Department of Justice Purchase Card Expenditures Related to Hurricane Recovery Efforts

Audit Report 06-36
September 2006
Office of the Inspector General

The OIG provided a draft of this audit report to the Justice Management Division (JMD) and the eight components included as part of this audit. The responses are incorporated as Appendix III of this final report. The OIG analysis and summary of actions necessary to close the report is presented in three parts. The first section presents the JMD’s plan for establishing standards for DOJ’s charge card program, and for ensuring that a system of internal controls are in place for effective oversight and to maximize the benefits when using government charge cards. The second section discusses the OIG analysis of the FBI’s disagreements with aspects of the report. The third section presents the summary of actions necessary to close the report. DOJ Charge Card Management Plan JMD, as DOJ’s Agency Program Coordinator, responded to the draft report. In its response, JMD proposed to take the following actions: Issue a Procurement Guidance Document requiring that all DOJ components have no more than 7 cardholders per Approving Official and that cardholder profiles are updated in Pathway Net® no later than 3 working days after any changes occur.15 Work with each component’s program coordinator to develop a list of items that should not be bought with purchase cards, and minimum documentation requirements for purchase card files. Meet with the ATF, FBI, USMS, and OJP to assess how each can best meet the refresher training requirements. In addition, JMD stated in its response that all DOJ purchase cards will be reissued in late October 2006. At that time, the purchase card hierarchies will be reviewed and updated. Subsequent to providing its response to the draft report, JMD provided the OIG with its DOJ Charge Card Management Plan that establishes a system of internal controls and serves as a framework for Departmental policies and procedures for the appropriate use of charge cards. The plan was developed in response to the requirements of Office of Management and Budget (OMB) Circular A-123 Appendix B, Improving the Management of Government Charge Card Programs. The plan establishes the minimum standards, requirements, and best practices for charge card programs within the Department. According to the plan, cardholders are appointed based on a thorough review of the requesting organization’s mission, procurement activity, and the number of cardholders available to support that activity. AOs are appointed at a sufficient level commensurate with the duties to ensure that they effectively monitor the performance of their cardholders. The plan does not specify a maximum cardholder to AO ratio but states that bureaus must consider the span of control to ensure that the number of cardholders and the charge card volume is at an appropriate level for effective review and control of cardholder performance. Training is required for cardholders, AOs, and Agency Program Coordinators (APC) prior to appointment. Refresher training must be completed within 3 years after appointment, or date of last refresher training. All participants are required to submit copies of their training certificates to the appropriate APC. According to the plan, cardholders with delegated purchase card authority over the micro-purchase threshold receive additional training and must be warranted contracting officers. The plan also outlines risk management procedures that can be tailored to specific component requirements for detecting possible misuse. According to the plan, as the capabilities of the Pathway Net® system are enhanced, the Department will benefit from more powerful data mining tools. Analysis of FBI Response Given the emergency situation, the OIG believes that the FBI generally followed appropriate record keeping procedures for the purchase card transactions it reviewed. Our report contains the total FBI dollars we tested as well as the dollar amounts related to the exceptions that we identified. Therefore, we believe that we have reported our findings in the proper context. However, the OIG disagrees with the FBI’s statement that the OIG has no evidence of any improper record keeping or internal control issues. During our audit, we identified purchases from two vendors (Baton Rouge Police Supply and Merchandise Distributor) where the FBI did not follow its own policies and procedures. In addition, certain FBI purchase card holders could not identify items that were precluded from purchase with a purchase card. These issues are discussed in more detail below. Baton Rouge Police Supply The OIG requested that the FBI provide a listing of purchase card transactions related to hurricane recovery efforts. On the listing provided was a transaction for Baton Rouge Police Supply for $15,700.97. The OIG requested the invoices for the transaction on April 10, 2006, and received documentation and four invoices on June 12, 2006, from the FBI totaling $16,369.80.       Invoice Amount Date       14105 $ 6,636.08 09-10-05       14133 $ 5,881.12 09-16-05       14156 $ 3,569.41 10-01-05       14322 $ 283.19 11-17-05   $16,369.80   The OIG auditors requested clarification on the difference between the originally stated amount of $15,700.97 and the $16,369.80. The OIG was told that the $15,700.97 was an estimate. In order to determine if we received all invoices for Baton Rouge Police Supply and validate the Baton Rouge Police Supply transactions, we searched the transaction database, and found four additional charges. Two were charges for convenience check fees of $1.50 each; one was a 10-03-05 transaction for $1,235; and another was a 10-04-05 transaction for $71.98. The OIG again requested clarification given the additional charges and requested copies of the invoices. The FBI supplied the OIG with a new listing of transactions totaling $17,678.88 as of June 22, 2006, but informed the OIG that it did not have invoices to support the $1,235 and $71.98 transactions. According to the FBI’s criteria, when an acquisition is made using a purchase card, a receipt document shall be retained as proof of purchase. All documents, including receipts, packing slips, purchase logs, dispute forms, and invoices, pertaining to purchase card transactions, must be retained for a period of 5 years from the cardholders statement date. The FBI’s criteria also states that if for some reason a cardholder does not have a proper receipt for any transaction, a document must be prepared that contains all appropriate information normally contained on a receipt (including vendor name, date of transaction, description, and dollar amount) and an explanation as to why the original receipt is not available. When the OIG reviewed the supporting documentation provided by the FBI, we could not identify either invoice for these two transactions or a document containing all appropriate information normally contained on a receipt and a written explanation on why the invoices were not obtained. Given the length of time the FBI took to provide the OIG with supporting invoices, the change in the number of invoices (originally told 4 then changed to 6), the total amount for Baton Rouge Police Supply (originally provided $15,700.97, then $16,369.80, and then $17,678.88), the missing two invoices, and the lack of documentation explaining why an invoice was not available, we concluded that the FBI did not follow its policies and procedures governing document retention, and we considered this an internal control finding. Merchandise Distributor The OIG auditors were not provided an invoice for a $3,673.30 Merchandise Distributor transaction dated September 13, 2005. The FBI instead provided a screen shot from the website used to make the purchase. The screenshot was for a Merchandise Distributor transaction dated September 4, 2005, for the amount of $3,710.40. The OIG requested clarification of why the screenshot reflected a different date and amount. The FBI cardholder stated that she may have received a discount; however, she could not provide documentation to substantiate her claim. Therefore, we are not certain that the transaction in question is the same transaction that we sampled. The FBI contends however that because the screenshot is for a greater amount then what the FBI was charged, there is no issue. However, the absence of an invoice or documentation explaining why an invoice was not obtained is a violation of the FBI’s purchase card criteria – an internal control issue. Use of Senior Contracting Officer The FBI took exception to the fact that our report did not include the qualifications and achievements of a particular contracting officer. However, this contracting officer was not the sole contracting officer who made FBI purchases and more importantly, the draft report did not identify any of the senior contracting officers or other personnel from any of the reviewed components. As we previously discussed with the FBI when it raised this issue on June 22, 2006, many components used experienced contracting officers to handle the bulk of major purchase card transactions and several components deployed these officers to the hurricane recovery sites. While we did not identify any of the contracting officers by name, or document personal accomplishments, we did specify the actions the components used to respond to hurricane recovery efforts in a chart on page 5 of our report. Appendix II In its response, the FBI stated that it contacted all the cardholders the OIG interviewed and all cardholders stated they were not asked if they were precluded from purchasing any items. During our audit, each cardholder we interviewed was asked if they were precluded from purchasing anything with their cards. Three of seven cardholders responded that they were either not precluded or did not know if they were precluded from making certain purchases. Although the OIG did not identify that precluded purchases were made, the FBI told us prior to the issuance of the draft report that they considered this issue to be very disturbing. An FBI official stated that he would “pull” the purchase cards of cardholders who were not aware of precluded items.16 While the FBI is within its right to cancel purchase cards, we believe that the issue could be better addressed by reinforcing policies on what items are not allowed to be purchased with purchase cards, and by instituting refresher training where applicable. Summary of Actions Necessary to Close the Report Based on responses received by the audited components and JMD, the OIG considers the report resolved. The following is a summary of actions necessary by each component to close the recommendations. EOUSA Resolved. This recommendation is resolved based on the EOUSA’s action to assist JMD in updating cardholder profiles and their agreement to the maximum cardholder to AO ratio of 7:1. The EOUSA response states that there is an option in regard to the cardholder to AO ratio given that the current JMD guidance indicates a maximum of 15:1. However, JMD has agreed to revise its policy and require the 7:1 ratio or 300 transactions. This recommendation can be closed when we receive and review the amended EOUSA policy limiting the cardholder to AO ratio to 7:1 or 300 transactions. Closed. This recommendation is closed based on the EOUSA updating and distributing its U.S. Attorneys’ Procedures on the Government Purchase Card Program. DEA Resolved. The DEA stated that its Purchase Card Handbook requires the Local Agency Program Coordinator and Purchase Card Approving Official to ensure cardholder profiles are current and the maximum rate of cardholders to AOs is observed in establishing new accounts. This recommendation can be closed when we receive copies of the DEA policy requiring cardholder profiles are updated and the requirement that the ratio of cardholders to AO does not exceed the 7:1 ratio or 300 transactions. Resolved. The DEA stated that it established management controls and restrictions on the types of purchases that can be made under the Purchase Card Program by restricting certain Merchant Category Codes. These restrictions have been issued in a Purchase Card Flash, which is an internal DEA email on news and policy notice, and also in DEA’s Purchase Card Program Handbook. Should a cardholder attempt to make a purchase from a restricted merchant, the purchase is declined by software at the point of sale, because all DEA purchase cards are coded to reject a particular Merchant Category Code. This recommendation can be closed when we receive documentation of DEA reinforcing policies on what items are not allowed to be purchased with purchase cards and the minimum documentation to be maintained in purchase card files. FBI Resolved. This recommendation is resolved based on the FBI’s action to address the cardholder to AO ratio. This recommendation can be closed when we receive and review the documentation outlining the requirement to maintain the 7:1 cardholder to AO ratio or 300 transactions, and confirmation that the cardholder profiles have been updated. Resolved. This recommendation is resolved based on the FBI’s agreement with the recommendation. This recommendation can be closed when JMD issues revised guidance that includes a do not buy list and the minimum documentation to be maintained in purchase card files, and we receive and review any revisions to the FBI’s guidance that are necessary based on JMD’s revised guidance. Resolved. This recommendation is resolved based on the FBI’s planned action to require refresher training and the training schedule for cardholders and AOs through 2007. This recommendation can be closed when we receive and review the amended policy requiring refresher training and documentation of how the FBI will provide refresher training after 2007. BOP Resolved. This recommendation is resolved based on the BOP’s action to require updated cardholder profiles and the adherence to the 7:1 cardholder to AO ratio. This recommendation can be closed when we receive confirmation that the field offices have updated the cardholder profiles. Closed. This recommendation is closed based on the BOP’s memo reinforcing policies on what can be purchased, documentation on the availability of funds, and maintenance of supporting documentation. ATF Resolved. The ATF stated it updates its manual listings to identify approving officials by position and clarify policies and procedures. While the OIG believe this is a good step, the recommendation was directed at updating the cardholder profiles in Pathway Net® so the approving official is easily identified and ratio of cardholder to AO is easily monitored. In order to close this recommendation, please provide documentation that ATF has updated cardholder profiles and requires a maximum cardholder to AO ratio of 7:1 or 300 transactions. Resolved. This recommendation is resolved based on the ATF’s action to reinforce policies on what items are not allowed to be purchased with purchase cards, the requirement to document the availability of funds, and the importance of retaining required supporting documentation. This recommendation can be closed when we receive and review the specific ATF update of the Bureau order, postings to the appropriate Bureau intra-web pages and reminders issued to cardholders. Resolved. This recommendation is resolved based on the ATF’s action to require purchase card refresher training. This recommendation can be closed when we receive documentation that ATF has amended its policies to require refresher training and has implemented the refresher training. USMS Resolved. This recommendation is resolved based on the USMS’s action to remind all cardholders and AOs of the requirement to update profile information and the maximum cardholder to AO ratio is 7:1. This recommendation can be closed when we receive documentation that the cardholder profiles have been updated and the USMS provides documentation specifying the required 7:1 ratio or 300 transactions. Resolved. This recommendation is resolved based on the USMS’s action to reinforce policies on what items are not allowed to be purchased with purchase cards, the requirement to document the availability of funds, and the importance of retaining required supporting documentation. This recommendation can be closed when we receive documentation of this USMS directive. Resolved. This recommendation is resolved based on the USMS’s planned action to institute refresher training. This recommendation can be closed when we receive documentation that the USMS has amended policies requiring refresher training and has implemented the refresher training. OJP Resolved. This recommendation is resolved based on OJP’s action to require updated cardholder profiles and the adherence to the 7:1 cardholder to AO ratio. This recommendation can be closed when we receive confirmation that the field offices have updated the cardholder profiles and documentation demonstrating the maximum cardholder to AO ratio is within the 7:1 ratio or 300 transactions. Resolved. This recommendation is resolved based on OJP’s action to reinforce policies on what items are not allowed to be purchased with purchase cards, the requirement to document the availability of funds, and the importance of retaining required supporting documentation. This recommendation can be closed when we receive documentation of the training provided and attendance at that training. Resolved. This recommendation is resolved based on OJP’s planned action to institute refresher training. This recommendation can be closed when we receive documentation that the OJP has amended policies requiring refresher training and has implemented the refresher training. CRS Resolved. This recommendation is resolved based on JMD’s planned efforts to issue a Procurement Guidance Document (PGD) requiring that all bureaus have no more than 7 cardholders to an AO and cardholder profiles are updated in Pathway Net® no more than 3 working days after a change occurred. This recommendation can be closed when we receive and review JMD’s amended policy. Resolved. This recommendation is resolved based on JMD’s planned efforts to issue the PGD specifying minimum documentation requirements for purchase card files. Additionally JMD will meet with the bureaus and develop a “do not buy” list that will be attached to the PGD and included in training. This recommendation can be closed when we receive and review the JMD amended policy and the developed “do not buy” list. Footnotes Pathway Net® is a proprietary web-based system that provides for an automated and paperless means for maintaining, retrieving, and storing purchase card transactions. The Pathway Cardholder profile is an electronic file that is used to identify specific data relating to individual cardholders including personal data, single purchase limit, monthly cycle limit, assigned approving official, and contact information FBI procurement policy identifies several items that all cardholders are precluded from purchasing with their cards including hotels, food, lodging, rental of motor vehicles, telecommunications services, and rental or lease of land or buildings.