The program provides the government with an effective and efficient tool for conducting purchase, travel and vehicle fleet operations. Government card usage provides streamlined, best practice processes that are consistent with private industry standards. The administrative cost savings of processing charge card transactions instead of paper-based transactions drives card use and merchant acceptance. Given its benefits, during the past decade the program has expanded with the support of the executive and legislative branches as well as the merchant community.

Five banks provide cards under contract with GSA: Bank of America, Bank One, Citibank, Mellon Bank, and US Bank. The contracts have a five-year base period, from 1998 to 2003, and contain five one year option periods which can extend the terms and conditions out to 2008. The program, commonly referred to as GSA SmartPay®, provides Purchase, Travel, and Fleet cards, and other value-added products and services.

Purchase, Travel, and Fleet cards provide several important benefits, including streamlined procurement and payment processes, and significant administative savings. The administrative savings for the purchase card alone is estimated to be $1.3 billion per year. This figure is based upon a 1994 study by the Purchase Card Council, which concluded that $53.77 savings is achieved each time a purchase card is used instead of a written purchase order. Additionally, GSA SmartPay® cards provide performance-based refunds to agencies. Refund information for previous years can be found in the GSA SmartPay® Executive Summary. The GSA SmartPay® electronic access systems also provide agencies with accurate, comprehensive transaction detail, in a more efficient and reliable manner. The cards eliminate the need for imprest funds or cash, and provide greater access to merchants because they are accepted worldwide.

For complete review of the transactions processed by business line, see the GSA SmartPay® Executive Summary.

GSA considers the program to be very successful because it provides the most cost efficient, effective solution to the government's purchase, travel, and fleet programs. Through GSA SmartPay® the government receives millions of dollars in refunds annually, and saved over an estimated $1.3 billion per year in administrative processing costs by using the purchase card rather than traditional purchase orders. The program is also popular with vendors who conduct business with the Government due to the streamlined and more efficient transaction process.

The purchase card is the most flexible purchasing tool available to the United States government. Here are some examples of how the card is used to acquire needed goods and services for federal agencies in meeting their mission:

• Responding to natural disasters (e.g., floods, hurricanes, tornadoes)
• Responding to terrorist attacks against US Government employees and civilians
• Obtaining goods and services directly from merchants in foreign countries where US Government personnel are deployed
• Processing transactions on the GSA Advantage!® website (all GSA Advantage!® vendors accept the card for micro-purchases)

In the cases cited above, the use of the card rather than a traditional purchase order enables the Government to fulfill its mission without unnecessary red tape - especially when time is of the essence.

Use of purchase cards by 392,500 cardholders ensures timely payment to merchants who do business with the Federal Government. Merchants are paid for credit card transactions within 48 hours of submitting the transaction to the card network. This is a vast improvement to the lengthy invoicing and payment process without cards and improves cash flow to merchants most in need: such as small businesses.

NOTE: The micro-purchase threshold for the Dept. of Homeland Security is $7,500. Not all GSA Advantage!® vendors will accept transactions with the card above $2,500.

The alternative to government charge cards is the traditional or paper-based purchases. Elimination of the charge card program and a return to the issuance of traditional purchase orders would be a costly proposition in terms of terminating the existing contracts, mission fulfillment, and administration. Contract termination costs for settlements with the five banks could be severe, considering that the banks would not be provided the opportunity to perform over the full five-year base period. More importantly, the use of traditional purchase orders would adversely impact agency missions because tradition purchase orders are a less efficient procurement tool than charge cards. Use of traditional purchase orders would also mean that the government would forego $1.3 billion per year in administrative savings and nearly $70 million in charge card refunds.

Additionally, implementation of the charge card was a determining factor in the downsizing of the acquisition workforce. Therefore, there is significant risk of mission failure by using traditional purchase orders if consideration is not given to the need to hire additional procurement personnel. Finally by eliminating charge cards and their accompanying electronic reporting mechanisms, additional contracting, audit, and investigative resources would need to be employed to provide an equivalent level of oversight. Such personnel costs may be prohibitive to an effective Government.

Because there are three distinct components of the program (purchase, travel and fleet), policies pertaining to the program are diffused among many Federal regulations, including the Federal Acquisition Regulation, Federal Travel Regulation, Federal Management Regulation, and the Treasury Financial Manual for Guidance of Departments and Agencies. There is no single source that captures all the relevant laws, regulations, and policies that apply to the program.

Each agency develops its own policies for the management of its card program. Agency policies are based on the numerous laws and governmentwide policies that pertain to the program and are tailored to the agency's mission and operating procedure.

While policies can differ greatly among agencies due to their varying missions, GSA recommends that, at a minimum, agency policy address the following areas:

• Delegation of contracting authority
• Training requirements
• Account limits and authorization
• Uses of the card
• Receipt and acceptance of supplies and services
• Reconciliation and payment of accounts
• Audit and review procedures
• Span of control for approving officials and A/OPCs (e.g., one approving official for every 5-10 cardholders)
• Criteria for canceling accounts with minimal activity
• Split disbursement and Salary offset procedures
• Infrequent travelers

Most agencies have comprehensive policies regarding the administration of their card programs. The problems lie not in the contents of the policy but rather in the implementation of the policy - that is, the policy is not disseminated to the people who work directly on the program, or the policy is not adequately or consistently applied. One step agencies can take to improve performance is to make sure that the policies are widely disseminated and easily accessible (e.g., post the regulations on the agency's intranet website)

One area where agency policy may require further enhancement is defining the role and responsibilities of the approving official. The approving official is the person directly responsible for reviewing purchase cardholder transactions and determining if transactions are reasonable and necessary.

Agencies could significantly benefit by having mandated governmentwide training standards for cardholders and A/OPCs. Currently, training varies widely among the agencies, and many agencies rely almost solely on the training provided at the annual GSA SmartPay® conference or on the online training contained on the GSA SmartPay® website. Likewise, the government could benefit by having clear, governmentwide guidelines for disciplining cardholders who misuse their cards; as with training, disciplinary actions and procedures vary widely among the agencies.

One of the program's strengths is the sheer variety and depth of information available on the program. The banks have developed robust Electronic Access Systems (EAS), which provide numerous electronic reports on an array of requirements. These reporting tools are used by agency auditors and investigators and are tremendous in their investigations. When misuse does exist, it is usually not difficult to find. This is in extreme contrast to the pre-card era, when most transactions were done in a paper-based format, in individual offices, which required time and labor intensive efforts to identify questionable transactions. Ironically, the wealth of information now available on the program makes it easier than ever for investigators to find waste, fraud, and abuse, which, in turn, is widely publicized.

Most media reports only give the sensational part of the story - the cases of egregious fraud or misuse of the card by cardholders. However, in reality, the incidents of fraud and misuse comprise a small fraction of the total transactions at each agency.

GSA required the banks to provide under contract certain program management tools at no cost to the Government. Examples of these tools are as follows:

• Credit limits - Credit limits restrict single purchase, daily, weekly, or monthly expenditures by the cardholder. In accordance with agency policy, limits are set which best meets the agency's needs.
• Merchant Category Code (MCC) Blocks - MCCs are established by the bankcard associations to identify different types of businesses. Merchants select the codes best describing their business. Agencies may limit the types of businesses where the card will be accepted by limiting the MCCs available to the cardholder.
• Internet Reports - Agencies have access to management reports via the internet. The banks provide standard reports and ad hoc reports. The following list may be utilized to detect misuse and fraud:
• Account Activity Report - This report shows all accounts in the activity and spending for each account during the billing cycle. The report provides details on each transaction such as transaction date, transaction type (credit, debit, convenience check, etc.), merchant name and dollar amount. This report may be used to sort transactions by dollar size, merchant, date or type. This report is particularly useful for identifying suspicious merchants, unusually high spending patterns, excessive convenience check usage or untimely purchases.
• Disputes - The disputes report identifies date, merchant, reason code, dollar amount and status of each dispute filed by a cardholder. Reviewing the report would identify cardholders with excessive disputes; the cardholder may require training or may be trying to disguise misuse or fraudulent activity.
• Unusual Spending Activity - The banks offer various reports identifying transactions, which may warrant further review. These reports vary by bank.
• Lost/Stolen Card - This report identifies cards that are reported lost or stolen. This report may be reviewed to identify cardholders who have repeatedly reported their cards missing. This may be an indicator that the cardholder needs to secure their card or that the cardholder is attempting to disguise misuse or fraudulent activity by denying the charges.
• Master File - Ad Hoc Reports - Ad hoc reporting tools enable agencies to customize management reports.
• Guides - The banks have developed written guides for Agency/Organization Coordinators (A/OPCs) and cardholders:
• A/OPC Guide - This guide addresses issues of concern to the A/OPC, including responsibilities of program participants, account setup and maintenance, account suspension/cancellation, disputes, reports and invoicing procedures. The guide is available from each bank in hard copy and on their websites.
• Cardholder Guide - The guide addresses authorized uses of the card, disputes and billing.

By providing electronic reports and transaction files, auditors and agency program managers have immediate access to information such as merchant name, type of merchant, dollar amount of transaction, and date of transaction. Thus, the ability to identify questionable transactions and follow through to ensure that the transactions were proper is simplified.

In some instances merchants are also providing line item detail including quantities, prices and product descriptions. While only a limited number of merchants are providing this additional information today, we continue to work with the card associations to increase availability of line item detail.

• Training - Resources provided by GSA for cardholders and A/OPCs:
• On-line cardholder training - Educates cardholders on proper use of purchase and travel cards.
• On-line Organization/Agency Program Coordinator (A/OPC) Training
• Blueprint for Success: Purchase Card Oversight - A manual designed to assist agency program coordinators with detecting and preventing card misuse/fraud (available on-line and in hard copy.)
• A/OPC Survival Guide for Travel Card A/OPCs - Discusses program management and delinquency controls (available on-line and in hard copy)
• Annual GSA SmartPay® Conference - Provides training for agency program coordinators on bank internet systems, best practices, and program management.
• Workgroups - Government agencies, GSA and the banks participate to create a more effective GSA SmartPay® program.
• Purchase Card Roundtable - For agency program coordinators to meet quarterly and share best practices
• Fraud Workgroup - To specifically work on purchase cardholder misuse and fraud.
• Travel Card Workgroup - For agency program coordinators to meet and share best practices.
• Fleet Card Users Group - For agency program coordinators to meet and share best practices.
• Inspector General Roundtable - For auditors and investigators to share best practices with respect to the prevention of purchase and travel card fraud and misuse

• A joint federal task force "Sudden Impact," was assembled by the FBI in the autumn of 2001 in the Washington, DC metropolitan area. This task force is compiled of multiple federal agencies ranging from the U.S. Army Criminal Investigation Command to the Defense Criminal Investigation Service to the Environmental Protection Agency. This task force meets on a regular basis, not only to discuss new purchase card investigations, but also to conduct proactive analysis of purchase card investigations, and of purchase card activity. The FBI has provided space with computers in order to download and compile purchase card activity for task force review. The task force receives prosecutorial assistance from attorneys within the Justice Department and the Department of Defense. GSA IG's representative on the task force is working directly with GSA SmartPay® banks to obtain data required for their interagency investigations.
• As mentioned above, the Inspector General Roundtable for auditors and investigators meets quarterly to discuss best practices with respect to the prevention of purchase and travel card fraud and misuse.

• The Office of Federal Procurement Policy formed the OMB Charge Card Task Force to discuss best practices in the purchase and travel card programs.
• OMB established a quarterly reporting requirement for agencies to submit certain performance criteria relating to their purchase and travel card programs.
• OMB can sponsor legislation related to improving the management, control and oversight of charge card programs and payment performance.

The purchase card shall be used to purchase supplies and services in accordance with the Federal Acquisition Regulation (FAR). Purchase card use as the procurement and payment tool for micro-purchases is defined in FAR 13.2. Micro-purchase means an acquisition of supplies or services in which the aggregate amount does not exceed $2,500, except that the limit is $2,000 in the case of construction, and $7,500 for the Department of Homeland Security. For purchases above the micro-purchase threshold, the purchase card may be used as an ordering and payment mechanism, not a contracting mechanism. When used as an ordering and payment mechanism, contractors may bill against the card. When the order is delivered, the contractor bills the purchase card account instead of issuing an invoice directly to the agency.

To allow agencies the maximum latitude, the contract excludes only a few categories of purchases, such as long-term rental or lease of land or buildings, travel or travel related expenses (excluding conference rooms, meeting spaces, and local transportation services such as Metro fare cards, subway tokens, etc.), and cash advances (unless permitted as a value added service under the agency task order). The contract does not specifically address the maximum transaction amount.

Please see GSA SmartPay® Executive Summary for current purchase card spend volume.

In the case of purchase cards, intentional use of the purchase card for other than official government transactions constitutes misuse, and depending on the facts, may constitute fraud. The employing agency of a cardholder employee who misuses the card or who participates in fraud cancels the purchase card and takes disciplinary action against the employee, as appropriate. In the case of card misuse, the employee will be held personally liable to the Government for the amount of any unauthorized (non-Government) transaction.

Additionally, depending on the facts involved, an employee may be subject to fine or imprisonment for action relating to purchase card misuse and fraud. For example, if convicted under 18 U.S.C. 287, a person is subject to a fine of not more than $10,000 or imprisonment for not more than five years or both. Military members may be subject to court martial under 10 U.S.C. 932, UCMJ Art. 132. Also, depending on the circumstances, other sections of the U.S. Code may apply and may carry additional penalties or fines:

• Frauds and Swindles (Mail Fraud) - 18 U.S.C. 1341
• Fraud by Wire, Radio, or Television - 18. U.S.C. 1343
• Conspiracy - 18 U.S.C. 371
• Bribery, Graft, and Conflicts of Interest - 18 U.S.C. 201
• Laundering of Monetary Instruments - 18 U.S.C. 1956
• Embezzlement and Theft - 18. U.S.C. 641
• Fraud and False Statements - 18 U.S.C. 1001
• Extortion and Threats - 18 U.S.C. 871
• Conspiracy to Defraud the Government with Respect to Claims - 18 U.S.C. 286
• Persons in a Position of Trust - Normally used during sentencing. This statement is usually introduced by the Assistant U.S. Attourney to obtain additional points from the Federal Sentencing Guidelines.

Employees issued a card have a responsibility to use the card to procure supplies and services at the direction of the agency under official purchase authorization. Examples of misuse include: 1) purchases which exceed the cardholder's limit; 2) purchases which are not authorized by the agency; 3) purchases for which there is no funding; 4) purchases for personal consumption; 5) purchases which do not comply with Federal Acquisition Regulation and/or other applicable procurement statutes and regulations; and 6) purhases that are billed by the merchant but are never received by the agency.

Purchase card misuse or fraud may have the following potential consequences for the cardholder

• Counseling
• Cancellation of purchase card
• Notation in employee performance evaluation
• Reprimand

There are two types of travel card accounts - the Centrally Billed Accounts (CBA) and the Individually Billed Accounts (IBA). The primary difference between the CBA and IBA is liability. CBAs are issued to the government, and the government retains liability for CBAs. Individual travelers are issued IBA cards, and the travelers have liability for the use and payment of their accounts.

In general, CBA cards are used by the Government to make centralized travel reservations (e.g., flight, train, and bus) through travel agents.

The IBA card may be used by individual travelers to pay for all other official travel-related expenses not covered by the CBA (e.g., hotel, meals, incidentals, etc.). Cardholders are expected to submit vouchers to their agency for all authorized travel-related expenses within 5 days after the travel is completed (or within 30 days if on continuous travel) and must pay their charge card bills in full within the established card billing cycle. Cardholders are not authorized to use their cards for anything other than official Government travel-related expenses.

There are three primary benefits associated with the CBA program:

• The banks do not charge agencies any fees for establishing or maintaining CBAs.
• Refunds. The bank pays a quarterly refund to the user agency based on the net dollar value of CBA transactions; additional refunds are offered if the agency pays electronically (virtually all agencies do pay their accounts electronically).
• Provides access to the Airline City Pairs system. Because CBAs have unique numbering sequences, the airlines know to charge the contract rate for the fare.

There are several benefits associated with the IBA program:

• Convenience. No matter where a government employee travels on official business, he or she can be sure that the card will be accepted at hotels, car rental offices, restaurants and ATMs worldwide - wherever Visa and MasterCard are accepted, the GSA SmartPay® card is accepted too. This enables agencies to meet their missions whether their employees are traveling domestically or internationally.
• Safety. Use of a travel card is less risky for travelers as it saves them the trouble of carrying large quantities of cash. If a card is lost or stolen, a replacement card can be sent to the cardholder within 24 hours; whereas if a traveler loses cash it cannot be replaced except out of the traveler's own bank account. Thus the IBA card protects government employees while they are on official government business.
• Refunds. The bank is required to pay the agency a refund each quarter based on the net dollar value of IBA transactions.

Please see the GSA SmartPay® Executive Summary for up-to-date travel card spend information.

Cardholders who misuse their travel card are subject to disciplinary action by their employer. Each agency develops and implements policies related to handling employee misuse of the travel card. Agency disciplinary actions may include:

• Cancellation of the card
• Counseling the employee
• Written warning to the employee
• Reprimand
• Suspension of employment
• Termination of employment

Additionally, the banks are authorized to take certain actions against cardholders whose accounts are cancelled for delinquency, such as:

• Assessing late fees
• Utilizing collection agencies to recover the delinquent
• Reporting the delinquency to national credit bureaus
• Salary offset

Agencies have alternatives available if an employee's card is suspended or cancelled due to delinquency or misuse, and the cardholder still must travel on official Government business, such as:

• Issue the employee a pre-funded card (e.g., a card that is "pre-loaded" with a certain amount of money and which is invalidated when the preset spending limit is reached)
• Issue the employee traveler's checks
• Provide the employee a cash advance (if the agency has such a system in place)

The primary GSA SmartPay® alternatives to the traditional IBA card are pre-funded cards and traveler's checks; both of these products are available under the GSA SmartPay® Master Contract as a core requirement (traveler's checks) or a value-added requirement (pre-funded cards). A pre-funded card is a card that the government pre-loads for a certain specified amount before the traveler begins his or her trip. When the employee makes a charge with the card (e.g. for hotel, car rental, ATM withdrawal, etc.), the amount of the card is reduced commensurate with the charge, until the amount is used in its entirety and the balance is zero. Traveler's checks are checks for specific denominations that are interchangeable with cash. Either one of these methods is widely accepted.

The primary advantage to these alternatives versus the IBA card are that they are delinquency proof - they are pre-paid by the Government and the traveler cannot exceed what is given except by using his or her personal funds. Additionally, both the pre-funded card and traveler's checks can be replaced if they are lost or stolen.

Most agencies no longer have imprest funds for paying cash advances for travel; the implementation of the IBA program rendered imprest finds unnecessary. If an agency were to cease using the GSA SmartPay® program, it would be necessary to re-create the imprest fund systems, and to assign staff to manage them.

The most serious problem with the travel card program is payment delinquency, specifically, with the IBA card program, where individual travelers are liable for payment to the GSA SmartPay® banks.

There are four contributing factors for delinquency:

• Employee withdraws cash or uses card for non-official travel expenses and does not pay the bank
• Employee fails to file for reimbursement from the agency and does not pay the bank
• Agency does not reimburse the employee in a timely manner, and the employee does not pay the bank or fails to pay the bank in a timely manner
• Employee receives reimbursment from the agency but does not pay the bank

Delinquency rates on the IBA travel card are cyclical in nature, with delinquencies being highest in the period of November through February and the lowest in April through June. Current Delinquency trends can be found in the GSA SmartPay® Executive Summary.