Overview
The University of Massachusetts (UMass) Amherst allowed restricted purchases, such as gift cards, memberships, automotive services, gasoline, information technology (IT) equipment that cost more than $400, and furniture, to be made with its procurement cards (Procards). Additionally, documentation to support these transactions was not always kept on file. As a result, there is a higher-than-acceptable risk of misuse of university funds.
During the two-and-a-half-year audit period, UMass Amherst Procard holders made 228,393 Procard transactions, totaling $29,844,025, on 3,004 Procards. According to the university’s Procard User Guide, these Procards are issued to faculty and staff members “to purchase and pay for consumable commodities and some select services of low dollar value.”
The Procard User Guide establishes rules for Procard use, including record management, and specifically identifies items that are not to be purchased with Procards. Among the 165 Procard transactions we tested, totaling $60,505, were 59 restricted transactions, totaling $17,446:
- 24 gift card/certificate purchases (totaling $4,715)
- 14 membership purchases (totaling $1,186)
- 2 automotive service purchases (totaling $236)
- 3 gasoline (service station) purchases (totaling $58)
- 9 purchases of IT items for more than $400 (totaling $7,142) that lacked the required IT Equipment Waiver Form to authorize them
- 7 furniture purchases (totaling $4,109)
Although these 59 transactions appeared to be business-related and would be allowable with other purchasing mechanisms, the items are not allowed to be purchased with Procards under the university’s current Procard policies.
Additionally, 14 (totaling $2,449) out of the 165 transactions tested were missing supporting documentation such as monthly statements and/or receipts.
Authoritative Guidance
The UMass Amherst Procard User Guide establishes requirements for record management; it requires Procard users to maintain adequate supporting documentation such as itemized packing slips, itemized sale receipts, itemized copies of vendor order forms or applications, itemized cash-register receipts, and monthly statements. It also specifies the types of purchases for which Procards may not be used:
The Procard shall not be used to purchase the following commodities . . .
- Furniture
- Gasoline, Automotive
- Gifts/Donations including Gift Certificates. . . .
- IT Equipment (Computers/Tablets/Laptops) unless an approved Equipment Waiver is held by the named Cardholder. . . .
- Personal purchases
Reasons for Noncompliance
The UMass Amherst Audit and Grant Compliance manager stated that restricted items can be purchased with prior approval from the Procard manager or their supervisor and the controller. However, the Procard User Guide does not contain a policy that allows the purchase of restricted items with prior approval.
The Audit and Grant Compliance manager could not locate the supporting documentation for some of the transactions.
Recommendations
- If UMass Amherst wants to allow its staff to purchase restricted items using Procards, management should amend the university’s Procard User Guide accordingly. At a minimum, the amendment should specify the process for documenting waiver approval as well as the amounts and categories of restricted purchases that can be approved.
- If UMass Amherst management does not want to make this policy change, it should take whatever measures it deems necessary to ensure that no restricted purchases are made with university Procards.
- UMass Amherst should ensure that all Procard transactions are supported by proper documentation such as monthly statements and receipts.
Auditee’s Response
The University of Massachusetts, Amherst (UMA) is committed to maintaining effective oversight of the Procard program. Depending on the situation, UMA Procurement Department, may grant cardholders approval to purchase legitimate business goods/services normally restricted on the Procard for reasons of immediacy and/or efficiency.
The Procard User Guide will be updated to include the process for obtaining approval for certain restricted commodities on the Procard. This approval process to be outlined in the Procard User Guide will include who to contact in Procurement, what information to provide to Procurement, and how to retain documentation of the approval for auditing purposes.
When restricted commodities are identified in an [internal] audit, without documentation of Procurement approval, the audit team will issue a finding. In the case of a restricted commodity finding, the cardholder and supervisor must acknowledge that the goods/services purchased on the Procard are restricted. While some restricted commodity purchases might require more frequent auditing of a cardholder, others will require stricter penalties depending on the nature of the purchase.
UMA requires all cardholders to receive cardholder training prior to the issuance of a Procard. Also, each Procard is required to have a trained records manager assigned to the card. Both cardholders and record managers are trained to ensure that Procard transactions are supported by proper documentation such as authorized statements and itemized receipts. It is a requirement for cardholders and records managers to reconcile, obtain required authorization, and retain monthly credit card statements for audit/archiving. The Procard audit team monitors supporting documentation and approvals during periodic monthly audits and archiving. Cardholders who cannot provide Procard documentation within a required timeframe are suspended.
UMA is implementing an automated credit card management system in FY19, which will report on any cardholder who does not submit required documentation within a reasonable timeframe. The audit team will continue to audit cardholders for Procard documentation requirements.
Auditor’s Reply
Based on its response, UMass Amherst is taking measures to address our concerns in this area. However, the response states that depending on the situation, the university’s Procurement Department may grant cardholders approval to purchase legitimate business goods or services that are normally restricted from the Procard for reasons of immediacy and/or efficiency. As noted above, UMass Amherst’s policies do not provide for its Procurement Department to waive the restrictions for the categories of transactions reviewed. Therefore, we reiterate that if UMass Amherst wants to allow its staff to purchase restricted items using Procards, university management should amend its Procard User Guide accordingly. At a minimum, the amendment should specify the process for documenting waiver approval as well as the amounts and categories of restricted purchases that can be approved.
Further, we acknowledge that UMass Amherst trains both Procard holders and record managers before Procards are issued and that the Procard audit team monitors supporting documentation and approvals. However, we recommend that UMass Amherst consider taking additional measures to ensure that no restricted purchases are made with university Procards. Such measures could include additional training for the cardholder and approver/s, or stricter penalties (such as reduction or loss of Procard privileges) for the cardholder, when a cardholder is found to have made restricted purchases repeatedly without proper documentation.
| Date published: | October 29, 2018 |
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