January 3, 2013
Principals and teachers spent thousands of dollars from their city-issued cash cards on purchases that they were later unable to justify, including furniture, Kindles and $200 worth of movie tickets, according to an audit released today by Comptroller John Liu.
Liu found that of the $130,000 in audited transactions, $85,551 was spent illicitly. Receipts were unaccounted for, transaction logs didn’t match spending records, and, in one case, pizza receipts appeared to have been doctored to make up for the missing documentation.
Liu’s office targeted 500 receipts from five high schools that had suspicious records. The selected sample represented just a slice of the $17.2 million that city schools spent using the debit cards in 2011, called procurement cards, or p-cards.
The city adopted the purchasing method in 2003 to provide more flexibility over budget spending. A teacher can use p-cards to pay for admission into museums or zoos for class trips; a school, meanwhile, could use them to quickly buy a new ink cartridge at a Staples instead of ordering through a vendor, which takes longer and costs more in processing fees.
Liu’s audit concluded that the flexibility had come in exchange for lax oversight. Although the city requires that schools follow considerable compliance when using the cards, Liu’s report suggests that the audited cardholders were not being required to follow the rules.
Cardholders must file receipts and fill out transaction logs detailing why the purchases were made. To maintain a tax exempt status, cardholders must complete a form at the time of their purchase. Some types of meals are banned from being expensed to the p-cards. And for individual purchases over $250, cardholders are required to first solicit bids from at least three vendors before deciding on the lowest-priced options
Sixty-three of the 541 audited transactions — worth about $30,000 — did not have documentation that proved it was an “educational need.” That includes $775 on five Kindle from Amazon.com, $194 in movie tickets from Costco.com and two sofabeds from Target worth nearly $700.
Eighty-three of the transactions totaling $13,409 went toward banned food purchases. These included a couple of dinner bills at an Upper West Side restaurant totaling $1,292 for 40 people. The host school, English Language Learners and International Support Preparatory, also spent $395 at an Indian restaurant for what school explained at “professional development”.
The other audited high schools were International High School, Murray Hill Academy, Pan American International High School At Monroe and Jamaica Gateway to the Sciences.
The audit didn’t directly accuse any of the schools of illegal purchases, but it suggested that the lack of proper governance left open the door for fraud.
“Greater care and discretion in the use of p-cards is in order before outright waste and abuse ensue,” said Comptroller John Liu.
Liu referred two of the schools — International Support Preparatory for allegedly doctoring pizza receipts and Murray Hill Academy — to be looked into by the Special Commissioner of Investigation.
A SCI spokeswoman said both investigations were closed and “there were no positive findings.”
All of the schools belonged to the same network, Children’s First 106, which officials targeted because it tallied the largest collective tab of any network in the city in 2011 — $516,667. The rest of the networks spent an average of $273,000.
In response to the audit’s recommendations, the city responded that it agreed with most and said it would strengthen the way it trains school staff with p-card holders and enforces the spending requirements.
A copy of Liu’s audit is below.