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Statement by
Marc R. Weisman
Acting Deputy Assistant Secretary, Office of Grants and Acquisition Management, Department of Health and Human Services
on
The Usage of the Government Credit Cards for Procurement Purchasing at the Department of Health and Human Services (HHS)
before the
House Committee on Energy and Commerce Subcommittee on Oversight and Investigations

May 1, 2001

Introduction:

Good morning Mr. Chairman and Members of the Subcommittee. I appreciate the opportunity to participate in today's hearings on the usage of the Government Credit Cards for procurement purchasing at the Department of Health and Human Services (HHS). I direct the Office of Grants and Acquisition Management a component of which is the Office of Acquisition Management, which office exercises functional management of purchasing activities within the Department.

Background:

HHS procurement spending averages about $5.5 billion dollars each fiscal year. In fiscal year 2001, HHS obligated approximately $338 million dollars or about 8% of our procurement dollars through the use of purchase credit cards. A total of 680,449 purchase transactions were accomplished in fiscal 2001. The average dollar amount per transaction was $500. About 7,500 purchase cards are currently issued.

Implementation of the purchase credit card program at HHS has enabled the acquisition workforce to absorb a decrease of over 300 full time positions since passage of the acquisition streamlining act of 1994. Saving from this workforce reduction and administrative cost saving associated with the reduction of paper-based order transactions, invoicing and payments is estimated at over $40 million dollars a year based on current purchase usage volumes. In addition, approximately $1 million dollars was rebated to HHS in fiscal 2001.

The HHS PURCHASE Credit Card Program:

In conformance with Secretary Thompson's vision of "one Department" my office and the HHS Inspector General will be working together to incorporate common controls over the purchase program throughout HHS. This will be necessary because, authorization and implementation of the purchase program occurred at a time when HHS was undergoing a movement towards de-centralization of its management controls. The Office of Acquisition Management did issue general policy guidance to all HHS components when the purchase card program first began and also required that each component put its own, more detailed procedures in place. While all of our operating components provide training and oversight of the program, their methodologies differ. It is the Office of Acquisition Management which interfaces with the bank when our components experience problems and collects management data for the whole Department.

As I mentioned, the Office of Acquisition Management began establishing policies for use of government purchase cards and user training material in the late 1980s. From then to the present our program has focused on six key elements:

• Responsibilities of Card Holders
• Responsibilities of Approving Officials
• Training
• Point-of-Sale Controls
• Audit and Review
• Problem Notification Procedures

The Office of Acquisition Management has not conducted an independent review of the HHS purchase card program since the passage of the procurement streamlining legislation in 1994. However, even though the 1994 act which created "micro-purchases" does not require program reviews, the Office of Acquisition Management (OAM) did work with the General Accounting Office on its August 1996 report on Purchase Card Use. That report established that the purchase program has enabled agencies to support missions at reduced costs and time, and recommended more effective acquisition government-wide guidance on usage of the card. And in1998, OAM assisted the then Inspector General in her review of the purchase card program at the Food and Drug Administration which report found, "...that FDA followed general guideline provided by the General Services Administration for the use of credit cards and designated and implemented adequate management controls over their use...."

Training:

All of our operating divisions require training prior to the issuance of a card to a card holder. Our training was developed in house, but may also include interactive computer training based on a CD-ROM developed by a strategic partnership between HHS, the General Services Administration, and the Federal Acquisition Institute. Instruction is provided by procurement personnel from our operational offices. Approving officials are also required to take the training.

Purchase controls:

The transactions of each card holder are reviewed monthly by an approving official. Each operating division conducts a manual review of the transactions at a level above the approving official. In some cases this manual review is aided by computer software which assists in targeting specific reviews by looking for such things as specific vendor names and multiple transactions at the same vendor in short time frames.

All HHS purchase Cards have "point-of-sale" electronic limitations such as blocking of certain merchant categories; imposing a monthly purchase ceiling; and single purchase dollar controls. These controls for merchant categories are necessarily broad in many cases. It is also the case that, while airlines, hotels and restaurants are generally off-limits to purchase card transactions, renting a hotel conference room for a training class would be legitimate transaction. (While micro-purchase authority is authorized to $2,500 some HHS cards have lower single purchase limits.) Lifting or changing these controls may only be authorized by the procurement official who has cognizance. (US Bank refers to this person as the Agency Program Coordinator or APC.)

Problem Notification Procedures:

The Centers for Disease Control, the Indian Health Service, the National Institutes of Health, and the Center for Medicare and Medicaid Services manage the purchase program in these operational divisions. Our program Support Center manages the program for all other components of the Department.

At the CDC the finance office has responsibility for audits of cardholder accounts. However, the procurement office is notified of any problematic findings. Procurement officials have the lead at the other four components. Most auditing is conducted on a random basis and done monthly; however, the NIH has a small number of card holders who have purchasing authority above the micro-purchase threshold and these cards are subject to a 100% monthly review.

All components suspend cards when deemed necessary. Notification of the Inspector General is not now automatic and is a judgement call by the procurement official.

Conclusion:

In preparing for this testimony, I had occasion to review past records on the purchase card program and I would note that the program has grown a generation since 1994 when HHS had only 450 cards in use, to today's 7,500 card portfolio.

I appreciate this opportunity to participate in efforts to bring about improvements to HHS programs and operations. The purchase card is an important business process tool. Its process efficiencies have eliminated millions of associated administrative actions which would be necessary not only for the issuance of the orders, but also which would be needed to process the invoices and payments associated with these orders.

I concur with our Inspector General and her conclusion that HHS currently lacks centralized policy, and I look forward to working with the Inspector General and all other appropriate parties in continued efforts to ensure proper and productive use of this purchasing tool.

Thank you for the opportunity to appear before you today.

I welcome your questions.