Federal Credit Cards Misused
Date: April 09, 2008 09:49AM
Why doesn't this suprise me?
"Federal employees used government credit cards to pay for lingerie, gambling, iPods, Internet dating services, and a $13,000 steak-and-liquor dinner, according to a new audit from the Government Accountability Office, which found widespread abuses in a purchasing program meant to improve bureaucratic efficiency.
The study, released by Senate lawmakers yesterday, found that nearly half the "purchase card" transactions it examined were improper, either because they were not authorized correctly or because they did not meet requirements for the cards' use. The overall rate of problems "is unacceptably high," the audit found.
The GAO also found that agencies could not account for nearly $2 million worth of items identified in the audit -- including laptop computers, digital cameras and, at the Army, more than a dozen computer servers worth $100,000 each.
Sen. Norm Coleman (R-Minn.), who requested the study along with Sen. Carl M. Levin (D-Mich.), said that money "intended to pay for critical infrastructure, education and homeland security is instead being spent on iPods, lingerie and socializing."
"Too many government employees have viewed purchase cards as their personal line of credit," Coleman said. "It's time to cut up their cards and start over."
The audit is the culmination of a series of GAO reports over the past decade that have uncovered improper use of government-issued purchase cards at agencies, including the Defense Department and the Department of Homeland Security. Government employees spent nearly $20 billion last year using "SmartPay" cards and related convenience checks, for items ranging from pencils to computers to utility trucks.
Purchase cards, used by about 300,000 government employees in 2007, are essentially the federal government's equivalent of corporate credit cards. Issued by five major banks, they are primarily for transactions under $2,500 but can be used for larger contract payments. All transactions are supposed to comport with federal purchasing guidelines, including proper authorization and documentation.
The latest study used scientific sampling to gauge problems with the cards across numerous federal agencies from July 2005 to September 2006. The report singles out incidents for special criticism as "abusive," "improper" or "fraudulent."
In the fraudulent category, a longtime employee of the U.S. Forest Service in Oregon, Debra K. Durfey, wrote convenience checks worth more than $640,000 from 2000 to 2006 to a live-in boyfriend, who used the money for gambling, car expenses and mortgage payments, according to the GAO and the Justice Department.
The fraud went undetected until a whistle-blower forwarded a tip to the Agriculture Department's inspector general. Durfey, who headed her unit's purchasing office, pleaded guilty last year and was sentenced to 21 months in prison and restitution.
Another fraud case involved the U.S. Postal Service, where an unidentified postmaster used his card to charge $1,100 over a 15-month period for "various online dating services" while he was under investigation for viewing pornography on a government computer. The employee worked out an agreement to remain on sick leave until he retired in 2007 and paid back the money spent on the dating services, according to the GAO report and a Postal Service spokesman.
In a case the GAO deemed "abusive," the Postal Service spent $13,500 in 2006 on a dinner at a Ruth's Chris Steak House in Orlando, including "over 200 appetizers and over $3,000 of alcohol, including more than 40 bottles of wine costing more than $50 each and brand-name liquor such as Courvoisier, Belvedere and Johnny Walker Gold." The tab came to more than $160 a head for the 81 guests, the report said Postal Service spokesman Gerry McKiernan said the dinner was held to entertain large postal customers who were already in Florida for another conference, and actually saved money because it combined four events into one. He also defended the payments for alcohol.
"When you're having dinner with customers, it's normal to have a drink," McKiernan said.
In another case at the State Department, a cardholder spent $360 at the Seduccion Boutique in Ecuador to buy "women's underwear/lingerie for use during jungle training by trainees of a drug enforcement program." The report does not include further details, but it says a State Department official "agreed that the charge was questionable."
The GAO found that 41 percent of the transactions it examined did not follow government purchasing rules. The problem was worse with larger purchases: Forty-eight percent of transactions over $2,500 were in violation of federal rules, the report said.
Levin said in a statement that "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."
In a written response to GAO, acting Controller Danny Werfel of the Office of Management and Budget said the administration "is extremely concerned with the incidences of purchase card abuse highlighted in GAO's report," and said it has agreed to increase oversight to lower the number of problems.
OMB spokeswoman Jane Lee also said the White House supports proposed Senate legislation aimed at reducing "inappropriate purchase card transactions." The Government Credit Card Abuse Prevention Act would require regular audits and other steps to cut down on credit card fraud and abuse. "