Pentagon cracks down on charge card abuse

The Defense Department is getting tough on military and civilian personnel who abuse government charge cards. Defense Department Comptroller Dov Zakheim Thursday announced a series of measures, including greater penalties, intended to rein in the abuse of government-issued travel and purchase cards. Since March, Zakheim has headed a charge card task force that was created to make reforms after the General Accounting Office reported on credit card misuse at Defense. The Defense Department has made wide use of purchase and travel cards to simplify its procurement processes. Since 1994, purchases cards have saved Defense about $20 per transaction--a total of $900 million. In fiscal 2001, Defense reported 207,506 purchase card transactions valued at $6.1 billion. Travel cards, meanwhile, have eliminated much of the red tape and costs associated with making advance travel payments to employees. In fiscal 2001, 1.4 million employees charged $3.1 billion in travel costs to their cards. Zakheim said the review found "the vast majority" of civilian and military personnel use the cards appropriately. Zakheim, who serves as the Pentagon's chief financial officer, estimates that less than 5 percent of all Defense charge card transactions are fraudulent or represent employee misuse. He stressed the reforms would not hurt these savings or reduce use of the cards. The proposed reforms would:

• Require all the military services to develop detailed plans by July 15 for better monitoring of charge cards. The Pentagon has told the services that no single manager should have oversight for more than 300 charge card accounts. Some managers currently oversee as many as 1,000 accounts.
• Make auditing charge cards a higher priority. Deputy Defense Secretary Paul Wolfowitz has ordered the Pentagon's inspector general to make auditing charge card accounts a priority. Also, Defense will use data mining software technology to sift through purchases to uncover possible patterns of fraud among card users.
• Increase penalties for fraud and misuse of the cards. Some employees could lose their security clearances; civilian retirees could have as much as 15 percent of their retirement pay docked to offset inappropriate purchases; and employees could be prosecuted in local and state courts--not just federal courts--for misusing the cards. Vendors who knowingly participate in charge card fraud schemes could be barred from doing further business with Defense.
• Reduce the number of charge cards issued by Defense by nearly 25 percent, from 1.6 million to 1.2 million. Managers are being told to eliminate cards that have been inactive for a year, as well as cards that have expired.
• Step up training for employees who have charge cards and rewrite regulations that could confuse card holders.

Zakheim says the reforms still require approval from the Office of Management and Budget and some, such as docking the pay of retirees to cover loses, would require congressional approval.

Sen. Charles Grassley, R-Iowa, a frequent critic of Pentagon accounting practices, said the changes would hold employees accountable for misuse and abuse of their cards. "The proposed rules will make them pay their bills on time. This is a giant step in the right direction. The momentum is good, but we still have a ways to go before we can claim victory," Grassley said.