The report (GAO-04-737) makes 36 recommendations to VHA and the Veterans Affairs Department that focus on segregating duties, better documentation, vendor discounts and program monitoring.
GAO found that a failure to segregate duties allowed for questionable purchasing. While the health agency does require that those who authorize transactions be separated from those who make the purchases and record the transactions, it does not require that an independent person receive the merchandise.
According to the auditors, if the worker who receives the purchase is different than the one who buys, the merchandise more likely will be intended for government, not personal, use. "We believe documented independent receiving is a basic internal control activity that provides additional assurance to the government that purchased items come into the possession of the government," the report said.
The watchdog agency also found numerous instances where purchases were not accompanied by supporting documents, such as authorizations or vendor invoices. The auditors said the agency should expect an almost zero failure rate for having documentation since invoices are easily obtained or replaced if accidentally lost. The report said missing invoices should be a red flag for potential fraud.
The report's sampling found that cardholders rarely take advantage of vender-offered discounts, or sometimes credit the discounts toward their own account instead of toward the purchase. Part of the problem, the auditors said, is a lack of agency-established policies to ensure that cardholders take advantage of these discounts. They also said that monitoring officials need to track occurrences to address why and how often discounts are passed over, to allow officials to pinpoint savings opportunities.
GAO's review found that the agency lacked procedures to ensure that cardholder accounts were closed when employees leave the agency, and that credit limits closely match actual needs and spending. One aspect of this, according to the auditors, was a lack of human capital resources to do the monitoring.
The report also detailed training needed to prevent questionable or wasteful purchases. It said that a lack of controls resulted in purchases that violated laws or agency policy. These included food, clothing and gift certificates that were for personal use.
The report urged the agency to take "appropriate disciplinary or corrective action for purchases determined to be not for a legitimate government need."
In response to a draft of the report, Veterans Affairs Department officials agreed with the majority of recommendations, saying the agency "has actions already in place or planned that meet the intent of the recommendations." The agency also pointed out that the reported $435,900 in fraudulent purchases is less than .01 percent of all purchase card activity.