Table 1 summarizes the progress made by both  units. In addition, in fiscal year  2002, SPAWAR Systems Center increased the number of approving officials  to 203 and NPWC, to 43. We previously reported that the lack of  documented evidence of purchase card training contributed to a weak  internal control environment at these two units. Monitoring and Oversight

Both SPAWAR Systems Center and NPWC have recently made some efforts  to implement new policies directed at improving internal review and  oversight activities, which, as we previously testified, were ineffective. While still relatively ineffective, this area has great potential  to strengthen the control environment at these two Navy units. Critical Internal Controls Remained Ineffective

Basic internal controls over the purchase card program remained  ineffective during the last quarter of fiscal year 2001 at the two units we  reviewed. For SPAWAR Systems  Center, this included SPAWAR Headquarters, which is located in San Diego,  and SPAWAR Systems Center San Diego. Specifically, our assessment of SPAWAR Systems Center and the  NPWC 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) monitoring and audit of  purchase card activity, and (4) management’s attitude in establishing the  needed controls, or “tone at the top;”  tests of statistical samples of key controls over fourth quarter fiscal year  2001 purchase card transactions, including (1) documentation of  independent confirmation that items or services paid for with the  purchase card were received and (2) proper certification of the monthly  purchase card statement for payment;  to the extent feasible, substantive tests of accountable items in our  sample transactions to verify whether they were recorded in property  records and whether they could be found;   data mining of the universe of fiscal year 2001 transactions to identify  any potentially fraudulent, improper, and abusive or questionable  transactions; analysis and audit work related to invoices and other information  obtained from three vendors—Cabela’s, REI, and Franklin Covey—from  which, based on interviews with cardholders and our review of other  transactions, we had reason to believe that SPAWAR Systems Center  had made significant improper and abusive or questionable purchases  during fiscal year 2001; and   analysis of the universe of fourth-quarter fiscal year 2001 purchase card  transactions to identify purchases that were split into one or more  transactions to avoid micropurchase thresholds or other spending  limits.
Why GAO Did This Study

This testimony discusses GAO's follow-up on the audit of key internal controls over purchase card activity at two Navy units based in San Diego--the Space and Naval Warfare Systems Command (SPAWAR) Systems Center and the Navy Public Works Center (NPWC).

What GAO Found

A breakdown in internal controls over $68 million purchase card transactions in fiscal year 2000 left these two units vulnerable to fraudulent, improper, and abusive purchases and to theft and misuse of government property. Although both units improved the overall control environment, including reducing the number of cardholders, increasing the number of approving officials, and decreased purchase card usage, serious weaknesses persisted in three key control environment areas. First, SPAWAR Systems Center needs to ensure that all cardholders receive required training and that this training is documented. Second, SPAWAR Systems Center needs to more carefully implement internal review and oversight activities, which have been ineffective. Third, GAO identified a significant impairment of management "tone at the top" at SPAWAR Systems Center during the last quarter of fiscal year 2001. The two basic internal controls over the purchase card program that GAO tested remained ineffective during the last quarter of fiscal year 2001 at both units. These weaknesses contributed to additional fraudulent, improper, abusive, or otherwise questionable purchases. GAO also identified purchases by SPAWAR Systems Center cardholders that were either excessively expensive or for questionable government needs.