Publicly released: August 20, 2019
Objective
We determined whether Government purchase card (GPC) cardholders under the Air Force Nonappropriated Fund Purchasing Office properly made and documented purchases in accordance with applicable laws and regulations.
Public Law 112‑194, “Government Charge Card Abuse Prevention Act of 2012,” section 2784, title 10, United States Code (2012), requires the DoD Office of Inspector General (DoD OIG) to conduct periodic audits and reviews of the DoD purchase card program.
Background
Nonappropriated funds (NAFs) are not appropriated by Congress but are funds received by the DoD from the sale of goods and services. NAFs are used to support Morale, Welfare, and Recreation programs, such as fitness, arts and crafts, auto hobby shops, outdoor recreation, bowling, golf, and other membership programs, as well as other programs for the collective benefit of military personnel, their family members, and authorized civilians.
The Air Force NAF Purchasing Office is the central purchasing office that oversees NAF contracting procedures throughout the Air Force. The Air Force NAF Purchasing Office developed, implemented, and maintains the Air Force NAF GPC program, which made 312,261 purchases totaling $255.2 million between July 1, 2017, and June 30, 2018.
Personnel in the Air Force NAF GPC program include:
- installation program coordinators, who manage the GPC program at the installation level and delegate purchase authority to cardholders;
- approving officials, who certify the cardholders’ GPC statement and determine whether the items purchased were for official use; and
- cardholders, who purchase supplies, resale items, and services for supporting activity needs, including the Air Force Morale, Welfare, and Recreation program or other support activities.
Office of Management and Budget Circular A‑123, Appendix C, states that an improper payment is any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements and includes payments with insufficient or a lack of documentation.
According to the DoD Government Charge Card Guidebook, administrative discrepancies are actions that violate operational policies or procedures but do not violate Federal law or regulation. Examples include incomplete forms and documentation and failure to retain required documents for the required period.
Finding
Although Air Force NAF GPC cardholders made purchases supporting the Air Force Morale, Welfare, and Recreation program and other support activities, not all purchases were proper and documented in compliance with applicable laws and regulations.
Based on our statistical projection of the 312,261 purchases between July 1, 2017, and June 30, 2018, Air Force NAF GPC cardholders:
- did not have proper written authority to use the NAF GPC for up to 28,901 purchases because installation program coordinators and approving officials did not manage the cardholders’ delegations of purchase authority;
- did not provide the proof of purchase to support up to 14,110 purchases because installation program coordinators and approving officials did not manage the cardholders’ documentation and Air Force Instruction 34‑275 did not always require cardholders to retain supporting documentation; and
- erroneously paid sales tax on up to 25,755 purchases because cardholders did not identify sales tax and have it removed at the time of purchase.
In addition, cardholders made recurring GPC purchases to the same merchant without establishing a contract because Air Force NAF GPC cardholders did not successfully coordinate with contracting offices to aggregate recurring GPC purchases.
As a result of these deficiencies, we statistically projected that cardholders made up to $23.3 million in potential improper payments on 14.6 percent, or 45,737 of 312,261 purchases, between July 2017 and June 2018. Additionally, Air Force NAF GPC program personnel were responsible for administrative discrepancies on up to 303,125 purchases totaling $167.3 million. Unless Air Force NAF GPC controls are strengthened, cardholders will continue to make improper payments, pay sales tax, and miss out on cost savings through negotiated contracts.
Recommendations
We recommend that the Director of the Air Force Nonappropriated Fund Purchasing Office:
- establish an annual requirement to review cardholder delegations of purchase authority to determine if the current installation program coordinator is establishing and retaining purchase limits to meet mission requirements;
- review the statistically sampled purchases that did not include the required supporting documentation or that included erroneously paid sales tax to determine if the purchases were improper payments and report confirmed improper payments in accordance with the Improper Payments Elimination and Recovery Improvement Act;
- establish procedures in AFI 34‑275 for retaining documentation when cardholders separate from an organization;
- develop procedures in AFI 34‑275 to ensure that cardholders retain documentation that:
- supports the purchase approval,
- verifies that items or services were received,
- proves all items or services were purchased,
- describes the items or services,
- provides the reason for the purchase, and
- identifies for whom the purchase was made;
- direct all installation program coordinators, approving officials, and cardholders to determine whether the purchases are tax‑exempt and recoup any erroneously paid sales tax; and
- identify purchases that are logically associated or purchased together and aggregate them to obtain lower prices and standardize requirements, as well as incorporate a requirement for aggregation into policy.
Management Comments and Our Response
The Assistant Deputy Chief of Staff for Manpower, Personnel, and Services, Headquarters Air Force, responding for the Air Force Nonappropriated Fund Purchasing Office Director, agreed with the recommendations and stated that the Air Force officials will:
- Establish a requirement to review the cardholder delegations of purchase authority on an annual basis.
- Review purchases without supporting documentation or with sales tax and report the confirmed improper payments.
- Include instructions in a new Air Force Manual and Installation/Unit out‑processing checklists for cardholder separations.
- Include instructions in a new Air Force Manual for required supporting documentation, including purchase requests, receipt of items or services, elements of a valid proof of purchase, and transaction notes.
- Include instructions in a new Air Force Manual, training, and education programs regarding the validation and recoupment of sales tax.
- Include instructions in a new Air Force Manual regarding the aggregation of purchases to obtain cost savings.
Comments from the Assistant Deputy Chief of Staff for Manpower, Personnel, and Services, Headquarters Air Force addressed all specifics of the recommendations. Therefore, the recommendations are resolved but will remain open. We will close the recommendations once we verify that the planned actions have been completed.
This report is a result of Project No. D2018-D000AX-0189.000.