CORPUS CHRISTI, Texas — "This is not a witch hunt in any way," said council member Gil Hernandez, who also serves on the city's audit committee.
The committee heard a briefing by the city auditor's office on allegations of abuse of P-Cards, or purchase cards, and meal expenses for the city's executive leadership team.
City auditor George Holland told the committee, "they were unable to determine the allegations of abuse," but did find significant gaps in policy that did not address best practices.
Gil Hernandez said they started to look into the matter last month after the allegations were brought to his attention.
"We had some over expenditures with regards to food purchases in the city's manager's office and on the 5th floor and we started digging we found some things that were not necessarily against policy but the policy is lacking in terms of controls," he said.
According to the memo from the City Auditor's Office, the allegation included a list of 14 employees that the AC asked the CAO to investigate.
Secondly, questions arose regarding the City Manager's reimbursements outside the use of P-Card purchases. Lastly, allegations arose regarding the stadium lease agreement and the use of the designated City suite, for which an allotment of a $500 food voucher is provided for use during ½ of the season's 69 home baseball games.
"What happened to HEB sandwich trays or Jason's Deli?" asked one resident during public comment.
Out of the 14 employees, it was advised 10 have 'P-Cards' with purchases of just over $148,000 over the course of 3 years.
The city manager does not have a P-Card.
The auditor's office further stated that it reviewed 100% of all reimbursement receipts to the City Manager. These transactions total $42,540.79 for the period October 2021-July 2024.
The city's auditor's office spent time during the meeting to go through their observations.
Observations:
The City Manager's contract allows a minimum of $7,200 for expenditures.
The CAO found that the City Manager is being reimbursed for the sales tax on meal purchases. The amount during the allegation period of sales tax paid on purchases was $3,509.62. Receipts were illegible many times to calculate percentage of tip.
The City is exempt from sales tax which is not taking place City-wide as a best practice.
Many of the reimbursement receipts were blank due to thermal paper fading. The recordkeeping of the receipts is inconsistent and missing detailed information on who attended, date, items purchased, name of merchant, time, and business purpose.
The Chief Financial Officer previously approved the City Manager's reimbursements into 2024.
The City Manager's direct assistants are currently approving the City Manager's receipts. The structure of the approver may prohibit the ability to objectively perform their review.
"We were unable to determine the allegations for abuse of P-Cards. I think that is an important statement," said Holland. "At this time, further review and analysis is required to make a determination. Meal expenses for the yacht club are reimbursed through the payroll process. The Yacht Club dues are paid personally by the City Manager."
While no action was taken at the meeting, recommendations were made.
Recommendations
The City Manager's contract needs to be updated to identify a maximum spending limit to prevent unlimited spending. The City Manager should be issued a P-Card, and not use his personal card for reimbursements. The City Manager's office should look at other options for P-Card administration Business purposes can be corroborated by attaching a copy an employee's Outlook calendar.
Options should be evaluated to minimize or eliminate the payment of sales tax on reimbursed items to prevent City funds from being spent unnecessarily. One option is to present the Yacht Club with a Sales Tax Exemption form and other businesses which are frequented.
Ensure proper record maintenance of receipts. Copy the receipt onto paper that does not fade. Digitally save this copy.
The CAO recommends that the City Secretary be the Approver of the City Manager's reimbursements and/or expenditures.
Duties performed by an Approver and Reconciler need to be segregated.
"Final recommendation is we have to do additional testing and there needs to be greater accountability and transparency over the P-Card program we believe that by doing this audit work, we'll be able to recommend enhancements in that area," said Holland.
It's also something that will now be included in the 2025 audit plan.
City manager Peter Zanoni said no laws were broken nor any rules regarding the use of the city's credit cards. He said in the last few weeks, they have tightened up the P-Card policy.
"We've strengthen the P-Card policy already in the last six weeks, with the help of the audit committee and audit chair, continue to review it. Maybe get some additional policies."