Report No.:  7R1-G10-052

Date:  February 26, 1997







February 26, 1997         52BN

Memorandum to:

Director, Department of Veterans Affairs Medical
Center (VAMC) Boston, MA

Advisory - Greater Compliance with Governmentwide
Purchase Card Procedures is Needed, Report No. 7R1-G10-052

1. The Office of Inspector General audited the Department
of Veterans Affairs (VA) Consolidated Financial Statements for
Fiscal Year (FY) 1996.  As part of this audit we reviewed selected
financial operations and tested internal controls at VAMC Boston,
as they pertain to the Expenditure Cycle, which generally includes
activities to acquire goods and services. The audit also included
a review of controls over the use and administration of government
purchase cards.

2. Based on substantive audit tests performed and
a review of selected accounting records, we concluded that generally
internal controls were adequate to ensure the reliability of obligations
as shown in VAMC Boston's financial statements as of September
30, 1996.  However, we identified a number of instances of non-compliance
with government purchase card procedures and guidelines which
warrant greater management attention.

3. This advisory report and enclosure provide details
of our observations made regarding controls over the government
purchase card program at VAMC Boston.  Specifically, we concluded
that greater compliance with the I.M.P.A.C. Purchase Card Procedures
Guide is needed in the following areas:

·Accountability
of Cardholders.

·Maintenance
of Cardholder Accounts.

·Certification
and Documentation of Cardholder Statements.

·Audits
of Cardholder Procurements.

·Use of
Required Sources of Supplies and Services.

·Proper
Use of Funds and Distribution of Costs.

4. We previously discussed these conditions with
you and your staff and your agreed to take corrective action.
 As a result, we are not making formal recommendations.  However,
we will follow-up on the implementation of planned actions during
future financial statement audits.

5. We appreciate the assistance of your staff.  If
you have any questions regarding the advisory report, please call
me at 617-687-3120.

(Original signed by:)

THOMAS L. CARGILL, JR.

Director, Bedford Audit Operations Division

Enclosure

cc: VISN1-Director, Boston, MA.

VHA Chief Financial Officer (17)

Assistant Secretary for Management (004)





During the audit we found that controls governing
the use and administration of the government purchase card program
had not been effectively implemented.  Specific areas needing
improvement include the following:

·Accountability
of Cardholders.

·Purchase
Card Certification Forms.

·Signature
Samples of Cardholder Participants.

·I.M.P.A.C.
Cardholder Account Set-Up Forms.

·Supporting
Documentation Attached to Cardholder Statements.

·Certifying
Official Signatures on Cardholder Statements.

·Audits
of Cardholder Procurements.

·Required
Sources of Supplies and Services.

·Proper
Distribution ofProcurements as of
September 30, 1996.

·Use of
Medical Care Funds for Research and General Post Fund Purposes.

Accountability of Cardholders

The I.M.P.A.C. Purchase Card Procedures Guide identifies
the program coordinator at the facility level as the individual
responsible for the control, issuance and cancellation of purchase
cards.

We requested from the program coordinator a listing
of cardholders by respective service and approved purchase/spending
limits.  We found that the facility did not maintain a listing
of cardholders and that the coordinator had to request the listing
from the purchase card company Rocky Mountain Bank.  The facility
should not need to rely on the purchase card company to inform
the facility who is in possession of a purchase card.

Further, during our review, the facility attempted
to identify potential problem areas with the purchase card program
by undertaking an entire review of the program which was approved
by the Associate Medical Center Director.  All purchase cards
were to be turned in to the Chief of Acquisitions & Material
Management Service (A&MMS) by November 22, 1996.  Purchase
cards were to be returned to cardholders with appropriate approval
documentation.  Additional purchase card training was to be scheduled
with each service within 2 weeks of being returned.

We requested from the program coordinator a list
of the cards that were surrendered by November 22, 1996.  The
coordinator was unaware of either the names of the cardholder
or number of cards that were surrendered.  Further, the coordinator
was unaware of the names of cardholders that had been reissued
a purchase card.

Controls over cardholder accountability are essential
in ensuring that the purchase card is used by authorized and approved
individuals since cardholders are making procurements on behalf
of the government.

Purchase Card Certification Forms

The I.M.P.A.C. Purchase Card Procedures Guide requires,
prior to the issuance of a Government Purchase Card, that a Governmentwide
Purchase Card Certification Form be completed by cardholders,
approving officials and the Head of the Contracting Activity (HCA).
 Upon completion of the form, cardholders become contracting officials.

We found that the Purchase Card Certification Form
was not completed for any of the 215 purchase cardholders or approving
officials.  We were not provided with an explanation as to why
forms were not prepared for all responsible cardholders.

Signature Samples of Cardholder Participants

The I.M.P.A.C. Purchase Card Procedures Guide requires
that the Billing Office be provided signature samples from each
program participant.  The Billing Office must maintain these files
and have them available for internal review, audit, or investigation
purposes.

We requested signature samples from the Fiscal Service
for each program participant.  The Chief of Fiscal stated that
signature samples were not provided to the Fiscal Service for
all program participants.

I.M.P.A.C. Cardholder Account Set-Up Forms

The I.M.P.A.C. Purchase Card Procedures Guide requires
that program cardholder account applications be prepared for all
purchase cardholders.  The set-up forms identify the cardholder,
approving official, and spending limits of the cardholder.

We randomly selected 8 purchase cardholders to determine
that account set-up forms were properly prepared for cardholders.
 We found that the program coordinator was unable to locate forms
for 3 cardholders.

Supporting Documentation Attached to Cardholder
Statements

The I.M.P.A.C. Purchase Card Procedures Guide requires
individual cardholders to attach supporting documentation (invoice,
sales slip) to the original statement of account.  The cardholder
must check each procurement on the statement to verify its accuracy.
 If for any reason the cardholder does not have a customer copy
of the sales slip to attach to the statement, the "Date of
Purchase" column should be annotated with the word "lost"
and attach a written explanation.

We reviewed 129 cardholder statements for the months
of January 1996 through October 1996.  These statements represented
$130,340 in purchases utilizing the purchase card.  We reviewed
10 cardholder statements from both purchasing agents and cardholders
in the various services.  Our review of these purchases disclosed
the following:

·No supporting
documentation (sales slips or invoices) was attached to 7 cardholder
statements for purchases totaling $3,586.  Further, there was
no written explanation for the lack of documentation.

Certifying Official Signatures on Cardholder
Statements

The I.M.P.A.C. Purchase Card Procedures Guide requires
the signatures of the respective cardholder and approving official
on the back of each purchase card account statement.  The cardholder's
signature is evidence that the cardholder has checked each procurement
and verified its accuracy.  The approving official's signature
is evidence of verification that each item appearing on the statement
has been received, is necessary and appropriate.

Our review of 129 cardholder statements disclosed
the following exceptions related to certifying official signatures:

·3cardholder statements had no cardholder signatures certifying
purchases and were still processed by Fiscal Service.



·5cardholder statements had no approving official signature but
the statements were still processed by Fiscal Service.

·31cardholder statements had an unauthorized individual signing as
the approving official and the statements were still processed
by Fiscal Service.

Audits of Cardholder Procurements

The I.M.P.A.C. Purchase Card Procedures Guide requires
the Billing Office to conduct an audit after the "Statements
of Account" are approved.  This review requires the Billing
Office staff to look at individual cardholder procurements, the
activity code and dollar limitations.

The Chief of Fiscal Service informed us that audits
of cardholder account statements were not conducted in FY 1996.

Required Sources of Supplies and Services

The Office of Acquisition and Materiel Management
Information Letter No. 90-96-1 provides that every purchase card
holder is responsible for ensuring that certain supplies and services
are procured from sources that are established by law. Federal
Acquisition Regulation (FAR) 13.602 requires that individuals
who make micro-purchases (purchases not exceeding $2,500) comply
with FAR Part 8, Required Sources of Supplies and Services.

We randomly selected 8 purchase card statements with
total purchases of $8,207 for compliance with FAR Part 8.  We
found that one cardholder statement with total charges of $2,395
or 29% of the purchases reviewed were not procured from the required
GSA source.  We discussed these purchases with the Chief of A&MMS,
the Assistant Chief of Purchasing and Contracts, and the Chief
of Materiel Management who concurred with our results.

Further, the Chief of A&MMS provided us with
additional examples of cardholder purchases totaling $2,607 that
were not made from required sources in accordance with FAR, Part
8, Required Sources of Supplies and Services.

We determined that cardholders purchased goods totaling
$5,002 that were not made from required sources in accordance
with FAR Part 8.

Proper Distribution of Procurements as of September
30, 1996

We reviewed the Financial Management System (FMS)
Status of Allowance Report as of September 30, 1996 and found
that procurements made with unspecified accounting classification
code (ACC) purchase cards totaling $273,222 were not properly
distributed to respective fund control points.

From the inception of the purchase card program at
VAMC Boston, Purchasing Agents in A&MMS were using unspecified
as well as specified ACC purchase cards when purchasing goods
and services for various services.  Purchase card procurements
made with specified ACC cards would be costed and reflected in
the proper fund control points of the various services.

However, use of the unspecified ACC cards by Purchasing
Agents resulted in the accumulation of procurements in an FMS
default control point during FY 1996 totaling $1,069,407 or (60%)
of the total purchase card procurements in FY 1996 valued at $1,766,410.
 The Fiscal Service initiated expenditure transfer transactions
in July and September totaling $796,184 leaving a balance of $273,222
in purchase card procurements not distributed to fund control
points as of September 30, 1996.

At the conclusion of our review Fiscal Service personnel
analyzed the September 30, 1996 balance and identified purchases
totaling $101,273 that could be distributed to proper fund control
points.  We were informed that expenditure transfers would be
processed for these purchases.  Fiscal personnel need to properly
identify and distribute the remaining balance of procurements
totaling $171,949 to the respective fund control points.

Use of Medical Care Funds for Research and
General Post Fund Purposes

We reviewed FY 1996 expenditure transfer transactions
associated with the Purchase Card Program and found that medical
care funds totaling $88,041 were temporarily used for the purchase
of research and general post fund supplies and services.  This
occurred because Purchasing Agents in A&MMS used unspecified
rather than specified purchase cards for research and general
post fund needs and subsequent expenditure transfers were not
timely processed.

We determined that medical care funds totaling $88,041
(or 11%) of the Fiscal Year 1996 expenditure transfers totaling
$796,184.87 were used to make purchases for research and general
post fund needs.  Unspecified purchase cards were used by Purchasing
Agents for the purchase of research supplies and services which
were charged to a default control point in Medical Care Appropriation
96/0160.  However, the transfer of these purchase card expenditures
were not accomplished in a timely manner.  An expenditure transfer
was processed on July 1, 1996 for purchase card purchases made
in April, May, and June.  Further, expenditure transfers were
processed on September 6, and 9, 1996 for purchases made in July
and August.  The purchasing practice of using unspecified purchase
cards combined with the delayed transfer of purchase card expenditures
to research and general post fund control points resulted in the
temporary use of medical care funds for research and general post
fund needs during Fiscal Year 1996.