Chairman Collins Holds Hearing to Examine Waste of Taxpayer Dollars in Federal Purchase Card Program

WASHINGTON, D.C. — According to a General Accounting Office (GAO) report released today during a Senate Governmental Affairs Committee hearing chaired by Senator Susan Collins (R-ME), with better oversight, as much as $300 million could be saved annually through the purchase card program.

“The American people have the right to expect the federal government to spend their tax dollars carefully and wisely. While this is true at all times, it is never more so than today, when the government faces enormous fiscal pressures and a growing budget deficit,” said Senator Collins.

Purchase cards are government-issued credit cards that are primarily used for making routine purchases such as office supplies, computers, and copying machines. The federal government is responsible for paying all charges by authorized cardholders, regardless of what was purchased.

Between fiscal years 1994 and 2003, the use of government purchase cards has increased dramatically from less than $1 billion to more than $16 billion a year. Federal agencies estimate that the use of purchase cards saves taxpayers hundreds of millions of dollars in reduced administrative costs; however, the rapid growth of the purchase card program also requires agencies to ensure that purchase card users are spending money appropriately and receiving favorable prices for goods and services. According to a GAO report released at the hearing, cardholders often lack the information and training needed to obtain the discounted prices negotiated by the federal government. As a result, GAO found numerous instances of cardholders paying significantly more for items for which discounts already had been negotiated.

In conducting its investigation, the GAO examined six agencies — the Departments of Agriculture, Army, Navy, Air Force, Interior, Justice, Transportation and Veterans Affairs — that together account for over 85 percent of all government purchase card transactions. If the six agencies reviewed in the study negotiated discounts of just 10 percent from major vendors, and if agency employees had used those discounts, GAO estimates annual savings of $300 million.

The GAO report, which was requested by Senators Collins and Feingold and Rep. Janice Schakowsky (D-IL), also discovered that agencies should be making greater efforts to collect and analyze data on purchase card transactions. “This would help agencies to eliminate waste and to expose fraud and abuse,” Senator Collins noted.

By analyzing transaction data, some federal agencies have been able to detect fraud. The Department of Defense (DOD), for example, discovered that a Navy cardholder used a government purchase card to pay for two automobiles, surgical enhancements, and a motorcycle. DOD also discovered other inappropriate transactions, such as using the card to purchase computer games, microwave ovens and bicycles.

“These examples demonstrate the need for better controls over the purchase card program and show why it is vital to give agencies the tools they need to control fraud and abuse,” Senator Collins said.

Senator Collins also announced that she and Senator Russ Feingold (D-WI) are introducing legislation, the Purchase Card Waste Elimination Act of 2004, to crack down on wasteful and inefficient federal purchase card spending.

“We must assure taxpayers that the federal government, which shops with taxpayer dollars, is doing the same thing working families do — paying attention to prices,” said Senator Collins. “Our legislation requires the Office of Management and Budget to direct agencies to better train cardholders and to more effectively scrutinize their purchases. It also instructs the federal government to increase its efforts to secure discounts from vendors and to provide agencies with the tools needed to control wasteful spending.”