-Cites lack of receipts, use of cards by non-cardholders among risk factors to City credit cards-

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New York City Comptroller William C. Thompson, Jr. today released an audit faulting the New York City Fire Department (FDNY) for lacking adequate internal controls over its use of credit cards.

Thompson’s audit found that the FDNY’s oversight of procurement cards (p-cards), which are credit cards used to buy goods and services for City programs and operations, was lax and that cards were used by personnel who were not authorized cardholders.

“The FDNY has inadequate internal controls over the use of p-cards,” Thompson said in the audit. “The FDNY allowed purchases to be made by individuals who were not cardholders and had an inadequate independent review of p-card purchases.”

Additionally, Thompson said, p-card purchases lacked receipts, receiving reports and user logs.

“As a result, there is an increased risk that errors and unauthorized charges may go undetected,” the Comptroller said, “as well as increased potential for fraud, or misappropriation and misuse of funds.”

You can view the audit – which covered Fiscal Year 2007 - at www.comptroller.nyc.gov

The FDNY uses two types of cards: purchasing cards and travel cards. During FY ‘07 the FDNY had 11 active purchasing card users with transactions totaling $93,496 and eight active travel card users with transactions totaling $103,664.
Specifically, Thompson’s auditors determined that:

• The FDNY was allowing persons other than the cardholder to make purchases, in violation of a Comptroller’s Memorandum reading: “Only authorized personnel use procurement cards.”   

In some instances an FDNY Chief provides permission to non-card holders for use.  This was prevalent within the FDNY Marine Division, where the purchases went towards fuel for the boats. For 24 of the 30 Marine Division fuel purchases, totaling $7,597, for which receipts were present, the charges were made by someone other than the cardholder. In addition, during the sample months there were 71 instances where fuel was bought and the Comptroller’s Office could not identify who made the purchase because the receipt was not signed.

• There was no formal reconciliation procedure in place to ensure documentation and reconciliation in a timely manner. Additionally, the reconciliation process was completed despite lack of supporting receipts, receiving reports and a purchase log. These practices violated the Comptroller’s Memorandum and the FDNY’s own Credit Card Policy. 

Specific FDNY personnel are responsible for reconciling certain types of purchases, such as travel and EZ-Pass bills. Auditors often found a lack of documentation to support purchases. Without receipts and receiving reports the FDNY cannot identify what was purchased, the itemized cost or whether items purchased were actually received.

• The FDNY did not have a purchase log for cardholders, or keep a purchase log, in violation of its Credit Card Policy, which states “the Cardholder must maintain a log of all transactions…Failure to do so will result in suspension of card privileges.”

“When the Comptroller’s Office asked for a log, one was provided,” Thompson said. “Later it came to light that the log provided was created specifically for the Comptroller’s Office and had not been in place prior to the request.”

• There was a clear lack of segregation of duties in processing p-card transactions to final payment and their reconciliation to credit card statements. Comptroller’s Directive 24 requires agencies to assign various personnel to address different levels of p-card transactions, such as recording payments and transactions and maintaining custody of assets. 

However, Thompson noted that the p-card custodian had other responsibilities including receiving credit card statements, issuing credit cards, reconciling p-card transactions, collecting receipts and invoices from users and vendors, scheduling travel requests, and approving purchases.

• The FDNY did not have user agreements on file for nearly a quarter of the agency’s p-cards (relating to three users), as recommended by the Memorandum. If cardholders do not sign an agreement, Thompson said, there is no evidence they are aware of the terms and condition of the card use, which can lead to misuse.

• The FDNY did not promptly register with the Comptroller’s Office its contractual p-card obligations with Citibank, in violation of Directive 24.

The Comptroller made eight recommendations to improve oversight and controls, including that the FDNY: ensure that only authorized cardholders use the p-cards; reevaluate the p-card program to determine whether it is necessary to issue more cards to prevent purchases made by unauthorized individuals; and ensure that one unit is assigned the responsibility of conducting an adequate, independent review of p-card purchases.

“Clearly the Fire Department was not taking all the necessary steps to ensure proper use of its p-cards,” Thompson said. “It is my hope that the FDNY will take notice and adhere to all the appropriate measures designed to strengthen oversight so that any flaws will be fixed.”

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