Audit Report 

OIG-04-034 

GENERAL MANAGEMENT: Summary Report on Weaknesses in 

Treasury Bureau Purchase Card Programs 

June 18, 2004 

Office of 

Inspector General 

Department of the Treasury 

Contents 

 GENERAL MANAGEMENT: Summary Report on Weaknesses in Page 1 

 Treasury Bureau Purchase Card Programs (OIG-04-034) 

Audit Report.................................................................................................. 3 

 Results in Brief............................................................................................. 4 

 Background ................................................................................................. 4 

 Finding and Recommendations....................................................................... 5 

 Weak Controls Resulted in Improper and Questionable Purchases .................. 5 

 Recommendations................................................................................... 11 

Appendices

 Appendix 1: List of Bureau Audit Reports .................................................. 13 

 Appendix 2: Objective, Scope, and Methodology........................................ 14 

 Appendix 3: Management Comments........................................................ 15 

 Appendix 4: Report Distribution................................................................ 17 

Abbreviations

 AO Approving Officials 

 Customs United States Customs Service 

 FAR Federal Acquisition Regulation 

 FMS Financial Management Service 

 Mint United States Mint 

 OPE Office of Procurement Executive 

 OCC Office of the Comptroller of the Currency 

 OIG Office of Inspector General 

 TD Treasury Directive 
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This page is intentionally left blank. 
OIG Audit 

Report

The Department of the Treasury 

Office of Inspector General

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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

June 18, 2004 

Jesus Delgado-Jenkins 

Acting Assistant Secretary for Management 

Barry K. Hudson 

Acting Chief Financial Officer 

This report summarizes significant findings from audits we 

conducted of the Government purchase card program at four 

Department of the Treasury bureaus--United States Mint (Mint), 

Financial Management Service (FMS), Office of the Comptroller of 

the Currency (OCC), and the divested U.S. Customs Service 

(Customs).1

 Our reports on these audits were issued over the 

period December 2002 through March 2004. A list of the reports 

is provided in Appendix 1. 

For each of the audits, our objective was to determine if the bureau 

had adequate controls over its purchase card program to ensure the 

cards were used as intended. We reviewed purchase card program 

policies and procedures to determine if they were reasonably 

effective in preventing and detecting improper usage. This 

included conducting a review of transactions and cardholder 

records. Accordingly, we were able to comment specifically on 

exceptions to policies and procedures, such as purchases 

exceeding the single purchase limit and split purchases. The audits 

included a review and analysis of purchase card controls and 

transactions encompassing a period from September 1999 through 

March 2003. A more detailed description of each audit’s objective, 

scope, and methodology is provided in Appendix 2. 

 

1

 Customs was transferred to the Department of Homeland Security in March 2003 in accordance with 

the Homeland Security Act of 2002. 
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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

Results in Brief 

Internal control weaknesses in bureau purchase card programs 

often led to improper and questionable purchases. We found 

weaknesses in bureau policies and procedures. We also found that 

bureau purchase card program policies and procedures were 

frequently not followed. The improper and questionable purchases 

we observed did not involve large dollar amounts. Nevertheless, 

we believe deviations from policies and procedures, coupled with a 

breakdown in internal controls to detect these deviations, make the 

bureaus and Department vulnerable to fraud, waste, and abuse. 

We recommend that your office reemphasize to all bureaus their 

responsibilities in managing the purchase card program; assess 

whether additional Departmental guidance is needed; and direct all 

bureaus to assess the adequacy of their policies, procedures, and 

internal controls, and implement changes as necessary to ensure 

compliance with Departmental guidance. Your response to our 

draft report, included as Appendix 3, indicated you agreed and plan 

to implement the recommendations and work with the bureaus and 

offices to improve their purchase card programs. 

Background

The Department of the Treasury purchase card program was 

established in accordance with an overall Government-wide effort 

to streamline Federal agency acquisition processes. The purchase 

card program was established in 1989 when the General Services 

Administration issued its first purchase card contract. The current 

version of the program is known as the SmartPay Program. 

The use of purchase cards is designed to provide a low-cost, 

efficient vehicle for obtaining goods and services directly from 

vendors. The program operates in a manner similar to a personal 

credit card, but can only be used for official Government business. 

The purchase card is primarily used for micro-purchases, but may 

also be used for larger purchases.2

 Although most cardholders 

 

2

 A micro-purchase is generally limited to $2,500. 
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have single purchase transaction limits of $2,500, some have limits 

up to $25,000 or more. In 1998, Treasury selected CitiBank to 

provide all card services--purchase card, travel card, and fleet 

card--to its bureaus. 

The Federal Acquisition Regulation (FAR), Part 13, “Simplified 

Acquisition Procedures,” establishes criteria for using purchase 

cards to place orders or payments. The FAR, Part 13.201(b), 

recommends agencies use the purchase card to the maximum 

extent practicable. 

As a cost-cutting measure, in December 1993, Treasury directed 

all bureaus to begin using purchase cards for small purchases. 

Treasury issued Treasury Directive (TD) 76-04, Government 

Purchase Card Program, to provide bureaus guidance on the use of 

purchase cards. TD 76-04 states that the card is the preferable 

method for making micro-purchases. It also requires agencies to 

establish approved uses and limitations on the types of purchases 

and spending limits. The TD further requires a cardholder to 

receive training prior to receiving a purchase card. Using the 

Department’s guidance, each bureau we audited established 

additional guidance for its employees. For example, FMS 

developed the FMS Purchase Card Handbook that was issued in 

March 2000. This manual, similar to guidance at other bureaus, is 

intended to outline responsibilities at each level for the program 

and describe related procedures and controls. 

Finding and Recommendations 

Weak Controls Resulted in Improper and Questionable 

Purchases 

 

In examining transactions for compliance with purchase card 

policies and procedures, we identified internal control weaknesses 

that led to improper and questionable card usage by the bureaus, 

though the improper and questionable usage generally did not 

involve large dollar amounts or indicate fraud. The improper and 

questionable transactions often occurred because of weaknesses in 
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internal controls. We also noted that one bureau was using the 

check-writing feature of the card to pay recurring expenditures, a 

practice which may be more costly than other payment 

mechanisms. 

Internal controls are the policies, procedures, techniques, and 

mechanisms that enforce management directives.3

 These controls 

help to ensure that actions are taken to reduce risks, and include 

activities such as approvals, authorizations, verifications, and 

reconciliation. Among the more significant internal control 

weaknesses we found were inadequate separation of duties, 

purchases made without proper authorization, insufficient review of 

transaction documentation, inadequate internal guidance, and 

insufficient training. 

Improper or Questionable Transactions

Through our transaction review, we found improper split purchases 

used to circumvent controls. Split purchases occur when the 

cardholder divides the purchase into two or more transactions to 

exceed the credit card spending limit. In some cases, a second 

cardholder may be involved. Some examples included the 

following: 

• We found 15 improper split purchases at the Mint, totaling 

over $100,000. Ten (10) of these split purchases occurred 

at the Philadelphia Mint facility. An example included 

$5,431 spent on an item when the cardholder had a $3,500 

single purchase limit. An attempt was made to process the 

entire transaction. After the transaction was declined, the 

transaction was split into $3,121 and $2,310, which 

allowed the purchase to be processed. Also at this same 

location, we found large purchases split between two 

different cardholders in the same division. 

 

3

 According to GAO’s Standards for Internal Control in the Federal Government (November 1999, 

GAO/AIMD-00-21.3.1), control activities are one of five standards for internal control. lnternal control 

activities help ensure that employees carry out management directives. The control activities should 

effectively and efficiently accomplish agency control objectives. They include a wide range of diverse 

activities such as approvals, authorizations, verifications, reconciliation, and performance reviews. 
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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

• At FMS, we found numerous split purchases that allowed 

the cardholders to exceed the card limits. For example, we 

found three purchases made within a 2-day period totaling 

$4,422, exceeding the $2,500 limit and competitive bidding 

threshold. We also found $7,919 in purchases of 

construction services that were purchased the same day but 

had been split into five transactions. 

We also identified improper purchases. For example, we found 11 

transactions at the Mint involving prohibited gasoline and oil 

purchases. Also at the Mint, one cardholder spent $115 at a 

grocery store on food items without written pre-approval as 

required. 

Furthermore, we found questionable card usage. For example, we 

found purchases for things such as antique globes, flowers, bottled 

water, automotive repairs, food and beverages at restaurants, 

movie tickets, and gift cards. 

Use of Card to Pay Recurring Expenditures May Not Be Cost 

Effective

We also found one bureau, OCC, used the check-writing feature to 

pay for large, recurring expenditures. This did not seem to be a 

very cost-effective use of the card. Using this feature, OCC 

incurred a cost of 1.25 percent of the transaction’s face amount. 

From CitiBank records, we determined OCC spent nearly $900,000 

nationwide over a 28-month period using this feature, with fees 

totaling an estimated $11,000. The cost to pay these 

expenditures could have likely been reduced considerably by using 

Treasury checks (at a cost of about 42 cents per check at the time) 

or electronic transfer (at a cost of about 2 cents per transfer). 

Weak Internal Controls

Although internal controls were established to prevent the misuse 

of purchase cards, the controls were not always adequate or 

followed, resulting in card misuse. Among the weaknesses we 

found were inadequate internal guidance, inadequate separation of 

duties, purchases made without proper authorization, insufficient 

review of transaction documentation, and insufficient training. 
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Inadequate Internal Guidance. As mentioned earlier in this report, 

the bureaus developed their own guidance to ensure purchase 

cards were used as intended. However, we found in some areas 

that the guidance was inadequate. 

For example, we determined that FMS had not sufficiently 

emphasized internal control activities in its FMS Purchase Card 

Handbook. The handbook did not have a requirement for 

Approving Officials (AO) to validate purchases or sign off on the 

reconciliation process. It also allowed sign off by a funding or 

budget official for purchases, rather than the unit manager or 

supervisor. 

Another example involved the Mint. In developing its internal 

purchase card policy, the Mint did not include many of the core 

requirements established by the Treasury Financial Manual4

 or 

TD 76-04. For example, the Treasury Financial Manual requires the 

managing office to annually review its program to identify and 

correct program weaknesses. The Mint did not have program 

review guidelines and did not consistently conduct annual reviews. 

In addition, Customs did not include a formal step for 

documentation review as part of the AO responsibility in its 

purchase card process. As a result, we found that AOs did not 

review supporting documentation for purchases. 

Inadequate Separation of Duties. Although many of the card 

transactions we reviewed were approved by an AO, others were 

not. In several cases, we found that cardholders were able to 

authorize their own purchases. 

For example, FMS lacked fundamental separation of duties to 

prevent cardholders from performing incompatible functions. 

Consequently, some cardholders directed all aspects of a purchase 

card transaction from initiating purchases through approving final 

payment. Similarly, at Customs we identified numerous 

 

4 The Treasury Financial Manual, issued by FMS, describes the fiscal responsibilities of Federal agencies 

by providing policies, procedures, and instructions. 
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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

transactions in which the purchase cardholder ordered, received, 

and paid for items. 

At the Mint, of 132 cardholders we interviewed, 30 percent said 

they allowed others to use their cards. In some instances, 

cardholders shared cards with their AOs. As a result, in those 

situations, there was effectively no separation of duties. 

Purchases Made Without Proper Authorization. Another observed 

control weakness at FMS involved purchase authorizations made 

by a funding/budget official rather than the unit manager or a 

supervisor authorized to approve purchases. At OCC, cardholders 

approved invoices for payment without proof of receipt for the 

merchandise or service, and purchases did not always have proper 

authorizations. 

Insufficient Review of Transaction Documentation. The review of 

cardholder transaction documentation by an AO is a fundamental 

control. At Customs, most AOs at the locations we sampled were 

not reviewing actual paper receipts and/or invoices to determine if 

the amount billed was correct and that the purchase was for a 

valid need. Although review of transactions by the AO was the 

principal means for assuring that transactions were valid, we found 

the AOs were relying on the “online review” of the transaction 

statement in the purchase card system. 

At OCC, required purchase logs were not properly maintained or 

were incomplete, and responsible officials did not follow policies 

and procedures when approving cardholder monthly bank 

statements. 

Insufficient Training. Although we found instances in which 

policies and procedures were weak, we also found that in some 

areas, while the policies and procedures may have been sufficient, 

they were not being followed. One possible reason is a lack of 

understanding of program requirements. We found that AOs were 

not always properly trained regarding their role to ensure purchase 

card usage was proper. 
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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

For example, at the Mint we could not find evidence of AOs 

receiving a basic training course in purchase card usage, although 

all AOs had received refresher training. At Customs, we found that 

AOs for cardholders with credit limits under $2,500 were not 

required to receive training. At FMS, we found deviations from 

prescribed policies and procedures that we believed could be 

addressed by providing AOs periodic training. 

Summary of Observations

The table on the next page provides a summary of significant 

program conditions and internal control weaknesses we found at 

the bureaus we audited.

 

FMS Mint OCC Customs

Program Conditions Improper and questionable transactions (includes split purchases 

and questionable items) X X X X 

 

Internal Control Weaknesses Inadequate internal guidance X X X 

Inadequate separation of duties X X X 

Purchases made without proper authorization or oversight X X X X 

No documentation to support purchases X X 

Insufficient review of transaction documentation (receipts, 

invoices) 

X X X X 

Untimely or insufficient supervisory approval or reconciliation X X X 

Insufficient training X X X X 

Non-compliance with policies, directives, and management 

practices X X X 

 Source: Prior OIG audits (see Appendix 1). 

Conclusion

The conditions summarized in this report suggest that the bureaus 

and, by extension, the Department were vulnerable to erroneous 

and improper payments, as well as possible fraud, waste, and 

abuse. Based on the pervasiveness of control deficiencies found at 

the four audited bureaus, we believe it would be prudent at this 

time for the Department to communicate these deficiencies to all 
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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

the bureaus and offices as well as the need for the bureaus and 

offices to ensure that adequate controls over their respective 

purchase card programs are established and enforced. 

Recommendations 

The Assistant Secretary for Management and Chief Financial 

Officer should: 

1. Formally reiterate and emphasize to all bureau procurement 

managers their responsibilities in properly administering their 

purchase card programs. 

Management Comment. The Office of Procurement Executive 

(OPE) concurred with our recommendation and will formally 

provide the report to Treasury’s bureaus and offices for their 

information and action in improving their programs, and will 

emphasize the responsibilities associated with managing the 

purchase card program. The target date for accomplishment is 

upon receipt of the OIG report. 

OIG Comment. The actions proposed by OPE satisfy the intent 

of our recommendation. 

2. Assess whether additional Departmental guidance is needed to 

clarify what constitutes improper card usage, the impropriety of 

split purchases, the role of approving officials, and adequate 

separation of duties. 

Management Comment. The OPE concurred with our 

recommendation and is currently reviewing Treasury’s 

department-wide policy on use of the Government purchase 

card, Treasury Directive (TD) 76-04, to ensure that the 

guidance is current and adequate. The target date for 

reissuance of TD 76-04 is September 30, 2004. 

OIG Comment. The actions proposed by OPE satisfy the intent 

of our recommendation. 
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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

3. Request that bureau heads assess the adequacy of their 

policies, procedures, and internal control over their respective 

purchase card programs and implement changes as necessary 

to ensure compliance with Departmental guidance. 

Management Comment. The OPE concurred with our 

recommendation and is conducting a gap analysis contrasting 

what constitutes a robust purchase card program with 

Treasury’s current program. OPE is including in this analysis a 

review of policies, procedures, and internal controls. The 

analysis is being conducted with the participation of bureau 

procurement managers. OPE identified the target date for 

completion as in process, with plans to continue the action on a 

recurring basis. An OPE official told us, in a follow-up 

discussion, that the target date for the first iteration of the 

analysis is September 30, 2004. 

OIG Comment. The actions proposed by OPE satisfy the intent 

of our recommendation. 

* * * * * * 

We would like to extend our appreciation to the Acting Director, 

Office of the Procurement Executive, and members of her staff for 

the cooperation and courtesies extended to us during preparation 

of this summary report. If you have any questions, please contact 

me or Robert A. Taylor, Deputy Assistant Inspector General for 

Program Audits, at (202) 927-5400. The major contributors to this 

report were Donald P. Benson, Director, and Robert Mello, Audit 

Manager, Eastern Field Audit Office. 

Marla A. Freedman 

Assistant Inspector General for Audit 
Appendix 1 

List of Bureau Audit Reports 

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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

The following is a list of reports issued by our office on bureau 

purchase card programs with a link to a copy of the reports on our 

Web site: 

• OCC Purchase Card Usage at the Western District and 

Headquarters, OIG-03-031, issued December 16, 2002. 

http://www.ustreas.gov/offices/inspector-general/auditreports/2003/oig03031.pdf

• TREASURY’S GENERAL MANAGEMENT: Customs Purchase 

Card Program, OIG-03-057, issued February 5, 2003. 

http://www.ustreas.gov/offices/inspector-general/auditreports/2003/oig03057.pdf

• FINANCIAL MANAGEMENT: Purchase Card Internal Control 

Weaknesses Expose FMS Headquarters to Improper and 

Questionable Purchases, OIG-04-014, issued 

December 19, 2003. 

http://www.ustreas.gov/offices/inspector-general/auditreports/2004/oig04014.pdf

• MANUFACTURING OPERATIONS: Control Weaknesses and Poor 

Management Oversight in the Mint’s Purchase Card Program, 

OIG-04-029, issued March 2, 2004. 

http://www.ustreas.gov/offices/inspector-general/auditreports/2004/oig04029.pdf
Appendix 2 

Objective, Scope, and Methodology 

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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

The purpose of this report was to summarize purchase card audits 

conducted by our office during the last 2 years at four bureaus 

within the Department of the Treasury, and communicate an 

overall message of what we found to the Assistant Secretary for 

Management and Chief Financial Officer. The audited bureaus 

were the Mint, FMS, OCC, and the legacy United States Customs 

Service. 

The overall objective of the four bureau audits was to determine 

whether the bureaus had adequate controls over the Government 

purchase card program. To achieve this objective, we reviewed 

applicable laws, regulations, directives, and manuals dealing with 

the bureau purchase card programs. We also sampled transactions 

from CitiBank’s online database, and interviewed key bureau 

officials and staff. Our bureau audits were performed in 

accordance with generally accepted government auditing 

standards. More detail concerning the scope and methodology of 

the prior audits can be found in the individual bureau audit reports 

identified with hyperlinks to our Web site in Appendix 1. 

After summarizing our prior audits, we discussed the results with 

the Acting Director, Office of the Procurement Executive, and the 

Department’s Purchase Card Coordinator. 

This summary report was prepared during the period January 

through March 2004 from the results of these bureau audits. The 

preparation and presentation of this report was also performed in 

accordance with generally accepted government auditing 

standards. 
Appendix 3 

Management Comments 

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 Treasury Bureau Purchase Card Programs (OIG-04-034) 
Appendix 3 

Management Comments 

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 Treasury Bureau Purchase Card Programs (OIG-04-034) 
Appendix 4 

Report Distribution 

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 Treasury Bureau Purchase Card Programs (OIG-04-034) 

Department of the Treasury

Acting Assistant Secretary for Management 

Acting Chief Financial Officer 

Office of the Procurement Executive 

Office of Strategic Planning and Evaluations 

Office of Accounting and Internal Control 

Office of Management and Budget

 OIG Budget Examiner