Summary
This study responds to a legislative mandate, which directs the Comptroller General to review the actions taken by the Department of Defense (DOD) to implement provisions included in the Bob Stump National Defense Authorization Act for fiscal year 2003 (Public Law 107-314) concerning management of the purchase card program. This study also discusses DOD efforts to implement provisions in the DOD Appropriations Act for fiscal year 2003 (Public Law 107-248) as well as recommendations and the status of disciplinary actions taken against individuals identified in prior GAO reports as having used the government purchase card for potentially fraudulent, improper, and abusive or questionable purposes.
DOD has initiated actions to implement all of the requirements in the National Defense Authorization Act for fiscal year 2003 and the DOD Appropriations Act for fiscal year 2003. While it has largely completed revamping its policies and other requirements, it still had considerable work to complete in order to implement managerial and oversight mechanisms, such as strategic sourcing, monitoring, and auditing. However, to implement the legislative requirement that DOD evaluate credit worthiness prior to issuing a purchase card, DOD is allowing cardholders to self-certify their credit worthiness rather than conducting credit checks on cardholders, as is typically done in the private sector. DOD started actions to implement nearly all of the 109 GAO recommendations, some of which may closely relate to the legislative provisions. DOD and the military services have taken disciplinary actions against cardholders whom a court of law determined had fraudulently used their purchase cards. They have also started to educate cardholders and approving officials on the proper use of the purchase card. The military services have not taken strong disciplinary actions against cardholders GAO identified as making improper and abusive or questionable purchase card acquisitions. The military services determined that many of these purchases did not directly violate existing policies. Consequently, the services modified these policies to provide a basis for disciplinary actions for similar purchases in the future.
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 help provide reasonable assurance that DOD holds cardholders and approving officials accountable for improper and abusive purchase card acquisitions, the Secretary of Defense should direct the service secretaries and the heads of DOD agencies to establish procedures to monitor the results of purchase card reviews conducted by the military services and the DOD agencies.
Agency Affected: Department of Defense
Status: Implemented
Comments: Beginning in fiscal year 2004, DOD established procedures to monitor progress towards improved controls over its Government Card Program, (including its purchase cards). DOD also established procedures to report on progress in this area as part of its Performance and Accountability (P&A) reporting. In this regard, DOD's fiscal year 2005 P&A report provided it had implemented the use of on-line statement review, approval, and certification. These actions are consistent with the DOD Government Charge Card Task Force recommendations on the use of on-line approval and certification processes to help resolve problems with late payment, while reducing interest penalties and loss of rebates. Implementing such an on-line approval process should provide the capability for review of transactions in near real-time and permit approving officials to perform continuous reviews during the billing cycle. On-line review also allows visibility into cardholder accounts throughout the billing cycle.
Recommendation: To help provide reasonable assurance that DOD holds cardholders and approving officials accountable for improper and abusive purchase card acquisitions, the Secretary of Defense should direct the service secretaries and the heads of DOD agencies to establish procedures to track whether the major commands and units are consistently applying DOD's disciplinary guidelines to those who made and/or authorized improper or abusive acquisitions.
Agency Affected: Department of Defense
Status: Implemented
Comments: DOD reported, in their 2005 Performance and Accountability Report, that it completed and implemented new disciplinary guidelines specifically targeted to purchase card misuse and aggressively pursuing prosecution of identified fraud cases. DOD also reported that it had increased awareness concerning the usage of purchase cards through training forums and enhanced training materials. Combined, these new initiatives will help DOD agencies track whether the major commands and units are consistently applying DOD's disciplinary guidelines to those who made or authorized improper acquisitions.
Recommendation: To help provide reasonable assurance that DOD holds cardholders and approving officials accountable for improper and abusive purchase card acquisitions, the Secretary of Defense should direct the service secretaries and the heads of DOD agencies to establish procedures to notify the appropriate officials at the major commands or units if DOD's disciplinary guidelines are not being consistently applied.
Agency Affected: Department of Defense
Status: Implemented
Comments: As part of DOD's 2005 Performance and Accountability report, it highlighted its efforts to implement new disciplinary guidelines specifically targeted to card misuse and aggressive pursuit and prosecution of identified fraud cases. These new guidelines include a notification process to alert officials at the major commands of inconsistent application of disciplinary guidelines. DOD also reported that they increased awareness concerning the proper usage of purchase cards through training forums and enhanced training materials.
