Credit cards

Kansas City workers abuse credit cards, audit finds

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Town Hall in downtown Kansas City

Star File Photo

Kansas City employees have made hundreds of questionable purchases on city-issued cards, according to an audit released Thursday by City Auditor Doug Jones.

The review found that employees may have violated ethics policies by using their cards to make purchases in the city from loved ones. He also discovered numerous cases of missing receipts, lack of supervisor approval, and cases of employees breaking purchases to avoid hitting the city’s $ 5,000 transaction limit.

The audit also revealed a situation which “could indicate possible illegal acts”. This was reported to city management for further investigation, Jones wrote, but he did not elaborate to preserve the integrity of the investigation.

In one case reviewed, a city official asked cardholders and a vendor to split a large bill into multiple smaller bills and make payments on multiple cards. It cost the city $ 3,000 in credit card fees.

“These fees would not be due if the department had made the payment in accordance with city policies,” the audit said.

The audit also found cases of employees using their acquisition cards for ineligible items such as computer hardware and software, food and entertainment. And some have been used to purchase office supplies, which are supposed to be purchased under a separate municipal contract.

Employee acquisition cards were issued to cover small, repetitive purchases necessary for city business. Kansas City has owned the cards since 2001 and currently has contracts with Bank of America to administer the cards, which are accepted by any supplier that accepts credit cards.

As of February 2021, the city had 213 active cards. The audit found that the water, fire and aviation departments had the most cards, made the most purchases and spent the most with those cards.

The audit examined a sample of 583 transactions between December 28, 2019 and January 27, 2021. It found 216 card transactions that resulted in 256 violations of acquisition card rules or the city’s procurement policy. . Collectively, these transactions have been valued at approximately $ 385,000.

“It’s theft,” said Councilor Heather Hall. “It is what it is.”

Hall said board members have not used acquisition cards since a former board member was accused of abusing a card years ago.

“They took it from all of us. So we don’t have them, ”she said. “I think it’s silly for a lot of people to walk around with credit cards on taxpayer money.”

While the city’s auditor made nine recommendations to improve accountability and rules regarding acquisition cards, Hall lobbied for discipline from city employees who were found to have made questionable purchases.

“Take the cards out of everyone who made these mistakes,” she said. “They don’t understand them anymore.

City Manager Brian Platt said the city plans to centralize all of its sourcing efforts, rather than allowing department-by-department purchasing management. He also wants to dramatically reduce the number of acquisition cards in circulation, which should improve oversight, he said.

“There are obviously far too many out there,” he said.

Platt was a business manager in Jersey City, New Jersey, before coming to Kansas City last year. He said Jersey City only had one acquisition card used and it was for emergency purchases only.

In his presentation, Jones recommended more training and supervision for card users.

The audit found 18 violations in which employees used their cards to make purchases from relatives, a troublesome finding because city workers are not expected to use their positions to financially benefit family members.

The audit found that two card approvers, who are supposed to review and approve acquisition card transactions, were unaware that purchasing products from family members was a potential ethical violation.

Jones recommended more regular spending reviews and requiring receipts documenting purchases. During the verification period, only a third of card transactions were accompanied by supporting documentation.

It also recommended resuming an earlier municipal practice of suspending cards when users fail to complete the required approval process. During the 13-month verification period, over 600 payments were made without completing the city’s three-tier policy approval process.

Kansas City chief financial officer Tammy Queen said the roughly $ 3 million employees spend on acquisition cards each year is only a small fraction – 0.18% – of the city’s overall budget.

“It really is a relatively small program for a government of our size,” she said. “… but it’s still an important place where we have to make sure we have the most controls in place. “

Queen said the city agreed with all of the audit recommendations.

Officials will start requiring employees to download receipts when shopping, she said. Officials will also look for unnecessary or underused cards that may be closed. The city will also conduct an annual card review and annual training for all users.

Likewise, the city will develop a new policy regarding e-commerce sites like Amazon and payment platforms like Paypal and Square. Jones said these can be prone to fraud, as purchases can obscure the identification of the seller or the product purchased.

For example, the audit found that an employee used an acquisition card to make a payment on Square to a family member.

Overall, around 20% of acquisition card transactions were made on third-party platforms and e-commerce platforms, the audit found. Amazon was the first supplier identified during the audit period.

Queen and the city manager said the city will start making changes to the acquisition card program in the coming weeks.

“We always appreciate the ability to make changes and improve our program,” said Queen.

This story was originally published 6 January 2022 17:53.

Kansas City Star Stories

Kevin Hardy covers the affairs of the Kansas City Star. He previously covered business and politics at the Des Moines Register. He also worked for newspapers in Kansas and Tennessee. He graduated from the University of Kansas