City of Atlanta to audit use of $95,000 in employee gift cards

A top city official in Atlanta abruptly blocked the purchase and distribution of gift cards for employees after The Atlanta Journal-Constitution and other media outlets raised questions about the use of cards worth tens of thousands of dollars.

Records obtained by the newspaper show that city departments purchased more than $95,000 worth of gift cards from California-based Patriot Marketing Group starting in December 2007. The bulk were bought for use as employee perks by Atlanta’s Department of Watershed Management.

The department oversees water and sewer accounts in Atlanta and in other local jurisdictions. It has been a frequent target of customer complaints about escalating and unpredictable bills.

Following an AJC open records request seeking documents on the cards, the city’s chief operating officer this month ordered the unused cards collected and asked the city’s internal auditor to investigate their use.

As of Tuesday, the human resources department had gathered up 396 unused gift cards worth $25,250 and locked them in a vault at City Hall. It appears hundreds of gift cards worth more than $70,000 may have been handed out over the last four years.

The city’s internal auditor plans to investigate whether all the cards can be accounted for and whether all the recipients can be identified. The audit may also look into the question of whether state, local and federal tax laws were followed.

Many cards were worth $25 or $50, but a number were for $100 or $250. Purchase records show at least one $300 card.

The program “needed stronger controls and accountability,” said Duriya Farooqui, the city’s chief operating officer. She said the city is committed to rewarding good work but said controls need to be tightened and centralized.

An investigation by the AJC showed that staffers at Watershed Management, responsible for overseeing thousands of miles of sewage and drinking water pipes, purchased gift cards for at least four years with little outside oversight or control.

The purchases began before Atlanta Mayor Kasim Reed took office in January 2010.

Originally described as an inexpensive way to show appreciation to employees who had weathered squeezed budgets, hiring freezes, extra demands and no raises, the gift cards were apparently put to a variety of uses.

Some went to staffers who performed well during the city’s year-long audit of residential water meters, for example. Others went to employees who rescued a colleague from a collapsed ditch. Others may have been used to buy food for crews that worked late.

With more than 1,400 employees and a budget of more than $540 million, the watershed department bought $87,000 worth of cards in less than four years, with $22,000 worth purchased between March and June this year.

Other departments, including Finance and Parks, Recreation and Cultural Affairs, bought cards but on a smaller scale.

On Oct. 4, Farooqui ordered city staffers to turn in all cards to the city’s human resources department the next day. Farooqui said she sent the memo less than 48 hours after she learned of an request for records showing gift card purchases since 2009.

“I want the highest standard applied to the reconciliation,” Farooqui told the AJC when asked about the upcoming audit. “I want an independent assessment. I do not want any doubts.”

Atlanta’s watershed department provides drinking water or sewage treatment to cities as small as Fairburn and as large as Sandy Springs. The department also serves parts of Coweta, DeKalb, Fayette and Fulton counties.

Documents from Watershed Management indicate Atlanta residents shoulder some of the highest big-city water and sewer rates in the country, assuming certain amounts of water use. This March, Atlanta voters renewed a 1 percent sales tax — expected to raise about $100 million per year — to help pay for sewer upgrades required by the federal government.

Records obtained by the AJC show a steady stream of gift card purchases at Watershed Management stretching back several year. City officials could not produce a written citywide policy that governed the purchases or outlined specifically how employees could earn the cards.

“All these policies, for all these departments, on spending money wisely should already be in place,” said Barbara Payne, executive director of the Fulton County Taxpayers Foundation. “That’s my biggest gripe. The public shouldn’t have to go through this. Could we call for a city-wide check on spending procedures? It’s obvious that these departments are not capable of making decisions about how to spend money, when to spend money.”

The gift cards were good at retailers such as Macy’s, Dunkin’ Donuts, Target, Home Depot and Krispy Kreme. Some Visa prepaid cards were for $100. One batch of gift card orders included requests for 27 gift cards of $250 apiece — a total of more than $6,000.

Buying in bulk occasionally netted the department a 10 percent discount.

Jim Beard, a former Watershed finance official and now the city’s chief financial officer, said concerns about the security of gift cards led him to take about $5,000 in gift cards with him and lock them in a safe in his new office when he changed jobs about a year ago.

“The office I was in did not have a safe,” Beard said in an interview. “I think we’d have a lot different conversation if I told you I left several thousands of dollars worth of gift cards in an office, in a desk drawer that was unoccupied for some period of time, and they disappeared. It was prudent of me then, and prudent now, to have taken those and put them in a safe.”

All of those cards have been turned in or accounted for, Beard said.

The finance department purchased more than $9,000 in gift cards this summer. The finance department has written guidelines governing gift card awards: only three awards per employee per year, and no cards should be given for anniversaries, weddings or birthdays, for example. The awards should be based on objective criteria.

In a memo sent in February 2009, a deputy commissioner at Watershed acknowledged “everyone is under pressure” and encouraged another manager to use gift cards to reward high performance. The memo laid out several guidelines, including that the cards be presented for a specific action, be awarded publicly and given only to a team.

It’s not clear if those policies were studiously followed, or whether the cards were protected from favoritism. But employees’ gripes about who got gift cards and who didn’t contributed to low morale, said Natalyn Archibong, chair of the City Council’s utilities committee.

“We have been bombarded with this,” Archibong said.

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Staff writer Shannon McCaffrey contributed to this article.