TREASURY’S GENERAL MANAGEMENT: 

Customs Purchase Card Program 

OIG-03-057 February 5, 2003 

Office of Inspector General

******* 

The Department of the Treasury 

 
Contents

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

 Results in Brief...............................................................................................3 

 Background ...................................................................................................5 

Finding and Recommendations .........................................................................6 

 Internal Controls Need Improvement ............................................................6 

 Recommendations......................................................................................9 

Other Matters 

Training For All Approving Officials ............................................................10 

Questionable Purchase .............................................................................10 

Non-Traditional Awards ............................................................................10 

Separation of Duties.................................................................................12

Appendices

 Appendix 1: Objectives, Scope, and Methodology .......................................14 

 Appendix 2: Management Comments.........................................................16 

 Appendix 3: Major Contributors To This Report...........................................18 

 Appendix 4: Report Distribution.................................................................19 

Audit of Customs Purchase Card Program (OIG-03-057) Page 1 
Contents

Abbreviations

 AAO Alternate Approving Official 

 AIMS Asset Information Management System 

 AO Approving Official 

 BO Budget Officer 

 BPC Bureau Program Coordinator 

 CH Cardholder

 FAR Federal Acquisition Regulation 

 FFS Federal Financial System 

 IA Internal Affairs 

 LPO Local Property Officer 

 MCC Merchant Category Code 

 MPO Management Program Officer 

 OH Organization Head 

 PC Purchase Card

 PCD Purchase Card Commitment Document 

 PCS Purchase Card System

 PIMS Property Information Management System 

 POL Purchase Card Order Log 

 SIP Self Inspection Program 

Audit of Customs Purchase Card Program (OIG-03-057) Page 2 
OIG Audit 

Report

The Department of the Treasury 

Office of Inspector General 

Audit of Customs Purchase Card Program (OIG-03-057) Page 3 

February 5, 2003 

Robert C. Bonner 

Commissioner 

U.S. Customs Service 

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

Department directed all bureaus to begin using purchase cards for 

small purchases. Customs has established a Purchase Card 

Program that is responsible for administrating and maintaining a 

Purchase Card System. Along with The Department’s Directive, 

Customs has issued it’s own Directive and a Purchase Card 

Manual. At the time of our audit, Customs had issued 1,318 cards 

to it’s 20,693 employees; 6.37 percent of the Customs workforce. 

This audit was included in our annual audit plan and was performed 

to determine whether government purchase cards are being used 

for their intended purposes and that Customs is taking advantage 

of the credit card rebate program. The audit included the review 

and analysis of purchase card processes and transactions during 

December 1, 2000 through December 1, 2001. We conducted our 

work from November 2001 through June 2002 at Customs 

Headquarters in Washington, D.C.; Customs Accounting Services 

Division in Indianapolis, Indiana; and Customs field offices in 

Savannah, Georgia; Charleston, South Carolina; Miami, Florida; and 

Tucson, Arizona. A more detailed description of our objective, 

scope, and methodology is provided in Appendix 1. 

Results in Brief

We found that, in general, the Customs Purchase Card Program 

was well planned and well administrated and that purchase cards 

are being used for their intended purpose. We reviewed 5 percent 

of a year’s transactions and did not find any instances of fraud or 

abuse in the sample transactions. We also found that Customs had
a system in place to ensure that payments to the contract vendor 

(Citibank) for the purchase card were on time so as to take 

advantage of the purchase card rebate. In addition, the Purchase

Card Program performs random audits on cardholders and the 

purchase card is an area in the Self-Inspection Program. Both of 

these functions contribute to the internal controls of the overall 

program. However, we found a few areas where the program 

could be improved. 

We found that Approving Officials were not always reviewing 

supporting documentation (i.e. receipts and invoices) for purchase 

card transactions in conjunction with the reconciliation statement. 

This occurred because Customs did not include a formal step for 

documentation review as part of the approving official’s 

responsibility in the purchase card process. 

We also found that cardholders and approving officials were not 

reconciling statements on time. To implement the Prompt Payment 

Act, Treasury Directive 76-04, Government Purchase Card 

Program, requires purchase card invoices be paid in full and in a 

timely manner prior to reconciliation. To ensure compliance with 

the Directive, Citibank’s invoice is processed through Asset 

Information Management System, Federal Financial System (AIMSFFS) 17 days after its receipt. As a result of this process, 

purchases were paid for even though the cardholder and approving 

official had not reviewed the monthly transactions. 

We made two recommendations to address the deficiencies we 

found. These recommendations included: 1) revising purchase 

card guidance regarding the approving official’s responsibilities, and 

2) timely reconciliation and approval of statement and establishing 

consequences when time frames are not met. 

We also included some observations on training for approving 

officials, questionable purchases, nontraditional awards, and 

separation of duties in the “Other Matters” section for your 

consideration. 

Audit of Customs Purchase Card Program (OIG-03-057) Page 4 
Background

Purchase cards are similar to personal credit cards, and are used to 

buy products and services with less paperwork involved than 

processing individual requisitions through the traditional 

procurement process. Credit card limits are issued to a cardholder 

with a transaction maximum and a maximum for aggregate 

monthly transactions. The Treasury Department mandated that the 

bureaus provide their employees the necessary training and written 

procedures. 

For the Treasury Department, guidance for bureaus/offices is given 

in Treasury Directive 76-04, Government Purchase Card Program. 

“This Directive sets forth policy for use of the Government 

purchase card for (a) making micro-purchases and; placing the task 

or delivery orders, as authorized in the underlying contract or 

agreement, without additional paperwork, and (b) use as a payment 

mechanism for procurements above the micro-purchase limit.” The 

Directive incorporates policy from procurement regulations in the 

Federal Acquisition Regulations (FAR); the Department of Treasury 

Acquisition Regulation (DTAR); the Javits-Wagner-O’Day (JWOD) 

Program; the small Business program; and, the environmental 

affirmative procurement program. The Directive requires purchase 

card invoices be paid in full and in a timely manner prior to 

reconciliation. In addition, the Directive gives overall guidance for 

the program and leaves the specific details of a Bureau’s program 

to the individual Bureau management, stating that Bureau 

procedures shall not be overly restrictive. 

In addition to the Treasury Directive, Customs has issued directive 

#5220-034A, dated April 21, 2000,for the Purchase Card Program. 

This directive gives more detailed guidance for the administration 

of the Customs Purchase Card Program as well as more guidance 

to cardholders. It also allows for purchases above the 

micro-purchase threshold of $2500. The majority of cardholders 

were given a single purchase limit of $2500, however, Customs 

has designated certain cardholders with authority to make larger 

purchases by supplying them with a higher single purchase limit. 

These cardholders received additional training. The Purchase Card 

Program personnel have also written a training manual that is used 

Audit of Customs Purchase Card Program (OIG-03-057) Page 5 
as guidance for the bureau’s Purchase Card Training Program and 

is issued to every cardholder. 

Finding and Recommendations

Finding 1 Internal Controls Need Improvement 

During our audit we identified two areas in internal controls that 

could be improved: 1) review of the monthly statements by the 

approving official and 2) timely reconciliation and approval by the 

cardholder and approving official. 

Review of Monthly Statements

We identified the review of cardholder transaction documentation 

as a critical control. In the locations we reviewed, most approving 

officials 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 

approving official was the principal means of assuring that 

transactions were valid, we found the approving officials were 

relying on the “online review” of the transaction statement in the 

purchase card system. We noted that several recent reports on 

purchase card programs issued by the General Accounting Office

and other Department OIG’s had similar findings in other 

Departments. 

One of the five components of internal controls listed in the

Standards for Internal Control in the Federal Government is control 

activities. Control activities are the policies, procedures, 

techniques, and mechanisms that enforce management directives. 

They help to ensure that actions are taken to address risks and 

occur at all levels and include activities such as approvals, 

authorizations, verifications, and reconciliations. Additionally, 

Customs Purchase Card Manual states that the Approving Official 

is responsible for ensuring that the statement and authorized 

purchases are made in accordance with the FAR and agency 

regulations, policies, and procedures. 

Audit of Customs Purchase Card Program (OIG-03-057) Page 6 
The guidance issued by Customs was general in nature and did not

contain specific language clarifying that a review of purchase card 

transactions must include reconciling the actual receipts and/or 

invoices to the statements and analyzing the charges to ensure 

that all transactions are legitimate. Guidance from the Department 

is also general in nature. Treasury Directive 76-04, Government 

Purchase Card Program, gives overall guidance for the program and 

leaves the specific details of a Bureau’s program to the individual 

Bureau management, stating that Bureau procedures shall not be 

overly restrictive. The Directive also states that approving officials 

are optional. Additionally, the approving official duties were 

considered “other duties as assigned” and were not considered 

when evaluations were given. As a consequence, approving 

officials did not attach a high priority to monitoring and reviewing 

monthly charge card purchases. 

The transaction review process is a critical element of the control 

environment. Accordingly, the bureau’s guidance must contain 

specific language that requires Approving Officials to reconcile

necessary invoices and receipts to the monthly reconciliation 

statements to ensure that all transactions are for legitimate 

government purposes. Adequate reviews are essential to detect 

and deter unauthorized purchases. The publication on purchase

cards issued by GSA, Blueprint for Success, states, “Government 

investigators tell us that in many instances, the approving official 

would have detected fraud earlier with proper review.” Without 

this key control, potentially fraudulent or improper transactions 

may not be identified promptly and the integrity of the Purchase

Card Program is compromised. 

Timely Reconciliation and Approval

Cardholders and approving officials were not reconciling 

transaction statements on time. According to the Purchase Card 

Manual, monthly statements are forwarded electronically to the 

cardholder through the automated PCS. Upon receipt, the 

cardholder has 10 calendar days to reconcile the charges and 

forward the statement to their approving official. The approving 

official then has 7 days to review the statement and give an 

approval. The statement is sent to AIMS-FFS for payment. 

Audit of Customs Purchase Card Program (OIG-03-057) Page 7 
AIMS-FFS receives the statement whether or not it was reconciled 

by the cardholder or approved by the approving official within the 

allotted 17 days. Payment is made to Citibank regardless of 

reconciliation or approval. 

To implement the Prompt Payment Act, Treasury Directive 76-04, 

Government Purchase Card Program, requires purchase card 

invoices be paid in full and in a timely manner prior to 

reconciliation. To comply with the Prompt Payment Act, after the 

allotted 17 days to the cardholder and approving official, payment 

is made to Citibank on the date that is most advantageous to the 

government. As a result of this process, purchases were paid for 

even though the cardholder and approving official had not reviewed 

the monthly transactions. 

The Purchase Card Program has an audit function that reviews 

delinquent cardholders and approving officials. Two reports are

available from the purchase card system (PCS). The first is the 

N report that lists all cardholders who have not reconciled their

statements within the 10-day timeframe. The second is the 

X report that lists all cardholders whose approving officials have 

not approved their statements within the 7-day timeframe. We 

requested these reports for our scope period and performed an 

analysis to determine the extent of the delinquencies. We 

identified 148 cardholders who failed to reconcile their statements 

more than one time and 52 approving officials who failed to 

approve statements more than one time. We quantified our results 

for one month out of the twelve using the statement ending 

January 8, 2001 and determined that Customs paid $330,483 for 

charges not reconciled by cardholders and paid $157,779 for 

charges not approved by approving officials. 

We determined that there are no procedures in place to ensure that 

cardholders and approving officials are held accountable when the 

required timeframes for reconciliation and approval of transaction 

statements are not met. Even though these reports were 

generated and reviews were done, the results are not tracked and 

management does not take an active role in their resolution. 

Audit of Customs Purchase Card Program (OIG-03-057) Page 8 
It is important for cardholders to reconcile their monthly statements 

and for approving officials to approve them within the required time 

frame to ensure their accuracy and to detect any improper 

purchases. Timely reviews and approvals are essential in ensuring 

that all transactions are legitimate government purchases. 

Recommendations

1. The Commissioner of Customs should ensure that the Purchase 

Card Program amend the bureau’s guidance to contain specific 

language that requires Approving Officials to reconcile 

necessary invoices and receipts to the monthly statements to 

ensure that all transactions are legitimate government 

purchases. 

Management Comment. Customs concurred and has set a 

completion date of June 2003 to do the following: An 

addendum will be made to the Purchase Card Manual requiring 

Approving Officials to reconcile necessary invoices and receipts

to the monthly statements to ensure that all transactions are 

legitimate government purchases. 

OIG Comment. We consider this recommendation to have a 

management decision with a target completion date of 

June 2003. 

2. The Commissioner of Customs should ensure that reconciliation 

and approval is performed timely and determines what actions 

should be taken when cardholders and approving officials do 

not adhere to the timeframes mandated in the purchase card 

process. 

Management Comment. Customs concurred and has set a 

completion date of September 30, 2003 to do the following: A 

message will be sent to all cardholders and approving officials 

reminding them of their responsibility to promptly reconcile and 

approve monthly statements. In addition, they will be advised 

that failure to promptly reconcile and approve monthly 

statements may result in suspension or removal from the 

program. Further, Customs will initiate a follow-up review to 

determine compliance with these requirements. 

Audit of Customs Purchase Card Program (OIG-03-057) Page 9 
OIG Comment. We consider this recommendation to have a 

management decision with a target completion date of 

September 30, 2003. In order to provide better oversight, we 

would further suggest that in addition to the initial compliance 

review, Customs conduct regular compliance reviews in 

subsequent years.

OTHER MATTERS

Training For Approving Officials

The approving official is a critical control in the Purchase Card 

Program. Currently, approving officials for cardholders with a 

credit limit below $2500 are not required to receive training; 

training is voluntary. However, those approving officials for 

cardholders with a credit limit above $2500 are required to attend 

the Purchase Card Program’s training. We believe that training 

should be mandatory for all approving officials. 

Questionable Purchases

Through our transaction testing we identified purchases that might 

be viewed as questionable, such as antique globes and a cordless 

mouse. Although we found supporting documentation for the

transactions, the items purchased did not easily fit within generic 

government-wide guidelines on purchases that are acceptable for 

the purchase card program. They might tend to raise questions 

about their reasonableness at first glance and could be subject to 

criticism. Customs and the approving officials need to be mindful 

in reviewing these purchases and the possible impact they could 

have if made public. 

Nontraditional Awards

During the course of our review a peripheral issue was identified. 

Customs authorized non-traditional awards in a memorandum titled 

“Expansion of the Honorary Awards Program Policy to Include 

Non-traditional Awards”, dated August 4, 1997, File: 

PER-13-05:OF:FM:FP GPR. The memorandum states that the dollar 

limitation for each honorary award may not exceed $100 per item 

Audit of Customs Purchase Card Program (OIG-03-057) Page 10 
per individual, and $400 per employee per calendar year from any 

and all Customs sources. Most all non-traditional awards were 

bought with the purchase card. Whenever we questioned the

cardholder or approving official about a non-traditional award, the 

response was “we obtained a pre-approval number.” After 

researching the issue, we found that the Purchase Card Program 

requires the cardholder to call them for a pre-approval number for 

any non-traditional award purchase. The cardholder is issued a 

pre-approval number by one of four people on the Purchase Card 

Program staff. However, these are system-generated numbers and 

although a record is kept within the Purchase Card System, no log 

is kept of the phone calls received requesting pre-approval and the 

numbers are not used to monitor or track the awards issued. The 

pre-approval process gives the appearance that there is some type 

of monitoring of the non-traditional awards program. 

Most of the Customs offices we visited purchased non-traditional 

awards such as gift certificates to restaurants and movie theatres 

in quantity to keep on hand. The purchase card program does not 

track who receives the award or when the award is presented. In 

some instances, management at the site actively tracked the 

awards, but some did not. During our review, we discovered one 

employee had received an award that exceeded the per-item perindividual limit that is stated in Customs guidelines. 

As part of our Audit analysis we requested a listing of all 

pre-approval numbers issued for our scope. We determined that 

during December 01, 2000 through December 01, 2001 there 

were 935 pre-approved transactions for nontraditional awards that 

totaled $383,904. These transactions represent 1 percent of the 

total transactions processed during our scope. 

If non-traditional awards are not being monitored for individuals on 

an annual basis, there is a possibility of exceeding the per item per 

individual and per calendar year limits. Customs should develop a 

system to monitor and track these awards. In addition, we feel 

that there is the potential for abuse since some of the awards are 

bought in quantity – “to have on hand for employees.” This is an 

awards program issue and the individual supervisors should monitor 

this program rather than rely on the purchase card program

personnel. 

Audit of Customs Purchase Card Program (OIG-03-057) Page 11 
Separation Of Duties

During our review, we determined there were numerous 

transactions where the purchase cardholder ordered, received and 

paid for items. We found that the lack of sufficient personnel 

sometimes played a part in this scenario. 

According to the Standards for Internal Control in the Federal 

Government, key duties and responsibilities need to be divided or 

segregated among different people to reduce the risk of error or 

fraud. This should include separating the responsibilities for 

authorizing transactions, processing and recording them, reviewing 

the transactions, and handling any related assets. No one 

individual should control all key aspects of a transaction or event. 

Customs guidance did not highlight the importance of this 

separation of duties. The focus of the Purchase Card Manual was 

on the purchasing of goods, not the receiving of goods. In 

addition, the purchasing function was often a collateral duty and 

management did not emphasize the separation of duties. 

When separation of duties does not exist there is a risk that fraud 

and abuse would go undetected. When one individual controls the 

key aspects of a process it creates an environment for error and 

fraud. Increased use of the program without a sound control 

environment could lead to waste and abuse. While Customs 

cannot eliminate waste and abuse, they are responsible for 

instituting a strong control environment to limit it. 

Audit of Customs Purchase Card Program (OIG-03-057) Page 12 
Audit of Customs Purchase Card Program (OIG-03-057) Page 13 
Appendix 1 

Objective, Scope and Methodology 

The objective of this audit was to determine whether government 

purchase cards are being used for their intended purposes and that 

Customs is taking advantage of the credit card rebate program. 

We designed this project as a multi-bureau audit and began with 

Customs. To accomplish our objective, we reviewed applicable 

laws, regulations, directives, manuals and records maintained at 

Customs Headquarters, Customs Accounting Services Division, and 

various Customs Managements Centers throughout the country. 

We obtained access to Citibank’s data through CitiDirect and 

tested transactions. We relied on the integrity of Citibank’s 

systems throughout this audit as well as the integrity of Customs 

Purchase Card System. 

Our universe consisted of all Customs Purchase Card Transactions 

available thru CitiDirect from 12/01/00 thru 12/01/01. The scope 

consisted of 109,289 transactions that totaled $32,312,484. We 

judgmentally selected our samples based on the amount of charge 

card activity using the number of transactions and the dollar 

volume. We also used Customs management reports to aid us in 

our sample selection. Once we selected individual cardholders at a 

location, we expanded our audit work to include other Customs 

offices within the immediate vicinity. Our work was designed to 

look for fraud and illegal or abusive transactions. Through our 

transaction testing we looked at 5 percent of the dollar value and 

6.5 percent of the total transactions. Because of the testing 

methods adopted, we could not project the results of our findings. 

In our work, data mining involved the manual or electronic sorting 

of purchase card data to identify and select for further follow-up 

and analysis transactions with unusual or questionable 

characteristics. We also analyzed purchases made with 

convenience checks. In addition, the Merchant Category Codes 

(MCC) were used to identify transactions with certain vendors that 

had a more likely chance of selling items that would be 

unauthorized or that would be personal items. We verified the 

validity of these transactions by contacting the corresponding 

Approving Officials and obtaining the required receipt 

documentation. The underlying documentation for each selected 

transaction was reviewed. Finally, we physically inventoried 

certain purchases at each location we visited to determine whether 

Audit of Customs Purchase Card Program (OIG-03-057) Page 14 
Appendix 1 

Objective, Scope and Methodology 

goods and services were received and used for government 

purposes. 

We conducted out audit work from November 2001 through

June 2002 in accordance with generally accepted U.S. government 

auditing standards. 

Audit of Customs Purchase Card Program (OIG-03-057) Page 15 
Appendix 2 

Management Comments 

Audit of Customs Purchase Card Program (OIG-03-057) Page 16 
Appendix 2 

Management Comments 

Audit of Customs Purchase Card Program (OIG-03-057) Page 17 
Appendix 3 

Major Contributors To This Report

George W. Tabb, Regional Inspector General for Audit (Southern) 

Patti Gleason, Audit Manger, (Miami) 

Patricia A. Alcaniz, Auditor-In-Charge 

Danny M. Helton, Auditor 

Alex Hernandez, Auditor 

Audit of Customs Purchase Card Program (OIG-03-057) Page 18 
Appendix 4 

Report Distribution 

The Department of the Treasury

Office of Strategic Planning and Evaluations 

Office of Accounting and Internal Control

U. S. Customs Service

Assistant Commissioner, Office of Field Operations 

Director, Evaluations Oversight, Office of Planning 

Director, Office of Management Inspection 

Office of Management and Budget

OIG Budget Examiner 

Audit of Customs Purchase Card Program (OIG-03-057) Page 19