HUD Purchase Cards: Poor Internal Controls Resulted in Improper and Questionable Purchases

In response to GAO's work, HUD has implemented the mandatory use of the HUD FORM 10.4, Requisition for Supplies, Equipment, Forms, Publications and Procurement Service, and formal purchase logs. These forms must be completed by the cardholder and signed by the approving official prior to any purchase card transaction.

In response to GAO's work, HUD has developed and implemented a robust review and approval process. HUD conducted mandatory training of this review and approval function to approving officials in January 2003, and again in December 2003.

HUD implemented a new procedure in which a list of approving officials, cardholders, and respective spending limits is distributed to each Assistant Secretary or equivalent within the department. They are responsible for reviewing the list for accuracy and submitting corrections to the Agency Program Coordinator, who then will update the list. Additionally, approving officials are required to provide written notification to the Agency Program Coordinator when they are reassigned to other offices or are no longer required to perform approving official duties. Rather than quarterly, this will be an ongoing procedure.

In response to GAO's work, in January 2003 and again in December 2003, HUD conducted mandatory training for all cardholders and approving officials. All cardholders and approving officials were provided a copy of the purchase card procedures and guidance. The guidance provides detailed instructions on the fields of information for the newly required purchase logs and the types of required supporting documentation.

HUD designated one staff member to perform planned internal reviews as well as random spot reviews. Reports containing recommendations to correct any deficiencies and weaknesses discovered will be issued on an interim basis as reviews are completed. GAO obtained an example of a notification of review memorandum and the results of that effort and related recommendations.

On May 28, 2003, HUD updated the remedial action plan to include the specific steps necessary to fully implement the majority of the recommendations.

In response to our report, HUD performed a follow-up review on the $2.3 million in questionable purchase card transactions identified. HUD completed reviews on 85% of these transactions which represented $2.1 million (91%) of the $2.3 million identified and found no instances of questionable transactions, fraud, waste or abuse of federal funds. A HUD-IG report (report no. 2005-DP-0003) on the purchase card program noted significant improvement in the overall management of the program as a result of actions taken to address the issues identified in our report. The remaining 15% of transactions that have not been reviewed (which total just under $200,000) are made up of many small dollar transactions (below $1,000.00), with the largest transaction totaling $6,382.60.