Business credit card update

Report: 11
Date: 23 March 2009
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, 11 September 2008 and 8 December 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 progress made in accounting for the residual outstanding American Express card expenditure pre and post April 2006;
2. note the progress with ongoing investigations being undertaken by the Directorate of Professional Standards and MPA Internal Audit;
3. note the progress with outstanding Barclaycard returns and the action being taken to reduce further the numbers of accounts where returns are overdue; and
4. agree that, beyond the enquiries being conducted by the Department of Professional Standards (DPS) and MPA Internal Audit, the monitoring and reporting of the outstanding American Express returns should be drawn to a close with the small number of residual American Express items passed to Internal Audit for a final review to ensure all reasonably practical steps have been taken to account for funds.

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, September and December 2008.

6. Finance Services and Procurement Services concluded the process of competitively retendering the service’s business card facility in January 2008. The successful tenderer - Barclaycard - was awarded a 4-year contract commencing in May 2008. A primary objective 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 there are 2,130 active Barclaycards.

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, therefore, 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 two files were originally selected for review in a targeted approach. Exchequer Services have reviewed 166 of the 170 returned files and referred 19 to Internal Audit for further review. Twelve files, with a value of £48.8k, that refer to retired officers remain outstanding with the business groups.

12. Business Groups are being advised to return files that they are unable to progress further, documenting the action taken to date, for them to be passed to Internal Audit to ensure that all reasonable action to account for has been taken so that this can matter can now be closed.

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. Overdue accounts valued at £2m as at 31 October 2007 were subject to a review by Internal Audit and DPS. The accounts still unreconciled by business groups are valued at £1,276 and relate to four accounts as shown in table 1 below:

Table 1 - Overdue as at 31 October 2007 still outstanding 10 March 2009

17. Exchequer Services have pursued these accounts in conjunction with DPS, who have sent out fortnightly returns on outstanding figures asking for progress reports. Given the size of the four amounts outstanding, further action is not considered to be the best use of resources. These cases will, therefore, be submitted to the MPA Internal Audit to ensure all reasonably practical action to account for these funds has been taken so that these cases can be closed.

All Outstanding American Express Card returns

18. American Express cards were all stopped on 10 June 2008. Those items that are outstanding in Business Groups as at 10 March 2009 are shown in table 2 below.

Table 2 – Overdue American Express expenditure at 10 March 2009

19. From the original £2m the remaining 19 cases totalling £5,769 will be passed to internal audit to ensure that all reasonably practical action to account for these funds has been taken so that these cases can now be closed.

Outstanding Barclaycard returns

20. Barclaycards were introduced from the 8 May 2008 with new tighter criteria for the cardholder to account for their expenditure within 30 days. Table 3 below shows those items of Barclaycard expenditure still outstanding as at 10 March 2009, excluding the March 2009 bill.

Table 3 – Outstanding Barclaycard expenditure at 10 March 2009

21. Business Groups are implementing local procedures to address the overdue Barclaycard amounts including clear documented action plans in each area within the business groups in addition to regular monthly senior management team meetings. The correct operation of the revised procedures and local processes has identified a further case of suspected abuse that is currently under investigation.

22. A technical issue with the credit limits on the cards was identified in January 2009. This caused some credit limits not to be reduced by the full amounts of expenditure incurred each month has been resolved with Barclaycard. This has not affected the recording or processing of transactions on the card in any way whatsoever. Barclaycard have apologised, put in place stricter controls to prevent a recurrence and will provide reparations for the administrative costs to the MPS of correcting the error.

March 2009 spend analysis

23. The total spend in March 2009 is £363k, is 13% lower than February 2009. Figure 1 below shows expenditure by business group each month since the Barclaycard scheme began.

Figure 1 - Barclaycard spend by month (available as appendix 1)

Note: there has not been any spend on Barclaycard within DoR.

24. To demonstrate the effectiveness of the current controls the spend has been analysed by the category of spend, the location of the spend and average and maximum spends in some categories. These results and other detailed analysis of the spend have been reported though the Transition Group and meetings with senior Business Group personnel. Business Groups have used this information to identify areas for management action and review within their respective areas.

Business groups

• Central Operations (CO)
• Deputy Commissioner’s Portfolio (DCP)
• Directorate of Information (DoI)
• Directorate of Resources (DoR)
• Human Resources (HR)
• Specialist Crime Directorate (SCD)
• Specialist Operations (SO)
• Territorial Policing (TP)

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, Director of Resources, MPS and Peter Tickner, Director of Internal Audit, MPA.

For information contact:

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

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