Forest Service purchase cards under fire
- By Sara Michael
- Sep 22, 2003
"Forest Service Purchase Cards: Internal Control Weaknesses Resulted in Instances of Improper, Wasteful, and Questionable Purchases"
The Forest Service is the latest agency to have auditors find that its purchase card program is riddled with waste, fraud and abuse.
The General Accounting Office reported that improper supervision of the agency's purchase card program likely led to about $2.7 million in wasteful and questionable purchases.
Forest Service officials, however, said they have taken steps to improve data mining and monitoring software to guard against fraud. Further, some purchases that are questionable at first glance are often appropriate for the service's operations, officials said.
Purchase cards fulfill an important role, said David Shea, chief of procurement policy at the Agriculture Department, which oversees the Forest Service. "We buy a lot of mission-related stuff," he said. "Government employees who are responsible for multimillion-[dollar] programs certainly could be trusted."
A review of the service's fiscal 2001 purchases uncovered evidence of unauthorized transactions and purchases of items highly susceptible to theft, such as snowmobiles and digital cameras, without proper documentation, GAO officials said in a report released last month.
The Forest Service lacked supervision of purchase approvals and had inadequate control over property, auditors found. These lapses led to more than $1.6 million in purchases that violated Forest Service policy, including purchases paid for twice, split to avoid spending limits and made on former employees' accounts, the report states.
GAO officials said they also found $212,104 in purchases deemed wasteful because there were cheaper alternative products, and they found an additional $869,825 in purchases for which the agency had no documentation.
Although the $2.7 million characterized as wasteful or improper expenditures makes up a small portion of the Forest Service's $320 million in annual purchase card spending, "it demonstrates vulnerabilities from weak controls that could be exploited to a greater extent," the report says.
In August 2001, the USDA's Inspector General identified several similar weaknesses. The service tried to remedy them in revisions of purchase card regulations in June 2001, December 2002 and February, officials said. But the changes don't fully address issues of purchase supervision and property control, GAO reported.
"They had taken some steps even while we were in the field doing our work," said Linda Calbom, a GAO director of financial management and assurance. She said officials continued their work and made their recommendations because they didn't feel Forest Service officials had sufficiently addressed the areas of concern.
"Internal controls are a process," Calbom said. "You really need preventative and protective controls. There were a number of areas that were lacking. You put it all together and it indicates a lot of vulnerability."
GAO officials made several recommendations, including establishing policies that segregate duties for each phase of the purchasing process and require supervisory review of all transactions.
Calbom said supervisory review was one of the most important strategies. "To have it be a self-policing activity, it really gives rise to a lot of exposure to an agency," she said.
Forest Service officials said they have taken steps to strengthen the program's management, such as requiring levels of auditing and providing a workshop on oversight. Officials have also refined the tools used to monitor transactions and alert managers to fraud, Shea said. The purchase card management system, developed in 1995, included software to watch for questionable purchases, but the system was not operating completely, he said.
"It was so new that what we were doing didn't work how we wanted it to," Shea said. "We went back and said, 'Let's make this better.' "
The system generates user messages, which notify the purchase card management office of questionable purchases. For example, a purchase from a jewelry store may raise a flag, and a manager can then examine it, Shea said.
The USDA also uses data-mining software to query transactions, Shea said. All transaction information is housed in a central database at the National Finance Center in New Orleans. "You have a visibility to the data now that you never had before," he said.
The Navy's purchase card program has been similarly criticized for years, prompting agency officials to make policy changes. They have increased purchase card training, set limits on expenditures and promoted accountability among senior leadership, according to a Navy e-Business Operations Office spokesman. Navy officials have also established a program management office and developed a database to store transaction information.
"These key elements are regularly measured and enforced through recurring internal audits and self-reporting," the spokesman said.
But the software and supervisory controls often don't tell the entire story, Shea said.
Commercial systems at many retail stores often do not list the items sold. For example, purchases from a touring company may seem in excess, but the purchases actually include renting buses to transport firefighters, he said. The purchase card system includes a field for entering an explanation of the purchase, but for stronger controls, the commercial systems need to include detailed purchase information, known as Level 3 data, Shea said.
"One of the biggest improvements is for industry to move to Level 3" information, he said. "You're talking about a lot of money for vendors. It's going to take time."
How to avoid purchase card fraud
How can you avoid having auditors snooping through your transactions? Here are some pointers from the General Accounting Office:
* Put a manager in charge of each stage of the transactions.
* Require managers to approve each purchase.
* Train employees before granting purchase card privileges and offer refresher courses.
* Establish systems to track how and whether employees have been trained.
* Make sure all purchases are entered into the database and periodically reviewed.
Source: General Accounting Office