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Response to October 2015 Legislative Audit

In August 2012, Shepherd University determined that a university employee had committed fraud and abuse using a P-card at Shepherd. That led to the discharge of the employee who was subsequently  charged with more than 50 felony counts of fraud and misappropriation of funds. The State Auditor requested that Shepherd modify its internal controls and accounting procedures to bring them into compliance with the State Auditor’s Purchasing Card Policies and Procedures and proper program oversight.

As part of a subsequent ongoing Legislative Audit, Shepherd received word on October 8, 2015 of additional issues with its administration of the P-card program. On October 13 the Legislative Auditor responded to Shepherd’s request for details, with an October 14 deadline for response by the university. A Legislative hearing was held in Charleston on October 18.

Shepherd is committed to a thorough and transparent investigation of the Legislative Auditor’s findings. This page has been created to detail what the Legislative Auditor’s report cited and Shepherd’s response. It will be updated as our internal investigation continues.

We have moved quickly to take both corrective action and to present evidence when the P-card purchases cited were justified and legitimate. Our goal is to come into full compliance with all State regulations and to be transparent in the process. 

Auditor’s Concern: Meals, not associated with team travel, were purchased on P-cards. One specific employee purchased over $1,000.oo in meals that were not flagged as unallowable., the majority of which appeared to be personal. The same person had multiple transactions that were flagged and subsequently reimbursed; however, the repeat offender continues to have a P-card.

Shepherd’s Response: The limited information provided by the Legislative Auditor made no effort to analyze whether any of the specific food charges were outside of the appropriate payment of team travel expenses for food.  We are auditing the identified charges to clarify that issue and will supplement our report on this issue.  [Posted: 10/21/15]

All of the questioned charges were made by an athletics coach. Of the 36 transactions cited by this auditor, we have confirmed that all 36 were specifically for team travel and have documented the events that the team travelled to. Since the auditor knew who this employee was, we are at a loss to understand why the auditor did not ask the Athletics department to provide the team travel schedule. [Updated: 11/3/15] 

Auditor’s Concern: Meals for athletics were purchased on P-cards for amounts averaging as much as $48.00 per meal.

Shepherd’s Response: Internal Investigation Ongoing [Posted: 10/21/15]

The specific transaction cited was an athletic team dinner which ran at a somewhat high per person expense. This was discussed with the coach following that expense. This team dinner occurred at the end of the conference tournament in Charleston, and it is not uncommon for student athletes at such a moment to eat an unusually large meal. We do not think that it is extravagant to have such a meal in an Outback Steakhouse, but we do agree that the coach could have strategically planned to better contain the expense. It is also noteworthy that expenditures on the P-Card for the team’s meals in the preceding two days were relatively low, which to some degree offsets the higher expense of the post-tournament meal. [Updated: 11/3/15] 

Auditor’s Concern: A dinner for two at Hollywood Casino’s Final Cut Steakhouse in Charles Town, WV was purchased on a P-card at a cost of $95.00, including tip, but the hospitality form lacked enough information to show the benefit to Shepherd.

Shepherd’s Response: The former University president hosted a hospitality dinner for a visiting national scholar in 2012 at the Hollywood Casino in Charles Town. The Casino is a vital component of the local economy, as well as the State’s tax revenues. The Casino is an active and dynamic good corporate citizen of the Eastern Panhandle, contributing to a wide assortment of charities and community improvement initiatives. The University does not feel that a very occasional patronage of the restaurant for the purpose of hospitality of out-of-state visitors is in any form an improper extravagance. The standard practice of the University president has been to omit names from the hospitality form that is provided to the procurement office. The procurement staff had been told that a record of the names is preserved in the President’s Office records and inspection can be provided as needed, but the meetings of the University President are sometimes sensitive and so this effort at discreetness has been utilized. The University will document the visiting scholar by separate cover. [Posted: 10/21/15]

Auditor’s Concern: Condoms, K-Y Jelly, and Vital Erotic Shots (a sexual enhancer) were purchased under the description “RA Program” and the purchase was approved for payment.

Shepherd’s Response: The auditors mis-assumed that the purchase of sexually-related items by a Residence Hall Director in November and December, 2012, were for a personal use.  In a university residence life program, it is a common programmatic component to distribute sexually related personal hygiene items to students.  The University considers the purchase/distribution of any sexual enhancement items, even if it was only $10 of the total purchase, to have been a mistake.  The Residence Life program now uses a comprehensive internal software system in which the Residence Life Staff log all of their proposed purchases in advance.  This will help ensure that the 2012 mistake is not repeated. [Posted: 10/21/15]

Auditor’s Concern: A sterling silver covered platter costing $95 was purchased for “music, opera: props” according to the P-card log. Its current location is unknown. The same P-card holder, no longer employed by Shepherd, also purchased groceries, clothing, and fuel under the description of “music, opera.”

Shepherd’s Response: All of the items identified in the report were purchased by the Theater Technical Director in winter 2013.  The former Technical Director left the University earlier this year for other career opportunities.  The University is attempting to recover the supporting documentation as to these purchases. [Posted: 10/21/15]

The University has documented that the “sterling silver platter” was never received by the University (and we do not think it was going to be sterling silver), and the P-Card charge for the platter was reversed in the very next monthly statement, which we believe was known to the Auditor and inexplicably disregarded. The University presently believes that each of the other purchases of this highly regarded former employee were for a completely legitimate purpose. The fuel purchase was in support of a student theater production. Although the audit report alleges that groceries and “clothing” were purchased, the transactions cited are an internet purchase of a pair of shoes for the student production and a $296 purchase of miscellaneous supplies at Walmart, none of which appear to be for any purpose other than support of the student production. (A large number of the items bought were in clusters of nearly a dozen each, for distribution to the student participants.) [Updated: 11/3/15] 

Auditor’s Concern: A car was rented for 1 1/2 months, costing $1,150.94; however, Shepherd has state cars available for use. The car was initially rented for one month at a cost of $789.99. The receipt had “Admission Recruiting” written on it and a Travel Settlement form was attached documenting only one (1) night of travel. The car rental was extended for an additional week and four days at a cost of $360.95. Except for the rental receipt, no other documentation was provided.

Shepherd’s Response: The University disputes that the rental car charges of the Admissions Office were extravagant or improper. Several years ago the University made a business decision to significantly reduce the size of its motor pool usage by faculty and staff to reduce costs and concluded that it could save money by having the Admissions Office recruiters use rental cars. This was not a reckless decision by a cardholder; this was a calculated business decision arising from comprehensive cost-analysis calculations. Even when the Admissions recruiters are not traveling on overnight trips, their day-trips are high mileage and are cost effective for such rentals. [Posted: 10/21/15]

Auditor’s Concern: Shuttle service from All Star Limousine in the amount of $372 to and from Dulles, $145 from “H Washington to Shepherdstown on 11/27” and $145 from “H Washington to Penn Station on 11/28” were made; however, no other details were given.

Shepherd’s Response: The shuttle service in November 2012 was provided for a visiting lecturer to be transported from regional transportation centers to Shepherdstown, and returned. While we would treat employee use of that shuttle as excessively extravagant, our staff felt that it was a reasonable arrangement for the visitor to our campus. [Posted: 10/21/15]

Auditor’s Concern: A down payment was charged to a P-card for a two bedroom townhouse at Nemacolin Woodlands Resort in Farmington, PA at a cost to the State of $380.41 (50% of the total charge). The stay was for a Saturday and Sunday in April 2013. Except for the mail confirmation, no other information was provided.

Shepherd’s Response: The University has confirmed that the charge was for the golf team to make use of the townhouse for all team members, during a golf tournament.  We are working to recover the appropriate documentation as to this expense. [Posted: 10/21/15]

The SU Golf Team spent a total of $760.82 on the townhouse in April 2013.  The team was competing in the Mystic Rock Collegiate Golf Tournament, hosted by Univ. Cal., Pa, at the Nemacolin Resort.  The $54 per night per person cost seemed like a an economic selection to the coach at the time.  Even though the SU team did not win this tournament, we are glad that they represented the University at this event and we think it was a sound investment. [Updated: 10/22/15]

Auditor’s Concern: A wine tasting and tour for eleven people at Breaux Vineyards in Purcellville, VA was paid for with the P-card. Documentation lists the event as the Council of Public Liberal Arts Colleges (COPLAC) Conference; however, no other information was available including a list of those participating in the tour.

Shepherd’s Response: The University hosted the annual national COPLAC conference in June 2013.  As a component of the multi-day conference, Shepherd structured several optional visits to several tourist destinations of our greater Eastern Panhandle community.  Ten COPLAC senior administrators participated in the vineyard tour, along with the Shepherd administrator who used his P-Card to pay for the tour, which cost less then $27 per participant. [Posted: 10/21/15]

The University did receive a $20 per person payment to offset most of the expense of this tour, so the actual cost to Shepherd of providing this event for our distinguished visitors from around the country was only $68.75. [Updated: 11/3/15]

Auditor’s Concern: Shipping was expedited, often for amounts above the price of the item being shipped. This practice was consistent with specific P-card holders who appeared to have no regard for the excessive amounts being charged to the State.

Shepherd’s Response: Internal Investigation Ongoing [Posted: 10/21/15]

The University is researching 11 listed purchases itemized by the Legislative Auditor.  Two remain under review.  Of the other nine, one was a purchase of multiple items for a science lab, and the shipping fee was a normal shipping fee, not expedited.  A second was a purchase of multiple items for an academic support area, again with only normal shipping, not expedited.  In the remaining seven cases of expedited shipping, all were for items needed for academic or co-curricular/extra-curricular student activities with specific timing required for use in the student activities, including Band performances, student Homecoming events, music student performances, and athletics. [Updated: 10/28/15]

The other two items listed by the auditor were actually the base cost and then a separate line item for shipping, for software ordered by a long-time administrative employee who has a substantial reputation on campus for being an advocate of minimizing administrative expense. He determined that there was a critical need for speed in the shipping of this item, and the shipping only cost $10. [Updated: 11/3/15] 

Auditor’s Concern: Other miscellaneous items included payment for two missing hotel pillows totaling $110 that should not have been the responsibility of the State to reimburse, travel insurance, books for personal use, computer games, and valet parking.

Shepherd’s  Response: The employee who paid for two missing hotel pillows was not paying for pillows that he personally lost. The employee is the soccer coach for both our men’s and women’s soccer teams. When the teams have stayed in a hotel and checked out and the hotel insists that something was missing and charges the credit card, the University has to absorb that expense unless one or more students confess to responsibility for the missing items, but in this case no one did. The Audit Team assumed that an employee used her P-Card for “computer games.” In reality, the P-Card purchase was of crossword and Sudoku puzzles that were published in the student newspaper, The Picket. The University expects to demonstrate that none of the book purchases highlighted for review were personal use. The University has already confirmed that the Kindle purchases (two of the three items highlighted) are part of the Kindle collection of the Scarborough Library, not a personal use. Travel insurance:  still under review. Valet parking:   Still under review.  The Legislative Auditor has cited three hotel stays in which valet parking was utilized.  It appears the total cost to the university of choosing valet rather than regular parking was an aggregate of less than $50. [Posted: 10/21/15]

The University has not found any rule that prohibits the purchase of travel insurance and the auditor has not explained to us what the concern with the charges are. As to the use of valet parking, the University also notes that the two hotels involved in these three instances are in very large metropolitan areas, and the University believes that a small additional cost for valet parking is appropriate when the alternative requires parking a distance from the hotel and could put the employee in personal jeopardy, walking alone in a large city in isolated areas. [Updated: 11/3/15] 

Auditor’s Concern: Two Shepherd employees were allowed to circumvent their established P-card transaction limits on three separate occasions by splitting one purchase from a vendor into two or more payment transactions for the purpose of spending more than they were authorized to spend.

Shepherd’s Response: The purchases from Best Buy remain under review.  The transactions in question involve the large-screen televisions that hang in the Dining Hall for students to watch while eating. The purchases from Weiss Brothers Industrial Supply were purchases of diverse assortments of products used by the housekeeping unit of the Facilities Department.   The Department’s view was that if the cardholder bought $6,000 of toilet paper, toilet cleaner, and gloves for workers, that the cardholder could proceed to also buy $4,000 of trash can liners and paper towels on the same day from the same vendor, as a separate transaction.  We will work with the State Auditor to establish clearer understandings of their expectations for such transactions. [Posted: 10/21/15]

Dress Clothes for SUPD

In summer 2013 as the new Martinsburg Center was opening, the budget plan for the center included security guards.  Start-up expenses included purchase of five sets of guard uniforms: shirt, tie, jacket, pants and shoes.  Similar to Police uniforms, these guard uniforms remained University property and were issued as work equipment.  The Legislative Auditor put this complaint in the first, “confidential”, draft of their letter which they sent to the University on October 8.  When we responded with a full explanation of what this purchase was, the Legislative Auditor removed this issue from their formal October 18 letter altogether.  But mysteriously, this issue was nevertheless reported in the media, erroneously, as an adverse finding by the Audit, when in reality the purchase was completely legitimate. [Posted: 10/22/15]