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

Report No. 98-I-283

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

     Date: March 2, 1998



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     U.S. Department of the Interior
     Office of Inspector General
         
         
     SURVEY REPORT

     USE OF THE GOVERNMENTWIDE PURCHASE CARD,
     BUREAU OF INDIAN AFFAIRS
                                    
     REPORT NO. 98-I-283 
     FEBRUARY 1998
  
  
  
     SURVEY REPORT
  
  
     Memorandum
  
     To:        Assistant Secretary for Indian Affairs
  
     From:      Robert  J. Williams
                Acting Inspector General
  
     Subject:   Survey Report on the Use of the Governmentwide Purchase
                Card, Bureau of Indian Affairs (No. 98-I-283)

  
     INTRODUCTION

     This report presents the results of our survey of the use of the
     Governmentwide purchase card at the Bureau of Indian Affairs. The
     original objective of the audit 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. GAO/NSIAD-96-138) 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 to
     evaluate the Program's efficiency and economy.  

     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 purchase
     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 in which the bureaus could develop their
     own card procedures. In November 1995, the Bureau implemented the
     Governmentwide Purchase Card Program and issued its own guidance in
     its "Bureau of Indian Affairs I.M.P.A.C. [International Merchant
     Purchase Authorization Card] User's Guide."
  
     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. Most single purchases were
     limited to $2,500 or the cardholder's maximum warrant authority for
     warranted cardholders. To ensure that cardholders complied with the
     Federal Acquisition Regulation and Bureau policies and procedures,
     each cardholder and approving official certified that they had
     received training on how to make small purchases. Training could be
     obtained through a formal training class, or the trainee could view a
     videotape on how to use the card. Each cardholder and approving
     official also received a copy of the Bureau Guide. The Guide
     contained instructions, requirements, and information on how to
     cancel a card, the responsibilities of the cardholder and approving
     official, restrictions on use of the card and restricted or
     unallowable purchases, requirements to verify availability of funds,
     and how to process the monthly statement. To process the statement
     each month, the cardholder was required to review it for accuracy;
     add the description of each item purchased, along with the document
     control number to be charged; and sign and submit the original
     statement, along with the sales receipts for all purchases, to the
     approving official. The approving official reviewed the information
     in the statement and attachments and compared this information with
     that contained in the Business Account Summary provided by Rocky
     Mountain Bank to the approving official of each cardholder before
     signing the statement and approving it for payment. The statement was
     then forwarded to the Branch of Payments, Division of Accounting
     Management, in Albuquerque, New Mexico, for payment.
  
     Personnel in the Branch of Payments matched the information in the
     statement with the information in the invoice received from Rocky
     Mountain Bank and recorded the document control number from the
     statement in the accounting system before the invoice was paid.
     However, the Branch of Payments could process the payment of the
     invoice without the required information by using default accounting
     codes to establish obligations.
  
     Statements that resulted in a credit balance (when the amount of
     credits totaled more than the amount of charges) were not recorded in
     the accounting system. In addition, if the cardholder noted an
     erroneous charge on the statement, the charge was paid by the Bureau
     and the cardholder was responsible for obtaining a credit for the
     erroneous charge from Rocky Mountain Bank. The cardholder was
     responsible for monitoring the statements to ensure that the proper
     credits were received from the vendor and Rocky Mountain Bank.
  
     As of February 1996, the Bureau had 316 cardholders. In fiscal year
     1995, Bureau cardholders used the Government purchase card to make
     purchases totaling approximately $2.2 million. From October 1, 1995,
     to February 29, 1996, cardholders made purchases totaling $1.8
     million.
  
     SCOPE OF SURVEY
  
     Our survey included small purchases made with the Government purchase
     card by Bureau personnel during fiscal years 1995 and 1996 (through
     February 1996). We reviewed the overall administration of the Program
     and Program records to determine whether acquisition procedures were
     followed and whether the disbursement records and the purchases made
     with the card were appropriate and supported. Our survey fieldwork
     was conducted at the Navajo and the Albuquerque Area Offices, in
     Gallup and Albuquerque, New Mexico, respectively; the Central Office
     West (including the Division of Accounting Management) and the Office
     of Trust Funds Management, both in Albuquerque; and the Eastern
     Navajo and the Fort Defiance Agencies at Crownpoint, New Mexico, and
     Fort Defiance, Arizona, respectively.
  
     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 under the circumstances.
     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 of Indian Affairs 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. 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 audit 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 Indian Affairs
     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 noted that
     funds were obligated twice for the same purchases (duplicate
     obligations), credit balances on monthly statements were not recorded
     in the accounting records, former employees' cards were not canceled,
     and periodic reviews of the purchases were not performed by
     appropriate officials. These conditions occurred because the Bureau's
     administrative procedures and controls over the obligation of funds,
     payments, cancellation of cards, and review of purchases needed to be
     improved.
  
     Duplicate Obligations
  
     Management control procedures allowed both Branch of Payments
     personnel and the cardholders to obligate funds for the same
     purchases. This occurred when invoices were received from the Rocky
     Mountain Bankcard System on which obligations had not been
     established by the cardholder or the charges shown on the invoices
     could not be matched with obligations in the accounting system. As a
     result, personnel in the Branch of Payments entered default document
     control numbers into the accounting system and established
     obligations based on the information in the invoices. However,
     duplicate obligations were created for the same purchases when either
     the cardholders routinely obligated funds after the items were
     purchased or the cardholder and the approving official obligated the
     funds upon purchasing the items but did not submit the monthly
     purchase card statements to the Branch of Payments within 10 days, as
     required by Section 3 of the Bureau Guide. We also noted that Branch
     of Payments procedures did not provide for the accounting technicians
     to contact the cardholders to obtain the statements and to resolve
     defaulted obligations. Further, cardholders and approving officials
     did not monitor their card statements and the accounting transactions
     to ensure that the transactions were recorded correctly. At the time
     of our survey, we were provided with a 15-page report on defaulted
     obligations transactions that were unresolved. The report included
     approximately 445 transactions, totaling $594,000, that were
     attributable to credit card transactions.
  
     Monthly Statements With Credit Balances
  
     The Branch of Payments did not record negative (credit) balances on
     the monthly statements in the Bureau's accounting system. A credit
     statement results when the amount of credits attributable to returns
     and adjustments exceeds the amount of purchases. The accounting
     technicians in the Branch of Payments said that these credits were
     not recorded because they were not aware, because of a lack of
     training, that negative amounts could be recorded in the accounting
     system. The Federal Financial System User's Guide provides
     instructions on how to use the Federal Financial System and describes
     how a credit voucher (negative amount) can be recorded in the Federal
     Financial System. As a result of the deficiency, the credit balances
     on the monthly statements were not recorded in the accounting system,
     which resulted in overstated expenses being reported. In addition,
     Bureau personnel could not identify the number of unrecorded credit
     transactions because the purchase card statements with the credit
     balances had been commingled and filed with the statements that had
     been processed.
  
     Cancellation of Cards
  
     We found, in our test of 14 employees who were no longer with the
     Bureau or who had transferred to another Bureau office, that the
     purchase cards had not been canceled for 8 of these employees. The
     approving officials responsible for canceling the eight cards stated
     that they were either uncertain of the procedures for canceling the
     cards or did not ensure that the actions taken resulted in the cards
     being canceled. The Bureau Guide contains instructions for canceling
     the purchase cards of employees who leave the Bureau or who are
     transferred to another Bureau office. Our test of the purchase card
     transactions for these eight employees did not disclose that any of
     the uncanceled cards had been used.
  
     Annual Review of Purchases
  
     The Bureau's warranted procurement and approving officials did not
     conduct periodic reviews of card purchases, as required by
     Departmental policy. According to Section XVI of the Departmental
     Handbook, warranted procurement officials and approving officials are
     to review and evaluate, at least annually, the adequacy and accuracy
     of the records related to Government purchase card acquisitions to
     ensure that the cards are used properly by Bureau personnel.
     According to Bureau personnel, the reviews were not performed
     (despite the Departmental requirement) because the Bureau had not
     established its own policies and procedures to conduct the periodic
     reviews of the purchase card records in its Guide.
  
     Recommendations
  
     We recommend that the Assistant Secretary for Indian Affairs:
  
     1. Ensure that cardholders and approving officials submit the purchase
     card monthly statements to the Division of Accounting Management
     within 10 calendar days, as required by the Bureau Guide.
  
     2. Require the Branch of Payments to notify the cardholders of all
     current and future defaulted accounting transactions and ensure that
     the cardholders take action to have duplicate transactions
     deobligated.
  
     3. Require that all credit transactions on the purchase card
     statements which have not been recorded and all future credit
     transactions listed on purchase card statements be identified and
     recorded in the Federal Financial System.
  
     4. Ensure that supervisors are properly trained regarding the need to
     cancel the purchase cards whenever a cardholder leaves the Bureau or
     is transferred to another Bureau office.
  
     5. Require that purchases are reviewed by warranted procurement and
     approving officials at least annually, as described in Section XVI of
     the Departmental Handbook.
  
     Bureau of Indian Affairs Response and Office of Inspector General
     Reply
  
     In the February 16, 1998, response (Appendix 1) to the draft report
     from the Assistant Secretary for Indian Affairs, the Bureau concurred
     with four recommendations and partially concurred with one
     recommendation. Although the Bureau only partially concurred with
     Recommendation 3, the alternative actions taken were sufficient for
     us to consider the recommendation resolved and implemented. Based on
     the response, we consider Recommendation 2 resolved but not
     implemented and Recommendations 1, 3, 4, and 5 resolved and
     implemented. Accordingly, the unimplemented recommendation 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 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 Bureau personnel in the conduct of our
     survey.


     APPENDIX 2

     STATUS OF AUDIT REPORT RECOMMENDATIONS
  

Finding/Recommendation
                            Reference


                          1, 3, 4, and 5


                                2


                              Status


Implemented.


Resolved; not implemented.

                         Action Required


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




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