GAO-04-986R LLNL Purchase Card Controls

United States Government Accountability Office

Washington, DC 20548 

August 6, 2004 

Congressional Requesters 

Subject: Lawrence Livermore National Laboratory: Further Improvements Needed 

to Strengthen Controls Over the Purchase Card Program

The Lawrence Livermore National Laboratory (LLNL) located in Livermore, 

California is a government-owned, contractor-operated national laboratory of the 

Department of Energy’s (DOE) National Nuclear Security Administration (NNSA).1

 

The University of California manages the lab under a cost-reimbursable contract with 

NNSA. The university is paid a management fee to operate the lab and is reimbursed 

for all allowable costs charged to the contract. 

During the fall of 2002, the Federal Bureau of Investigation began investigating two 

Los Alamos National Laboratory employees for alleged misuse of lab credit cards. 

Other allegations of theft and misuse of government funds at Los Alamos soon 

followed. In light of the problems identified at Los Alamos, you asked us to review 

selected procurement and property management practices at two DOE and two 

NNSA contractor labs, including LLNL.2

This report summarizes the information provided during our June 14, 2004 briefing to 

your staff on these issues as they relate to Lawrence Livermore. The enclosed 

briefing slides highlight the results of our work and the information provided.3 

Specifically, we reviewed LLNL’s purchase card program and property management 

practices to determine whether (1) internal controls over the lab’s purchase card 

(Pcard) program provided reasonable assurance that improper purchases would not 

occur or would be detected in the normal course of business, (2) purchase card 

expenditures made under the contract properly complied with lab policies and other 

applicable requirements and were reasonable in nature and amount and thus were 

allowable costs payable to the contractor under the contract, and (3) property 

controls over selected asset acquisitions provided reasonable assurance that 

 

1

The National Nuclear Security Administration (NNSA) was created in fiscal year 2000 as a separately 

organized agency within DOE. As part of its national security mission, NNSA has responsibility for the 

institutional stewardship of three national security laboratories. 

2

The four labs we reviewed were DOE’s Lawrence Berkeley National Laboratory and Pacific Northwest 

National Laboratory, and NNSA’s Lawrence Livermore National Laboratory and Sandia National 

Laboratories. 

3

Separate briefings were provided for each of the labs reviewed, which we also summarized in separate 

letters. 
Page 2 GAO-04-986R LLNL Purchase Card Controls

accountable assets would be properly recorded and tracked.4 Our review covered 

selected transactions that occurred during fiscal year 2002 and the first half of fiscal 

year 2003 (October 1, 2001, through March 31, 2003), which were the most current 

data available when we requested the data for our review. This report also includes 

five recommendations for action—four related to actions needed to be taken by 

Livermore and one related to action needed to be taken by the NNSA contracting 

officer for Livermore. 

Results in Brief 

LLNL had implemented a number of internal controls over its Pcard program and 

property management functions. However, weaknesses in LLNL’s Pcard program 

increased the lab’s risk of improper purchases. For example, lab policy did not 

require approving officials to verify purchases listed in the cardholder’s transaction 

summary report against supporting documents, which compromised the effectiveness 

of the review process in detecting improper purchases. Of the 144 nonstatistically 

selected transactions obtained through data mining5 for fiscal year 2002 and the first 

half of fiscal year 2003, we found 15 (10 percent) totaling $23,923 lacked an invoice, 

credit receipt, or other sales documentation necessary to validate the dollar amount, 

quantity, and nature of the items purchased. The lack of such documentation 

minimizes the effectiveness of supervisory review of Pcard transactions. 

Additionally, during our review period, the lab allowed supplemental labor 

personnel—staff that worked at the lab for a labor subcontractor and thus were not 

LLNL employees—to be issued Pcards, but did not have adequate controls in place to 

help ensure that the Pcards were returned if supplemental employees stopped 

working at the lab. Instead, it relied on the subcontractor to perform this function, 

with no oversight by lab employees. 

These control weaknesses likely contributed to the $97,348 in improper, wasteful, 

and questionable purchases we identified in our review.6 While relatively small 

compared to the approximately $120 million in purchase card activity that occurred 

during the review period, it demonstrates vulnerabilities from weak controls that 

could be exploited to a greater extent. Specifically, 87 of the 144 purchases in the 

nonstatistical selection we reviewed were for the purchase of controlled items that 

LLNL’s policy requires to be preapproved. Thirty-two of these 87 transactions (37 

percent) totaling $31,571 did not have any evidence of preapproval. We also 

identified two improper split purchases—that is, groups of two or more similar 

transactions that were split to circumvent single purchase limits—consisting of 11 

transactions totaling $28,137 from a statistical sample. Further, we considered 11 

 

4

Throughout this document, references to purchases and transactions refer to those made by the 

contractor employees of the lab that are charged to the NNSA contract. Although the lab’s purchase 

cards are issued by the contractor, purchases charged to the NNSA contract are ultimately reimbursed 

and thus paid for by the federal government. Similarly, property purchased that is charged to NNSA 

becomes government property. 

5

Data 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. 

6

This is the net total after adjusting for one $525 purchase that was both improper because the 

cardholder failed to obtain a required preapproval and wasteful because it was excessive in cost. 
Page 3 GAO-04-986R LLNL Purchase Card Controls

transactions totaling $9,945 to be wasteful because they were excessive in cost 

compared to other available alternatives and/or were of questionable need. For 

example, one cardholder spent $1,559 for a reclining leather chair. While the 

requester had a documented medical need for a special chair due to back problems, 

in a similar situation another cardholder purchased an orthopedic chair from a 

medical supply store for $599. We considered 12 transactions totaling $28,220 to be 

questionable because they were missing key documentation that would enable us or 

the lab to determine what was purchased, the quantity and cost of the items 

purchased, and whether the items purchased were proper and reasonable. Because 

we only tested a small portion of the transactions we identified 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. 

Accountable assets we tested generally were properly accounted for and tracked in 

LLNL’s property management system. Out of 144 transactions reviewed, there were 6 

transactions for the purchase of 26 accountable assets totaling $70,048. Of these 26 

assets, one item totaling $3,481 had not been recorded in the property management 

system. 

In response to recent internal audit and other reviews, LLNL management has made a 

number of improvements to its internal controls that, if properly implemented, should 

further enhance controls over the Pcard program. However, additional corrective 

actions are needed to address weaknesses identified. 

Recommendations for Executive Action 

In order to address the issues identified in our review, we recommend that the 

Administrator of NNSA direct Lawrence Livermore National Laboratory’s Director to 

take the following four actions to strengthen internal controls over the purchase card 

program and reduce the lab’s vulnerability to improper, wasteful, and questionable 

purchases. 

• Establish policies and procedures requiring that purchasers request and 

maintain a copy of the detailed sales receipt, invoice, or other independent 

support showing the description, quantity, and price of individual items 

purchased. 

• Require approving officials to review transaction documentation before 

approving transactions listed on the cardholders’ monthly transaction 

summary reports. This should include determining that there is independent 

support for the description, quantity, and price of individual items purchased, 

and that the cardholder obtained and documented any required preapprovals 

before purchase. 

• Consider modifying the Pcard system so that purchases that are not reconciled 

timely by the cardholder are charged to a temporary suspense account rather 

than to each cardholder’s default account codes. 
Page 4 GAO-04-986R LLNL Purchase Card Controls

• In conjunction with the implementation of the lab’s online training and 

recertification for cardholders and approving officials, include in such training 

an emphasis on (1) the lab’s policy to obtain preapprovals for all purchases of 

items listed on the controlled items and services list, and (2) consideration of 

best value in making and approving purchases. Because the controlled items 

and services list is frequently updated, the training should include reviewing 

the items on the current list and any recent changes. 

We also recommend that the Administrator of NNSA direct the NNSA contracting 

officer for the lab to review the improper, wasteful, and questionable items we 

identified to determine whether any of these purchases should be repaid to NNSA. 

Agency Comments 

We obtained oral comments on a draft of this briefing from NNSA officials. They 

generally agreed with the findings and recommendations, and indicated that the lab 

has made a number of improvements to its controls in light of the problems identified 

at Los Alamos. 

We also obtained oral comments from LLNL officials, who disagreed with the 

recommendations to (1) require sales documentation such as a receipt or invoice and 

(2) require approving officials to review such documentation before approving 

purchases. They indicated sales receipts and invoices were not always available and 

did not feel they were necessary to support purchases. Instead, they felt that as long 

as the order amount entered into the Pcard system by the cardholder matched the 

total purchase amount charged by the bank, that was sufficient evidence to support 

that the purchase was proper. 

We disagree. The matching of the total dollar amount of the transaction to the order 

amount entered by the cardholder without independent evidence of the description, 

quantity, and price of individual items purchased does not provide sufficient evidence 

that the items purchased were proper. Because the cardholder enters the order, 

makes the purchase, and reconciles any differences, a reviewer would not be able to 

determine if the original order amounts were correct nor whether additional items 

were purchased under that order. Consequently, sufficient independent evidence for 

the individual items purchased and corresponding supervisory review of such 

evidence is necessary to help reduce the risk of improper purchases. 

The lab also provided technical and clarifying comments, which we incorporated as 

appropriate. 

Scope and Methodology 

To determine if LLNL’s internal controls over its Pcard program provided reasonable 

assurance that improper purchases would not occur or would be detected in the 

normal course of business, we reviewed LLNL’s contract with NNSA and applicable 

provisions of the DOE Acquisition Regulation (DEAR) and the Federal Acquisition 
Page 5 GAO-04-986R LLNL Purchase Card Controls

Regulation (FAR), performed walkthroughs of key processes, interviewed LLNL and 

NNSA management and staff, and compared the results to the lab’s policies and 

GAO’s Standards for Internal Control in the Federal Government.

7

 These standards 

provide the overall framework for establishing and maintaining internal control and 

for identifying and addressing major performance and management challenges and 

areas at greatest risk of fraud, waste, abuse, and mismanagement and are based on 

internal control guidance for the private sector.8

To determine whether Pcard expenditures complied with lab policies and other 

applicable requirements and were reasonable in nature and amount, we performed 

data mining on fiscal year 2002 and the first half of fiscal year 2003 Pcard transactions 

to identify indicators of potential noncompliance with policies and procedures and to 

identify purchases that appeared to be from unusual vendors, purchases made on 

weekends, during the holidays, or at fiscal-year end, and purchases of attractive 

assets. Based on the results, we (1) selected a statistical sample of 27 potential split 

purchases and tested to determine whether they were in fact split purchases, and 

(2) tested a nonstatistical selection of 144 transactions for evidence of supervisory 

review and approval, adequacy of supporting documentation, and reasonableness of 

the purchases. 

To determine if property controls over selected asset acquisitions provided 

reasonable assurance that accountable assets would be properly recorded and 

tracked, we performed walkthroughs to observe property controls, reviewed property 

management policies and procedures, tested accountable property items selected in 

the nonstatistical selection to determine whether these assets had been entered into 

the lab’s property system prior to our review, performed data mining on the property 

database to identify possible database errors or inaccuracies such as property 

assigned to terminated employees and multiple property items with the same serial 

number, and performed a physical observation of selected assets to determine 

whether they could be properly accounted for. 

We requested oral comments on a draft of the enclosed briefing slides from the 

Administrator of NNSA or his designee and have included any comments as 

appropriate in the letter and enclosed slides. While we identified some improper, 

wasteful, and questionable purchases, our work was not designed to determine the 

full extent of such purchases. We conducted our work on all four labs from March 

2003 through May 2004 in accordance with generally accepted government auditing 

standards. 

 

7

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

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 

8

Internal Control—Integrated Framework, Committee of Sponsoring Organizations of the Treadway 

Commission (COSO). 
Page 6 GAO-04-986R LLNL Purchase Card Controls

- - - - - 

Unless you publicly announce its contents earlier, we plan no further distribution of 

this report until 30 days after its date. At that time, we will send copies of this report 

to the Ranking Minority Member, House Committee on Energy and Commerce; the 

Secretary of Energy; the Administrator of NNSA; and the Lawrence Livermore 

National Laboratory Director. Copies will also be made available to others upon 

request. In addition, the report will be available at no charge on our home page at 

http://www.gao.gov. If you have any questions about this report, please contact me at 

(202) 512-9508 or Doreen Eng, Assistant Director, at (206) 287-4858. You may also 

reach us by e-mail at calboml@gao.gov or engd@gao.gov. Additional contributors to 

this assignment were Rick Kusman, Delores Lee, Kelly Lehr, Diane Morris, Estelle 

Tsay, and Eric Wenner. 

Linda M. Calbom 

Director, Financial Management and Assurance 

Enclosure 
Page 7 GAO-04-986R LLNL Purchase Card Controls

List of Requesters

The Honorable Sherwood Boehlert, Chairman 

The Honorable Bart Gordon, Ranking Minority Member 

Committee on Science 

House of Representatives 

The Honorable Joe Barton, Chairman 

Committee on Energy and Commerce 

House of Representatives 

The Honorable Jerry Costello 

The Honorable James Greenwood 

The Honorable W.J. “Billy” Tauzin 

House of Representatives 
Enclosure 

Page 8 GAO-04-986R LLNL Purchase Card Controls

June 14, 2004, Briefing 

1

Lawrence Livermore National Laboratory

Further Improvements Needed to Strengthen Controls 

Over the Purchase Card Program

Briefing to the Staff of the Committees on Science and 

Energy and Commerce, House of Representatives 

June 14, 2004
Enclosure 

Page 9 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 2

Table of Contents

• Introduction and Objectives

• Results in Brief

• Background

• Scope and Methodology

• Internal Control Weaknesses 

• Improper, Wasteful, and Questionable Purchases

• Property Management

• Recent Policy and Procedural Changes

• Conclusions

• Recommendations

• Agency Comments
Enclosure 

Page 10 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 3

Introduction and Objectives

• The Lawrence Livermore National Laboratory (LLNL) is a governmentowned, contractor-operated national laboratory of the Department of 

Energy’s (DOE) National Nuclear Security Administration (NNSA).1 It is 

managed by the University of California under a cost-reimbursable 

contract with NNSA. The university is paid a management fee to operate 

the lab and is reimbursed for all allowable costs charged to the contract. 

• During the fall of 2002, the Federal Bureau of Investigation began 

investigating two Los Alamos National Laboratory employees for alleged 

misuse of lab credit cards. Other allegations of theft and misuse of 

government funds at Los Alamos soon followed. 

• In light of the problems identified at Los Alamos, you asked us to review 

selected procurement and property management practices at two DOE 

and two NNSA contractor labs, including LLNL.2

1NNSA was created in fiscal year 2000 as a separately organized agency within DOE. As part of its 

national security mission, NNSA has responsibility for the institutional stewardship of the three national 

security laboratories which includes LLNL.

2The four labs we reviewed were DOE’s Lawrence Berkeley National Laboratory and Pacific Northwest 

National Laboratory, and NNSA’s Lawrence Livermore National Laboratory and Sandia National 

Laboratories.
Enclosure 

Page 11 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 4

Introduction and Objectives (cont’d)

• The objectives of our review at LLNL were to determine whether:

• Internal controls over LLNL’s purchase card (Pcard) program 

provided reasonable assurance that improper purchases would not 

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

• Purchase card expenditures made under the contract (1) properly 

complied with lab policies and other applicable requirements and (2) 

were reasonable in nature and amount and thus were allowable 

costs payable to the contractor under the contract.

• Property controls over selected asset acquisitions provided 

reasonable assurance that accountable assets would be properly 

recorded and tracked.
Enclosure 

Page 12 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 5

Introduction and Objectives (cont’d)

• Our review covered selected transactions that occurred 

during fiscal year 2002 and the first half of fiscal year 2003 

(October 1, 2001, through March 31, 2003), which were the 

most current data available when we requested the data for 

our review. 

• Throughout this document, references to purchases and 

transactions refer to those made by the contractor 

employees of the lab that are charged to the NNSA contract. 

Although the lab’s purchase cards are authorized by the 

contractor, purchases charged to the NNSA contract are 

ultimately reimbursed and thus paid for by the federal 

government. Similarly, property purchased that is charged 

to NNSA becomes government property.
Enclosure 

Page 13 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 6

Results In Brief

• LLNL had implemented a number of internal controls over its Pcard 

program and property management functions. However, weaknesses in 

LLNL’s Pcard program increased the lab’s risk of improper purchases. 

Our review of a nonstatistical selection of 144 transactions, while not 

projectable to the universe of transactions, indicated a number of control 

weaknesses. For example,

• Lab policy did not require approving officials to verify purchases 

listed in the cardholder’s transaction summary report against 

supporting documents, which compromises the effectiveness of the

review process in detecting improper purchases.

• Fifteen (10 percent) of 144 nonstatistically selected transactions 

totaling $23,923 lacked an invoice, credit receipt, or other sales 

documentation necessary to validate the dollar amount, quantity,

and nature of the items purchased.
Enclosure 

Page 14 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 7

Results in Brief (cont’d)

• During our review period, the lab allowed supplemental labor 

personnel—staff that worked at the lab for a labor subcontractor and 

thus were not LLNL employees—to be issued Pcards. However, the 

lab did not have controls in place to help ensure that the Pcards 

were returned if supplemental employees stopped working at the 

lab. Instead, it relied on the subcontractor to perform this function.

• These control weaknesses likely contributed in part to the $97,3483 in 

improper, wasteful, and questionable transactions we identified during 

our review. For example,

• Eighty-seven of the 144 purchases in the nonstatistical selection we 

reviewed were for the purchase of controlled items that LLNL’s 

policy requires to be preapproved. Of these 87, 32 transactions (37 

percent) totaling $31,571 did not have any evidence of preapproval.

3This is the net total after adjusting for one $525 purchase that was both improper because the 

cardholder failed to obtain a required preapproval and wasteful because it was excessive in cost.
Enclosure 

Page 15 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 8

Results in Brief (cont’d)

• Two were improper split purchases—that is, groups of two or more 

similar transactions that were split to circumvent single purchase 

limits—consisting of 11 transactions totaling $28,137. 

• Eleven transactions totaling $9,945 we determined to be wasteful 

because they were excessive in cost compared to other available 

alternatives and/or were of questionable need. For example, one 

cardholder spent $1,559 for a reclining leather chair. While the 

requester had a documented medical need for a special chair due to 

back problems, in a similar situation another cardholder purchased 

an orthopedic chair from a medical supply store for $599.

• Twelve transactions totaling $28,220 we considered questionable 

because they were missing key documentation that would enable us

or the lab to determine what was purchased, the quantity and cost of 

the items purchased, and whether the items purchased were proper

and reasonable.
Enclosure 

Page 16 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 9

Results in Brief (cont’d)

• Accountable assets we tested generally were properly accounted for 

and tracked in LLNL’s property management system. Out of 144 

transactions reviewed, there were 6 transactions for the purchase of 26 

accountable assets totaling $70,048. Of these 26 assets, one item 

totaling $3,481 had not been recorded in the property management

system.

• In response to recent internal audit and other reviews, LLNL 

management has made a number of improvements to its internal 

controls which, if properly implemented, should further enhance controls 

over the Pcard program. We are making five recommendations to 

address issues raised in our review that require additional action.

• NNSA headquarters officials generally agreed with the findings and 

recommendations. Lab officials disagreed with recommendations to (1) 

require cardholders to maintain documentation such as a receipt or 

invoice and (2) require approving officials to review such documentation 

before approval, stating such documentation was unnecessary. We

disagree, as independent evidence of the description, quantity, and price 

of individual items purchased and the supervisory review of such

evidence is critical to reducing the risk of improper purchases.
Enclosure 

Page 17 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 10

Background

• LLNL is a nuclear weapons and research lab located in 

Livermore, California and has been operated by the 

University of California since it opened in 1952.

• The lab’s 8,900 staff are University of California employees. 

Its fiscal year 2003 budget was about $1.6 billion.

• During fiscal year 2002, the lab made about $80 million in 

Pcard purchases. 

• As of March 2003, the lab had 284 active Pcard users. 
Enclosure 

Page 18 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 11

Background (cont’d) 

• Most cardholders have a $5,000 or $10,000 single purchase 

limit with monthly limits ranging from $100,000 to $250,000. 

Five cardholders have monthly limits from $500,000 to 

$3,000,000 because they purchase specific items for the 

entire lab (i.e., furniture, shop stock, and library items). 

• LLNL’s property management department provides policy 

and oversight for property management at the lab. 

• Specific property center representatives within each 

organization are responsible for coordinating with property 

management to track the physical assets and ensure that 

information recorded in the property database for each 

accountable asset is current.
Enclosure 

Page 19 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 12

Background (cont’d)

• Items that qualify as accountable assets are recorded and tracked in the 

property management system. Accountable assets include:

• Assets with an acquisition value of $5,000 or more. 

• Designated “attractive assets”, which are items that are considered 

susceptible to theft and generally have an acquisition value of $300 

or more, such as computers and digital cameras.

• Lab policy does not allow cardholders to purchase accountable assets 

with a Pcard unless the cardholder receives prior approval to do so.

• As of June 2003 LLNL’s property management system contained over 

61,000 NNSA-owned accountable assets with a total recorded 

acquisition cost of $1.3 billion. 
Enclosure 

Page 20 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 13

Scope and Methodology 

To determine if LLNL’s internal controls over its Pcard program provided 

reasonable assurance that improper purchases would not occur or 

would be detected in the normal course of business, we

• Reviewed LLNL’s contract with NNSA and applicable provisions of the DOE Acquisition Regulation (DEAR) and the Federal Acquisition 

Regulation (FAR),

• Performed walkthroughs of key processes, interviewed LLNL and NNSA management and staff, and compared the results to the lab’s

policies and GAO’s Standards for Internal Control in the Federal 

Government. These standards provide the overall framework for establishing and maintaining internal control and for identifying and 

addressing major performance and management challenges and 

areas at greatest risk of fraud, waste, abuse, and mismanagement

and are based on internal control guidance for the private sector.4

4Internal Control — Integrated Framework, Committee of Sponsoring Organizations of the Treadway Commission (COSO). 
Enclosure 

Page 21 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 14

Scope and Methodology (cont’d)

• To test specific control activities and determine whether purchase card 

expenditures complied with lab policies and other applicable 

requirements and were reasonable in nature and amount, we first 

obtained from the lab the database of purchase card transactions for 

fiscal year 2002 and the first 6 months of fiscal year 2003. We

separately obtained from the lab’s Pcard issuing bank the total dollar 

value of Pcard purchases for the period to compare to the database for 

completeness. 

We then selected transactions using the following methods.

• Data mining. We performed data mining on the Pcard transaction database to identify potential noncompliance with policies and 

procedures.

• We looked for potential split purchases (i.e., groups of two or 

more similar transactions that potentially were split to circumvent single purchase limits), cardholders with multiple purchase cards,

and transactions on cards assigned to employees on leave or 

former employees.
Enclosure 

Page 22 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 15

Scope and Methodology (cont’d)

• Because of the high volume of potential split transactions, we 

forwarded the results of a statistical sample of potential split

purchase transactions to the lab for a response and related 

documentation that we then used to assess the transactions. 

• For all other data mining selections, we forwarded the results that 

met specific criteria to the lab for a response and related 

documentation that we used to assess the transactions. 

• Nonstatistical selection. We performed additional data mining on Pcard transactions to first identify purchases that appeared to be 

from unusual vendors, purchases made on weekends, during the 

holidays, or at fiscal year-end, and purchases of attractive assets.

• As these analyses yielded thousands of transactions, we then 

made a nonstatistical selection of 150 of these transactions 

totaling $276,969, taking into account factors such as item 

description, amount, and frequency of similar purchases, among 

other things.
Enclosure 

Page 23 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 16

Scope and Methodology (cont’d)

• Based on our review of the supporting documents, we 

determined 6 transactions were reversed by the vendor 

shortly after the purchases were made. Thus, we 

eliminated these from further review, reducing the total 

nonstatistical selection from 150 to 144 transactions. 

• We used the 144 transactions to test specific control 

activities, such as segregation of duties, evidence of 

supervisory review and approval, and adequacy of 

supporting documentation, as well as to examine the 

allowability and reasonableness of the purchases. 
Enclosure 

Page 24 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 17

Scope and Methodology (cont’d)

• To determine if property controls over selected asset 

acquisitions provided reasonable assurance that 

accountable assets would be properly recorded and 

tracked, we 

• Performed walkthroughs to observe property controls,

• Reviewed property management policies and procedures,

• Tested accountable property items selected in the nonstatistical selection to determine whether these 

assets had been entered into the lab’s property system 

prior to our review, 
Enclosure 

Page 25 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 18

Scope and Methodology (cont’d)

• Performed data mining on the property database to 

identify possible database errors or inaccuracies such as 

property assigned to terminated employees and multiple 

property items with the same serial number, and

• Performed a physical observation of selected assets to 

determine whether they could properly be accounted for.

• While we identified some improper, wasteful, and 

questionable purchases, our work was not designed to 

determine the full extent of improper purchases. We 

conducted our work on all four labs from March 2003 

through May 2004 in accordance with generally accepted 

government auditing standards.
Enclosure 

Page 26 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 19

Internal Control Weaknesses

During the period of our review, LLNL’s internal controls did not provide 

reasonable assurance that improper Pcard purchases would not occur 

or would be detected in the normal course of business. Weaknesses we 

identified included the following:

• Supervisory Review: The approving official’s review of each 

purchase card transaction is one of the most important controls to 

help ensure that Pcard purchases are appropriate. We found that 

this critical control was compromised because LLNL policy did not 

require approving officials to verify transactions listed on the

cardholders’ monthly transaction summary report against the 

supporting documentation. Without reviewing supporting 

documentation such as the vendor invoice or receipt, the approving 

official may not be aware of what specifically was purchased, the 

quantity, or the dollar amounts. 
Enclosure 

Page 27 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 20

Internal Control Weaknesses 

(cont’d)

• Certain transactions, because of the way they were set up by the lab, were not subject to any supervisory review. 

• LLNL’s electronic data interchange (EDI) system allowed 

cardholders to electronically make purchases called “material 

requests” from certain vendors that had agreements with LLNL. 

Material requests were limited to certain items in the vendor’s 

catalog as negotiated with the lab. When a cardholder submitted 

a material request order, the EDI system electronically sent the

order to the vendor along with authorization to charge an 

institutional credit card number. 

• Because these purchases were charged to an institutional credit 

card number, they did not show up on individual cardholders’ 

monthly transaction summary reports and thus were not reviewed 

or approved by the cardholders’ approving official to determine if 

there was a legitimate need for the items purchased. Two of the

144 transactions we reviewed were EDI purchases and thus did 

not have any supervisory review.
Enclosure 

Page 28 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 21

Internal Control Weaknesses 

(cont’d)

• Transaction Documentation: We identified several 

transactions that lacked key supporting documentation to 

verify specifically what was purchased and the related 

cost. 

• GAO’s Standards for Internal Control in the Federal 

Government states that transactions and other 

significant events need to be clearly documented, and 

the documentation should be readily available for 

examination. 

• LLNL’s Pcard policy required each cardholder to 

maintain the monthly reconciliation reports signed by 

the cardholder and approving official along with the 

corresponding backup information (e.g, packing slips, 

receipts, or invoices) for up to 3 years. 
Enclosure 

Page 29 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 22

Internal Control Weaknesses 

(cont’d)

• Out of the 144 transactions we reviewed, 15 (10 percent) totaling $23,923 lacked an invoice, receipt, or other sales 

documentation. 

• Without such documentation, the laboratory did not 

have any independent evidence of the description and 

quantity of what was purchased and/or the price paid.

• This lack of documentation was largely due to the fact 

that the Pcard policy did not require cardholders to 

request the sales receipts or invoices, if packing slips 

or order forms were available. However, packing slips 

do not typically show the costs of the items 

purchased, and order forms do not represent 

confirmation of goods actually purchased and 

received. 
Enclosure 

Page 30 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 23

Internal Control Weaknesses 

(cont’d)

Reconciliation of transactions: Cardholders were to reconcile their 

transactions electronically on the Pcard system to supporting documents 

weekly to verify that the charges were correct, input the item 

descriptions, and record the proper account codes for each transaction. 

If the cardholder did not perform this reconciliation, the Pcard system 

automatically charged the transactions to the cardholder’s default 

account code which may not be appropriate for each purchase. 

• Each cardholder must establish a default account code when they 

complete the application for a Pcard. The account code determines 

whether costs are charged to the NNSA contract, a contract for 

another agency or sponsor, or absorbed by the contractor as in the 

case of unallowable costs. This code also indicates the specific 

project or overhead account that the expense is to be charged to. 
Enclosure 

Page 31 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 24

Internal Control Weaknesses 

(cont’d)

• Since each cardholder may make purchases for many requesters 

and purposes, their default codes may not be appropriate for some 

purchases. For example, if the cardholder’s default codes are for a 

specific NNSA project and they make purchases that are not 

supposed to be charged to the contract, if they do not perform the 

monthly reconciliation these purchases will initially be charged to 

NNSA. If uncorrected, NNSA may reimburse the lab for these nonNNSA expenditures. 

• For example, the nonstatistical selection of transactions we 

reviewed included a $463 charge that the cardholder did not 

reconcile because he said he didn’t recognize the charge and thus, 

allowed it to automatically charge to his default account code. 

Although he erroneously applied a credit received 6 months later

from a different transaction to partially offset the charge, the

remainder was charged to NNSA via the cardholder’s default code,

even though NNSA received no benefit from the expense.
Enclosure 

Page 32 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 25

Internal Control Weaknesses 

(cont’d)

Pcards Issued to Supplemental Employees: LLNL 

subcontracted with certain companies to supply the lab with 

additional staff to supplement its workforce. These 

supplemental employees were employees of the 

subcontractor and not the lab. Until December 2003, the lab 

allowed supplemental employees to have Pcards. 

However, the lab did not have controls in place to help 

ensure that the accounts were cancelled and the Pcards 

returned if the supplemental employee stopped working at 

the lab. Instead, it relied on the subcontractor to perform 

this function. 

• During our review period, 31 supplemental employees 

had active Pcard accounts.
Enclosure 

Page 33 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 26

Internal Control Weaknesses 

(cont’d)

• LLNL did not maintain a database to track supplemental 

employees’ start and termination dates. Instead, it relied 

on the subcontractor that employed the staff to track this 

information. 

• Although there was an exit checklist to be completed 

when a supplemental employee left the lab, LLNL also 

relied on the subcontractor to ensure the checklist was 

completed and that the purchase cards were turned in. 

Consequently, the lab could not ensure that Pcards 

issued to supplemental employees were cancelled timely 

and returned to the lab upon termination, increasing the 

risk of improper purchases.
Enclosure 

Page 34 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 27

Improper, Wasteful, and Questionable 

Purchases

We also identified improper, wasteful, and questionable 

transactions totaling $97,3485 indicating additional areas 

where controls could be improved. 

Improper Purchases: We identified 43 transactions totaling $59,708 of improper purchases, which we defined as 

purchases that violated the NNSA contract or lab 

purchasing policies. Four of these transactions had been 

discovered as improper by the procurement department’s 

internal review group during its periodic purchase 

transaction reviews. The improper purchases identified 

included the following:

5This is the net total after adjusting for one $525 purchase that was both improper because 

the cardholder purchased a restricted item without preapproval and wasteful because it 

was excessive in cost.
Enclosure 

Page 35 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 28

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• Controlled or restricted items without preapproval. In the 

nonstatistical selection of 144 transactions, 87 were for the purchase 

of items listed on the lab’s Controlled Items and Services List 

(CISL). Of these 87, 32 transactions (37 percent) totaling $31,571 

were improper because they were either restricted items that had

not received preapproval as required by lab policy, or were 

prohibited from being purchased with a Pcard.

• Four of these transactions totaling $3,887 were discovered by the 

lab’s internal review process. 

• Examples of the remaining 28 transactions totaling $27,684 

include the following:

• Eight purchases for catering services and other food items 

totaling $9,776, despite the fact food is a restricted item.
Enclosure 

Page 36 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 29

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• A portable video projector for $3,481 for which the cardholder 

did not obtain preapproval, despite the fact video projectors 

are on the CISL and thus require preapproval.

• A purchase of a laptop case using Paypal, a prohibited thirdparty payment facilitator. Paypal accepts credit card payments 

from the purchaser, then remits the proceeds to the vendor 

who typically does not directly accept credit cards. Because 

Paypal shows up as the vendor name on the cardholder’s 

statement, and not the vendor that provided the goods or 

services purchased, there is no way to verify who actually was 

paid and what was received in return.

• Two purchase transactions for digital cameras costing $487 

and $1,120. The CISL requires digital cameras over $300 to 

be purchased under a different purchase method.
Enclosure 

Page 37 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 30

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• Split Purchases: LLNL’s Pcard policy prohibits splitting purchases into more than one transaction to circumvent single purchase limits. 

Using data mining techniques, we identified 210 potential split 

purchases—that is, groups of two or more similar transactions that 

potentially were split to circumvent single purchase limits. After selecting a statistical sample of 27 of these potential split purchases, 

we found 2 were in fact improper split purchases consisting of 11 

transactions totaling $28,137. LLNL’s internal reviews had 

discovered one of these two split purchases totaling $16,332. Our sample also included one potential split purchase consisting of 8 

transactions totaling $18,108 for which the lab was unable to 

provide sufficient documentation to determine whether this was in 

fact a split purchase. Therefore, we considered this to be potentially 

improper.

• An internal review group in the lab’s procurement department 

performs data mining procedures to identify potential split 

purchases. They then follow up with identified cardholders to 

determine whether the purchases were in fact split purchases 

and to reinforce the policy. Based on the results above, these 

controls appeared to help minimize the frequency of split 

purchases.
Enclosure 

Page 38 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 31

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• Wasteful Purchases: Out of 144 transactions, we also 

identified 11 transactions totaling $9,945 that we determined 

to be wasteful—that is, were excessive in cost compared to 

other available alternatives and/or were of questionable 

need or both.

• We considered them excessive in cost when compared 

to available alternatives that would meet the same basic 

need, or of questionable need when they appeared to be 

items that were a matter of personal preference or 

convenience, were not part of the usual and necessary 

equipment for the work the employees were engaged in, 

and/or did not appear to benefit NNSA.
Enclosure 

Page 39 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 32

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• Two of these transactions totaling $2,020 were identified by the

lab’s internal review process or by its internal auditors. These 

included the following:

• One purchase of five sets of Bose noise-canceling headsets 

costing $299 each. Similar noise-canceling headsets are 

available from other vendors for $85-$150. In March 2004, 

LLNL implemented a policy requiring all purchase requests for 

these types of headsets to be reviewed and approved by the 

Environment, Safety, and Health team before purchase. The 

contractor subsequently repaid NNSA for the cost of these 

headsets.

• One purchase of two air purifiers costing $262 each from The Sharper Image. We question both the government need for 

these items and the cost, given that other air purifiers are 

available for $100-$220 and the need for this equipment had 

not been documented. In March 2004, LLNL began requiring 

that all purchase requests of air purifiers be reviewed and approved by the Environment, Safety, and Health team before 

purchase. The contractor subsequently repaid NNSA for the 

cost of these air purifiers.
Enclosure 

Page 40 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 33

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• Some of the remaining 9 transactions totaling $7,925 included:

• A reclining leather “zero-gravity” chair costing $1,559. While the 

requester had a documented medical need for a special chair 

due to back problems, another cardholder purchased an 

orthopedic chair from a medical supply store for $599 to meet a 

similar need.

• A beverage-serving cart purchased for a conference room that 

cost $1,688. We identified other quality beverage tables and 

carts available for about $400.

• Rain gear purchased for $460 which included two jackets costing $150 each and other apparel. We identified other heavy duty 

work-related rain gear costing from around $60. 

• $842 for motivational posters purchased from Skymall costing 

from $70 to $120 each. The same or similar posters were 

available from other vendors for $36 to $68 each.
Enclosure 

Page 41 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 34

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• Questionable Purchases: We identified 12 transactions totaling 

$28,220 that we classified as questionable because there was 

insufficient documentation to determine what was actually 

purchased, the quantity and cost of items purchased, and whether

the purchase was proper and reasonable. These included the 

following:

• Two of these transactions totaling $6,725 were cash advances 

that were used to purchase money orders from the post office. 

According to a lab official, the money orders were used to 

purchase visas from the Russian embassy for a number of LLNL 

employees scheduled to travel to Russia. However, the 

cardholder could not provide any receipt from the Russian 

embassy documenting how the money orders were spent. 

Without additional supporting documentation, we were unable to 

verify how the money orders were ultimately used.
Enclosure 

Page 42 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 35

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• One transaction was for a total purchase of $1,388 

from REI, an outdoor sporting goods store. The 

cardholder could not provide the receipt for the 

purchase. The lab indicated that the purchase was for 

protective clothing for a qualified emergency response 

employee who needed to be able to respond to 

emergencies under all weather conditions. However, 

without a receipt, there is no independent evidence of 

what was purchased and thus, we could not 

determine whether the purchase was reasonable.

• One $2,000 transaction was for the purchase of 20 

$100 Sears gift certificates. According to the purchase 

request, these gift certificates were for the Directorate 

Awards Program. However, LLNL was unable to 

provide any support indicating the recipients of these 

awards and whether they were all distributed.
Enclosure 

Page 43 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 36

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• As mentioned previously, we also identified a potential 

split purchase that consisted of eight transactions 

totaling $18,108 with characteristics similar to a split 

purchase. However, the lab was unable to provide 

sufficient supporting documentation to determine 

whether this was in fact a split purchase. Because of 

this lack of documentation, we could not determine 

whether the purchases were proper and therefore also 

consider these to be questionable.
Enclosure 

Page 44 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 37

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• These instances of improper, wasteful, and questionable transactions 

may be attributed in part to inadequate training of cardholders and 

reviewing officials. 

• Although approving officials were expected to be cognizant of Pcard 

policies to fulfill their responsibilities as approving officials, training 

for approving officials was not offered or required until August 2002. 

Additionally, refresher training courses were not offered or required 

for approving officials. Instead, Pcard policies and procedures and 

updates to policies were made available via an internal Web site. 

• Because purchasing requirements often change, adequate training 

on the proper use of the Pcard for all parties involved in the 

purchasing process is essential. While updates to Pcard policies 

were sent to approving officials and made available via an internal 

Web site, without formal training and refresher courses, Pcard 

policies and changes are more likely to be forgotten or overlooked. 
Enclosure 

Page 45 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 38

Improper, Wasteful, and Questionable 

Purchases (cont’d)

• While the $97,3486 of improper, wasteful, and questionable 

purchases identified by GAO are relatively small compared 

to the $120 million in purchase card activity at the lab during 

our review period, they demonstrate vulnerabilities from 

weak controls that could be exploited to a greater extent. In 

addition, because we only tested a small portion of the 

transactions we identified 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. 

6This is the net total after adjusting for one $525 purchase that was both improper because the 

cardholder purchased a restricted item without preapproval and wasteful because it was excessive in 

cost.
Enclosure 

Page 46 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 39

Property Management

• GAO’s Standards for Internal Control in the Federal Government

requires agencies to establish physical controls to secure and safeguard 

vulnerable assets. Such assets should be periodically counted and 

compared to control records. LLNL policy requires that controlled and 

attractive property be tagged with bar-code property numbers and 

tracked in the property management system.

• In our review of 144 nonstatistically selected transactions, 6 were for the purchase of 26 accountable property items totaling $70,048. 

• LLNL property management recorded all of these assets in the property management system except for one item totaling $3,481. 

LLNL subsequently entered the item to its property database.

• We selected all 26 of these assets for physical observation. We physically verified 23 of the assets and reviewed supporting 

documentation to confirm the status for the remaining 3, 2 of which 

were off-site and 1—a $390 cellular phone—which had been 

reported stolen and was under investigation.
Enclosure 

Page 47 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 40

Property Management (cont’d)

• We also selected five additional items totaling $5,663 

that appeared to be attractive items but were not listed 

on the attractive items list as items required to be 

tracked in the property database. We were able to 

locate all of these items.

• The low incidence of unrecorded items may be attributed to two factors. One, lab policy prohibits the purchase of 

controlled and attractive items with a Pcard unless the 

cardholder has obtained prior approval. Secondly, lab 

officials informed us that, for the past 3 years, a 

procurement review group has performed periodic 

unannounced inspections of Pcard packages at central 

receiving. Since Pcard packages are not normally 

opened by central receiving, lab officials stated that 

these inspections have identified accountable assets 

purchased by cardholders.
Enclosure 

Page 48 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 41

Recent Policy and Procedural Changes

According to LLNL management, it has recently 

implemented several new controls in response to recent 

Pcard reviews.

• In August 2002, LLNL implemented a policy requiring 

Pcard approving officials to go through a formal training 

process on Pcard purchasing policies. Previously, only 

cardholders were required to have such training. In 

addition, lab officials stated they are currently in the 

process of implementing an online training and 

recertification process for cardholders and approving 

officials.
Enclosure 

Page 49 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 42

Recent Policy and Procedural Changes 

(cont’d)

• The lab’s director of internal audit informed us that, following an 

internal audit review completed in April 2003, the lab began 

generating a weekly report of unreconciled transactions that were 

automatically charged to the cardholders’ default accounting codes. 

An internal review group is responsible for reviewing and following 

up on these items to determine adequate resolution.

• The lab’s director of internal audit stated that in October 2003, 

internal audit provided training to the procurement department on 

data mining techniques to help procurement better detect improper 

purchases.

• According to a lab official, all three of the University of California 

laboratories began using new, consistent criteria for determining 

sensitive property beginning in October 2003. 
Enclosure 

Page 50 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 43

Recent Policy and Procedural Changes 

(cont’d)

• In December 2003 LNNL changed its policy to prohibit 

non-lab personnel such as supplemental employees 

from having Pcards. According to LLNL management, 

all Pcards issued to supplemental employees were 

cancelled at that time.

• In February 2004, LLNL clarified its guidelines on 

purchases of catering services made by one of its off-site 

locations. The revised guidelines included minimum 

time requirements for business meetings, preapproval 

requirements, and definitions of visitors. The revisions 

were made in response to an internal audit of fiscal year 

2002 and 2003 off-site catered events that resulted in 

repaying NNSA $11,458 for unallowable meal 

purchases. 
Enclosure 

Page 51 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 44

Recent Policy and Procedural Changes 

(cont’d)

• On March 5, 2004, LLNL began requiring formal review and documentation of the Environment, Safety, and 

Health team’s assessment of site conditions and 

requiring preapproval for all requests to purchase air 

purifiers and noise-canceling headphones. This change 

was in response to a recent internal audit review which 

resulted in the lab repaying NNSA $5,490 for 11 air 

purifiers and 9 headphones.

• According to lab officials, the EDI system that charged certain purchases against a central purchase card 

account rather than individual cardholders’ Pcard 

accounts was eliminated in May 2004. Now, purchases 

that were made through EDI are to go through a different 

system that charges the account of the cardholder 

making the purchase. Thus, such charges would appear 

on the cardholder’s monthly statement for review by their 

approving official.
Enclosure 

Page 52 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 45

Recent Policy and Procedural Changes 

(cont’d)

• Lab officials also informed us that they expect to 

implement an automated control in the Pcard system by 

October 2004 that will flag certain purchases. This 

systems upgrade is being designed to better alert 

cardholders and approving officials of purchases that 

may be in LLNL’s restricted or prohibited items list which 

require preapproval and/or a waiver to purchase with a 

Pcard. 
Enclosure 

Page 53 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 46

Conclusions

LLNL has implemented a number of noteworthy internal 

controls over its Pcard program and property management 

functions. However, weaknesses in certain control areas 

made the lab vulnerable to, and in some instances 

contributed to, improper, wasteful, and questionable 

purchases. In response to recent audits, the lab has 

continued to make changes to address certain identified 

weaknesses. While these are positive steps, further 

strengthening of controls is needed and management needs 

to ensure that it gives continued attention to ongoing 

monitoring of compliance with established policies and 

procedures.
Enclosure 

Page 54 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 47

Recommendations

• We recommend that the Administrator of NNSA direct Lawrence 

Livermore National Laboratory’s Director to take the following four 

actions to strengthen internal controls over the purchase card program 

and reduce the lab’s vulnerability to improper, wasteful, and 

questionable purchases.

• Establish policies and procedures requiring that purchasers 

request and maintain a copy of the detailed sales receipt, invoice, 

or other independent support showing the description, quantity, 

and price of individual items purchased.

• Require approving officials to review transaction documentation 

before approving transactions listed on the cardholders’ monthly

transaction summary reports. This should include determining 

that there is independent support for the description, quantity,

and price of individual items purchased, and that the cardholder

obtained and documented any required preapprovals before 

purchase.
Enclosure 

Page 55 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 48

Recommendations (cont’d)

• Consider modifying the Pcard system so that 

purchases that are not reconciled timely by the 

cardholder are charged to a temporary suspense 

account rather than to each cardholder’s default 

account codes. 

• In conjunction with the implementation of the lab’s 

online training and recertification for cardholders and 

approving officials, include in such training an 

emphasis on (1) the lab’s policy to obtain 

preapprovals for all purchases of items listed on the 

controlled items and services list, and (2) 

consideration of best value in making and approving 

purchases. Because the controlled items and services 

list is frequently updated, the training should include 

reviewing the items on the current list and any recent 

changes.
Enclosure 

Page 56 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 49

Recommendations (cont’d)

• We also recommend that the Administrator of NNSA direct 

the NNSA contracting officer for the lab to review the 

improper, wasteful, and questionable items we identified to 

determine whether any of these purchases should be 

repaid to NNSA.
Enclosure 

Page 57 GAO-04-986R LLNL Purchase Card Controls

Lawrence Livermore National Laboratory 50

Agency Comments

• We obtained comments on a draft of this briefing from NNSA officials. 

They generally agreed with the findings and recommendations, and 

indicated that the lab has made a number of improvements to its 

controls in light of the problems identified at Los Alamos.

• We also obtained comments from LLNL officials, who disagreed with the 

recommendations to (1) require sales documentation such as a receipt 

or invoice and (2) require approving officials to review such 

documentation before approving purchases. They indicated sales 

receipts and invoices were not always available and did not feel they 

were necessary to support purchases. Instead, they felt that as long as 

the order amount entered into the Pcard system by the cardholder

matched the total purchase amount charged by the bank, that was 

sufficient evidence to support that the purchase was proper.
Enclosure 

Page 58 GAO-04-986R LLNL Purchase Card Controls

(190129) 

Lawrence Livermore National Laboratory 51

Agency Comments (cont’d)

• We disagree. The matching of the total dollar amount of the 

transaction to the order amount entered by the cardholder 

without independent evidence of the description, quantity, 

and price of individual items purchased does not provide 

sufficient evidence that the items purchased were proper. 

Because the cardholder enters the order, makes the 

purchase, and reconciles any differences, a reviewer would 

not be able to determine if the original order amounts were 

correct nor whether additional items were purchased under 

that order. Consequently, sufficient independent evidence 

for the individual items purchased and corresponding 

supervisory review of such evidence is necessary to help 

reduce the risk of improper purchases. 

• The lab also provided technical and clarifying comments, 

which we incorporated as appropriate. 
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

Obtaining Copies of 

GAO Reports and 

Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To 

have GAO e-mail you a list of newly posted products every afternoon, go to 

www.gao.gov and select “Subscribe to Updates.”

Order by Mail or Phone The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to:

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Congressional 

Relations

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548

Public Affairs Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.