federal acquisition service u.s. general services administration conduct effective oversight of your...

Federal Acquisition Service

U.S. General Services Administration

Conduct Effective Oversight of Your GSA SmartPay2 Program

Conduct Effective Oversight of Your GSA SmartPay2 Program

Joline McDonaldElizabeth SkolnikOffice of Charge Card Management (OCCM)

12th Annual GSA SmartPay Training ConferenceAugust 10 – 12, 2010

Joline McDonaldElizabeth SkolnikOffice of Charge Card Management (OCCM)

12th Annual GSA SmartPay Training ConferenceAugust 10 – 12, 2010


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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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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GSA SmartPay2 Program Overview

The GSA SmartPay program, enables over 350 Federal agencies/organizations to obtain charge card products and services through master 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

DID YOU KNOW…$943 was spent using Federal charge cards every second in FY09

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Preventing Waste, Fraud and Misuse/Abuse


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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

Source: GAO-08-333


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GAO Report on Government Purchase Cards

Case studies that the GAO examined included:

Source: GAO analysis of bank data and supporting documentation.

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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GAO RecommendationsGSA 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

Source: GAO-08-333


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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

Source: GAO-08-333


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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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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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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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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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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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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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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)

Additional consequences include:• Reprimand• Counseling• Cancellation of card• Notation in employee performance evaluation• Suspension or termination of employment• Criminal prosecution

DID YOU KNOW…Many agencies/ organizations have their own policies for consequences related to fraud and misuse.


Program Oversight - Roles & Responsibilities


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Addressing Misuse/Abuse and FraudWhat 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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Roles & Responsibilities of A/OPCsA/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


Establish Internal PoliciesA/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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Establish Internal ProceduresA/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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Risk Management ControlsA/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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ATM SafetyATMs 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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Charge Card Management Oversight


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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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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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.


Leading Practices: Reporting

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

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

A full listing of agency reports can be found in section C.3.3.1 of the GSA SmartPay2 Master Contract


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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


Resources & Contacts


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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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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QuestionsPlease provide your feedback and thoughts about the current

and future program at: www.gsa.gov/gsasmartpayunder “GSA SmartPay Program Feedback Form”

Contact UsJoline McDonald, [email protected]

Elizabeth Skolnik, [email protected]

GSA SmartPay Program Support Phone: (703) 605-2808

E-mail: [email protected]

www.gsa.gov/gsasmartpay


Thank you!


APPENDIX - Sample Scenarios


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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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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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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