Treasury
Inspector General for Tax Administration
Office of Audit
CONTROLS OVER THE PURCHASE CARD
PROGRAM WERE NOT EFFECTIVE IN ENSURING APPROPRIATE USE
Issued on August 31, 2011
Highlights
Highlights of Report Number:
2011-10-075 to the Internal Revenue Service Deputy Commissioner for Operations Support and the Deputy Commissioner for
Services and Enforcement.
IMPACT ON TAXPAYERS
From September 1, 2007, through March 31, 2009,
the Internal Revenue Service (IRS) made more than 174,000 purchases totaling more
than $80 million using purchase cards. However,
the IRS does not have the necessary controls in place to ensure that improper
and abusive purchases do not occur, any such transactions are promptly detected,
and appropriate corrective action is taken.
WHY TIGTA DID THE AUDIT
While the use of
purchase cards has been credited with reducing administrative costs, audits of Federal
agency purchase card programs have found varying degrees of waste, fraud, and
abuse. One of the most common risk
factors cited by auditors is a weak internal control environment. The overall objective of this review was to
determine whether the IRS’s controls over Federal Government micro-purchase
cards are sufficient to ensure that the IRS’s use of purchase cards is in
compliance with all applicable regulations and procedures.
WHAT TIGTA FOUND
While
some controls were working as intended, overall management controls were not
effective to ensure the appropriate use of IRS purchase cards. TIGTA found violations of applicable laws and
regulations that included purchases made without necessary approvals and
verification of funding, purchases that were potentially split into two or more
transactions to circumvent micro-purchase limits, and purchases made from
improper sources. In addition, the IRS
did not have a policy to provide guidance for establishing an appropriate span
of control over the number of purchase cardholders assigned to approving
officials.
Until management controls are effectively strengthened,
implemented, and enforced, the IRS will continue to be at risk for
noncompliance with applicable laws and regulations, and the IRS cannot ensure
that improper and abusive purchases do not occur. In addition, if such purchases do occur, the IRS
cannot ensure the transactions are promptly detected and that appropriate
corrective action is taken.
WHAT TIGTA RECOMMENDED
TIGTA recommended that
the Deputy Commissioner for Operations Support and the Deputy Commissioner for
Services and Enforcement emphasize to cardholders that split-purchase
transactions will not be tolerated. The
Chief, Agency-Wide Shared Services, should emphasize the importance of
preparing an order log prior to purchase, improve oversight reviews by using
data analysis techniques to identify potential split-purchase transactions, and
expand oversight reviews to include evaluating the
requirement for purchasing office supplies from contract vendors and preferred
sources. Finally, the Chief, Agency-Wide
Shared Services, should develop and implement guidance for determining an
appropriate span of control for approving officials.
In their response
to the report, IRS officials agreed with all of our recommendations. The IRS has changed its reviews of split-purchase
transactions and expanded oversight reviews to include the use of contract
vendors and preferred sources. The IRS
plans to provide guidance on oversight and enforcement responsibilities,
develop examples and scenarios that constitute a split purchase, review the
potential split purchases TIGTA identified, and review the current span of
control to identify relevant factors in the development of a policy on span of
control. The IRS also plans to emphasize
corrective actions regarding the verification of funding prior to purchase and
the IRS policy on split-purchase transactions.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go
to:
http://www.treas.gov/tigta/auditreports/2011reports/201110075fr.html.
Email Address: TIGTACommunications@tigta.treas.gov
Phone
Number: 202-622-6500
Web Site: http://www.tigta.gov