Specifically, during this time frame, the OIG  reported 5 fraud cases totaling $435,900. In addition, the OIG reported it had identified 457 improper or questionable  purchases totaling $1.1 million that did not comply with the FAR, VA policy,  or were not adequately supported by documentation. Scope and Methodology

To determine whether existing controls at VHA were designed to provide  reasonable assurance that improper purchases would be prevented or  detected in a normal course of business, we obtained an understanding of  VA/VHA’s purchase card and convenience check policies and procedures,  and the related internal controls. Specifically, we   reviewed applicable laws and regulations, VA and VHA directives and  handbooks, and previous reports issued by VA’s OIG,   conducted walkthroughs and telephone interviews with VHA personnel  to identify key purchase card and convenience check policies and  procedures,     assessed the adequacy of internal controls, using our Audit Guide:  Auditing and Investigating the Internal Control of Government  Purchase Card Programs, Standards for Internal Control in the  Federal Government, Internal Control Management and Evaluation  Tool, Guide for Evaluating and Testing Controls Over Sensitive  Payments, and Executive Guide: Strategies to Manage Improper  Payments, and   performed tests of those control activities that we considered to be key  in creating a system to provide reasonable assurance that transactions  are correct and proper throughout the purchase card procurement  process and convenience check payment process. Noncompliance With Purchasing Requirements Resulted in Instances of Improper Purchases

The lack of adequate internal controls resulted in numerous purchases  made in violation of either applicable laws and regulations or VA/VHA  purchase card policies that we classified as improper purchases. Improper  purchases we found due to violations of applicable laws and regulations  included (1) purchases of items for personal use, such as food for internal  meetings and clothing, (2) purchases made from an improper source,   (3) purchases split into two or more transactions to circumvent single  purchase limits, (4) purchases, over the $2,500 micro-purchase threshold  that exceeded the cardholders’ delegated purchasing authority, and (5) no  evidence of competition for purchases exceeding the $2,500 micro- purchase threshold. Noncompliance with simplified acquisition procedures. Improper use of the convenience checks. We also identified other transactions that  we classified as questionable because there was insufficient or no  documentation to determine what was purchased. Therefore, we categorized these purchases as questionable government  need. For example, we identified two transactions for 3,348 movie gift  certificates totaling over $30,000. We also identified two purchases that we considered wasteful because of  excessive cost. We identified a cardholder who purchased a $999 digital  camera when there were other less costly digital cameras widely available. The  lack of compliance with established internal control requirements coupled  with a lack of internal control guidance in some areas such as  documentation, resulted in improper, wasteful, and questionable  purchases. Comments from the Department of Veterans Affairs

The following are GAO’s comments on VA’s letter dated May 24, 2004.
Why GAO Did This Study

The Department of Veterans Affairs Office of Inspector General (OIG) has identified significant vulnerabilities in Veterans Affairs' (VA) use of government purchase cards. In its April 26, 2004 report, the OIG reported instances of fraudulent activity totaling $435,900, and numerous improper and questionable uses of the purchase cards totaling $1.1 million. Given that VHA comprised at least 90 percent of VA's dollar and transaction volume for fiscal year 2002, GAO was asked to determine whether existing controls at VHA were designed to provide reasonable assurance that in the future, improper purchases would be prevented or detected in the normal course of business, purchase card and convenience check expenditures were made in compliance with applicable laws and regulations, and purchases were made for a reasonable cost and a valid government need.

What GAO Found

Weaknesses in the Veterans Health Administration's (VHA) controls over use of purchase cards and convenience checks resulted in instances of improper, wasteful, and questionable purchases. These internal control weaknesses included inadequate segregation of duties; lack of key supporting documents; lack of timely recording, reconciling, and reviewing of transactions; and insufficient program monitoring activities. This lack of adequate internal controls resulted in numerous violations of applicable laws and regulations and VA/VHA purchase card policies that GAO identified as improper purchases. These included purchases intended for personal use, purchases made from an improper source, purchases split into two or more transactions to circumvent single purchase limits, noncompliance with simplified acquisition procedures, incorrect procurement procedures, and improper use of convenience checks. GAO's work also identified over $300,000 in purchases that were considered wasteful--that is, excessive in cost or for questionable government need--or were considered questionable because there was insufficient or no documentation to determine the propriety of the transaction. Examples of wasteful and questionable purchases included two purchases for 3,348 movie gift certificates totaling over $30,000 for employee awards that were not supported by award letters or justifications; a purchase for a digital camera totaling $999 when there were other less costly digital cameras widely available; and a purchase of 3 cases of beer totaling $38.