Posted on 04/08/2008 6:14:57 PM PDT by NormsRevenge
WASHINGTON - Federal employees charged millions of dollars for Internet dating, tailor-made suits, lingerie, lavish dinners and other questionable expenses to their government credit cards over a 15-month period, congressional auditors say.
A report by the Government Accountability Office, obtained Tuesday by The Associated Press, examined spending controls across the federal government following reports of credit-card abuse at departments including Defense, Homeland Security and Veterans Affairs.
The review of card spending at more than a dozen departments from 2005 to 2006 found that nearly 41 percent of roughly $14 billion in credit-card purchases, whether legitimate or questionable, did not follow procedure — either because they were not properly authorized or they had not been signed for by an independent third party as called for in federal rules to deter fraud.
For purchases over $2,500, nearly half — or 48 percent — were unauthorized or improperly received.
Out of a sample of purchases totaling $2.7 million, the government could not account for hundreds of laptop computers, iPods and digital cameras worth more than $1.8 million. 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," investigators wrote, calling the governmentwide failure rate in enforcing controls "unacceptably high."
"This audit demonstrates that continued vigilance over purchase card use is necessary," the 57-page report stated.
The report calls for the General Services Administration and Office of Management and Budget, both of which help administer the government's credit-card program, to set guidance to improve accounting for purchased items, particularly Palm Pilots, iPods and other electronic equipment 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. 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.
"We agree that no level of abuse or misuse is acceptable," Doan wrote.
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.
The AP reported Sunday that VA employees last year 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.
In Tuesday's report, 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 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," said Sen. Norm Coleman, R-Minn., the top Republican on the Senate Homeland Security subcommittee on investigations, which requested the GAO report. "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. Carl Levin, D-Mich., who chairs the investigations subcommittee, agreed. "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," he said.
You hit the nail on the head.
The problem is the first line supervisor who is supposed to be monitoring the abusers. You obviously did careful reviews because you knew YOU would be reviewed. That cannot have been the case in these abuse stories.
The answer is not a "reward" program. The answer is holding first line (and up) supervisors responsible for these transgressions. Reviewing expense accounts is no fun and, as has been pointed out, certainly doesn't win one "friends". But the supervisor is obligated to review expenses with a suspicious eye (especially when a company- or government-issued card is involved). By giving the employee the temptation you increase your responsibility to keep an eye on him/her. In order to avoid abuse a system has to be in place where card holders are fairly certain fraud will be detected AND THEY HAVE TO FEAR THE CONSEQUENCES.
Every one of these abusers had a superior who was supposed to be reviewing purchases. THAT SUPERIOR IS THE ONE WHO SHOULD HAVE BEEN FIRED. No allowing them to say "I don't have an accounting degree" or something like that. If they can't do the job, demote them. And the job includes reviewing ALL expenditures, especially on government-issued cards.
Hold first line supervisors accountable. If that's not happening, then fire the supervisors' supervisors.
The military had this strange idea that they could dump these credit cards on every rank of soldier, and they act surprised when the cards get misused. I never took one. Always put it on my own card and then let them reimburse me. As long as I filed the paperwork quickly, there was never a finance charge.
But, I had resources that a young enlisted guy simply didn’t have. And I understood how per diem and reimbursements worked.
When I worked for a large accounting partnership we were issued with American Express cards. Each card had was in the employee’s name, and the employee was personally responsible for purchases placed on the card. The Firm, naturally, picked up the cost of the card.
You could use the card for any expense you encountered in the course of doing business. And you claimed back your expenses using a very pragmatic rule: all expenses had to be chargeable to a Client, and the Billing Manager for that Client needed to approve them. No approval, no reimbursement.
You would get reimbursed your expenses by direct deposit into your bank account. You were then expected to pay your card balance yourself.
It would have been fine to buy women’s undies on the card — but just try to get a Billing Manager to charge his Client for it! It would never happen: the Client would rip the Billing Manager a new one if it were ever on-billed. And the Partner would rip the Billing Manager a new one if it were ever written off. This tended to make the Billing Managers very vigilant and very intolerant of bogus expenditures...
And so, no reimbursement for Women’s Undies — out of your own bank account it would come.
It was a very fair, very self-policing system, full of commonsense. Real expenses would be met without demur, and bogus expenditures just didn’t happen.
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