a

GAO

United States General Accounting Office

Report to Congressional Requesters

June 2002 PURCHASE CARDS

Control Weaknesses 

Leave Army 

Vulnerable to Fraud, 

Waste, and Abuse

GAO-02-732
Page i GAO-02-732 Army Purchase Card Control

Contents

Letter 1

Results in Brief 3

Background 7

Weaknesses in Overall Control Environment for Army Purchase 

Card Program 10

Critical Internal Control Activities and Techniques Not Effectively 

Implemented 27

Potentially Fraudulent, Improper, and Abusive or Questionable 

Transactions 43

Conclusions 59

Recommendations for Executive Action 59

Agency Comments and Our Evaluation 62

Appendixes

Appendix I: Scope and Methodology 65

Appendix II: Overview of Army Purchase Card Program 69

Appendix III: Comments from the Department of Defense 74

Appendix IV: GAO Contacts and Staff Acknowledgments 80

Tables Table 1: Program Coordinators’ Span of Control 24

Table 2: Internal Control Activity Statistical Testing Failure 

 Rates 28

Table 3: Advance Approval Failure Rates 30

Table 4: Independent Receiving Failure Rates 32

Table 5: Approving Official Review Failure Rates 36

Table 6: Existence of Invoice Failure Rates 39

Table 7: Property Items Not Recorded in Property Books 41

Table 8: Examples of Potentially Fraudulent Army Purchase Card

 Transactions 44

Table 9: Examples of Purchases Intended for Personal Use 49

Table 10: Examples of Abusive or Questionable Purchases 56

Table 11: Major Commands and Installations Audited 65

Table 12: Number and Value of Army Transactions in Fiscal Year

 2001 69

Figures Figure 1: Army Purchase Card Program Management Structure 9

Figure 2: Army Purchase Card Processes 71
Contents

Page ii GAO-02-732 Army Purchase Card Control

Abbreviations

DOD Department of Defense

JWOD Javits-Wagner-O’Day Act
Page 1 GAO-02-732 Army Purchase Card Control

United States General Accounting Office

Washington, D.C. 20548

A

June 27, 2002 Letr

The Honorable Charles E. Grassley

Ranking Minority Member

Committee on Finance

United States Senate 

The Honorable Stephen Horn

Chairman 

The Honorable Janice D. Schakowsky

Ranking Minority Member

Subcommittee on Government Efficiency, Financial Management

and Intergovernmental Relations

Committee on Government Reform

House of Representatives

The Department of Defense (DOD) is promoting departmentwide use of 

purchase cards for obtaining goods and services. It reported that for the 

year ended September 30, 2001, about 230,000 cardholders used purchase 

cards to make about 10.7 million transactions at a cost of over $6.1 billion. 

Purchase cards are to be used exclusively for government-related 

purchases. Purchase card transactions include acquisitions at or below the 

$2,500 micropurchase threshold, commercial training requests valued at or 

below $25,000, and payments on contracts. The use of purchase cards has 

dramatically increased in past years as agencies have sought to eliminate 

the lengthy process and paperwork long associated with making small 

purchases. The benefits of using purchase cards versus traditional 

contracting and payment processes are lower transaction processing costs 

and less “red tape” for both the government and the vendor community. 
Page 2 GAO-02-732 Army Purchase Card Control

We support the use of a well-controlled purchase card program to 

streamline the government’s acquisition processes. However, it is 

important that agencies have adequate internal control in place to protect 

the government from fraud, waste, and abuse. In July 2001 and March 

2002, we testified on significant breakdowns in internal control over 

purchase card transactions at two Navy sites in San Diego, California.1

 This 

work identified a weak internal control environment; ineffective internal 

control; and potentially fraudulent,2

 improper, and abusive purchases.

As a result of our work at the two Navy sites and continuing concern about 

fraud, waste, and abuse in DOD’s purchase card program, you requested 

that we expand our audits of purchase card controls. As the initial part of 

this requested work, this report focuses on the Army, which has the largest 

purchase card program in DOD. In fiscal year 2001, the Army had about 

109,000 cardholders, 4.4 million transactions, and $2.4 billion in purchases. 

We plan to report to you separately on the results of our audits of the Navy 

and Air Force purchase card programs.

The objective of our audit of the Army’s purchase card program was to 

assess the adequacy of internal control over the authorization, purchase, 

and payment of purchase card transactions during fiscal year 2001. 

Specifically, we addressed whether (1) the Army’s overall control 

environment and management of the purchase card program were 

effective, (2) the Army’s key internal control activities operated effectively 

and provide reasonable assurance that purchase cards were used 

appropriately, and (3) indications existed of potentially fraudulent, 

improper, and abusive and questionable transactions. We audited the 

Army’s internal control policies, procedures, and activities at five major 

commands that account for about 66 percent of total purchases and 62 

percent of total transactions. At one installation in each of the commands, 

we tested a statistical sample of purchase card transactions and conducted 

other audit work to evaluate the design and implementation of key internal 

control procedures and activities. The results of our review of the 

1

U.S. General Accounting Office, Purchase Cards: Control Weaknesses Leave Two Navy 

Units Vulnerable to Fraud and Abuse, GAO-01-995T (Washington, D.C.: July 30, 2001) and 

Purchase Cards: Continued Control Weaknesses Leave Two Navy Units Vulnerable to 

Fraud and Abuse, GAO-02-506T (Washington, D.C.: Mar. 13, 2002).

2

For this report, we limit the use of the term “fraudulent” to describe those instances in 

which someone has been convicted, or punished under the Uniform Code of Military 

Justice, of fraudulent activity. In all other circumstances we use the phrase “potentially 

fraudulent.”
Page 3 GAO-02-732 Army Purchase Card Control

transactions comprising the statistical samples can only be projected to the 

individual installation at which we performed the testing and cannot be 

used to project to the command level or to the Army as a whole. The 

cumulative results of all our work offer significant perspective on the 

adequacy of the design and implementation of purchase card program 

internal control within the Army. 

We also looked for indications of potentially fraudulent, improper, and 

abusive or questionable purchases as part of our statistical sampling and 

through nonrepresentative selections of transactions using data mining of 

fiscal year 2001 transactions. Our data mining included identifying 

transactions with certain vendors that had a more likely chance of selling 

items that would be unauthorized or that would be personal items. 

Because of the large number of transactions that met these criteria, we did 

not look at all potential abuses of the purchase card. While we identified 

some potentially fraudulent, improper, and abusive or questionable 

purchases, our work was not designed to identify, and we cannot 

determine, the extent of potentially fraudulent, improper, and abusive or 

questionable purchases. See appendix I for further details on our scope 

and methodology. 

We requested comments from the Secretary of Defense or his designee on a 

draft of this report. We received comments from the Acting Director of the 

Army Contracting Agency dated June 17, 2002, and have reprinted those 

comments in this report. We conducted our audit work from June 2001 

through April 2002 in accordance with generally accepted government 

auditing standards, and we performed our investigative work in 

accordance with standards prescribed by the President’s Council on 

Integrity and Efficiency, as adapted for GAO’s work. 

Results in Brief The purchase card program offers significant benefits; however, a weak 

overall control environment and breakdowns in key internal control 

activities leave the Army vulnerable to potentially fraudulent, improper, 

and abusive purchases. Our work at five Army major commands and one 

installation in each of the commands showed that the Army has not 

established an effective internal control environment. As the use of 

purchase cards has greatly expanded, Army management has not 

emphasized internal control activities that can provide reasonable 

assurance that the individual transactions are for authorized purposes or 

that they adhere to legal and regulatory requirements. At the individual 

transaction level, we identified a substantial number of purchases for 
Page 4 GAO-02-732 Army Purchase Card Control

which cardholders and approving officials had not adhered to important 

internal control activities and that were not in accordance with valid 

requirements, policies, and procedures. 

A major contributor to the weak overall control environment and weak 

program management is informal and incomplete operating procedures. 

While existing governmentwide, DOD-wide, and Army-wide procurement 

regulations are the foundation for the Army purchase card program, the 

Army has not issued servicewide regulations or operating procedures, but 

relies on ad hoc memorandums and other informal guidance. This informal 

guidance does not provide the purchase card program with consistent, 

comprehensive policies and procedures to guide those implementing the 

program. For example, the scope of responsibilities and specific duties of 

installation-level program coordinators, the primary focal points for 

managing the purchase card program, are not addressed in Army guidance. 

The major commands and installations we audited had established policies 

and procedures; however, these policies and procedures were inconsistent 

between commands and did not provide adequate guidance on key control 

environment issues. 

Another major contributor to the weak overall control environment is 

ineffective oversight of the purchase card program. The Army purchase 

card program did not have the infrastructure—guidance and human 

capital—needed to implement the oversight activities that are essential for 

effective internal control. Army and major command management levels 

did not conduct meaningful oversight activities of their own and did not 

provide direction to installation-level program coordinators on needed 

oversight activities. At the local installation level, the sporadic oversight 

activities performed did not provide reasonable assurance that internal 

control procedures and activities were followed. For example, program 

coordinators did not routinely perform annual reviews of approving 

officials’ activities as required, and the reviews that were made were 

seldom documented. Program coordinators told us that they did not have 

sufficient human capital to conduct required annual reviews or to define 

and conduct other needed oversight activities. In addition, approving 

officials’ activities usually were considered “other duties as assigned” and 

were not the primary duties on which the officials were evaluated and 

rewarded. They generally said that many other duties were of a higher 

priority than monitoring purchases and reviewing monthly cardholder 

statements.
Page 5 GAO-02-732 Army Purchase Card Control

We identified a significant breakdown in key internal control activities. 

Control activities tested were (1) advance approval of purchases, 

(2) receiving of goods and services by someone other than cardholders, 

(3) approving officials reviewing cardholders’ monthly reconciled bills and 

supporting documentation, and (4) whether transaction files contained 

invoices that supported the transactions. Our statistical sample results at 

the five installations showed significant failure rates for all four tested 

control activities. The high failure rate—40 to 86 percent—for approving 

official review is of particular concern because it is perhaps the most 

important control activity. 

The weaknesses we identified in the control environment and the 

breakdown in specific internal control activities had specific 

consequences—potentially fraudulent, improper, and abusive and 

questionable transactions were not being prevented or identified promptly. 

Potentially fraudulent transactions are (1) cardholder purchases that are 

intended for personal benefit, (2) unauthorized transactions by vendors, or 

(3) other purchases using compromised accounts. At three of the five 

installations, we found that potentially fraudulent transactions went 

undetected because of breakdowns in internal control. For example, 

Eisenhower Army Medical Center, at Fort Gordon, Augusta, Georgia, had 

two fraud cases that were not identified by appropriate approving official 

review. Each case involved tens of thousands of dollars, with cardholders 

purchasing jewelry, clothing, and other items for their personal use. 

Another fraud case under investigation at the end of our fieldwork involved 

purchases of over $100,000 of electronic equipment, computers, and other 

items. The actions of the cardholder, approving official, and other service 

members were being investigated. In our Army-wide data mining,3

potentially fraudulent transactions include the purchase of escort services 

and the use of a compromised account to purchase athletic shoes. 

We also identified a number of improper transactions—meaning those in 

which the purchase was intended for government use but was not 

permitted by law, regulation, or DOD policy—involving clothing, food, or 

other items. For example, at the Soldier, Biological and Chemical 

Command – Natick, in Natick, Massachusetts, the purchase of L.L. Bean 

Gore-Tex parkas for 10 civilian employees at a cost of $2,400 was not an 

3

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. 
Page 6 GAO-02-732 Army Purchase Card Control

appropriate use of federal funds because the parkas were not treated solely 

as government property available only for official use. Other improper 

purchases included meals, fruit baskets, luggage, and services. We also 

identified as improper numerous purchases in which cardholders made a 

substantial number of purchases of similar items (split purchases) to 

circumvent the legislatively mandated micropurchase limit of $2,500 for a 

single purchase. Using contracts for such purchases would comply with 

procurement requirements and could result in lower prices for the 

purchased items. 

We identified abusive and questionable transactions at each of the five 

installations we audited as well as in our Army-wide data mining. Abusive 

transactions are those that were authorized, but the items purchased were 

at an excessive cost or for a questionable government need, or both. 

Questionable transactions were those that cardholders purchased items for 

which there was not a reasonable and/or documented justification. 

Examples of abusive and/or questionable purchases included sunglasses, 

fine china, cigars, wine, and a $2,250 tree. The purchase card transaction 

files we examined generally did not include explanations or advance 

approvals that would justify these types of purchases and permit a 

determination that the purchases were not improper or abusive. 

Explanations and advance approvals for purchases of potentially 

questionable items could increase visibility and oversight of such 

purchases and reduce the potential for abusive and wasteful spending. 

During our audit, the commands we audited began to address many of the 

deficiencies we identified and implement many of the recommendations 

applicable at their levels. In addition, DOD established a task force to 

develop recommendations to improve procedures. 

This report contains recommendations to the Army to improve the overall 

control environment for the Army’s purchase card program; to strengthen 

key internal control activities; and to increase attention to preventing 

potentially fraudulent, improper, and abusive and questionable 

transactions. We also recommend that the task force assess the DOD-wide 

applicability of the recommendations addressed to the Army. In written 

comments on a draft of this report, DOD concurred with our 

recommendations and described actions completed, under way, or planned 

to implement them. Although it concurred with our recommendation for 

an Army-wide standard operating procedure directing the implementation 

of specific internal control activities, DOD took exception to broad 

application of two of the five recommended activities—advance approval 
Page 7 GAO-02-732 Army Purchase Card Control

and independent receiving. We agree that not all purchases require 

advance approval and independent receiving. However, we continue to 

believe these are important control activities and that the Army-wide 

standard operating procedure should (1) discuss the criteria for 

determining when these activities are applicable and (2) articulate 

guidelines for implementing them. 

Background The Army’s purchase card program is part of the governmentwide 

Commercial Purchase Card Program established to simplify federal agency 

acquisition processes by providing a low-cost, efficient vehicle for 

obtaining goods and services directly from vendors. DOD has mandated 

the use of the purchase card for all purchases at or below $2,500 and has 

authorized the use of the card to pay for specified larger purchases. DOD 

has had significant growth in the program since its inception and estimates 

that in fiscal year 2001 about 95 percent of its transactions of $2,500 or less 

were made by purchase card. 

The purpose of the program was to simplify the process of making small 

purchases. It accomplished this goal by allowing cardholders to make 

micropurchases of $2,500 or less—$25,000 or less for training—without 

having to execute contracts. The government purchase card can also be 

used for larger transactions, but they still require contracts. In these cases, 

the Army often refers to the card as a payment card because it pays for an 

acquisition made under a legally executed contract. 

The Army uses a combination of governmentwide, DOD, and Army 

guidance as the policy and procedural foundation for its purchase card 

program. The Army purchase card program operates under a 

governmentwide General Services Administration purchase card contract, 

as do the purchase card programs of all federal agencies. In addition, 

government acquisition laws and regulations, such as the Federal 

Acquisition Regulation, provide overall governmentwide guidance. DOD 

and the Army have promulgated supplements to these regulations. 

The Assistant Secretary of Defense for Acquisition, Technology, and 

Logistics, in cooperation with the Under Secretary of Defense 

(Comptroller), has overall responsibility for DOD’s purchase card program. 

The DOD Joint Purchase Card Program Management Office, in the office of 

the Assistant Secretary of the Army for Acquisition Logistics and 

Technology, is responsible for overseeing DOD’s program. The Army 

agency program coordinator, within the joint office, has oversight over the 
Page 8 GAO-02-732 Army Purchase Card Control

Army’s purchase card program. However, primary management 

responsibility for the purchase card program lies with the contracting 

offices in the major commands and local installations. Figure 1 depicts the 

Army purchase card program management hierarchy as it was during our 

audit work. For the major commands, the figure shows the number of 

installation program coordinators within the command. For the five 

installations we audited, the figure shows the number of approving officials 

and cardholders at each installation.

On May 1, 2002, the Army created an Office of the Deputy Assistant 

Secretary of the Army (Procurement) and the U.S. Army Contracting 

Agency. The responsibility for the Army purchase card program and the 

DOD Purchase Card Joint Program Management Office will be moved to 

the newly created office. This new Deputy Assistant Secretary’s office will 

be in a “transitional” status until October 1, 2002. 
Page 9 GAO-02-732 Army Purchase Card Control

Figure 1: Army Purchase Card Program Management Structure 

Source: GAO analysis of Army purchase card program organization.

At the installation, personnel in three positions—program coordinator, 

cardholder, and approving official4

—are collectively responsible for 

providing reasonable assurance that purchase card transactions are 

appropriate and meet a valid government need. The installation program 

coordinator, typically a full-time position under the direction of the director 

of the contracting office, is responsible for the day-to-day management, 

administration, and oversight of the program. In our work, we noted that 

program coordinators develop local standard operating procedures, issue 

and cancel cards, train cardholders and approving officials, and coordinate 

Assistant Secretary of the

Army for Acquisition

Logistics and Technology

DOD Purchase

Card Program

Management Office

Army Agency

Program Coodinator

Materiel Command

Installation program

coordinators - 47

Training Command

Installation program

coordinators - 17

Forces Command

Installation program

coordinators - 13

National Guard Bureau

Installation program

coordinators - 55

Medical Command

Installation program

coordinators - 12

Soldier, Biological

and Chemical 

Command - Natick

Approving officials - 87

Cardholders - 208

Fort Benning

Approving officials - 162

Cardholders - 450

Fort Hood

Approving officials - 321

Cardholders - 1,242

Texas National

Guard

Approving officials - 26

Cardholders - 437

Eisenhower Army

Medical Center

Approving officials - 162

Cardholders - 540

4

Approving officials are also referred to as either billing officials or certifying officials. 

These three terms are often used interchangeably.
Page 10 GAO-02-732 Army Purchase Card Control

with other Army units and the card-issuing bank. Cardholders—soldiers 

and civilian personnel—are to make purchases, maintain supporting 

documentation, and reconcile their monthly statements. Approving 

officials, who typically are responsible for more than one cardholder, are to 

review cardholders’ transactions and the cardholders’ reconciled 

statements and certify the official consolidated bill for payment. 

Approving officials receive an official bill that consolidates their 

cardholders’ purchases. Appendix II provides additional details on the 

Army purchase card program. 

Weaknesses in Overall 

Control Environment 

for Army Purchase 

Card Program

Weaknesses in the internal control environment for the Army purchase 

card program at the five major commands and five installations we audited 

contributed to internal control breakdowns and potentially fraudulent, 

improper, and abusive purchases. The importance of the role of 

management in establishing a positive internal control environment cannot 

be overstated. GAO’s Standards for Internal Control discusses 

management’s key role in demonstrating and maintaining an organization’s 

integrity and ethical values, especially in setting and maintaining the 

organization’s ethical tone, providing guidance for proper behavior, and 

removing temptations for unethical behavior.

Army purchase card management has not encouraged a strong internal 

control environment. It has not focused on ensuring an adequate 

environment for a greatly expanding program. Instead, Army purchase 

card management focused significant attention on maximizing the use of 

the purchase card for small purchases and on paying bills quickly to reduce 

delinquent payments, and it developed performance measures and goals 

for them. However, purchase card management has not focused equal 

Mangement and employees should establish and maintain an

environment throughout the organization that sets a positive and

supportive attitude toward internal control and conscientious

management. A positive control environment is the foundation for all

other standards. It provides discipline and structure as well as the

climate which influences the quality of internal control.

GAO’s Standards for Internal Control in the Federal Government

(GAO/AIMD-00-21.3.1, November 1999)
Page 11 GAO-02-732 Army Purchase Card Control

attention on internal control, and it has not developed performance 

measures to assess the adequacy of internal control activities or set goals 

for them. As a result, our audit identified a weak internal control 

environment characterized by a lack of (1) adequate operating procedures 

specifying needed program management, oversight, and internal control 

activities and (2) oversight by all management levels over the program’s 

implementation at the installation level. These weaknesses are 

symptomatic of a purchase card infrastructure that is insufficiently robust 

to build and sustain a strong internal control environment. As discussed in 

the next section, strong internal control activities are needed to effectively 

manage the Army’s purchase card program and provide reasonable 

assurance that the billions of dollars spent under the program adhere to 

legal and regulatory requirements. Developing performance measures and 

setting performance goals are fundamental to implementing and 

maintaining strong internal control activities. 

Inadequate Program 

Operating Procedures

The Army operates its purchase card program without a specific 

servicewide regulation or standard operating procedures to govern 

purchase card activities throughout the agency. Instead, the Army relies on 

memorandums issued by the DOD and Army purchase card program 

offices and procedures issued by major commands and installations. Our 

assessment of the existing Army guidance is that it does not adequately 

identify and direct the implementation of needed actions and control 

activities. 

The memorandums issued by the DOD and Army purchase card program 

offices do not provide the Army purchase card program with a 

comprehensive set of policies and operating procedures that identify the 

actions and control activities needed to manage the program. Instead, they 

address such topics as cash management of certified purchase card 

invoices or suggest best practices, including discussions of the importance 

Appropriate policies, procedures, techniques, and mechanisms exist

with respect to each of the agency’s activities .... Management has

identified the actions and control activities needed to address the

risks and directed their implementation. GAO’s Internal Control

Standards: Internal Control Management and Evaluation Tool

(GAO/AIMD-01-1008G, August 2001)
Page 12 GAO-02-732 Army Purchase Card Control

of internal control activities. Also, the memorandums often only request 

that Army commanding officers implement a suggested action; they do not 

direct that specific actions be taken within specific time frames. Such 

requests might not achieve the desired results. For example, an August 3, 

2001, Office of the Assistant Secretary of the Army for Acquisition Logistics 

and Technology memorandum requested Army units’ assistance and 

support in implementing the DOD program office’s earlier request to assess 

the adequacy of purchase card program human capital resources. Because 

they are only requests, they do not have to result in action. For example, in 

the example above, we found no evidence that the major commands or 

installations had made an assessment of their overall purchase card human 

capital resource needs. 

Without agencywide operating procedures, the Army has relied on its major 

command and local installation program coordinators to establish 

purchase card policies and procedures to guide approving officials, 

cardholders, and others involved in the purchase card program as they 

implement the program. The standard operating procedures for the major 

commands and installations we audited varied widely, and they were not 

adequate. For example, the Army Materiel Command does not have 

standard operating procedures, but uses a Web-based tutorial that is part of 

required training to guide cardholders and approving officials. A training 

tutorial does not carry the force of a regulation or a standard operating 

procedure. Consequently, installation program coordinators, such as at the 

Soldier, Biological and Chemical Command - Natick, developed standard 

operating procedures that set program implementation standards and 

requirements at the installation. 

At the installation level, the contrast between three installations illustrates 

the differences. As discussed above, the Soldier, Biological and Chemical 

Command – Natick had a detailed operating procedure that was revised 

during our work there to add further detailed instructions. Fort Benning, 

in Columbus, Georgia, did not have installation-level operating procedures. 

At Fort Hood, in Killeen, Texas, the installation-level procedures were 

supplemented with detailed procedures developed by the military units, for 

example, battalions and brigades, located there. Thus, the procedures at 

these three installations differed significantly and within Fort Hood 

procedures were different. Collectively, the Army policy memorandums 

and the major command and installation-level operating procedures do not 

adequately address key control environment issues. Among the more 

important issues not adequately addressed are 
Page 13 GAO-02-732 Army Purchase Card Control

• responsibilities and duties of installation-level program coordinators, 

• controls over the issuance and assessment of ongoing need for cards,

• appropriate span of control for approving officials, and

• appropriate cardholder spending limits.

In addition to the above control environment issues, we identified 

weaknesses in the individual control activities we tested, which we discuss 

in the next section of this report. 

Responsibilities and Duties of 

Installation-Level Program 

Coordinators

Army guidance has not addressed the scope of responsibilities and specific 

duties of installation-level program coordinators, although they are the 

primary focal point for managing the purchase card program and generally 

spend all their time on the purchase card program. The importance of 

these program coordinators to the purchase card program cannot be 

overstated. During our work we noted that program coordinators develop 

and enforce operating procedures, establish and cancel cardholder and 

approving official accounts, train cardholders and approving officials, 

interact with the bank, and field myriad questions about the program from 

both cardholders and approving officials. Yet, the Army does not have 

guidance on how to do these activities, and it does not provide program 

coordinators with guidance or assistance in developing oversight activities 

to monitor how well their programs are functioning. Program coordinators 

told us that they did not get formal training in what their duties are and 

how they should be done. They said they had to do a lot of on-the-job 

learning and they called other program coordinators for advice.

Controls over the Issuance and 

Assessment of Ongoing Need for 

Cards

Little guidance exists to assist program coordinators and unit managers in 

selecting who should be issued a purchase card. Carefully controlling the 

issuance of cards and continually reassessing the need and justification for 

outstanding cards are important issues in controlling the government’s risk 

in the purchase card program. At the installations we audited, the 

operating procedures usually specified that unit managers, after deciding 

who should be a cardholder and who should be an approving official, 

request the installation program coordinator to process the appointments. 

Yet, we found little guidance at any level that provided criteria to these 

officials for determining how many cards a unit should have or who should 

have them. The November 2001 operating procedure at the Soldier, 

Biological and Chemical Command - Natick requires unit directors to 

provide written justification for the selection of a cardholder or approving 
Page 14 GAO-02-732 Army Purchase Card Control

official. However, without guidance from the Army, the command did not 

establish criteria to guide the directors’ decisions. In no case did we 

identify guidance that required cardholders to have a continuing need to 

make procurements for an office or organization, and none of the guidance 

discussed the need to reassess the ongoing need for outstanding cards. 

Span of Control for Approving 

Officials

Standard operating procedures at the major commands and installations 

we audited do not adequately discuss the span of control that is 

appropriate for approving officials that could provide a reasonable 

assurance that they can effectively perform their responsibilities. The 

training program for Army Materiel Command and the standard procedures 

at the Soldier, Biological and Chemical Command – Natick discuss that an 

approving official should have only as many cardholders for whom he/she 

can review all monthly transactions. Approving officials who have more 

cardholders than they can effectively supervise is symptomatic of a weak 

control environment. The Army did not provide criteria for approving 

officials’ span of control until July 2001,5

 just prior to our testimony on the 

purchase card program at two Navy installations.6

 The July guidance 

suggested a span of control of five to seven cardholders. However, this 

guidance had not been promulgated in major command or installation 

guidance as of the end of our fieldwork. 

Cardholder Spending Limits Policies and procedures that addressed controlling cardholders’ spending 

limits were inadequate. Unit managers and approving officials coordinate 

with the program coordinator to set both transaction and monthly spending 

limits for cardholders. However, we found no policy guidance or 

procedures that provided criteria to guide them in making these decisions, 

except a recitation of the micropurchase spending limits, until an August 

13, 2001, memorandum from the Director of Defense Procurement. This 

memorandum, which was in response to congressional hearings on our 

Navy testimony,7

 noted that not every cardholder needs to have the 

maximum transaction or monthly limit and that reasonable limits based on 

what the person needs to buy should be set. We found that individual 

transaction limits were generally set at the micropurchase maximum of 

5

Memorandum from Director, Purchase Card Joint Program Management Office, to assistant 

secretaries of defense agencies. Subject: Internal and Management Controls – DOD 

Purchase Card Program (July 5, 2001).

6

GAO-01-995T.

7

GAO-01-995T.
Page 15 GAO-02-732 Army Purchase Card Control

$2,500. Installations generally set monthly limits at a generic level, such as 

$10,000, $25,000, or $100,000, for most of their cardholders. We saw little 

evidence that limits were set based on an analysis of individual 

cardholders’ needs or past spending patterns. In some cases, we were told 

that the monthly limits were based on the anticipated peak spending to 

avoid possible limit changes. We also saw infrequently used cards that, 

nevertheless, had spending limits set at the maximum. Limits that are 

higher than justified by the cardholder’s authorized and expected usage 

unnecessarily increase the government’s exposure to potentially 

fraudulent, improper, and abusive purchases. 

Army Addressing Control Issues As we were performing our review of the Army purchase card program and 

in response to our July testimony on Navy purchase card activities, DOD 

and Army officials have issued a number of memorandums that address 

some of the weaknesses that we have discussed. For example, a 

memorandum from the Director of Defense Procurement, issued in August 

2001,8

 said that only those personnel with a continuing need to purchase 

goods or services as part of their jobs should be cardholders. In another 

example, DOD’s Joint Program Office, after we requested data on inactive 

cards, sent a February 2002 memorandum9

 to agency program coordinators 

asking that they consider canceling cards with little activity or imposing 

other controls, such as reducing the monthly limit to 1 dollar. However, at 

the locations we audited, the guidance in these and other memorandums 

had not been incorporated into operating procedures as of the end of our 

fieldwork. 

DOD and Army purchase card officials told us that they recognized the 

need for the Army to issue standard operating procedures for the purchase 

card program. They said that work had been ongoing on developing such 

procedures, which could be issued in this fiscal year. In addition, on March 

19, 2002, the Secretary of Defense directed the Under Secretary of Defense 

(Comptroller) to establish a Charge Card Task Force to review the 

operations of both purchase and travel cards and to develop 

recommendations to improve procedures. 

8

Memorandum from Director, Defense Procurement, Office of the Under Secretary of 

Defense, to directors of defense agencies. Subject: Government Purchase Card – Internal 

Controls (Aug. 13, 2001).

9

Memorandum from Director, Purchase Card Joint Program Management Office, to agency 

program coordinators. Subject: Internal Controls (Feb. 1, 2002).
Page 16 GAO-02-732 Army Purchase Card Control

Ineffective Program 

Monitoring and Oversight

Ineffective oversight of the purchase card program also contributes to 

weaknesses in the overall control environment. In general, effective 

oversight activities would include management reviews and evaluations of 

how well the purchase card program is operating, including the internal 

control activities. We identified little monitoring or oversight activity 

directed at assessing program results, evaluating internal control, or 

identifying the extent of potentially fraudulent, improper, and abusive or 

questionable purchases. At no management level, Army headquarters, 

major command, or local installation, is the infrastructure provided for 

such activities. At the installation level, where the most responsibility for 

oversight appears to reside, guidance or training on what oversight 

activities should be undertaken does not exist, and the needed human 

capital resources to perform those activities are not in place. 

Army-Wide and Major Command 

Oversight Limited

At the Army-wide level, the purchase card agency program coordinator—

the position involving direct oversight of the Army program—does not 

conduct internal control oversight activities. The agency program 

coordinator, who is in the DOD Joint Purchase Card Program Office, has no 

human capital resources to conduct oversight activities. The coordinator’s 

activities are mainly directed at answering program operation questions 

from and transmitting reports to major command and installation-level 

program coordinators. 

Agency internal control monitoring assesses the quality of performance

over time. It does this by putting procedures in place to monitor

internal control on an ongoing basis as a part of the process of carrying

out its regular activities. It includes ensuring that managers and

supervisors know their responsibilities for internal control and the

need to make internal control monitoring part of their regular

operating processes. Ongoing monitoring occurs during normal

operations and includes regular management and supervisory

activities, comparisons, reconciliations, and other actions people take

in performing their duties. GAO's Internal Control Standards:

Internal Control Management and Evaluation Tool

(GAO-01-1008G, August 2001)
Page 17 GAO-02-732 Army Purchase Card Control

The major commands have direct authority over the installations that 

report to them and have responsibility for the purchase card programs of 

their installations. While the major commands that we audited had 

procedures to guide the installations’ activities, we found little evidence of 

oversight activities by the commands to monitor the installations’ 

implementation of the procedures. The major commands’ purchase card 

program office personnel do participate in contract management reviews 

conducted at their installations every 2 years. These reviews, which 

generally are completed in 1 week, are focused on the installation’s 

contracting operations and have a small purchase card component. The 

program coordinators at the major commands we audited confirmed that 

they conduct little oversight of internal control activities at the local 

installation programs. 

Installation-Level Oversight 

Activities Inadequate 

The only significant oversight activities we identified were at the local 

installation level where the primary purchase card activities are taking 

place. However, none of the installations we audited had a comprehensive 

or effective program of oversight and monitoring. The oversight and 

monitoring activities consisted primarily of isolated inspections of 

approving official’s compliance with monthly statement certification 

requirements and monitoring resolution of disputed transactions. 

Audits and inspections of the purchase card program by internal auditors 

can provide additional oversight of the installation level purchase card 

program. For example, at the Soldier, Biological and Chemical Command – 

Natick, where the command has recognized that the program coordinator 

did not have the infrastructure to perform oversight reviews, the internal 

auditor provided assistance. According to the auditor, the audits are 

designed to ensure continued command attention and to assist the program 

coordinator with developing policies, procedures, and controls. However, 

at the installations we visited, audits and inspections were generally limited 

in both scope and number. For example, at Fort Hood, the internal 

auditors conducted occasional purchase card reviews as part of the 

command inspection program. Although these inspections occasionally 

surfaced control problems, the results were not communicated to the 

purchase card program coordinator so that systemic problems could be 

identified and addressed. 

The DOD Financial Management Regulation assigns installation program 

coordinators the responsibility for the implementation and execution of the 

purchase card program in accordance with established Office of the 

Secretary of Defense and applicable DOD component regulations, policies, 
Page 18 GAO-02-732 Army Purchase Card Control

and procedures. Thus, installation program coordinators, who act under 

the direction of the installation’s director of contracting, are the pivotal 

officials in managing and overseeing the purchase card program. 

A comprehensive and robust management and oversight program could 

include a number of activities. At the installations that we audited, the 

program coordinators were devoting significant time and attention to some 

basic activities such as establishing cardholders and approving officials 

and providing required training to these individuals. In most cases, 

cardholders and billing officials were being appropriately established and 

were receiving the required initial training. However, we found that 

refresher training, required by DOD guidance for cardholders and 

approving officials every 2 years, was seldom provided at the five 

installations we audited. Program coordinators at every location except 

the Texas Army National Guard in Austin, Texas, told us that this training 

seldom, if ever, occurred because of inadequate time and human capital 

resources.

While devoting time and resources to establishing cardholders and 

approving officials, other important activities were not receiving attention. 

For example, the key oversight activity identified in Army regulations is an 

annual review of the records of approving officials. This key activity was 

not effectively carried out at any of the five installations. In addition, 

program coordinators were not monitoring potential abusive and 

questionable transactions, and taking prompt and appropriate action to 

cancel accounts for departed and unneeded cardholders. 

Inspecting approving official activities. Army guidance, reiterated in an 

August 2001 memorandum,10 provides for the installation’s program 

coordinator to annually inspect the records of approving officials. Our 

work showed that none of the program coordinators at the five 

installations had a comprehensive inspection program, although three 

program coordinators had conducted some inspections. Our work also 

showed that the few that had been conducted were focused on only a 

limited number of cardholders and did not include remediation plans. 

Without inspecting cardholders’ and approving officials’ activities and 

10Memorandum from Acting Deputy Assistant Secretary of the Army (Procurement), Office 

of the Assistant Secretary of the Army for Acquisition, Logistics and Technology, to the 

heads of defense contracting agencies. Subject: Management Controls – Army Purchase 

Card Program (Aug. 3, 2001). 
Page 19 GAO-02-732 Army Purchase Card Control

developing remediation plans, program coordinators had no structured 

way to determine either currently or over the long run how well their 

approving officials were functioning or to follow up their inspections and 

determine whether cardholders and approving officials had improved their 

performance.

The following summarizes the ineffective and limited information on 

inspections of approving officials’ records at the audited installations.

• At Eisenhower Army Medical Center, the program coordinator 

performed a few targeted inspections in fiscal year 2001, rather than 

undertake a comprehensive audit of approving officials’ activities. 

These inspections covered eight approving officials and 15 cardholders. 

• At Fort Benning, the program coordinator told us that records of a few 

approving officials are inspected each year but there is no specific 

timetable for the inspections and the results are not documented. An 

internal audit of the purchase card program at Fort Benning prepared 

for the commanding general in 2001 concluded that the program 

coordinator had not placed enough emphasis on oversight 

responsibilities. 

• At Fort Hood, the program coordinator conducted few inspections of 

approving officials’ activities due to a heavy workload in establishing 

cardholders and approving officials and limited human capital 

resources. 

• At the Soldier, Biological and Chemical Command - Natick, the program 

coordinator did not conduct inspections of approving officials’ 

activities. However, internal review performed audits focused on 

various purchase card areas to assist the program coordinator. 

• An April 2001 internal review audit report of the Texas Army National 

Guard program stated that there was no evidence reviews were 

conducted to test management controls over the purchase card 

program. Subsequent to the audit report, the program coordinator and 

the director of contracting said that they had begun to occasionally 

conduct a small number of reviews. 

Monitoring potentially abusive and questionable transactions. Program 

coordinators at the five installations have not routinely monitored 

potentially abusive transactions. Their activities in this area were generally 
Page 20 GAO-02-732 Army Purchase Card Control

confined to answering cardholder questions about potentially questionable 

aspects of proposed purchases and occasionally scanning bank data for 

questionable transactions. The program coordinators told us that the Army 

and major command purchase card offices do not require them to analyze 

purchase card transactions and have not provided guidance on data to be 

analyzed or on analysis techniques. Our own data mining efforts, including 

our analysis of Army-wide data, shows the usefulness of these techniques 

and their potential for identifying transactions that contain indicators of 

potentially fraudulent, improper, and abusive and questionable 

transactions, as we discuss in a later section of this report. 

While cardholders and approving officials are the first line of defense in 

preventing purchase card abuse, program coordinator activities become 

especially critical if the approving official is not carrying out required 

duties. For example, after noting that we were requesting additional details 

on purchases from some questionable vendors, the Fort Benning program 

coordinator noticed that a cardholder had purchases from such vendors. 

Subsequent investigation of the cardholder revealed potentially fraudulent 

purchases totaling $10,748. The cardholder’s potentially fraudulent 

activities were not detected promptly because the approving official had 

not been monitoring the cardholder’s purchases or reviewing the monthly 

statement. 

Program coordinators, in addition to analyzing questionable transactions, 

need to analyze other purchase card data, such as bank status reports on 

disputed transactions. The Fort Hood program coordinator, who was not 

effectively monitoring bank status reports on disputed transactions, did not 

identify that cardholder inaction beyond the expiration date for disputes 

had resulted in the loss of ability to recover funds on previously disputed 

charges. At our suggestion, the coordinator followed up on an unresolved 

expired dispute and obtained credit for over $1,000 in returned unordered 

merchandise. Such a recovery demonstrates that a data analysis program 

for installation program coordinators can produce savings for taxpayers. 

Canceling accounts for departed cardholders. None of the program 

coordinators at the five installations had focused effective attention on 

canceling accounts of departed and unneeded cardholders prior to the 

completion of our fieldwork. Program coordinators can reduce the 

government’s exposure to fraud, waste, and abuse by monitoring 

cardholder account activity and determining whether issued cards 

continue to be required. If cards are not active and unneeded because of 

change in duties or other reassignments, timely cancellations of cards is an 
Page 21 GAO-02-732 Army Purchase Card Control

important control. At all five installations, we identified weaknesses in 

their processes for canceling accounts for inactive or unneeded 

cardholders, and each location had significant numbers of cards that were 

inactive and should have been canceled. 

The most serious problem was when some accounts had not been canceled 

even though the cardholder was no longer at the installation or even with 

the Army. Each installation had a policy that the program coordinator be 

notified when an account should be canceled, but they were not effective. 

Even the existence of processes to identify when a cardholder’s account 

should be canceled were not always effective. For example, the Soldier, 

Biological and Chemical Command - Natick had developed a process to 

terminate the purchase card when the cardholder departed. The process 

involved a checkout procedure that required each departing cardholder to 

obtain a release from the program coordinator prior to being allowed to 

leave the installation. Yet, even with this process in place, the installation 

had 20 inactive cards that needed to be canceled. Although the checkout 

process had been developed, data had not been analyzed to evaluate if the 

process was effective. 

This problem of unneeded cards was especially serious at Fort Hood, 

which also had a checkout process that included the purchase card. 

Available data showed that 317—26 percent—of 1,242 current cardholders 

at Fort Hood were no longer assigned to the units that issued their cards. 

Therefore, the cards should have been terminated. Neither the installation 

nor purchase card program office had established processes to ensure that 

purchase cards of departing or reassigned personnel were canceled. As 

identified later in this report, failure to terminate cards of reassigned 

cardholders can result in potentially fraudulent transactions.

The problem at Fort Hood was exacerbated by the high turnover of active 

duty military personnel rotating to and from the installation—Fort Hood 

military personnel statistics show that about 1,600 soldiers depart the 

installation monthly. The personnel office managing the transfers of 

military personnel had established checklist procedures to cancel 

government travel cards held by departing employees, but did not have 

similar procedures for canceling purchase cards. They said that the 

procedure was not established because the social security numbers of 

cardholders are not provided for computerized matching to the social 

security numbers of departing soldiers. Fort Hood’s purchase card 

program office agreed to review records and cancel cards for reassigned 

personnel and to identify workaround procedures to ensure that cards of 
Page 22 GAO-02-732 Army Purchase Card Control

departed personnel were terminated. Following the completion of our 

fieldwork, Fort Hood program officials notified us in mid-May that they had 

canceled 258 cardholder accounts and were continuing to identify other 

accounts for cancelation. The command said it was also attempting to 

improve its checkout procedures. 

The above conditions illustrate that the Army as a whole may also need to 

reduce its active cards. Since our testimonies and report on the purchase 

card programs at two Navy locations,11 there has been concern over 

whether DOD has too many purchase cards and cardholders. Since that 

time, the Navy reports that it has reduced its total active cards from about 

58,000 to about 26,000. With the Army’s lack of guidance to installations on 

controlling the issuance of cards and on reassessing the need for 

outstanding cards, the Army should also have opportunities to reduce its 

reported 109,000 active cards. Army officials reported that as of April 30, 

2002, they had reduced the number of active accounts to about 100,000 and 

would continue to assess the need for cards. 

Infrastructure Is Insufficient for 

Effective Monitoring and 

Oversight 

DOD, Army, and the major commands we audited have not provided 

installation-level program coordinators the infrastructure needed for 

program monitoring and oversight. The coordinators do not have guidance 

or training on what they should be doing to monitor and oversee the 

implementation of internal control activities, and they have not been 

trained. They do not have the human capital resources to perform 

significant monitoring and oversight activities. And finally, they do not 

have grade-level positions that are commensurate with their 

responsibilities and that would provide some additional authority to 

achieve better purchase card internal control. 

No program guidance or training. Although installation-level program 

coordinators are tasked with major program management responsibilities, 

applicable DOD, Army, and major command guidance does not provide a 

statement of duties, position description, or other information on the 

scope, duties, or specific responsibilities for the position. The guidance 

also does not establish program coordinators’ oversight responsibilities. 

The Army and major command guidance to installation-level program 

coordinators is generally limited to a requirement that program 

11GAO-01-995T; U.S. General Accounting Office, Purchase Cards: Control Weaknesses 

Leave Two Navy Units Vulnerable to Fraud and Abuse, GAO-02-32 (Washington, D.C.: 

Nov. 30, 2001); and GAO-02-506T.
Page 23 GAO-02-732 Army Purchase Card Control

coordinators review each approving officials’ records and activities 

annually. The Army and major commands also have not developed data 

analysis techniques and tools for installation-level program coordinators to 

use in analyzing bank electronic data as a part of their oversight activities. 

Also, the Army and major commands have not developed training courses 

for program coordinators. At the five audited installations, the 

coordinators told us they had not received any specific program 

coordinator training. They said the available training was limited to 

cardholders training sessions either on-line or conducted by other 

coordinators and the General Services Administration’s annual 

governmentwide purchase card program conference. Thus, program 

coordinators essentially have had to develop program management and 

oversight activities and to decide how to conduct them.

Inadequate human capital resources. The Army has not provided 

sufficient human capital resources at the installation level to enable 

monitoring of purchases and develop a robust oversight program. The two 

key positions for monitoring purchases and overseeing the program are the 

program coordinator and the approving official.

While the program coordinator position is a specifically designated 

responsibility, we found that the coordinator has very limited assistance in 

administering, managing, and overseeing the program. At the five 

installations that we audited, the assistance available to the program 

coordinator ranged from no staff at two locations to one full- time assistant 

at two locations. Considering that the coordinators are responsible for 

procurement programs involving thousands of transactions and millions of 

dollars, as shown in table 1, the inadequacy of human capital resources is 

apparent. 
Page 24 GAO-02-732 Army Purchase Card Control

Table 1: Program Coordinators’ Span of Control

a

This program coordinator has responsibility for all nine Army medical centers in the Southeast. 

Source: GAO analysis of Army purchase card program data as of September 30, 2001.

The Army does not have guidance on the appropriate human capital 

resources for the program coordinator’s office. However, the program 

coordinators told us, and our observations confirmed, that with current 

resources, time was not available to conduct systematic reviews of 

approving officials’ activities, much less undertake other management 

analyses and oversight activities. They each said that their time was 

generally consumed with administrative duties such as training new 

cardholders, issuing appointment letters, setting up accounts for new 

cardholders, monitoring delinquencies, interacting with the bank to resolve 

problems, and interacting with cardholders to answer questions about the 

purchase card program. These administrative activities are necessary to 

operate the purchase card program, but do not achieve routine oversight of 

activities.

As previously discussed, the Director, Purchase Card Joint Program 

Management Office, recognized in his July 5, 2001, memorandum, the need 

to assess the adequacy of resources and asked that the services conduct an 

assessment of the policies and guidelines that are in effect to assist 

commanders and directors in the proper allocation of resources to the 

purchase card program. He asked that the assessment be conducted in the 

coming weeks (emphasis added). However, the Army program office could 

not identify any such assessments. By the end of our fieldwork, the five 

installations and five major commands included in our work had not 

conducted any studies or assessments to address the question of 

appropriate resources. 

Installation

People in program

coordinator office

Number of

approving

officials

Number of

cardholder

accounts

Number of fiscal

year 2001

transactions

Value of fiscal year

2001 transactions

(in millions)

Eisenhower Army Medical Centera 1.5 162 540 68,805 $30

Fort Benning 2 162 450 44,421 19

Fort Hood 2 321 1,242 110,822 58

Soldier, Biological and Chemical 

Command – Natick

1 87 208 16,480 96

Texas Army National Guard 1 26 437 20,306 7
Page 25 GAO-02-732 Army Purchase Card Control

As opposed to the specifically designated role of the program coordinator, 

approving official responsibilities generally fall into the category of “other 

duties as assigned,” without any specific time allocated for their 

performance. We found that approving officials generally had many other 

duties of a higher priority than monitoring purchases and reviewing their 

cardholders’ purchase card statements.

Also, many approving officials are responsible for a large number of 

cardholders. A large workload, especially one in an “other duties as 

assigned” category can inevitably lead to less attention than expected or 

desired. We found that a number of approving officials at the installations 

we visited had numerous cardholders reporting to them. For example, at 

Fort Hood, 29 billing officials had 10 or more cardholders. Two of the 29 

had over 20 cardholders. At Eisenhower Army Medical Center, one 

approving official had 18 cardholders, one of whom was spending about 

$100,000 per month for surgical supplies and equipment. The approving 

official said he simply did not have time to review each cardholder’s 

monthly bills and transactions each month. At the Texas Army National 

Guard, 16 of the 26 approving officials had 10 or more cardholders, and 8 of 

them had 25 or more. The number of cardholders that these approving 

officials were responsible for far exceeded the Army’s suggested maximum 

of 7 cardholders per approving official,12 as discussed earlier. 

The DOD Inspector General also reported a problem with approving 

officials having too many cardholders. In a March 2002 report on the 

purchase card program,13 the Inspector General reported that 1,816 

approving officials, or 8.8 percent off the Army’s 20,709 officials, were 

assigned more than 7 cardholders and that 21 of them were assigned more 

than 100 cardholders.

12Memorandum from the Department of the Army, Office of the Assistant Secretary of the 

Army, Acquisition Logistics and Technology, Director, Purchase Card Joint Program 

Management Office. Subject: Internal and Management Controls – DOD Purchase Card 

Program (July. 5, 2001).

13Department of Defense, Office of the Inspector General, Controls Over the DOD Purchase 

Card Program, D-2002-075 (Washington, D.C.: Mar. 29, 2002). 
Page 26 GAO-02-732 Army Purchase Card Control

A large span of control for approving officials is not conducive to thorough 

review of each cardholder’s monthly statement. The August 3, 2001, 

memorandum14 from the Acting Deputy Assistant Secretary of the Army 

(Procurement) to the contracting community cited earlier stated that 

“[approving] officials are the first line of defense against fraud, waste, and 

abuse, as they are required to review each of their cardholder statements. 

If they have too many cardholders under their purview there is no way 

these officials can perform the required reviews and attendant 

certifications of cardholder purchases.” In the February 1, 2002, 

memorandum15 cited earlier from the Director of the Purchase Card Joint 

Program Management Office to agency program coordinators, the director 

requested program coordinators’ help in ensuring that approving officials’ 

span of control is commensurate with their ability to adequately perform 

their responsibilities. The memorandum said that approving officials 

should have a reasonable span of control over the cardholders they 

supervise and approving officials must be given adequate time for a 

complete monthly review to determine that each charge is legal and proper. 

Following completion of our fieldwork, the installations we audited 

reported that they had begun to bring their approving officials’ span of 

control into line with the criteria. 

Insufficient authority to encourage compliance. The program 

coordinators at the five installations we audited generally did not have the 

grade level or organizational authority—“clout”—to enforce compliance 

with purchase card procedures. At the five installations we audited, the 

program coordinators were part of the installation’s contracting operation 

and reported to the director of contracting, from whom they derived their 

authority. However, we believe that the program coordinators’ grade levels 

were not commensurate with their responsibilities or sufficient to provide 

the authority needed to enforce purchase card program rules. Only one of 

the five was a GS-12, two were GS-9s, and two were GS-7s. Program 

coordinators have the primary responsibility for purchase card program 

management and significant control over procurement activities carried 

out by a large number of individuals. For example, table 1 shows that the 

14Memorandum from Acting Deputy Assistant Secretary of the Army (Procurement), Office 

of the Assistant Secretary of the Army for Acquisition, Logistics and Technology, to the 

heads of defense contracting agencies. Subject: Management Controls – Army Purchase 

Card Program (Aug. 3, 2001).

15Memorandum from Director, Purchase Card Joint Program Management Office, to agency 

program coordinators. Subject: Internal Controls (Feb. 1, 2001).
Page 27 GAO-02-732 Army Purchase Card Control

Fort Hood program coordinator has responsibility for overseeing a 

program of over 110,000 purchase card transactions totaling about 

$58 million and carried out by 321 approving officials and 1,242 

cardholders. 

In addition to the relatively low grades, the Army has not made the program 

coordinator position career enhancing by making it part of a contracting 

career path. At three of the five installations, program coordinator position 

descriptions were for traditional contracting positions, although their 

coordinator duties are unique. Two coordinators had locally developed 

position descriptions that included their coordinator responsibilities, but 

these descriptions still carried traditional contracting titles. At the Soldier, 

Biological and Chemical Command – Natick, the program coordinator’s 

position description, which was written to justify a GS-12 grade, was for a 

procurement analyst and specifically included program coordinator duties. 

However, the director of contracting said that obtaining approval for the 

position took much discussion and persuasion because of its uniqueness. 

At Fort Benning, the program coordinator’s position description was 

developed specifically for the local position. 

Critical Internal 

Control Activities and 

Techniques Not 

Effectively 

Implemented

Our work shows that critical internal control activities and techniques over 

the purchase card program were ineffective at the five installations we 

audited. Based on our tests of statistical samples of transactions, we 

determined that the transaction-level control activities and techniques we 

tested were not effective, rendering purchase card transactions at the five 

installations vulnerable to potentially fraudulent and abusive purchases 

and theft and misuse of government property. 

Control activities occur at all levels and functions of an agency. They 

include a wide range of diverse activities such as approvals, authorizations, 

verifications, reconciliations, performance reviews, and the production of 

records and documentation. For the Army purchase card program, we 

Internal control activities help ensure that management’s directives

are carried out. The control activities should be effective and

efficient in accomplishing the agency’s control objectives. GAO's

Standards for Internal Control in the Federal Government

(GAO/AIMD-00-21.3.1, November 1999)
Page 28 GAO-02-732 Army Purchase Card Control

opted to test those control activities that we considered to be key in 

creating a system to provide reasonable assurance that transactions are 

correct and proper throughout the procurement process. The key control 

activities and techniques we tested include 

• advance approval of purchases,

• independent receiving—receiving and acceptance of goods and services 

by someone other than the cardholder, 

• independent review by an approving official of the cardholder’s monthly 

statements and supporting documentation, and 

• cardholders obtaining and providing invoices that support their 

purchases and provide the basis for reconciling cardholder statements. 

Table 2 summarizes the results of our statistical testing. Our work showed 

internal control activity failures in both purchase and payment cards, 

although the percent of failure—the failure rate—was generally higher for 

purchase card transactions. 

Table 2: Internal Control Activity Statistical Testing Failure Rates

Source: GAO testing and statistical analysis of Army purchase card transaction files.

In addition to the internal control activities we tested statistically, we noted 

two other internal control-related problems during our work. First, the 

purchase card exacerbates the long-standing difficulties of maintaining 

property records over accountable property. Second, cardholders did not 

always maintain purchase card transaction records as required by 

regulations. 

 Estimated percent of transactions without documentation of 

Installation

Advance

approval

Independent

receiving

Approving

official review

Supporting

invoice

Eisenhower Army Medical Center 60 71 86 26

Fort Benning 46 75 73 16

Fort Hood 36 65 66 7

Soldier, Biological and Chemical Command – Natick 25 55 40 14

Texas Army National Guard 69 87 41 14
Page 29 GAO-02-732 Army Purchase Card Control

Advance Approval of 

Purchases

Without Army-wide operating procedures, requirements for advance 

approval are not consistent but do exist, to some extent, at each of the five 

audited installations. Two major commands and three installations 

specifically require advance approval. Others required written descriptions 

of purchases and appropriate coordination and review prior to the 

purchases. Advance approval requirements also varied within individual 

units at the installations and by individual approving officials. The 

requirements were generally for informal approval directed toward 

ensuring budget and funds control as well as establishing a valid need for a 

purchase so that cardholders are not acting totally independently.

The approvals that we saw included e-mails from a cardholder’s supervisor 

as well as a request for a purchase initiated by someone other than the 

cardholder. For example, the Soldier, Biological and Chemical Command – 

Natick used an electronic system to manage its purchase card activity, 

making it easy for Natick employees to request a cardholder to make a 

purchase and for supervisors, unit heads, resource managers, and logistics 

personnel to have knowledge of and approve the request with a few 

computer keystrokes. Approval of a purchase can range from a blanket 

approval for routine small dollar purchases of items such as office supplies 

to a one-time written approval for specific large dollar items. For example, 

at Fort Hood, some units have a blanket approval for routine, small dollar 

purchases, such as office supplies under $300. 

For our testing of advance approval, we accepted reasonable documented 

evidence that a cardholder’s supervisor or other responsible person had 

requested and/or approved the purchase. This included a request for 

purchase from a responsible official, and it also included specific blanket 

approval for routine purchases within set dollar limits. As table 3 shows, 

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. Simply put, no one

individual should control all the key aspects of a transaction or

event. GAO's Standards for Internal Control in the Federal

Government (GAO/AIMD-00-21.3.1, November 1999)
Page 30 GAO-02-732 Army Purchase Card Control

we estimated that the failure rate at the five installations ranged from 25 

percent at Soldier, Biological Chemical Command – Natick to 69 percent at 

the Texas Army National Guard.

Table 3: Advance Approval Failure Rates

Source: GAO testing and statistical analysis of Army purchase card transaction files.

Although the failure rate was unacceptably high overall, the failure rate 

was particularly high for micropurchases, even though some of those 

purchases were for computers, electronic devices, and other items for 

which advance approval would appear warranted because the procurement 

was not routine.

We believe that leaving cardholders solely responsible for a procurement 

without some type of documented approval puts the cardholders at risk 

and makes the government inappropriately vulnerable. A segregation of 

duties so that someone other than the cardholder is involved in the 

purchase improves the likelihood that both the cardholders and the 

government are protected from fraud, waste, and abuse. We believe that 

advance approval is an appropriate internal control activity, especially 

considering that many cardholders in our audit were administrative 

personnel and not supervisors or managers. 

Installation

Estimated percent of

transactions without

advance approval

95 percent confidence

interval

Eisenhower Army Medical Center 60 48 to 71

Fort Benning 46 34 to 58

Fort Hood 36 23 to 51

Soldier, Biological and Chemical 

Command – Natick

25 14 to 38

Texas Army National Guard 69 59 to 79
Page 31 GAO-02-732 Army Purchase Card Control

Our testing of advance approval as a control activity is not advocating a 

return to the formal advance approval that DOD has de-emphasized in the 

purchase card program. A February 1997 study of the purchase card 

program identified DOD’s requirement for formal prepurchase approval 

documentation through the administrative chain of command for each 

purchase card transaction as an impediment to expanded use of the 

purchase card.16 The formal prepurchase documentation that previously 

existed could impede purchases and increase costs. The more informal 

practices that exist at the installations we audited eliminate much of the 

previous formal documentation, but still can serve to protect the 

cardholders and the government. For example, blanket approval for 

routine purchases within set dollar limits involves minimal cost, but 

reasonable control. For nonroutine purchases involving significant 

expenditures, advance approval, even through informal processes, appears 

to be an important control activity.

Documentation of 

Independent Receiving by 

Other Than Cardholder

Independent receiving—receiving of goods and services by someone other 

than the cardholder—provides additional assurance that purchased items 

are not acquired for personal use and that the purchased items come into 

the possession of the government. The requirement for documentation of 

independent receiving by someone other than the cardholder was not 

generally addressed in the procedures of the commands and installations 

we audited. However, installations and units within the installations often 

required some documentation of independent receiving of at least some 

portion of their purchases. At Fort Benning, instructions in various units 

16Joint Report of the Purchase Card Financial Management Team and the Purchase Card 

Integrated Product Team to the Under Secretary of Defense (Acquisition and Technology) 

and the Under Secretary of Defense (Comptroller) (Washington, D.C.: Feb. 26, 1997). 

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 ... handling any

related assets. Simply put, no one individual should control all the

key aspects of a transaction or event. GAO's Standards for

Internal Control in the Federal Government

(GAO/AIMD-00-21.3.1, November 1999)
Page 32 GAO-02-732 Army Purchase Card Control

required documentation of independent receiving. At Fort Hood, the 

Department of Public Works had established the same type of requirement. 

The Fort Hood official in the department told us he established the 

requirement for independent receipt because, while in a prior job at 

another installation, he had observed potentially fraudulent purchases that 

would have been prevented if the independent receipt requirement had 

existed. 

Because Army guidance does not address the issue of evidence of 

independent receiving, and the requirements varied at the five installations, 

we accepted as evidence of independent receiving for this test, any 

signature or initials of someone other than the cardholder on the sales 

invoice, packing slip, bill of lading, or other shipping or receiving 

document. Table 4 shows the results of our testing.

Table 4: Independent Receiving Failure Rates

Source: GAO testing and statistical analysis of Army purchase card transaction files.

As shown above, the five installations we audited generally did not have 

independent, documented evidence that the items ordered and paid for 

with the purchase card had been received. This lack of documented, 

independent receiving extended to all types of purchases, including 

computers and other expensive or highly pilferable items. We believe that 

documented independent receiving is a basic internal control activity that 

provides additional assurance to the government that purchased items 

come into the possession of the government. 

Installation

Estimated percent of

transactions without

independent receiving

95 percent confidence

interval

Eisenhower Army Medical Center 71 60 to 81

Fort Benning 75 62 to 84

Fort Hood 65 51 to 77

Soldier, Biological and Chemical 

Command - Natick

55 44 to 67

Texas Army National Guard 87 78 to 94
Page 33 GAO-02-732 Army Purchase Card Control

Approving Official Review

Approving official review is a recognized control activity at all levels of the 

purchase card program. DOD’s purchase card joint program office, major 

command procedures, and the installations’ operating procedures 

recognize that the approving official review is central to ensuring that 

purchase card transactions are appropriate. Army guidance requires 

approving officials to review and certify each cardholder’s monthly 

transactions. The August 3, 2001, memorandum discussed earlier17

described the approving official review process as the “first line of defense” 

against misuse of the card. 

The responsibilities of the approving official involve two overlapping 

functions: 

• reviewing the cardholder’s transactions to provide reasonable assurance 

that, among other things, (1) the transactions are legal, proper, and 

correct in that appropriate procurement procedures were followed and 

17Memorandum from the Acting Deputy Assistant Secretary of the Army (Procurement), 

Office of the Assistant Secretary of the Army, Acquisition Logistics and Technology, to the 

heads of Army contracting offices. Subject: Management Controls – Army Purchase Card 

Program (Aug. 3, 2001).

Transactions and other significant events should be authorized

and executed only by persons acting within the scope of their

authority. This is the principal means of assuring that only valid

transactions to exchange, transfer, use, or commit resources and

other events are initiated or entered into. GAO's Standards for

Internal Control in the Federal Government (GAO/AIMD-00-21.3.1,

November 1999)

Control activities ensure that only valid transactions ... are initiated

or entered into .... Control activities are established to ensure

that all transactions ... that are entered into are authorized and

executed only by employees acting within the scope of their authority.

GAO’s Internal Control Standards: Internal Control Management

and Evaluation Tool (GAO-01-1008G, August 2001)
Page 34 GAO-02-732 Army Purchase Card Control

(2) supporting documentation and records, including supporting 

invoices, are adequate and

• certifying the cardholder’s transactions for payment.

An appropriate approving official review, at a minimum, would facilitate 

certification; however, certification by itself does not ensure that the 

desired review occurred. Certification is likely to occur even if the 

required reviews are not made because certification is necessary for 

payment. 

Section 2784 of title 10, United States Code, requires the Secretary of 

Defense to issue regulations controlling the use of government credit cards 

within the department. The statute requires that these regulations be 

consistent with “regulations that apply government-wide regarding use of 

credit cards by government personnel for official purposes.” 

The regulations that apply governmentwide are in the Treasury Financial 

Manual. Section 4535 of Volume I of the manual provides that the 

cardholder and approving official18 will review the cardholder statement of 

account received at the end of each monthly billing cycle. The cardholder 

statement must be submitted to the billing office early enough to permit the 

billing office to process and pay the consolidated monthly invoice within 

the Prompt Payment Act deadline. The provision directs the billing office 

to pay the consolidated invoice on time, “even if all cardholder statements 

are not received....” 

As part of our work, we asked the DOD Under Secretary of Defense 

(Comptroller) for his views on DOD’s compliance with these statutory 

requirements. In a letter dated April 30, 2002, the Principal Deputy and 

Deputy Under Secretary of Defense for Management Reform stated that 

DOD's Financial Management Regulation, various purchase card 

reengineering memorandums, and other pronouncements together 

complied with section 2784.

18Section 4520 defines the approving official as an individual who (1) reviews cardholder 

statement(s), (2) is responsible for authorizing cardholder purchases, and (3) ensures that 

the statement is reconciled and submitted to the designated billing office on time.
Page 35 GAO-02-732 Army Purchase Card Control

DOD’s regulations are consistent with the governmentwide regulations 

regarding the responsibilities of cardholders and approving officials.19 

Therefore, if cardholders and approving officials are not reviewing and 

reconciling their statements of account in time for disbursing offices to 

process payments on time, they are not complying with Treasury and DOD 

requirements. 

We noted numerous cases during our audit where the approving official 

certified the billing statement for payment but had not examined the 

transactions or the documentation supporting them to determine whether 

the transactions were correct and for a valid government purpose. In one 

case, a note on one approving official’s certified billing statement said that 

the approving official had not reviewed the transactions. Accordingly, 

certification for payment is made without the required reconciliation. In 

that instance, certification was clearly nothing more than a “rubber stamp.” 

Consequently, we tested for other evidence that the billing official had 

reviewed the cardholders’ transactions. Without such evidence, neither 

we, nor internal auditors, nor program coordinators who are required to 

annually review approving official’s records, can determine whether 

approving officials are complying with review requirements or simply 

certifying the statement without the required review. For this test, we 

accepted virtually any markings, notes, or dates, other than the 

certification signature, on the transactions listed on the cardholder’s or 

approving official’s bill as documentation that a review had occurred. In 

instances of appropriately documented reviews, we found evidence of the 

approving official checking off on each transaction in the cardholder’s 

statement and the supporting documentation for each, and signing the 

cardholder’s statement as having reviewed it. Instances in which the 

documentation was not available included missing statements, missing 

invoices, and statements without any marks by either the cardholder or the 

approving official to indicate that a reconciled statement had been 

prepared or submitted to the approving official. 

Our testing revealed that documented evidence of approving officials’ 

review of cardholders’ transactions and their reconciled statements did not 

19For example, the April 30 letter cites the Financial Management Regulation, volume 10, 

chapter 10, section 1203, which says that (1) cardholders are to reconcile each statement 

against supporting documentation and sign the statement and (2) approving officials are to 

reconcile the cardholders’ statement and sign the consolidated monthly bill. 
Page 36 GAO-02-732 Army Purchase Card Control

exist for most of our sample transactions. The failure rate at each of the 

five installations we audited was high, as table 5 shows. The high failure 

rate is of particular concern for this control activity because it is perhaps 

the most important to providing reasonable assurance that purchases are 

appropriate and for a legitimate government need. 

Table 5: Approving Official Review Failure Rates

Source: GAO testing and statistical analysis of Army purchase card transaction files.

Although of concern, the high failure rates are not unexpected because 

major command and local standard operating procedures, while 

recognizing the importance of approving official review, do not specify the 

required extent, content, or documentation of approving officials’ reviews. 

In addition, the high failure rate may be attributable to approving official 

responsibilities falling into the category of “other duties as assigned” and to 

approving officials being responsible for a large number of cardholders, as 

previously discussed. A large workload, especially one in an “other duties 

as assigned” category, can inevitably lead to less attention than expected or 

desired. 

For example, the previously mentioned cardholder at Eisenhower Medical 

Center, who was the approving official for 18 cardholders, one of whom 

spends about $100,000 monthly for surgical supplies and medical 

equipment, told us that he had not reviewed the cardholders’ records 

because he did not have time. We examined that cardholder’s records as 

part of our control activity testing and found that the records were in 

disarray. Numerous transactions did not have invoices. Other transactions 

had invoices with prices that differed from the cardholder’s log but were 

not reconciled. Subsequent to our audit, the program coordinator worked 

Installation

Estimated percent of

transactions without

approving official

review

95 percent confidence

interval

Eisenhower Army Medical Center 86 75 to 94

Fort Benning 73 61 to 83

Fort Hood 66 52 to 79

Soldier, Biological and Chemical 

Command – Natick

40 28 to 52

Texas Army National Guard 41 30 to 52
Page 37 GAO-02-732 Army Purchase Card Control

with the approving official’s manager to reduce the workload by appointing 

additional approving officials. 

Our discussions with approving officials indicated that some reviews had 

been made, but we could not determine the frequency or extent of the 

reviews because they were not documented. Without documentation, the 

lack of a review can go unnoticed. For example, at the Texas Army 

National Guard, approving officials’ subordinates frequently performed 

cardholder statement reviews because of the large number of cardholders 

for whom each approving official was responsible. When one of these 

subordinates was absent due to an extended illness, no one performed 

reviews of the transactions, but the approving official did not notice 

because reviewers were not required to document their work. According 

to guard officials, this problem was addressed after our inquiries by 

appointing more approving officials and directing approving officials to 

personally review their cardholder transactions. 

We identified numerous instances of purchases that clearly had not been 

adequately reviewed and reconciled to the statement, but the statements 

were, nonetheless, certified for payment. Such activities allow potentially 

fraudulent, improper, abusive, and questionable purchases, which are 

discussed in more detail in the following section of this report, to go 

undetected. The following are two example of such unauthorized charges 

that we identified.

• A Fort Hood cardholder purchased 15 wire storage containers in April 

2001. The vendor incorrectly included $808 of shipping and handling 

charges in the $2,748 bill. The approving official certified the statement 

for payment including the erroneous shipping and handling charges. 

Apparently, neither the cardholder nor the approving official reviewed 

the transaction in sufficient detail. After we detected the erroneous 

charges in November 2001, about 7 months after the original charge, a 

refund was obtained. 

• Another approving official at Fort Hood certified for payment a $539 

charge on a May 2001 statement for a purchase from a catering 

company. After our inquiry about an invoice for the purchase, the 

approving official determined that the charge was inappropriate and a 

refund was made. Approving official review of a reconciled statement 

should have detected this inappropriate charge. 
Page 38 GAO-02-732 Army Purchase Card Control

We believe that the approving official’s review of the cardholders’ 

purchases is a vital internal control activity. Without documentation of 

such review, neither we, internal auditors, nor program coordinators can 

determine the extent that the approving official is carrying out review 

responsibilities. 

Obtaining and Retaining 

Invoices

Essentially, the Army requires that an invoice support purchase card 

transactions. Thus, the invoice is a key document in purchase card internal 

control activities. Throughout the major commands’ and installations’ 

procedures, the need for obtaining and retaining an invoice is recognized. 

Without an invoice, independent evidence of the description and quantity 

of what was purchased and the price paid is not available. In addition, the 

invoice is the basic document that is required to be attached to the 

cardholder’s monthly statement during a cardholder’s reconciliation and 

prior to approving official review. 

In testing for evidence of an invoice, we accepted either the original or a 

copy of the invoice, sales slip, or other store receipt. Table 6 shows the 

results of our testing. 

Internal control and all transactions and other significant events

need to be clearly documented, and the documentation should be

readily available for examination. All documentation and records

should be properly managed and maintained. GAO's Standards for

Internal Control in the Federal Government (GAO/AIMD-00-21.3.1,

November 1999)
Page 39 GAO-02-732 Army Purchase Card Control

Table 6: Existence of Invoice Failure Rates

Source: GAO testing and statistical analysis of Army purchase card transaction files.

The following missing invoice example illustrates the questions that can 

arise when an invoice is not available. As part of our Army-wide data 

mining, we identified several types of vendors that cardholders are 

generally prohibited from using. We identified four transactions for which 

the monthly billing indicated that purchases were made at a jewelry store—

one category of prohibited vendors—in Kuwait for three purchases totaling 

$4,365 and a credit for returned merchandise of $1,353. Upon inquiry into 

this transaction, Army officials said that the purchase was for mattresses 

for a vessel prepositioned in the area. However, they also said that the 

transaction file did not contain a detailed invoice to allow us—or the 

approving official who was located in the United States—to confirm that 

mattresses were, indeed, the merchandise purchased, and if so, how many 

and at what unit price. Without such an invoice, a thorough investigation is 

needed to determine whether this transaction was proper, potentially 

fraudulent, improper, or abusive. 

The failure rates for evidence of invoice were lower than those for the 

other internal control activities we tested. However, we believe that even 

these failure rates are unacceptable for such a key document. A valid 

invoice to show what was purchased and the price paid is a basic document 

for the transactions and a missing invoice is an indicator of potential fraud. 

Without an invoice, two key control activities—independent receiving and 

approving official review—become ineffective. Independent receiving 

cannot confirm that the purchased items were received and the approving 

official cannot review a cardholder statement reconciled with the 

supporting invoice. A near zero failure rate is a reasonable goal 

considering that invoices are easily obtained or replaced when 

inadvertently lost. 

Installation

Estimated percent of

transactions without

an invoice

95 percent confidence

interval

Eisenhower Army Medical Center 26 17 to 38

Fort Benning 16 8 to 28

Fort Hood 7 2 to 19

Soldier, Biological and Chemical 

Command – Natick

14 6 to 25

Texas Army National Guard 14 7 to 23
Page 40 GAO-02-732 Army Purchase Card Control

Purchase Cards Complicate 

Property Book Management 

Consistent with GAO’s internal control standards, DOD’s Property, Plant 

and Equipment Accountability Directive and Manual, which was issued 

in draft for implementation on January 19, 2000, requires accountable 

property to be recorded in property records as it is acquired. In addition to 

high-cost property items, accountable property also includes easily 

pilferable or sensitive items, such as computers and related equipment, 

cameras, cell phones, and power tools. Recording these items in the 

property records is an important step to ensure accountability and financial 

control over these assets and, along with periodic inventory, to prevent 

theft or improper use of government property.

At each of the five installations we visited, we found that accountable items 

acquired by purchase cards were not recorded in property records. In 

addition, officials at four of the five installations could not readily locate 

property items. While some of the items were located after considerable 

searching, others such as computers and printers were not. Some or all of 

the items might, in fact, be at the installation; however, without positive 

assurance, there is substantial risk that items were converted to personal 

use or sold. Property items not recorded in the property books and not 

found demonstrate a weak control environment and problems with the 

property management system. Table 7 shows the results of our work. 

An agency must establish physical control to secure and safeguard

vulnerable assets. Examples include security for and limited

access to assets such as cash, securities, inventories, and equipment

which might be vulnerable to risk of loss or unauthorized use.

Such assets should be periodically counted and compared to control

records. GAO's Standards for Internal Control in the Federal

Government (GAO/AIMD-00-21.3.1, November 1999)
Page 41 GAO-02-732 Army Purchase Card Control

Table 7: Property Items Not Recorded in Property Books 

Source: GAO nonrepresentative selection of Army purchase card transactions.

Effectively managing accountable property has long been a problem area 

and the use of the purchase card has added further difficulties. With over 

100,000 army cardholders, the number of people buying accountable 

property has greatly expanded. Cardholders are responsible for reporting 

on the accountable property they buy so that it is recorded in the 

installation’s accountable property, but they often do not. For example, 

property book officers at Fort Hood and the Texas Army National Guard 

told us that a major problem with property bought in a purchase card 

transaction is that cardholders do not properly notify property book 

officers and/or provide documentation supporting the purchases. At Fort 

Hood, cardholders are required by the installation’s purchase card 

procedures to obtain transaction document numbers for purchases of 

equipment items prior to making the purchases, but the requirement is 

frequently ignored. Further, we noted that the installations we audited 

generally did not record items such as memorabilia like pictures of famous 

people and framed jerseys of sports stars. Some of these items cost 

hundreds of dollars and are pilferable and desirable items. 

Because of its long-standing problems, property management has been the 

subject of internal audits at the installations we audited. At the Soldier, 

Biological and Chemical Command - Natick, as a result of an internal audit 

of property accountability, the logistics office had worked for over a year to 

improve its management of accountable property. We believe that the 

attention focused on accountable property management was the reason 

that the installation had the best result in our audit. 

Installation

Transactions

with property

items

Transactions

with items not

on property

books

Transactions with

items that command

could not show were

in government’s

possession

Eisenhower Army Medical 

Center

28 8 2

Fort Benning 27 8 6

Fort Hood 40 11 2

Soldier, Biological and 

Chemical Command – Natick

43 4 0

Texas Army National Guard 25 17 1
Page 42 GAO-02-732 Army Purchase Card Control

Others had not done so well in correcting their problems. A Fort Benning 

internal audit completed in April 2001 found that 84 percent of the 

accountable items purchased with a purchase card had not been recorded 

on the property book. An ongoing internal audit by the Texas Army 

National Guard was finding similar property accountability problems. At 

Eisenhower Army Medical Center, an evaluation of the center’s logistics 

operations estimated that $2 million to $5 million of accountable property 

acquired with the purchase card was not on the center’s property books.

Cardholders have little incentive to undertake the required coordination 

and reporting on property items because of the additional work involved. 

Our work showed that items received centrally by logistics officials are 

more likely to be recorded on the property books. Thus, central receiving 

appears to help mitigate against cardholders not assuring accountable 

property is recorded and may be worth pursuing across the board or for 

certain asset types. In addition, we believe that robust monitoring and 

oversight activities of the purchase card program that include examining 

how well cardholders are fulfilling their property management 

responsibilities could help improve property management related to the 

purchase card program. 

Retaining Purchase Card 

Records

During our work we noted several instances in which cardholders and 

approving officials had not maintained purchase card transaction files for 3 

years as required by the Federal Acquisition Regulation, Part 4, Section 

4.805. In our testing, the records most often missing were the ones for 

cardholders who had left the installation. Either the cardholders destroyed 

the records prior to leaving or the replacement cardholder destroyed them 

because they were not the new cardholder’s records. At Eisenhower Army 

Medical Center, a replacement cardholder destroyed the departed 

cardholder’s files because the office had little room to store old files and 

the new cardholders did not see the need to store someone else’s files. In 

Internal control and all transactions and other significant events

need to be clearly documented, and the documentation should be

readily available for examination ... All documentation and records

should be properly managed and maintained. GAO's Standards for

Internal Control in the Federal Government (GAO/AIMD-00-21.3.1,

November 1999)
Page 43 GAO-02-732 Army Purchase Card Control

some cases, we were told that the departed cardholders took the records 

with them to their new installations. In other cases, the records were lost 

when units were deployed. Regardless of the causes, the records were not 

available for our inspection and records retention requirements were not 

complied with. In those instances, we could not document that internal 

control activities had been carried out. 

Although we found no concrete indications of fraud in these situations, the 

lack of records raises concerns about whether the files were destroyed so 

that potentially fraudulent, improper, or abusive transactions were not 

documented. For example, in one case in which the cardholder had left 

the Army, we found charges during the last month of the cardholder’s 

military service from the installation’s liquor store and vendors such as WalMart stores that sell a multitude of potentially personal items. The 

replacement cardholder told us that the purchases were probably for a unit 

party, but the timing of the purchases along with missing documentation 

does not allow ruling out the possibility that items may have been bought 

for personal use. However, the unit’s purchase card records for this period 

were in disarray and invoices and other documentation that could verify 

items purchased or aid further assessments of the propriety of the 

purchases were not available. 

Potentially Fraudulent, 

Improper, and Abusive 

or Questionable 

Transactions

Buying items with purchase cards without the requisite control 

environment creates unnecessary risk of excess outlays, which can range 

from outright fraudulent purchases to ones that were of questionable need 

for the unit’s mission or were unnecessarily expensive. We identified 

purchases at the installations we audited that were potentially fraudulent, 

improper, and abusive or questionable, which can result from a weak 

control environment and weak internal control activities. As discussed in 

appendix I, our work was not designed to identify, and we cannot 

determine, the extent of potentially fraudulent, improper, and abusive or 

otherwise questionable transactions. However, considering the control 

weaknesses identified at each installation, such transactions are likely 

occurring and have not been detected. In addition to the purchases 

identified at the audited installations, our Army-wide data mining of 

selected transactions identified additional cases of potentially fraudulent, 

improper, and abusive or questionable transactions. 
Page 44 GAO-02-732 Army Purchase Card Control

Potentially Fraudulent 

Purchases

The Army has no information as to the extent of potentially fraudulent 

purchases that have been identified or are being investigated within the 

purchase card program. We identified instances of potentially fraudulent 

transactions at three of the five installations we audited and in our Armywide data mining, as table 8 shows. Some of the potentially fraudulent 

transactions were identified in response to our inquiries. Others were 

identified or being investigated independent of our audit. 

Table 8: Examples of Potentially Fraudulent Army Purchase Card Transactions

Source: GAO analysis of Army purchase card transactions and related documentation.

We considered potentially fraudulent purchases to include those made by 

cardholders that were unauthorized and intended for personal use. 

Potentially fraudulent purchases can also result from compromised 

Type of items purchased

Where or how 

identified Total amount Individuals involved

Various items for personal use, such as computer game 

station, computer, digital camera, and surround sound 

system

Eisenhower Army 

Medical Center

$100,000

(estimated)

Cardholder,

approving official, and others

Computer, rings, purses, and clothing from such vendors 

as Victoria’s Secret, Calvin Klein, and others

Eisenhower Army 

Medical Center

30,000

(estimated)

Cardholder

Various items for personal use and cash advances Fort Benning 30,000 Cardholder

Rental cars, cruises, cell phones, hotels, Payless Car 

Rental, Extended Stay America, and other vendors

Fort Benning 20,751 User of alleged stolen card

Car repairs, groceries, clothing, and other personal items Eisenhower Army 

Medical Center

12,832 Cardholder and vendor

Personal clothing, trip to Las Vegas, payments of 

personal bills

Fort Benning 10,748 Cardholder

Sunglasses and other items for personal use from 

Sunglass Hut, Discovery Channel store, and others

Fort Hood 1,452 Separated cardholder, user of 

alleged compromised account

Various personal use items such as food and gas for 

personal vehicles at Shell and other vendors

Fort Benning 1,170 User of alleged stolen card 

Digital camera from Office Max and other personal items 

from Circuit City and various other vendors

Fort Hood 786 Unknown

Escort services Army-wide data 

mining

 630 Cardholder

Prepaid phone cards from MCI, Sprint, and Ameritech, 

and pizza from Larry’s Pizza and Po Boys 

Fort Hood 524 Under investigation

Athletic shoes Army-wide data 

mining

 458 User of alleged compromised 

account

Internet site subscriptions Fort Hood 210 Under investigation
Page 45 GAO-02-732 Army Purchase Card Control

accounts in which a purchase card or account number is stolen and used by 

someone other than the cardholder to make a potentially fraudulent 

purchase. Potentially fraudulent transactions can also involve vendors 

charging purchase cards for items that cardholders did not buy. The 

installations we audited had policies and procedures that were designed to 

prevent and/or detect potentially fraudulent purchases, such as the 

requirement that approving officials review the supporting documentation 

for each transaction for legality and proper government use of funds. 

However, as discussed earlier, our testing showed that these control 

activities had not been implemented as intended. 

Although collusion can circumvent what otherwise might be effective 

internal control activities, a robust system of guidance, internal control 

activities, and oversight can create a control environment that provides 

reasonable assurance of preventing or quickly detecting fraud, including 

collusion. However, in auditing the Army’s internal control at five 

installations during fiscal year 2001, we did not find the processes and 

activities that provide such assurance. 

The following examples of fraud illustrate the cases in table 8. 

• At Eisenhower Army Medical Center, an Army investigation initiated 

near the end of our work has revealed an estimated $100,000 of 

potentially fraudulent purchases. The investigation began when an 

alternate cardholder received an electronic game station that had been 

ordered by another cardholder who was away on temporary duty. The 

alternate cardholder, noting that the purchase did not appear to be for 

government use, notified the program coordinator who notified the local 

Army criminal investigations division. The ensuing investigation 

revealed that the military cardholder, approving official, and several 

other soldiers and civilians colluded to purchase numerous items 

including computers, digital cameras, an audio surround system, a 32-

inch television, a stereo system, and other items for personal use. 

• A Fort Benning military cardholder charged $30,000 for personal goods 

and cash advances before and after retirement. Because these 178 

transactions went undetected, it appears that the approving official’s 

certification was only a “rubber stamp” and was not based on a review 

of the cardholder’s bill, reconciliations, and supporting documentation. 

The approving official not only failed to detect these potentially 

fraudulent transactions while the cardholder was on active military 
Page 46 GAO-02-732 Army Purchase Card Control

duty, but also failed to notice that charges were continuing to be made 

after the cardholder retired. 

• At Eisenhower Army Medical Center, a military cardholder defrauded 

the government of $30,000 from April 25 to June 20, 2001. The 

cardholder took advantage of a situation when the cardholder’s 

approving official was on temporary duty for several months. The 

cardholder believed that the alternate approving official would certify 

the statement for payment without reviewing the transactions or their 

documentation. With this belief, the cardholder purchased a computer, 

purses, rings, and clothing. These fraudulent transactions were not 

discovered until the resource manager who monitored the unit’s budget 

noticed a large increase in spending by the cardholder. The cardholder 

had destroyed all documentation for the 3-month period during which 

these transactions took place. However, investigators found 

merchandise and invoices that showed the cardholder had used the 

government credit card. The cardholder was court-marshaled in April 

2002 and sentenced to 18 months incarceration. These fraudulent 

transactions might not have occurred if the cardholder had known that 

the approving official would review the transactions. At a minimum, 

prompt approving official review would have detected the fraudulent 

transactions. 

• Over a 6-month period in 2001, a civilian cardholder made 62 

unauthorized transactions totaling $12,832 to pay for repairs to a car and 

buy groceries, clothing, and various other items for personal use. We 

were told that the cardholder colluded with the gas station vendor who 

inflated the prices paid for items and received a kickback. The 

approving official identified this case by reviewing the cardholder’s 

August 2001 transactions. The fraud went undetected for several 

months because the approving official had not reviewed the 

cardholder’s bills and supporting documentation for over 5 months. The 

approving official has been relieved of approving official duties and 

reprimanded. The investigation into the fraud was ongoing at the end of 

our fieldwork. 

• In our Army-wide data mining, we identified a cardholder transaction 

for $630 on June 15, 2001, that was coded as being an escort service. In 

response to our inquiry on this transaction, we were informed that no 

authorization existed for the transaction and that it was with an escort 

service in New Jersey. In discussions with provost marshal officials, we 

were informed that the cardholder had been investigated in February 
Page 47 GAO-02-732 Army Purchase Card Control

2002 because of money missing from chapel funds. The provost 

marshal’s office, after our March 2002 inquiry about the $630 

transaction, investigated it and other suspicious charges by the 

cardholder. The investigators could not get an invoice from the vendor. 

Their investigations revealed no other fraudulent, improper, or abusive 

and questionable transactions. They determined that for a short period, 

the cardholder was also serving as the billing official and that it was 

during this period that the fraudulent transaction with the escort service 

occurred. Disciplinary actions included removing the soldier from 

cardholder duties, reducing his rank, taking one-half month’s pay for 2 

months, requiring 45 days extra duty, and ordering repayment of the 

funds. 

• During June 2001 at Fort Hood, several purchases of prepaid telephone 

cards and pizza totaling $524 were made and certified for payment by a 

new approving official who did not realize that the cardholder had 

separated from the Army in early 2001. In attempting to respond to our 

request for supporting information for one of the transactions, the 

approving official recognized that the charges were potentially 

fraudulent. In the subsequent investigation, an investigator found that 

the purchase card account was still active in December 2001. This case 

remained under investigation as of January 2002. 

In addition to the potentially fraudulent cases identified by our work, we 

attempted to obtain other examples of potentially fraudulent activity in the 

Army purchase card program from the Army’ Criminal Investigation 

Command in Washington, D.C. However, data on the command’s 

investigations were not available. Further, while Army investigators 

acknowledge that they have investigated a number of fraud cases, their 

database on investigations does not allow retrieval of data on 

investigations involving potentially fraudulent use of purchase cards. 

Purchase card program officials and Army investigation command officials 

said that they had no information on the total number of fraud investigation 

cases throughout the Army that had been completed or were ongoing. 

Based on our identification of a number of potentially fraudulent cases at 

the installations that we audited, we believe that the number of cases 

involving potentially fraudulent transactions could be significant. Without 

such data, the Army does not know the significance of fraud cases that 

have been or are being investigated and cannot take corrective actions, to 

the extent possible, to prevent similar potentially fraudulent cases in the 

future.
Page 48 GAO-02-732 Army Purchase Card Control

Improper Purchases and 

Transactions

Our work identified transactions that were improper, including split 

purchases and purchases from nonmandatory sources. Improper 

transactions are those purchases that, although approved by Army 

personnel and intended for government use, are not permitted by law, 

regulation, or DOD policy. We identified three types of improper 

purchases. One type was purchases that did not serve a legitimate 

government purpose. Another type was split purchases in which the 

cardholder circumvents cardholder single purchase limits. The Federal 

Acquisition Regulation guidelines prohibit splitting purchase 

requirements into more than one transaction to avoid the need to obtain 

competitive bids on purchases over the $2,500 micropurchase threshold or 

to circumvent higher single transaction limits for payments on deliverables 

under requirements contracts. The third type was purchases from an 

improper source. Various federal laws and regulations require 

procurement officials to acquire certain products from designated sources 

such as the Javits-Wagner-O'Day Act (JWOD) vendors. The program 

created by this act is a mandatory source of supply for all federal entities. 

It generates jobs and training for Americans who are blind or have other 

severe disabilities by requiring federal agencies to purchase supplies and 

services from nonprofit agencies, such as the National Industries for the 

Blind and the National Institute for the Severely Handicapped. 

Personal Use We found several instances of purchases, such as clothing, in which 

cardholders purchased goods that were not authorized by law or 

regulations. The Federal Acquisition Regulation provides that the 

governmentwide commercial purchase card may be used only for 

purchases that are otherwise authorized by law or regulations. Therefore, 

a procurement using the purchase card is lawful only if it would be lawful 

using conventional procurement methods. Under 31 U.S.C. 1301(a), 

“[a]ppropriations shall only be applied to the objects for which the 

appropriations were made....” In the absence of specific statutory 

authority, appropriated funds may only be used to purchase items for 

official purposes, and may not be used to acquire items for the personal 

benefit. The improper transactions, as shown in table 9, were identified as 

part of our review of fiscal year 2001 transactions and related activity. We 

identified most of them as part of our Army-wide data mining of 

transactions with questionable vendors although several were identified as 

part of our work at the five audited installations.
Page 49 GAO-02-732 Army Purchase Card Control

Table 9: Examples of Purchases Intended for Personal Use

 Source: GAO analysis of Army purchase card transactions and related documentation.

The following examples of the improper transactions illustrate of the type 

of cases included in table 9.

• We identified purchases of clothing by Soldier, Biological and Chemical 

Command – Natick that should not have been purchased with 

appropriated funds. According to 5 U.S.C. 7903, agencies are authorized 

to purchase protective clothing for employee use if the agency can show 

that (1) the item is special and not part of the ordinary furnishings that 

an employee is expected to supply, (2) the item is essential for the safe 

and successful accomplishment of the agency’s mission, not solely for 

the employee’s protection, and (3) the employee is engaged in hazardous 

duty. Further, according to a Comptroller General decision dated

March 6, 1984,20 clothing purchased pursuant to this statute is property 

of the U.S. government and may only be used for official government 

Items Vendor

Clothing

 Gore-Tex parkas

 Rain coats

 Civilian clothes for military staff

 Clothing and meeting facilities after golf

 tournament

 Bomber jackets

L.L. Bean

Cabellas

Macy’s and Hecht’s

Heraldic United Waddinxveen and 

 Heidelberg Golf Course 

SkyMall

Meals/food

 Elegant fruit baskets

 Teacher appreciation dinners

 Meals for training event

 Meals for firemen

 Personal meals

Resort

Catering services 

Catering services 

Catering services

Local restaurants

Other 

 Cell phone time charges

 Sales taxes

 Radio for personal use

 Personal luggage 

 Portable office carriers

 Hotel facilities and services

AT&T Wireless

Various 

Bose

Luggage On-Line

International Luggage Center

Opryland Hotel

2063 Comptroller General Decisions 245, 247 (1984). In requesting the Comptroller General’s 

approval of the purchases, the agency represented that “the parkas would be labeled as 

[agency] property, centrally controlled, and issued and reissued to employees only for job 

requirements.” 
Page 50 GAO-02-732 Army Purchase Card Control

business. Thus, clothing purchases, except for rare circumstances in 

which the purchase meets stringent requirements, is usually considered 

a personal item for which appropriated funds should not be used. In 

one transaction, a cardholder had purchased 10 L.L. Bean Gore-Tex 

parkas at a total cost of about $2,400 for employees who worked outside 

in cold weather. These parkas were not specialty items, and they were 

not used solely for official use. The employees were allowed to take the 

parkas home and wear them in off-duty hours.

• In another example of clothing for personal use from our Army-wide 

data mining, several charges for amounts from $330 to $770 were 

identified at Macy’s and Hecht’s. We were informed that these were for 

purchases of civilian clothes for enlisted personnel who are serving as 

assistants to general officers. We were informed by the Director, 

Purchase Card Unit, Defense Contracting Command Washington, that 

this appears to be a fairly widespread practice and that the practice is 

clearly improper and is believed to violate fiscal law. 

• As part of our data mining of Army-wide purchase card transactions, we 

identified a questionable transaction, which a subsequent investigation 

determined that a cardholder purchased a Bose radio for $523 to use in 

his office. The radio was clearly for his personal use in his office; 

therefore, it should not have been purchased with the Army purchase 

card. The employee was required to reimburse the U.S. Treasury for the 

cost of the radio. A broader review of the purchases made by this 

cardholder’s unit revealed other problems similar to those we identified 

in our work such as property accountability, not purchasing from 

mandatory sources, purchases at excessive costs, and missing records. 

As with our other work, these problems indicate that approving officials 

were not adequately reviewing cardholder transactions. 

• In our Army-wide data mining we identified charges by two cardholders 

under one approving official of about $7,600 at the Opryland Hotel in 

Nashville, Tennessee, in November 2000. In response to our inquiry, we 

were told that these charges were unexpected and resulted from the 

Chief Information Officer’s Management Conference at the hotel in 

August 2000. The charges were unexpected because registration fees 

were to cover all charges. After a large bill of over $20,000 was 

eventually reduced to about $7,600, the supervisor instructed the 

cardholders to pay the additional charges with their purchase cards. 

However, to pay the $7,600 in charges of less than $2,500 and avoid 

obvious split purchases, the bill was split into segments and divided 
Page 51 GAO-02-732 Army Purchase Card Control

between two cardholders. The amounts paid were $2,500 for longdistance phone calls, $934 for phone line hookup, $2,500 for meeting 

room rental, and $1,715 for audio visual services. However, because 

separate invoices for the charges do not exist, the officials can neither 

support the correct amount of any charges nor support that the charges 

are for purposes permitted by law, regulation, or policy. 

• Fort Hood paid improper and excessive cell phone charges because no 

one was monitoring them. The information management division’s 

approving official certified the installation’s consolidated monthly 

charges for payment for over 1,100 cell phones and over $50,000 

monthly time charges without reviewing the usage. While local 

procedures require the units using the cell phones to verify their own 

monthly usage, the procedures do not address how and when this is to 

be done. We found that some units had not routinely verified the 

charges. Others, who said they usually did verify their charges, could 

not for the period November 2001 through March 2002 because a change 

in the phone company’s billing processes did not allow the units to have 

access to their monthly charges. Without reviewing the charges, the 

Army has no assurance that charges are proper and not excessive. We 

reviewed current usage and identified excessive monthly time charges 

and charges for phones that had no monthly usage. For example, one 

cell phone user, who had a $79.95 per month plan that allowed 650 

minutes of airtime, used 3,400, 2,696, and 1,915 minutes during a 3-

month period and incurred time charges of $1,040, $795, and $523. Fort 

Hood officials told us that improper and excessive charges occur 

because units do not have the appropriate monthly plan. In the above 

example, the unit could have reduced its costs to $550, $374, and $200—

a 52 percent savings—with an appropriate plan. Fort Hood officials also 

told us that excessive costs occur because of personal use. They said 

that when they identified charges for unauthorized personal use, they 

require employees to reimburse the government for these improper 

charges. However, without monitoring, use of uneconomical plans and 

unauthorized personal use would not be identified.

Split Purchases Another category of improper transaction is a split purchase, which occurs 

when a cardholder splits a transaction into more than one segment to avoid 

the requirement to obtain competitive bids for purchases over the $2,500 

micropurchase threshold or to avoid other established credit limits. The 

Federal Acquisition Regulation prohibits splitting a purchase into more 

than one transaction to avoid the requirement to obtain competitive bids 

for purchases over the $2,500 micropurchase threshold or to avoid other 
Page 52 GAO-02-732 Army Purchase Card Control

established credit limits. Once items exceed the $2,500 threshold, they are 

to be purchased through a contract in accordance with simplified 

acquisition procedures, which are more stringent than those for 

micropurchases. 

Our analysis of data on purchases at the five installations we audited and 

our data mining efforts identified numerous occurrences of potential split 

purchases. In addition, internal auditors at four of the installations 

identified split purchases as a continuing problem. In some of these 

instances, the cardholder’s purchases exceeded the $2,500 limit, and the 

cardholder “split” the purchase into two or more transactions of $2,500 or 

less. For example, in our Army-wide data mining, we identified a series of 

split purchases at Fort Stewart, Georgia. An approving official had two 

cardholders spend $16,000 over a series of days to buy numerous pieces of 

executive office furniture for the official’s office that was located on the 

mezzanine of a warehouse. These purchases included elegant desks, 

chairs, and a conference table. 

We also identified numerous cases where the Army is making repetitive 

micropurchases to meet requirements that in total greatly exceed the 

micropurchase limit. While some repetitive purchases might not clearly be 

split purchases, the Army is not taking advantage of a mechanism designed 

to foster lower prices for repetitive acquisitions of similar items over an 

extended period. Section 13.303-1 of the Federal Acquisition Regulation

provides for blanket purchase agreements as a “simplified method of filling 

anticipated repetitive needs for supplies or services.” Use of a blanket 

purchase agreement, rather than repetitive, individual micropurchases, 

could lower per unit prices for the goods or services acquired. Below we 

discuss four situations in which blanket purchase orders should have been 

used.

• At the Soldier, Biological and Chemical Command – Natick, the public 

works department routinely used the same vendors 35 times to provide 

and install carpeting, 25 times to provide heating and air conditioning 

services, and 39 times to provide graphic display services. Although 

each of the transactions for these vendors was under the micropurchase 

limit, the total purchases for fiscal year 2001 were about $38,000, 

$44,000, $77,000, respectively. However, the installation did not have a 

blanket purchase agreement with the vendors. In these instances the 

public works department officials had not recognized they needed such 

a contract, and they agreed to pursue one. We noted that the installation 
Page 53 GAO-02-732 Army Purchase Card Control

had blanket purchase agreements for other similar circumstances that 

the internal auditor identified. 

• At the Texas Army National Guard, the Occupational Health Office used 

purchase cards to pay for routine medical examinations and to buy 

ergonomic chairs and safety glasses for employees. While the individual 

cost for purchases were much less than the micropurchase limit, the 

total annual cost significantly exceeds the limit. For instance, the office 

paid over $80,000 for about 705 examinations at a dozen clinics and 

hospitals throughout the state in the first 10 months of fiscal year 2001. 

The guard also used purchase cards to pay for meals provided troops 

while they attended mandatory weekend drills or training. While the 

individual cost for any single guard unit’s training meal would rarely 

exceed the single-purchase $2,500 limit, the total recurring cost of the 

meals is one of the guard’s largest annual expenses—over $500,000 in 

the first 10 months of fiscal year 2001. 

• At Fort Benning, the Dismounted Battlespace Battle Lab, a combat 

training unit, routinely purchased doors that were destroyed during 

training exercises to instruct troops how to enter a building that may 

contain an enemy. The battle lab spent $111,721 in 84 transactions with 

one vendor to buy doors during a 10-month period in fiscal year 2001, 

but the unit did not have a blanket purchase agreement. In this case, 

battle lab officials had refused attempts by the Fort Benning contracting 

division and purchase card program coordinator to execute an 

agreement. We found that the battle lab also needed a contract for the 

numerous computer modems it purchased. Further, in these purchases, 

the battle lab cardholder’s purchasing pattern was to split purchases to 

avoid the micropurchase limit of $2,500. We saw numerous instances in 

which the cardholder made more than one purchase near the limit for 

the same item over a short period. 

• In a data-mining example, the Army Personnel Command made 

repetitive buys of interment flag cases from the same vendor. Data 

show that three purchases, two for $2,250 and one for $1,800, were 

made on the same day and that in total the command purchased 438 

cases for $65,700 in calendar year 2001. The command has agreed that 

purchases in the future will be on a yearly basis in a competitive 

contract.

Improper Source Another type of improper purchase occurs when cardholders do not buy 

from a mandatory procurement source. Various federal laws and 
Page 54 GAO-02-732 Army Purchase Card Control

regulations require government cardholders to acquire certain products 

from designated sources. For example, the program created by JWOD 

generates jobs and training for Americans who are blind or have other 

severe disabilities by requiring federal agencies to purchase supplies and 

services furnished by nonprofit agencies, such as the National Industries 

for the Blind and the National Institute for the Severely Handicapped. 

Under the Federal Acquisition Regulation, Part 8.7, JWOD is a mandatory 

source of supply for all entities of the government. Unlike the "Buy 

American" Act and other rules that have been waived by recent 

procurement reform measures, JWOD’s mandatory status remains in effect 

for all purchases, including those under the micropurchase threshold. 

Most JWOD items are of small value such as office supplies, cleaning 

products, or medical/surgical supplies that nearly always fall into the 

micropurchase category. 

While procurement source was not the primary focus of our work, we 

noted that cardholders frequently did not purchase from required sources 

when they should have. For example, we noted numerous purchases of 

office supplies or other JWOD-supplied products from local vendors when 

these or substantially similar products were available from the General 

Services Administration or one of its contractors’ catalogs or Web sites. We 

also noted that some cardholders did not know their responsibilities or the 

requirements, despite the fact that these requirements are a primary 

emphasis during cardholder training programs. For example, some said 

that they had not heard of JWOD or either of the institutes that cardholders 

should use. As further evidence of cardholders’ noncompliance with this 

mandatory source requirement, the Director of Sales for the National 

Industries for the Blind told us about large decreases in sales of JWOD 

products at Fort Hood and other Army installations over the past 2 years 

because cardholders were purchasing from commercial firms rather than 

buying the mandatory products. 

The following two examples involving Franklin Covey illustrate the 

situations we found.

• In our data mining work, we identified a cardholder at Tooele Army 

Depot who made 10 purchases for a total of about $11,900 from Franklin 

Covey, with most of the purchases in August 2001. These purchases 

were primarily for inserts to day planners, an item that is available from 

the JWOD catalog. In response to our questions as to why the 

mandatory source was not used, we were advised that (1) in the past 

JWOD planners were not used by the self-service store’s customers 
Page 55 GAO-02-732 Army Purchase Card Control

because they did not include pages with dates for each day and

(2) under an interpretation that is now recognized to be in error, the 

purchases were made from another source under the premise that 

planners from JWOD did not meet customer needs. We were informed 

that future purchases of planners would be in one purchase through 

JWOD.

• In another case, a unit spent $3,100 over an 18-month period to purchase 

day planners from Franklin Covey. One item cost $199 and another 

$250. In contrast, cardholders can buy JWOD day planners for about 

$40. 

In fiscal year 2001, the Army made more than 4,700 purchases costing 

about $792,000 dollars from Franklin Covey. A review of individual 

purchases, which we did not make, would be required to determine which 

purchases were for items that should have been from a mandatory source. 

However, we believe it is likely that many of these purchases could have 

been for JWOD products. 

Abusive or Questionable 

Purchases 

We identified numerous examples of abusive or questionable transactions 

at each of the five installations we audited. We defined abusive 

transactions as those that were authorized, but the items purchased were 

at an excessive cost (e.g., “gold plated”) or for a questionable government 

need, or both. When abuse occurs, no law or regulation is violated. Rather, 

abuse occurs when the conduct of a government organization, program, 

activity, or function falls short of societal expectations of prudent behavior. 

Often, improper purchases such as those discussed in the previous section 

are also abusive. Transactions that are both improper and abusive were 

discussed previously. For example, the executive furniture purchased at 

Fort Stewart discussed earlier as improper split purchases were also 

abusive purchases. We believe that this type furniture was not in keeping 

with the office environment and not justified by the official’s position or 

grade level. Another example is the excessive cell phone charges at Fort 

Hood. 

Questionable transactions are those that appear to be improper or abusive 

but for which there is insufficient documentation to conclude either. For 

questionable items, we concluded that cardholders purchased items for 

which there was not a reasonable and/or documented justification. 
Page 56 GAO-02-732 Army Purchase Card Control

Questionable purchases often do not easily fit within generic 

governmentwide guidelines on purchases that are acceptable for the 

purchase card program. They tend to raise questions about their 

reasonableness. Many, such as gym quality exercise equipment, are 

common Army—and DOD—purchases because the Army must provide 

more than merely a work environment for its soldiers. However, others, 

like the fine china purchased for the culinary arts team competition 

discussed below, clearly raise questions about whether they are 

appropriate purchases. Precisely because these types of purchases tend to 

raise questions and subject the Army to criticism, they require a higher 

level of prepurchase review and documentation than other purchases. 

These types of purchases raise questions that go beyond the confines of the 

purchase card program. 

When we examined purchases that raised these types of questions, we 

usually did not find evidence of prepurchase justification. In attempting to 

justify whether purchases were acceptable, improper, or abusive, program 

coordinators, approving officials, and cardholders often provided an afterthe-fact rationale for the purchases. We believe that these types of 

questionable purchases require scrutiny before the purchase, not after. 

Table 10 identifies examples of these types of purchases.

Table 10: Examples of Abusive or Questionable Purchases

Description of purchase Where or how identified Total amount

Palm Pilots for Pentagon officials Army-wide data mining $30,000

Palm VI personal digital assistants Texas Army National 

Guard

 13,400

Crystal, china, and accessories for culinary 

arts

Fort Hood and Army-wide 

data mining

Over 3,800

Sunglasses for Golden Knights parachute 

team

Army-wide data mining 2,450

Tree for Earth Day Soldier, Biological and 

Chemical Command – 

Natick

 2,250

Meals for battle labs without sufficient 

documentation to determine if improper

Fort Benning 1,700

Two unframed Elvis Presley pictures from 

Graceland

Fort Hood 550

John Elway jersey – framed Soldier, Biological and 

Chemical Command – 

Natick

 450
Page 57 GAO-02-732 Army Purchase Card Control

Source: GAO analysis of Army purchase card transactions and related documentation.

To understand more fully the nature of potentially questionable purchases, 

we selected six of the examples above to explain in more detail below. 

• Palm Pilots for Pentagon officials. In February 2001, two purchases for 

a total of 80 Palm Pilots at a total cost of $30,000 were made for the 

Office of the Under Secretary of Defense for Acquisition, Technology, 

and Logistics. Two questions about this purchase are whether a valid 

need had been identified for the purchase and whether the urgency of 

the purchase justified the purchase from a vendor that could deliver 

immediately but was charging $1,540 more than the lowest competitor. 

No documentation was available to show how the office had determined 

that 80 Palm Pilots were a valid government requirement. An e-mail 

related to the purchase suggested that there was a need “to get enough 

goodies for everyone.” The documentation also suggested that the items 

were being ordered for inventory and would be issued to personnel 

when requested. This does not indicate a predetermined requirement 

and does not appear to support that the requirement was urgent, as the 

office determined. Based on the determination of urgency, the price 

paid was $1,540 more than the lowest competitor’s price so that delivery 

could be immediate.

• Culinary arts. At Fort Hood and during our Army-wide data mining 

effort, we noted several purchases for various culinary arts events. 

Among the purchases were fine china and crystal from Royal Doulton 

and Lenox. Other purchases were for accessories such as a rotating 

lighted ice-carving pedestal. Although participation in culinary arts 

team events is an approved Army activity, the transactions we examined 

and inquired about did not have a documentation of the need for the 

specific items purchased. Although the transactions we examined 

totaled about $3,800, we believe that the total cost of such purchases 

Army-wide is far more. We were told that purchases of culinary arts 

accessories are common throughout the Army. One reason, we were 

told, is because most installations have culinary arts teams that attend 

competitions involving the use of expensive accessories and fine crystal 

and china.

Cigars Army-wide data mining 300

Wine Army-wide data mining 150

(Continued From Previous Page)

Description of purchase Where or how identified Total amount
Page 58 GAO-02-732 Army Purchase Card Control

• Sunglasses for the Golden Nights parachute team. In February 2001, a 

cardholder purchased 30 pair of sunglasses from Sunglass Hut at about 

$100 each for a net cost of $2,450—some glasses were returned for 

credit from a prior purchase—for the Golden Knights. In response to 

our inquiry about this purchase, we were told that it was not 

preapproved and that sunglasses were authorized in the common table 

of allowances when they are needed for training. However, because 

goggles are worn during parachute jumps, not sunglasses, we believe 

these purchases were personal use items and thus of questionable 

government need. The approving official for the transaction believed 

that the purchase was appropriate. According to the official, the 

parachute team has 85 members and the purchase was for new 

members. 

• Tree for Earth Day. The Environmental, Safety and Health Office at the 

Soldier, Biological and Chemical Command – Natick bought a $2,250 

tree to plant in celebration of Earth Day. Although this transaction did 

not have documented approval prior to purchase or a documented 

justification for its need, we were told that the tree was purchased for 

the commanding general to plant among a grove of other trees between 

two installation buildings during an Earth Day celebration. While 

planting a tree for Earth Day may be an acceptable expenditure of 

government funds, we believe the expenditure of over $2,200 for a tree 

is an excessive cost. 

• Cigars. In April 2001 a cardholder at Schofield Barracks in Hawaii 

purchased three boxes of Hula Girl Cigars for $300. According to 

information provided in response to our inquiry about the purchase, the 

cardholder bought the cigars for gifts to VIPs to be presented by the 

Commanding General, 25th Infantry Division, Schofield Barracks, 

during deployment on an exercise in Thailand. The purchaser was an 

acting protocol officer during a changeover in officers and did not have 

an approving official reviewing the purchases. No documentation was 

available from the Army to demonstrate that this purchase was a valid 

government need. The current Chief of Protocol said that no other 

cigars had been purchased.

• Wine. A cardholder purchased two cases of wine on September 20, 

2001, from the Naked Mountain Vineyard. After we questioned this 

purchase, the Army concluded that the cardholder had used the wrong 

card to purchase the wine, but it had corrected the error to put the 

purchase in the correct accounting classification. An Army official 
Page 59 GAO-02-732 Army Purchase Card Control

assured us that the purchase was appropriately authorized by 

“competent authority in the course of execution of a highly classified, 

compartmented program.” We were provided no evidence that this 

purchase was a valid government need. 

Conclusions We support the use of a well-controlled purchase card program. It is a 

valuable tool for streamlining the government’s acquisition processes. 

However, the Army program is not well controlled. The Army’s weak 

control environment was the root cause of the problems we saw with 

purchase card transactions, including the potentially fraudulent, improper, 

and abusive or questionable purchases. The Army has not provided the 

aggressive leadership needed to build and maintain an internal control 

infrastructure that encourages a strong control environment that provides 

accountability. Such an environment is an important counterbalance to the 

increased risk of potentially fraudulent and wasteful spending that results 

from the rapidly expanding use of the purchase card. The Army now 

spends billions of dollars through a purchase card program for which 

internal control is not adequate and for which appropriate management 

oversight does not exist. The Army needs to ensure that installation-level 

program coordinators, the primary program management officials, have the 

tools to develop local control systems and oversight activities. 

Strengthening the control environment will require a renewed focus on, 

and commitment to, building a robust purchase card infrastructure. The 

installations and major commands we audited have been responsive to our 

findings, and they have begun to make changes at their levels. However, 

the major changes to the Army purchase card program infrastructure that 

are essential to encouraging and enabling improvements in the overall 

control environment await action at the Army and DOD management 

levels. 

Recommendations for 

Executive Action 

To strengthen the overall control environment and improve internal control 

for the Army’s purchase card program, we recommend that the Secretary of 

the Army direct the Deputy Assistant Secretary of the Army (Procurement) 

and other Army officials as appropriate to improve the overall Army 

purchase card infrastructure by taking the following actions. 
Page 60 GAO-02-732 Army Purchase Card Control

Overall Program 

Management and 

Environment

• Address key control environment issues in Army-wide standard 

operating procedures. At a minimum, the following key issues should 

be included in the procedure:

• controls over the issuance and assessment of ongoing need for cards;

• cancellation of cards when a cardholder leaves the Army, is 

reassigned, or no longer has a valid need for the card; 

• span of control of the approving official; and 

• appropriate cardholder spending limits. 

• Help ensure that program coordinators and approving officials have the 

needed authority, including grade level, to serve as the first line of 

defense against purchase card fraud, waste, and abuse by issuing a 

policy directive that specifically addresses their positions, roles, and job 

descriptions. Policies should also be established that hold these 

officials accountable for their purchase card program duties through 

performance expectations and evaluations.

• Assess the adequacy of human capital resources devoted to the 

purchase card program, especially for oversight activities, at each 

management level, and provide needed resources. 

• Develop and implement a program oversight system for program 

coordinators that includes standard activities and analytical tools to be 

used in evaluating program results. 

• Develop performance measures and goals to assess the adequacy of 

internal control activities and the oversight program. 

• Require reviews of existing cardholders and their monthly spending 

limits to help ensure that only those individuals with valid continuing 

purchasing requirements possess cards and that the monthly spending 

limits are appropriate for the expected purchasing activity. These 

reviews should result in canceling unneeded cards Army-wide and 

especially at Fort Hood where we found a significant problem. 
Page 61 GAO-02-732 Army Purchase Card Control

Specific Internal Control 

Activities

• Direct the implementation of specific internal control activities for the 

purchase card program in an Army-wide standard operating procedure. 

While a wide range of diverse activities can contribute to a system that 

provides reasonable assurances that purchases are correct and proper, 

at a minimum, the following activities should be included in the 

promulgated procedure:

• advance approval of purchases, including blanket approval for 

routine, low dollar purchases;

• independent receiving and acceptance of goods and services; 

• independent review by an approving official of the cardholder’s 

monthly statements and supporting documentation; 

• approving official reconciling the charges on the monthly statement 

with invoices and other supporting documentation and forwarding 

the reconciled statement to the designated disbursing office for 

payment as required by governmentwide and DOD regulations; and 

• cardholders obtaining and retaining invoices that support their 

purchases and provide the basis for reconciling cardholder 

statements. 

• Develop and implement procedures and checklists for approving 

officials to use in the monthly review of cardholders’ transactions. 

These procedures and checklists should specify the type and extent of 

review that is expected and the required review documentation.

• Reiterate records retention policy for purchase card transaction files 

and require that compliance with record retention policy be assessed 

during the program coordinator’s annual review of each approving 

official. 

• Require the development and implementation of coordination and 

reporting procedures to help ensure that accountable property bought 

with the purchase card is brought under appropriate control.
Page 62 GAO-02-732 Army Purchase Card Control

Potentially Fraudulent, 

Improper, and Abusive and 

Questionable Purchases

• Require additional prior documented justification and approval of those 

planned purchases that are “questionable”—that fall outside the normal 

procurements of the cardholder in terms of either dollar amount or type 

of purchase.

• Analyze the procurements of continuing requirements through 

micropurchases and require the use of appropriate contracting 

processes to help ensure that such purchases are acquired at best 

prices. 

• Develop an Army-wide database on known fraud cases that can be used 

to identify potential deficiencies in existing internal control and to 

develop and implement additional control activities, if warranted or 

justified.

• Develop and implement an Army-wide data mining, analysis, and 

investigation function to supplement other oversight activities. This 

function should include providing oversight results and alerts to major 

command and installations when warranted. 

We also recommend that the Under Secretary of Defense (Comptroller) 

direct the Charge Card Task Force to assess the above recommendations, 

and to the extent applicable, incorporate them into its recommendations to 

improve purchase card policies and procedures throughout DOD. 

Agency Comments and 

Our Evaluation

In written comments on a draft of this report, which are reprinted in 

appendix III, DOD concurred with our recommendations. Although 

concurring with our recommendation for an Army-wide standard operating 

procedure directing the implementation of specific internal control 

activities, DOD took exception to broad application of advance approval of 

purchases and independent receiving and acceptance of goods and services 

in an Army-wide standard operating procedure. DOD said that broad 

application of those activities would add costs to the process without a 

comparable reduction in risk. However, DOD recognized the applicability 

of these activities in some circumstances and commented that the Army 

standard operating procedure will (1) include a list of items requiring 

advance approval and (2) require advance approval for a category of items 

that fall outside the “common sense” rule. 
Page 63 GAO-02-732 Army Purchase Card Control

We continue to believe that both advance approval and independent 

receiving are important internal control activities and have applicability to 

the Army purchase card program, including many micropurchases. We 

recognize that not all purchases require specific advance approval and 

some small dollar and other purchases may not lend themselves to 

documented independent receiving. Therefore, the Army-wide standard 

operating procedure should (1) discuss the criteria for determining when 

these control activities are applicable and (2) articulate guidelines for 

implementing them. 

As agreed with your offices, unless you announce its contents earlier, we 

will not distribute this report until 30 days from its date. At that time, we 

will send copies to interested congressional committees; the Secretary of 

Defense; the Under Secretary of Defense for Acquisition, Technology, and 

Logistics; the Under Secretary of Defense (Comptroller); the Secretary of 

the Army; the Assistant Secretary of the Army for Acquisition Logistics and 

Technology; the Deputy Assistant Secretary of the Army (Policy and 

Procurement); the Director of the Army Contracting Agency; the Director 

of the Defense Finance and Accounting Service; and the Director of the 

Office of Management and Budget. We will make copies available to others 

upon request. 
Page 64 GAO-02-732 Army Purchase Card Control

Please contact Gregory D. Kutz at (202) 512-9505 or kutzg@gao.gov,

Ronald D. Malfi at (202) 512-7420 or malfir@gao.gov, or David Childress at 

childressj@gao.gov if you or your staffs have any questions concerning this 

report. Major contributors to this report are acknowledged in appendix IV.

Gregory D. Kutz

Director

Financial Management and Assurance

Ronald D. Malfi 

Acting Managing Director 

Office of Special Investigations 
Page 65 GAO-02-732 Army Purchase Card Control

Appendix I

Scope and Methodology AAppenednxidexiIs

We audited the adequacy of the Army’s internal control over authorization, 

purchasing, and payment of fiscal year 2001 purchase card transactions. 

The Army’s purchase card program is the largest of the services, with the 

most cardholders, transactions, and dollars spent. We are also performing 

audits of the other services and will report the results of those audits 

separately. For the Army, we performed work in the major commands that 

have the largest purchase card programs, accounting in fiscal year 2001 for 

about 66 percent of total Army purchases and about 62 percent of total 

Army transactions. We conducted detailed work at the following major 

commands and installations. 

Table 11: Major Commands and Installations Audited

Source: U.S. Army organizational tables. 

At the Army and major command levels we evaluated the policies and 

procedures used to guide the purchase card program, and we evaluated the 

activities they engage in to oversee the program. At the installation level, 

we used a case study approach to evaluate the local purchase card 

program, and our work there consisted of three major segments. We 

evaluated the overall control environment, including the adequacy of the 

Army’s policies and procedures. We evaluated the implementation of key 

internal control activities at the installations. Finally, we identified 

evidence of potentially fraudulent, improper, or abusive or questionable 

transactions at each audited installation and conducted limited follow-up. 

To assess the control environment, we examined the installations’ policies 

and procedures and oversight activities. To assess their adequacy, we used 

as our primary criteria applicable laws and regulations; our Standards for 

Internal Control in the Federal Government (GAO/AIMD-00-21.3.1, 

Major command Installation and location

Forces Command Fort Hood

 Killeen, Texas

Material Command Soldier, Biological Chemical Command – Natick

 Natick, Massachusetts

Training and Doctrine Command Fort Benning

 Columbus, Georgia

Army National Guard Texas Army National Guard

 Austin, Texas

Medical Command Eisenhower Army Medical Center 

 Ft. Gordon, Augusta, Georgia
Appendix I

Scope and Methodology

Page 66 GAO-02-732 Army Purchase Card Control

November 1999); and our Internal Control Standards: Internal Control 

Management and Evaluation Tool (GAO-01-1008G, August 2001). To 

assess the management control environment, we applied the fundamental 

concepts and standards in our internal control standards to the practices 

followed by management. 

To test the implementation of specific control activities at the five 

installations we audited, we selected a stratified random sample 

probability of 150 purchase card transactions from the population of 

transactions paid from October 1, 2000, through July 31, 2001, for each of 

the installations. With these statistically valid probability samples, each 

transaction in the five installations’ populations had a nonzero probability 

of being included, and that probability could be computed for any 

transaction. Within each installation we stratified the population of 

transactions by the dollar value of the transaction and by whether the 

transaction was likely to be for a purchase of computer-related equipment. 

Each sample transaction in an installation was subsequently weighted in 

the analysis to account statistically for all the transactions in the 

population of that installation, including those that were not selected.

For each transaction sampled, we tested whether key internal control 

activities had been performed. For each control activity tested, we 

projected an estimate of the percent of transactions for which the control 

activity was not performed, for each installation. Because we followed a 

probability procedure based on random selections of transactions, our 

sample for each installation is only one of a large number of samples that 

we might have drawn. Since each sample could have produced different 

estimates, we express our confidence in the precision of our particular 

samples’ results (that is, the sampling error) as 95 percent confidence 

intervals. These are intervals that would contain the actual population 

value for 95 percent of the samples we could have drawn. As a result, we 

are 95 percent confident that each of the confidence intervals in this report 

will include the true (unknown) values in the study populations.

Although we projected the results of our samples to the populations of 

transactions at the respective installations, the results cannot be projected 

to the population of Army transactions or installations.

For the sampled transactions that were for accountable items, we tested 

whether they had been recorded in the installation’s property book records 

and whether the installation could demonstrate the item’s existence. We 

did not project the results of this test because some transactions contained 
Appendix I

Scope and Methodology

Page 67 GAO-02-732 Army Purchase Card Control

so many accountable items—as many as 500—that we elected to perform a 

nonstatistical analysis of the degree to which these items were recorded in 

property books.

In addition to our review of a statistical sample of transactions at the five 

audited installations, we also identified other selected transactions at the 

five locations and throughout the Army’s fiscal year 2001 purchase card 

transactions to determine if indications exist of potentially fraudulent, 

improper, and abusive or questionable transactions. Our data mining 

included identifying transactions with certain vendors that had a more 

likely chance of selling items that would be unauthorized or that would be 

personal items. For a small number of these transactions at each of the five 

installations and from the Army-wide database, we requested limited 

documentation, usually the supporting invoice, that could provide 

additional indications as to whether the transactions were potentially 

fraudulent, improper, and abusive or questionable. If the additional 

documentation indicated that the transactions were proper and valid, we 

did not further pursue documentation on those transactions. If the 

additional documentation was not provided or if it indicated further issues 

related to the transactions, we obtained and reviewed additional 

documentation or information about these transactions. While we 

identified some potentially fraudulent, improper, and abusive or 

questionable transactions, our work was not designed to identify, and we 

cannot determine, the extent of potentially fraudulent, improper, or 

abusive transactions. Because of the large number of transactions that met 

these criteria, we did not look at all potential abuses of the purchase card. 

For those potentially fraudulent transactions that had been or were being 

investigated at the five audited installations, we discussed the cases with 

the investigators and/or obtained records and reports on the investigations. 

We also interviewed purchase card officials and Army criminal 

investigators to identify other Army purchase card fraud cases that had 

been or were being investigated. 

We did not audit the Defense Finance and Accounting Service’s purchase 

card payment process. We also did not audit electronic data processing 

controls used in processing purchase card transactions. The installations 

received paper monthly bills containing the charges for their purchases and 

used manual processes for much of the period we audited, which reduced 

the importance of electronic data processing controls. 
Appendix I

Scope and Methodology

Page 68 GAO-02-732 Army Purchase Card Control

We briefed DOD managers, including officials in DOD’s Purchase Card 

Joint Program Management Office, major command purchase card 

program coordinators, and purchase card program officials at the 

installations we audited on the details of our review, including our 

objectives, scope, and methodology and our findings. Written comments 

on a draft of this report were received from the Acting Director of the Army 

Contracting Agency and have been reprinted in appendix III. We 

conducted our audit work from June 2001 through April 2002 in accordance 

with generally accepted government auditing standards, and we performed 

our investigative work in accordance with standards prescribed by the 

President’s Council on Integrity and Efficiency, as adapted for GAO’s work. 
Page 69 GAO-02-732 Army Purchase Card Control

Appendix II

Overview of Army Purchase Card Program ApendxiI

The Army’s purchase card program is part of the Governmentwide 

Commercial Purchase Card Program, which was established to streamline 

federal agency acquisition processes by providing a low-cost, efficient 

vehicle for obtaining goods and services directly from vendors. It was 

intended to shorten the time between need and acquisition while providing 

management with monthly reports and a thorough audit trail of all 

purchases. Under a General Services Administration blanket contract, the 

Army has contracted with U.S. Bank for its purchase card services. DOD 

reported that it used purchase cards for about 10.7 million transactions, at 

a cost of over $6.1 billion, during fiscal year 2001. The Army’s reported 

purchase card activity totaled about 4.4 million transactions, valued at 

$2.4 billion, during fiscal year 2001. This represented about 40 percent of 

DOD’s activity for fiscal year 2001. The Army’s purchase card transactions 

were made with Visa cards issued to over 109,000 civilian and military 

personnel.

Table 12: Number and Value of Army Transactions in Fiscal Year 2001

 Source: GAO analysis of Army purchase card program data.

DOD has mandated the use of the purchase card for all purchases at or 

below $2,500, and it has authorized the use of the card to pay for larger 

purchases. DOD has experienced significant growth in the program since 

Major command and location

Number of

transactions

Cost of

transactions

(in millions)

Percent of

total Army

cost

Forces Command 852,863 $438 18

Fort Hood 110,822 58

Training and Doctrine Command 537,718 267 11

Fort Benning 44,421 19

National Guard Bureau-Army 498,924 180 8

Texas Army National Guard 20,306 7

Medical Command 443,134 233 10

Eisenhower Medical Center, Fort 

Gordon 

19,258 9

Materiel Command 408,217 460 19

Soldier, Biological and Chemical 

Command

- Natick 

16,480 96

Other major commands 1,650,000 822 34
Appendix II

Overview of Army Purchase Card Program

Page 70 GAO-02-732 Army Purchase Card Control

its inception and now estimates that approximately 95 percent of its 

micropurchase transactions in fiscal year 2001 were made by purchase 

card. 

Governmentwide Purchase 

Card Program Guidelines

The purchase card can be used for both micropurchases and payment of 

other purchases. Although most cardholders have limits of $2,500, some 

have limits of $25,000 or higher. The Federal Acquisition Regulation, Part 

13, “Simplified Acquisition Procedures,” establishes criteria for using 

purchase cards to place orders and make payments. DOD and the Army 

have supplements to this regulation that contain sections on simplified 

acquisition procedures. U.S. Treasury regulations govern purchase card 

payment certification, processing, and disbursement. DOD’s Purchase 

Card Joint Program Management Office, which is in the Office of the 

Assistant Secretary of the Army for Acquisition Logistics and Technology, 

has issued departmentwide guidance related to the use of purchase cards. 

However, each service has its own policies and procedures governing the 

purchase card program. 

Army Purchase Card 

Acquisition and Payment 

Processes

Within the Army, the overall management responsibility for the purchase 

card program is under the cognizance of the agency program coordinator 

within the Purchase Card Joint Program Management Office. However, the 

function of this agency program coordinator and the office is limited and 

most of the major management responsibility lies with the contracting 

offices in the major commands and contracting offices at the installations. 

At the installation, the program coordinator is responsible for 

administering and overseeing the purchase card program within his or her 

designated span of control and serving as the communication link between 

the Army unit and the purchase card-issuing bank. The other key 

personnel in the purchase card program are the approving officials and the 

cardholders. They are responsible for implementing internal controls to 

ensure that transactions are appropriate. 

Purchase Card Process Figure 2 illustrates the general design of the purchase card processes for 

the Army. The overall process begins with the cardholder ordering or 

purchasing a good or service. It ends with payment of the bill by the 

Defense Finance and Accounting System. 
Appendix II

Overview of Army Purchase Card Program

Page 71 GAO-02-732 Army Purchase Card Control

Figure 2: Army Purchase Card Processes

Source: GAO analysis of Army purchase card program data.

A purchase cardholder is the Army military service member or civilian 

employee who has been issued a purchase card that bears the cardholder’s 

name and the assigned account number. Before the card is issued, the 

cardholder is to receive training on purchase card policies and activities. 

U.S. Bank reverses

disputed charges and 

credits monthly statement

Cardholders are to reconcile

underlying receipts/sales

slips to monthly purchase

card statements, identify any

invalid charges, and prepare

dispute forms

Cardholder or approving

official are to log disputed

charges and send forms

to U.S. Bank for credit

Approving official reviews

cardholder support, establishes

obligation, and certifies monthly

consolidated bills for payment

Monthly purchase card

statements are received

from bank

Goods and services

received with or without

documentation of

independent receiving

Pilferable items to be

recorded in accountable

property records

Cardholders are to log items

not received and follow

up to (1) confirm receipt

or (2) dispute the charge

Defense Finance and

Accounting Service

processes purchase card

payments to U.S. Bank

Purchase cardholder

orders/charges goods

and services

Vendor Items picked up

Items shipped
Appendix II

Overview of Army Purchase Card Program

Page 72 GAO-02-732 Army Purchase Card Control

Each cardholder has an established daily and monthly credit limit and is 

designated to make purchases at selected types of vendors. The 

cardholder is expected to safeguard the purchase card as if it were cash. 

Purchase cardholders are delegated limited contracting officer-ordering 

responsibilities, but they do not negotiate or manage contracts. 

Cardholders use purchase cards to order goods and services for their units 

as well as their customers. Cardholders may pick up items ordered directly 

from the vendor or request that items be shipped directly to receiving 

locations or end users. 

The approving official is responsible for providing reasonable assurance 

that all purchases made by the cardholders within his or her cognizance 

were appropriate and that the charges are accurate. The approving official 

is supposed to resolve all questionable purchases with the cardholder 

before certifying the bill for payment. In the event an unauthorized 

purchase is detected, the approving official is supposed to notify the 

program coordinator and other appropriate personnel within the command 

in accordance with the command procedures. After reviewing the monthly 

statement, the approving official is to certify the monthly invoice and send 

it to the Defense Finance and Accounting Service for payment. 

The purchase card payment process begins with receipt of the monthly 

purchase card billing statements from the bank. Section 933 of the 

National Defense Authorization Act for Fiscal Year 2000, Public Law 106-65, 

requires DOD to issue regulations that ensure that purchase cardholders 

and each official with authority to authorize expenditures charged to the 

purchase card reconcile charges with receipts and other supporting 

documentation. Army memos and regulations provide that upon receipt of 

the individual cardholder statement, the cardholder is to reconcile the 

transactions appearing on the statement by verifying their accuracy to the 

transactions appearing on the statement and notify the approving official in 

writing of any discrepancies in the statement. 

Before the credit card bill is paid the approving official is responsible for 

(1) providing reasonable assurance that all purchases made by the 

cardholders within his or her cognizance are appropriate and that the 

charges are accurate and (2) the timely certification of the monthly billing 

statement for payment by the Defense Finance and Accounting Service. 

The approving official must review and certify for payment the monthly 

billing statement, which is a summary invoice of all transactions of the 

cardholders under the approving official’s purview. 
Appendix II

Overview of Army Purchase Card Program

Page 73 GAO-02-732 Army Purchase Card Control

Upon receipt of the certified monthly purchase card summary statement, a 

Defense Finance and Accounting Service vendor payment clerk is to

(1) review the statement and supporting documents to confirm that the 

prompt-payment certification form has been properly completed and 

(2) subject it to automated and manual validations. The Defense Finance 

and Accounting Service effectively serves as a payment processing service 

and relies on the approving official certification of the monthly payment as 

support to make the payment. The Defense Finance and Accounting 

Service vendor payment system then batches all of the certified purchase 

card payments for that day and generates a tape for a single payment to 

U.S. Bank by electronic funds transfer. 
Page 74 GAO-02-732 Army Purchase Card Control

Appendix III

Comments from the Department of Defense ApendxiI
Appendix III

Comments from the Department of Defense

Page 75 GAO-02-732 Army Purchase Card Control
Appendix III

Comments from the Department of Defense

Page 76 GAO-02-732 Army Purchase Card Control
Appendix III

Comments from the Department of Defense

Page 77 GAO-02-732 Army Purchase Card Control
Appendix III

Comments from the Department of Defense

Page 78 GAO-02-732 Army Purchase Card Control
Appendix III

Comments from the Department of Defense

Page 79 GAO-02-732 Army Purchase Card Control
Page 80 GAO-02-732 Army Purchase Card Control

Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts David Childress, (202) 512-4639

Ray B. Bush, (404) 679-1915

David Shoemaker, (404) 679-1867

Acknowledgments Staff making key contributions to this report were Wendy Ahmed, 

William B. Bates, Bertram J. Berlin, James D. Berry, Jr., Johnny R. Bowen, 

Francine M. DelVecchio, Ronald M. Haun, James P. Haynes, 

Kenneth M. Hill, Fred Jimenez, Mitchell B. Karpman, Richard A. Larsen, 

Christie M. Mackie, Judy K. Pagano, John J. Ryan, and Sidney H. Schwartz.

(192024)
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