PETER CONRADI/Bullet News
Almost one-third of Niagara Region employees may carry corporate credit cards, but it’s the most efficient way of making some purchasers and is probably saving taxpayers’ money, according to the acting director of finance.
“I can make a purchase on a Visa card, or issue paper work to get a purchase order,” says acting finance director Chris McQueen. “In most cases it’s more efficient to process them on card. They are generally purchases that are preauthorized and budgeted.”
The question of credit card use has come up with the release of an audit committee report, noting there are 1,047 company credit cards for about 3,600 staff members. A number of councillors questioned the need for so many cards and wondered about oversight.
“I am not in favour of credit cards because I think they breed contempt,” said St. Catharines Coun. Alan Caslin. “And one in three employees needing a credit card seems excessive. It almost sounds like there are more people from the Region shopping at Home Depot than there are regular customers.
“I just can’t understand why there would be so many credit cards.”
The credit card program was introduced in 1999 to cut transaction costs when people are buying inexpensive items. It is often faster to be able to buy something off the shelf immediately rather than issue a purchase order.
However, over the years the number of cards has grown, with spending on the cards now reaching about $7.3 million, or about $6,910 per account.
“We’re just looking for trouble,” said Niagara Fall Mayor Jim Diodati. “There is no way they have someone checking line by line every single thing that is bought with so many cards.”
However, the report did not find any instances of abuse, noting “all expenditures reviewed were found to be to the benefit of the corporation and required for operating purposes.”
McQueen said the Region’s cards are issued through RBC and provide a one per cent rebate on all transactions – and that results in about $80,000 coming back to the local government each year.
“I use it for smaller purchases like conferences or at the GO station or booking a hotel for a conference, smaller incidental things,” McQueen said. “We are billed monthly for office supplies and pay online for that with a purchase card.”
McQueen said about 400 of the credit cards are used for fleet management. A card is assigned not to a person, but to a vehicle, including police, and used to monitor fuel and maintenance costs.
“We can track purchases to the asset … the vehicle. It makes it cleaner for tracking. The system does a lot of our bookkeeping for us. It saves us doing paper work for individual transactions. When the cards started in 1999 we had a manual accounts payable process. We have refined that process, but Visa is still offering us analytics.
“For example, we know fuel is one of the largest single purchase items. We can look at the analytics and see how much was spent on X or Y vehicle. We also have restrictions on the cards so you can only purchase gas and maybe windshield fluid. You can’t go in the store and buy stuff or get cash advances. Those are services that Visa offers to us to make sure we have safeguards in place. We really do want to have the appropriate checks and balances in place. That was the point of the audit.”
Nevertheless, the audit committee did identify what it called “control weaknesses.” For example, “procedures to verify the approval of transactions by managers need to be enhanced,” wrote the report.
There were cases of spending exceeding the singe-purchase limit of $5,000. And there were further examples of transactions being split into several orders to get around purchasing policies or the single-purchase limits on cards.
“That’s a lot of cards,” acknowledged Regional Chairman Gary Burroughs.
Welland Coun. Peter Kormos said he saw the sense of credit card use.
“Normally I am all over this kind of thing like a cheap suit, but unless there is some indication of abuse, I don’t see a problem.”
McQueen said the Region is in the midst of putting in place a new financial management system, and that may provide an opportunity to reduce the number of cards, but he said it could also reinforce the need to maintain or increase the current level. He said it will at the very least give the Region an incentive to continue assessing its credit card program.
McQueen doesn’t believe there are too many credit cards in circulation, but said it’s something that will get persistent oversight.
“It’s a high risk and a free way of doing business, but the good news is that the report didn’t identify any fraud; everything bought was for regional business. We will do another compliance review on a fairly regular schedule. This creates an awareness in the organization, because people know there is compliance testing going on. It also let’s us ask, ‘Where are we using (the cards) and does it make sense?’
“We really can manage spending and efficiency with the cards. We can go online and see the outstanding balance owing. That’s helpful to us and we may not be able to get same kind of line of sight on it internally.
“If we have someone out in the field doing maintenance we don’t want them coming back here for a washer. It’s much more efficient to run into Home Depot or Canadian Tire or Home Hardware and have them pick up what they need.”
Local municipalities have varying policies on numbers and use of credit cards. St. Catharines has 60-65 cards with about 700 emplyees; Wainfleet has 12 cards and 42 employees; Niagara Falls 62 cards and 550 employees; Fort Erie 16 card and 127 employees; Pelham 17 cards and 55 employees; and Welland one card for 257 employees.