlling all phases of card issuance and administration. Determine the spending limits assigned to each cardholder. Document how limits are assigned and investigate any unreasonable limits. Assess how Finance department personnel monitor statements for inappropriate charges. i. Inquire about procedures used to ensure that travel and other items charged to a p-card are not also claimed on employee reimbursement requests. If necessary, select a sample of credit card charges and verify that a reimbursement form was not submitted for those same charges. ii. Determine whether the financial institution offers resources that will assist with monitoring for misuse (such as prohibited vendors, no cash advances, trend analyses reports, etc.). Determine what purchases are automatically rejected upon attempted payment via credit card. i. Observe an example p-card auto-rejection for an attempted disallowed purchase. Evaluate procedures used when a potentially inappropriate charge is identified. Determine if p-cards are disabled when required per policy. f) Inquire about procedures in place to address lost or stolen cards. g) Inquire of accounts which are used for p-card purchases and then repaid by other departments or schools (such as activity fund accounts). Determine any delinquent amounts needed to be repaid, and the cause of the delinquency.

7 PURCHASING CARD 7) IT Controls Inquire of management to understand the capabilities possible with superuser access. Can inappropriate purchases be hidden? Can duplicate purchases be made, with one purchase refunded to cash, and the JE record removed or altered? i. If sufficient risks exist from IT access, determine who has access that can override controls or put them at risk. Assess the access and for any questionable access rights held, inquire of management on the appropriate need for such access.