The Awareness Network

Your Tax Dollars Stolen By Gov’t Employees

Congressional auditors report that federal employees have used their government credit cards to charge millions of dollars for internet dating, tailor-made suits, lingerie, expensive dinners and other questionable expenses over a 15-month period.

A report by the Government Accountability Office examined spending controls across the federal government following reports of credit-card abuse at various governmental departments including the Defense Department, Homeland Security, and Veterans Affairs.

The review of card spending at more than a dozen departments from 2005 to 2006 found that nearly 41% of roughly $14 billion in credit-card purchases, whether legitimate or questionable, did not follow procedure. Either the purchases were not properly authorized or they had not been signed for by an independent third party as required in federal rules to deter fraud.

For purchases over $2,500, nearly half (48%) were unauthorized or improperly handled.

$1.8M out of $2.7M Unaccounted For

With purchases totaling $2,700,000, the government could not account for hundreds of iPods, computers, and digital cameras. In one case, the U.S. Army could not say what happened to computer items making up 16 server configurations, each of which cost nearly $100,000.

Agencies often could not provide the required paperwork to justify questionable purchases. Investigators also found that federal employees sometimes double-billed or improperly expensed lavish meals and Internet dating for many months without question from supervisors; the charges were often noticed only after auditors or whistle-blowers raised questions.

Breakdowns in internal controls over the use of purchase cards leave the government highly vulnerable to fraud, waste and abuse. The government-wide failure rate in enforcing controls is unacceptably high. This audit demonstrates that continued vigilance over purchase card use is necessary…

GAO Report

The report calls for the General Services Administration and Office of Management and Budget, both of which help oversee the government’s credit-card program, to improve accounting for purchased items, particularly small electronic equipment such as Palm Pilots, iPods and other items that could be easily stolen.

OMB and GSA were also urged to tighten controls over convenience checks, which are a part of the credit-card program, and to remind federal employees that they will be held responsible for any items if the purchases are later deemed improper.

In response, both OMB and GSA agreed with portions of the report. But GSA administrator Lurita Doan noted the vast majority of federal employees use their cards properly and that many oversight measures already are in place, though it is obvious that the entire system needs revamping. She acknowledged there is room for improvement but added that by using purchase cards the federal government saves about $1.8 billion in administrative costs each year. Which seems an odd thing to say, given the fact that all of the misappropriated funds add up

We agree that no level of abuse or misuse is acceptable

GSA administrator Lurita Doan

The GAO study comes amid increasing scrutiny of purchase cards, which are used by 300,000 federal employees and are directly payable by the U.S. government (i.e.: your tax dollars).

Last year, it is reported by the AP that Veterans Administration employees racked up hundreds of thousands of dollars in government credit-card bills at casino and luxury hotels, movie theaters and high-end retailers such as Sharper Image. Government auditors have been investigating these and similar charges, citing past spending abuses.

Investigators did not seek to determine the extent of fraud or waste at each agency. They cited numerous cases of questionable spending, which they said represented what could be found government-wide, including the VA.

“The purchase card is a useful tool for the government, and in no way are we suggesting it shouldn’t continue to be used widely,” said Gregory D. Kutz, GAO’s managing director of forensic audits and special investigations, in a telephone interview. “However, I would say these cases once again show that lack of internal controls cost taxpayers millions of dollars and thus continued focus is needed on improving these controls.”

Among the expenditures cited in the GAO report:

• An Agriculture Department employee fraudulently wrote 180 convenience checks for more than $642,000 to a live-in boyfriend over a six-year period. The money was used for gambling, car and mortgage payments, dinners and retail purchases that went unnoticed until USDA’s inspector general received a tip from a whistle-blower. The employee, who pleaded guilty to embezzlement and tax fraud charges, was sentenced last year to 21 months in prison and ordered to repay the money.
• U.S. Postal Service workers separately billed more than $14,000 to government credit cards for Internet dating services and a dinner at a Ruth’s Chris Steakhouse in Orlando, Fla., for 81 people at a cost of $160 each for steaks and crab. The dinner bill also included more than 200 appetizers and more than $3,000 worth of wine and brand-name liquor such as Courvoisier, Belvedere and Johnny Walker Gold.
• In the Internet dating case, a postmaster charged $1,100 over 15 months for two online services, including the Ashley Madison Agency. The expenses went unnoticed for more than a year even though he was under internal investigation for viewing pornography on a government computer. The postmaster was eventually told to repay the Internet charges but faced no disciplinary action.
• At the Pentagon, four employees purchased $77,700 in clothing and accessories at high-end clothing and sporting goods stores. The spending included more than $45,000 at Brooks Brothers and similar stores for tailor-made suits - $7,000 of which were purchased a week before Christmas. The credit-card holders said the items were for service members working at U.S. embassies with civilian attire. Pentagon rules allow purchases of civilian clothing when performing official duty, but generally only up to $860 per person.
• Justice Department and FBI employees charged $11,000 at a Ritz Carlton hotel for coffee and “light” refreshments for 50 to 70 attendees for four days, averaging about $50 per person. Seventy percent of the total conference cost of $15,000 was for the food and beverages, while audiovisual and other support services totaled only about $4,000, or 30 percent of the charges. It was not clear what action, if any, that Justice took in light of the conference expenses, which GAO deemed excessive.
• At the State Department, one credit-card holder bought $360 worth of women’s lingerie at Seduccion Boutique for use during jungle training by trainees of a drug enforcement program in Ecuador. One State Department official later agreed that the charge was questionable and stated that he would not have approved the purchase had he known about it.

Too many government employees have viewed purchase cards as their personal line of credit. When money that was intended to pay for critical infrastructure, education and homeland security is instead being spent on iPods, lingerie and socializing, we must immediately remedy the problem.

Sen. Norm Coleman, R-Minn.
Top Republican on Senate Homeland Security
subcommittee on investigations

“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,” said Sen. Carl Levin, D-Mich., who chairs the investigations subcommittee.

Tags: auditors report, congressional auditors, credit card abuse, federal employees, government accountability office, government credit cards

This entry was posted on Friday, April 11th, 2008 at 11:04 pm and is filed under analysis. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.