oversight

Controls Over Purchase Card Use in Federal Student Aid.

Published by the Department of Education, Office of Inspector General on 2005-10-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                               UNITED STATES DEPARTMENT OF EDUCATION

                                                OFFICE OF INSPECTOR GENERAL





                                                             October 20, 2005
                                                                                                        CONTROL NUMBER
                                                                                                          ED-OIG/A19F0016


Theresa S. Shaw
Chief Operating Officer
Federal Student Aid
U. S. Department of Education
Union Center Plaza Rm 112G1
830 First Street, NE
Washington, DC 20202

Dear Ms.Shaw:

This Final Audit Report (Control Number ED-OIG/A19F0016) presents the results of our audit
of Controls Over Purchase Card Use in Federal Student Aid. The objectives of our audit were
to assess the current effectiveness of internal control over the purchase card program and the
appropriateness of current purchase card use in Federal Student Aid (FSA).


                                                  BACKGROUND
The Government purchase card is a less costly and more efficient way for offices and
organizations to purchase needed goods and services directly from vendors. The purchase card
eliminates the need to process purchase requests through procurement offices and avoids the
administrative and documentation requirements of traditional contracting processes. The
Department of Education (Department) selected Bank of America to provide purchase card
support and services.

The Office of the Chief Financial Officer (OCFO), Contracts and Acquisitions Management
(CAM), coordinates the purchase card program within the Department and acts as the liaison
with Bank of America. FSA’s Executive Officer is responsible for administering the purchase
card program in that office. Approving officials (AOs) and alternate approving officials (AAOs)
are appointed by the Executive Officer and are the primary officials responsible for authorizing
cardholder purchases and ensuring timely reconciliation of cardholder statements.
On October 5, 2000, the Office of Inspector General (OIG) issued a report entitled, “Results of

                               400 MARYLAND AVE., S.W. WASHINGTON, D.C. 20202-1510

         Our mission is to ensure equal access to education and to promote educational excellence throughout the Nation.
Ms. Shaw                                                                                    Page 2 of 11



the OIG Review of SFA’s 1 Internal Controls Over the Procurement of Goods and Services Using
Third Party Drafts and Purchase Cards,” (Control Number A&I 2000-014). OIG reported a
number of deficiencies in FSA’s internal control over the purchase card progr am including
improper assignment of authority, need for training or refresher training for staff involved in the
purchase card program, lack of written internal purchase card procedures, unfamiliarity with
Department policy and procedures, inadequate supporting documentation, and noncompliance
with procurement regulations for a purchase over $2,500.

This audit is part of a review of the purchase card program being performed Department-wide.
A random sample of transactions across the Department, as well as all transactions over $2,500,
charges to blocked merchant category codes, and potential split purchases are being reviewed.
This report represents the results of the portion of the random sample and other transaction
categories reviewed in FSA. A summary report will be provided to the Department’s Chief
Financial Officer upon completion of the audits in individual offices.


                                            AUDIT RESULTS

While improvements were noted from the prior OIG review of purchase card activity, we found
that FSA needs to further improve internal control over purchase card use. We found that FSA
did not always obtain and maintain adequate documentation and approvals to support purchases
in accordance with Department policies and FSA’s internal policy. We also noted that one
cardholder was charged sales tax for a purchase card transaction, and a cardholder did not obtain
an estimate for a purchase and subsequently split the payment to avoid exceeding the $2,500
micropurchase limit. These issues occurred because FSA staff were not always familiar with, or
inconsistently applied, Department policy and FSA guidelines regarding documentation,
approvals, and clearance for specific items. We also found that AOs did not ensure that
cardholders submitted complete supporting documentation prior to approving the statements for
payment.

Without adequate supporting documentation, FSA does not have assurance that purchases were
appropriate and were made in accordance with Federal regulations and Department policy and
procedures. Failure to document receipt of goods and services could result in of payment for
items that were ultimately not provided to the Department. Approving purchases without
adequate supporting documentation could result in payment for goods and services that were not
received and increases the Department’s vulnerability to potential misuse or waste of
government resources. Failure to seek required approvals for certain purchases could result in
the expenditure of funds for items that are not compatible with current configurations, or that are
already available for use within the Department.




1
    SFA (Student Financial Assistance) became FSA (Federal Student Aid) on March 6, 2002.


                                                ED-OIG/A19F0016
Ms. Shaw	                                                                                Page 3 of 11



Issues noted above regarding inadequate supporting documentation, unfamiliarity with
Department policy and procedures, and noncompliance with procurement regulations for a
purchase over $2,500, were also reported in the prior OIG review of FSA’s purchase card
activity.

In its response to the draft audit report, FSA provided corrective actions to address each of the
recommendations included in our report. The complete text of FSA’s response is included as
Attachment 1 to this report.


Finding 1 	 FSA Needs to Further Improve Internal Control Over Purchase
            Card Use

While improvements were noted from the prior OIG review, FSA needs to further improve
internal control over purchase card use. We reviewed 73 purchases totaling $59,319 made by 20
FSA headquarters cardholders. We found that FSA cardholders did not always obtain or
maintain adequate documentation to support purchases as required by Department policy and
FSA guidelines.

We found that 54 of the 73 purchases (74 percent) did not include one or more elements required
by Department policy. Specifically we determined:2

           •	 Three purchases did not include written purchase requests.
           •	 Three purchases did not contain a record of purchase.
           •	 53 purchases did not include complete documentation to support that the goods or
              services were received. 29 of these were purchases of training services.
           •	 One cardholder was charged sales tax for a purchase card transaction.

In addition, we found that 22 of the 73 purchases (30 percent) did not include one or more
elements required by FSA guidelines. Specifically we determined:2

           •	 16 purchases did not include documentation of pre-approval.
           •	 Eight purchases did not include the “FSA Purchase Card Request Form.”
           •	 Five purchases did not have Bank of America Statements or Statement of Transaction
              Reports signed by the cardholders.

We also noted that complete supporting documentation required by Department policy and/or
FSA guidelines was not originally provided in the purchase card files for 20 additional
purchases. FSA provided additional documentation that supported these purchases, and these
purchases are not included in the exceptions noted above.



2
    Some purchases included issues in more than one category.


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Ms. Shaw	                                                                                    Page 4 of 11



We reviewed a total of 107 potential split purchases (purchases from the same vendor on the 

same day or within a few days). We found that two purchases represented one instance where 

the cardholder did not obtain an estimate of total charges for the purchase before it was made,

and inappropriately split the payment to avoid exceeding the $2,500 micropurchase limit. The 

two payments totaled $3,441. 


In our review of potential split purchases, we also noted that eight purchases of software did not 

include documentation of approval by the Office of the Chief Information Officer (OCIO) as 

required. 


Department Directive (Directive) OCFO: 3-104, “Government-wide Commercial Purchase Card 

Program,” dated January 23, 2002, Section VI, defines cardholder and AO responsibilities. 

The Directive states, 


       H. The Cardholder is responsible for . . . 2. Purchasing goods or services in
       accordance with established Department policy, procurement regulations, and
       individual internal office procedures . . . 6. Providing documentation to support
       purchases for AO approval and official record keeping. This documentation
       includes receipts, invoices, logs, etc.

       F. An Approving Official (AO) is responsible for . . . 6. Reviewing, validating,
       and approving for payment the Cardholder's reconciled bank statement each
       billing cycle . . . 14. Reviewing all management reports of Cardholder activity
       under his or her authority . . . 15. Reviewing appropriateness of purchases. This
       includes determining individual purchases are appropriate, that the goods or
       services were properly received and accepted, and that the payment was proper.

Section VII.A.7 of the Directive further states, “The Cardholder should secure a written request
(email or requisition) from the appropriate Department employee requesting the Cardholder to
procure goods or services.”

OCFO Procedure CO-097, “Procedure for Buying, Using a Government Commercial Purchase
Card,” revised March 2003, Section 10.d, states,

       Retain data supporting the purchases (including records of oral quotatio ns). Keep
       your files neat, up-to-date, and easily retrievable. Documentation will be retained
       in a central filing location established by your Principal Office. The record
       should be kept for 3 years after final payment. The records must be kept secure
       and be easily retrievable upon request. Documentation includes:
            •	 Request for purchase (a written request from the requisitioner).
            •	 Record of purchase (i.e. written notes, printout of CPSS Quick Purchase
               screen, invoice, internet printout, etc.).
            •	 Record of receipt and acceptance (i.e. packing slip, training certificate).




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Ms. Shaw                                                                                Page 5 of 11



The Federal Acquisition Regulation (FAR) 29.302, “Application of State and local taxes
to the Government,” states,

       (a) Generally, purchases and leases made by the Federal Government are immune
       from State and local taxation. Whether any specific purchase or lease is immune,
       how-ever, is a legal question requiring advice and assistance of the agency-
       designated counsel. (b) When it is economically feasible to do so, executive
       agencies shall take maximum advantage of all exemptions from State and local
       taxation that may be available.

Section VII.A.5 of the purchase card Directive (OCFO 3-104), states,

       At the time of purchase, the Cardholder should tell the merchant that he or she is
       paying with a Government Purchase Card. He or she must also confirm that the
       merchant understands the purchase is not subject to sales tax.

FSA established additional guidelines for purchase card use within its office. “FSA
Administration Supplemental FSA Purchase Card Policy for Pcardholders and Approving
Officials,” (Supplemental Policy), dated July 7, 2003, and updated January 23, 2004, . Section 7,
states:

   Effective April 1, 2002, all FSA employees who wish to have goods and services 

   procured for the m through the Government purchase card (Pcard) will be required to 

   use the FSA Pcard Purchase Request Form . . . The main purpose for this change is to 

   satisfy pre-purchase approval documentation requirements. One of the most 

   important internal control activities needed in the Pcard program is the review and 

   approval of requested items for all card purchases by FSA Supervisors/Program 

   Managers prior to making the actual orders and it is good business practice to review 

   all proposed purchases prior to initiating actual procurement actions . . . . 


Section 9 of the Supplemental Policy states:

   Upon receipt of the electronic statement, Pcardholders should perform the following
   activities: 1. Create and Print the Statement of Transaction Report . . . 5. Create
   Activity Log Report, 6. Print reports out, sign, and submit them along with their
   statement and other backup documentation to the FSA approving official.

The FAR prohibits splitting a transaction into more than one segment to avoid the requirement to
obtain competitive bids for purchases over the $2,500 micro-purchase threshold, or to avoid
other established limits. Specifically, FAR 13.003(c)(2) states,

       Do not break down requirements aggregating more than the simplified acquisition
       threshold (or for commercial items, the threshold in Subpart 13.5) or the micro-
       purchase threshold into several purchases that are less than the applicable
       threshold merely to- (i) Permit use of simplified acquisition procedures; or


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Ms. Shaw	                                                                                Page 6 of 11



       (ii) Avoid any requirement that applies to purchases exceeding the micro-

       purchase threshold. 


Section VII.A.3 of the Directive also refers to this section of the FAR, stating, “Purchases are not
to be split to stay within the single purchase limit or to avoid following procedures for Simplified
Acquisitions, in accordance with FAR 13.003(c).”

OCIO Handbook OCIO-08, “Handbook for Software Management and Acquisition Policy,”
dated August 25, 2003, outlines procedures regarding the purchase and management of software.
Section VI.A.1 states,

       Requisitions for software and upgrades will be submitted to OCIO by the
       Contracts and Purchasing Support System (CPSS) for approval, and upon
       award, delivery and receipt by the [Contracting Officer] CO, registered in the
       Software Library.

We found tha t cardholders and AOs were not always familiar with, or inconsistently applied,
Department and/or FSA requirements. We also found that AOs did not ensure that the
cardholder submitted complete supporting documentation prior to approving the statements for
payment. For example,

   •	 Some cardholders maintained additional files and did not include all documentation in the
      purchase card files and reconciliation packages provided to the AOs.

   •	 Cardholders thought that software included on the Department’s Produc t Support Plan
      did not require OCIO approval prior to purchase.

   •	 With respect to the sales tax charge, the cardholder was not aware that sales tax was
      included in the total amount. As a result of our audit, FSA contacted the vendor and
      obtained a credit for the sales tax charged.

   •	 FSA’s purchase pre-approval policy was not consistently applied. In some cases the
      approval documentation was dated after the transaction date, or was not signed or dated.
      As such, the documents did not provide evidence of pre-approval as intended by FSA’s
      guidelines.

   •	 FSA policy on the use of the purchase request form was not consistently followed. FSA
      officials indicated they did not expect the form to be used for training purchases.
      However, FSA’s Supplemental Policy did not make this exception. We noted that this
      form was used for training purchases by some cardholders, but not by others. We also
      noted that some non-training purchases did not include the form.




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Ms. Shaw	                                                                                 Page 7 of 11




   •	 For the split purchase, the cardholder stated she was not aware that the amount of
      purchase would exceed $2,500. Documentation in the purchase card file did not include
      any information on a quote received for the purchase. When the invoice was received the
      total amount exceeded $2,500 and two payments were made.

With respect to the software license purchases, FSA indicated at our exit conference that pre-
approval was not specifically required because these purchases were for additional software
licenses for products already in use within FSA. FSA stated OCIO procedures did not
specifically require licenses purchases to follow the same process as software purchases. They
added that the purchased licenses were provided to OCIO to allow for installation and inventory.
FSA indicated in some instances staff contacted OCIO verbally to determine if licenses were
available prior to making purchases. However, FSA provided no written documentation to
support that OCIO stated pre-approval was not required for purchases of licenses.

We met with OCIO to obtain clarification on its policy for the purchase of software and licenses.
OCIO stated that pre-approval is required for both software and license purchases. OCIO stated
that adherence to this process: allows OCIO to stay current on what software is being used
throughout the Department; assists in the maintenance of a database of all available software and
licenses; allows OCIO to determine if copies are available for use within the Department before
a PO spends additional funds; and helps ensure that the product is genuine, virus-free, and from a
legitimate source. OCIO also stated that pre-approval is also required for purchases of products
identified on the Department’s Product Support Plan List.

Lack of adequate supporting documentation reduces FSA’s assurance that purchases were
appropriate and were made in accordance with Federal regulations, Department policies and
procedures, and FSA guidelines. Approving purchases without reviewing adequate supporting
documentation could increase the Department’s vulne rability to potential misuse or waste of
government resources. Failure to document receipt of goods and services could result in of
payment for items that were ultimately not provided to the Department. Payment of sales tax
increases the cost of goods or services purchased, and reduces the amount of funds available for
other uses.

Failure to seek required approvals for software purchases could result in the expenditure of funds
for items that are not compatible with current configurations, or that are already available for use
within the Department. In addition, independent purchase of these items could result in higher
costs to FSA if established contracts or Department sources are not used.

Failure to follow internal policies with respect to pre-approval of purchases and documentation
required renders the controls FSA established ineffective and reduces FSA’s assurance that
purchases made are appropriate. Inconsistent application of some aspects of internal policy
could lead to confusion as to the applicability of other areas of the policy.

Failing to obtain an estimate for purchases could result in sufficient funds not being available for
payment, or in the case of purchases over $2,500, in circumventing competition requirements by
only soliciting bids from one vendor. With the request for the purchase, FSA was provided the

                                         ED-OIG/A19F0016
Ms. Shaw	                                                                              Page 8 of 11



names of two vendors, but documentation in the purchase card file indicated only one vendor
was contacted. As such, FSA has no assurance that it received the best price for the services.
Splitting payments for purchases permits a cardholder who is restricted from obligating more
than $2,500 for a single purchase to make payments in excess of that amount without the proper
authority and training.


Recommendations:

We recommend that the Chief Operating Officer for FSA hold the Executive Officer, Approving
Officials, and cardholders accountable for their responsibilities in the purchase card program by
establishing a process to:

1.1	   Ensure FSA cardholders and AOs are familiar with Department policies and procedures
       regarding: (a) obtaining and maintaining appropriate documentation to support purchases,
       (b) coordinating software purchases with OCIO, (c) ensuring sales tax is not charged, (d)
       obtaining quotes or estimates before purchase, (e) prohibitions against splitting payments.

1.2	   Ensure FSA cardholders and AOs are familiar with additional FSA guidelines for the
       purchase card program, including requirements for preapproval and forms to be used.

1.3	   Ensure cardholders consistently obtain and maintain written purchase requests, records of
       purchase, records of receipt, approvals for purchases requiring special clearances, and
       other supporting documentation required by Department policy and procedures and FSA
       guidelines. Ensure that this documentation is filed in the official purchase card files to
       support the purchases.

1.4	   Require AOs to thoroughly review reconciliation packages provided by cardholders to
       ensure adequate supporting documentation is provided and maintained, appropria te
       approvals and clearances are obtained, and to ensure that purchases or payments are not
       split.

1.5	   Ensure FSA guidelines are revised and clarified as needed with respect to the use of the
       FSA Purchase Card Request Form for purchase of training services, and other areas as
       appropriate.


FSA Response:

In response to our Draft Audit Report, FSA provided corrective actions to address each
recommendation. FSA reported the Acting Director, FSA Administration, sent a reminder e-
mail to all purchase cardholders, alternates, Approving Officials, and the Executive Management
Team stressing the need to fully comply with Departmental and FSA policies. FSA also reported
it will conduct training sessions with all purchase cardholders, AOs, and alternates. The training
session will address all OIG findings and recommendations, and FSA’s updated Supplemental
Policy. FSA also stated it will perform annual compliance reviews on each cardholder and AO.

                                        ED-OIG/A19F0016
Ms. Shaw                                                                               Page 9 of 11



Finally, FSA stated it will review and update its Supplemental Policy and clarify issues including
use of approval and training forms. An updated policy will be posted on the FSA website and
distributed to all purchase cardholders, alternates, and AOs.


                 OBJECTIVES, SCOPE, AND METHODOLOGY

The objectives of our audit were to assess the current effectiveness of internal control over the
purchase card program and the appropriateness of current purchase card use in FSA. To
accomplish our objectives, we performed a review of internal control applicable to FSA’s
administration and management of its purchase cards. We evaluated the prior OIG review of the
purchase card program in FSA to determine the issues previously reported. We reviewed
requirements related to the purchase card program in the Treasury Financial Manual, Federal
Acquisition Regulation, Office of Management and Budget memoranda, and Bank of America’s
contract and task order. We also reviewed Departmental Directives, FSA and OCFO procedures
and guidance applicable to the purchase card program.

We conducted interviews with OCFO and FSA officials to obtain information and an
understanding of the purchase card program. We also reviewed training records for staff
participating in the program. To test controls and evaluate the appropriateness of purchase card
use, we reviewed supporting documentation provided by FSA staff for purchases made during
the scope period noted below.

The scope of our review included purchases made by Washington, DC, (Headquarters)
cardholders during the period July 1, 2003, through June 30, 2004. We used sampling and data
mining to select purchases for review. From the universe of purchases made by Department
Headquarters cardholders, we randomly selected purchases of $50 or more for review. The
random sample was chosen to provide a representative review of purchases across the
Department. We also identified high-risk categories of potentially inappropriate purchases and
reviewed all transactions in those categories – purchases over $2,500, charges to blocked
merchant category codes, and potential split purchases. In FSA, the random sample included 70
purchases. FSA high- risk purchases included four purchases made against blocked merchant
category codes (MCCs) and 107 potential split purchases. No purchases over $2,500 were
identified for FSA. One transaction was included in both the random sample and the blocked
MCCs, and five transactions were included in both the random sample and the potential split
purchases. Overall, we reviewed 175 purchases totaling $179,369.

In total, FSA Headquarters cardholders made 1,661 purchases totaling $814,542 during the scope
period. The purchases we reviewed represented 11 percent of the total number and 22 percent of
the total amount of purchases made during the period. Since the random sample was selected
based on the universe of all purchases of $50 or more made by Headquarters cardholders in the
Department, the results of this review cannot be projected to the universe of FSA purchases.




                                        ED-OIG/A19F0016
Ms. Shaw                                                                               Page 10 of 11



We relied on computer-processed data initially obtained from Bank of America’s Electronic
Account Government Ledger System to select cardholder purchases made during the scope
period. This data was also recorded in the Department’s Contracts and Purchasing Support
System and reconciled by FSA and OCFO staff through Education’s Central Automated
Processing System. We verified the completeness and accuracy of the data by reviewing
cardholder statements, invoices, receipts, and other supporting documentation to validate
purchase amounts recorded in these systems. Based on our testing, we concluded that the
computer-processed data were sufficiently reliable for the purpose of our audit.

We also reviewed reports prepared by OCFO staff that reported purchase card transactions that
were overdue for reconciliation. These reports were part of the “Fast Facts” reports distributed
monthly to all Department staff through the Department’s Intranet. We did not validate the
accuracy of these reports, as we used them for informational purposes only, as an ind icator of
reconciliation timeliness.

We conducted fieldwork at Department offices in Washington, DC, during the period May 18,
2005, through August 4, 2005. We held an exit conference with FSA staff on August 17, 2005.
Our audit was performed in accordance with generally accepted government auditing standards
appropriate to the scope of the review described above.


                            ADMINISTRATIVE MATTERS

Corrective actions proposed (resolution phase) and implemented (closure phase) by your office
will be monitored and tracked through the Department’s Audit Accountability and Resolution
Tracking System. Department policy requires that you develop a final corrective action plan
(CAP) for our review in the automated system within 30 days of the issuance of this report. The
CAP should set forth the specific action items, and targeted completion dates, necessary to
implement final corrective actions on the finding and recommendations contained in this final
audit report.

In accordance with the Inspector General Act of 1978, as amended, the Office of Inspector
General is required to report to Congress twice a year on the audits that remain unresolved after
six months from the date of issuance.

Statements that managerial practices need improvements, as well as other conclusions and
recommendations in this report, represent the opinions of the Office of Inspector General.
Determinations of corrective action to be taken will be made by the appropriate Department of
Education officials.

In accordance with the Freedom of Information Act (5 U.S.C. § 522), reports issued by the
Office of Inspector General are available to members of the press and general public to the extent
information contained therein is not subject to exemptions in the Act.




                                         ED-OIG/A19F0016
Ms. Shaw	                                                                            Page 11 of 11



We appreciate the cooperation provided to us during this review. Should you have any questions
concerning this report, please call Michele Weaver-Dugan at (202) 245-6941. Please refer to the
control number in all correspondence related to the report.

                                       Sincerely,




                                       Helen Lew /s/

                                       Assistant Inspector General for Audit Services 



cc:	   Mary Nelson, Acting Director, FSA Administration
       Marge White, FSA Audit Liaison Officer
       Mark Love, FSA Audit Liaison




                                       ED-OIG/A19F0016
                                           FEDERAL
                                           STUDENT AID



                               CHI EF O PERATING OFFI CER


                                                                     OCT - 3 2005
TO:           Michele Weaver-Dugan, Director
              Operations Internal Audit Team

FROM:         Theresa S. Shaw ~
              Chief Operating Officer

SUBJECT:      Draft Audit Report
              Contro ls Over Purchase Card Use in Federal Student Aid
              ED-OIGI A 19FOO 16

This is in response to your September 1,2005, Draf1 Audi t Report. It is very important
that FSA's purchase card program strictly comp ly with all federal regulations,
departmental policies and procedures, and FSA's supplemental policies and guidelines.
Thank you for noting in yo ur report that FSA has improved purchase ca rd controls since
the last review. The fo llowing responses address the referenced finding and
recommendat ions in the draft report:

Find ing 1: FSA Needs to Further Improve Internal Control Over Purchase Card
Use.

Recommendation 1.1: Ensure FSA cardholders and Approving Officials (AOs) are
familiar with Department policies and procedures regarding; (a) obtaining and
maintaining appropriate documentation to support purchases, (b) coordinating
software purchases with OCIO, (c) eusuring sales tax is not charged, (d) obtaining
quotes or estimates before purchase, (e) prohibitions against splitting payments.

FSA Response: The Acting Director, FSA Administration sent an emai l dated
September 14, 2005, to all FSA purchase cardho lders, AOs and their altemates, and the
Executive Management Team stressi ng the need to fully compl y wi th all Departmental
and FSA policies. The Departmental Directive and FSA Supplemental Policy were
attached to the emai l. FSA will reduce the number o[purchase cardholders by December
31,2005 . FSA Administration will condu ct trainulg sessions with all purchase
cardholders and AOs and their alternates prior to January 31, 2006. The train ing sessions
will cover all OlG aud it findings and recommendations. Finall y, FSA Administration
will perfonn a compliance review of each cardholder and AO on an annu al basis. These
internal reviews will ensure compliance with all Departmental and FSA policies and will
be completed by September 30, 2006.



                         83 0 First Street, NE, Washillgton, D.C. 20202
                                        1-800-4-FED-AID
                                    www.swdenraid.ed. gov
Recommendation 1.2: Ensure FSA cardholders and AOs are familiar with
additional FSA guidelines for the purchase card program, including requirements
for pre-approval and forms to be used.

FSA Response: The training sessions described in response to recommendation 1.1 will
cover additional FSA guidelines, including proper use of the pre-approval fOnTIS and
training fonns. This training will be completed by January 31,2006. The aIllual FSA
Administration compliance reviews will focus on adherence to additional FSA
guidelines. Each purchase cardholder and AO will be reviewed by September 30,2006.

Recommendation 1.3: Ensure Purchase Cardholders (PCHs) cousistently obtain
and maintain written purcbase requests, records of purchase, records of receipt,
approvals for purchases requking special clearances, and other supporting
documentation required by Department policy and procedures and FSA guidelines.
Ensure that this documentatiou is flied in the official purchase card files to support
the pOl·chases.

FSA Response: The training sessions described in response to reco=endation 1.1 will
cover the official purchase card file documentation requirements. Tbis trainiLlg will be
completed by Ja.J1uary 31,2006. The annual FSA Administration complia.J1ce reviews
will include required documentation to be maintained in the official purchase card file.
Each purchase cardholder and AO will be reviewed by September 30, 2006.

Recommendatiou 1.4: Require the AOs to thoroughly review reconciliation
packages provided by cardholders to ensure adequate supporting documentation is
provided and maintained, appropriate approvals and clearances are obtained, and
to ensure that purchases or payments are uot split.

FSA Response: The training sessions described in response to reconlllendation 1.1 will
cover AOs' review of reconciliation packages and required documentation. Tbis training
will be completed by January 31, 2006. The annual FSA Administration compLia.J1ce
reviews will include required documentation of the AO's purchase card reconciliation
package. Each purchase cardholder and AO will be reviewed by September 30, 2006.

Recommendation 1.5: Ensnre FSA guidelines are revised and clarified as needed
with respect to the nse of the FSA Purchase Card Request Form for pnrchase of
training services, and other areas as approp,"iate.

FSA Response: FSA Administration will review a.J1d update the Supplemental Policies
for FSA. This update will clarify issues identified in the OlG audit including the use of
approval forms and training fonn SF-182 a.J1d will be completed by November 30, 2005.
The updated copy of the Supplemental Policies for FSA will be posted on the FSAnet




                                            2

website and distributed to all purchase cardholders and AOs and their altemative by
December 31 , 2005 . The training sessions described in response to recommendation 1.1
will include the updated Supplemental Policies for FSA and will be completed by
January 31,2006.

If you have any questions concerning this matter, please contact Mary Nelson, Acting
Director, FSA Administration at 202-377-3463.

cc: Pat Howard




                                           3