Audit shows misuse of state agency credit cards

By Jody Barr - bio | email

COLUMBIA, SC (WIS) - South Carolina Legislative auditors released a report Wednesday outlining several instances of misuse of state-issued credit cards.

Auditors spent the past several months auditing the state's more than 10,000 procurement cards, issued to state agency employees. The credit card program was started in 1996 to allow state employees the ability to make small purchases for supplies and materials.

LAC's audit report found several instances of misuse of the cards and ignorance of state procurement laws in the state's $163 million in credit card purchases from August 1, 2008 through July 31, 2009. "We found personal purchases, fraudulent items that agencies didn't detect and things that should have easily been detected, that the state ended up paying for," said Legislative Audit Council Director Tom Bardin.

State policy sets ground rules on what state employees can purchase with tax payer-funded credit cards. Employees cannot purchase meals, fuel, travel fees or gift cards, but auditors found several instances of state employees breaking the rules and failure of agency accountants to catch the mistakes.

The Budget and Control Board signed a contract with Bank of America, which issued Visa check cards to state agency employees to use in accordance with state procurement laws. Purchases are limited to a maximum of $2,500, and purchases over that amount are subject to bids and state contracts. Auditors discovered state employees using making purchases to get around the requirement, and breaking state purchasing laws in the process.

The LAC report does not include all findings from each agency audited.


USC Upstate

The LAC uncovered the purchase of $11,791 in gift cards by three University of South Carolina Upstate employees between 2008 and 2009. The gift cards were purchased from by employees who had state credit cards assigned to them, the report showed. Auditors found some of the cards were given to "individuals for services rendered," and in one case, the employee gave himself a $100 in cash from a gift card for "services rendered."

A second employee, according to the LAC, used the credit card at ATM machines, and converted the cash to his own use. The employee returned $640 to the university. Another USC Upstate employee was paid $1,100 in gift cards in 2008, but never filed a 1099 tax form as required by the Internal Revenue Service, according to the LAC report.

All three employees were disciplined, but the cases were never prosecuted, according to the LAC.

South Carolina Law Enforcement Division

LAC auditors sampled 39 purchases charged to SLED's state credit cards during the audit. Seven charges went against state regulations when employees charged hotels, rental cars, and rental trucks to the cards.

Auditors also found records that SLED employees charged $652.55 on the state credit card when the agency paid to register the agency's new logo with the United State's Copyright Office. The purchase was made without a purchase requisition, which is against SLED's policies.

A SLED employee purchased a Kindle reader from an online store, and had the equipment shipped to the employee's home address instead of SLED's office. The employee told the LAC the Kindle was needed "for a pending trip." The LAC report states acts such as this could lead to theft of equipment purchased by tax dollars.

Department of Archives and History

Auditors looked at 12 purchases from this agency and found seven purchases for meals, hotel rooms, and travel expenses that are prohibited by state procurement laws. The agency told LAC auditors that the purchases should have been electronically blocked, but the blocks were removed "at the request of a supervisor."

An Archives and History employee purchased two gift cards from Wal-Mart for a total of $303.45, which is not allowed under state policy. The agency told LAC auditors that the cards were purchased to pay another store that did not accept the state's credit cards.

South Carolina State University

The LAC pulled 52 purchases from South Carolina State University's credit card records. On one card, auditors found 17 purchases that amounted to more than $4,000 "for meals at a single restaurant in Orangeburg," the report showed.  In three separate cases, university officials charged $400 in meals listed as "official dinner." However, auditors reported the university had "no documentation indicating who attended." The name of the restaurant was not included in the report.

SC State officials did not follow state purchasing rules when the P-Card was used to buy a computer, according to auditors. A SC State internal audit found that the university's purchasing office "does not adequately administer or monitor the P-Card program," according to the LAC report. The report showed SC State officials don't always follow procurement laws, or the university's own policies governing P-Cards. The LAC noted SC State officials charged airplane tickets and charged travel agent fees to the state credit card.

Department of Natural Resources

Auditors found a DNR official purchased $3,400 worth of tents in 2008, and did so without a state contract and without seeking quotes. The LAC reported that DNR financial staffers caught the purchase in May 2008, but the DNR employee who made the purchase told the LAC he "thought the minimum dollar amount that would require a contract or quotes for a P-Card purchase was $5,000." The agency reported the purchase as "unauthorized," but the report does not show how the agency handled the employee.

Department of Employment and Workforce

LAC auditors found two "improper" purchases on DEW credit cards that required a state contract and bids where the agency didn't comply with state policy. In one purchase, the DEW employee spent $6,000 on lapel pins for a Veterans Day promotion, according to the LAC. The purchase went against the agency's contract on lapel pins, and required the DEW to seek "three written quotes for the purchase," according to auditors.

A second purchase involved computer upgrades for DEW computers, which cost tax payers $2,699. The DEW spent the money without a state contract and three competitive bids, which is against state policy. The employee told the LAC, "…that he did not realize the transactions were over $2,500, and therefore did not secure the required quotes."

Patriots Point Development Authority

This Charleston-based agency spent $3,050 on two fire-proof filing cabinets, but could not provide records to the LAC that showed the agency followed the state's contract and competitive bid regulations.


The top-ten list of agencies that charged the most on state credit cards, in millions:

  1. Medical University of South Carolina               $24m
  2. Clemson University                                          $23m
  3. University of South Carolina                            $22m
  4. Medical University Hospital Authority               $17m
  5. Budget and Control Board                               $12.7m
  6. Dept. of Transportation                                   $12.2m
  7. Santee Cooper                                                $6m
  8. Dept. of Education                                           $5.7m
  9. Coastal Carolina University                             $5.5m
  10. College of Charleston                                      $4.9m


LAC auditors found several instances where state agencies were getting around state procurement laws in making purchases that would require a state contract and seeking competitive bids on products and services that could have cost tax payers more to purchase. Auditors uncovered practices within agencies where purchases that would total more than $2,500 were split, in order to bypass state law, according to the LAC report. Here are the agencies the LAC named:

*Francis Marion University
*Medical University Hospital Authority
*Dept. of Transportation
*South Carolina State University
*USC Upstate
*Dept. of Public Safety
*Medical University of South Carolina


The LAC recommended 33 separate changes to the way state agencies handle state credit cards that give state employees access to spend tax dollars. Some of the recommendations include stricter written policies within agencies to govern the way the cards are used. Another would require agencies to post employee abuse of the cards on the state's transparency Web site along with the police report and details of the charges. Auditors believe this would serve as deterrence in the future.

Auditors want agencies to reconcile the procurement card statements at least once a month in order to ensure a better chance at agencies catching fraudulent charges, and charges that violate the state's purchasing laws. "If the block had been in place, that wouldn't have happened," said Bardin.

Bardin says the key to stopping the abuse is solid oversight. "There should be very little tolerance for misuse, very little tolerance for employees and supervisors not doing their jobs," said Bardin. "A number of items that should not be purchased are easy to find, if managers are doing their jobs."

The report showed that one in 10 state employees hold a state-issued credit card. The LAC recommends state agencies reduce the over 10,000 cards, to reduce the likelihood of abuse and fraud. Another change would require agencies to issue cards with the cardholder's name to make tracking potential abuse and holding employees accountable easier.

State auditors recommended the General Assembly pass tougher laws to investigate and monitor state P-Card use to ensure agencies are complying with state law.


The LAC investigators interviewed 90 state agencies on their use of state P-Cards. The findings:

74%: Had formal written policies governing the use of state credit cards.

36%: Had discovered and disciplined employees for "improper" use of state credit cards.

*The LAC report showed only two agencies: The Citadel and the Dept. of Social Services fired employees for misuse between 2008 and 2009. The Citadel had two employees prosecuted.

37%:  The LAC found 33 agencies with lost or stolen state credit cards.

43%:  Only 39 of the 90 agencies surveyed by the LAC had employees reimburse the state for personal use of the P-Card. The audit report states "personal use of the card is never allowed."

83%:  75 of the 90 agencies audited showed to have regular reviews of state employees' use of state credit cards.

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