For Immediate Release
Wednesday, March 7, 2007
Grassley: Time for Waste, Fraud and Abuse of Government Credit Cards to Stop
WASHINGTON – Senator Chuck Grassley said it’s time to stop the reckless spending on government issued credit cards. Today, Grassley introduced legislation that would require all federal agencies to establish safeguards and internal controls for government charge card programs as well as establish penalties for violations. The legislation is based on his past oversight work with the Government Accountability Office (GAO) and was introduced with Senators Norm Coleman of Minn., Joe Lieberman of Connecticut, and Susan Collins of Maine. Congressman Joe Wilson filed companion legislation in the House of Representatives.
“Every time we open these GAO reports we find more outrageous spending. Internet gambling and a Yankees baseball game don’t seem to be appropriate uses of tax payer money. The federal agencies don’t seem to be stepping up, so our legislation helps put some common sense controls on these credit cards,” Grassley said.
Grassley said the legislation would also stipulate that cases of fraud be referred to the U.S. Attorney for prosecution and employees that egregiously misuse or commit fraud with a government charge card be fired. The bill would also increase oversight by providing that each agency Inspector General periodically conduct risk assessments and audits to identify fraud and improper use of credit cards.
Grassley introduced similar legislation in the last two Congresses that was not acted upon. He has worked to expose government credit card abuse since 2001, starting with the Department of Defense. The Government Accountability Office has documented abuses in the Departments of Defense and Housing and Urban Development, the U.S. Forest Service, the Federal Aviation Administration and others.
Following the devastation of Hurricane Katrina, Grassley was concerned that a provision raising the limit for emergency "micro-purchases" on government credit cards from $15,000 to $250,000 was ripe for waste, fraud and abuse and successfully fought to bring the limit back down. At the time, Grassley said that wasting taxpayer money does not help the victims of Hurricane Katrina.
Here are the required safeguards and internal controls in the bill.
• performing credit checks for travel card holders and issuing restricted cards for those with poor or no credit to reduce the potential for misuse
• maintaining a record of each cardholder, including single transaction limits and total credit limits so agencies can effectively manage their cardholders
• implementing periodic reviews to determine if cardholders have a need for a card
• properly recording rebates to the government based on prompt payment
• providing training for cardholders and managers
• utilizing available technologies to prevent or catch fraudulent purchases
• establishing specific policies about the number of cards to be issued, the credit limits for certain categories of cardholders, and categories of employees eligible to be issued cards
• invalidating cards when employees leave the agency or transfer
• establishing an approving official other than the purchase card holder so employees cannot approve their own purchases
• reconciling purchase card charges on the bill with receipts and supporting documentation
• submitting disputed purchase card charges to the bank according to the proper procedure
• making purchase card payments promptly to avoid interest penalties
• retaining records of purchase card transactions in accordance with standard government record keeping polices
• utilizing mandatory split disbursements when reimbursing employees for travel card purchases to ensure that travel card bills get paid
• comparing items submitted on travel vouchers with items already paid for with centrally billed accounts to avoid reimbursing employees for items already paid for by the agency
• submitting refund requests for unused airline tickets so the taxpayers don’t pay for tickets that were not used
Here is a copy of Grassley’s statement inserted into the Congressional Record today.
Prepared Statement by Senator Chuck Grassley
Government Credit Card Abuse Prevention Act
Wednesday, March 7, 2007
Mr. President,
It’s time we put a stop to wasteful, abusive, and fraudulent use of government credit cards. In fact, it’s overdue. For several years, I have been working with the Government Accountability Office (GAO) to investigate misuse of government credit cards and the lack of internal controls in agencies that breeds such activity. We have found shockingly flagrant abuses like $2,443 in taxpayers’ money going to pay for a down payment on a sapphire ring at a place called E-Z Pawn and $1,935 in taxpayers’ money used to purchase two LA-Z-Boy reclining rocking chairs with full lumbar support and vibrator-massage features, all using government purchase cards. Government travel cards, which are only to be used for legitimate travel-related expenditures, have been used to pay for everything from women’s lingerie from Frederick’s of Hollywood to tickets to the Phantom of the Opera to a seven night Alaskan cruise for two. In each report it has issued, the GAO has made recommendations about what kind of controls need to be implemented to prevent such abuses from occurring in the future. Our oversight work has helped shine a light on this problem and has led to some improvements. Some agencies have moved to fix the specific shortcomings highlighted by the GAO, and the Office of Management and Budget has issued a circular to agencies that seeks to bring about an improved control environment. However, I believe a more comprehensive approach is needed. There is considerable commonality between the control breakdowns the GAO found in the agencies it investigated. The same controls were often missing or inadequate, and therefore the same recommendations are repeated in report after report. The OMB circular does not address many of these recommendations and it makes no sense for the GAO to visit every agency and bureau in the Federal Government to point out where they fall short. We know what is needed to prevent waste, fraud, and abuse of government credit cards and we must ensure that these internal controls are implemented consistently across the federal bureaucracy. That is why I am reintroducing the Government Credit Card Abuse Prevention Act, along with Senators Lieberman, Collins, and Coleman. I should also mention that Representative Joe Wilson will be reintroducing companion legislation in the House of Representatives and I appreciate his help and assistance as we’ve worked together on this legislation.
Based primarily on the recommendations of the GAO in numerous reports, as well the work of agency inspectors general and my own oversight work, my bill seeks to curtail waste, fraud, and abuse of government purchase cards, government travel cards, and centrally billed accounts. By way of background, government purchase cards are essentially credit cards held by an agency that authorized individuals use to purchase items necessary for the work of the agency. Since the agency pays the bills directly, the American taxpayer is on the hook when improper purchases slip through the cracks. That means hard working American citizens are paying for someone else’s Christmas shopping, or at the very least items with little or no legitimate public interest. Just like the parents’ credit card in the hands of an undisciplined teenager, government purchase cards in the hands of poorly trained bureaucrats with inadequate oversight can lead to rash and ill-considered impulse buys. Take for instance an incident uncovered by the GAO when an individual at the Air Force Academy found a dead deer alongside the road and decided to use a government purchase card to pay for mounting the mule deer head to hang on the wall at the office.
Centrally billed accounts are another credit product that federal agencies use, primarily for purchasing transportation services. Like purchase cards, the bill is sent to the government so it’s the taxpayer who pays when the bureaucrats let things slip through the cracks. For instance, we’ve had repeated cases where government employees had airplane tickets purchased on their behalf directly from a centrally billed account, and then they sought and received reimbursement as though they had paid for the ticket. In other words, the ticket was paid for twice with the employee pocketing the cost the second time, and no one would be the wiser if it weren’t for the GAO. The GAO has also found millions of dollars worth of fully refundable, unused airline tickets that no one bothered to cash in. I was pleased to work with Senator Coleman, then the Chairman of the Permanent Subcommittee on Investigations, to bring these issues with centrally billed accounts to light, as well as Senator Collins, who was at the time the Chairman of the Government Affairs Committee. In addition to being co-requesters of the GAO reports, they held hearings in their respective committees and were kind enough to invite me to testify about our work.
Government travel cards, on the other hand, are not paid directly with taxpayers’ money like purchase cards and centrally billed accounts, but they are only supposed to be used to pay for legitimate expense while on official government travel. Failure by employees to repay these cards results in the loss of millions of dollars in rebates to the Federal Government. Also, when credit card companies are forced to charge off bad debt, they raise interest rates and fees on everyone else. Nevertheless, government travel cards with high credit limits have been handed out like candy at a parade to individuals with abysmal credit ratings who ordinarily would never be issued that kind of credit. It’s no surprise then when we learn that certain government employees have abused their government travel cards to buy jewelry, take in a New York Yankees game, or to fuel an internet gambling habit. Such abusive charges often occur when the cardholder is not even on travel at all. In fact, government travel cards have been used to provide cash advances in employees’ hometowns. There are even examples of charges at so called “gentleman’s clubs” like Cheetah’s Lounge and DéjB Vu Showgirls, and even at legalized brothels. Suffice it to say that the GAO was able to determine that these charges were not for food or other approved travel expenses. It also comes as no surprise when the GAO found that employees issued government travel cards despite bad credit often bounce checks when their bill comes due, sometimes repeatedly and fraudulently. Common sense then leads us to the same conclusion that the GAO came to through empirical analysis, namely that a significant relationship exists between potential travel card fraud, abuse, and delinquencies and individuals with substantial credit history problems. That is why my legislation requires agencies to perform credit checks for travel card holders and issue only restricted cards for those with poor or no credit to reduce the potential for misuse.
My bill would also require a series of common sense internal controls, which the GAO has found to be lacking in many cases, to be implemented in every federal agency. These include: maintaining a record of each cardholder, including single transaction limits and total credit limits so agencies can effectively manage their cardholders; implementing periodic reviews to determine if cardholders have a need for a card; properly recording rebates to the government based on prompt payment; providing training for cardholders and managers; utilizing available technologies to prevent or catch fraudulent purchases; establishing specific policies about the number of cards to be issued, the credit limits for certain categories of cardholders, and categories of employees eligible to be issued cards; invalidating cards when employees leave the agency or transfer; establishing an approving official other than the purchase card holder so employees cannot approve their own purchases; reconciling purchase card charges on the bill with receipts and supporting documentation; submitting disputed purchase card charges to the bank according to the proper procedure; making purchase card payments promptly to avoid interest penalties; retaining records of purchase card transactions in accordance with standard government record keeping polices; utilizing mandatory split disbursements when reimbursing employees for travel card purchases to ensure that travel card bills get paid; comparing items submitted on travel vouchers with items already paid for with centrally billed accounts to avoid reimbursing employees for items already paid for by the agency; and submitting refund requests for unused airline tickets so the taxpayers don’t pay for tickets that were not used.
My bill would also provide that each agency Inspector General periodically conduct risk assessments of agency purchase card and travel card programs and perform periodic audits to identify potentially fraudulent, improper, and abusive use of cards. We have had great success working with Inspectors General using techniques like data mining to reveal instances of improper use of government charge cards. Having this information on an ongoing basis will help maintain and strengthen a rigorous system of internal controls to prevent future instances of waste, fraud, and abuse with government charge cards.
In addition, my bill requires penalties so that employees who abuse government charge cards will not get away scot free. In fact, in cases of serious misuse or fraud, the bill provides that employees must be dismissed and suspected cases of fraud will also be referred to the appropriate U.S. Attorney for prosecution under federal anti-fraud laws. It is essential that we send a clear message that misuse and fraudulent use of government credit cards will not be tolerated. The lack of consistency in the past in applying punishments to those caught abusing government charge cards has sent the wrong message and led to an environment where misuse of government charge cards is more likely. My bill will change that.
The American people expect us to be good stewards of their money and their cynicism about government only builds when they read about bureaucrats saying, “Just put it on plastic” willy nilly with their hard earned dollars. Unfortunately, such incidents persist. In the wake of Hurricane Katrina, Congress hastily passed a supplemental spending bill containing an ill-advised provision to dramatically raise the micro-purchase threshold for purchase cards. I worked with Senators Collins and Lieberman, the leaders of the Homeland Security and Governmental Affairs Committee, to reverse what amounted to an invitation to misuse government purchase cards. Then, because of our concerns and the concerns of other members of Congress about the potential for fraud and abuse of purchase cards in the response to the hurricanes in the Gulf Coast region, the GAO conducted an investigation of purchase cards at the Department of Homeland Security. Just last September, the GAO issued its report finding instances of abusive or questionable government charge card transactions, including the purchase of a beer brewing kit, a 63-inch plasma television with a price tag of $8,000 that was found unused in its original box 6 months later, and tens of thousands of dollars for training at golf and tennis resorts. Clearly the abuse of government credit cards remains a problem and Congress needs to act. My bill will establish the discipline needed in government agencies to keep those credit cards in the wallet unless needed. I am particularly glad to be joined in introducing this bill by Chairman Lieberman and Ranking Member Collins as well as Senator Coleman. Their leadership on this issue will continue to be invaluable. I urge the rest of my colleagues to join us in this effort and put a stop to the bureaucratic shopping spree.
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