Gov’t credit card audit raises concerns

US$190,000 not accounted for

An internal audit has revealed that
more than $190,000 worth of purchases made on credit cards issued to
high-ranking members of the Cayman Islands government essentially could not be
accounted for because no receipts for those purchases had been submitted at the
time the review was completed.

The expenses were incurred during
the government’s 2008/09 budget year. The government’s Internal Audit Unit
studied 1,125 credit card transactions between July 2008 and June 2009. Of
those, supporting documentation for transactions totalling $190,594.32, about
10 per cent of the 1,125 purchases, could not be provided.

“Therefore, we were unable to
determine if these purchases were for legitimate government business,”
officials with internal audit noted in their February 2010 report.

Moreover, the auditors expressed
concern that credit card purchases – which are typically made by government
chief officers, ministers and department heads – were being reviewed by subordinate
staff members.

“Monitoring (credit card) usage by
subordinate staff inherently lacks independence,” the report noted. “This
review process as a control is inherently compromised and therefore increases
the risk of misuse of the credit cards.”

In general, the audit found a lack
of documented procedures in the use and monitoring of the government-issued
credit cards which “may allow improper of questionable purchases or untimely
processing”.

Despite the audit’s statements,
there were no specific cases referenced in the report that pointed out where
someone might have used a government-issued credit card improperly. However,
the report did note that some credit card purchases fell outside the initial
scope of card usage agreements.

The issuance of government credit
cards to government ministers and official members of Executive Council (now
known as Cabinet) as well as their deputies, and permanent secretaries (chief
officers) was approved by ExCo in May 2001. The cards were given solely for
“official travel and hosting expenditures of the Cayman Islands Government”.

The credit card facility was later
extended to government department heads, depending on the person’s job and
responsibilities. Usage of the cards now includes purchases of good and
services for official government business. The financial secretary personally
approves all requests for government-issued credit cards.

The Treasury Department issues the
credits cards through an agreement with a local bank, but treasury officials
have no control over what the cards are used for. It is up to the chief
officers of the ministries and portfolios to monitor and report on credit card
usage.

“Card holders have been using
credit cards for expenditures incurred in the undertaking of a government
business which are not necessarily travel or hosting related,” the audit report
noted. “Draft policies and procedures do not address other uses.”

The card policy does state that
government credit card holders should seek to maintain a separation between
personal expenditures and government-related expenditures.

According to the audit, some 272
transactions between July 2008 and June 2009 were posted to the wrong
government account, meaning the purchases were for items other than travel or
hosting-related expenses.

For instance, the Ministry of
Community Affairs reported more than US$35,000 in misclassified credit card
transactions.

According to that ministry’s
response in the audit: “In reviewing the report findings, it highlights that
[the] majority of the erroneous transactions occurred with the Public Works’
Department which was responsible for entering and verifying all entity invoice
batches in respect to its department transactions. The erroneous entries
highlighted will be corrected.”

The former Portfolio of Finance and
Economics, which had nearly $7,500 in misclassified credit card expenses, said
it had a vacancy in the position that was supposed to be reviewing the credit
card records.

Poor record-keeping was cited in
the case of US$190,594.32 worth of credit card expenses that had no
documentation to back them up. The vast majority of those unaccounted for
expenses occurred in four government ministries and the Cabinet Office.

“Inadequate retention of supporting
documents such as these eliminates that audit trail required by the financial
regulations,” the internal audit report read.

Only $5,144.39 worth of expenses
classified as “personal” were made on government issued credit cards during the
2008/09 financial year, according to the audit. More than $4,300 of those
expenses had been reimbursed to government, according to records. US$780 had
not been reimbursed, according to records.

“In the absence of documented and formally
communicated policies for corporate credit card management, expenditures of any
nature may be charged and justified by card holders,” the audit read. “The
government’s reputation may also be at risk if the card was used to purchase
prohibited items or services from disreputable vendors.”

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