Forest Service Purchase Cards: Internal Control Weaknesses Resulted in Instances of Improper, Wasteful, and Questionable Purchases

Highlights

Since 1999, GAO has designated Forest Service's financial management as a high-risk area because of internal control and accounting weaknesses that have been identified by the Inspector General and GAO. Given these known risks and the hundreds of millions of dollars in credit card purchases made by the agency each year, GAO was asked to review the Forest Service's fiscal year 2001 purchase card transactions to determine whether (1) existing internal controls were designed to provide reasonable assurance that improper purchases would be prevented or detected, (2) purchases were made in accordance with established policies and procedures, and (3) purchases were made for a reasonable cost and reflected a legitimate government need.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Forest Service	With regard to improving the Forest Service's internal controls over purchasing, the Chief of the Forest Service should establish policies and procedures that segregate duties for at least some phases of the purchasing process when using the purchase card. The Forest Service program should ensure that no one individual is able to take all the steps needed to request, purchase, receive, maintain, and validate goods and services.	Closed – Implemented In its revised purchase card policy the Forest Service now requires that purchases shall at least be either 1)authorized/requested in writing or 2) validated by someone other than the person making the purchase (pg 17 of 51 of new policy). This provides for a segregation of duties that was not in place during our audit.
Forest Service	With regard to improving the Forest Service's internal controls over purchasing, the Chief of the Forest Service should establish policies and procedures requiring that supervisors review and validate all of their subordinates' purchase card transactions, including review of original supporting documentation to confirm they are appropriate, for official purposes, and reconciled in a timely manner.	Closed – Implemented Forest Service issued direction to the field on April 18, 2004 to require documentation of supervisory review of proposed purchase card transactions on a supervisor checklist.
Forest Service	With regard to improving the Forest Service's internal controls over purchasing, the Chief of the Forest Service should strengthen policies and procedures to ensure that the appropriate the local agency program coordinator (LAPC) is notified and the LAPC cancels cardholder accounts immediately when a purchase card is lost or stolen or a cardholder leaves Forest Service employment.	Closed – Implemented USDA has made enhancements to its purchase card system, the new 6.2 PCMS, which will allow for better local agency program coordinator oversight and administrative control of the purchase made by cardholders, such as running transaction files against employee database and automatically canceling cards of employees when they leave the agency.
Forest Service	With regard to improving the Forest Service's internal controls over purchasing, the Chief of the Forest Service should establish a systematic process that the agency program coordinator can use to track and monitor training for cardholders and program coordinators to help ensure that they receive (1) training before being granted purchase cards or approval authority and (2) timely, periodic refresher training in areas such as proper segregation of duties, purchasing policies and procedures, supervisor and program coordinator responsibilities for reviewing and approving individual purchases, and reporting potential purchase card fraud and abuse.	Closed – Implemented The revised purchase card policy (FSH.6309.32 Part 4G13) has been significantly improved in the area of training for key personnel involved in monitoring purchase card activity, especially the Local Agency Program Coordinator. The revised policy provides for training on monitoring responsibilities to be performed weekly, monthly, and annually. In addition, the revised policy provides training on recommended actions for monitoring the activities of the purchase card holders.
Forest Service	With regard to improving the Forest Service's internal controls over purchasing, the Chief of the Forest Service should revise and strengthen policies and procedures for cardholders who have had their purchase card use suspended or limited to ensure that similar action is taken on the use of convenience checks.	Closed – Implemented The revised purchase card policy (FSH.6309.32 Part 4G13) includes guidance on appropriate actions to be taken against cardholders for various types of noncompliance concerning the use of their cards.
Forest Service	With regard to improving the Forest Service's internal controls over purchasing, the Chief of the Forest Service should revise and strengthen policies and procedures over disputed transactions to ensure that all disputed transactions are identified in a timely manner and completely resolved.	Closed – Implemented The revised purchase card policy (FSH.6309.32 Part 4G13) provides improved guidance on actions to be taken regarding disputed transactions. An additional clause has been added which states "After the 60 day time limit has passed, the transaction is no longer disputable and must be approved." The policy also states that disciplinary actions can be taken against employees for failure to dispute a charge.
Forest Service	With regard to improving the Forest Service's internal controls over purchasing, the Chief of the Forest Service should establish policies and procedures to ensure that original documentation is maintained in central locations, such as regional offices, so that it is readily available for periodic monitoring reviews by supervisors, LAPCs, and Chiefs of the Contracting Office.	Closed – Implemented The Forest Service policy provides that a cardholder's original documentation is to be maintained at the unit where the cardholder is located. However, Forest Service also revised its policy to require cardholders to furnish original documentation for review purposes within a reasonable period of time and provide for consequences if the cardholder fails to provide the documentation.
Forest Service	With regard to improving the Forest Service's internal controls over purchasing, the Chief of the Forest Service should revise and strengthen policies and procedures for designating property costing under $5,000 as "sensitive" to include all equipment susceptible to theft. Also, the Chief of the Forest Service should ensure that the revised policies and procedures are applied consistently across all Forest Service regions.	Closed – Not Implemented Forest Service considered adding items to its list of sensitive property and of the items we identified as potentially sensitive during our testing, only snowmobiles were added. The Forest Service position on our recommendation continues to remain that it is not cost effective to track other property below the $5,000 capitalized threshold. No additional items will be added to the list for the foreseeable future and no further action will be taken on this recommendation.
Forest Service	With regard to improving the Forest Service's internal controls over purchasing, the Chief of the Forest Service should establish policies and procedures to ensure that all sensitive and accountable personal property used in Forest Service operations is promptly entered into the PROP system or other comparable system and that a periodic inventory of the items is taken.	Closed – Implemented FS has implemented a variety of measures to help ensure all sensitive and accountable property is entered into the PROP system. Policy letters jointly signed by the FS Director of Acquisition Management (AQM) and the FS Chief Financial Officer have urged field units to enter data into PROP within 30 days of receipt. Also, since January of 2002 the FS no longer allows offices to purchase sensitive or accountable property with purchase cards, which was a major source of unaccounted-for property. Substantial progress has been made in correcting the PROP 304 (error) report since the time of the audit. The FS headquarters office now issues a monthly report to all Regional AQM Directors that indicates the total dollar amount of all items on the PROP 304 report that is more than 30 days old. Numerous data "fixes" have been made to the PROP 304 database that have significantly reduced errors. In addition, several of the financial fields have been "locked" so that these numbers are either generated by the system or input by the CFO's office.
Forest Service	With regard to improving and enforcing compliance with purchasing requirements at the Forest Service, the Chief of the Forest Service should implement monitoring techniques to identify improper transactions such as cardholders making split purchases, cardholders writing checks payable to themselves, purchases exceeding established dollar thresholds, or purchasing unauthorized items.	Closed – Implemented The revised purchase card policy (FSH.6309.32 Part 4G13) has been significantly clarified the responsibilities of the key personnel involved in monitoring purchase card activity especially the Local Agency Program Coordinator. They have included monitoring responsibilities to be performed weekly, monthly and annually. In addition, the revised policy provides recommended actions for monitoring the activities of the purchase card holders and have made enhancements to the "alerts" system function to better enable identification of purchase card improprieties.
Forest Service	With regard to improving and enforcing compliance with purchasing requirements at the Forest Service, the Chief of the Forest Service should revoke or suspend purchasing authority of cardholders who are found to be frequently or flagrantly noncompliant with policies and procedures.	Closed – Implemented The revised purchase card policy (FSH.6309.32 Part 4G13) has been significantly improved regarding actions to be taken in response to unauthorized, inappropriate, or unofficial use of the purchase card, including but not limited to, writing checks for cash or to self, travel advances, split purchases, allowing other employees to use the purchase card and/or checks, and writing checks to vendors that accept the credit card.
Forest Service	With regard to purchases that may be at an excessive cost or for questionable government need, the Chief of the Forest Service should require purchases of certain assets, such as computer equipment, Personal Digital Assistants, and other electronics to be coordinated centrally to take advantage of economies of scale, standardize types of equipment purchased, and better ensure bona fide government need for each purchase.	Closed – Not Implemented Forest Service is conducting a spending analysis of purchase card data and is currently exploring and establishing contracts and or BPAs for supplies and/or services where opportunities exist for economies of scale. Research is on going and future actions and/or policy will be guided by the spending analysis.
Forest Service	With regard to purchases that may be at an excessive cost or for questionable government need, the Chief of the Forest Service should develop and implement purchasing guidelines, based on specific Forest Service uses, for equipment such as digital cameras and projectors.	Closed – Not Implemented The Forest Service does not believe that they purchases items such as digital cameras and projectors in sufficient quantities to warrant developing guidelines for the purchase of these assets for specific FS uses. However, they are conducting a spending analysis of purchase card data and are currently exploring and establishing contracts and or BPAs for supplies and/or services where opportunities exist for economies of scale. Research is on going and future actions and/or policy will be guided by the spending analysis.
Forest Service	With regard to purchases that may be at an excessive cost or for questionable government need, the Chief of the Forest Service should require that cardholders document their determination that purchased items economically met the needs of the government based on an evaluation of price, consideration of the item's expected use, and other factors.	Closed – Implemented The revised Forest Service purchase card policy includes a requirement that cardholders limit purchase card transactions to those that meet the Government's minimum needs at the least cost to the government.
Forest Service	With regard to purchases that may be at an excessive cost or for questionable government need, the Chief of the Forest Service should follow up on transactions we identified for which no supporting documentation was provided to determine that the items purchased were for a legitimate government need, and take appropriate disciplinary or corrective action as warranted.	Closed – Not Implemented The Forest Service stated that they had followed up on the individual transactions that we identified during our audit, and had resolved the issues with the cardholders. However, they did not document the actions taken for each of these instances. Therefore, we can not verify that any of the issues we identified were addressed

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Auditing and Financial Management

AccountabilityCreditCredit salesFederal procurementFinancial managementFinancial recordsFraudInternal controlsQuestionable procurement chargesPurchase cards