A Review of State Use of Cell Phones, Pagers, and Satellite Phones
June 2008

REPORT (PDF)     SUMMARY (PDF)

Members of the General Assembly requested the Legislative Audit Council to conduct an audit of state agencies’ use of cell phones and other wireless communication devices. We reviewed whether agencies had policies and procedures to ensure that cell phones and other devices are used in an efficient manner and reviewed the adequacy of agency internal controls over these devices.

We estimate that during the time of our review state agencies had over 15,000 cell phones, 7,000 pagers, and 170 satellite phones. Approximately 25% of state employees carried state-issued cell phones. Of the 100 agencies we surveyed, 96 reported having issued cell phones and/or pagers to their employees. For equipment and services, we estimate that the state spent over $7 million on cell phones, $790,000 on pagers, and $68,000 on satellite phones in FY 05-06.

We found ways that agencies have taken steps to improve the efficiency of their use of these devices, including establishing statewide contracts, adopting cell phone plans that allow employees to share minutes, and using only one provider of cell phone services to obtain additional savings over the state contract.

We also identified areas where agencies could improve the efficiency and effectiveness of their management of cell phones and other devices. We believe if all agencies were to adopt the recommendations contained in this audit, the state should be able to reduce its total expenditures on cell phones and pagers by at least 10%, resulting in estimated savings of over $800,000 annually.

We found that there is no statewide policy addressing the acquisition, assignment, and use of cell phones and other devices. We found that 26 (27%) of the 96 agencies that provided cell phones or pagers to their employees reported they did not have a written policy for these devices. A statewide policy could assist agencies in addressing areas such as personal use, justification for assignment and retention, equipment purchases, and monitoring of cell phone usage to prevent overages. We concluded that state agencies should:

• Review their cell phone usage to ensure they are using the most cost-effective plan. We found several agencies that were using less than half of their shared cell phone minutes. During the course of our review, S.C. State University (SCSU) and the Department of Revenue revised their cell phone plans with an estimated combined annual savings of $57,000 (16% and 12% respectively of total cell phone expenditures).

• Review employee cell phone usage to determine if employees have a continuing need for the cell phone. Agencies should also provide prepaid phones to employees who need phones only for use in emergencies. In a review of five agencies, we identified over 90 cell phones that could be eliminated and over 100 phones which could be switched to prepaid phones. We estimate a combined savings of over $37,000 annually.

• Improve their procedures for preventing overage charges. We identified three agencies with significant overage charges, including the Department of Probation, Parole, and Pardon Services (PPP), which incurred $108,000 in overage charges between August 2006 and July 2007. We also found individual employees who incurred high cell phone charges, including an SCSU employee who incurred charges of over $5,000 between July 2006 and June 2007.

• Take steps to prevent inappropriate personal use of cell phones. We found instances where state employees downloaded games and ringtones onto their state cell phones. PPP employees incurred almost $1,500 in charges for games, ringtones, and other materials between August 2006 and July 2007. We also found examples of extensive personal use, including a PPP employee whose 150 hours in personal calls between July 2006 and August 2007 resulted in $2,800 in overage charges.

• Take steps to ensure compliance with Internal Revenue Service (IRS) regulations concerning personal use of state-issued cell phones. The IRS considers cell phones assigned to state employees to be “listed property” and “working condition fringe benefits,” which are taxable. Therefore, any state employee using a cell phone provided by the state for business use may be required to pay taxes on any personal use that the employee does not reimburse. State agencies may also be subject to taxes for the employees’ personal use.

• Prohibit state employees from making directory assistance (411) calls using their state-issued cell phones. Instead, state employees can call a free 800 number to obtain directory assistance without incurring a charge. We reviewed 14 state agencies for FY 06-07 and found that over $10,000 was spent on this type of call. We also identified 21 employees who had incurred over $100 each in 411 calls during FY 06-07 with amounts ranging from $106 to $356.

• Reduce administrative costs by having cell phone bills consolidated into one invoice per service provider. Agencies also should make greater use of cell phone companies’ online management systems to review agency cell phone usage.

• Improve coordination of satellite phones by compiling a directory of all satellite phone numbers belonging to state agencies. Agencies should also have written policies regarding appropriate use, acquisition, management, and testing of satellite phones.

• Review pager usage, particularly where employees are assigned both a pager and a cell phone. We reviewed pagers at five state agencies and identified 671 employees with both a pager and cell phone.

In addition, the Budget and Control Board’s Division of the State Chief Information Officer (CIO) should verify information provided by cell phone companies on state agency cell phone expenditures. Companies are required to pay an administrative fee of 1% of the total actual sales to cover costs associated with contract administration, which amounted to approximately $49,000 in FY 05-06 for state agency cell phone expenditures. Companies self-report information on state agency expenditures, and the CIO does not independently verify this information. We reviewed the information sent by the companies and found errors.