Report 2000-001.3 Summary - July 2000
It Has Merits, But It Has Not Reached Its Full Potential
RESULTS IN BRIEF
The Department of General Services (General Services) created the State of California's purchasing card (CAL-Card) program in 1992 to streamline the process that state departments use to make small purchases. Under this program, state employees are issued credit cards to make work-related purchases. Between December 1998 and November 1999, CAL-Card purchases among state departments other than the California State University system totaled nearly $107 million. The California State University system also uses the purchasing card program, but it is the subject of a separate report.
We reviewed the administration of the CAL-Card program at the seven state departments that used the program most heavily during the period December 1998 through November 1999. Although our review did not identify widespread personal abuses, we found that departments can more effectively use the program by integrating it into their overall procurement practices. We noted that a high number of cardholders and large volume of purchases have created unanticipated inefficiencies for some departments, in part because the need to review and process CAL-Card transactions has greatly increased the administrative workload. About 4 percent of the transactions in our sample were for purchases that totaled less than $10 each and were made primarily for photo processing and single videotapes. The average transaction was less than $200 in most of the 31 departments participating in the CAL-Card program, and in 4 it was less than $100. Departments could improve the effectiveness of the CAL-Card program by planning and coordinating their purchases, especially very small purchases. Finally, the CAL-Card program is supplanting normal procurement methods. Some departments used the CAL-Card for purchases of more than $15,000 that would have been better handled by standard procurement methods, and cardholders had vendors split purchases to circumvent spending limits, or used the card for travel-related purchases, in direct violation of CAL-Card policies.
The extent to which controls existed and were enforced varied among the seven departments we reviewed, but departments that trained their staff in proper CAL-Card procedures and had a monitoring and enforcement process had fewer errors in the sample we tested. Three of the seven departments we reviewed do not require formal training in CAL-Card procedures for their employees who either hold cards or approve purchases. In addition, some departments have not implemented effective review processes to ensure that purchases are in accordance with CAL-Card policies. Only three of the seven departments perform post-payment reviews of transactions. Post-payment reviews are important because they allow departments to monitor cardholders' use of CAL-Cards and to detect and correct problems.
We also found that some of the control features built into the CAL-Card program are not working as originally intended. Departments can limit the amount charged per transaction or charged in a 30-day period, yet in at least one instance, the bank did not prevent a cardholder from exceeding this limit. In addition, although departments can block purchases from certain types of vendors through the use of vendor codes, departments have found that the codes are so broad that blocking them limits legitimate access to some vendors. Consequently, some departments have chosen not to use these codes.
To establish a more effective CAL-Card program, departments should take the following steps:
- Reemphasize to their cardholders and approving officials that the CAL-Card program has specific procedures and controls and is only one of several procurement methods available.
- Assess the costs and benefits of operating the CAL-Card program and, based on this assessment, determine the appropriate number of cardholders and approving officials needed.
- Train cardholders and approving officials in CAL-Card procedures and institute a system of post-payment monitoring and enforcement.
The agencies and audited departments generally concur with the findings and recommendations in this report. Each department is planning to take action to strengthen controls over their CAL-Card programs. In addition, the Department of General Services recognizes the importance of the merchant code restrictions and is working to make improvements in this area.