	Conclusions

The serious breakdown in internal controls at the SPAWAR Systems Center  San Diego and the Navy Public Works Center San Diego are the result of a  weak overall internal control environment, flawed or nonexistent policies  and procedures, and employees that do not adhere to valid policies. Develop policies and strategies on credit limits provided to cardholders  with a focus on minimizing specific cardholder spending authority and  minimizing the federal government’s financial exposure. Naval Supply Systems Command,  SPAWAR San Diego, and Navy Public Works Center San Diego officials told  us that they were aware of this incident but did not have a listing of the  account numbers affected. Our assessment of SPAWAR San Diego and the Navy  Public Works Center San Diego purchase card controls covered   the overall management control environment, including (1) span of  control issues related to the number of cardholders, (2) training for  cardholders and accountable officers, (3) management of rebates, and  (4) monitoring and audit of purchase card activity;  tests of statistical samples of key controls over purchase card  transactions, including (1) documentation of independent confirmation  that items ordered by purchase card were received, (2) proper  certification of purchase card statements for payment, and (3) proper  accounting for purchase card transactions;   substantive tests of accountable items in our sample transactions to  verify whether they were recorded in property records and whether they  could be found; and   analysis of the universe of transactions to identify (1) any potentially  improper, fraudulent, and abusive transactions and (2) purchases that  were split into one or more transactions to avoid micro-purchase  thresholds or other credit limits. In addition, we did not physically examine purchases made to  determine whether goods and services were received and used for  government purposes.
Why GAO Did This Study

GAO reviewed purchase card activity at the Space and Naval Warfare Systems Command (SPAWAR) Systems Center and the Navy Public Works Center in San Diego and found significant breakdowns in internal controls over purchase card transactions, including fraudulent, improper, and abusive purchases and theft and misuse of government property. Neither SPAWAR nor the Navy Public Works Center had effective policies for issuing purchase cards, establishing credit limits, and minimizing the federal government's financial exposure. Any employee having supervisory approval could get a card.

What GAO Found

GAO found that the units did not do credit checks on prospective cardholders. GAO also found that nearly half of SPAWAR's fiscal year 2000 purchase card transactions and more than half of the Navy Public Works Center's transactions were made by employees who did not have documented evidence of timely training. Policies for rebate management were deficient, including a lack of procedures to maximize rebates and ensure that bank calculations of rebates were correct. Management was not effectively using internal reviews and audits to determine whether purchase card internal controls were effectively implemented. These internal control weaknesses allowed purchases that were potentially fraudulent, improper, or abusive. GAO summarized this report in testimony before Congress ( GAO-01-995T , July 2001).