NSW Audit Office - Financial Reports – 2003 - Volume 2 – Compliance Review of Credit Card Usage in

NSW Audit Office - Financial Reports – 2003 - Volume 2 – Compliance Review of Credit Card Usage in

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Compliance Review of Credit Card Usage in Universities in New South Wales We reviewed how well the State’s ten universities complied with their policies and procedures for credit card use. This is the third time since 1997 we have reviewed credit card use in NSW government agencies. Our 2001 review included a university and raised some serious concerns about credit card usage. As a result we decided to conduct a review of all universities. Universities extensively use credit cards, with two spending over $15.0 million annually on purchases. KEY FINDINGS What They Were Doing Well The universities as a whole were performing a number of functions well. These included: having a manual of policies and procedures (although, not always comprehensive) controls over opening credit card accounts recording details of cards held assigning an officer to be responsible for card operations following up lost and stolen cards. Where They Can Improve Our review identified the following deficiencies: only four universities have credit limits on all their cards policies and procedures manuals have some deficiencies: one is out of date and does not always reflect current practices two do not instruct users on how to use the cards one does not require monthly reconciliations between university and provider records two universities used credit cards in isolated instances to obtain cash advances. While not considered best practice, the policy of one of the ...

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Compliance Review of Credit Card Usage in Universities in New South Wales
We reviewed how well the State’s ten universities complied with their policies and procedures for credit card use. This is the third time since 1997 we have reviewed credit card use in NSW government agencies. Our 2001 review included a university and raised some serious concerns about credit card usage. As a result we decided to conduct a review of all universities.
Universities extensively use credit cards, with two spending over $15.0 million annually on purchases.
KEY FINDINGS
What They Were Doing Well
The universities as a whole were performing a number of functions well. These included:
having a manual of policies and procedures (although, not always comprehensive) controls over opening credit card accounts recording details of cards held assigning an officer to be responsible for card operations following up lost and stolen cards.
Where They Can Improve
Our review identified the following deficiencies:
only four universities have credit limits on all their cards policies and procedures manuals have some deficiencies: àone is out of date and does not always reflect current practices àtwo do not instruct users on how to use the cards àone does not require monthly reconciliations between university and provider records two universities used credit cards in isolated instances to obtain cash advances. While not considered best practice, the policy of one of the universities allows this. In the second university, its policy does not, but the university believes the circumstances were extenuating one university did not require cardholders to sign a statement that they have read and understand their credit card responsibilities. At two universities where policy requires this, our sampling indicated that it was not always happening instances where the policies and procedures manual were not followed by individual universities: àcards were not promptly cancelled when staff resigned àa university did not delegate an officer to perform certain duties àapplications for credit cards were approved by one officer instead of two àapplicants did not complete the necessary paperwork we noted instances at two universities where staff bought items outside the policy of each university. A third university issued a card to a person not employed by the university and a cardholder at a controlled entity used a card for private purposes five universities had instances where cardholders are purchasing items without adequate supporting documentation or prior approval.
Auditor-General’s Report to Parliament 2003 Volume Two
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Compliance Review of Credit Card Usage in Universities in New South Wales
RECOMMENDATIONS
We recommend that universities should:
only use cards with credit limits
ensure policies and procedures manuals cover every procedure and process needed to effectively operate credit cards. Most importantly, the manual should set out clearly the types and nature of spending that universities will allow when using cards
not permit cash advances as they can lead to a loss of control
ensure that when cardholders receive a credit card they sign a statement to indicate that they understand their responsibilities
have controls to ensure that cardholders observe the requirements of their policies and procedures manuals
ensure that officers monitoring the nature of goods and services purchased using cards are able to report any doubtful purchases to the Vice-Chancellor or, in the case of purchases by the Vice-Chancellor, to the university’s Senate or Council
only give cards to university staff
recall credit cards from cardholders who do not promptly provide supporting documentation. Approval to purchase must be obtained prior to the purchase being made.
DETAILED FINDINGS
Credit Limits
At the time of the audit, the University of Newcastle had issued 900 cards to staff, with a credit limit of $10 million and 288 cards with no credit limits. At the other extreme, Southern Cross University had only 63 cards. Only four universities (New England, Western Sydney, Technology and Sydney) imposed credit limits on all of their cards. Both the Universities of Newcastle and New South Wales spent over $15 million via cards in 2002. Only Southern Cross University spent less than $1 million.
Policies and procedures manuals
The policies and procedures manual prepared by the University of Technology, Sydney does not advise users of the eligible types of spending for their credit cards. It also does not document the process for seeking a new card provider. The manual is currently being updated.
Manuals prepared by Charles Sturt University and University of Technology, Sydney do not fully instruct users on how to use the cards.
The manual of a controlled entity of the University of New South Wales does not inform users about the monthly reconciliation process.
Cash Advances
Three instances were noted at the University of Wollongong where cardholders obtained cash advances for business purposes, contrary to policy. The university has advised that the advances were made in extenuating circumstances. The cardholders sought and received approval before obtaining the advance.
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Auditor-General’s Report to Parliament 2003 Volume Two
Statement of Use
Compliance Review of Credit Card Usage in Universities in New South Wales
Credit cardholders at the University of Sydney do not have to formally acknowledge their credit card responsibilities. The policy of Charles Sturt University requires this procedure, but our testing showed that this is not happening.
Compliance with Policies and Procedures Manuals
Two staff members at Macquarie University resigned, but the University did not promptly cancel their credit cards. They had not been misused. At the University of New England, the credit card policy document did not clearly indicate the officer responsible for authorising and administering the issue and cancellation of cards. At the University of Technology, Sydney during the first half of 2002, the Dean of a particular faculty did not always approve applications for cards despite the policy requiring this. At the University of Sydney applicants must sign particular paperwork to obtain a card but many cardholders did not comply with the policy.
Officers of Southern Cross University purchased a number of items outside its policy, including airfares, alcohol, books, a camera, subscriptions and conferences. Tips were often added to the cost. In addition, amounts spent on some meals appeared excessive. These findings were confirmed by the university. Use of credit cards was significantly reduced and controls strengthened in December 2002.
At the University of Sydney cardholders in two instances purchased airfares without following the University’s policy. A high level of unsupported payments hindered any further observations about the nature of some purchases. See item below.
The University of Wollongong issued a card to a person who was not an employee. The person was an office bearer of the University Postgraduate Association and appears to have used the card inappropriately for private purposes. The university has told us that the amount involved was approximately $25,000 and the matter has been referred to the Police. At a controlled entity of the university, an officer used a card for private expenditure. The amount involved was recovered.
Documentation
The University of Sydney paid for a number of purchases where cardholders did not supply the necessary supporting documentation. A similar situation existed at the University of Wollongong and the University of Technology, Sydney. Macquarie University experienced delays in receiving supporting documentation from one cardholder. At Southern Cross University cardholders often purchase items without prior approval.
BACKGROUND We believe that universities should apply credit card controls similar to those used elsewhere in the public sector. Being autonomous bodies, universities began using credit cards at different times over the last two decades. At the time of our review, they were all increasingly using credit cards.
The New South Wales Public Sector introduced the corporate credit card in 1987 to pay for official travel. In 1988 it expanded use to include goods and services and later to include entertainment and hospitality costs. The corporate credit card was seen as an efficient way to pay for large volume, low value and low risk purchases.
We have regularly argued that agency credit cards increased the risk of misuse by individual officers. In recent times we have audited their use on a number of occasions.
Auditor-General’s Report to Parliament 2003 Volume Two
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Compliance Review of Credit Card Usage in Universities in New South Wales
In January 1997, this Office tabled in Parliament a performance audit report on ‘The Corporate Credit Card’. In the following year, a compliance review on the usage of credit cards was undertaken. Our 1998 audit raised a number of serious concerns and resulted in the Treasury issuing a Policy and Guidelines Paper called ‘Review of Credit Card Use – Best Practice Guide’ for public service agencies. The Guide included a revision of the Treasurer’s Directions, a draft schedule of cardholder responsibilities and an example of an agency policy document to assist agencies develop their own policy.
A follow-up audit was conducted in 2001. The sample of agencies for this review included one university. We noted instances at the university of spending without prior approval, spending on non-business items and spending not adequately supported by documentation. The result of the review at the university raised some serious concerns. As a result we decided to conduct this review at all ten universities during 2002.
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Auditor-General’s Report to Parliament 2003 Volume Two