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June 16, 2008

Audit Finds State Wasting Money on Small Purchases

State Would Save Millions by Using Procurement Cards More Often

New York State could have saved more than $30 million dollars over the past two fiscal years if State procurement cards had been used to make small-dollar purchases, according to an audit released today by State Comptroller Thomas P. DiNapoli. State procurement cards are credit cards with tight credit limits and strict guidelines for use.

“Every tax dollar matters, especially now,” DiNapoli said. “The State has to maximize every opportunity to save money and boost efficiency. Using the procurement card system instead of the paper-based purchase order and vouchering system is a simple way State agencies can cut costs and eliminate waste. Every agency should take advantage of every opportunity to save tax dollars.”

Auditors found during the 2005-06 and 2006-07 fiscal years State agencies processed at least 1.1 million payments for transactions under $2,500 that could have been made using a credit card. If these purchases had been made using procurement cards, the State could have realized at least $4 million in rebates from the card issuer and saved more than $26 million in processing costs.

Voucher- or purchase order-based systems often include multiple layers of approvals and processing for each transaction. The systems are more costly than credit card systems because they are labor intensive. Credit card issuers very often pay rebates to governments. Using credit cards can also give governments the ability to negotiate discounts with vendors and reduce paper use. Although New York State introduced credit card-based procurement several years ago, its use has been inconsistent and many agencies still fail to take advantage of the program, DiNapoli’s auditors found.

DiNapoli’s auditors examined the purchasing processes at four State agencies (Office of General Services, Department of Environmental Conservation, Office of Children and Family Services, and Department of Correctional Services). Auditors discovered that the agencies varied considerably in how often they used procurement cards and varied in management support for using the cards.

DiNapoli’s audit recommends agencies increase and promote the use of procurement cards for eligible small-dollar transactions to realize cost savings and rebate revenues. In addition, agencies should streamline and automate their procurement card processes to reduce the time and costs associated with less-efficient controls. Agency officials agreed with the audits recommendations and said they are taking steps to put them in place.

The audit is one of a series of audits done by the Office of the State Comptroller intended to identify cost savings and program efficiencies in State agencies.

Click here for a copy of the audit.



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