Transcript Federal Acquisition Service Conduct Effective Oversight of Your GSA SmartPay2 Program

U.S. General Services Administration
Federal Acquisition Service
Conduct Effective Oversight of Your
GSA SmartPay2 Program
Joline McDonald
Elizabeth Skolnik
Office of Charge Card Management (OCCM)
12th Annual GSA SmartPay Training Conference
August 10 – 12, 2010
Federal Acquisition Service
Value to the Customer
 Understand the difference between waste, fraud and misuse/abuse
 Improve ability to identify potential misuse by cardholders
 Understand consequences of waste, fraud and misuse/abuse
 Learn and share general charge card management best practices
 Learn about relevant legislation and regulations
 Find out about general resources
 Review waste, fraud and misuse/abuse sample scenarios
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Federal Acquisition Service
Agenda
 GSA SmartPay Program Overview
 GAO Report on Governmentwide Purchase Cards (GAO-08-333)
 Understanding and Preventing Waste, Fraud, and Misuse/Abuse
 Roles and Responsibilities
 General Charge Card Management Best Practices
 Resources and Contacts
 Questions
 Sample Scenarios
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Federal Acquisition Service
GSA SmartPay2 Program Overview
DID YOU KNOW…
 The GSA SmartPay program, enables over 350
$943 was spent using
Federal agencies/organizations to obtain charge Federal charge cards
card products and services through master
every second in FY09
contracts that GSA established with three
banks: Citibank, JP Morgan Chase, and U.S. Bank
 Agencies/organizations issued task orders against these master
contracts to obtain charge card products and services
 Agencies/organizations pay no direct fees to use the program
 Period of performance for existing contracts is through 2018
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Federal Acquisition Service
Preventing Waste, Fraud and Misuse/Abuse
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Federal Acquisition Service
GAO Report on Government Purchase Cards
 In March 2008, GAO released a report that analyzed
purchase card transactions government-wide related to
the GSA SmartPay1 program to:
• Determine if internal control weaknesses existed in
the government purchase card program
• Identify examples of fraudulent, improper, and
abusive activity
What GAO Found:
 Internal control weaknesses in agency/organization
purchase card programs exposed the federal
government to fraud, waste, abuse, and loss of assets
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Source: GAO-08-333
Federal Acquisition Service
GAO Report on Government Purchase Cards
 Case studies that the GAO examined included:
Type of
Purchase
Amount
Activity
Fraudulent
$642,000
Cardholder used convenience checks to embezzle public funds
for over 6 years. The $642,000 was used for personal
expenditures, such as gambling, car and mortgage payments,
and other retail purchases.
Improper
$112,300
Cardholder improperly used convenience checks—and
consequently had to pay thousands in fees—for relocation
services. Agency policy generally prohibits convenience checks
above $3,000.
Abusive
$77,000
Four cardholders purchased expensive suits and accessories
from Brooks Brothers and other high-end clothing stores to
outfit several service members.
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Source: GAO analysis of bank data and supporting documentation.
Federal Acquisition Service
GAO Recommendations
GSA and Dept. of Treasury work with Agencies/Organizations to:
 Improve internal controls over the government purchase card
program
 Provide guidance on how cardholders can document
independent receipts and acceptance of items obtained with a
purchase card
 Remind cardholders to obtain prior approval or subsequent
review of purchase activity for purchase transactions that are
under the micro purchase threshold
 Strengthen monitoring and oversight of purchase cards
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Source: GAO-08-333
Federal Acquisition Service
GAO Recommendations (cont’d)
GSA and Dept. of Treasury work with Agencies/Organizations to:
 Remind travelers who receive government-paid-for-meals at
conferences or other events, they must reduce the per diem
claimed on their travel vouchers by the specific amount that
GSA allocates for the provided meal
 Provide agencies/organizations guidance regarding what
should be considered sensitive and pilferable property (e.g.
computers, palm pilots, digital cameras, fax machines, can be
easily converted to personal use)
 Cancel convenience check privileges of cardholders who
improperly use these checks
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Source: GAO-08-333
Federal Acquisition Service
Fraud vs. Misuse
 Fraud: A person or entity other than the cardholder makes
transactions using the cardholder’s account
 Misuse: Cardholder uses his/her own card for transactions
not permitted per policy
 In the case of government charge cards, intentional use of
the government charge card for other than official
government transactions constitutes misuse, and may
involve fraud
 The cardholder is liable for all transactions classified as
misuse
DID YOU KNOW…
Misuse by employees impacts the
performance of agency/organization
program and rebate earnings potential
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Federal Acquisition Service
Fraud
 Fraud involves use of the card or cardholder data by an
unauthorized person
 High-risk situations for fraud include:
• Card was never received
• Card was lost
• Card was stolen
• Altered or counterfeit cards
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Federal Acquisition Service
Phishing: Example of Fraud
 Have you ever received an
email similar to this?
Gone Phishing?
With fraud on the
rise, it is
imperative that
A/OPCs and
cardholders learn
to recognize
criminal methods
in order to protect
their GSA
SmartPay charge
cards.
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Federal Acquisition Service
Examples of Misuse
 Personal use or unauthorized purchases
 Use for or by someone other than the cardholder
 Purchases from an unauthorized merchant
 Purchases which are not authorized by the agency
 Purchases for which there is no funding
 Purchases for personal consumption
 Purchases which do not comply with Federal Acquisition
Regulation (FAR) and/or other applicable procurement
statues and regulations
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Federal Acquisition Service
Possible Indicators of Fraud and Misuse
 Merchant Category Code (MCC) appears to be outside the
cardholder’s general area of responsibility
 Account has been closed due to fraud and a new card has been
reissued
 Cardholder frequently disputes transactions
 Cardholder has had multiple authorizations declined
 Cardholder makes transactions on non-work days
 Cardholder consistently hits his/her monthly limit
 Merchant address appears to be a home address
Cues to misuse and abuse can be determined by asking
“Who”, “What”, “Where”, “When”, “Why” and “How Much”
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Federal Acquisition Service
Possible Indicators of Fraud and Misuse (cont’d)
 Cardholder has several transactions with the same merchant
within a short period of time (e.g., 48 hours), and the
transactions total more than $3,000 (micro-purchase threshold)
 Cardholder is unable to provide proof of purchases such as
receipts
 Cardholder has multiple transactions of even dollar limits (e.g.,
$20, $100)
 Cardholder repeatedly does business with the same merchants
(minimal rotation of sources)
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Federal Acquisition Service
Consequences of Fraud and Misuse
 Employing agency/organization of a cardholder who misuses the card or
who participates in fraud may cancel the GSA SmartPay charge card and
take disciplinary action against the employee, as appropriate
 In case of card misuse, employee will be held personally liable to the
government for the amount of any unauthorized (non-government
transaction)
DID YOU
 Additional consequences include:
KNOW…
• Reprimand
Many agencies/
• Counseling
organizations have
• Cancellation of card
their own policies
• Notation in employee performance evaluation for consequences
related to fraud
• Suspension or termination of employment
and misuse.
• Criminal prosecution
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Federal Acquisition Service
Program Oversight - Roles & Responsibilities
Federal Acquisition Service
Addressing Misuse/Abuse and Fraud
What happens if fraud has already taken place?
 Agency/Organization Program Coordinators are responsible for
reporting any suspected or actual fraud to your contracting bank
or agency’s Inspector General
 If fraud is suspected of a cardholder, merchant, or other third
party, A/OPCs may file a complaint with the agency/organization
Inspector General
 Many agencies/organizations provide a fraud hotline number for
reporting misuse/abuse and fraud
 Contact your GSA SmartPay2 contracting bank to see what tools
and resources they provide for eliminating fraud and misuse
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Federal Acquisition Service
Roles & Responsibilities of A/OPCs
A/OPC responsibilities, as they relate to fraud and misuse
include:
 Promote appropriate use of GSA SmartPay charge card by
cardholders
 Establish internal policies and procedures
 Take appropriate action regarding charge card waste, fraud or
abuse
 Provide cardholders with “Helpful Hints” for Card Use brochure
 Ensure cardholders receive appropriate training and take
refresher training at a minimum once every three years, or more
frequently (as required by your agency/organization)
 Monitor account activity and managing delinquencies
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Roles & Responsibilities of Cardholders
Cardholder responsibilities, as they relate to fraud and misuse
include:
 Use the charge card appropriately, in accordance with
agency/organization policy, laws, and governmental regulations
 Understand preventative measures to avoid fraud and misuse
 Keep up-to-date with required program and agency/organization
specific training, including refresher training
 Review and understand “Cardholder Dos and Don’ts” available
on the GSA SmartPay website
 Reference our new Fraud Brochure, available on the
GSASmartPay website and at our Welcome Center
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Establish Internal Policies
A/OPCs should establish clear policies for their agency/
organization to prevent cardholder misuse by outlining:
 Timeframes for cancelling inactive cards and cards for
exiting/retiring employees
 Controls on cards – credit, single purchase limit, Merchant
Category Codes (MCCs), etc.
 Cash advances and convenience check limits
 Eligible Cardholders
 Who should have authority to make changes to accounts
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Federal Acquisition Service
Establish Internal Procedures
A/OPCs should establish clear procedures to prevent misuse by
explicitly outlining the following:
 How to obtain, change, and close an account
 Policy and refresher trainings for cardholders and users
 Reconciliation process
 Audit process and frequency
 Required standard and ad hoc reports which can be used to
monitor fraud, misuse/abuse
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Federal Acquisition Service
Risk Management Controls
A/OPCs should establish risk management controls to
prevent misuse:
 Set reasonable credit limits
 Restrict use through MCC Blocks
 Limit Cash Access
 Use reporting tools to monitor card usage
 Manage delinquencies
 Implement proper training for cardholders
 Maintain training certificates in a database or personnel
records
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Federal Acquisition Service
ATM Safety
ATMs offer a great deal of convenience, but here are some tips you might
share with your cardholders:
 Be careful when using a freestanding ATM machine, especially those
that are poorly lit or in a hidden area
 Have your card ready as you approach the ATM
 Ensure that nobody can see you entering your personal identification
number (PIN)
 Take your ATM receipts or transaction records to keep your account
information confidential
 Do not use ATMs that appear unusual, or offer options that you are
not familiar with
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Federal Acquisition Service
Charge Card Management Oversight
Federal Acquisition Service
Leading Practices
 Engage management at the highest levels
 Review credit limits and lower as appropriate
 Issue cards based on need, versus title
 Perform an annual review of all issued cards to determine if
each cardholder meets the criteria for continued participation in
the federal government charge card program
 Incorporate process to enable an alternate point of contact to
receive and accept material
 Utilize your GSA SmartPay2 contracting bank’s resources
 Create a newsletter to reinforce agency/organization charge
card policies and procedures
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Federal Acquisition Service
Leading Practices (cont’d)
 Provide the GSA SmartPay card-sized booklet, “Helpful
Hints for Purchase Card Use” and “Helpful Hints for Travel
Card Use” with each cardholder application
 Publish frequently asked questions (FAQs) related to the
charge card on your agency’s/organization’s website
 Eliminate manually performing data analysis by developing
ad hoc reports that can be generated as needed
 Perform an annual review of all issued cards to determine if
each cardholder meets the criteria for continued
participation in the federal government purchase charge
card program
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Federal Acquisition Service
Leading Practices: Payment Reconciliation
 Reconcile frequently, at least
once a month
 Reconcile interface files/mappers
to statements/invoices
 Confirm payment and generate
invoice status reports
 Review payment reconciliations
to ensure agency and bank
records agree
 Monitor the status of disputed
transactions
Benefits of Payment
Reconciliation:
• Avoid hidden delinquencies
• Frequent reconciliation
leads to smooth program
close-out
• Avoid out of balance
conditions between
agencies/organizations and
issuers
More information on this topic will be provided during the “GSA SmartPay Charge Card
Reconciliation” See program for more information. Presentation will be available on our
website following the conference.
Federal Acquisition Service
Leading Practices: Reporting
GSA SmartPay2 contractor banks are required to issue a set of reports to
A/OPCs (determined by the agency/organization) that cover topics such as
transactions, payments, disputes, delinquencies
 Monitor reports regularly
 Use reports proactively, not
reactively
 Understand and familiarize
yourself with all available
reports
 Develop ad hoc reports
Benefits of Reports:
• Allow A/OPCs to oversee their GSA
SmartPay charge card program’s
overall financial condition
• Monitor for potential
fraud/waste/abuse
• Provide invoice, payment, and
refund data
• Supply necessary data to fulfill
OMB requirements
A full listing of agency reports can be found in section C.3.3.1 of the GSA
SmartPay2 Master Contract
Federal Acquisition Service
Leading Practices: Training
 Provide a comprehensive face-to-face cardholder training
as orientation for new cardholders
 Discuss agency/organization policy
 Ensure cardholders and A/OPCs fulfill the required
refresher training requirements at a minimum every three
years, or more frequently per agency/organization policy
 Ensure that training is easily accessible
 Engage in bank-provided training
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Resources & Contacts
Federal Acquisition Service
Training Resources
 GSA SmartPay Online Training:
 GSA SmartPay Travel Cardholder and A/OPC Training
 GSA SmartPay Purchase Cardholder and A/OPC
Training
 Requested on-site training with banks
 Training Sessions at the Annual GSA SmartPay Conference
 Publications and materials are available on-line and may be
ordered via the Centralized Mailing List Service (CMLS)
website. (Can be ordered onsite at our Welcome Center)
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Federal Acquisition Service
Other relevant GSA SmartPay Courses:
 GSA SmartPay2 Purchase Card Basics
 GSA SmartPay2 Travel Card Basics
 GSA SmartPay2 Fleet Card Basics
 GSA SmartPay2 Master Contract Basics
 GSA SmartPay Program Update
 GSA SmartPay in More than One Flavor: Innovative Products &
Services
 Basic Charge Card Payment Reconciliation
 Navigating the GSA SmartPay Website
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Federal Acquisition Service
Questions
Please provide your feedback and thoughts about the current
and future program at: www.gsa.gov/gsasmartpay
under “GSA SmartPay Program Feedback Form”
Contact Us
Joline McDonald, [email protected]
Elizabeth Skolnik, [email protected]
GSA SmartPay Program Support
Phone: (703) 605-2808
E-mail: [email protected]
www.gsa.gov/gsasmartpay
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Federal Acquisition Service
Thank you!
Federal Acquisition Service
APPENDIX - Sample Scenarios
Federal Acquisition Service
What’s wrong with this scenario?
Case #1
 A cardholder conspired with a local business owner to make purchases
not authorized by the cardholder’s agency. The merchant circumvented
the authorization process to allow the cardholder to make purchases for
his personal consumption. The cardholder approved the transactions.
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What’s wrong with this scenario?
Case #2
 A business owner approached a cardholder and offered to provide
kickbacks to the cardholder if the cardholder made supply purchases
from his business. The cardholder was authorized to make purchases
of these supplies and the supplies were delivered. The company
provided false receipts for the supplies. The cardholder repeatedly
made transactions with this company. The company paid cardholder a
percentage of sales.
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Federal Acquisition Service
What’s wrong with this scenario?
Case #3
 A cardholder obtained goods and services for personal use. The ship to
address was the employee’s home. A third party did not confirm receipt
of the materials. The cardholder advised the merchant to split
transactions to ensure they would not exceed the cardholder’s single-
purchase limit.
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