Statements on Introduced Bills and Joint Resolutions - S. 1744

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. GRASSLEY (for himself and Mr. BYRD):

S. 1744. A bill to prevent abuse of Government credit cards; to the Committee on Governmental Affairs.

Mr. GRASSLEY. Mr. President, today I am introducing a bill to help curtail abuses of government-issued credit cards throughout the Federal Government. I am pleased to join Representative WILSON who is introducing an identical measure in the House today and I thank him for his interest and work on this important issue. I am also very glad to have Senator BYRD co-sponsor my bill. He has been a staunch advocate for improved management of government credit programs and I have been honored to work with him on this issue in the past.

As many of my colleagues are aware, I have been working for several years to expose abuses of government purchase cards and travel cards, starting with the largest user of government charge cards, the Department of Defense. Working with the GAO, former subcommittee Chairman Horn in the House, and others, we have been able to uncover a disturbing number of instances where DOD-issued credit cards have been abused. When I say abused, I mean government credit cards were used to pay for everything from cars to Caribbean cruises. The list also includes furniture, breast implants, and gentleman's clubs.

So what does all of this mean for the American taxpayer? In the case of government purchase cards, it means that hardworking Americans are paying for government employees' Christmas shopping. Purchase cards are intended to be used to purchase supplies or other items needed by a government agency and are paid directly by the agency with taxpayer money. However, it is hard to justify payments on a sapphire ring, kitchen appliances, and gift certificates to department stores as necessary office expenses. Astoundingly, these are examples of charges that have been made and paid for out of the taxpayer's pocket with no questions asked.

Government travel cards work differently, but are still subject to abuses that negatively impact the American public. They are issued to individual employees for use on official travel. The employee must pay the bill and is reimbursed by the agency. Unfortunately, government travel cards are routinely issued to individuals who have a bad credit history or even a record of credit card fraud. This opens up the door for abuse. Not only have travel cards been used for questionable travel expenses, but travel cards have been used when employees are not on official travel to pay for items from gambling and prostitution to tickets for a pop music concert by the Backstreet Boys. Some employees have committed fraud by repeatedly writing bad checks to pay travel card bills and some have taken government funds in reimbursement for travel expenses and not paid off their travel card bills.

When a travel card bill is not paid on time, the agency loses out on rebates that the agency would otherwise receive from the credit card company. These rebates add up. In fact, in fiscal year 2001, the Federal Government received $71 million in rebates, but this amount declined in fiscal year 2002 to $69.2 million mainly due to delinquencies in paying off travel cards.
We're talking real money and, especially in a time of budgetary belt-tightening, this trend cannot be allowed to continue. In addition, since Bank of America took over the DOD charge card contract in 1998, it had to "charge off" over $61 million dollars in bad debt. The military service branches have recovered less than $24 million of that amount, leaving almost $40 million in losses to the credit card company. In fact, the situation got so bad that Bank of America considered dropping its account with DOD. Although actions by DOD to reduce delinquencies and recover bad debt through methods like salary offsets have now improved the situation somewhat, this scandal has left a black mark on the reputation of the Federal Government. Furthermore, these losses inflicted on credit card companies by Federal employees hurt the millions of innocent Americans who are credit card customers by raising the interest rates and fees the company must charge.

What we have learned through our investigation of the travel card and purchase card programs in the Department of
Defense is that these abuses were allowed to occur as a result of weak internal controls. The revelations about DOD
sparked questions about the possibility of similar deficiencies in other departments. In fact, subsequent work with the
GAO and agency Inspectors General has uncovered weak internal controls in the travel card and purchase card programs of agencies like the Department of Education, the Federal Aviation Administration, the Department of Housing and Urban Development, the Department of the Interior, and the Department of Agriculture leading to wasteful and questionable purchases with taxpayer dollars. We know about HUD employees using agency purchase cards for personal shopping sprees at stores like Best Buy and JC Penny, FAA employees purchasing individual subscriptions to Internet providers and gift cards from Home Depot, and Department of Agriculture employees using travel cards to buy a car and enroll in bartending school. The list goes on.

Clearly, this is a problem that needs to be addressed government-wide. Ideally, Federal agencies would get their own houses in order. Unfortunately, the atrocious abuses that have been uncovered in the charge card programs of agency after agency would likely never have come to light without congressional oversight. In fact, the positive developments we have seen so far in curtailing government credit card abuses have been the result of Congress cajoling the bureaucracy to put controls in place. The bill I am introducing today would require all agencies to promulgate regulations to establish safeguards and internal controls to prevent fraud, waste, and abuse of Federal purchase cards and travel cards.

The GAO has now issued an Audit Guide for auditing and investigating the internal control of government purchase card programs, which it developed based on its experiences auditing various agencies purchase card programs. This excellent guide outlines five standards for internal control to curtail fraudulent, improper, and abusive purchases. These include: establishing a positive control environment among agency management and employees, providing for a risk assessment, implementing control activities to enforce management directives and help ensure actions are taken to reduce risks, recording and communicating information to program managers and others who need it, and ongoing monitoring. My bill would go a long way to push agencies toward the effective management approach GAO has outlined.

In fact, my bill requires agencies to establish policies for purchase card programs, and travel card programs where applicable, that incorporate many of the specific recommendations GAO has made to various agencies as a result of its investigations. These include: training for cardholders as well as approving officials and agency program coordinators, establishing who is eligible to be a cardholder and limits on how much they can charge, limiting the number of cards distributed to those who really need them, establishing requirements for documentation and records to support each purchase, cancelling cards for employees who leave or transfer, and establishing penalties to hold card holders and approving officials accountable for misuse.

My bill also requires that credit checks be performed before issuing a government charge card and that no one found to be not creditworthy be issued a government credit card. In my opinion, it is absurb that this is not standard practice.
Government employees who could never get a private credit card due to bad credit, bankrupty, or history of fraud will no longer be handed a government charge card with no questions asked.

Finally, my bill would provide that the each agency Inspector General will periodically conduct risk assessments of agency purchase card and travel card programs and perform periodic audits to identify potential 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. The information continually provided to the head of each executive agency as well as the Director of the Office of Management and Budget and the Comptroller General by each agency IG will be an enormous help in strengthening and maintaining a rigious system of internal controls to prevent future instances of waste, fraud, and abuse with government charge cards.

Due to aggressive congressional oversight and the efforts of talented investigators working for the GAO and agency IG's, we now know that weak internal control over agency purchase and travel card programs has lead to waste, fraud, and abuse across the Federal Government. It has come to the point that Congress must intervene to require agencies to put in place the policies and procedures necessary to stop the misuse of taxpayer dollars and the abuse of the public trust. I wish I could say this bill is a silver bullet and that once enacted, all the problems with government credit cards will disappear, but I don't pretend this is the case. Ultimately, it is up to agency officials and program managers to implement best practices for managing purchase card and travel card programs. To that end, I would encourage all agencies to take a close look at the
GAO Audit Guide and use its approach. Meanwhile, continued congressional oversight will still be necessary.
Nevertheless, my bill will serve to kick-start the bureaucracy into taking this problem seriously and I believe it will be a big step toward putting the lid back on the Federal cookie jar. I know many of my colleagues are equally appalled by the many tales of credit card fraud and abuse perpetrated on the American public and I would urge senators to join me in this effort.