[Survey Report on Use of the Governmentwide Purchase Card, Office of Surface Mining Reclamation and Enforcement]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 98-I-197

Title: Survey Report on Use of the Governmentwide Purchase Card,
       Office of Surface Mining Reclamation and Enforcement

Date: January 16, 1998

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United States Department of the Interior

C-IN-OSM-001-96

SURVEY REPORT

Memorandum

To:  Director, Office of Surface Mining Reclamation and Enforcement

From:     Robert J. Williams
     Assistant Inspector General for Audits

Subject:  Survey Report on Use of the Governmentwide Purchase Card, Office of Surface
Mining Reclamation and Enforcement (No. 98-I-197)

INTRODUCTION

This report presents the results of our review on the use of the Governmentwide purchase
card at the Office of Surface Mining Reclamation and Enforcement. The original objective
of the survey was to determine whether the Office of Surface Mining managed the
Governmentwide Purchase Card Program in an efficient and economical manner and in
accordance with applicable laws, regulations, and guidelines. However, during our survey,
the General Accounting Office issued the report entitled "Acquisition Reform: Purchase Card
Use Cuts Procurement Costs, Improves Efficiency" (No. GAO/NSIAD-96438). The report
stated: "Agencies have found they can support their missions and reduce costs by having
program staff use the purchase card for simple purchases. Further, agency studies have
shown that purchase card use reduces labor and payment processing costs." Therefore, based
on these statements, we revised our objective to determine whether the Program was
managed in accordance with applicable laws, regulations, and guidelines rather than
effectively and economically.

BACKGROUND

In 1989, the General Services Administration awarded a contract to Rocky Mountain
BankCard System (Rocky Mountain Bank) to provide purchase card services within the
Federal Government. The card was intended to streamline the small purchase and payment
process and to be used only for official purposes. On June 28, 1990, the Department of the
Interior issued the "Handbook for Utilization of the Governmentwide Commercial Credit
Card," under Department of the Interior Acquisition Policy Release (DIAPR) 90-35.
According to the Release, the Department's intent in issuing the Handbook was to present
the general policy within which each bureau could develop its own purchase card policy. In
October 1992, the Ofice of Surface Mining implemented the Governmentwide Purchase

 
Card Program and issued its own guidance, "Internal Procedures for Use of the
Governmentwide Commercial Purchase Card Service." According to these internal
procedures, the purchase card may be used for the acquisition of reasonably priced items
needed for mission-related purposes within an employee's official duties. The purchase card
cannot be used to obtain cash advances, travel-related tickets, meals, lodging, vehicle rentals,
or telecommunications services or equipment or to purchase nonexpendable property costing
over $50. Also, purchases cannot be split to avoid the established purchase limits, and all
items purchased must be immediately available; that is, no back ordering or partial shipment
is permitted.

Rocky Mountain Bank submits to each cardholder a monthly statement that itemizes the
cardholder's transactions. In accordance with Office of Surface Mining procedures, the
cardholder, within 5 days of receiving the statement, must review and reconcile the
transactions, certify that the transactions were recorded accurately, and provide the
appropriate fund code to which the transaction should be recorded and a clear description of
the items purchased. The cardholder is required to forward the certified statement and all
applicable supporting documentation to the cognizant approving official. The approving
official is responsible, within the next 5 days, for reviewing the monthly reconciliation of the
cardholder's statement, verifying that all purchases were made in accordance with
Government regulations, ensuring that funds were available before the cardholder made the
purchases, and sending the statements to the Office of Surface Mining's Division of
Financial Management for payment. The Division reconciles the total of each purchase card
statement with an account summary listing provided by Rocky Mountain Bank. No
statements are paid by the Division without being reviewed and approved by an approving
offkial. The Bureau has also designated three Program coordinators to manage the Purchase
Card Program Bureauwide.

As of March 1997, the Office of Surface Mining had 71 cardholders. In fiscal year 1996,
Office of Surface Mining cardholders used the Government card to make purchases totaling
approximately $244,727. From October 1, 1996, to March 3 1, 1997, cardholders made
purchases totaling $386,455, a 58 percent increase over total purchases in fiscal year 1996.

SCOPE OF SURVEY

Our survey included purchases made with the Government card by OfTice of Surface Mining
employees and included 322 monthly statements, valued at $386,455, covering the period
from October 1,1996, through March 3 1,1997. We randomly selected 45 ($41,804) of the
322 monthly statements for review. The 45 statements were selected through a statistical
random sample that consisted of 30 individual cardholders and 23 approving officials. We
reviewed overall administration of the Program and records to determine whether acquisition
procedures were complied with and whether disbursement records and purchases made on
the card were supported. Survey fieldwork was conducted at the Office of Surface Mining's
Mid-Continent Regional Coordinating Center, Alton, Illinois; the Western Regional
Coordinating Center, Denver, Colorado; and the Division of Financial Management,
Lakewood, Colorado, where the supporting documents were located. In addition, we

2

 
contacted three Program coordinators and the Rocky Mountain BankCard Center in Fargo,
South Dakota.

Our survey was made in accordance with the "Government Auditing Standards," issued by
the Comptroller General of the United States. Accordingly, we included such tests of records
and other auditing procedures that were considered necessary to accomplish our objective.
As part of our survey, we reviewed the Department's Accountability Report for fiscal year
1996, which includes information required by the Federal Managers' Financial Integrity Act,
to determine whether any reported weaknesses were within the objective and scope of our
audit. We also evaluated the Office of Surface Mining's system of internal controls related
to purchase card activities and found that, overall, the Office of Surface Mining provided
adequate management controls of the purchases made with the card. However, we did find
some areas where improvements are needed. The improvements and recommended
corrective actions are discussed in the Results of Survey Section of this report, and the
recommendations, if implemented, should improve the internal controls in those areas
discussed.

PRIOR AUDIT COVERAGE

Neither the Office of Inspector General nor the General Accounting Office has issued any
reports that specifically addressed our survey objective since the Office of Surface Mining's
implementation of the Purchase Card Program in October 1992. However, the General
Accounting Office report entitled "Acquisition Reform: Purchase Card Use Cuts
Procurement Costs, Improves Efficiency" (No. GAO/NSLAD-960138), issued in August
1996, stated, "Agencies have found [that] they can support their missions at reduced costs
by having program staff use the purchase card for simple purchases." Although the
Department of the Interior was included in the study, there were no recommendations in the
report addressed to the Department.

RESULTS OF SURVEY

We concluded that, overall, the Office of Surface Mining's Governmentwide Purchase Card
Program was managed in accordance with applicable laws, regulations, and guidelines.
Therefore, we terminated the audit at the end of the survey. However, we did note several
instances in which purchases were made of nonexpendable property over the required dollar
limit and in which the warranted contracting officers were not conducting reviews of
purchases as stated in the Department's "Handbook for Utilization of the Governmentwide
Commercial Credit Card." These conditions occurred, respectively, because established
procedures were not complied with and Departmental guidance was not incorporated into
the O&e of Surface Mining's regulations and procedures.

 
Nonexpendable Personal Property

The Office of Surface Mining's internal procedures provide that the purchase card may not
be used to purchase nonexpendable personal property that exceeds $50. However, we noted
in our sample testing of 45 purchase card statements containing 225 transactions that 5
cardholders purchased 9 items, totaling $4,740, of nonexpendable personal property which
exceeded $50. The property included a labeler, a printer, a projector, a shredder, ergonomic
equipment, and a camera. Program coordinators said that these purchases occurred because
the Office of Surface Mining's internal procedures limiting purchases for nonexpendable
personal property to $50 were "too restrictive" and that the limitation should be increased
significantly. As such, we found that approving officials approved purchases that exceeded
the $50 limit because they relied on the Program coordinators' statements that the Office of
Surface Mining was going to eliminate the $50 restriction. We believe that the Office of
Surface Mining should determine whether the $50 limit restricts the effective use of the
purchase card and adjust the value accordingly. In August 1997, the Office of Surface
Mining provided us with a draft of its proposal to change its purchase card regulation by
raising the purchase limit of nonexpendable property to $999.99 per item. Regarding the
proposed increase in the purchase limit, 1 of the 9 items that we found exceeding the $50
limit was in excess of $1,000. However, until this proposed change becomes effective, the
cardholders should comply with the established limit.

Annual Reviews

Section XVI of the Departmental Handbook states that warranted contracting officers are to
review and evaluate, at least once annually and preferably quarterly, the adequacy and
accuracy of their respective office's records related to credit card acquisitions to ensure
proper use of the credit card. However, during our testing, we noted that the Office of
Surface Mining did not have warranted contracting officers conduct annual or quarterly
reviews of purchases. Office of Surface Mining officials said that this occurred because its
internal procedures did not require this review. In our opinion, the Office of Surface Mining
should incorporate these reviews into its procedures because these reviews are an important
management oversight tool which will help reduce the risk to the Office of Surface Mining
that the purchase cards are misused and ensure compliance with Program requirements.

Recommendations

We recommend that the Director, Office of Surface Mining Reclamation and Enforcement:

  1. Expedite fmalization of the draft guidelines which increase the purchase card limit
and ensure that all cardholders and approving officials comply with established Purchase
Card Program policies and procedures for acquiring goods and services with the purchase
card.

   2.  Require that card purchases are reviewed by a warranted contracting official at
least annually, as described in Section XVI of the Departmental Handbook.

 
Bureau officials were provided a copy of the preliminary draft report on October 28, 1997.
After reviewing the preliminary draft, the Bureau offkials indicated that a formal exit
conference was not required and subsequently provided a formal written response to the
preliminary draft report on December 3,1997 (Appendix 1).

The response from the Director, Offke of Surface Mining, to the preliminary draft report
generally concurred with the finding and the two recommendations. Based on the response,
we consider Recommendations 1 and 2 to be resolved but not implemented. Accordingly,
both recommendations will be referred to the Assistant Secretary for Policy, Management
and Budget for tracking of implementation.

Since the report's recommendations are considered resolved, no further response to the
Offke of Inspector General is required (see Appendix 2).

The legislation, as amended, creating the Office of Inspector General requires semiannual
reporting to the Congress on all audit reports issued, actions taken to implement audit
recommendations, and identification of each significant recommendation on which corrective
action has not been taken.

We appreciate the assistance of Office of Surface Mining personnel in the conduct of our
audit.

 
APPENDIX 2
Page 1 of 2

To . .

Through:

From:

Subject:

United States Department of the Interior

OFFICE OF SURFACE MINING
RECLAMATION AND ENFORCEMENT
   Washington, D.C. 20240

MEMORANDUM

Response to Preliminary Draft Survey Report on Use of the Governmentwide
Purchase Card, Office of Surface Mining Reclamation and Enforcement,
(Assignment No. C-IN-OSM-00l-96)

Thank you for your memorandum of October 28, 1997 regarding the draft survey report entitled,
"Use of the Governmentwide Purchase Card, Office of Surface Mining Reclamation and
Enforcement (OSM) (Assignment No. C-IN-OSM-00l-96)."

We have completed the review of the draft survey report, and appreciate the opportunity to
provide comments to the two recommendations you offered. Our specific plans for
implementing the recommendations are explained in the attachment. The Assistant Director for
Finance and Administration will be the responsible offkial for carrying out the implement&ion
Plan .

LG. Recommendation No. 1

"Expedite finalization of the draft guidelines which increase the purchase card limit and ensure
that all cardholders and approving officials comply with established Purchase Card Program
policies and procedures for acquiring goods and services with the purchase card."

OSM Comment

On September 25, 1997, as an interim measure, the OSM cardholders were informed of the
Acting Director's decision to allow non-warranted cardholders to use the I.M.P.A.C. card to
purchase property limited to $999.99 and less. This action raised the threshold from the previous
$50.00. A copy of the September 25,1997, memorandum is attached.

OSM is currently revising the internal procedures to include current information related to the
purchase card limit, and other information necessary to improve understanding of the guidance

 
APPENDIX 2
Page 2 of 2

and compliance with its requirements.

1.G. Recommendation No. 2

Require that card purchases are reviewed by a warranted contracting official at least annually, as
described in Section XVI of the Departmental Handbook.

OSM Comment

Departmental guidance regarding annual reviews is incorporated within OSM's current internal
procedures. Specifically, OSM's delegation of authority letter to the purchase card users
incorporates reference of the Department of the Interior Policy Release (DIAPR) 90-35,
"Handbook for Utilization of Govemmenbwide Commercial Credit Card." Additionally, in
Section XII of OSM's internal control procedures (see attached copy), the Agency Program
Coordinators @PCs) are directed to perform annual audits on the purchase card usage. APCs
are, in fact, warranted contracting officials in OSM. However, OSM's internal procedures do
not specify that APCs are warranted contracting officials. OSM will clarify its internal
procedures to assure that reviews of the credit card program will be consistently performed at
least annually by a warranted contracting official.

OSM's goal is to establish clear and concise guidance which is consistently followed. OSM will
incorporate the modifications described above, and other applicable procedures in a document to
be finalized by March 1998.

If you have any questions concerning our response, please contact George Stone, Audit
Coordinator, Office of Strategic Planning and Budget, at (202) 208-7840.

Attachments

[ATTACHMENTS NOT INCLUDED BY OFFICE OF INSPECTOR GENERAL.]

 
APPENDIX 2

STATUS OF SURVEY REPORT RECOMMENDATIONS

Finding/Recommendation
c -

land2        Resolved; not implemented.

No further response to the
Offke of Inspector General
is required. The
recommendations will be
referred to the Assistant
Secretary for Policy,
Management and Budget
for tracking of
implementation.

 
ILLEGAL OR WASTEFUL ACTIVITIES
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THE OFFICE OF INSPECTOR GENERAL BYr

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