COLEMAN, LEVIN CRACK DOWN ON WASTEFUL, ABUSIVE PURCHASES ON GOVERNMENT CREDIT CARDS (GAO REPORT ATTACHED)

GAO finds 41% of purchases made with government credit cards violate rules

Washington DC—Continuing their fight against the waste, fraud, and abuse of the hard-earned American tax dollar, Senator Norm Coleman (R-MN), Ranking Member of the Permanent Subcommittee on Investigations (PSI), and Subcommittee Chairman Carl Levin (D-MI) initiated a Government Accountability Office (GAO) investigation to study the extent to which federal employees are misusing government credit cards and debit cards, referred to collectively as “purchase cards.” GAO found that, of the $17.7 billion the federal government spent on purchase cards in Fiscal Year 2006, an estimated 41 percent failed to meet internal controls established by the Standards for Internal Control in the Federal Government, which require purchases to be properly authorized and that someone other than the purchaser receive and sign for the good or service. “At a time of increased economic pressures, and a feeling that government spending is out of control, the American people should not be expected to tolerate wasteful and abusive spending of their tax dollars,” said Coleman. “The fact that an estimated 41 percent of the $17.7 billion spent using government purchase cards in 2006 was improper or not properly accounted for, demands immediate and aggressive attention. When money that was intended to pay for critical infrastructure, education and homeland security is instead being spent on iPods, and socializing, we must immediately remedy the problem, and restore the public's confidence in the system.” “Millions of dollars worth of laptops, iPods, and digital cameras are being purchased with government credit cards and disappearing,” said Levin. “Although internal controls over government credit cards have improved, we still have a long way to go to stop the fraudulent use of these cards.” Specifically, the analysis revealed several types of fraud, waste, and abuse involving government purchase card transactions. Some of the egregious examples involved government employees using government-issued purchase cards to pay for their own entertainment expenses, internet dating services, mortgage payments, and retail purchases. In one instance, four Department of Defense (DOD) cardholders purchased more than $77,000 in clothing and accessories at high-end retailers. At Brooks Brothers, the cardholders paid $2,300 per person for tailor-made suits and accessories when DOD regulations provide a civilian clothing allowance of $860 per person. The report stated that numerous government agencies could not account for a substantial amount of so-called “pilferable” property. For instance, GAO reviewed a sample of 1,058 accountable items worth $2.7 million that had been purchased with a government purchase card, including digital cameras, iPods, PDAs, and laptop computers, and found that 458 of the 1,058 items worth $1.8 million were missing and presumed stolen. Another issue identified by the GAO study involves identity theft, in which someone other than the purchase cardholder made unauthorized charges to the card. The cardholder can dispute these charges but GAO found that cardholders did not always do so in a timely fashion. Further, when an account has been compromised in this manner, government regulations require that the account should be closed and the cardholder should be issued a new card with a new account number, but government agencies too often failed to take those steps. “Too many government employees have viewed purchases cards as their personal line of credit. It’s time to cut up their cards and start over,” added Coleman. “The basic rules for authorizing purchases and accounting for goods and services are not that difficult: Use the card for legitimate purchases, not to cover the costs of buying yourself an iPod.” Coleman and Levin are cosponsors of the Government Credit Card Abuse Prevention Act of 2007, along with Senators Charles Grassley (R-IA), Joseph Lieberman (I-CT), and Susan Collins (R-ME). This bill would require all federal agencies to strengthen their internal controls for government charge card programs, as well as establish penalties for violations. For example, the bill would authorize federal agencies to offset the salaries of government employees who make improper purchases with their government purchase cards. It 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. The bill will be considered by the Committee on Homeland Security and Governmental Affairs at a markup scheduled for Thursday of this week. # # # FOR ADDITIONAL INFORMATION CONTACT LEROY COLEMAN 202/228-5798