GAO publishes guide on preventing purchase card abuse

Missing or altered documents and unexplained transactions are two of several signs that should alert federal agencies to purchase card abuse, according to a draft guide released Friday by the General Accounting Office.

The guide requested by Rep. Stephen Horn, R-Calif., former chairman of the House Government Reform Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations, outlines steps agencies can take to detect and prevent abuse of the card. It supplements existing guidance on purchase card procedures, including the Treasury Department's Financial Manual.

In fiscal 2002, the government completed $15.2 billion worth of purchase card transactions. The Defense Department alone had 214,000 cardholders and bought $6.8 billion with purchase cards. Purchase cards, which are really charge cards, help federal employees avoid extensive paperwork when buying smaller items valued at under $2,500.

But a 2000 General Accounting Office survey revealed that Navy personnel systematically misused the cards to purchase expensive personal items, including clothes, cosmetics and compact discs. An Oct. 15 memorandum from the Office of Management and Budget directed agency heads to submit quarterly reports beginning Jan. 15 on their progress to overhaul their charge card programs.

Though some agencies have cracked down on card abuse, the problem is far from gone, GAO said. The guide draws from the watchdog agency's own experience uncovering and stemming card abuse at the Defense, Education and Housing and Urban Development departments. It contains case studies to illustrate relevant points and checklists for agency managers or outside auditors reviewing purchase card use.

The first section of the guide reviews the laws and regulations governing purchase card use and the signs that employees may be using the cards improperly, either unintentionally or purposely.

If agencies find evidence that workers are repeatedly failing to follow proper procedures for documenting purchases with the card, GAO recommends they provide extra training or take disciplinary actions such as closing down the cardholder's account or issuing a formal reprimand. The guide also suggests that agencies document these actions, to help them track repeat offenders and decide if their disciplinary actions helped.

A second section of the guide describes how agencies should assess whether they are currently doing enough to prevent card abuse. The section includes actions necessary to stem misuse. For instance, agencies should establish training programs for cardholders and officials who sign off on card transactions, the guidance said.

Two closing sections of the guide look at how agencies can conduct statistical tests on card use and use data mining techniques to detect irregularities. Data mining can detect patterns of misuse, GAO said, and can help investigators pinpoint questionable transactions before they get out of control.

GAO will accept feedback on the draft guide until Aug. 1.

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