Nevertheless, similar to examinations of these programs at the Departments of the Army and Navy, auditors found egregious instances of fraud and abuse, including charges at online gambling establishments, gentlemen's clubs, and cruise tickets and purchases of sunglasses, designer leather laptop cases, and taxidermy services.
"Since we began this project over a year ago, I have been both amazed and appalled at the arrogant and egregious abuse of these programs that were designed to save taxpayer dollars," said Horn, chairman of the House Subcommittee on Government Efficiency, Financial Management andIntergovernmental Relations. "Instead of saving money, we have found government employees who are treating these cards as personal credit cards, collectively costing the government millions of dollars," Horn said.
"I am heartened by the actions under way to curb these abuses by both the Administration and the Secretary of Defense. Nevertheless, Congress must continue its vigilant oversight of these programs," Horn said. "Taxpayers deserve to know that our military services are using the tax money they provide for its intended purposes, especially in times such as these when the demands are so great and the resources so limited."
"Although I am leaving Congress at the end of the year, I have every confidence that my friends and colleagues, Sen. Grassley and Rep. Schakowsky, will carry on this effort we have begun. By introducing and shepherding legislation into law that requires the Defense Department to deny travels card to those with severe prior credit problems, Sen. Grassley has taken a significant step toward keeping these cards out of the hands of those who would abuse them," Horn said.
Grassley said, "New reports, same story. Like the Navy and the Army, Air Force credit cards have few controls, extensive abuse and little accountability. Clearly, the Defense Department has to stop handing out credit cards like so many Christmas cookies. There are reasons for hope. Earlier this year, Senator Byrd and I successfully put forth an amendment to put a lid on Defense Department credit cards, to require credit checks, to require disciplinary action for abuse, and to prohibit the use of credit cards at adult clubs and casinos. Also, the new Defense Department inspector general is looking hard at this problem. I'll continue to work with the GAO and the Defense Department inspector general until credit card abuse stops."
The GAO examined these programs at five Air Force bases, including Nellis (Nevada), Hill (Utah), Travis (California), Edwards (California), and Lackland (Texas).
The GAO's travel card program audit found that the Air Force's delinquency rate was the lowest of the three military services and only slightly higher than that of other federal agencies. As in earlier GAO reports on the Navy and Army travel card programs, auditors found that low- and mid-level enlisted personnel -- airmen to technical sergeants with basic pay levels ranging from about $11,000 to $28,000 ? accounted for a high percentage of the delinquencies. The report also stated that Bank of America, which issues the travel cards, has charged off more than $12 million dollars in bad debts related to Air Force accounts. However, auditors found that the volume of dollars charged off has been decreasing in recent months due, in part, to the institution of a salary offset program, which is similar to garnishing employees' wages.
Despite these improvements in delinquency management, the GAO found that a weak control environment contributed to significant travel card fraud and abuse throughout the Air Force. With respect to fraud, auditors found that for the 18 months ending March 31, 2002, more than 6,300 Air Force personnel attempted to pay off their credit card balances by writing checks without sufficient funds to cover them. In fact, more than 400 of these employees may have committed bank fraud by writing three or more NSF checks to Bank of America. Similar to GAO's findings for the Army and Navy, abuse of the travel card was substantial, with purchases of cruises; casino and Internet gambling; entertainment, including tickets to see the Dallas Cowboys, the Backstreet Boys, and NSYNC; and adult entertainment including 187 transactions at gentlemen's clubs such as the Cheetah Lounge in Las Vegas and several transactions at houses of prostitution.
The GAO found little evidence of disciplinary action against Air Force personnel who misused the travel card. Of the 58 cardholders with the most significant fraud or abuse that the GAO investigated, only 19 had any evidence of disciplinary action.
The GAO also found that 32 of these 58 travel card abusers had active secret or top secret clearances in August 2002. In addition to travel card abuse, these individuals often had other financial problems including numerous charged-off credit cards, bankruptcy, and foreclosed home mortgages. The GAO found that these individuals present security risks to the Air Force. For example, a C-5 mechanic who abused the travel card over several years was able to maintain a secret clearance. This individual, who had severe gambling problems, was not effectively dealt with until caught stealing body armor and chemical-biological protective masks destined for Afghanistan.
One of the primary causes of the travel card problems was that the Air Force provided a travel card to individuals regardless of their prior credit history, the GAO found. This flawed policy resulted in individuals with prior severe credit problems ? including bankruptcy, numerous charged off credit card balances, foreclosed home mortgages, and repossessed automobiles ? being provided with a government travel card and then repeating their prior pattern of abuse. The Byrd-Grassley Amendment to the fiscal year 2003 Department of Defense Appropriations Act requires DOD to deny a travel card to individuals with severe prior credit problems. If effectively implemented by the Department of Defense, this new law should result in keeping government credit cards out of the hands of individuals who are likely to abuse them, according to the GAO.
The GAO's audit of the Air Force's purchase card program found a weak overall control environment similar to that found at the Departments of the Army and Navy. For example, GAO auditors found cardholders carrying as many as 10 purchase cards. Many of the credit limits on these cards exceeded spending by as much as 20 to 1. In addition, the GAO found a proliferation of purchase cards at the Air Force, with one purchase card for every seven Air Force employees.
Although the GAO found significant control breakdowns, Air Force management has made strong efforts to improve the program. The implementation of standard policies, annual audits, and automated controls have helped to strengthen controls over the purchase card program. For example, the Air Force has directed its purchase card bank ? U.S. Bank ? to automatically suspend purchase card accounts that have not been reconciled after 60 days.
Even with these improvements, the GAO found numerous instances of improper and abusive charges, and significant breakdowns in the program. For example, GAO auditors found that Air Force purchase cards were used to buy: sunglasses, including $540 for Oakley sunglasses that were justified as "paratrooper goggles"; food provided to employees during unit lunches and planning conferences held at their normal duty stations ? one dinner and show charged to official representation funds, although permitted, included alcohol charges of about $800 for 18 people, which appeared excessive; clothing, including dresses and a blazer for civilian employees to wear while participating in an awards ceremony; unneeded computers, purchased with fiscal year-end funds in September 2001, including 20 computers and monitors that were still in the original boxes in June of 2002; designer leather goods including laptop cases costing $224 to $595 each; and $300 spent on taxidermy services to prepare a shoulder mount of a "road kill" mule deer, represented as for educational purposes.
At the request of Representatives Horn and Schakowsky and Senator Grassley, the GAO is continuing its work on DOD credit cards, including a comprehensive audit of the centrally billed travel program.
The two new GAO reports are available at www.gao.gov.