Federal employees waste millions on unauthorized credit-card purchases

The recommendation comes after release of a new GAO report that analyzed governmentwide purchase card programs to identify fraudulent, improper and abusive practices.

The federal government spends billions annually through its purchase card programs, acquiring millions of items from paper and pencils to computers and making payments on government contracts for goods and services.

Using a statistical sample of transactions over $50 from July 1, 2005, through June 30, 2006, GAO estimated that nearly 41 percent of almost $14 billion in transactions had not been properly authorized, or that when the good or service was delivered, a person other than the cardholder received and signed for it.

Improper purchases included subscriptions to Internet dating services, custom-made suits, video iPods, lavish dinners, car loan and mortgage payments, and other questionable items.

When auditing the $2.7 million sample of assets procured with purchase cards, including digital cameras, laptops, cell phones and video iPods, the GAO found items to be missing, stolen, or appearing to be acquired for personal use valued at over $1.8 million.

Procedural abuses included bypassing competitive sourcing, circumventing limits on convenience checks by splitting purchases, using cards for personal expenditures, improper cash advances, excessive entertainment costs and purchasing higher-end items over lower-cost models with basic requirements.

The 61-page report, GAO-08-333, acknowledges that “the governmentwide failure rate is unacceptably high” and that “weak internal controls over proper authorization and independent receipt of purchase card acquisitions expose the government to fraudulent, improper and abusive purchase card activity and loss of assets.”

The GAO made 13 recommendations to the Office of Management and Budget (OMB) and the General Services Administration (GSA) to strengthen purchase card controls, especially in the areas of convenience checks and property; strengthen monitoring and oversight of purchase cards; and impose financial liability for unauthorized purchases and disciplinary action against the purchase card abusers.

Among the recommendations:

–That the director of OMB remind agencies that internal controls over purchase card activities extend to the use of convenience checks; request that cardholders, approving officials or both reimburse the government for unauthorized or erroneous purchase card transactions; officials requesting the purchase of a personal item by a cardholder should reimburse the government for the cost of improperly purchased items.

–That the administrator of GSA provide agencies guidance on how cardholders can document independent receipt and acceptance of items obtained with a purchase card; provide guidelines regarding what should be considered sensitive and pilferable property that can be easily converted to personal use and to notify the property accountability officer to promptly record such property; remind agencies to instruct cardholders to obtain prior approval for purchase transactions under the micropurchase threshold of $2,500; minimize issuance of convenience checks on purchase card accounts and cancel cardholders’ privileges if they use convenience checks improperly; and more.

OMB has agreed with its recommendations; GSA has partially agreed.