Government must tighten rules on use of Government Procurement Cards

March 20, 2012 3:23 PM

The National Audit Office (NAO) has this morning confirmed what the TPA has said for some time: that Government Procurement Cards (GPCs) do have the potential to save money but that current procedures are far too lax, and that Whitehall departments have become complacent in their oversight.

The NAO report reveals that more than £322 million was spent on GPC’s in 2010-11 alone, covering 1.75 million transactions. Their findings also show that of this, almost 75 per cent was spent by the Ministry of Defence alone, with a total spend of £237 million.

Each department is responsible for establishing internal rules and guidance on their use of GPCs, but the NAO findings outline widespread concerns over the monitoring of the cards. The report says:
 “We found different controls in each of the five departments we examined. There were instances of departments not complying with controls, such as missing receipts or invoices to support transactions, or no evidence that the card holder was authorised to make purchases. In some departments we identified more significant issues, including a large backlog of unapproved transactions, and limited approval and reviewing procedures.”

They go on to say:
“Some departments have inadequate management information and cannot monitor Government Procurement Card use effectively. This presents a further weakness in departmental controls. Without accurate data, departments cannot monitor adherence to policies, assess exposure to risk, or review whether controls meet business need”

We have always argued that if used correctly, these cards will be a cost-effective method of paying for goods. They have the potential to save on the administrative costs of processing expenses. But there must always be robust measures in place to prevent employees from sneaking through dubious transactions which previously would have been picked up when submitting a receipt for reimbursement. Further to this, the NAO report says Whitehall departments are using an outdated calculation to justify their heavy use. They claim:
The finding from a 1998 KPMG report that each Government Procurement Card transaction costs an average of £28 less than a non-card transaction was based on procurement processes that are no longer used. This outdated figure can no longer serve as the basis of a business case for using the Card. Our preliminary work in the Ministry of Justice indicates that the cost of procurement has decreased substantially, due to advances such as electronic procurement and invoicing methods. In the specific transactions we examined, we estimated the difference in cost to be around £5 or 35 per cent less for a Card transaction compared with a non-card catalogue transaction.”

More must be done to guarantee value for money. The NAO argue that a consistent method of gathering and recording the dat must be implemented. This would make sure each department knows how much is spent and can then develop guidance and rules to respond to this. They also propose more controls on their use, such as:

  • block all merchant category groups (categories of spending) for individual cards unless specifically required to meet a defined business need

  • increase the use of (near) real-time online monitoring to detect suspicious or fraudulent transactions

  • withdraw cards for repeated low-level breaches

  • approve 100 per cent of transactions by someone with designated authority

  • regularly assess the business need for individual cards, promptly withdrawing them if such need no longer exists

  • the case for more stringent deterrents, such as publishing all transactions (not just those of £500 and above, as at present) and publishing instances of detected fraud


In carrying out extensive research into Whitehall use of GPCs in 2011, we discovered that the levels of recorded information varied enormously. Some departments record detailed information including specific transaction categories while others couldn’t provide the information at all (the MOD, for example, would only provide transactions over £25,000). This is a real problem when trying to scrutinise spending. Similarly, if the department doesn’t keep a proper, easily accessible record of their spending, then it also makes it impossible for them to look at their own spending and hunt for potential savings.

It is incredibly worrying that almost 24,000 cards are in use but the measures to monitor them are far from adequate. The Cabinet Office needs to get a grip on the use of these cards as a matter of urgency to ensure transactions such as the ones we uncovered last year do not continue, and so the scheme can work as efficiently as intended.The National Audit Office (NAO) has this morning confirmed what the TPA has said for some time: that Government Procurement Cards (GPCs) do have the potential to save money but that current procedures are far too lax, and that Whitehall departments have become complacent in their oversight.

The NAO report reveals that more than £322 million was spent on GPC’s in 2010-11 alone, covering 1.75 million transactions. Their findings also show that of this, almost 75 per cent was spent by the Ministry of Defence alone, with a total spend of £237 million.

Each department is responsible for establishing internal rules and guidance on their use of GPCs, but the NAO findings outline widespread concerns over the monitoring of the cards. The report says:
 “We found different controls in each of the five departments we examined. There were instances of departments not complying with controls, such as missing receipts or invoices to support transactions, or no evidence that the card holder was authorised to make purchases. In some departments we identified more significant issues, including a large backlog of unapproved transactions, and limited approval and reviewing procedures.”

They go on to say:
“Some departments have inadequate management information and cannot monitor Government Procurement Card use effectively. This presents a further weakness in departmental controls. Without accurate data, departments cannot monitor adherence to policies, assess exposure to risk, or review whether controls meet business need”

We have always argued that if used correctly, these cards will be a cost-effective method of paying for goods. They have the potential to save on the administrative costs of processing expenses. But there must always be robust measures in place to prevent employees from sneaking through dubious transactions which previously would have been picked up when submitting a receipt for reimbursement. Further to this, the NAO report says Whitehall departments are using an outdated calculation to justify their heavy use. They claim:
The finding from a 1998 KPMG report that each Government Procurement Card transaction costs an average of £28 less than a non-card transaction was based on procurement processes that are no longer used. This outdated figure can no longer serve as the basis of a business case for using the Card. Our preliminary work in the Ministry of Justice indicates that the cost of procurement has decreased substantially, due to advances such as electronic procurement and invoicing methods. In the specific transactions we examined, we estimated the difference in cost to be around £5 or 35 per cent less for a Card transaction compared with a non-card catalogue transaction.”

More must be done to guarantee value for money. The NAO argue that a consistent method of gathering and recording the dat must be implemented. This would make sure each department knows how much is spent and can then develop guidance and rules to respond to this. They also propose more controls on their use, such as:

  • block all merchant category groups (categories of spending) for individual cards unless specifically required to meet a defined business need

  • increase the use of (near) real-time online monitoring to detect suspicious or fraudulent transactions

  • withdraw cards for repeated low-level breaches

  • approve 100 per cent of transactions by someone with designated authority

  • regularly assess the business need for individual cards, promptly withdrawing them if such need no longer exists

  • the case for more stringent deterrents, such as publishing all transactions (not just those of £500 and above, as at present) and publishing instances of detected fraud


In carrying out extensive research into Whitehall use of GPCs in 2011, we discovered that the levels of recorded information varied enormously. Some departments record detailed information including specific transaction categories while others couldn’t provide the information at all (the MOD, for example, would only provide transactions over £25,000). This is a real problem when trying to scrutinise spending. Similarly, if the department doesn’t keep a proper, easily accessible record of their spending, then it also makes it impossible for them to look at their own spending and hunt for potential savings.

It is incredibly worrying that almost 24,000 cards are in use but the measures to monitor them are far from adequate. The Cabinet Office needs to get a grip on the use of these cards as a matter of urgency to ensure transactions such as the ones we uncovered last year do not continue, and so the scheme can work as efficiently as intended.

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