Old tricks for abusing purchase cards apparently still in use, audit finds
Some Internal Revenue Services managers appear to be circumventing the dollar limit on credit card micro-purchasing by splitting the transactions into two or more parts, according to a new federal audit.
Selected IRS employees are allowed to use the micro-purchase credit cards to make authorized purchases of low-cost items such as office supplies and training. Under federal acquisition rules the limit per transaction is $3,000.
However, some IRS employees may have improperly skirted those rules by splitting the purchases into two or more parts. For example, to buy $5,000 worth of office equipment on the card, the purchase could be itemized into two invoices each showing a value of $2,500.
“Our analysis identified 843 potential split purchases involving 3,066 individual transactions made by 437 purchase cardholders,” said the Oct. 11 report from the Treasury Inspector General for Tax Administration.
It's an old trick for getting around rules on spending. In 2002, Linda Calbom, then director of financial management and assurance at GAO, testified of finding splt purchases at the Education department and the Navy. Other audits have found similar tactics in use.
In the current case, the IRS evaluated 368 of those transactions and determined that 37 transactions totaling $48,390 had the potential to be improper split purchases. These included 18 transactions, totaling $16,500, conducted with a single vendor, in a single day, for training classes for a group of employees.
“While the IRS may have had a valid business need to purchase these items, they should have used another procurement method,” the auditors wrote. “When purchases are split in this manner, normal procurement policies and procedures are not followed and the micro-purchase/single-transaction dollar limits are circumvented.”
The auditors also recommended that the IRS review 257 of the identified questionable transactions to determine if they are split purchases.
Overall, the inspector general’s office recommended that the IRS improve its oversight of the employees’ use of credit cards for small purchases. From September 2007 to March 2009, the agency’s 4,270 purchase card holders spent more than $80 million using purchase cards.
In addition to the cases in which the cardholders apparently split transactions to circumvent the $3,000-per-transaction limit, the auditors also found instances in which cardholders made purchases without necessary approvals and without advance verification that funding was available.
J. Russell George, treasury inspector general for tax administration, recommended that the IRS reinforce the guidance prohibiting split-purchase transactions, improve and expand oversight reviews and develop other controls.
IRS officials agreed with the recommendations.
Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.