P-Card Transactions Raise Control Concerns
P-Card Transactions Raise Control Concerns
Department of Homeland Security (DHS) cardholders made thousands of transactions related to relief and rescue operations in the aftermath of the 2005 Gulf Region hurricane season. When questionable transactions came to light, the U.S. Government Accountability Office (GAO) initiated a number of audits and investigations.
Working with the DHS Office of Inspector General (OIG), GAO interviewed DHS personnel and reviewed purchase card policies and procedures to assess the level of control. The scope of the joint audit covered all DHS purchase card transactions from June 13, 2005, through November 12, 2005.
Last month, GAO testified before Congress that DHS’s weak monitoring and oversight controls over the government purchase card program exposed the federal government to potential fraud and abuse. GAO’s report details “numerous examples of potentially fraudulent, improper, and abusive or questionable transactions.”
The highly publicized beer brewing kit, a $8,000 plasma television, and tens of thousands of dollars for training at golf and tennis resorts were reported as sexy examples of government fraud for taxpayers. For the procurement community, eye-opening estimates based on a statistical samples taken by GAO and DHS OIG reveal a grim reality. Study findings include:
- 45 percent of DHS’s purchase card transactions were not properly authorized,
- 63 percent did not have evidence that goods or services were received, and
- 53 percent did not give priority to designated sources.
“Last year the [federal] government spent over $17 billion using purchase cards, with questionable monitoring,” says Scott Amey, General Counsel, Project On Government Oversight (POGO). “I had hoped that previous reports of purchase card spending on Victoria Secret merchandise, jewelry, escort services, trips to Las Vegas, and breast enhancement surgery provided the government with the proof that it needed to improve card oversight.”
It may have been previous reports, hurricane-related media coverage, or just plain good government that led to the passage of Senate Bill 457, the “Purchase Card Waste Elimination Act of 2006.” The bill sends a clear signal that policy makers are serious about purchase card reform.
Passed by unanimous consent on June 6, 2006, S. 457 “requires the Director of the Office of Management and Budget to issue guidance for, and provide oversight of, the management of micropurchases made with government-wide commercial purchase cards, and for other purposes.”
The bill’s Congressional counterpart, H.R. 5581, was referred to the Committee on Government and the Committee on Armed Services on June 9, 2006.
In the event of a disaster or daily operations, purchase controls will always be a challenge for card programs. Traditional limits on credit, number of transactions per day, time-of-day, day-of-week, etc., are difficult, if not impossible, to enforce in an emergency-response environment.
Government entities–on all levels–should approve policies and implement procedures with the goal that a controlled environment and effective management of purchase card usage will stave off fraudulent or questionable purchase card activity in an emergency environment.
One of GAO’s discoveries that I found very interesting was the fact that DHS had completed a draft Purchase Card Manual that contained effective control procedures. Due to disagreements over implementation, the manual was not finalized, and cardholders were left to follow different sets of procedures. Who knows if implementation of the manual would have made an marked difference in a large-scale rescue and relief situation? If your manual is sitting on a shelf somewhere awaiting approval, you might want to take action.
To download the GAO report, “Control Weaknesses Leave DHS Highly Vulnerable to Fraudulent, Improper and Abusive Activity,” visit: www.govinfo.bz/5966-290. For information on S. 457 and H.R. 5581, visit: www.govinfo.bz/5966-291.
