Components' Procedures Could Be
Improved to Take Advantage of
the VISA Program Benefits
Twice a year, RMBCS provides refunds to the components based on the total dollar amounts charged to the VISA cards for the refund period. The refund amount is determined by how quickly the component pays the invoice, the method by which it receives and pays the invoice and the method by which it receives its management reports.
We found that most of the components do not take full advantage of available program benefits. In addition, we found that components have delinquent VISA accounts for which they must pay penalty fees, or have funds owed to them by RMBCS.
RMBCS provides a refund to components as an incentive to pay sooner than 30 days as required by the Prompt Payment Act, as amended (31 United States Code §3901). The refund amount is determined by how quickly the components pay their invoices. To maximize this amount, RMBCS encourages the components to pay the invoice immediately and provides a 60-day period after it receives payment during which components can dispute a transaction. Components can receive higher refunds if they (1) receive and pay their invoices electronically and (2) receive all of their management reports electronically.11
The JMD Finance Office, which pays the invoices for the OBDs, including the OIG, USMS Headquarters Offices and some of the USMS district offices, pays the monthly invoice upon receipt. The remaining USMS district offices that JMD does not service and all of the remaining components pay RMBCS within 30 days to comply with the Prompt Payment Act.
Electronic receipt of invoices and management reports requires use of a modem and, possibly, communications software if the component's software is not compatible with the software used by RMBCS. An RMBCS official told us that, if the components need this communications software, RMBCS can provide it at no cost.
The components can pay their monthly invoices by electronic funds transfer or by Treasury check. However, the preferred method is by electronic funds transfer, which will be mandatory January 1, 1999. Only JMD receives and pays its invoice from RMBCS electronically. However, JMD did not benefit from a higher refund because it also received a hard copy of the invoice. A JMD official told us that, during our review, JMD initiated action to eliminate the hard copy of the invoice. The USMS district offices for whom JMD does not pay and all other components either receive their monthly invoices in hard copy from RMBCS, or pay by third party draft rather than electronically and, therefore, cannot benefit from the refund.
Table 1, shows, by component, the refund amounts received from RMBCS in March 1996 (for
the period August 1, 1995 to January 31, 1996) and in September 1996 (for the period
February 1, 1996 to July 31, 1996).
Table 1 - Refund Amounts to DOJ Components
Using the total dollar amounts charged to the Department's VISA cards for the period February 1, 1996 to July 31, 1996, we determined that, if all of the components had received and paid their monthly invoices electronically upon receipt, the total refund to the Department in September 1996 could have been at least $168,800 instead of the $19,583.18 (shown in Table 1). According to RMBCS, none of the components receive all of their management reports electronically. As a result, none of them benefitted from this aspect of the potential refund. The refund in September 1996 could have been even more than $168,800 if the components received their reports electronically.
According to the GSA contract, agencies may elect to receive invoices and remit payment electronically more frequently than once a month. Daily receipt and payment allows an agency to maximize the refund available.12 However, RMBCS is currently capable of providing daily invoices only at the agency level. In the Department, invoices are received and paid at the component level. A RMBCS official told us that their system is being enhanced to provide daily invoices at the component level and that this enhancement was expected to be completed by February 1997. As of March 1997, RMBCS was unable to provide a new projected completion date. Using the total dollar amounts charged to the Department's VISA accounts for the period February 1, 1996 to July 31, 1996, RMBCS estimated that the Department's refund for daily electronic receipt and payment of invoices and electronic receipt of management reports would have been $241,750 for this 6-month period.
Outstanding accounts have balances that can be either credits (amounts owed to the components by RMBCS) or delinquencies (amounts owed to RMBCS by the components). RMBCS data as of October 7, 1996, showed that the Department had 81 accounts with delinquent balances owed to RMBCS, amounting to $158,200 and 73 accounts with credits owed to the Department, amounting to $52,000. These accounts have had outstanding balances from 53 to 1,180 days. This information is provided, by component, in Appendix VI. Designated finance offices in the components receive this information monthly from RMBCS only if they have accounts with outstanding balances over 30 days.
Delinquent Amounts Owed to RMBCS - If components do not pay their invoices within 30 days of receipt in accordance with the Prompt Payment Act, they must pay interest penalty fees. In some components, delinquent accounts occur primarily because cardholder reconciliation is done prior to payment. For example, DEA, FBI, and INS procedures require that the cardholders reconcile their monthly statements before the finance offices pay the RMBCS invoice. Cardholders may be slow to
reconcile their statements or may not have received their statements from RMBCS in time to reconcile them within established time frames.
Credits Owed to the Department - Credits occur when, for example, an item is returned to a vendor. If RMBCS receives the vendor's credit in the same billing period as the one in which the item was purchased, the credit automatically offsets the transaction and RMBCS applies the credit to the cardholder's monthly statement of account. However, if the credit is not received until a subsequent billing period, the two do not automatically offset. The components must inform RMBCS how to apply the credit. We found that several components have not notified RMBCS how to apply credits owed to them.
We suggest that the components reassess their payment procedures of paying only after cardholders reconcile their accounts and consider paying their monthly invoices upon receipt. They could benefit from a larger refund and would eliminate the potential for delinquent accounts and resulting interest penalty fees. We also suggest that the components more closely monitor their outstanding accounts to ensure they recover funds owed to them by RMBCS.
With the advent of mandated electronic funds transfer and an overall movement toward less paperwork, we suggest the components assess their capabilities for electronic receipt and payment of invoices and management reports and make every effort to take advantage of this option. The components should also assess their capabilities for daily receipt and payment of invoices when RMBCS makes this option available.
OBJECTIVES, SCOPE AND METHODOLOGY
Our objectives were to determine the extent of VISA card use, identify any barriers to increased VISA card use, and assess the internal controls in the VISA purchase card program. We reviewed Department and component policy and guidance for use of the VISA card. We also examined procurement and payment practices to identify barriers to card use in the Department.
We reviewed Presidential Executive Order 12931, Federal Procurement Reform; the Vice President's National Performance Review; Federal Acquisition Streamlining Act of 1994; the Federal Acquisition Regulations; and the Justice Acquisition Regulations. We also reviewed the General Services Administration contract with the Rocky Mountain BankCard System (RMBCS) for the Governmentwide Credit Card Program.
We interviewed officials from RMBCS responsible for the administration of the VISA purchase card program and officials with the General Services Administration responsible for contract administration. We interviewed senior managers in finance and procurement responsible for policy and administration of the VISA card program, and selected cardholders in the Bureau of Prisons; Drug Enforcement Administration; Federal Prison Industries; Federal Bureau of Investigation; Immigration and Naturalization Service; U.S. Marshals Service; National Institute of Corrections; Justice Management Division; Office of Justice Programs; Offices, Boards, and Divisions; and the Office of the Inspector General. In addition, we interviewed procurement and finance officials responsible for the VISA card program in other federal agencies (United States Departments of Agriculture, Energy, Treasury, and Veterans Affairs) to determine what barriers they have had to overcome to increase VISA card use.
To test internal controls, we obtained from RMBCS transaction data for Department cardholders during the April-May 1996 billing period. We used the U. S. Army Audit Agency Statistical Sampling System to determine the sample size for each component and the Statistical Package for Social Sciences to randomly select the transactions for review in each component. From a total of 18,331 transactions made by 2,943 cardholders throughout the Department, we selected 886 transactions made by 594 cardholders. We also used the U.S. Postal Service's surveillance software to check for potential instances of misuse.
We requested that the 594 cardholders provide copies of the invoice and required component purchase request/approval form for each of the 886 VISA card transactions in the random sample. We also requested that each of the 594 cardholders provide copies of the cardholder statement of account for the April-May 1996 billing period and a copy of the delegation of authority to use the VISA card.13
We interviewed selected cardholders based on our review of the VISA transactions, and potential misuse as identified by the U.S. Postal Service's software program. We interviewed selected approving officials to determine whether they monitored the accounts as required and whether they had an excessive number of cardholders for whom they were responsible.
VISA CARDHOLDERS AND TRANSACTIONS
(APRIL 15 - MAY 16, 1996)
|VISA TRANSACTIONS||RANDOM SAMPLE|
1 This includes 4 NIC cardholders.
2 There were 25 VISA transactions made by 3 NIC cardholders. None of the transactions was randomly selected.
3 This includes 30 OIG cardholders and 3 OJP cardholders
4 There were 63 VISA transactions made by OIG cardholders. Six of the 30 OIG transactions were randomly selected. There were 44 transactions made by 2 OJP cardholders. Two of the 44 OJP transactions were randomly selected.
SOURCE: BASED ON RMBCS DATA AND OIG RANDOM SAMPLE
DEPARTMENT OF JUSTICE COMPONENTS REVIEWED
Bureau of Prisons (BOP)
Drug Enforcement Administration (DEA)
Federal Bureau of Investigation (FBI)
Federal Prison Industries (FPI)
Immigration and Naturalization Service (INS)
United States Marshals Service (USMS)
National Institute of Corrections (NIC)
Office of Justice Programs (OJP)
Office of the Inspector General (OIG)
Offices, Boards, and Divisions (OBD):
Associate Attorney General, Office of the
Attorney General, Office of the
Civil Rights Division
Community Oriented Policing Services, Office of
Community Relations Service
Deputy Attorney General, Office of the
Environment and Natural Resources Division
Executive Office for United States Attorneys
Executive Office for United States Trustees
Foreign Claims Settlement Commission
Immigration Review, Executive Office for
Information and Privacy, Office of
Intelligence Policy and Review, Office of
Interpol, U.S. National Central Bureau
Justice Management Division
Legal Counsel, Office of
Legislative Affairs, Office of
Pardon Attorney, Office of the
Policy Development, Office of
Professional Responsibility, Office of
Public Affairs, Office of
Solicitor General, Office of the
United States Attorneys' Offices
United States Parole Commission
United States Trustees
VISA PURCHASE CARD PROGRAM GROWTH BY COMPONENT
(Dollars in Thousands)
|FY 1993||BOP||DEA||FBI||FPI||INS||OJP||USM||OBD||DOJ TOTAL|
TYPES OF PURCHASES IN OIG RANDOM SAMPLE
Our review of 886 randomly selected VISA transactions from the billing period, April
16-May 15, 1996, indicates that the Department's cardholders use their VISA cards to make
a wide range of purchases. The following are examples of the types of purchases we found:
|278 (31.4%)||$ 82,518||Office supplies - such as copier paper, pens, staples, file folders, and stamp pads. We also included publications in this category including magazine subscriptions.|
|132 (14.9%)||$ 74,127||Mission-related - unique to the mission of the component, such as chemicals for DEA laboratories and fresh produce for inmates in BOP institutions.|
|109 (12.3%)||$ 35,654||Tools and equipment - for maintenance and construction. This includes such items as drill bits, electrical supplies, and plumbing supplies.|
|101 (11.4%)||$ 34,954||Other - transactions that could not be combined into a single category.|
|96 (10.8%)||$ 27,017||Automotive - parts and services related to automobile maintenance and repairs.|
|79 ( 8.9%)||$ 41,497||Computer-related - such as Internet services and printers.|
|50 ( 5.6%)||$ 14,539||Repairs and services - such as copier maintenance.|
|41 ( 4.6%)||$ 18,714||Mandatory sources - vendors such as the FPI, GSA, or GPO.|
11 RMBCS management reports include cardholder activity reports that show details of cardholder transactions, such as amount and vendor name; invoice status reports that show outstanding account balances; and disputed transaction status reports that list unresolved and recently resolved disputes.
12 For example, the Department of Veterans Affairs projected monthly refunds of $400,000 for daily payment of invoices if it met its goal of 95 percent use of VISA for micropurchases in FY 1996.
13 Two cardholders (one in BOP and one in an OBD) were on extended sick leave and could not submit documentation.