best credit card reviews by andrewa


									            Compliance Review of Credit Card Usage
              in Universities in New South Wales

We reviewed how well the State’s ten universities complied with their policies and procedures for
credit card use. This is the third time since 1997 we have reviewed credit card use in NSW
government agencies. Our 2001 review included a university and raised some serious concerns
about credit card usage. As a result we decided to conduct a review of all universities.

Universities extensively use credit cards, with two spending over $15.0 million annually on


What They Were Doing Well

The universities as a whole were performing a number of functions well. These included:

      having a manual of policies and procedures (although, not always comprehensive)
      controls over opening credit card accounts
      recording details of cards held
      assigning an officer to be responsible for card operations
      following up lost and stolen cards.

Where They Can Improve

Our review identified the following deficiencies:

      only four universities have credit limits on all their cards

      policies and procedures manuals have some deficiencies:

            one is out of date and does not always reflect current practices
            two do not instruct users on how to use the cards
            one does not require monthly reconciliations between university and provider records

      two universities used credit cards in isolated instances to obtain cash advances. While not
      considered best practice, the policy of one of the universities allows this. In the second
      university, its policy does not, but the university believes the circumstances were

      one university did not require cardholders to sign a statement that they have read and
      understand their credit card responsibilities. At two universities where policy requires this,
      our sampling indicated that it was not always happening

      instances where the policies and procedures manual were not followed by individual

            cards were not promptly cancelled when staff resigned
            a university did not delegate an officer to perform certain duties
            applications for credit cards were approved by one officer instead of two
            applicants did not complete the necessary paperwork

      we noted instances at two universities where staff bought items outside the policy of each
      university. A third university issued a card to a person not employed by the university and a
      cardholder at a controlled entity used a card for private purposes

      five universities had instances where cardholders are purchasing items without adequate
      supporting documentation or prior approval.

Auditor-General’s Report to Parliament 2003 Volume Two                                             9
Compliance Review of Credit Card Usage in Universities in New South Wales


We recommend that universities should:

      only use cards with credit limits

      ensure policies and procedures manuals cover every procedure and process needed to
      effectively operate credit cards. Most importantly, the manual should set out clearly the
      types and nature of spending that universities will allow when using cards

      not permit cash advances as they can lead to a loss of control

      ensure that when cardholders receive a credit card they sign a statement to indicate that
      they understand their responsibilities

      have controls to ensure that cardholders observe the requirements of their policies and
      procedures manuals

      ensure that officers monitoring the nature of goods and services purchased using cards are
      able to report any doubtful purchases to the Vice-Chancellor or, in the case of purchases by
      the Vice-Chancellor, to the university’s Senate or Council

      only give cards to university staff

      recall credit cards from cardholders who do not promptly provide supporting documentation.
      Approval to purchase must be obtained prior to the purchase being made.


Credit Limits

At the time of the audit, the University of Newcastle had issued 900 cards to staff, with a credit
limit of $10 million and 288 cards with no credit limits. At the other extreme, Southern Cross
University had only 63 cards. Only four universities (New England, Western Sydney, Technology and
Sydney) imposed credit limits on all of their cards. Both the Universities of Newcastle and New
South Wales spent over $15 million via cards in 2002. Only Southern Cross University spent less than
$1 million.

Policies and procedures manuals

The policies and procedures manual prepared by the University of Technology, Sydney does not
advise users of the eligible types of spending for their credit cards. It also does not document the
process for seeking a new card provider. The manual is currently being updated.

Manuals prepared by Charles Sturt University and University of Technology, Sydney do not fully
instruct users on how to use the cards.

The manual of a controlled entity of the University of New South Wales does not inform users about
the monthly reconciliation process.

Cash Advances

Three instances were noted at the University of Wollongong where cardholders obtained cash
advances for business purposes, contrary to policy. The university has advised that the advances
were made in extenuating circumstances. The cardholders sought and received approval before
obtaining the advance.

10                                                Auditor-General’s Report to Parliament 2003 Volume Two
                                Compliance Review of Credit Card Usage in Universities in New South Wales

Statement of Use

Credit cardholders at the University of Sydney do not have to formally acknowledge their credit
card responsibilities. The policy of Charles Sturt University requires this procedure, but our testing
showed that this is not happening.

Compliance with Policies and Procedures Manuals

Two staff members at Macquarie University resigned, but the University did not promptly cancel
their credit cards. They had not been misused. At the University of New England, the credit card
policy document did not clearly indicate the officer responsible for authorising and administering
the issue and cancellation of cards. At the University of Technology, Sydney during the first half of
2002, the Dean of a particular faculty did not always approve applications for cards despite the
policy requiring this. At the University of Sydney applicants must sign particular paperwork to
obtain a card but many cardholders did not comply with the policy.

Officers of Southern Cross University purchased a number of items outside its policy, including
airfares, alcohol, books, a camera, subscriptions and conferences. Tips were often added to the
cost. In addition, amounts spent on some meals appeared excessive. These findings were confirmed
by the university. Use of credit cards was significantly reduced and controls strengthened in
December 2002.

At the University of Sydney cardholders in two instances purchased airfares without following the
University’s policy. A high level of unsupported payments hindered any further observations about
the nature of some purchases. See item below.

The University of Wollongong issued a card to a person who was not an employee. The person was
an office bearer of the University Postgraduate Association and appears to have used the card
inappropriately for private purposes. The university has told us that the amount involved was
approximately $25,000 and the matter has been referred to the Police. At a controlled entity of the
university, an officer used a card for private expenditure. The amount involved was recovered.


The University of Sydney paid for a number of purchases where cardholders did not supply the
necessary supporting documentation.

A similar situation existed at the University of Wollongong and the University of Technology,

Macquarie University experienced delays in receiving supporting documentation from one

At Southern Cross University cardholders often purchase items without prior approval.


We believe that universities should apply credit card controls similar to those used elsewhere in the
public sector.

Being autonomous bodies, universities began using credit cards at different times over the last two
decades. At the time of our review, they were all increasingly using credit cards.

The New South Wales Public Sector introduced the corporate credit card in 1987 to pay for official
travel. In 1988 it expanded use to include goods and services and later to include entertainment and
hospitality costs. The corporate credit card was seen as an efficient way to pay for large volume, low
value and low risk purchases.

We have regularly argued that agency credit cards increased the risk of misuse by individual
officers. In recent times we have audited their use on a number of occasions.

Auditor-General’s Report to Parliament 2003 Volume Two                                                 11
Compliance Review of Credit Card Usage in Universities in New South Wales

In January 1997, this Office tabled in Parliament a performance audit report on ‘The Corporate
Credit Card’. In the following year, a compliance review on the usage of credit cards was
undertaken. Our 1998 audit raised a number of serious concerns and resulted in the Treasury issuing
a Policy and Guidelines Paper called ‘Review of Credit Card Use – Best Practice Guide’ for public
service agencies. The Guide included a revision of the Treasurer’s Directions, a draft schedule of
cardholder responsibilities and an example of an agency policy document to assist agencies develop
their own policy.

A follow-up audit was conducted in 2001. The sample of agencies for this review included one
university. We noted instances at the university of spending without prior approval, spending on
non-business items and spending not adequately supported by documentation.

The result of the review at the university raised some serious concerns. As a result we decided to
conduct this review at all ten universities during 2002.

12                                                Auditor-General’s Report to Parliament 2003 Volume Two

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