FAA Purchase Cards: Weak Controls Resulted in Instances of Improper and Wasteful Purchases and Missing Assets
Published: 2003-03-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In May 2002, GAO reported on breakdowns in purchasing controls at the Federal Aviation Administration's (FAA) Alaskan Region that resulted in improper and wasteful purchases. Many of the weaknesses were associated with the use of government credit cards--referred to as purchase cards--and raised concerns that similar problems might exist FAA-wide. As a result, GAO was asked to determine whether FAA's purchase card controls reasonably ensured that purchases were proper, at a reasonable cost, and for valid government needs. GAO also assessed whether assets bought with purchase cards were being properly safeguarded and recorded.
section_title: What GAO Found
paragraphs: Weaknesses in FAA's purchase card controls resulted in instances of improper, wasteful, and questionable purchases, as well as missing and stolen assets. These internal control weaknesses included inadequate segregation of duties, lax supervisory review and approval, missing purchase documentation, inadequate training, and insufficient program monitoring activities, all of which created an environment vulnerable to fraud, waste, and abuse. These weaknesses contributed to the $5.4 million of improper purchases GAO identified. Among these were purchases that were split into two or more segments to circumvent single purchase limits. GAO also identified over $630,000 in purchases that were considered wasteful--that is, excessive in cost, for questionable government needs, or both--or were considered questionable because they were missing a receipt to show what was actually purchased. In addition, over half of the asset purchases--such as computers and other equipment--that GAO examined had not been recorded in FAA's property system, increasing the risk of loss or theft. As a result, FAA could not locate or document the location of over a third of the 692 items that GAO attempted to observe. These missing items totaled almost $300,000. In separate internal reviews, one FAA location identified over 800 items, totaling almost $2 million, that were lost or stolen in fiscal years 2001 through 2002. Given systemic weaknesses in FAA's property controls, the actual amount of missing or stolen equipment FAA-wide could be much higher.

section_title: Letter
paragraphs: The use of purchase cards in the federal government has dramatically  increased in past years as agencies have sought to eliminate the  bureaucracy and paperwork long associated with making small purchases.   The benefits of using purchase cards are lower costs and less red tape for  both the government and the vendor community.  However, given the  nature, scale, and increasing use of purchase cards, it is important for  agencies to have adequate internal controls in place to help ensure proper  use of purchase cards and thus to protect the government from waste,  fraud, and abuse.
In September 2001, the Department of Transportation’s (DOT) Office of  Inspector General (OIG) issued a report on the results of its audit of DOT’s  government purchase card program.  That review examined 785 fiscal year  2000 purchase card and convenience check transactions made by 9 of  DOT’s 11 operating administrations.  Based on its review of this limited  sample of transactions, the OIG reported that purchases were reasonable,  valid, and received.  However, the OIG also noted that within the Federal  Aviation Administration (FAA), internal controls were weak concerning  verification of purchases, splitting purchases to avoid purchase card limits,  and performing reviews of purchase card usage.  Subsequently, we  reviewed purchasing controls and activities—including those involving the  use of purchase cards—within the Airway Facilities Division at FAA’s  Alaskan Region and found similar internal control weaknesses.  These  included an inadequate supervisory review and approval process, an  inadequate segregation of duties, and a lack of oversight of spending that  allowed improper and wasteful expenditures to occur.
Given these results, you requested that we conduct an in-depth audit of  FAA’s purchase card and convenience check transactions for fiscal year  2001 to determine the validity of purchase card and convenience check  usage.  Consequently, we designed our review to determine if FAA’s   (1) internal controls provided reasonable assurance that improper  purchase card and convenience check purchases would not occur or would  be detected in the normal course of business, (2) purchase card and  convenience check expenditures were made in accordance with  established policies and procedures, (3) purchases were made for  reasonable costs and valid government needs, and (4) controls over  purchase card and convenience check asset acquisitions were adequate to  properly record and safeguard assets.
subsections: section_title: Background
paragraphs: The General Services Administration (GSA) administers the federal  government’s credit card program.  GSA contracts with commercial banks  to issue credit cards to federal employees to make official government  purchases.  FAA’s purchase cards are issued by Bank of America.  The FAA  purchase card, unless otherwise prohibited, is intended to be the primary  purchasing method when vendors accept purchase cards as payment.  This  payment method is intended to streamline procurement and payment  procedures and reduce administrative burden by reducing the number of  procurement requests, purchase orders, and vendor payments issued.   FAA’s purchase card program also includes the use of convenience checks  to pay vendors that do not accept credit cards.  In fiscal year 2001, FAA  made over 364,000 purchases using purchase cards and convenience  checks totaling $151 million.  This reflects a significant increase over the  prior fiscal year, when FAA made a total of 271,000 purchase card and  convenience check purchases (a 34 percent increase) totaling $126 million  (a 20 percent increase).
The Department of Transportation and Related Agencies Appropriations  Act of 1996 exempted FAA from the Federal Acquisition Regulation and  other provisions of acquisition law, and directed the FAA Administrator to  develop and implement FAA’s own acquisition system. The resulting  system, called the FAA Acquisition Management System (AMS), took  effect April 1, 1996. AMS establishes policy for all aspects of the acquisition  life cycle. It was intended to simplify acquisition management into a system  providing more timely and cost-effective acquisition of equipment and  materials. Although FAA is exempted from certain federal acquisition  requirements, many of these requirements have been incorporated into  FAA’s policies.
FAA also established the FAA Acquisition System Toolset that  supplements AMS by providing additional acquisition policy and guidance,  such as the Commercial and Simplified Purchase Method guidance, which  provides guidance on purchase cards and convenience checks.  Within this  guidance, FAA delegates to each acquisition office within a region or  center, or within headquarters the responsibility of managing its own  purchase card program and establishing its own internal processes for  issuing purchase cards and monitoring the program.  In addition, FAA’s  internal Purchase Card/Check User Guide assists cardholders and  approving officials in carrying out their responsibilities.
GSA and Bank of America also provide purchase card guidance and GSA  provides training that is available to cardholders, approving officials, and  program coordinators.  For example, GSA’s Blueprint For Success:  Purchase Card Oversight was prepared by a working group of agency  program coordinators (APC) and provides general program guidance to  APCs in performing their responsibilities.  Beginning in fiscal year 2003,  GSA made available to APCs a Web-based on-line training course covering  such topics as APC responsibilities, reporting tools, and preventive  measures to use in monitoring the purchase card program.
APCs are generally responsible for setting up and maintaining all accounts,  developing internal program guidelines and procedures, ensuring that  cardholders and approving officials receive proper training, and monitoring  for fraud and misuse.  Each agency must designate an APC to function as  the agency’s primary liaison to the contract bank and to GSA.  FAA’s  operating guidance also requires the chief of the contracting office within  each region or center and within headquarters to delegate a person or  persons to act as the APC for that location.  As a result, FAA has a different  APC at each of its 12 major locations, with the headquarters APC  designated agencywide responsibility for the program.
Cardholders are responsible for understanding and complying with  purchasing policies and procedures, maintaining records and receipts of all  purchases, reconciling their purchases to their monthly statements, and  preparing and submitting required property management forms for assets  purchased.  Each cardholder’s designated approving official—which is  normally the next level supervisor—is responsible for reviewing the  cardholder’s transactions to assure they are properly documented, comply  with purchasing policies, and are necessary for accomplishing the mission  of the agency.  Approving officials are also responsible for reporting  fraudulent or improper use of the card.  As of January 2002, 8,534 out of  51,062 (17 percent) FAA employees had commercial purchase cards, most  of which had a single purchase limit between $2,500 and $10,000 and a  monthly purchase limit between $5,000 and $120,000.  Each convenience  check issued is not to exceed $2,500.
Other key roles affecting purchases include the accounting certification  officer (also known as the funds certification officer), and the property  custodian.  FAA’s procurement guidance specifies that, prior to purchase,  the program office funds certification officer shall determine whether the  expenditure is authorized by the appropriation and provide either a written  certification that adequate funds are available or condition the purchase  upon availability of funds.  Property custodians are responsible for  reviewing and processing source documents for the receipt, transfer, or  disposal of accountable property in their assigned custodial areas,  conducting physical inventories, and ensuring that property is adequately  safeguarded.
In September 2001, DOT’s OIG issued a report on the results of its audit of  DOT’s purchase card program.  The OIG examined a total of 785 purchase  card and convenience check transactions totaling $1.2 million made by  FAA, the U.S. Coast Guard, and seven other DOT operating  administrations.  Based on this limited sample, the OIG reported that  generally, purchases were reasonable, valid, and received.  However, it also  reported that (1) approving officials were not verifying that purchases were  authorized, (2) cardholders were splitting single purchases into multiple  transactions to avoid purchase card limits, and (3) FAA was not conducting  periodic follow-up reviews of purchase card usage.  The OIG also found  instances of purchase card fraud and violations of DOT policies and  internal control procedures.  These results were similar to those found  during the OIG’s previous review of DOT’s purchase card program.  In  November 1997, the OIG reported that approving officials were not  performing required reviews of documentation, cardholders were splitting  purchases, and periodic follow-up reviews were not being conducted.  It  recommended at that time that DOT reemphasize the requirement for  approving officials to review supporting documentation for cardholder  purchases and provide guidance for conducting periodic follow-up reviews.   The OIG indicated in these reports that DOT and FAA actions taken and  planned to address the recommendations sufficiently addressed the  recommendations made.  However, based on our findings the corrective  actions taken were not fully effective.
In May 2002, we issued a report on the results of our review of purchasing  controls and activities within the Airway Facilities Division at FAA’s  Alaskan Region.  This was the only unit in FAA to implement a pilot  program, called the Corporate Maintenance Philosophy, from 1997 to 2001.   Due to controversy surrounding this program, including allegations of  inappropriate spending, we reviewed this unit’s internal controls and  selected expenditures.  With respect to its purchase card program, we  found  inadequacies in the segregation of purchasing duties, the supervisory  review and approval process, and the tracking of accountable property  and award inventories;  improper purchases, such as purchases that were split to circumvent  purchase limits, restricted items that were purchased without required  approvals, and items that were not bought from required vendors and  lacked the necessary waivers to do so;  purchases of expensive items such as flat panel computer monitors  costing over $3,000 each and PDAs ranging from $300 to over $500 each;  and  a decentralized operating environment and a lack of training that  contributed to these weaknesses.
Our report resulted in 18 recommendations to FAA to address these issues.   In its response to this report, FAA agreed with the recommendations and  indicated it had initiated action to address all of the issues.
section_title: Scope and Methodology
paragraphs: The scope of our review included FAA headquarters, FAA’s two centers,  and eight of its nine regional offices.  We conducted site visits to six of  these locations.  To obtain an understanding of FAA’s purchase card and  convenience check policies and procedures, the related internal controls,  and policies and controls over assets purchased, we   reviewed FAA’s AMS policy, procurement guidance, purchase  card/check user guide, property management policies, and local  operating procedures over the purchase card program, and  conducted walkthroughs and structured telephone interviews with FAA  management and staff to identify key purchase card, convenience  check, and accountable property policies, procedures, and initiatives.
To assess the adequacy of internal controls, we used our Standards for  Internal Control in the Federal Government, Internal Control  Management and Evaluation Tool, Guide for Evaluating and Testing  Controls Over Sensitive Payments, and Strategies to Manage Improper  Payments.
To test internal controls over transactions and determine whether  expenditures were made in compliance with policies and procedures, were  reasonable, and had a valid government need, we selected transactions  using three different methods.  For each method of selection, we provided  FAA with the transactions selected and obtained and reviewed related  supporting documentation. The three methods are as follows.
Data mining.  We performed data mining on Bank of America’s  database of FAA’s fiscal year 2001 purchase card and convenience check  transactions for indicators of potential noncompliance with established  policies and procedures.  Specifically, we looked for purchases that  exceeded cardholder or convenience check spending limits, split  purchases, cardholders with multiple purchase cards, former employees  who had active purchase card accounts after their separation dates,  cardholders who were payees on convenience checks, and cash  advances.  We forwarded the results of all transactions that met specific  criteria to the cognizant APCs for their responses and related  documentation, which we used to assess whether in fact these were  violations of policy.
Statistical sampling.  We selected a stratified random (statistical)  sample of 333 transactions totaling $4.2 million from the population of  transactions paid from October 1, 2000, through September 30, 2001, to  test specific control activities, such as segregation of duties, evidence of  approving official review and approval, and adequacy of supporting  documentation; whether the purchases complied with purchasing  policies; and whether the purchases appeared reasonable and had a  valid government need.  Results from the statistical sample were  projected to the population of FAA purchase card and convenience  check transactions for fiscal year 2001.
Nonstatistical sampling.  We also selected transactions on a  nonstatistical basis to allow us to identify transactions that appeared to  have a higher risk of fraud, waste, or abuse, although the results cannot  be projected to the overall population of purchases.  To select these  transactions, we first performed data mining on fiscal year 2001  transactions to identify purchases from certain vendors that would  more likely be selling unauthorized or personal use items; purchases  made on the weekends, during holidays, or at fiscal year-end; and  purchases of sensitive assets.  This resulted in tens of thousands of  transactions identified, from which we then selected 1,874 transactions  totaling $7.9 million to test whether these purchases were made at  excessive cost and/or for questionable government needs, and whether  they complied with select purchasing policies and procedures.
To determine if controls over purchase card and convenience check  equipment acquisitions were adequate to properly record and safeguard  assets, we did the following.
Reviewed policies and procedures over the management and control of  accountable property and sensitive items.
Tested accountable property selected in the statistical and nonstatistical  samples to determine whether these assets had been entered into FAA’s  property management system prior to our review.
Selected 81 transactions for equipment purchases made by four FAA  locations to conduct an unannounced inventory of desktop computers,  laptops, and other sensitive items that were purchased with government  purchase cards or convenience checks.
While we identified some improper purchases, our work was not designed  to identify all fraudulent or otherwise improper purchases made by FAA.   We conducted our review from January through December 2002 in  accordance with generally accepted government auditing standards. We  requested written comments on a draft of this report from the Secretary of  Transportation or his designee.  Written comments were received from the  department’s Assistant Secretary for Administration and are reprinted in  appendix I.
section_title: Internal Controls Were Lacking or Ineffective
paragraphs: FAA’s internal controls did not provide reasonable assurance that improper  purchase card and convenience check purchases would not occur or would  be detected in the normal course of business.  Internal controls serve as the  first line of defense in safeguarding assets and in preventing and detecting  fraud, waste, and abuse.  Our Standards for Internal Control in the  Federal Government requires that (1) key duties and responsibilities be  divided or segregated among different people to reduce the risk of error or  fraud, (2) transactions and other significant events be authorized and  executed only by persons acting within the scope of their authority, (3) all  transactions and other significant events be clearly documented, and the  documentation be readily available for examination, (4) management  ensure that its workforce has the required skills necessary to achieve  organizational goals, and (5) internal control monitoring be performed to  assess the quality of performance over time and ensure that audit findings  are promptly resolved.  We found that FAA lacked these key internal  controls or had not adequately implemented them, increasing the risk that  improper purchases could occur.
subsections: section_title: Segregation of Purchasing Duties Was Inadequate
paragraphs: We identified limited segregation of duties during our detailed tests of  transactions.  From the statistical sample of 333 purchase card and  convenience check transactions, 93 lacked evidence of adequate  segregation of duties.  Based on the results of our review of these  transactions, we estimate that $44 million of the total sampled population  of purchase card and convenience check transactions lacked adequate  segregation of duties.  What we found most often was that the cardholder  requested the purchase, placed the order, and picked up or received the  acquired goods without any other review or approval.  Although 68 of the  93 transactions had evidence of the approving official’s review and  approval, we determined that adequate segregation of duties did not exist  because the cardholder had performed a majority of the purchasing duties  with little if any oversight.
For example, we noted an instance where an employee at one location  served as the funds certification officer, approving official, and property  custodian for purchases in her area.  Consequently, she certified that funds  were available for purchases; reviewed and approved purchases made by  cardholders under her supervision; and accounted for, recorded, and  maintained property inventory records for assets purchased.  We also  found that 7 of FAA’s 12 APCs and 4 alternates were also cardholders.  One  of these APCs also served as an approving official.  Because APCs are  responsible for monitoring cardholders’ and approving officials’ activities  for indications of potential fraud, waste, and abuse, these APCs were  essentially monitoring their own activities.  In fact, the cardholder with the  largest dollar volume of charges in FAA during fiscal year 2001, totaling   $4 million, was an APC.
Several factors contributed to these segregation of duties weaknesses.   From our discussions with several APCs, we noted that generally,  segregation of duties was not an area of focus in the training for  cardholders and approving officials.  We also were told that certain field  offices may not be able to adequately segregate purchasing duties because  of the small number of employees located at those sites.  In addition, we  found that FAA’s operating guidance did not specify how purchasing duties  should be separated.  Although the guidance describes key duties and  responsibilities involved in the purchasing process, it generally does not  specify that these key duties and responsibilities be segregated among  different people.  For example, the guidance states that an approving  official is normally the cardholder’s immediate supervisor.  However, the  guidance does not require other key roles, such as the funds certification  officer and the property custodian, to be filled by someone other than the  cardholder and the approving official.  Lacking appropriate segregation,  FAA cannot ensure that purchases are appropriate, have been duly  authorized, and comply with purchase requirements.
section_title: Supervisory Review and Approval Process Was Inadequate
paragraphs: Because the only segregation of duties required by FAA policy is between  the purchaser and approving official for a particular transaction, the  approving official often may be the only party aside from the purchaser  who reviews the transaction.  Consequently, the approving official’s review  is a critical internal control for ensuring that purchases are appropriate and  comply with FAA requirements.  However, we found FAA’s supervisory  review and approval process was inadequate for ensuring that purchases  were proper.  Specifically, we found numerous transactions that did not  have evidence of supervisory approval, had been approved even though  they were missing key documents, did not comply with one or more  purchasing policies or procedures, or were wasteful purchases.  We also  identified duplicate charges that had not been promptly disputed with the  bank to ensure that they were removed from accounts and refunded to  FAA.
Review of transactions by persons in authority is the principle means of  assuring that transactions are valid.  Although FAA requires that approving  officials review and approve cardholders’ purchases, this was not  consistently done.  For example, of the 333 purchase card and convenience  check transactions in the statistical sample, 52 transactions lacked  evidence of approving official review.  Based on the results of our review of  these transactions, we estimate that $27 million of the total sampled  population of purchase card and convenience check transactions lacked  evidence of approving official review.  We also nonstatistically selected  1,874 transactions from fiscal year 2001 that appeared to have a higher  susceptibility to fraud, waste, and abuse, and found that 419 of these  transactions (22 percent) also lacked evidence of supervisory review.   Because the approving official review is the first, and sometimes only, line  of defense for detecting improper transactions, it is critical that approving  officials perform and document adequate, timely reviews.
The number of purchase transactions that had been approved even though  they were missing key documents further illustrates FAA’s inadequate  supervisory review and approval.  Specifically, from our statistical and  nonstatistical samples, we noted 155 transactions totaling $402,439 were  missing key purchase documents such as a credit card slip or invoice, yet  approving officials still approved 66 of these purchases.  Missing invoice  documentation raises questions about the adequacy of the approving  official’s review, since without such documentation, it can be difficult to  determine what was purchased based on the cardholder’s monthly credit  card statement alone.  For example, we identified a $1,240 transaction at  Sears, Roebuck and Co. that the cardholder claimed was used to purchase  a refrigerator.  However, the monthly billing statement only indicated  where the purchase was made, and did not contain a description of what  was purchased.  Without a credit card receipt or invoice, we could not  verify what was purchased or whether it was being used for government  purposes.  As noted later in this report, we also found that cardholders  throughout the agency made numerous improper purchases (i.e.,  purchases that did not comply with one or more purchasing policies or  procedures) and wasteful purchases (i.e., purchases that were excessive in  cost or for questionable government needs) that nevertheless were  approved.
Without documented approval and a thorough review of all supporting  documentation by approving officials, there is no assurance that items  purchased comply with purchasing requirements and have a legitimate  government purpose. For example, in fiscal year 2001 a former FAA  employee was convicted of illegally making over $58,000 in personal  charges with his government purchase card over at least a 9-month period,  including numerous purchases made at various auto specialty businesses  and a custom auto body shop.  We could not determine from the case  documentation provided to us whether the cardholder’s supervisor  approved any of these purchases.  However, had the approving official  timely and thoroughly reviewed the credit card statements and supporting  documentation for each transaction, he could have identified numerous  improper purchases at vendors such as Commercial Van Interiors,  Exclusive Window Tint, The Custom Shop, and Fairway Chevrolet on the  government purchase card.  In another case, a cardholder made six cash  advances totaling $1,800 that occurred over four monthly billing cycles.   File documentation contained a copy of one of the cardholder’s bank  statements from that period.  Although cash advances are prohibited, the  authorizing official approved this statement even though the charges on  that statement included three cash advances. In addition, the cash  advances were made at two gambling establishments, including one called  the Normandie Club, which should have raised at least some suspicions on  the part of the approving official in reviewing the cardholder’s statement.   These violations were not identified by the approving official, but were  identified by the accounting department.  The cardholder was reprimanded  and the account was closed. However, FAA officials informed us that  because the cardholder repaid the cash advances, no further disciplinary  actions were taken against the cardholder.  In addition, no disciplinary  actions were taken against the approving officials in either case, despite  the fact that approving officials are responsible for reviewing all  transactions against supporting documentation and reporting potential  fraud and abuse by cardholders.
We also noted that three transactions totaling $3,712 were charged twice to  cardholders’ accounts and had not been credited at the time of our review.   Bank of America only allows a cardholder 60 days from the time a disputed  transaction first appears on a cardholder’s monthly credit card statement to  submit a written dispute form to the bank, but the cardholders in these  three cases did not do so. In each case, the cardholders initiated verbal  inquiries to the vendor or to Bank of America regarding the duplicate  charges, but did not follow through with written dispute forms as required.   In addition, approving officials did not perform timely follow up with the  cardholders to ensure that the written dispute forms were submitted  promptly.  Therefore, these erroneous charges were not credited back to  the cardholders’ accounts, and FAA was not reimbursed for the duplicate  payments made to the bank.
One factor that might contribute to FAA’s inadequate supervisory review is  that, in certain instances, there was a high ratio of cardholders to approving  officials.  Having a manageable number of cardholders is essential for  approving officials to be able to conduct timely, thorough reviews of  transactions to help facilitate detection of possible purchase card misuse  and fraud.  Although there is no definitive requirement, GSA’s Blueprint for  Success: Purchase Card Oversight indicates that most approving officials  are assigned from 4 to 10 cardholders each.  However, we  found that 228 of  FAA’s 1,741 approving officials, or 13 percent, were assigned from 11 to 47  cardholders each.  FAA’s operating guidance does not address the number  of cardholders that would be appropriate to enable approving officials to  adequately perform their supervisory responsibilities. However, approving  officials who have more cardholders than they can effectively supervise are  less likely to adequately perform their responsibilities in a timely manner.
section_title: Some Purchases Lacked Key Documentation
paragraphs: We found that some of FAA’s purchase card transactions lacked key  supporting documentation.  FAA’s procurement guidance requires that all  purchase transactions made by a cardholder must be supported by a  certification of funds availability and an invoice or credit card slip.   Furthermore, FAA Order 1350.15B, Records Organization, Transfer, and  Destruction Standards, requires that acquisition records for purchases of  $25,000 or less be maintained for 3 years after final payment.  Acquisition  records for purchases exceeding $25,000 should be maintained for 6 years  and 3 months after final receipt of goods or services.
Of the 333 transactions tested in the statistical sample, we found 18  instances where FAA lacked an invoice, credit card slip, or other store  receipt.  Based on these results, we estimate that $8 million of the total  fiscal year 2001 purchase card and convenience check transactions lacked  key supporting documentation.  Similarly, our review of 1,874  nonstatistically selected transactions identified 131 transactions   (7 percent) totaling $356,487 that were missing such key purchase  documents.  In some instances, cardholders or FAA employees indicated  that the invoice had been lost, shredded, or not retained when the  cardholder retired or separated from FAA.  However, we also found  instances where no explanation was provided as to why cardholders could  not submit supporting documentation as of the end of our fieldwork.  The  invoice is the basic document that cardholders are required to attach to  their monthly statements for approving official review.  Without such  documentation, FAA does not have any independent evidence of the  description and quantity of what was purchased and the price paid.   Therefore, it cannot determine whether the purchase was appropriate.
Although the percentage of missing invoices was lower than the exceptions  for other internal control activities we tested, we believe it is still  unacceptable for such a key document.  A valid invoice to show what was  purchased and the price paid is a basic document for these transactions,  and a missing invoice could be an indicator of potential fraud.  A near zero  failure rate is a reasonable goal considering that invoices are easily  obtained or replaced when inadvertently lost.
We also identified 178 instances in the statistical sample where FAA lacked  a written certification from the responsible fiscal authority that funds were  available to make the specific purchase.  Based on the results of our review  of these transactions, we estimate that $84 million of the total sampled  population of purchase card and convenience check transactions lacked a  written certification that adequate funds were available.  FAA requires this  documentation to help ensure compliance with the Anti-Deficiency Act (31  U.S.C. 1341) and other fiscal laws that require that specific expenditures be  authorized under the particular appropriation to be charged, and that funds  are available in the appropriation for the expenditure.
section_title: Training Was Inadequate to Perform Key Functions
paragraphs: With the many purchase requirements that cardholders, approving officials,  and APCs must follow, adequate training is essential for them to perform  their duties effectively.  However, we found that FAA had not provided  adequate training for these key purchase card program participants.  Our  Standards for Internal Control in the Federal Government states that  training should be aimed at developing and retaining employee skill levels  to meet changing organizational needs.  FAA’s purchase card procurement  guidance requires APCs to ensure that both cardholders and approving  officials receive proper training on the policies and procedures for use of  the card.  However, it does not specify how frequently such training must  be provided. Although APCs are required to provide initial training to  cardholders and approving officials, they are not required to provide any  refresher training on an ongoing basis.
The lack of refresher training may have contributed to the numerous policy  violations we identified during our detailed testing (as discussed later in  this report), such as purchases that exceeded various purchasing limits,  purchases that were not made from required vendors, and purchases of  accountable property that were not recorded in the property management  system.  Cardholder responses to our questions on these control areas also  indicated that they were not aware of key requirements.  For example,  during our transaction testing, one cardholder said that certification of  funds availability—which FAA policy clearly states must be performed for  all transactions prior to purchase—was not required at the time of  purchase.  Another cardholder said it was not required because the  particular transaction was under $2,500, while a third cardholder noted that  the manager’s signature on the credit card statement constituted  certification of funds.
FAA recently began implementing steps to ensure that existing cardholders  and approving officials obtain refresher training on the purchase card  program.  For example, an FAA memorandum from the Assistant  Administrator for Regional and Center Operations, dated April 25, 2002,  emphasized that all cardholders and approving officials under her line of  reporting would be required to obtain refresher training, although no final  date for completion of training was given.  Another FAA memorandum,  dated April 30, 2002, from the Assistant Administrator for Financial  Services and Chief Financial Officer also recommended, but did not  require, that all parties involved in the purchase card program take periodic  refresher training.
Since then, some APCs have taken actions to implement the applicable  requirements/recommendations at their locations.  For example, at one  FAA location the APC began requiring all cardholders and approving  officials to complete purchase card retraining, including reading FAA’s  internal purchase card operating procedures and certifying completion,  reading GSA’s Blueprint for Success: Purchase Card Oversight, completing  GSA’s on-line quiz, and submitting the certificate of completion to the APC.   We were informed that the APC closed 40 cardholders’ accounts for failure  to comply with the retraining requirement.  This APC also held six “special  emphasis” training sessions for all cardholders and approving officials,  which emphasized areas of weakness that we had identified during our site  visit.  Another APC developed a database for her location to track the dates  that cardholders and approving officials completed the initial and updated  training.
While FAA has begun to address the lack of refresher training for its  cardholders and approving officials, the agency still has no specific training  requirement or courses for its APCs.  Adequate training for APCs is critical  because they are responsible for overseeing the entire purchase card  program.  While FAA’s procurement guidance requires APCs to ensure that  cardholders and approving officials receive proper training, the guidance is  silent on ensuring the same for APCs.  Consequently, the training available  to APCs during fiscal year 2001 was limited to training offered by GSA and  Bank of America; however, these sources were not fully utilized.  For  example, GSA conducts an annual governmentwide conference to train  APCs on account administration, program management, reporting tools  available for monitoring the program, and the banks’ various electronic  access systems.  However, we noted that only 6 of FAA’s 12 APCs attended  GSA’s August 2002 training conference, and only 1 of the APCs attended  any bank-sponsored training during fiscal years 2001 and 2002 for the  purchase card program.
As FAA makes changes to strengthen controls over the purchase card  program, APCs require detailed guidance and training for carrying out  some of these initiatives.  However, they have not always received this.  For  example, an April 30, 2002, FAA memorandum, required each region and  center, and the headquarters office to begin conducting annual reviews of  purchase card and convenience check transactions effective fiscal year  2002.  Although the memorandum provided information regarding the type  of sampling methodology to use, what to review, and the criteria to be used  when conducting the annual review, there was no discussion regarding the  population to be used in selecting the sample or specific data analysis  techniques to be performed to identify potentially fraudulent, improper, or  questionable transactions.  In addition, the annual review only focused on  reviewing the cardholder’s records for compliance with limited policies and  procedures, and did not include an assessment of key control activities  such as assessing the ongoing need for cards, appropriate segregation of  duties, and record retention.
Without detailed guidance and commensurate training, locations may not  conduct adequate annual reviews.  In addition, inconsistent methodologies  used to perform reviews may not provide meaningful results for  determining how the overall program is functioning.  As noted later in this  report, we identified instances where APCs were unaware of the  monitoring tools available to them or were untrained in how to use them.   Without proper training, APCs are limited in how effectively they can  manage their programs, which in turn limits their ability to prevent and  detect fraud, waste, and abuse.
section_title: Program Monitoring Was Inadequate
paragraphs: FAA did not adequately monitor and evaluate the effectiveness of controls  over its purchase card program to ensure that findings of audits were  promptly resolved.  The OIG reported deficiencies in DOT’s  departmentwide purchase card program, which included FAA, as far back  as 1997, yet FAA did not take sufficient action to address these weaknesses.   For example, in the 1997 review the OIG reported that cardholders  purchased restricted and prohibited items and made split purchases to  circumvent cardholders’ single purchase limits; approving officials did not  adequately perform required supervisory reviews, such as reviewing the  documentation to support cardholder purchases; and operating  administrations did not statistically sample purchase card transactions for  potentially improper purchases in part because they lacked adequate  guidelines or procedures to do so.
DOT’s primary response was to issue memorandums reiterating purchasing  requirements, and issue guidance for conducting statistical reviews.   However, it did not follow up to determine whether those actions were  sufficient to resolve the cited weaknesses.  Consequently, the OIG reported  similar audit results in 2001, finding that cardholders continued to make  split purchases, primarily at FAA; approving officials were not verifying  that purchases were authorized; FAA was not sampling purchase card  transactions to determine if purchases were authorized and complied with  purchasing requirements; and disciplinary actions were inconsistent when  cardholders or approving officials violated policies.  As in 1997, DOT and  FAA responded primarily by issuing memorandums and guidance.   Although FAA management stated that the headquarters APC would begin  performing internal audits of the purchase card program, the headquarters  APC informed us that these internal reviews would be limited to  headquarters’ purchase card activity and would not cover the controls or  transactions at FAA’s 11 regions and centers.
Without adequate monitoring to determine whether policies are being  properly implemented, the issuance of new policies and guidance was  generally ineffective.  Our May 2002 report on FAA’s Alaskan Region  purchases and this report identified many of the same weaknesses  reported by the OIG as well as other findings.  While the work performed  by the OIG and us differed as to the specific scope and periods covered, the  nature and scope of weaknesses identified were indicative of insufficient  attention by management to establish and maintain sound internal controls  over its purchase card program.  Despite these repeated warnings, FAA  management has not ensured that its efforts to address audit findings have  actually corrected the problems.
In April 2002, the Office of Management and Budget (OMB) directed all  federal agencies to prepare a remedial action plan for their purchase card  programs about the adequacy of internal control systems that monitor the  use of purchase cards.  DOT’s plan, which was approved by OMB on   August 8, 2002, set forth several actions it planned to complete by  November 30, 2002, such as reviewing cardholder spending limits to ensure  that limits match cardholders’ needs, and reviewing, adjusting, and  restricting certain merchant category codes to lessen the risk of fraud or  misuse.  We noted that FAA was still in the process of implementing these  actions at the end of our fieldwork.
The inadequate follow-up on prior audit findings may be due in part to the  lack of centralized oversight of FAA’s purchase card program.  During our  entrance conference with FAA officials, they admitted that no oversight or  monitoring was performed at the FAA-wide level due to FAA’s decentralized  operations and reporting structure.  Consequently, they were unable to  provide us even basic information about their overall purchase card  program, such as the total number of cardholders and approving officials,  or the volume of purchase card activity.  FAA officials stated that the  headquarters APC was FAA’s designated national representative, which the  APC acknowledged.  However, we found no monitoring activities directed  at assessing overall program results, evaluating internal control and  compliance with purchasing procedures, or ensuring that local purchase  card policies and procedures were consistent with FAA acquisition policy.
With the lack of centralized oversight of the purchase card program, FAA  has had to rely upon the 12 individual APCs (1 at each location) to manage  activities within their jurisdictions.  However, we found that APCs’ primary  attention appeared to focus on basic program activities such as opening  and closing cardholder accounts and providing training for new  cardholders and approving officials, with little if any attention paid to  monitoring for compliance with program requirements or for improper  purchases.  Consequently, we found that APCs generally were not   (1) consistently utilizing Bank of America’s Electronic Account  Government Ledger System (EAGLS) reporting functions to detect  potential misuse and/or fraud within their programs, (2) canceling  accounts of departed employees in a timely manner, and (3) monitoring for  increased risk of improper purchases due to cardholders with multiple  accounts, as further discussed below.   Given that FAA makes thousands of  purchase card transactions annually, which, in fiscal year 2001, exceeded  $150 million, it is essential that FAA management devote adequate  attention to monitoring its purchase card program to ensure that it is  properly managed and to reduce the risk of fraud, waste, or abuse.
EAGLS reports.  EAGLS can generate account activity reports, which  identify trends such as purchases from merchants that would not be  expected to be traditional suppliers or unusually high spending patterns;  dispute reports, which identify cardholders with excessive disputes that  may indicate cardholder misuse or fraudulent activity; and various other  exception reports that can track information such as unallowable  automated teller machine transactions or cash withdrawals or charges  at specific merchant category codes for businesses unrelated to FAA’s  mission.  Several APCs told us that they did not know that some of these  essential reports existed or were not sure how to access the data to  print these reports from EAGLS.  As a result, they were not using them  to systematically monitor cardholder activity for potential fraud or  abuse.
Separated employees.  We also found that accounts of cardholders who  resign, retire, or otherwise leave FAA employment were not promptly  closed upon their departure.  Although FAA’s procedures require that the  APC be notified via an employee clearance form when cardholders leave  the agency, some APCs acknowledged that they did not always receive  the forms or receive them timely. However, at the time of our review,  only 1 of the 11 APCs actively reviewed cardholder names against  monthly personnel reports to ensure that departed employees’ accounts  were canceled soon after their departure.  Consequently, our data  mining identified five cardholders from three FAA locations whose  accounts remained open a month or more after their fiscal year 2001  separation dates.  Although we did not identify any associated  fraudulent activity, charges continued to be made to four of the five  accounts from automatic monthly billings, such as Internet service fees,  or when other employees incurred charges at vendors that had the  departed cardholders’ account numbers on file.  FAA identified and  closed three of the open accounts but was unaware of and did not close  the remaining two accounts until we brought them to its attention,  including one that was closed 6 months after the cardholder left the  agency.
Multiple accounts.  We also found that APCs were not monitoring for  increased risk of improper purchases by cardholders with multiple  purchase cards.  During our data mining, we identified 176 cardholders  who were issued from two to eight purchase cards each.  According to  FAA, multiple cards were issued so that the originating office could  separately track expenditures against different funding allocations.   However, because every transaction requires an accounting  classification code to indicate the appropriation and fund that the  purchase is to be charged against, there is no need for separate purchase  cards to do this.  In addition, the issuance of multiple cards to the same  cardholder places an additional administrative burden on APCs,  cardholders, and approving officials in carrying out their respective  responsibilities, and increases FAA’s risk of improper purchases.  As a  result of our audit, APCs have begun to review and cancel the excess  purchase cards issued to these cardholders and have stopped issuing  multiple cards to individual cardholders.
FAA officials informed us that a national purchase card program  coordinator and a national organization reporting coordinator were  appointed to oversee the program beginning January 6, 2003.  Proper  oversight at this level will be critical for ensuring that identified program  weaknesses are addressed nationally and program improvements are  implemented consistently.
section_title: Noncompliance with Policies and Procedures Resulted in Some Improper Purchases
paragraphs: The lack of adequate internal controls was evident in identified violations  of FAA acquisition requirements that we classified as improper purchases.   These included (1) purchases that were split into two or more transactions  to circumvent single purchase limits, (2) purchases that exceeded other  limits established by FAA, (3) purchases from other than required vendors  without the appropriate waivers, (4) unauthorized purchase actions  whereby someone other than the cardholder made the purchase, and   (5) withdrawals or payments to cardholders through cash advances or  convenience checks.  Table 1 shows the number of exceptions we  identified for each category, as described further below.
While the total amount of improper purchases we identified is relatively  small compared to the over $150 million in annual purchase card and  convenience check transactions, it demonstrates vulnerabilities from weak  controls that could easily be exploited to a greater extent.
The above policy violations are discussed in more detail below.
Split purchases.  During our data mining and detailed tests of  transactions, we found 997 split purchase transactions—purchases  that had been split into more than one transaction to stay within  established single purchase limit—totaling $5.1 million.  For example, a  cardholder with a single purchase limit of $5,000 purchased a printer  and accessories totaling $8,391.  The cardholder had the vendor make  three separate charges to the purchase card, on the same day, to avoid exceeding the single purchase limit.  Another cardholder informed us  that she was directed by her supervisor to issue multiple convenience  checks to pay a vendor in order to work around the $2,500 convenience  check limit, despite the fact the cardholder advised her supervisor that  this was contrary to procurement policy.  After the split purchases were  discovered, the cardholder stated that the incident was investigated, she  was counseled, and her account was subsequently closed in January  2002.  However, no disciplinary action was taken against the supervisor.   We noted that cardholders and approving officials generally were not  disciplined when these types of policy violations occurred.
We identified another 201 transactions totaling over $543,000 that we  considered potential split purchase transactions, but could not confirm  this because cardholders did not provide adequate documentation to  enable us to fully assess the transactions.  The purpose of the single  purchase limit is to require that purchases above established limits be  subject to additional controls to ensure that they are properly reviewed  and approved before the agency obligates funds.  By allowing these  limits to be circumvented, FAA has less control over the obligation and  expenditure of its resources.
Purchases that exceeded limits established by FAA policy.  We found  that several purchases exceeded FAA’s established purchase card  thresholds for the procurement of services and the dollar limit for  purchases made with convenience checks.  When cardholders  circumvent these management controls, FAA has no assurance that  purchases comply with certain labor laws and that cardholders are  making contractual commitments on behalf of FAA within the limits of  their delegated purchasing authority.  FAA’s operating procedures  prohibit the use of the purchase card and convenience checks when  procuring certain nonconstruction services of $2,500 or more, such as  janitorial, grounds, and guard services, or when procuring certain  services, such as temporary help and consulting services, regardless of  the amount.  During our detailed tests of transactions, we identified  four transactions totaling $16,460 for nonconstruction services costing  $2,500 or more.  We also identified seven transactions totaling $111,648  for consulting services even though FAA prohibits using the purchase  card for these types of purchases.  For example, a cardholder procured  consulting services for engineering, technical analysis, and program  management support activities from the same vendor over a 3-month  period totaling $67,000 because management had directed that these  services continue while a new contract was awarded.
FAA’s operating procedures also prohibit the use of the purchase card  or convenience check when procuring construction services valued at  $2,000 or more.  FAA defines these services as the construction,  alteration, or repair of buildings, structures, or other real property.   During our detailed tests of transactions, we identified eight  transactions totaling $35,735 that exceeded the $2,000 limit for  purchasing construction services with the purchase card.  These  included a $5,224 purchase for the repair of wiring and replacement of  lighting at an FAA cafeteria and two purchases totaling $12,684 from  the same vendor on two different occasions for electrical work at an  FAA facility.
Our data mining also identified 11 transactions totaling $50,823 where  cardholders exceeded the $2,500 convenience check limit.  The most  serious violation was the use of a convenience check to pay for  equipment modifications totaling $18,690.  FAA indicated it had  previously identified this purchase as a violation of policy, notified the  cardholder’s approving official, and taken steps to ensure the  cardholder was reminded of convenience check policies and  procedures.  However, we noted that no disciplinary action was taken  against the approving official who was responsible for ensuring that the  purchase was made in accordance with policies and procedures.
Purchases were not made from required vendors.  Cardholders made  numerous purchases from other than required vendors without  obtaining appropriate waivers to indicate that they were authorized to  buy elsewhere.  During our testing of the 333 transactions in the  statistical sample, we identified 36 purchases that were required to be  purchased from a mandatory source.  Of the 36, 20 transactions were  not purchased from the mandatory vendors and did not have the  required waiver from Federal Prison Industries, Inc. (UNICOR) or any  documentation that would support that a Javits-Wagner-O’Day (JWOD)  Act supplier did not offer the items or that the items were currently  unavailable.  Based on the results of our review of these transactions,  we estimate that $9 million of the related sample population of  purchase card and convenience check transactions lacked the required  waivers or other supporting documentation.  For example, a cardholder  purchased 24 office chairs totaling $15,246 from a commercial vendor  without obtaining a waiver indicating that UNICOR could not meet the  purchase request.  In another example, a cardholder purchased a leather  binder, refills, and other accessories totaling $196 from Franklin Covey,  a high-end office supply store, instead of purchasing similar products  from a JWOD supplier.  The cardholder provided an explanation that the  purchase was for business use, but provided no documentation why  similar products were not procured from a JWOD supplier.  During our  data mining, we noted that FAA made 2,903 purchases totaling $492,643  from Franklin Covey in fiscal year 2001.  While we did not review all of  these individual purchases, based on our detailed testing of similar  transactions, it is likely many of them should have been procured from a  mandatory source, if at all.  In response to our questions about such  purchases, FAA’s Director of Acquisitions responded to us in a  November 21, 2002, memorandum that FAA is reviewing the need to  establish guidelines on what can be purchased from this vendor.
Unauthorized purchase actions made with the purchase card.  During  our detailed tests of transactions, we found several unauthorized  transactions where noncardholders made purchases using cardholders’  accounts, increasing the risk that the card may be used to make  improper purchases.  FAA’s operating guidance requires that the named  cardholder on the purchase card be the only one to use the card to make  purchases.  Allowing someone other than the cardholder to use the card  is considered an unauthorized purchase action that is subject to  disciplinary action.  However, we found that FAA did not always comply  with this requirement.
Specifically, we identified 12 unauthorized purchases totaling $75,646  where someone other than the cardholder made the purchase.  Seven of  these unauthorized purchases, totaling $70,000, related to one  cardholder’s account.  According to the cardholder, her supervisor had  requested her purchase card account number so that others in the office  could make purchases, which included various computer and office  equipment, including 20 PDAs.  Because the total order exceeded the  cardholder’s single purchase limit, the vendor split the order into seven  different purchase transactions, which is also a violation of policy.   When her monthly billing statement came, the cardholder stated that  she was unable to account for some of the transactions because the  purchasers did not provide her with all of the related receipts for the  items purchased.  Furthermore, the cardholder informed us that an  additional 14 transactions totaling $79,445 that were not in the sample  but were listed on her monthly billing statement were also unauthorized  purchase actions made by others in her office.  Because of these  unauthorized uses and the related frustrations associated with  attempting to reconcile her monthly billing statements, the cardholder  informed us that per her request, the APC closed her account on  October 27, 2002.
We identified another unauthorized transaction when a cardholder was  unable to provide any supporting documentation for the item in the  sample, stating she had not made the purchase. The cardholder stated  that she transferred from the unit that issued her the card in July 1999,  but was asked to leave the active credit card with the assistant manager  so that the office could continue to use it to make purchases. Because  the cardholder left the issuing unit in July 1999, all purchases made to  her account during fiscal year 2001, our period of review, were  unauthorized purchase actions.  As a result, we identified an additional  28 unauthorized purchase transactions totaling $3,595 that were charged  to the cardholder’s account from October 2000 through January 2001.   The APC eventually closed the cardholder’s account on January 28,  2002, approximately 2 ½ years after the cardholder had left.
Cash advances and cash payments made to cardholders.  FAA’s  operating guidance prohibits the use of the purchase card for cash  advances and prohibits cardholders from issuing convenience checks  payable to themselves.  However, during our data mining we identified  three cash advance transactions and one transaction where the  cardholder wrote a convenience check payable to herself.  For example,  one cardholder used the government purchase card to obtain a $100  cash advance to pay a vendor for lawn services rendered at an FAA  facility.  The approval form for this transaction showed that the key  authorizers and reviewers of this transaction—including the funds  certification officer and the approving official—had approved the cash  advance even though it was a violation of policy.  In another example, a  cardholder wrote a convenience check payable to herself totaling $214,  in violation of policy.  She purchased an item at a warehouse club that  did not accept the brand of the government purchase card.  Because the  cardholder did not have authorization to use a convenience check at the  time of purchase, she made the purchase with her personal credit card  and subsequently requested and received authorization from her  supervisor to be reimbursed by writing a convenience check payable to  herself, even though this was a violation of policy.
As described above, our review of FAA’s purchase card activities identified  numerous policy violations that resulted in improper purchases.  However,  we generally found that disciplinary action was not taken against the  cardholders or approving officials when these policy violations occurred.   Enforcement of disciplinary action procedures helps prevent or deter  future policy violations from occurring and assists in holding cardholders  and approving officials accountable for carrying out their responsibilities  when using, reviewing, and approving purchase card transactions.
section_title: Poor Controls Resulted in Some Wasteful and Questionable Purchases
paragraphs: The inadequacies and ineffectiveness of internal controls were also evident  in the number of transactions identified that we classified as wasteful— that is, were excessive in cost compared to other available alternatives  and/or were for questionable government needs.  Our reviews of  transactions in both the statistical and nonstatistical samples identified  transactions that we considered wasteful.  In addition, FAA cardholders  frequently did not document their determination that the purchase  represented the “best value” to the government, which FAA purchasing  policy defines as the solution that is most advantageous to FAA based on an  evaluation of price and other factors. We also identified other transactions  that we classified as questionable because there was insufficient  documentation to determine what was purchased or because the charges  were made to a third party billing company that did not identify the actual  vendor.  Lacking this documentation or identity, neither we nor other  reviewers of the transactions could verify the reasonableness and  appropriateness of the purchases.
Table 2 indicates the number of transactions and dollar amounts in both the  statistical and nonstatistical samples that we determined to be excessive in  cost relative to similar products on the market, for questionable  government needs, or for which we were unable to determine the  reasonableness of the item due to missing invoices or because the charges  were paid to third party on-line billing services.  While not significant to the  overall purchase card program, these transactions are indicative of what  can occur when the use of the cards is not properly controlled.  Because we  tested only a small portion of the transactions that appeared to have a  higher risk of fraud, waste, or abuse, there may be other improper,  wasteful, and questionable purchases in the remaining untested  transactions.
subsections: section_title: Wasteful Purchases
paragraphs: We identified 114 purchases totaling $222,602 that we determined to be  wasteful because they were excessive in cost relative to available  alternatives, were of questionable government need, or both.  We  considered them excessive in cost when compared to available alternatives  that would meet the same basic needs or questionable as government  expenditures because they appeared to be items that were a matter of  personal preference or personal convenience, were not reasonably  required as part of the usual and necessary equipment for the work the  employees were engaged in, and/or did not appear to be for the principal  benefit of the government.  Specifically, we identified 46 purchases totaling  $140,131 that we considered excessive in cost, 10 purchases totaling $3,312  for which we questioned the government need, and an additional 58  purchases totaling $79,159 that we considered both excessive in cost and  for questionable government need.  Such purchases included purchases of  store gift cards for later use; hotel and resort charges, including room  rentals and food costs for internal management meetings; award,  retirement, and farewell gifts; Internet services for individual FAA  employees; and purchases of PDAs and accessories.  These examples are  described below.
Store gift cards.  We noted several purchases of store gift cards for  which we question the government need.  Purchases of gift cards are  particularly risky because they are the equivalent of cash.  Unlike  purchases made with a purchase card, which appear on a monthly  billing statement to be approved by an approving official and supported  by receipts, purchases made with a gift card have no such subsequent  audit trail.  Consequently, if the gift cards are lost, stolen, or misused,  there is no means for determining how they were spent.  In addition, gift  cards used after the end of the fiscal year in which they are purchased  violate the “bona fide” needs rule under 31 U.S.C. 1502(a) (2000).   For  example, one cardholder purchased 10 $100 Home Depot store gift  cards, totaling $1,000, that the cardholder stated were to be used to  purchase tile and mini blinds for installation in the day care facility after  the close of the fiscal year.  However, the cardholder was only able to  provide one receipt dated 3 months after the close of the fiscal year,  which showed that 3 of the gift cards were used to purchase items  totaling $203.49.  In addition to violating the bona fide needs rule, we  identified several problems with this purchase.  One, the $96.51 balance  due from that purchase—government funds—was refunded in cash to  the person using the gift cards, which we confirmed with the vendor.   However, because the purchase was made with gift cards, which do not  identify the purchaser, we could not determine who received the cash  back nor what happened to it.  Two, among the items purchased were  two pairs of cowhide gloves, which were not part of the intended  purpose the cardholder stated.  Three, because the purchase was made  with gift cards rather than the government purchase card, the state sales  tax was charged and paid even though the federal government was  exempt from state sales tax.  In addition to these problems, the  cardholder could not show how the remaining 7 gift cards were used,  whether they were spent for government purposes, when they were  used, or even who used them.  Another cardholder spent $775 on Wal- Mart gift cards, but similarly was unable to provide any documentation  on how the cards were ultimately spent.
In another example, one cardholder told us she was given verbal  approval to spend a certain amount on an awards ceremony.  When the  award ceremony expenses totaled less than the allocated amount, the  cardholder purchased a grocery store gift card for the remaining $179,  which was later used to buy postage stamps for Christmas cards to send  to other FAA facilities, and food and utensils for a Christmas luncheon  and a retirement gathering, all of which are unallowable government  expenditures.  When we asked FAA for its policy on the purchase of gift  cards, the Director of Acquisitions responded to us in a November 21,  2002, memorandum that FAA’s present policy is that gift cards will not  be purchased for later use because such purchases are a violation of the  fiscal law statute regarding bona fide need.  However, unless  cardholders and approving officials are aware of this policy and  management adequately monitors compliance, such expenditures are  likely to continue.
Conference room rentals and related food charges.  We identified  several purchases for the rental of hotel and resort facilities used for  internal FAA meetings, conferences, and training.  For example, FAA  paid $2,660 for a conference room and audiovisual rentals at the  Tropicana Resort and Casino in Las Vegas, with no explanation as to the  reason why this location was chosen to hold an internal FAA  management meeting.  After we reported similar findings in our report  on FAA’s Alaskan Region, the Chief Financial Officer issued a June 4,  2002, memorandum that established new spending restrictions, one of  which now requires that internal FAA conferences and off-site meetings  be held in federal facilities.  However, this memorandum was issued  after the period of our review.  We also identified transactions for  conference room rentals that included significant food and beverage  costs, which we considered excessive and for which we questioned the  government need.  For example, in one case FAA spent $12,866 for food  at a Hyatt Hotel for a conference, and $18,050 for food at another  conference.  We also noted a wasteful purchase representing a  cancellation fee charge totaling $5,398 that resulted because the  cardholder did not cancel FAA’s reservation for a conference room  rental in time to avoid the fee.
Award, retirement, and farewell gifts.  We noted several purchases for  award, retirement, and farewell gifts.  Although FAA policy gives  managers a wide berth in determining the nature and extent of awards,  we identified six purchases for award gifts for which they were unable  to provide the purposes for which the recipients were being recognized.   For example, we identified three purchases of Waterford crystal costing  from $110 to $220 each.  For these purchases, FAA could not provide the  award letters or justification for the awards.  Consequently, it could  provide no evidence that these purchases were truly awards.  We also  identified two purchases for award events for which FAA was unable to  provide the basis for the awards.  These included a purchase of $225 for  the rental of bowling lanes and shoes for 27 employees with no  justification as to why the individuals were receiving the award, and  $459 for 100 movie passes for “employee appreciation day” with no list  of awardees or basis for the award.
We also identified eleven purchases that FAA cardholders characterized  as either retirement gifts or farewell gifts.  However, they were unable to  demonstrate that the gifts were authorized under applicable agency  authority.  The retirement gifts included two Waterford crystal gifts, a  glass clock, and an inscribed globe, which ranged in cost from $101 to  $209 each.  The farewell gifts included a $329 engraved desk statue for a  manager transferring to another unit within FAA.
Internet services.  During our data mining, we identified 472 purchases  totaling $16,894 for individual subscriptions to various Internet service  providers, such as America Online, CompuServe, and EarthLink.  We  inquired with FAA regarding these types of purchases.  In his   November 21, 2002, response to us, the Director of Acquisitions  indicated that these were unnecessary, stating that FAA provides  Internet access for employees through eight authorized Internet access  points and that employees should obtain the necessary services from  one of these access points.  The Director stated that FAA would work  with the cardholders and FAA’s information resource management  contact points and staff offices to ensure that employees do not  inappropriately obtain individual subscriptions to Internet service  providers.
PDAs and accessories.  During our detailed testing, we identified 25  purchase transactions for 123 PDAs and/or PDA accessories totaling  $66,684.  For example, one of these transactions included a purchase of  30 PDAs and accessories totaling $13,189.  However, no documentation  was available to show how the office determined that these 30 PDAs  were necessary to fulfill a valid government need, rather than for the  personal preference of employees.  We also noted a wide range in cost  for the PDAs purchased.  Specifically, the statistical and nonstatistical  samples contained transactions for PDAs that ranged in cost from $100  to $558.  Cardholders did not provide justification as to why the more  expensive PDAs were needed, nor why there was a valid government  need for these items.  In addition, FAA incurred other costs to support  the PDAs, such as those for PDA keyboards, carrying cases, and PDA  Internet services.  For example, in one instance we identified a purchase  of six leather PDA accessories from the Coach store totaling $717.  In  addition to being excessive in cost, we question whether such items are  necessary government expenses.
In a June 4, 2002, memorandum prepared in response to our report on  FAA’s Alaskan Region, FAA established new spending restrictions that  included prohibiting the use of federal funds to purchase PDAs except  where the affected associate or assistant administrator personally  decides that it is vital to a person or organization successfully achieving  their mission in an effective and efficient manner.
We also identified numerous other individual purchases that we considered  wasteful or, in some cases, abusive.  Such purchases included a $299 Bose  headset, which the cardholder indicated was used by her director and other  senior managers during long flights; $206 for key chains and crystal hearts  for training participants; and a $65 picture frame for a cardholder’s use in  her office.  In another example, a cardholder purchased a $3,707 Sony Vaio  laptop computer because an assistant division manager saw it while on  travel and asked the cardholder to buy it for him, despite the fact that other,  less costly laptop computers were widely available.  For example, during  the same month another cardholder in the same region purchased 22 lower- end Sony Vaios for $1,330 each; a midrange Sony Vaio in the sample cost  $1,700.  According to the first cardholder, the model the assistant division  manager wanted was new on the market and thus was only available  directly from the manufacturer at that time.
Part of the problem with these purchases is that cardholders often did not  document their determination that the specific purchase represented the  best value to the government.  FAA policy requires purchasers to determine  that prices are fair, reasonable, and provide the best value to FAA.  Its  policy states that the determination that price is fair and reasonable should  be documented and the extent of the documentation depends on the  complexity and dollar value of the procurement action.
We examined transactions in the statistical sample to determine whether  there was any evidence that cardholders considered best value in making  their purchase decisions, such as any evidence that at the time of purchase  the cardholder considered prices from other vendors, services provided by  the vendor, quality of product versus alternatives, prior experience with a  vendor, or useful life of a product.  We identified 213 purchases to which  the determination of best value applied.  Of these, 152 purchases did not  have any documentation demonstrating that cardholders considered best  value before making their purchases.  Based on the results of our review of  transactions, we estimate that $74 million of the sampled population of  purchase card and convenience check transactions lacked documentation  of the best value determination.
While FAA has issued some new policies to prohibit or better control  certain types of expenditures, the types of wasteful purchases we identified  can only be prevented through proper employee training, adequate  segregation of duties, and thorough management review and enforcement.   Until FAA provides adequate management oversight of its purchase card  program, including more thorough, systematic monitoring of expenditures  with appropriate disciplinary action when warranted, the types of wasteful  and abusive purchases we identified, as well as those that may not have  appeared in the sample, are likely to continue.
section_title: Questionable Purchases
paragraphs: As discussed earlier in this report, we identified numerous transactions  that were missing adequate supporting documentation to identify what was  purchased and the amount.  Specifically, 18 of the 333 transactions in the  statistical sample and 131 of the 1,874 transactions in the nonstatistical  sample lacked an invoice, credit card slip, or other sales documentation.   Lacking key purchase documentation, neither approving officials nor we  could determine or support what was actually purchased, how many items  were purchased, the cost of the items purchased, and whether there was a  legitimate government need for such items.  However, based on the vendor  names and explanations provided by the cardholders, we believe at least  some of these items may have been determined to be improper or wasteful  had the documentation been provided or available.  For example, in one  transaction that was missing an invoice, the cardholder stated that the  purchase was for a $499 Bose Wave radio/CD player that was needed to  monitor the news and weather.  Table 3 illustrates some of the other  transactions in the sample for which cardholders were unable to provide an  invoice or other documentation to support what was purchased.
In addition, during our data mining, we identified 50 transactions totaling  $13,450 that involved the use of third party on-line payment services to pay  for cardholder purchases.  We selected 30 of these transactions totaling  $7,802 for further review.  When using these types of services, the  cardholder charges the amount of the transaction to the third party  payment company.  The payment company then forwards the funds to the  vendor, generally because the vendor does not accept credit cards for  payment.  There is no additional expense to the government for using these  third party payment companies.  However, because the name of the third  party payment company appears on the cardholder’s billing statement and  not the name of the actual vendor that provided the goods or services  purchased, there is no certainty that the purchase was for a bona fide  government need and use.  For example, one of the purchases included a  transaction totaling $470 that the cardholder stated was for payment of  software design services.  Although the cardholder provided an invoice for  the amount, there is no way to verify that the invoice belonged to the actual  transaction because the merchant name on the cardholder’s billing  statement was the name of the third party payment company, not the name  of the vendor that purportedly supplied the software design services.  In  addition, the invoice date and the transaction date on the cardholder’s  monthly billing statement did not match.  As a result, we could not verify  that the invoice supported the transaction.
Furthermore, of the 30 transactions reviewed, 17 transactions involving  four different third party payment companies were for purchases the  cardholders claimed they did not make.  Except for 2 transactions totaling  $180, we noted that Bank of America subsequently credited the  cardholders’ accounts because it determined that the charges were  fraudulent in nature.  This type of fraudulent activity demonstrates the risk  that purchases made using third party payment companies may not be for  valid government needs.
We asked FAA for its policy on using third party payment companies.  In its  November 21, 2002, response to us, FAA indicated that it plans to issue  guidance in the near future to emphasize that when the cardholder knows a  purchase will be processed by a third party payment company, the  cardholder must immediately make the approving official aware of the  transaction and provide supporting documentation once the purchase is  received.  However, this does not resolve the difficulty of ensuring that the  supporting documentation is in fact associated with the transaction, given  that the merchant name on the invoice and the name on the billing  statement will not match.
section_title: Poor Controls Contributed to Wasted or Missing Assets
paragraphs: In reviewing purchases of computers and other portable assets bought with  purchase cards, we found that FAA lacked adequate controls over such  purchases to ensure that they were properly recorded and accounted for.   Assets bought with purchase cards were not required to go through a  central receiving point to help ensure that items were recorded in FAA’s  property system before they were distributed to users.  As a result, we  identified 262 asset-related transactions totaling $4.1 million that contained  one or more property items that had not been recorded in FAA’s property  management system.  In testing a selection of unrecorded items, we  identified 238 items totaling $287,766 for which FAA could not account.  Of  these, 202 items were missing; FAA reported that the other 36 items had  been transferred to other FAA locations or had been returned for repair and  replacement, although FAA could not provide any documentation to  support these claims.  In addition to the items we found missing, the  property management division at one FAA location identified during its  physical inventory counts over 800 items totaling almost $2 million that  were lost or stolen in fiscal years 2001 and 2002.  Given the systemic  weaknesses we identified in FAA’s property controls, the actual amount of  missing or stolen equipment agencywide could be much higher.
FAA’s cardholders buy a significant amount of computers and computer- related equipment with purchase cards.  For example, in fiscal year 2001  FAA purchased at least $26.4 million in computers and computer-related  equipment at vendors that primarily sell such items, such as Dell, Micron,  and Gateway.  Our Standards for Internal Control in the Federal  Government requires agencies to establish physical control to secure and  safeguard vulnerable assets.  FAA policy requires that accountable  property, items that meet specific FAA criteria and dollar thresholds, be  recorded in FAA’s Personal Property In-use Management System (PPIMS)  to establish accountability for these items.  However, FAA did not require  purchases of such property to go through a central receiving point where  they could be adequately safeguarded until they were bar coded and  recorded in PPIMS.  Instead, purchase cardholders who bought sensitive  items such as computers often took physical delivery of these items at the  time of purchase or had them delivered directly to them.  Consequently,  FAA generally relied on the cardholders to determine whether assets met  the requirements for tracking in PPIMS and to forward the appropriate  information to property custodians for input.  However, during our  transaction review, we noted that cardholders did not appear to be  knowledgeable of the different asset classifications that required input into  PPIMS.  For example, in selecting the statistical and nonstatistical sample  transactions, we asked cardholders to provide documentation showing the  item had been entered into PPIMS for all purchases of accountable  property.  Several cardholders responded “not applicable” to this request,  even though the items they purchased met FAA’s criteria for tracking in  PPIMS.
Consequently, we identified 262 asset-related transactions totaling   $4.1 million where one or more property items had not been recorded in  FAA’s property management system.  Specifically, from the statistical  sample, 39 asset-related transactions totaling $737,951 had not been  recorded in PPIMS even though the property items had been purchased at  least 1 year earlier.  Based on the sample results, we estimated that   $17 million of the sampled population were unrecorded in PPIMS. From  the nonstatistical sample, 223 asset-related transactions totaling $3.4  million had one or more items that had not been entered into PPIMS.   When an asset is not recorded in the property management system, there is  no systematic means of identifying where it is located or when it is moved,  transferred, or disposed of and no record of its existence when physical  inventories are performed.  Thus, unrecorded assets can be easily lost or  stolen without detection.
Given the high risk of theft or loss, we conducted an unannounced  inventory to test FAA’s ability to account for its assets.  We selected 81  purchases of assets totaling over $1.3 million made during fiscal year 2001  by four FAA locations. The 81 transactions were for the purchase of 692  items consisting primarily of computer-related equipment, such as personal  computers, laptops, and printers, as well as certain sensitive items, such as  PDAs, that are easily pilfered.  All of the transactions selected contained 1  or more items that had not been recorded in PPIMS.  Of the 692 items we  attempted to observe, we found that FAA could not locate 238 items (34  percent) totaling $287,766 at the time of our observation.  Although FAA  reported that 36 of these missing items had been transferred to other FAA  locations or had been returned for repair and replacement, contrary to  policy FAA could not provide any documentation to support these claims.
In addition to the items we found missing, we noted that at one FAA  location the property management division identified 405 items totaling  over $900,000 that were lost or stolen in fiscal year 2001 and another 437  items totaling over $1 million that were lost or stolen in fiscal year 2002.   These lost or stolen items were primarily identified through physical  inventory counts performed during those years.  During our follow-up with  that location’s property management division, we noted that employees  and FAA units responsible for safeguarding the assets were not held  accountable when items were identified as lost or stolen.  This lack of  disciplinary action when items were lost or stolen, combined with poor  recordkeeping within those FAA units, created an environment where there  was little accountability for government assets.  Because lost or stolen  items that were not recorded in PPIMS might never be identified as  missing, the actual number of missing or stolen items at this and other FAA  locations may be much higher.
During our site visits and unannounced physical inventories, we also  observed instances where computers were not stored in a separate and  secured storage room, and as a result, employees had unlimited access to  these assets.  For example, during an unannounced physical inventory at  one location, we observed that an unsecured common office area was  being used to store computer equipment.  Without enhanced physical  security, FAA will continue to be at risk for further computer equipment  losses.
We also noted instances in which cardholders purchased varying brands of  computer equipment in small quantities from different vendors at various  times of the year with no documented coordination with FAA’s information  technology or acquisitions unit.  For example, the statistical and  nonstatistical samples contained 47 transactions for 108 computers or  laptops totaling over $400,000 where cardholders purchased fewer than 5  computers or laptops in a single transaction. By not coordinating such  purchases, FAA could not take advantage of quantity discounts that it  might have otherwise received had it combined, negotiated, and purchased  similar items in large quantity with a single vendor.  In addition, the wide  variety of equipment purchased makes it more difficult for the information  technology unit to provide user and network support and equipment  maintenance.
In an official response to us on November 21, 2002, FAA stated that it is  developing standard policy guidance that will require equipment items over  $500 to be centrally purchased to take advantage of economies of scale and  to facilitate equipment standardization.  However, it also needs to ensure  that the purchases are needed to avoid wasted purchases.  For example,  one cardholder purchased 30 personal computers costing over $36,000 in  November 2000.  Although this particular transaction had been coordinated  through the information technology unit prior to purchase, we physically  observed that as of July 2002 all but 1 of these computers were still unused,  sitting in their unopened boxes in a warehouse. Given how quickly  computer technology advances, those computers will likely never be used  by the agency.  Had there been adequate central oversight, FAA could have  prevented this purchase or directed the items to a unit that needed them.   We noted 10 subsequent transactions for the purchase of a total of 134  personal computers made by cardholders in the same center as the  cardholder that purchased the 29 unused computers.
section_title: Conclusions
paragraphs: Although weaknesses with FAA’s purchase card program were reported as  far back as 1997, FAA has not corrected the identified problems.   Consequently, improper and questionable purchases continued to occur,  and numerous items purchased were lost or stolen because appropriate  accountability had not been established.  FAA has taken the first step  towards addressing some of these issues by establishing new positions and  responsibilities for overseeing its purchase card program at the national  level, and issuing new policies to address some of the weaknesses  identified.  However, correcting the problems we identified will require a  thorough evaluation and strengthening of current policies and procedures,  a strong commitment at all levels of the agency to carrying them out, and  appropriate oversight to continually assess the effectiveness of its controls.
Until this occurs, FAA will continue to be exposed to fraud, waste, abuse,  and lost assets in connection with its purchase card program.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Administrator of FAA take the following actions to  strengthen internal controls and compliance in its purchase card program,  decrease wasteful purchases, and improve the accountability of assets in  order to reduce FAA’s vulnerability to improper and wasteful purchases.
subsections: section_title: Internal Controls
paragraphs: With regard to improving FAA’s internal controls over purchasing, we  recommend that FAA do the following.
Establish policies and procedures that segregate duties for all phases of  the purchasing process when using the purchase card.  No individual  should be able to take all the steps needed to request, purchase, pick up,  and receive goods and services purchased.  Such policies should also  require that responsibilities of the cardholders, approving officials,  funds certification officers, property custodians, and APCs be  performed by different people to ensure that management controls are  not circumvented.
Develop detailed procedures that specify the type and extent of  approving official review that is expected.  Such procedures might  include a checklist for approving officials to use in their monthly  reviews of cardholders’ transactions.  At a minimum, these procedures  should describe the types of supporting documentation that the  approving official should ensure that the cardholder has provided, such  as the invoice and/or credit card receipt, certification of funds  availability, documentation of best value, applicable waivers, PPIMS  input forms, and written dispute forms for any disputed charges; the  purchasing requirements that the approving official should review for  compliance with policies and procedures, such as reviewing for split  purchases, cash advances, and compliance with purchase card and  convenience check spending limits and limits for construction and  nonconstruction services; and a requirement that as evidence of review,  the approving official sign the cardholder’s monthly billing statement.
Establish policies and procedures to limit the number of cardholders  assigned to any one approving official consistent with GSA guidelines.
Follow up on transactions we identified that were missing invoice  documentation to determine what was purchased and whether the items  were for legitimate government needs, and take appropriate disciplinary  actions as warranted.
Reiterate records retention policy for purchase card transaction files.
Establish procedures to be performed by the approving official or  issuing office when a cardholder leaves that office to ensure that his or  her purchase files are retained in accordance with policy.
Require refresher training for all cardholders and approving officials.
Such training should cover the areas discussed in this report, such as  proper segregation of duties, purchasing policies and procedures,  approving official responsibilities for reviewing and approving  individual purchases, and reporting potential purchase card fraud and  abuse.
Establish a systematic process that each APC can use to track and  monitor training for cardholders and approving officials to help ensure  that they receive (1) training before being granted purchase cards or  approval authority and (2) timely, periodic refresher training.
Require initial and periodic refresher training for APCs, the national  purchase card coordinator, and the national organization reporting  coordinator that will assist them in carrying out their purchase card  program management and oversight responsibilities.  This should  include developing a training curriculum specific to FAA purchase card  policies and procedures.
Develop a national purchase card program monitoring and oversight  system that includes assigning specific responsibility for following up  on the effectiveness of actions to address prior audit or management  review findings, overseeing local APC activities to ensure that local  policies and procedures are adequate and consistent FAA-wide, and  developing and using analytical tools to evaluate overall program  results.
Develop operating guidance to assist APCs in performing their  monitoring responsibilities.  At a minimum, the guidance should  provide detailed procedures for conducting annual reviews of  cardholder and approving official activities, including the population  to use when selecting the sample, the internal controls that should be  assessed to ensure that they are operating as intended, and data  analysis techniques and tools to use in analyzing bank electronic  data, and  specify the monthly EAGLS and other reports that should be  monitored for potential fraud, waste, and abuse.
Establish procedures to monitor and ensure purchase cards are  canceled when cardholders leave FAA, are reassigned, or no longer have  valid needs for the cards.
Identify cardholders with multiple purchase cards and cancel additional  cards.
Establish policies and procedures that prohibit the future issuance of  multiple cards to cardholders.
Establish procedures to periodically assess whether each cardholder  continues to have a valid need for a purchase card and the  appropriateness of the individual’s spending limits.  This should include  verifying that current APCs and their alternates are not purchase  cardholders.
section_title: Compliance with Purchasing Requirements
paragraphs: With regard to improving and enforcing compliance with purchasing  requirements at FAA, we recommend the following.
Revoke or suspend purchasing authority of cardholders who are found  to be frequently or flagrantly noncompliant with policies and  procedures, such as cardholders making split purchases, cash advances,  or purchases exceeding established dollar thresholds.
Exercise appropriate disciplinary action against supervisors or  approving officials who direct or approve purchase transactions that are  noncompliant with policies and procedures.
Clarify FAA policy regarding the type of documentation required of  cardholders, in lieu of a waiver, when not using a JWOD supplier, since  JWOD suppliers do not issue standard waivers.
section_title: Wasteful and Questionable Purchases
paragraphs: With regard to purchases that may be at an excessive cost or for  questionable government need, we recommend that FAA do the following.
Establish agency policies covering the allowability, justifications, and  approvals required for purchasing items that should be controlled or  restricted such as store gift cards and food.
Clarify AMS policy and operating guidance regarding documentation  requirements for the best value determination, including types of  acceptable documentation.
Establish policies and procedures to better limit and control the use of  third party on-line payment companies as a payment mechanism.  This  might include requiring documented advance approval from the  approving official to help ensure that the item is needed and that the on- line payment company is the only viable method of payment, as well as a  subsequent verification to help ensure that the item or service  purportedly purchased was in fact received.
section_title: Recording and Safeguarding of Assets
paragraphs: With regard to improving FAA’s controls over the purchasing, recording,  and safeguarding of assets, we recommend the following.
Require centralized receiving and acceptance of accountable assets and  sensitive property items purchased.
Establish required time frames for completing and submitting property  input forms, and for recording accountable assets in the property  management system.
Follow up on property items that FAA officials were unable to locate at  the time of our unannounced inventory to determine whether the items  were subsequently located and entered into FAA’s property management  system or whether the items were in fact lost or stolen, and take  appropriate disciplinary actions as warranted.
Establish procedures to ensure that appropriate disciplinary action is  taken against cardholders, approving officials, and/or property  custodians as applicable who are unable to account for purchased  assets under their responsibility in order to improve accountability for  these assets.
Improve physical security over the storage of computer-related  equipment, such as placing these items in locked storage until they can  be entered into the property management system and assigned to users.
Require purchases of certain assets, such as computer equipment, to be  coordinated centrally to take advantage of economies of scale,  standardize types of equipment purchased, and to better ensure bona  fide government need for each purchase.
section_title: Agency Comments and Our Evaluation
paragraphs: We received written comments from DOT on a draft of this report, which  are reprinted in appendix I.  DOT expressed its commitment to the  principles of the program and said that FAA has taken or plans to take a  number of actions to ensure that the issues identified in our report are  effectively addressed and appropriately enforced.  For example, FAA  established a (1) National Purchase Card Coordinator position to provide  centralized program monitoring and (2) National Organization Reporting  Coordinator position to enhance operating guidance and assist agency  program coordinators in improving guidance for monitoring the purchase  card program.  In addition, FAA has revised its operating guidance to assist  in strengthening controls over the purchase card program.  Examples  include clarifying segregation of duties requirements, specifying the type  and extent of the approving official review, and developing standard policy  guidance requiring that high cost or high quantity items be centrally  purchased to take advantage of economies of scale.  Implementation of  these and other recommendations in our report should greatly reduce  FAA’s vulnerability to improper, wasteful, and questionable purchases and  missing assets.
As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 10 days after its  date.  At that time, we will send copies of this report to the Ranking  Democratic Member, House Committee on Transportation and  Infrastructure; the Secretary of Transportation; and the FAA Administrator.   Copies will also be made available to others upon request.  In addition, the  report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you have any questions about this report, please contact me at (202) 512- 9508 or calboml@gao.gov; Doreen Eng, Assistant Director, at   (206) 287-4858 or engd@gao.gov; or Steven Haughton, Assistant Director, at  (202) 512-5999 or haughtons@gao.gov.  Major contributors to this report are  acknowledged in appendix II.
section_title: Comments from the Department of Transportation
section_title: Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: Staff members who made key contributions to this report include Brooks  Bare, Beverly Burke, Sharon Byrd, Anh Dang, Christine Fant, Angela  Fernandez, Richard Kusman, Carla Lewis, and Russell Rowe.
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subsections: section_title: Order by Mail or Phone
section_title: To Report Fraud, Waste, and Abuse in Federal Programs
section_title: Public Affairs