Agencies to employ card alerts
Like credit card companies, GSA will use data mining to detect improper spending
- By Mary Mosquera
- Apr 25, 2008
Federal agencies are scrambling to tighten their internal controls following a report by the Government Accountability Office that highlighted employees’ misuse of government purchase cards.
The purchase cards have been a boon to government efficiency, saving the government an estimated $18 billion a year, said David Shea, director of the Office of Charge Card Management in the General Services Administration’s Federal Acquisition Service.
In November, GSA will replace the current purchase card program with SmartPay2, a newer program designed to help agencies track employees’ purchasing transactions and perform data mining to detect patterns of unusual spending.
In 2007, federal departments and agencies had 283,861 purchase cards in circulation, and employees spent $18 billion in 24 million purchasing transactions.
However, a recent GAO audit uncovered millions in improper spending in a sample of purchase card transactions from mid-2005 to mid-2006. GAO found that agencies failed to properly authorize and provide complete documentation for 41 percent of 192 transactions in the random samples it audited, according to GAO’s audit report.
Weak internal controls “expose the government to fraudulent, improper and abusive purchase card activity and loss of assets,” Gregory Kutz, managing director of GAO’s forensic audits and special investigations, said in the report.
SmartPay2 will address some of the management and oversight weaknesses highlighted in GAO’s audit, Shea said.
“When you have that much activity, unfortunately you’re going to have a few go wrong,” Shea said. “That’s what the GAO report brings out.”
SmartPay2 will generate e-mail alerts that inform managers whenever an employee uses a card and indicate the amount spent. The SmartPay2 program will produce reports in a summary form for managers who supervise employees who are high-volume card users.
As part of the program, GSA will require banks that offer Visa or MasterCard cards for federal use to provide a transaction monitoring service. Visa offers a service called Intellilink. MasterCard offers Expert Monitoring System.
“What these systems allow you to do is to load in your agency’s business rules and search for transactions that don’t meet them,” Shea said.
Based on its audit findings, GAO recommended that each purchase card transaction be pre-authorized. GSA responded by suggesting that pre-authorization might not be practical in all circumstances. However, GSA said it preferred the current practice of requiring that all employees be trained in the proper use of purchase cards as a condition for receiving the cards.
“Where people have done improper things is a major concern to us, but we don’t want to overreact to it,” Shea said. “We want to apply judicious controls and make sure that the controls we have in place are being applied and discipline is being applied to personnel who have done wrong.”
Shea added that most employees don’t misuse the purchase card program. “You’re always striving for a sense of balance between internal controls and card flexibility or usability.”
Shea said the program saves the government about $1.8 billion a year in expensive and time-consuming administrative costs.
Individual departments and agencies provide several layers of controls for a program that has many benefits, purchasing officials say. For example, the Agriculture Department’s Forest Service firefighters battling wildfires use purchase cards to buy bottled water from local merchants.
Agencies set the rules for eligibility, procurement levels, oversight and spending reconciliation for the purchase card program. “I rely on the agency’s head of contracting activities to ensure appropriate oversight of policies associated with the purchase card,” said Boyd Rutherford, USDA’s assistant secretary for administration.
Agencies must also comply with Office of Management and Budget policies that require them to reconcile purchase card transactions on a quarterly basis.
After GAO released its report in early April, OMB issued a memo April 15 on the purchase card program in which it urged agencies to improve their internal controls.
“This is a very serious issue that breaches the trust of the taxpayers as well as diminishes the significant benefits that are achieved through the federal charge card program,” said Jim Nussle, OMB’s director.
The memo directed agencies to report to OMB by June 30 about their plans for improving internal controls and training employees in the proper use of the purchase card program. OMB also requested inventories of small electronics that employees purchase with the cards — items that could easily be converted to personal use.