Components' Resistance to VISA
Card Use Has Been
Difficult to Overcome
The JMD has encouraged the components to use the VISA card since FY 1993 when the Vice President's National Performance Review (NPR) recommended its use to streamline procurement and payment procedures. In addition, an interagency Procurement Council found that use of the VISA card saves, on average, $54 in administrative costs every time it is used instead of a purchase order. The Attorney General has involved at least one other Department entity--the Office of Investigative Agency Policies (OIAP)--in another effort to increase VISA card use for simplified acquisition purchases in the Department. On February 17, 1995, the OIAP established Department goals for VISA card use in FY 1995 and FY 1996.
Still, the components have been slow to designate VISA cardholders in their program and field offices. Although improvement was made in FY 1996, some managers in the components have continued to resist using the VISA card primarily because they prefer alternative procurement and payment methods and they fear cardholder misuse.
JMD Efforts to Increase VISA Card Use
JMD began promoting VISA card use in response to NPR's recommendations. Similar to what other federal agencies had done, the Department's Chief Acquisition Officer signed a pledge in November 1993 to increase by 100 percent the agency's use of the VISA card by October 1994. JMD officials told us that they have continually advocated use of the VISA cards in periodic meetings with the components' finance and procurement officials. JMD also routinely provides the components with reports of their VISA card use.
In a formal effort to promote VISA card use, JMD coordinated meetings with the components' procurement and finance officials between September and December 1993, to discuss their VISA purchase card programs. In a January 1994 report, JMD identified centralized procurement programs in the components as a barrier to VISA card use. JMD attributed this barrier to the components' lack of trust in program and field offices.
Department Goals to Increase VISA Card Use
In 1994, the Attorney General requested that the OIAP address the use of VISA cards by the Department's components. In response to this request, the Director, OIAP, reviewed the VISA purchase card program and endorsed VISA card use instead of purchase orders for transactions under $2,500. In a memorandum to the Attorney General dated February 17, 1995, he urged the components to set a goal of using the VISA card for 25 percent of all simplified acquisitions in FY 1995 and 50 percent in FY 1996. However, the Department did not establish goals for FY 1997 and beyond. Tracking the components' efforts to meet the established goals was left to the components to coordinate with JMD.
The JMD determined that over 87 percent of the Department's payments are for purchases under $2,500 and it has tracked the Department's progress in using the VISA card primarily for these purchases. To assess progress in FY 1995, JMD developed a profile of vendor payments. The components provided JMD with the potential number of payments for which the VISA card could have been used.5 This assessment showed that, during FY 1995, the Department used the VISA card for only 97,060 (or 14.6 percent) of the possible 662,990 purchases that were at or below $2,500 and that the components fell far short of the Department's 25 percent goal established for FY 1995.
In FY 1996 JMD used procurement data submitted by the components to the Federal Procurement Data System (FPDS) to assess the Department's use of the VISA card.6 Although not conclusive because of reporting differences among the components, the data showed that the Department used the VISA card for approximately 41 percent of the potential number of purchases under $2,500. Therefore, the Department was closer to meeting its goal of 50 percent for all simplified acquisitions in FY 1996.
During our review, we found some senior finance and procurement managers in the components who were not aware of the goals established by OIAP or did not accept them, and some who established goals different from those of OIAP. For example, at the FBI, the Unit Chief, Procurement, said that the FBI's goal for FY 1996 was 10 percent because the OIAP goal of 50 percent was not realistic. According to DEA's Chief, Policy Staff, the DEA goal for card use in FY 1996 was 25 percent, which is only one-half of the goal established by OIAP. The INS did not have quantitative goals for VISA card use. The Director, Procurement told us that she believed that the OIAP goals were unrealistic.
Why Components Are Not Using the VISA Cards
To determine potential barriers to VISA card use in the components, we spoke with procurement and finance officials in the Departments of Agriculture, Energy, Treasury, and Veterans Affairs. These officials identified obstacles to VISA use in their agencies and some of the methods they used to overcome them. We have provided this information in Appendix V.
The Department's components have experienced similar obstacles as those in other federal agencies. They had to (1) overcome the culture shock of program and field office personnel making their own purchases instead of procurement personnel in central locations, (2) accept a procurement and payment method different from what they were used to, and (3) overcome the fear that employees would use the VISA card inappropriately.
Centralized Procurement Authority - The components were initially reluctant to give their program and field offices authority to make their own purchases. In addition, managers in the components preferred that the procurement offices continue to buy needed goods and services. Over time, procurement personnel found that having the program and field offices buy what they needed allowed them to focus on other procurement matters, such as contract administration. Managers in the program and field offices found that they received the supplies and services faster if they used their VISA cards rather than going through a procurement office.
Most of the components have delegated VISA procurement authority to all of their program and field offices and have designated cardholders who are in non-procurement positions. As discussed previously, when USMS, OJP, and USAO have expanded VISA card use in all their district and program offices, we believe the centralized procurement barrier will be eliminated.
Alternative Procurement and Payment Methods - Some components prefer procurement and payment methods other than the VISA card because they have a comfort level with more familiar methods.7 We found the following among the components:
· JMD's Facilities and Administrative Services Staff guidance on the VISA card states that the VISA card does not take the place of blanket purchase agreements and, if needed items can be acquired by established BPAs, then that should be the first choice in procurement methods.
· JMD's Procurement Services Staff (PSS) said they do not use the VISA card for monthly or recurring charges because it is less cumbersome to issue one BPA or purchase order each year than to initiate 12 separate VISA transactions. In addition, the PSS officials said that, with the VISA card, the monthly invoice amount could exceed the cardholder's purchase limits.
· An FBI finance official said the FBI managers prefer the third party draft payment system because they are comfortable using it. They believe that by using this method they can obtain a greater level of detail, which they need to generate their reports, such as payment by vendor.
These examples illustrate preferences, not valid arguments, for using procurement and payment methods other than the VISA card. The VISA card should be used in place of BPAs and third party drafts as encouraged by the Department. When required, PSS can raise cardholder limits to allow VISA card use for monthly or recurring charges. If requested by the FBI, RMBCS, the GSA contractor, will provide Cardholder Activity Reports, which detail cardholder transaction information, such as charges by vendor, at daily or less frequent intervals.
Officials in JMD told us that they believe there are many purchases made within the Department for which the VISA card is not a good mechanism. Examples of these are payments for county clerk fees, fact witnesses and filing court motions. To solve problems associated with litigation support procurement, such as obtaining copies of transcriptions, the Chief Acquisition Officer authorized another alternative procurement method, the certified invoice procedure. This method has less record keeping and less supervisory oversight associated with it than the VISA card, which requires that cardholders reconcile their monthly statements of account and that approving officials ensure funds are available.
In the USAOs, an attorney, for example, is delegated authority to use the certified invoice procedure. Under this procedure, this attorney can simply request transcription services orally. When the services are received, the attorney certifies receipt of the transcriptions on the invoice and forwards the invoice to the finance office for payment. Recently, some USAOs have authorized VISA cards for employees in their finance offices who use them to pay the invoices. This streamlines the payment process by reducing the number of invoices and ensures that funds are available.
The certified invoice procedure is also used in other components, but the components may be using this method when the VISA card could better be used. For example, the USMS district offices use the certified invoice procedure and many have continued to use it because of their familiarity with the vendors. However, in a 1996 internal review of a district office, USMS officials found that transactions using the certified invoice procedure were not being properly documented and suggested that VISA card use be increased for micropurchases instead of the certified invoice procedure.
The components' use of the third party draft as a payment method will be virtually eliminated by January 1, 1999. By this date, the Debt Collection Improvement Act of 1996 mandates that the components make all payments by electronic funds transfer.8 The VISA card is an alternative to third party draft and one which meets this mandate.
The BOP and FPI have mandated use of the VISA card for all micropurchases. We believe that the other components will continue to use alternative methods for micropurchases as long as they have those options available. As long as this remains the case, the Department will not make maximum use of the VISA card.
Fear of Misuse - Senior Department officials believe the greatest barrier to increased use of the VISA card continues to be a lack of trust in employees to use the card appropriately. Cardholders are responsible for using the card only for official government business and in accordance with procurement regulations. Components can take disciplinary action against employees who do not use the card appropriately.
Most of the components have internal review offices that have included the VISA card program as part of their reviews or are incorporating them into their guidelines for future program reviews. In addition, most of the components' guidance on the VISA program state that procurement offices conduct their own random audits of VISA cardholders. However, some procurement officials told us they had not conducted any audits in FY 1996, or had conducted only a limited number.
Using the OIG random sample of transactions and a U. S. Postal Service software program to identify potential misuse, we identified 27 transactions as potential instances of misuse.9 For example, we questioned the following transactions:
· Transactions for hotels, e.g., the Holiday Inn, Embassy Suites and the Morrison-Clark Inn. We found that an FPI cardholder had purchased hotel gift certificates for use in an employee incentive program. Although approved by the institution's warden, this type of VISA purchase is prohibited by component policy.
· A transaction for Road Runner Sports. The USMS cardholder stated that she purchased two heart monitors for the district's exercise room.
· Vendor receipts with signatures other than the cardholders. We determined that these transactions were made by the cardholders over the telephone, but the merchandise was picked up by persons other than the cardholders. Rather than mark the VISA card receipts as telephone orders, the vendors requested that the persons picking up the merchandise sign the VISA card receipts.
We found that 25 of the 27 transactions were appropriately made with the VISA card. We notified the responsible officials in FPI and BOP about the two hotel gift certificates. The other two examples given above were not cases of misuse. Our review of cardholders' transactions indicates that the Department's cardholders are using their VISA cards as intended. Because the risk of misuse is low and there is adequate opportunity for oversight, the components should not consider this a barrier to increasing use of the VISA cards.
The Department can do more to ensure continued growth of its VISA purchase card program. We suggest that the Department establish goals for VISA card use in future fiscal years, ensure that the goals are widely disseminated, and track the components' efforts to meet them.
Because the Department is committed to streamlining procurement and payment procedures
by using the VISA card, JMD should continue its efforts to encourage the components' use
of the card. Also, the components should instruct their managers on the benefits of the
VISA purchase card program and aggressively promote use of the VISA card.
The Inspections Division recommends that the Assistant Attorney General for Administration:
3. Mandate use of the VISA card for micropurchases, when possible.
5 The BOP VISA card program was implemented in FY 1996. The information that BOP provided to JMD was based on actual FY 1996 use as of June 15 and projected through the end of the fiscal year.
6 The FPDS is an automated collection of procurement data used to measure and assess the impact of federal procurement on the nation's economy, the extent to which small businesses and small disadvantaged businesses share in federal procurement, the impact of competition, and other procurement policy purposes.
7 These methods include a blanket purchase agreement (BPA), a type of charge account that permits consolidated invoicing; a Standard Form-44, Purchase Order-Invoice-Voucher, a pocket-sized purchase order form used for on-the-spot, over-the-counter purchases; or a purchase order, a government offer to purchase goods or services.
8 An electronic funds transfer can be made through an automated clearing house or by wire transfer.
9 The Postal Service developed this surveillance program to improve oversight capabilities. This program allows transaction review by various purchase attributes.