Statement of Linda M. Springer

Statement of The Honorable Linda M. Springer
Controller, Office of Federal Financial Management
Office of Management and Budget

Before the
Committee on Governmental Affairs
United States Senate

April 28, 2004

Thank you for allowing me the opportunity to provide written testimony for the record for the hearing before the Senate Committee on Governmental Affairs on the issue of the government-wide management of purchase cards.

Improving agency performance of purchase card programs is an important component of the Administration's efforts to strengthen overall financial management in the executive branch and to eliminate improper payments of all kinds throughout the government. The Office of Management and Budget (OMB) is pleased that your Committee is taking the time to evaluate the government’s purchase card programs.

I would first like to provide some history on this issue, as well as clarify the relevant roles and responsibilities of the specific offices at OMB that oversee efforts to improve the management of purchase card programs.

In April of 2002, then OMB Director Mitchell Daniels issued a memorandum to executive agencies in which he expressed concern about agency purchase and travel card programs. This memo also directed agencies to submit to Office of Federal Procurement Policy (OFPP) reports on how they planned to manage risk using internal controls. Shortly thereafter, OFPP established an interagency task force to explore problems and identify best practices in the purchase card program. In October of 2002, Director Daniels issued a second memorandum that shared several of these best practices and established a quarterly reporting requirement to ensure continued and consistent monitoring of the purchase card programs.

In the past, OFPP has generally been responsible for all aspects of agency purchase card management and performance. Last year, however, the decision was made by the OMB Deputy Director for Management to shift some of the purchase card oversight responsibility to the Office of Federal Financial Management (OFFM). This decision was based in part on OFFM’s ownership role of the President’s Management Agenda (PMA) initiative to improve financial management and its responsibility to oversee efforts to eliminate agency improper payments, such as delinquent payments, misuse and fraud.

OFPP oversees Federal acquisition efforts and sets policies and procedures to ensure that agencies enter into fair and reasonable contracts that are in the best interest of the taxpayer. OFPP works with the General Services Administration (GSA) – the agency responsible for the operations and contract management of the purchase, travel, and fleet card programs – and other agencies to ensure that purchase card programs reflect sound and efficient business practices, such as implementing appropriate strategic sourcing agreements.

OFFM is now responsible for evaluating agency efforts to carry out purchase card activity in an efficient manner, so that fraudulent and inappropriate purchases are avoided and bills are paid on time. As part of this oversight, OFFM oversees the collection of the quarterly reports from Federal agencies.

Since the purchase card reporting requirement began in January of 2003, the following improvements have been demonstrated:

Ratio of approving officials to purchase cardholders has generally decreased, thereby improving the span of control.
Number of cards has decreased government-wide.
Rebate amounts have generally increased.

As we analyze these reports, we are working with agencies to ensure that effective internal controls and process improvements are implemented to manage purchase card programs.

In my role as OMB Controller, I meet frequently with agency Chief Financial Officers (CFOs) and Inspectors General (IGs) to discuss strategies for strengthening purchase card controls and overall management. As a result of these discussions, additional best practices among agencies have been brought to our attention. For example, some agencies have established automated processes in which an email is generated and distributed to an approving official when a purchase card is used for a purchase. Other agencies also use an automated reconciliation processes to ensure each transaction is valid before the approving official reviews statements for payments. Through the CFO Council and other relevant venues, OFFM has begun working to develop strategies to expand the implementation of these and other best practices government-wide.

We have also begun evaluating a government-wide approach to ensure that Federal employees that pose a credit risk are either not issued cards or are issued cards with significant restrictions and/or additional controls. As you know, Section 638 of the 2004 Omnibus Appropriations Act requires Federal agencies to conduct an assessment of an employee’s “creditworthiness” before issuing that employee a travel or purchase card. In order to carry out this provision, OMB has convened an interagency task force and is in the process of reviewing a variety of options for implementation. It is our goal to develop a cost-effective approach that can be fairly and uniformly applied across the government.

OMB appreciated the opportunity to respond to a draft of the General Accounting Office (GAO) report entitled “Contract Management: Agencies Can Achieve Significant Savings on Purchase Card Buys.” OMB representatives from OFPP, OFFM, and the Office of General Counsel provided input to GAO throughout the process regarding ongoing efforts to monitor the purchase and travel card programs through the quarterly reports.

In addition to participating in information-gathering conference calls with GAO in December of 2003, OMB provided oral comments to GAO at the end of January of 2004 on the general recommendation to use the quarterly reports to capture strategic sourcing information. OMB agreed that agencies should generally increase their focus on purchase card pricing issues. However, OMB recommended that agencies not necessarily be required to submit sourcing information through the quarterly reports. Rather, we recommend that information on strategic sourcing be collected and shared using the existing cross-agency forums sponsored by GSA – such as annual purchase, travel, and fleet card conferences, regular roundtable discussions with agency purchase/travel card managers and agency IGs, and other existing forums.

We are pleased that GAO included information on the existing periodic cross-agency forums in its report.

Thank you again for the opportunity to provide a written statement for the record. We look forward to continuing to work with you and the other members of the Committee on this important issue.