Marin panel urges better county credit card oversight

Officials need to tighten the oversight of county-issued credit cards used by nearly 300 employees, according to the Marin County Civil Grand Jury.

A new report by the investigative panel recommends a number of changes in the system, most notably transferring full responsibility for administering and policing use of the card to the county’s Department of Finance.

The purchase cards, also known as CAL-Cards, are made available through a program provided by the state. California contracts with U.S. Bank to provide Visa credit cards to authorized state employees. The program is available for any local government in California that wishes to participate.

The CAL-Card program is jointly administered by the county’s Department of Public Works and Department of Finance. The public works department issues the cards, matches cardholder receipts to U.S. Bank invoices and prepares monthly invoices for payment. Once reconciled, the monthly invoice from U.S. Bank is submitted to the Department of Finance for final review and payment.

“The current structure of oversight split between DPW and DOF results in significant variability in the administration of CAL-Cards across the county departments,” the grand jury report says. “There is no system in place that adequately documents, tracks, and remedies CAL-Card violations.”

Finance Director Mina Martinovich and Public Works Director Rosemarie Gaglione did not respond to requests for comment.

“We appreciate the work that the grand jury put into evaluating CAL-Card administration within the county of Marin,” Dan Eilerman, assistant county executive, wrote in an email. “We will be working internally between the Department of Public Works, designated by the Board of Supervisors as the county’s purchasing agent, and the Department of Finance, to review and evaluate the findings and recommendations in coming weeks and will bring our proposed response to the board and the public for consideration.”

The cards are used in situations where the expense is less than $5,000; the purchase is out of the ordinary; the purchase is needed under urgent circumstances; or the vendor cannot employ the normal purchase order and invoice payment system used for most of the county’s procurement needs.

“While the program is an effective way to make governments and their operations more efficient, the CAL-Card program also subjects local governments to inherent risks by decentralizing the purchasing process and allowing a greater number of employees to directly purchase materials and supplies,” the grand jury said.

According to the grand jury, a large number of CAL-Cards are in use in Marin compared to other counties of similar size, and it is not often clear that cardholders are making purchases from suppliers with competitively bid pricing.

The state issues a CAL-Card policy manual, but the grand jury reports that Marin County employees are not adhering strictly to its guidelines.

For example, the grand jury writes, “There are instances of large dollar purchases being divided into two payments to circumvent the dollar limit on a single purchase, which is a breach of policy.”

In another case, the grand jury states that “in a countywide review of CAL-Card purchases from April 2022 to April 2023 conducted by the DOF, it was discovered that there were purchases made from restricted merchants.” CAL-Card policy states that restrictions on specific merchants cannot be removed.

The CAL-Card manual prohibits “approving officials” — those who have the authority to authorize payment of purchases by cardholders — from being issued CAL-Cards.

“However, in a few cases approving officials do have cards,” the grand jury said. “This contradicts the premise of segregation of duties that no one person should be responsible for more than one aspect of any transaction.”

The grand jury states that in some respects even the policies in the CAL-Card manual seem lacking. For example, the manual does not call for background checks on cardholders.

“This presents a potential risk of card misuse,” the grand jury writes.

The grand jury pointed out that “neither cardholders nor those preparing the U.S. Bank invoices for payment routinely check with the county purchasing agent who is charged with the duty to provide oversight in procurement. This check would ascertain if the item or service being purchased is already available within the system at a competitively bid contracted price.”

The grand jury also cites a risky confusion of roles between approving officials and invoice processors, who receive the U.S. Bank monthly summary purchases, match them to the invoices and then enter supporting documentation so the finance department can pay the U.S. Bank bill.

“In practice,” the grand jury writes, “approving officials are functioning as invoice processors in many departments. This violates the best practice of separating the functions of the invoice processor from the approving official.”

The CAL-Card manual requires all cardholders, approving officials and invoice processors to attend initial and periodic training.

“There is little evidence of detailed initial training or periodic training,” the grand jury said.

New card users are merely told to read the CAL-Card manual and watch a 15-minute video provided by U.S. Bank. The video suggests that the county perform random monthly audits and requires the county to “review reports for program adherence and spending patterns.”

The grand jury, however, stated that it found no evidence that either is happening.

The grand jury acknowledged that the finance department lacks adequate resources to administer all aspects of the CAL-Card program. Another of its recommendations is that county supervisors provide the department with adequate staffing and other resources to meet this challenge.

The report contains a number of other recommendations. For example, it suggests that a procedure be created to ensure that a preferential government price is obtained when CAL-Cards are used for travel and that an audit system be developed to monitor travel expenses.

The grand jury recommends implementing a “‘notice of non-compliance,’ currently being developed, to document, track and remedy violations in CAL-Card processes.” As planned, the notices would be issued to cardholders who submit invoices that lack proper documentation or violate rules, such as using two payments for purchases to circumvent rules against large dollar purchases.

Asked if he could provide additional information about what is the works, Eilerman wrote, “No, I can’t answer at this time.”