U.S. Department of Energy 

Office of Inspector General 

Office of Inspections and Special Inquiries 

Sandia National Laboratory-California 

Procurement Card Program 

DOE/IG-0754 January 2007 

Inspection Report 


SANDIA NATIONAL LABORATORY-CALIFORNIA 

PROCUREMENT CARD PROGRAM 

 

TABLE OF 

CONTENTS 

OVERVIEW 

Introduction and Objective 1 

Observations and Conclusions 2 

DETAILS OF FINDINGS 

Internal Controls Not Enforced 3

Questionable Purchases 5

Number of Card Holders 8

RECOMMENDATIONS 8 

MANAGEMENT COMMENTS 9

INSPECTOR COMMENTS 9

APPENDICES

A. Scope and Methodology 10

B. Management Comments 11 

C. Prior OIG Reports 16 
Overview 

Page 1 Sandia National LaboratoryCalifornia Procurement Card 

 Program

INTRODUCTION The mission of the Department of Energy’s (DOE’s) Sandia 

AND OBJECTIVE National Laboratory-California (Sandia-CA) includes applying 

advanced science and engineering to support the United States’ 

deterrence policy by ensuring the nuclear weapons stockpile is 

safe, reducing the proliferation of weapons of mass destruction, 

and enhancing the surety of energy. Sandia-CA is managed by 

Lockheed Martin Corporation for the National Nuclear Security 

Administration (NNSA). Sandia-CA employs about 900 people. 

In support of its mission, Sandia-CA procures more than 

$40 million in goods and services annually. Employees at SandiaCA have several procurement methods available to them, to 

include the Procurement Card Program. This Program was 

established to simplify the procurement of low value, 

commercially available goods and services without going through 

a more protracted and costly competitive procurement process. 

Sandia-CA’s procurement card activities are administered by the 

Sandia National Laboratory-New Mexico (Sandia-NM) corporate 

organization. There are about 400 procurement card holders at 

Sandia-CA, with most limited to a spending authority of no more 

than $5,000 per transaction and $25,000 per month. However, 

some employees in the Sandia-CA Procurement Department have 

been authorized by Sandia management to spend as much as 

$250,000 to $1 million per monthly billing cycle. 

Given the wide-spread use of procurement cards throughout the 

Department and the potential for abuse, the Office of Inspector 

General (OIG) has established a proactive initiative to review 

procurement card programs at Department facilities. Appendix C 

contains a partial listing of prior OIG reports related to 

procurement card reviews. As part of the OIG initiative, we 

reviewed the Procurement Card Program at Sandia-CA. The 

objective of this inspection was to determine whether Sandia-CA’s 

internal controls ensured that purchases made using procurement 

cards were in accordance with applicable policies and procedures. 

Our inspection methodology included reviewing all of 

Sandia-CA’s procurement card transactions for January through 

November 2005. There were 21,568 transactions valued at 

$12.7 million. 
OBSERVATIONS AND We concluded that Sandia-CA’s internal controls did not ensure 

CONCLUSIONS that purchases made using procurement cards were in accordance 

with applicable policies and procedures. Specifically, we found 

that: 

• Internal controls established to prevent waste or abuse were not 

adhered to in many instances. Sandia-CA managers approved 

571 transactions valued at $272,009 that lacked the required 

description of the items procured. Further, Sandia-CA 

employees purchased “restricted items” without obtaining the 

required advance permission, and these purchases were 

subsequently approved by Sandia-CA managers without that 

permission. 

• Sandia-CA employees and visitors may have inappropriately 

benefited from purchases of items of questionable allowability 

amounting to $102,277. This included 218 purchases of 

catered meals amounting to $89,649 and 56 purchases totaling 

$12,628 for items such as massagers, water bottles, and 

“coins.” 

• Approximately 44 percent of Sandia-CA employees had been 

issued procurement cards. We do not believe this is consistent 

with guidance pertaining to procurement card internal controls, 

which calls for the number of procurement card users to be 

limited to the minimum necessary to carry out activity 

missions. 

Although the number of problem transactions we identified was 

relatively small when compared to the total number of items 

purchased during the sampled timeframe, we believe actions can 

readily be taken to enhance Sandia-CA’s Procurement Card 

Program and, thus, decrease the future risk of waste or abuse.

Page 2 Observations and Conclusions 
Details of Findings 

INTERNAL CONTROLS We found that internal controls established to prevent waste or 

NOT ENFORCED abuse were not adhered to in many instances. Specifically, 

Sandia-CA managers approved 571 transactions valued at 

$272,009 that lacked the required description of the items 

procured. Further, Sandia-CA employees purchased “restricted 

items” without obtaining the required advance permission, and 

these purchases were subsequently approved by Sandia-CA 

managers without that permission. 

Transaction Approval A requirement of Government funded credit card programs is that 

approving officials must perform a monthly validation/ 

reconciliation of their subordinates’ procurement card purchases. 

The purpose of the validation/reconciliation is to ensure that only 

authorized purchases are made, that the purchases are properly 

charged to the appropriate cost account, and that there is a business 

necessity associated with the item(s) procured. 

We conducted a basic review of all 21,568 procurement card 

transactions made by Sandia-CA card holders during January 

through November 2005. Additionally, we performed data mining 

and judgmental sampling that focused on specific types of 

transactions. 

We identified a total of 571 purchases valued at $272,009 where 

the descriptions of the purchases were left blank, so it was not 

possible to identify the items purchased. Of those, one card user 

left 73 transaction descriptions blank amounting to $63,933, while 

another card user left 133 descriptions blank amounting to 

$60,810. We interviewed some of the procurement card users who 

failed to provide an item description. In one case, an employee 

told us he accidentally used his procurement card to buy items 

from an on-line adult novelty store, while another employee said 

he accidentally used his procurement card to purchase a personal 

meal at a restaurant. In both instances, the individuals’ supervisors 

approved the purchases despite the blank description field. Both 

employees had reimbursed Sandia-CA for the purchases prior to 

our interviews. 

We also observed that there were many other procurement card 

purchases where the item description was so vague that it was 

uncertain how the managers knew what they were approving or 

what the business purpose of the item was. For example, we noted 

a $280 purchase from an internet retailer described as “electronics” 

and a $9,800 purchase from another internet retailer described as 

“software.”

Page 3 Details of Findings
After our fieldwork, a Sandia official told us that an automated 

message had been sent to all card holders who had not provided 

transaction description information for transactions since 

October 1, 2005, requiring them to do so and resubmit the 

transactions for re-approval by their managers. The same message 

also required managers to reject any future transactions that did not 

have description information. 

Procurement of Sandia’s Procurement Card Manual contains a list of restricted 

Restricted Items items that employees are prohibited from purchasing without 

specific permission, yet some purchases were made and approved 

without this permission. Examples of some of the purchases of 

restricted items are shown in Table 1. 

Cost Restricted Items 

Purchased 

Restricted Item 

Definition/Prohibition 

$ 140 Office Plant Personal use 

$ 425 Massagers for gift bags Gifts 

$ 500 Deposit for celebration Food 

$ 1,013 Duffle bags for Admin. 

Symposium 

Gifts 

$ 1,728 Projector Projectors, greater than 

$1,000 

$ 6,705 Hand held radios Radios, regardless of cost 

$ 7,828 Camera and peripherals Cameras greater than 

$1,000 

$ 12,836 Tent, chair and linen 

rental 

Tent rentals 

 Table 1

The Sandia Procurement Card Manual states that the intent of the 

Restricted Items List is to establish process controls to ensure 

compliance with corporate business rules, employee safety, 

national security, or protection of major assets. The Restricted 

Items List prohibits the use of a procurement card for certain types 

of items such as ammunition, cameras costing more than $1,000, 

computers, food (excluding business meals), radios, tent rentals, 

and unallowable costs, unless a waiver is provided by Sandia-NM. 

Unallowable costs are defined as costs that have been determined 

to be unreasonable or unallocable to the cost account the item is 

charged to and can include costs associated with items prohibited 

by law or regulation. The Sandia Financial Manual states that 

unallowable costs cannot be charged to the DOE contract and must 

either be charged to the Lockheed Martin fee (corporate earnings) 

or paid by the employee (as a personal expense). 

Page 4 Details of Findings
A “Sandia Procurement Center Work Guidance” document states 

that in special circumstances and with proper justification card 

holders can be given permission to purchase restricted items and 

that Sandia-NM Procurement Card Program officials will review 

each request and make a determination based on judgment as to the 

business necessity of such purchases. We interviewed 18 SandiaCA card holders who had made purchases of items from the 

Restricted Items List. Only three people said that they had 

received permission from Sandia–NM to make restricted item 

purchases. The other individuals said they did not receive 

permission from Sandia-NM Procurement Card Program officials 

to make these purchases. Despite this lack of permission, these 

purchases were approved by their supervisors. 

We determined that an August 2004 Government Accountability 

Office (GAO) report entitled “Sandia National Laboratories: 

Further Improvements Needed to Strengthen Controls Over the 

Purchase Card Program,” had a related finding that, although 

Sandia required purchases of restricted items to be pre-approved, 

Sandia did not require documentation of such approvals for the 

majority of the review period (2002-2003). Consequently, neither 

GAO nor Sandia could determine if that control was effective. We 

noted at the time of our review that Sandia still did not specifically 

require that permission to purchase a restricted item be in writing. 

In light of the continuing concerns we identified, we believe it 

would be beneficial for Sandia to require written permission for 

purchases of items on the Restricted Items List. 

QUESTIONABLE We found that Sandia-CA employees and visitors may have 

PURCHASES inappropriately benefited from purchases of items of questionable 

allowability amounting to $102,277. This included 218 purchases 

of catered meals totaling $89,649 and 56 purchases totaling 

$12,628 for items such as massagers, water bottles, and “coins.” 

Federal Policy Federal policy generally prohibits the use of Government funds to 

for Meal Cost pay for meals and refreshments unless a person is on official travel, 

Reimbursement as these purchases are considered to be a personal subsistence 

expense. Specifically, the Comptroller General stated that there is 

a realization that many agency officials would like to approve the 

use of appropriations to pay for food and refreshments at 

Government sponsored meetings and conferences, including 

meetings to discuss internal operational and other day-to-day 

matters of agency business, and that the rationale for paying for 

such meals is to follow common business practices of the private 

sector. However, the Comptroller General also stated that an 

expenditure of public funds must be anchored in existing law, not 

Page 5 Details of Findings
the practices and conventions of the private sector, and that 

Government funds are not available for the costs associated with 

meals because meals and other such expenses are considered 

personal in nature.1

 In other decisions, the Comptroller General 

has elaborated on the prohibition on using Government funds to 

pay for food by stating that, generally, appropriations are not 

available to provide food to employees at their duty stations.2

 In 

addition, the Comptroller General has specifically denied claims 

for reimbursement for subsistence expenses at employees’ duty 

stations where the employees were escorting or participating in 

meetings with visiting officials3

. 

Meals During the 11-month period of time covered by our inspection 

sample, 218 catered meals totaling $89,649 were purchased using 

procurement cards. This was an average of nearly one meal per 

business day where food was provided through the use of 

procurement cards at a variety of events that included in-house 

team celebrations, new employee orientation, business meetings, 

and guest visits. The attendees benefiting from these catered meals 

included Federal and contractor employees, industry partners, 

guests, and retirees. A sample of the meal events paid for by 

procurement card is shown in Table 2. 

Event Cost 

Catering for congressional visit $ 413 

Homeland security meeting $ 575 

NNSA conference $ 889 

Sandia media event $ 2,278 

Townhall meeting $ 3,803 

Catering for anniversary reunion $ 4,542 

Awards ceremony $ 5,690 

Catering for anniversary symposium $ 10,988 

 Table 2 

We determined that the Sandia Financial Manual allows for 

refreshments and business meals to be provided at Government 

expense only during a business meeting, subject to certain 

considerations regarding specific categories of recipients. Sandia 

has defined the following requirements for providing 

meals/refreshments at business meetings: 

 

1

 Comptroller General Decisions B-288266 (2003) and B-235163.11 (1996); 65 Comp. Gen.16 (1985); 47 Comp. 

Gen. 657 (1968). 

2

 68 Comp. Gen. 604 (1989). 

3

 Comptroller General Decision B-247563.4 (1996). 

Page 6 Details of Findings
(1) “The meal/refreshment is integral to a meeting 

or business-related conference where business is 

carried on”; and, 

(2) “Attendance at the meal is necessary to full 

participation, i.e., employees are not free to take 

meals elsewhere without missing essential 

formal discussions.” 

However, we concluded that, given the Comptroller 

General decisions, even the provision of meals at 

Government expense during business meetings may be 

unallowable. Thus, we believe the DOE Sandia 

Contracting Officer should review (1) the Sandia meal 

policy for consistency with the Comptroller General 

Decisions and (2) Sandia-CA’s meal costs for allowability. 

Gift/Souvenir From our sample we also identified 56 procurement card 

Purchases transactions for gifts and souvenir items that were valued at 

$12,628. In many instances, the procurement card users said that 

they were directed by their managers (who would be the 

procurement card users’ approving officials and would reconcile 

and authorize the procurement transactions) to procure these items. 

A sample of gift or souvenir items purchased during our sample 

period is shown in Table 3. 

Item Cost 

Movie tickets $ 320 

Blinking buttons with Sandia name $ 383 

Coffee mugs $ 423 

Glasses for anniversary symposium $ 582 

Visors, water bottles, etc., for visitor program $ 837 

Souvenir coins $ 1,423 

Promotional souvenirs for Sandia $ 1,882 

Sandia souvenir apparel $ 2,786 

 Table 3 

Specific to the souvenir apparel, we were told that it consisted of 

shirts and other clothing items that had the Sandia logo 

embroidered on them and that they were purchased for resale. We 

were also told that the proceeds were supposed to be used to 

reimburse the Government. We reviewed a “Chargebacks Detail 

by Task/Chg” accounting document that indicated reimbursements 

had been deposited for the sale of at least some of the apparel. 

Page 7 Details of Findings
We could find no authorization for Sandia-CA to spend 

Government funds on gifts or souvenirs, even if reimbursements 

were made. The Sandia Financial Manual states that “The cost of 

gifts is generally unallowable, regardless of amount,” and that gifts 

to non-employees are unallowable and must be purchased with 

Lockheed Martin fee money. Additionally, the Federal 

Acquisition Regulation4

 states that unallowable public relations 

and advertising costs include the costs of corporate celebrations; 

promotional materials that are designed to call favorable attention 

to the contractor and its activities; and souvenirs, imprinted 

clothing, buttons, and other mementos provided to customers or 

the public. 

NUMBER OF We found that approximately 44 percent of all Sandia-CA 

CARD HOLDERS employees had been issued procurement cards. We do not believe 

this is consistent with guidance pertaining to procurement card 

internal controls. Departmental guidelines require that heads of 

contracting activities limit the number of procurement card users to 

the minimum necessary to carry out the activity’s missions. 

Additionally, a GAO Audit Guide states that the total number of 

card holders in an organization is one factor that should be 

considered in limiting the potential loss to the organization from 

fraudulent, improper, and abusive purchases. The Guide also states 

that by limiting the number of procurement cards and related limits 

to the levels necessary to meet operational requirements, an 

organization can better manage and control its procurement card 

program. 

RECOMMENDATIONS We recommend the Manager, Sandia Site Office: 

1. Direct the Sandia Site Office Contracting Officer to make a 

cost allowability determination for the $102,277 in questioned 

costs associated with purchases by Sandia-CA employees, and 

recover funds that are determined to be unallowable. 

2. Direct the Sandia Site Office Contracting Officer to conduct a 

review of the Sandia Financial Manual meal policy to ensure 

that it is consistent with Comptroller General Decisions. 

3. Direct Sandia-NM to conduct a review of the $272,009 in 

procurement card transactions that lacked a description to 

ensure that an appropriate business necessity existed for these 

purchases, and recover funds that are determined to be 

unallowable. 

 

4

 Section 31.205-1 “Public relations and advertising costs.” 

Page 8 Recommendations
4. Ensure that Sandia-CA enforces the requirement that all 

purchases made with procurement cards contain a clearly stated 

description that would allow a determination of business 

necessity. 

5. Require that permission for Sandia-NM and Sandia-CA 

procurement card holders to purchase items from the Restricted 

Items List be in writing and be retained for an appropriate 

period of time. 

6. Consider requiring that Sandia-NM procurement card officials 

implement a data mining program at Sandia-CA regarding 

restricted items to ensure that such purchases are appropriately 

approved. 

7. Require that Sandia-CA reduce the number of procurement 

card holders to facilitate improved oversight of procurement 

card transactions. 

MANAGEMENT In comments on a draft of this report, management concurred with 

COMMENTS the report recommendations and identified corrective actions that 

have been or will be taken to address them. Management’s 

verbatim comments are included at Appendix B. 

INSPECTOR We found management’s comments to be responsive to our report 

COMMENTS recommendations. 

Page 9 Management and Inspector Comments 
Appendix A 

SCOPE AND The fieldwork for this inspection was conducted primarily between 

METHODOLOGY February and May 2006. As part of this inspection, we visited the 

Sandia-CA and Sandia-NM sites to interview NNSA and 

contractor officials. We also conducted interviews of procurement 

card users and examined documents and records at Sandia-CA and 

Sandia-NM. Our document review and analysis included: 

• Sandia-CA procurement card transaction records for January 

through November 2005; 

• Procurement card transaction invoices; 

• 2005 Procurement Card Self-Assessment; 

• Sandia Financial and Procurement Manuals; 

• Sandia Procurement Center Work Guidance documentation; 

• Decisions by the Comptroller General of the United States; 

• Prior DOE Office of Inspector General reports; 

• GAO documentation; and, 

• The Federal Acquisition Regulation, 48 Code of Federal 

Regulations. 

Also, pursuant to the Government Performance and Results Act of 

1993, we examined performance measurement processes as they 

related to the Sandia-CA procurement card program. 

This inspection was conducted in accordance with the “Quality 

Standards for Inspections” issued by the President’s Council on 

Integrity and Efficiency. 

Page 10 Scope and Methodology 
Appendix B 

Page 11 Management Comments 
Appendix B (continued) 

Page 12 Management Comments 
Appendix B (continued) 

Page 13 Management Comments 
Appendix B (continued) 

Page 14 Management Comments 
Appendix B (continued) 

Page 15 Management Comments 
Appendix C 

PRIOR OIG REPORTS The following are previously issued OIG reports that are related to 

procurement cards. 

“Selected Purchase Card Transactions at the Nevada Site Office” 

(INS-O-06-01, November 2005). This report found that 

procurement card transactions were not always reviewed and 

approved by designated approving officials; procurement card 

holders and designated approving officials were not completing 

refresher training within required timeframes; there were 

inconsistencies with how the procurement card program was 

administered; and monthly bank statements were not reconciled 

with procurement card financial records. 

“The Department’s Federal Purchase Card Program at 

Headquarters” (DOE/IG-0675, February 2005). This report found 

that procurement card users did not take full advantage of an 

automated procurement system, resulting in inefficiencies; 

acquired accountable items that were not then entered into the 

Department’s property management system; exceeded documented 

purchasing authority and did not demonstrate a continued need for 

a procurement card; and acquired several items that reflected a 

questionable use of the procurement card. 

“Los Alamos National Laboratory’s Purchase Card Program 

Corrective Actions” (DOE/IG-0644, April 2004). This report 

found that the Laboratory could enhance guidance to procurement 

card holders by clarifying the rationale for items that should not be 

acquired by procurement card and the processes for seeking 

exceptions to those restrictions; could automate its data analysis 

techniques to identify purchases that did not comply with internal 

guidance; and could enhance periodic reviews of card holder 

activities by improving follow-up actions to correct noted 

problems and imposing sanctions for departures from established 

procedures. 

“Sandia National Laboratories Procurement Card Program” (WRB-02-03, August 2002). This report found that Sandia 

procurement card holders purchased restricted items, split 

purchases to avoid transaction limits, and allowed unauthorized 

users to make purchases. 

“U.S. Department of Energy’s Purchase Card Programs - Lessons 

Learned” (I01OP001, February 2002). This report identified 

lessons learned that can be used to improve the operation and

Page 16 Prior OIG Reports 
Appendix C (continued) 

performance of the procurement card programs, including: 

developing comprehensive guidelines for procurement card 

processes; clearly delineating allowable and non-allowable items; 

taking aggressive steps to assure compliance with established 

policies and procedures; and establishing a system that provides a 

full accounting of the number of card holders, card holder status, 

and spending limitations. 

Page 17 Prior OIG Reports 
IG Report No. DOE/IG-0754 

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