University of Georgia:

House Bill 1113
FAQ's

Q: What is House Bill 1113?

A: During the 2008 legislative session, the General Assembly passed House Bill 1113 (HB 1113), and Governor Sonny Perdue signed it into law. HB 1113 establishes that any person who uses resources or methods such as purchase orders, government contracts or credit cards (P-Cards) for personal benefit will face civil and criminal penalties. Common examples of purchasing methods at UGA include, but not limited to purchase orders, check requests, petty cash accounts/advances, government contracts, credit cards, charge cards or debit cards. This also includes the submission of fraudulent requests for expense reimbursement. HB 1113 also establishes that any person, including but not limited to a supervisor, who knowingly assists another person in violating this law will be subject to the same criminal charges and penalties.

Q: I’ve reviewed the bill and it addresses administrative P-Card requirements in addition to personal use or misuse of resources or purchasing methods. What else is included under HB 1113 that I should familiarize myself with?

A: HB 1113 covers a number of items, including P-Card administration requirements. A summary of the categories in HB 1113 is noted below:

• Penalties to persons using purchase orders, government contracts, credit cards, charge cards or debit cards for personal gain;
• Penalties to persons who assist in misuse of these mechanisms for personal gain;
• Requirements for P-Card use and the administration of P-Card programs;
• Penalties for specific misuse of P-Cards;
• Penalties for supervisors who knowingly, intentionally, willfully, wantonly or recklessly allow P-Card misuse or who conspire with an employee in violation of the law; and
• Penalties to persons using travel advances for non-governmental purposes or who submit or approve, knowingly or through willful and wanton neglect, a fraudulent request for reimbursement of expenses.

Q: Will UGA have to make significant changes to its policies and procedures to meet the requirements of HB 1113?

A: UGA maintains a strong culture of fiduciary responsibility. Our business operations, which are regularly reviewed through internal and external audits, demonstrate our commitment to accountability and stewardship of the state’s resources. UGA’s track record of strong internal controls and approval systems underscores our ability to sustain high standards of accountability and meet the requirements of HB 1113 with some modifications to our policies and procedures. In particular, the P-Card controls and approval systems that UGA has established gives us great confidence in our ability to administer the P-Card program within the requirements specified by HB 1113 and to continue to operate the program as an effective and efficient purchasing mechanism for the University.

Q: When does HB 1113 take effect?

A: All transactions beginning July 1, 2008 will be governed by HB 1113.

Q: Why was HB 1113 enacted?

A: During 2007, a number of state agencies within Georgia, including colleges and universities, were experiencing cases of employee misuse and fraud associated with purchasing cards. HB 1113 was passed to increase the level of criminal penalties for persons misusing P-Cards and other purchasing mechanisms. It demonstrates the state’s commitment to stricter accountability for the use of resources.

Q: I don’t have a P-Card and I’m not involved in the approval of P-Card purchases, so HB 1113 does not apply to me, right?

A: Wrong. HB 1113 is not only applicable to P-Card holders or persons involved in P-Card approvals. Its provisions also apply to any person who is involved in transactions such as making purchases, processing check requests, or submitting expense reimbursements and to any person who approves these types of business transactions. Even if you do not currently perform these types of functions at UGA, you need to be aware of HB 1113 since job responsibilities change and employees move into new roles and new positions. HB 1113 potentially impacts all faculty and staff. That’s why the University feels it is important for all employees to be well informed and understand their personal responsibilities under the law.

Q: What are some examples of personal use through purchase orders, check requests, petty cash, government contracts, credit cards, charge cards, debit cards or reimbursement requests?

A: There are many examples of how purchasing and payment mechanisms can be used for personal gain. The following are just a few examples which would violate HB 1113.

Example #1: Employee A submits a purchase request (or check request) for 12 supply items for his/her department. The department only needs 10 of these items, but the employee purchases 12 and takes the other two items for personal use. This is an obvious violation of HB 1113. However, suppose the employee orders 12 items, two of which are for personal use, with the full intention of reimbursing the department for those items. While the reimbursement makes the department whole, the employee has used the purchase order (or check request), a mechanism for official University business, for personal gain; this is also a violation of HB 1113.

Example #2: A statewide contract exists for office furniture. Employee B visits a local office furniture dealer to purchase a desk and chair for their home office (personal use). The local dealer is a distributor on the state office furniture contract. During the visit, Employee B mentions he is a University employee and asks for statewide contract pricing never mentioning that this is not a business purchase. Employee B allows the vendor to process the transaction as a statewide contract purchase. This is a violation of the law.

Example #3: Employee C travels to California to attend a conference. The trip is for official business, and the employee has an approved travel authority. The employee arranges the trip to include a day before and after the conference for personal time. While the round-trip cost of the airline ticket is not impacted by the dates of the flights, the employee submits hotel, meal and transportation costs which are during the personal time and outside of the scope of the business travel to the conference. Seeking reimbursement for these expenses incurred on personal time violates HB 1113.

Example #4: Employee D is a P-Card holder and routinely purchases office supplies for his/her department. If Employee D were to purchase items for personal use, the employee has violated the law. If the employee were to personally take advantage of rebates, gifts or other discounts offered by vendors, this would also be in violation of HB 1113. For example, ABC Office Supply Company offers customers a rewards program. Under the program, customers earn points based on the amount of their purchases. Upon earning certain number of points, the customer can select gifts such as luggage or household decorative items. By participating in the rewards program, the employee has realized a personal gain through the use of the P-Card which is a purchasing mechanism for business purposes only. Therefore, participation in such reward programs must not occur. Departmental participation in rebate or rewards programs is allowed provided the department can clearly demonstrate that the items offered under the program benefit the University unit and remain in the custody of the department.

Example #5: Employee E is a Petty Cash Custodian. Employee E uses funds from the petty cash account to pay for personal expenses but repays the petty cash fund at a later date. Even though Employee E repays the funds, this is a violation of the law because the custodian has had personal use of those funds.

Example #6: Employee F requests use of petty cash from the departmental petty cash custodian to make a business purchase. While at the store, Employee F sees items he/she would like to have and makes the purchase using the petty cash funds. That is clearly a violation of the law. Even if Employee F purchases the personal items with the intention of stopping by an ATM on the way back to the office to have the cash to immediately reimburse the petty cash fund for the amount of the personal purchase, this is also a violation of HB 1113 since Employee F has had personal use of those funds.

Example #7: Employee G is the petty cash custodian for a petty cash advance approved to take students and Employee G on a University sanctioned trip. Portions of the petty cash account are used for Employee G’s travel and at the end of the trip, Employee G will need to submit appropriate travel receipts and documents to support the reimbursement of the petty cash and charge the expenses against the appropriate account. Under HB 1113, this petty cash advance qualifies as a “travel advance of public funds.” In his/her capacity as the petty cash custodian, Employee G is required to return any unused petty cash and submit all receipts for reimbursement of the petty cash advance by the date specified in the authorized petty cash application. If Employee G does not return the unused petty cash and file the reimbursement request by the specified closing date, Employee G has had “personal use” of those petty cash funds because they have not been returned or accounted for in the specified time period allotted for the petty cash advance.

Q: I have a University corporate travel card that I use for business travel and other personal expenses. Is this a violation of HB 1113?

A: Yes. HB 1113 includes misuse of corporate travel cards and notes them under the category of “charge cards”. Due to the severe penalties for personal use of a travel card under HB 1113, the University announced in June 2008 that it would no longer participate in the state travel card programs. The potential exposure to our employees under these standards is too substantial. While the card itself does not prohibit employees from using it to pay for items that they do not intend to submit for reimbursement from UGA, HB 1113 classifies these as personal use of a state issued purchasing tool. A frequent example is if Employee H watches a movie in the hotel room but uses the travel card (as opposed to their personal credit card) to pay the entire hotel bill. Even though Employee H does not submit the cost of the movie to the University for reimbursement, HB 1113 would define this as use of the card for a personal expense, and thus it is a violation of the law.

Q: Under HB 1113, any person, including but not limited to a supervisor, who knowingly assists another person in violating this law, will be subject to the same criminal charges and penalties. What does this mean?

A: Just as with all crimes of theft or robbery, all persons associated with the conduct of the crime will face penalties. For example, if a supervisor approves purchases or justifies transactions which include amounts for personal gain of others, these actions are a clear violation of HB 1113. Furthermore, if any person, including a supervisor, knowingly allows P-Cards to be used outside of the requirements specified in HB 1113, that person also will be in violation of the law. For further information, refer to the FAQ which outlines these requirements.

Q: What if I make a mistake and use my P-Card for a personal purchase? What if I make a mistake and use another purchasing method for a personal purchase? Are these violations of HB 1113?

A: Based on guidance provided to UGA by the Board of Regents (BOR) and the Attorney General’s Office, there is no gray area under this new law, and thus, any misuse, including inadvertent use, such as mistakenly using a P-Card for a personal purchase, is a violation of law. Per BOR mandate, UGA must report all instances of misuse, whether transacted using a P-Card or not. It is up to the State Attorney General’s Office to determine whether to prosecute.

Q: What am I required to do if I have inadvertently misused my P-Card or other purchasing mechanism?

A: In cases of inadvertent misuse:

1) Immediately report the transaction to your supervisor and to the Controller’s Office. Immediately submit a check payable to UGA to repay the inadvertent purchase and forward it to the Controller’s Office along with a memo explaining the circumstances and timeline with a copy of the receipt and other supporting documentation.
2) The reporting requirement to the BOR Office will be handled centrally from the Controller’s Office. The BOR will be providing these reports to the State Attorney General’s Office, which will review all cases that have been reported to the BOR.
3) In cases of inadvertent use, UGA will:
• provide the BOR with an explanation of what took place;
• confirm that the employee self-reported the incident, if appropriate;
• confirm that the funds have been returned;
• and provide an associated timeline of the incident.
The decision whether to prosecute a case rests with the State Attorney General’s Office.

There are additional, specific reporting requirements for P-Card misuse. Please refer to http://www.busfin.uga.edu/procurement/pcardmisuse.html for further details.

Q: What are the penalties under HB 1113?

A: HB 1113 outlines criminal penalties as follows:

• If the total amount of misused state funds does not exceed $500.00, a person will be charged with a misdemeanor of high and aggravated nature which shall be punishable by not more than 12 months’ imprisonment and a fine not to exceed $5,000.00.
• If the total amount of misused state funds exceeds $500.00, a person will be charged with a felony which shall be punishable by not less than one nor more than 20 years’ imprisonment and a fine not to exceed $50,000.00 or triple the amount of such unlawful purchases, whichever is greater.
• In either circumstance, a person will be subject to immediate termination of state employment and shall owe restitution to the state equal to the amount of such unlawful purchases, plus interest to be assessed at a rate of 12 percent per annum to be calculated from the date each unlawful purchase was made.
• Any person, including but not limited to a supervisor, who knowingly assists another person in violating this law will be subject to the same criminal charges and penalties outlined above.
• Any person who uses a travel advance received from public funds for nongovernmental purposes or submits or approves, knowingly or through willful and wanton neglect, a fraudulent request to the state for reimbursement of expenses will be subject to the same criminal charges and penalties outlined above.

Q: These new rules are intimidating. Can I just surrender my P-card and revert to the old way of purchasing?

A: While these new laws are quite strict, there is no need to overreact and surrender your P-Card. However, you should make sure you are informed of the provisions of the law and abide by them. It is important to remember that the provisions of HB 1113 apply to all types of purchasing mechanisms, not just P-Cards. UGA’s track record of strong internal controls and approval systems gives us great confidence in the University’s ability to operate under the requirements of the law and sustain high standards of accountability. The P-Card remains a viable and valuable purchasing tool at the University of Georgia and our employees have proven they are responsible and accountable stewards of P-Cards.

However, if you are a department head or a business manager for a unit and your unit currently has a number of P-Cards distributed to your faculty and staff, then you will want to consider how the P-Card program is currently working in your unit. Take time to consider reducing the number of cardholders and operating the P-Card program differently in order to sustain purchasing flexibility and meet the requirements of HB 1113 and the new policy requirements which have been issued by DOAS and the BOR? As a department head, supervisor or business manager, you should feel reasonably certain that every person who holds a card will be responsible and proactive in learning the new rules and abiding by them. If not, you may want to reconsider the P-Card distribution and protocol within your unit.

Q: What P-Card requirements are specifically addressed under HB 1113?

A: HB 1113 outlines a number of specific requirements with respect to purchasing cards or P-Cards. P-Card misuse that may result in civil and criminal penalties includes:

• use of a purchasing card for personal gain;
• purchasing items on a card that are not authorized for purchase by such employee (for example, a cardholder purchases items for department use without the authorization of a supervisor or other departmental authority);
• purchasing items in violation of HB 1113 (prohibited items include items over $5,000.00, gift cards, alcoholic beverages, tobacco products and personal items that are not job-related);
• retaining for an employee’s personal use a rebate or refund from a vendor, bank or other financial institution resulting from a purchase or use of the purchasing card (for example, certain vendors will issue rebate checks or merchandise awards when customers accumulate points. Some vendors will issue prizes that are personal use items such as luggage, dishware, jewelry, etc.).

In addition to the more obvious misuse for personal gain, the definition of “misuse” could also include non-compliance with policy requirements included in HB 1113. For example, HB 1113 requires that:

• P-Cards only be issued to employees whose job duties require the use of a P-Card;
• Employees receiving a P-Card sign an ethical behavior agreement;
• Transaction logs be maintained to show specific information for each purchase;
• Purchases be reviewed and approved by supervisory personnel;
• Departments review not less than annually, all P-Cards issued to employees and eliminate cards for employees with low usage;
• Employers perform criminal background checks and credit checks on persons hired for positions for which purchasing cards are issued;
• Purchases be accompanied by receipts and supporting documentation and if they are not supported, the employee will be personally responsible for the purchase;
• An employee’s supervisor who knowingly intentionally, willfully, wantonly, or recklessly allows or who conspires with any employee, who has a P-Card and violates the requirements under HB 1113, is subject to termination of employment and criminal prosecution.

HB 1113 also establishes a number of requirements specific to the P-Card program. For example, HB 1113 requires that:

Q: What if I am aware of a person who is using purchasing mechanisms or reimbursement requests for personal gain. What should I do?

A: UGA has a policy on fiscal irregularity, fraud and responsibilities for reporting malfeasance (http://askuga.uga.edu/default.asp?id=987&Lang=1&SID=). Under this policy, all administrators, faculty and staff who know or suspect employee malfeasance or misuse of resources have a duty to report such matters. There are a number of options for making these reports:

• Report it to your supervisor and ask them to report it to the Controller’s Office.
• Report it directly to the Controller’s Office.
• Report it using the Compliance, Ethics and Reporting Hotline.

http://www.tnwinc.com/uga/ or 1-877-516-3467.