Tuesday, May 19, 2015

Purchase Card Programs - Recommendations to Reduce Risks

We've spent the past couple of postings discussing our gleanings from last week's House Committee on Veterans' Affairs hearing on waste, fraud, and abuse in the VA purchase card program. The idea behind doing so is to offer some best practices to contractors who face similar issues in administering their own purchase card programs. The lessons learned by Government managers could be equally applied to commercial enterprises.

The following comes from the prepared testimony of the VA's acting assistant secretary for management and interim chief financial officer and highlights activities that the VA has done or plans to do to curb fraud waste and abuse in its purchase card program.

  1. The VA consolidated its purchase card program under its Financial Services Center enabling it to have centralized oversight and management. The number of purchase cards were reduced by 31 percent from 37,000 to 25,500.
  2. The VA reduced card spending limits due to inactivity, invalid training certificates, and lack of valid warrants.
  3. Controls have been implemented with the bank to limit the use of Government purchase cards for specific types of merchants.
  4. Training is required prior to the issuance of a card, with refresher training required every two years (anyone who has had an internal control audit by DCAA knows that training is always a recommendation).
  5. The VA conducts two types of oversight reviews, data mining and statistical sampling. The data mining seeks patterns or relationships in the data and identifies areas of potential non-compliance with policy requirements. The statistical sampling seeks to select and evaluate a representative sample of transactions to review for compliance with policy.
  6. The VA issues quarterly memoranda to responsible officials to notify them of potential unauthorized commitments such as split purchases and transactions that exceeded micro-purchase limits that may require ratification. The VA requires positive feedback on actions taken.
VA employees spend about $4 billion annually on 6 million transactions (that's an average of $667). Certainly these numbers dwarf what any single contractor might spend and therefore the levels of oversight (both internal management and Congressional) is warranted. However, contractors have been significantly harmed by purchase card abuse and to the extent that those abuses are passed on to the Government through flexibly-priced contracts, purchase card programs will be on the Government's radar. Should DCMA (Defense Contract Management Agency) decide to initiate a CPSR (Contractor Purchasing System Review) at your facility, it is almost a certainty that they will look at your purchase card program.

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