By: Paul Emanuelli
This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its November 2019 report entitled Investigation into use of corporate credit cards by the City of Onkaparinga , South Australia’s Ombudsman found that weak policies led to the misuse of corporate credit cards, including evidence of inappropriate expenditures and poor record-keeping, by members of the City’s municipal council. The report raised concerns over an apparent culture of inappropriate spending of public money by elected officials:
I accept that some of the expenditure, when considered in isolation, may not in itself amount to maladministration. I am concerned, however, at the pervasiveness of the types of expenditure considered in this report. There appears to have been a culture of spending public money without proper consideration of its appropriateness and necessity.
In fact, the report found weak regulations over the use of corporate credit cards, which vaguely prohibited their use for “personal reasons” but failed to establish any further controls as long as total expenditures did not exceed the prescribed limits and any single transaction did not exceed $20,000. The audit found that members of council made a series of questionable purchases using their corporate credit cards, including excessive expenditures on meals, cars and catering, as well as a series of gift expenditures made during a trade trip to China. The report concluded that weak governing policies contributed to the inappropriate corporate credit card expenditures:
In addition, my view is that incurring the above expenses was wrong under section 25(1)(g) of the Ombudsman Act. I am concerned that, at the time the purchases were made, the policies of the council were inadequate and did not stipulate appropriate limitations on the use of the corporate credit cards. Arguably the council’s former policies and procedures contributed to the systemic use within the council of credit cards, accruing expenditure which was often inappropriate without an apparent regard for the appropriateness of the expenditure by either the cardholder or the manager approving the cardholder’s expenses.
The Ombudsman concluded that in making these inappropriate expenditures, the City Council “committed maladministration in public administration” as defined under the Independent Commissioner Against Corruption Act, 2012. As this case study illustrates, elected officials do not enjoy immunity from scrutiny when the inappropriate expenditure of public resources is concerned. Public institutions should therefore establish clear institutional policies governing the use of corporate credit cards to guard against similar spending abuses.
