FAA Purchase Cards: Weak Controls Resulted in Instances of Improper and Wasteful Purchases and Missing Assets
GAO-03-405
Published: Mar 21, 2003. Publicly Released: Mar 27, 2003.
Skip to Highlights
Highlights
In May 2002, GAO reported on breakdowns in purchasing controls at the Federal Aviation Administration's (FAA) Alaskan Region that resulted in improper and wasteful purchases. Many of the weaknesses were associated with the use of government credit cards--referred to as purchase cards--and raised concerns that similar problems might exist FAA-wide. As a result, GAO was asked to determine whether FAA's purchase card controls reasonably ensured that purchases were proper, at a reasonable cost, and for valid government needs. GAO also assessed whether assets bought with purchase cards were being properly safeguarded and recorded.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should establish policies and procedures that segregate duties for all phases of the purchasing process when using the purchase card. No individual should be able to take all the steps needed to request, purchase, pick up, and receive goods and services purchased. Such policies should also require that responsibilities of the cardholders, approving officials, funds certification officers, property custodians, and Agency Program Coordinators (APC) be performed by different people to ensure that management controls are not circumvented. |
Closed – Implemented
During 2003 and 2004, FAA reiterated and updated its purchase card policy and procedure guide, the FAA Acquisition System Toolset (FAST), which detailed the program reviews and established the positions of the National Purchase Card Coordinator to provide FAA-wide monitoring and oversight over the purchase card program and the Headquarters Purchase Card Audit Coordinator.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should develop detailed procedures that specify the type and extent of approving official review that is expected. Such procedures might include a checklist for approving officials to use in their monthly reviews of cardholders' transactions. At a minimum, these procedures should describe the types of supporting documentation that the approving official should ensure that the cardholder has provided, such as the invoice and/or credit card receipt, certification of funds availability, documentation of best value, applicable waivers, Personal Property In-Use Management System input forms, and written dispute forms for any disputed charges; the purchasing requirements that the approving official should review for compliance with policies and procedures, such as reviewing for split purchases, cash advances, and compliance with purchase card and convenience check spending limits and limits for construction and non-construction services; and a requirement that as evidence of review, the approving official sign the cardholder's monthly billing statement. |
Closed – Implemented
In January 2004, FAA developed checklists and added them to FAST to be utilized by the Agency Program Coordinator and National Purchase Card Coordinator to perform monitoring and oversight functions for its purchase card program. The checklists are reviews of prior approvals, authorizations, required documentation, fiscal responsibilities, official responsibilities and so forth. In March 2005, additional guidance was added to FAST for program performance measurements as a baseline for monitoring future process improvements. In 2005, the Government Purchase Card and Check Evaluation Report Checklists were used for each quarterly program evaluation.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should establish policies and procedures to limit the number of cardholders assigned to any one approving official consistent with GSA guidelines. |
Closed – Implemented
In its corrective action plan submitted to GAO on March 10, 2004, FAA stated that it had developed a policy that the Agency Program Coordinator would have responsibility for working with the lines of business to obtain a desirable ratio of cardholders to approving officials. FAA officials stated that its overall average of supervisors to cardholders is one to six, well within GSA's guidelines of one to ten. In January 2003, FAA revised its guidance that will help ensure that all field office ratios are less than its overall average, as well as GSA's ratio.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should follow up on transactions we identified that were missing invoice documentation to determine what was purchased and whether the items were for legitimate government needs, and take appropriate disciplinary actions as warranted. |
Closed – Implemented
FAA did respond to our "Questionable Purchases Identified During GAO's Review of FAA's Purchase Card Program" spreadsheet and determined that some transactions were not appropriate. They are now reviewing transactions and following up on questionable transactions, including the suspension of cardholders and approving officials when reviewers found instances of split purchases and purchases of the items from non-mandatory sources. On March 24, 2003, FAA issued a memo instituting a two-strike policy that acknowledges that cardholders may violate purchase card rules unintentionally one time and corrective actions for negligence or willful violation in the second instance. On October 7, 2003, the Administrator Heads of Office and Service also reminded management that they were required to inform and explain the Government Purchase Card Policy concerning violations to their staff. In 2004 they completed the Office of Management and Budget's required Purchase Card Quarterly Reports, where they reported the results of their purchase card program audits and reviews, including identified instances of possible fraudulent use of the purchase cards. As a result of the review, FAA reported 9 instances in which disciplinary actions were taken for improper use of purchase cards, including 2 cardholders whose card privileges were revoked.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should reiterate records retention policy for purchase card transaction files. |
Closed – Implemented
FAA concurred with GAO's recommendation and revised the FAA Acquisition System Toolset (FAST) to further reiterate this policy. In January 2003, FAST guidelines were revised to state that purchase cardholders shall retain all purchase card documentation for 6 years and 3 months from the date of purchase.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should establish procedures to be performed by the approving official or issuing office when a cardholder leaves that office to ensure that his or her purchase files are retained in accordance with policy. |
Closed – Implemented
FAA concurred with GAO's recommendation and, in October 2003, it updated the FAA Acquisition System Toolset (FAST). FAST guidelines were revised to require cardholders who transfer to another office or terminate employment with the agency to notify the approving official and provide to them all purchase card documentation before the employee transfers to another office or leaves the agency.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should require refresher training for all cardholders and approving officials. Such training should cover the areas discussed in this report, such as proper segregation of duties, purchasing policies and procedures, approving official responsibilities for reviewing and approving individual purchases, and reporting potential purchase card fraud and abuse. |
Closed – Implemented
FAA concurred with GAO's recommendation and, in October 2003, it updated the FAA Acquisition System Toolset (FAST) guidance to require refresher purchase card training every 2 years for all cardholders and approving officials. The training consists of reading the Purchase Card User's Guide on the FAA intranet, which includes the areas of segregation of duties, purchasing policies and procedures, and proper documentation. Cardholders and approving officials must certify completion of the training. The Agency Program Coordinators have established tracking systems to ensure that employees complete the training within 2 years of the anniversary of their last or initial training date. FAA will continue to monitor refresher training with its agency-wide evaluation that began in January 2004, and will assess the effectiveness of this tracking system.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should establish a systematic process that each APC can use to track and monitor training for cardholders and approving officials to help ensure that they receive (1) training before being granted purchase cards or approval authority and (2) timely, periodic refresher training. |
Closed – Implemented
During 2003, FAA reiterated and updated the training requirements of the purchase card policy and procedures guide, the FAA Acquisition System Toolset (FAST). As a result, FAST now requires the Agency Program Coordinator (APC) to establish and maintain a tracking system to monitor the initial and refresher training of the purchase cardholders and approving officials. FAST now provides a sample-tracking tool to guide the agency-wide evaluation of the tracking system. The APCs are to use the tool to establish and maintain the Cardholders and Approving Officials Spending Limits and Training Tracking Charts. During monitoring and oversight evaluations, the National Purchase Card Coordinator (NPC) is to review the APC's use of tracking system. As a result of FAA's 2004 reviews, training is now monitored. Further, several cardholders and approving officials had cards and approval authority revoked or had spending limits lowered.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should require initial and periodic refresher training for APCs, the national purchase card coordinator, and the national organization reporting coordinator that will assist them in carrying out their purchase card program management and oversight responsibilities. This should include developing a training curriculum specific to FAA purchase card policies and procedures. |
Closed – Implemented
FAA concurred and in January 2004 updated the FAA Acquisition System Toolset (FAST) to require minimum training for the National Purchase Card Coordinator, Agency Program Coordinator (APC), the alternate APC, and National Organization Reporting Coordinator. The refresher training is required every 2 years and the minimum training "may" include GSA SMARTPAY training, EAGLS training, the Simplified Acquisition Procedures Course, and the Appropriations Law Course.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should develop a national purchase card program monitoring and oversight system that includes assigning specific responsibility for following up on the effectiveness of actions to address prior audit or management review findings, overseeing local APC activities to ensure that local policies and procedures are adequate and consistent FAA-wide, and developing and using analytical tools to evaluate overall program results. |
Closed – Implemented
FAA's National Purchase Card Coordinator (NPC) and the APC used the Federal Aviation Administration System Toolset (FAST) checklists to monitor and review the program's compliance with the FAST requirements. The NPC used the checklists to conduct the 2004 quarterly reviews and the Headquarters Purchase Card Coordinator's 2004 annual audit with the report issued in 2005.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should develop operating guidance to assist APCs in performing their monitoring responsibilities. At a minimum, the guidance should provide detailed procedures for conducting annual reviews of cardholder and approving official activities, including the population to use when selecting the sample, the internal controls that should be assessed to ensure that they are operating as intended, and data analysis techniques and tools to use in analyzing bank electronic data. |
Closed – Implemented
In its March 10, 2004, Corrective Action Plan, FAA stated that it developed operating guidance to assist APCs in performing their monitoring responsibilities and included the revised guidance in the FAA Acquisition System Toolset (FAST) that was updated in January 2004. The updated guidance consists of a checklist guide to help APCs monitor several key internal control areas such as prior approval, authorized use, documentation, prohibited and restricted purchases, third party payments, use of mandatory and commercial supply sources, and fiscal responsibility. In addition, FAA uses information from the Electronic Account government Ledger System to prepare quarterly reports on purchase card activity. In April 2004, FAA provided additional documentation that showed Quarterly Purchase Card Reports prepared by all APC and specific guidance developed for annual reviews and data analysis
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should develop operating guidance to assist APCs in performing their monitoring responsibilities. At a minimum, the guidance should specify the monthly Electronic Account Government Ledger System and other reports that should be monitored for potential fraud, waste, and abuse. |
Closed – Implemented
In its March 10, 2004, Corrective Action Plan, FAA stated that it developed operating guidance to assist APCs in performing their monitoring responsibilities and included the revised guidance in the FAA Acquisition System Toolset (FAST) that was updated in January 2004. FAA uses information from the Electronic Account government Ledger System (EAGLS) to prepare quarterly reports on purchase card activity. In April 2004, FAA provided additional documentation that showed Quarterly Purchase Card Reports prepared by all APC and specific guidance developed for annual reviews and data analysis. As of March 2004, this recommendation has not been implemented. It was included with a prior recommendation (no. 11) in FAA's response.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should establish procedures to monitor and ensure purchase cards are canceled when cardholders leave FAA, are reassigned, or no longer have valid needs for the cards. |
Closed – Implemented
In October 2003, FAA updated the FAA Acquisition System Toolset (FAST) to require that cardholders who transfer to another office or terminate employment with FAA must notify their approving official and provide them with all purchase card documentation before transferring within or leaving the agency. In addition, FAA's guidance was revised to clearly specify that the approving official will determine and review cardholders' needs and cancel cards once there is no longer a need. In January 2004, FAST was also revised to require approving officials to review cardholder accounts on a quarterly basis in order to ensure that accounts that have not been used within the prior year are canceled, unless extended periods are authorized by the Chief of the Contracting Office.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should identify cardholders with multiple purchase cards and cancel additional cards. |
Closed – Implemented
As of March 2004, FAA has substantially completed the process of identifying and cancelling multiple purchase card accounts. Thus far, 113 cards have been canceled.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should establish policies and procedures that prohibit the future issuance of multiple cards to cardholders. |
Closed – Implemented
In July 2003, FAA amended the FAA Acquisition System Toolset (FAST) to authorize each cardholder to use and maintain only one purchase card and to prevent the issuance or allowance to maintain multiple purchase cards for any purpose. In addition, FAST was revised to give the Agency Program Coordinator the power to cancel multiple purchase card accounts.
|
| Federal Aviation Administration | With regard to improving FAA's internal controls over purchasing, FAA should establish procedures to periodically assess whether each cardholder continues to have a valid need for a purchase card and the appropriateness of the individual's spending limits. This should include verifying that current APCs and their alternates are not purchase cardholders. |
Closed – Implemented
In January 2003, FAA updated the FAA Acquisition System Toolset (FAST) guidelines to require approving officials to conduct quarterly reviews of cardholders' single purchase limits to ensure that the limits are appropriate for the cardholders' actual needs. The guidelines also specified that cardholder accounts that had not been utilized within a 1-year period must be canceled. FAA also updated the FAST in January 2004 to specifically prohibit Agency Program Coordinators and their alternates from being purchase cardholders.
|
| Federal Aviation Administration | With regard to improving and enforcing compliance with purchasing requirements at FAA, FAA should revoke or suspend purchasing authority of cardholders who are found to be frequently or flagrantly noncompliant with policies and procedures, such as cardholders making split purchases, cash advances, or purchases exceeding established dollar thresholds. |
Closed – Implemented
In January 2004, FAA revised its FAA Acquisition System Toolset (FAST), stating that the purchase card privileges will be suspended for 6 months for any cardholder who violates purchase card guidance twice within a 6 month period. The revision also stated that purchase card privileges can be restored upon completion of remedial training, or could be permanently revoked altogether. In response to the instances GAO identified as possible split transactions, FAA took action against those cardholders by counseling 124 cardholders on proper purchase card usage, recommending refresher training for 24 cardholders and approving officials, and either canceling or temporarily revoking the purchase cards for 8 employees. In addition, FAA conducted training briefings for over 50 cardholders in June and July 2003 to address possible purchase card misuse and reiterate FAST policies and procedures, and an open forum for all headquarters' organizations during February 2004.
|
| Federal Aviation Administration | With regard to improving and enforcing compliance with purchasing requirements at FAA, FAA should exercise appropriate disciplinary action against supervisors or approving officials who direct or approve purchase transactions that are noncompliant with policies and procedures. |
Closed – Implemented
In January 2004, FAA updated the FAA Acquisition System Toolset (FAST) guidance to specify that any approving official, supervisor, or manager responsible for purchase card misuse or fraud will be subject to disciplinary action under the FAPM Letter 2632 Code of Conduct & Discipline Order, HRPM 4.1 on Standards of Conduct, and HROI Table of Penalties. In addition, following its review of purchases GAO had identified as split transactions, FAA's Eastern Region management instituted corrective action against several approving officials, including requiring refresher training and revoking approval authority. In response to the split transactions and other instances of noncompliance that GAO identified, DOT informed all FAA management in March 2003 that a two-strike policy acknowledges that an individual may violate purchase card rules unintentionally one time, but that a second time, whether the result of negligence or willful violation, will require corrective action, ranging from formal admonishment to removal from federal service. In its March 10, 2004, memo, FAA also stated that it will exercise appropriate disciplinary action against supervisors or approving officials who direct or approve inappropriate purchase transactions.
|
| Federal Aviation Administration | With regard to improving and enforcing compliance with purchasing requirements at FAA, FAA should clarify FAA policy regarding the type of documentation required of cardholders, in lieu of a waiver, when not using a JWOD supplier, since JWOD suppliers do not issue standard waivers. |
Closed – Implemented
In its March 10, 2004, memo, FAA clarified that its purchase card policies mandate the purchase of products and services from mandatory Javits-Wagner-O'Day Act suppliers, like Federal Prison Industries, Inc. (Unicor). The memo also clarified that there is no waiver procedure to buy products or services elsewhere unless a waiver is received from Unicor for purchases exceeding $2,500. In January 2004, FAA revised the FAA Acquisition System Toolset (FAST) guidelines on selecting potential sources, stating that cardholders must determine if the product or service is available through mandatory sources of supplies and when written waivers are required.
|
| Federal Aviation Administration | With regard to purchases that may be at an excessive cost or for questionable government need, FAA should establish agency policies covering the allowability, justifications, and approvals required for purchasing items that should be controlled or restricted such as store gift cards and food. |
Closed – Implemented
In January 2003 and 2004, FAA updated its purchase card guidance in the FAA Acquisition System Toolset (FAST) to include items for which purchase by FAA purchase card are either prohibited or restricted. Items that would be prohibited in most cases include food items for meetings and conventions, gifts, membership fees for individual employees, personal items or furnishings, and drinking water. Plasma displays and personal data assistants were listed as restricted purchases; buying these items by purchase card would require written justification from the affected associate or assistant administrator. In March and October 2003, DOT and FAA officials, respectively, issued memos reiterating the responsibilities for purchase card holders and other interested individuals (managers and supervisors). In addition, FAA began reviewing purchase card activity for questionable prohibited purchases and restrictive buying from other than mandatory sources during fiscal year 2003.
|
| Federal Aviation Administration | With regard to purchases that may be at an excessive cost or for questionable government need, FAA should clarify Acquisition Management System policy and operating guidance regarding documentation requirements for the best value determination, including types of acceptable documentation. |
Closed – Implemented
In October 2003, FAA updated its purchase card guidance of the FAA Acquisition System Toolset (FAST) to specify that if an employee cannot find an item from a mandatory source, the employee must provide documentation that two or more vendors were contacted to determine the best value. The guidance further clarified that best value entails a fair and reasonable price, functional specifications, delivery capability, and warranty.
|
| Federal Aviation Administration | With regard to purchases that may be at an excessive cost or for questionable government need, FAA should establish policies and procedures to better limit and control the use of third party on-line payment companies as a payment mechanism. This might include requiring documented advance approval from the approving official to help ensure that the item is needed and that the online payment company is the only viable method of payment, as well as a subsequent verification to help ensure that the item or service purportedly purchased was in fact received. |
Closed – Implemented
In October 2003, FAA updated its purchase card guidance in the FAA Acquisition System Toolset (FAST) to require cardholders to immediately notify the approving official before purchase is to be processed through a third-party online payment company. The guidance also requires that the cardholders provide their approving officials with all documentation that supports the on-line payment transaction within 5 days of receipt of the item.
|
| Federal Aviation Administration | With regard to improving FAA's controls over the purchasing, recording, and safeguarding of assets, FAA should require centralized receiving and acceptance of accountable assets and sensitive property items purchased. |
Closed – Implemented
In 2004, FAA revised its guidance requiring a centralized process for bulk accountable and sensitive item purchases such as computers to be made from and received at only its Logistics and Technical Centers. The guidance will help FAA ensure that bulk accountable and sensitive equipment purchases are centrally received and properly tracked to prevent undetected loss or theft.
|
| Federal Aviation Administration | With regard to improving FAA's controls over the purchasing, recording, and safeguarding of assets, FAA should establish required time frames for completing and submitting property input forms, and for recording accountable assets in the property management system. |
Closed – Implemented
On September 11, 2003, FAA re-emphasized that newly acquired assets are to be recorded in the Personal Property In-Use Management System (PPMIS) within 30 days of receipt.
|
| Federal Aviation Administration | With regard to improving FAA's controls over the purchasing, recording, and safeguarding of assets, FAA should follow up on property items that FAA officials were unable to locate at the time of our unannounced inventory to determine whether the items were subsequently located and entered into FAA's property management system or whether the items were in fact lost or stolen, and take appropriate disciplinary actions as warranted. |
Closed – Implemented
As a result, FAA informed us that it had reviewed and tracked the 238 items identified during the unannounced inventory and took appropriate property management actions including the initiation of reports of survey, as warranted. In particular, FAA identified all items as either (1) non-accountable (not requiring entry within the property management system), (2) accountable with action taken within the property management system (price adjustment to and existing item or new addition) or (3) not found (and included them on Reports of Survey.
|
| Federal Aviation Administration | With regard to improving FAA's controls over the purchasing, recording, and safeguarding of assets, FAA should establish procedures to ensure that appropriate disciplinary action is taken against cardholders, approving officials, and/or property custodians as applicable who are unable to account for purchased assets under their responsibility in order to improve accountability for these assets. |
Closed – Implemented
The Assistant Secretary for Administration instituted a two-strike policy on March 24, 2003. This policy provided that an individual may violate purchase card rules unintentionally one time. A second instance, whether the result of negligence or willful violation, requires corrective action ranging from formal admonishment to removal from Federal service. FAA already had an existing policy that strongly supported taking disciplinary action regarding the misuse of Government purchase cards. Supervisors and managers have been reminded to follow the Table of Penalties, which dictates when to take appropriate progressive disciplinary action for misuse of Government property, including misuse of Government purchase cards.
|
| Federal Aviation Administration | With regard to improving FAA's controls over the purchasing, recording, and safeguarding of assets, FAA should improve physical security over the storage of computer-related equipment, such as placing these items in locked storage until they can be entered into the property management system and assigned to users. |
Closed – Implemented
The FAA revised Order 1600.69A FAA Security Management Program, which outlines the requirements for the storage and designation of areas where high risk items such as computer related equipment are stored. The order establishes procedures to ensure that only authorized personnel shall be allowed unescorted entry into critical areas; all visitors shall be escorted within critical areas; and entrances into critical areas shall be posted with signage as required. The order also states that critical areas will be secured when personnel are not present and specifically assigned to control entry and suggested other means that may be considered for controlling entry into critical areas. The other means include: (1) the use of security lock devices, (2) the of use solid wood or metal doors, (3) an effective personnel identification system, (4) the installation of a fixed guard post or employee controlling entry, (5) the use of electronic devices (e.g. card readers, digital scrambler pads, etc.), (6) the use of Intrusion Detective Systems, and (7) the installation of floor to ceiling walls.
|
| Federal Aviation Administration | With regard to improving FAA's controls over the purchasing, recording, and safeguarding of assets, FAA should require purchases of certain assets, such as computer equipment, to be coordinated centrally to take advantage of economies of scale, standardize types of equipment purchased, and to better ensure bona fide government need for each purchase. |
Closed – Implemented
FAA revise the FAA Acquisition System Toolset (FAST) guidelines in October 2003. The revised guidance requires that high cost, high quantity items like computer equipment be purchased centrally at the region, center, or headquarters line of business to allow the purchaser to take advantage of the economies of scale and equipment standardization.
|
Full Report
Office of Public Affairs
Topics
CreditCredit salesFederal procurementFraudInternal controlsProgram managementQuestionable procurement chargesPurchase cardsPrison costsReal property