Navy urged to control purchase card use.

General Accounting Office investigators called for tighter controls on the use of purchase cards by Navy personnel, after uncovering evidence of widespread fraud and abuse at two Navy installations in San Diego.

GAO said the government-issued credit cards were used to buy cosmetics,

"A weak internal control environment at the SPAWAR (Space and Naval Warfare) Systems Center San Diego and the Navy Public Works Center San Diego contributed to internal control weaknesses, fraud, and abuse," GAO said in a report, "Purchase Cards: Control Weaknesses Leave Two Navy Units Vulnerable to Fraud and Abuse."

The report was a follow-up to testimony presented July 30 before the House Government Reform Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations chaired by Rep. Stephen Horn (R-Calif.).

The Navy allows local commands to set policies and procedures for purchase card use. But GAO recommended "specific policies and strategies on minimizing the number of cardholders" and "Navy-wide criteria on the types of items that can be acquired using a government purchase card." The Defense Department disagreed with the recommendations.

GAO also recommended that the Navy set specific penalties for credit card abuse in its regulations. The Navy said it already does that.

More than one-third of SPAWAR Systems Center employees had purchase cards, the report said. Any supervisor at the center could authorize a card for an employee, with no credit check.

"The two Navy units had given purchase cards to over 1,700 employees, most of whom had credit limits of $20,000 or more and the authority to make their own purchase decisions," the auditors said. "We found no valid justification" for such widespread use of the cards, they added.

Many items purchased with the cards, including laptop computers, Palm Pilots and digital cameras, did not appear on the units' property inventories and could not be accounted for.

GAO said the Navy had prosecuted one case of alleged purchase card fraud by an employee in one of its San Diego units. Four other cases were under investigation.

"The serious breakdown in internal controls at the SPAWAR Systems Center San Diego and the Navy Public Works Center San Diego are the result of a weak overall internal control environment, flawed or nonexistent policies and procedures, and employees that do not adhere to valid policies," the report said. "We found significant problems with every aspect of purchase card management that we reviewed."

The auditors said internal controls, including procedures for accounting for purchases and certifying monthly purchase card statements, "were ineffective."