Business card update

Report: 7 (Linked to exempt item 13)
Date: 11 September 2008
By: Chief Executive and the Director of Resources on behalf of the Commissioner

Summary

This report provides details of the work that has been completed in relation to the Business Card investigation, which was first reported to Full Authority on 22 November 2007 and to the Corporate Governance Committee on 14 March 2008 and 12 June 2008.

The report also details progress on the implementation of the new management process for the governance of the MPS Business Card and the introduction of the new credit card contract.

A. Recommendation

That

1. members note the actions that have been completed in processing outstanding Business Card reconciliations;
2. note the progress with ongoing investigations being undertaken by the Directorate of Professional Standards and MPA Internal Audit; and
3. note the progress on the implementation of the new management processes put in place to avoid a recurrence of the issues identified.

B. Supporting information

Background

1. The American Express 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 American Express 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 previous Standard Operating Procedures (SOP), all cardholders were 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 were then submitted through the supervising officer to Exchequer Services to be processed on the accounting system. To accommodate deployments outside the MPS cardholders were 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. Progress on these actions was reported back to the Corporate Governance Committee in March and June 2008.

6. Finance Services and Procurement Services concluded the process of competitively retendering the service’s business card facility in January 2008. The successful tender by Barclaycard was awarded a 4-year contract commencing in May 2008. The primary object of the exercise was of having more comprehensive control arrangements in place from May 2008, including improved management information and cardholder safety.

7. Following a review by each business group of American Express cardholders, new Barclaycards were issued from 8 May 2008. The contract with American Express ceased on 10 June 2008 when all cards were cancelled.

8. The issues outstanding from the accounting for expenditure incurred using American Express cards has been analysed in two ways:

• Pre April 2006 Expenditure
• Post April 2006

Pre-April 2006 Expenditure

9. Following a review in January 2008 by Finance Services, Internal Audit and the Directorate of Professional Standards pre April 2006 expenditure was dealt with on an intelligence lead targeted approach using the following criteria:

• the 100 cardholders with highest value outstanding returns,
• all officers of chief inspector rank and above,
• anyone not previously included above but identified by Internal Audit’s analysis of the data and to require inclusion.

This led to an examination of 182 of the 993 unreconciled accounts from this period.

10. The review concluded that the reconciliation of older transactions would prove more difficult because of the passage of time, the different record keeping systems in place between 2003-05 and the retirement or resignation of a significant number of cardholders. It has, therefore, proved necessary for Exchequer Services to analyse expenditure records and populate common templates for consideration by business groups and affected officers.

11. The value of the claims to be reconciled under the targeted approach is £994k of the £1.6 million pre April 2006 outstanding expenditure. One hundred and eighty files, relating to the unreconciled balance of £994k, have now been distributed to business groups by Exchequer Services (2 files are being dealt with centrally) of which 131 have now been completed and returned (see table 1 below).

Table 1 – Pre-April 2006 targeted exercise

* DoR includes accounts from all business groups being centrally reconciled

12. Business groups are finalising the 51 outstanding files for completion by the end of September 2008. At the conclusion of the process, all of these 182 files will be passed to Internal Audit for review.

13. The remaining £606k of the £1.6m represents 811 cardholders with an average outstanding balance of some £750 – the value of the claims range between £3,775 to 36p. It is, therefore, intended to bring the review to a conclusion ensuring that resources are only directed at specific cases identified as warranting further inquiry.

Post April 2006

14. 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.

15. 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.

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

• Claims outside of the business 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 business card policy that contained items of personal expenditure but were repaid by the officer within acceptable parameters.
• Claims outside of the business 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.

17. The position as at 21 August 2008 shows 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 groups to facilitate the reconciliation of accounts by individual officers and staff. The position at 21 August 2008 in respect of those post-2006 accounts with unreconciled amounts on 31 October 2007 can be summarised as shown in table 2 below.

Table 2 – Change in position from 31 October 2007

Notes:

1. Changes reflect a reallocation of cards as a result of reconciliation exercise
2. Of the £118,603 unreconciled, £106,741 relates to accounts being investigated by DPS.

18. Current workloads in Exchequer Services indicate that Barclaycard business card reconciliations in the main are being submitted in a timely manner as shown by:

• American Express expenditure incurred before the cards were stopped on 10 June 2008 that is still not reconciled (see table 3 below),
• Barclaycard expenditure that has not been reconciled within 30 days (see table 4 below).

Table 3 – Reconciliation Outstanding: American Express as at 21 August 2008

(1) Note includes £118,603 from table 2 above

Table 4 – Reconciliation Outstanding: Barclaycard as at 21 August 2008

It should be noted that there are some cases where operationally it is not possible to reconcile accounts within 30 days as per the policy. As the new scheme has now been operating for a few months Exchequer Services will start to provide management with information on cardholders with unreconciled balances outstanding at 60 days with a recommendation that the cards be withdrawn. Business groups will then have to put the case whether the card needs to remain active for operational reasons or confirm that the card can be stopped and the management action required to reconcile the outstanding balance.

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 from March 2008. At present, there are 1,842 open Barclaycard accounts compared to 3,533 AMEX cards in November 2007.

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

21. The new business card scheme has allocated each cardholder an annual spend limit, which has been set by the business groups, and will be based on operational requirements. Eighty percent of cardholders have a maximum expenditure limit of £5,000 per annum

22. Line managers now receive a copy monthly statement outlining the expenditure incurred by their staff who have been issued with a business card.

23. The period allowed for cardholders to complete reconciliations for incurred expenditure has been reduced to 30 days

24. Each new cardholder on receiving their card is issued with a revised set of guidance notes clearly stating the circumstances on when the business card should be used. Each cardholder is 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 has been established to assist cardholders 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.

27. A group of senior business managers drawn from every business group (presently meeting as the Business Card Transition Group) meets regularly to ensure the new procedures are operating effectively and that policy is being enforced equitably and stringently across all business groups.

August 2008 spend on the Barclaycard

28. Overall the August Barclaycard spend of £391k represented a 4% decrease compared with July’s spend of £408k. In the top 6 categories of spend shown in table 5 below, 14% of the spend on accommodation was in establishments with “London” in their address. Cash withdrawal remains high at 31% of total spend in August costing an additional £3,800 in cash withdrawal charges. This is, in part, due to attendance of officers at the Olympics in Beijing. Business groups are monitoring the position on cash withdrawals to ensure they are kept to a minimum within the parameters required for operational effectiveness.

29. Much of the unusual spend represents operational necessity but those returns that do not show adequate operational justification for off policy spends are being challenged through the Business Card Transition Group after the return has been processed to ensure appropriate action is taken within each business group.

Table 5 – Top 6 Expenditure Categories August 2008

C. Race and equality impact

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

The processing of reconciliations and the referral of returns are undertaken with a fair and equitable application of policy and procedure. The allocation of the new Business Card (Barclaycard) was determined by operational need identified at Business Group level. Barclaycard will respond to cardholder needs making reasonable adjustments under Disability and Discrimination Act requirements.

D. Financial implications

1. The financial implications of this exercise are set out in Section B of this report. The expenditure incurred on credit cards has been charged to the Authority’s accounts in the year the expenditure was incurred. The exercise undertaken has been focussed on reconciling individual items of spend to supporting documentation/authorisations.

2. 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.

3. 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 completed.

4. As identified in Section B, systems have been put in place to ensure robust governance exists to support the corporate credit card scheme and the early identification of any potential abuse.

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.

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

Abbreviations

Business Groups

CO

Central Operations

DCP

Deputy Commissioner’s Portfolio

DoI

Directorate of Information

DoR

Directorate of Resources

HR

 Human Resources

SCD

Specialist Crime Directorate

SO

Specialist Operations

TP

Territorial Policing

Send an e-mail linking to this page

Feedback