Auditor calls pCard oversight an unresolved, years-old issue

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Always Investigating has been digging into the government credit card or pCard system for months, pouring over records from a wide range of departments, agencies and counties. Misuse of county credit cards is at the center of investigations on the Big Island and Maui.

The state auditor had found years ago that there was too much of a hands-off approach to pCards and the system has not changed since.

More than a decade ago, the state established the pCard program as a way to simplify, put all smaller purchases on a card instead of writing up purchase orders for every little thing.

“We save time in the way that things are purchased,” explained Sarah Allen, administrator of the State Procurement Office. “We only have to pay one vendor instead of multiple.”

But in 2010, the state auditor put out a report that was part crystal ball in light of recent pCard scandals on the Big Island and Maui.

“I think more oversight from State Procurement Office is what we recommended in the first part,” said state auditor Jan Yamane. “I think that would still be in order. I think that recommendation stands.”

So do six other auditor recommendations that never resulted in any changes.

“We spend all this money on all these audits and reports, and we don’t do a good enough job of following through,” said Sen. Donna Mercado Kim, D-Kapalama, Alewa, Kalihi Valley, Ft. Shafter, Moanalua Gardens and Valley.

Oversight is still the major weakness from that audit that stands out today.

“I think it still remains a risk area,” Yamane said. “Anytime you have someone with the ease of purchasing with a pCard, the potential exists for some type of abuse.”

But the State Procurement Office administrator says they can only dedicate about a half of one person’s job to pCard oversight.

The rest of the day-to-day work ends up delegated to 21 people in every state department plus all the counties who are designated “chief procurement officers” but each of them also has other jobs to do.

“We can’t ensure anything,” Allen said. “If somebody wants to do something wrong, they’ll find a way. But if we had more resources to do more thorough reviews, we certainly would be able to stem that I think.”

Since another state budget has gone by without funds to bolster the office, the head of procurement suggests dedicating some fraction of the $1 million a year in rebates the pCard vendor gives back.

“We would be able to enlarge our office in regards to procurement, create better training and maybe even start to do some real auditing, or I should say reviews, because we don’t have audit responsibilities.”

Until then, there exists a vast difference in pCard oversight, some tight, some loose to a fault.

“The question that we have watching what’s going on around us is, why aren’t some of these things blocked?” Yamane said. “Someone must have removed the controls or not put the controls in place in the first place.”

We’ve found some other interesting things in the course of our reviews. Total credit card spending at the University of Hawaii is about $25 million a year across 1,275 cardholders. The top 30 people spend between $100,000 and $200,000 each.

The UH Cancer Center alone holds five of those six-figure-spending spots, usually on lab supplies.

“If you have two or three or four people buying the same thing, what kind of stock do we have?” Kim said. “Are they working with each other? Is it sitting on the shelf? What’s the shelf life on them and who is paying attention to those things? It seems like a small little thing but it really adds up.”

The Honolulu Board of Water Supply charges $2.5 million a year on the cards, including more than $16,000 just on boots.

These may all be for legitimate government purposes, but questions remain about oversight for the program, including where all the stuff goes. By law, all state and county agencies are supposed to file inventories with the State Procurement Office.

Always Investigating asked who is current and for those missing, how far back? Are we getting the best prices on things when we buy this way?

“That’s a little hard to say,” Yamane said. “You’re supposed to get three quotes before you buy anything.”

“We can certainly spend a lot more time and effort looking at how we procure and how we can be more efficient,” Allen said. “We certainly could save a lot more that way.”

Huge investigations into pCards show it pays to pay attention. A nine-year federal audit found that nearly half of government credit card purchases were improper, fraudulent and abusive.

“It is a culturally systemic problem, it sounds like,” Allen said. “You have to have leaders that are ethical and show procurement integrity. I think it’s beyond processes or policy. It’s really about building a culture of ethical leadership.”

Previously reported pCard Statements and Related Documents:

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