Editor's note: The city's response to the findings of this audit can be viewed in the audit itself, which is linked below.
A city audit found multiple control failures in Corpus Christi's procurement card program, validating concerns raised by a KRIS 6 News investigation last year.
The audit examined $39.9 million in procurement card transactions from October 2021 through July 2024 and identified 10 major findings requiring corrective action.
City Manager Spending Under Scrutiny
That audit found City Manager Peter Zanoni was incorrectly reimbursed $72.75 for alcohol expenses and paid $1,643 in excessive tips, with auditors determining 81% of tested gratuities exceeded appropriate amounts. In one instance, the city paid $150 for two chateaubriand steaks at Vietnam Restaurant, but officials did not provide the names of attendees when requested.
During the audit period, Zanoni's total meal reimbursements reached approximately $37,000, processed through payroll rather than procurement cards.
The audit states that "inadequate record-keeping, such as missing attendee lists, results in a lack of transparency and accountability, suggesting poor financial control and potential misuse of public funds."
Security Breach: Terminated Employees Keep Card Access
The audit also found that some terminated employees maintained access to city procurement cards long after leaving their positions. Four former employees out of approximately 400 tested had active procurement cards for an average of 235 days after termination. While no unauthorized purchases were detected during the audit review, auditors warned this practice "creates the possibility of unauthorized charges."
The discovery prompted immediate action from the Procurement Department, which has since begun receiving termination reports and now deactivates cards immediately upon notification of employee departures.
Office Spending Raises Questions
The audit revealed the Office of Management and Budget spent an average of $66 per day on snack refreshments between June and August 2024. The total food supply expenses reached $4,391.93 during that three-month period, with auditors identifying several problematic practices.
The investigation found purchases of non-business-related food, orders made by employees who weren't cardholders, lack of documented approval for purchases, and incorrect coding of expenses.
Whataburger Field Suite Lacks Oversight
The city's suite at Whataburger Field, provided as part of the stadium lease agreement, operated without proper controls or documentation. Auditors found inconsistent tracking of attendees, no reasonable spending limits beyond the provided $500 food voucher, and inequitable access among city departments.
"Policies and procedures were lacking for transactions at Whataburger Field, which resulted in noncompliance with Best Practices for using the City Suite. This has been addressed, and the CM (City Manager) issued policies to improve internal controls as of March 28, 2025," the audit states.
Investigation Timeline and Context
The audit process began after KRIS 6 News submitted public information requests in July 2024 examining city executive spending on food and entertainment. That investigation revealed the city's fifth floor spent more than $44,000 at local restaurants between September 2023 and July 2024, including $13,053 at the Corpus Christi Yacht Club and over $25,000 at Corpus Christi Hooks games.
One month after the initial records request, Zanoni updated the city's procurement card policy. The Audit Committee unanimously approved a comprehensive audit in September 2024.
Financial Impact and Lost Revenue
The city receives rebates from Wells Fargo based on total procurement card spending, generating $237,566 over the past three years. However, Zanoni's practice of using personal cards for business expenses and seeking payroll reimbursements instead of using city procurement cards cost taxpayers approximately $506 in lost revenue share.
This finding highlighted a broader issue where the city was missing opportunities to maximize financial benefits while reducing oversight of executive spending.
Control Weaknesses
The audit revealed control failures beyond individual spending issues. Out of 413 spot audits conducted by the Procurement Department during the audit scope, $2,209.31 in non-compliant transactions were identified but never properly followed up. These included missing receipts, excessive tipping, and one outside fraud charge (fraud not committed by the cardholder).
The segregation of duties presented another concern, with some approvers reporting directly to the person making purchases, creating inherent conflicts of interest. The audit found that proper independent oversight was lacking in some departments.
Additionally, merchant category codes that restrict inappropriate purchases weren't being reviewed regularly.
"During the audit, the Contracts and Procurement Department updated the MCCs blocked codes and chose 21 additional MCCs to complement the City's exisiting MCCs. The City currently blocks a total of 719 MCC codes," according to the audit report.
The audit also found a lack of automated controls to prevent employees from seeking both procurement card reimbursements and payroll reimbursements for the same expenses, creating opportunities for duplicate payments.
Policy Changes and Comprehensive Recommendations
The city implemented several policy updates in August 2024, including GSA per diem rates for meal spending, a 20% maximum tip threshold, and requirements for itemized receipts and attendee lists. However, the audit identified the need for much more comprehensive reforms.
The audit found "P-Card Expenses and expense spending were in compliance with existing policies and procedures. However, we believe that internal controls should be strengthened further to reduce the risk of inappropriate spending."
The audit recommends nearly 30 specific changes across the 10 major findings.
City management has agreed to implement nearly all audit recommendations by September 30, 2025. The city responded agreed to all but two recommendations, with only partial disagreement regarding requiring the City Manager to use a city procurement card, noting this would require City Council action to modify employment contracts.
Management commitments include implementing automated expense tracking systems, enhancing training programs, establishing clearer approval hierarchies, and creating comprehensive documentation requirements.
