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Legislative Audit Division StateofMontana ReporttotheLegislature Limited Scope Performance Audit September2001 Purchasing Card Program ElevenStateAgenciesandtheTwoUniversityUnits Thislimitedscopeperformanceauditprovidesinformationaboutthestate's PurchasingCardProgram. Weprovideinformationoncarduse,typesof itemspurchasedwithcards,purchasingcardcontrols. Overall,oursample ofcardtransactionsshowedpurchasesmadewithpurchasingcardswere reasonable. ST/ITE DOCUMENTS COLLECTIO, ^":' r "2002 MONTANA STAfE L.br "Y HELEN'' r.T-i-^tf.; r- Directcomments/inquiriesto: LegislativeAuditDivision ^O^^TMA Room 160,StateCapitol STATE L^IAar POBox201705 OlP-03 HelenaMT 59620-1705 Helpeliminatefraud,waste,andabuseinstategovernment CalltheFraudHotlineat 1-800-222-4446statewideor 444-4446inHelena. "|°|NTANY|ATELIBRARY 3 0864 0015 2490 2 PERFORMANCEAUDITS Performance audits conducted by the Legislative Audit Division are designed to assess state governmentoperations. Fromtheauditwork,adetermination ismadeastowhetheragenciesand programs are accomplishing their purposes, and whether they can do so with greater efficiency and economy. The audit work is conducted in accordance with audit standards set forth by the UnitedStatesGeneral AccountingOffice. Members of the performance audit staff hold degrees in disciplines appropriate to the audit process. Areas of expertise include business and public administration, statistics, economics, accounting, logistics,computerscience, andengineering. Performance audits are performed at the request ofthe Legislative Audit Committee which is a bicameralandbipartisan standingcommitteeoftheMontanaLegislature. Thecommitteeconsists ofsix membersoftheSenateandsixmembersoftheHouseofRepresentatives. MEMBERSOFTHELEGISLATIVEAUDITCOMMITTEE LEGISLATIVE AUDIT DIVISION ScottA. Seacat,LegislativeAuditor Deputy LegislativeAuditors: JohnW. Northey,LegalCounsel JimPellegrini. PerformanceAudit Tori Hunthausen, ISAudit&Operations JamesGillett. Financial-ComplianceAudit September2001 TheLegislativeAuditCommittee OftheMontanaStateLegislature: Thisisourlimitedscopeperformanceauditofthestate'sPurchasingCardProgram(ProCard) administeredbytheDepartmentofAdministration,MontanaDepartmentofTransportation,The UniversityofMontana,andMontanaStateUniversity. Thereportprovidesinformationtothelegislatureconcerningpurchasingcardusebystateanduniversity employees,andpurchasingcardcontrolsinplaceatasampleofstateagenciesanduniversityunits. Overall,wefoundpurchasesmadewithProCardsarereasonable. We wishtoexpressourappreciationtothedepartmentsanduniversityunitsstafffortheircooperationand assicsftnannrcpe Respectfullysubmitted. A. ScottA. Seacat LegislativeAuditor Room 160.StateCapitolBuildingPOBox201705Helena.MT 59620-1705 Phone(406)444-3122 FAX(406)444-9784 [email protected] Legislative Audit Division Limited Scope Performance Audit Purchasing Card Program ElevenStateAgenciesandtheTwoUniversityUnits MembersoftheauditstaffinvolvedinthisauditwereTomCooper, Susan Jensen,JoeMurray,JimNelson, KentRice, KentWilcox, KrisWilkinson,and MaryZednick. 1 Table ofContents ListofTables andFigures ii AppointedandAdministrativeOfficials iii ReponSummary S-i ChapterI-Introduction 1 Introduction 1 AuditObjectives 1 AuditScopeandMethodology I DataLimitations 2 IssuesforFurtherStudy 3 ReportOrganization 4 ChapterII -Background 5 Introduction 5 PurposeofPurchasingCards 5 SoftwareProvidedtoTrackTransactions 5 AccesstoSoftwareandInformation isControlled 6 SomePurchasingDetailsRecorded 6 ReportscanbeGenerated 6 ProcessforObtainingandUsingaCard 7 UseLimitsPlacedonCards 9 CardActivityReconciledtoPARIS 10 ProCardProgramscanbeDecentralized 1 CardUse 12 TypesofItemsPurchased 13 RebatesBasedonCardUse 16 ChapterIII-FutureUtilizationandProCardControls 17 Introduction 17 ProCardProgramGrowing 17 AmountPurchasedwithProCardsIncreasing 17 Control Review Results 18 PurchasesReasonable 20 SomeAgenciesCouldIncreaseControls 20 BasicCardUseControls 20 ReceiptsReconciledtoStatements 21 Follow-upforMissingReceipts 21 SegregationofDuties 21 EnhancedManagementControls 22 RequiringLogsorForms 22 CardLimits 23 CustomizingPoliciesandProcedures 23 TrainingCardholdersonCardUse 23 Conclusion 24 AgenciesResponses 27 AppendixA A-1 Page i 1 List ofFigures and Tables Figures Figure 1 StepstoEstablishProCardProgramandDistributeCards 8 Figure2 ProcessforPurchasingItemsandPayingGECapital 1 Figure3 PurchasingCardUse 12 Tables Table 1 TransactionsNotAllowedwiththeProCard 9 Table2 Top 10VendorsinCalendarYear2000ThroughOctober31 13 Table3 DollarAmountsSpentbyMerchantCategory 14 Table4 NumberofTransactionsbyMerchantCategory 15 Table5 Rebates 16 Table6 ComparisonofProCardUsageforSelectedItems 18 Pageii Appointed and Administrative Officials DepartmentofAdministration BarbaraRanf. Director DepartmentofTransportation DavidA. Gait. Director TheUniversityofMontana George M. Dennison, President MontanaStateUniversity Dr. GeoffreyGamble. President Pageiii