Purchase Cards:

Control Weaknesses Leave the Air Force Vulnerable to Fraud, Waste, and Abuse

GAO-03-292: Published: Dec 20, 2002. Publicly Released: Dec 20, 2002.

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In July 2001 and March 2002, GAO testified on significant breakdowns in internal controls over purchase card transactions at two Navy sites that resulted in fraud, waste, and abuse. As a result, the Congress asked GAO to audit purchase card controls at DOD. This report focuses on Air Force purchase card controls and addresses whether the overall management control environment and key internal controls were effective in preventing potentially fraudulent, improper, and abusive purchase card transactions.

Weaknesses in the overall control environment and breakdowns in key controls relied on to manage the purchase card program leave the Air Force vulnerable to fraud, waste, and abuse. Major contributors to the weak control environment included excessive numbers of purchase cards, with about one purchase card for every seven employees, approving official span of control that far exceeded DOD guidelines, and credit limits that were 12 to 20 times higher than actual spending. Of the five key control activities tested, the Air Force had significant control breakdowns in at least three of them (1) receiving of goods and services by someone other than the card holder, (2) cardholder reconciliation, and (3) approving official review of the cardholder's reconciled statements. The highest failure rates--69 to 87 percent--at the four locations tested related to approving official review--viewed by DOD as the first line of defense against misuse of the purchase card. The control breakdowns resulted in purchases that were potentially fraudulent, improper, and abusive or questionable. GAO also identified potentially fraudulent transactions for which supporting documentation was not available to show the quantity and type of items purchased. Air Force officials could not recall the purpose of these transactions. In addition, GAO identified (1) improper transactions related to weaknesses in controls relied on to prevent splitting purchases into multiple transactions to circumvent micropurchase and cardholder transaction limits and (2) the failure to use mandated sources of supply. Finally, GAO found that cardholders who abused or improperly used the purchase card were not subject to strong disciplinary action or consequences. The Air Force has taken a number of steps to improve control over the purchase card program. For example, it implemented automated controls during fiscal year 2002 to help monitor approving official span of control, credit limits, and cardholder reconciliation and approving official review of monthly statements. If effectively implemented, these controls should help strengthen the overall Air Force purchase card control environment as well as controls over statement reconciliation and approval.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: MID 904, "Department of Defense Charge Card Task Force Status Report," December 2002, transitioned responsibility for implementation and management of the Task Force recommendations from the Office of the Under Secretary of Defense--comptroller's Performance and Management Excellence Directorate--to appropriate DOD organizations. DOD established a Senior Steering Group charged with ensuring successful implementation of MID 904 and created Integrated Product Teams (IPT) to create solutions to DOD credit card problems based upon Senior Steering Group strategic direction. In response to GAO's recommendation, the DOD IPT incorporated plans to address GAO's Air Force purchase card recommendations. GAO's participation in Air Force command purchase card conferences and DOD's March 21, 2003, IPT strategic planning conference confirmed that actions were underway to address GAO's Air Force purchase card recommendations.

    Recommendation: The Under Secretary of Defense (Comptroller) should direct the Charge Card Task Force to assess the above recommendations, as well as the strengths in the Air Force purchase card program that GAO identified, and to the extent applicable, incorporate them into its future recommendations to improve purchase card policies and procedures throughout DOD.

    Agency Affected: Department of Defense: Department of the Air Force

  2. Status: Closed - Implemented

    Comments: On January 31, 2006, the Air Force revised Air Force Instruction (AFI) 64-117 to require that copies of surveillance results be provided to the approving/billing official's organizational commander. In addition, AFI 64-117 requires agency/organization program coordinators to monitor corrective actions on purchase cards and annual surveillance findings and provide quarterly status reports to their installation Contracting Director/contracting squadron commander.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to make revisions to Air Force Instruction 64-117 by requiring reports on surveillance results to be addressed to unit commanders.

    Agency Affected: Department of Defense: Department of the Air Force

  3. Status: Closed - Implemented

    Comments: On January 31, 2006, the Air Force issued revisions to Air Force Instruction (AFI) 64-117, "Air Force Government-wide Purchase Card Program," providing that reports of annual surveillance are signed by the installation Contracting Director/contracting squadron commander and addressed to the unit commanders.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to make revisions to Air Force Instruction 64-117 by requiring reports on the results of annual surveillances to be signed by installation contracting directors to demonstrate management oversight and "tone at the top."

    Agency Affected: Department of Defense: Department of the Air Force

  4. Status: Closed - Implemented

    Comments: On March 18, 2003, the Associate Deputy Assistant Secretary for Contracting signed a policy memorandum that mandated use of the Purchase Card Surveillance Checklist and posted the checklist to the Air Force Contracting Web page. In addition, the Air Force has included this mandate in draft revisions to Instruction 64-117, Government-wide Purchase Card Program. As of August 2003, the revisions to the Instruction were undergoing internal coordination in preparation for issuance.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to make revisons to Air Force Instruction 64-117 by requiring that the surveillance checklist, which is included in an appendix to the Air Force Instruction, be used to guide and document surveillance results.

    Agency Affected: Department of Defense: Department of the Air Force

  5. Status: Closed - Implemented

    Comments: On January 31, 2006, the Air Force revised AFI 64-117 to make agency/organization program coordinators responsible for providing mandatory refresher training to all approving officials on an annual basis.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to make revisions to Air Force Instructions 64-117 by stipulating , in the body of the Instruction, that approving officials are required to have annual purchase card refresher training.

    Agency Affected: Department of Defense: Department of the Air Force

  6. Status: Closed - Implemented

    Comments: In response to GAO's discussions with Department of the Air Force contracting officials and receipt of GAO's draft report for comment, the Air Force reissued Instruction 64-117 on December 6, 2002. The revised Instruction included records retention guidance that is consistent with federal regulations and DOD financial management policy. Air Force action on GAO's recommendation will assure compliance with federal regulations and DOD policy and result in adequate documentation of purchase card transactions to support management oversight and audits of the Air Force's purchase card program.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to make revisions to Air Force Instructions 64-117 by requiring purchase card program management and administrative records generated by installation program coordinators and approving officials, such as records of cardholder and approving official appointments and training, cardholder delegations of authority, and purchase card surveillances, to be retained for 3 years.

    Agency Affected: Department of Defense: Department of the Air Force

  7. Status: Closed - Implemented

    Comments: In response to GAO's discussions with Department of the Air Force contracting officials and receipt of GAO's draft report for comment, the Air Force reissued Instruction 64-117 on December 6, 2002. The revised Instruction included records retention guidance that is consistent with federal regulations and DOD financial management policy. Air Force action on GAO's recommendation will assure compliance with federal regulations and DOD policy and result in adequate documentation of purchase card transactions to support management oversight and audits of the Air Force's purchase card program.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to make revisons to Air Force Instruction 64-117 by correcting faulty records retention guidance by referring to specific guidelines in the Federal Acquisition Regulation, National Archives and Records Administration federal records retention guidelines, DOD's Financial Management Regulation, and other federal guidelines as appropriate.

    Agency Affected: Department of Defense: Department of the Air Force

  8. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, the Air Force Associate Deputy Assistant Secretary (Contracting) directed Air Force contracting directors to assess the adequacy of staffing (manning) devoted to the purchase card program, especially oversight activities, at each management level by April 30, 2003, and provide resources where needed. In addition, the Air Force included a manpower standard for the purchase card program in ARMS 12AO, the operational Contracting Manpower Standard. The purchase card manpower standard for program coordinator staffing is based on the number of cardholders. The Air Force also acknowledged that it would reexamine its standard in light of additional oversight and management tasks that are being added to agency program coordinator duties.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to assess the adequacy of human capital resources devoted to the purchase card program, especially for oversight activities, at each management level, and provide needed resources where appropriate.

    Agency Affected: Department of Defense: Department of the Air Force

  9. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Associate Deputy Assistant Secretary of the Air Force for Contracting signed a policy memorandum that required reports on purchase card surveillance results to include an assessment of the unit's program control, including, at a minimum, all of the ratios in GAO's recommendation, as well as number of cardholders and approving officials requiring training.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to require reports on annual surveillance results to include an assessment of control environment issues, including the ratio of cardholders to employees, ratio of approving officials to cardholder accounts, ratio of monthly credit limits to actual spending, and number of cardholders and approving officials requiring training.

    Agency Affected: Department of Defense: Department of the Air Force

  10. Status: Closed - Implemented

    Comments: The Air Force worked with its purchase card contract bank to develop standardized reports that provide program coordinators with enhanced surveillance capabilities for detecting fraud and other misuse of the purchase card. Reports include: Accounts with High Credit Limits, Accounts with Multiple Lost/Stolen Cards, Frequent Credit Transactions, Suspect Merchants, and Over Limit Convenience Checks.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to develop and implement a program oversight system for program coordinators that includes standard activities and analytical tools to be used in evaluating program results.

    Agency Affected: Department of Defense: Department of the Air Force

  11. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Assistant Secretary of the Air Force for Acquisition issued a memorandum signed by the Associate Deputy Assistant Secretary for Contracting that directed Installation Purchase Card Program Managers to track and monitor corrective actions on purchase card audit recommendations and annual surveillance findings, and provide periodic status reports to their installation Contracting Director. GAO's participation in Air Force Command purchase card conferences confirmed that installations are providing their contracting directors with monthly and quarterly briefings on the status of corrective actions.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to require installation program coordinators to track and monitor corrective actions on purchase card audit and annual surveillance findings and provide periodic status reports to their installation contracting directors.

    Agency Affected: Department of Defense: Department of the Air Force

  12. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, the Air Force initiated a number of required purchase card training courses, including (1) mandatory Defense Acquisition University Continuous Learning Center Online Training Module with specific training for cardholders and approving officials, (2) the DOD Credit Card Task Force CD-ROM Internal Control training, (3) the Air Force Logistics Management and Acquisition Project training (program manager's reference guide, sample cardholder and approving official training template), (4) GSA/DOD Online Program Manager Course (specific training for agency purchase card program coordinators), and (5) CD-ROM training on Javits-Wagner-O'Day mandated sources of supply.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to establish specific training courses for cardholders, approving officials, and agency program coordinators tailored to the specific responsibilities associated with each of those roles.

    Agency Affected: Department of Defense: Department of the Air Force

  13. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Air Force Associate Deputy Assistant Secretary (Contracting), in the office of the Assistant Secretary for Acquisition, issued a purchase card policy memorandum directing that alternate cardholder and approving official accounts be suspended when primary cardholders and billing officials are available. As a result of GAO's work, the Air Force has eliminated the unnecessary financial risk associated with duplicate credit limits assigned to primary and alternate cardholders and approving officials.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisiton and the Deputy Assistant Secretary for Contracting to deactive purchase card accounts of alternate cardholders and approving officials when primary cardholders and approving officials are available.

    Agency Affected: Department of Defense: Department of the Air Force

  14. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Air Force Associate Deputy Assistant Secretary (Contracting), in the office of the Assistant Secretary for Acquisition, issued a purchase card policy memorandum directing that, effective immediately, installation purchase card program managers shall review (in consultation with approving officials) existing credit and monthly spending limits against current spending patterns, and determine if cardholder spending authority can be reduced in the interest of minimizing the federal government's financial exposure. The Air Force policy directive also required that alternate cardholders and approving official accounts be suspended when primary cardholders and billing officials are available.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretray for Contracting to review existing credit limits and monthly spending and develop policies and strategies on credit limits provided to cardholders with a focus on minimizing specific cardholder spending authority and minimizing the federal government's financial exposure.

    Agency Affected: Department of Defense: Department of the Air Force

  15. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Air Force Associate Deputy Assistant Secretary (Contracting), in the office of the Assistant Secretary for Acquisition, issued a purchase card policy memorandum directing that, effective immediately, installation purchase card program managers shall review the number of cardholders who report to an approving official and make the changes necessary so that approving officials do not have responsibility for reviewing more than seven cardholder accounts, in accordance with Air Force and DOD policies. As a result of GAO's work, the Air Force established a policy and related procedures for assuring that approving official responsibilities constitute a reasonable span of control, thereby strengthening the overall purchase card control environment.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Depurty Assistant Secretary for Contracting to direct all agency program coordinators to review the number of cardholders who report to an approving official and make the changes necessary so that approving officials do not have responsibility for reviewing more cardholder accounts than allowed by Air Force and DOD policies.

    Agency Affected: Department of Defense: Department of the Air Force

  16. Status: Closed - Implemented

    Comments: In commenting on GAO's report, the Assistant Secretary of the Air Force for Financial Management agreed to eliminate purchase card accounts used solely to facilitate line item accounting within the same appropriation.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force Acquisition and the Deputy Assistant Secretary for Contracting to eliminate purchase cards used to facilitate line item accounting.

    Agency Affected: Department of Defense: Department of the Air Force

  17. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Air Force Associate Deputy Assistant Secretary (Contracting), in the office of the Assistant Secretary for Acquisition, issued a purchase card policy letter directing that, effective immediately, installation purchase card program managers are to review purchase card use and eliminate unneeded purchase card accounts. The Air Force canceled approximately 27,000 (about 36 percent) of its purchase card accounts between September 30, 2002 and the end of March 31, 2003, including nearly 2,000 accounts during March 2003, thereby eliminating the administrative burden and financial risk associated with these unneeded purchase card accounts and strengthening the overall purchase card control environment.

    Recommendation: To strengthen the overall control environoment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to direct all command and installation-level agency program coordinators to review purchase card use with a view toward eliminating unneeded purchase card accounts.

    Agency Affected: Department of Defense: Department of the Air Force

  18. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Air Force Associate Deputy Assistant Secretary (Contracting), in the office of the Assistant Secretary for Acquisition, issued a purchase card policy letter directing that, effective immediately, the number of purchase cards is to be minimized by applying the specified strategies. These strategies included (1) issuing purchase cards only to those with an ongoing need, (2) terminating accounts that have not been used in the last 6 months, unless a written justification is submitted and approved by the command-level purchase card program coordinator, and (3) requiring installation purchase card program managers to review purchase card use and eliminate unneeded purchase card accounts. As a result of our work, the Air Force canceled approximately 27,000 (about 36 percent) of its purchase card accounts between September 30, 2002, and the end of March 31, 2003, including nearly 2,000 accounts during March 2003, thereby eliminating the administrative burden and financial risk associated with these unneeded purchase card accounts and strengthening the overall purchase card control environment.

    Recommendation: To strengthen the overall control environment and improve internal control over the Air Force purchase card program, the Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to establish specific policies and strategies governing the number of purchase cards to be issued with a focus on minimizing the number of cardholders.

    Agency Affected: Department of Defense: Department of the Air Force

  19. Status: Closed - Implemented

    Comments: On January 31, 2006, the Air Force revised Air Force Instruction (AFI) 64-117 to require that reports on surveillance results include recommendations for unit commander actions where approving officials and cardholders have failed to follow the Air Force instruction. AFI 64-117 also requires agency/organization program coordinators to monitor corrective actions on purchase cards and annual surveillance findings and provide quarterly status reports to their installation Contracting Director/contracting squadron commander.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to make revisions to Air Force Instructions 64-117 by requiring reports on surveillance results to include recommendations for unit commander action, where approving officials and cardholders have failed to follow Air Force policy--particularly policy related to federal regulations, such as micropurchase requirements and mandated sources of supply.

    Agency Affected: Department of Defense: Department of the Air Force

  20. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on January 31, 2006, the Air Force revised its Government-wide Purchase Card Instruction (AFI) 64-117 to require approving officials to review each cardholder's electronic statement of accounts monthly, verify that all transactions are appropriate, and if so, approve the statement of acconts for payment. AFI 64-117 states that every effort should be made to accomplish this within 5 working days after the end of the billing cycle, but no later than 15 calendar days after the end of the cycle. Approving official's cardholder accounts that have not been reconciled and approved within 30 days of the end of a billing cycle shall be temporarily suspended by the installation/organization program coordinator (A/OPC), pending approval. Further, for any accounts not approved within 30 days, the approving official must provide a written statement signed by the unit commander explaining why the account was not reconciled before the A/OPC can remove the suspension.

    Recommendation: To resolve noncompliance with requirements in law for proper certification of purchase card payments, the Secretary of the Air force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to work with the Under Secretary of Defense (Comptroller) to resolve inconsistencies between DOD and Air Force policies and procedures for reconciling purchase card statements prior to payment.

    Agency Affected: Department of Defense: Department of the Air Force

  21. Status: Closed - Implemented

    Comments: The Under Secretary of Defense (Comptroller) obtained a Deputy General Counsel (DGC) opinion on this matter. The DGC stated that the business practice of paying a purchase card account statement before receipt of a reconciled statement and supporting documentation is supported by governmentwide policy and is not otherwise prohibited by statute. The DGC did caution that the practice is contingent on maintaining appropriate internal controls sufficient to ensure that the benefits of this practice outweigh the risk of loss. DOD had previously identified related internal control deficiencies associated with the "pay and confirm" practice, and worked with the card issuing bank to implement a process that automatically suspends any billing account that has not been reconciled and certified by the approving official within 60 days of the statement date. Billing accounts that have not been reconciled and certified for six billing cycles are terminated. The Deputy Director of DOD's Purchase Card Program Management Office told GAO that DOD would monitor the implementation of this Air Force Control.

    Recommendation: To resolve noncompliance with requirements in law for proper certification of purchase card payments, the Secretary of the Air Force should develop a strategy for achieving Air Force compliance with requirements in the law that DOD purchase card policies and procedures require reconciliation of purchase card statements prior to payment.

    Agency Affected: Department of Defense: Department of the Air Force

  22. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Associate Deputy Assistant Secretary for Contracting issued a policy memorandum that stated that cardholders and approving officials who have requested personal items to be purchased for their use may be required to reimburse the government for such purchases, with the exception of purchases of civilian clothing for military aides and costumes for Air Force band members. According to an Air Force headquarters Acquisition official, the Air Force plans to continue its policy to permit government purchases of these clothing items, but agreed to give these purchases close scrutiny because of the potential for abuse.

    Recommendation: The Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting should require benefiting individuals to reimburse the government for the cost of any personal items that they requested or directed a cardholder to purchase for them.

    Agency Affected: Department of Defense: Department of the Air Force

  23. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Assistant Secretary of the Air Force for Acquisition issued a policy memorandum signed by the Associate Deputy Assistant Secretary for Contracting that required installation Purchase Card program managers to remind all cardholders and billing (approving) officials that they are "accountable officials" in accordance with Air Force Purchase Card Instruction 64-117 paragraph 1.b. and, as such, they may be liable for any unauthorized or erroneous purchase card transaction that was not disputed within the 60-day grace period.

    Recommendation: The Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting should require cardholders and/or approving officials to reimburse the government for any unauthorized or erroneous purchase card transactions that were not disputed.

    Agency Affected: Department of Defense: Department of the Air Force

  24. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on April 21, 2003, the Office of the Under Secretary of Defense issued a policy memo signed by the Deputy Under Secretary of Civilian Personnel Policy that provides a range of suggested penalties and directed DOD components to implement these to ensure consistent application. In addition, on June 10, 2003, the Under Secretary of Defense issued disciplinary guidelines for misuse of purchase cards by military personnel and directed DOD components to take appropriate disciplinary action to ensure personal accountability for purchase card misuse.

    Recommendation: The Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting should establish appropriate, consistent Air Force-wide policy as a guide for taking disciplinary actions with respect to cardholders and approving officials who make or approve fraudulent, improper, or abusive purchase card transactions.

    Agency Affected: Department of Defense: Department of the Air Force

  25. Status: Closed - Implemented

    Comments: In June 2003, the Air Force Acquisition office requested transaction detail related to purchase card transactions that were charged to the wrong appropriation as a basis for requesting that the Air Force Financial Management office make the appropriate accounting adjustments. The Air Force Associate Deputy Assistant Secretary (Contracting) provided GAO's audit documentation to the Air Force Office of Financial Management, and asked that the necessary accounting adjustments be made. In August 2004, the Air Force provided GAO documentation that showed accounting adjustments had been made to record purchase card transactions to the proper appropriation account with regard to the purpose and applicable fiscal year of the transaction, as appropriate.

    Recommendation: The Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting should require accounting adjustments to be made to correct transactions that were charged to the wrong appropriation account with respect to fiscal year and purpose of the expenditures.

    Agency Affected: Department of Defense: Department of the Air Force

  26. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on March 18, 2003, the Air Force Associate Deputy Assistant Secretary for Contracting signed a contract policy memo that required Installation Purchase Card Program Managers to cancel convenience check privileges of all cardholders who have misused convenience checks more than once. Specifically, the Assistant Secretary of the Air Force for Acquisition has established a policy that the second time a cardholder violates convenience check rules, he or she will lose convenience check privileges.

    Recommendation: The Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting should cancel convenience check privileges of cardholders who have continued to improperly use convenience checks.

    Agency Affected: Department of Defense: Department of the Air Force

  27. Status: Closed - Implemented

    Comments: This recommendation relates to unauthorized use of the purchase card by the Air Force Chaplain's Office. The Air Force obtained a legal review of this issue, which determined the Chaplain Tithe and Offering Fund is a non-appropriated fund under authority of the Air Force and, as such, may use the government purchase card. However, the legal opinion stated that chaplain service volunteers are not considered employees of the federal government for the purpose of making purchases with the government purchase card. On March 22, 2004, the Air Force issued a related policy in Air Force Instruction 52-105, volume 2, Chaplain Service Chapel Tithes and Offerings Fund, which established guidelines and controls for use of the government purchase card. GAO's review of this policy confirmed that the purchase card controls enumerated for the Fund are adequate.

    Recommendation: The Assistant Secretary of the Air Force for Acquistion and the Deputy Assistant Secretary for Contracting should review organizational use of the purchase card and revoke purchase cards issued to organizations that do not have authority to participate in the governmentwide purchase card program.

    Agency Affected: Department of Defense: Department of the Air Force

  28. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on May 22, 2003, the Office of the Assistant Secretary of the Air Force for Acquisition issued a contract policy memo signed by the Associate Deputy Assistant Secretary (Contracting) directing contracting offices to evaluate their purchasing practices with vendors and where appropriate, develop contracts to optimize Air Force purchase power. Air Force commands have initiated programs for obtaining discounts with local vendors. In addition, the Air Force has initiated a blanket purchase agreement with Office Depot for an additional five percent discount over the GSA schedule vendor prices when Air Force units make purchases through Air Force Advantage. Other Air Force Commands have initiated arrangements for receiving volume discounts with major vendors--vendors with whom they make over $1 million in purchases annually.

    Recommendation: The Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting should identify vendors with which the Air Force used purchase cards to make frequent, recurring purchases, evaluate Air Force purchasing practices with those vendors, and where appropriate, develop contracts with those vendors to optimize Air Force purchasing power.

    Agency Affected: Department of Defense: Department of the Air Force

  29. Status: Closed - Implemented

    Comments: The Deputy Assistant Secretary of the Air Force (Contracting) mandated the use of the GSA Purchase Card Annual Review Checklist to standardize the evaluation of program results in a March 2003 policy letter. In addition, in lieu of developing a separate Air Force database, during fiscal year 2003, the Air Force Office of Special Investigations initiated quarterly reporting of information on its purchase card investigations to the DOD Inspector General for macro level analysis of systemic weaknesses in the program. GAO's ongoing collaboration with the DOD Inspector General, particularly with regard to April 28, 2004 testimony before the Senate Governmental Affairs Committee on DOD's purchase card program, confirmed that Air Force OSI is effectively working with the DOD Inspector General's Office on data mining techniques for detection of potentially improper and fraudulent purchase card transactions.

    Recommendation: The Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting should establish an Air Force-wide database of known purchase card fraud cases by type of fraud, including vendor fraud and compromised accounts, that can be used to identify deficiencies in existing internal control and implement additional control activities, if warranted.

    Agency Affected: Department of Defense: Department of the Air Force

  30. Status: Closed - Implemented

    Comments: In lieu of establishing an Air Force-wide database, the Air Force Office of Special Investigations, in conjunction with other DOD Criminal Investigative Organizations, reports information regarding government purchase card investigations on a quarterly basis to the DOD Inspector General for macro level analysis of systemic weaknesses in the program. GAO's ongoing collaboration with the DOD Inspector General, particularly with regard to April 28, 2004, testimony before the Senate Governmental Affairs Committee on DOD's purchase card program, confirmed that Air Force OSI is effectively working with the DOD Inspector General's Office on data mining techniques for detection of potentially improper and fraudulent purchase card transactions.

    Recommendation: The Assistant Secretary of the Air Force for Financial Management (Comptroller)should direct the Air Force Audit Agency and Air Force Office of Special Investigations to establish an Air Force-wide database of known fraud cases by type of fraud, including purchase card fraud, that can be used to identify systemic weaknesses and deficiencies in existing internal control and to develop and implement additional control activities, if warranted or justified.

    Agency Affected: Department of Defense: Department of the Air Force

  31. Status: Closed - Implemented

    Comments: In response to our recommendations, the Air Force advised that DOD Instruction 5000.64 and various Air Force Instructions require organizational commanders to account for property issued to them. In addition, on January 31, 2006, the Air Force revised Air Force Instruction (AFI) 64-117 to require cardholders to notify the property book officer (custodian) of all purchases of accountable property, including pilferable items, upon receipt of the item.

    Recommendation: The Assistant Secretary of the Air Force for Logistics should establish policies and procedures for recording all pilferable and sensitive property, including digital cameras, palm pilots, and cell phones, in installation accountable property records. At a minimum, the Assistant Secretary should require installations to follow DOD policies and procedures on accountable property.

    Agency Affected: Department of Defense: Department of the Air Force

  32. Status: Closed - Implemented

    Comments: On January 31, 2006, the Air Force revised its Government-wide Purchase Card Instruction AFI 64-117 to require unit commanders to record pilferable items in the appropriate property book and devise programs for visibility and audit trail capability for pilferable items acquired with a purchase card. In addition, AFI 64-117 defined pilferable items as those easily resold on the open market and listed examples, including cell phones, digital cameras, fax machines, palm pilots, copiers, and printers.

    Recommendation: The Deputy Assistant Secretary for Contracting should revise Air Force Instruction 64-117 to define and list examples of sensitive and pilferable property purchased with a government purchase card, including cell phones, digital cameras, fax machines, palm pilots, and copiers and printers, and require prompt recording of these items in installation property systems.

    Agency Affected: Department of Defense: Department of the Air Force

  33. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on January 31, 2006, the Air Force revised its Governmentwide Purchase Card Instruction AFI 64-117 to assign accountability for equipment items equal to or under the micro-purchase threshold to unit commanders. In accordance with this responsibility, unit commanders are to ensure that computer equipment purchased with a government purchase card is entered into the Information Technology Asset Management System (ITAMS). Further, AFI 64-117 requires unit commanders to establish locally devised program that provides visibility and audit trail capability. AFI 64-117 refers to AFI 33-101, Communications and Information Management Guidance and Responsibilities for detailed guidance on accounting for computer equipment and software.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to revise Air Force Instruction 64-117 to provide cardholders, approving officials, and installation program coordinators with detailed instructions on encouraging installation contracting officers to consider the benefits of central purchasing and receiving and acceptance of computer equipment by installation information technology units to facilitate recording computer equipment in accountable property records at the time it is received.

    Agency Affected: Department of Defense: Department of the Air Force

  34. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, on January 31, 2006, the Air Force revised its Government-wide Purchase Card Instruction AFI 64-117 to require that the contracting squadron commander/chief of contracting shall brief the installation commander on the purchase card program at least quarterly and include a summary of violations, including fraud, and corrective actions taken in each instance or provide a justification why no action was considered necessary. The AFI stated that the briefing to the installation commander should include the numbers of accounts suspended due to failure to reconcile, instances of suspected fraud, waste, or abuse along with corrective action taken, surveillance results, convenience check violations, preferred vendor and vendor discount programs, and overall installation trends. In addition, the Air Force has adopted the Department of Defense Government Charge Card Guidebook issued on October 1, 2005, which describes key steps in investigations of suspicious activity and provides examples of credit card misuse. The Guidebook also requires periodic audits and risk assessments to identify sources of fraud, waste, and abuse.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to revise Air Force Instruction 64-117 to provide cardholders, approving officials, and installation program coordinators with detailed instructions on verifying that all potentially fraudulent and erroneous transactions that have been detected are disputed and properly resolved.

    Agency Affected: Department of Defense: Department of the Air Force

  35. Status: Closed - Not Implemented

    Comments: The Air Force provided no evidence that actions were taken based on this recommendation. Closed not implemented.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to revise Air Force Instruction 64-117 to provide cardholders, approving officials, and installation program coordinators with detailed instructions on requiring reconciliation of monthly purchase card statements associated with accounts that were "shut down" (suspended) in July 2002 due to lack of cardholder reconciliation and approving official review.

    Agency Affected: Department of Defense: Department of the Air Force

  36. Status: Closed - Implemented

    Comments: On January 31, 2006, the Air Force revised Air Force Instruction (AFI) 64-117 to establish procedures that require cardholders to document all transactions, including receipts and invoices, as well as shipping and packing documents, and receiving reports and signatures of the person verifying receipt on the vendor receipt, sales receipt, shipping document, credit card receipt, or equivalent document, and require cardholders to maintain timely documentation to support monthly reconciliations of all transactions in the cardholders' statements of account.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to revise Air Force Instruction 64-117 to provide cardholders, approving officials, and installation program coordinators with detailed instructions on requiring cardholders to maintain documentation of timely and independent receiving and acceptance of items obtained with a purchase card.

    Agency Affected: Department of Defense: Department of the Air Force

  37. Status: Closed - Implemented

    Comments: On January 31, 2006, the Air Force revised Air Force Instruction (AFI) 64-117 to establish procedures that require cardholders to document all transactions, including receipts and invoices, as well as shipping and packing documents, and receiving reports and signatures of the person verifying receipt on the vendor receipt, sales receipt, shipping document, credit card receipt, or equivalent document.

    Recommendation: The Secretray of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to revise Air Force Instruction 64-117 to provide cardholders, approving officials, and installation program coordinators with detailed instructions on establishing specific procedures for documenting independent receiving, such as requiring the approving official or supervisor to sign and date the vendor invoice, sales receipt, or credit card receipt, or requiring the approving official to sign the cardholder's monthly purchase log to verify that items noted as having been received were actually received.

    Agency Affected: Department of Defense: Department of the Air Force

  38. Status: Closed - Implemented

    Comments: On January 31, 2006, the Air Force revised Air Force Instruction (AFI) 64-117 to include criteria that cardholders obtain independent verification of receipt of all items purchased with the government purchase card that cost over $500 or that are considered to be sensitive or pilferable, regardless of purchase price.

    Recommendation: The Secretary of the Air Force should direct the Assistant Secretary of the Air Force for Acquisition and the Deputy Assistant Secretary for Contracting to revise Air Force Instruction 64-117 to provide cardholders, approving officials, and installation program coordinators with detailed instructions on establishing appropriate criteria, including types of items and dollar thresholds for documenting independent receiving and acceptance of items obtained with a purchase card.

    Agency Affected: Department of Defense: Department of the Air Force

 

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