Inspect What You Expect | Citizens Against Government Waste

Inspect What You Expect

The WasteWatcher

During my previous career in the Marine Corps, one of my superiors offered the following advice when supervising subordinates:  “Inspect what you expect.”  In other words, do more than just assign a task and then assume it will be accomplished without any follow-up.  After all, Marines are trained that a leader is ultimately responsible for whatever happens – or fails to happen – under his or her watch.   Therefore, while the proverbial ball may be dropped by a lower-level assignee, the proverbial buck stops at the corner office.

On March 4, 2014, the inspector general (IG) for the Environmental Protection Agency (EPA) released its report, Ineffective Oversight of Purchase Cards Results in Inappropriate Purchases at EPA, criticizing the abuse of taxpayer-backed credit cards by EPA employees.  While previous Congresses and administrations have acknowledged the need to curtail wasteful purchasing practices, this report was spurred by a 2012 law that empowered IGs to take action.  The legislative mandate that led to the new crackdown on improper use of government credit cards originated with S. 300, the Government Charge Card Abuse Prevention Act of 2012, introduced by Senator Charles Grassley (R-Iowa) on February 8, 2011.  On July 22, 2011, an amended version passed the Senate by unanimous consent.  Just over a year later, on August 1, 2012, the House of Representatives agreed to its own version of the bill by voice vote.  On September 22, 2012, the Senate agreed to the House-amended version, again by unanimous consent, and the bill was signed into law (P.L. 112-124) by President Obama on October 5, 2012.

Essentially, the law requires agency heads to establish and maintain safeguards to ensure that these purchase cards are used appropriately, or more importantly, to prevent waste, fraud, and abuse in the use of the cards.  It empowers IGs to conduct periodic assessments “to identify and analyze risks of illegal, improper or erroneous purchases and payments.”  In fiscal year 2012, EPA cardholders spent more than $29 million.

The IG report stated that “the EPA did not provide effective oversight to ensure that purchase card holders and approving officials comply with internal control procedures.  Purchase card users must comply with federal and EPA requirements.  The EPA’s oversight was not effective because of inattention to EPA policies by cardholders, approving officials and the purchase card team.  Of $152,602 in transactions we sampled, we found $79,254 of prohibited, improper and erroneous purchases were not detected. This lack of compliance indicates a continued risk of prohibited, improper and erroneous purchases.  Improved purchase card oversight potentially saves money by reducing prohibited, improper and erroneous purchases, which would be especially helpful in the current budget environment.”

The report went on to say that “EPA’s oversight was not effective in ensuring that purchase cardholders and approving officials complied with internal controls.  The EPA’s internal controls did not prevent prohibited, improper and erroneous purchases.  The EPA staff did not follow policies on restricted and prohibited transactions and records maintenance, leading to questions regarding the validity of the purchases.”

The report cited infractions in nine areas of internal control, based on 80 high-risk transactions reviewed by the IG.  In only three of the transactions did the IG find no internal control issues, while one of the transactions had six internal control issues.

1.      For 35 percent of the sampled transactions, for a total value of $47,222, cardholders did not have the required independent third-party verification.

2.     In 30 percent of the transactions, valued at $39,713, cardholders placed orders prior to receiving official approval.

3.     For 20 percent of those sampled, for a value of $41,415, cardholders did not obtain funding prior to purchase.

4.     Approving officials did not review purchase card logs for 18 percent (value: $22,402) of the sampled transactions.

5.     In 13 (16 percent) of the 80 transactions (value:  $21,465), cardholders did not follow “restricted approval and transaction” policies.  Of these, several infractions were highlighted.  In one instance, cardholders spent $2,867 in gym memberships.  In another transaction, meeting space was purchased at a nearby hotel that, had the cardholder followed procedure, would not have cost the EPA an additional $2,400; the event could have been held (at no cost) in the government’s own conference room.

6.     In 14 percent of the transactions, valued at $11,694, cardholders and approving officials did not use mandatory sources.

7.     Ten transactions were not handled properly, requiring closer scrutiny that was not performed and resulting in cost issues of $12,643.

8.     Twelve percent of the transactions (value:  $33,549) were not supported by adequate recordkeeping.

9.     Finally, in seven of the transactions (9 percent of the sample), cardholders and approving officials made $8,165 in purchases prohibited by the Contracts Management Manual.

The IG concluded that:  “Half of the dollar value of our sampled transactions contained prohibited, improper or erroneous purchases.  This indicates an ongoing risk.  Improved purchase card oversight could save the government money, which would be especially helpful in the EPA’s current budget environment.”  The report had highlighted the fact that, despite an internal compliance letter assuring that the agency would act to correct vulnerabilities, the EPA “allowed offices to skip a biennial review and did not require follow-up.”  The upshot of the report is that relevant policies are already in place, but they were not followed by users nor properly administered by supervisors.

In other words, EPA leadership failed to inspect what the law (and common sense) expects.

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