a

GAO

United States General Accounting Office

Report to the Chairman, Subcommittee 

on Oversight and Investigations, 

Committee on Veterans’ Affairs, House of 

Representatives

June 2004 VHA PURCHASE 

CARDS

Internal Controls Over 

the Purchase Card 

Program Need 

Improvement

GAO-04-737
www.gao.gov/cgi-bin/getrpt?GAO-04-737.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact McCoy 

Williams at (202) 512-6906 or 

williamsm1@gao.gov. 

Highlights of GAO-04-737, a report to the 

Chairman, Subcommittee on Oversight 

and Investigations, Committee on 

Veterans' Affairs, House of 

Representatives. 

June 2004

VHA PURCHASE CARDS 

Internal Controls Over the Purchase Card 

Program Need Improvement 

Weaknesses in the Veterans Health Administration’s (VHA) controls over use 

of purchase cards and convenience checks resulted in instances of improper, 

wasteful, and questionable purchases. These internal control weaknesses 

included inadequate segregation of duties; lack of key supporting 

documents; lack of timely recording, reconciling, and reviewing of 

transactions; and insufficient program monitoring activities. 

This lack of adequate internal controls resulted in numerous violations of 

applicable laws and regulations and VA/VHA purchase card policies that 

GAO identified as improper purchases. These included purchases intended 

for personal use, purchases made from an improper source, purchases split 

into two or more transactions to circumvent single purchase limits, 

noncompliance with simplified acquisition procedures, incorrect 

procurement procedures, and improper use of convenience checks. 

GAO’s work also identified over $300,000 in purchases that were considered 

wasteful – that is, excessive in cost or for questionable government need – or 

were considered questionable because there was insufficient or no 

documentation to determine the propriety of the transaction. Examples of 

wasteful and questionable purchases included two purchases for 3,348 

movie gift certificates totaling over $30,000 for employee awards that were 

not supported by award letters or justifications; a purchase for a digital 

camera totaling $999 when there were other less costly digital cameras 

widely available; and a purchase of 3 cases of beer totaling $38. Some 

examples of questionable purchases from vendors that would more likely be 

selling unauthorized or personal use items are shown in the table below. 

Examples of Purchases Where No Documentation Was Provided 

Vendor Transaction amount

Radio Shack $3,305

The Sharper Image 2,127

The Brass Elephant (a restaurant, fine dining) 2,081

Baltimore Orioles 1,705

FFP Palm Computing 1,478

Daddy’s Junky Music 1,041

Eddie Bauer 900

Gap Kids 788

Hollywood Beach Country Club 500

Southwest Airlines 399

Harbor Cruises 357

Hecht’s 280

L.L. Bean 239

Christmas Palace 209

Source: GAO’s analysis of nonstatistical transactions selected for fiscal year 2002. 

The Department of Veterans Affairs 

Office of Inspector General (OIG) 

has identified significant 

vulnerabilities in Veterans Affairs’ 

(VA) use of government purchase 

cards. In its April 26, 2004 report, 

the OIG reported instances of 

fraudulent activity totaling 

$435,900, and numerous improper 

and questionable uses of the 

purchase cards totaling $1.1 

million. Given that VHA comprised 

at least 90 percent of VA’s dollar 

and transaction volume for fiscal 

year 2002, GAO was asked to 

determine whether existing 

controls at VHA were designed to 

provide reasonable assurance that 

in the future, improper purchases 

would be prevented or detected in 

the normal course of business, 

purchase card and convenience 

check expenditures were made in 

compliance with applicable laws 

and regulations, and purchases 

were made for a reasonable cost 

and a valid government need. 

GAO is making 36 

recommendations to strengthen 

VA/VHA’s internal controls and 

compliance in its purchase card 

program. In responding to our 

draft report, VA generally agreed 

with our conclusions and expressly 

concurred with 32 of the 36 

recommendations. For the 

remaining 4 recommendations, VA, 

in principle, concurred with 3 of 

these recommendations and 

presented reasons and/or 

alternative action steps to address 

the weaknesses identified in our 

report. 
Page i GAO-04-737 VHA Purchase Cards

Contents

Letter 1

Results in Brief 2

Background 4

Scope and Methodology 8

Critical Internal Controls Were Ineffective 12

Noncompliance With Purchasing Requirements Resulted in 

Instances of Improper Purchases 27

Poor Controls Resulted in Some Wasteful and Questionable 

Purchases 35

Conclusions 41

Recommendations for Executive Action 41

Agency Comments and Our Evaluation 46

Appendixes

Appendix I: Comments from the Department of Veterans Affairs 49

GAO Comments 54

Appendix II: Staff Acknowledgments 56

Acknowledgments 56

Tables Table 1: Description of Statistical Samples 11

Table 2: Summarization of VHA Timeliness Standards 

Exceptions 19

Table 3: Range of Days Departed Cardholder Accounts Remained 

Open 24

Table 4: Transactions Identified as Wasteful or Questionable 36

Table 5: Examples of Purchases Where No Documentation Was 

Provided 39

Figure Figure 1: Time Spent on A/OPC Duties 26
Contents

Page ii GAO-04-737 VHA Purchase Cards

This is a work of the U.S. government and is not subject to copyright protection in the 

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reproduce this material separately.

Abbreviations

A/OPC Agency/Organization Program Coordinator

CFO Chief Financial Officer

DHHS Department of Health and Human Services

EFT Electronic Funds Transfers

FAR Federal Acquisition Regulation

FSC Financial Service Center

GSA General Services Administration

JWOD Javits-Wagner-O’Day 

MCC Merchant Category Code

OIG Office of Inspector General

USPS United States Postal Service

VA Department of Veterans Affairs

VAAR Veterans Affairs Acquisition Regulation

VHA Veterans Health Administration

VISN Veterans Integrated Service Network
Page 1 GAO-04-737 VHA Purchase Cards

United States General Accounting Office

Washington, D.C. 20548

A

June 7, 2004 Letr

The Honorable Steve Buyer

Chairman 

Subcommittee on Oversight and Investigations

Committee on Veterans’ Affairs

House of Representatives

Dear Mr. Chairman:

The use of purchase cards in the federal government has dramatically 

increased in past years as agencies have sought to eliminate the 

bureaucracy and paperwork long associated with making small purchases. 

The benefits of using purchase cards are lower administrative costs and 

less red tape for both the government and the vendor community. 

However, given the nature, scale, and increasing use of purchase cards, it is 

important for agencies to have adequate internal controls in place to help 

ensure proper use of purchase cards and thus to protect the government 

from waste, fraud, and abuse.

The Department of Veterans Affairs Office of Inspector General (OIG) has 

continued to identify significant vulnerabilities in the Veterans Affairs’ (VA) 

use of government purchase cards. On April 26, 2004, the OIG issued a 

report on its evaluation of internal controls over VA’s purchase card 

program.1

 This report summarizes the results of 83 reports issued during 

the period March 1999 through September 2003, that stem from various 

OIG investigations, hotline calls, and combined assessment program 

reviews performed at VA medical facilities and regional offices. In its 2004 

report, the OIG identified internal control weaknesses such as inadequate 

segregation of duties and purchases that lacked supporting documentation. 

The OIG also reported instances of fraudulent activity totaling $435,900, 

and numerous improper and questionable uses of the purchase cards 

totaling $1.1 million. The OIG made a number of recommendations for 

corrective action.

Given that VA is the second largest user of the governmentwide purchase 

card program with reported purchases totaling $1.5 billion for fiscal year 

1

Department of Veterans Affairs Office of Inspector General: Evaluation of the Department 

of Veterans Affairs Government Purchase Card Program, Report Number 02-01481-135 

(Washington, D.C.: April 26, 2004).
Page 2 GAO-04-737 VHA Purchase Cards

2002, and because of known program weaknesses previously reported by 

the OIG, you requested that we review the Veterans Health Administration’s 

(VHA) purchase card program for fiscal year 2002, which comprised at 

least 90 percent of VA’s dollar and transaction volume, to determine if 

control problems still existed. 

In response to your request, we initiated a body of work designed to 

determine whether (1) existing controls at VHA were designed to provide 

reasonable assurance that improper purchases would be prevented or 

detected in the normal course of business, (2) the VA’s purchase card and 

convenience check expenditures were made in compliance with applicable 

laws and regulations, and (3) purchases were made for a reasonable cost 

and a valid government need. Our review focused on the approximately 

$1.4 billion of disbursements that the VHA made during fiscal year 2002, the 

most recent fiscal year for which complete data were available when we 

began our review.

Results in Brief VHA’s internal controls were not designed to provide reasonable assurance 

that improper purchase card and convenience check purchases would not 

occur or would be detected in the normal course of business. We found 

that (1) VHA lacked adequate segregation of duties between those 

purchasing and receiving goods; (2) payments for purchase card and 

convenience check transactions often did not have key supporting 

documents; (3) timeliness standards for recording, reconciling, and 

reviewing transactions were not met; and (4) cardholders did not 

consistently take advantage of vendor-offered purchase discounts. 

Generally, we found that internal controls were not operating as intended 

because cardholders and approving officials were not following VA/VHA 

operating guidance governing the program, and in the case of 

documentation and vendor-offered discounts, lacked guidance. We also 

noted that monitoring activities could be strengthened, such as in instances 

where (1) accounts remained active long after the cardholder had left 

service at VA, (2) credit limits on accounts were significantly higher than 

actual usage, and (3) human capital resources were insufficient to enable 

adequate monitoring of the purchase card program.

This lack of adequate internal controls resulted in numerous violations of 

applicable laws and regulations and VA/VHA purchase card policies. We 

classified purchases made in violation of applicable laws and regulations or 

VA/VHA purchase card policies as improper purchases. We found 

violations of applicable laws and regulations that included purchases for 
Page 3 GAO-04-737 VHA Purchase Cards

personal use such as food or clothing, purchases that were split into two or 

more transactions to circumvent single purchase limits, purchases over the 

$2,500 micro-purchase threshold that were either beyond the scope of the 

cardholder’s authority and/or lacked evidence of competition, and 

purchases made from an improper source. We also found violations of 

VA/VHA policy that included using convenience checks to pay for 

purchases even though the vendor accepted the government purchase 

card, convenience check payments that exceeded established limits, and 

purchases for which procurement procedures were not followed. While 

the total amount of improper purchases we identified, based on limited 

scale audit work, is relatively small compared to the more than $1.4 billion 

in annual purchase card and convenience check transactions, we believe 

our results demonstrate vulnerabilities from weak controls that may have 

been exploited to a much greater extent. 

The ineffectiveness of internal controls was also evident in the number of 

transactions that we classified as (1) wasteful, that is, excessive in cost 

compared to other available alternatives or for questionable government 

need or (2) questionable because there was insufficient documentation to 

determine what was purchased. Our work identified over $300,000 in 

wasteful or questionable purchases, including two purchases for 3,348 

movie gift certificates totaling over $30,000 for employee awards where 

award letters or justification for the awards could not be provided; a 

purchase for a digital camera totaling $999 when there were other less 

costly digital cameras widely available; and a purchase of 3 cases of beer 

totaling $38, where the cardholder stated that the purchase was made at 

the request of a VA pharmacy for a patient. We also noted 250 questionable 

purchases totaling $209,496 that lacked key purchase documentation from 

vendors that would more likely be selling unauthorized or personal use 

items. Examples of these types of purchases included a purchase from 

Radio Shack totaling $3,305, a purchase from Gap Kids totaling $788, and a 

purchase from Harbor Cruises totaling $357. Missing documentation 

prevented us from determining the reasonableness and validity of these 

purchases. Because we tested only a small portion of the transactions that 

appeared to have a higher risk of fraud, waste, or abuse, there may be other 

improper, wasteful, and questionable purchases in the remaining untested 

transactions.

Without improvements in its internal controls to strengthen segregation of 

duties, documentation of purchase transactions, timely recording, review 

and reconciliation of transactions, and program monitoring, VHA will 

continue to be at risk for non-compliance with applicable laws and 
Page 4 GAO-04-737 VHA Purchase Cards

regulations and its own policies and remain vulnerable to improper, 

wasteful and questionable purchases. We make 36 recommendations in 

this report to address the internal control and compliance issues we 

identified.

In commenting on a draft of this report, VA generally agreed with our 

conclusions and expressly concurred with 32 of the 36 recommendations. 

For these recommendations, VA reported that it has actions either already 

in place or planned that meet the intent of our recommendations. For the 

remaining four recommendations, VA, in principle, concurred with three of 

these recommendations and presented reasons and/or alternative action 

steps to address the weaknesses identified in our report, which we believe 

are responsive to the intent of our recommendations. VA also included 

some technical comments that we have addressed in finalizing our report 

where appropriate. 

Background The General Services Administration (GSA) administers the federal 

government’s contracts in support of agencies’ purchase card programs. 

GSA contracts with commercial banks to issue purchase cards to federal 

employees to make official government purchases. Citibank issues 

purchase cards to VA operating administrations, including VHA. Use of the 

purchase card is intended to streamline federal agency acquisition 

processes by providing a low-cost, efficient vehicle for obtaining goods and 

services directly from vendors. VA’s purchase card program, including 

VHA, also includes the use of convenience checks to pay vendors that do 

not accept purchase cards as payment.

VA is subject to the Federal Acquisition Regulation (FAR), which governs 

the acquisition of goods and services by all executive agencies. To 

implement and supplement these regulations, VA issues the Department of 

Veterans Affairs Acquisition Regulations (VAAR), which prescribes VA 

procurement policies and procedures.

To implement and supplement the VAAR, VA issues directives that set forth 

policy, and handbooks, that prescribe procedures for implementing the 

applicable policy. For the purchase card program, VA issued 

departmentwide guidance, VA Directive 4080, Government Purchase Card 

Policy, and VA Handbook 4080, Government Purchase Card Procedures, 

both dated April 4, 2003. VA has separate policies and procedures for the 

use of convenience checks related to the purchase card program: VA 

Directive 4010, Agent Cashier Policy, and VA Handbook 4010, Agent 
Page 5 GAO-04-737 VHA Purchase Cards

Cashier Procedures, both dated October 17, 1994; and VA Directive 4070, 

Cash Management, and VA Handbook 4070.2, Disbursement Mechanisms, 

both dated April 21, 1997. 

VHA Directive 1730.1 Use of the Government Purchase Card in VHA, (May 

19, 2003) and VHA Handbook 1730.1, Use and Management of the 

Government Purchase Card Program (June 14, 2000) provide policies and 

procedures that VHA facilities and program offices must follow when using 

the government purchase card. VHA uses this guidance, in conjunction 

with VA’s departmentwide guidance, to operate its VHA purchase card 

program. VA and VHA mandate the use of the purchase card for all micropurchases – acquisitions of supplies and services generally at or below 

$2,5002

 and provides that the purchase card must be used to the maximum 

extent practical for all purchases up to the simplified acquisition threshold, 

currently $100,000.3 

In fiscal year 2002, VHA used purchase cards and convenience checks to 

make 2.8 million purchases totaling $1.4 billion. During this time frame, 

about 14,000 of the approximately 188,000 VHA employees, or 7 percent of 

the VHA workforce, had purchase cards or convenience check accounts. 

For the purchase cards, a majority of the cardholders had single purchase 

limits between $2,500 and $25,000. For the convenience checks, the single 

purchase limits were either set at $2,500 or $10,000. 

The VHA Chief Financial Officer (CFO) has overall responsibility for the 

implementation and oversight of the purchase card program within VHA. A 

facility director and/or regional office director at each of VHA’s 21 Veterans 

Integrated Service Network (VISN)4

 is responsible for implementing the 

purchase card program at the local level. These officials are also 

responsible for designating5

 an agency or organization program 

coordinator (A/OPC) to oversee the purchase card program at each facility 

2

This requirement is more stringent than the FAR, which only provides that the purchase 

card shall be the preferred method to purchase and pay for micro-purchases, 48 C.F.R. § 

13.201(b).

3

48 C.F.R. § 2.101.

4

A VISN represents integrated networks of health care facilities that provides coordinated 

services to veterans to facilitate continuity through all phases of health care. 

5

The VISN director is also responsible for designating a billing officer and dispute officer 

whose roles affect the purchase card process.
Page 6 GAO-04-737 VHA Purchase Cards

within the director’s geographic area. There are approximately 162 VHA 

medical centers and about 148 local A/OPCs responsible for the primary 

management of the purchase card activity at their facilities. 

Generally, at each facility, personnel in three positions – A/OPC, 

cardholder, and approving official – are collectively responsible for 

providing reasonable assurance that purchase card transactions are 

appropriate and meet a valid government need. The A/OPC is responsible 

for the day-to-day management, administration, and oversight of the 

program such as ensuring appropriate training has been provided, setting 

up cardholder and approving official accounts, retrieving and canceling all 

unneeded cards, and performing reviews of purchase card activity to 

ensure compliance with applicable laws, regulations, policies and 

procedures. VHA’s purchase card guidance states that the A/OPC cannot be 

a cardholder or an approving official. 

The cardholders are responsible for making purchases, inputting purchase 

information in the local purchasing system, maintaining supporting 

documentation, and electronically reconciling their purchases by matching 

the payment charges from the purchase card program contractor to the 

local purchasing system. The approving officials, who typically are 

responsible for more than one cardholder, are charged with monitoring 

purchase card usage to ensure compliance with applicable laws and 

regulations and VA/VHA policies and procedures, are to ensure applicable 

documentation is maintained, and according to VHA guidance, certify, 

through an electronic signature, that all procurements are legal and proper 

and that the items have been received. VA’s guidance also provides that in 

most cases, the approving official should not be a cardholder. However, 

where staffing levels necessitate, the approving official may be a 

cardholder, but cannot approve his or her own transactions.

VHA’s purchase card program also allows the use of convenience checks to 

pay vendors that do not accept credit cards. VA’s disbursement mechanism 

policy provides that convenience checks be used in lieu of cash but only 

when the government purchase card cannot be used. Agent cashiers are 

responsible for making payments to the payee upon receiving authorization 

and supporting purchase documentation from the office requesting 

payment, reconciling the check payments as they clear VA’s purchase card 

account, and maintaining a copy or carbon copy of the check for a period 

of one year. 
Page 7 GAO-04-737 VHA Purchase Cards

On February 12, 1999, the OIG issued a report of VA’s purchase card 

program.6

 The OIG reported that management controls were not 

effectively implemented to ensure the integrity of the purchase card 

program and that maximum benefits were not being realized. Among other 

things, the OIG found weaknesses related to account reconciliation and 

certification, documentation, split purchases, and safeguarding of purchase 

cards. The OIG made several recommendations for corrective action. 

During the period March 1999 through September 2003, the OIG issued an 

additional 83 reports that continued to identify internal control weaknesses 

in the VA’s purchase card program. A summarization of these results, was 

reported in the OIG’s April 26, 2004 report on its evaluation of VA’s 

purchase card program. Specifically, during this time frame, the OIG 

reported 5 fraud cases totaling $435,900. The fraud cases involved former 

and current employees and in one instance, a non-VA employee. Items 

purchased included computers, televisions, stereos, DVD and CD players, a 

diamond ring, and other merchandise. The OIG reported that generally, 

cardholders were able to commit purchase card fraud because approving 

officials did not ensure that purchases were legal and proper and that items 

had been received and were for official government use. 

In addition, the OIG reported it had identified 457 improper or questionable 

purchases totaling $1.1 million that did not comply with the FAR, VA policy, 

or were not adequately supported by documentation. The improper and 

questionable purchases included (1) procurements over the $2,500 micropurchase threshold without the use of competition, (2) purchases split into 

two or more transactions to circumvent the micro-purchase limit, (3) use of 

the purchase card by someone other than the cardholder, and (4) recurring 

purchases from the same vendor where the cardholders did not maintain 

vendor documentation to support the purchases. The OIG made two new 

recommendations in its 2004 report that (1) direct VA facility managers to 

conduct quarterly audits, (2) provide for the development and 

implementation of procedures and checklists for approving officials to use 

in monitoring cardholder activity, (3) update VA’s purchase card policy to 

include span of control criteria for approving officials, and (4) expand 

internal audit procedures to include identifying questionable purchases 

through data mining. The OIG reported that the Under Secretary for 

6

Department of Veterans Affairs Office of Inspector General: Audit of the Department of 

Veterans Affairs Purchase Card Program, Report Number 9R3-E99-037 (Washington, D.C.: 

February 12, 1999). 
Page 8 GAO-04-737 VHA Purchase Cards

Health, the Under Secretary for Benefits, and the Assistant Secretary for 

Management agreed with the findings and recommendations and provided 

acceptable improvement plans.

Scope and 

Methodology

To determine whether existing controls at VHA were designed to provide 

reasonable assurance that improper purchases would be prevented or 

detected in a normal course of business, we obtained an understanding of 

VA/VHA’s purchase card and convenience check policies and procedures, 

and the related internal controls. We then assessed the adequacy of those 

controls using various GAO prescribed guidance and by performing 

detailed tests of transactions. Specifically, we 

• reviewed applicable laws and regulations, VA and VHA directives and 

handbooks, and previous reports issued by VA’s OIG, 

• conducted walkthroughs and telephone interviews with VHA personnel 

to identify key purchase card and convenience check policies and 

procedures, 

• assessed the adequacy of internal controls, using our Audit Guide: 

Auditing and Investigating the Internal Control of Government 

Purchase Card Programs,

7 Standards for Internal Control in the 

Federal Government,

8 Internal Control Management and Evaluation 

Tool,

9 Guide for Evaluating and Testing Controls Over Sensitive 

Payments,

10 and Executive Guide: Strategies to Manage Improper 

Payments,11 and 

7

U.S. General Accounting Office, Audit Guide: Auditing and Investigating the Internal 

Control of Government Purchase Card Programs, GAO-04-87G (Washington, D.C.: 

November 2003).

8

U.S. General Accounting Office, Standards for Internal Control in the Federal 

Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 2000).

9

U.S. General Accounting Office, Internal Control Management and Evaluation Tool, GAO01-1008G (Washington, D.C.: August 2001).

10U.S. General Accounting Office, Guide for Evaluating and Testing Controls Over 

Sensitive Payments, GAO/AFMD-8.1.2 (Washington, D.C.: May 1993).

11U.S. General Accounting Office, Strategies to Manage Improper Payments: Learning 

From Public and Private Sector Organizations, GAO-02-69G (Washington, D.C.: October 

2001).
Page 9 GAO-04-737 VHA Purchase Cards

• performed tests of 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 purchase card procurement 

process and convenience check payment process. The key internal 

control activities we tested included the following.

• Segregation of duties – (1) independent receiving and acceptance of 

goods and services by someone other than the cardholder, and (2) 

dividing key duties and responsibilities among different people to 

reduce the risk of error or fraud,

• Adequate supporting documentation – (1) cardholders and agent 

cashiers obtaining and maintaining invoices or other documentation 

that support their purchases and provide a basis for reconciling 

purchases, (2) agent cashiers obtaining written authorization to 

disburse funds for payment, and (3) agent cashiers maintaining 

copies of checks issued, and

• Timely recording of transactions and events – prompt recording, 

reconciliation, and review of transactions in VHA’s electronic 

purchase card order system.

In addition, although not a primary focus of the internal control testing, we 

reviewed purchase card and convenience check supporting documentation 

to determine whether any vendor-offered discounts were taken for 

purchased goods. We also inquired of and reviewed VHA’s monitoring 

procedures over the purchase card program to determine if ongoing 

monitoring occurred in the normal course of operations. 

To determine whether purchase card and convenience check expenditures 

were made in compliance with applicable laws and regulations, we 

reviewed the Federal Acquisition Regulation, VA’s acquisition regulation, 

and VA/VHA policies and procedures, and performed tests of federal and 

agency acquisition requirements related to the purchase card procurement 

process and convenience check payment process. 

To perform tests of internal controls and applicable laws and regulations, 

we selected purchase card and convenience check transactions using two 

different methods. For each method of selection, we provided VHA with 

the transactions selected and obtained and reviewed related supporting 

documentation. The two methods are as follows.
Page 10 GAO-04-737 VHA Purchase Cards

• Data Mining.

12 We performed data mining on VA’s Financial Service 

Center (FSC)13 database of fiscal year 2002 purchase card and 

convenience check transactions for indicators of potential 

noncompliance with established policies and procedures. Specifically, 

we looked for purchases that were split into two or more transactions to 

circumvent single purchase limits, convenience check purchases that 

exceeded established limits, purchases made against designated 

blocked merchant category codes (MCCs),14 A/OPCs with card 

accounts, cardholders who were payees on convenience checks, ratio of 

cardholders assigned to approving officials, comparison of single and 

monthly credit limits to actual purchase card activity, former employees 

who had active purchase card accounts after their separation dates, and 

purchases from vendors on the Department of Health and Human 

Services Office of Inspector General (DHHS OIG) Exclusion List.15 We 

forwarded the results of the transactions that met the specific criteria to 

the VHA Central Office in Washington, D.C. to obtain responses and 

related documentation, which we used to assess whether in fact these 

were violations of applicable laws and regulations or policy. 

We also asked Citibank, VHA’s purchase card program contractor, to 

extract from its database of VHA cardholders, all inactive VHA 

purchase card accounts. We analyzed this data and forwarded our 

results to the VHA Central Office for further review and assessment of 

cardholders’ ongoing need for the card. 

12Data mining applies a search process to a data set, analyzing for trends, relationships, and 

interesting associations. For instance, it can be used to efficiently query transaction data for 

characteristics that may indicate potentially improper activity.

13The FSC is the designated payment office responsible for making payments to the 

purchase card program contractor, Citibank, for all VA purchase card accounts. FSC makes 

daily electronic payments to Citibank for purchase card and convenience check purchases.

14 MCCs are standard codes that the credit card industry maintains to categorize merchants.

15 Section 4331(c) of the Balanced Budget Act of 1997, Public Law 105-33, 111 Stat. 251, 396, 

amended sections 1128 (a) and (b) of the Social Security Act 42 U.S.C. § 1320a-7, to 

significantly expand the authority of the DHHS OIG to exclude certain individuals and 

entities from all federal health care programs. Accordingly, these programs are now 

required to ensure that no excluded individual or entity is receiving payments from any 

federal health care program for items or services furnished on or after the effective date of 

the OIG exclusion.
Page 11 GAO-04-737 VHA Purchase Cards

• Statistical Sampling. We selected five stratified random statistical 

samples of purchase card and convenience check transactions from five 

populations of purchase card and convenience check transactions paid 

from October 1, 2001 through September 30, 2002. See table 1 below for 

a description of each sample and their related populations which were 

aggregated from a database of all purchase card and convenience check 

transactions for fiscal year 2002 to test specific control activities and 

compliance with applicable laws and regulations, and policies. We 

stratified transactions in each sample on the basis of the total dollar 

values for each population. Sample units in each sample were 

subsequently weighted in the analysis to account statistically for all the 

transactions in the population, including those that were not selected. 

Results from these statistical samples were projected to their respective 

populations of purchase card and convenience check transactions for 

fiscal year 2002.

Table 1: Description of Statistical Samples 

Source: GAO statistically determined samples for fiscal year 2002 testing. 

To determine whether purchases were made for a reasonable cost and a 

valid government need, we selected transactions on a nonstatistical basis 

to allow us to identify transactions that appeared to have a higher risk of 

fraud, waste, or abuse, although the results cannot be projected to the 

overall population of purchases. To select these transactions, we first 

performed data mining on fiscal year 2002 transactions to identify 

purchases from certain vendors that would more likely be selling 

unauthorized or personal use items; purchases made on the weekends, 

Sample Description Sample Type

Number of 

Strata

Sample 

Size

Total Number of 

Transactions in 

the Population

Total Dollar 

Value of 

Sampled 

Transactions 

Total Dollar Value 

of Transactions in 

the Population 

Internal control - purchase 

cards

Stratified 

random 10 283 1,884,695 $4,766,287 $1,309,391,363 

Internal control - 

convenience checks

Stratified 

random 8 255 82,582 $358,917 $30,675,553 

Split purchases - purchase 

cards

Stratified 

random 9 280 63,502 $4,047,212 $89,365,980 

Exceeding limits - 

convenience checks

Stratified 

random 3 105 5,925 $403,553 $14,230,649 

Purchases greater than 

$2,500

Simple 

random Not applicable 76 84,375 $435,249 $546,026,889 
Page 12 GAO-04-737 VHA Purchase Cards

during holidays, or at fiscal year-end; purchases from travel-related 

vendors; and purchases of sensitive assets. This resulted in tens of 

thousands of transactions identified, from which we then selected 982 

transactions totaling $1.2 million to test whether these purchases were 

made at excessive cost and/or for questionable government need, and 

whether they complied with select purchasing regulations, policies, and 

procedures.

While we identified some improper purchases, our work was not designed 

to identify all fraudulent or otherwise improper purchases made by VA. We 

conducted our review from April 2003 through April 2004 in accordance 

with generally accepted government auditing standards. 

Critical Internal 

Controls Were 

Ineffective

VHA’s internal controls were not designed to provide reasonable assurance 

that improper purchase card and convenience check purchases would not 

occur or would be detected in the normal course of business. We found 

that VHA lacked adequate segregation of duties between purchasing and 

receiving goods; that purchase card and convenience check transactions 

often did not have key supporting documents; that timeliness standards for 

recording, reconciling, and reviewing transactions were not met; and that 

cardholders did not consistently take advantage of vendor-offered 

purchase discounts. Generally, we found that internal controls were not 

operating as intended because cardholders and approving officials were 

not following VA/VHA operating guidance governing the program, and in 

the case of documentation and vendor-offered discounts, lacked guidance. 

We also noted instances where monitoring activities could be strengthened 

through prescribed operating procedures to decrease the risk of improper 

purchases. 

Effective internal controls are the first line of defense in safeguarding 

assets and in preventing and detecting fraud. In addition, they help to 

ensure that actions are taken to address risks, and are an integral part of an 

entity’s accountability for the stewardship of government resources. Our 

Standards for Internal Control in the Federal Government requires that 

(1) key duties and responsibilities be divided or segregated among different 

people to reduce the risk of error or fraud, (2) all transactions and other 

significant events be clearly documented and readily available for 

examination, and other significant events be authorized and executed only 

by persons acting within the scope of their authority, (3) transactions 

should be promptly recorded to maintain their relevance and value to 

management in controlling operations and decisions, and (4) internal 
Page 13 GAO-04-737 VHA Purchase Cards

control monitoring be performed to assess the quality of performance over 

time and ensure that audit findings are promptly resolved. Similarly, 

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. Control activities occur at 

all levels and functions of the entity. They include a wide range of diverse 

activities such as approvals, authorizations, verifications, reconciliations, 

performance reviews, and the production of records and documentation. 

Segregation of Purchasing 

Duties Was Inadequate 

VHA lacked adequate segregation of duties regarding independent 

receiving of goods and separation of responsibilities within the purchasing 

process. 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. Such separation of 

responsibilities within the purchasing process reduces the risk of error or 

fraud. From our purchase card internal control testing, we estimate that 

$75 million16 in transactions did not have evidence that independent 

receiving of goods had occurred. In addition, our data mining of the 

purchase card and convenience check activity identified 15 A/OPCs who 

were also cardholders that collectively made 9,411 purchases totaling $5.5 

million during fiscal year 2002. Because A/OPCs are responsible for 

monitoring cardholders’ and approving officials’ activities for indications of 

fraud, waste, and abuse, these A/OPCs were essentially monitoring their 

own activities. 

VA’s and VHA’s purchase card guidance varied regarding segregation of 

duties within the purchasing process. VHA’s guidance does not require 

independent receiving by someone other than the cardholder; however, it 

does state that cardholders are responsible for ensuring that goods and 

services ordered are received. In addition, VA’s current guidance, dated 

April 4, 2003, makes no mention of the receiving function regarding 

cardholder purchases. The guidance only requires a clear separation of 

duties for authorizing transactions, making purchases, and recording 

transactions. 

16 We are 95 percent confident that the total dollar value of purchase card transactions that 

lacked independent receiving was between $37.4 million and $112.6 million. 
Page 14 GAO-04-737 VHA Purchase Cards

Although there is no written agency-wide requirement for independent 

receiving, agency officials informed us that the purchase card order system 

includes an option that allows for independent receiving when a cardholder 

creates a detailed purchase card order17 in the system. Specifically, the 

cardholder can select an option that requires independent receiving of 

goods at the applicable VHA facility warehouse. Once goods are physically 

received and notated to that effect via an electronic signature in the 

purchase card order system, the cardholder can print the receiving report 

and maintain it in his or her files. Although this option is available, we 

found that cardholders did not consistently select the detailed process 

option when creating a purchase card order in the system. One of the 

factors contributing to this inconsistency is the ambiguity of the criteria 

that VA has instituted for determining when the detailed process option 

should be selected for creating a purchase card order. According to the 

purchase card order system’s user guide, the cardholder should use the 

detailed process option to keep track of specific items in the inventory 

system. However, this user guide does not identify the types of procured 

goods that should be inventoried, tracked, and accounted for by this 

system. 

To test the independent receiving function, we requested certain system 

data print screens for each transaction included in the purchase card 

internal control sample to determine whether the cardholder had created a 

detailed purchase card order that would allow for independent receiving. 

From the documentation provided, we determined that 142 of the 283 

sample transactions were detailed purchase card orders and thus, had 

characteristics of independent receiving. Of the 142, we found 16 

transactions totaling $70,475 where cardholders did not provide evidence 

that independent receiving had occurred. Based on the results of our 

review, we estimate that $75 million18 of the total sampled population of 

purchase card transactions lacked evidence of independent receiving. We 

believe 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. 

17VA uses the term “detailed purchase card order” to identify orders where cardholders need 

to track items for inventory purposes and/or enter additional information about specific 

items on the order. 

18See footnote 16. 
Page 15 GAO-04-737 VHA Purchase Cards

Another weakness we identified regarding segregation of duties included 

A/OPCs who are also cardholders. VHA’s purchase card guidance explicitly 

prohibits A/OPCs from being cardholders. When A/OPCs perform in this 

dual capacity, they are essentially monitoring their own activities. During 

our data mining of the purchase card and convenience check activity, we 

identified 15 of 180 A/OPCs who were also cardholders and had collectively 

made 9,411 purchases totaling $5.5 million during fiscal year 2002. When 

we inquired about the dual responsibilities, we were told that certain VHA 

facilities cannot adequately segregate purchasing duties because of the 

small number of employees located at those sites and that management is 

aware of the dual responsibilities. Although this segregation of duties issue 

was prevalent during fiscal year 2002, our period of review, it has been 

largely rectified, since all but one A/OPC account had been closed as of the 

end of fieldwork. Regarding the open account, the national program 

coordinator provided us a copy of a memorandum, dated December 1, 

1997, from the Chief of Acquisition and Material Management to the 

director of that facility requesting approval to keep the A/OPC as a 

cardholder because the office has no other staff to perform these 

cardholder responsibilities. In the memorandum, the Chief also stated that 

the office has a “double check audit” in place to ensure there are no 

problems with any of the A/OPC’s purchases. 

Purchases Lacked Key 

Documentation 

We found instances where purchase card and convenience check 

transactions lacked key supporting documentation such as internal written 

authorization for convenience check disbursements and vendor invoices 

that independently support the description and quantity of what was 

purchased and the price paid. We also found that VHA’s purchase card 

guidance does not address the types of documentation that cardholders 

should maintain to support purchases made. The guidance only addresses 

documentation requirements in its audit guide, which is an appendix to the 

purchase card guidance that provides instructions to internal reviewers 

when performing their monitoring functions. Furthermore, we noted that 

VA’s operating guidance for convenience checks has no requirement that 

vendor documentation be provided before checks are issued. The 

guidance only provides that sufficient documentation, such as a VA-created 

purchase order, must be evident before checks are issued. 

The invoice is a key document in purchase card internal control activities. 

Without an invoice, independent evidence of the description and quantity 

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

the invoice is the basic document that should be forwarded to the 
Page 16 GAO-04-737 VHA Purchase Cards

approving official or supervisor so that he or she can perform an adequate 

review of the cardholder’s purchases. 

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

invoice, sales receipt, packing slip, in cases where the item description 

could be directly traced to the cardholder’s detailed purchase card order, 

and the purchase card order amount agreed to the charged amount, or 

other store receipt. Of the 283 purchase card sample transactions, 74 

transactions totaling $2.1 million lacked an invoice, credit card slip, or 

other adequate vendor documentation to support the purchase. Based on 

these results, we estimate that $312.8 million19 of the fiscal year 2002 

purchase card transactions lacked key supporting documentation. For the 

convenience check sample, we found 35 of 255 transactions totaling

$43,669 lacked the same key documentation. Based on these results, we 

estimate that $3.8 million20 of the fiscal year 2002 convenience check 

transactions lacked key supporting documentation. 

We also noted missing documentation in the other three statistical samples 

(purchases over $2,500, purchase card split purchases, and convenience 

checks exceeding established limits) and one nonstatistical sample. For 

the three statistical samples, in instances where VHA did not provide 

documentation to us to perform our test work, we reported these 

purchases as exceptions for each attribute tested. Based on our audit 

work, we estimate that $45.9 million21 of the fiscal year 2002 purchase card 

and convenience check transactions had missing documentation. For the 

nonstatistical sample, we reported all transactions with key missing 

documentation as questionable transactions, as discussed later in this 

report. In some instances, cardholders or others told us that the invoice or 

other file documentation had been lost, sent to storage, destroyed after a 

year, or not retained when the cardholder retired or separated from VA. 

However, there were instances for which no explanation was provided as 

to why cardholders could not submit supporting documentation as of the 

end of our fieldwork. Without such documentation, we could not verify 

19We are 95 percent confident that the total dollar value of purchase card transactions that 

lacked key supporting documentation was between $243.2 million and $382.4 million. 

20We are 95 percent confident that the total dollar value of convenience check transactions 

that lacked key supporting documentation was between $2.4 million and $5.3 million. 

21We are 95 percent confident that the total dollar value of purchase card and convenience 

check transactions that had missing documentation was between $30.8 million and $61 

million. 
Page 17 GAO-04-737 VHA Purchase Cards

what was purchased, whether it was for a legitimate government purpose, 

or complied with acquisition requirements. 

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

document for the transactions, and a missing invoice could be an indicator 

of potential fraud. Without an invoice, two key internal 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’s reconciled 

purchase with the supporting invoice. A near zero failure rate is a 

reasonable goal considering that invoices are easily obtained or replaced 

when inadvertently lost.

VA’s operating guidance over convenience checks does not provide detailed 

procedures regarding appropriate written documentation or authorization 

that is required to be forwarded to the authorizing employee (agent 

cashier) prior to the disbursement of funds to a third party. VA’s operating 

guidance only provides that the required documentation be the same as 

that for paying with cash such as a purchase order. The guidance makes no 

mention of independent vendor documentation and that this type of 

documentation be required prior to issuing checks to vendors. In addition, 

VA’s guidance requires that the agent cashiers issuing convenience checks 

retain copies of issued convenience checks for only one year. This 

documentation requirement is inconsistent with the Federal Acquisition 

Regulation and VHA’s Records, Control Schedule 10-1, dated February 14, 

2002, which requires that such records be retained for 6 years and 3 months 

after final payment for procurements exceeding the simplified acquisition 

threshold and for 3 years after final payment for procurements below the 

simplified acquisition threshold.22

22 48 C.F.R. § 4.805. See also General Records Schedule 3, Transmittal No. 8 (Dec. 1998).
Page 18 GAO-04-737 VHA Purchase Cards

In testing for evidence of written authorization, we accepted either a copy 

of a purchase order, standard forms VA uses for certain types of 

expenditures such as salary and travel, or signed internal memorandums. 

Of the 255 convenience check transactions, 17 transactions totaling $8,890 

lacked written authorization needed to issue the convenience check. 

Based on these results, we estimate that $1.7 million23 of the fiscal year 

2002 convenience check transactions lacked written authorization. In 

addition, we noted that 19 of the 255 convenience check transactions 

lacked a copy of the check or carbon copy. Based on these results, we 

estimate that $2.3 million24 of the fiscal year 2002 convenience check 

transactions lacked this supporting documentation. Although VA only 

requires copies of convenience checks to be retained for one-year, 

retaining the copies and the supporting documentation for the longer 

retention period mandated by the FAR and incorporated in VHA’s Records, 

Control Schedule 10-1, would facilitate subsequent internal and external 

reviews in assessing whether or not transaction activity was proper and in 

compliance with acquisition policies and procedures.

Timeliness Standards Were 

Not Met for Recording, 

Reconciling and Reviewing 

Transactions 

As part of the purchase card process, VHA has established several 

timeliness standards that cardholders and approving officials must meet to 

ensure prompt recording, reconciliation, and review of purchases. 

Specifically, within 1 workday of making a purchase, cardholders are 

required to input or record the purchase information in VA’s purchase card 

order system. Within 10 calendar days of electronically receiving the 

transaction charge information from Citibank, the cardholder must 

reconcile 75 percent of these Citibank charges to the purchase information 

in the system. Within 17 calendar days, 95 percent of the Citibank charges 

must be reconciled. As evidence of reconciliation, the purchase card order 

system assigns the date the cardholder reconciled the purchase in the 

system. For testing the timeliness of cardholder reconciliations, we used 

the 17 calendar day criteria. In addition, VHA requires that within 14 

calendar days of electronically receiving the cardholder’s reconciled 

purchases, that the approving official, through an electronic signature,

23We are 95 percent confident that the total dollar value of convenience check transactions 

that lacked key supporting documentation was between $.8 million and $2.7 million. 

24We are 95 percent confident that the total dollar value of convenience check transactions 

that lacked a copy of the check or carbon copy was between $1.2 million and $3.4 million.
Page 19 GAO-04-737 VHA Purchase Cards

certify in the purchase card order system that all procurements are legal, 

proper, and have been received.25 

Table 2 summarizes the statistical results of VHA’s timeliness standards that 

cardholders and approving officials must meet to ensure prompt recording, 

reconciliation, and review of purchases. Our work shows that the internal 

controls were not operating as intended to ensure prompt recording of 

transactions and events. 

Table 2: Summarization of VHA Timeliness Standards Exceptions

Source: GAO’s estimate of the audit results for 283 sampled transactions selected to test VHA timeliness standards for fiscal year 2002. 

The population total of transactions from which this stratified random sample was selected was 1,884,695.

The following examples illustrate the extent of untimely recording, 

reconciliation, and review of the purchase card transactions.

• Untimely recording. A cardholder made a purchase on July 9, 2002 for 

$994, but did not input information into the VA’s purchase card order 

system until August 29, 2002 or 51 days later. According to VHA policy, 

the cardholder was required to input information about this purchase 

within one workday of making a purchase. The purpose of this 

timeliness standard is to ensure that VHA has proper control over the 

25VA revised its timeliness standards in the agency-wide government purchase card 

procedures issued April 4, 2003. Specifically, cardholders are now required to reconcile all 

of their purchases within 5 working days instead of 10 calendar days. VA has removed the 

incremental reconciliation goals of 75 percent of the purchases within 10 calendar days and 

95 percent within 17 calendar days. Also, VA converted the 14 calendar days formerly 

allotted to approving officials for review and certification to 10 working days.

VHA Timeliness 

Tests of Purchase 

Card Order System

Number of Sample 

Transactions 

in Error 

Estimated Total 

Number of 

Transactions

in Error

Confidence Interval 

at a 95 Percent 

Confidence Level

Estimated Dollar 

Value of Amount

in Error

(in millions)

Confidence Interval 

at a 95 Percent 

Confidence Level 

(in millions)

Purchase card 

orders were entered 

within 1 day 36 289,352 164,100 – 458,414 $152.5 $99.9 – $205.1

Cardholder 

reconciliation within 

17 days 53 351,256 216,683 – 522,909 $252.7 $184.4 – $321.0

Approving official 

certification within 14 

days 44 308,448 181,930 – 475,207 $212.4 $149.2 – $275.7
Page 20 GAO-04-737 VHA Purchase Cards

obligation and expenditure of its resources. By allowing this timeliness 

standard to be circumvented, VHA has less control over its financial 

resources.

• Untimely reconciliation. A cardholder made a purchase of $100 on 

August 24, 2002. Citibank electronically sent charge information to VHA 

for this purchase on October 8, 2002. According to the VHA policy, the 

cardholder should have reconciled this charge within 17 days, or by 

October 25, 2002, of receiving the Citibank charge information to meet 

the 95 percent reconciliation timeliness standard. However, the 

cardholder did not reconcile this charge until September 8, 2003, or 335 

days later after receiving the Citibank charge information. The purpose 

of cardholder reconciliation is to detect invalid transactions, including 

billing errors and unauthorized purchases. If cardholders do not 

promptly reconcile their purchase card charges, the risk increases that 

fraudulent, improper, and wasteful purchase card expenditures could 

occur and go undetected.

Also, during our review of cardholder reconciliations, we found 17 

instances of cardholders who had electronically notated that the 

reconciliation had been completed, but the invoice amount and the 

charged amount did not agree and there was no documentation to 

explain the difference. VHA’s purchase card guidance requires that 

cardholders match Citibank payment charges to VA’s purchase card 

order system within VHA’s prescribed tolerance level, currently $100 or 

10 percent, whichever is less.26 However, VHA’s guidance only requires 

that cardholders provide a written explanation when differences, at the 

prescribed tolerance level, occur between the vendor invoice amount 

and Citibank payment charged amount. Cardholders are not required 

to document any differences below the prescribed tolerance level. We 

believe cardholder reconciliation is a key control activity for detecting 

invalid transactions, including billings and unauthorized purchases. 

Documenting any difference between the invoice amount and payment 

charged amount provides additional assurances that transactions are 

properly reconciled and charged amounts are correct. We brought this 

issue to the attention of several VHA officials. VHA officials agreed that 

26VHA’s operating guidance incorrectly reports the tolerance level at $100 or 100 percent, 

whichever is less. When we inquired about the tolerance criteria, VHA officials stated that 

the tolerance level included in the operating guidance was incorrect and that the correct 

tolerance level for matching transactions is $100 or 10 percent. VHA officials stated that 

they would revise the guidance to correct this error.
Page 21 GAO-04-737 VHA Purchase Cards

cardholders should explain any difference in the purchase card order 

system and said they would proceed to have VHA’s purchase card 

guidance revised to clarify this cardholder responsibility.

• Approving Official Review. A cardholder reconciled his purchase card 

transaction totaling $3,149 on December 21, 2002. According to the VHA 

policy, the approving official should review the reconciled purchase and 

certify within 14 calendar days that the purchase was legal, proper, and 

has been received. We noted that for this transaction, there was no 

evidence that the approving official reviewed this cardholder’s 

reconciliation until August 6, 2003 or 227 days later from the receipt of 

cardholder reconciliation. The purpose of an independent approving 

official review of reconciled cardholder purchase card transactions is to 

ensure that key responsibilities in the purchase card program are 

segregated and that no one individual has control over all aspects of a 

purchase card transaction. If approving officials do not promptly review 

cardholder purchase card transactions, VHA has no assurance that 

purchase card activity did not involve fraudulent, improper, or wasteful 

transactions.

It is critical that cardholders and approving officials promptly record, 

reconcile, and review purchase card transactions so that erroneous 

charges can be quickly disputed with the vendor and any fraudulent, 

improper, or wasteful purchases can be quickly detected and acted upon. 

Vendor Discounts Not 

Consistently Taken

From our detailed tests of transactions, we found instances where 

cardholders did not consistently take advantage of vendor-offered 

purchase discounts. Specifically, we identified 69 invoices containing 

vendor-offered discounts totaling $15,785 that were available to the 

cardholder, but not taken at the time of purchase or subsequently credited 

for the discount amount, as evident by the amount charged to the 

cardholders’ account. When purchases are made, vendors may offer 

purchase discounts if buyers make early payments of their invoices. 

Typically, the vendor specifies a period of time during which the discount is 

offered, but expects the full invoice amount for payments made after that 

period. When cardholders use the purchase card, payment to vendors, via 

Citibank, generally occurs at the time of purchase. In turn, Citibank bills 

VA for the purchases through a daily electronic file. VA makes daily 

payments to Citibank to pay charges made from the previous day. 

Therefore, it is critical that cardholders inquire of any vendor-offered 

discounts at the time of purchase and make efforts to obtain a credit upon 
Page 22 GAO-04-737 VHA Purchase Cards

receipt and review of the invoice. Our detailed testing indicated that VHA 

did not always take advantage of vendor-offered discounts and that VHA 

lacked purchase card guidance to ensure cardholders inquired of or 

reviewed vendor payment terms to determine whether discounts were 

being offered for the applicable goods and services rendered. 

For example, one vendor offered VHA a discount of 2.9 percent, or $896, for 

an invoice amount of $30,888, if paid within 15 days. Citibank, on behalf of 

VA, made payment to the vendor within the 15-day timeframe, yet the 

vendor charged the cardholder’s account for the full invoice amount. We 

found no evidence that the cardholder attempted to obtain a credit for the 

available discount offered. In another example, we found that a cardholder 

had taken advantage of the vendor-offered discount. The vendor offered 

VHA a discount of 3 percent, or $180, for an invoice amount of $6,000, if 

paid within 30 days. We noted that the vendor charged the cardholder’s 

account for the discount amount of $5,820. 

A factor that may contribute to cardholder inconsistencies for taking 

advantage of vendor discounts is the lack of established policies and 

procedures that address this issue. Specifically, we found that VHA’s 

purchase card guidance did not include established procedures to ensure 

cardholders take advantage of available vendor discounts prior to making 

payments, or require that approving officials identify instances when 

cardholders did not take advantage of vendor discounts in order to 

determine the frequency of these occurrences. Without such guidance, 

VHA will not be able to determine the extent of this type of occurrence and 

actual dollars lost to the government.

Program Monitoring 

Improvements Could Be 

Made

Our review found that VHA’s monitoring requirements lacked procedures to 

ensure that cardholder accounts were cancelled promptly when an 

employee left service and that cardholder credit limits were based on 

actual spending patterns. In addition, we found that VHA management has 

not provided sufficient human capital resources at the A/OPC level, to 

enable adequate monitoring of the purchase card program. Our Standards 

of Internal Control state that internal control monitoring assess the quality 

of performance over time and that ongoing monitoring should occur in the 

course of normal operations. It includes regular management and 

supervisory activities, comparisons, reconciliations, and other actions 

people take in performing their duties. 
Page 23 GAO-04-737 VHA Purchase Cards

VHA’s purchase card guidance includes prescribed monitoring procedures 

over its purchase card program to help ensure purchases are legal and 

proper. For example, the purchase card guidance requires that on a 

monthly basis, the Head of the Contracting Activity office at each VHA 

facility, the A/OPC and billing officer, perform joint reviews to include 

various aspects of the purchase process, such as proper accounting of 

purchases; proper oversight to ensure purchases were for a legitimate 

government need; and timely recording, reconciliation, and review of 

purchases. Although VHA’s guidance requires these reviews, we found no 

monitoring procedures to identify active accounts of cardholders who had 

separated from VA nor provisions for ongoing assessment of cardholders’ 

credit limits. We also noted insufficient human capital resources at the 

A/OPC level, for executing the prescribed monitoring activities over its 

purchase card program.

• Prompt cancellation of departing cardholder accounts. We identified 18 

instances of purchase card accounts that remained active after the 

cardholder separated from VA and all related outstanding purchase 

orders had been reconciled. Specifically, we found that the cancellation 

of these accounts varied from the date that the last purchase had been 

reconciled, ranging from 1 day to 339 days. Of the 18 purchase card 

accounts that remained active after the cardholder had left VA, we 

determined that 14 accounts remained active 6 or more days after the 

cardholders’ outstanding purchase orders had been reconciled, which 

we deemed too long.27 For example, one cardholder separated from VA 

on April 3, 2002 with 5 outstanding purchase card orders that were made 

against the cardholder’s account prior to separation. The last purchase 

transaction was reconciled on May 21, 2002, but the account was not 

canceled until April 25, 2003, or 339 days after reconciliation. 

According to VHA’s purchase card guidance, departed cardholders are 

responsible for turning in their purchase card to the A/OPC in 

accordance with facility procedures, and providing the approving 

official with records of outstanding orders and unreconciled charges 

prior to leaving service. The approving official is responsible for 

ensuring a designated alternate approving official takes appropriate 

27For the remaining four purchase card accounts, we determined that these had been 

promptly canceled after all outstanding purchase orders were reconciled. Specifically, two 

accounts were canceled within 1 day, one account within 2 days, and the remaining account 

within 4 days of reconciliation.
Page 24 GAO-04-737 VHA Purchase Cards

action necessary to complete the pending orders of departed 

cardholders and notifies the A/OPC when the last purchase has been 

reconciled so that the card account will be canceled promptly. 

However, VHA has no specific procedures for determining the time 

period for prompt cancellation of card accounts once all outstanding 

orders have been reconciled. As a result, for analysis purposes, we 

determined that untimely cancellation of cardholder accounts occurred 

when accounts were not canceled within 5 days of the reconciliation 

date for the last purchase charged against that account, as shown in 

table 3 below. 

Table 3: Range of Days Departed Cardholder Accounts Remained Open

Source: GAO’s analysis of VHA departed cardholder accounts that were untimely cancelled in fiscal year 2002.

In addition to the above analysis, we also identified 3 card accounts from 

two VHA facilities where the applicable A/OPC did not provide us the 

necessary documentation as of the end of our audit fieldwork to determine 

the time period when the departed cardholders’ accounts had been 

canceled once the transactions against their accounts had been reconciled. 

Therefore, we were unable to determine if these departed cardholder 

accounts had been promptly canceled once all outstanding purchase orders 

had been reconciled. Requiring monitoring procedures to identify active 

accounts of departed cardholders and ensure prompt closure once 

outstanding purchase orders have been reconciled would assist in reducing 

the risk of fraud, waste, and abuse that could occur when accounts remain 

open beyond the necessary time frame.

• Reasonableness of cardholder credit limits. Our analysis of purchases 

VHA cardholders made in fiscal year 2002 showed that, on average per 

Range of Days Accounts Remained 

Open

Number of Departed Cardholders’ 

Accounts That Were Untimely Cancelled 

Within the Range of Days

6-50 days 5

51-100 days 4

101-150 days 2

151-200 days 0

201-250 days 1

251-300 days 1

301-339 days 1
Page 25 GAO-04-737 VHA Purchase Cards

month, cardholders cumulatively purchased $112 million of goods and 

services, but they had credit limits of $1.2 billion or 11 times their actual 

spending. The difference between the cumulative credit limits of $1.2 

billion and actual spending of $112 million per month on average 

represents a monthly financial exposure of $1.1 billion to VHA. For 

example, we identified 5 cardholders with monthly credit limits of about 

$10 million each, yet each cardholder’s average purchases for one month 

only totaled $111,310. 

According to VHA’s purchase card guidance, the approving official, in 

conjunction with the A/OPC, billing officer, and head of contracting 

activity, recommends cardholder single purchase and monthly credit 

limits. However, we found no guidance on what factors to consider 

when recommending the dollar amounts to be assigned to each 

cardholder, such as existing and continuing needs of program 

operations and cardholders. Further, we found no monitoring 

procedures that require the A/OPC or approving official to determine, 

on an ongoing basis, whether or not cardholder limits should be 

changed based on existing and expected future use. Although 29 of the 

111 A/OPCs who responded to a GAO data collection instrument 

question regarding monitoring cardholder’s single and monthly credit 

limits, reported that such monitoring occurs and that cardholders’ 

limits were increased or decreased to reflect actual spending patterns, 

we found no consistent application VHA-wide. 

A determination of cardholders’ spending limits requires an objective 

effort by operational supervisors and management, with assistance 

from purchase card program management, to evaluate the existing and 

continuing needs of operations and cardholders. Periodic monitoring 

and analysis of cardholders’ actual monthly and average charges, in 

conjunction with existing credit limits would aid VHA management in 

making reasonable determinations of cardholder spending limits. 

Without adequate monitoring, the financial exposure in VHA’s purchase 

card program can become excessive when its management does not 

exercise judgment in determining single purchase and monthly credit 

limits. Limiting credit available to cardholders is a key factor in 

managing the VHA purchase card program, minimizing the 

government’s financial exposure, and enhancing operational efficiency.
Page 26 GAO-04-737 VHA Purchase Cards

• Inadequate human capital resources. VHA has not provided sufficient 

human capital resources to enable monitoring of the purchase card 

program. One key position for monitoring purchases and overseeing the 

program is the A/OPC. While the A/OPC position is a specifically 

designated responsibility, we found in many instances that the A/OPC 

also functioned in another capacity and/or performed other assigned 

duties such as a systems analyst, budget analyst, and contract specialist.

Of the 90 A/OPCs that responded to a GAO data collection instrument 

question regarding other duties assigned, including a percentage 

breakdown of time spent on the various duties,28 55 A/OPCs, or 61 

percent, reported that they spend 50 percent or less of their time 

performing A/OPC duties. The bar graph below provides further 

information on the allocation of resources directed at monitoring the 

VHA purchase card programs at the local level. 

Figure 1: Time Spent on A/OPC Duties

28 We actually received 111 responses to this question, and found that 97, or 87 percent of the 

A/OPCs, function in another capacity and/or perform other assigned duties. However, 21 of 

these responses did not include a breakout of the percentage of time spent on each 

responsibility and therefore, were excluded from this analysis for comparative purposes. 

0

5

10

15

20

25

30

35

0 to 25 26 to 50 51 to 75 76 to 100

Percentage range of time

Number of A/OPC’s

Source: GAO analysis of the A/OPC monitoring related to fiscal year 2002.
Page 27 GAO-04-737 VHA Purchase Cards

The bar graph above depicts the percentage of time that A/OPCs reported 

they spend to carry out their duties related to the purchase card program. 

Of the 90 A/OPCs who provided a percentage breakdown of performing 

their assigned duties, we found that 31 A/OPCs spend up to 25 percent of 

their time performing A/OPC assigned tasks, 24 A/OPCs spend between 26 

and 50 percent, 11 A/OPCs spend between 51 and 75 percent, and the 

remaining 24 A/OPCs spend between 76 and 100 percent. For example, at 

the extreme low end of the scale, one A/OPC responded that he was also 

the budget analyst and that he spends 100 percent of his time on budget 

analyst duties, leaving no time for A/OPC duties on an ongoing basis. In 

another example, an A/OPC responded that she was also the director of the 

finance center and that she spends 99.5 percent of her time on these 

director duties, leaving less than 15 minutes per 40-hour week for A/OPC 

duties on an ongoing basis. Given that VHA makes millions of purchase 

card and convenience check transactions annually, which in fiscal year 

2002, exceeded $1.4 billion, it is essential that VHA management devote 

adequate attention to monitoring its purchase card program to ensure that 

it is properly managed to reduce the risk of fraud, waste, and abuse.

Although VHA has prescribed some monitoring procedures to ensure 

purchases are made in compliance with laws, regulations, policies, and 

procedures, these procedures do not adequately address other aspects of 

the program as described previously, that, if not frequently monitored, 

could increase the program’s risk of fraud, waste, and abuse. In addition, 

these types of monitoring activities become more critical when existing 

internal controls are not operating as intended and result in improper, 

wasteful, and questionable purchases as we identify in the remainder of 

this report.

Noncompliance With 

Purchasing 

Requirements Resulted 

in Instances of 

Improper Purchases

The lack of adequate internal controls resulted in numerous purchases 

made in violation of either applicable laws and regulations or VA/VHA 

purchase card policies that we classified as improper purchases. Improper 

purchases we found due to violations of applicable laws and regulations 

included (1) purchases of items for personal use, such as food for internal 

meetings and clothing, (2) purchases made from an improper source, 

(3) purchases split into two or more transactions to circumvent single 

purchase limits, (4) purchases, over the $2,500 micro-purchase threshold 

that exceeded the cardholders’ delegated purchasing authority, and (5) no 

evidence of competition for purchases exceeding the $2,500 micropurchase threshold. Improper purchases we found due to violations of 

VA/VHA policy included (1) obtaining conference rooms and other items 
Page 28 GAO-04-737 VHA Purchase Cards

without following applicable procurement procedures, (2) convenience 

check payments that exceeded established limits, and (3) using 

convenience checks to pay purchases even though the vendor accepted the 

government purchase card. 

While the total amount of improper purchases we identified is relatively 

small compared to the over $1.4 billion in annual purchase card and 

convenience check transactions, it demonstrates vulnerabilities from weak 

controls that could easily be exploited to a greater extent. 

The just-cited violations are discussed in more detail here.

• Purchases of items for personal use. From the nonstatistical sample, 

we identified 17 purchases totaling $14,054 for clothing, food, and other 

items in which cardholders purchased goods that were for personal use. 

Items that are classified as personal expenses may not be purchased 

with appropriated funds without specific statutory authority. The 

Federal Acquisition Regulation emphasizes that the governmentwide 

commercial purchase card may be used only for purchases that are 

otherwise authorized by law or regulation.29 We identified 6 purchases 

of clothing totaling $2,377 that were for personal use and not authorized 

by law. One transaction was a purchase of 4 winter jackets totaling $286 

for warehouse employees exposed to inclement weather. Absent 

specific statutory authority, cold weather clothing is an employee’s 

personal responsibility for which appropriated funds are not available.30 

In another example, we found a purchase of 18 pairs of Wrangler and 

Levi’s jeans totaling $405 that VHA indicated were to be used as 

“employee uniforms” for the engineering office. Under 5 U.S.C. § 5901, 

appropriated funds are available to furnish employees with either 

uniforms or a uniform allowance. Because the statute does not define 

“uniform,” the Comptroller General has relied on the common meaning 

of the term “uniform” in determining what wearing apparel may be 

purchased with appropriated funds.31 Merriam-Webster’s Tenth 

Collegiate Dictionary (2001) defines a “uniform” as “dress of a 

2948 C.F.R. § 13.301 (a).

30B-289683, Purchase of Cold Weather Clothing, Rock Island District, U.S. Army, Oct. 7, 

2002; B-288828, Purchase of Insulated Coveralls, Vicksburg, Mississippi, Oct. 3, 2002.

31B-251189, Agency for International Development – Purchase of Business Suits for 

Agency Chauffeurs, Apr. 8, 1993.
Page 29 GAO-04-737 VHA Purchase Cards

distinctive design or fashion worn by members of a particular group and 

serving as a means of identification” and broadly regarded as 

“distinctive or characteristic clothing.” Jeans would not qualify as a 

uniform under that definition as jeans are common everyday attire and 

would not distinguish or set a group apart. 

We also found 11 transactions that included purchases of food totaling 

$11,677 that were for personal use and not authorized by law. We 

identified 5 transactions that included the purchase of food for 

government meetings totaling $3,142 and 6 transactions where a 

significant portion of the purchases were for food related to 

refreshments or meals for training sessions or conferences in the 

medical center’s immediate geographic area totaling $11,309. For 

example, one transaction totaling $575 included lunch and beverages 

purchased from the Pacific Athletic Club in the amount of $277 in 

addition to a room rental fee. According to documentation provided, 

this purchase was for seven VA employees to discuss the Compensated 

Work Therapy program. In another example, breakfast and lunch 

meals totaling $2,430 were purchased during a weeklong training 

conference for new supervisors at a local inn. All attendees were on 

staff at the nearby medical facility and the documentation provided 

indicates that networking was scheduled to take place during breakfast 

and lunch. This and other purchases of refreshments identified during 

our testing were improper to the extent that employees were not in a 

travel status or the agency did not justify providing meals to 

employees.32

• Improper Source. We identified 8 purchases totaling $7,510 in the nonstatistical sample that were subject to procurement from a mandatory 

source of supply but were obtained from other sources. Various federal 

laws and regulations such as the Javits-Wagner-O’Day Act (JWOD) 

require government cardholders to acquire certain products from 

designated sources. The JWOD program is a mandatory source of 

supply for all federal entities. It generates job and training for 

Americans who are blind or have severe disabilities by requiring that 

32 We recognize that VA may have been relying in part on a provision of the Federal Travel 

Regulation in effect at the time of VA’s purchases that allowed for the purchase of light 

refreshments at conferences where more than 50 percent of attendees were in travel status. 

However, as discussed in B-288266, this provision was not authorized. Matter of: Use of 

Appropriated Funds to Purchase Light Refreshments at Conferences, B-288266 (Jan. 27, 

2003).
Page 30 GAO-04-737 VHA Purchase Cards

federal agencies purchase supplies and services furnished by nonprofit 

agencies, such as the National Industries for the Blind and the National 

Institute for the Severely Handicapped. Most JWOD program supplies 

are small value items such as office supplies, cleaning products, or 

medical/surgical supplies that nearly always fall into the micro-purchase 

category. 

Based on our nonstatistical testing, we noted that cardholders did not 

consistently purchase items from JWOD when they should have. For 

example, a cardholder purchased planner starter kits and refills for 

employees totaling $1,591 from Franklin Covey, a high-end office 

supply store. These items provide essentially the same features as the 

JWOD items, and would have cost $1,126, or $465 less, if they had been 

procured through JWOD or a JWOD supplier. During our data mining, 

we noted that VHA made 652 purchases totaling $76,350 from Franklin 

Covey during 2002. While we did not review all of these individual 

purchases, based on our detailed testing of similar transactions, it is 

likely that many of them should have been procured from a mandatory 

source at a much lower cost.

• Split purchases. Using data mining techniques, we identified card 

purchases that appeared to have been split into two or more 

transactions by cardholders to circumvent their single purchase limit.33 

We requested documentation for a statistically determined sample of 

280 potential split transactions totaling $4 million. Of these 280 

transactions, we determined that 49 transactions were actual splits. 

Based on these results, we estimate that $17.1 million34 of the total fiscal 

year 2002 purchase card transactions were split transactions. For 

example, a cardholder with a single purchase limit of $2,500 purchased 

accommodations at 110 hotel rooms totaling $4,950. When performing 

follow-up, the cardholder stated that VA provides lodging 

accommodations for veterans receiving medical services such as 

radiation therapy, chemotherapy, and day surgery who live at least 150 

33Using data mining, we identified instances where one cardholder made multiple purchases 

from the same vendor on the same day that, in total, exceeded the cardholder’s established 

single purchase limit. We then followed up with the A/OPCs and cardholders and, based on 

the documentation and responses provided, determined whether split purchases had been 

made.

34We are 95 percent confident that the total dollar value for actual split purchase card 

transactions was between $12.4 million and $21.9 million. 
Page 31 GAO-04-737 VHA Purchase Cards

miles from the medical facility. The cardholder created two separate 

purchase orders and had the vendor create two separate charges, one 

for $2,500 and the other for $2,450, so that the purchase could be made. 

On the documentation provided, the cardholder stated the “purchase 

was split per the direction of the previous purchase card program 

administrator.” The cardholder also stated that currently, her purchase 

card at that facility is no longer used to pay hotel lodging for veterans. 

Hotel payments are now disbursed electronically via VA’s Financial 

Service Center. The purpose of the single purchase limit is to require 

that purchases above established limits be subject to additional controls 

to ensure that they are properly reviewed and approved before the 

agency obligates funds. By allowing these limits to be circumvented, VA 

had less control over the obligation and expenditure of its resources.

• Noncompliance with simplified acquisition procedures. The Federal 

Acquisition Regulation provides that the purchase card may be used by 

contracting officers or individuals who have been delegated micropurchase authority in accordance with agency procedures.35 Purchases 

above the micro-purchase threshold using the purchase card are 

permissible only by warranted contracting officers who must promote 

competition to the maximum extent practicable when making such 

purchases.36 Contracting officers must consider solicitation of 

quotations from at least three sources,37 and they must minimally 

document the use of competition or provide a written justification for 

the use of other than competitive procedures.38 When cardholders 

circumvent these laws and regulations, VHA has no assurance that 

purchases comply with certain simplified acquisition procedures and 

that cardholders are making contractual commitments on behalf of VHA 

within the limits of their delegated purchasing authority.

35 48 C.F.R. § 13.301 (a).

36The FAR uses the term "contracting officer" to mean a person with the authority to enter 

into, administer, and/or terminate contracts and make related determinations and findings, 

48 C.F.R. § 2.101. The term "warrant" is commonly used to refer to the SF 1402, Certificate of 

Appointment, which is the written document appointing an individual to be a contracting 

officer and stating any limitations on the scope of authority to be exercised, other than 

limitations already contained in applicable laws or regulations, 48 C.F.R. § 1.603-3(a). 

3748 C.F.R. § 13.104 

3848 C.F.R. § 13.106-3(b).
Page 32 GAO-04-737 VHA Purchase Cards

From the statistical sample of purchases over $2,500, we found that for 

19 of the 76 transactions, cardholders lacked warrant authority needed 

to make these types of purchases. Based on these results, we estimate 

that cardholders with only micro-purchase authority, made $111.9 

million39 of the total fiscal year 2002 purchases that exceeded $2,500. In 

addition, we found that 12 of the 76 transactions lacked evidence of 

competition. Based on these results, we estimate that $60 million40 of 

the total fiscal year 2002 purchases totaling more than $2,500 lacked 

evidence of competition. 

For example, one cardholder made a purchase of 2,000 washcloths 

totaling $3,100, but could provide no evidence that competition was 

used. According to the cardholder, at the time of purchase, he was 

under the impression that VA had a contract with the vendor to procure 

the goods and therefore, did not seek competition. We also found one 

cardholder who purchased flu vaccine syringes for a VA pharmacy 

totaling $19,943, but was not a warranted contracting officer. In 

addition, we found instances where cardholders were warranted 

contracting officers, but not at the time of purchase for specific 

transactions we selected. Specifically, we found seven cardholders 

who made purchases over the micro-purchase threshold, with a 

combined total of $27,473, where the warrants provided were dated 

after the purchase of goods. These cardholders could not provide 

documentation to show that they were warranted contracting officers 

at the time these purchases were made.

39We are 95 percent confident that the total dollar value for purchases over $2,500 made by a 

non-warranted cardholder was between $52.8 million and $170.9 million. 

40We are 95 percent confident that the total dollar value for purchases over $2,500 that 

lacked evidence of competition was between $26.3 million and $93.7 million. 
Page 33 GAO-04-737 VHA Purchase Cards

• Incorrect procurement procedures used to obtain conference room 

rentals and other items. We identified 23 purchase card transactions 

totaling $112,924 in the nonstatistical sample related to the rental of 

conference room facilities used for internal VA meetings, conferences, 

and training. For these purchases, the cardholders could not provide 

documentation to show that efforts had been made to secure free 

conference space. VA’s acquisition regulations state that rental 

conference space will be obtained (paid for) only in the event that free 

space is not available and that complete documentation of efforts to 

secure free conference space will be maintained in the purchase order 

file.41 For one purchase, VHA paid $31,610 for conference room 

facilities and related services for 3 days at the Flamingo Hilton Hotel in 

Las Vegas. The cardholder provided no evidence that attempts to secure 

free facilities had been made. In addition, of the 23 purchase card 

transactions cited, 12 purchases totaling $103,662 occurred at one VHA 

facility. This included one transaction totaling $12,000 for a 3-day 

Training Course on Prevention and Management of Disruptive Behavior 

at the MGM Grand Hotel in Las Vegas. Again, we were not provided 

evidence that efforts had been made to secure free conference space. 

Two additional transactions totaling $755 were for different types of 

purchases where VA’s acquisition regulation was not followed. One 

purchase was a recruitment advertisement totaling $690. VA requires 

that approval be obtained prior to making this type of purchase and 

that evidence of this approval be maintained in the file. We found no 

evidence that approval had been obtained prior to making the 

purchase. For the second transaction, the cardholder paid annual 

membership dues associated with an international honor society of 

nursing in an employee's name totaling $65. VA used its general post 

funds to pay this charge despite the fact that VA policy prohibits the use 

of general post funds for membership fees. Additionally, as 

appropriated funds are not available to pay employees' membership 

fees in societies or associations,42 VA policy requires that membership 

in organizations be in the agency's name, not the employee's name.

41 The Department of Veterans Affairs Acquisition Regulation, Part 870, subpart 113 (VAAR 

870.113).

425 U.S.C. § 5946.
Page 34 GAO-04-737 VHA Purchase Cards

• Improper use of the convenience checks. We identified improper use of 

convenience checks related to purchases that exceeded VA’s established 

limits of $2,500 and $10,000 and payments to vendors who accept the 

purchase card payments. VA’s convenience check guidance requires 

that a single draft transaction be limited to $2,500 or in some cases 

$10,000 unless a waiver has been obtained from Department of the 

Treasury, and restricts convenience check use to instances where 

vendors do not accept purchase cards. From our statistical testing of 

convenience check limits, we found that 91 of 105 convenience check 

purchases were paid using multiple checks because the total purchase 

amount exceeded the established convenience check limit. Based on 

these results, we estimate that $13.8 million43 of the total fiscal year 2002 

convenience check transactions were improperly used to pay purchases 

exceeding the established limits. 

For example, we found 29 different purchases for metered postage 

from the United States Postal Service (USPS) where the purchase 

amount exceeded the convenience check limit. One purchase for 

postage totaled $50,000, but the single transaction limit on convenience 

checks for that facility is $2,500. In order to make payment, the agent 

cashier issued 20 different checks at $2,500 each. Regarding an 

explanation of the purchase, the agent cashier stated that separate 

checks were written because the convenience checks cannot be 

written over $2,500. The agent cashier also stated that since this 

purchase, the VHA facility has implemented new procedures that allow 

for electronic funds transfers (EFT) to USPS. During our review, we 

also found another VHA facility that is currently using EFTs as an 

alternate payment mechanism to USPS. Based on the explanations 

obtained for the various improper check purchases we identified, it 

appears to be routine practice for agent cashiers to issue numerous 

checks when the purchase amount exceeds the established check limit 

of $2,500 or $10,000. For example, at one VHA facility, the agent cashier 

provided a written explanation that it is their policy to issue numerous 

checks instead of increasing the check limit. 

43We are 95 percent confident that the total dollar value for actual split convenience check 

transactions was between $13.6 million and $14.0 million.
Page 35 GAO-04-737 VHA Purchase Cards

We also found instances where convenience checks were used to pay 

vendors who accept the purchase card as payments. VA’s disbursement 

mechanism guidance provides that third party drafts (convenience 

checks) should be used in lieu of cash but only when the government 

purchase card cannot be used. From a statistical sample of 255 

convenience checks transactions, we found 23 instances where 

vendors accepted the purchase card as payment, yet convenience 

checks were issued instead to make payments. In these instances, we 

were provided no documentation as to why the convenience check was 

used in lieu of the purchase card. Based on these results, we estimate 

that $2.6 million44 of the total fiscal year 2002 convenience check 

payments made to vendors in lieu of the purchase card lacked this type 

of documentation. For example, an agent cashier made a convenience 

check payment of $8,327.32 to a party rental vendor for the purchase of 

various stage equipment, chairs and tents used for an outside cemetery 

dedication. We contacted the vendor and found that it accepts credit 

cards as a form of payment. The agent cashier provided no 

documentation showing why the convenience check was used in lieu of 

the purchase card. 

In April 2003, VA issued new purchase card guidance that attempted to 

clarify the use of convenience checks. Specifically, this guidance 

provides that for micro-purchases, convenience checks may be used in 

lieu of the purchase card only when it is advantageous to the 

government and it has been documented as the most cost-effective and 

practical procurement and disbursement method. However, we found 

no established criteria for determining the “most cost-effective and 

practical procurement and disbursement method.” 

Poor Controls Resulted 

in Some Wasteful and 

Questionable 

Purchases

The inadequacies and ineffectiveness of internal controls were also evident 

in the number of transactions identified that we classified as wasteful—

that is, excessive in cost compared to other available alternatives or for 

questionable government need. We also identified other transactions that 

we classified as questionable because there was insufficient or no 

documentation to determine what was purchased. Specifically, of the 982 

nonstatistical sample transactions we reviewed, 250 transactions totaling 

$209,496 lacked key purchase documentation. As a result, we could not 

44We are 95 percent confident that the total dollar value for convenience check transactions 

that were incorrectly used was between $1.4 million and $3.7 million. 
Page 36 GAO-04-737 VHA Purchase Cards

determine what was actually purchased, how many items were purchased, 

the cost of each of the items purchased, and, whether there was a 

legitimate government need for such items. 

Table 4 summarizes the number of transactions and dollar amounts that we 

determined to be wasteful or questionable. While not significant to the 

overall purchase card program, these transactions are indicative of what 

can occur when the use of the cards is not properly controlled. Because we 

tested only a small portion of the transactions that appeared to have a 

higher risk of fraud, waste, or abuse, there may be other improper, 

wasteful, and questionable purchases in the remaining untested 

transactions.

Table 4: Transactions Identified as Wasteful or Questionable

Source: GAO’s analysis of nonstatistical transactions selected for fiscal year 2002.

a The missing invoice category includes (1) 184 transactions totaling $155,429 where VHA provided 

internal documentation, but no independent vendor documentation to support the purchase, and (2) 66 

transactions totaling $54,068 where VHA provided no documentation at all regarding the purchases.

Wasteful Purchases We identified 20 purchases totaling $56,655 that we determined to be 

wasteful because they were excessive in cost relative to available 

alternatives or were of questionable government need. The limited number 

of wasteful purchases found in the nonstatistical sample demonstrates that 

cardholders are generally prudent in determining that prices of goods and 

services are reasonable prior to making credit card purchases. For items 

labeled as wasteful, we considered them excessive in cost when compared 

to available alternatives that would meet the same basic needs or 

questionable as government expenditures because they appeared to be 

items that were a matter of personal preference or convenience, were not 

reasonably required as part of the usual and necessary equipment for the 

Transaction category

Number of 

transactions

Dollar amount of 

transactions

Wasteful transactions 20 $56,655

Questionable transactions:

Missing invoicea 250 $209,496

Inadequate/incomplete documentation 65 $37,100

Total Questionable Transactions 315 $246,596

Total Wasteful and Questionable Transactions 335 $303,251
Page 37 GAO-04-737 VHA Purchase Cards

work the employees were engaged in, or did not appear to be for the 

principal benefit of the government. Specifically, we identified 18 

purchases totaling $55,156 for which we questioned the government need 

and 2 purchases totaling $1,499 that we considered excessive in cost. A 

majority of the purchases were related to office-wide and organizational 

awards. 

We noted several purchases for items to be presented as awards. Many of 

these types of purchases were for gift certificate and gift card awards. 

Although VA policy gives managers great latitude in determining the nature 

and extent of awards, we identified 10 purchases totaling $51,117 for award 

gifts for which VHA was unable to provide information on the recipients of 

the award or the purposes for which the recipients were being recognized. 

Therefore, we categorized these purchases as questionable government 

need. For example, we identified two transactions for 3,348 movie gift 

certificates totaling over $30,000. For these purchases, the cardholders and 

A/OPCs could not provide the award letters or justification for the awards. 

Consequently, it could provide no evidence that these purchases were truly 

used for awards. We also identified one purchase for an award event 

totaling $2,500 for which the cardholder was unable to provide a 

justification for the ceremony or detail what awards were presented. Also, 

based on VHA purchase order documentation provided, we noted one 

additional purchase of items to be used as awards totaling $250 for which 

no vendor documentation was provided to support the purchase. 

Therefore, we classified and reported this transaction under our missing 

invoice category. 

We also identified two purchases that we considered wasteful because of 

excessive cost. We identified a cardholder who purchased a $999 digital 

camera when there were other less costly digital cameras widely available. 

For example, during the same six-month period from February 2002 

through July 2002, two other cardholders purchased digital cameras for 

$526 and $550. No documentation was available to show why that 

particular model camera was necessary. In the second example, we 

identified a purchase for a 20-minute magic show totaling $500 that was 

performed during a VA volunteer luncheon. Although VA policies allow for 

funds for volunteer events, this expenditure as roughly $25 per minute, 

seemed excessive. 

Questionable Purchases As discussed earlier in this report, we identified numerous transactions 

from the statistical samples that were missing adequate supporting 
Page 38 GAO-04-737 VHA Purchase Cards

documentation to identify what was actually purchased, how many items 

were purchased, and the cost of the items purchased. In these instances, 

we reported those sample transactions as exceptions for each attribute we 

tested. In addition, we requested supporting documentation for a 

nonstatistical sample of 982 transactions totaling $1.2 million. Of these, we 

identified 315 transactions totaling $246,596 that appeared to be improper 

or wasteful, but for which VHA either provided insufficient or no 

documentation to support the propriety of the transactions. 

We classified 250 of these 315 transactions, totaling $209,496, as missing 

invoices because the cardholders provided either VHA internal 

documentation, but no vendor documentation to support the purchase, or 

provided no documentation at all to support the purchase. VHA internal 

documentation includes purchase orders, reconciliation documents, and 

receiving reports. Vendor documentation includes invoices, sales receipts, 

and packing slips. Specifically, internal documentation was available for 

184 of these transactions totaling $155,429 but no vendor documentation 

was available. No documentation was available at all for the remaining 66 

transactions totaling $54,068. 

An example of a transaction with internal documentation, but no vendor 

documentation included a purchase from Circuit City where the cardholder 

stated that the purchase was for three $650 television sets and three $100 

television stands, totaling $2,300 (including $50 shipping), that were 

needed to replace the existing ones in the VA facility’s waiting area. In 

another transaction, no vendor documentation was available for a 

transaction from Black & Gold Beer where the cardholder stated that the 

purchase of beer was for a patient. The purchase order shows that three 

cases were purchased at $12.50 each, totaling $38. The cardholder stated 

that the purchase was at the request of the pharmacy for a specific patient; 

however, no documentation was provided to support this claim. Table 5 

illustrates some transactions in the nonstatistical sample for which 

cardholders provided no documentation to support what was purchased. 
Page 39 GAO-04-737 VHA Purchase Cards

Table 5: Examples of Purchases Where No Documentation Was Provided

Source: GAO’s analysis of nonstatistical transactions selected for fiscal year 2002.

Based on these examples and other transactions identified in the 

nonstatistical sample, we believe that at least some of these items may 

have been determined to be potentially fraudulent, improper, or wasteful 

had the documentation been provided or available. In addition, we noted 

that of the 66 transactions where VHA cardholders provided no 

documentation to support the purchase, 32 transactions (48 percent) 

represented 2 or more transactions to the same cardholder. For example, 

one cardholder did not provide documentation for 5 transactions totaling 

$5,799 from various types of merchants, including two restaurants, a movie 

theater, a country club, and an airport café.

For 65 transactions totaling $37,100 that appeared to be either improper or 

wasteful, the documentation we received was not the correct supporting 

documentation or was inadequate, and we were unable to determine the 

propriety of the transactions. For example, one transaction was for $1,350 

to Hollywood Entertainment; however, the purchase order and invoice 

listed Hear, Inc. as the vendor for closed captioning services. The 

Vendor Name Transaction Amount ($)

Radio Shack 3,305

Wyndham Hotels Resort 2,953

The Sharper Image 2,127

The Brass Elephant 

(a restaurant, fine dining) 2,081

Gibby’s Steak and Seafood 1,758

Baltimore Orioles 1,705

FFP Palm Computing 1,478

Daddy’s Junky Music 1,041

Eddie Bauer 900

Gap Kids 788

Hollywood Beach Country Club 500

Southwest Airlines 399

Harbor Cruises 357

Hecht’s 280

L.L. Bean 239

Christmas Palace 209

Macys.com 163
Page 40 GAO-04-737 VHA Purchase Cards

cardholder stated that she believed Hollywood Entertainment is an 

associate company name for Hear, Inc.; however, they could not provide 

any documentation to support this statement. Additionally, from our 

Internet searches of both Hollywood Entertainment and Hear, Inc. we 

found no information to indicate that these two companies were associated 

in any way. 

In another example, the transaction was for $1,400 to Fabulous 

Pewterware, a company that sells handcrafted items made of pewter; 

however, the purchase order and invoice listed Ball Med & Associates Inc., 

a company that provides medical services, as the vendor and described the 

purchase as repairs. The A/OPC stated that Fabulous Pewterware is 

synonymous with Ball Med & Associates Inc.; however, he could not 

provide documentation supporting this claim. From our Internet search of 

Fabulous Pewterware, we found no information to indicate that these two 

companies were one and the same. 

We also identified 68 transactions totaling $31,772 involving the purchase 

of tickets for sporting events, plays, movies, amusement/theme parks, and 

other recreation activities for veterans and VA volunteers. The 

documentation provided for these transactions was inadequate or missing 

a vendor invoice; therefore, we could not determine whether these tickets 

were used in support of the volunteers or veterans. 45 As a result, these 

purchases were also categorized as questionable. Various programs under 

VHA, such as Recreation Therapy, Voluntary Services, and Blind 

Rehabilitation Service, sponsor assorted activities for the benefit of 

veterans and for VA volunteers. From our review of these types of 

purchases, we found that VHA does not have procedures in place to ensure 

that the purchased items were used by the intended recipients and are 

properly accounted for. In most cases, there was inadequate or no 

documentation to account for how the tickets were distributed and who 

participated in the events. 

For example, we found one purchase of 62 theme park tickets to Six Flags 

totaling $997 for veterans. Upon request, we received a list of veterans to 

whom tickets were distributed and we noted that the list only accounted 

45Of the 68 transactions, 52, totaling $24,442, did not have adequate documentation and 

therefore, are included in the inadequate/incomplete documentation category. The 

remaining 16 transactions, totaling $6,600 were missing vendor documentation and 

therefore, are included in the missing invoice category. 
Page 41 GAO-04-737 VHA Purchase Cards

for 28 tickets. When we contacted the cardholder to obtain clarification for 

the discrepancy, we were told that the difference was due to veterans 

receiving additional tickets for their family members; however, there was 

no evidence to support this claim. As a result, we were unable to determine 

whether the remaining 34 tickets were provided to veterans for the 

intended purpose. In another example, we found a purchase of 46 tickets 

totaling $812 for veterans to attend a Pittsburgh Pirates baseball game. 

However, we were provided no documentation that identified who received 

the tickets or who attended the baseball game. Proper accountability over 

the distribution and receipt of tickets for such events is needed to help 

ensure that tickets are not improperly used for personal use.

Conclusions Overall, VHA’s internal controls were not designed to ensure improper 

purchases would be detected or prevented in the normal course of 

business. While VHA has some internal controls, they are often not 

operating as intended because cardholders and approving officials are not 

adhering to internal control requirements guidance, resulting in violations 

of federal acquisition regulations as well as VA/VHA’s own policies. In 

other instances, internal controls are lacking, as in the case of 

documentation requirements, in which there is not adequate guidance. The 

lack of compliance with established internal control requirements coupled 

with a lack of internal control guidance in some areas such as 

documentation, resulted in improper, wasteful, and questionable 

purchases. Although the total amount of these purchases is small in 

comparison with the size of the purchase card and convenience check 

program, it reveals a vulnerability from weak controls that could be 

exploited. Until controls are strengthened and guidance is expanded and 

clarified, VHA will continue to be at risk of improper payments through 

purchase card and convenience check transactions.

Recommendations for 

Executive Action

We are making the following 36 recommendations to the Acting Under 

Secretary for Health and, in some instances, the Secretary of Veterans 

Affairs to strengthen internal controls and compliance in its purchase card 

program in order to reduce VHA’s vulnerability to improper, wasteful, and 

questionable purchases.
Page 42 GAO-04-737 VHA Purchase Cards

Internal Controls With regard to improving internal controls over purchasing, we recommend 

that the Acting Under Secretary for Health do the following.

Segregation of duties:

• Establish appropriate criteria, including types of items and dollar 

thresholds for requiring and documenting independent receiving and 

acceptance of items obtained with a purchase card. 

• Establish specific procedures for documenting independent receiving, 

such as requiring the cardholder to maintain a signed copy of the 

receiving report showing the purchase was received in the warehouse, 

or requiring the approving official or supervisor to sign and date the 

vendor invoice, packing slip, sales or credit card receipt to verify that 

the items purchased were actually received.

• Require that VHA senior management at the VA headquarters in 

Washington, D.C. document its approval that the one VHA 

Agency/Organization Program Coordinator (A/OPC) can continue to 

function as a cardholder since this is inconsistent with VA/VHA policy. 

• Establish procedures that require an independent person to periodically 

review this A/OPCs’ purchasing activities.

Documentation:

• Establish guidance dictating vendor documentation needed to support 

the purchase transactions (in description, quantity, and price) that 

provides the basis for reconciling electronically received charges from 

Citibank.

• Require cardholders to maintain documentation of timely and 

independent receiving and acceptance of items obtained with a 

purchase card.

• Incorporate into VHA’s existing purchase card guidance, file retention 

requirements as mandated by FAR Subpart 4.805 Storage, Handling, 

and Disposal of Contract Files.

• Identify cardholders who repeatedly fall outside the required 

timeframes for recording purchase card order information into the VA’s 
Page 43 GAO-04-737 VHA Purchase Cards

purchase card order system and for performing reconciliations of 

purchases. 

• Identify approving officials who continually fail to meet the required 

timeframes for reviewing and certifying that cardholder purchases are 

legal and proper.

• Provide adequate retraining for these cardholders and approving 

officials and consider whether to suspend their responsibilities if the 

established timeframes continue not to be met.

Vendor Discounts:

• Establish procedures that require cardholders, at the time of purchase, 

to determine whether vendors offer purchase discounts when early 

payments are made for goods and services rendered.

• Establish procedures requiring internal management review auditors to 

• identify loss of vendor-offered discounts, 

• determine frequency of occurrences and actual dollars lost to the 

government, and 

• periodically report to VHA management for consolidation and further 

review so that appropriate actions can be taken.

Program Monitoring:

• Establish timeframes for the prompt cancellation of purchase card 

accounts when the cardholder has left the agency and all outstanding 

purchase orders have been reconciled.

• Establish procedures to ensure prompt cancellation of purchase cards 

when cardholders leave VA, are reassigned, or no longer have valid 

needs for the cards.

• Establish procedures to periodically assess whether each cardholder 

continues to have a valid need for a purchase card. 

• Review existing credit limits and monthly spending and develop policies 

and strategies on credit limits provided to cardholders with a focus on 
Page 44 GAO-04-737 VHA Purchase Cards

minimizing specific cardholder spending authority and minimizing the 

federal government’s financial exposure.

• Assess the adequacy of human capital resources devoted to the 

purchase card program, especially for oversight activities, at the A/OPC 

level, and provide needed resources.

Compliance with 

Purchasing Requirements

With regard to improving and enforcing compliance with purchasing 

requirements, we recommend that VHA develop written detailed 

procedures and guidelines to aid cardholders in complying with the Federal 

Acquisition Regulation, Veterans Affairs Acquisition Regulations and other 

internal policies and procedures when using the purchase cards and 

convenience checks as procurement and payment mechanisms for goods 

and services rendered. Such procedures could be either incorporated in 

VHA’s existing guidance over the purchase card program or presented 

separately. Specifically, we recommend that the Acting Under Secretary 

for Health do the following. 

• Establish steps to be followed when circumstances permit the purchase 

of generally prohibited items such as clothing, food, and gifts.

• Establish steps to be followed when the purchase amount will exceed 

the $2,500 micro-purchase limit or the cardholders’ single purchase limit 

to prevent splitting the purchase.

• Establish steps to be followed if the cardholders, with only micropurchase authority, need to make a purchase over the $2,500 micropurchase threshold. 

• Establish steps to be followed when cardholders request to make 

purchases of office supplies and other goods from other than a 

mandatory source supplier for items that are “essentially the same.”

• Establish steps on how to document the use of competition and 

circumstances under which it can be justified not to use competitive 

procedures.

• Establish steps on how to document efforts to secure free conference 

space before purchasing rental of conference room facilities.
Page 45 GAO-04-737 VHA Purchase Cards

• Reiterate in VHA’s refresher training to cardholders and approving 

officials areas discussed in this report, such as segregation of duties, 

documentation requirements and retention of supporting 

documentation, taking advantage of available vendor-offered discounts, 

canceling of departed cardholders’ accounts, applicable laws and 

regulations, and agency policies and procedures. 

• Provide refresher training to agent cashiers on the areas discussed in 

this report, such as purchases that exceeded established check limits 

and payments to vendors who accept the purchase card as a form of 

payment.

• Consider whether to revoke or suspend purchasing authority of 

cardholders who are found to be frequently or flagrantly noncompliant 

with policies and procedures, such as cardholders making split 

purchases, procuring goods and services beyond their purchasing 

authority, or making purchases exceeding established dollar thresholds.

Wasteful and Questionable 

Purchases

With regard to purchases that may be at an excessive cost or for 

questionable government need, we recommend that the Acting Under 

Secretary for Health do the following. 

• Require that cardholders or others track and document award 

purchases to the end user, including who received the award and the 

purposes for which the recipient is being recognized. Copies should 

also be maintained in the purchase card order file.

• Require that cardholders or others track and document ticket purchases 

for recreational activities to the end user, including who received the 

ticket, date received, and signature by the recipient as evidence of 

receipt. Copies should also be maintained in the purchase card order 

file.

• Follow up on transactions we identified for which no supporting 

documentation was provided to determine whether the items purchased 

were for a legitimate government need.

• Take appropriate disciplinary or corrective action for purchases 

determined to be not for a legitimate government need.
Page 46 GAO-04-737 VHA Purchase Cards

Convenience Checks Policies and procedures over convenience checks are established at the 

department level only. Therefore, we are making four recommendations to 

the Secretary of Veterans Affairs to strengthen and improve controls over 

convenience check usage in its purchase card program. Specifically, to 

improve internal controls over convenience check purchasing, we 

recommend that the Secretary of the Veterans Affairs, in conjunction with 

the Acting Under Secretary for Health, do the following.

• Require agent cashiers to maintain written documentation that 

authorizes the disbursement of funds to third parties.

• Establish detailed procedures that specify the types of documentation 

that agent cashiers must obtain from the requesting office that support 

the disbursement of funds to third parties via convenience checks. 

• Establish detailed criteria in VA’s purchase card guidance for 

determining under what situations convenience checks provide the 

“most cost-effective and practical procurement and disbursement 

method” when using in lieu of the purchase card. Incorporate this 

criteria in VA’s convenience check guidance as well.

• Incorporate into VA’s existing convenience check guidance, file 

retention requirements as mandated by FAR Subpart 4.805 Storage, 

Handling, and Disposal of Contract Files.

Agency Comments and 

Our Evaluation

The Department of Veterans Affairs (VA) provided written comments on a 

draft of this report. In its response, VA generally agreed with our 

conclusions and expressly concurred with 32 of the 36 recommendations. 

For these recommendations, VA reported that it has actions either already 

in place or planned that meet the intent of the recommendations. For the 

remaining four recommendations, VA, in principle, concurred with three of 

these recommendations and presented reasons and/or alternative action 

steps to address the weaknesses identified in our report. 

Regarding these four recommendations, two recommendations addressed 

segregation of duties weaknesses related to an A/OPC that also functioned 

as a cardholder. We recommended that VHA senior management in 

Washington, D.C. approve this dual responsibility since this is inconsistent 

with VA/VHA policy and that procedures be established to require an 

independent person to periodically review this A/OPC’s purchasing 
Page 47 GAO-04-737 VHA Purchase Cards

activities. In essence, VA agreed that the dual responsibility of the A/OPC 

constituted a violation of department policy and stated that VHA 

headquarters never granted approval for the A/OPC to function in this dual 

capacity and would not do so. VA also reported that it has instructed the 

director of the facility in question that the dual responsibilities of the 

A/OPC is a violation of department policy and may not continue. We 

believe that VA’s planned action is an acceptable approach to solving the 

problem we identified, and if implemented will address the intent of our 

recommendations and resolve this segregation of duties issue and policy 

violation. 

We also recommended that VHA establish steps to be followed if 

cardholders, with only micro-purchase authority, need to make a purchase 

over the $2,500 micro-purchase threshold. VA responded that purchases 

greater than $2,500 should require a warrant and that any exception could 

complicate and thereby weaken existing policy. We agree that cardholders 

must have the applicable purchasing authority to make purchases over the 

$2,500 micro-purchase threshold and did not intend for VHA to establish 

procedures that were contrary to this FAR purchasing requirement. We 

believe VA has misinterpreted the intent of our recommendation. Our 

intent was to address the need for additional written purchase card 

guidance for cardholders who need to procure specific goods and services, 

yet the purchase amount exceeds their micro-purchase threshold. Such 

guidance could include instructing cardholders to contact their local 

procurement office so that a contracting officer can make the purchase 

instead. We believe additional written guidance to cardholders is needed 

as evidenced by our findings and similar findings reported by the OIG as far 

back as 1999. 

Lastly, we recommended that VHA require cardholders or others to track 

and document ticket purchases for recreational activities to the end user. 

VA reported that the burden of having each patient sign for each ticket 

would be onerous. As an alternative, VA stated that the cardholder should 

ensure that an accurate patient count is kept on file in the purchase card 

order file. We believe this proposed alternative method does not 

sufficiently address the accountability issue over these types of purchases. 

By only maintaining an accurate patient count, internal and external 

reviewers still will not have enough information available to determine who 

received the ticket or attended the event. A “patient count” provides only 

limited assurances over the accountability of tickets. Independent 

evidence from the recipient is needed to support that he/she received or 

attended such events and would increase the accountability over these 
Page 48 GAO-04-737 VHA Purchase Cards

types of purchases to help ensure that tickets are not improperly used for 

personal use. In a few instances, we found that VHA local offices had 

implemented, at varying degrees, tracking procedures of ticket purchases 

similar to those envisioned by our recommendation. For example, one 

field office, maintained an attendance sheet that identified the recreational 

activity, date and time of the activity, the particpants’ names and check 

marks as to whether or not participants attended the event. At another 

field office, we were provided a similar attendance sheet, including each 

recipient’s signature and last four digits of his/her social security number. 

Employing these types or similar procedures agencywide appears 

reasonable since some of the VHA field offices already have existing 

procedures in place. 

Also, in its response letter, VA included some technical comments that we 

have addressed in finalizing our report where appropriate. VA’s written 

comments and our evaluation of certain comments not addressed above 

are presented in appendix I.

As arranged with your offices, unless you announce the contents of this 

report earlier, we will not distribute it until 2 days from its issuance date. 

We will then send copies of this report to the Secretary of the Department 

of Veterans Affairs, the Acting Under Secretary for Health, appropriate 

congressional committees, and other interested parties. We will also make 

copies available to others upon request. In addition, this report will be 

available at no charge on GAO’s Web site at http://www.gao.gov.

Should you or your staff have any questions on matters discussed in this 

report, please contact me at (202) 512-6906 or williamsm1@gao.gov; or 

Alana Stanfield, Assistant Director, at (202) 512-3197 or stanfielda@gao.gov. 

Major contributors to this report are acknowledged in appendix II.

Sincerely yours,

McCoy Williams

Director, Financial Management and Assurance
Page 49 GAO-04-737 VHA Purchase Cards

Appendix I

Comments from the Department of Veterans Apendxies

Affairs ApendxiI

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.

See comment 1.

See comment 2.
Appendix I

Comments from the Department of Veterans 

Affairs

Page 50 GAO-04-737 VHA Purchase Cards

See comment 3.
Appendix I

Comments from the Department of Veterans 

Affairs

Page 51 GAO-04-737 VHA Purchase Cards
Appendix I

Comments from the Department of Veterans 

Affairs

Page 52 GAO-04-737 VHA Purchase Cards
Appendix I

Comments from the Department of Veterans 

Affairs

Page 53 GAO-04-737 VHA Purchase Cards
Appendix I

Comments from the Department of Veterans 

Affairs

Page 54 GAO-04-737 VHA Purchase Cards

The following are GAO’s comments on VA’s letter dated May 24, 2004. 

GAO Comments 1. We did not indicate that the VHA purchase card program operations 

were effective overall. During the exit conference meeting on April 26, 

2004, we communicated that the weaknesses identified at VHA were 

similar to the internal control weaknesses we reported at other federal 

agencies, although the extent of fraud, waste, and abuse that we 

identified at some of those agencies were not as prevalent at VHA. We 

also communicated that our findings stemmed from weak internal 

controls over the purchase card program and that strengthening 

controls would reduce the program’s vulnerability to improper, 

wasteful, and questionable purchases. We further stated that we would 

be making a number of recommendations for each of the identified 

areas that were discussed at the meeting. 

Regarding the $435,900 cited as fraudulent activity, we reported that 

this amount was identified from the OIG’s work and not GAO’s work. 

However, VA should not be deriving unjustified levels of assurances 

that its program is “effectively managed” based on the OIG’s findings 

and our findings identified in this report from data mining and 

nonstatistical testing of transactions. As we indicated in our report, 

while the total amount of improper purchases we identified, based on 

limited scale audit work, is relatively small compared to the more than 

$1.4 billion in annual purchase card and convenience check 

transactions, we believe our results demonstrate vulnerabilities from 

weak controls that may have been exploited to a much greater extent. 

In addition, our internal control findings and noncompliance with 

federal and agency purchasing requirements identified from the 

statistical testing further illustrate that controls were ineffective and 

improved management is needed over program operations. 

2. In our opinion, the approving official’s certification of the purchase 

card order for most micro-purchases does not provide sufficient 

assurance that purchased items are not acquired for personal use and 

that they come into the possession of the government. Various types of 

sensitive items such as personal digital assistants, cell phones, digital 

cameras, laptops, and computers can be purchased below the $2,500 

micro-purchase threshold. These and other items that can be easily 

pilfered should go through a central receiving point to reduce the risk 

of error or fraud. 
Appendix I

Comments from the Department of Veterans 

Affairs

Page 55 GAO-04-737 VHA Purchase Cards

3. We recently provided VHA a schedule of purchase card transactions in 

which no documentation was provided during our fieldwork to support 

the purchases selected for review. 
Page 56 GAO-04-737 VHA Purchase Cards

Appendix II

Staff Acknowledgments ApendxiI

Acknowledgments Staff members who made key contributions to this report include:

Sharon Byrd, Polly Cheung, Lisa Crye, Danielle Free, Carla Lewis, Julia 

Matta, Gloria Medina, Tarunkant Mithani, Donell Ries, and Stacey Smith. 

(195011) 
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