Corporate charge card

Report: 11
Date: 14 March 2008
By: The Commissioner and MPA Chief Executive

Summary

This report provides details of the work that has been completed in relation to the Corporate Charge Card investigation, which was first, reported to Full Authority on 22 November 2007.The report also details the results of the recent procurement exercise completed to appoint a new corporate charge card provider, and outlines the planned improvements to the control systems that will be introduced by the MPS and the new provider in April 2008.

A. Recommendation

That

1. members note the actions that have been completed in processing outstanding Corporate Charge Card reconciliations;

2. note the progress with ongoing investigations being undertaken by the Directorate of Professional Standards and MPA Internal Audit; and

3. endorse the new management processes being put in place to avoid a recurrence of the issues identified.

B. Supporting information

Background

1. The AMEX corporate charge card scheme was introduced in April 2003 as a means of reducing bureaucracy and the need to maintain temporary imprest accounts across the Service.

2. As at 22 November 2007 3,533 officers and staff had been issued with AMEX cards, of which an average of 700 to 800 were used in any given month. In a typical month, the cards will be used in up to 26 currencies and up to 20% of the spend will be overseas. The majority of cards are held in Specialist Operations and Specialist Crime Directorates.

3. Under current Standard Operating Procedures, all cardholders are required to complete a claims form accounting for their expenditure, attaching original receipts and a copy of the relevant statement from American Express. The forms are then submitted through the supervising officer to Exchequer Services to be processed on the accounting system. To accommodate deployments outside the MPD cardholders are required under the SOP to complete this reconciliation within three months from the date of expenditure.

4. At 31 October 2007, unreconciled overdue transactions stood at £3.7m. This figure was made up of pre-April 2006 expenditure of £1.6m and post-April 2006 expenditure of £2.1m.

5. At the meeting of the Full Authority on a 22 November 2007 a series of actions were agreed which would facilitate the completion and processing of the identified unreconciled claims.

6. Full Authority also noted that Finance Services and Procurement Services were well advanced in the process of competitively retendering the service’s corporate card facility with the aim of having more comprehensive control arrangements in place from April 2008, including improved management information and cardholder safety.

Current Position - Post-April Expenditure

7. All Individual cardholders with outstanding balances as at 31 October 2007 were instructed to reconcile their accounts, which were then authorised by their line manager and submitted to Exchequer Services.

8. Exchequer Services updated the account database and made a first assessment on whether the expenditure was within the corporate charge card policy. All those deemed to have been outside the policy, for any reason were referred to MPA Internal Audit.

9. Internal Audit reviewed the referred accounts and categorised them into:

• Claims outside of the corporate charge card policy i.e. an officer should have used an alternative procurement process to purchase particular items of equipment or services for operational use.
• Claims outside of the corporate charge card policy that contained items of personal expenditure but were repaid by the officer within acceptable parameters.
• Claims outside of the corporate charge card policy that were considered potentially unacceptable or without sufficient supporting documentation.
• Exempt appendix 1 outlines the number of claims that have been processed in this way.

10. The exercise has taken longer than originally anticipated but significant progress has been made. Regular updates have been provided to Management Board members to ensure management action was maintained and Exchequer Services have worked closely with business managers and managers to facilitate the reconciliation of accounts by individual officers and staff. The position at 8 March 2008 in respect of those post-2006 accounts with outstanding amounts on 31 October 2007 can be summarised as follows:

Table 1: Amount Outstanding at 31 October 2007

Notes:

1. Changes reflect a reallocation of cards as a result of reconciliation exercise
2. Relates to retirees/unallocated cardholders
3. Of the £252k unreconciled, £96,616 relates to accounts being investigated by DPS.

11. Current workloads in Exchequer Services indicate that current corporate charge card reconciliations in the main are now being submitted in a timely manner. Since 31 October 2007, Exchequer Services have processed £3.7m transactions and the position on all accounts (post-2006) as at 3 March 2008 (including all transactions since 31 October 2007) can be summarised as follows:

 Table 2: Status of account

Review of Cards issued

12. Every business group has undertaken a comprehensive review of all cards allocated to their business groups. In total 1,400 cards have been deemed to be no longer operationally required and have been cancelled.

Current Position Pre-April 2006 Expenditure

13. A review of the process completed for reconciling the post 2006 expenditure claims was completed by Finance Services, Internal Audit and the Directorate of Professional Standards in January 2008.

14. It was accepted that the reconciliation of older transactions would prove more difficult because of the passage of time and the different record keeping systems in place between 2003-05. It has, therefore, proved necessary for Exchequer Services to analyse expenditure records and populate common templates for consideration by business groups and affected officers.

15. Based on the results and analysis of the post 2006 reconciliations it was decided to take an intelligence led targeted approach in securing reconciliations for pre 2006 expenditure.

16. Cardholders considered to be higher risk in terms of value and types of transactions/expenditure incurred were identified and instructed, together with all senior officers and staff, to complete reconciliations.

17. This process is currently ongoing and is scheduled to be completed by 31 March 2008.

18. Internal Audit has also purchased an audit software system, which allows corporate charge card expenditure patterns (for both reconciled and unreconciled accounts) to be analysed against specific risk criteria. This has produced a targeted list of individuals for review by Internal Audit. This software has also been used to review pre-April 2006 expenditure patterns to support the intelligence-led targeted approach.

Introduction of the new Corporate Charge Card

19. The procurement exercise for a new corporate charge card provider was completed in January 2008 and Barclaycard was awarded a four-year contract.#

20. The introduction of a Visa product, which is accepted worldwide, will significantly reduce the need and ability to make cash withdrawals.

21. The new corporate charge card scheme will allocate each cardholder an annual spend limit, which will be set by the business groups, and will be based on operational requirements. It is estimated that 80% of cardholders will have a maximum expenditure limit of £5000 per annum

22. Line managers will receive a copy monthly statement outlining the expenditure incurred by their staff who have been issued with a Corporate Charge Card.

23. The period allowed for card holders to complete reconciliations for incurred expenditure will be reduced to 30 days

24. Each cardholder on receiving their new card will be issued with a revised set of guidance notes clearly stating the circumstances on when the corporate charge card should be used. Each cardholder will be required to sign for their card, including an acknowledgement that any over claim or overpayment can be deducted from their salary.

25. In partnership with Barclaycard, an intranet site will be established to assist card holders in the administration of their account.

26. Any cardholder who fails to submit reconciliations on time may have their card withdrawn and any unreconciled transactions deducted from their salary.

C. Race and equality impact

The equality and diversity implications of this investigation continue to be monitored by the Director of Strategic Finance and the Directorate of Professional standards.

D. Financial implications

1. The financial implications of this exercise are set out in Section B of this report.

2. All costs for this review and investigation are currently being met from existing budgets. This has required a significant redirection of resources within Exchequer Services, DPS and the MPA Internal Audit Forensic Branch. Business Groups have also had to dedicate resources to support this process. Resources will continue to be allocated until the reconciliation and related investigations are repeated.

3. It is standard policy to recover any money owed to the Authority for any reason. Action will be taken to ensure that all funds are recouped where appropriate subject to legal advice.

E. LEGAL IMPLICATIONS

In line with relevant statutory requirements, action will be taken against officers/staff as appropriate and to recoup any funds due to the Authority.

Report author:

F. Background papers

None

G. Contact details

Report author: Anne McMeel, MPS Director of Strategic Finance and Peter Tickner, MPA Director of Internal Audit

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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