oversight

Trends in the Number of Strikes and Use of Permanent Strike Replacements in the 1980s

Published by the Government Accountability Office on 1990-06-13.

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

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      United States

GAO   General Accounting
      Washington,
                            Office
                    D.C. 20548

      Accounting   and Financial
      Management     Division


      B-238531

      September 11,199O

      The Honorable   Edward R. Roybal
      Chairman,  Subcommittee    on Treasury,
        Postal Service,    and General
        Government
      Committee on Appropriations
      House of Representatives
      Dear Mr. Chairman:
      In response to your request         in House Report 101-170, dated
      July 25, 1989, that we study the difficulties           surrounding
      the government's    use of credit      cards, we are providing      the
      results  of our review of the small purchases credit            card
      program.    This report    covers the information     we presented
      to your office   in our May 10, 1990, briefing        and, along
      with our earlier    report   entitled,     Cash Management:     Diners
      Club Business Travel Management Program Needs Improvement
       (GAO/AFMD-90-66, April     30, 1990), completes     our work in
      response to your request.
      RESULTS IN BRIEF
      The small purchases      credit   card program can help agencies
      improve the efficiency       of their  purchasing  and payment
      processes.    However, the amount of any administrative
      savings that have resulted        from the credit  card program is
      not known because most agencies have not conducted an
      analysis   comparing   the cost of using the credit     card to the
      cost of other purchasing        and payment methods.
      Although   the small purchases       credit  card program includes
      internal   controls      that should prevent    the credit    card from
      being misused,       four of the seven agencies        in our review had
      some problems with the implementation           of these controls.
      These agencies,       however, are currently      taking   or planning
      corrective    action     to resolve  the problems.
B-238531


BACKGROUND
The Department         of Commerce started            using the small
purchases      credit     card under a pilot           project       in 1986,       Under
the pilot      project,      the Colorado National               Bank, through        its
subsidiary,       the Rocky Mountain BankCard System (Rocky
Mountain),      provided       Mastercard      credit     cards to federal
agencies     to make small purchases.                 Organizational         entities
within    24 federal       agencies     participated           in the pilot
project.       In March 1989, the General Services
Administration          (GSA), the central         agency responsible             for
managing governmentwide             contracts,        awarded a contract            to
Rocky Mountain for a governmentwide                    program using VISA
credit    cards for small purchases.                  For the most part,
agencies     that participated          in the Commerce pilot               project
did not start         using the GSA contract             until     after
September 29, 1989, when the Commerce pilot                         project
expired.       From October 1989 through March 1990, agencies
spent $21 million          under the GSA contract.
The small purchases          credit   card, also known as the
International        Merchant Purchase Authorization       Card, has a
government       seal and is embossed with the words, "US GOVT
TAX EXEMPT." Participating             agencies  assign the credit     card
to selected       personnel     to make purchases    such as office    and
computer supplies         and equipment     for work at remote
locations.        The credit      card can be used for purchases      up to
$25,000,      but the average purchase with the credit           card
during     the first    year of the GSA contract       was $199.
The government does not pay vendors directly               for purchases
made with the credit        card.  Instead,     vendors get paid
through the credit       card network generally       within    48 hours
of a purchase,       and agencies  receive    a consolidated      bill
each month from Rocky Mountain.           As of February       1990, 30
federal     departments   and agencies were participating           in the
program under the GSA contract.           Additional     background
information      on the small purchases     credit    card program is
contained     in appendix    I.
OBJECTIVES,       SCOPE, AND METHODOLOGY
We undertook   this review in January 1989 to examine a new
cash management tool for purchasing      and paying for small
items --the  small purchases credit   card.   The objectives      of
our review were to determine    (1) the benefits,    limitations,
and costs of the small purchases    credit   card program and

2
B-238531


(2) whether      agencies are implementing           the   internal     controls
established      for the program.
We selected      seven agencies for our review to represent                  a
range of sizes of small purchases           credit     card programs.
These agencies were the Environmental              Protection        Agency;
the Department       of Housing and Urban Development;               the
Department      of the Treasury's     Bureau of Alcohol,            Tobacco,
and Firearms and Internal         Revenue Service;        the Department
of Health and Human Service's          Social   Security
Administration;        the Department   of Transportation's             Coast
Guard Ninth District;        and the 89th Military          Airlift      Wing of
the United States Air Force.
We interviewed       officials       about their      views of the program
and reviewed agency internal               guidance     for the program,
other relevant       documents,       and a sample of monthly
cardholder    statements.           We conducted our work from
January 1989 to July 1990.               Our work was performed           in
accordance with generally              accepted government auditing
standards.     The views of responsible               agency officials       were
sought during      the course of our work and are incorporated
where appropriate.            Additional      details    on our objectives,
scope, and methodology            are contained       in appendix     II.
PROGRAMBENEFITS,         LIMITATIONS,      AND INTERNAL CONTROLS
The agencies     in our review were generally          satisfied      with
the small purchases        credit   card program because it has
enabled them to reduce the paperwork            needed to make
purchases and expedite          the procurement    process.      The
program also reduces the number of invoices               agencies
receive    and must process for payment.           However, some of
these efficiency       improvements     can be offset     by the time
required    by finance     offices   to obtain   individual      cardholder
statements    to use in verifying        the agencies'      consolidated
credit   card invoice.
Agency officials          we interviewed    were generally     dissatisfied
with the administrative            fee agencies must pay for using the
small purchases         credit    card.   This fee, however, will
decline     substantially       as more agencies participate          in the
program and total          government purchases with the card
exceed $50 million.            More details    on the benefits     and
limitations      of the program are included         in appendix        III.
The Department of        the Treasury   instructs         agencies    to report
the administrative         savings that result         from using     cash
3
B-238531


management initiatives,       including    the small purchases
credit   card program.      However, it has not instructed
agencies to conduct the type of analyses            that would enable
them to develop reliable        estimates    of the savings from
using the credit      card.   As a result,     agencies have reported
savings figures     to Treasury     that may be inaccurate.        The
data on savings under the program are further            discussed     in
appendix    IV.
Four of the seven agencies                in our review had various
weaknesses in their            implementation          of the internal           controls
over the small purchases               credit     card program.           For example,
our review showed that,               as of December 1989, the Internal
Revenue Service          (IRS) headquarters            did not have adequate
internal     controls       over $392,000 (94 percent)                  of the
$418,000 in credit            card purchases made during fiscal                    years
1988 and 1989.           At IRS, we found that                (1) cardholders        did
not routinely        verify      their    monthly credit           card statements
and document their            purchases with receipts                and
 (2) approving       officials        did not routinely            review the
cardholders'        statements.          When these internal             control
procedures      are not followed,             an agency has no assurance
that its cardholders'              purchases were for authorized
purposes or that it received                  the items on its credit              card
invoice.       Internal       control     problems at the other three
agencies     included       missing      documentation           of purchases      by
cardholders       and lack of approving              official        review of
statements.        These agencies are currently                    taking    or
planning     corrective        actions      to resolve         the problems.
Appendix V contains            additional        details       on the internal
control    problems we identified.
RECOMMENDATION
In order to accurately       assess the savings associated            with
using the small purchases        credit     card program, we recommend
that the Secretary     of the Treasury         revise  the instructions
to agencies    for reporting     savings     from the small purchases
credit  card program.       These instructions        should require
that agencies calculate       their     savings estimates     based on
their  costs for using the small purchases             credit   card
versus other procurement        and payment methods, covering            the
entire  procurement    and payment process.


As agreed with your            office,   unless you publicly     announce
its contents  earlier,            we plan no further  distribution      of
4
B-238531


this report    until    10 days from the date of this letter.          At
that time we will       send copies to the Director       of the Office
of Management and Budget, the Secretary            of the Treasury,
the Administrator       of the General Services       Administration,
and the heads of the agencies where we conducted our work.
We will  also make copies available          to others upon request.
Please contact       me at (202) 275-9454 if you or your staff
have any questions.        Major contributors      to this briefing
report  are listed      in appendix VI.
Sincerely   yours,




             lnancla




5
                               Contents

                                                                              Page
LETTER                                                                          1
APPENDIXES
        I    BACKGROUND                                                         8
   II        OBJECTIVES,      SCOPE, AND METHODOLOGY                           14
 III         PROGRAMBENEFITS AND LIMITATIONS                                   20
   IV        RELIABLE ANALYSES OF PROGRAMSAVINGS
               UNAVAILABLE                                                     26
       V     INTERNAL CONTROL PROBLEMS                                         30
   VI        MAJOR CONTRIBUTORS TO THIS REPORT                                 36

TABLES
   I.1       Administrative        Fees Under the           GSA Contract
               as of March        4, 1990                                      12
 II.1        Monthly   Cardholder        Statements         Reviewed           17

                                 ABBREVIATIONS

ATF               Bureau     of Alcohol,        Tobacco,       and Firearms
EPA               Environmental         Protection       Agency
GAO               General     Accounting        Office
GSA               General     Services        Administration
HUD               Department      of Housing         and Urban Development
IRS               Internal     Revenue Service
SSA               Social     Security      Administration




                                          6
                                                                         .

APPENDIX I                                                  APPENDIX I




                              BACKGROUND



PROGRAM STARTED AS COMMERCE PILOT   PROJECT AND IS NOW UNDER GSA
GOVERNMENTWIDE CONTRACT



PROGRAM USES INTERNATIONALLY   RECOGNIZED CREDIT CARD FOR PURCHASES
UP TO $25,000  INSTEAD OF TRADITIONAL   GOVERWENT PURCHASING METHODS



GOVERNMENT REIMBURSES CONTRACTOR BANK FOR CREDIT   CARD PURCHASES



CONTRACTOR BANK CHARGES GOVERNHENT AN AD?¶INISTRATIVE   FEE FOR
CREDIT CARD SERVICES
APPENDIX I                                                                     APPENDIX I


                                      BACKGROUND
         In 1986, the Department           of Commerce started     a pilot    project
using an internationally             recognized     credit  card to make small
purchases.          It contracted      with the Colorado National        Bank for
credit      card services      provided      through the bank's subsidiary,         the
Rocky Mountain BankCard System (Rocky Mountain).                     Organizational
entities       within   24 federal      agencies participated      in the Commerce
pilot      project,    which expired       in September 1989.
        The current    small purchases      credit    card program is
administered      by the General Services          Administration     (GSA), the
central    agency responsible        for managing governmentwide         contracts.
The GSA contract       with Rocky Mountain for the governmentwide               program
took effect      on March 4, 1989.        GSA issued a Federal        Supply Schedule
on the Governmentwide          Commercial   Credit    Card Service,     which
includes     the requirements      for using the GSA contract          and provides
agencies guidance on implementing            the program.         The GSA small
purchases credit       card program is similar          to the Commerce pilot
project,     except GSA uses a VISA credit           card, and Commerce used a
Mastercard.       In addition,     the GSA program uses a different           method
to pay Rocky Mountain and charges agencies a different                   type of fee
than was used under the Commerce pilot               project.
PURCHASING UNDER THE PROGRAM
      Agencies provide        the small purchases          credit     card to employees
who need a simplified        method of making small purchases.                  For
example, the Bureau of Alcohol,            Tobacco, and Firearms gives cards
to agents conducting       surveillance       to pay for car repairs            and
photographic     supplies;      the Coast Guard gives cards to its personnel
to purchase tools and parts for their               boats;     and HUD gives cards to
employees to purchase office           supplies.        Each credit       card is
assigned     to a cardholder,      who is the only person authorized                to use
the card.      The credit    card replaces       traditional         purchasing   and
payment methods, such as cash from an imprest                     fund,l   the standard
form 44,2 and the purchase order.


1An imprest     fund    is a cash fund with an authorized            cashier
 responsible      for   receiving monies and making small            cash
 disbursements.
2The standard      form 44 is a multiple        carbon copy form used for
 over-the-counter       purchases made while away from the purchasing
 office    or at isolated     activities.       To receive payment, the vendor
 can send one of the standard             form 44 carbons, as an invoice,  to
 the federal      agency.
                                           9
APPENDIX I                                                                         APPENDIX I


       Agencies can use the small purchases credit           card for
purchases    of $25,000 or less, which is the amount defined              as a
small purchase in the Federal       Acquisition    Regulation      (48 C.F.R.
13.101 (1989).      However, agencies    routinely   use the card for
purchases    well below $25,000.     The average purchase with the
credit   card during the first    year of the GSA contract          was $199.
From October 1989, after     the Commerce pilot      project     expired,
through March 1990, agencies      spent about $21 million         with the
credit   card.
       Cardholders          have limits     on the amount they can spend with the
credit     card and the types of vendors they can use.                       The agencies
covered by our review,               except the Air Force's          89th Military      Airlift
Wing, generally           limit    the amount cardholders         can spend on any
single     purchase to $1,000 or less, unless the cardholder                        works in a
procurement        office.       In addition,      agencies    limit     the amount all
cardholders        in an office        can spend during a month.             They also
determine      the types of vendors cardholders                can use, such as
hardware stores and business                services.      Cardholders       are generally
prohibited       from using the small purchases              credit      card at airlines,
restaurants,         and hotels       because the small purchases            credit   card
program is not intended               to compete with the Diners Club credit                  card
program for employee travel.
      For purchases      over specified     amounts, which vary by vendor,
the vendor is required        to obtain   authorization         from the credit
card network,     which electronically        connects vendors,          banks, and
the VISA credit      card organization.        To obtain      authorization       for
the purchase,     the vendor either      calls    the network or passes the
card through a device that is electronically                connected       to the
network.    If the purchase is above the cardholder's                  limits    or the
vendor is not one of the types authorized               for use by the
cardholder,    the vendor will       not receive     authorization        for the
sale.
PAYMENTS UNDER THE PROGRAM
       Vendors who accept the credit         card as a source of payment do
not have to send invoices        to the federal      agency making the
purchase.     Instead,   according    to a Rocky Mountain official,        they
can generally     get cash reimbursement        for the sale from their      banks
within    48 hours.    The vendors'     banks are reimbursed     by the credit
card company, which, in turn,         is reimbursed     by Rocky Mountain.
Rocky Mountain must then get reimbursed             by the government.




                                              10
APPENDIX I                                                                       APPENDIX I


        Under the Commerce pilot         project,     Treasury      reimbursed      Rocky
Mountain through a letter         of credit,       which enabled Rocky Mountain
to get payments on a daily          basis for the government's               credit     card
charges.      However, under the letter           of credit,       Rocky Mountain was
paid before agencies received            and verified        the accuracy of their
credit    card invoices.      In order for agencies              to verify     the
accuracy of their      credit    card invoices        before making payment, the
GSA contract      did not use a letter          of credit      to pay Rocky Mountain.
Instead,     under the GSA contract,         Rocky Mountain sends an invoice                 to
each agency at the end of a billing               period,      and the agency must
make payment in accordance          with the Prompt Payment Act of 1982, as
amended (31 U.S.C. Chapter 39).              The act generally           requires     that
agencies pay an interest         penalty      if they do not make payment
within    30 days after    receiving      an invoice.          The GSA contract
estimates     that it will    take approximately           55.5 days from the time
Rocky Mountain makes payments for credit                  card purchases         to the time
federal    agencies receive      and pay their         invoices.
FEES FOR USING THE CREDIT CARD
       Commerce charged agencies      an annual fee for each credit     card
under the pilot      project.  This fee, which was initially      $50 and
later   reduced to $25, primarily      covered Commerce's costs for
administering    the program.     Under the GSA contract,    agencies no
longer pay annual credit      card fees.     Instead,  they pay a fee--
called    the administrative   fee --which   is a percentage  of all
purchases made with the credit        card.
       The administrative         fee for the first         year of the GSA contract
 (March 4, 1989, through March 3, 1990) was 2.356 percent.                           Of this
fee, 61.5 percent        covered Rocky Mountain's            cost of funds3 for the
estimated      55.5 days it finances        credit     card purchases.          In
addition,      the administrative       fee provides        a profit      margin for Rocky
Mountain and covers its administrative                 expenses,       such as those for
preparing      management information         reports     to agencies.         The
administrative       fee declined     to 1.876 percent          in March 1990, the
beginning      of the second contract         year.     It will      decline    further
when the government's          total  purchases with the card exceed certain
dollar    levels.      For the first      2 contract      years,     total   government
purchases will       be calculated     by adding together            the purchases made
during both years.         However, for the remaining              3 years of the
contract,      only total    purchases     within     each contract        year will    be


3The cost of funds is the interest paid to borrow the funds or the
 income that could have been earned by using the funds for an
 alternative investment.
                                             11
APPENDIX I                                                                      APPENDIX I


used to determine  the administrative     fee.   The fee that is reached
by the end of a contract   year carries     over to the next contract
year and remains in effect    until   the next level   is reached.    (See
table  1.1.)
Table   1.1:   Administrative             Fees Under the   GSA Contract    as of
               March 4, 1990
               Total   government           purchases          Administrative       feea,b
                  (Dollars        in millions)                        (Percent)
                             $       50                                   1.143
                                     75                                   1.036
                                    100                                     .887
                                    150                                     .779
                                    200                                     .676
                                    250                                     .629
                                    500                                     .528
                                 1,000                                      .512
aThe administrative     fees are adjusted     at the beginning    and middle
 of the contract    year according   to a formula      in the contract.      The
 formula  is based on changes in the federal         funds rate (which is
 the GSA contract's     basis for calculating      Rocky Mountain's     cost of
 funds) and the income Rocky Mountain receives           from fees that
 vendors pay under the program.
bAgencies that receive           their  monthly reports    and invoices
 electronically,         instead    of through the mail,    are charged an
 administrative        fee . 094 less than those listed        above.   For
 example,      instead     of paying 1.143 percent,     those agencies would
 pay 1.049 percent.

        After  a new level with a lower administrative     fee is reached,
Rocky Mountain will       refund the agencies  involved  in the program the
difference     between what they paid under the previous      fee and what
they would have paid if the new fee had been in place during            the
year.      This refund will    cover purchases made from the beginning      of
the contract       year to the point the new fee is reached.      The refund
will    be calculated    and paid at the end of the contract     year.




                                                 12
APPENDIX I
                  APPENDIX I




             13
APPENDIX II                                                    APPENDIX II




                    OBJECTIVES,    SCOPE, AND METHODOLOGY



OBJECTIVES    OF OUR REVIEW WERE TO


     --   DETERMINE THE BENEFITS, LIMITATIONS,        AND COSTS OF THE SMALL
          PURCHASES CREDIT CARD PROGRAM


     --   ASSESS AGENCIES' IMPLEMENTATION        OF THE INTERNAL   CONTROLS
          ESTABLISHED FOR THE PROGRAM



SELECTED 7 AGENCIES        TO REPRESENT A RANGE OF SIZES   OF CREDIT      CARD
PROGRAMS



INTERVIEWED    OFFICIALS     TO GET THEIR   VIEWS ON PROGRAM BENEFITS      AND
LIMITATIONS


OBTAINED AVAILABLE DATA ON THE COST OF USING THE CREDIT            CARD
VERSUS OTHER PROCUREMENT AND PAYMENT METHODS


REVIEWED A SAMPLE OF MONTHLY CARDHOLDER STATEMENTS UNDER COMMERCE
PILOT PROGRAM AND GSA CONTRACT




                                       14
APPENDIX II                                                                APPENDIX II


                       OBJECTIVES,      SCOPE, AND METHODOLOGY
       The objectives    of our review were (1) to determine    the
benefits,   limitations,     and costs of the small purchases   credit   card
program and (2) to assess agencies'        implementation of the internal
controls   established    for the program.
       To determine     the requirements          for the program and how the
program is intended         to operate,      we reviewed federal        requirements
for small purchases,          agency internal        guidance and other documents
on the small purchases credit            card program,        and the Federal      Supply
Schedule on the Governmentwide              Commercial Credit       Card Service.         To
obtain background       information      on the Commerce pilot          project,     the
GSA program, and the contracts              with Rocky Mountain,        we reviewed       the
contracts     and Commerce reports          on the results      of the pilot      project
and interviewed     officials       at Commerce, GSA, the Office             of
Management and Budget, Treasury,               and Rocky Mountain.          To learn
about requirements        to make credit         card purchases     from small
businesses,     we reviewed the laws and regulations                establishing       the
requirements     and interviewed        officials       at the Small Business
Administration.
       We selected      agencies     for our review to represent             a range of
sizes of small purchases           credit     card programs under the Commerce
pilot   project.      Three of the agencies we selected                 for review--the
Department      of the Treasury's         Bureau of Alcohol,         Tobacco, and
Firearms     (ATF); the Department          of Transportation's          Coast Guard
Ninth District;       and the Department            of Health and Human Services'
Social   Security     Administration         (SSA)--had      over 350 cardholders
each and were among the agencies with the most cardholders.                           Three
other agencies--      the Environmental           Protection      Agency (EPA), the
Department      of Housing and Urban Development's                 (HUD) headquarters,
and the Air Force 89th Military               Airlift      Wing--had    between 50 and
350 cardholders,       while the Department            of the Treasury's       Internal
Revenue Service's        headquarters       had less than 50 cardholders.
       At these agencies,   we interviewed     officials  involved    in
managing and implementing       the program,   such as procurement,
finance,    and approving  officials,     and cardholders   to obtain    their
views on the benefits     and limitations     of the small purchases       credit
card program.
       In our analysis     of whether agencies were following             the
internal   controls    established      for the program,       we reviewed a sample
of cardholder     statements      to determine      if (1) cardholders      were
adequately    documenting      their  purchases and (2) the purchases            were
properly   reviewed by an approving          official.       Most of our review was
conducted while agencies were participating                in the Commerce pilot
                                            15
APPENDIX II                                                               APPENDIX II


project,     and, for all agencies,         we reviewed the most recent month
of activity      at the time of our review.               Also, for some agencies,         we
reviewed additional         months of activity.            To determine      if switching
to the GSA contract          affected   agencies'       internal    controls     over the
program,     we reviewed some agencies'           first      month of activity       under
the GSA contract.          We were unable to review a sample of cardholder
statements      at IRS headquarters        because, at the time of our work,
few cardholders        had reviewed and submitted             their   statements     as
required     by IRS guidelines.          In addition       to reviewing      2 months of
cardholder      statements      at SSA headquarters,          we reviewed the
documentation        of statements     for SSA cardholders          in one regional
area for fiscal        year 1989.      We did this because SSA does not
require     cardholders      to send their     documentation        of purchases      to
headquarters.         Table 11.1 shows the number of months for which we
reviewed statements          at each agency, the number of statements                 in the
sample, and the total           charges on the statements           we reviewed.




                                           16
APPENDIX II                                                               APPENDIX II


Table   11.1:     Monthly    Cardholder   Statements     Reviewed
                                                              Mr     of         Dollar
                             Number of months reviewed        statements        value
                            Under Commerce     Under GSA
Environmental
 Protection
 Agency                            4                                214        $132,118
Departient of
 Housing and Urban
 Development
 headquarters                      4               1                213         251,941
Coast Guard,
 Ninth District                    4               0a               164          38,109
Bureau of
 Alcohol, Tobacco,
 and Firearms                      1               1                 63          12,969
Social Security
 Administration                    1               1                 50           5,684
Air Force 89th
 Military
 Airlift  Wing                     1
aThe Coast Guard Ninth District was making organizational changes in the
 program that would have affected the results of our work covering the first
 month under the GSAcontract; therefore, we excluded it from our sample.
bThe Air Force 89th Military Airlift Wing planned to start using a credit card
 designed for aviation and did not participate  in the small purchases credit
 card program under the GSAcontract.

       To supplement    our detailed    analysis  of the agencies      in our
review,   we also obtained     the views of officials     at the Departments
of the Navy and Interior       and the Department     of Agriculture,     because
these agencies account for 44 percent of the dollars              spent under
the GSA contract     from April     1989 through March 1990.
      To determine     the savings that result    from using the credit
card, we obtained      Treasury   documents on savings reported  by
agencies participating       in the program.   Also, from Commerce and
                                          17
APPENDIX II                                                            APPENDIX II


entities     within    the Navy and Interior,          we obtained analyses    of the
cost of using other procurement             and payment methods versus the cost
of using the small purchases            credit    card; however, we did not
assess the accuracy and validity               of the cost analyses    performed     by
agencies.       In  addition,     we assessed whether the arrangement          under
the GSA contract         of including    the cost of funds in the
administrative       fee is cost-effective          from a governmentwide
perspective.        To do this,      we compared the cost of different         levels
of administrative         fees to the government's         cost of funds for making
immediate payment to Rocky Mountain.
     The views of responsible agency officials    were sought during
the course of our work and are incorporated    where appropriate.




                                         18
APPENDIX II        APPENDIX II




              19
                                                                                      ,

APPENDIX III                                                           APPENDIX III




                           PROGRAM BENEFITS      AND LIMITATIONS



CREDIT     CARD BENEFITS      INCLUDE


     --     PAPERWORK REDUCTION


     --     PROMPT RECEIPT      OF ITEMS


     --     REDUCED NUMBER OF INVOICES

     --     REDUCED VENDOR INQUIRIES          ABOUT PAYMENTS




CREDIT     CARD LIMITATIONS       INCLUDE


     --     TIME   REQUIRED BY FINANCE        OFFICE   TO VERIFY   AGENCY INVOICE


     --     ADMINISTRATIVE      FEE


      --    DIFFICULTIES      IDENTIFYING     SMALL BUSINESSES




                                            20
.

    APPENDIX III                                                              APPENDIX III


                            PROGRAMBENEFITS AND LIMITATIONS

            The small purchases credit        card program offers     several
    benefits     to agencies,   such as reducing       the paperwork    needed to make
    a purchase and reducing        the number of invoices       agencies receive.
    However, the overall       benefits    from the program are limited         by
    factors    such as the time-consuming         nature of verifying     the agency's
    credit    card invoice    and the requirement        to pay an administrative
    fee for using the credit         card.
    PROGRAMBENEFITS
          The small purchases credit            card program     can help improve
    purchasing  and payment efficiency             and reduce    the cash requirements
    of imprest  funds.
    Credit   Card   Improves    Purchasing      Efficiency
           Cardholders    and officials          who manage the small purchases          card
    programs at EPA, HUD, the Coast Guard, ATF, and SSA told us that
    the credit     card requires       less paperwork      than other purchasing
    methods.      For example, with the small purchases              credit     card, a
    cardholder     does not have to complete a requisition               form requesting
    that the procurement        office      purchase office    supplies.        Instead,    the
    cardholder     can buy supplies         directly   from an office       supply store.
    Also, the cardholder        does not need to go to an imprest               fund
    cashier,     which eliminates        the need to complete a form requesting
    imprest    fund monies.
            Officials       at EPA, HUD, the Coast Guard, and ATF stated that
    the card reduces the amount of time required                to obtain     an item
    because cardholders          can make purchases     themselves,     instead    of
    waiting      for the procurement       office   to make the purchase or for
    procurement         forms to be approved.      Also, officials      at EPA and HUD
    told us that by letting           program officials    make their      own small
    purchases,        the procurement     office  can concentrate     its efforts     on
    complex, higher priced purchases.
          In addition,     officials     at EPA, ATF, HUD, IRS, and the Coast
    Guard informed     us that using the small purchases        credit     card makes
    it easier   to find vendors who will         do business with the federal
    government.     For example, officials        said that, in the past, some
    vendors would not accept purchase orders or standard               form 44s
    because the government          took too long to make payment.        However,
    they said that the vendors like the small purchases             credit     card,
    which, according     to a Rocky Mountain official,       generally      enables

                                               21
APPENDIX III                                                                 APPENDIX III


the vendors to receive          payment     from   their    banks   within    48 hours     of
the purchase.
Credit   Card Can Improve         Payment    Process
       The small purchases credit             card enables agencies     to reduce the
number of invoices        their     finance    offices   receive   from vendors and
must process for payment.              This occurs because under the small
purchases    credit    card program,        the agencies     do not make individual
payments to vendors.            Instead,    vendors are paid through the credit
card network,       and agencies       pay Rocky Mountain based on a
consolidated     monthly     invoice      of all credit     card purchases.
Reducing the number of invoices               agencies must pay saves Treasury
the $.30 in processing            and mailing      costs for the check issued to
pay each invoice.
        Making fewer individual             payments to vendors can also help
agencies     avoid problems that result              from receiving      many invoices,
such as late payments and inquiries                  from vendors.       For example, a
finance     office     official     at the Coast Guard Ninth District
attributed       the District's       use of the small purchases             credit     card
with reducing        the number of late payments it made from 200 in
fiscal     year 1987 to 10 in fiscal             year 1989.     Also, officials          at
ATF, the Coast Guard Ninth District,                   and EPA said that using the
card had greatly           reduced the number of inquiries            vendors make to
agency finance         offices     about invoice       payment.    Officials        said that
responding       to these inquiries          can be extremely      time-consuming;
therefore,       reducing       the number of these inquiries           can improve the
finance     offices'       overall   efficiency.
Credit    Card Reduces       Imorest    Funds
        The small purchases credit         card enables agencies       to reduce
the use of imprest       funds for small purchases,        thereby     reducing  the
amount of cash that needs to be held in these funds.                   Reducing the
size of imprest      funds improves Treasury's        cash flow and gives it a
higher cash reserve on which to earn interest.                Specifically,
Treasury     is able to invest       the unneeded cash in special         bank
accounts     that earn interest        and to delay borrowing     funds from the
public,    thus reducing     interest     on borrowed funds.
       According    to a December 1989 Department        of Commerce report    on
its experiences       under the pilot    project,    Commerce's imprest  funds
decreased     40 percent     in fiscal  year 1988, when it began using the
small purchases       credit   card extensively.      Based on this decrease,
Commerce estimated        the government    saved $91,000 in interest    during
fiscal   year 1988.       In addition,   an analysis    done by the Navy's
Naval Weapons Center at China Lake fouIid that the Center's             imprest
                                             22
APPENDIX III                                                                    APPENDIX III


fund used $20,000 less in the month of September 1989 than it used
in September 1988, when its small purchases  credit card program was
just beginning.
PROGRAMLIMITATIONS
       The limitations       of the small purchases      credit  card include    the
amount of time that agencies          spend verifying      their credit  card
invoices    and the cost of the administrative           fee for using the
credit   card.      In addition,   not all vendors accept the credit         card,
and, as with other small purchase methods, those making purchases
with the credit       card may have difficulty        complying  with the
requirement     to make purchases      from small businesses.
Verifying     Agency     Invoices        Is Time-Consuming
        Efficiency       improvements      that result        from receiving        fewer
invoices       can be offset      by the amount of time the finance                   office
spends verifying          monthly credit         card invoices.         To verify       its
agency's       consolidated      monthly     invoice,      a finance     office     must
receive      statements      from each cardholder           that have been reviewed by
the cardholder         and approving       official.        The finance       offices       at EPA
and ATF had difficulties             getting      statements      from all their
cardholders        and had to spend time contacting                 the cardholders          to
obtain     the statements.         Officials         at the EPA and ATF finance
offices      stated    that the significant            amount of time their           offices
spend contacting          cardholders      is a disadvantage           of the credit         card
program.
Agencies Dissatisfied             With
the Administrative          Fee
         Our review found that agency officials              were generally
dissatisfied       with the administrative          fee agencies must pay to use
the credit      card.    Agency officials        stated that the federal
government      should not have to pay an administrative               fee because
Rocky Mountain already          earns income from fees vendors pay on
purchases made with a VISA card.                However, Rocky Mountain and GSA
officials      stated that Rocky Mountain's            income from vendors'     fees--
called     the interchange      fee-- currently       does not cover Rocky
Mountain's      costs for the program.           The interchange     fee is shared
among the vendor's         bank, the VISA network,          and Rocky Mountain.       In
1989, Rocky Mountain's          interchange      fee income from the small
purchases     credit    card was 1.37 percent          of all government purchases
with the card.
       In addition,    Rocky Mountain and GSA officials   told us that                        the
administrative      fee is necessary  because Rocky Mountain cannot
                                               23
APPENDIX III                                                                   APPENDIX III


charge the federal    government    the amount of interest     on late
payments that it charges private        sector cardholders.      For example,
Rocky Mountain currently     charges private      sector cardholders    an 18.6
percent  annual interest    rate;   federal   agencies pay a significantly
lower interest   rate, which is calculated       by Treasury pursuant      to
the Prompt Payment Act.       For the last 6 months of 1989, this rate
was 9.125 percent annually.
       As discussed     in appendix      I, a portion    of the administrative
fee covers Rocky Mountain's           cost of funds for making payments for
credit   card purchases       approximately    55.5 days before it receives
reimbursement.        This cost of funds was not included            in the annual
credit   card fees agencies paid under the Commerce pilot                 project;
however, by paying Rocky Mountain daily               for credit   card purchases,
the government      lost the interest       it could have earned if it had
delayed payment.         According    to a GSA official,       now that the cost of
funds is covered through the administrative                fee, some agencies
perceive    the fee as being too high.
        To determine       whether the current             arrangement    of including        the
cost of funds in the administrative                     fee is cost-effective         from a
governmentwide         perspective,         we compared the current          administrative
fee to the amount of interest                 the government would lose by making
daily     payments to Rocky Mountain.                 Our analysis      showed that,
because the administrative                fee will      decline    when total    government
purchases      reach certain         dollar     levels     (as shown in table       I.l),
paying the administrative               fee will      eventually     be more cost-
effective      than making daily            payments to Rocky Mountain.
Specifically,         we converted        the interest        rate applicable     to the
government's        investments       to a rate comparable           to the credit        card's
administrative         fee. 4 We concluded            that the interest       the government
would lose by making daily                payments to Rocky Mountain is equivalent
to a 1.229 percent administrative                   fee.      This is greater     than the
1.143 percent         administrative         fee agencies will         pay when total
government       purchases with the credit                card exceed $50 million.




4For this conversion,          we (1) used the          federal     funds rate (which is
 the basis for calculating           the cost of          funds portion     of the GSA
 contract's     administrative       fee) minus         . 25 percent     to approximate
 the interest     rate for the government's                 investments    and
  (2) converted     it from an annual rate              to a rate applicable        to a
 55.5 day period,       which is the period             of time credit      card purchases
 are financed     as estimated       by the GSA         contract.
                                               24
APPENDIX III                                                                    APPENDIX III


Some Vendors       Do Not Accent        Credit        Cards
       Although       the credit      card generally     makes it easier       to find
retail     vendors from which to make purchases,              officials      at HUD,
IRS, the Coast Guard, and SSA mentioned                  that some vendors,       such as
some wholesalers           and office     equipment   repair  shops, do not accept
credit     cards.       Also, agencies       such as IRS and SSA which
frequently      purchase information            from banks to determine       an
individual's       financial       status    are unable to use the small
purchases      credit      card to purchase the information            because the
banks do not accept credit               cards for payment.
      Rocky Mountain officials      stated that they are making efforts
to get more vendors to accept the credit        card. They stated   that
they ask federal    agencies   to give them the names of vendors that
do not accept the credit      card, so that they can contact    the
vendors and arrange for them to accept the credit       card.
Cardholders       May Have Difficulties
Identifying       Small Businesses
         The Small Business              Investment      Act of 1958, as amended,
generally         requires        that agencies make small purchases                  from small
businesses,          when available           (15 U.S.C. 644(j)         (1988)).        However, due
to the complexity               of the definition          of a small business,
cardholders          may have difficulty             identifying      small businesses          from
which to make purchases.                     According      to a Small Business
Administration            official,        the definition,        contained      in a 15-page
table      in the Code of Federal                Regulations       (13 C.F.R. 121.601
 (1990)),       probably        is not understood          by cardholders.          Agency
officials         told us that their            primary      guidance    on how to identify
small businesses              for those who make small purchases,                   including
credit       cardholders,           is to ask someone at the business                 whether it is
small or large.               Small Business Administration               officials       told us
that salespeople              should not be expected to know whether the
business        they work for qualifies                as a small business          under federal
regulations.            Therefore,         those who use the small purchases                 credit
card, as well as those who use other procurement                              methods, may have
difficulty          identifying        small businesses          and complying        with the
requirement           to purchase from those businesses.




                                                 25
                                                                            ,




APPENDIX IV                                                      APPENDIX IV




           RELIABLE   ANALYSES   OF PROGRAM SAVINGS   UNAVAILABLE



LIMITED   ANALYSES BY 3 AGENCIES    INDICATE   THE CREDIT   CARD CAN SAVE
MONEY



TREASURY ESTIMATES    OF SAVINGS   FROM THE CREDIT    CARD MAY BE
INACCURATE



AGENCIES SHOULD ANALYZE HOW CREDIT CARD COSTS COMPARE WITH COSTS
OF OTHER PURCHASING AND PAYMENT METHODS




                                     26
    .

.

        APPENDIX IV                                                                         APPENDIX IV


                      RELIABLE ANALYSES OF PROGRAMSAVINGS UNAVAILABLE

                 Although    the agencies       included      in our review believe     that
        using the small purchases             credit     card improves efficiency,       most had
        not analyzed        how the cost of using the credit              card compares with
        the cost of using other purchasing                  and payment methods.       However,
        three organizations,          including       the Department      of Commerce, have
        conducted       such analyses.        The Department       of the Treasury,     in its
        efforts      to monitor    agencies'       progress     in using cash management
        initiatives,        has been collecting          data from agencies on operational
        savings that result         from using the credit           card.     However, the data
        may be inaccurate         because agencies have not conducted              the type of
        analyses       needed to make reliable           estimates    of savings.
        LIMITED AGENCY ANALYSES
        INDICATE THE CREDIT CARD
        CAN SAVE MONEY
                 The Department     of Commerce and components in the Navy and
        Interior      have analyzed      the cost of using the small purchases
        credit     card compared to other procurement          and payment methods.        As
        mentioned       in appendix    I, we did not verify      the accuracy and
        validity      of these analyses.       The analyses    resulted    in varying    cost
        figures,      but all showed that allowing        program officials      to make
        their     own purchases with the credit        card was less expensive        than
        other methods.
                The Department        of Commerce's analysis           found that the small
        purchases       credit    card is more cost-effective             to use than three
        traditional        methods of making purchases            and payments--the              purchase
        order,      the standard      form 44, and cash from an imprest                   fund.      The
        analysis       was based on procurement            and finance      office      officials'
        judgment of the amount of staff                time spent requesting             a
        procurement,         completing    required      forms, receiving          deliveries        or
        picking       up purchases,      and certifying       the bill      for payment.            The
        analysis       was also based on the assumption              that the credit             cards
        were being used by program officials                  who did not have to complete                  a
        requisition        form for a credit        card purchase.         The Commerce analysis
        results       were that a purchase with the credit                card costs $16 to
        process,       while a purchase order costs $44 to process,                      and imprest
        fund and standard          form 44 purchases cost $26 and $22, respectively.
        Department       of Commerce officials           said this analysis           only applies
        to Commerce and does not necessarily                  apply to other agencies,
        because it is based on Commerce's procedures,                      which probably            differ
        from those used by other agencies.                   The primary        reason that less
        staff     time is needed to make and pay for a purchase with the card
        than for other methods is that forms, such as requisition                                forms,
                                                       27
APPENDIX IV                                                                       APPENDIX IV


standard     form 44s, or imprest  fund vouchers,                 do not have to be
completed     before making a card purchase.
        The Department     of the Interior's    Geological  Survey did an
analysis     that covered the same type of expenses as Commerce's
analysis    and found that it spends from $166 to $245 to process a
purchase order and $18 to process a credit            card purchase.       The
Naval Weapons Center at China Lake also did an analysis               that
compared the average cost of processing           a purchase made by the
procurement      office   using methods other than the credit        card with
the cost of having officials         make their   own purchases with the
credit    card.      This analysis  showed that a purchase with the credit
card costs $98 compared to $154 for a purchase by the procurement
office.
TREASURY ESTIMATES ON SAVINGS FROM
THE CREDIT CARD MAY BE INACCURATE
          Agencies using the small purchases             credit    card are instructed
to report       savings that result       from the program to Treasury.             For
fiscal      year 1989, 13 agencies        reported     savings of $1,659,616        from
using the small purchases          credit     card.      However, we believe      this
figure      may be inaccurate     because, according            to a Treasury
official,       agencies generally     based their         savings figures    on the
results      of Commerce's analysis,         which do not necessarily         apply to
agencies other than Commerce.               In addition,        not all agencies using
the credit        card have yet reported        savings     to Treasury.
        Treasury's      instructions         to agencies       for reporting      savings from
the credit        card program did not require               them to conduct their          own
analyses      of the cost of using the credit                  card compared to other
procurement        and payment methods.             Instead,       Treasury   provided    the
results     of Commerce's analysis              as a guideline,         and, according      to a
Treasury      official,      agencies      generally      used these results         as the
basis for calculating             their    savings under the program.               These data
may not be reliable           because Commerce's analysis                 is based on the
cost of Commerce's own internal                  operations,        which could differ        from
the costs associated           with the same operations                of other agencies.
As we discussed         above, Interior's           Geological        Survey and the China
Lake Naval Supply Center,                which performed         their    own analyses,     had
results     that differed         significantly        from those of Commerce.
      We believe    that to obtain    reliable   estimates      of cost savings
from this program,      agencies must conduct their        own analyses
comparing   the cost of using the small purchases            credit  card with
other procurement      and payment methods.      Without these comparative
analyses,   Treasury will     not have meaningful     statistics     with which
to assess the costs and benefits          of the small purchases credit
                                              28
APPENDIX IV                                                          APPENDIX IV


card program versus other procurement      and payment methods.   Such
analyses  can also be useful  to the Office    of Management and Budget
and GSA in determining   the effectiveness    of the credit  card
program.
RECOMMENDATION
       We recommend that the Secretary        of the Treasury     revise   the
instructions     to agencies   for reporting     savings from the small
purchases    credit  card program.      These instructions      should require
that agencies calculate      their   savings estimates      based on their
costs for using the small       purchases    credit    card versus other
procurement     and payment methods, covering        the entire   procurement
and payment process.




                                       29
                                                                              ,

APPENDIX V                                                       APPENDIX V




                       INTERNAL   CONTROL PROBLEMS



4 OF 7 AGENCIES   REVIEWED HAD SOl4E INTERNAL   CONTROL PROBLEM



     --   PURCHASES AT IRS HEADQUARTERS WERE NOT ROUTINELY       DOCUMENTED
          OR REVIEWED



     --   PURCHASES AT EPA AND HUD WERE MISSING      DOCUMENTATION



     --   STATEMENTS NOT REVIEWED BY DESIGNATED      APPROVING OFFICIALS
          AT EPA, ATF, AND HUD



     --   CARDS USED BY NONCARDHOLDERS AT HUD




                                   30
c


    APPENDIX V                                                                         APPENDIX V


    understand       the requirement        to do so and that for some purchases,
    especially       those made over        the telephone,  vendors may not provide
    receipts.
           At EPA, the documentation       of purchases   improved under the GSA
    contract.     Of the 40 statements      we reviewed at EPA for the first
    month under the GSA contract,        15 percent were missing       receipts    for
    purchases.     An EPA official     who oversees the small purchases credit
    card program attributed        the improvement    to EPA's monitoring       of card
    purchases and sending memorandums to cardholders            reminding     them of
    the program's    requirements.
            Although     the documentation      of purchases at HUD did not improve
    under the GSA contract,          HUD officials     stated      that they will      be
    issuing     additional     guidance to cardholders          and holding    training
    sessions     to help ensure that cardholders            follow     the credit     card
    program's      procedures.
    STATEMENTS NOT REVIEWED BY
    DESIGNATED APPROVING OFFICIALS
             The review of monthly   cardholder    statements    by the approving
    official     is an essential   control    to ensure that credit      card
    purchases are for official       purposes.     The approving    official  needs
    to be aware of the requirements         for credit   card use and for
    documenting      purchases and should be able to detect misuse of the
    card.      However, we found the following:
          --     At EPA, 7 percent         of the 174 statements          we reviewed from
                 the Commerce pilot         project     were accepted by the finance
                 office     with no approving       official      signature.     According       to
                 an EPA official        involved    in the small purchases            credit
                 card program,       EPA managers travel          frequently,    and,
                 therefore,       the approving     officials       may not have been
                 available      to sign the statements.             In its operations        under
                 the GSA contract,         EPA'S finance      office     returns   all monthly
                 statements       to the cardholder        if the approving       official's
                 signature      is missing.
          --     Twenty-seven     percent       of the 63 statements            we examined at
                 ATF's finance     office       and 15 percent       of the 213 statements
                 at HUD's finance       office       were approved by someone other
                 than the designated         approving     official.          Officials      at ATF
                 said the approving         officials     may have been too busy or not
                 available    to review the statements.                Consequently,          someone
                 else was designated         to perform the review,              but the agency
                 did not have a system for verifying                 that these people were
                 authorized     to perform        the approving      officials'         review.    An
                                                   33
APPENDIX V                                                                        APPENDIX V


           ATF official        stated    that,       in the future,      ATF will      require  a
           written     explanation       whenever someone other than the
           designated       approving       official      approves a cardholder
           statement.         Also, HUD officials            said that during the period
           covered by our review,               HUD was undergoing         a change in
           administration         and many of the managers were on an acting
           basis;    therefore,       the credit        card files     had not been
           changed to show the individuals                   currently     authorized      to
           serve as approving           officials.          According    to a HUD official,
           to address this problem,                the HUD finance       office    will    keep a
           file    of officials       who are authorized            to review cardholder
           statements       for the approving           official.
CARDS USED BY NONCARDHOLDERSAT HUD
        The cardholder's       knowledge of credit      card purchases    and
verification        of the monthly statement    is a key element in the
internal      controls    over the card.   The federal       government   is only
liable     for purchases made by authorized          cardholders.     However, the
practice      of loaning    cards could result     in instances     of fraud.
       Out of the 213 statements             we reviewed at HUD, we found
8 instances      of noncardholders         using the small purchases           credit    card
to make purchases which appeared to be for authorized                        purposes.
In these instances,           noncardholders       had signed the credit         card
receipts     attached      to the monthly       statements.       However, because
27 percent of the statements              we reviewed at HUD were missing
receipts,     we were unable to determine              the extent     to which
noncardholders       used the credit         card.     A HUD official      involved    in
the program stated that cardholders                  should not allow others to use
their    cards but that some cardholders               view the card as an office
card and not an individual             card.      Also, a HUD cardholder         told us
that he allows a co-worker             to use his card if he does not have the
time to make the purchase himself.                   A HUD official     stated that HUD
will   provide     additional      guidance     to cardholders      and hold a training
class that emphasizes           that cardholders         should not allow others to
use their     cards.




                                             34
    5




.

        APPENDIX V                                                                      APPENDIX V


                                     INTERNAL CONTROL PROBLEMS

                 Policies    and procedures     have been issued prescribing               internal
        controls       for the small purchases         credit       card program that should
        prevent      cardholders      from using the card for unauthorized                purposes.
        However, we found weaknesses in the implementation                       of these
        controls       at four of the seven agencies              in our review--IRS,        HUD,
        EPA, and ATF. Specifically,             we found instances            of inadequate
        documentation        of purchases by cardholders,               lack of approving
        official       review of cardholder       statements,          and noncardholder      use of
        the card.         We generally    did not find any significant              problems     in
        these areas at the Social            Security     Administration,        the Coast Guard
        Ninth District,         or the 89th Military          Airlift      Wing.
                The agencies       in our review are making or planning              corrective
        action      to ensure that their        internal     control   procedures      are
        followed.        Therefore,    we are not making specific            recommendations
        to these agencies.           We advised internal         audit staff      at these
        agencies of the problems we identified.                    IRS internal     audit staff
        have been conducting          a review of the small purchases credit                 card
        program,      and we suggested that other agencies'               internal    audit
        staffs      monitor   their   agencies'      efforts   to correct      the problems we
        identified.
        INTERNAL CONTROLS OVER CARD PURCHASES
               The small purchases         credit   card program has two primary
        internal     controls    to ensure that the credit          card is only used for
        authorized     purposes and that agencies only pay for items they have
        received.      These controls       are (1) cardholders        are to review
        monthly    statements      of their    charges and attach       receipts       showing
        what was purchased and (2) approving              officials     are to review the
        cardholders'       statements     and receipts     to ensure that the purchases
        were for authorized         purposes.      After  the approving       officials
        review the statements,          they send them to the finance             office    to use
        in verifying       the agency's     credit    card invoice.
               These internal    controls    over the small purchases credit         card
        program were developed under the Commerce pilot             project    and were
        included    in agencies'    internal    guidance on the program.        The
        Federal   Supply Schedule on the Governmentwide           Commercial Credit
        Card Service under the GSA contract           also provides    guidance   to
        agencies on the controls         over the program.




                                                    31
                                                                                                      ,

APPENDIX V                                                                           APPENDIX V


PURCHASES NOT DOCUMENTEDOR
REVIEWED AT IRS HEADQUARTERS
       Our review at IRS headquarters                  disclosed      that IRS cardholders,
who were purchasing          agents in the procurement                office,      were not
implementing       the internal        controls      over the small purchases               credit
card program.         Specifically,        as of December 1989, cardholders                    had
not submitted        statements      to the IRS finance           office      for
approximately        $392,000,      or 94 percent,          of the $418,000 in purchases
they made with the card during                fiscal      years 1988 and 1989.              Because
the finance      office    did not receive           these statements,            IRS had no
assurance     that the purchases           were received         by the agency or were
for authorized        purposes.        An official        from IRS' office          of internal
audit told us that that office                conducted a review of the small
purchases     credit     card program at IRS and also identified                       this
problem.
       According     to an IRS official,    the problem occurred             because
purchasing     agents in the procurement       office     ordinarily       are not
required     to verify   receipt   of the items they purchase and,
therefore,     did not follow    this requirement       for purchases made with
the small purchases       credit   card.  IRS has made an effort               to
resolve    this problem by appointing       an official       to monitor         the
program,     ensure that cardholders     submit their        old statements          and
documentation      for the purchases,    and provide       clear     instructions        to
cardholders      on procedures   for the program.
MISSING DOCUMENTATION OF
PURCHASES AT HUD AND EPA
         At HUD and EPA, about a quarter               of the statements          we reviewed
from the Commerce pilot            project      were submitted         to the agencies'
finance     offices     without    receipts       for the purchases.           The receipts
or other documentation,            such as packing          slips    from items received
through the mail,          are needed to document that the items purchased
were received         and were for authorized            purposes.       At HUD, 27 percent
of the 173 monthly cardholder                statements      we reviewed       from the
Commerce pilot         project   were missing         sales receipts        for purchases
totaling     approximately       $27,500.         In addition,        29 percent     of the 174
statements       we reviewed at EPA from the Commerce pilot                      project   did
not have receipts           for purchases       of at least $29,600.             A HUD
official     stated     that the receipts          may be missing        because (1) the
cardholders        are not attaching         them to the statements,             (2) approving
officials       are not ensuring        that cardholders          attach    them, and (3)
some vendors do not provide               receipts.       EPA officials        stated that
some cardholders          may not attach        receipts     because they do not


                                               32
.



APPENDIX V        APPENDIX V




             35
APPENDIX VI                                                      APPENDIX VI


                    MAJOR CONTRIBUTORS TO THIS REPORT
ACCOUNTING AND FINANCIAL      MANAGEMENTDIVISION,      WASHINGTON, D.C.
Robert A. Pewanick,    Senior Assistant     Director
Helen Lew, Assistant     Director
Kathleen Peyman, Evaluator-in-Charge
Tracy E. Ferrell,    Accountant
Kent L. Eby, Accountant

DETROIT REGIONAL OFFICE
Robert F. Stephens,    Regional    Assignment   Manager
Gerald H. Springborn,    Evaluator
Allen R. Walter,   Evaluator




(901492)


                                      36