McMahan (The People's Watchdog) Seeks Credit Card Audits to Safeguard Tax Dollars

By Randy Ellis

The Oklahoman State credit cards are being used to make millions of dollars in purchases each year with little or no oversight or approval, state Auditor and Inspector Jeff McMahan said Wednesday.

Violations of state purchasing laws, potentially illegal destruction of state credit card records, missing receipts and numerous questionable purchases were uncovered by a preliminary review of a small sample of state credit card purchases, McMahan said.

Auditors found employees using state credit cards to shop at places such as "Saks Fifth Avenue, pawn shops, convenience stores and video stores," he said.

Questionable purchases included Christmas decorations, "smiling elephants," food, gasoline and travel, McMahan said.

Since problems appear to be widespread, McMahan said he is asking Attorney General Drew Edmondson to request a series of detailed investigative audits to look at credit card use in every state agency.

Charlie Price, spokesman for the attorney general, said Edmondson's office has not received McMahan's report. "When we do receive the report, it will be reviewed to see if an investigative audit is warranted," Price said.

What is legitimate?The state auditor's office initiated its special audit of state credit card use after The Oklahoman published reports detailing credit card abuse in selected state agencies.
"We have agencies that are using state credit cards to purchase doughnuts and refreshments for their staffs every day," McMahan said. "This might be legal -- I've been told that it was, but I don't see how. We don't do that in the auditor's office, and I don't believe that's how taxpayers expect their money to be spent."

Auditors said they discovered significant problems in a review of just 609 of the nearly 80,000 state credit card transactions made between July 1, 2004 and June 30, 2005. State credit card purchases totaled more than $18.2 million that year.

Auditors didn't look at Oklahoma higher education credit card purchases, which totaled more than $91.8 million during a similar one-year time period, he said. Universities contract with outside auditors to examine purchases, he said.

Required receipts were missing from a quarter of the credit card purchases examined, making it impossible for auditors to determine if the items were bought for legitimate state purposes, McMahan said.

The Department of Consumer Credit and J.M. Davis Memorial Commission were particularly bad about having large numbers of credit card transactions with missing receipts, the audit revealed. The Department of Consumer Credit was cited for having 61 transactions totaling $11,697 with missing receipts, and the J.M. Davis Memorial Commission was cited for having 16 transactions totaling $642 with missing receipts.

Many of the purchases that lacked receipts were made at Wal-Mart and similar stores which sell items that might be used for state or home use, McMahan said. He said he may ask the attorney general to issue subpoenas for corporate records so that auditors can determine what was bought.

"When you spend taxpayers' dollars, if you don't have a receipt, you probably should pay for it out of your own pocket," McMahan said.

The auditor said he was also concerned by the lack of safeguards in place at the Oklahoma Housing Finance Agency, where two cardholders control 24 credit cards. The agency has separate credit cards for each of 12 cost centers. Each card has a single purchase limit of $25,000 and monthly purchase limit of $50,000, which gives the agency a potential financial exposure of $14.4 million a year.

"That seems ridiculous and extremely dangerous," McMahan said.

Cards can be coded to prohibit the purchase of certain categories of items, but that wasn't done at this agency, so the cards could be used in liquor stores, pawn shops, adult entertainment stores and similar places, McMahan said.

A problem developed when one of the housing agency's cardholders loaned a credit card to another employee, who lost it. The lost card was then used to make $992 in purchases, including $970 at Common Wealth Tobacco, $21 at a 7-Eleven and $1.12 at Staples. The agency was able to recoup all but the $1.12 spent at Staples.

Credit card purchases of Christmas decorations, treasure chests, "smiling
elephants," and other items were questioned in an audit of the Pardon and Parole Board that was released last November and summarized again in the audit released Wednesday.