North Carolina’s university system could save at least $300,000, and possibly millions of dollars, if all 16 campuses began using procurement cards for small purchases, State Auditor Ralph Campbell’s Office says.

But the report cautioned that procurement cards, similar to credit cards, would require strict oversight to make sure they were not misused, according to an auditor’s office press release on Dec. 19. Sampling of purchases made by the five universities using the cards indicated four instances of inappropriate use, totaling about $111.

The cards were authorized by the General Assembly in 1997 in a pilot program. The University of North Carolina at Chapel Hill, N.C. State University, East Carolina University, UNC-Wilmington and N.C. Agricultural and Technical State University have been using the procurement cards for about four years.

Auditors found that 2,353 cards were issued in fiscal 2001-02, ranging from 969 cards at UNC-Chapel Hill to 177 cards at NC A&T. The cards were used to purchase $23.6 million in merchandise during the fiscal year, less than 5 percent of the universities’ non-construction purchasing for the year. Under the terms of the contract with the bank-card company operating the program for the state, the five universities received rebates of $87,500 for the year.

Seven other universities are at some stage of implementing a procurement card system, but four others indicated they had no immediate interest in the program because of concerns that costs might outweigh benefits.

Auditors calculated that if all 16 universities used the procurement card system for 4 percent of their small purchases, the state would save a total of $314,379. If the cards were used for 10 percent of nonconstruction purchases, the savings would climb to $541,055, the press release said.

An earlier study of UNC purchases indicated that 80 percent of all nonconstruction buying was for less than $2,500. If all of the purchasing was done with procurement cards, auditors estimated the state could save about $4.3 million a year. No alternative procurement systems offered similar savings, the auditor’s office said.

The report recommends that the state, through the Department of Administration’s Purchasing and Contract Division, could use its consolidated purchasing power to gain even larger rebates. Some of the increased rebates could be used by the division to increase its monitoring of the procurement card program.

“The procurement card program in the participating universities has shown that it can be a cost-effective system for small purchases,” Campbell said. “This is exactly the sort of change that the state needs to make to get the best benefit for taxpayers. A procurement card system must be closely monitored to make sure it is not abused, and any expansion of the program must be accompanied by the development of a rigorous monitoring system.”

Richard Wagner is the editor of Carolina Journal.