State Audit Suggests Compliance Issues for Procurement at Tech
An audit report released by the state of Georgia’s Department of Administrative Services (DOAS) gives Georgia Tech a rating of 74 out of 100 and cites several compliance issues stemming from Tech’s use of state procurement cards, commonly referred to as PCards.
The audit stemmed from a process improvement review that DOAS regularly conducts for all state agencies and reflects purchases made during the final two months of 2011. The review cites six areas in which PCard holders were out of compliance, and suggests that cardholders “are displaying a lack of awareness of state procurement laws and administrative rules.”
Because they work like corporate credit cards, PCards are a familiar and convenient tool for acquiring the goods and services needed for everything from conference registration to office supplies. Georgia Tech is by far the largest procurement card user, representing about 15 percent of the state’s program, and the PCard has been a primary tool for purchasing business items and services less than $5,000. All Georgia Tech PCard holders are required to complete an online PCard tutorial prior to receiving a PCard and annually thereafter. Failure to comply with this training results in PCard suspension. Currently, there are 1,650 PCards issued to Georgia Tech.
Responding to DOAS, Georgia Tech Business Services contends that the risk is less significant than reported. Georgia Tech permits departments to use the PCard to purchase and process expenditures that are supported from “non-state funds,” such as discretionary funds provided by the Georgia Tech Foundation. These “non-state funds” are appropriate for a variety of purchases such as food items. Similar purchases using state funds may be more restricted.
Additionally, DOAS cited other concerns related to the purchase of computer peripherals and information technology products from non-state contracted vendors. Georgia Tech pointed out that poor service from the state vendor for these goods and services are well documented by multiple state agencies, so much so that DOAS subsequently modified the contract to allow flexibility in the use of alternate vendors.
“We believe Georgia Tech is a model for the state in terms of our tracking and oversight programs,” said Steve Swant, executive vice president for Administration and Finance. “Other state entities have sought our assistance in developing their own compliance protocols. At the same time, when it comes to the stewardship of state resources we do not believe in complacency; we will continue to develop better training, controls and enforcement to further reduce the inadvertent violations of procurement policies.”
Georgia Tech PCard statements are reviewed, approved, and certified within 45 days of purchase. The Georgia Tech Office of Internal Auditing currently conducts quarterly reviews of PCard transactions for policy violations, and will be implementing a continuous audit software program as an additional control.
“Our controls are very good,” Swant said. “There is a multi-layer process, required training, and audits. The Institute continues to stress compliance and to make a significant investment in monitoring tools that will help detect and correct improper use as it occurs.”
One administrative solution to reducing the reliance on PCards is the 2011 implementation of the SciQuest (known on campus as BuzzMart) e-procurement system, which offers centralized management, reporting and controls. With multiple vendors, negotiated rates and reduced paperwork requirements, it has proved to be a popular alternative to the PCard. By the end of fiscal year 2013, Tech’s PCard expenditures dropped nearly 20 percent and are projected to drop another 25 percent — to about $30 million — this fiscal year.
Georgia Tech has reduced PCard spending limits by half: less than $2,500 from the state program standard of less than $5,000, and further tightened policies on PCard usage.
“While we do not want to eliminate this valuable tool for Tech’s procurement needs, we can narrow the types of expenditures approved for its use,” Swant said. “The rules surrounding appropriate and inappropriate uses are complex, and we believe the majority of violations are due to misunderstandings of policy and process. For those very few bad actors who seek to intentionally defraud Georgia Tech or our sponsors, we will take appropriate action, including dismissal and referral to the state attorney general.”