State audit finds Mill Creek lacks control over credit card expenses

3-year review showed city manager with two-dozen charges without adequate documentation
By Dan Aznoff | Jun 21, 2018

Changes adopted to monitor internal controls over credit card expenses by the city of Mill Creek have apparently not corrected the issues over disbursements, potentially placing public “resources at risk of loss or misappropriation,” according to an Accountability Audit Report issued by the office of Washington state Auditor Pat McCarthy on Thursday, June 21.

The Auditor expanded its annual review to cover the past three years based on a history of internal controls. The report cited City Manger Rebecca Polizzotto for an unusual number of charges without prior documentation.

The audit covered city expenditures for all of 2016. The review of charges for meals, employee recognition and travel related expenses was expanded to cover the three years between 2015 and 2017 based on “previously reported concerns related (with) the city’s policies and procedures governing credit card usage and lack of detailed support for transactions tested in the prior audit.”

The audit identified 24 purchases for $2,048 without itemized receipts. Of those, charges $992 were charged on the credit card assigned to City Manager Rebecca Polizzotto.

The findings prompted the Auditor’s office to expend its review.

“Because the card assigned to the City Manager had the highest dollar volume lacking detail support, we expanded our testing of this card and reviewed 52 additional purchases between 2015 and 2017.

The expanded review indicated $1,622 in charges “with unclear purpose.” The charges in question included $269 for alcoholic beverages, $995 for meals and $398 for employee recognition items.

The state audit allows an opportunity for the party in question to respond to allegations. The city responded to the findings of the Auditor’s Office by explaining steps taken to correct the situation, monitored by the City Attorney.

“The city updated its internal controls whereby the Finance Director was tasked with reviewing and approving the City Manager’s credit card receipts.” In turn, “the City Manager was tasked with reviewing and approving the Finance Director’s receipts.”

The city reply also indicated it had conducted a comprehensive review and rewrite of its policy governing all business related expenses.

The auditor’s office responded to the city’s rebuttal by reaffirming the audit was not done on reimbursements, but into charges made on city credit cards.

“As a result of not effectively monitoring credit card purchases, the city cannot demonstrate all expenditures were for a valid public purpose.”

The state Auditor’s office recommended the city establish internal controls to ensure all transactions are properly supported with original, detailed supporting documentation that clearly identifies a public purpose.

The office also recommended, “The city ensure that its policies and procedures require itemized receipts paid with public funds.”

The state Auditor also recommended that the city clarify and/or establish policies and procedures for meals with meetings and recognition activities, “including allowable purchase and applicable spending limits to ensure the city is not at risk of gifting public funds.”

The state law (RCW 42.24.115) directs employees to repay unallowable charges as a remedy for recoupment only.

“However, strong policies and procedures would prevent unallowable expenditure from occurring, eliminating the need for payback.”

Charges on the 10 city-issued credit cards in 2015 totaled $72,196. The total charges jumped by almost 60 percent in 2016 to $122,714. The charges on city credit cards dropped slightly in 2017 to just under $118,000.

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