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

Report No. 98-I-253

Title: Survey Report on the Use of the Governmentwide Purchase
       Card, Bureau of Reclamation

Date: February 17, 1998

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C-IN-BOR-003-96

United States Department of the Interior

OFFICE OF INSPECTOR GENERAL
    Washington, D.C. 20240

SURVEY REPORT

Memorandum

To:  Commissioner, Bureau of Reclamation

From:   Robert J. Williams
     Acting Inspector General

Subject: Survey Report on the Use of the Governmentwide Purchase Card, Bureau of
Reclamation (No. 98-I-253)

INTRODUCTION

This report presents the results of our survey of the use of the Govemmentwide purchase
card at the Bureau of Reclamation. The original objective of the survey was to evaluate the
economy and efficiency of the Bureau's Governmentwide Purchase Card Program and to
determine whether the Program was managed 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. GAOINSLAD-96438) on August 6, 1996. The report stated: "The
use of purchase cards for small purchases can reduce agencies' mission support, labor, and
payment processing costs 50 percent by moving simple purchases from procurement offices
to program offices and consolidating payments. In addition, some agencies found that
purchase card use has helped them absorb the impact of administrative staff reductions and
improve service delivery." 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 economically and efficiently.

BACKGROUND

The Bureau of Reclamation's Engineering and Research Center and its Division of
Acquisition and Property Management participated in the Department of Commerce's
Bankcard Pilot Program, which was started in 1987 and ended in September 1989. Having
success with the pilot Bankcard Program, the Bureau implemented the Bankcard Program

 
Bureauwide in October 1989, when the General Services Administration awarded a contract
to Rocky Mountain BankCard System 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 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 February 1996,
the Bureau issued its own guidance titled "Bureau of Reclamation Governmentwide Purchase
Card Handbook." According to the Reclamation Handbook, the purchase card may be used
for the acquisition of supplies and services using small purchase procedures except for some
specified categories, such as meals, lodging, and telecommunications equipment.

The Bureau designated an Agency Program Coordinator to manage the Purchase Card
Program Bureauwide. To assist the Agency Program Coordinator in administration of the

regions.2 The cardholders were selected by Bureau managers and supervisors or approving
officials. Each authorized cardholder was issued a Delegation of Authority, which identified
a maximum dollar amount for each single purchase and a total dollar amount for all
purchases per month that the cardholder could make. Single purchases for nonprocurement
personnel were limited to $2,500, called micro-purchases, and procurement personnel were
limited to their current warrant authority. 3 Each cardholder and approving official also
received training on how to make purchases and a copy of the Reclamation Handbook. The
Reclamation Handbook contains instructions, requirements, and information such as (1) the
responsibilities of the Agency Program Coordinator, the Regional Program Coordinator, the
cardholder, and the approving official; (2) restrictions on the use of the purchase card;
(3) emphasis on the need to ensure that funds are available to pay for purchases; and (4) the
requirement that Regional Program Coordinators or their designees should perform annual
reviews.

Since September 1996, the Accounts Payable Team, within the Bureau's Finance and
Accounting Services, has reviewed invoice amounts and cost data from the Rocky Mountain
Bankcard System. To promote timely payments to the vendors, the Team certifies and pays
invoices before the monthly billing statements are received from the cardholder based on the

Region 3 had two additional Program Coordinators: one in the Yuma Area Offke and one in the
Phoenix Area
Office.

2The Bureau uses "regions" in its internal accounting and management information systems to refer
to the
following offices: Region 1, Pacific Northwest Regional Offke; Region 2, Mid-Pacific Regional
Offke;
Region 3, Lower Colorado Regional Offke; Region 4, Upper Colorado Regional Offke; Region 6,
Great Plains
Regional Office; Region 7, Administrative Service Center; Region 8, Reclamation Service Center;
and
Region 9, the Washington Offke (there is no Region 5.)

3Purchase card warrant authority amounts range from $5,000 to $100,000.

2

 
information obtained through an interface with Rocky Mountain Bankcard System. Once
the Team receives the statement from the cardholder, it enters the cost data from the
cardholder's statement into the Federal Financial System, which compares this data with data
in the Rocky Mountain Bankcard System. The matching process is used to verify the
accuracy of the invoice amounts. In those instances where items were initially paid for
through the interface by the Team but were then disputed by the cardholder, the cardholder
and the approving official were responsible for resolving the issue and/or ensuring that the
Rocky Mountain Bankcard System credited the Bureau for those items.

The use of the purchase card within the Bureau has increased significantly since fiscal year
1995. In fiscal year 1995, 778 cardholders made purchases totaling approximately
$11.5 million. In fiscal year 1996,980 cardholders made purchases totaling approximately
$20.4 million. For the first 9 months of fiscal year 1997, 1,126 cardholders had made
purchases totaling approximately $20.2 million.

SCOPE OF SURVEY

Our survey, which was conducted from March 1996 through June 1997, included micro-
purchases made by Bureau personnel with the Government purchase cards during fiscal years
1995, 1996, and 1997 (through June 1997). We judgmentally selected four of the higher
volume months for our review, which had activity of 241 statements, totaling 1,644
transactions, with a value of $842,640. We also reviewed Program records for 212
cardholders to determine whether acquisition procedures were complied with and whether
the disbursement records and the purchases made on the purchase cards were supported. Our
survey fieldwork was conducted at the Reclamation Service Center and the Administrative
Service Center, in Denver, Colorado; the Upper Colorado Regional Office, in Salt Lake City,
Utah; the Provo Projects Office, in Provo, Utah; the Weber Basin Job Corps Center, in
Ogden, Utah; and the Flaming Gorge Field Station, in Dutch John, Utah. In addition, with
the assistance of the Bureau Agency Program Coordinator, we contacted all eight of the
Bureau's regional offices and obtained information concerning performance of the annual
review of the credit card transactions required by the Reclamation Handbook.

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,
and determined that none of the reported weaknesses were within the objective and scope of
our audit. We also evaluated the Bureau's system of internal controls related to purchase
card activities and found that, overall, the Bureau provided adequate management controls
of the purchases made with the card. However, we did find some areas in which
improvements were 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.

3

 
PRIOR AUDIT COVERAGE

Neither the Office of Inspector General nor the General Accounting Office has issued any
reports during the past 5 years that specifically addressed our survey objective. However, as
discussed previously, the General Accounting Office's August 6, 1996, report stated that
agency studies revealed that use of the purchase card reduced labor and payment purchasing
costs. Although the Department of the Interior was included in the study, no findings were
directly addressed to the Department.

RESULTS OF SURVEY

We concluded that, overall, the Bureau of Reclamation's Govemmentwide 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 noted several
instances of noncompliance with some of the Program's guidelines. Specifically, we noted
deficiencies in 32 (13 percent) of our judgmental sample of 241 credit card statements that
we tested. These deficiencies consisted of cardholders splitting purchases to avoid the
$2,500 purchase limit and the Regional Program Coordinators not conducting annual
evaluations of credit card transactions at three of the eight regions contacted. These
conditions occurred because established procedures were not complied with.

Split Purchases

The Departmental Handbook (Section VII) and the Reclamation Handbook (Section IV,
Part G) prohibit card purchases from being split to avoid the $2,500 single purchase limit.
According to these guidelines, purchases that exceed the $2,500 limit should be made by
using other procurement methods, such as the mandatory Federal Supply Schedules.
However, we identified 135 of the 1,644 transactions tested, totaling $260,840, involving 27
cardholders, that we believe were split. For example, one $183 1 transaction for 12 computer
hardware items was followed on a cardholder's statement with an identical $1,83 1
transaction for the same type of computer hardware from the same vendor on the same day.
Similarly, two days later, one $1,804 transaction for two computer monitors from the same
vendor was followed with a $902 transaction for one more computer monitor on the same
cardholder's statement. Of the 27 cardholders, we were able to contact 8 cardholders, who
provided reasons for the split purchases. The cardholders stated the following:

  - Procurement officials had encouraged the cardholders to make all purchases by using
the card instead of the regular procurement process because the latter action took more time.

  - The procurement process was "slow" and "cumbersome" and the final outcome would
be a contract or purchase order placed with the same firm that the cardholder used.

4

 
  - The purchases were "within the spirit of reinventing government" in that cardholders
would be "cutting through red tape" to make their own decisions.

- The computer hardware sales prices were "bargains that should be taken advantage
of' and there would be a need for the large numbers of computer hardware.

Although these reasons may have some merit, procedures in the Departmental and
Reclamation Handbooks were developed to establish controls for the use of the purchase
cards, and the lack of compliance with these procedures increases the risk to Bureau
management that the cards will be misused and Government funds will be mismanaged.

Annual Reviews

The Departmental Handbook (Section XVI) and the Reclamation Handbook (Section III,
Part D) require that cardholder files and office records related to credit card acquisitions be
reviewed annually for accuracy. However, the Agency Program Coordinator told us that
Regions 1 (Pacific Northwest), 3 (Lower Colorado), 4 (Upper Colorado), 6 (Great Plains),
and 7 (Administrative Service Center) performed the required reviews but that only the
Program Coordinators in Region 3 submitted a copy of the findings to the Agency Program
Coordinator. In our opinion, these reviews are necessary to ensure that the Program is
properly managed in that the reviews can identify deficiencies, such as splitting purchases,
which, in addition to our review, was identified as a finding in the reviews completed by two
of the Regional Program Coordinators. The Agency Program Coordinator stated that she
was not aware that the Departmental and Bureau Handbooks required annual Bureauwide
reviews. In addition, Regional Program Coordinators and their designees indicated that they
did not have sufficient time to review purchase card-related matters.

Recommendations

We recommend that the Commissioner, Bureau of Reclamation:

  1. Direct all cardholders and approving officials to comply with the established
Purchase Card Program policies and procedures, emphasizing that purchases are not to be

split.

2. Direct the Regional Program Coordinators or their designees to complete the

annual reviews of purchases made with the Government purchase card and to submit
documentation of these reviews to the Agency Program Coordinator.

Bureau of Reclamation Response and Office of Inspector General Reply

In the January 22, 1998, response (Appendix 1) to the draft report from the Commissioner,
Bureau of Reclamation, the Bureau concurred with both recommendations. Based on the
response, we consider the recommendations resolved but not implemented. Accordingly,

5

 
the recommendations will be referred to the Assistant Secretary for Policy, Management and
Budget for tracking of implementation, and no further response to the Office 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 the Bureau of Reclamation personnel in the conduct of our
survey.

 
APPENDIX 1
Page 1 of 2

IS KEPI.J' REFtK T'f )

D-5010
ADM-8.00

United States Department of the Interior

To . .

From:

Subject:

MEMORANDUM

Office of Inspector General
Attention: Assistant
Eluid L. Martinez
Commissioner

General for Audits

           *

Draft Audit Report on
Reclamation, C-IN-BOR-003-96

ide Purchase Card, Bureau of

The Bureau of Reclamation (Reclamation) offers the following comments in response to the
recommendations in the subject report.

1

Direct all cardholders and approving officials to comply with the established Purchase Card
Program policies and procedures, emphasizing in particular that purchases are not to be
 
split .

Concur. The Department of the Interior Handbook for Utilization of the
Governmentwide Commercial Credit Card (DIAPR 90-35) and the Bureau of
Reclamation Governmentwide Purchase Card Handbook state that purchases made
using the credit card shall not be split or fragmented to avoid the single purchase limit.
However, as a result of your findings and our own internal reviews, Reclamation
believes additional direction is warranted and a memorandum to this effect will be
issued. Approving officials will be directed to continue to review cardholder purchases
to ensure compliance with the requirements of the Federal Acquisition Regulation,
Department of the Interior Acquisition Regulation, Reclamation Acquisition Regulation
System, and the procedures stated in the Reclamation Handbook.

The responsible official is the Bureau Procurement Chief. The target date for issuing
the memorandum is February 20, 1998.

 
APPENDIX 1
Page 2 of 2

Direct the Regional Program Coordinators or their designees to complete the annual
reviews of purchases made with the Government purchase card and to submit

documentation (

Concur. D
cardholder

APR 90-35 directs the Regional Program Coordinators to review
files at least once annually to ensure proper utilization of the credit card

f these reviews to the Agency Program Coordinator.

and to ensure the adequacy and accuracy of their office's records related to credit card
acquisitions.

Reclamation's Handbook also requires that cardholder files be reviewed annually;
however, in order to provide additional guidance to Regional Program Coordinators,
the Handbook will be revised to include procedures for conducting these annual
reviews, documenting findings, and submitting a copy of findings to the Agency
Program Coordinator.

The responsible official is the Bureau Procurement Chief. The target date for revising
the Handbook is March 30, 1998.

If you have any questions or require additional information, please contact Luis Maez at
(303) 236-3289, extension 245.

cc:  Assistant Secretary - Water and Science, Attention: James Hess

 
APPENDIX 2

STATUS OF AUDIT REPORT RECOMMENDATIONS

Finding/Recommendation
    Reference

1 and 2

Status          Action Required

Resolved; not implemented.

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

9

 
ILLEGAL OR WASTEFUL ACTMTIES
   SHOULD BE REPORTED TO       8

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