NEWS

Government Purchase Cards Abused, Says GAO

By Matthew Harwood

Government employees, according to the Government Accountability Office, used their agency purchase cards to subscribe to Internet dating services, buy iPods for personal use, and eat and drink lavishly, all on the government's dime.

Along withe improper use, the watchdog agency found outright fraud and lax accounting of card use, all of which investigators blamed on weak internal controls.

Federal policy dictates two-step validation for all purchases made with government-issued cards. First, a supervisor authorizes the purchase, then, when the good or service is received, someone different than the cardholder receives and signs for it.

According to the report, these internal controls are circumvented almost as often as they are followed.

Using a statistical sample of purchase card transactions from July 1, 2005, through June 30, 2006, GAO estimated that nearly 41 percent of the transactions failed to meet either of these basic internal control standards. Using a second sample of transactions over $2,500, GAO found a similar failure rate—agencies could not demonstrate that 48 percent of these large purchases met the standard of proper authorization, independent receipt and acceptance, or both.

Investigators found that government agencies could not demonstrate possession of many physical items purchased with the cards. Of the 1,058 "accountable and pilferable" items bought with purchase cards that the GAO investigated,  agencies could not account for 458. Those goods were valued at over $2.7 million, with the missing or stolen goods accounting for $1.8 million. The GAO says "some of these assets appeared to have been acquired for personal use."

The report described some of the more colorful purchase card practices of government employees.

One postmaster at the United States Postal Service (USPS) used his purchase card to subscribe to two Internet dating sites over a 15 month period from April 2004 to October 2006. The purchases appeared on the card's monthly statement, nevertheless, the purchases were authorized and paid for by the USPS.

A cardholder at the National Aeronautics and Space Administration (NASA) bought two 60GB iPods for the agency's data storage needs. The GAO audit, however, found the iPods were personalized with the requester's and agency's names and stored video and music files on top of official data.

In another instance at the USPS, the agency shelled out $13,000 for 81 conference attendees to live it up on delicacies such as steak, crab, and various appetizers while drinking over $3,000 in top-shelf liquor. The average price for the meal totaled $160 per person. "We define this transaction," said the GAO, "as abusive."

The most flagrant abuse, however, involved an employee from the Department of Agriculture. There, an employee fraudulently paid her live-in boyfriend $642,000, which they in turn spent on gambling, car and mortgage payments, and retail goods. Currently the employee is serving a 21-month prison sentence and will have to make full restitution to the government.

The GAO said its findings only reflect a small sampling of government purchase card transactions, and therefore, it cannot "determine the extent of fraud, waste, and abuse occurring in the governmentwide purchase card transactions."

The GAO recommended that the General Services Administration (GSA), which administers the purchase card program, issue guidance and reminders to improve internal controls—such as independent receipt and acceptance of purchases— inside government agencies and ensure they can verify possession of physical items bought with cards.

GSA did not agree with the GAO's recommendation and replied that these responsibilities fall on the individual agencies.

The GAO in turn disagreed with the GSA's reply. "The fact that governmentwide policies in these areas do not currently exist demonstrates the GSA needs to formulate guidance that is consistent and available to every agency," GAO officials

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