U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

Ineffective Oversight of 

Purchase Cards Results in 

Inappropriate Purchases 

at EPA 

Report No. 14-P-0128 March 4, 2014 

Scan this mobile 

code to learn more 

about the EPA OIG. 
 

Report Contributors:	 Catherine B. Allen

 Melinda Burks 

 Eileen Collins 

 Kimberly Crilly

 Janet Kasper 

 Paula Latham 

 Madeline Mullen 

 LaTanya Scott 

Abbreviations 

CMM Contracts Management Manual 

EPA U.S. Environmental Protection Agency 

FMFIA Federal Managers’ Financial Integrity Act 

FY Fiscal Year 

GSA General Services Administration 

OAM Office of Acquisition Management 

OARM Office of Administration and Resources Management 

OIG Office of Inspector General 

OMB Office of Management and Budget 

Cover photo: Government purchase card. (U.S. General Services Administration) 

Hotline Suggestions for Audits or Evaluations 

To report fraud, waste or abuse, contact To make suggestions for audits or evaluations, 

us through one of the following methods: contact us through one of the following methods:
 

email: 

phone: 

fax: 

OIG_Hotline@epa.gov 

1-888-546-8740 

1-202-566-2599 

email: 

phone: 

fax: 

OIG_WEBCOMMENTS@epa.gov 

1-202-566-2391 

1-202-566-2599 

online: http://www.epa.gov/oig/hotline.htm online: http://www.epa.gov/oig/contact.html#Full_Info 

write: EPA Inspector General Hotline 

1200 Pennsylvania Avenue, NW 

Mailcode 2431T 

write: EPA Inspector General Hotline 

1200 Pennsylvania Avenue, NW 

Mailcode 2431T 

Washington, DC 20460 Washington, DC 20460 
 

 

 

U.S. Environmental Protection Agency 14-P-0128 

March 4, 2014 Office of Inspector General 

At a Glance
 

Why We Did This Audit 

The Government Charge Card 

Abuse Prevention Act of 2012 

states the Inspector General is 

to conduct periodic 

assessments of the agency 

purchase card and 

convenience check programs 

to identify and analyze risks of 

illegal, improper or erroneous 

purchases and payments. 

The Office of Inspector General 

(OIG) also looks for categories 

of purchases that could be 

made by means other than 

purchase cards in order to 

better aggregate purchases 

and obtain lower prices. 

In fiscal year 2012, the 

U.S. Environmental Protection 

Agency’s (EPA’s) active 

cardholders spent more than 

$29 million in purchases. The 

EPA did not provide effective 

oversight to ensure that 

purchase card holders and 

approving officials complied 

with internal control 

procedures. 

This report addresses the 

following EPA theme: 

 Embracing EPA as a high 

performing organization. 

For further information, 

contact our public affairs office 

at (202) 566-2391. 

The full report is at: 

www.epa.gov/oig/reports/2014/ 

20140304-14-P-0128.pdf 

Ineffective Oversight of Purchase Cards 

Results in Inappropriate Purchases at EPA 

What We Found 

The EPA did not provide effective oversight to The EPA began taking ensure that purchase card holders and approving action to improve the officials comply with internal control procedures. oversight of purchase 

Of $152,602 in transactions we sampled, we found cards and is considering 

$79,254 of prohibited, improper and erroneous other improvements. 

purchases. Some of the more egregious purchases 

we identified were meals for an awards recognition ceremony and gym 

memberships for EPA employees and their families. 

Although the Office of Administration and Resources Management’s Federal 

Managers' Financial Integrity Act 2012 assurance letter stated that the agency 

would take corrective actions to correct any identified vulnerabilities, it allowed 

offices to skip a recent biennial review and did not require follow-up. 

The EPA is analyzing transactions to identify purchases that can be made by 

other means to obtain lower prices. The EPA initiated a Business Analysis and 

Strategic Sourcing Service Center team to identify efficiencies in contracting to 

encourage competition and decrease spending with nonmandatory vendors. 

The EPA estimated potential cost savings of 8 percent. 

 Recommendations and Planned Agency Corrective Actions 

We recommend that the EPA implement regular transaction reviews to determine 

if the cardholders and approving officials are complying with EPA guidance. The 

EPA should provide additional training to the purchase card holders and approving 

officials to address issues identified in this report and institute follow-up actions for 

the prohibited, improper or erroneous purchases identified in this audit. The EPA 

should institute agencywide standard operating procedures, and revise the 

Contracts Management Manual to more specifically address purchases such as 

gym memberships and gift cards. In addition, the EPA should ensure that biennial 

review weaknesses are corrected and change the biennial review process to 

ensure that each office conducts uniform reviews, including transaction testing for 

every cardholder. The EPA's planned corrective actions address all of the draft 

report recommendations. Based on the response to the draft report, one 

recommendation was added to the report that the agency will need to address. 

 Noteworthy Achievements 

As we discuss in our audit results, the EPA began taking action to improve the 

oversight of purchase cards. The EPA is in the process of considering additional 

improvements, including focused transaction reviews to ensure compliance with 

EPA policies. In addition, we commend the EPA’s strategic sourcing procurement 

efforts to obtain quantity discounts. 
 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

SUBJECT: Ineffective Oversight of Purchase Cards Results in Inappropriate Purchases at EPA 

 Report No. 14-P-0128 

FROM: Arthur A. Elkins Jr. 

Craig Hooks, Assistant Administrator 

THE INSPECTOR GENERAL 

March 4, 2014 

MEMORANDUM 

TO: 

 Office of Administration and Resources Management 

This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the 

U.S. Environmental Protection Agency (EPA). This report contains findings that describe the problems 

the OIG has identified and corrective actions the OIG recommends. This report represents the opinion of 

the OIG and does not necessarily represent the final EPA position. Final determinations on matters in 

this report will be made by EPA managers in accordance with established audit resolution procedures. 

The office responsible for implementing most of the recommendations is the Office of Acquisition 

Management. The Office of Human Resources is responsible for implementing one of the 

recommendations. 

Action Required 

In accordance with EPA Manual 2750, you are required to provide a written response to this report 

within 60 calendar days. You should include planned corrective actions and completion dates for the 

unresolved recommendation. Your response will be posted on the OIG’s public website, along with our 

memorandum commenting on your response. Your response should be provided as an Adobe PDF file 

that complies with accessibility requirements of Section 508 of the Rehabilitation Act of 1973, as 

amended. The final response should not contain data that you do not want to be released to the public; 

if your response contains such data, you should identify the data for redaction or removal along with 

corresponding justification. We will post this report to our website at http://www.epa.gov/oig. 

If you or your staff have any questions regarding this report, please contact Richard Eyermann, 

acting Assistant Inspector General for Audit, at (202) 566-0565 or eyermann.richard@epa.gov; 

or Janet Kasper, Director, at (312) 886-3059 or kasper.janet@epa.gov. 
 

 

 

 

 

 

 

 

 

 

 

Ineffective Oversight of Purchase Cards 14-P-0128 

Results in Inappropriate Purchases at EPA 

Table of Contents 

Chapters 

1 Introduction ........................................................................................................ 1

 Purpose....................................................................................................... 1 

Background ................................................................................................. 1 

 Responsible Offices .................................................................................... 2 

 Noteworthy Achievements ........................................................................... 2 

 Scope and Methodology .............................................................................. 2 

2 Purchase Card Team Did Not Provide Effective Oversight............................ 4
 

Purchase Card Users Must Comply with Federal and 

 EPA Requirements ............................................................................... 4 

EPA Cardholders and Approving Officials Did Not Comply With 

 Policy and Procedures ......................................................................... 5 

Ineffective Oversight Contributes to Risks .................................................. 10 

Purchase Card Program Needs Improvement ............................................ 11 

Conclusion................................................................................................... 11 

Recommendations ...................................................................................... 12 

Agency Comments and OIG Evaluation ...................................................... 12 

3 Biennial Reviews Need Improvement .............................................................. 15 

 Biennial Review Requirements ................................................................... 15 

Biennial Reviews Are Not Effective in Identifying and Correcting 

 Internal Control Weaknesses ............................................................... 15 

Internal Control Problems Continue Year After Year .................................. 17 

Recommendations ...................................................................................... 17 

Agency Comments and OIG Evaluation ...................................................... 17 

4 Strategic Sourcing to Gain Better Prices......................................................... 18
 

Status of Recommendations and Potential Monetary Benefits.............................. 20
 

Appendices 

A Agency’s Response to Draft Report................................................................. 21 

B EPA’s Agreed Corrective Actions and Planned Completion Dates .............. 25 

C Distribution ......................................................................................................... 26 
 

 

 

Chapter 1

Introduction 

Purpose 

The Government Charge Card Abuse Prevention Act of 2012 states the Inspector 

General is to conduct periodic assessments of the agency purchase card and 

convenience check programs to identify and analyze risks of illegal, improper or 

erroneous purchases and payments. The U.S. Environmental Protection Agency’s 

(EPA’s) Office of Inspector General (OIG) conducted an audit of the purchase 

cards and convenience checks to determine whether the EPA: 

 Has sufficient controls to identify potentially illegal, improper and 

erroneous use of purchase cards. 

 Is analyzing purchase card transactions to identify purchases that could be 

made by other means to obtain lower prices. 

Background 

The government purchase card program was established over 30 years ago to 

streamline the federal acquisition processes by providing a low-cost, efficient 

vehicle for obtaining goods and services directly from vendors. The General 

Services Administration (GSA) administers the governmentwide purchase card 

program. GSA contracts with several banks, including J.P. Morgan Chase, the 

bank the EPA uses to provide purchase cards to employees. 

Office of Management and Budget (OMB) Circular A-123, Appendix B, 

Improving the Management of Government Charge Card Programs, established 

minimum requirements and best practices for agency purchase card programs. In 

addition, Appendix B requires that each agency develop and maintain written 

policies and procedures for the appropriate use of government purchase cards. 

The Government Charge Card Abuse Prevention Act of 2012 was enacted on 

October 5, 2012. It is designed to prevent recurring waste, fraud and abuse of 

government charge cards. The law requires agencies to take appropriate personnel 

actions for employees who violate purchase card guidelines or make erroneous, 

improper or illegal purchases. The law mandates a set of 13 core safeguards and 

internal controls each agency should utilize to prevent and detect improper use of 

government charge cards. It further instructs the OIG to conduct periodic risk 

assessments to determine the scope, frequency and number of periodic audits. The 

OIG’s analysis or audits should identify: 

 Potentially illegal, improper or erroneous uses of purchase cards. 

 Any patterns of such uses. 

14-P-0128 1 
 

 

	 Categories of purchases that could be made by means other than purchase 

cards in order to better aggregate purchases and obtain lower prices. 

For fiscal year (FY) 2012, the EPA’s 1,370 active cardholders transacted more 

than $29 million in purchases. In addition, the EPA’s 309 convenience check 

writers wrote more than 1,000 checks totaling more than $500,000. The EPA had 

1,370 active purchase card holders of the 2,071 employees who are assigned 

purchase cards. Some employees have cards only for emergency response 

purposes. The bank contract provides refunds based on annual net volume of sales 

as well as prompt payment, and the EPA estimated that FY 2012 refund dollars 

totaled $350,900. 

Responsible Offices 

The office responsible for implementing most of the recommendations is the 

Office of Administration and Resources Management’s (OARM’s) Office of 

Acquisition Management. OARM’s Office of Human Resources is responsible for 

implementing one of the recommendations. 

Noteworthy Achievements 

As we discuss in our audit results, the EPA began taking action to improve the 

oversight of purchase cards. According to the EPA’s purchase card team staff, 

some of the actions the EPA has implemented as of August 2013 include review 

of monthly bank reports to identify taxes paid on transactions and review of payee 

names on convenience checks to look for checks to EPA employees. The EPA is 

also in the process of considering other improvements, such as focused 

transaction reviews to ensure compliance with EPA policies, uniform standard 

operating procedures, and working with human resources on disciplinary actions 

for misuse, fraud, and abuse of purchase cards. 

Scope and Methodology 

We conducted this audit from January 2013 through November 2013, in 

accordance with generally accepted government auditing standards issued by the 

Comptroller General of the United States. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our audit objective. 

We believe that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objective. 

The purchase card team within the Office of Acquisition Management’s (OAM’s) 

Policy, Training and Oversight Division is responsible for administering the 

purchase card program and serves as the liaison between cardholders and the 

contracted bank. The team establishes policies and training requirements. They 

oversee set up and canceling of accounts and provide ongoing advice to 

14-P-0128 2 
 

 

cardholders and approving officials. In addition, they conduct purchase card 

oversight to ensure that the program is operating in accordance with applicable 

guidance. 

We evaluated the effectiveness of the EPA’s internal controls through review of 

policies, procedures and biennial reviews as well as transaction testing. We 

analyzed the internal control procedures available on the purchase card website 

and obtained from the purchase card team. We reviewed reports of declines, 

infractions, inactivity, split purchases and separated employees. We reviewed 

criteria documents such as OMB A-123 Appendix B, EPA’s Contract 

Management Manual, and EPA guidance on food and awards. 

We evaluated the EPA’s purchase card and convenience check internal controls 

by interviewing purchase card holders, approvers and management responsible for 

oversight. We tested the effectiveness of internal controls through review of 

transactions selected from a focused sampling plan. We obtained a spreadsheet of 

the 67,000 FY 2012 transactions. Next we reviewed the merchant names and 

merchant category codes for atypical transactions and higher risk transaction 

groups. Then we randomly selected 69 transactions from the 15 transaction 

groups. We did not choose a statistical sample because the Government Charge 

Card Abuse Prevention Act of 2012 emphasized identifying cases of illegal, 

improper or erroneous purchases. We also selected 11 transactions that seemed 

inappropriate because of the name or merchant category codes (such as dance 

hall, child care, theater and music). Cardholders, convenience check writers and 

approving officials were asked to provide documentation supporting each of the 

selected transactions. 

We analyzed the FY 2012 biennial reviews to identify the internal controls tested 

and how the results were used by management. We also reviewed how the 

internal controls were reported in OARM’s annual Federal Managers’ Financial 

Integrity Act (FMFIA) assurance letter to the EPA Administrator. We interviewed 

staff who prepared biennial reviews and the FMFIA assurance letter. We 

compared the FY 2012 biennial review results to the 2008 biennial review results 

and attempted to obtain the FY 2010 results as well. 

We analyzed the largest dollar volume vendors from FY 2012 to determine the 

top five vendors. Then we interviewed responsible staff to determine actions the 

EPA is taking to obtain lower prices. 

There were no prior audits impacting the objectives of this assignment. 

14-P-0128 3 
 

 

 

 

 

Chapter 2

Purchase Card Team Did Not Provide 

Effective Oversight 

The EPA did not provide effective oversight to ensure that purchase card holders 

and approving officials comply with internal control procedures. Purchase card 

users must comply with federal and EPA requirements. The EPA’s oversight was 

not effective because of inattention to EPA policies by cardholders, approving 

officials and the purchase card team. Of $152,602 in transactions we sampled, we 

found $79,254 of prohibited, improper and erroneous purchases were not 

detected. This lack of compliance indicates a continued risk of prohibited, 

improper and erroneous purchases.1 Improved purchase card oversight potentially 

saves money by reducing prohibited, improper and erroneous purchases, which 

would be especially helpful in the current budget environment. 

Purchase Card Users Must Comply With Federal and EPA 

Requirements 

OMB Circular A-123, Appendix B, Improving the Management of Government 

Charge Card Programs, states that agencies should identify specific risks 

associated with charge card programs, and implement strict internal controls to 

mitigate these risks to the greatest possible extent. The charge card management 

plan requires management controls, policies and practices for ensuring 

appropriate charge card and convenience check use, oversight of payment 

delinquencies, fraud, misuse or abuse. 

The EPA’s Contracts Management Manual (CMM) establishes policy for the use 

of governmentwide commercial purchase cards. The CMM provides guidance in 

the following areas: 

	 Record Keeping: Cardholders are required to maintain a purchase card 

log as well as other supporting documentation, and coordinate with 

property officials to ensure that accountable or sensitive personal property 

purchases are tracked. 

 Prior Approval: Approval from the approving and funds certifying 

officials is required prior to purchase. 

 Independent Receipt Verification: Cardholders shall obtain third party 

verification that the item ordered was received. 

	 Prohibited Transactions: Transactions using third-party payment 

processors and individual employee memberships in professional 

organizations are prohibited. 

1

 In this report, we define improper transactions as purchases that, although intended for government use, are not 

permitted by law or government/agency policy. 

14-P-0128 4 
 

 

 

 

 

 

	 Restricted Transactions: Cardholders are restricted in making certain 

purchases. For example, acquisition professionals are needed to make 

purchases for orders requiring the cardholder to accept a vendor’s terms or 

sign a vendor’s agreement or contract, public building alteration and 

repair, and purchases requiring a statement of work or certain advance 

payments. 

	 Requires Prior Approval: Some transactions require additional approvals: 

o	 An information management officer signature or email confirmation is 

required for electronic and information technology. 

o	 A facilities manager’s signature or email confirmation is required 

when the purchase includes conference facilities and meeting rooms, 

audio-visual equipment, and building alteration and repair. 

o	 A training officer’s signature or email confirmation is required for 

employee training.2 

 Specific Sources: The CMM lists priority sources that must be used 

before purchasing from commercial vendors. 

	 Closer Scrutiny Required: Non-monetary awards, light refreshments and 

meals, conferences, meeting retreats and other events require closer 

scrutiny. 

	 Standard Operating Procedures: All approving officials must develop 

standard operating procedures but the content is at the discretion of the 

approving officials as long as procedures are consistent with federal and 

agency policy. 

EPA Cardholders and Approving Officials Did Not Comply With 

Policy and Procedures 

The EPA’s oversight was not effective in ensuring that purchase cardholders and 

approving officials complied with internal controls. The EPA’s internal controls 

did not prevent prohibited, improper and erroneous purchases. The EPA staff did 

not follow policies on restricted and prohibited transactions and records 

maintenance, leading to questions regarding the validity of the purchases. 

We found a number of transactions where cardholders, approving officials, the 

purchase card team and program offices were not providing oversight. Although 

cardholders must evaluate each purchase request to ensure that it complies with 

federal and agency acquisition rules, in many transactions, they did not. Although 

the approving official is responsible for conducting personal and detailed reviews 

of cardholders’ transactions to ensure compliance with all applicable regulations, 

policy, special approvals and purchase card procedures, the approving official 

frequently did not provide the required oversight. 

2

 Although the CMM does not include conferences in the definition of training, EPA’s process for approving 

training includes any type of training event including conferences. 

14-P-0128 5 
 

 

 

 

Table 1 summarizes top internal control issues from the 80 high risk transactions 

we reviewed. No internal control issues were found in three transactions, and the 

other transactions averaged two internal control issues, but one had six. 

Table 1: Top internal control issues 

Ref. Internal Control Oversight Issues 

Number of 

transactions 

1 Cardholders did not verify receipt 28 

2 Cardholders did not obtain prior approval 24 

3 Transaction not funded prior to purchase 20 

4 Purchase logs not reviewed 14 

5 Restricted transactions/missing required approvals 13 

6 Required sources not utilized 11 

7 Closer scrutiny required but not performed 10 

8 Records not maintained 9 

9 Prohibited transactions approved 7 

Source: OIG analysis of documentation provided by the EPA. 

1 - Cardholders Did Not Verify Receipt 

In 28 (35 percent) of the 80 sampled transactions, valued at $47,222, cardholders 

did not have the required independent third party verification. The CMM requires 

third party verification that the ordered item was received. In one transaction, the 

cardholder explained that verbal verification was received, but it was not noted. 

Several training transactions did not have proof that training was received, 

although some verification was provided after we asked for it. Most gift card 

recipients were not required to sign for them upon receipt. Cardholders did not 

obtain verification for a variety of reasons, including they did not believe it was 

applicable or they did not understand the definition of third party verification. 

Noncompliance increases the possibility that purchases could be made for 

personal use rather than government need. It also increases the risk that the 

government is paying for items that were not received. 

2 - Cardholders Did Not Obtain Prior Approval 

Cardholders placed orders prior to receiving approving official approval for 24 

(30 percent) of the 80 sampled transactions, valued at $39,713. The CMM 

requires approval prior to purchase unless approving official operating procedures 

waive the requirement for certain purchases, such as office supplies. In two 

training transactions, cardholders mistakenly stated that approval is not required 

since the training officer had approved the training. When approving officials do 

not approve purchases in advance, there is a higher risk that purchases will not 

comply with EPA guidelines. Approving officials are supposed to determine if 

transactions are reasonable and necessary, and their oversight can provide needed 

cost savings. 

14-P-0128 6 
 

 

3 - Transactions Not Funded Prior to Purchase 

Cardholders did not obtain funding prior to purchase for 20 (25 percent) of the 

80 sampled transactions, valued at $41,415. The CMM states that before placing 

orders, cardholders must coordinate with the funds certifying official to ensure 

funds are available. One cardholder waited until the employee received the 

product before requesting the funding. Another cardholder was not aware of this 

requirement. Cardholders may believe that funding is only required prior to 

payment, not prior to purchase. When cardholders are noncompliant with this 

funding requirement, the EPA has a higher risk of improperly obligating 

government funds. 

4 - Purchase Logs Not Reviewed 

 Approving officials did not review purchase card logs for 14 (18 percent) of the 

80 sampled transactions, valued at $22,402. The CMM requires that approving 

officials review and approve cardholders’ logs at least quarterly. Approving 

officials were inattentive to this requirement. In one transaction, the approving 

official incorrectly believed it was unnecessary to perform a quarterly review 

because he approved the purchase in advance. Consequently, he was unaware that 

the funder and cardholder amended his prior approval to purchase an additional 

item. In fact, this was a fraudulent purchase in the amount of $805. When 

purchase card logs are not reviewed quarterly, cardholders may change previously 

approved purchases and the approving official would not discover potential fraud. 

In this budget environment, it is especially important that approving officials 

ensure that cardholders are being good stewards of taxpayer dollars. 

5 - Restricted Transactions/Missing Required Approvals 

In 13 (15 percent) of 80 transactions, valued at $21,465, cardholders did not 

follow restricted transaction and approval policies. The CMM identifies certain 

transactions as restricted to purchase by acquisition professional cardholders, or 

requires approval by a facilities manager, information management officer or 

training officer. Cardholders who were not acquisition officials purchased items 

that EPA guidance restricts to acquisition professionals. Examples of such 

transactions include anything requiring a statement of work, advanced payments, 

facilities or technology purchases. 

	 In three instances, cardholders who were not acquisition professionals 

purchased gym memberships that required pre-payment for services 

totaling $2,867. Two of those purchases were for family memberships, 

and not just the EPA employee. The cardholders were inattentive to the 

policy that requires any order requiring advance payment be ordered by 

acquisition professional card holders. When cardholders do not involve 

acquisition professionals, the government’s interest is not protected. 

14-P-0128 7 
 

 

 

	 In several transactions, meeting space was purchased without the approval 

of an EPA facilities manager or by an acquisition professional cardholder. 

One cardholder held a meeting at a nearby hotel and did not know he was 

required to seek approval from the EPA facilities manager. The EPA could 

have saved over $2,400 if the meeting was held in the nearby government 

conference room. 

	 In another transaction for booth rental, an acquisition professional was not 

involved as required. Neither the cardholder nor the approving official 

knew that a contract required an acquisition professional. When 

acquisition professionals are not involved, there is a risk that the 

government’s interests are not protected. 

Since the purchase cards are intended for simple, over-the-counter purchases, and 

most cardholders are not acquisition professionals, they do not have the training 

to properly process orders which require statements of work, specifications, 

clauses or indefinite pricing. 

6 - Required Sources Not Utilized 

In 11 (14 percent) of the 80 sampled transactions, valued at $11,694, for the 

purchase of supplies, cardholders and approving officials did not use mandatory 

sources and thought that it was optional. The CMM allows cardholders to opt out 

of using mandatory sources only under specific circumstances. One cardholder 

said the mandatory vendor takes too long to deliver, and another cardholder did 

not think that the mandatory source requirement applied. None of the cardholders 

documented the need for an alternative vendor over mandatory sources. 

Cardholders and approving officials misunderstood the EPA’s policy requirement 

for using mandatory sources before using a commercial vendor. When 

cardholders do not use mandatory sources, the EPA does not obtain the potential 

cost savings from strategic sourcing agreements. 

7 - Closer Scrutiny Required But Not Performed 

Ten (13 percent) of 80 sampled transactions required closer scrutiny and were not 

handled appropriately. They were valued at and resulted in cost issues of $12,643. 

We found that cardholders and approving officials were not cautious in the 

following situations: 

	 Inappropriate food purchases were a problem in three transactions. The 

CMM advises cardholders and approving officials to be cautious when 

placing orders for clothing, entertainment, non-monetary awards and light 

refreshments. EPA Order 1900.3 established policy for determining the 

circumstances where light refreshments, meals or ethnic food samples may 

be purchased using EPA-appropriated funds and defines light refreshments 

14-P-0128 8 
 

 

 

for award ceremonies. Although light refreshments are defined as those 

that do not include portions of food typical of a meal, in one of our 

samples, light refreshments included all the elements of a meal for an 

awards ceremony. Four different appetizers, chicken tenderloin, fresh 

fruit, pasta salad, large cookies, soft drinks and punch were purchased at a 

cost of $2,900. Meals are not an allowable expense for an awards 

recognition ceremony. Cardholders misinterpreted the food policies. These 

funds could have been put to better use, and inadequate oversight put 

funds at risk. 

	 Gift cards were a problem in seven transactions. In one example, 

20 American Express gift cards were purchased for $1,588 to provide 

on-the-spot awards. There was no third-party verification that any 

awardees received the gift cards. Office of Personal Management guidance 

states that cash equivalents (including gift certificates and vouchers with a 

clear face value) given as awards are generally taxable. The Performance 

Management Recognition Handbook states that an item or memento given 

as a non-monetary award must demonstrate the employee-employer 

relationship (e.g., EPA logo or other appropriate meaning) and must not 

have a monetary value either in terms of being converted to cash or in 

terms of clearly conveying a sense of cash value. The gift cards did not 

meet these requirements. The EPA misinterpreted the policies related to 

non-monetary awards. The EPA cardholders and approving officials 

understood that gift cards could be used as employee awards because an 

EPA attorney supposedly approved it in the past. The gift cards were not 

an appropriate use of government funds and funds could have been put to 

better use within EPA programs. Continued misapplication of the award 

policy will continue this poor accountability and erroneous use of 

government funds. 

8 - Records Not Maintained 

We found that nine (12 percent) of the 80 sampled transactions, valued at 

$33,549, were not supported by adequate recordkeeping. Documents supporting 

two transactions totaling $26,152 could not be located despite instructions to 

maintain supporting documentation. The EPA’s policy requires the retention of 

documentation for 3 years on a fiscal year basis. Cardholders were not attentive to 

this basic requirement. In two cases, the cardholders left their positions and no 

arrangements were made to retain the records. In another transaction the 

cardholder stated that records were not kept because of privacy concerns. This 

lack of documentation increases the risk that purchases could be fraudulent, 

improper or abusive. 

14-P-0128 9 
 

 

 

9 - Prohibited Transactions Approved 

In seven (9 percent) of 80 sampled transactions, cardholders and approving 

officials made $8,165 in purchases prohibited by the CMM. The CMM prohibits a 

number of types of purchases, including any order which is not a necessary expense 

of appropriated funds for official government business, use of third party processors 

which provide payment processing services for merchants that do not have a 

system to accept the credit card, and purchase of individual employee 

memberships. One cardholder purchased environmental education DVDs totaling 

$500 and used a third party processor because she did not have check writing 

privileges. In two other cases, the cardholders did not realize that a third party 

processor was used. Another cardholder purchased an individual employee 

membership in an academic organization. When the cardholders are inattentive to 

CMM policy about prohibited transactions, cardholders can make unnecessary 

and inappropriate purchases. 

Ineffective Oversight Contributes to Risks 

The EPA’s oversight was not effective because of inattention to EPA policies by 

cardholders, approving officials and the purchase card team. They did not identify 

specific risks and implement strict internal controls to mitigate these risks to the 

greatest possible extent, as required by OMB. 

As part of its oversight, the purchase card team reviewed reports from the 

purchase card issuing bank for split purchases, declines and separation reports to 

look for erroneous transactions. However, according to the audit liaison of the 

Policy, Training and Oversight Division, the purchase card team has not 

conducted additional reviews of transactions due to a shortage of staff. 

Approving officials wrote their own standard operating procedures, as required by 

the CMM. However, some of the standard operating procedures were inconsistent 

with federal and EPA policies. For example, one office’s procedure classified 

lab/testing supplies, furniture and computer purchases as routine. Another office’s 

policy did not require prior approval by the cardholder’s approving official for 

training. Until recently, the purchase card team did not receive or review the 

standard operating procedures to know if they complied with the EPA’s overall 

purchase card policies. 

Inadequate training contributed to noncompliance with EPA policies. Some 

cardholders do not use their purchase cards every year. Consequently, they are 

less experienced and unfamiliar with the proper procedures. The requirement for 

training only once every 3 years may not be effective in maintaining cardholders’ 

retention of proper procedures. 

14-P-0128 10 
 

 

 

 

Purchase Card Program Needs Improvement 

Seventy-five of 80 reviewed transactions were not in compliance with EPA 

policies. The total sample value was $152,602, of which $79,254 represented 

prohibited, improper and erroneous purchases. These transactions represented 

purchases of gym memberships, food, hotel space, and purchases split to stay 

under threshold for using the purchase card. 

Table 2: The 80 sampled transactions listed by type of transaction and cost issues 

Transaction 

Type Sample 

Sample 

dollar 

value 

Third party 

verification 

for training 

Closer 

scrutiny 

Restricted/ 

approvals 

Missing 

records Prohibited Other3 

Total 

cost 

issues 

Fitness 5 $19,735 $ 2,867 $14,368 $17,235 

Gift certificates 5 8,163 8,163 8,163 

Split purchases 3 7,500 $7,500 7,500 

Office supplies 17 14,182 500 199 896 1,596 

Food 7 4,784 3,980 21 4,001 

Hotel 5 11,738 

5,908 

1,221 7,129 

Training 4 6,466 709 7 716 

Close to $3,0004 10 52,101 5,930 11,788 3,000 42 20,760 

Unusual 

merchant code 

6 6,551 2,092 3,015 5,107 

Automotive 5 7,185 17 17 

Charity 4 1,750 350 350 

Third party 

processor 

4 3,357 2,150 2,150 

Convenience 

checks 

5 9,090 1,630 2,900 4,530 

Total 80 $152,602 $1,980 $12,643 $20,606 $26,156 $8,165 $9,704 $79,254 

Source: OIG analysis of sampled transactions showing source of cost issues. 

These transactions were undetected by EPA’s cardholders, approving officials and 

purchase card team. With ineffective management controls to ensure the 

appropriate use of EPA purchase cards, there is a continued risk of prohibited, 

improper and erroneous purchases. 

Conclusion 

In summary, the EPA’s oversight did not ensure that purchase card holders and 

approving officials complied with internal control procedures. Half of the dollar 

value of our sampled transactions contained prohibited, improper or erroneous 

purchases. This indicates an ongoing risk. Improved purchase card oversight 

3

 This category includes split purchases, overcharges, sales tax and lost refunds due to late payment by cardholders. 4 We sampled 10 transactions close to $3,000 because the micro-purchase threshold is $3,000. Purchases over $3,000 should 

be handled by acquisition professionals and purchases close to $3,000 could be split purchases. 

14-P-0128 11 
 

 

could save the government money, which would be especially helpful in the 

EPA’s current budget environment. 

Recommendations 

We recommend that the Assistant Administrator for Administration and 

Resources Management: 

1.	 Implement regular transaction reviews to determine if the cardholders and 

approving officials are complying with EPA guidance. 

2.	 Institute agencywide standard operating procedures, and ensure that any 

deviations comply with guidance. 

3.	 Provide additional training on the purchase card policy and procedures to 

the purchase card holders and approving officials to address the 

noncompliance issues identified in this report. 

4.	 Revise the CMM to more specifically address purchases requiring closer 

scrutiny such as gym memberships and gift cards. 

4a. Determine whether the purchase of gift cards as awards is an appropriate 

use of government funds and make the necessary revisions to EPA 

policies to establish appropriate internal controls. 

5.	 Institute follow-up actions as appropriate to hold individuals accountable 

and recover the funds used for the prohibited, improper or erroneous 

purchases identified in this audit. 

Agency Comments and OIG Evaluation 

In its response, OAM agreed with all the recommendations and provided 

corrective action plans, with completion dates, to address the recommendation. 

OAM also commented on some of the findings and the draft report was revised 

where appropriate. 

In response to recommendation 1, OAM is planning the following corrective actions. 

	 Amend the CMM to address approval and documentation requirements for 

purchase card actions procured through EPA’s Acquisition System by 

warranted contracting officers. 

	 Deploy an automated system including an electronic purchase card log. 

	 Research, analyze and assess the viability of establishing liaisons in each 

of 23 offices to work closely with OAM on managing internal controls and 

oversight responsibilities. 

14-P-0128 12 
 

 

 

 

	 Assess the viability of increasing data mining through the bank and Visa 

to enhance internal controls and oversight. 

The agency indicated these corrective actions will be taken by September 30, 

2014. When implemented, the agency actions, taken as whole, should address the 

recommendation. 

OAM agreed with recommendation 2 and plans to develop and distribute draft 

standard operating procedures by March 31, 2014, with final procedures 

anticipated by December 31, 2014.5

 When implemented, the agency actions 

should address the recommendation. 

In response to recommendation 3, OAM stated it is planning the following 

corrective actions. 

	 Review the audit findings to ascertain the specific areas of noncompliance. 

Develop mini training sessions for all cardholders and approving officials. 

Training will be completed by September 30, 2014. 

	 Depending on the severity of the violation, cardholder(s) and approving 

official(s) deemed to be in violation of agency policy or procedures may 

have their authority revoked or suspended pending the completion of the 

aforementioned training. 

	 Purchase card policy will be revised to include this supplemental training 

requirement, as well as the new suspension and revocation implications. 

A draft of the revised policy will be completed by September 30, 2014. 

	 Purchase card training requirements will be changed from every 3 years to 

every 2 years effective January 2014. The CMM revision will be updated 

to reflect this change. 

When implemented, the agency actions should address the recommendation. 

In response to recommendation 4, OAM stated it is planning the following 

corrective actions. 

	 Revise the CMM and review the audit findings to ascertain the specific 

areas requiring closer scrutiny that will be addressed with cardholders and 

approving officials. A draft rewrite will be completed by September 30, 

2014. 

	 Review cardholder supporting documentation and converse with both the 

cardholder and approving office concerning the purchase of gym 

memberships. Pursue reimbursement to the agency where deemed 

appropriate by June 30, 2014. 

5

 EPA response contained a December 30, 2015 date. However, we confirmed with OAM staff that it is supposed to 

be December 30, 2014. 

14-P-0128 13 
 

 

 

 

	 Recently blocked 130+ additional Merchant Category Codes to prevent 

transactions considered high risk, including codes considered nonapplicable for routine Agency purchase card transactions. 

The agency’s corrective actions should address the recommendation. 

OAM stated that gift card purchases are not a purchase card issue but a process 

issue because managers are responsible for executing SF-50 actions, as they 

would for any other monetary or time off award, in order to capture this data on 

the employee’s W-2 form for tax purposes. The OIG was unable to identify this 

specific requirement and the response did not address the issues in the report 

related to gift cards. Our review found several issues related to the use of a 

purchase card to buy gift cards for awards. First, EPA Manual 3130 A2, 

Recognition Policies and Procedures Manual, does not specifically address 

whether gift cards can be used as informal or formal recognition. Second, 

purchase card holders bought multiple quantities of gift cards at the same time but 

did not always maintain records of who received the gift cards. Third, Office of 

Personal Management tax guidance on awards states gift certificates and vouchers 

are cash equivalents and are generally taxable regardless of amounts. The EPA 

needs to address each of these issues if it is to continue to allow purchase card 

holders to buy gift cards to be used as awards. Recommendation 4a has been 

added to address the issues related to gift cards. The EPA will need to provide a 

corrective action plan and milestone date for addressing the recommendation 

when responding to the final report. The responsible office for this new 

recommendation is the Office of Human Resources. 

OAM agreed with recommendation 5 and proposed the following corrective 

actions. 

	 Update the CMM to remove the prohibition against using third party 

processors. The draft rewrite of the CMM will be completed by 

September 30, 2014. OIG understands that third party processors are now 

common and that OAM plans to remove the prohibition from the CMM. 

OIG cautions that EPA must then ensure that IRS form 1099s are generated 

for individuals who receive third party processor payments for services. 

	 Conduct follow-up to hold individuals accountable for other types of 

prohibited, improper or erroneous purchases identified in the audit report. 

Final written disposition will be completed by June 30, 2014. 

When implemented, the agency actions should address the recommendation. 

To assist in the resolution of the report and tracking of corrective actions, 

appendix B contains a table of the agreed-to corrective actions and planned 

completion dates. 

14-P-0128 14 
 

 

Chapter 3

Biennial Reviews Need Improvement 

Although OARM’s FY 2012 FMFIA assurance letter stated that it would take 

corrective actions to correct any identified vulnerabilities and improper use of the 

purchase card, it did not complete the required 2010 biennial review and did not 

ensure that corrective actions were taken on vulnerabilities identified during the 

2008 biennial review. Federal and EPA policy require, at a minimum, a review 

every 24 months. The purchase card team allowed offices to skip the 2010 

biennial review and did not require follow-up to correct internal control 

weaknesses noted in prior years’ reviews because they did not believe they had 

the authority to do so. Because the EPA’s purchase card biennial reviews were not 

effective in identifying and correcting internal control weaknesses within program 

and regional offices, the same problems continued from 2008. 

Biennial Review Requirements 

The EPA’s Purchase Card Review Program memorandum dated June 28, 2004, 

stated: 

There has been no Agency consistency in how program oversight 

reviews are conducted, and no centralized effort to capture and 

review the reports for systemic issues. The agency needs a formal, 

centralized purchase card oversight program that involves OAM 

and EPA program offices or regions that use the purchase card. 

As a result of the memorandum, the CMM was updated to improve oversight 

consistency. The CMM assigns responsibility for the overall implementation, 

quality, and consistency of the purchase card program to the purchase card team. 

At least once every 24 months, program organizations shall conduct a review to 

ensure compliance with agency and federal policies. Program offices and regions 

decide when to schedule reviews, but reviews must be conducted at a minimum 

every 24 months. The review must encompass a sampling of transactions from 

each of the cardholders under the approving official. Program and regional offices 

shall provide the results of their reviews to the purchase card team, and the offices 

should perform required follow-up or corrective actions as needed. 

Biennial Reviews Are Not Effective in Identifying and Correcting 

Internal Control Weaknesses 

The EPA’s oversight was not effective in ensuring that biennial reviews were 

performed as required. The EPA was also not effective in ensuring consistency, 

and the FMFIA assurance letter was inaccurate. 

14-P-0128 15 
 

 

 

We were told that half of the program offices did not conduct a biennial review in 

2010 as required. No consequences occurred. The CMM required biennial 

reviews, but the purchase card team allowed offices to skip the 2010 biennial 

review and did not follow up on previous weaknesses. The purchase card team did 

not believe they had the authority to demand performance of the biennial reviews. 

Since the biennial review process was not followed, corrective actions and 

improved internal controls did not occur and weaknesses continued from 2008 

onward. Table 3 shows that the same internal control weaknesses that occurred in 

2008 continued to occur in 2012. 

Table 3: Comparison of weaknesses reported in 2008 and 2012 biennial reviews 

Internal control weakness 

2008 

biennial review 

2012 

biennial review 

Missing third party verification of receipt X X 

Supporting documentation not adequate X X 

Standard operating procedure difficulties X X 

Purchase card logs not complete X X 

Cost allocations take more than 10 days X X 

Not approved before funds committed X X 

Did not use mandatory sources as required X X 

Source: OIG analysis of the EPA’s 2008 biennial review consolidated report and the 

2012 biennial reviews. 

The quality of the biennial reviews was inconsistent among the programs and 

regional offices. We noted differences in whether responsible staff: 

 Use purchase card team guidance to perform the biennial reviews. 

 Observe and report additional risk factors noted during the review. 

 Plan the review in advance and assign support staff. 

 Test transactions of all cardholders. 

These differences resulted in biennial reviews that were inconsistent and did not 

allow the purchase card team to compare the internal controls in the program and 

regional offices. The EPA provided inadequate guidance to promote consistency 

in the biennial reviews. When quality is inconsistent, there is no way to compare 

results for systemic issues and take corrective actions. 

The August 17, 2012, FMFIA assurance letter issued by OARM to the EPA 

Administrator stated OARM will correct any identified vulnerabilities and 

improper use of the purchase card. At the time of the letter, neither the 2010 nor 

the 2012 reviews had been completed. FMFIA requires the OARM program 

office to attest to the soundness of its internal control procedures annually. The 

assurance letter staff were not aware that the required 2010 biennial review had 

not been performed. Also, they stated that the OARM letter only applied to 

purchases made by OARM cardholders. When assurance letters do not provide 

accurate status of internal control risks, the integrity of the FMFIA process and 

14-P-0128 16 
 

 

 

the adequacy of its internal controls to prevent fraud, waste and abuse are called 

into question. 

Internal Control Problems Continue Year After Year 

Because the EPA’s purchase card biennial reviews are not effective in identifying 

and correcting internal control weaknesses, the same problems continue year after 

year. Also, if management is not aware of the extent of the problems, the risk 

cannot be mitigated. Since the biennial review process was not used as required in 

the CMM to improve the EPA’s compliance with agency and federal policies, 

corrective actions did not occur and weaknesses continued from 2008. In light of 

the current budget situation, the purchase card team should provide adequate 

internal control oversight to protect funds from unreasonable expenditures. 

Recommendations 

We recommend that the Assistant Administrator for Administration and 

Resources Management: 

6.	 Ensure biennial review weaknesses are corrected by each office’s 

management and correctly reported in OARM’s assurance letter. 

7.	 Change the biennial review process to ensure that each office conducts 

uniform reviews including transaction testing for every cardholder. 

Agency Comments and OIG Evaluation 

In response to recommendation 6, OAM agreed with our recommendation and is 

in the process of integrating purchase card oversight into the performance 

measurement and management program in order to ensure review results are 

correctly reported in OARM’s assurance letter. This will be completed by 

September 30, 2014. When implemented, the agency actions should address the 

recommendation. 

In response to recommendation 7, OAM agreed with our recommendation and 

will include organizational self assessments and peer reviews under the contract 

management assessment program. This will be completed by September 30, 2014. 

When implemented, the agency actions should address the recommendation. 

To assist in the resolution of the report and tracking of corrective actions, 

appendix B contains a table of the agreed-to corrective actions and planned 

completion dates. 

14-P-0128 17 
 

 

 

 

Chapter 4

Strategic Sourcing to Gain Better Prices 

The EPA is analyzing efficiencies in contracting, including purchase card 

transactions to identify purchases that can be made by other means to obtain 

lower prices. OMB suggests program managers should be aware of any 

agencywide or multi-agencywide contracts that will yield better pricing and 

ensure that cardholders are aware of agency policies for using these contracts. 

The EPA just recently began its strategic sourcing efforts and is currently 

focusing on information technology and lab supplies. The EPA’s Business 

Analysis and Strategic Sourcing Service Center staff stated that increases in 

strategic sourcing agreements will result in potential cost savings of 8 percent. 

OMB Circular A-123, Appendix B, aims to improve the management of 

government charge card programs and suggests purchase card program managers 

should be aware of any agencywide or multi-agencywide contracts that will yield 

better pricing, and ensure that cardholders are aware of agency policies for using 

these contracts. For example, agencies should minimize the number of small 

orders from schedule contracts and consider a more strategic approach to buying 

certain commodities. Lastly, agencies should review and analyze purchase card 

spending patterns and levels for opportunities to negotiate discounts, improve the 

buying process and increase savings based on volume. 

The EPA initiated a Business Analysis and Strategic Sourcing Service Center 

team to identify efficiencies in contracting in October 2012. Strategic sourcing 

critically analyzes an organization’s spending patterns to better leverage its 

purchasing power, reduce cost and improve management of commonly purchased 

goods and services. The new team is pursuing strategic sourcing opportunities 

ranging from laboratory supplies to information technology services, which could 

potentially save up to $60 million in annual costs or avoided costs. 

We aggregated the purchase card transactions in FY 2012 by vendor and 

identified the top five purchase card vendors. The top four vendors are laboratory, 

office and computer suppliers. The EPA already had contracts with two of those 

vendors and is currently pursuing competitive blanket purchase agreements with 

two other vendors. Table 4 shows transaction and dollar volumes for the top five 

vendors. 

14-P-0128 18 
 

 

Table 4: Top Purchase Card Vendors in FY 2012 

Merchant 

Number of 

transactions Dollar amount Current contract actions 

Vendor A 1,459 $1,383,359 Pursuing blanket purchase agreement 

Vendor B 2,803 1,231,321 Currently has a contract 

Vendor C 2,075 930,370 Pursuing blanket purchase agreement 

Vendor D 399 411,823 Currently has a contract 

Vendor E 2,257 367,068 Nothing at this time 

Source: OIG analysis of purchase card top vendors. 

The EPA’s efforts to find additional cost savings may be realized in new strategic 

sourcing agreements. The EPA believes its efforts to pursue strategic sourcing 

agreements will result in the following: 

 Increased strategic sourcing agreements may decrease spending with 

nonmandatory vendors. 

 New contracts established with multiple vendors will further promote 

competition and best pricing alternatives. 

 Streamlining purchase opportunities will save costs, time and effort spent 

on purchases. 

The EPA estimated potential cost savings of 8 percent. 

In light of the EPA’s strategic sourcing procurement efforts to obtain quantity 

discounts, we have no recommendation. 

14-P-0128 19 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Planned 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Completion 

Date 

Claimed 

Amount 

Agreed-To 

Amount 

1 12 Implement regular transaction reviews to 

determine if the cardholders and approving 

officials are complying with EPA guidance. 

O Assistant Administrator 

for Administration and 

Resources Management 

09/30/2014 

2 12 Institute agencywide standard operating 

procedures, and ensure that any deviations 

comply with guidance. 

O Assistant Administrator 

for Administration and 

Resources Management 

12/31/2014 

3 12 Provide additional training on the purchase 

card policy and procedures to the purchase 

card holders and approving officials to address 

the noncompliance issues identified in this 

O Assistant Administrator 

for Administration and 

Resources Management 

09/30/2014 

report. 

4 12 Revise the CMM to more specially address 

purchases requiring closer scrutiny such as 

gym memberships and gift cards. 

O Assistant Administrator 

for Administration and 

Resources Management 

09/30/2014 

4a 12 Determine whether the purchase of gift cards 

as awards is an appropriate use of government 

funds and make the necessary revisions to 

EPA policies to establish appropriate internal 

controls. 

U Assistant Administrator 

for Administration and 

Resources Management 

5 12 Institute follow-up actions as appropriate to 

hold individuals accountable and recover the 

O Assistant Administrator 

for Administration and 

06/30/2014 $79 $79 

funds used for the prohibited, improper or 

erroneous purchases identified in this audit. 

Resources Management 

6 17 Ensure biennial review weaknesses are O Assistant Administrator 09/30/2014 

corrected by each office’s management and 

correctly reported in OARM’s assurance letter. 

for Administration and 

Resources Management 

7 17 Change the biennial review process to ensure 

that each office conducts uniform reviews 

O Assistant Administrator 

for Administration and 

09/30/2014 

including transaction testing for every 

cardholder. 

Resources Management 

O = Recommendation is open with agreed-to corrective actions pending.
 

C = Recommendation is closed with all agreed-to actions completed.
 

U = Recommendation is unresolved with resolution efforts in progress.
 

14-P-0128 20 

1 
 

 

 

 

 

 

Appendix A 

Agency’s Response to Draft Report 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

ADMINISTRATION 

AND RESOURCES 

MANAGEMENT 

JAN 24 2014 

MEMORANDUM 

SUBJECT: Response to Draft Audit Report OA-FY13-0116: EPA Needs to Improve 

Purchase Card Oversight 

FROM: Craig E. Hooks, Assistant Administrator 

 Office of Administration and Resources Management 

TO: Janet Kasper, Director 

Contracts and Assistance Agreements Audits 

OAM has reviewed Draft OIG audit OA-FY13-0116, and provides the following discussion and 

information in response to audit findings and recommendations. 

Response to Recommendations 

Recommendation 1: Implement regular transaction reviews to determine if the cardholders and 

approving officials are complying with EPA guidance. 

OAM Response: OAM agrees with this recommendation, but takes exception to the report 

finding that Contracting Officers (CO’s) did not get Approving Official (AO) approval before 

making a purchase (page 11 section 1 – Cardholders Did Not Obtain Prior Approval). Warranted 

contracting officers are not subject to the same requirements as programmatic cardholders. COs 

receive requisitions through EPA Acquisition System, which includes programmatic approvals 

and validates the requirement. As a result, the EAS purchase request record fully complies with 

purchase card approval and documentation policies. Having explained this situation, OAM 

agrees that CMM Chapter 13.3 does not differentiate between documentation requirements for 

CO’s versus program office cardholders. Consequently, the rewrite of CMM Chapter 13.3 

“Using the Government-wide Commercial Purchase Card” will address approval and 

documentation requirements for purchase card actions being procured through EAS by warranted 

contracting officers for programmatic clients. A draft rewrite will be completed by September 

30, 2014. 

With regard to approval and documentation requirements for all other cardholders, OAM will 

take the following corrective actions by September 30, 2014: 

14-P-0128 21 
 

 

 Deploy an automated system including an electronic purchase card log with a 

requirement to document ALL purchase card transactions Agency-wide. The system will 

ensure documented evidence of electronic approvals and provide a record of all purchases 

made with purchase cards and/or convenience checks. 

 Within each cognizant contracting organization, research, analyze and assess the viability 

of establishing Organization Program Coordinator (OPC) liaisons in each of EPA’s 23 

offices. These individuals will work closely with OAM on managing internal controls 

and oversight responsibilities within their respective programs or regional offices. 

 Assess the viability of increasing data mining reporting through the bank and Visa to 

enhance internal controls and oversight. 

Recommendation 2: Institute Agency-wide standard operating procedures, and ensure that any 

deviations comply with guidance. 

OAM Response: OAM agrees with this recommendation and will develop and distribute draft 

standard operating procedures by March 31, 2014, with a final SOP anticipated by December 31, 

2015. 

Recommendation 3: Provide additional training on purchase card policy and procedures to 

purchase cardholders and approving officials to address the non-compliance issues identified in 

this report. 

OAM Response: OAM agrees with this recommendation and will review the audit findings to 

ascertain the specific areas of non compliance that need to be addressed with cardholders and 

approving officials. 

For areas of non-compliance identified, OAM will develop mini training sessions that will be 

offered to all cardholder and approving officials on those subjects. These mini training sessions 

will be in addition to the mandated (required) training that cardholders and approving officials 

must successfully complete to obtain/maintain a purchase card, convenience check and/or 

approving official authority. Training will be completed by September 30, 2014. 

Depending on the severity of the violation, cardholder(s) and approving official(s) deemed to be 

in violation of Agency policy and/or procedures may have their authority revoked, or suspended 

pending the completion of the aforementioned training. Should a cardholder or approving official 

fail to complete a required mini training session, the purchase card team will have the sole 

discretion to suspend or revoke his/her purchase card, convenience check, and/or approving 

official privileges. Purchase card policy will be revised to include this supplemental training 

requirement, as well as the new suspension and revocation implications. 

Furthermore, purchase card training requirements will be changed from every three years to 

every two years for all cardholders and approving officials effective January 2014. Accordingly, 

the revision to CMM 13.3 currently being vetted for comment will be updated to reflect this 

change in training requirements. 

14-P-0128 22 
 

 

Recommendation 4: Revise the CMM to more specifically address purchases requiring closer 

scrutiny such as gym memberships and gift cards. 

OAM Response: OAM agrees with the recommendation that questionable purchases be subject 

to closer scrutiny in the revised CMM. Further, OAM will review the audit findings to ascertain 

the specific areas requiring closer scrutiny that will be addressed with cardholders and approving 

officials. OAM will review cardholder supporting documentation and converse with both the 

cardholder and approving office concerning the purchase of gym memberships and pursue 

reimbursement to the Agency where deemed appropriate by June 30, 2014. 

In regards to gift card purchases, we do not consider this a purchase card issue, rather, we 

consider it a process issue. When managers issue gift cards, they are responsible for executing 

SF50 actions, as they would for any other monetary or time off award, in order to capture this 

data on the employee’s W-2 form for tax purposes. 

OAM also placed a block on 130+ additional EPA Agency-wide Merchant Category Codes 

(MCC) to prevent transactions considered high risk, including codes considered non-applicable 

for routine Agency purchase card transactions. These transactions will be declined at the point of 

sale. For blocked transactions, cardholders will be required to contact the Purchase Card Team 

to discuss and provide written supporting documentation for the proposed transaction which is 

reviewed by a team member. In this scenario, determinations on whether to proceed with the 

purchase will be subject to closer review and scrutiny by a purchase card team member. 

Recommendation 5: Institute follow-up actions as appropriate to hold individuals accountable 

and recover funds used for prohibited, improper or erroneous purchases identified in this audit. 

OAM Response: OAM agrees with this recommendation, but takes exception to the report 

finding regarding prohibited transactions involving third party processors (page 10). As a result 

of changing market conditions and best practices, OAM acknowledges CMM Chapter 13.3 

contains obsolete guidance on this subject. Accordingly, the prohibition against using third party 

processors will be removed in the upcoming CMM policy rewrite. 

With regard to holding individuals accountable for other types of prohibited, improper or 

erroneous purchases, OAM will conduct follow-up communications with individuals identified 

in the OIG draft report with a copy to the individual’s approving official and branch chief. These 

communications will require that final written disposition of the questionable action(s) be 

provided to the respective program division director. Dispositions will be completed by June 30, 

2014 

Recommendation 6: Ensure biennial review weaknesses are corrected by each office’s 

management and correctly reported in OARM’s assurance letter. 

OAM Response: OAM agrees with this recommendation and is in the process of integrating 

purchase card oversight into the performance measurement and management program (PMMP), 

in order to ensure review results are correctly reported in OARM’s assurance letter. This 

integration and implementation will be completed by September 30, 2014. 

14-P-0128 23 
 

 

 

Recommendation 7: Change the biennial review process to ensure that each office conducts 

uniform reviews including transaction testing for every cardholder. 

OAM Response: OAM agrees with these recommendations and is in the process of integrating 

purchase card oversight into the performance measurement and management program, to include 

reviews as part of the organizational self assessments and peer reviews under the PMMP’s 

contract management assessment program. This integration and implementation will be 

completed by September 30, 2014. 

Having provided the above corrective actions in response to the OIG recommendations in the 

subject audit, OAM also intends to implement a pilot program for an automated purchase card 

system during FY14. The system will serve as the official cardholder electronic record including 

supporting documents and receipts, and will enhance internal program controls and oversight by 

allowing virtual program oversight audits of transaction records. 

If you have any questions, please contact John Bashista, director, Office of Acquisition 

Management at (202) 564-4310. 

Attachment 

cc: 

Madeline Mullen 

Nanci Gelb 

John Bashista 

Thomas Dussault 

Lisa Maass 

Ronda Boatright 

John Showman 

Steve Blankenship 

Brandon McDowell 

14-P-0128 24 
 

 

 

Appendix B 

EPA’s Agreed Corrective Actions and 

Planned Completion Dates 

No. Corrective action(s) Comp. Date 

1 Amend the CMM to address approval and documentation requirements for 

purchase card actions procured through EPA’s Acquisition System by warranted 

contracting officers. 09/30/14 

2 Deploy an automated system including an electronic purchase card log. 09/30/14 

3 Research, analyze and assess the viability of establishing liaisons in each of 23 

offices to work closely with OAM on managing internal controls and oversight 

responsibilities 09/30/14 

4 Assess the viability of increasing data mining through the bank and Visa to 

enhance internal controls and oversight. 09/30/14 

5 Draft agency wide standard operating procedures for purchase cards. Draft 

03/31/14 

Final 

12/31/14 

6 Review the audit findings to ascertain the specific areas of noncompliance. 

Develop mini training sessions for all cardholders and approving officials. 09/30/14 

7 Depending on the severity of the violation, cardholder(s) and approving official(s) 

deemed to be in violation of agency policy or procedures may have their authority 

revoked or suspended pending the completion of the aforementioned training. 09/30/14 

8 Purchase card policy will be revised to include this supplemental training 

requirement, as well as the new suspension and revocation implications. 

Draft 

09/30/14 

9 Purchase card training requirements will be changed from every 3years to every 

2 years effective January 2014. completed 

10 Revise the CMM so questionable purchases are subject to closer scrutiny and 

review the audit findings to ascertain the specific areas requiring closer scrutiny. 

Draft 

09/30/14 

11 Review cardholder supporting documentation and converse with both the 

cardholder and approving office concerning the purchase of gym memberships. 

Pursue reimbursement to the agency where deemed appropriate. 06/30/14 

12 Blocked 130+ additional Merchant Category Codes to prevent transactions 

considered high risk, including codes considered non-applicable for routine agency 

purchase card transactions. 

Completed 

12/10/13 

13 Update the CMM to remove the prohibition against using third party processors. Draft 

09/30/14 

14 Conduct follow-up to hold individuals accountable for other types of prohibited, 

improper or erroneous purchases identified in the audit report. Final written 

disposition of the questionable action(s) will be provided to the respective program 

division director. 06/30/14 

15 Integrate purchase card oversight into the performance measurement and 

management program in order to ensure review results are correctly reported in 

OARM’s assurance letter. 09/30/14 

16 Include organizational self assessments and peer reviews under the contract 

management assessment program. 09/30/14 

Source: OIG analysis of EPA’s January 24, 2014 response and related communication. 

14-P-0128 25 
 

 

Appendix C 

Distribution 

Office of the Administrator 

Assistant Administrator for Administration and Resources Management 

Agency Follow-Up Official (the CFO) 

Agency Follow-Up Coordinator 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for External Affairs and Environmental Education 

Principal Deputy Assistant Administrator, Office of Research and Development 

Principal Deputy Assistant Administrator, Office of Administration and Resources Management 

Director, Grants and Interagency Agreements Management Division, 

Office of Administration and Resources Management 

Director, Office of Acquisition Management, Office of Administration and Resources Management 

Director, Office of Policy and Resource Management, Office of Administration and 

 Resources Management 

Director, Office of Human Resources, Office of Administration and Resources Management 

Deputy Director, Office of Policy and Resource Management, Office of Administration and 

 Resources Management 

Audit Follow-Up Coordinator, Office of Administration and Resources Management 

Audit Follow-Up Coordinator, Office of Acquisition Management, Office of Administration and 

 Resources Management 

Audit Follow-Up Coordinator, Office of Policy and Resource Management, 

 Office of Administration and Resources Management 

14-P-0128 26