WASHINGTON - The Internal Revenue Service (IRS) needs to improve oversight over its

employees' use of credit cards for small purchases to ensure that all such uses are proper, a new

report concludes.

Like other Federal agencies, the IRS provides credit cards to certain IRS employees for

purchases of less than $3,000. These purchase cards are used for items such as office supplies,

training, and other low-cost items. IRS employees are provided separate credit cards to use for

travel.

From September 1, 2007, through March 31, 2009, the IRS's 4,270 purchase card holders made

more than 174,000 purchases totaling more than $80 million using purchase cards.

The Treasury Inspector General for Tax Administration (TIGTA) reviewed the IRS's purchase

card program and found numerous instances in which cardholders made purchases without

necessary approvals and verification of funding; 2,955 purchases that were potentially split into

two or more transactions to circumvent micro-purchase limits; and purchases made from

improper sources.

The Federal Acquisition Regulation (FAR) prohibits splitting high-cost procurements into

multiple credit card purchases and requires, whenever possible, the use of existing contracts.

Cardholders are also required to seek approval for purchases and verify that funding is available

prior to using the credit cards.

"The IRS must develop the controls necessary to ensure that improper and abusive purchases do

not occur, that any such transactions are promptly detected, and that appropriate corrective

actions are taken," said J. Russell George, Treasury Inspector General for Tax Administration.

TIGTA made a series of recommendations to the IRS, including reinforcement to cardholders

that split-purchase transactions will not be tolerated, improving its oversight of purchases, and

developing and implementing guidance for determining an appropriate span of control for

approving officials.

IRS officials agreed with TIGTA's recommendations, stating that they have changed their

reviews of split-purchase transactions and expanded oversight reviews to include the use of

contract vendors and preferred sources. IRS officials plan to provide guidance on oversight and

enforcement responsibilities; develop examples and scenarios that constitute a split purchase;

review the potential split purchases TIGTA identified; and review and develop a policy

concerning the current span of control on purchase cards.