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A House lawmaker wants the government to investigate fraud by vendors in the federal purchase and travel card programs.

During a hearing Tuesday before the House Government Reform Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations, the Navy's purchase and travel card use was called into question for the third time since July 2001, after a General Accounting Office study said the agency's internal controls were insufficient to root out fraud, waste and abuse.

"Vendors are submitting charges against cards where no goods or services were provided," said Rep. Janice Schakowsky, D-Ill., as she asked GAO officials to investigate the pervasiveness of that practice.

Purchase cards allow federal workers to avoid the government's lengthy procurement process for government purchases by allowing officials to charge up to $2,500 without going through the paperwork required for major acquisitions. The 1998 Travel and Transportation Reform Act requires federal employees to use government charge cards, instead of personal credit cards, for travel expenses. In fiscal 2001, Defense Department employees put $6.1 billion on purchase cards and another $3.4 billion on travel cards.

"Government credit cards can work in the right kind of environment," Sen. Charles Grassley, R-Iowa, testified during the hearing.

But the Navy, which has seen widespread abuse of the cards at its Space and Naval Warfare Systems Center (SPAWAR) and Navy Public Works Center, has yet to get it right, lawmakers said Tuesday.

"Once again, the bottom line is the same: no controls, extensive abuse and no accountability," Grassley said. "If the Defense Department wants this program to succeed, then the Defense Department needs to get on the stick and make the controls work."

Over the past two years, Grassley and Rep. Stephen Horn, R-Calif., have hammered away at the Defense Department for its travel and purchase card delinquency, abuse and fraud rates, citing cases where employees used the cards to pay for prostitutes, lap dances, golf outings, clothes, compact discs, leather goods, jewelry, flowers, food and other unauthorized purchases and services. In some cases, vendors and cardholders are working together to defraud the government, GAO found.

"I find the lack of control on this issue shameful and embarrassing," Schakowsky said. "This is a management failure."

Navy and Pentagon officials have implemented stringent controls for the cards in the past few months, including limiting the number of cards issued, reducing credit limits and requiring training in the use of purchase and travel cards, said Rear Admiral Robert Cowley, deputy for acquisition and business management in the Navy's research development and acquisition office.

But Gregory Kutz, director of financial management and assurance at GAO, said those changes and the agency's current internal control measures might not prevent additional fraud and abuse.

"The high failure rate - 80 percent to 98 percent - of cardholder reconciliation and approving official review is of particular concern because it is perhaps the most important control by providing reasonable assurance that purchases are appropriate and for a legitimate government need," Kutz told lawmakers, though he noted that the agency was trying to implement GAO's recommendations.

Schakowsky was less forgiving.

"We keep having these hearings and we keep hearing the same thing over and over again," she said. "I'm ready for somebody to come back ... and say 'We have punished this many cases, disciplined this many people,' rather than talk about process."

COMMENTS

• Unfortunately, the purchase card and travel card are lumped together in an article about abuse. The majority of abuse is on the travel card. This card is billed back to the individual and is only charged to the government when the individual defaults. Controls have been a lot less stringent because of this. However, the military activities should have paid more attention to unpaid bills before the individual cardholders defaulted. This travel card program does have problems and deserves negative attention. The purchase card, however, is a totally different animal. Our major command put early emphasis on internal control over this program. They realized the pitfalls and provided strong support to the subordinate commands to do likewise. They were always ready with guidance and training. I have talked to other activities and, because of this, they also have very few problems. I think the purchase card abuse is a problem within a few Navy activities that did not implement proper controls. Even at those activities, the abuse was a relatively minor part of their total purchases. Overall, the abuse is miniscule when compared to the total volume purchased with the Purchase Card throughout the Navy. The vast majority of those using this system are honest, hard working individuals who are using the tools they have been given to get the job done. The politicians are nitpicking for publicity because it creates great sound bites. It is just like the West Nile virus. Based on new accounts, we have an epidemic. However, when you look at the detailed statistics, the number of people who are seriously affected is miniscule. Most infected individuals don't even know they have the disease, or get nothing more than a mild viral infection. Stein Asbjornsen Posted February 24, 2003 4:58 PM
• Since the inception of the credit card program, many of the "hands on users" did not want the cards in the first place. The procedures at the time 1997 were not outlined clearly and the admonition was typical by our Command, you will use a travel card. The Material/Service purchase cards which were introduced about 1994 came with many rules and regulatory training. There is no simplicity currently to accomplish purchasing using the card. The time to accomplish purchasing using the card is not worth the level of effort it takes to do so. What has been missing from any publication is that using the card is a collateral duty by personnel that are not Material Department buyers, but must take on more job responsibility whether they want it or not. The reduction of Federal Personnel in many different job sectors but increased work load creates some of the problems. There is less experienced and qualified personnel using the cards, and the so-called new procedures since the July 2001debacle is laden with so much checking more time is wasted than gained productivity. It is heart warming that our representatives are looking into something that they ultimately created by the continual reduction in work forces, base closures etc. It is no different than a Judge second guessing a police officer who has seconds to react in a critical situation but the judicial system can sit and ponder the results. With the amount of money they spend on political hearings, and witch hunts I only wish they could use our tax dollars for a better economy. John T. Ellis Posted February 24, 2003 4:57 PM
• I am a Navy purchase cardholder and user. I was inspired to respond to your article by the comment from Rep. [Janice] Schakowsky [D-Ill.] that she's ready to hear that people are getting punished. BRAVO! This is exactly what is needed. Accountability for their actions. What we don't need is more controls. The mandatory procedures we follow hear at NAVAIR-PAX River are sufficient to prevent this type of thing from happening. The difference is we follow them. Thank you for emphasizing the punishment aspect by ending your article with this Schakowsky comment. Anonymous Posted February 24, 2003 4:56 PM