In response to our findings of fraud, waste, and abuse at the Department of Defense (DOD), Congress enacted legislation specifically directed at improving the management of DOD’s purchase card program.7 However, concerns remain over whether purchase card usage continues to expose the federal government to increased risk of fraud, waste, and abuse. Therefore, you asked us to (1) determine whether internal control weaknesses in the purchase card program existed governmentwide and (2) if so, identify specific examples of fraudulent, improper, and abusive activity.8
To identify control weaknesses and specific examples of fraudulent, improper, and abusive activity, we reviewed applicable federal laws and regulations related to the FAR and purchase card uses. We also identified and applied the internal control principles contained in Standards for Internal Control in the Federal Government,9 Audit Guide: Auditing and Investigating the Internal Control of Government Purchase Card Programs,10 and selected agencies’ purchase card policies and procedures.11 We then obtained purchase card transaction data from the five banks that supplied purchase cards governmentwide. Using these
7The Bob Stump National Defense Authorization Act for Fiscal Year 2003, Pub. L. No. 107- 314, § 1007; Department of Defense Appropriations Act, 2003, Pub. L. No. 107-248, § 8149 as amended by Department of Defense Appropriations Act, 2004, Pub. L. No. 108.87, § 8144.
8For this report, we define fraudulent purchases to include those made by cardholders that were unauthorized and intended for personal use, purchases made using purchase cards or account numbers that had been stolen or compromised, and purchases appropriately charged to the purchase card but that involve potentially fraudulent activity that went undetected because of the lack of integration among processes related to the purchase, such as travel claims or missing property. Improper transactions are those purchases that although intended for government use, are not permitted by law, regulation, or government/agency policy. Abusive purchase card transactions involve transactions that are deficient and improper when compared with behavior that a prudent person would consider reasonable and necessary, for example, purchases that were made at excessive cost (wasteful) or were not needed by the government, or both.
9GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 10GAO-04-87G (Washington, D.C.: November 2003).
11Whenever they were provided, we reviewed purchase card policies and procedures of purchase card programs at major departments, such as the Departments of Agriculture, Defense, Energy, and the Interior, to name a few. We also reviewed policies and procedures at a number of other agencies and independent establishments, such as the National Aeronautics and Space Administration and the U.S. Postal Service.
GAO-08-333 Governmentwide Purchase Cards