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pt the auditor

Credit Cards Can Be Charged Back, Too

I like to sniff around all parts of the revenue system in locations that I audit. I tripped over one recently that you might find interesting.
Seems this rather large location in a Midwestern city had an automated system for charging credit cards. Customers could use their cards at the exit, or at a pay-on-foot machine, or they could use the cards to pay monthly fees. Pretty slick, right?
Well, I noticed that credit card charges go directly into the bank. (It takes a day or so, but it works pretty well.) After a bit of auditing, I noticed that charges can come out of the location's account just as easily.
It seems that if a customer disputes the charge, the bank notifies the location. The location has so many days to respond, and if it doesn't, then the money is simply taken back out of the account.
Well, this particular location may have been a bit behind in its paperwork, as none of the challenges by the bank had been addressed, and the money was simply removed from the account. The best (or worst) part is, nobody noticed.
Why would this happen?
In case one, the parker used their credit card in the CCIO (credit card in/credit card out) system and had no record of the transaction and simply forgot they were in a certain city using their credit card to park. When they received their statement, they challenged the charge, and when there was no response to the challenge, the transaction was reversed.
The problem was that the money was owed, and if the facility management had simply responded to the bank's notification, all would have been well. I found a dozen or so of these -- at an average of $25 each -- over a two-month period. Not the national debt, but it adds up.
In case two, the dollars get bigger. The customer had authorized the garage to automatically debit their credit card for monthly parking fees. This was done automatically by the parking facility's computers.
In this case, the customer went on vacation, and instead of contacting the garage, contacted the bank and had the charge reversed. At the same time, the automatic debit was turned off.
Since the operator neglected to follow up on the notification from the bank, the customer had been parking for free for the past four months. Plus, the card activity showed that they weren't gone for a month's vacation as there was no break in card activity.
When we sorted it all out (and back-billed the customer), we found that they "remembered" that they gave their permit and card to their son who worked in a nearby building. Had the audit not caught this credit card error, they would have parked free indefinitely.
What the bookkeeper had done was check the amount of the cashier reports, and if they equaled the deposit slips, then the amount put in the bank must be correct. However, there was never any back-checking of the bank statement against the previous month's reports. That would have quickly turned up the back charges by the credit card companies.
Further, the owner had spent big bucks installing a revenue control system. This system tracked all credit card, cash and monthly transactions. The deposits were never reconciled with the totals from the revenue control system; it was just assumed the system was incorrect.
My audit showed that the computer system was slightly off (an error easily fixed by the manufacturer), but was certainly closer to the correct numbers than the manual deposits computed by the cashiers.
In any case, the totals from the revenue control system should equal the lane, POF and cashier totals exactly. If not, a full-blown audit should be started and the reasons for the discrepancy found. If it is the revenue control equipment's error, that should be fixed. That revenue control system you bought is your first line of defense. If the numbers don't match there, you know you have problems elsewhere.
Most operators scoff at the problems described above. They have procedures in place to ensure that they don't happen. That doesn't mean they are followed. Remember, they had procedures in place at the facility I just told you about.

Audit, audit, audit.

Article Abstract from December, 2004




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