Department of Justice Purchase Card Expenditures Related to Hurricane Recovery Efforts
Audit Report 06-36
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:
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.
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.
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.
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.
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