The Pentagon Takes a Swipe at Savings

aced with daunting delays, a pestilence of paperwork, an agonizing approval process and pricey processing charges, it's a wonder Defense Department employees ever use their purchase cards at all, let alone often enough to make DoD government's leading card user. The current system is so convoluted that DoD predicts re-engineering it will shave $35 million a year from costs incurred by the Army alone.

For example, many Defense organizations require cardholders to file a requisition document for every card purchase. The paperwork then creeps through an arduous process-funds must be approved, DoD's local and national inventories screened for the item, and finally the local contracting activity must OK the buy-before a purchase card ever leaves anyone's wallet.

Buyers who hurdle all those impediments and get cleared to use IMPAC face an equally intimidating set of paperwork requirements. They must retain proof of every purchase: receipts for over-the-counter buys or a written log of vendor, price, item and date for phone orders. When monthly IMPAC statements arrive, cardholders manually reconcile each transaction with its receipt, adding 65-digit lines of accounting coding to distribute costs among projects and appropriations. Then an approving official performs a second reconciliation followed by reviews up another level or two at some activities.

Though Defense component procurement shops keep accounting records of every transaction and Rocky Mountain bank details each one on a monthly statement, the Defense Finance and Accounting Service (DFAS) also enters the same information in the official DoD accounting system-all 65 digits per transaction. For each purchase, DFAS charges the parent service or agency $24.92. For the typical monthly invoice with its 175 transactions DFAS charges $4,400. It was hope of reducing these charges that prompted DoD to create teams in April 1996 to streamline the process. Their recommendations take effect this year.

To help cardholders avoid the lengthy hunt for funding before every purchase, DoD will reserve bulk funding in advance for IMPAC accounts. The department also is trimming its approval and accounting overload, and will provide card management software packages to field installations. Defense components can download them for free from the DFAS Web site, ( www.purchasecard.dfas.mil). Cardholders and contracting officials will use the software to reconcile statements and get them approved on line, not on paper.

The department also will convert to Rocky Mountain/First Bank's Corporate Payment System. And from now on, when DoD disputes a charge, it will pay the invoice instead of waiting for customers to reconcile each charge. That should cut down on interest payments, which last year totaled $580,000.

Hamre predicts the streamlining will cut DFAS charges to Defense components from $25 per transaction to $25 per invoice. The Army, which holds 50 percent of DoD's purchase card accounts, began the conversion in March, and by the end of fiscal 1997, all Defense employees should be carrying the new gold-bordered IMPAC cards that signal DoD's new swipe at savings.