We requested comments from the Secretary of Housing and Urban  Development. This created an environment  where improper purchases could be made with little risk of detection and  likely contributed to the $2.3 million in improper, potentially improper, and  questionable purchases we identified through our data mining efforts. Control Weaknesses Contributed to Improper, Potentially Improper, and Questionable Purchase Card Transactions

Poor internal controls created an environment where improper purchases  could be made with little risk of detection. We also found 2,507 transactions, totaling about $1.3 million, with vendors  that would not routinely be expected to engage in commerce with HUD. In  order to determine whether these questionable purchases were a valid use  of government funds, we requested supporting documentation for each  purchase. In these instances, we  were unable to determine what was purchased, for whom, and why. Because HUD  was unable to provide adequate documentation for these purchases, we  consider them to be a questionable use of government funds and therefore  potentially improper purchases. For example, our testing revealed that HUD employees  used their purchase cards to buy portable assets, such as computer  equipment and digital cameras, totaling over $74,500 for which they have  provided either no support or inadequate support. Our review of HUD’s  remedial purchase card action plan found that it did not address all the  weaknesses we identified. Conclusions

The problems we identified with HUD’s purchase card program leave the  agency vulnerable to wasteful, fraudulent, or otherwise improper  purchases. Recommendations for Executive Action

To strengthen its internal control over the purchase card program and  reduce HUD’s vulnerability to improper purchases, we recommend that the  Secretary direct the Assistant Secretary for the Office of Administration to  take the following actions:  implement the preapproval requirement in the existing purchase card   develop and implement a robust review and approval function for  purchase card transactions, focusing on identifying split purchases and  other inappropriate transactions, and on performing a detailed review of  relevant supporting documentation for each purchase;  update the list of approving officials and their designated cardholders  quarterly to ensure accuracy and completeness;  establish specific requirements for documentation and records to  support all purchase card purchases;  develop and implement a formal monitoring process to periodically  assess the effectiveness of the enhanced review and approval process;  revise the remedial action plan for purchase cards to include the  specific steps necessary to fully implement the above five  recommendations; and  follow up on the purchases we identified for which cardholders did not  provide adequate supporting documentation to determine the validity  and the propriety of the purchases.
Why GAO Did This Study

Due to the Department of Housing and Urban Development's (HUD) increasing use of purchase cards and the inherent risk associated with their use, Congress asked GAO to audit the purchase card program concentrating on assessing internal controls and determining whether purchases being made are a valid use of government funds.

What GAO Found

Significant internal control weaknesses in HUD's approximately $10.6 million purchase card program resulted in improper, potentially improper, and questionable purchases in fiscal year 2001. Because of these internal control weaknesses, there was often inadequate documentation supporting many purchases GAO reviewed, and as a result, GAO was unable to determine whether these purchases were a valid use of government funds. GAO also found that HUD's remedial action plan for its purchase card program does not adequately address all the control weaknesses we identified. These weaknesses created an environment in which improper purchases could be made with little risk of detection and likely contributed to the $2.3 million in improper, potentially improper, and questionable purchases GAO identified. GAO found improper and potentially improper purchases totaling about $1 million where HUD employees either split or appeared to have split purchases into multiple transactions to circumvent cardholder limits. GAO also found that HUD employees lacked adequate supporting documentation for about $1.3 million in questionable purchases including those from vendors not expected to engage in commerce with HUD, purchases made on holidays and weekends, and $74,500 in portable assets such as computer equipment and digital cameras. In these instances, it was not possible to determine what was purchased, for whom, and why. The problems GAO identified with HUD's purchase card program leave the agency vulnerable to wasteful, fraudulent, or otherwise improper purchases. Unless HUD makes specific improvements to its review and approval process, requirements for documentation and record retention, monitoring process, and remedial action plan, the department remains susceptible to fraud, waste, and abuse.