Procurement Card Program Audit Procedures Operating Procedure #OP037

Effective: June 2011 Revised: December 2016

1.0 PURPOSE

1.1 Frederick County Public Schools (FCPS) has established a Procurement Card program to enable employees to make purchases that are necessary for FCPS' operations with a degree of efficiency. Use of the procurement card will facilitate purchases, expedite payment to vendors and improve internal administrative cost controls. Cards will provide an avenue for purchasing from vendors who do not accept purchase orders. Procurement cards will be issued to trusted, responsible employees, as their safekeeping and proper use are imperative.

1.2 This document describes the procedures utilized for the audit of the Procurement

Card program at FCPS. It specifies the actions to be taken during the audit under any given billing cycle.

2.0 DEFINITIONS

2.1 Approving Official: The Approving Official is the person(s) in authority responsible for the card activities of subordinate cardholders. A cardholder cannot be his/her own Approving Official. The Approving Official is responsible for reviewing the cardholder's purchases to ensure they are made in accordance with FCPS policy. In most cases this person is the cardholder’s immediate supervisor.

2.2 Audit Log: A compilation of various audit information that is submitted to the

Purchasing Manager on a monthly basis.

2.3 Billing Cycle: The credit billing cycle is the 16th to the 15th of each month.

2.4 Cardholder: The cardholder is the employee to whom a card is issued. The card bears the employee's name and may only be used by the employee to make authorized purchases for FCPS.

2.5 Level 3 Data: Detailed transaction data, provided by the vendor, that shows line-

item information. 2.6 Problem Children: Cardholder(s) that violate any of the outlined infractions

noted in OP034, Procurement Card Program Rules and Procedures.

2.7 Procurement Card Administrator (PCA): The designated person who serves as the coordinator of applications, issuance and destruction of cards, establisher of reports, and administrative training. The PCA is the liaison between FCPS and the card-provider. The PCA’s are Bill Meekins CPPB, CPCP, and Hope Miller CPCP.

2.8 Sales Tax: A tax imposed on the sale of taxable items, calculated as a set

percentage of the sales price. 2.9 Sensitive Assets: An item between $300 and $5000 that has been identified by

the Accounts Payable department as requiring an inventory tag. A listing of these items is located on the Accounts Payable intranet site.

2.10 Split Purchase: A practice whereby cardholders or suppliers split a purchase’s

total into two or more transactions to circumvent single transaction limits.

Note: Multiple transactions that are made to fulfill various work order requests from the FCPS Computerized Maintenance Management System (CMMS), at a single vendor, may be exempt from being identified as a split purchase, provided that an individual work order number does not exceed the single transaction limit.

2.11 Watch List: A listing of Cardholders who have committed one, or more,

infractions. Additionally, Cardholders may be added by an Approving Official, or one of the PCA’s. Cardholders remain on the watch list until the watch period has ended.

3.0 PCARD AUDIT STEPS

3.1 Audit Cabinet Members in PeopleSoft 3.1.1 All cabinet members’ transactions are audited monthly.

3.1.2 PeopleSoft will deliver the list of transactions. 3.1.3 Audit comments will be left in each transaction.

3.2 Audit New Cardholders in PeopleSoft

3.2.1 All new Cardholders have their transactions audited for three (3) consecutive months.

3.2.2 PeopleSoft will deliver the list of transactions. 3.2.3 Audit comments will be left in each transaction.

3.3 Audit 10% of the total transactions for the billing cycle as random transactions in PeopleSoft

3.3.1 Determine the number of transactions for the billing cycle. This number is

entered into PeopleSoft for the creation of the random transactions to be audited.

3.3.2 Audit comments will be left in each transaction.

3.4 Audit our problem children 3.4.1 Problem children are identified on the Watch List.

3.4.2 Problem children are audited for three (3) billing cycles: the billing cycle they are identified and two consecutive cycles after.

3.4.3 Audit comments will be left in each transaction.

3.5 Audit all transactions that may have been charged Maryland State sales tax

3.5.1 The Sales Tax report and Transaction Detail report are used to identify these transactions.

3.6 Audit Travel transactions 3.6.1 The Travel report is used to identify these transactions. 3.7 Audit Even dollar transactions 3.7.1 The Even dollar report is used to identify these transactions 3.8 Audit Level 3 vendors

3.8.1 The Transaction Detail report is used to identify the transactions with Level 3 approved vendors.

3.8.2 A maximum sampling of three (3) transactions will be made per vendor

(vendors with no transactions will not be sampled). 3.8.3 Cardholders will be contacted to provide backup documentation for

review purposes. 3.8.4 Audited transactions will have the backup documentation, and a

corresponding comment, attached.

3.8.5 Vendors that have multiple errors will be removed from the approved vendor list.

3.8.6 Findings will be reported on the Audit Summary Sheet.

3.9 Audit and verify that Cardholders on extended leave have no purchases during

their extended leave status

3.9.1 The Terminated Cardholder report will be used to identify the Cardholders on extended leave.

3.9.2 The BOE Pcard Transaction Inquire screen in PeopleSoft will be used to

verify that no transactions have occurred by the identified Cardholder for the specified billing cycle.

3.10 Audit Cardholders with limits over $5000

3.10.1 The Transaction Detail report will be used to identify the Cardholders with limits over $5000.

3.10.2 All transactions for the billing cycle will be audited. 3.10.3 Audit comments will be left in each transaction.

3.11 Auditing Cardholders with temporary increases over $5000 for the billing cycle

3.11.1 Cardholders will be identified by the approval emails from the Purchasing Manager and will be added to the Watch List.

3.11.2 All transactions for the billing cycle will audited. 3.11.3 Audit comments will be left in each transaction.

3.12 Create the Audit Summary Sheet

3.12.1 The Audit Summary is completed at the end of each billing cycle audit and contains the following information:

3.12.1.1 The number of Cabinet member transactions audited 3.12.1.2 The number of new Cardholder transactions audited 3.12.1.3 The number of random transactions audited 3.12.1.4 The number of potential split transactions identified

3.12.1.5 The number of problem children transactions audited, with Cardholder names

3.12.1.6 The number of transactions audited for Cardholder’s with high

dollar/risk, with Cardholder names 3.12.1.7 The number of transactions audited for Cardholder’s whose limits

were temporarily increased to over $5000, with Cardholder names

3.12.1.8 The number of transactions audited for Level 3 vendors, with

vendor names 3.13 Non-active Cards 3.13.1 The Cardholder Profile report is used to identify these cards. 3.14 PCA reviews deactivated accounts

3.14.1 Card accounts that have been deactivated by one PCA will be reviewed by the other PCA to verify account has been cancelled.

4.0 TRANSACTIONAL AUDIT ACTIONS 4.1 PeopleSoft assigns a unique document number to each pcard transaction. 4.2 In auditing the transaction, the following areas will be reviewed:

4.2.1 Review the account string to insure the string is appropriate for the purchase. If not, the cardholder will be contacted for the correct string. Purchasing will initiate the Offline Account Code Change Form.

4.2.2 Review the attachment:

4.2.2.1 For correctness. If the attachment is incorrect, the cardholder will be contacted for the correct attachment.

4.2.2.2 Verify the attachment is self-explanatory, or additional

comments have been added to explain the transaction. If not, the cardholder will be contacted for additional information.

4.2.2.3 On travel transactions, verify the extended day travel form is

attached.

4.3 If the vendor is on the approved Level 3 list, check that the line-item detail total matches the transaction total.

5.0 REPORTS USED FOR AUDITING 5.1 Cardholder Profile Report (yearly) – PaymentNet

5.1.1 Furnishes all cardholders and their account information. 5.1.2 Used to verify the Cardholder’s last transaction date. 5.1.3 Cardholder’s who have not used their cards for a one year period are

contacted.

5.2 Even Dollar Report (monthly) – PeopleSoft 5.2.1 Furnishes all transactions, in a defined period, that end in $.00. 5.2.2 Used to identify potential gift card purchases.

5.2.3 Analyze vendors that have a high likelihood of gift card purchases, i.e. Wal-Mart, Target, Amazon, etc.

5.2.4 Suspect transactions are reviewed to see if it is a gift card purchase.

5.2.4.1 If No – Move to the next suspected transaction. 5.2.4.2 If Yes – An infraction notice is sent to the Cardholder and their

Approving Official. The Cardholder gets added to the Watch List.

5.3 Missing Attachment Report (monthly) – PeopleSoft

5.3.1 Furnishes all transactions that do not flag as having an attachment present.

5.3.2 Used to verify that transactions have the necessary attachments, where applicable.

5.3.3 Approved Level 3 vendors are identified and can be omitted, unless the

transaction is a credit. 5.3.4 If missing, the Cardholder is contacted to provide the missing attachment.

5.4 Sales Tax Report – PeopleSoft

5.4.1 Furnishes all transactions that have been flagged as having an amount in the sales tax field.

5.4.2 Used to verify that that amount identified as sales tax is actually sales tax. 5.4.2.1 If No – Move to the next suspected transaction. 5.4.2.2 If Yes – Check to see if a credit has been issued.

5.4.2.2.1 If Yes – Document the finding in the comments section of the transaction and move to the next suspected transaction.

5.4.2.2.2 If No – An infraction notice is sent to the Cardholder

and their Approving Official. The Cardholder gets added to the Audit Log.

5.5 Split Transaction Report (monthly) – PaymentNet

5.5.1 Furnishes transactions that have been identified as two, or more, purchases on the same day, to the same vendor, that total a value greater than the Cardholder’s allotted single purchase limit.

5.5.2 Used to verify that the identified transactions are truly split transactions.

5.5.2.1 If No – Document the finding on report. Move to the next set of suspected transactions.

5.5.2.2 If Yes - An infraction notice is sent to the Cardholder and their

Approving Official. The Cardholder gets added to the Watch List.

5.6 Transaction Detail Report (monthly) – PaymentNet 5.6.1 Furnishes all transactional detail for a given billing cycle. 5.6.2 Used to verify multiple pieces of information:

5.6.2.1 Review transactions that exceed $5000. 5.6.2.2 Review transactions that may be for items categorized as

Sensitive Assets. 5.6.2.3 Review transactions that have values in the Sales Tax field. 5.6.2.4 Review Level 3 data providing vendors.

5.7 Travel Report (monthly) – PeopleSoft

5.7.1 Furnishes transactions that have been identified as relating to travel.

5.7.2 Used to verify that the identified transactions correlate to travel related expenses and that the correct comments and/or attachments are documented.

5.7.2.1 If Yes – Document the finding on the report. Move to the next

transaction. 5.7.2.2 If No – Contact the Cardholder for the missing information.

5.8 Terminated Cardholder Report (daily) – PeopleSoft

5.8.1 Furnishes Cardholders who are on extended leave, who were terminated, or who are scheduled to retire.

5.8.2 Used to identify Cardholders who require a change to their card account

status:

5.8.2.1 Extended Leave – The card is placed into “suspended” status until the Cardholder returns to active duty.

5.8.2.2 Terminated – The card is cancelled immediately, or as of the

effective date on the report. 5.8.2.3 Retired – The card is cancelled as of the effective date on the

report. 5.9 Unapproved Document Report (as needed) – PeopleSoft

5.9.1 Furnishes transactions that have not been fully approved through workflow in PeopleSoft.

5.9.2 Used to verify all transactions, in a specified billing cycle, have been fully

approved through workflow in PeopleSoft. 5.9.3 The report identifies the PeopleSoft user who has the transaction waiting

for their approval. 5.9.4 The user is contacted to work the transaction document.

5.10 Workflow Alternate Approvers Report (daily) – PeopleSoft

5.10.1 Furnishes Approving Officials who have temporarily transferred their approval responsibilities to a different user, and the length of time for the transfer.

5.10.2 Used to verify the identified temporary Approving Official does not have

a credit account.

5.10.2.1 If No – The temporary Approving Official is allowed. 5.10.2.2 If Yes – The temporary Approving Official will have their credit

account temporarily suspended for the corresponding timeframe. 6.0 PCARD AUDIT LOG

6.1 The Audit Log is completed at the end of each billing cycle audit and contains the following information:

6.1.1 A listing of the problem children being audited for that billing cycle. 6.1.2 A listing of the cardholders who have had their limits temporarily

increased over $5000 for the billing cycle. 6.1.3 A listing of the cardholders who have limits over $5000. 6.1.4 A listing of the cardholders who are considered high risk. 6.1.5 A listing of the cardholders who have been issued an infraction notice. 6.1.6 A listing of the cardholders who have been identified as having paid sales

tax. 6.1.7 A listing of credit accounts that have been deactivated.