Auditors also found the DHS purchase card manual lacked clear and consistent directions. "As a result, the department cannot be sure that purchase cards are always used for their intended purpose," the IG stated.
With DHS buying $514 million in goods and services with purchase cards in fiscal 2010, the IG wanted to assess the department's strengths and weaknesses in managing the program and to ensure the internal controls that track potential abuse worked properly.
Purchase cards, similar to credit cards, are used for routine transactions up to $3,000, streamlining the costly procurement process by reducing the paperwork required for major acquisitions.
The freedom they offer can lead to abuse, however.
For instance, auditors launched an investigation of the Transportation Department in April. The IG found two Federal Aviation Administration employees who used the cards to buy more than $150,000 of personal goods and services.
In 2008, OMB issued updated requirements for using purchase cards after a Government Accountability Office report found 41 percent of $14 billion in transactions were not properly authorized or signed for by an independent third party.
For the DHS audit, officials noticed patterns that sent red flags, such as purchases made on weekends and holidays. From there they saw that for a sample of 201 potentially high-risk transactions between July 2009 and May 2010, 187, or 93 percent, violated at least one of OMB's internal control requirements. For example, in 69 percent of the transactions there was no evidence an independent third party had signed for the goods or services at delivery.
The IG also analyzed 75 transactions in DHS' post-payment audit review covering July 2009 to November 2009, and found 67, or 89 percent, had insufficient documentation to meet OMB requirements.
Some of the issues could stem from incomplete, conflicting or vague information in DHS' purchase manual. For example, the guide is unclear on who must sign off on purchases. While most DHS employees still obtained written approval prior to making purchases with the cards, 36 percent of 276 total transactions the IG examined lacked a designated official's permission, and 5 percent were not approved by anyone.
The inspector general recommended Homeland Security update its purchase card manual to more effectively address all OMB requirements, review the supporting documents of transactions to verify they are valid and sufficient, and develop new techniques allowing DHS to target high-rick transactions during payment reviews.
Peggy Sherry, deputy chief financial officer, agreed with the recommendations and said DHS is working to implement them and create stronger oversight to prevent fraud, waste and abuse.