Purchase Cards Cut Red Tape but Not Spending
Small change adds up.
According to a new Government Accountability Office report, cheap, unregulated purchases on government credit cards totaled $19 billion in 2015 alone. The report focuses on micro-purchases—transactions under $3,500—that are made on government purchase cards. Because agencies tend to see micro-purchases as minor, low-cost investments, little time is spent regulating how much money is spent on certain goods and services, and what agencies get in return for their money.
GAO studied micro-purchase data from six federal agencies: the Departments of Defense (DoD), Veterans Affairs (VA), Interior, Homeland Security, and Energy, and the Environmental Protection Agency (EPA). In theory, agencies are supposed to follow purchase card guidelines laid out by the Office of Management and Budget (OMB). These guidelines direct agencies to review purchase card spending patterns in order to negotiate discounts. GAO’s report highlights instances when buying in bulk through blanket purchase agreements is cheaper than making hundreds of small transactions on individual purchase cards.
Yet GAO found that due to challenges presented by analyzing purchase card data—the unavailability of many specific item descriptions, quantities, and unit prices—some agencies do not thoroughly track their spending. And, though five of the six agencies studied did review their spending in some way, “[n]one of the six agencies in [the GAO’s] review have purchase card guidance that encourages local officials to examine purchase card spend patterns to obtain savings and to share information on such efforts.” According to GAO, all agencies should be directing local officials to identify potential areas for saving.
GAO acknowledges that agencies often have valid reasons for not investing “substantial time and resources into leveraging the government’s purchasing power when it comes to purchase cards.” Agencies can analyze their purchase card charges using data from either the General Services Administration or from the banks that support purchase card systems. However, important transaction information such as item descriptions, quantities, and unit prices are available only through banks, and banks have this information only if suppliers submit it to them. Some suppliers don’t provide those purchase details, and many government agencies decide to spend their resources analyzing what they consider to be higher-risk, more important purchases instead of tracking down those details.
But a regional VA office proved that a little purchase card analysis can go a long way. After reviewing purchase card data, the branch determined that paying for wheelchair ramps would be cheaper with a blanket purchase agreement than with the purchase cards used at the time. The result: the VA saved $1.1 million.
Few agencies in GAO’s report analyzed their purchase card spending as well as this regional VA office. The report found that most agencies analyze purchase card data to some extent, generally to check for intentional fraud or abuse, and include the data in aggregate spending analyses. But GAO concluded that some agencies could improve their mechanisms for tracking purchases and finding cheaper options. Energy, for instance, performs no purchase card analysis whatsoever, and certain components of DoD—including the Air Force and the Navy—also fail to analyze data. Interior, the VA, and the EPA saw positive results when they conducted purchase card analyses. GAO recommended that DoD should “issue guidance or instruction to help ensure that components make reasonable efforts to analyze component-level purchase card spend patterns to identify areas for possible savings.” But, according to GAO, officials at all six agencies were hesitant about spending more agency time analyzing purchase card data.
GAO’s study is not the first to point out the weaknesses of the purchase card system. In the past two years alone, Inspectors General (IG) for multiple agencies have found widespread abuse of purchase cards. The IG for the EPA, for example, found serious misuse of government purchase cards in 2014. And last year, the DoD IG investigated and confirmed over a million dollars’ worth of purchase card charges at casinos and strip clubs.
Purchase cards originated to save the government time and money. The use of the cards, which broadened to include not just procurement offices but individual cardholders in 1994, was meant to speed up purchases of small items for daily use in government offices. When employees are allowed to make low-risk, reasonable purchases for government purposes, resources are saved.
The original benefits associated with purchase cards remain. But as GAO, OMB, and IG investigations have shown, rigorous oversight is necessary in order to minimize waste and abuse. Agencies cannot avoid in-depth analysis of their purchase card charges when $19 billion is at stake. The government needs to make sure it spends taxpayer dollars wisely.