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H i g h l i g h t s A c c o u n t a b i l i t y I n t e g r i t y R e l i a b i l i t y

Highlights of GAO-08-333, a report to the Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, U.S. Senate

Actions Needed to Strengthen Internal Controls to Reduce Fraudulent, Improper, and Abusive Purchases

Why GAO Did This Study

What GAO Found

Over the past several years, GAO has issued numerous reports and testimonies on internal control breakdowns in certain individual agencies’ purchase card programs. In light of these findings, GAO was asked to analyze purchase card transactions governmentwide to (1) determine whether internal control weaknesses existed in the government purchase card program and (2) if so, identify examples of fraudulent, improper, and abusive activity.

Internal control weaknesses in agency purchase card programs exposed federal government to fraud, waste, abuse, and loss of assets. When test internal controls, GAO asked agencies to provide documentation on sel transactions to prove that the purchase of goods or services had been properly authorized and that when the good or service was delivered, an individual other than the cardholder received and signed for it. Using a statistical sample of purchase card transactions from July 1, 2005, throu June 30, 2006, GAO estimated that nearly 41 percent of the transactions 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 purchase the standard of proper authorization, independent receipt and acceptan both.

GAO used statistical sampling to systematically test internal controls and data mining procedures to identify fraudulent, improper, and abusive activity. GAO’s work was not designed to determine the overall extent of fraudulent, improper, or abusive transactions.

What GAO Recommends

To reduce fraud, waste, and abuse governmentwide, GAO made 13 recommendations to the Office of Management and Budget (OMB) and the General Services Administration (GSA) to instruct agencies to strengthen purchase card controls in the areas of convenience checks and property, and impose financial liability for unauthorized purchases, among other things. OMB agreed and GSA partially agreed. Although it manages the purchase card program, GSA did not agree that it had the authority to help agencies improve controls over independent receipt and acceptance or asset accountability—two areas where the use of purchase cards poses unique internal control challenges.

To view the full product, including the scope and methodology, click on GAO-08-333. For more information, contact Gregory Kutz at (202) 512-6722 or kutzg@gao.gov.

Breakdowns in internal controls, including authorization and independe receipt and acceptance, resulted in numerous examples of fraudulent, improper, and abusive purchase card use. These examples included ins where cardholders used purchase cards to subscribe to Internet dating services, buy video iPods for personal use, and pay for lavish dinners th included top-shelf liquor. The table below shows some of the case studi GAO identified, including one case where a cardholder used the purcha card program to embezzle over $642,000 over a period of 6 years from t Department of Agriculture’s Forest Service firefighting fund. This cardh was sentenced to 21 months in prison and ordered to pay full restitution

Fraudulent, Improper, and Abusive Purchases by Cardholders

Type of purchase


Amount Activity

Fraudulent Department

$642,000 Cardholder used convenience checks to embezzle p

of Agriculture

funds for over 6 years. The $642,000 was used for p expenditures, such as gambling, car and mortgage payments, and other retail purchases.


Department of Energy

112,300 Cardholder improperly used convenience checks—a consequently had to pay thousands in fees—for relo services. Agency policy generally prohibits convenie checks above $3,000. 77,700 Four cardholders purchased expensive suits and accessories from Brooks Brothers and other high-en clothing stores to outfit several servicemembers.


Department of Defense

Source: GAO analysis of bank data and supporting documentation.

In addition, agencies were unable to locate 458 items of 1,058 total accountable and pilferable items totaling over $2.7 million that GAO sel for testing. These missing items, which GAO considered to be lost or sto totaled over $1.8 million and included computer servers, laptop comput iPods, and digital cameras. For example, the Department of the Army c not adequately account for 256 items making up 16 server configuration of which cost nearly $100,000.

United States Government Accountabil

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