Business card update

Report: 13
Date: 8 December 2008
By: Commissioner and MPA Chief Executive

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 Corporate Governance Committee on 14 March 2008, 12 June 2008 and 11 September 2008.

The report also details progress on the implementation of the new management process for the governance of the MPS Business Card.

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 MPD 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, June and September 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. Currently 1,988 Barclaycards are in use.

8. The outstanding unreconciled amounts on American Express cards has been analysed in two ways:

• Pre April 2006 Expenditure
• Post April 2006

Pre-April 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 and above,
• anyone not previously included above but identified by Internal Audit’s analysis of the data and to require inclusion.

10. The review concluded 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.

11. The targeted approach will reconcile £994k of the £1.6 million pre April 2006 outstanding expenditure; the remaining £606k represents 811 card holders. One hundred and eighty files have now been distributed by Exchequer Services (2 files are being dealt with centrally) of which 162 have now been completed and returned (see table 1 below).

Table 1 – Pre-April 2006 targeted exercise

12. Business groups are finalising the 20 outstanding files for completion by the end of November 2008. At the request of MPA Internal Audit Exchequer Services is analysing the results of the reconciliation exercise before referring all of the pre-2006 account files to Audit. The files will be sent to MPA Internal Audit by the end of November. At the same time the summary will be sent to DPS.

Post April 2006

13. 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.

14. 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.

15. 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.

16. The position as at 17 November 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 17 November 2008 in respect of those post-2006 accounts with outstanding amounts on 31 October 2007 can be summarised as shown in table 2 below.

Table 2 – Change in Position from 31 October 2007

The remaining £8,353 unreconciled relates to 12 accounts including two retired officers and one officer overseas.

17. All Business Groups have advised that they are proactively chasing overdue accounts. Some accounts remain overdue due to cardholders remaining on long-term overseas operations. Also a number of cardholders who frequently travel overseas have not had their claims fully reconciled due to a process difficulty with multi currency use. The Transition Group is currently working with Internal Audit to resolve these issues. The current position is analysed between the two card providers:

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

Table 3 – Outstanding American Express expenditure as at 17 November 2008

Table 4 – Outstanding Barclaycard expenditure as at 17 November 2008

11% of the amount overdue, i.e. £19,618, is more than 60 days overdue

Introduction of the new Corporate Charge Card

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

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

20. 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

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

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

23. 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.

24. In partnership with Barclaycard, an intranet site has been established to assist cardholders in the administration of their account.

25. Exchequer Services has distributed reports to all business groups identifying late returns and potentially off policy spend that permit them to investigate the circumstances in each individual case further. The Business Groups have the opportunity then to recommend that any cardholder who fails to submit reconciliations on time may have their card withdrawn and any unreconciled transactions deducted from their salary.

26. 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.

October 2008 spend on the Barclaycard

27. Overall the October Barclaycard spend of £461k is broadly comparable with September’s spend of £451k as shown in figure 1 below:

Figure 1 - Barclaycard Spend By Month (available as supporting material)

Note there not been any spend on Barclaycard within DoR.

28. Cash withdrawn on the card has been analysed between that withdrawn in Stirling (GBP) and that withdrawn in other currencies in table 5 below.

Table 5 - Cash Withdrawn On Barclaycard October 2008

1. 1.At 22% October cash withdrawals are slightly better than AMEX which averaged 25% cash withdrawals
2. This position, however, continues to be monitored with business groups with the aim of reducing the overall level of cash withdrawals

29. The remainder of the spend is analysed between the categories of spend incurred on the card; the top 6 categories of spend are shown in table 6 below, 45% of the spend on accommodation was spent overseas, 44% within the UK outside of London and 11% in establishments with “London” in their address.

Table 6 - Top 6 Categories of spend October 2008

30. Much of the unusual spend represents operational necessity but those 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.

Abbreviations

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

C. 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.

D. 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.

E. 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 completed.

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.

F. Background papers

None

G. Contact details

Report author: Anne McMeel, MPS Director of Resources 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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