With the University’s state funding in jeopardy because of Lansing’s amateur budget handling, you would think that motorcycle parts would be the last thing the University would be buying. But because of fraudulent purchases on University-issued credit cards, that’s exactly what it spent thousands of dollars on in the last two years. Before this type of frivolous spending further jeopardizes the University’s funding, this credit-card program needs an overhaul.
When the University began issuing credit cards, or P-Cards, in 1995, the cards were designed to ease the bureaucratic process for employees to make work-related purchases. But because the program was poorly designed and lacked effective oversight, it also eased the process of cheating the University.
According to a University internal audit earlier this year, these questionable purchases total more than $300,000. The most recent example of the fraud involves a maintenance supervisor who purchased motorcycle parts and electronics between October 2004 and November 2006 with his P-Card. The purchases wasted more than $50,000 before the employee was caught.
Among the many problems with the P-Card program, including lax spending limits and an abundance of unnecessary cards, the largest problem is a flawed system of oversight. Individual P-Card accounts are supposed to be monitored by “approvers.” Each approver is responsible for monitoring between 50 and 100 employees, and they usually do this by looking for purchases that exceed $5,000. Because these approvers are responsible for so many people and the monitoring system is not well defined, it’s easy to evade suspicion.
To the University’s credit, it has already taken seriously some of the auditors’ recommendations and curtailed the spending limits and the number of accounts. But these fixes are still limited by the University’s failure to fix the structural problems with the program. If the University doesn’t act soon, this scandal can be more than just an embarrassment.
While the University has been adding up its credit-card bills, Michigan State University recently imposed a 9.6 percent tuition increase to compensate for the state’s funding cut. As the University prepares to announce tuition rates, this budget cut is undoubtedly looming. What taxpayer would blame the state for cutting funds to a university that isn’t using its funding appropriately?
Admittedly, ending the corruption within the P-Card program won’t prevent a tuition increase in the face of the state’s harsh budget cuts. But if the University doesn’t take action, it might be getting an even more undesirable bill – this time from Lansing.