GAO: Lax oversight at housing agency led to abuse of purchase cards

The Housing and Urban Development Department does not have enough controls in place to stop employees from abusing government purchase cards, according to the General Accounting Office.

Poor oversight led to more than $2.3 million in inappropriate and suspicious purchase card charges by HUD employees in fiscal 2001, according to a new GAO report (03-489). Purchase cards were established in 1998 to simplify the procurement process for purchases of $2,500 and less.

Despite clear purchase card policies at HUD and a governmentwide mandate to implement internal controls for managing and controlling areas at risk of waste, fraud and abuse, GAO found that lax oversight at HUD allowed employees to use the cards for unauthorized purchases in fiscal 2001.

"We found that a preapproval process, required by HUD to help ensure appropriateness of each purchase, was virtually nonexistent," the report said. "Additionally, HUD was not performing the required periodic reviews of purchase card transactions to assess compliance with its policies and procedures, thus preventing adequate monitoring of the purchase card program."

Some of the charges GAO uncovered were made at department stores, such as Best Buy, Circuit City, Dillard's, JCPenney and Sears, as well as restaurants including The Cheesecake Factory and Legal Sea Foods. Other items were charged at companies that went out of business before the charges were made. Because HUD officials were unable to provide documents supporting these purchases, GAO determined they were potentially improper purchases.

During the past two years several GAO reports and congressional hearings revealed governmentwide incidents of waste, fraud and abuse in the purchase card program, prompting administration officials to beef up card oversight and require agencies to develop plans for revamping their purchase card programs. HUD's remedial plan, however, will do little to curb the abuse in its program, GAO said.

"The remedial action plan prepared by HUD is an important first step toward addressing the control weaknesses we identified," the report said. "At the same time, much still remains to be done to effectively control the inherent risk in HUD's purchase card program."

GAO recommended that HUD implement the preapproval requirement, create a review and approval process for purchase card transactions and establish requirements for documentation supporting purchase card transactions. The watchdog agency also asked HUD to revise its remedial action plan and follow up on the questionable purchases identified by GAO.

In a written response, Vickers Meadows, assistant secretary for administration at HUD, agreed the purchase card program needed tighter controls and described actions the agency had taken to improve oversight, most of which mirrored GAO's recommendations.