Treasury issues final report on state credit card programMajor changes implemented due to possible misuse by former employee
Delaware State Treasurer Chip Flowers has issued a 21-page report, including, significant supporting evidence, detailing an investigation into the misuse of a state-issued credit card by a former Treasury employee and recommending a dozen procedural changes to improve internal controls by all state agencies to prevent future abuses. The report finds that the first direct notification to Flowers from state officials responsible for administering the credit card program occurred more than 18 months after the first questionable charge was made.
Flowers ordered a special investigative team to prepare the report June 14, after he was notified of possible misuse of a state credit card by Erika J. Benner, who served as deputy state treasurer from January 2011 until August 2013.
The report includes a chronology of $2,341.58 in non-business-related charges made on Benner’s state credit card between Oct 6, 2011 and Feb. 25, 2013. The report notes that Benner reimbursed the state for all improper charges during the period.
The report also chronicles communications, primarily through email and telephone conversations, between officials in the state Division of Accounting, which administers the state’s credit card program, and employees of the state Treasury concerning charges made on Benner’s state credit card. The report notes that the misuse of the state credit card was disclosed to Flowers in June 2013, after which Flowers created a special investigative team that worked with multiple state agencies, including the Office of Management & Budget and the Attorney General’s Office to create the report.
To protect taxpayer funds, in addition to the $2,341.58, Flowers requested Benner pay thousands in additional charges until the Treasury could determine if such charges were legitimate business expenses (the report found such charges were in fact legitimate business expenses and most (if not all) of this amount will be returned to Benner).
Flowers stated, “Though the Treasury has achieved numerous accomplishments over the past three years, including making millions from our state portfolio, like many Delawareans, I was not only upset that the incident occurred, but it took over 18 months for the issue to be brought to my attention.
"The report found clear evidence that Treasury and Division of Accounting officials were not only aware of the improper charges and reimbursements, but failed to take substantive actions to address the issue, notify me and follow the protections set forth in the law. I have directed the Treasury to adopt the recommendations in the report to avoid incidents of this nature happening in the future and I strongly suggest that the Division of Accounting, as administrator of the program, make major changes to the state’s credit card program as recommended by the report.”
Flowers further stated, “Despite our numerous accomplishments, no agency or department is perfect. However, I refuse to be a typical politician – hoping that the people forget about a problem after it occurs by being silent. On the contrary, I aspire to be a true public servant - publicly recognizing and addressing problems to avoid them in the future. We must not fear the truth; rather, we must embrace it to ensure that the integrity of our state government is never compromised. This has been and will continue to be my commitment to the people of the state of Delaware.”
The report identifies shortcomings in the Treasury’s procedures for reconciling statements on credit card use by its employees and in the procedures used by the Division of Accounting to oversee the entire program and not follow the escalation procedures set forth in state law.
Within the Treasury, the report found, one employee was responsible both for coordinating use of credit cards and reconciling the statements, but the policy, which dated back to previous treasurers, did not require notification to the Treasurer of incidents involving misuse.
The report noted, according to the Treasury, the Division of Accounting did not follow two requirements under state law. First, the Division of Accounting has a duty to “reject all bills, statements, accounts, and demands against the state which do not conform with such controls as are adopted by the State's financial management and prescribed in the accounting manual.”
Second, the Division of Accounting must notify “the General Assembly, the Attorney General and the director of the office of management and budget in writing of any irregular, illegal or improper financial administration or transaction.”
In addition, the report noted that neither state law nor the Division of Accounting's policies require the division to notify heads of state agencies when it appears that one of their employees has misused a state-issued credit card. The report recommends a change in the law to require such notification.
The report also found that neither the Division of Accounting nor the Treasury’s credit card coordinator warned Benner that she should cease using her state credit card for personal reasons.
According to the report, in June 2013, after Flowers was notified about the improper use of Benner’s state credit card, Flowers ordered that her card be suspended and that her access to state financial information be restricted.
The report makes 12 recommendations for the Treasury and the Department of Finance, including the following (some of which were completed earlier this year):
- Taking disciplinary action against employees in Treasury who violated, failed to enforce and failed to report violations of credit card policies;
- Taking disciplinary action against employees in accounting who did not follow the requirements of state law and the policies of the credit card program;
- Replacing Treasury’s credit card coordinator and reconciler and dividing those responsibilities between two employees (completed);
- Reducing the number of credit cards issued to Treasury employees from 15 to four (completed);
- Requiring that Accounting document any violation of state credit card policy in writing to the credit card coordinator in the appropriate agency, with copies of the report sent to the appropriate department head and the employee believed to have violated the policy and the Attorney General;
- Clarifying reimbursement rules associated with travel expenses paid with state credit cards;
- Recommending that the Department of Finance and Accounting develop a warning system to notify agencies and employees when reimbursements for personal charges are made;
- Changing Treasury’s credit card authorization and review process to require multiple reviews, including a final review by the Treasurer or a top aide; and
- Increasing communication among Treasury, Finance and Accounting on financial matters involving potential violations of state policies and developing a standing interagency working committee to handle future violations and coordinating responses.
The full report is available at http://treasury.delaware.gov/wp-content/uploads/Treasury-Report.pdf.