DOD policing purchase card use

DOD IG Report: Summary Report on the Join Review of Selected DoD Purchase Card Transactions

Data mining techniques have enabled the Defense Department and its agencies to crack down on fraudulent and inappropriate use of purchase cards, according to a report the DOD Inspector General released late last month.

The IG said that continuous monitoring of the system is required to prevent future misuse of the cards. This misuse has resulted in millions spent on items and services for which use of the cards was never intended, ranging from plastic surgery to prostitutes to costumes and jewelry

The report indicates that an automated data mining process, which would be able to flag suspected fraudulent transactions and more closely scrutinize them, is the best first step to take in the monitoring process.

"DOD management needs to establish and maintain a culture that promotes a positive and supportive attitude toward internal controls and conscientious management," the report stated. "Such an environment is the foundation for all other control standards that provide discipline, structure and a climate that influences quality."

By using data mining tools to assign risk to individual transactions, the report noted that managers and supervisors are forced to perform their oversight responsibilities, and take appropriate actions to correct improper use and perform follow-up.

The latest batch of culprits were caught between October 2000 and December 2001 purchasing a $232 Santa suit, a motorcycle, and accessing pornographic and gambling Web sites.

The IG also acknowledged that not all purchases were made by the cardholder, and, in some cases, stolen card numbers led to unauthorized purchases. For instance, the Air Force reported 155 purchases totaling $30,000. The cardholders successfully disputed 118 of those charges, amounting to more than $28,000.

Other transactions, however, were not so benign. Two Washington Headquarters Services employees used a card to make 500 purchases of goods and services for the sole purpose of defrauding the government. Both were caught; one was imprisoned and the other was sentenced to probation. Both have been ordered to repay the government.

"We believe effective controls can be facilitated by developing an automated oversight program using data mining techniques that can detect potentially fraudulent, wasteful or abusive purchase card transactions," the report concluded. "Based on the actions that DOD management has initiated or taken, this report makes no recommendations for corrective action."