Summary of Report 05-029

March 2005

Report Number 05-029

Cardholders at the four institutions of higher education that we audited generally used their procurement cards in accordance with state procurement laws and institutional policies and procedures to make purchases that were allowable, reasonable, and appropriate. However, opportunities exist for all four institutions to improve controls to further reduce the risk that cards will be misused in the future. We audited Texas A&M International University (A&M International), Texas Tech University Health Sciences Center (Health Sciences Center), Texas Tech University (Texas Tech), and The University of Texas at Arlington (UT Arlington).

All four have established controls over their procurement card programs. In most cases, these controls are ensuring that purchases made with the cards are allowable, reasonable, and appropriate. UT Arlington can improve its overall management/control environment to reduce risk of fraud. Additional improvements in specific controls at all four institutions will help the institutions detect and prevent procurement card misuse. For example:

• At the Health Sciences Center, Texas Tech, and UT Arlington, members of management allowed cardholders to use their procurement cards to purchase items that the institutions' policies prohibit. While exceptions to restrictions may be necessary from time to time, these three institutions' procurement card policies and procedures either do not allow exceptions or do not address the process for granting them.

• Targeted judgmental queries of each institution's procurement card transactions identified purchases that exceeded the per-transaction limit, as well as purchases split between transactions and between cardholders to circumvent those limits. These limits are in place in part to help ensure that large-dollar purchases comply with institution and state requirements for competitive bids.

• A&M International's, Texas Tech's, and UT Arlington's procedures for conducting monitoring independently of the individual departments are either not complete or not documented. Having up-to-date formal procedures that have been approved by management helps ensure that the monitoring function consistently meets management's expectations for identifying and responding to misuse of procurement cards.

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