ONPA Releases Audit Report on Telecom Credit Card Usage
Palikir, Pohnpei (Office of the FSM National Public Auditor): March 5, 2010 - The Office of the National Public Auditor (ONPA) announces the release of Audit Report No. 2010-04, Audit of Telecom Credit Card Use. Soft copy of the report is available for public review online at www.fsmopa.fm and hard copies are available at the ONPA's offices in Palikir, Pohnpei and Weno, Chuuk. The audit was conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS) issued by the Comptroller General of the United States. ONPA performed this audit after a recent financial audit done by Deloitte and Touche revealed that Telecom's corporate credit cards had been used for personal purchases.
In reviewing Telecom's credit card practices, the ONPA found that personal use of the credit cards occurred routinely. Telecom's executives charged over $27,000 of personal items during the audit period of October 2006 through May 2009. Over $7,000 of personal charges was still owed to Telecom as of May 2009 of which $3,600 had been owed for more than 240 days.
Telecom's executives did not always submit supporting documents for purchases made with credit cards. As a result, the audit could not verify the validity of 107 transactions totaling $41,528. Of these, 80 transactions totaling $25,697 in airfare, hotel and restaurant could not be verified as to business-related or personal because Telecom did not retain receipts or invoices.
Telecom incurred interest and late charges resulting from the personal use. A total of $2,294 in interest charges and late fees was incurred during the period of audit however it could not be determined how much was actually caused by personal charges.
Credit cards were used by the officers to pay for meals and entertainment and charged to representation expenditures. In 10 of the 12 months of Fiscal Year 2008, one officer charged more than $1,000 per month in meals and entertainment. It was found that 41 meals and receptions exceeded $500 each during the period of audit. The audit states that Telecom is an entity of the FSM government and therefore by statute it exists for the benefit of the public and should only incur indebtedness for the purpose of expanding and improving telecommunications facilities. The audit recommended that the Board provide more guidance to its officers regarding representation in order to ensure that funds are used prudently and in the best interest of Telecom and the FSM.
The audit revealed that Telecom did not adhere to its policies and procedures. Credit cards were used for items ranging from travel expenses to representation to personal expenses to items purchased over the internet. Additionally, usage was not limited to the corporate officers. The Executive Secretary was often given the task of making travel and other internet purchases for management, other employees and the Board of Directors. Concern that controls were not sufficient to prevent unauthorized use of the credit cards is discussed. The report also notes that the policies and procedures should be updated by the Board of Directors to reflect changes in practice.
The audit also discussed concern that Telecom incurred excessive expenses when taxis were used by the executives for personal errands. The report cites one such trip to Honolulu during which over $200 was spent going to Costco, Ross, Home Depot and the zoo. The report recommends that the Board develop a policy regarding the use of the taxis. It also recommends that the Board review the taxi charges incurred by Telecom and consider requiring the executives to reimburse Telecom for any charges the Board finds to be inappropriate.
The audit revealed weaknesses in Telecom's internal control processes and provides specific recommendations to strengthen control to minimize the likelihood in the future that cards would be used to make unauthorized purchases.
Telecom's executive management generally agreed with the audit findings and recommendations, and management's written response is included as an appendix to the audit report.
For further information on this release, please contact:
FSM Office of the President Public Information: Press, Radio, Video P.O Box 34 Palikir Station, Pohnpei, FM 96941 Tel.: (691) 320-2548/2092 Fax.: (691) 320-4356 e-mail: firstname.lastname@example.org http://www.fsmpio.fm/