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DLA Paid for Inadequately Documented and/or Unallowable Credit Card Transactions Totaling $126,333.

Audit calls for improved monitoring to ensure payments are in compliance with policies and procedures related to credit card usage.

Table of Contents

Overview

DLA’s former executive director did not always follow DLA’s established policies and procedures regarding the use of the school’s credit card, and the board did not provide proper oversight of credit card transactions. As a result, DLA cannot be certain that expenses paid for using the school’s credit card during our audit period were necessary and for school-related purposes.

During our audit period, DLA had one credit card that was issued to the former executive director. Between July 1, 2014 and June 30, 2017, 2,287 transactions, totaling $346,838, were processed using this credit card. We reviewed all 2,287 credit card transactions. Our testing identified 479 transactions, totaling $68,965, that were insufficiently documented; 250 transactions, totaling $45,531, that included sales tax; and 104 transactions, totaling $11,837, that both included sales tax and were insufficiently documented. Also, for the 36 months reviewed, there was no evidence that the board chair and treasurer both reviewed and approved the reconciled credit card statements.

Authoritative Guidance

According to Section 209 of DLA’s Fiscal Policies and Procedures Guide,

If credit cards are issued, they should . . . be used only for school-related expenditures. All charges must be supported by documentation (receipts, invoices, travel expense reports, requisition forms, and other supporting documentation) to be eligible for payment by the Charter School.

Monthly credit card statements are reconciled to receipts, invoices, travel expense reports, requisition forms and other supporting documentation and are approved by the Executive Director, unless not deemed independent; then the approval would be performed by the Chair of the Board and the Treasurer.

Since the former executive director was the only one authorized to use DLA’s credit card, allowing her to review and approve her own expenses would not be a proper control; therefore, the board chair and treasurer should have reviewed and approved all transactions she made with this credit card.

In addition, Section E(2) of DESE’s Charter School Administrative and Governance Guide states, “As state governmental entities, charter schools are exempt from state sales tax.”

Reasons for Issues

DLA officials could not explain the deficiencies we identified regarding DLA’s administration of this credit card. DLA had not established any monitoring controls to ensure that its policies and procedures related to the use of its credit card and the reconciliation of documentation related to credit card expenses were adhered to. It also had not established controls to ensure that it was not charged sales tax on any purchases made with this card.

Recommendations

  1. DLA should establish monitoring controls to ensure adherence to its policies and procedures related to the use of its credit cards and reconciliation of credit card statements.
  2. DLA should follow DESE guidelines regarding the nonpayment of state sales tax and establish monitoring controls to ensure adherence to those guidelines.

Auditee’s Response

DLA currently has established monitoring controls to ensure adherence to its policies and procedures related to the use of its credit cards and reconciliation of credit card statements.

DLA is committed to following DESE guidelines regarding the nonpayment of state sales tax and has since established monitoring controls to ensure adherence to those guidelines.

Auditor’s Reply

Based on its response, DLA is taking measures to address our concerns in this area.

Date published: November 19, 2018
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