- The Washington Times - Tuesday, June 24, 2003

D.C. public school officials cannot account for more than $1.6 million in employee-issued credit-card charges, which include improper purchases for hotel services, food, gifts and “items prone to mysterious disappearance,” city auditors have found.

The unaccounted-for charges make up about one-quarter of the D.C. public school system’s $6.3 million credit-card expenses in fiscal 2001.

“Payments made in the absence of supporting documentation exposed [the school systems] finances to a significant risk of fraud, waste and abuse,” D.C. Auditor Deborah K. Nichols wrote in a report dated June 16.

“Further, any order from a financial officer to make payments in the absence of supporting documentation exhibited poor professional judgment, undermined the integrity of transactions processed through [the school systems] financial system, and indicated a weak internal control system and environment.”

An audit of the system’s expenses for fiscal 2001 found that school officials had paid $6.3 million for employee-issued credit-card charges.

But school-finance officials could not provide documentation to support about $984,728 in credit-card payments and had only incomplete documentation for charges totaling $684,518.

Auditors found that school employees paid tax on items that were tax-exempt and that the school system paid $112,415 in late fees on credit cards — more late-fee expenses than in any other of the city’s 15 agencies.

“The $112,415 could have been to more productive use if [the school systems] purchase-card program had not been mismanaged,” the auditors wrote.

Auditors also noted that some purchases, such as $20,344 for athletic equipment and supplies, circumvented usual competitive-procurement processes and are forbidden under current regulations.

D.C. school officials yesterday did not return calls seeking comment.

In a written response to the audit, school officials pledged to create better financial controls by Sept. 30 by training cardholders about credit-card use and suspending privileges for those who do not comply, requiring documentation for purchases and holding cardholders liable for unauthorized purchases.

The D.C. school system has been under fire amid a scandal in which millions of dollars were misappropriated from the teachers union and a financial crisis last year in which school officials overspent their budget by millions.

Most recently, school board officials have criticized the system over a national report that says D.C. schoolchildren are the country’s worst readers and fare only slightly better than some non-English-speaking students in the American territories.

D.C. regulations require government credit-card transactions to include supporting documentation, such as an invoice, receipt or bank statement.

Auditors found that school financial officials approved all credit-card transactions in 2001, even those without documentation.

In a memo dated July 9, 2001, a former chief financial officer for the school system ordered payments to be made even without documentation, auditors said. As a result, $684,518 was paid to vendors without invoices, receipts, bank statements, transaction reports or other documentation.

The auditors noted that school financial officials sometimes facilitated payments by creating documentation for cardholders who didn’t submit any — a violation of regulations — and “may have aided in concealing the misuse of [government] funds.”

Employee-issued credit cards are supposed to be suspended when supporting documents for purchases are overdue, but financial officials let school workers continue to use their cards, auditors reported.

City school officials also charged $82,877 worth of items forbidden under the regulations including food, entertainment, gifts, rental cars and hotel services.

Auditors found $18,955 worth of unauthorized purchases of “sensitive items and items prone to mysterious disappearance” such as camcorders, televisions, DVD players and laptop computers. They also found $7,125 in purchased assets that were never recorded in the school system inventory.

D.C. school officials have a purchase limit of $2,500 per transaction, but auditors said cardholders often circumvented the limit by splitting purchases. In one case, a cardholder made four purchases in one day from the same vendor, totaling $3,620.

Auditors also noted that it was impossible to verify the status of cardholders because the school system had no current list of cardholders or cards that have been activated, terminated or suspended.

The credit cards were issued to school officials at individual schools and officials in the central school administration, the audit noted.

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