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

Report No. 98-I-316

Title: Survey Report on the Use of the Governmentwide Purchase
       Card, U.S. Geological Survey

     Date: March 18, 1998




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

     SURVEY REPORT
         
         
     USE OF THE GOVERNMENTWIDE PURCHASE CARD,
     U.S.GEOLOGICAL SURVEY
                            
     REPORT NO. 98-I-316
     MARCH 1998
  
                              
                              
                              
     SURVEY REPORT
                                 
     Memorandum
   
     To:     Director, U.S. Geological Survey
  
     From:   Robert J. Williams
             Acting Inspector General          
                                                  
     Subject:     Survey Report on the Use of the Governmentwide
                  Purchase Card, U.S. Geological Survey (No. 98-I-316)
  
  
     INTRODUCTION
  
     This report presents the results of our survey on the use of the
     Governmentwide purchase card at the U.S. Geological Survey in Reston,
     Virginia. The original objective of the review was to determine
     whether the Geological Survey 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-96-138) on August 6, 1996. The
     report stated: "Agencies have found they can support their missions
     at reduced 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." Based on these
     statements, we revised our objective to address the management of the
     Geological Survey's Program rather than the Program's efficiency and
     economy.
  
     BACKGROUND
  
     In 1989, the General Services Administration awarded a contract to
     Rocky Mountain BankCard System to provide credit card services within
     the Federal Government. The card was intended to streamline the small
     purchase and payment processes. The BankCard System issued
     instructions on the proper use and approval of items purchased with
     the credit cards as follows: (1) Cardholder Instructions for the Use
     of the Governmentwide Credit Card and (2) Approving Official
     Instructions for the Use of the Governmentwide Credit Card. In April
     1990, the Geological Survey implemented the Governmentwide Purchase
     Card Program. 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. In December 1994, the Geological Survey issued its guidance in
     the revised "Supplemental Bankcard Handbook," which augmented the
     cardholder instructions issued by the Bankcard System and by the
     Department of the Interior.
  
     At the Geological Survey, the purchase cards are used primarily for
     the acquisition of supplies and services costing $2,500 or less. The
     Geological Survey's Office of Acquisition and Federal Assistance is
     responsible for administering and managing the Governmentwide
     Purchase Card Program.
  
     On a monthly basis, the BankCard System submits invoices to the
     Geological Survey's Office of Financial Management, in Reston. The
     monthly invoices represent the aggregate credit card amounts for each
     Geological Survey division. In addition, the BankCard System submits
     to each cardholder a monthly statement that itemizes the cardholder's
     transactions. Upon receipt of the monthly cardholder statement, the
     cardholder is required to reconcile the statement with the
     transaction documentation and certify that all purchases listed on
     the statement are accurate and were made for official Government
     purposes. The cardholder is required to forward the certified
     statement and all supporting documentation to the cognizant approving
     official. The approving official is required to review the
     cardholder's statement and supporting documentation and to certify
     that the cardholder's purchases were made for valid Government
     purposes. The BankCard System also submits to each approving official
     a statement that lists monthly purchase amounts made by all
     cardholders assigned to the approving official.
  
     The use of the purchase card within the Geological Survey has
     increased significantly since the first year the Program was started
     in 1990 and has continued to increase to approximately 3,000 purchase
     cards nationwide as of September 30, 1996, as shown in the following
     table:
  
  
                                 
                             1990        1994          1995           1996     
 
     Purchase Cards             100        1,200         2,100         3,000
     Purchase Transactions      900       29,000        57,000        84,000
     Purchase Amount       $129,000   $3,660,000   $11,130,000   $21,200,000
  
  
     SCOPE OF SURVEY
  
     Our survey included purchases made with the Government purchase card
     by Geological Survey employees in Reston during the 5-month period of
     October 1, 1995, through February 28, 1996. We judgmentally selected
     462 purchases, totaling $313,244, made by 32 cardholders and reviewed
     by 11 approving officials. These cardholders and approving officials
     were selected based on the highest dollar value transactions for the
     period reviewed. 
     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. In
     planning our survey, we reviewed the Secretary's Annual Statement and
     Report to the President and the Congress, which is required by the
     Federal Managers' Financial Integrity Act, for fiscal year 1995 and
     determined that there were no reported weaknesses related to the
     objective and scope of our survey.
  
     We also evaluated the Geological Survey's system of internal controls
     related to purchase card activities and found weaknesses in the areas
     of approving officials' reviews, card security, card usage, purchase
     limits, and telephone order logbooks. We also determined that the
     Geological Survey did not provide adequate oversight of purchases
     made with the card. These weaknesses and the recommended corrective
     actions are discussed in the Results of Survey section of this
     report. The recommendations, if implemented, should improve the
     internal controls in these areas.
  
     PRIOR AUDIT COVERAGE
  
     Neither the Office of Inspector General nor the General Accounting
     Office has issued any reports during the past 5 years concerning the
     Geological Survey's management of the Governmentwide purchase card
     that specifically addressed our revised 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 processing costs. Although the
     Department of the Interior was included in the study, no findings
     were directly related to the Department.
  
     RESULTS OF SURVEY  
     
     We found that for 138 ($98,879)
     of the 462 ($313,244) transactions reviewed, the Geological Survey's
     approving officials either did not certify the cardholders'
     statements or certified the statements without obtaining vendor
     invoices or itemized receipts to verify that the items purchased were
     for valid Government purposes. We also found that for 193
     transactions, totaling $193,036, cardholders either allowed
     noncardholders to use their card, did not maintain telephone
     logbooks, or split orders.  In addition, we found that 7 of the 32
     cardholders reviewed did not adequately safeguard their purchase
     cards. The instructions and procedures for the use of the
     Governmentwide purchase card are included in the Bankcard System's
     Cardholder Instructions and Approving Officials Instructions, the
     Department's "Handbook," and the Geological Survey's "Handbook." The
     deficiencies occurred because (1) approving officials did not perform
     all of the required review procedures; (2) the Office of Acquisition
     and Federal Assistance did not perform periodic reviews of the
     Purchase Card Program; and (3) the Geological Survey did not provide
     adequate training to cardholders and approving officials in the areas
     of acquiring, documenting, and reviewing purchases. As a result, the
     Geological Survey did not have reasonable assurance that improper
     uses of the purchase cards would be prevented or detected in a timely
     manner.
  
     Approving Officials' Review
  
     Section IV of the Department's "Handbook" states that the approving
     officials are responsible for (1) maintaining a current listing of
     all cardholders under their purview, (2) reviewing cardholders'
     transactions and performing a monthly reconciliation and
     certification of each cardholder's statement against the monthly
     statement submitted to the approving officials by the Bankcard
     System, (3) verifying that all transactions were made for valid
     Government purchases, and (4) ensuring that all goods and/or services
     have been received.  After certifying that the cardholders'
     statements are accurate, the approving official is to forward the
     original statements to the finance office.  In order to adequately
     verify that the purchases made by the Geological Survey's cardholders
     are valid and for official Government purposes, approving officials
     need to (1) review the approving officials' statements to ensure that
     all cardholders submitted their statements; (2) review all of the
     documentation, such as invoices or itemized receipts, required by the
     Department's "Handbook" and by the Geological Survey's "Handbook";
     and (3) ensure that a description of the items purchased is annotated
     on the statement by the cardholder and that the statement is in
     agreement with the description on the invoice or the itemized
     receipt.
  
     We found that for 138 (30 percent) of the 462 transactions we
     reviewed, all of the 11 approving officials either did not certify
     the cardholders' statements or certified the cardholders' statements
     without documents such as vendor invoices or itemized receipts to
     verify that the purchases were valid and for official Government use.
     In addition, 6 of the 11 approving officials did not reconcile the
     cardholders' statements to the corresponding approving officials'
     statements to ensure that all cardholders who made purchases
     submitted their statements. Examples of the lack of certification
     and/or documentation and the lack of the approving officials'
     reconciliation efforts are as follows:
  
     - A cardholder's statement containing 10 transactions, valued at
     $3,218,  was paid, even though the approving official in the Geologic
     Division had not certified that the purchases were valid and
     necessary. According to the description provided by the cardholder on
     the statement, these purchases consisted of items such as computer
     memory, plotter supplies, and software. The approving official stated
     that she did not sign this particular statement because the
     cardholder never provided the statement to her for review and that
     without this statement, there was no way of knowing that the
     cardholder had used the purchase card. However, this discrepancy
     would have been identified if the approving official had reviewed and
     reconciled the cardholder's statement to the approving official's
     statement.
  
     - An approving official in the Geologic Division approved 21
     transactions, valued at $19,044, even though the cardholders did not
     provide vendor invoices or itemized receipts in support of the
     purchases. In addition, the cardholders had not provided a detailed
     description for $17,018 of the $19,044 in transactions, as required
     by the Geological Survey's "Handbook." According to the descriptions
     provided by the cardholders for the remaining purchases of $2,026,
     items such as computer disks, laboratory supplies, and software were
     purchased. The approving official stated that he instructed his
     secretary to review the transactions and that, based on her review,
     he signed the cardholders' statements. The secretary, however, did
     not compare the cardholders' statements with the invoices and
     receipts supporting the statements.  In addition, the approving
     official told us that he did not reconcile the approving official's
     statement with cardholders' statements because the approving
     official's statement was "redundant" and "did not really serve any
     purpose."
  
     - A Geologic Division approving official who approved 13 transactions,
     valued at $8,665, that did not have supporting invoices and receipts
     had delegated the review of cardholder statements to her
     Administrative Operations Assistant. According to the description
     provided by the cardholder on the statements, the items purchased
     included laptop computers, a modem, and various software. The
     approving official signed the statements based on the Assistant's
     review. The approving official told us that she did not compare the
     approving official's statement with the cardholders' statements
     because by the time she received the approving official's statement,
     the cardholders' statements had already been reviewed and sent to the
     finance office.
  
     - A Water Resources Division employee who was not an approving
     official certified a statement for purchases totaling $1,067.
     Although the Geological Survey "Handbook" allows a "responsible
     employee" to certify the cardholders' statements when the approving
     officials are not available, the Division employee stated that he had
     not received any purchase card training and was unaware of the
     certification requirements. The employee also acknowledged signing
     cardholders' statements on more than one occasion. In addition, the
     approving official informed us that he did not reconcile the
     approving official's statement with the cardholders' statements.
  
     By not reviewing itemized receipts and invoices and by not reconciling
     the approving official's statement with the cardholders' statements,
     inappropriate purchases could be made and not be detected. For
     example, although the Geological Survey's Doraville, Georgia, office
     was not included in our review, an August 1996 investigation
     conducted by the Assistant Inspector General for Investigations found
     that a cardholder in the Doraville office used the Government
     purchase card for personal use and was subsequently criminally
     prosecuted and found guilty. The items purchased over a 9-month
     period totaled $25,633 and included food, clothing, gasoline, toys,
     cellular telephone service, videos, and computer games. Whenever the
     approving official asked the cardholder whether the purchase card was
     used, the cardholder stated that it had not been used. However, if
     the approving official's statement had been reviewed and reconciled
     as required, the approving official would have known in the first
     month of the card's use that the card had been used for personal
     items.
  
     Other Deficiencies
  
     Geological Survey cardholders did not follow purchase card procedures
     for 193 purchases, totaling $193,036.  Specifically, we found that
     (1) individuals who were not authorized cardholders made five
     purchases, (2) the purchase card limit was exceeded on 39 purchases,
     and (3) cardholders did not always maintain a written logbook for 149
     purchases made by telephone. As a result, the potential existed for
     items to be purchased that were not for valid Government purposes.
  
     Unauthorized Use.  The Department's "Handbook" (Section X) and the
     Geological Survey's "Handbook" (Section 4A(1)) require that the
     purchase card be used only by the cardholder. However, we found that
     for five purchases, totaling $9,560, the sales receipts were signed
     by three individuals who were not the authorized cardholders. The
     Chief, Branch of Facilities Management, said that in those instances,
     receipts were signed in the absence of the cardholder and with the
     knowledge that the cardholder had previously authorized and placed
     the call for the purchases. The Chief further stated that he would
     establish guidelines which stated that the only signature acceptable
     was that of the authorized cardholder. In our opinion, employees who
     are not cardholders but who receive delivery of purchases ordered by
     telephone should be instructed to print the words "phone order" on
     the sales draft and sign their name and "received by" next to their
     signature. The receipt should then be provided to the cardholder for
     use in reconciling the monthly statement.
  
     Split Purchases. The Department's "Handbook" (Section VII) and the
     Geological Survey "Handbook" (Section 4(6))  state that purchases
     should not be split to avoid the single purchase limit. The single
     purchase limit established by the Geological Survey was $2,500.
     However, we found that the cardholders split 16 orders for similar
     items from the same vendors into 39 orders, totaling $65,268. The
     total amount paid to each of the vendors for the items exceeded the
     single purchase limit of $2,500. For example, an employee in the
     Information Systems Division requested that a cardholder purchase
     computer equipment. On September 22, 1995, the cardholder placed two
     separate orders with the same vendor for the equipment in the amounts
     of $2,424 and $290, respectively. For another purchase, a cardholder
     made separate purchases for two computers of $2,152 each from the
     same vendor. The requests for the purchase of these two computers
     were received on the same day; however, the cardholder placed the
     order with the vendor on two separate days.
  
     Telephone Order Logbooks. The Department's "Handbook" (Attachment C)
     and the Geological Survey's "Handbook" (Section 4A(5)) require that
     purchase card users maintain a logbook of all transactions made by
     telephone. Each purchase card transaction is to be entered in the
     logbook at the time the order is placed. The logbook is maintained so
     that individual and cumulative costs of orders can be tracked to
     ensure that the delegated monthly limit is not exceeded. The monthly
     limit is the amount each cardholder may spend in a 30-day period and
     is established by the approving official based on anticipated usage
     and budgetary considerations. The monthly limit for the cardholders
     reviewed ranged from $5,000 to $25,000.  We found that cardholders
     did not maintain a logbook for 149 telephone purchases, valued at
     $121,126. We concluded that because cardholders did not follow
     purchase card procedures, there was an increased risk that the card
     could be used for personal use and that purchase limits could be
     exceeded.
  
     Card Security
  
     The Department's "Handbook" (Section X) states that purchase cards
     should be safeguarded in the same manner as cash. The Geological
     Survey's "Handbook" states that protecting the card from loss or
     theft is the responsibility of the cardholder. The Geological
     Survey's "Handbook" further states that the card should be kept in a
     safe place.
  
     We found that 7 of 32 cardholders in our sample were not properly
     safeguarding their purchase cards in that they kept their cards in
     unlocked desk or file cabinet drawers. In addition, one cardholder
     posted the purchase card number on a bulletin board outside his work
     station. The lack of security over purchase cards increases the
     potential for cards to be lost, stolen, or used for inappropriate
     purposes.
  
     Oversight Reviews
  
     In accordance with the Geological Survey Manual, the Office of
     Acquisition and Federal Assistance and the Office's regional branches
     conduct reviews of purchase card transactions as part of the Office's
     small purchase reviews of regions and makes recommendations to the
     field offices regarding any deficiencies identified. The Eastern
     Region has 39 field offices. According to the Geological Survey
     Manual, reviews are to be conducted every 4 years. However, the
     Reston office has never been reviewed.  Our examination of reviews
     that had been performed at eight field offices in the Eastern Region
     indicated that purchase card transactions were included in the
     reviews and that deficiencies such as the purchase of personal items,
     unauthorized purchases, split purchases, and the absence of a logbook
     were identified in the Purchase Card Program. Recommendations were
     made by the review team to address the deficiencies identified. Since
     the procedures used by the team for reviewing purchases were not
     documented, we could not determine whether the review team verified
     that approving officials were performing all of the required review
     procedures. Therefore, we were unable to determine whether the
     reviews were complete.
  
     In conclusion, the Geological Survey was not adequately performing its
     oversight responsibilities of the Purchase Card Program. By not
     including the Reston office in its scheduled reviews and by not
     documenting the review procedures used, the Geological Survey was not
     ensuring that all cardholders and approving officials were complying
     with Departmental and Geological Survey requirements when using the
     purchase card. As a result, the Geological Survey could not ensure
     that all items purchased were for valid Government purposes.
  
     Training
  
     The Department's "Handbook" (Section VI) states: "All approving
     officials and cardholders must receive training on the use of the
     Governmentwide credit card program, its features, bureau procedures,
     and, as appropriate, small purchase procedures, upon or immediately
     following designation. In all cases, appropriate training must be
     received prior to cardholder receipt of the credit card."
  
     The Geological Survey had not provided formal training to any of the
     cardholders or approving officials during the period of our review.
     However, Geological Survey personnel responsible for managing the
     Purchase Card Program stated that, in lieu of formal training
     courses, they relied on signed certifications from the cardholders
     stating that the cardholders had read the Geological Survey's
     "Handbook" and that they understood the requirements for the proper
     use of the purchase card. However, based on the deficiencies that we
     found, we believe that this method of training was not completely
     effective.
  
     In February 1995, the Geological Survey developed a formal training
     course and presented it at two pilot sessions. In February 1996, the
     course, for which attendance was voluntary, was revised and presented
     at the Reston location, where it was attended by 2 of the 11
     approving officials and 8 of the 32 cardholders included in our
     review. Since there were no outlines of the course contents or
     evaluations of the courses, we were unable to determine whether the
     training was adequate. Also, we believe that the training should be
     mandatory for all cardholders and approving officials.
  
     Recommendations
  
     We recommend that the Director, U.S. Geological Survey:
  
     1. Ensure that approving officials follow the review procedures
     established by the Department and the Geological Survey when
     certifying cardholders' statements.
  
     2. Ensure that cardholders comply with the purchase card policies and
     procedures concerning unauthorized purchases, split purchases, and
     telephone orders.
  
     3.  Ensure that purchase cards are adequately safeguarded.
  
     4. Ensure that written procedures are developed for documenting the
     review of purchase card transactions and that the Geological Survey's
     Reston office is included in the schedule for these reviews.
  
     5.  Ensure that cardholders and approving officials receive adequate
     training in the proper use of the purchase card.
  
     U.S. Geological Survey Response and Office of Inspector General Reply
  
     In the January 8, 1998, response (Appendix 1) to our draft report from
     the Associate Director for Operations, the Geological Survey
     generally agreed with the finding and recommendations and provided
     suggested changes to the report, which we incorporated as
     appropriate. Based on the response, we consider Recommendations 1, 2,
     4, and 5 resolved and implemented and request that the Geological
     Survey reconsider its response to Recommendation 3, which is
     unresolved (see Appendix 2).
  
     Regarding Recommendation 3, the Geological Survey's "Handbook"
     instructs cardholders to keep their purchase cards in a safe place
     and not to allow others to use their cards. However, as stated in our
     report, we found that this requirement, which was in effect during
     our review, was not always complied with. Therefore, the Geological
     Survey should state what actions it is taking to ensure that
     cardholders are safeguarding their purchase cards and the purchase
     card account numbers. Specifically, we suggest that the Geological
     Survey issue a notice to all cardholders which states that purchase
     cards should not be kept in unlocked desks or file cabinets and that
     the purchase card account number should not be posted for public
     viewing. In addition, the safeguarding of purchase cards should be
     included in the Geological Survey's review of the purchase card
     program.
  
     In accordance with the Departmental Manual (360 DM 5.3), we are
     requesting a written response to this report by April 15, 1998. The
     response should provide the information requested in Appendix 2.
  
     The legislation, as amended, creating the Office of Inspector General
     requires semiannual reporting to the Congress on all audit reports
     issued, the monetary impact of audit findings, 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 Geological Survey personnel in the
     conduct of our survey.
  
  
  
                  STATUS OF SURVEY REPORT RECOMMENDATIONS
  
  
Finding/Recommendation
     Reference                 Status                Action Required
                                                                                                                                                  
  
   1, 2, 4, and 5            Implemented.       No further action isrequired.
  
        3                     Unresolved.        Reconsider the response to
                                                 indicate how assurance is 
                                                 provided that cardholders are
                                                 safeguarding their purchase
                                                 cards.  Also, provide an
                                                 action plan that includes 
                                                 target dates and titles of
                                                 officials responsible for
                                                 implementation.   





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