OFFICE OF INSPECTOR GENERAL  PALM BEACH COUNTY      John A. Carey  Inspector General                    Inspector General  Accredited  “Enhancing Public Trust in Government” Audit Report 2018-A-0013 Town of Jupiter Credit Cards September 12, 2018 Insight – Oversight – Foresight                 OFFICE OF INSPECTOR GENERAL  PALM BEACH COUNTY    AUDIT REPORT   2018‐A‐0013       John A. Carey  Inspector General  DATE ISSUED:  SEPTEMBER 12, 2018                     Inspector General  Accredited  “Enhancing Public Trust in Government” TOWN OF JUPITER – CREDIT CARDS SUMMARY WHAT WE DID We conducted an audit of the Town of Jupiter (Town) credit card program. This audit was performed as part of the Office of Inspector General, Palm Beach County (OIG) 2018 Annual Audit Plan. Our audit focused on the credit card program and controls for the credit card expenditures. The scope included review of the Town’s credit card activities from October 1, 2016 to September 30, 2017. WHAT WE FOUND During the audit, we found that the Town has been working to establish stronger internal controls by creating a Cardholder’s Agreement and Request Credit Card form. We found internal control weaknesses and operational areas that need improvement. We found weaknesses in the purchase review and approval process, the utilization of the rebate program, the card cancellation process, and the process for managing temporary changes to cardholders’ credit card spending limits. Generally, the overall credit card program lacked adequate written guidance. This audit report reflects what we found based on the policies and procedures, confirmed process, and documentation that we were provided access to at the time of the audit. After the delay by the Town in providing the requested records, in accordance with government auditing standards, we deemed the delay excessive and finalized the audit report. It should be noted that after our draft audit report was presented and discussed at the August 9, 2018 exit meeting with Town Management, the Town Manager requested additional time to provide documentation that was not previously provided during the 10 month period. This information is noted in Exhibit 4 – Transaction Detail Additional Information Provided by Town. Page 1 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 Our audit identified a total of $83,741 in questioned costs1, $109.01 in identified costs2, and $29,145 in avoidable costs.3 Non-Compliance with Policy We found that three former employees’ credit cards were used to complete purchases after their last day of employment by other Town employees. Additionally, credit card purchases lacked proper approvals and adequate documentation, which resulted in approximately $83,741 in questioned costs. The Town paid sales tax in error. The sales tax improperly paid is an identified cost of $109.01. Rebate Revenue The Town did not procure a more competitive rate for credit card rebates (i.e. cash back) that would have optimized the Town’s rebate return on its purchases and cash transactions. Our recommendation to participate in a higher yield rebate program may result in approximately $29,145 in future avoidable costs over the next three years. Cards Not Deactivated Timely Three (3) out of four (4) (75%) former employee cardholder accounts tested were deactivated more than one day after the former employees separated from employment with the Town. The gap between the date of the employee's separation and the date of account deactivation ranged from five (5) to 15 business days. The failure to deactivate credit card accounts timely increases the risk of unauthorized use. Lack of Sufficient Written Guidance The Town lacked sufficient written guidance in the following areas to help reduce inappropriate use of credit cards and enhance internal controls over the credit card program:  Credit card issuance process;  Cardholder acknowledgment of receipt of the credit card use guidelines and credit card;  Spending limits and oversight / monitoring;  Prohibited / disallowed purchases;  Periodic transaction monitoring / oversight for all purchases;  Credit card deactivation;  Penalties for policy violations;  Rebate program participation and rebate reconciliation / allocation; and  Cardholder training. Lack of adequate written guidance increases the risk of misuse of the Town’s credit cards. 1 Questioned costs can include costs or financial obligations incurred pursuant to: a potential violation of a provision of a law, regulation, contract, grant, cooperative agreement, other agreement, policies and procedures, or document governing the expenditure of funds; a finding that, at the time of the OIG activity, such cost or financial obligation is not supported by adequate documentation; or, a finding that the expenditure of funds for the intended purpose is unnecessary or unreasonable. 2 Identified costs are costs that have been identified as dollars that have the potential of being returned to the entity to offset the taxpayers’ burden. 3 Avoidable costs are costs an entity will not have to incur, lost funds, and/or an anticipated increase in revenue following the issuance of an OIG report. The maximum period for calculating Avoidable Costs shall typically be three years from the issuance of the OIG report, except in instances where it involves a contract with a specified contract period. Page 2 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 WHAT WE RECOMMEND Our report contains four (4) findings and offers fourteen (14) recommendations. Implementation of the recommendations will 1) assist the Town in strengthening internal controls, 2) save approximately $29,145 in future avoidable costs, and 3) enhance compliance with the Town’s credit card procedures. Despite numerous requests by our office, the Town management did not provide us with certain documentation until after the audit was completed. At Town management’s request, we considered the additional information and incorporated the information into Exhibit 4. We characterized the delayed production as a corrective action by the Town. We provided the Town management with an opportunity to respond to the findings in this Audit Report. The Town management responded that it does not concur with our findings (see Attachment 1) and disputes several statements in the Report. Although the Town management did not accept the findings, we are encouraged that the Town is implementing a number of our recommendations. By implementing the recommendations, the citizens of the Town of Jupiter will be better served and taxpayer funds will be better protected. We disagree with multiple assertions in the Town management’s response. Additionally, we do not agree that the Town management’s production of documentation after the completion of the audit resolved many of the issues we identified. The Town did not timely provide sufficient evidence to our office to show that all of the identified exceptions were resolved. Moreover, the Town management’s response contains several assertions that contradict the requirements in the Town Council’s Resolution (74-16). Attachment 2 provides further information on our rebuttal to Town management’s response. Examples of Purchases in Violation of Town Policy or Lack of Sufficient Documentation:  $4,100 in gift cards  $1,683 in food purchases  $13,601 in entertainment tickets o Miami Dolphin tickets o Marlins tickets o Sunday brunch on a cruise o Theater tickets  $17,903 for the purchase of 33 tablet devices (i.e. I-pads, Microsoft Surfaces, and Galaxy tablets) Page 3 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 BACKGROUND The Town was incorporated in 1925. The Charter of the Town was enacted by the Florida Legislature by Special Acts 1953. Subsequently, the Town adopted Ordinance Number 58-96 on March 10, 1998, under the provisions of the Home Rule Powers Act of the State of Florida, enacting the Amended Charter of the Town, which was ratified by the vote of the electors at a special election. The Town is located on the Atlantic Ocean in northern Palm Beach County with more than 60,000 year-round residents. The Town operates under the Council-Manager form of government. Policy making and legislative authority are vested in the Town Council that consists of the Mayor and four other Council Members. The Town Manager is appointed by the Town Council and is responsible for carrying out the policies and ordinances established and approved by the Town Council and managing day-to-day activities of the Town. The OIG 2018 Annual Audit Plan identified purchasing card programs as a high-risk global area. We selected the Town for audit based on our Purchasing Card Survey, Audit Report 2018-A-0008. We selected the Town because it reported $6,000,000 in purchasing card expenditures for Fiscal Year (FY) 2017, had the highest average expenditure per purchasing card of all municipalities surveyed of $127,660 for FY 2017, the Finance Director was assigned to oversee the purchasing card program4, and because the Town has not been previously audited by the OIG Audit Division. Credit Card Program Background The Town entered into a Commercial Card Agreement for credit card services with SunTrust Bank effective February 27, 2014. The Town had 52 active credit cards issued at the time of the audit, and credit card purchases for FY 2017 totaled $6,450,544 (see Exhibit 1). The Commercial Card Agreement includes a Net-Spend Rebate Program and Large Ticket Transaction Rebate Program that provide the Town with an annual rebate payment based upon purchases and cash transactions. 4 The Finance Department overseeing the purchasing card program creates a potential segregation of duties conflict as the head of the Finance department may be responsible for purchasing authority operations (i.e. oversight of procurement related-policies that may include the Purchasing Card policy), as well as, accounting operations (i.e. payment processing for procured goods and services). A conflict in segregation of duties indicates a potential internal control deficiency in the prevention of fraud, waste, and abuse. Page 4 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 OBJECTIVES, SCOPE, AND METHODOLOGY The objectives of the audit were to determine whether the Town had internal controls in place and were adequate to appropriately govern credit card use, including controls to prevent and detect fraud, waste, and abuse, and to determine whether credit card expenditures were in compliance with policies and served a valid public purpose. The audit scope included credit card activities from October 1, 2016, to September 30, 2017 (FY 2017). The audit methodology included:  Reviewing internal controls;  Interviewing appropriate personnel;  Reviewing reports, contracts, and user agreements;  Performing data analysis of the population of transactions;5 and  Performing detailed testing of selected transactions. Data analyses were used in the audit to select high-risk transactions and / or cardholders for detailed testing. Data analyses were performed in the CaseWare IDEA software and consisted of analyzing the population of credit card transactions and cardholders for attributes or combinations of attributes considered high risk. Attributes can be characteristics or traits of the cardholder or purchase transactions and may vary based on the entity, purchasing card system, or system configuration. Cardholder attributes may include, but are not limited to: employment status, credit and transaction limits, department, or title / position. Transaction attributes may include, but are not limited to: the purchase amount, purchase date, vendor / supplier, purchase description, Merchant Category Code, approval or lack of approval, or supporting documentation or lack of supporting documentation. Attributes are considered high risk if they are abnormal, inconsistent, or outliers in comparison to the population, subgroups of the population (e.g. by cardholder, department, Merchant Category Code, etc.), policy / procedure, best practices, or expected value / outcomes. As part of the audit, we completed a data reliability assessment for the computer systems used by the Town related to administering and reporting of the credit card process. We determined that the computer-processed data contained in these computer systems were sufficiently reliable for the purposes of the audit. This audit was conducted in accordance with generally accepted government auditing standards. These standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. 5 See Exhibit 5 for a detailed listing of data analyses. Page 5 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 FINDINGS AND RECOMMENDATIONS Finding (1): Credit card transactions did not comply with policy. The Town's Procurement Policy Standard Operating Procedures, Section IV(E). Credit Card Purchases, states in part, credit cards may be utilized for incidental purchases for less than $250 and not more than $2,500 per month from a single vendor without incurring specific prior approval…The department utilizing the card is responsible for providing invoices (receipts) or other acceptable documentation signed by the appropriate Department Director or their designee to the Finance Department with the monthly credit card billing as supporting documentation for payment within the timeframe allowed by the Finance Department. Section VIII(P). Sales Tax Exemption of the policy also states, "All employees who purchase goods or services on behalf of the Town shall supply each vendor with a copy of the Town's tax exemption certificate to avoid being assessed State Sales Tax." We performed data analyses on the total population of credit card transactions to identify high risk transactions for detailed testing (see Exhibit 5 for a listing of the data analyses performed). We selected 142 credit card transactions for testing proper support and approval, compliance with the Town’s procurement policy, exclusion of sales tax, and reconciliation to the credit card statements (see Exhibit 1 for statistics on the sample of transactions selected). Eighty-six (86) transactions of the 142 transactions (61%) sampled had one or more exceptions for a total of 100 different exceptions. We noted the following violations of policy (see Exhibit 2 for a breakdown by Department):  10 of 142 transactions (7%) totaling $658 made by former employees lacked proper approval.  11 of 142 transactions (8%) totaling $33,723 lacked proper pre-approval.6  75 of 142 transactions (53%) totaling $66,432 lacked proper approval by the department director or designee.  4 of 142 transactions (3%) that incorrectly included sales tax totaling $109.01. In addition to the policy violations detailed above, we also noted several conditions created by the lack of clear guidance in the Town’s procurement policy. The procurement policy did not require that the invoices (receipts) supporting the credit card purchases be detailed or itemized. Neither the procurement policy nor the credit card authorization form 6 The Town’s Procurement Policy required prior approval for purchases $250 or more and when the total monthly expenditures with a single vendor exceed $2,500 per month. Page 6 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 requires an explanation or reason for the credit card purchase to be documented and submitted with the supporting documentation. Thirty-three (33) of 142 transactions (23%) totaling $40,993 lacked adequate documentation to validate the items purchased or reason for the purchase (see Exhibit 2 for a breakdown by Department). We requested that the Town provide additional support relating to the transactions above, but there was an excessive delay in the Town providing access to the records. Therefore, we completed testing without the requested support and documented our findings without resolution. Additionally, the Finance Department reviews credit card purchase documentation to ensure all transactions have support but did not routinely review or monitor credit card transactions to validate the items purchased, proper approval or pre-approval exists, or sales tax was excluded. Furthermore, the Finance Department did not appear to have a written policy or procedure for reviewing credit card statements for credit cards used by former employees to ensure that no charges were incurred after an employee separates from employment with the Town. Questioned costs resulting from transactions made by former employees, lacking proper approvals7, and lacking adequate documentation totaled $83,741. Additionally, identified costs totaled $109.01 for purchases that incorrectly included sales tax in the purchase amount. See Exhibit 3 for a listing of the transactions that make up the questioned and identified costs. The risk for fraud, waste, and abuse increase when credit card purchases lack proper approvals and adequate documentation. Additionally, a lack of routine monitoring and oversight increases the risk for noncompliance with policy and procedure and increases the risk for fraud, waste, and abuse. 7 A portion of the transactions lacking proper pre-approval and approval also lacked adequate documentation but were only counted once for questioned costs. Page 7 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 Recommendations: (1) Ensure that state sales tax is not paid on credit card purchases and consider seeking reimbursement for sales tax improperly paid. (2) The Town require credit cardholders to obtain proper approvals for purchases. (3) Revise the Town’s credit card policy and procedures to require credit cardholders to submit to the Finance Department supporting documentation for each credit card purchase, to include an itemized receipt or sufficient detail to clearly show all the items purchased, that sales tax was not paid, and documentation of the reason for the purchase. (4) The Town develop and implement a process to monitor credit card purchases routinely for compliance with policy requirements and to ensure adequate documentation is provided. (5) The Town use its credit card system (SunTrust Enterprise Spend Platform) to produce reports of purchase transactions for monitoring and review. Management Responses: See Attachments Finding (2): The Town did not procure a competitive rate for the credit card rebate (i.e. cash back) that could lessen the taxpayer’s burden. The Town's procurement policy, Section III Procurement Methods states in part, Certain expenditures, items or services are not appropriate for normal marketplace competition or for products where no competition exists. These will be procured by other means agreed upon in advance as authorized by the town manager or his designee. Examples of these items are artistic services, academic programs, health care or medical services, real property, utilities, legal services, financing services and proprietary computer software. (emphasis added) The Town entered into a Commercial Card Agreement for credit card services with SunTrust Bank effective February 27, 2014. The Town had 52 active credit cards issued at the time of the audit. The Commercial Card Agreement includes a Net-Spend Rebate Program and Large Ticket Transaction Rebate Program that provide the Town with an annual rebate payment based upon purchases and cash transactions made during the rebate period (January through December). The expenses associated with this Page 8 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 agreement are minimal. Credit card spend totals for FY 2017 resulted in rebate revenue of approximately $53,731. The Finance Director stated that the Town competitively bid the Agreement; however, the Town did not provide documentation to show competitive bidding occurred. The Town lost potential revenue by not procuring a higher yield rate for the rebate from SunTrust or contracting with a different institution offering a higher rate. The State of Florida Purchasing Card Services contract with Bank of American, N.A., which can be used by local governments in Florida, has more beneficial rebate rates.8 The rebate rate on standard transactions is higher at 1.45% versus 1.35% in the SunTrust Commercial Card Agreement. Similarly, the rebate rate on large ticket transactions in the State of Florida Purchasing Card Services contract is higher at 0.55% versus 0.35% in the SunTrust Commercial Card Agreement. The Town could potentially increase its annual rebate revenue and lessen the taxpayer’s burden by terminating its SunTrust9 Commercial Card Agreement and negotiating better rates, competitively bidding the credit card program contract, or implementing the Purchasing Card Services contract procured by the State of Florida. Based on the rebate rates in the State of Florida contract, the Town lost potential revenue of approximately $9,71510 for FY 2017. If the Town implements the OIG recommendation to use a higher yield rate for the credit card program, it may result in approximately $29,14511 in future avoidable costs over the next three years. Additionally, there was no written guidance for managing the rebate program, and the Town did not perform a review or reconciliation of the rebate amount to determine if it is accurate and in conformance with the agreement. The Town could be losing rebate revenue if it does not review or reconcile the amount received to verify it is accurate and in conformance with the agreement. We performed a recalculation of the rebate amount for FY 2017 purchases and determined the amount received by the Town was accurate and generally in conformance with the agreement. Moreover, the Town had no policy governing how the credit card rebate revenue should be applied or booked to the Town’s financials. As a result, there was no formal allocation method established to return funds to the originating departments or the general fund, 8 Purchases must total $1,000,000 or more each year to obtain the rebate rates in the State of Florida Purchasing Card Services contract. 9 The SunTrust Commercial Card Agreement provides, 9(a) Term of Agreement. Unless terminated earlier as provided in this Agreement, the initial term of this Agreement will be for Five (5) years from the date of execution by both parties and will continue thereafter under the terms and conditions contained herein (as may be amended from time to time), provided, however, either party may terminate this Agreement at any time upon at least sixty (60) days prior written notice. 10 Estimated rebate revenue of $63,446 was calculated based on the Town’s FY 2017 spend. Estimated rebate revenue less actual rebate received of $53,731 = $9,715 in lost potential revenue. 11 Lost potential revenue of $9,715 for FY 2017 x 3 years = $29,145 in future avoidable costs. Note – the State of Florida contract is valid through 2021 with the rates used for the calculation of avoidable costs. Page 9 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 and application / allocation of rebate revenue may not be performed consistently when received and recorded. Recommendations: (6) The Town review other programs, such as, the State of Florida Purchasing Cards Services contract, to determine if a more beneficial rebate program is available that meets the Town's credit card program requirements. (7) The Town develop and implement written guidance to help manage and control the credit card rebate program, including but not limited to, reconciliation / review of rebate amounts and the application / allocation of rebate amounts to Town funds and departments. Management Responses: See Attachments Finding (3): Three former employees’ credit cards / cardholder accounts were not deactivated in a timely manner. Management should ensure cardholder accounts of separated employees are deactivated in a timely manner to reduce the risk of unauthorized credit card charges. Prompt deactivation of credit cards / cardholder accounts allows management to limit access to them to only authorized individuals and maintain accountability for their custody and use. Management may periodically compare credit cards / cardholder accounts with the recorded accountability for those resources to help reduce the risk of errors, fraud, or misuse.12 The Town's Finance Department staff advised our office that they typically deactivate cardholder accounts of former employees the day after the employee separates from employment. During the audit, the Town implemented a Cardholder's Agreement requiring the cardholder surrender the card to the Human Resources Department if separating from employment. We noted three (3) out of four (4) (75%) former employee cardholder accounts tested were deactivated more than one day after the former employees separated from employment with the Town. The gap between the date of the employee's separation and the date of account deactivation ranged from five (5) to 15 business days, leaving the Town exposed to unauthorized use. It appeared the Town's actual process for deactivating cardholder accounts upon an employee's separation is inconsistent with the process the Town’s Finance Department communicated to our office. Additionally, the Town’s process was not documented in a 12 The best practice is provided in The Government Accountability Office (GAO) Standards for Internal control in the Federal Government issued by the U.S. Comptroller of the Treasury dated September 2014. Page 10 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 policy or procedure to provide clear guidance to responsible personnel, which may have contributed to the delays in card deactivations. As a result of the delayed card deactivations, 10 credit card purchases totaling $658 were made on the credit card accounts after the employees separated from employment and are considered questioned costs in Finding (1). Recommendations: (8) The Town review all credit card statements for credit cards used by former employees for potential use after employee separation dates and determine if the transactions completed were appropriate. (9) The Town should timely deactivate credit cards when an employee’s employment with the Town ends. Management Responses: See Attachments Finding (4): The credit card program lacked adequate written guidance. Management is responsible for establishing and implementing the control activities of an entity. This includes designing appropriate controls and implementing policies and procedures to facilitate the entity’s achievement of objectives and response to relevant risks. Control activities include reviews by management at the functional or activity level, proper execution of transactions, accurate and timely recording of transactions, access restrictions to and accountability for resources and records, and appropriate documentation of transactions and internal control.12 The Town had two documents that provide written guidance regarding the Town’s credit card program: 1) the Procurement Policy Standard Operating Procedures and 2) a Cardholder’s Agreement and Request Credit Card Form. The Town implemented the Cardholder’s Agreement and Request Credit Card Form during the audit; however, the forms have not been incorporated by reference into the Town’s Procurement Policy. The new forms address several weakness identified in the policy. The Town did not provide our office with all Cardholder’s Agreements and Request Credit Card forms as we requested during the audit. Page 11 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 The Town’s procurement policy did not provide adequate written guidance regarding:  Which employees or class of employees are eligible to request and obtain a credit card;  The criteria used for approving requests for credit cards and the process and timeline for evaluating and approving requests for credit cards13 (i.e. the credit card issuance process, responsible parties, and documentation);  Cardholder responsibilities;14  Cardholder acknowledgment of receipt of the procurement policy14 and credit card;  The criteria justifying changes to spending limits13, process for implementing spending limit changes, and obligations for oversight / monitoring of the spending limits;  Prohibited / disallowed purchases13 and the requirements for oversight / monitoring of all purchases;  Periodic review and transaction monitoring / oversight for all purchases;  Credit card deactivations / cancellations;13 (e.g. employee separation - see also Finding (3);  Credit card repayment, revocation,14 or penalties for inappropriate usage;14  Identify employees responsible for reporting and addressing lost / stolen cards,14 disputes,14 unauthorized employee purchases,14 or fraudulent transactions;14  Rebate program participation and rebate allocation (see also Finding (3)); and  Cardholder training. Additionally, on September 7, 2017, the Town Finance Director authorized a temporary credit limit increased from $15,000 to $30,000 for 48 cardholders in anticipation of Hurricane Irma. After the hurricane-related emergency ended, the Finance Director authorized a reduction in the credit limits to pre-hurricane levels on October 2, 2017. A SunTrust bank control statement dated October 27, 2017 showed the credit limits were decreased to the pre-hurricane amounts; however, the SunTrust computer system Account Listing as of October 26, 2017 showed that a decrease had not occurred. Based on the information, we requested additional documentation necessary to determine if the limits were reduced to pre-hurricane limits, but there was an excessive delay in receiving access to the records and no support was provided. Therefore, we were unable to determine if the decrease occurred. Management should ensure temporary changes to credit limits are reversed in a timely manner to align with the credit card spending limits authorized by the Finance Director, thereby reducing the risk of unauthorized credit card charges. In doing so, management limits access to credit cards to authorized individuals and maintains accountability for their use.11 The Town's Procurement Policy did not address temporary credit card limit increases, which may be necessary for emergency purchases. 13 This was partially addressed in the Cardholder Agreement and Credit Card Request Form implemented during the audit. 14 This was adequately addressed in the Cardholder Agreement and Credit Card Request Form implemented during the audit. Page 12 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 A lack of adequate written guidance for personnel regarding the credit card program exposes the Town to inconsistent processing of transactions, risk of error, credit card misuse, and inappropriate transactions that go undetected. It appears management did not properly monitor credit limits, and there was a lack of adequate oversight over credit card limits to ensure actions are performed appropriately. The risk for unauthorized purchases is increased when controls, such as the normal established cardholder credit limit, are not in place or monitored. Our testing of the 142 sampled credit card transactions identified a total of 100 instances of noncompliance with the Town’s procurement policy, as well as, 33 transactions that lacked adequate documentation to validate the purchase (see also Finding (1)). These policy violations and lack of documentation indicate cardholders were not provided adequate guidance and training regarding the credit card program and that there was a lack of proper monitoring and oversight for the credit card program expenditures. Recommendations: (10) The Town update the procurement policy or develop a separate written policy and procedures for the Credit Card program to, at a minimum, include: a. Which employees or class of employees are eligible to request and receive a credit card. b. The criteria used for approving requests for credit cards and the process and timeline for evaluating and approving requests for credit cards, including but not limited to, identifying employees responsible for managing the program and required documentation (i.e. itemized receipts) needed prior to approving requests. c. Requirement for the cardholder to acknowledge receipt of the Cardholder Agreement and credit card. d. Factual basis to justify changes to spending limits and the documentation thereof. e. A process for ensuring that credit card spending limits align with the limits authorized by the Finance Director and the criteria justifying changes to spending limits, a process for implementing spending limit changes, and obligations for oversight / monitoring of the spending limits. f. Detailed guidance for allowable purchases and penalties for accidental, personal, or disallowed purchases. g. The process for deactivating cardholder accounts of employees who separate from employment with the Town, including but not limited to, assigning responsibility and timeline for notifying the Finance Department of the employee's separation, collection of the physical credit card, deactivation of the cardholder's account, and review of transactions that occur after the separation date, if any. h. Periodic transaction monitoring and oversight of all purchases for compliance with policy and adequate documentation. i. Cardholder training. Page 13 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 (11) The Town update the procurement policy to include the recently implemented Cardholder's Agreement and Request Forms. (12) The Town ensure all current cardholders complete a new Cardholder Request Form acknowledging acceptance of the Cardholder’s Agreement. (13) The Town provide training on the updated policy and procedures to current cardholders, department directors, and any new cardholders prior to issuance of a credit card. (14) The Town review all cardholder accounts to determine if the current credit limits are accurate and appropriate for all users. Management Responses: See Attachments Page 14 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 SUMMARY OF POTENTIAL FINANCIAL AND OTHER BENEFITS IDENTIFIED IN THE AUDIT Questioned Costs Finding Description 1 1 1 1 Purchases After Employee Separation Lack of Pre-Approval Lack of Approval Lack of Adequate Documentation TOTAL QUESTIONED COSTS Questioned Costs $ 658 33,723 32,051 17,309 $83,741 Identified Costs Finding 1 Description Sales Tax Paid in Error TOTAL IDENTIFIED COSTS Identified Costs $109.01 $109.01 Avoidable Costs Finding 2 Description Rebate Revenue TOTAL AVOIDABLE COSTS Identified Costs $29,145 $29,145 This report is available on the OIG website at: http://www.pbcgov.com/OIG. Please address inquiries regarding this report to the Director of Audit by email at inspector@pbcgov.org or by telephone at (561) 233-2350. Page 15 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 ATTACHMENT Attachment 1 – Town of Jupiter’s Management Response, page 26 – 37 Attachment 2 – OIG Rebuttal to Town of Jupiter’s Management Response – page 38 - 39 Enclosure 1 – Timeline of Actual Events Related to Management’s Excessive Delays – page 40 EXHIBIT LIST Exhibit 1 – Audit Sample Statistics Exhibit 2 – Summary of Testing Exceptions Exhibit 3 – Transaction Detail for Questioned / Identified Costs Exhibit 4 – Transaction Detail Additional Information Provided by Town Exhibit 5 – Data Analyses Performed Page 16 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 EXHIBIT 1 Audit Sample Statistics A udit Sample Statistics Total Purchase. by Depart'nent Audit Sande llo. ofCrodtt Total Cmdit 16 of lo. ofClodit Tohl Credit of Cards Card Catt! Total Card Card Toni Deparment Issued Tnmaclom Purcllaea Amoult Transactions Purchaoeo Arr-om! Building 1 134 41.755 8% 7 5 11.528 8% Business Development 2 28 3.454 1% 2 639 0% Community Redevelopment 2 15 2.549 1% - - 0% Community Relations 1 122 24.938 5% 5 5.478 4% IE ngin eering 1 60 12.273 2% 1 1.410 1% Finance 12 297 56.768 11% 47 22.601 16% Human Resources 2 59 13.223 3% 4 2.333 2% Information Systems 1 10 5.679 1% 1 3.468 2% Planning 820ning 3 52 13.070 3% - - 0% Police Depaltment 7 459 117.585 24% 21 31.938 22% Public Works 4 121 22.035 4% 1 379 0% Recreation 8 337 95.001 19% 19 34.377 24% Stonn Water 1 75 12.570 3% 2 2.176 2% Tom Clerk 2 31 4.672 1% - - 0% Town Manager 1 22 3.736 1% 2 1.236 1% Utilities 3 147 38.326 8% 12 14.056 10% Water lent 1 85 26.551 6% 8 11.824 8% Total 52 2.054 8 497.105 100% 133 3 143.493 100% Florida Pox-era: Light 625 2.636.181 41% 8 32.747 7% Waste Management 20 3.317.173 51% 1 284.956 62% Grand Total 2.699 3 6,450,544 142 461,196 Page 17 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 EXHIBIT 2 – Summary of Testing Exceptions Page 18 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 EXHIBIT 3 – Transaction Detail for Questioned / Identified Costs15 15 This chart is in actual dollars and cents based on the amount of the transactions. This amount is slightly different from the totals used in the report based on rounding. Page 19 of 40 Page 20 of 40 Tran section Detall for Queltloned 1 Idohtl? ed Costs Pumas: Locket m? helm Tmsuctlen ?mm 9min Duodenal 1W l?a' Dinner Front 0113me date cm cm Ens-lam Pm. Deceit-eu- Approval anon Siern'r Water 1126:2011 Batteries Plus 113 (21 leek 1 .20 mm batteries fer Iaeer Ie~re1 55. 90 31131111 Water Deperlmenl (PEG) Fee 5 1.50 5 Eh" FieE perme?elee en?'lcaiei Renewal. and Storm Wat? 1125.120? El'r'n Deparlmerl (PEG) F99 1.50 5 Finance arerzen mamas? 5 1.33113 5 Finance 4.0.1201? Arnericamay Reaislrellen for 2011' Congress rill-Access Pass 5 1.3011]: -.--.- n? Finance 513.1201? Hal 5 54,32 81mm Water 21241201? Olrcle K05330 Dump 1ruck reel purchase - Mel care 00111110114119 3 100.00 a Slorm Water 313.1201? Wei?Maniz?b? (1) pair eimrk sheesane (21 pairs 01 boots 130.23 11-11-11- OFFICE OF INSPECTOR GENERAL Slurm Wale! 3.13.1201? (m Wrangler ian?s 5 packet sl'IJrl 1 11.70 1.33 ?day S10mwetsi1ralring FL was! FL Pollilion Slerm Wa_ter 313.1231? Frerida Waher?? 01! 00 Cenhel Deeraers Association 1.0mm rFire-t (?ees and Cer?ee Mail Peslage for 4 large 31erm Water 311511201? P0 11450001120 25.32 5 Fuel purchase to allend service for Teller-r efrlcer - Finance 3231201? Honor Guard 211W 5 Finance 9113:2017 05330 Fuelfer pal-behind iralier 1mm) 5 Fina'lte 913.1201? Circle 05338 Fud fill pal-henna irailer 1001]] 100.111 Finance 911mm? Circle 0533 ?es fer eel-heme iraiier 'Finanee 91241201? uel 1 er pal-behind iralEr 511 Hu'nal?l Resources 4161201? 0'30 (E) (3111 came for Employee Picnic Raf?e 1'00. 00 Hu-neh Resumes 518.1201? DunI-dri #3510415 0 dozen deniesier May 2017 Salel'iTreihlng 3935 ??uuL?maa Hui-ran Resumes 6.11.1201? Old Florida Bar 5: Gill Gilt card terTea'n of the Year 600.111 5 Paddlebeard Eiren?l - EceTeur fer (10 he Hercan Resumes $231201? ELI eine 3 .I1r 3c P?db rammed by Chm) ers.e_e 68.25 2,000.11! 5 - lime eganmeri iireerzeieIWe-uen acme (Wares (115') Penn: G'n?lc ardefer Pelce Deeartrneri Pelee Dmarimerl 131212010 #1049 Velurleers ?01111! 5 EXHIBIT 3 Continued (9.1 We Iransiers. (9) Cir License males; vehicle Peice Deparlmerl 1.13.1201? Mirth Tax Cellecler regislraliens 1.05195 Pulse Den-armed 21212111? Amen Desk risers and ?our mas 1,901.56 21.38 'F'eice 315.1201? Amen ?ldelace Pnis Canon Cameras 1.409ch ne'er-ru- nun? Peice Dgerimeri 4112:2017 Amazen idler-lace Pets (12) Penermence Pele short sleeve en'rte 1 ?15.13 Fuel Mn [0 Tallahassee for Florida Pellce Pelee Deparei'ierl 411241201? Chevron 030802? Memorial 20.00 ?b9 'Pelce Deparlmerl 411351201? Amazon Prr'ts KVH Tracirieien [er labile Cen'l'rmcl Vel'i'cle 2.01038 Peice Dyarlmeri 916.1201? The Hume Dem! ?12114 Freezeisfer EOC me Emmy Center- IRMA 400.11) 11 Pelee Dgam'neri 910.1101? Ciex Heellh Empeena Charge e105 'Pueli: Works Glh'gleheiindueineleq lire reck- 3 11er starter 319. 43 Recreetlen 1111512010 cp'pen?emng Arls Tickele for Halinee Showing of Cabaret 1,515. 00 SierrnWater 5.13.1201? - i: ?l?cewelesi'eir?l'emerlemv 110.0: 51mm Water 115.1201? Apple store new (3 12865 Pads and char-Jets 2,1 56.15 11-11- ?1-5511-1111-1? auunanu Uili?as 1111112015 Ama?rg AWWA Dues 2,005.11) 2018-A-0013 Page 21 of 40 Transaction Detail for Questioned ?Identi?ed Costs Purchases Lackof Lunar Luna Tmm?on Vader Dmdp?on Quinton-d mu Prun- 1r M?m ?at. cm ems Em?ww Pu- "9 Documen- n-mlmnon Approx! mm? ?lm OFFICE OF INSPECTOR GENERAL Gm Bands for Guanananas and Jerry's for King Tide Utilities 11101201? Rammed Contest Gift Cards for manaDanas and Jews for King Tlde Ulil'rties 111012117 Jeltys Restalrart Contest {h '10 2mm Emages. snacks. lurch. and Supplies to host the Wes 39ml? Mane-wood Bags! 3 Dell ANITA wamshap at me Canmun?y tamer 255.410 Utilities Emmi? Jupiter Misc-Paymml Buildng Pennil Fee 220.44 Ublr?es 3mm"? Par-era Erma #204722 Bagels for Lax RAP workshop 60.3? win v: ALAIL Ramona 34mm ijagrs Jmiher Welcome brat-Mast Lama; Recreaum 6:13:201? th Kas'rnla'm mamas (37] Manna uckets 1350.25 Recreation 5:25:21]? Mncamhralma't -Pa'1'y1n Easner Eggs 2m? 1.137.331 Recreatim 511 ?201? Miami del?l'ns (43] Miami del?lim 5.33.03 rRazreatim 1mm Delraylmacoastal Cr Final Farmer! Sunday Cruse Ulp 1.256.613 6595659969 Recreation 1 Kravis Carter BM American in Paris mike-IS final payment 1540.75 Depostt fomcmets to see 'Mama Mla' at me Recreation 2116131]? Bcp?pm?aning Arts Ermam Pafunning Arts Center iA. 1.23011] Recreation Ms Tutkets 1'cr Mama Mla A. w: 1280.00 Town Manager Guanahznas Restauart Items puchasad could n11 be identi?ed u. LIJHIID EXHIBIT 3 Continued m1? Ita?ns pucmsecl tml? DE 154.94 658$ U?lmes m1? Apple Snore #024 Ian Pro 12.9 25663 and accessones 1.1961]: Ln ?1 I mun-Law?, Tom $53,710.41 loam 1o 11 El 33 4 4 Counted toward QuestJmeu Cost or Idea-med Cost. 1 NdEd as an exceptim ml dreary Emnhad mad Questioned or Identi?ed Costs for amther basting mature. 2018-A-0013 OFFICE OF INSPECTOR GENERAL 2018-A-0013 EXHIBIT 4 – Transaction Detail Additional Information Provided by Town Page 22 of 40 Page 23 of 40 Trina-diam datil Addticn? lr'lormzim Prowdad by Tom - Emptions Ere-mining Perm cl Llokol Mt.- Propr Link a! rid-nude Transaction Errdog- Fro Props Mn?ilt- Sill Tat mm Dmip?on Wow I?cn Paid SturmWater 1310.931? GandethPk-n Bah @Paiuaders-E-wauanb; 1'1 StormWaur 11195131? Wesiern AnaMicaILab mitt-61051151: 1'1 1! Sbmwuer 112011201? JcWestem (1jPaicIf 1120:2317 StunnWater 11214231? Walrnarmcm (7)Pair ofwolr EhrmWatar 1124:2017 Vining Pha le?m supple: 1! Shim Water ?2:113:17 Ergohch Group Triple hol'zonul sand pale. human-.223 Snda.salarl. paper prnduemeaing Sthaur 112513317 Linensilr. and cleaning products 1' Wel Field permsticide applicator ShunWam 112312317 DIparInerttF'BC] Renmal.and Fae SturmWater 1mm? Erm Rmmal. and run (2) 2- pal: 1 .23! NIMH bahues for I?ll Storm Water 11265331? Euleries Plus 773 level OFFICE OF INSPECTOR GENERAL SharmWater 1:20.931? Errn DeparlrnerHF'BC] RenewalJr-d Fee We! Fleld permitrcide StormWater 1.2513317 Erm Deparlnert(F'BC) HenmalJnd Fee Finance m1? Ups-macaw ups Charges 1'1 Fee-ammonia: 2317 Congress All- Finance 474201? Amelie Inpav Rec-us Pass 1'1 Finance 533317 urn-3330351830317? UPS- Tm Hal 1'1 Du'np truck furl pul cm: I - tunl card rm Storm Water 2124331? Circle 05338 working (1) par and{2) pa'r'rs of Strum-Water m1? bow ShunWahr m1:- Walmar?crn [8)Wransler Men's 5 pock at short 1' SdaySbIrrwa'l-il training J. StormWahr @3301? Florida Wat-um 0103 Pnl?ion Cor-[rd Operators Nsocidion Town Manlgu Us]: P011m fol'4 large envelopes EXHIBIT 4 Continued Fuelpuchaseto attend service 1hr Finance 5123231? Shell WISH-33301330 fallen of?cer - Honor Guard 1'1 Finance 0113:1331? Circle 1405338 Fuelfar pull- bah'nd 1'1 Finance 9113:3313 tircle [63-33 Fuelfor pull- behind tailer 11 inance Q?m1? Circle 05333 Fuelfar pull- bth'nd hill; Finance 9.124331? Shell Fuelfor wlbehind tailer 1'1 [213) Gilt cards 1m mpiwn Picnic Human Rescucs Ri?e 1! (5) dozen clones for ?@2017 Safety Hman?escucu 5:18.120? Duririn #361346 Training 3- Hurnan Resources brida Bar 5. Gril Git card for Team of ?u Year 5. Paddiehoald Eue? Eco?i'our for 33 (to Human Resources 5123:3317 Blue-line SLIM. Padde be rci'nbursad by I: igna) 4' wt Peirce Deparlrnerl 1113912010 er?lft??lm 1'1 '1 [10) Pmk-G-i?calds fur F'cice Police Department 12.112931: Publkm DepartnentVoIm'ieers {1 55 ?le tl'll'ri'll?'. ity License Police Depadmerl 1.125931? Marlin Tax Collector plates: [9)vehiclereg'stra1iors Police Depadmerl match h'ittplacePrnis Duh risers andibnr mat 1' Police Depadmerl 2.15.031? ?tnazon h'irtplaoe Cameras 2018-A-0013 Page 24 of 40 Transaction ddall Mold onal totem-ration Provided by Town - Intonation: Iten'ratnlnu rum-m 'l'nnlae?on ?le Vandm Hamilton Pueh?el alter Ermlqac Ternhatton Laeltal' Proper Pre- Naomi-l Lleknl' ma! Llelul' non-Trent- Salel Pald olioe Deputrnent Amazon F'rnts (42) Perfo'rmenoe Polo short sleeve shirts 1'1 olioe Department 412412017 hevron 0 30882?" Fuel tortn'pto rorFlor'rda Polioe Memorial ~11 olioe Department 41261201? Manon Traov'reion for Mobile Command Vehiote 1'1 olioe Depa?trnent 9151201 1' The Home Depot #0214 Freezers tor EOC and Community Center - IRMA otioe Department 913901 1' CioxHealth Subpoena PluioWorks 4121201? Gh?uobelinduetrideq Truck tire rack - 3 tier starter Recreation 111159016 339' perm-ring Arts Tldrete for Matinee Showng or Cabaret Storm Water 51331201? Wei-Mm Of?oe supplies for retireme'rt partyr Storm Water 31261201? Maple Store are 24 (3) 1 2365 ads el'rd oharg ere Ullit?ns 1111712015 Munro AMA Dues Uliities 15101201? GUMOD H105 estmrart Gift Cards tor Guana Danae am Jeltfs lorKir-g Tide Contest Uliit'les 11101201? Jettys Restaurant Gift Cards tor Guana bar-nae and Jett'g?s tort-ting Tide Contest Ulilties 51.91201? Maplemod Elag el 3 Deli Beverages. sn?e. lunch, and supplies to host the MTA workshop at the Center Lillities 81241201? Jupiter Misc-Payment Buildi?rg Permit Fee Uliit'?s 312412017 Penere Bread #204322 Bagels tor Lox workshop Cornmm?ty Relations 3141201? Jupiter Jun Welcome breakfast Recreation 511 312017r Tickets?miemi Martina Martina rip tickets Recreation 51251201? mmwman EasterEggs 2m? 5111901? Mimi Dolphins (48) Miami Doip hins tickets Recreation 1 01312015 Detreytn'lraeoas?tel Cr Frnal Payment fa Sunday EfLI'lCl't Cruise trip Reuea?lion 111512016 Kravis Center Boxotf [33] American in arts tickets - Inal Recreation 211 31233011r Bcp?pertoming Arts Deposit fortioirete to see ?Mama Mia? at the Error-nerd Performing Arts Center Reoreation 3924.901? Bop' perm-ring Arts Tidrets for Mama Mia Manager 1111312015 Guanab anas Restaurart Items purchased could not he Identi?ed Town manager 51221201? Flowenn art Items purchased could not be identi?ed Uliities 523.201"! ?pple Store no 24 (1) Ipad Pro123 25663 and ecceeoortes Total Elce?blu?m?iu 32 211 1 woeption not resolved from additional documentation. ?4'1 The exception was an exception for the audl report and oorrective action properly implemerted addition at doodrnertation provided. EXHIBIT 4 Continued OFFICE OF INSPECTOR GENERAL 2018-A-0013 OFFICE OF INSPECTOR GENERAL 2018-A-0013 EXHIBIT 5 – Data Analyses Performed High risk transactions were selected for detailed testing based on the following data analyses:  Abnormal purchases by department and cardholder by month and year.  Abnormal purchases by department and Merchant Category Codes (MCC).  Unauthorized card use (transactions using cards that are not assigned to an authorized cardholder).  Inactive cards (cards assigned to an authorized user that have had no transactions within the last 12 months).  Inactive employee usage (transactions for cards assigned to inactive employees and after their last day of work, i.e. separated / terminated, retired, on extended leave).  Employees with multiple cards (multiple cards assigned to one employee).  Duplicate payments.  Procurement policy thresholds exceeded (by vendor and transaction amount).  Purchases made on Town holidays.  Purchases that could potentially be cash advances (rounded numbers).  Purchases with MCCs that could potentially be personal (e.g. restaurants / bars, casinos / pawn shops, cruises, souvenir shops, florists, gas stations, charities, etc.).  Purchases from blacklisted vendors.  Transactions split across multiple cards or on one card.  Key words (e.g. miscellaneous, gift, other).  Excessive year-end budget usage or misuse. Page 25 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 ATTACHMENT 1 – TOWN OF JUPITER’S MANAGEMENT RESPONSE Page 26 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 replaced hy rnere rnedern fenns ef electrenic centrels. The Tewn has heen aslred hy the IG effice te preyide paper fenns ef supperting decurnentati en that de net exist and are net required. dis a result, the errpectatiens efyeur effice left the Tewn with little eppertunity fer success. The audit rep ert indicates audit findings ef ll transaetiens net haying preper Fre-iappreyal and 54 transaetiens laclcing preperiappreyal. These findings are categerically ?lse, as the Tewn utilizes the Munis purchasing and appreyal system and all the transaeti ens questiened in the audit haye preper de cunientatien and appreyal in that system. The draft audit repert indicates in several places that the Tewn delayed in preyiding supperting dectnnentatien te yeur staff. I haye preyided a detailed tirneline ef the audit engagement as part ef the Tewn? respense. The tirneline very clearly shews that the Tewn was an early adepter and ??eely ce eperated with IE staff in the audit precess that began en Septernher 23,311? It was agreed dining eur audit l-ricl-reffnieeting en Dcteher IT, 201?, thatthe audit weuld he cernpleted hefere the end efEIecernher, 201?, as the Tewn? eutside auditers weuld begin their werl-: in early Januaryr El] 13. Tewn Jupiter staff became very cencerned ah eut the re seurc es that weuld he required te eernplete the audit engagernent when en January 1 l, EDI 3, after the agreed upen eernpletien date the audit, the IG f?ce rnade its first request fer supperting de eurnentatien relating te 9 54 credit card transaetiens. The Tewn peinted eut that a sample ef954 transaeti ens en a tetal credit card transaetiens was cen1pletely unreasenahle and eutside the scepe ef any standard audit practice. The 1G effrce en January 23, El] 13 reduced their request te 142 transactiens. Even with this reduced number eftransactiens, preyiding the details while eur eutside audit engagement was underway was very hurdens te Tewn Jupiter staff. [In Piugust 9, EDI E, the Tewn efJupiter anle staffniet te discuss an initial draft ef the audit repert and the remaining epen iterns fren1 the audit. Since that time, the Tewn has preyided significant supperting de eurnentatien fer all ef the transaetiens still in questien hy the IG effice. The Tewn received email cenfirrnatien frern IG effice staffindicating that several efthe audit findings frern the initial draft repert were satisfied by the additienal supperting decurnentatien suhniitted. Upen reyi ew ef the current draft rep ert, nene efthese cleared issues have heen rerneyed frern the audit repert, leaying Tewn ef Jupiter staff cernpletely cenfus ed and unahl te understand hew the Tewn ceuld essihly ayeid anything hut a negative result frern this audit. The Tewn again requests that the IG effice talre inte acceunt the electrenic supp erting de eurnentatien aleng with ether supp erting de curnents and me dify the findings in the audit repert te preperly re?ect the systems intenial centrel that exist at the Tewn ef Jupiter. RegardsMichael ?iJillella Finance Direct er Page 27 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 Finding Credit card transactions did not comply with policy. si. 5 of ms transactions (reg totaiing $555 made by ionner empioyees iacired proper approvai. - Approval 1D St?tEd above authorized by an authorized approver. 5. of tat? transactions totaiing $53, F25 iacired proper pre?approvai.c Response Glut of the 11 instances sited only 3 lacked pre authorization as indicated in policy, one was an auto renewal of a software package used by the Town and the others were for a purchases that was authorized by management in the Munis electronic wontflow after. 5. F5 ot tat? transactions totaiing $55Jri52 iacired proper approvai 5y tne department director or designee. Response ?ll T5 transactions stated above received proper approval with either a signed form or through the Town?s electronic wontflow or both. Detailed pack up for these items have been provided to IE staff. at of 142 transactions that incorrectly included sales tax totaling $155.51. Response ?The Town agrees sales tax was paid. E. in addition to tne poiicv vioiations detaiied aoove, we aiso noted severai conditions created .ov tne iaciu: of ciear guidance in tne Tow n?s procurement poiicy. Tne procurement poiicyr did not require tnat tne invoices {receipts} supporting tne credit card purcnases pe detaiied or itemized. Response Training occurs for the purchasing policy with new employees that are involved in the purchasing process. F. Neitner tne procurement poiicv nortne credit card autnorization form requires an espianation or reason for tne credit card purcnase to oe documented and suomitted vritn tne supporting documentation. Response The only authorized reason for any transaction is for ?Town Use and Purchases Only?, as required in the Town purchasing policy. r3. Tni'nytourfdci} oi 1?42 transactions totaiing $42155?? iacired adeduate documentation to vaiidate tne items purcnased or reason for tne purcnase {see Esnioit 2 for a oreairdovrn 5v Depa rtment}. Page 28 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 Response ?hlo written reason is required per the Town purchasing poliov as all purchases must be for Town business, ifthev were not they would not be approved by the department approvers. H. Tne anse Department at: net appear te nave a wn'tten pettsv er preseaure tar revtewtngI ereatt parer state rnents ter credit cards used by tanner ernpteve es te ensure tnat ne energes were incurred atter an ernptevee separates trern ernptevrnent tne Tewn. Response Credit oard statements are reoonoiled on basis and those reo onoiliations were made available for the IG of?oe review. Credit oards are oolleoted when an em plovee separates emplovm ent with the Town onoe a replaoement oard is issued to the replaoement em plovee assigned those duties. I. Duesttenea pests trern transaottens made by tanner ernpteyees, tastn'ng ana dooumentatten tetatea $53, Fatt. Response ?All the trans aotions in question reoeived authorization from assigned managers over that deparbn ent either by a preauthorization form or though the Town?s eleotronio approval system. All trans aoti ons have attaohed and adequate dooumentation for approval by management and staff. J. HEW-HIGHER GDEFE Ef?gl?f flit" that t't'tIS'Clt'tE'IZ'fpr? {El-t t't't WE EWDUHF. SEE 3 flit" 5' HEN-HQ CIT f?E' that Hit} WE auestr?enea Ett't?' BEETS. Response The Town paid sales tax on these transaotions. Recommendations: {if} that state SEES ts t'tl?f DH preatt DEWIDUWFESES Ei't't?' SEEM-HQ retrnpursernent flit" ta}: THE Will training prooedures With in an E??l?t to gain higher oomplianoe in thiE area. Tne Town reautre oreatt oa ranetaers to eptatn proper apprevats tor puronases. Response Proper approvals are done in with the Town?s purohasing poliov for all purchases as detailed in our supporting dooumentation and in the lvlunis see exoel spreadsheet attaohed. t3) Revise tne Tewnts credit card pests);r ana preseaures ta reautre preatt paranetaers ta ta tne Ftnanse Department appurnentatten tar easn oreatt parer pursnase, ta tnstuae an .I'ternttesr reserpt er aetatt ta steanflr snew at! tne tterns Page 29 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 purchaseci, that saies tax was paici, ahcr cipcurhehtatibh at the reasbh bar the purchase. Response Itemized receipts are required and the preferred cf dccumentaticn. The requires all purchases cn credit cards tc be business purpcses thus cur pclicy dces require a written e:-:planaticn cn each receipt stating the same. (at) The Tewh cieyeiep ahci irhpierheht a precess te rhehiter creciit carci purchases rputiheiy tercbihpiiahce with peiicy recruireihehts ahci te ehsure aciecruate accurhehtatieh is previcieci. Credit card purchases Iilte all purchases and are reccnciled and reviewed an a weekly and basis. (5) The Tewh use its credit carci systerhI (SuhTrust Ehterprise Spehcr Piatterih) te preciuce reperts bi purchase tra hsactiehs ter mehiterihg ahci review. The reccnciliaticn which includes cf the EunTrust repcrt is en a basis and was made available IG cffice review. Finding The did prccure a ccmpetitive rate fer the credit card rebate (Le. cash back} that cculd lessen the taxpayer?s burden. it. The Fihahce Directerstatecr that the Tewh cpmpetitiyeiy bici the agreement, hcwever, the ciici het previcie ciecuihehtatieh te shew cerhpetitive biciciihg bccurreci. The ibst pbtehtiai revehue by precurihg a higher yieicr rate ter the rebate SuhTrust er cehtractihg with a cii'tiereht ihstitutieh ph?erihg a high er rate. The State at Fiericia Purchasihg Sarci Services cehtract with Sahiu: pt r?lrhericah, as, which cah be useci by iecai gbverhihehts i'h Fiericia, has rhere beheticiai rebate ratesS The rebate rate eh stahciarci trahsactiehs is higher at #5913 versus 3? .3591; i'h the SuhTrust Sarci hgreerheht. Sirhiiariy, the rebate rate eh iarge ticitet trahsactiehs i'h the State at Fiericia Purchasihg Sara Services is higher at b.5591?: versus b.3591?: i'h the SuhTrust Serhrherciai Sarci agreemeht. ccmpetib've quctes were secured Elanlt cf America, .JF Mcrgan and Euntrust at the time the rebate was put in place. At that time, the tctal spend cn credit cards issued by the incumbent prcvider, Elanlt cf America was in the range cf $1milicn annually. Given that annual spend, the rebate was expected tc be in the range cf annually sc a fcrmal prccess was required. Based en the pricing submitted and discussicns with each banlt, Euntrust was deemed tc prcvide the best ccmbinaticn cf rebate and custcmer Page 30 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 Euntrust has ccn? nuallv prcvided supericr custcmer suppcit cver the incumbent prcvider and thrcugh the effcits cf their custcm er staff the has secured cther mcre substantial tc accept payment by the Tcwn?s credit card allcwing the tc increase cur vclume tc the current level. This increased vclume cf spend advccated bv Eunlrust has allcwed the and cur residents tc earn a higher rebate than was available pricrtc securing services Euntrust We wn'tten guiciance esist ter tne rebate bregrarn, ancr tne Tewn ciici net a review er et tne rebate anieunt te cieterrnine i't i't is accurate ancr in centerrnance witn tne agreement. Tne Tewn ceuicr be iesing rebate revenue it i't ciees net review er recenciie tne arneunt receivecr te ven'fv i't is accurate ancr in centerrnance witn tne agreernent. We a recaicuiatien et tne rebate ter Eat burcnases ancr tne anieunt receivecr bv tne Tewn was accurate anci generaiifv in ance witn tne agreernent. Rebates are reccnciled annually to expenses and balanced baclt tc percentage rate. This reccnciliaticn was made available IG cf?ce review. iviereeverj tne Tewn baa ne beiicv geverning new tne creciit carcr rebate revenue sneuicr be abbiieci er beeireci te tne Tewn?s tinanciais. a resuit, tnere was ne terniai aiiecatien rrietnecr estabiisbeci te return tuncis te tne eriginating ciebartrnents er tne generai tunc? ancr abbiicatienr aiiecatien et rebate revenue may net be bertennecr censistentifv wnen receivecr ancr recercieci. Revenue is tc general fund, there is nc allccaticn between funds. mill-h cf the rescurces used tc implement and manage this are paid with general fund dcllars, thus nc allccaticn is deemed necessary. REEG re} Tne Tewn review etner bregrarnsl sucn as! tne State at Fien'cia Purcnasing carcis Services centractl te cteterniine i't a rnere beneticiai rebate bregranil is avaiiabie tnat tne Tewn?s creciit carci bregrarn recruirernents. The will review cther cpb'cns in the future tc increase vield. Tne Tewn cieveieb ancr irnbiernent written guiciance te neir:I rnanage anci centrei tne creciit carcr rebate bregrarnl inciuciing but net iirriitecr tel review et rebate arneunts anci tne abbiicatienr aiiecatien et rebate arneunts te Tewn tunas anci ciebartrnents. Page 31 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 - Reccnciliaticn i5 annually when rebate dEP?Eit i5 Ei?u'Ed. allccaticn prccedure required. Finding (3): Three fcnner credit cards were net deactivated in a timely:r manner. hi. We heted three eut ei teur tehher erheielree cerdheicier eceeuhte tested were deactivated mere theh ehe eel;r alter the eeperetecr trerh empiejrrheht with the Tewh. The gee tetweeh the date etthe emeieyee?e eeperetieh ehcr the date ei ecceuht deectr'lreti'eh rehgecr treiri five (5) te 5 deyel ieew'hg the Tewh te uheutheriaecr use. r?le reeuit et the delayed cerci deectivetieha t5 credit cercr purchases teteiihg $555 were made eh the credit cercr ecceuhte after the eeperetecr trerh emeieymeht ehcr ere ceheicierecr duestieheci ceete ih Fihciihg The lteeps an ac?lre list cf card hclders and has prcvided this list human rescurce tc use when em are leaving em ent with the sc the cards can he ccllected at that time. The HR department has added this item tc their check list cf items tc be ccllected by HR The charges in were an a Town issued credit card and the charges were authcriaed by the manager until a replacement card was issued tc the assigned to these tasks. See excel spreadsheet attached. mmendaticns: The Tewh rew'ew credit cercr etetemehte ter credit cercte ueecr his? termer ier hetehtiei etter emeieyee see eretieh detee ehd determihe it the treheectiehe cempietecr were appreeriete. Credit card statements are reccnciled en a basis and credit cards are ccllected when an em plcyee separates em plc'fm ent with the Tcwn. The Tewh eheuicr timely deactivate credit cards wheh eh emhiejiree?e emhieyrheht with the Tewh ehcie. intc farm for ccllecticn cf card upcn separaticn cf em ent and delivered tc Finance for deactiva?cn. Page 32 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 Finding The credit card laclted adequate written guidance. N. The Team created ahd irhhierhehted Gardheider?s agreemehts ahd Ftequest Credit Card Ferrhs durihg the audit; heweyer, the terms have hat heeh ihcehcerated by reterehce ihte the Tewh?s Precuremeht Peiicy. The purchasing pclicy adcpted by the Ccuncil is updated en a pencdic basis and the credit card terms in questicn will be a part cf the next update at the dccument But, in the meantime the did deyelcp the terms and distribute tc the departments use. Ci. The Tayrh did hat preside cur lrrith Gardheider?s a greerhehts ahd Request Credit Card terms as we requested durihg the audit. - THESE Agreements Wi'?'l were made available fer IE cffice review. The Tew h?s crecurerheht ceiicy did hat preside adequate guidahce regardihg: Which eihhieyees er ciass at eihhieyees are eiigihie ta request ahd ehtaih a credit card' Directcr?s are allcwed tc determine which em plcyees functicns require use at a prcyided credit card and then these em plcyees are authcna ed by the Finance Directcr tc be issued a credit card. - The criteria used tar apprairihg requests tar credit cards ahd the prccess ahd tihieiihe icreyaiuatihg ahd achreyihg requests tar credit tie. the credit card issuahce prccess] parties ahd dacurhehtatichj; - Directcr?s decisicn thrcugh the request fcrm, authcnaed by the Finance Deparbn ent. - Credit ard s. - Gardheicier ac ithewiedgiheht at receipt at the hrecureihe ht ceiicytei ahd credit card; credit Gard Authcrizaticn term. The criteria iustiiyihg chahges te shehdihg prccess teriihhierhehtihg shehdihg iirhit chahges, ahd ehiigatiehs tar eyersig ht rhehiterihg at the shehdihg iirhits,?- All purchasing limits must the adcpted purchasing pclicy. The use cf a credit card dces circumvent the purchasing pclicy adcpted by Ccuncil. Prehihited disaiiewed purchases ahd the requiremehts tar eyersight trhehiterihg at aiihurchases; - All purchases must be authcriaed thrcugh the purchasing prccess and all items purchased are far use. Page 33 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 Pen'ddlc reylew and far all - Already performed once a month and processes shown to IE Audit team and documented by IG on1?lEEl2D1T. - Gredll card rep. separelldn see alsd f3}; Incorporated into form for collection of card upon separation of em ploym ent. Gredll card repaymenl, reydcalldn, lnapprepn'ale usage; credit Card Authorization form. - ldrrepdn?lng and sldlen cards, parcnasesl dr lraadalenl credit I: ard A uthona ation form. Repale pregram and repale alldcalldn {see alsd and No allocation required. Training perform ed with iss uance of card. Cl. Dn Seplemper 2d? Fl the wan Flnance a lempdrary credll lncreased l?rdm ld ldrald ln dl? l-ldrn'cane lrma. l?il?ler lne ndrn'cane?relaled emergency ended lne Flnance Dlrecldr a ln lne credlr r-i panll slalemenl daled Bill sndwed lne credll were decreased ld lnepre?ndrn'cane ndweyer; lne San syslem as dl Ed, Elil sndwed lnal a decrease nad Based an lne lnl?cnnalla n, we reddesled necessary ld delennlne ll lne were reduced la pal lnere was an escesslye delay ln access la lne and nd sappdn? was preylded. Tnereldre, we were anaple ld delermlne ll= lne decrease Ftesponse There appeared to he conflicting limits in the banking system but the issue was indeed resolved by Dctoher 21"? and no violations in policy relating to spending limits occurred during that time period. This was the first instance of an increase in credit limit as a result of an emergency declaration leading to the delay that resulted in reversing the temporary credit limit increase. Fl. r?i lacll cl adeddale wn'llen gdldance lne credll card pregrem espdses lne lawn rd n'sll cl errer, credll card and lnal pd dndelecled. ll appears managemenl prdpeny credll and there was a laclc: cl adeddale dyer credll card ld ensure are peddrmed apprep n'alely. Tne rlslu: ls lncrea sed wnen as the ndrmal credll were ln place dr Page 34 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 Response There was no credit card misuse cr credit limits exceeded and credit card utilizaticn is mcnitcred regularly via the cnline banlting pcrtal. An increase cr decrease cf available credit dces negate the reguirem ents cf the Tcwn?s Purchasing pclicy er the purchasing prccedures in place which requires management as well as deparlment directcr cr their designee cf all purchases. These are and have been in place sc this statement is net an accurate reflecticn cf the cf .Jupiter pclicies, prccedures cr 3. Der testing at tne tat sainpied credit card transactiens identified a tetai at dd instances at nenceinpiiance witn tne Tewn?s precarenient pciicyl as weii as! 34 transactiens tnat iacited adecriiate decanientatien ta iraiidate tne parcnase {see aise Finding inese peiicy iridiatians and iacit at dcciirnentatien indicate cardneiders were net prew'ded adediiate guidance and training regarding tne credit card and tnat tnere was a iacit at prcper nteniten'ng and aversignt tertne credit card pregranil expenditures. This statement is net factually accurate as dccument has been prcyided tc the IG cffice. The has a firm grasp cn what is required cf cur inten'Ial systems and we maintain cf rescurces prcyidedtc us by cur citizens. In the audit repcrt fer the fiscal year ended El?n-1T issued by the cutside GPA firm cf Galer, Dcnten, Leyine, et al, nc management letter ccmments were prcyided indicating the is required tc malte changes tc cur systems. The and cur staff have hard tc implement systems that are updated and prcyide the effective means cf prcyiding seniices tc cur residents while ensuring the prcper ccnb'cls cf the rescurc es entrusted tc us. We will rescrt tc antiquated dccum entaticn prccesses [paper that have been replaced by mere mcdern cf just to satisfy an cutdated leyel cf eapectaticn cf the tc prcyide the IG cffice with cf dccum entaticn. ft d) Tne Lip-date tne precnrein ent peiicy er deireiep a separate written peiicy and precediires tar tne Credit Card pregrain tel at a minimum, items above. d. Factdai basis ta instiiy cnanges ta spending and tne tnereat. cnly change in spending limit was in tc hurricane preparaticn. The change in limitwas dcne in with ccde and nc yiclaticn in pclicy Page 35 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 E. See response to Finding 5. h. Pen'eciic iranasch?en premiering and Oversight Di sii purchases fercempiisnce with and ecfequeie crec umenieh?en. All purchases must be authorized thrcugh the purchasing prccess which is reviewed and apprcirep by departments and management with policy. Page 36 of 40 Page 37 of 40 DATE 92'281?201? 95191201? 10;?1 21201? Memorandum received IUI171201 26-Oct 2-N ov 3-H ov ov 14-N ov 15-N ov 21-N ov 29-N ov 8-D ec 14-Dec 14-Dec 20-Dec 22 -D ec 11-.I an 23-J an 213 - ZIEI lZ-Feb 13-Feb UZZ-ZIB 13-Mar 15-Mar B-Apr ACTION e-m ail e-m ail Site Visit Site Visit documents sent documents sent documents sent documents sent documents sent e-mail MV email documents sent documents sent documents sent documents sent e-mail documents sent e-mail e-mail documents sent email email Site Visit documents sent email email Site Visit email email email DETAIL Purchasing Card Survey Form Completed Survey Form Notice they will be auditing credit card aco?vices from 10J1f16 to Kick off meeting - should have everym ing completed by year end Reviewed processes Card Holder List, FY12 Transactions, Purchasing Policy Version 12-21-16. TOJ Card li?igreement with Suntrust. 201? Fin Org Chart Test Sample: 10f2016 Control Statement, 3 individual statements reflecting the charges being expensed accordingly Control statements sent from 1022016 to 9,101? Credit Card po iCy extracted from Purchasing PoliCy Proof of closed account: Burgess, Lukasik, Ficarro. C. Credit Card limit increase Irma; Credit Card limit decrease Irma response to a 1112 email darifying processes response to a 1112 email regarding die SunTrust Commercial Card Agreement Provided statements showing purchases from and 9f23f12-9ii30f1? {26- statementsl Provided FPL and WM statements for Oct 2016 and Oct 2017 Mu nis ser ID and Password assignment 'steps', Transaciion Search 9f23f16-10f2221 2' IE requesiing confirmation of CC process, blacklist?? And sample CC nenctweek so can set up site visit Confirmation that the write up of our CC process was explained correctly IG to have sample data by end of nestweek. Delay caused by other assignments that required immediate attention. response to: blacklisted customers and detai on an inactivated CC holder Budd Transaciion Search 0?7f17 and Travel Policy requested in 12f21 email IG sample set received 954 sample records selected, with 30 requesting add'l info IG reduced sample set 142. with 30 requesting add'l info Detailed Transaction Testing, all documents for sample set provided in a folder on a stand alone computer 5 Budd screen shotinactivated; Audit Tracking report reflecting limit increase for Irma: Proof of payment for Rebate: 2016 and 2017 Response to IE email on 2;?12 requesting clarification. Resonse to IE email on 2:13 requesting clarification Detailed Transaction Testing follow up email you get back to us lire following week - Resonse from IG. Will do best to get back follow up questions by end of business on Thursday 6:44pm from Megan Gai lard with requestfor add'l records 79 Finance Director em ail indicating the Town and IG of?ce agreed to oomplete audit by 12-31-12 and Town staff time is limited OFFICE OF INSPECTOR GENERAL 2018-A-OO13 OFFICE OF INSPECTOR GENERAL 2018-A-0013 ATTACHMENT 2 – OIG REBUTTAL OF MANAGEMENT RESPONSE Introduction / Summary Rebuttal Despite numerous requests by our office, the Town management did not provide us with certain documentation until after the audit was completed. The additional information provided was considered and incorporated into Exhibit 4 as part of Town management’s corrective action. Nevertheless, our audit findings are unchanged for two reasons. First, the information requested by our office during the audit was not provided to us until after the audit was completed and the Town management received our draft audit report. Second, the Town did not provide documented evidence to resolve all the exceptions.16 The exceptions that were not resolved are shown in Exhibit 4. External Audit Town management indicates in its response that in its most recent external audit completed for fiscal year ending September 30, 2017, no management letter comments were provided requiring the Town to make changes to its internal control systems or credit card purchasing procedures. It should be noted that there is a distinct difference between an external audit and an OIG audit in that an external audit focuses on materiality and fair presentation of the financial statements; whereas, the OIG audit focuses on the use of taxpayer money. In this audit, we found weak controls that did not fully protect taxpayer’s funds and exposed the taxpayer funds to waste, fraud, and abuse. Additionally, an external auditor’s review of internal controls is based on expressing an opinion on the financial statements and not on the effectiveness of the Town’s internal control. This OIG audit included a review of the effectiveness of the Town’s internal controls for operations rather than the impact of internal control on the financial statements. These are two completely different types of audits with different objectives, methodology, and procedures. Paper Transactions Town Management states that “Town staff is of the belief that the only way to satisfy the concerns identified in this audit would be to utilize paper transactions and approvals.” The Town staff’s belief is mistaken. The OIG office never required “paper” transactions and approvals. The OIG office requested evidence of approval (electronic or paper) but evidence was not provided. Although Town Management states the Town has an appropriate internal control system, the Town’s staff did not provide our office with information to support their statements regarding that system. This OIG audit focused on whether Town management complies with the Town’s policies and requirements, and we found instances where the Town violated the resolution that the Town Council approved, as shown in Finding 1. In addition, the OIG requested access to the Town’s computer system to conduct the audit to avoid paper or manual copies being needed, and the Town declined to provide access. 16 An exception is one instance of an issue; whereas, a finding is the combined total of exceptions and/or the overall issue indicated by the exceptions. The Town did not resolve any of the findings in totality with the documentation provided. Page 38 of 40 OFFICE OF INSPECTOR GENERAL 2018-A-0013 Town management states that Munis (computer system) was used for approvals; however, the policy, approved by the Town Council in Resolution 74-16 requires “invoices (receipts) or other acceptable documentation signed by the appropriate Department Director or their designee.” [Emphasis added] Management’s statement regarding the Town’s process contradicts the Town’s written policy. Additionally, documentation was not provided for all exceptions when requested either by electronic records or paper files. The policy, approved by Council in Resolution 74-16 on December 20, 2016, requires purchases of more than $2,500 per month from a single vendor receive prior specific approval. This documentation was not provided for all exceptions when requested either by electronic records or paper files. Timeline The timeline provided in the Town management’s response only includes a portion of the relevant dates and information. During the entrance conference on September 28, 2017, the OIG stated we would attempt to complete the audit by December 2017; however, we encountered significant delays caused by the Town’s delay in providing requested documentation and the Town’s request that we review all files in person, as shown in Enclosure 1. In order to review documents in person, we had to wait until Town staff was available to meet to review the documentation. Thus, it was not possible to complete the audit by December 2017. On March 15, 2018, we followed-up with Town management on requests initiated during fieldwork and prior emails. On April 3, 2018, the Town provided a response stating it would be “a couple months” for them to provide documentation. The Town did not provide the requested documentation until the audit was completed and a draft audit report was provided -- seven months after the initial request on January 23, 2018. During the exit conference on August 9, 2018, the OIG stated that any additional documentation submitted would be considered. The information was considered and incorporated into Exhibit 4. Because the information was provided after the audit was completed, we characterized the delayed production as a corrective action by the Town. Finally, even with the additional documentation provided, all four findings would remain because the Town did not provide sufficient evidence to show resolution. The Town provided sufficient information to only resolve some exceptions. Page 39 of 40 Page 40 of 40 s?me d??umems In} (- No additional documents provided by Town provided by Town Dec 2017 Jan 201 8 Feb 2018 Mar 2018 Apr 2018 May 2018 Audit of Credit Card Activities for FY 2017 Jun 2018 Jul 2018 Aug 2013 EXCESSIVE DELAYS I11 I'lOFFICE OF INSPECTOR GENERAL