Compliance Review of Purchasing Cards for General Services Department
DATE: May 9, 2018
TO: Ralph M. Terrazas, Fire Chief Los Angeles Fire Department
FROM: Georgia Mattera, Chief Deputy Controller, Office of the Controller
SUBJECT: COMPLIANCE REVIEW OF PURCHASING CARDS
The Controller’s Office conducted a compliance review of the Los Angeles Fire Department’s (LAFD) oversight of Purchasing Card (PCard) usage to ensure expenditures are authorized, supported, and comply with the City’s PCard Program Cardholder Manual (Manual).
While management of each City department is responsible for designing, implementing, and maintaining a system to provide reasonable assurance that PCard usages are authorized, supported, and comply with the Manual, the Controller’s Office assists management by performing periodic assessments of the effectiveness of these departmental systems. These assessments compliment, but do not in any way replace, management’s assurance responsibilities.
Our review identified certain areas in which LAFD can enhance its internal controls to ensure PCard usage by your employees is authorized, supported, and comply with the Manual, as detailed in the attached report.
The City of Los Angeles (City) created the PCard Program to provide departments with an efficient, cost effective way of routinely paying for low value items, and during disasters a quick way to make large purchases. PCards are credit cards issued to City employees. The Controller’s Office administers the PCard Program while each Department determines which employees should receive PCards and is responsible for approving/reviewing each PCard purchase and transaction, ensuring compliance with the City’s regulations for authorized use, as defined by the PCard Program Cardholder Manual (Manual). Several City Departments have issued PCards to their employees, including Los Angeles Fire Department (LAFD). The Controller’s Office conducts periodic compliance reviews of PCard usage to ensure expenditures are authorized, supported, and comply with the guidelines.
FACT #1: LAFD provides essential emergency and non-emergency services to the second largest city in the nation.
FACT #2: LAFD has approximately 3,700 sworn and civilian employees, has 106 Fire Stations throughout the City and has 381 Fire Apparatus (i.e., fire trucks).
FACT #3: LAFD’s budget for 2018 totaled $657 million, with 95% of its budget dedicated to salaries. LAFD allocates 78% of its budget to Fire Suppression and Emergency Medical Service Programs.
FACT #4: In 2017, 22 LAFD employees were assigned 39 PCards who charged more than $839,970 for items procured.
FACT #5: Most PCards issued to LAFD employees have a $5,000 cycle limit and a $1,000 single purchase limit. However, five LAFD managers also hold special hybrid PCards, with $75,000 limits, during states of emergency.
Compliance Review Results
We identified opportunities where LAFD can enhance its internal controls and ensure PCard usage by its employees is authorized, supported, and complies with the Manual, as follows:
- Ensure PCard holders are not using PCards to purchase items from vendors with established contracts with the City’s procurement program, as the City’s purchasing agent may have negotiated better prices.
- Periodically remind PCard holders of prohibited purchasing practices including the purchasing for items through PayPal.
- Developing a cancellation policy and canceling PCards for employees who fail to submit their monthly PCard Payment Record (PCPR) and related receipts to support transactions.
Further, LAFD should consider establishing new procurement contracts with vendors whose products LAFD routinely buys with PCards.