oversight

FCA IMPAC Program

Published by the Farm Credit Administration, Office of Inspector General on 1998-08-11.

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

FCA's IMPAC Program

             A98-03
Farm Credit Administration	                           Office of Inspector General
                                                      1501 Farm Credit Drive
                                                      McLean, Virginia 22102-5090
                                                      (703) 883-4030




August 11, 1998


The Honorable Marsha Pyle Martin
Chairman of rhe Board and
 Chief Exer,ntive Officer
Falm Credit Administration
McLean, Virginia

Dear Ms. Martin:

The Office of Inspector General has completed an audit of the IMPAC (International Merchant
Purchase Authorization Card) program at the Farm Credit Administration (FCA or Agency).
The objective of this audit was to evaluate the effectiveness of the IMPAC program and review
tht policies and procedures for efficiency of operations.

The review was conducted in accordance with Government Auditing Standards issued by the
Comptroller General for audits of Federal organizations, programs, activities, and functions.
Fieldwork was conducted from May 15 through June 9, 1998. An entrance conference was held
on May 15. An initial draft report was provided to management on June 26, 1998. An exit
conference was held with management officials on July 22, 1998 and a final draft report was
provided to management for comment on July 23, 1998.

FCA's IMPA.C program has greatly streamlined the procurement process. Moreover, goods and
services are now acquired more quickly. Agency employees have generally received the
program enthusiastically. We have five recommendations that we feel will make the process
more efficient and decrease some of the administrative burden on Office of Resources
Management staff.

We thank the Director of the Office of Resources Management and his staff, as well as the other
participants in the IMPAC program we interviewed, for their input. If you or your staff have any
questio.r..s regarding this audit, we would be pleased to meet with you at your convenience.


R~e.p.ctfully, ~
               { J!/c V
      i&rn f?; zl;:
Eldon W. Stoehr
Inspector General
                           Table of Contents



Background                                                    1

Objective, Scope and Methodology                              2

Observations, Conclusions and Recommendations                 2

     One fonn should be utilized to log all purchases
     made with the IMPAC                                      4

     The IMPAC should be used to pay for training
     whenever the vendor accepts this payment method          5

     Ensure that controls are in place to prevent duplicate
     ordering and overspending within budget categories       5

     HARD should develop and implement procedures
     to randomly audit cardholders' records                   5

     The Agency should simplify the current accounting
     code structure by reducing the number of account
     codes and cost centers                                   6


Management Response

User Response Questionnaire
                                  FCA Office of Inspector General

                                  Audit A98-03: INlJ'AC Program




BACKGROUND

The Farm Credit Administration (FCA or Agency) is an independent Federal financial regulatory
agency of the United States government with regulatory, examination and supervisory
responsibilities for the Farm Credit System (banks, associations, and related institutions
chartered under the Farm Credit Act of 1971, as amended).

In 1989, the General Services Administration (GSA) contracted for the use of a commercial
credit card service for government agencies to use generally for micropurchases (under $2,500).
The service is called IMPAC (International Merchant Purchase Authorization Card) and is
recognized internationally. It is accepted wherever the Visa card is accepted but its use was
initially restricted to procurement personnel. Consequently, the use of the IMPAC was not very
widespread throughout the government. In 1989, just 10,000 federal and military employees
made use of the IMPAC program. However, in 1994, Federal procurement reforms changed the
way agencies made purchases. The Federal Acquisition Streamlining Act (FASA) and Executive
Order 12931 (EO 12931) expanded the card use, removed some mandatory procurement source
requirements, and allowed for the delegation of micropurchase authority to program officials
rather than restricting it to procurement personnel.

Since the FASA and EO 12931 were enacted in 1994, more than 250,000 civilians and military
personnel now use the IMPAC. The value of these transactions has grown from $460,000 in
1989 to over $2.9 billion in 1996. This represents 31 percent of all government acquisition
transactions, up from 16 percent in 1995.

In 1989 procurement personnel at FCA began using the 11\IfPAC; however, a January 1995 Office
of Inspector General audit reported that 82 percent of all FCA purchases still processed through
purchase orders were micropurchases. That audit report recommended that the Agency utilize the
purchase cards for its micropurchases.

In 1997, the Agency initiated a test pilot program group of six cardholders and delegated them
procurement authority to use the IMPAC. The group was selected by the Human and
Administrative Resources Division (HARD) in coordination with other management officials.
This test program ran from January 1997 through May 1997. After the test group completed this
program, adjustments were made to the program by HARD. The IMPAC program was extended
Agency-wide in February of 1998. Cardholders were required to participate in a training
program and pass an examination prior to receiving delegated purchasing authority and being
issued credit cards and/or checks.

The checks issued through the IMPAC program may be utilized in lieu of the credit card, when
necessary. Purchases made using the check carry a 1.5% service fee. There is no service fee for
the use of the IMPAC credit card.




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                                  FeA Office of Inspector General

                                  Audit A98-03: IMPAC Program




OBJECTIVE, SCOPE AND METHODOLOGY

The objective of this audit was to evaluate the effectiveness of the IMPAC program at FCA. We
also reviewed the policies and procedures for efficiency of operation and determined if the
controls in place are appropriate. This was accomplished by: 1) reviewing the laws enabling the
use of the IMPAC, 2) reviewing the policies and procedures adopted by the Agency when the
program was implemented, 3) interviewing the participants in the program, and 4) reviewing the
IMPAC usage to date. After these reviews were completed we analyzed the results to identify
possible improvements to the program.

We relied on input from employees participating in the program in order to determine the
effectiveness of the policies. In the Office of Resources Management (ORM), we interviewed,
among others, the managers of the program in the HARD as well as the Property Management
Official (PMO), the Receiving Clerk, and the Designated Billing Official in the Fiscal Resources
Division (FRD). We also interviewed some of the participants in the test pilot program, as well
as Approving Officials and Requestors (someone needing supplies/services but not issued an
IMPAC) to get their perspectives on the program and whether it is meeting their needs. We
prepared standard interview questions in order to gather and summarize the input in a consistent
manner.

OBSERVATIONS, CONCLUSIONS AND RECOlVlMENDATIONS

In general, the IMPAC program has been very well received at FCA. Cardholders and
requestors alike agree that the program has greatly streamlined the procurement process.
Moreover, goods and services are now acquired more quickly.

Increased IMPAC usage has greatly decreased the processing of purchase orders and
receipt of individual invoices.

As of May 1998, FCA had issued 36 credit cards and, in most cases checks, to seven different
offices: 13 in ORM, 11 in the Office of Examination (field offices included), three each in the
Offices of Policy Analysis and General Counsel, and two each in the Offices of the Board,
Inspector General and Congressional and Public Affairs. (The Farm Credit System Insurance
Corporation independently obtained their own IMPAC and does not work with or through the
FCA's program.)

Credit cards are being utilized for a wide variety of purchases, ranging from office supplies and
books, to computer software, to training. Checks are generally being used for on-the-spot
awards for employees and when vendors do not accept credit cards.

Since the decentralization of the IMPAC program in February through May of 1998,
procurement staff have processed 26 requisitions for micropurchases as purchase orders, down
from 38 during the same period in fiscal year (FY) 97. These purchases have generally been
from vendors who did not accept the credit card as a form of payment. Through the first eight




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                                   FCA Office of Inspector Gener3.1

                                   Audit A98-03: IlvIPAC Program


months in FY 98, the records indicate that the Agency has made 25..+ micropurchases, 71 percent
of which have been through the INIP AC program. This is a great improvement over the 18
percent in all ofFY 95.

During March and April. the Agency made 181 micropurchases, 161 with the HyfP AC and 20
using checks. The total dollar amount of these purchases was '573,877. According to the
Accompan.ving Report oj the National Pelformance Review, the average estimated savings
realized utilizing the INIP AC versus a purchase order ranges from '529 to '5227 per transaction.
Assuming the low end of this estimate, FCA saved at least '55,200 on the 181 INIP AC
transactions processed during this two-month period.

Some cardholders are not making use of the IMPAC as frequently as they should.

When an office submits a requisition to HARD for items which should be ordered through the
decentralized INfP AC program, the paperwork is generally returned to the requesting office with
instructions for them to utilize their I.MPAC to make the purchase. However, of the 52 L\tIP AC
purchases Procurement staff have made during the four months the program has been in place
Agency-wide, 17 have been for other offices possessing their own INIPAC. Procurement staff
have been instructed to process these requests using Procurement's INIPAC instead of returning
the requisitions to the requesting office. This number appears to be decreasing each month.
  evertheless, those cardholders not utilizing their INIPAC should be strongly encouraged to do
so in order to obtain the full benefit of the program. This fact is also noted in an April 6, 1998
memo from the Chief, Administrative Services Branch (ASB) as a result of his review of the
Agency's L\t1PAC purchases.

Agency policies and procedures are adequate but procedures for receiving. reporting and
recording could be improved.

The security and safeguarding measures used by all cardholders and the HARD were sufficient.
However, the process of reporting the receipt of certain furniture, fixtures and equipment to the
Agency's PMO is inefficient and is more labor intensive than it was when the former
requisition/purchase order process was in place. Under current procedures, the Receiving Clerk
does not receive a copy of all orders placed under the INIPAC program. He is, therefore,
unaware when property with a value in excess of $500 is received and needs to be added to the
Agency's inventory unless the cardholders notify him directly. The PMO is currently relying on
the Receiving Clerk and/or FRD to communicate this information. We feel it is necessary to
establish a paperwork trail to guarantee the PMO, through the Receiving Clerk, is consistently
informed of the receipt of these items. The implementation of Recommendation No.1 below
would rectify this situation.

The Receiving Clerk also needs the information on the orders so that he can deliver the items to
the appropriate office when they are received. During the test pilot program, a Memorandum of
Call (MofC) was required for each L'vIPAC purchase. This is a five-part form completed by the
cardholder and distributed to the FRD, Receiving Clerk, Approving Official (when the monthly
invoice was received) and requestor. This form enabled all the recipients to know what was




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                                   FCA Office of Inspector General

                                   Audit A98-03: I1v1PAC Program



ordered, by whom, the cost, the accounting codes to charge it to, and the expected delivery date.
This form provided information imperative to the Receiving Clerk so that he knew where to
deliver items as well as which items needed to be added to the inventory upon receipt. This form
also enabled FRD to obligate funds for purchases immediately. Its use does not appear to have
been imperative to any of the other recipients.

Use of the MofC was made optional under the current procedures. Based on our interviews, we
found that, while eliminating the mandatory use of the MofC may have made the process easier
for some cardholders, it has added unnecessary confusion and administrative burden to the
receiving process in McLean. In addition, it has made the verification of the receipt of inventory
items more burdensome for ORM staff. Management decided to eliminate the use of this form
without feedback from all members of the test pilot group.

Field offices have not experienced confusion and added administrative burden in the receiving
function with the elimination of the MofC. They simply need to notify the Receiving Clerk
when they receive items that are required to be carried on the Agency's inventory and are doing
so.

The Purchase Activity Log (Log) is now required to be completed by every cardholder when
they place an order using their IMPAC. It is submitted electronically to FRD on a weekly basis.
This form is awkward for cardholders to work with in that it is 8 Y2 x 14 and users are unable to
view the entire form on the screen at the same time. In addition, if a cardholder orders multiple
items and scrolls down the form, the headers do not continue on the page and the user must
constantly refer back to the top of the screen for column headings. It is also awkward to file,
given the Federal government's move in the 1980s, to standardize files at 8 Y2 x 11.

Cardholders have not always provided a copy of their Log to the FRD on a weekly basis, as
required in the procedures manual. Timeliness in the submission of this information is important
to the FRD as they use this document to make obligations in the financial management system
(FMS) upon receipt. Weekly submissions enable FRD to distribute the data entry workload
throughout the month, rather than having a large volume at the end of each month. Offices need
to ensure that they are following the procedures and submitting their paperwork in a timely
manner.

One form should be utilized and distributed electronically to the FRD on a weekly basis. In
McLean, however, it should also be distributed immediately to the Receiving Clerk. In addition,
the Receiving Clerk should get a copy of this Log from the field when they are purchasing items
that need to be included on the Agency's inventory records. This Log should be online and userĀ­
friendly. In an effort to streamline the Log, it should be reformatted and contain only the
information that is pertinent to both of these recipients and the cardholder.

Recommendation No.1: One form should be utilized to log all purchases made with the
IMPAC.




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                                   FCA Office of Inspector General

                                   Audit A98-03: INlPAC Program





Currently, the use of the IMPAC to pay for training is very minimal. From February through
May of 1998, 163 training forms (SF 182) were processed by HARD. Only nine of those were
paid with the IMPAC. utilizing the INIPAC to pay for training does not eliminate the SF 182;
the Office of Personnel Management requires Federal agencies to submit this form for all
training requests. The [\IP AC can, however, substantially expedite the processing of training
requests by allowing the cardholder to deal directly with the vendor in enrolling staff in classes
and seminars. It also eliminates a separate invoice for each training class attended. That saves
considerable staff time in FRD.

Recommendation No.2: The IMPAC should be used to pay for training whenever the
vendor accepts this payment method. (In the April 6 surnrnary of a review of INIPAC
purchases conducted by ASB, it is also recommended that a revised policy for processing
training forms should be developed.)

Policies and procedures for individual offices need to be strengthened.

All offices have multiple cardholders. Generally, there are no procedures in place to ensure that
a requestor does not ask more than one cardholder to place an L\1PAC order for the same item(s).

Also, there are generally no controls to prevent overspending within an office budget prior to
placing an order. Currently, overspending is not identified until the FRD receives a copy of the
Log, which is at least a week later. In many instances, the items may already have been
received.

Recommendation o. 3: Ensure that controls are in place to prevent duplicate ordering
and overspending within budget categories.


The requisition and purchase order process places the paperwork burden on Procurement staff
within HARD. The IMPAC program places this burden on the cardholder. Therefore, it is
necessary to have procedures in place to perform periodic audits of cardholder files to ensure that
all documentation is accurate and accounted for and the procedures in place are being followed.

After fieldwork was completed, the ASB drafted procedures for conducting these audits. \Ve
recornrnend ASB add the following elements to their proposed review template to ensure
program compliance: (1) INIPAC purchases are made whenever possible, in lieu of requisitions;
(2) Appropriate personnel are notified of the receipt of items required to be carried on the
Agency's inventory; (3) Copies of the Log are provided to the Receiving Clerk when
appropriate; and (4) Corrections to account codes are noted on the Log.

Recommendation No.4: HARD should develop and implement procedures to randomly
audit cardholders' records.




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                                  FCA Office of Inspector General

                                  Audit A98-03: Itv'lPAC Program




Presently, all IMPAC cardholders are responsible for assigning the correct accounting codes for
all of their micropurchases. The Agency currently has 127 individual account codes and 28 cost
centers. Many times, cardholders are unsure of the correct codes to assign certain purchases.
They enter the codes they believe to be correct and forward the Log to FRD electronically. FRD
then reviews the data and, if correct, enters it into the FMS. If incorrect, FRD makes the
correction, enters it into the FMS and notifies the cardholder of any changes made.

It is imperative to the accuracy of the Agency's FMS and individual office budgets that these
codes be correctly entered into the FMS. Therefore, we recommend the Agency simplify the
current accounting code structure by reducing the number of account codes and cost centers.
This would greatly decrease the chances of the errors being made by cardholders in the
assignment of codes.

Recommendation No.5: The Agency simplify the current accounting code structure by
reducing the number of account codes and cost centers.


Other Issues of Interest

The General Services Administration (GSA) has made multiple awards on contracts for a new
credit card program, one that will allow purchases, travel and fleet expenses. (Fleet expenses are
defined as the purchase of gas, uniforms and other expenses incurred while operating
government vehicles.) This new program will begin in November of this year. The current
contract the Agency has with the Bank of Boston for the IMPAC expires in November 1998, as
does the Agency's contract for travel credit cards (American Express). Therefore, we must make
an award to another vendor(s) for these services.

The ORt'\1 has intentions of introducing the new credit card program at FCA (purchases, travel
and fleet). Their use would further streamline and automate purchases and expenses. This
universal card program would be fully integrated with the Agency's FMS. We would encourage
the pursuit of integrating this program at FCA as soon as the new FMS is in place at FCA.




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