Between $6 million and $8 million a year in taxpayer funds flows from the coffers of the County of Kern and into the retail world through credit cards.
Yet despite thousands of transactions, remarkably few were found to be fraudulent or subject to abuse, according to a review by The Californian.
Scores of county employees have access to “P-cards,” the governmental cousin to your everyday credit card.
Those employees are human and prone to mistakes. So how does Kern County keep taxpayers' money safe?
The Californian obtained a list of every transaction reported by the County of Kern in the 2016-17 fiscal year and reviewed it to see how the cards were used.
And we talked with county fiscal watchdogs about the systems that are in place to cut back on the risks associated with government credit cards.
Since January 2008, the county has seen a surge in the use of P-cards to handle day-to-day county spending.
Computer accessories, lumber, couplings for snorkel hoses, airfare, hotel stays, groceries and meals for front-line firefighters were among the things purchased in nearly 20,000 transactions in the 2016-17 fiscal year.
Kern County spent $6.6 million through the use of the purchase cards during that period, up 83 percent from the $3.6 million paid through cards in the 2008-09 fiscal year.
Only a tiny fraction of that spending has been identified as fraudulent or inappropriate use of public funds.
An examination of that spending offers some lessons for county officials.
Between November 2016 and May 2017, Kern County Animal Services Director Nick Cullen charged $3,245 in personal expenses to his county “P-card,” completing 11 transactions for a variety of products and services.
He bought some cleats, a wireless camera system, wireless data and paid $1,166 for a car rental.
“He did reimburse the County, and he did it prior to any review by my office,” wrote Kern County Auditor-Controller Mary Bedard in an email. “It wasn’t questions from us that prompted the repayments. He initiated them.”
Cullen said he stored the P-card number on several online purchasing sites that he does both personal and county business on. Sometimes he used the wrong card to make a purchase.
He also used the card to make purchases for county events that weren’t allowed under county policy, he said.
“I used it a few times if we had an event and bought food for staff and volunteers,” Cullen said. “And I learned I couldn’t do that.”
Since the mistaken payments, he said, he’s removed the county card from the list of stored cards on websites like Amazon.
He’s also looked more closely into what he is allowed to purchase using the card, he said.
Cullen isn’t alone.
A total of 16 county employees used public funds to pay for personal items in “erroneous personal transactions” totaling $4,727.
For most it was a one-time circumstance.
Nsele Nsuangani, of the Department of Public Health, paid $12.99 for bottled water in a hotel room in May 2017.
But others had a tidy string of mistakes.
Allison Molina, of the Kern County Planning Department, had her county credit card input into Amazon for legitimate online purchasing.
But in December 2016 and January and April 2017, she forgot to select a personal card when she completed a purchase on the online merchant’s website.
“I have taken the P-card off of the Amazon account completely since it was not supposed to even be saved and I repaid it back to the department along with a couple other transactions that were mistakenly charged,” Molina wrote in her comments about the transaction.
The same thing happened to a couple of Kern County Fire Department personnel on the list, said Kern County Fire Chief Brian Marshall.
“One of the things that happens is you have an Amazon account with your personal (information) and an account with a county card,” he said. “When you order something, if you don’t have the right credit card checked, all of the sudden you’ve bought a personal item on a county credit card.”
Marshall said his department stays on top of the use of its P-cards to make sure the use of the card is accidental, that things are caught when a card is hit with fraud and that the county is paid back quickly.
“We take that type of event very serious. There are multiple layers of review,” Marshall said. “Someone can’t just go off and start charging stuff. We’d catch that pretty quick if somebody went rogue. This is transparency. This is the taxpayers' money.”
Kern County’s P-cards are credit cards. They are paid every month out of the appropriate department’s budget after the review of charges is complete.
And like all digital methods of payment, they are vulnerable to fraud.
In the fiscal year 2016-17, Kern County was hit with $23,348 in fraudulent charges, according to a review of records obtained by The Californian.
Of those losses, all but $566.13 have been reimbursed through credits from the company that received the fraudulent payment or the employee.
The total rate of fraud was just over one-third of 1 percent of the total value of payments made through the county purchase cards.
Auditor-Controller Mary Bedard’s department is charged with watching the flow of county funds and making sure fraud and misuse don’t put taxpayer funds at risk.
“There are various roles within each department. A P-card requester is authorized to request a card for an employee, a P-card user is the card holder, and a P-card approver reviews and approves all P-card transactions after they occur. The requester, approver, and user all have to view a video Purchasing has online detailing the rules for P-card use and pass a test,” she wrote in an email.
The user of the purchase card must certify each transaction and attach supporting documentation including a receipt within 45 days of the transaction, Bedard wrote.
That documentation is reviewed by the “approver,” the person tasked with determining if the use of the card was legitimate, she wrote.
“Personal use is generally self-reported or possibly identified through the approval process at the department. We have not seen repeated personal use,” Bedard wrote. “The instances do seem to be accidental. If the employee is not following P-card policies, including late certifications or failure to provide receipts, the department can revoke their card.”
Finally, the Auditor-Controller's office has staff dedicated to reviewing all of the county’s P-card usage on a monthly basis to double check each department’s accounting efforts.
“We do this on a sample basis. All transactions over $1,000 are reviewed, 10 percent to 20 percent of the transactions between $100 and $1,000 are reviewed, and 1 percent to 3 percent of the transactions under $100 are reviewed,” Bedard wrote.
All fraud transactions are reviewed.
They check the detailed receipts to make sure the purchase seems logical given the function of the department that is spending the money.
“If it seems like an odd purchase for a given department, we contact the P-card approver for more information. We also may question it if the item was delivered to an employee’s home rather than work,” Bedard wrote. “If the employee is missing the receipts we require a written explanation. If this happens repeatedly the explanation must come from the employee’s supervisor. That generally takes care of the problem.”
Department heads said they have dedicated staff to monitoring the increasing amount of county business done on purchase cards.
Lito Morillo, director of Kern County Aging and Adult Services, said his staff do their end-of-the-month reconciliation and then hand it off to their supervisors.
Once the supervisor is satisfied, then it is forwarded to the accounts payable department for review.
Marshall, the county's fire chief, said his department asked for funding in a recent budget cycle for a single employee who does most of the bulk purchasing for the department.
That person, he said, is an expert in the purchasing rules and knows how to make sure things are done right.
USES AND NEED
While P-cards can have their downsides, county department heads said the upside outweighs the downsides in a major way.
“They hold a very important piece of the purchasing puzzle,” said interim General Services Director Geoffrey Hill. “When used properly, they cut down on our purchase administration significantly. A purchase order requires a lot more administrative time.”
And the county is actually trying to flow a dramatic portion of its small-dollar spending through the purchase cards for the sake of efficiency and cost savings.
“Our goal — in fact one of our performance measures — is that we’re trying to have 80 percent of all purchases (on) P-cards and the value of those to be no greater than 20 percent,” Hill said.
Most of the county’s spending will still go through strict purchase orders and bidding systems designed to ensure the county is getting the best bang for its buck.
“We want the higher-dollar purchases to go through purchase orders and other instruments. That way we get a higher level of scrutiny on the purchases as well as we can take advantage of blanket purchase orders and those types of things,” Hill said.
Marshall said replacing those cumbersome purchase orders and reimbursement processes is one of the best reasons the cards are critical for his department.
“Most departments work 8 to 5 Monday through Friday,” he said. “When we run a 24/7/365 business it gives us the ability to fix things.”
If a toilet breaks on a Sunday shift, there’s no longer the need to call in a general services employee on overtime, Marshall said.
The station calls the battalion chiefs, who have possession of the P-cards, and the chief can run to Home Depot and pick up the broken piece.
Then it’s back to the station where the firefighters on duty can fix the toilet themselves.
And the county cards are a huge boon to firefighters who are fighting rural blazes in Kern County and across the western United States.
Marshall remembers responding to the massive, deadly Cedar Fire in San Diego County in 2003.
He and a crew drove all night from Kern County to get to the fire line. When they got there, the response team had yet to set up the incident support needed to provide firefighters with food or a place to stay.
“I took off and I found a McDonald's and I said, 'I need 25 Big Macs and fries,'” Marshall said.
In those days, he had to pay out of pocket and then demand reimbursement.
“Now, if you slide the credit card, you get the item,” Marshall said.
And the card opens up a whole world of online purchasing to county departments, he said.
“You can search on Amazon and get it a lot cheaper than anywhere else and get it delivered,” Marshall said.
Cullen, of Kern County Animal Services, said the cards come in handy for his shelter staff as they handle the day-to-day struggle of caring for hundreds of dogs, cats and livestock.
“We don’t have a contract for cat litter,” he said.
For an organization caring for a large number of cats at all times, the need for litter is critical. But handling that need through a regular contract would lock the county into a price on a commodity that experiences price fluctuations.
“The P-card allows us to shop and get the best deal,” Cullen said.
The cards have been used to pay for warranties for the tablets that animal services officers have in their trucks.
And they have been used to lock in the cheapest price on hay.
In addition, Cullen said, the P-cards have been critical in addressing a new gap in services Animal Services discovered in the wake of the devastating Erskine Fire.
“We were wholly unprepared for an emergency like that,” he said.
So they’ve started developing stashes of emergency supplies at strategic locations around the county.
Dog crates, bowls, containers and other tools will be critical to making sure officers and staff can rescue and care for animals injured and made homeless by disaster.
In the end, P-cards carry inherent risks for county financial officers.
But in the ebb and flow of modern retail the risk is balanced by significant upsides, county officials said.
The key to making them worthwhile is watching the money closely.