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Charleston County doles out credit cards to roughly half its employees, raising fraud risk

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Charleston County doles out credit cards to roughly half its employees, raising fraud risk

Charleston County has issued charge cards to 915 employees, roughly half its workforce — a flood of credit that raises risks of misuse and fraud, a Post and Courier investigation shows.

Purchase cards, often simply called p-cards, are similar to consumer credit cards. They've become wildly popular here and across the nation, with banks touting how they reduce paperwork.

But as their popularity has grown, so has abuse.

A review of audits and charges by Charleston County revealed a portrait of misuse, from minor mistakes to crimes.

One employee used a county purchase card to buy “faux birch logs” and “owl jars” on Amazon, records show. They were delivered to her house in Mount Pleasant — an accident, the county said.

A department head saw his purchase card spending privileges suspended for a year after he used his card for some of his wife’s travel expenses.

And an employee responsible for p-card oversight in her department allegedly racked up nearly $25,000 in questionable expenses. She now faces an embezzlement charge.

With 915 cardholders, Charleston County has many more p-cards than many other government agencies.

Richland County has roughly the same number of employees but only 97 cardholders. Greenville County has about 300. The city of Charleston has 208, Berkeley County, 163. North Charleston has only 42.

In fact, Charleston County has three times as many cardholders as the state government of Massachusetts.

With so many cardholders, Charleston County auditors face a monumental challenge tracking expenses and making sure employees don’t use p-cards as personal ATMs. In its last fiscal year, cardholders spent $11.6 million on travel and supplies, from a few dollars on office expenses to thousands of dollars on out-of-state conferences. 

The Post and Courier obtained p-card statements from several departments, along with internal audit reports.

Many p-card charges appeared to be legitimate government expenses.

But auditors flagged dozens of other questionable charges, triggering apologies and sanctions.

On the public dime

Charleston County isn't alone when it comes to p-card problems.

In December, the FBI charged Allendale Town Administrator DeWayne Ennis with using bank cards to buy a car and pay for auto and home repairs. Ennis pleaded guilty to a charge of stealing federal funds.

Incumbent Dan Johnson and lawyer Byron Gipson bid for support in primary (June 12 copy) (copy)

Former Columbia-area prosecutor Dan Johnson (right) speaks at a candidates forum in Columbia in May, with his then-opponent, lawyer Byron Gipson. Joseph Cranney/Staff

Last March, The Post and Courier exposed how Dan Johnson, a Columbia-area solicitor, used p-cards for pricey meals, Christmas parties, luxury Uber rides and other perks. Johnson faces state and federal embezzlement and fraud charges. He lost his re-election bid in a June Democratic primary.

Johnson's communications assistant, Nicole Holland, also used a p-card to fly to Kentucky to visit family and visit an orthodontist. She pleaded guilty to two federal fraud charges. 

And in Richland County, County Council members used p-cards to fill up their gas tanks and fix their cars, The Post and Courier reported last year. One council member spent at least $1,750 at gas stations and declined to turn in any receipts. “I never bother to,” she told the newspaper. Another council member used a p-card to buy clothes because she said she “pulled the wrong card out.”

Charleston County began issuing p-cards 18 years ago so employees could make smaller purchases without going through a lengthy procurement process, said Shawn Smetana, the county's public information officer. Last year, the county also received more than $154,000 in rebates, he said.

But in late 2017, officials in the Emergency Management Department grew suspicious about an employee’s p-card charges, setting off a still-unfolding chain of events.

Procurement department auditors confronted the employee, who said she’d made some charges by accident, according to internal memos obtained through the state's Freedom of Information Act.

Sheriff’s Office detectives were called in to interview the employee again, and she admitted making $4,753.30 in purchases for her own benefit, the memo said. As officials went through more charges, the total grew – to $24,707.48.

The number could have been even higher because of missing receipts and the “intermingling of personal and business purchases,” procurement officials said. 

Patty Pace eventually was charged with embezzlement of public funds. She'd worked in the department for 12 years, and one of her duties was as a p-card "liaison," an employee in charge of greenlighting other colleagues' p-card charges.

Pace’s case triggered a deeper look at other departments, internal memos show. 

Questions lead to more questions

County auditors found few or no problems in some departments.

Other departments failed to produce receipts and lacked other basic documentation for their expenses.

The director of Public Works, James Neal, was called out for using his p-card to pay travel expenses for his wife, who accompanied him on a trip to a conference. Auditors noted that conference expenses were “combined with a personal trip.”

Neal also used his p-card to rack up reward points, a violation of county policy. He eventually reimbursed the county $648.99, including $276.46 in personal charges at two conferences. He lost p-card spending privileges for a year.

In a statement, Neal said his wife attended a conference in Phoenix as a presenter on behalf of Charleston County. He and his wife had worked on a fitness program called Step it Up Charleston. "When I learned of the accounting mistakes made, I immediately reimbursed the county,” Neal said.

Auditors also flagged numerous charges by employees in the Human Resources Department. They questioned charges for home supplies and groceries — charges the department later said were related to employee wellness promotions. Tensions apparently grew.

On Oct. 18, 2018, then-director Fagan Stackhouse urged his employees to talk only to him and another employee, Mina McCann, when they had p-card questions. In bold he wrote: “We strongly request that you do not contact the Contracts and Procurement Department.” Stackhouse recently left the county for a job in Raleigh, N.C.

Auditors, meanwhile, cited McCann for buying five white faux birch logs, satin ribbon, wood slices and owl jars. Amazon order receipts show they were delivered to her house. The county later said they were decorative items for employee events. McCann also rented a Mercedes convertible during a conference in 2017, using the first day for her personal use, records show. Auditors flagged the charge, and she repaid the county $102.98, the county said. 

At the time, McCann also was a p-card liaison. She will no longer handle p-card duties as of Jan. 2, said Smetana, the county's spokesman. McCann declined to comment. 

Charleston County wellness incentives reportedly bought with p-cards

Items reportedly bought with p-cards for Charleston County wellness program. Photo accompanied an internal email obtained through an open records request. 

Auditors also found improper charges in other departments, citing employees for buying uniforms and car washes and other expenses not allowed under county policies. Some departments failed to keep documentation for meals and other travel expenses.

Several department heads pushed back.

Referring to the county's prohibition about using p-cards to rack up reward points, Steve Dykes, executive director of economic development, wrote in a memo to auditors: "We are in total disagreement with this policy as it saves the County money."

But, he added, we "have changed our practices and informed our staff that, under no circumstances, are they to use their personal loyalty cards even if it saves the county money." 

Watchdogs required

Purchase cards are an important way of reducing waste and increasing efficiency, said Rick Grimm, chief executive officer of the National Institute of Governmental Purchasing.

Card-carrying employees can make quick purchases, bypassing the time-consuming process of seeking bids and cutting paper checks.

"Say you're a plumber working a job, and you have a part that you need to replace, like a p-trap," Grimm explained. In the past, that plumber might have to get a purchase order and have a paper check cut, a process that might delay a repair. But with a p-card, he "can go to Home Depot, use his p-card and get his work done." 

Grimm added that government agencies have some leverage with banks that handle p-cards. They can require banks to set spending limits or limit the types of things employees can buy.

"The two things we often hear about are meals and alcohol. There are codes that prohibit cards from being used for entertainment or tickets." Government agencies also need to do constant training to prevent violations and hold violators accountable as examples, he said.

As for how many employees should hold p-cards, Grimm said it's helpful to think of them as petty cash funds, "no different than handing someone a $100 bill." If employees routinely need to make petty-cash purchases, then it makes sense for them to have cards. But, he added, "the more cards you have, the more auditing and training you need to do."

Charleston County has tightened its p-card policies, prohibiting employees in most cases from using them on Amazon, Costco and other online shopping club sites.

New rules also prohibit spending on "employee perks," including coffee supplies, gifts and party supplies. The county in late November published a new p-card policy manual. The manual also describes a point system for infractions, with warnings that fraudulent use may result in firing and referrals to law enforcement for prosecution.

Smetana said the county has increased training requirements and is looking at other ways to refine its p-card use.

Stricter rules are in place and in the works, but with 900-plus cardholders, the agency remains an outlier when it comes to the sheer number of employees who can quickly put expenses on the county's tab. Smetana said the county has no plans to change this.

Reach Tony Bartelme at 843-937-5554. Follow him on Twitter @tbartelme.

Tony Bartelme is senior projects reporter for The Post and Courier. He has earned national honors from the Nieman, Scripps, Loeb and National Press foundations and is a three-time finalist for the Pulitzer Prize. Reach him at 843-937-5554 and @tbartelme