Summary
Over the past several years, GAO has issued numerous reports and testimonies on internal control breakdowns in certain individual agencies' purchase card programs. In light of these findings, GAO was asked to analyze purchase card transactions governmentwide to (1) determine whether internal control weaknesses existed in the government purchase card program and (2) if so, identify examples of fraudulent, improper, and abusive activity. GAO used statistical sampling to systematically test internal controls and data mining procedures to identify fraudulent, improper, and abusive activity. GAO's work was not designed to determine the overall extent of fraudulent, improper, or abusive transactions.
Internal control weaknesses in agency purchase card programs exposed the federal government to fraud, waste, abuse, and loss of assets. When testing internal controls, GAO asked agencies to provide documentation on selected transactions to prove that the purchase of goods or services had been properly authorized and that when the good or service was delivered, an individual other than the cardholder received and signed for it. Using a statistical sample of purchase card transactions from July 1, 2005, through June 30, 2006, GAO estimated that nearly 41 percent of the transactions failed to meet either of these basic internal control standards. Using a second sample of transactions over $2,500, GAO found a similar failure rate--agencies could not demonstrate that 48 percent of these large purchases met the standard of proper authorization, independent receipt and acceptance, or both. Breakdowns in internal controls, including authorization and independent receipt and acceptance, resulted in numerous examples of fraudulent, improper, and abusive purchase card use. These examples included instances where cardholders used purchase cards to subscribe to Internet dating services, buy video iPods for personal use, and pay for lavish dinners that included top-shelf liquor. GAO identified some of the case studies, including one case where a cardholder used the purchase card program to embezzle over $642,000 over a period of 6 years from the Department of Agriculture's Forest Service firefighting fund. This cardholder was sentenced to 21 months in prison and ordered to pay full restitution. In addition, agencies were unable to locate 458 items of 1,058 total accountable and pilferable items totaling over $2.7 million that GAO selected for testing. These missing items, which GAO considered to be lost or stolen, totaled over $1.8 million and included computer servers, laptop computers, iPods, and digital cameras. For example, the Department of the Army could not adequately account for 256 items making up 16 server configurations, each of which cost nearly $100,000.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Gregory D. Kutz
Government Accountability Office: Financial Management and Assurance
(202) 512-9505
Recommendations for Executive Action
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, the Director of Office of Management and Budget (OMB) should issue a memorandum reminding agencies that internal controls over purchase card activities, as detailed in Appendix B of OMB Circular No. A-123, extend to the use of convenience checks.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, the Director of OMB should issue a memorandum to agency heads requesting the cardholders, approving officials, or both reimburse the government for any unauthorized or erroneous purchase card transactions that were not disputed.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, the Director of OMB should issue a memorandum to agency heads requesting when an official directs a cardholder to purchase a personal item for that official, and management later determines that the purchase was improper, the official who requested the item should reimburse the government for the cost of the improper item.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of General Services Administration (GSA), should, in consultation with the Department of the Treasury's Financial Management Service, provide agencies guidance on how cardholders can document independent receipt and acceptance of items obtained with a purchase card. The guidelines should encourage agencies to identify a de minimis amount, types of purchases that do not require documenting independent receipt and acceptance, or both.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of GSA, should, in consultation with the Department of the Treasury's Financial Management Service, provide agencies guidance on how cardholders can document independent receipt and acceptance of items obtained with a purchase card. The guidelines should encourage agencies to indicate that the approving official or supervisor took the necessary steps to ensure that items purchased were actually received.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of GSA, should, in consultation with the Department of the Treasury's Financial Management Service, provide agencies guidance regarding what should be considered sensitive and pilferable property. Because purchase cards are frequently used to obtain sensitive and pilferable property, remind agencies that computers, palm pilots, digital cameras, fax machines, printers and copiers, iPods, and so forth are sensitive and pilferable property that can easily be converted to personal use.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of GSA, should, in consultation with the Department of the Treasury's Financial Management Service, instruct agencies to remind government travelers that when they receive government-paid-for meals at conferences or other events, they must reduce the per diem claimed on their travel vouchers by the specified amount that GSA allocates for the provided meal.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of GSA, should, in consultation with the Department of the Treasury's Financial Management Service, provide written guidance or reminders to agencies that cardholders need to obtain prior approval or subsequent review of purchase activity for purchase transactions that are under the micropurchase threshold.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of GSA, should, in consultation with the Department of the Treasury's Financial Management Service, provide written guidance or reminders to agencies that property accountability controls need to be maintained for pilferable property, including those items obtained with a purchase card.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of GSA, should, in consultation with the Department of the Treasury's Financial Management Service, provide written guidance or reminders to agencies that property accountability officers need to promptly record, in agency property systems, sensitive and pilferable property that is obtained with a purchase card.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of GSA, should, in consultation with the Department of the Treasury's Financial Management Service, provide written guidance or reminders to agencies that, consistent with the guidance on third-party drafts in the Department of the Treasury's Treasury Financial Manual, volume 5, chapter 4-3000, convenience checks issued on the purchase card accounts should be minimized, and that convenience checks are only to be used when (1) a vendor does not accept the purchase cards, (2) no other vendor that can provide the goods or services can reasonably be located, and (3) it is not practical to pay for the item using the traditional procurement method.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of GSA, should, in consultation with the Department of the Treasury's Financial Management Service, provide written guidance or reminders to agencies that convenience check privileges of cardholders who improperly use convenience checks be canceled.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve internal control over the government purchase card program and to strengthen monitoring and oversight of purchase cards as part of an overall effort to reduce instances of fraudulent, improper, and abusive purchase card activity, consistent with the goals of the purchase card program, to streamline the acquisition process, the Administrator of GSA, should, in consultation with the Department of the Treasury's Financial Management Service, provide written guidance or reminders to agencies that cardholders need to timely notify the property accountability officer of pilferable property obtained with the purchase card.
Agency Affected: General Services Administration
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
