An internal Gainesville city audit did not find any fraudulent purchases in a review of purchasing card transactions but did identify potential issues in the review, including three declining balancing cards each with spending limits in excess of $250,000.
At the city’s audit committee Monday, Interim City Auditor Brecka Anderson and her team made the first of four reports this year concerning Gainesville’s General Government and Gainesville Regional Utilities (GRU) 612 purchasing cards – or p-cards.
During this first report period, the city auditor’s office looked at $236,417 worth of p-card purchases from a two-year period between January 2021 and December 2022. The 170 reviewed transactions represent 1% of the $20 million total p-card spending during the period.
The city’s auditors examined each transaction to see whether the purchases were for business-related activities and had proper approval and adhered to set spending limits. They also checked that sales tax was either not charged or was refunded and that p-card holders provided receipts or other documentation for the purchases.
Among the things that the audit team reported Monday:
- Three cardholders with no monthly spending limits were assigned declining balance cards – one at $250,000, one at $500,000 and one at $700,000.
- Four invoices were split between multiple payments to avoid the p-card’s single transaction limits.
- Four items purchased on p-cards were not allowed as p-card transactions, which included a payment of an employee’s home internet service.
- 22 purchases did not have appropriate prior approval.
- Nine card holders had monthly credit limits above $35,000, and those high limits were not necessary given the person’s purchase history.
Sue Wang, the city’s director of finance, said the three large declining balance cards were assigned to employees who make large purchases for the city: a GRU IT employee who buys computers for the city, an employee with the city’s vehicle fleet who buys parts for fleet maintenance and an employee with the Regional Transit System who similarly buys parts for the city’s buses.
“[The declining balance cards have been] a standing practice for a long time,” Wang said. “It doesn’t mean it’s right, so now is the opportunity to review those processes and see whether that’s appropriate.”
City Manager Cynthia W. Curry said that as of March 1 she had pulled back several p-cards on the general government side, reducing the number issued to one per department except for Gainesville Fire Rescue, the Parks, Recreation and Cultural Arts Department, and the city’s six charter officers.
“This action was taken to address the State Auditor General’s findings, prepare for their return, and review other best practice measures to make us accountable and responsive,” Curry said in an email interview after the meeting. “This will give us time to revise our procurement card procedures, and evaluate mandatory training for all card holders.”
Curry said the three large declining balance cards were among those that she had pulled from employees.
First issued around 2006, the declining balance cards were in use because the purchases of things like parts for the city’s electric buses were often expensive and frequently exceeded the $20,000 monthly limit for regular purchase card transactions, Curry said.
Peter DeMaris, an internal auditor for the city, also said that the general government and GRU p-card processes are different, and each group has its own policies regarding approvals, transaction limits and required documentation. One of the audit team’s recommendations was to bring the GRU p-card processes more in line with the rest of the city.
GRU general manager Tony Cunningham said GRU has 385 employees with p-card – and “the vast majority” of GRU cards have purchase limits between $2,000 and $5,000. Some of the GRU employees with p-cards are at the utilities’ power plants while others may work in the field.
During the two-year time frame of the audit, GRU employees made $11.4 million in p-card purchases. The general government side made $8.9 million in p-card purchases during the two-year audit period.
“The overall spend is fairly small compared to the operation and maintenance expenses, but it still is a significant amount as you can see from the audit,” Cunningham said.
Cunningham said he was working with GRU supervisors to improve their approval processes – several of the purchases without approval on the GRU side were the result of supervisors not giving official approval by a deadline.
“One of the things coming out of the audit was to improve the training and setting those deadlines and then reporting of when people miss those deadlines,” he said.
Curry said the city had discovered that employees were making p-card purchases instead of using a purchase order, which is the city’s preferred way to buy things, because the p-card transactions were faster and easier.
Commissioner Cynthia Chestnut, who is not on the audit committee but sat in on Monday’s meeting, said using a purchase order would help with issues related to prior approvals and help determine in advance whether the city is being charged sales tax.
“It seems to me that would be the better way to go,” Chestnut said. “It may be time consuming, but it may save us some money and save us some heartache.”
Mayor Harvey Ward, who chairs the audit committee, said the city needs to review its policies but that he often hears from small businesses that they would like to have easier ways to do business with the city.
“On the local small business end, they would certainly rather be paid upfront than wait a month or two to be paid,” Ward said.
Harold Monk, who is an external CPA appointed to the audit committee, said he was concerned about the transactions where single purchases were split into different payments to avoid a single transaction limit.
“It’s not just wrong, but it could be criminal in some instances,” Monk said.
Although Monk said he was bothered by the employees’ requests to split the purchases into multiple transactions, he said he was more concerned that a merchant was willing to do that.
“There ought to be some consequence to that vendor,” Monk said. “If they are going to accommodate fraud, they shouldn’t be a vendor for the city in the future.”
A second p-card report along with a travel reimbursements review is scheduled for the next quarterly audit committee meeting on June 21.
Also from Monday’s audit committee meeting:
- Wang said the city’s fiscal year 2022 audit is underway. Previous years’ audits, including FY 2021, have been late. But Wang’s team has caught up with the city’s bank reconciliations, which were almost a year and a half behind less than a year ago.
- Wang also said the city is in the process of hiring a candidate for the comptroller position. Wang herself was originally hired to fill the comptroller position in the summer of 2022 but moved into the director of finance position when the previous director encountered personal health issues and had to resign.
The new comptroller is expected to start in April, Wang said.