San Jose's Office of City Auditor on Thursday reported that some city employees seriously violated rules of credit card use, such as unapproved purchases of computer tablets, rent on a BMW car, $700 on wine and $47,000 at an employee-owned company.
City Auditor Sharon Erickson found that employees generally adhered to city policies on using procurement cards, or "p-cards," at taxpayer expense, but recommended the city tighten its oversight on the cards and switch from paper-based to online record keeping.
Erickson, in her report sent to the City Council on Thursday, reviewed of a sample of 3,500 transactions by 910 city credit cardholders who made 41,000 purchases totaling $12.8 million in all city departments and offices between April 2013 and this past April.
Cardholders are limited to $2,500 for single purchases and $10,000 per month, Erickson said.
While most employees followed city procedures "with few exceptions," Erickson said she discovered some "serious violations," including p-cards of terminated employees that remained active and employees sharing charge card information with colleagues not authorized to use them.
Some p-card purchases were for "a large number of IT products, including tablets, which were made without IT approval," Erickson reported.
"In one case, one department used its p-card to purchase many high-end tablets with the intention of going paperless," according to Erickson.
"When we brought this to IT staff's attention, they stated that these purchases would not have been approved because IT does not support that brand of tablets," she wrote.
In another case, while city policy explicitly states that p-cards not be used to make personal purchases, one employee who totaled his car used a p-card to rent a new BMW vehicle for two and a half weeks, Erickson stated.
The person claimed that the expenses would be transferred to their personal credit card, but never were, and so $500 was charged to the city and was not detected by the worker's department. The person will have to pay the city back, Erickson said.
In another instance, despite city policy that states p-card holders "shall purchase the least expensive item," Erickson reported some employees shopped at high-end retailers and one cardholder feted delegates and city staff at "an expensive downtown restaurant," paying for "48 dinners and $700 spent on alcohol, including 12 $55 bottles of wine."
Another employee charged up 10 tickets at $225 apiece for a VIP table at an awards dinner to honor a city staff member, but the recipients of the tickets were not employed by the city, she stated.
In still another case, city cardholders from December 2011 to June of this year made 65 purchases totaling more than $47,000 at a company owned by a more senior employee of the same department, including $38,000 spent by one cardholder since June 2013, Erickson reported.
That situation entailed "a serious conflict of interest" under the city's Code of Ethics and Outside Employment Policy. The case has been forwarded to the city's Office of Employee Relations for possible discipline and the department's card suspended.
City spokesman David Vossbrink said that although he had not seen the p-card audit report, "this is exactly why we have a city auditor."
"If she finds clear violations of our policies, we don't accept that," Vossbrink said. "If she finds things we need to tighten, we tighten them."
Those who violate city spending policies face disciplinary actions, from paying the charged funds back to termination if a case can be made, Vossbrink said.