July 14, 2010

Despite some abuse of Maryland state credit cards, program saves money and paperwork

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By Megan Poinski
Megan@MarylandReporter.com

First of a three-part series

Audits of 10 state agencies in the past year have found misuse of state-issued credit cards, resulting in the firing or resignation of several state workers and investigations by the attorney general’s office.

But officials from the Comptroller’s Office that oversee the cards 7,500 employees hold say that abuse is rare, and the cards return millions in rebates to state coffers, streamline procurement, speed payment to vendors and generate less paperwork.

Program administrator Gerard Mueller said that with a stringent usage policy and the approval process afterward, the majority of state employees issued credit cards use them as intended.

“Ninety-eight percent of the program relies on employees as individuals being honest and doing the right thing,” Mueller said.

Cards by the numbers

The state of Maryland credit card program — officially referred to as the corporate purchasing card program — has been around for 13 years, Mueller said. In fiscal 2010, there were about 7,500 cards issued to government employees in 76 agencies.  The cards were used for 696,286 transactions, accounting for $223.7 million in state spending.

Mueller explained that with that widespread use of the cards produced two major benefits. One, the state saved almost $196,000 in postage to mail the paperwork and checks those purchases would have generated under the regular procurement system.

More significantly, the government received a cash rebates of nearly $3.4 million, Mueller said. This rebate is similar to “cash back” options available on some consumer credit cards, and the percentage of the rebate is negotiated each year by state officials. Mueller said the percentage rebate is generally based on the total spending done with the cards, and the state has received this kind of rebate each year since 1997. The refunded money goes into the General Fund to be used for state operations.

“This program puts money back in the taxpayers’ pocket,” said Roland Unger, director of the General Accounting Division of the Comptroller’s Office.

Unlike many consumer credit cards, the state pays no annual fee to have cards with an incentive attached. Also, unlike many consumers, the state pays the bill in full every month, so taxpayer dollars are not spent on interest, Unger said.

Thursday: Checks and balances in the credit card use policy

Friday: Abuse and problems with credit cards