U.S.

Department of Energy
Western Area Power Administration
HQ Procurement Office &
Internal Audit and Compliance Office

Capping Report
Internal Control Weaknesses in Western Area Power
Administrations Purchase Card Program

W-IA&C 2016-03

February 2016

United States Government

MEMORANDUM

DATE:
REPLY TO
ATTN OF:

Depaiiment of Energy
Western Area Power Administration

February 4, 2016

PJDc,,,.,.rrem=.L~ J,,._

jJ

A7100, George A. Kelley, Director of

_
A8500, Lisa Hansen, Supervisory Auditor, Governance and Poli~~d. ~

SUBJECT:

Capping Repmi on Internal Control Weaknesses in Western Area Power

Administration's Purchase Card Program

TO:

A 7000, Anthony Montoya, Executive Vice President and Chief Operating

Officer

This capping repmi summarizes the results of the Offices of Procurement and Internal Audit
and Compliance's (IA&C) review of Western Area Power Administration's (Western)
compliance with established policies, procedures, and standards related to its Government
Purchase Card (GPC) Program. Between December 2014 and October 2015, we issued five
separate reports on the GPC Program- one repmi for each ofWestern's four regional
locations (Dese1i Southwest, Upper Great Plains, Rock)' Mountain, and Sierra Nevada) and a
repmi for the Headquarters Office (HQ). For these five reviews, we data mined over 86,800
transactions totaling more than $37.3 million and examined just over 12,000 (14%) of those
transactions totaling around $7 .2 million (19% ). Of the transactions reviewed, we identified
more than 11,600 (13%) transactions totaling approximately $6.8 million (18%) that required
further review by regional and headquarters' officials.
While we found some areas that appear to be compliant, the majority of the GPC Program
aieas tested were non-compliant with established policies and procedures, lacked necessary
internal controls, and failed to meet minimum GPC requirements. Specifically, based on our
review of over 12,000 GPC transactions, we found weaknesses in the control environment
that contributed to potentially fraudulent or improper transactions. These weaknesses
included:
Completed annual management reviews were ineffective;
Inadequate oversight and monitoring at various levels; and
Ineffective and in some cases non-existent internal control activities.
Our previously issued GPC repmis discuss in detail the findings relating to Western's
compliance with GPC policies and procedures with regard to the tested transactions. The
purpose of this report is to summarize the findings from our prior reports and include
recommendations that we believe will have Western-wide applications to improve its GPC
program. Management comments are included in their entirety in Appendix III.

BACKGROUND
Breakdowns in the internal controls over purchase card programs have been the subject of
Congressional and media scrutiny for several years. For example, in October 2014, the
Chairman of the Oversight and Government Reform Subcommittee on Government
Operations requested that the U.S. Government Accountability Office conduct an
investigation into potential waste, fraud, mismanagement, and abuse in the use of federally
issued purchase cards, with a focus on transactions involving small purchases. These small
purchases, known as micro purchases, are not to exceed $3,000 per transaction, but in
aggregate can easily surpass several million dollars over the course of a year. Westerns
management supports and encourages the use of a well-controlled and executed GPC
Program and stresses the importance of having adequate internal controls to protect Western
from fraud, waste, and abuse.
Responsibility for the GPC program was delegated by the Head of the Contracting
Activity (HCA) to the previous Directors of Procurement (Director), who further
delegated this responsibility to the Administrative Officer in each region. The
Administrative Officers remained responsible for the program until the current Director
reported for duty in January 2014 and was subsequently delegated program responsibility
by the HCA on March 17, 2014, and he has chosen not to re-delegate his authority.
Western consists of a Headquarters (HQ) and four regional offices located throughout its 15state service area, to include Desert Southwest (DSW), Upper Great Plains (UGP), Rocky
Mountain (RM), and Sierra Nevada (SN). For the purpose of our purchase card review, the
Colorado River Storage Project Management Centers transactions were reviewed in
conjunction with the RM review. As of July 2014, Western had a total of 1,439 employees
and 476 Government Purchase Card cardholders (GPC-CH).
Westerns Employees and Active GPC-CH at its Five
Locations
# of
Active
% GPC-CH to
Office Locations
Employees GPC-CH
# Employees
Headquarters
278
30
10.8%
Desert Southwest
216
65
30.1%
Upper Great Plains
363
177
48.8%
Sierra Nevada
183
56
30.6%
Rocky Mountain
399
148
37.1%
Total
1,439
476
Due to concerns raised in DSW regarding the possibility of the questionable use of purchase
cards for up-fitting (accessorizing) of Government owned and/or leased vehicles, the Director
initiated a review of these questionable transactions. Based on the results of that review,
confirming the misuse of the purchase card, the Director requested that the Office of IA&C
participate in a joint review of DSWs entire purchase card program. Subsequently, a decision
was made to review the purchase card program Western-wide. Therefore, over the past 14
months, the purchase card review teams conducted similar reviews of the GPC Program at

Westerns other locations in the following order: HQ, RM, UGP, and SN. The focus of the
audits was on those transactions that appear to be higher risk based on attributes such as the
merchant name, dollar amount, trends in purchase dates, and description of the transaction.
RESULTS OF REVIEW
Based on the transactions we reviewed, we found weaknesses in Westerns control
environment that contributed to breakdowns in key control activities and potentially
fraudulent and improper purchase card transactions. Ineffective oversight of the GPC
Program by the HQ Procurement Policy team and regional Administrative Officers
contributed to these weaknesses. Specifically, we identified ineffective monitoring or
oversight activities for assessing program results, evaluating internal controls, and identifying
the extent of potentially fraudulent, improper, and abusive or questionable purchases. In
general, effective oversight activities would include regular management reviews and
evaluations of how well the purchase card program is operating, as well as any associated
internal control activities. The control weaknesses and supporting examples of potentially
fraudulent or improper transactions are summarized later in this report.
It is important to note that during the completion of the GPC audits, Westerns management
took immediate action. The following are measures taken by HQ and the regions:
1. On August 21, 2014, the HCA notified Westerns Managers that several instances of
improper use of Government purchase cards had been identified, which included
possible unlawful activity, unauthorized and questionable purchases, inability to
account for certain property, and splitting of purchases to circumvent transaction
limits. The HCA further stressed the seriousness of these issues and emphasized how
crucial it was that the purchase card users and approving officials fulfill their
obligations and scrutinize every purchase to ensure proper use.
2. The regions have:
a. addressed the need to reduce the total number of GPC cards, and
b. provided additional training to regional staff.
3. The Procurement Director has:
a. issued Westerns Government Purchase Card Policy and Operating Procedures;
b. reduced the available monthly credit exposure Western-wide by $1.5 million
(from $4 million to $2.5.million);
c. reviewed and adjusted single purchase and cycle limits;
d. required documented business case justifications Western-wide for all new requests
to open a GPC account as well as any changes to existing accounts;
e. reduced infrequently used GPC cards, to include, evaluating the monthly available
credit limits to determine if they should be reduced;
f. re-evaluated the unblocked MCCs with Westerns stakeholders and re-blocked all
these codes in accordance with DOEs policies and procedures;
g. initiated 90 day reviews of new cardholder account activity to ensure adherence to
GPC procedures; and

h. developed supplemental training to present to the regions in addition to the

mandatory biennial GPC training to further reinforce the importance of effective
controls and adherence to laws, regulations, and policies and procedures.
While these are steps in the right direction, further actions are needed to strengthen the
controls over Westerns GPC Program. The purchase card is a valuable tool for Western to
streamline the process to meet its purchasing needs. However, implementing a program
without effective controls or adequate management oversight can lead to potentially
fraudulent, improper, and abusive or questionable transactions to go undetected. The
problems we identified, of the transactions reviewed, with missing supporting
documentation, insufficient Procurement Office reviews, and failures to follow laws,
regulations, policies and procedures, and standards for internal controls, leave Western
vulnerable to potential fraud, waste, and abuse.

cc: M. Gabriel, A0000, Lakewood, CO

L. Kimberling, A8000, Lakewood, CO
R. Harris, B0000, Billings, MT
R. Moulton, G0000, Phoenix, AZ
B. Warren, J0000, Loveland, CO
L. Jeka, L0000, Salt Lake City, UT
S. Paluru, N0000, Folsom CA

TABLE OF CONTENTS

Results of Review.............................................................................................................. 1
Appendices
I. Objective, Scope, and Methodology.......................................................................... 16
II. Definitions .............................................................................................. 17
III. Managements Response.............................................................................................19

Internal Control Weaknesses in Westerns Government Purchase Card Program

Weaknesses in Overall Control Environment

We found weaknesses in Westerns control environment at each of its four regional locations
and its headquarters office, and breakdowns in key control activities that resulted in
potentially fraudulent and improper purchase card transactions. Ineffective oversight of the
GPC Program contributed to these weaknesses. In general, effective oversight activities
would include regular management reviews and evaluations of how well the purchase card
program is operating, including other associated internal control activities. However, we
identified inadequate monitoring and oversight activities by the Administrative Officers
directed at assessing program results, evaluating internal controls, or identifying the extent of
potentially improper purchases. In addition, the HQ Procurement Office did not provide
adequate oversight and management of the Government Purchase Card (GPC) program.
The Government Accountability Offices (GAO) Standards for Internal Control in the
Federal Government 1 states that Management and employees should establish and maintain
an environment throughout the organization that sets a positive and supportive attitude
toward internal control and conscientious management. A positive control environment is
the foundation for all other standards. It provides discipline and structure as well as the
climate which influences the quality of internal control.
In addition, according to GAOs Internal Control Standards: Internal Control Management
and Evaluation Tool2, agency internal control monitoring assesses the quality of performance
over time. It does this by putting procedures in place to monitor internal control on an ongoing basis as a part of the process of carrying out its regular activities. It includes ensuring
that managers and supervisors know their responsibilities for internal control and the need to
make internal control monitoring part of their regular operating processes. Ongoing
monitoring occurs during normal operations and includes regular management and
supervisory activities, comparisons, reconciliations, and other actions people take in
performing their duties.
Lastly, GAO's Standards for Internal Control in the Federal Government3 states that
transactions and other significant events should be authorized and executed only by persons
acting within the scope of their authority. This is the principal means of assuring that only
valid transactions to exchange, transfer, use, or commit resources and other events are
initiated or entered into.
Ineffective Annual Management Reviews
The Department of Energys (DOE) Purchase Card Policy and Operating Procedures4
(Procedures) state that the HCA should ensure annual reviews of cardholder records are
conducted and documented to determine the extent of adherence to prescribed procedures,

GAOs Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1, November 1999
GAOs Internal Control Standards: Internal Control Management and Evaluation Tool, GAO-01-1008G, August
2001
3
GAOs Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1, November 1999
4
Department of Energy Purchase Card Policy and Operating Procedures, CHAPTER 13.1, August 2012
2

Internal Control Weaknesses in Westerns Government Purchase Card Program

guidelines, policies, regulations, and good management practices, and to identify any needs
for improvement, guidance and/or training. These reviews should include an assessment of
the appropriateness of transaction dollar limits as well as confirmation of the need for the
account based upon usage. The review should also include selecting a sampling of
cardholder records within each of the approving officials accounts and completing a
designated checklist for each individual record reviewed in the sample selected. While
annual reviews were performed, based on the number of questionable and/or improper
transactions and lack of documentation we identified, it was evident that some reviews were
not sufficiently performed, nor were they adequately reviewed/documented by the HQ Policy
Team, otherwise these items would likely have been identified and appropriate action taken
prior to our reviews.
The Director of Procurement took corrective measures to address the weaknesses identified
in completing the annual management reviews by substituting robust reviews of the GPC
Program Western-wide that included data mining and analysis of transactions, review of
available supporting documentation and approvals, assessment of cardholder spending limits
and credit exposure to Western.
Inadequate Daily Oversight and Monitoring
Our testing revealed limited, and in some cases no documented evidence of approving
officials reconciliation of documentation supporting cardholders transactions to their
statements. Financial Management Regulation, volume 10, chapter 10, section 1203, states
that (1) cardholders are to reconcile each statement against supporting documentation and
sign the statement, and (2) approving officials are to reconcile the cardholders statement and
sign the consolidated monthly bill. Further, DOEs Procedures state that the approving
official must review, approve, and sign the monthly account statement. The approving
officials signature represents, among other things; that (1) all purchases were authorized, (2)
the cardholder did not make repetitive purchases for the same item from one merchant, (3)
purchases were not split, (4) documentation for the purchase transaction was completed, and
(5) documentation and invoice dates match purchase dates. The violations we identified of
non-compliance with laws, regulations, and policies and procedures demonstrated that the
approving officials did not perform their monitoring responsibilities as required.
Approving Official Review
We noted a trend during our review where the approving official certified the billing
statement for payment but had not examined the transactions or the supporting
documentation to determine whether the transactions were correct and for a valid
Government purpose. Such activities could allow potentially fraudulent, improper, abusive,
and questionable purchases to go undetected. Examples of these transactions are
summarized later in this report.
The approving officials reviews are a recognized control activity at all levels of the purchase
card program. DOEs policy and guidance requires approving officials to review and certify
each cardholders monthly transactions. Without documentation of such reviews, neither the
2

Internal Control Weaknesses in Westerns Government Purchase Card Program

Procurement Office as program oversight, nor the program coordinators, or other

management officials could determine whether the approving officials were carrying out
their review responsibilities as required.
Controls over the Issuance and Assessment of Ongoing Need for Cards
Carefully controlling the issuance of cards and continually re-assessing the need and
justification for outstanding cards are important issues in managing the Governments risk in
the purchase card program. However, we found that there was no review that systematically
considered Westerns mission needs based on the volume of active purchase cards. For
example, we identified over 100 infrequently used cards from our sampled transactions with
a total credit exposure over $1,500,000. We defined infrequently used cards as those
cardholders with GPC activity that trended at a level lower than the general volume of GPC
activity according to region or HQ location.
During the course of our reviews, we noticed that Western officials closed some of the
infrequently used purchase cards we identified; however, these cards were generally closed
due to retirements or transfers, rather than based on an analysis of Westerns credit exposure.
As noted in the following section, Cardholder Spending Limits, some cardholders had higher
than normal purchase limits for emergency purposes. Infrequently used cards and limits that
are higher than justified by the cardholders authorized and expected usage unnecessarily
increases the Governments exposure to potentially fraudulent, improper, and abusive
purchases. Limiting credit available to cardholders is a key factor in managing the purchase
card program and in minimizing the Governments financial risk. The Director of
Procurement (Director) has taken corrective action Western-wide to reduce infrequently used
GPC cards, to include, evaluating the monthly available credit limits to determine if they
should be reduced.
Cardholder Spending Limits
For each Western location, the individual supervisors requested the single purchase and total
credit limits for each cardholder. In the past, these purchase limits were not controlled or
determined by the Regional Administrative Officer as program coordinator, or
assessed/reviewed by the HQ procurement policy manager or program coordinator. For
example, in one region, all but two cardholders had single purchase limits set at $3,000. One
cardholders limit was $2,500 and the other was set at $100,000. The cardholder with the
higher dollar amount was a procurement official who had a higher than normal limit for
emergency purposes. We found that individual transaction limits were generally set at the
micro-purchase threshold ($3,000) Western-wide; however we did not see evidence that
these purchase limits were set based on an analysis of individual cardholders needs or past
spending patterns.

Internal Control Weaknesses in Westerns Government Purchase Card Program

The table below quantifies Westerns purchase card expenditure limits for reviewed
cardholder accounts.

Office
Locations
Headquarters
Desert
Southwest
Upper Great
Plains
Sierra
Nevada
Rocky
Mountain
Total

Cardholders Purchase Limits

# of Active # of Cardholders # of Cardholders # of Cardholders
Cardholders
with Purchase
with $3,000
with Purchase
Reviewed
Limits < $3,000 Purchase Limits Limits > $3,000
26
2
24
0
65

58

168

76

90

50

42

133

131

442

91

345

The Director has taken corrective action to review and adjust all single purchase and cycle
limits when necessary. He is also requiring documented business case justifications Westernwide for all new requests to open a GPC account as well as any changes to existing accounts.
Procurement of Services Using the GPC
We identified several transactions where purchase cards or convenience checks were used to
procure services that were in violation of the Service Contract Act (SCA). According to the
SCA, the GPC should not be used to obtain services greater than $2,500 in a single year.
However, we found that purchase cards were used to procure services for amounts greater than
the annual SCA dollar threshold. For example:

In one region, several monthly charges were made for garbage collection services from
January 2012 through May 2014. Specifically, the region charged $6,299.92 in calendar
year (CY) 2012, $5,265.82 in CY 2013, and $3,420.53 from January through May of
2014; for a total of $14,986.27; and

In another region, one cardholder exceeded the SCA annual limit with purchases for pest
control services. Specifically, for CY 2012, CY 2013 and through July 2014, purchases
totaled $9,102.33, $6,637.96, and $4,737.95 respectively. In aggregate, the amount paid
by purchase card to this vendor (for the period reviewed) was $20,478.24.

These services were purchased without consideration of terms and conditions, necessary
licenses, etc., creating significant risk for Western. Services charged on the GPC that
routinely exceeded the maximum dollar threshold included payments for management,
consulting, public relations, and many other commonly used services. Payments to these
vendors demonstrated clear violations of the GPC program requirements.
4

Internal Control Weaknesses in Westerns Government Purchase Card Program

Proper Procurement Vehicles Were Not Used for Certain Procurements

Of the 12,000 transactions reviewed, we could not find documented evidence that the priority
of sources requirements was met or considered. For example, purchases of office supplies,
boots, Nomex gear, printer toner, computer equipment, electronics, and other items that are
readily available through General Services Administration (GSA) were purchased on the
open market, often times at substantially greater cost. All GPC purchases must be performed
in accordance with the Federal Acquisition Regulation (FAR) Part 8, Required Sources of
Supplies and Services, Part 12, Acquisition of Commercial Items, Part 13, Simplified
Acquisition Procedures, and others as applicable. During our review of all five Western
locations, we did not find support documenting that cardholders considered market research
prior to making purchases, which contributed to possible overpayments for readily available
items. In addition, we found that supplies, clothing, furniture, and other items were
purchased at commercial sources that were available from mandatory sources such as the
AbilityOne Program and UNICOR.
Key Internal Control Activities Were Not Effectively Implemented
The review results of the selected transactions demonstrated that key internal control
activities over Westerns purchase card program were either ineffective or not in place. Poor
internal controls created a weak control environment that permitted potentially fraudulent
and improper transactions to occur. Control activities occur at all levels and functions of an
agency. They include a wide range of diverse activities such as approvals, authorizations,
verifications, reconciliations, performance reviews, and the production of records and
documentation. We found that the following control activities were either not effective or
were not in place: (1) obtaining and retaining invoices and documentation supporting
purchase card transactions, (2) purchases made to blocked merchant category codes (MCC)
as mandated by DOE, (3) training on the purchase card program at the region level, and (4)
accountability over property procured with the purchase card.
Obtaining and Retaining Invoices and Supporting Documentation
For the transactions reviewed, GPC-CHs and approving officials did not maintain proper
documentation to support purchases. For example, in our requests for supporting
documentation for selected transactions at each of Westerns locations, personnel were
unable to locate or could not provide satisfactory evidence to support transactions for
approximately 270 cardholders. According to DOE procedures, cardholders are required to
reconcile the statement of account with their purchase card log and convenience check log (if
applicable) and maintain copies of charge/credit slips, customer receipts, and other required
documentation. Documentation of the following is also required: (1) consideration of prices
obtained from a single source that are found to be fair and reasonable, if the purchase is made
without securing competitive quotations, (2) evidence that the purchases are distributed
among qualified suppliers by rotating recurring procurements among merchants, and (3)
justification for verbal and mail order (internet) purchases of supplies or services
(competition, fair price, delivery, etc.). In all cases, there needs to be a complete audit file,
but we found that this did not exist. In fact, there was no indication of quality, detailed
5

Internal Control Weaknesses in Westerns Government Purchase Card Program

reviews by the approving officials, regional Administrative Officers, or the HQ Procurement

Policy team.
In addition, we identified multiple purchases made from single vendors with no
documentation to support whether prices were fair and reasonable and/or the rationale for not
distributing purchases among qualified suppliers. In summary, very few of the transactions
we reviewed were properly documented and supported. In addition, no explanations were
provided to support purchases in instances when documentation was missing.
Further, according to DOEs Procedures, cardholders must maintain a purchase card log. At
a minimum, the log should contain the date on which the item or service was ordered, the
merchants name, the dollar amount of the transaction, a description of the item or service
ordered, and an indication of whether the item was received. Our review indicated that the
majority of these logs are not being maintained in accordance with the guidance.
GAOs Internal Control Standards state that All transactions and other significant events
need to be clearly documented, and the documentation should be readily available for
examination. All documentation and records should be properly managed and maintained.
Without supporting sales receipts or invoices, it is not possible to ascertain the quantity and
type of items purchased or whether those items were for a valid Government requirement or
of a personal nature.
Purchases Made to Mandated Blocked MCC Codes
Western cardholders made transactions to multiple MCCs that DOE had designated to be
blocked. Specifically, 337 transactions totaling $164,191.62 were made using the purchase
card to merchants with these MCCs. The MCC descriptions included motorcycle shops,
automotive body repair and paint shops, car washes, and towing services. DOEs Procedures
state that should a cardholder need to make a valid purchase from a merchant in one of these
category codes, the Organizational Program Coordinator (OPC) will need to clear the
purchase with the JPM Chase Bank. If recurring transactions need to be made from blocked
MCCs the OPC shall submit a request, with justification, to the agency point of contact for
approval.

Internal Control Weaknesses in Westerns Government Purchase Card Program

The table below details the number of transactions and amounts charged to MCC codes that
were designated to be blocked and example merchants from those specific MCC codes.
Transactions to Potentially Blocked MCCs
MCC
MCC
Code
Description
5571 Motorcycle
Shops and
Dealers
7531 Automotive
Body Repair
Shops
7535 Automotive
Paint Shops
7542

Car Washes

7549

Towing Services

Example Merchants
Cycle Gear, Craig Power
Sports, Champion Cycle,
Adrenaline Powersports
Cutting Edge Auto Glass,
Collins Auto Renewal, AAA
Window Tint
Beaver Stripes, Hightower
Supply #2, Auto Body
Specialties, Beller Equip
The Car Wash, Cowboy Auto
Spa, Hamilton Touchless,
Kwik and Kleen Carwash
Interstate Towing, Hartz E&F
Towing, MW Towing,
California Towing
Total

# of
Transactions
$102,591.27
152
$ Charged

$42,014.46

82

$1,063.09

$4,862.81

68

$13,659.99

27

$164,191.62

337

In November 2014, the Director obtained a list of unblocked MCC codes for Western. Upon
review, all of the previously referenced MCC codes had been requested by Western, at some
point, to be unblocked by DOEs Agency Program Coordinator. However, the Director was
unable to locate the required written justification documenting that the HQ Level IV OPC or
regional Administrative Officer requested that the DOE HQ Agency Program Coordinator
approve the use of these codes, or any documentation to indicate the reasoning for the MCCs
to be unblocked at all. Upon request, DOE provided evidence of a request by Western (in
2008) as a seemingly temporary solution to address issues with Westerns Fleet Cards,
although, there was no documentation of any follow-up once the Fleet Card issues were
resolved. Since the completion of our audits, the Director re-evaluated the unblocked MCCs
with Westerns stakeholders and re-blocked all these codes in accordance with DOEs
policies and procedures.
Lack of Training at the Regional Level
Neither the regional Administrative Officers nor the HQ Procurement Policy team provided
any regional or Western specific training, local procedures or processes, or supplemented the
minimum required training to ensure assigned cardholders understood program requirements.
In addition, minimal oversight of cardholder transactions and approving officials records
significantly contributed to deficiencies within this area of responsibility. To address this
issue, the Director is developing supplemental training to present to the regions in addition to
the mandatory biennial GPC training to further reinforce the importance of effective controls
7

Internal Control Weaknesses in Westerns Government Purchase Card Program

and adherence to laws, regulations, and policies and procedures. In the interim, GPC training
has been added to regional craft training sessions that has been conducted by both HQ
program coordinators and regional coordinators.
According to GAOs Internal Control Standards: Internal Control Management and
Evaluation Tool 5, to effectively manage the workforce to achieve results the agency should
consider ensuring that Employees are provided orientation, training, and tools to perform
their duties and responsibilities.
Lack of Property Accountability
We were unable to confirm the existence of documentation or locate evidence that personal
property purchased and receipted by the cardholder was reported to the property management
office for proper accountability and control. DOEs procedures state that personal property
purchased and receipted by the cardholders is to be reported to the property management
office, in writing, that includes the cardholders name, office, telephone number, building
and room number; nomenclature, model and serial numbers of the property, original
acquisition cost, delivery or acceptance date, receipt verification (witness name, office,
telephone number, building and room number). Also, personal property appears to have been
purchased for and provided to contractor personnel without authority or accountability.
In addition, each card purchase is required to be manually or electronically documented,
which includes evidence of transaction completion and receipt of property. Property receipts
are required to be submitted along with the monthly statement of account to the approving
official, and the original is to be maintained by each cardholder for record keeping purposes.
However, cardholders and approving officials did not ensure accountable, sensitive, and
other property was properly accounted for and recorded. We concluded that a very high
percentage of the files reviewed did not meet minimum documentation requirements
regarding personal property or other general program requirements.
Control Weaknesses Contributed to Potentially Fraudulent or Improper Transactions
GAO has found numerous instances of fraud, waste, and abuse related to the purchase card
program at dozens of agencies across the Government. Internal control weaknesses in
Westerns purchase card program directly increase the risk of fraudulent, improper, and
abusive transactions. For example, we identified several purchase card transactions Westernwide that were either potentially fraudulent or improper. The following describes some of
these examples.
Potentially Fraudulent Purchases
We identified several purchases of items that could have been for personal use at each of
Westerns five locations, which are considered potentially fraudulent according to GAOs
definition. However, because of the lack of supporting documentation in the cardholders

GAOs Internal Control Standards: Internal Control Management and Evaluation Tool, GAO-01-1008G, August
2001

Internal Control Weaknesses in Westerns Government Purchase Card Program

files, we were unable to determine the justification for the purchases or conclude whether
they were for Government use. GAO defines fraudulent purchases as the Use of the
government purchase card to acquire goods or services that are unauthorized and intended for
personal use or gain. Transactions we questioned were to merchants such as, Amazon,
Cabelas, Walgreens, Bass Pro Shops, Target, and others. The table below provides
examples of the potentially fraudulent transactions we identified Western-wide and the
charges within various merchant categories.
Purchases for Potentially Fraudulent Transactions

MCC Description
Book Stores
Clothing-Sports Riding
apparel, Clothing,
Apparel and Accessory,
Clothing Rental
Drug Stores,
Pharmacies
Grocery Stores,
Supermarkets
Recreational & Utility
Trailers
Shoe Stores,
Commercial Footwear
Specialty Retail Stores
Misc.
Sporting Goods Stores

Example Merchants
Amazon.com, Amazon Marketplace
Payments, Barnes & Noble

$ Charged
$271,533.41

Dicks Clothing and Sporting,

Riverside, Gear Up and Get Out There,
Work Wear, Inc.

$92,135.64

Walgreens, Rocky Mountain Sunscreen

$4,994.18

Target, Walmart, Safeway

Affordable Trailers, Als Trailer Sales,
Lances Triple T Trailers
Hoffman Boots, Red Wing Shoes, Boot
Barn, Waynes Boot Shop
The Glove Wagon, Murdochs Ranch
& Home Supply, Lintons Big R
Bass Pro Shop, Cabelas Retail, Jax
Outdoor Gear, Sportsmans Warehouse
Total

$89,358.76
$128,901.40
$104,826.08
$942,185.58
$196,389.92
$1,830,324.97

Improper Purchases and Transactions

Our data mining identified numerous examples of potentially improper transactions. GAO
defines improper purchases as Government purchase card transactions that are intended for
government use but are not permitted by law, regulation, or organization policy. We
identified transactions from our review of the sampled transactions that were improper;
including split purchases and purchases from improper sources. Examples we found
included (1) split purchases made to circumvent the cardholders single-purchase limits or to
avoid the need to obtain competition on purchases over the $3,000 micro-purchase limit; (2)
improper sources when cardholders did not buy from a mandatory procurement source, or
document reasoning for not purchasing from these sources; (3) improper use of convenience
checks; and (4) purchases that were prohibited or otherwise not authorized by federal law,
regulation, or Government/agency policy. Our review documented purchases by and for
contractor personnel that were prohibited. We also identified instances of contractor
personnel performing inherently Government functions such as determining what items and
9

Internal Control Weaknesses in Westerns Government Purchase Card Program

from which vendors purchases were made. The following paragraphs provide further details
on the potentially improper purchases and transactions we found Western-wide.
Split Purchases
A split purchase is the practice of dividing a purchase into two or more smaller transactions
to keep each transaction under a cardholders single purchase limit, or other established
credit limits. Based on our data mining, we identified transactions totaling over $2.7M that
potentially could have been split purchases. However, because supporting documentation
was not always maintained and available for review, we could not confirm the total number
of actual split purchases. Therefore, Western regional and HQ offices will perform a more
detailed review to determine the substance of these transactions.
The Federal Acquisition Regulation (FAR) and DOEs purchase card procedures prohibit
these practices. Once items exceed the $3,000 threshold, they are to be purchased in
accordance with simplified acquisition procedures, which are more stringent than those for
micro-purchases. During our review, we identified examples where cardholders potentially
split transactions to a single merchant as well as multiple cardholders splitting transactions to
the same merchant.
Order of Precedence
Another type of improper purchase occurs when cardholders do not buy from a mandatory
procurement source or consider the priorities for use of mandatory sources required by FAR
Part 8. If not a mandatory source, agencies are encouraged to consider satisfying
requirements from or through non-mandatory sources such as Federal Supply Schedules or
Government-wide acquisition contracts. While procurement sourcing was not the primary
focus of our work, we noted that cardholders frequently did not purchase from or through
non-mandatory sources. For example, we noted numerous purchases of office supplies,
personal items, and electronics from local vendors when these or substantially similar
products were available from either mandatory or non-mandatory sources such as the General
Services Administration or one of its contractors catalogs or Web sites, oftentimes at
considerable savings. In addition, supplies, clothing, furniture, and other items were being
purchased at commercial sources that were available from mandatory sources such as the
AbilityOne Program and UNICOR. There was no documentation uncovered that indicated
these sources were considered to determine if their products or services could meet
Westerns needs. Adequacy of program management and control of key supplies and
services could not be determined due to lack of supporting documentation.
Improper Use of Convenience Checks
Our analysis of convenience check use for the scope of the reviews identified purchase
cardholders with convenience check authority that had issued 3,251 convenience checks
totaling $2,341,534.43. The corresponding convenience check fees incurred for these
transactions totaled $35,392.72, or 1.5 percent of the face value of each check processed.
According to DOEs procedures, convenience checks are a payment and/or procurement
tool intended only for use with merchants that do not accept purchase cards and for other
10

Internal Control Weaknesses in Westerns Government Purchase Card Program

authorized purposes where charge cards are not acceptedand should be used as a payment
method of last resort. In addition, because there is a 1.5 percent fee, cost-benefit
considerations are required when using convenience checks. We identified improper use of
convenience checks related to payments for amounts over $2,500 for services and to vendors
who accepted purchase card payments. For example, at one region, we identified 15 separate
convenience checks in excess of the $2,500 limit for services. The dollar amounts of the
checks ranged from just over $2,500 to $3,000 each.
In addition, convenience checks are not authorized for use in construction projects that
exceed $2,000 per requirement. Although there appeared to be examples of this in the
transactions we reviewed, it was difficult to determine if the services identified would be
classified as construction or other services since there was no MCC code attached to these
convenience check transactions and there was minimal or no supporting documentation. For
example, in one region, four checks were addressed to a construction-type company for more
than $7,400 in total; however, due to the lack of supporting documentation, we could not
make a clear determination as to the nature of these transactions.
Further, according to DOEs guidance, cardholders must maintain a Convenience Check Log
that includes the check number, merchant name, business address, merchant tax identification
number or social security number, the description of the purchase, the dollar amount of the
purchase, the dollar amount of the check fee, and the total cost. Our review of the logs
corresponding to the sampled transactions demonstrated that they were not being maintained
in accordance with the guidance.
Prohibited Purchases
We also found instances where DOE purchase cards were used to up-fit and/or accessorize
GSA vehicles. Examples of up-fitting include adding radios, mud flaps, suspension
upgrades, bumpers, different wheels and tires, and high jacks for lifted trucks. The
justification given for adding extra equipment was to enhance GSA vehicles so that they
could better perform duties necessary to carry out Westerns mission.

11

Internal Control Weaknesses in Westerns Government Purchase Card Program

The table below details the dollar amount by vendor we identified during our reviews.
Total Number and Amount of Potential Up-fitting Transactions
Vendor
XTC Motorsports
Bullhide 4X4
Drake Equipment of AZ
Winch Ready
Custom Wheel Service
Rhino Linings
Street Image
Fly-N-Hi
Pickup Specialties
Totally Trucks
4 Wheel Parts
Custom Auto
Chimney Canyon 4X4
Total

Number of
Transactions

Dollar Amount of
Transactions

70
68
42
8
11
16
13
1
4
7
4
7
3
254

$160,669.28
$57,819.77
$53,270.11
$14,518.40
$13,259.08
$12,047.25
$10,346.63
$8,300.00
$6,780.00
$5,536.84
$2,651.00
$2,299.00
$1,785.00
$349,282.36

Using the DOE purchase card to purchase supplies or services for GSA fleet vehicles is
prohibited by DOE policy. In addition, the Code of Federal Regulations requires GSA
approval for the modification of a GSA fleet vehicle, for which we found no evidence of
compliance. We identified several vendors, primarily those listed in the table above, known
to perform potential up-fitting. Some examples of items installed were: lift kits, off road
shocks, custom wheels and tires, custom bumpers, cargo glides, winches, step bars, new
radios, GPS units, and tool boxes.
CONCLUSION
The purchase card is a valuable tool for Western to streamline the process to meet its
purchasing needs. However, implementing a program without effective controls or adequate
management oversight can lead to potentially fraudulent, improper, and abusive or
questionable transactions to go undetected. The problems we identified, in the sample
transactions reviewed, with missing supporting documentation, insufficient official reviews,
and failures to follow laws, regulations, policies and procedures, and internal control
standards, leaves Western vulnerable to fraud, waste, and abuse. Several of the transactions
highlighted within this report are examples of misuse of the purchase card. In addition,
Westerns supervisors did not always demonstrate the commitment to enforce established
controls.

12

Internal Control Weaknesses in Westerns Government Purchase Card Program

We support the use of a purchase card program with effective controls and recognize that
strengthening the control environment will require detailed and continued attention and
commitment by all parties involved. We have provided recommendations to address the
weaknesses identified in this report and to improve Westerns management and
administration of its GPC Program.
RECOMMENDATIONS
To address the weaknesses identified in this report, we recommend that the Chief Operating
Officer direct Westerns Director of Procurement to:
1. Establish a GPC Organizational Program Coordinator position whose primary
responsibility is management and oversight of the GPC Program.
2. Design standardized purchase card and convenience check log templates to track and
record transactions that will be implemented Western-wide.
3. Establish mandatory, Western-wide training (along with an annual refresher) that will
include information on the penalties for misuse of the GPC and/or non-compliance
with program requirements for all cardholders and approving officials.
4. Design and implement procedures to ensure:
a. compliance with DOEs requirement to review all new cardholder files within 3
months of activation;
b. HQ and the regions are conducting robust annual GPC program reviews as
required and that HQ Procurement officials verify the accuracy and completeness
of the reviews, and the validity of the findings. This will also include the
identification of the HQ individual responsible for overseeing the annual
execution of this effort; and,
c. written documentation is completed and maintained as evidence that personal
property purchased and receipted by the cardholder was reported to the property
management office for accountability and control.
5. Implement a procedure to evaluate a sample of GPC transactions from the HQ and
regional offices periodically throughout the fiscal year to proactively identify and
remedy weaknesses. The evaluation should include obtaining and reviewing
evidence to ensure that:
a. cardholders
1) reconciled each statement against supporting documentation;
2) maintained a purchase card log or convenience check log, if applicable, and
reconciled it to the statement;
3) maintained a file that includes:
a) copies of charge/credit slips, customer receipts and other required
documentation;
b) documented evidence of price fair and reasonableness;
13

Internal Control Weaknesses in Westerns Government Purchase Card Program

c) purchases were made from mandatory sources or documented reasoning

supporting an alternative;
d) evidence of distributed purchases among qualified suppliers by rotating
recurring procurement among merchants; and,
e) have sufficient documentation for verbal and mail ordered items (internet)
and purchases of supplies or services (competition, fair price, deliver,
etc.).
4) signed their credit card statement; and,
5) followed all applicable regulations, directives, orders, etc.
b. approving officials reviewed, approved, and signed monthly account statements
indicating certification of each cardholders monthly transactions.
c. purchase card transactions were accurate and for a valid government purchase;
d. no blocked merchant category codes were requested to be unblocked without
approval;
e. there were no violations of the Service Contract Act;
f. purchases were made in accordance with FARs Required Sources of Supplies
and Services; and,
g. purchases were made in accordance with FARs Acquisition of Commercial
Items.
6. Review the number of cardholders with access to convenience checks to determine if
a consolidation of check usage can be put in place with fewer cardholders. The
outcome of the review should be documented and the volume of cardholders with
access to convenience checks should be reduced if found practical.
7. Formalize and complete the efforts to:
a. reduce infrequently used GPC cards across Western to minimize credit exposure
which can be facilitated by the use of inactive account alert;
b. evaluate the monthly available GPC credit limits Western-wide to determine if
they should be reduced; and,
c. ensure that a business case analysis is conducted for all new requests to open a
GPC account as well as any changes to existing accounts.
We recommend that the Chief Operating Officer direct Westerns regional and other
identified HQ officials to complete the reviews initiated on all questionable transactions
identified during the individual HQ and regional GPC audits and prepare a summary report
detailing the results of the review These reports are due to the Director of Procurement by
February 1, 2016.
MANAGEMENT AND AUDITOR COMMENTS
Westerns response to our draft audit report is included in its entirety in Appendix
III. Western agrees with the reports recommendations, and has already implemented, or is
currently working towards implementing all of our recommendations. We consider
14

Internal Control Weaknesses in Westerns Government Purchase Card Program

managements comments and its completed and planned corrective actions responsive to our
recommendations. We will work with Western officials on corroborating the adequacy of the
completed actions and validate the successful completion of the remaining actions through a
formal Corrective Action Plan.

15

Appendix I Objective, Scope and Methodology

OBJECTIVE, SCOPE AND METHODOLOGY

OBJECTIVE
To determine whether the Western Area Power Administration (Western) was effectively
overseeing and managing its Government Purchase Card (GPC) Program.
SCOPE
The review was performed from July 2014 through September 2015 at the four regional
offices and the Headquarters Office (HQ), in Lakewood, CO. We evaluated the effectiveness
of Westerns GPC Program by assessing the adequacy of internal controls and compliance
with regulation, policy, and operating procedures.
METHODOLOGY
To accomplish our objective, we:

Obtained and reviewed applicable Western and Department of Energy (DOE) HQ

guidelines, policies, and operating procedures pertaining to the use of the government
purchase card;

Identified the universe of purchase card transactions made by Western card holders
for the period January 1, 2012 through June 18, 2014;

Data mined/judgmental sampled from Westerns universe of purchase card and

convenience check transactions totaling over 86,800 and more than $37.3M from the
period January 1, 2012 through June 18, 2014;

Used the data mining results to select a sample of transactions covering cardholders
to review;

Reviewed documentation for the sample of purchase card and convenience check
transactions against Western and DOE HQ guidelines, policies, and operating
procedures;

Held discussions with Westerns Director of Procurement, Regional GPC Program

coordinators, and Westerns Procurement Policy Manager; and,

Obtained and reviewed the results of Westerns HQ and Regional FYs 2012 and 2013
GPC program reviews.

Exit briefings were held with Westerns Chief Operating Officer, Regional Managers,
Regional Administrative Officers, and other appropriate Western officials throughout the
reviews.

16

Appendix II Definitions

DEFINITIONS
Abuse: Use of a Government charge card to buy unauthorized items, or authorized items but
at terms (e.g., price, quality) that are excessive, for questionable Government need, or both.
Approving Official: The individual delegated approving authority by the Head of the
Contracting Activity (HCA) or designee. The approving official is responsible for reviewing
the monthly Statements of Account for each assigned cardholder and to ensure that purchases
are made, and documentation kept, in accordance with (IAW) all regulatory and procedural
guidance. The approving official is usually the cardholders supervisor, or a person
independent of the cardholder, and is at least one level above the cardholder.
Blanket Letter of Approval: A written approval issued by an approving official identifying
certain types of purchases that cardholders under their purview can make without seeking
their approving officials approval prior to the transaction.
Cardholder: A Western employee with delegated purchasing authority who is issues a
purchase card, is the sole user of the card, is the custodian of the card, and has his or her
name embossed on the card.
Convenience Checks: Checks that can be written in lieu of using the purchase card for
purchases from merchants who do not accept the purchase card. There is a service charge
equal to 1.5% of the face value of the check for each check written.
Data Mining: An automated process used to scan databases to detect patters, trends, and/or
anomalies for use in risk management and other areas of analysis.
Fair and Reasonable: A determination that the price is what a prudent person in the ordinary
course of business would pay without any undue influence.
Government Purchase Card (GPC): A distinctly designed VISA purchase card issued under
the GSA SmartPay Program.
Improper Purchase: A purchase of goods or services intended for Government use but not
permitted by law or regulation, or that is in violation of law or regulation.
Limits:
Single Purchase Limit: The maximum dollar limit for an individual purchase card
transaction.

17

Appendix II Definitions (contd.)

Monthly Spending Limit: The maximum dollar amount authorized to be spent by a

cardholder within a 30-day period.
Cycle Limit: The maximum dollar amount authorized to be spent by a cardholder within the
billing cycle.
Micro-purchase: An acquisition of supplies or services using simplified acquisition
procedures, the aggregate amount of which does not exceed $3,000 for supplies, $2,000 for
construction, and $2,500 for services subject to the Service Contract Act.
Misuse: Use of a Government purchase card for other than the official Government purpose
for which it is intended.
Purchase Card Log: A manual or automated log in which the cardholder documents his/her
individual transactions. The purchase card documentation should provide an audit trail
supporting the decision to use the card and approvals that were obtained. At a minimum, the
log will contain the date on which the item or service was ordered, the merchants name, the
dollar amount of the transaction, a description of the item or service ordered, and an
indication of whether the item was received. If a convenience check is used the log must
contain the merchants business address and tax identification number.
Split Purchase: The practice of splitting a transaction into two or more small transactions to
keep the purchase beneath a cardholders single purchase limit, or other purchase limitation.

18

United States Government

Department of Energy
Western Area Power Administration

MEMORANDUM
DATE:

JAN 2 8 2016

REPLY TO
AT'INOF:

A7000, A. Montoya

sUBrncT:

To:

Response to Draft Capping Report: "Internal Control Weakness in Western Area Power
Administration's Purchase Card Program"
L. Hansen, A8500

The Western Area Power Administration (Western) appreciates the efforts by the Western
Offices of Procurement and Internal Audit and Compliance to review compliance with
established policies, procedures, and standards related to its Government Purchase Card
Program. This review was initiated internal to Western as pait of its ongoing desire to improve
program management and build upon operational, technology and organizational excellence.
Western also acknowledges the employees who cunently have or had, during the review period,
purchase caids. For the most part, card holders were using the cards for appropriate purposes
and are to be commended for their supp01t of the review and desire to improve program
management. As indicated in the Draft Capping Rep01t, the review identified potentially
fraudulent purchases. Western's review of these transactions suggests that most were for
-legitimate Government purposes. However, we have identified some transactions that were
intended for personal use or gain. These have been refened to the DOE Office of Inspector
General and other Federal Agencies for action. Western agrees with the report's
recommendations and has already completed or is working to corn.plete them. A summary of the
management response on each recommendation is below.
RECOMMENDATIONS

19

To address the weaknesses identified in this rep01t, we recommend that the Chief Operating
Officer direct Western's Director of Procurement to:
1. Establish a GPC Organizational Program Coord,inator position whose primary
responsibility is management and oversight of the GPC Program.
COMPLETE. Western has identified a procurement analyst position whose primary
responsibility is management and oversight of the GPC program. Once the employee is onboard a transition will begin.
2. Design standardized purchase card and convenience check log templates to track and
record transactions that will be implemented Western-wide.
COMPLETE. A standard log will be published with the GPC procedures which will be
issued by February 1, 2016.

SAFETY - A HABIT TO LIVE BY

2
3. Establish mandatory, Western-wide training (along with an annual refresher) that will
include information on the penalties for misuse of the GPC and/or non-compliance
with program requirements for all cardholders and approving officials.

IN PROGRESS. We are cmTently developing Western-wide training and will add

infmmation on the new disciplinary order. ECD: March 1, 2016.
4. Design and implement procedures to ensure:
a. compliance with DOE's requirement to review all new cardholder files within
3 months of activation;

IN PROGRESS. Cunently, as new accounts are established the OPC inputs a calendar
reminder for the 90-day review, which is cmTently the responsibility of the regional program
coordinators. In the future, once the new OPC is in place, that responsibility will reside at
HQ. In addition, a monthly report will be run identifying all new accounts at that 90-day
junction to allow the OPC to monitor and ensure completion.
b. HQ and the regions are conducting robust annual GPC program reviews as
required and that HQ Procurement officials verify the accuracy and completeness
of the reviews, and the validity of the findings. This will also include the
identification of the HQ individual responsible for overseeing the annual
execution of this effort; and,

IN PROGRESS. This will be developed by the incoming OPC and complement the existing
DOE requirements. The next annual review, due in January 2017, will be done by HQ with
support of Audit and Compliance.

20

c. Written documentation is completed and maintained as evidence that personal

property purchased and receipted by the cardholder was reported to the property
management office for accountability and control.

COMPLETE. Western's GPC Procedures require cardholders to inform the property

management office of the acquisition and request the equipment/property be recorded.
Written confamation of compliance is required to be retained with the GPC records and will
be reviewed as paii of the annual reviews and as determined necessary.
5. Implement a procedure to evaluate a sample of GPC transactions from the HQ and
regional offices periodically throughout the fiscal year to proactively identify and
remedy weaknesses. The evaluation should include obtaining and reviewing
evidence to ensure that:
a. cardholders 1) reconciled each statement against supp01iing documentation;

2) maintained a purchase card log or convenience check log, if applicable, and

reconciled it to the statement;
3) maintained a file that includes:
a) copies of charge/credit slips, customer receipts and other required
documentation;
b) documented evidence of price fair and reasonableness;
c) purchases were made from mandatory sources or documented reasoning
supporting an alternative;
d) evidence of distributed purchases among qualified suppliers by rotating
recurring procurement among merchants; and,
e) have sufficient documentation for verbal and mail ordered items (internet)
and purchases of supplies or services (competition, fair price, deliver,
etc.).
4) signed their credit card statement; and,
5) followed all applicable regulations, directives, orders, etc.
b. approving officials reviewed, approved, and signed monthly account statements
indicating ce1tification of each cardholders monthly transactions.
c. purchase card transactions were accurate and for a valid government purchase;

21

d. no blocked merchant category codes were requested to be unblocked without

approval;
e. there were no violations of the Service Contract Act;

f.

purchases were made in accordance with F AR's Required Sources of Supplies

and Services; and,

g. purchases were made in accordance with FAR's Acquisition of Commercial

Items.
CONCUR. Once the new OPC is in place procedures will be developed and vetted through
Audit and Compliance to meet this recommendation. Expected Completion Date will is
2017.
6. Review the number of cardholders with access to convenience checks to determine if
a consolidation of check usage can be put in place with fewer cardholders. The

outcome of the review should be documented and the volume of cardholders with
access to convenience checks should be reduced if found practical.
IN PROGRESS. A review has been initiated to identify all accounts with authorized
convenience checks. Once this list is finalized a rep01i of convenience check transactions
will be consolidated and reviewed for compliance with DOE policy and the need for access
to checks will be evaluated and re-validated if necessary, to determine if the number of check
writers is appropriate to meet Western's mission needs.

7. Formalize and complete the effo1is to:

a. reduce infrequently used GPC cards across Western to minimize credit exposure
which can be facilitated by the use of inactive account alert;
COMPLETE. A recent review was conducted on 100% of GPC accounts across Western to
dete1mine if cycle limits were appropriate and we also looked at infrequently used accounts.
As a result of this review, Western's credit exposure was reduced by $1.5M. This review
will be done on an annual basis.

b. evaluate the monthly available GPC credit limits Western-wide to dete1mine if

they should be reduced; and,
COMPLETE, SEE a. ABOVE.

c. ensure that a business case analysis is conducted for all new requests to open a
GPC account as well as any changes to existing accounts.
COMPLETE. Business rationale is required for all new accounts and any changes to
existing accounts.

22

We recommend that the Chief Operating Officer direct Western's regional and other
identified HQ officials to complete the reviews initiated on all questionable transactions
identified during the individual HQ and regional GPC audits and prepare a summary repo1i
detailing the results of the review These reports are due to the Director of Procurement by
February 1, 2016.

IN PROGRESS. Western's regional and other identified HQ officials are reviewing all
questionable transactions and preparing documentation of their findings and actions. The Chief
Operating Officer will work with the Office of Internal Audit and Compliance Liaison to
establish a due date for the summary rep01i detailing the results of the review.

5
Western is committed to improving program management through internal review to build upon
operational, technology and organizational excellence. We acknowledge the need to improve
internal controls in our purchase card program and have proactively taken steps to close
compliance gaps, and improve internal processes.

thony H. Montoya

ecutive VP and Chief Operating Officer

23