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.

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

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Government Cyber Insider tracks the technologies, policies, threats and emerging solutions that shape the cybersecurity landscape.


Reader comments

Thu, Oct 13, 2011 BigMoney PA

Gee, they are so concerned about these nickel and dime transactions (too many pens and pencils) when there are hundreds of millions of dollars that go unaccounted for in Iraq and Afghanistan. Sometimes priorities to audit go after the easiest way to justify one's job. Try tackling the big issues some time.

Wed, Oct 12, 2011

Good grief. If anything, this should should that the micropurchase threshold is still too low. The last time it was raised, it went from $2,500 to $3,000, a tiny and meaningless increase. Do we really want people going out and soliciting bids for items that cost $3,001? The procurement cycle gets delayed, time gets wasted, and procurement costs increase by engaging in inane rituals like that. If the micropurchase threshold was increased to something like $10,000, the government could get the latest and greatest technology it needs right now instead of wasting 12 hours to save 15 cents.

Wed, Oct 12, 2011

This just is another Government watchdog agency that needs watching. Hypocrisy in the government is the norm. They like to make and enforce rules on how everyone else is supposed to run their business, but when it comes to following them, they see no problem cheating until they are caught. Now try to guess how these rule breakers are dealt with versus how those in the private sector are treated. Who do you think will get off the easiest and who really should be dealt the harshest? Ethically those who make and enforce the rules should be dealt the harshest penalties when breaking them, but why is it that the opposite is what usually happens? Just one more reason why we need to cut the size and influence of Government.

Wed, Oct 12, 2011

The number of federal IMPAC cards, and the number of procurement offices, should be cut by about 2/3. There is a couple hundred dollars in back end costs for each purchase, no matter how trivial. Plus, the CC holders almost always buy off one of the government portals, even if buying directly from vendor, or purchasing from a local store, is cheaper. They just click on the first listing that comes up on GSA Advantage or DoD eMall, and away they go.

Wed, Oct 12, 2011

The rules set down for the P-Cards are clear enough. So why do these types of issues keep cropping up? It could be that people are just lazy, or untrained, or unaware of other options for doing the same thing. Or, it could be that the Federal procurement system has become so onerous that it is easier to just get what you need and get your hands slapped than to go through the required processes for higher dollar value purchases. And we should not discount the possibility of pressure being placed on P-Card holders to engage in the bad behavior by upper management because of short deadlines and inability plan proactively. We keep hearing about "reform" and "streamlining" but we seem to only get so far before the rules mavens step in and make things just as complicated -- but in a different way.

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