Mayor Faulconer. The report: "A split transaction involves breaking up a high-dollar purchase into smaller transactions in order to circumvent the internal controls."
When San Diego Republican mayor Kevin Faulconer ascended to power three years ago, he promised to clean up the mess left by fallen Democrat Bob Filner, but city hall traditions die hard, including loose handling of the city's electronic credit card accounts, based on a new report by city auditor Eduardo Luna.
Eduardo Luna: "Our investigation determined that the poor oversight of P-Card use has been ongoing for the last year and was reported to have been an issue for much longer."
In the week before Filner took off on a Paris junket in June 2013, emails later uncovered by the Union-Tribune revealed, city procurement officials quietly raised the spending limits of so-called purchasing cards, also known as P-Cards, used to transfer funds to cover official expenses.
"Please increase my p-card transaction limit and month limit this month to $30,000 so that I am able to purchase airfare for the Mayor [some words redacted] for an international trip planned for next week,” wrote Rimah Khouri, acting deputy director in the city’s Human Resources Department to p-card administrator Dianne Owalla, according to the U-T's July 2013 account.
"No city officials returned calls to explain why the increase was needed, or how much was actually spent," the story added.
Now comes auditor Luna with word via the city's anonymous Fraud Hotline that certain unnamed, highly ranked city officials have been playing fast and loose with the electronic payment system during Faucolner's reign.
"The Office of the City Auditor received an anonymous Fraud Hotline report alleging that a Department of Information Technology manager intentionally overrode Procurement Card policies and internal controls," says Luna's March 28 report to assistant chief operating officer Stacey LoMedico.
"During the course of our investigation, we determined that the named manager, and two other senior managers had violated P-Card internal controls."
Noted Luna, "Our investigation determined that the poor oversight of P-Card use has been ongoing for the last year and was reported to have been an issue for much longer."
The auditor found that "one manager intentionally overrode P-Card internal controls regarding split transactions, after being specifically advised not to use the P-Card to make the purchase in question by the City’s P-Card Administrator."
According to the report, "a split transaction involves breaking up a high-dollar purchase into smaller transactions in order to circumvent the internal controls limiting the maximum dollar amount for a single transaction. The practice of splitting transactions is 'strictly prohibited and viewed as a serious infraction.'"
Making things worse, "A second manager was found to have been in possession of the P-Card assigned to a subordinate...When we asked the manager about inappropriate use of the P-Card in question, the manager did not disclose their own inappropriate use."
Auditors also found that "a third manager was not honest and forthcoming regarding the misuse of the manager’s assigned P-Card, and did not reveal prior internal control and policy violations that we had confirmed through independent sources and documents.”
Says the document, “we identified over $8,000 in charges made on the P-Card issued to the manager on a day when the manager was out of the office."
Concludes the report, "While we did not identify fraudulent transactions such as personal purchases, our findings are especially concerning given the Department of Information Technology’s responsibility for the City’s information technology security, and the specific involvement by managers who have a significant role in the City’s internal controls."
The audit's recommendation that "the Assistant Chief Operating Officer take the appropriate corrective action with respect to the employees identified in the confidential report" was agreed to by the Faulconer hands, with a target implementation date of May 1.