oversight

Distribution, Usage and Control of Purchase and Travel Cards at the Farm Credit Administration I-09-01

Published by the Farm Credit Administration, Office of Inspector General on 2009-06-30.

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

OFFICE OF
INSPECTOR GENERAL   Report of Inspection
                       Distribution, Usage and
                    Control of Purchase and Travel
                             Cards at the
                     Farm Credit Administration
                                I-09-01


                         JUNE 30, 2009




                    FARM CREDIT ADMINISTRATION
Farm Credit Administration	                            Office of Inspector General
                                                       1501 Farm Credit Drive
                                                       McLean, Virginia 22102-5090




June 30, 2009


The Honorable Leland A. Strom
Chairman of the Board
Farm Credit Administration
1501 Farm Credit Drive
McLean, VA 22102-5090

Dear Chairman Strom:

The Office of the Inspector General completed an inspection of Distribution, Usage and
Control of Purchase and Travel Cards at the Farm Credit Administration (FCA). The
objective of this inspection was to determine the effectiveness and efficiency of the credit
card program at FCA.

We found that FCA has adequate internal controls and there were no notable delinquencies
or misuses. During the course of the inspection, the Office of Management Services (OMS)
initiated enhancements to internal controls. The OMS agreed to further improve the
program by updating policies and procedures, determining if the distribution of travel cards
to all FCA employees is appropriate, and providing supervisors with more information
concerning government travel of their direct report cardholders.

We appreciate the courtesies and professionalism extended to OIG staff. If you have any
questions about this inspection, I would be pleased to meet with you at your convenience.

Respectfully,



Carl A. Clinefelter
Inspector General

Enclosure
   Office of the Inspector General





       DISTRIBUTION, USAGE AND CONTROL OF

      PURCHASE AND TRAVEL CARDS AT THE FCA


                OIG INSPECTION 09-01


June 30, 2009                           Final Report
                           Inspection Objective


  To determine the effectiveness and efficiency of the implementation of
   government purchase and travel cards at FCA using standards set forth by
   the Government Accountability Office and Appendix B of the Office of
   Management and Budget (OMB) Circular A-123 (revised January 2009).
  To review:

             FCA’s distribution of purchase and travel cards,

             FCA employees’ use of purchase and travel cards,

             The Agency’s purchase and travel card controls to mitigate the risk of
              fraud, misuse, and delinquency, and

             Agency actions in response to recommendations made in prior
              purchase card inspections.


June 30, 2009 – Final Report                                                           2
                                   Inspection Scope

      Identify the users and degree of usage of the purchase and travel cards by FCA
       employees during calendar year 2008.

      Identify the relationships between FCA, the Bureau of the Public Debt (BPD),
       issuing bank, and the General Services Administration (GSA).

                                        MILESTONES

      Entrance conference – January 21, 2009

      Fieldwork – January through May 2009

      Exit Conference – June 24, 2009

      Inspection in accordance with the President’s Council on Integrity and Efficiency
       and the Executive Council on Integrity and Efficiency “Quality Standards for
       Inspections.”

    June 30, 2009 - Final Report                                                           3
                               General Background

     GSA manages the Federal government’s charge card program, known as SmartPay.
      Through SmartPay, agencies are able to select charge card products and services
      from contracts negotiated with major banks. The contracts allow agencies to select
      the type of charge cards, depending on their needs. At FCA, we have purchase
      cards, travel cards, and a fleet card. This report focuses on purchase and travel
      cards.

     OMB prescribes policies and procedures to agencies regarding how to maintain
      internal controls that reduce the risk of fraud, misuse and delinquency in government
      charge card programs [Appendix B of OMB Circular A-123 (Revised January 2009)].
      This guidance, incorporating prior guidance and recommendations from GAO,
      establishes standard minimum requirements and suggested best practices for
      government charge card practices. The requirements must be included in “internal
      agency regulations, procedures and training materials,” constituting a charge card
      management plan. FCA has adopted many of the best practices. Notably, FCA
      stringently uses the retail blocking option for Merchant Category Codes (MCC) and
      sets reasonable transaction and monthly credit limits.

    June 30, 2009 - Final Report                                                        4
                                   Purchase Cards 

                                    Background

     The government purchase card program began in 1982 (E.O. 12352).

     Through the National Performance Review (NPR) and amendment of the Federal
      Acquisition Streamlining Act (FASA) in 1993-1994, a micro-purchase threshold was
      established and purchase card use expanded and became the “preferred method” for
      making micro-purchases (was $2,500, in 2006 became $3,000).

     Key components having roles and responsibilities in administering the SmartPay
      program at FCA include:

           Office of Management Services (OMS),
           Client Services and Communication Team,
           Agency/Organization Program Coordinator (APC),
           Designated Billing Official,
           Cardholder, and
           Approving Official for each Cardholder.



    June 30, 2009 - Final Report                                                       5
                               Purchase Cards 

                                Background

         FCA partners with BPD and Citibank to provide credit card
              services. BPD has an Agency Coordinator and acts as liaison
              between BPD Finance, GSA, and Citibank.

         During calendar year 2008, FCA charged a total of $883,297.54
              on purchase cards. OIG has previously completed two
              evaluations of purchase cards:

                •    Purchase Card Inspection 02-07, September 9, 2002; and
                •    FCA’s IMPAC Program, A98-03, August 11, 1998.

         The reports concluded that the use of credit cards had
              streamlined the procurement process, and goods and services
              were acquired more quickly. All recommendations made in the
              reports were agreed to and accomplished by FCA management.
June 30, 2009 - Final Report                                                  6
                                       Purchase Cards

                                          Findings

               Safeguards and controls are adequate.

    23
Cardholders             Effective span of control in limiting issuance to 23 cardholders
   Total
                         throughout FCA.

20 / $3,000             20 of the cardholders have a limit of $3,000 per transaction
    per
transaction
                         (micro-purchase).

                        17 of the cardholders have a monthly limit of $10,000. Must
17 / $10,000             ask permission to exceed.
monthly limit
                        A few staff members (3) in OMS have higher limits because
                         they potentially handle higher priced procurements.
 3 / higher              Documentation and adherence to process is examined
    than
$10,000 limit            annually. Files are kept for 3 years.


        June 30, 2009 - Final Report                                                        7
                                Purchase Cards

                                   Findings

 Internal controls
         Cardholders must obtain prior approval by an Approving Official
          and subsequent review of purchase card activity.

         Purchases must be documented by cardholder and Approving
          Official in a Purchase Activity Log.

         Tight controls on MCC causes blocking of all but normal
          business expenses (since 2006). Permission must be granted
          by the APC to unblock a charge to a blocked expense.

         Training is required for cardholders, Approving Officials and the
          APC and that person’s backup before cards are approved and
          issued. Refresher training provided online through BPD required
          every 3 years.
 June 30, 2009 - Final Report                                           8
                                   Purchase Cards

                                      Findings

     Transaction reviews are effective. Monthly review and authorization to pay bill
      by FCA of all purchases. Any suspicious charges are questioned.

     BPD does annual random audit of purchase card logs.

     During calendar year 2008, the timeframe used during this inspection cycle,
      there was no need for disciplinary proceedings due to misuse or abuse.

     Convenience checks are used in rare instances where a vendor does not
      accept a purchase card. They are discouraged and used very sparingly. Only
      1 cardholder per office. There is a 2% service charge for use of checks.

     Purchase card review is included in Agency management control plan, A-123.
      OMS will conduct the review of this assessable unit, which is scheduled for
      June 2009.



    June 30, 2009 - Final Report                                                    9
                               Purchase Cards

                                 Conclusion

Each agency must develop and maintain written policies
and procedures for the appropriate use of charge cards
consistent with the requirement of A-123, App. B.
Although FCA uses BPD’s Government Purchase Card
Procedures dated March 2008, has a draft operating
procedure, and puts out periodic guidance on
appropriate purchase card use, the guidance should be
consolidated. Some references in the operating
procedures should be updated.


June 30, 2009 - Final Report                         10
                                  Purchase Cards 

                                Agreed-Upon Action

1.	 OMS will update the Purchase Card policy and procedures to
    include:

               A link to the FCA Credit Card Management Plan which
                will be updated and submitted to OMB annually.
               Consolidation of existing guidance on purchase cards.
               A section on inappropriate actions and/or charges,
                including a link to PPM 826.




 June 30, 2009 – Final Report                                           11
                                Travel Cards 

                                Background

 Public Law 105-264 and Section 301-51.1 of the Federal
   Travel Regulation (FTR) establishes:
         Use of government travel card is mandatory for government
          travel (exemption from mandatory use - 5 or less uses per year).
         Must be used for official government travel only.
         Travel charged to individually billed accounts must be paid on
          time by the individual cardholder.
         In April 2005, it became permissible to split disbursement of the
          travel voucher reimbursement between charge card vendor and
          traveler.

 June 30, 2009 - Final Report                                            12
                                         Travel Cards 

                                           Findings

 All FCA employees have travel cards (not temporary or contract
  employees).
 Employees are individually billed and therefore liable as opposed to
  Centrally billed (government liability).
 During calendar year 2008 travel card charges made by FCA staff
  include:

                                 Lodging	        $713,452.46

                                 Airlines	       $849,056.63

                                 Rental Cars	    $130,342.06

  June 30, 2009 - Final Report                                     13
                                 Travel Cards 

                                   Findings

 During 2008, no delinquencies over 60 days at FCA. No card suspended.

 Adequate internal controls.

 Tight controls on MCCs causes only common business expenses to be
    approved.

 Monthly limit of $8,000 per credit card cycle [exception: in 2008, one Board
    Member’s limit increased for international travel] .

 ATM access has limits of $210/day and $1,050/week.

 During this inspection, OMS started to collect travel data for 3-month
    increments in order to begin the practice of giving an employee’s travel card
    data to the supervisor as a tool to review travel costs to ensure employees
    who have charges on their official government charge card were on official
    travel when charges were incurred.

  June 30, 2009 - Final Report                                               14
                                Travel Cards

                                  Findings

 During this review, OMS began doing monthly reviews of randomly
    selected FCA travel cardholders to ensure the following:

     1.	      For Temporary Duty (TDY) expenses, employee was in travel
              status,
     2.	      ATM withdrawals are made in accordance with Agency policy,
     3.	      All charges are appropriate and related to official Government
              travel.
     If there are questionable charges or ATM withdrawals, the
     employee is contacted to ascertain the validity of the charge.

     Any appearance of fraud or wrongdoing is to be reported by the
     APC to the OMS Director and OIG.

 June 30, 2009 - Final Report                                            15
                               Travel Card

                                Findings

 PPM 711 is outdated. It refers to “Bank of America”
      throughout, including contact numbers for lost cards. It
      also references duties for supervisors to “review on a
      monthly basis, a report of each employee’s card activity.”
      This practice was not taking place during the period
      reviewed in this inspection.
 Many FCA employees have a travel credit card and do not
      travel. There is an inherent risk in providing a credit card
      without need. Even though the risk is minimal because
      the employee retains liability for payment of charges, the
      Agency is responsible for tracking usage and control of
      the card.

June 30, 2009 - Final Report                                         16
                               Conclusion

 While there are prudent controls and adequate
      monitoring of travel card usage, Agency policies and
      procedures should be updated. This would enable a
      user to have a single reference tool, possibly including
      links to references, and would enable the Agency to
      enhance its Management Control Plan.
 It may be useful to review the distribution of travel cards
      and to consider further dollar limitation or reduced
      activation.



June 30, 2009 - Final Report                                     17
                               Travel Cards 

                           Agreed-Upon Actions

2.	     OMS will update travel policy and procedure, PPM 711, to include:

              A statement that credit worthiness may be assessed by the contract bank prior
               to issuance of a travel charge card to a first time cardholder.

              Changing references from an individual financial institution to “contract bank”.

              Incorporating BPD’s role.

3.	     Determine whether to place restrictive limitations on cards for travel
        cardholders with limited activity, or deactivate the cards during periods
        when not in travel or authorized use. Include restrictions and policy
        determinations on card distribution in the updated policy and procedure.

4.	     Each quarter, beginning July 2009, OMS will provide Office Directors with
        a Travel Card Transaction report showing all charges to individuals’
        government travel cards.

June 30, 2009 - Final Report                                                                      18