Office of Management and Budget to issue guidance on purchase card requirements

The Office of Management and Budget will issue a memorandum to agency leaders early this week emphasizing and clarifying existing requirements for the use of government purchase cards.

The memo comes on the heels of a Government Accountability Office report that found nearly 41 percent of $14 billion in transactions were not properly authorized or signed for by an independent third party. GAO's sample of transactions more than $2,500 concluded that 48 percent of purchases did not properly comply with federal rules to deter fraud.

GAO recommended that OMB director Jim Nussle issue memoranda reminding agencies of existing controls over purchase card activity, and agency officials said in a conference call last week they would do that. According to the watchdog agency, breakdown of internal controls "resulted in numerous examples of fraudulent, improper and abusive purchase card use." GAO's examples included instances where cardholders purchased Internet dating services, iPods and lingerie.

"What we've taken from this [report] is that we need to do a better job of working with agencies to get them to adhere to the policies that exist," said Clay Johnson, OMB deputy director for management. "On top of that there are certainly opportunities to strengthen some of these policies and put some of them into law."

Johnson and Danny Werfel, acting controller of OMB's federal financial management office, said they are working with lawmakers, in particular Sen. Charles Grassley, R-Iowa, to expand existing OMB requirements into law.

"Once they're law, there's the ability to create stiffer penalties for misuse than are in OMB regulations, so we welcome Congress' help and partnership in building those stiffer penalties into the process," Werfel said.

Legislation to that effect, the 2007 Government Credit Card Abuse Prevention Act (S. 789), introduced by Grassley, passed the Senate Homeland Security and Governmental Affairs Committee last Thursday. A companion bill in the House, H.R.1395, awaits review by the Oversight and Government Reform Subcommittee on Government Management, Organization, and Procurement.

In the official written response to GAO's report, OMB officials agreed that the purchase card program will not be as efficient as it could be unless agencies implement strong and effective controls to prevent waste, fraud and abuse. They said they had designated charge card management a major focus area in 2005 under Appendix B of Circular No. A-123.

OMB also proposed issuing more guidance to agencies, pointing out that Appendix B extends to convenience checks as well as charge cards and agency personnel have financial responsibility with regard to unauthorized and erroneous purchase card transactions.