[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
GYM MEMBERSHIPS, GIFT CARDS AND HAIR SALONS: EXAMINING THE MISUSE OF
GOVERNMENT-SUPPLIED CREDIT CARDS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT OPERATIONS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
OCTOBER 14, 2014
__________
Serial No. 113-149
__________
Printed for the use of the Committee on Oversight and Government Reform
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http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan Vacancy
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Government Operations
JOHN L. MICA, Florida, Chairman
TIM WALBERG, Michigan GERALD E. CONNOLLY, Virginia
MICHAEL R. TURNER, Ohio Ranking Minority Member
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
THOMAS MASSIE, Kentucky MARK POCAN, Wisconsin
MARK MEADOWS, North Carolina
C O N T E N T S
----------
Page
Hearing held on October 14, 2014................................. 1
WITNESSES
Ms. Janet Kasper, Director, Contracts and Assistance Agreement
Audits, Office of Inspector General, U.S. Environmental
Protection Agency
Oral Statement............................................... 8
Written Statement............................................ 10
Mr. Elliot Lewis, Assistant Inspector General for Audits, Office
of Inspector General U.S. Department of Labor
Oral Statement............................................... 15
Written Statement............................................ 17
Ms. Anne Richards, Assistant Inspector General for Audits, Office
of the Inspector General, U.S. Department of Homeland Security
Oral Statement............................................... 25
Written Statement............................................ 27
Mr. John Lyle, Deputy Assistant Secretary, Contracting, U.S. Air
Force
Oral Statement............................................... 32
Written Statement............................................ 34
Mr. H.L. Larry, Deputy Director of Air Force Services, U.S. Air
Force
Oral Statement............................................... 38
APPENDIX
Oct. 14, 2014, letter to GAO from Reps. Mica and Connolly........ 58
EPA answers to questions for the record.......................... 60
GYM MEMBERSHIPS, GIFT CARDS AND HAIR SALONS: EXAMINING THE MISUSE OF
GOVERNMENT-SUPPLIED CREDIT CARDS
Tuesday, October 14, 2014
House of Representatives,
Subcommittee on Government Operations,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 1:04 p.m., in
Room 2154, Rayburn House Office Building, Hon. John Mica
[chairman of the subcommittee] presiding.
Present: Representatives Mica, and Connolly.
Staff Present: Melissa Beaumont, Assistant Clerk; Molly
Boyl, Deputy General Counsel and Parlimentarian; Ashley Callen,
Deputy Chief Counsel for Investigations, Linda Good, Chief
Clerk; Ashok Pinto, Chief Counsel, Investigations; Andrew
Rezendes, Counsel; Laura Rush, Deputy Chief Clerk; Jessica
Seale, Digital Director; Jaron Bourke, Minority Administrative
Director; Courtney Cochran, Minority Press Secretary; Juan
McCullum, Minority Clerk; and Cecelia Thomas Minority Counsel.
Mr. Mica. Good afternoon. I would like to welcome everyone
to the Subcommittee on Government Operations.
And this is a subcommittee of the House Oversight and
Government Reform Committee for this hearing on October 14.
And, first of all, I thank my ranking member Mr. Connolly
for being here and for our negotiating and working together to
make this hearing a reality, which hasn't been a very simple
process.
We had planned to conduct this hearing I think at least two
times before. One time they eliminated votes that eliminated
votes that week and members didn't return. Another time we had
it scheduled. And this is the convenient time for this hearing.
And, also, we have tried to conduct as many oversight hearings
as we can. I think it's an important responsibility not only of
this committee but the Congress, to see how taxpayer dollars
are expended.
So, first, I thank the ranking member for his forbearance
and also cooperation in making this--in this campaign season--a
top priority in interest of the American people and the
taxpayers who pay the bill.
The title of the hearing today is involves gym memberships,
gift cards, and hair salons. And the purpose is actually
examining the misuse of government-supplied credit cards.
So as we start this hearing, we always--Mr. Issa starts the
hearing--and cites a little principle statement of the purpose
of our hearings and this committee and subcommittee.
There are appropriators in Congress, and there are
authorizers in Congress who write legislation. Everything
outside the Constitution is created by law or funded by
Congress. Early on, in about 1808, the Founding Fathers created
the forbearer of this committee, and that is the Government
Reform and Oversight Committee today.
And we've had various names of that purpose, but it's one
of the few governments that I know on the planet that has
additional check on how money is expended for programs that are
authorized by government. And it is an important responsibility
because the public has the right to know how their money is
spent. It's our duty to see that that money is properly spent.
So with that little opening statement of our principles and
purpose of the committee, I want to, again, turn to the order
of business, which will be opening statements from myself, the
ranking member, Mr. Connolly. Then we'll recognize the
witnesses that we have. We have five witnesses today. And then
we'll proceed with questions. I appreciate our witnesses
appearing.
Again, the purpose of the whole hearing is to look at the
way credit cards and micropurchases, small purchases are made.
We formed a program several years back--I think it's actually
30 years back, to allow the use of credit cards. And the
program allows, again, a government-issued credit card for
small purposes.
This program is administered by GSA and actually, we did a
hearing prior to 2012 looking at some of the abuses and misuse
of credit cards in anticipation of trying to improve that
process. The program gives Federal departments and agencies and
employees the flexibility for these small purchases, which are
currently capped at $3,000.
One of the key benefits of this program, the credit card
program, is it allows the government to avoid burdensome
administrative costs and a lot of paperwork. But,
unfortunately, while it does simplify the process and it does
save money, it does have some serious drawbacks.
In 2008, the Government Accountability Office published a
report that found internal control weaknesses in agency
purchase card programs exposed the Federal Government to fraud,
waste, abuse, and also loss of assets. And that is quoted from
that report.
Congress responded to this and some other very serious
audit findings by passing a bill that some of us were involved
in in 2012 that was called the Government Charge Card Abuse
Prevention Act of 2012. And this hearing is actually a follow-
up to see what has taken place since we passed that law and how
effective it has been.
This act, among other things, required tighter controls and
also allowed departments and agencies to fire employees who
engage in fraud when using a government card to make purchases.
It also directs the inspectors general to engage in annual
reviews of the program. We are going to highlight and focus on
one of those reviews in this hearing today.
This act does not apply to the Department of Defense.
However, today we've invited one representative of the
military, the Air Force to testify about how they avoid fraud
in the agency's purchase card program. We also will hear from
the Air Force about whether they need a statute like we have,
the Government Charge Card Abuse Prevention Act, which, again,
we passed in 2012 but exempted the DOD. And we will question as
to whether we think that type of law needs to be imposed on
DOD.
Today I expect to hear from some of the civilian agencies
about the effectiveness of the act. And one of the reports that
we are going to cover here--we have actually--this is part of
what this hearing was called for back in March. And, again,
we've had a delay in conducting this hearing. But in March, the
Office of Inspector General of EPA issued this report entitled,
``Ineffective Oversight of Purchase Credit Cards Results in
Inappropriate Purchases at EPA.'' And we'll hear from the EPA
IG in that regard.
We will find from that report that the EPA did not provide
effective controls required by the 2012 law. The IG found that
more than half the credit card purchases sampled--now listen to
this. They took a sampling. But half of those that were sampled
were either prohibited, improper, or erroneous purchases.
In fact, again in that report--that's quite startling--but
94 percent of their review of the EPA transactions were not in
compliance with EPA--and this is their words--``not in
compliance with EPA policies,'' according to the law.
We have evidence that DHS spent $12,000, all purchases and
charges at one particular coffee shop in California. I got a
little Starbucks here. We are not supposed to show any labels.
But they bought $12,000 worth of Starbucks coffee at this
California location in 2013. This is just the Coast Guard in
that one Starbucks, a pretty heavy bill with those credit
cards. But we now are up to more than $31,000 that DHS spent at
that Starbucks, again, looking at different reports that have
been filed.
A recent report suggests that the Bureau of Land Management
used government charge cards to buy almost $800,000 in gift
cards. This is another recent report, and this is the Office of
Inspector General at the U.S. Department of Interior. So we
have another agency that, again, has gone wild with these micro
charge card purchases. The bureau is not with us today, but we
intend to follow up with that agency and any others we see with
abuses.
Another example of abuses in the Department of Labor. The
Inspector General Office is with us today to discuss the
serious abuses they have found when their office audited the
Job Corps program. Let me focus on this report for just a
moment because it's a model for how an IG should operate and
interact with the department over which it has oversight.
The Labor Department Office of Inspector General received a
request for an audit and a review of the Job Corps in my home
State and the city of Miami from the Department of Labor
Management. The request related to allegations that the Miami
office was abusing this credit card purchase program. The OIG
conducted an audit and found that there were, indeed,
individuals using government prepaid debit cards for their own
personal gain at that Miami office. And they also found similar
abuses across the U.S. Specific to Miami, the cards were used
for nearly $100,000 worth of trips to the hair salon, clothing
stores, and payment of personal phone bills.
As a result of the OIG's work, again the Department of
Labor OIG, and through their work, three Miami employees were
terminated and were referred to authorities, and two other
employees resigned. This demonstrates how the system should
work. And we gave some pretty strong authority in that 2012 law
to act. However, again, the Department of Defense is not
covered by the act. But it's actually I think the government's
largest purchaser. And we had done some preliminary review and
found some serious abuses in DOD that need to be addressed.
This committee has examined similar instances of abuse of
taxpayer dollars. In 2012, the Oversight Committee and
Transportation and Infrastructure Committee, which I chaired at
the time, held hearings on the infamous GSA Las Vegas
conference. On September 25, that's not too many days ago--Jeff
Neely, the now infamous GSA employee responsible for organizing
the extravagant Las Vegas conference that caught everybody's
eye--I have a picture of him. Everybody recalls this guy
thumbing his nose at us in a hot tub. But it took all that time
to document and go after the falsely filed travel vouchers and
statements that Mr. Neely had made.
Mr. Neely represented GSA on several instances that his
travel was for official purposes, and many of Mr. Neely's
reported business trips, as we saw, were for pleasure. The
individuals in Miami and Mr. Neely are the rare--let me say
rare bad examples of Federal workers in our Federal workplace.
The vast majority of Federal employees are honest and
hardworking, dedicated individuals.
But I hope today's hearing will serve us as both a reminder
that we need to do a better job monitoring this credit card
program and also act as a deterrent to--and to deter bad
actors.
Make no mistake, Congress, the Inspector Generals, your
managers, and all of us in Congress will hold the offenders
accountable. The American people work hard, send their taxpayer
dollars to Washington, and they expect and they deserve to have
accountability and responsible use of their tax dollars here.
If the 2012 law needs additional reform, we will reform it.
If agencies fail to uphold the law, we will hold them
accountable. Congress needs to be informed so that we can take
the appropriate action, and I'm hoping this hearing will
achieve that goal.
Today we'll be sending--and again, this is not a
Republican-Democrat political issue. This is the fiscal
responsibility and proper conduct and operations of our Federal
Government and agencies. And Mr. Connolly has worked in
lockstep, has never faltered a moment in assisting in this
effort to go after, again, people who abuse the law. He is
joining me today in sending a letter to GAO requesting an
update to the audits and investigations they have previously
conducted on purchase credit card fraud.
Mr. Connolly has signed on to this request, so it's from
the both of us. And without objection, a copy of that letter
will be made a part of the record. So ordered, without
objection.
Mr. Mica. But I want to thank, again, Mr. Connolly for his
steadfast commitment to, again, going after abuses where we see
it, his strong support of Federal employees, and we try to make
certain that they are rewarded and recognized.
But also, while this is a small and rather quiet hearing
today, it is important. And I thank him for his commitment.
I thank the witnesses for their participation and look
forward to their testimony.
And let me recognize the distinguished ranking member from
the nearby State of Virginia, Mr. Connolly. Thank you sir.
Mr. Connolly. Thank you, Chairman Mica.
And I thank you for the 2 years we've had the opportunity
to work together, we have absolutely worked on a bipartisan
basis on our agenda for this subcommittee.
And I appreciate that, the commitment of your staff and my
staff to making that happen.
It is a model for how I think the broader committee and the
committee structure in Congress can work. We don't pretend we
don't have disagreements. But we have been able to find common
ground. And I really appreciate your leadership in that regard
and your friendship. Thank you, Chairman Mica.
And, by the way, I think we're the only show in town today.
Mr. Mica. A small but important activity today. I thank you
again for attending.
Mr. Connolly. I was greeting our panel and telling them how
lucky they were to be part of the only show in town here on the
Hill.
The subcommittee is addressing an issue of Federal
financial management that boasts broad bipartisan agreement
over the desired outcomes; namely, dramatically reducing
incidents of waste, fraud, and abuse involving government
charge cards while ensuring agencies are identifying abusers
and taking appropriate enforcement actions to deter such
conduct. I have long believed that to build trusts in public
institutions, it's absolutely vital for public servants to
conduct themselves in a manner that reduces both real and
perceived risks of such waste, fraud, and abuse.
When I served on the Fairfax County Board of Supervisors
and as its chairman for 5 years, I made it the policy of my
office never to use or possess a purchase card, which not only
eliminated any rick of waste, fraud, and abuse but also carried
considerable value with respect to enhancing our community's
trust in its local government, a vital characteristic that may
be difficult to quantify but I think is absolutely essential
for good government. I don't necessarily subscribe to that
model for the entire Federal Government, but it has something
to commend it.
Ensuring that agencies actually implement corrective
actions in response to the IG recommendations is a critically
important facet of congressional oversight, and I look forward
to receiving a progress update this afternoon.
In addition to reviewing those three IG reports, I also
look forward to learning more about how the Air Force is
improving its charge card program after examining one specific
$24,000 procurement of what surely must be high quality
commercial-grade espresso machines intended to serve thousands
of servicemembers on a daily basis. Although this acquisition
was certainly not a small dollar charge card purchase, it
recently garnered negative press attention due to the cost
alone. And I hope our Air Force witness can provide us with the
next context to fully understand why the purchase was made for
these machines and the costs associated with it.
We must also examine the effectiveness of our own efforts
here in Congress. And I look forward to reviewing the
implementation of a bipartisan Government Charge Card Abuse
Prevention Act of 2012, which you mentioned, Mr. Chairman,
which the Oversight Committee considered and favorably reported
back in 2011 prior to its unanimous passage by Congress and
enactment late in 2012.
Finally, it's also important that our subcommittee provide
context to ensure that we do not throw the proverbial baby out
with the bath water.
Moving beyond specific cases of abuse that certainly make
my own blood boil to truly safeguard taxpayer dollars, one must
understand that evidence derived from nearly 16 years of
experience with Federal charge card programs seems to indicate
that in authorizing frontline Federal employees to use charge
cards to make micropurchases, Congress actually facilitated a
more efficient procurement system that continues to achieve
actual cost savings and cost avoidances that outstrip the
estimated costs associated with obviously unacceptable
instances of charge card abuse.
According to the GSA, taxpayers benefit from charge card
programs because they cost agencies nothing to obtain charge
card services and the use of the cards has generated more than
$1 billion in gross agency rebates over the past decade alone,
resulting from contractual provisions requiring the credit card
companies to pay rebates, also known as refunds, to agencies
based on the amounts charged to the cards.
It is vital we not overreact in response to outrageous but
isolated incidents of abuse with broad one-size-fits-all
restrictions that revert our Federal procurement system back to
the pre-1998 era, which featured higher administrative burdens
and more cumbersome bureaucracy that resulted from agencies
being unable to utilize government charge cards as a low-cost
method to streamline acquisition.
As the Office of Management and Budget noted in a
government-wide memorandum reminding agencies of the
obligations to consider small businesses when making
micropurchases, the majority of the approximately 260,000
purchase cards in circulation are in the hands of frontline
civil servants to efficiently support mission delivery. To be
clear, I'm not minimizing the findings of numerous Government
Accountability Office reports and the IG audits in front of us
over the last decade that identified inadequate and
inconsistent controls across Federal agencies with respect to
both purchase and travel cards.
In fact, that's one of the reasons I certainly
enthusiastically supported the Government Charge Card Abuse
Prevention Act. I further recognize that while Congress
codified the majority of the GAO's recommendations in passing
that bill, as the findings of DHS, DOL, and EPA reveal, much
more work remains to be done. And I certainly am prepared to
join with you, Mr. Chairman, in inking an additional
legislative remedy, if that's what's required.
As the GS conference scandal demonstrated, the nature of
misconduct often results in consequences that go far beyond the
pure dollars wasted. For example, in my district, constituents
and industry often raise concerns that in our response to that
outrageous $800,000 boondoggle, the Federal Government may have
unintentionally swung the pendulum too much in the other
direction, preventing effective communication between public
and private sectors, inhibiting interagency coordination, and
perhaps even having a chilling effect on the innovation that
occurs from networking.
The bottom line is that we cannot rest until we have
significantly enhanced internal control standards to lessen the
risk of waste, fraud, and abuse.
For the disgraced minority of those who abuse government
charge cards, we must ensure that the consequences are
consistently implemented and appropriate in relation to the
severity of the abuse. It's absolutely vital that we enhance
enforcement to ensure justice is carried out and to ensure
credibility on the part of the Federal Government and with its
taxpayers. And also do right by the vast majority of Federal
employees who, as you indicated, Mr. Chairman, are hardworking
and honest civil servants.
With that, I look forward to this hearing and look forward
to our testimony. Thank you, Mr. Chairman.
Mr. Mica. I thank the ranking member, Mr. Connolly, for his
statement.
And all members may have 7 days to submit opening
statements for the record.
Now let me turn to recognize our panel.
I will introduce them. First we have Janet Kasper. Janet
Kasper is the director of contracts and assistance agreements
audits in the Office of Inspector General at the U.S. EPA.
Mr. Elliot Lewis is the assistant Inspector General for
audits at the U.S. Department of Labor.
Ms. Anne Richards is the Assistant Inspector General for
audits at the U.S. Department of Homeland Security.
Mr. John Lyle is the Associate Deputy Assistant Secretary
for contracting at the United States Air Force.
And Mr. H.L. Larry is the Deputy Director of Air Force
Services at the United States Air Force.
I thank all of the witnesses. I welcome them today. I don't
know if you have come before our committee or our subcommittee
before, but this is an investigation of an oversight committee
of Congress.
And in accordance with our rules, we do swear in our
witnesses. So if you will please stand, I will administer the
oath.
Raise your right hand, please. Do you solemnly swear or
affirm that the testimony you are about to give before this
subcommittee of Congress, is the whole truth and nothing but
the truth?
All of the witnesses, the record will reflect, answered in
the affirmative.
And, again, I welcome you and thank you for coming today.
Of course we don't have as many members today, since we are
not voting. But we try to limit you to 5 minutes, which if you
have to go a little bit over, I think today would be okay. We
do have copies of your statements that were prepared and
submitted to the committee, which will be made a part of the
record. Without objection, so ordered. So you can, again, try
to make some major points to the panel this afternoon.
And we will run the clock. But again we'll try to give you
as much leeway as possible. And then we'll go through all of
the five witnesses. And then Mr. Connolly and I will direct
questions to the witnesses.
So with that, first let me recognize for the purpose of her
testimony Janet Kasper, director of contracts and assistance
agreement audits at the U.S. Inspector General's Office of EPA.
Welcome and you are recognized.
Pull the mic up, too, as all of you testify so we can hear
you. Thank you.
WITNESS STATEMENTS
STATEMENT OF JANET KASPER
Ms. Kasper. Good afternoon, Chairman Mica, Ranking Member
Connolly, and members of the subcommittee. Thank you for
inviting me to appear before you today.
The government purchase card program was established over
30 years ago to provide--to streamline the Federal acquisition
process by providing a low-cost, efficient vehicle for
obtaining goods and services. The Government Charge Card Abuse
Prevention Act of 2012 was designed to prevent recurring waste,
fraud, and abuse of government purchase cards.
In 2012, EPA had 2,071 employees who were assigned purchase
cards. Of those, more than half were active cardholders who
transacted $29 million in purchases. In addition, EPA had 1,000
check writers, totaling more than $500,000. The Charge Card
Abuse Prevention Act of 2012 states that the Inspector General
is to conduct periodic assessments of the agency's purchase
card program to identify risk of illegal, improper, or
erroneous payments.
In March 2014, the EPA OIG issued a report on EPA's
management of purchase cards. The objective of the audit was to
determine whether EPA's use of purchase cards--whether EPA has
sufficient controls to identify potentially illegal, improper,
and erroneous use of purchase cards. Overall, we found that
EPA's oversight is not effective to ensure purchase cardholders
and approving officials comply with internal controls.
Of $152,602 in transactions we sampled, we found $79,254 of
prohibited, improper, and erroneous purchases. The
improprieties range from missing approvals to more serious
issues of using cards for prohibitive purchases.
Specifically, the internal control oversight issues we
identified in one or more transactions included: Cardholders
should not verify receipt of purchase items; cardholders did
not obtain approval prior to making purchases; cardholders and
approvers did not apply closer scrutiny to transactions, such
as clothing entertainment and light refreshments.
There were some transactions that, in our opinion, were
more egregious than others. EPA policies allow for the purchase
of light refreshments for an award recognition ceremony. From
one transaction we reviewed, EPA provided four different
appetizers, chicken tenderloin, fresh fruit, pasta salad,
cookies, soft drinks, and punch, much more than just slight
refreshments. The total cost of the food was $2,900.
In 13 of 80 transactions we reviewed, cardholders did not
follow requirements related to restricted transactions. For
example, in three instances, cardholders who were not
acquisition professionals purchased gym memberships that
required prepayment of services totaling $2,867. Two of these
purchases were for family memberships, not just the EPA
employee.
Our audit found the approving officials did not review
purchase logs for 14 of the 80 transactions. For one
transaction, the approving official incorrectly assumed that
since he had preapproved the purchase, he did not have to
review the purchase card quarterly--the purchase card log
quarterly. Consequently, he was unaware that the funder and
cardholder amended his prior approval to purchase an additional
item for $805 for personal use.
In conclusion, 75 of 80 reviewed transactions were not in
compliance with EPA policies. These transactions were
undetected because EPA approving officials and purchase card
team.
Improved purchase card oversight potentially saves money by
reducing prohibited, improper, and erroneous purchases which
would be especially beneficial in the current budget
environment.
To improve transparency, during the past year, the OIG has
started to publish reports on its own compliance with laws,
regulations, and procedures. As part of this effort, the OIG
initiated a detailed audit of its own internal controls over
purchase cards. We plan to make that report public very soon.
Mr. Chairman, this concludes my prepared statement. I would
like to thank the subcommittee for your continuing support for
the OIG's mission and your robust interest in our work.
I would be pleased to answer any questions you or the
subcommittee members may have.
Mr. Mica. Thank you for your testimony, Ms. Kasper.
[Prepared statement of Ms. Kasper follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. We will now turn to Mr. Elliot Lewis, assistant
inspector general for audits, Office of Inspector General, the
U.S. Department of Labor.
Welcome. And you are recognized, sir.
STATEMENT OF ELLIOT LEWIS
Mr. Lewis. Good afternoon, Chairman Mica, Ranking Member
Connolly. Thank you for the opportunity to discuss our April
2014 audit that identified wasteful spending due to the misuse
and mismanagement of prepaid debit cards and government travel
cards in the Job Corps program.
Our audit concluded that more than $900,000 of government
funds were misused or wasted because Job Corps lacked basic
internal controls over prepaid debit cards and centrally billed
government travel cards used to pay for student travel.
The $1.7 billion Job Corps program provides residential and
nonresidential educational training and support services to
approximately 60,000 disadvantaged at-risk youth age 16 to 24
at 125 Job Corps centers nationwide. Job Corps student travel
costs more than $20 million annually. Job Corps pays student
travel expenses for initial visits, admissions, transfers, and
breaks.
The department referred allegations it had received
relating to misuse of debit cards at one of its centers. We
conducted an audit to determine whether student travel expenses
claimed by Job Corps centers were allowable.
In May of 2009, Job Corps centers began issuing prepaid
debit cards to students rather than cash so students could pay
for checked baggage charges incurred during travel. Job Corps
later expanded the use of cards to pay for student meals while
in transit.
During our audit, we reviewed the records for nearly 18,000
cards, with a total value of $600,000 to determine whether they
complied with Federal and DOL travel rules. We found that
approximately 35 percent of the cards were misused to purchase
items such as consumer electronics, clothing, wireless
telephone service, and various online purchases. These improper
purchases included at 98 of the 104 centers reviewed.
At the Miami center alone, over 1,800 cards were misused to
make improper purchases, totaling more than $96,000. The
operator at the Miami center generally agreed with our results
and terminated three employees while two others resigned.
Job Corps and most of the other centers we reviewed
acknowledged that prepaid debit cards had been used to make
more than 6,000 improper purchases, totaling almost $250,000.
However, we could not always determine who made these purchases
because the centers did not maintain adequate control over the
cards.
Our audit also found that even if the debit cards were
properly used, they were not cost-effective. We found Job Corps
paid more than $100,000 in merchant fees for the 18,000 prepaid
debit cards purchased by centers from December of 2009 to March
of 2013. In addition, completely unused cards could be returned
for a refund but partially used cards could not. We identified
about 4,000 cards with partially remaining balances, totaling
almost $30,000.
Job Corps and its center operators lacked basic internal
controls over these cards. Moreover, Job Corps did not place
sufficient emphasis on establishing processes for centers to
distribute and monitor the cards, nor did Job Corps monitor
centers use of the cards to ensure charges were allowable,
necessary, and reasonable.
We also reviewed Job Corps centers use of government-issued
travel cards to pay for student travel. Job Corps centers were
required to use a government travel card in order to obtain
contracted airfares. We found many instances where cards were
canceled or suspended because Job Corps had not ensured that
the card accounts were paid. When centers were unable to use
their government travel cards, they were forced to purchase
commercial airfares which were often 50 percent or more above
the government fare. Travel card suspensions for the Boston
region alone cost Job Corps over $400,000, the cost savings
lost from paying commercial airfares.
As a result of our audit, we made several recommendations
for Job Corps to improve internal controls, processes, and
oversight. We also recommended Job Corps take corrective action
to ensure that government travel cards are not suspended or
canceled. The Department responded that it has taken steps to
address these issues and will take additional actions to
improve the oversight of Job Corps student travel. The
Department stated it has eliminated the use of the prepaid
debit cards.
In conclusion, Mr. Chairman, it is important that Job Corps
ensure that all of its funds are spent efficiently and
effectively in support of the program. Although travel is not
the largest of Job Corps' costs, the results of this audit
demonstrate that Job Corps can do more to ensure its travel
funds are spent wisely.
As with all our reports, we will follow up on the
Department's actions in response to our recommendations.
Thank you for the opportunity to testify today. I would be
pleased to answer any questions that you or any members of the
subcommittee may have.
Mr. Mica. Thank you, Mr. Lewis. And we will hold the
questions, as I said.
[Prepared statement of Mr. Lewis follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. We will now turn to Anne Richards, and she is the
assistant inspector general for audits at the Office of
Inspector General at the U.S. Department of Homeland Security.
Welcome. And you are recognized.
STATEMENT OF ANNE RICHARDS
Ms. Richards. Good afternoon, Chairman Mica, Ranking Member
Connolly. Thank you for inviting me to discuss our work related
to DHS' purchase card program.
My testimony today will focus on our efforts to assess the
program and recommend ways to decrease the inherent risk of
purchase card use as well as the department's progress in
implementing those recommendations.
In fiscal year 2013, DHS purchase cardholders spent about
$439 million in over 924,977 million purchase card
transactions, placing the Department among the top purchase
card users in the Federal Government.
When used properly, purchase cards decrease administrative
costs, increase procurement efficiency, and provide an audit
trail. Purchase cards are a low-cost procurement and payment
mechanism that eliminates the need for paper purchase orders
and expedites vendor payments.
The inherent or natural risk of purchase card misuse is
greater because of the number of cardholders and the low dollar
decentralized actions which are subject to fewer reviews and
controls. But this increased risk was purposely accepted to
reap the benefits of a simplified procurement process. That is,
less cost and quicker response.
Over the last decade, the DHS OIG and GAO have conducted
several audits and investigations addressing the Department's
use of purchase cards. Based on that work, we have reported
that a weak control environment and breakdowns in key controls
have exposed DHS to purchase card fraud and abuse.
In short, purchase card guidance was inconsistent. And
inadequate staffing, insufficient training and ineffective
monitoring also contributed to the weak control environment.
DHS has agreed with our recommendations and taken actions to
improve its control environment. To this end, DHS has taken
actions to ensure cardholders and approving officials have
required training. Cardholders do not exceed single purchase
limits or monthly limits without appropriate justification, and
that cardholders comply with documentation requirements and
approvals before making purchases.
DHS has also taken steps to improve its post payment audit
process to include more targeted reviews of potentially
questionable transactions, such as those transactions taking
place at retail stores, ATMs, or restaurants.
In our audits, we also identified numerous examples of
potentially fraudulent, improper, and abusive or questionable
transactions. Those transactions were subsequently individually
reviewed, and appropriate corrective actions were taken when
necessary.
In January of this year, we reported that DHS had an
adequate internal control framework to manage its purchase card
program but that the Department needed to continue improving
its compliance with regulations and implementing its internal
controls. In other words, the internal control design is strong
but more vigorous adherence to the design is still needed.
Additionally, new controls are in place based on the
Government Charge Card Abuse Prevention Act of 2012, including
the periodic risk assessments to be conducted by our office and
the annual reporting requirement on the state of charge card
internal controls and the status of any outstanding audit
recommendations.
Pursuant to that legislation and the results of our 2013
risk assessment, we are currently conducting a purchase card
audit to determine whether the department has made progress in
improving its implementation and internal controls. This audit
includes evaluating a sample of transactions to determine if
the internal controls are working as designed. We plan to
publish a report on this audit in early 2015.
Consistent application of controls and vigilant oversight
by management minimized fraudulent, improper, abusive, or
questionable purchase card usage; but the inherent risks cannot
be eliminated. Nevertheless, purchase cards give the government
flexibility in making purchases and save money on transaction
processing.
The Department's actions provide reasonable assurance that
potential fraud, waste, and abuse are minimized while the value
and benefit of simplified procurements using purchase cards
have been maximized.
Mr. Chairman, this concludes my prepared statement. I
welcome any questions you or the ranking member may have.
Mr. Mica. Thank you, Ms. Richards. And we will get back to
you with questions.
[Prepared statement of Ms. Richards follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. I will turn to our next witness, Mr. John Lyle.
He is the Associate Deputy Assistant Secretary for Contracting
at the U.S. Air Force.
Welcome, sir. And you are recognized.
STATEMENT OF JOHN LYLE
Mr. Lyle. Thank you sir. Good afternoon. And thank you,
Chairman Mica and Ranking Member Connolly, for the opportunity
to testify this afternoon.
Because I have submitted my complete system for the record
and based on your request, I will provide a brief summary of my
testimony.
First and foremost, we, in the Air Force, are committed
towards ensuring proper spending controls are effectively used
in the government-wide purchase card program, referred to as
GPC. In summary, when used in place of written purchase orders,
the GPC allows us to appreciably reduce delinquent payment
interest charges, saves $70 per transaction in administrative
costs, and obtain rebates that further our ability to execute
the mission. In fiscal year 2013, Air Force units saved $105
million on 1.5 million transactions and received $14.7 million
in rebates on total expenditures of $1.2 billion.
Through a variety of tried and true systemic and human
controls, we are confidently able to monitor the activities of
over 26,000 cardholders spread across 10 Air Force major
commands; four field operating agencies; and three direct
reporting units, both domestic and overseas. In accomplishing
this, we strongly endeavor to work with the Office of Secretary
of Defense's Office of Defense Procurement and Acquisition
Policy and our industry partners at U.S. Bank and Visa to
augment the fields' ability to protect taxpayer dollars against
fraud, waste, abuse, and misuse.
The Air Force leads the Department of Defense with 96
percent of cardholders registered and the Purchase Card Online,
or PCOLS, System. PCOLS is an automated tool that audits 100
percent of all GPC transactions. It flags 3 percent of the
high-risk transactions from manual audit.
Since 2002, the Air Force Audit Agency has conducted eight
audits on the GPC program, with two of the most recent
occurring in 2012 and 2013. These audits, used in conjunction
with other internal control measures, like data mining reports,
ad hoc and scheduled inspections, and a host of checks and
balances that separate the roles and functions have proven
invaluable in improving the fiduciary stewardship of the
program.
Mr. Chairman and ranking member, thank you again for the
opportunity to testify today and I look forward to your
questions.
Mr. Connolly. Mr. Chairman?
Mr. Mica. Yes.
Mr. Connolly. Could I just ask Mr. Lyle where he is from?
Mr. Lyle. I'm from Maine originally and spent a lot of time
in Massachusetts.
Mr. Connolly. Yep. You are pretty good with the Rs. But
``charge'' and ``card.'' I'm from Boston. We have trouble with
those Rs.
Thank you, Mr. Chairman. Thank you, Mr. Lyle.
Mr. Mica. We don't have to bring in an interpreter,
fortunately.
[Prepared statement of Mr. Lyle follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. You are accompanied by Mr. H.L. Larry. And Mr.
Larry is Deputy Director of Air Force Services.
Did you have an opening statement, sir?
Mr. Larry. Yes. Brief comments, sir If I may.
Mr. Mica. Okay. Then you are recognized. Thank you.
STATEMENT OF H.L. LARRY
Mr. Larry. Good afternoon. Thank you, Mr. Mica and Ranking
Member Connolly, for the opportunity today as I respond to your
questions regarding the purchase of espresso machines and
accessories for Yokota Air Base in Japan.
We appreciate the leadership and support the subcommittee
continually provides on matters affecting the readiness and
quality of life for our Airmen and their families. And we will
remain vigilant for the need to continuously exercise tight
fiscal stewardship of our scarce resources.
Resource management in Air Force Services is somewhat
unique because we are responsible for funds appropriated by the
Congress as well as nonappropriated funds, or NAFs. NAFs are
generated by morale, welfare, and recreational activities
through sales and fees charged, such as the purchase of goods
and services at our bowling centers and by Air Force Services'
share of the Army and Air Force exchange service dividends.
In 2007, Air Force Services nonappropriated programs
migrated from the government purchase card to the NAF purchase
card to gain further manpower, efficiencies, and increase
rebates. The NAF purchase card is used to make authorized NAF
purchases for supplies and equipment.
In regard to the inquiry into the purchase of espresso
machines and accessories for Yokota Air Base in Japan, four
espresso machines, along with accompanying accessories, were
sourced using nonappropriated funds and installed at two
nonappropriated activities, a base coffee shop and the base
enlisted club.
This purchase was authorized and approved by the
appropriate installation officials and executed by the local
servicing contracting office in accordance with Air Force NAF
contracting procedures. Pricing was determined fair and
reasonable based on requirements and competition.
We will continue to manage and monitor use of
nonappropriated funds generated throughout the Air Force and
ensure these funds are properly used for all Airmen and their
families to enjoy.
We look forward to your continued partnership in delivering
the best quality of life to our airmen and their families.
Again, Chairman Mica, thank you for the opportunity to be
here today.
I look forward to working with you and your fellow
subcommittee members.
And I welcome any questions you may have. Thank you.
Mr. Mica. Thank you.
Mr. Mica. And we will get right into the question, since
you brought this subject up, Mr. Larry, about the Air Force
base I guess it was in Japan where they purchased these three
espresso machines for $8,000 apiece.
Now, this was nonappropriated funds; is that--that's what
you were saying?
Mr. Larry. That is correct, sir.
Mr. Mica. Okay. Because there was a press account. We get
the accounts. Some of them are anecdotal press. And it raised
everyone's eyebrows because $8,000. And that was at one
location. But it was not taxpayer money. We want to make that
clear.
Was a card used and then paid back? Or how did that work?
Mr. Larry. Yes, sir.
From the nonappropriated funds side, we had warranted
contracting specialist there at the installations, and they
have certain dollar thresholds. In this case, when you combine
all four of the machines that were purchased, it exceeded the
NAF threshold. So we turned to our partners from the
appropriated funds side who executed half of the
nonappropriated----
Mr. Mica. Okay. Again, the press reports. We get them. And
right now, there are millions of Americans out there working
hard, trying to pay their bills, put their kids through school,
pay their taxes.
And Mr. Connolly and I right now are trying to separate
fact from fiction when it comes to some of the credit card gone
wild stories that are out there.
So yours is an example of where there was a legitimate
expenditure. The press account was not correct, as I understand
it. Is that right?
Mr. Larry. That is correct, sir.
Mr. Mica. Okay. Again, we want the whole truth and nothing
but the truth. And, again, the proper expenditure of taxpayer
dollars.
But that brings me--okay, as long as we are on coffee and
we did espresso machines. You saw the Starbucks. And actually,
I buy, just for the record, I buy McDonald's. I try to get the
senior coffee for a dollar when it's on sale. This is more
expensive. So I'm not promoting any product.
Mr. Connolly. I would like to do that too; but I'm too
young, Mr. Chairman.
Mr. Mica. And you get free refills too at McDonald's.
But in any event, that aside. Again, I put up--we were
absolutely startled, Ms. Richards, when we saw at one Starbucks
in California, $12,000 worth of purchases.
Are you aware that those purchases took place on the
government credit cards?
Ms. Richards. Mr. Chairman, your staff shared the list of
purchases that you had with us. We've begun to make some
preliminary inquiries. We are going to include those
transactions as a separate test in----
Mr. Mica. But you have not----
Well, again, we have from that one Starbucks credit card
purchases of $12,000. And I don't begrudge Coast Guard people
or DHS people of, you know, where it's legitimate business and
possibly buying some coffee for meetings, official meetings or
guests----
Ms. Richards. Mr. Chairman, the Coast Guard has provided
some initial information for us on their look at those
purchases. And many of those purchases----
Mr. Mica. You don't dispute what we have?
Ms. Richards. No. But, Mr. Chairman----
Mr. Mica. Okay. And then the other thing too is we have
found, in looking at other DHS entities, there was $31,000 that
we have found at Starbucks across the other entities. So, I
mean, that just jumps out at you, $12,000 in one California
Starbucks location.
Ms. Richards. And the majority of those purchases were to
furnish coffee for the dining pantries onboard Cutters for when
they were operating at sea.
Mr. Mica. Well, there may be a very legitimate purchase
requirement. But for the rest of DHS, it's $31,000 that we have
been able to identify.
So, again, if you can document that, if it's justified. We
don't--we don't begrudge.
Ms. Richards. And, as I said, some of the purchases seem to
be legitimate use of the card to supply the kitchens or galleys
onboard ships.
We will be looking at all of those purchases that you
provided to us. And as part of our audit, we will be looking
for those types of purchases where the vendor's name, such as
this coffee shop, would jump out at you as something you would
need to look at.
Mr. Mica. Again, that jumped out, twelve at one location.
And we have, again, a wide variety of Coast Guard stations.
In fact, my wife even had one of the Coast Guard Cutters,
the small ones, named after her. We are very proud of the Coast
Guard and their service. But that kind of catches your eye.
You did testify that we had $439 million in credit card
purchases. Is that DHS-wide?
Ms. Richards. That is DHS-wide, sir.
Mr. Mica. Okay. And, okay, we have three inspector general
reports here, March for EPA this year, Ms. Kasper. Mr. Lewis
was Department of Labor, April 2014. DHS is January earlier
this year--that are a part of what we are reviewing here today.
The other two--well, in the EPA report, Ms. Kasper, you
testified--what we calculated about half of the sample
purchases, over half, there was something wrong, a misuse,
abuse, or noncompliance. Is that correct?
Ms. Kasper. Yes, that's correct.
Mr. Mica. Okay. And Mr. Lewis, in your testimony, you just
testified that you found about 35 percent of the purchases with
a credit card were abusive or noncompliant.
Mr. Lewis. That was just with the prepaid debit cards.
Mr. Mica. Okay. Would you guesstimate on credit cards? That
was debit cards.
Mr. Lewis. Well, the issues with the credit cards, travel
cards, themselves, were actually cases where they should have
been using the cards and were not. So we lost government
airfare. We lost $400,000.
Mr. Mica. So you lost money there. Okay.
So what I am trying to do is, we had 50 percent abuse. Even
with a new law, EPA use of credit cards--debit cards, or credit
cards, at least 35 percent in your review.
Okay. You have $439 million, almost half a billion, Ms.
Richards, in DHS. You did not speak to what you found as like a
percentage of abuse. Is it possible to calculate that or what
you reviewed?
Ms. Richards. In 2013, we did a risk assessment because it
was a follow-up from the work we had published earlier. So we
didn't test the individual transactions in that audit. So I
cannot at this time estimate any numbers of purchases that
would have been inappropriate, based on that work.
Mr. Mica. Well, again, we are sorting through some of those
figures. And that's pretty--I mean, it's almost a half a
billion dollars and you said you had how many credit cards
issued?
Ms. Richards. The department currently has about 9,700
purchase card users.
Mr. Mica. Okay. And, you know, there's poor management,
poor control. Some of that was what you had stated that was
identified; is that correct?
Ms. Richards. Yes, sir.
Mr. Mica. Yeah. So, again, we would have to assume that a
significant number of those purchases were noncompliant. And I
think you spoke about actually the lack of compliance or the
lack of training or whatever. Actually, it sounds like a lack
of management or administrative oversight and education of
employees that causes this. Is that what you found?
Ms. Richards. We've done a number of audits of this topic
over the years, both my office and our Office of Emergency
Management Oversight, as well as GAO. And we have found over
the audits that we have done that there have been a lack of
controls and a lack of oversight. But we've also seen the
Department take our recommendations and implement them. And so
they are working hard to improve their internal control
environment and their internal controls and oversight.
That's why we did a risk assessment last year; and we are
in the process of doing it going forward.
Mr. Mica. To get them to do that, have you published a
manual, a set of guidelines? What is--what have you done? Is it
meetings that you conduct on training?
Ms. Richards. We've published a number of reports----
Mr. Mica. Okay.
Ms. Richards. --prior to the--you're looking at our latest
report from January 2014. We've published a number of reports,
I believe two in '13 and one in '12.
Mr. Mica. I have a copy of your report. But your report
talks about some of the problems. It's sort of an audit or
overview of what's going on. But is there a simple guideline
that you publish for----
Ms. Richards. We don't publish a guideline for the
Department. That would be a management function. We've provided
recommendations on what they should include in the guidelines
they publish.
Mr. Mica. But they--have they published that to----
Ms. Richards. Yes, they have.
Mr. Mica. --your satisfaction?
Ms. Richards. Yes, they have.
Mr. Mica. Okay. Again, we have some noncompliance at
significant levels.
Let me see. Mr. Lyle, was it? You testified that we save
about--that the Department of Defense or at least the Air
Force--you're speaking for Air Force--you calculate that you
save about $70 per transaction by using the credit card, or I
don't know if you use debit cards. But there's the--again, you
don't have the paperwork, you don't have the administrative
costs and all of that. How did--is that how you calculate that
savings?
Mr. Lyle. Yes. As opposed to traditional government
contracting----
Mr. Mica. Yeah. And probably--I just talked to one of my
DOD contractors from my district, who didn't have very kind
words about Federal defense contracting. But probably that's
one of the most difficult to proceed with, and so that's where
you calculate $70 per transaction.
Mr. Lyle. Correct.
Mr. Mica. And you have $1.2 billion worth of purchases with
credit cards----
Mr. Lyle. With government----
Mr. Mica. --just at Air Force.
Mr. Lyle. Just in the Air Force, yes, sir.
Mr. Mica. So it's got to be huge dollars. I mean, we've
gone from, you know, $12,000 worth of Starbucks purchases to
1.2.
And you said 26,000 credit cards at the Air Force?
Mr. Lyle. Twenty-six thousand cardholders, yes.
Mr. Mica. Okay. And why shouldn't DOD and the Air Force be
subject to the same provisions of the 2012 law?
Mr. Lyle. Well, I can't speak for the entire Department of
Defense, but I know for the Air Force we're very proud of our
accomplishments in that system that I talked about during my
brief summary that's also included in my testimony, the
Purchase Card On-Line program, PCOLS.
And that system audits 100 percent of all transactions. And
then 3 percent of the high-risk items that might have items
like gym memberships or hair salons or things like that that
are in the merchants' card code, if they pop up in this report,
they'll flag a risk item. And then that will require a manual
insight or someone from the--either the cardholder's
supervisor, which is approving official, or the agency. And the
program coordinator will go in and look at each one of those
transactions.
Mr. Mica. Do you conduct that--do you have a system that
you've set up internally, or are you using a credit card
company that does it for you?
Mr. Lyle. That is a system that's been established within
the Department of Defense. And the Director of Procurement and
Acquisition Policy, that office administers the PCOL System
across the Department of Defense.
Mr. Mica. Is that with a private contractor that operates
it?
Mr. Lyle. Sir, I have to take that question----
Mr. Mica. Probably would be. I don't think you'd----
Mr. Lyle. --for the record. I don't believe that it is. I
believe that the private contractor established that system,
and it rides right along with the GPC program.
Is that correct? U.S. Bank?
Okay, U.S. Bank provided that.
Mr. Mica. Okay.
Mr. Lyle. We set it up with U.S. Bank.
Mr. Mica. Because I do know some of the bank credit card
folks are incredible. I've had several instances where--in
fact, I gave my credit card, an American Express, to buy
sandwiches for staff one day. I don't spring that often. But
somebody picked up the credit card number. And that was at
lunchtime. By 7 o'clock, I was called by--this happened to be
American Express, and they said that we've examined your
purchases and your wife usually doesn't spend $5,000 at
Nordstrom's. And they had--they had contacted me. They canceled
the card immediately. So someone had gotten the number in 6, 7
hours and was charging things.
So you have that type of system that can pick out----
Mr. Lyle. Yes, sir. What you're talking about, though, is a
potential fraud abuse----
Mr. Mica. Yeah.
Mr. Lyle. --that someone unauthorized got the card.
Mr. Mica. Yeah, that's a little bit different, but you're
using the same principles----
Mr. Lyle. Yes.
Mr. Mica. --that the credit card has----
Mr. Lyle. Correct.
Mr. Mica. --some aberration and purchasing kicked up.
Mr. Lyle. Aberration, risk items.
Mr. Mica. Do we have anything like that in DHS? You're a
huge purchaser.
Ms. Richards. I don't know that we have a specific program
designed, but we do have the data, and they do do data
analytics on that data to identify those kinds of anomalies.
Mr. Mica. That would be interesting to find out. Maybe you
can ask staff to pursue that.
Might be a--I don't know if your model is that good. We
should also check that out, Mr. Lyle. But, again, we need as
many assurances that the cards aren't being abused, that
they're properly used. And if there is some dramatic aberration
in the use--and you have a system that kicks it out. That would
be good, that we mirror that in other agencies.
She's not--DHS hasn't quite caught up with Air Force, but
half a billion is--and, again, if you have 20, 30 percent of
it, that's----
Mr. Lyle. If I could just make one additional comment?
Mr. Mica. Yes. Go right ahead, Mr. Lyle.
Mr. Lyle. Of the 96 percent that are registered, the 4
percent is usually turnover. One person leaves, another person
coming in. So we'll never achieve 100 percent----
Mr. Mica. Yes.
Mr. Lyle. --of cardholders registered in the system, but we
are very confident that we're doing very well.
In fact, about 6 months earlier this year, we were down to
about 91 percent. We put a big push within the Air Force
because this is our best way to guard against fraud, waste, and
abuse. And our commanders took this on, and we elevated our
registration back up to the 96 percent, leading DOD.
Mr. Mica. Uh-huh. Well, we have some examples of DOD. My
question was originally, would you have a problem if we put you
under similar provisions? And we may have to revise some of
them after this hearing, look at additional safeguards. But is
there any reason that Air Force or DOD should be exempt?
Mr. Lyle. Right. And I started to answer your question by
stating that, because of the internal controls that we do have
already, with the PCOLS as well as the 30-day audits by the
assessing officials as well as by the area or agency and
program coordinators, that's been working very well.
About .45 percent of all of our transactions--we had, I
believe--and I'll go back to refresh my memory on the total
number of--1.5 million transactions, I believe. But of those
transactions, .45 percent, we had some potential risk
violations. That's a total of about 1,910. Each one of those
was reviewed, and we found that 26 resulted in UCMJ or civilian
personnel actions that we'll have to take.
Mr. Mica. Okay. So you----
Mr. Lyle. We are finding them.
Mr. Mica. --actually kicked those--when they're kicked out,
you do investigate----
Mr. Lyle. Yes.
Mr. Mica. --every one of them and then take action.
Mr. Lyle. Every single one of them. Yes.
Mr. Mica. But that still doesn't answer my question as to
whether you would object to being--yeah, I guess you can't
speak from that policy----
Mr. Lyle. I can't speak for the policy for the entire
Department of Defense. I would have to take that for the record
and ask DPAP, Director of Procurement and Acquisition Policy,
to answer that.
But from an Air Force perspective, I can see how the act
that you passed is definitely something that's viable and
worthwhile. And we'd look at it and see how it might apply to
the Air Force.
Mr. Mica. Well, it has had some successes; we heard the
Department of Labor. But we still have obvious--I don't want to
say rampant abuse, but significant abuse. And we don't have
credit cards--government credit cards gone wild
tamed yet.
But, with that, I have more questions, but let me yield to
Mr. Connolly, who has been waiting.
Mr. Connolly. Thank you, Mr. Chairman.
Mr. Larry, I want to make sure I followed your answer to
the question of the $25,000 espresso machines. You said that
they were purchased with unappropriated funds; is that correct?
Mr. Larry. Correct, sir.
Mr. Connolly. What are unappropriated funds?
Mr. Larry. Sir, we call it a nonappropriated fund. It's the
funds--on the base, you're on a golf course, a bowling center.
When you go in and you buy a hamburger or you play a round of
golf, you bowl a line of bowling, the dollars that that airmen
or that family member take out of his or her pocket and pay for
that good or service on the spot, those are nonappropriated
fund dollars.
Mr. Connolly. Generated by those activities.
Mr. Larry. Yes, sir.
Mr. Connolly. Were government-issued purchase cards or
debit cards used for that acquisition?
Mr. Larry. No, sir.
Mr. Connolly. Okay. That's what I wanted to know.
Let me ask our IGs, is it ever permissible to use a
government-issued purchase card, debit card, or the like for a
hair salon session, gym membership, personal gym membership, or
personal gift cards?
Ms. Kasper?
Ms. Kasper. Hair salons, we didn't have it in our
transactions. But we did do some research on the idea of gym
memberships, and there is a comptroller general decision that
says, in some circumstances, it is permissible to purchase gym
memberships if it's part of some health and welfare program.
Mr. Connolly. Authorized by your employer.
Ms. Kasper. Right.
Mr. Connolly. Right.
Ms. Kasper. Obviously, it's not a----
Mr. Connolly. But let's put that aside for a minute. Let me
reframe the question. Is it ever permissible to go to a hair
salon or your personal gym, unrelated to that exemption, for
you or your family or to purchase gift cards and using a
government-issued debit card, purchase card, credit card?
Ms. Kasper. Not unless it has a government-associated use,
an approved use.
Mr. Connolly. And are the policies you look at at EPA
explicit about that prohibition?
Ms. Kasper. They are not explicit about the prohibition.
Mr. Connolly. They are not?
Ms. Kasper. Right. That was part of our recommendation in
the report, is that they be more explicit about the issues of
gym memberships and gift cards, that EPA needed to improve its
internal controls there. EPA is in the process of improving
their policies in that area, but they have not completed their
policies in that area.
Mr. Connolly. That doesn't sound complicated. I mean----
Ms. Kasper. Yeah.
Mr. Connolly. --what goes through one's mind if you're a
Federal employee and you've got a federally issued credit card
and you decide, you know, I need groceries tonight, why not
just put it on the government card? I mean, I'm not saying
anyone has ever done that, but, clearly, some alarm bell ought
to go off in your head, that's not a proper use of a
government-issued credit card.
Ms. Kasper. Normally, you would expect most people to think
that, but there are apparently people out there that think, you
know what, no one's looking at this, let me use this.
Mr. Connolly. Well, temptation is a different issue. That's
right.
Mr. Lewis--and I look forward to the EPA's explicit
prohibition. It is amazing to me, Mr. Chairman, they don't have
one.
But, Mr. Lewis, what about the Department of Labor? Is it
ever permissible--same question.
Mr. Lewis. I can't think of a case where it would be
permitted. It would be very narrow. As Ms. Kasper said, there
would have to be some nexus to government business in order to
do that----
Mr. Connolly. Right.
Mr. Lewis. --and I don't know what that would be in the
Department of Labor.
Mr. Connolly. I suppose if you were the Department of Labor
employee of the year and you were going to meet Queen
Elizabeth, we might say, yeah, get your hair done. But other
than that, I can't think of an exemption for a hair salon. Can
you?
Mr. Lewis. No.
Mr. Connolly. Are the policies at DOL, Department of Labor,
explicit in this prohibition?
Mr. Lewis. Well, we are--we currently have an audit looking
at the general purchase cards across the Department. So we're
still looking at how well that's done. In terms of this audit--
--
Mr. Connolly. No, that's not my question. Is there an
explicit prohibition in the Department of Labor's own policy
saying you can't use credit cards for those purposes?
Mr. Lewis. I do not know exactly what the policy says for
the purchase cards in general in the Department. That's what
we're currently looking at.
For what we have looked at in the Job Corps program, it was
explicit as to what you could use the cards for. And there
were--in this case, there were only two uses, which was----
Mr. Connolly. But not explicit in prohibited activities.
Mr. Lewis. No. Explicit in terms of----
Mr. Connolly. You know, in----
Mr. Lewis. --the two only things it could be used for.
Mr. Connolly. --my life, I often will be engaged in various
and sundry things, and the question that always comes to mind
that you ought to ask is, what could go wrong with that? So not
having an explicit--you know, thou may not----
Mr. Lewis. Yes.
Mr. Connolly. --use it for personal purposes, I don't
understand what's hard about that, but it's astounding to me
they didn't have one.
Mr. Lewis. Well, I think that's important, like I said, in
the general purchase card program. In the case of these debit
cards, where there were only two uses--bag claim--baggage
claim--or baggage fees when traveling, students are traveling,
and the allowance they give them for meals while traveling.
Mr. Connolly. Yeah.
Mr. Lewis. So, in that case, it's very easy to stipulate
there are only two uses. You don't need to stipulate all the
things you should not use it for.
Mr. Connolly. Yeah.
Ms. Richards, the Department of Homeland Security?
Ms. Richards. I can't think of an instance where those
purchases would be appropriate. But, again, you'd have to look
at the individual purchase to see if there wasn't a nexus to
government services.
Mr. Connolly. Well, assuming there wasn't, though. My
question is predicated on, no, no, there's no nexus, this is
personal.
Ms. Richards. The Department of Homeland Security's
regulations do state that government purchase cards are to be
used for government business only and not for personal
business. The----
Mr. Connolly. So you have an explicit prohibition.
Ms. Richards. We don't have an explicit prohibition naming
those items. It's----
Mr. Connolly. No.
Ms. Richards. --an explicit prohibition of personal use.
Mr. Connolly. Right. Yeah, that guidance.
Ms. Richards. Yes.
Mr. Connolly. Okay.
Mr. Lyle, understanding that you can't speak for policy for
the Air Force--we understand that--but can you think of a
reason why we wouldn't want to include the Pentagon, and by
extension the Air Force, in a government-wide consistent set of
standards and enforcement mechanisms and standard operating
procedures with respect to the use of such cards, especially
since you are by far the biggest user?
Mr. Lyle. Yes, Department of Defense is the largest user of
government purchase cards. And would the Air Force--I mean, I
can speak for policy for the Air Force, just not for the
Department of Defense. And, as you know, we are part of the
Office of Secretary of Defense, Director of Procurement and
Acquisition Policy. They set the policy for all of OSD.
But from an Air Force perspective, the internal controls
that I mentioned earlier, as far as the PCOLS--and I'm not
saying that these internal controls would--wouldn't--would
not--would obviate or not need the government control act, as
far as the transaction--you know, as far as the Government
Charge Card Abuse Prevention Act, I'm not saying that we
wouldn't benefit from that act. But I can just tell you a
little bit about our internal control process that we have now.
In addition to the PCOLS, we have six levels of control. We
also have a separation of function: a requiring organization or
a person that has a need, the cardholder, and then the payer.
And no one person can have all three of those functions and
responsibilities and to have one person to prevent those kind
of frauds. And the only way that that could happen is that all
three people would have to be in collusion together to be able
to execute a fraudulent-type action of that caliber. But that's
not to say that it's not impossible. So whether or not the card
prevention act would prevent that, that's something that we
could certainly look at.
And as far as those six levels, I was talking about the
agency or the program coordinator does monthly reviews of every
transaction and--excuse me, an annual review of every
transaction--but the approval official of the cardholder looks
at every single transaction. Once again, the separation of
power and control and function so that no one person has all
authority and control over the card.
Mr. Connolly. Has the Air Force IG audited the use of these
purchase cards for you?
Mr. Lyle. Yes, the Air Force audit agency has. I'm not
aware of the IG looking at these particular cards. They usually
refer that to the Air Force contracting organization. If they
suspect or if anyone reports a problem with a government
purchase card, they refer out--they refer those issues.
Mr. Connolly. It's just that when you're spending $1.2
billion----
Mr. Lyle. Right.
Mr. Connolly. --with 26,000 purchase cards in distribution
in just the Air Force----
Mr. Lyle. Right.
Mr. Connolly. --it's hard to believe that there hasn't been
some misuse.
Mr. Lyle. As I mentioned earlier, we have documented 26
actions out of those 1.5 million transactions.
Mr. Connolly. But you heard the statistics here today.
Mr. Lyle. Yes.
Mr. Connolly. That would put you at radical variance from
other Federal agencies in the civilian sector.
Mr. Lyle. Yes. That's not to say that we don't have abuses
of the card or misuse of the card, fraud abuses. And we have--
we know about every single one of them, and we do a check on
those particular instances.
Mr. Connolly. Well, if your numbers are accurate, then
maybe we need to have the U.S. Air Force take over the issuance
of all Federal credit cards, debit cards, purchase cards.
Mr. Lyle. Sir, if you give us the resources, we'll be glad
to.
Mr. Connolly. Yeah. We'll transfer some of that management
money. I mean, because that's quite a record, Mr. Lyle. Quite a
record.
Mr. Lyle. We're very proud of our accomplishments. I'm not
aware of any fraudulent issues other than 26 I mentioned. I
don't know exactly what each and every one of those are. But I
am very proud of the accomplishments of the government
cardholders we----
Mr. Connolly. Again, if the numbers you cite are accurate,
you should be.
Mr. Lyle. Sir, I have no reason to believe they aren't.
Mr. Connolly. Let me ask again our three auditors--three
IGs, excuse me--questions a layman might ask: Are there just
too many cards in circulation for us to really get our arms
around it, holding in abeyance Mr. Lyle's testimony? And are
there too many employees authorized to use such purchase cards?
Should that--should those numbers be more manageable and more
controlled in terms of the number?
Ms. Kasper. Within EPA, they do----
Mr. Connolly. I can't hear you, Ms. Kasper.
Ms. Kasper. Within EPA, they do conduct an annual review to
make sure we've got the right number of people with purchase
cards. The idea is also that they be at the local level and
that they be supervised locally. Whether or not 2,000 employees
is the right number, I can't really say at this point.
Mr. Connolly. Well, if I--how many employees are there in
EPA total?
Ms. Kasper. Sixteen thousand.
Mr. Connolly. So what if I said, everyone who's an
employee, when you become an employee of the EPA, we're going
to issue one of these cards to you because you might need it,
and, you know, they're working so well, why not have everybody
have one? What would be wrong with that?
Ms. Kasper. It would be wrong because you'd have to have
quite a few controls.
Mr. Connolly. Well, that's my point. Do we have any idea
about what is an optimum number versus, ``That's too many''?
That's what I'm trying to get at. I mean, you withhold judgment
on 2,000, but you exercise judgment on 16,000. So----
Ms. Kasper. I don't--I'm not aware of what the optimal
number is. And I'm also not aware that EPA knows what the
optimal----
Mr. Connolly. Well, when you looked at this problem, was it
your impression that the EPA is challenged with managing this
number of cards issued to this number of people? Is that beyond
their management skill, or you think it's just right?
Ms. Kasper. EPA was challenged in managing that number
because they left it up to each of the approving officials to
come up with their own standard operating procedures, and that
resulted in a lot of variance across the agency.
Mr. Connolly. Yeah, because there's a lack of uniformity in
standard-setting.
Ms. Kasper. Right.
Mr. Connolly. Well, that doesn't sound like----
Ms. Kasper. One of the things--one of the things EPA has
done, based on the audit report, is now implemented standard
operating procedures that will be instituted across the agency
in the hopes of trying to level things out and institute more
controls.
Mr. Connolly. Well, that's a novel thought.
I mean, I worked for a very large company with 45,000
employees. When credit cards were issued, there was a standard
policy company-wide. We didn't just leave it up to local
managers to decide how a credit card could be used or when it
would be issued or to whom. We had standards. And it worked for
a very large worldwide company.
Ms. Kasper. Yes, sir.
Mr. Connolly. Mr. Lewis, you indicated in your testimony
that 98 of 104 centers, job centers, had improper travel
purchases; is that correct?
Mr. Lewis. Correct.
Mr. Connolly. Ms. Richards had a piece of testimony where
she said she thinks the problem in DHS is not with the design
of standards; it's with the enforcement of those standards.
Correct?
Ms. Richards. Yes, sir.
Mr. Connolly. How would you characterize it in the
Department of Labor? Do you think the design of standards is
satisfactory or even exemplary? Or is there a problem with the
design of the standards itself?
Mr. Lewis. Well, in this particular instance, I think it's
the design of the standards, or lack of design, as well as
enforcement or oversight over these. But, again, this is a
very, I guess, kind of narrow and unique issue within the Job
Corps program that utilize these debit cards.
And in answer to your previous question, I think the
conclusion in this case was that one debit card was too many
debit cards. Even if--they are such small individual purchases
that were being handled in this manner, that even if you put
all the controls in place to ensure that purchases were proper,
it would cost a lot more to administer that than it would be
worth.
The Department was buying--or the Job Corps centers were
purchasing these cards that ranged in value from $10 to $60.
They paid $6 apiece for a card. So a $10 debit card cost them
$16. So no matter how you administer that, it was not going to
be an effective tool.
And the fact that they had so many of these debit cards on
hand made it much more tempting to people to misuse them. So
they have switched to either using the travel cards, which were
available to pay for some of these expenses, or the very
smallest things, such as a $5 meal allowance, it would just be
best to give the student cash for that rather than pay an
additional $6 to provide a debit card.
Mr. Connolly. Yeah. Exactly.
And my final question: Ms. Richards, it's my understanding
that your office has issued three previous reports on the
Department's use of purchase cards since 2010. Is that correct?
Ms. Richards. Yes, sir.
Mr. Connolly. Each report contained recommendations. Has
the agency--has the Department of Homeland Security acted on
those previous recommendations?
Ms. Richards. Yes, sir, they have. I will have to get back
to you with the list of the specific actions they've taken to
each one of those recommendations.
Mr. Connolly. Yeah, I would----
Ms. Richards. In general, they have.
Mr. Connolly. --like to see that. Because, obviously, we
don't want to see recommendations ignored. And it tells us
something here in the Oversight and Government Reform Committee
when an agency is making a good-faith effort to comply with
recommendations from the IG.
Ms. Richards. Yes, sir.
Mr. Connolly. All right. Thank you very much.
Thank you, Mr. Chairman.
Mr. Mica. Thank you.
A couple of questions. Well, first, Ms. Richards, we were
looking through your testimony and then your report, and it
said you reported 925 million purchases, totaling $439 million.
That's in the testimony.
Ms. Richards. That's from 2013.
Mr. Mica. But when you divide that up, it comes up to about
50 cents per transaction. Is there--are we missing--is this--is
that correct?
Ms. Richards. Sir, those are the numbers that I have. Some
transactions are smaller than others.
Mr. Mica. An average of 50 cents a transaction?
Ms. Richards. That average doesn't sound probable. I would
have to get back to you, sir.
Mr. Mica. We don't think that these records--I mean,
something is missing here. I just don't think that's accurate,
but it's--you repeated that in your testimony.
Ms. Richards. Those are the numbers that I had. Those are
department-reported numbers. We do not----
Mr. Mica. And that's the report we have, too. But, again,
something doesn't make sense there. If you could check that.
Ms. Richards. Yes, sir.
Mr. Mica. And we will be leaving the record open for a
period of 2 weeks.
Without objection, so ordered.
So we will have additional questions we'll be submitting
after this.
Okay. The number--the 2012 law allowed--and Air Force is
out and not under this. But the 2012 law allowed employees to
be fired, dismissed, terminated, prosecuted.
Can you tell us, Ms. Kasper, EPA, how many that you know
of--terminated, disciplined, or prosecuted?
Ms. Kasper. We recommended in our report that EPA take
action. EPA was supposed to be taking action by September 30th.
We haven't done the follow-up review yet for those actions.
Mr. Mica. Do you know of any?
Ms. Kasper. I'm not aware of any.
Mr. Mica. Okay. Could you check that?
Ms. Kasper. Yes.
Mr. Connolly. Would the chair yield?
Mr. Mica. Yes. Oh, yeah.
Mr. Connolly. When you say ``take action,'' does that
include--and if so, how many--referrals for prosecution?
Ms. Kasper. That could potentially be among the actions
that they could take.
Mr. Connolly. But you didn't make that recommendation.
Ms. Kasper. No. No, we just said that they take the
appropriate action among----
Mr. Connolly. Leaving it up to them to----
Ms. Kasper. Right.
Mr. Connolly. Okay.
Thank you, Mr. Chairman.
Mr. Mica. Well, again, we can pass a law, but the law has
to be enforced, and there has to be consequences.
I remember we had--I had Rudy Giuliani here years ago when
he became mayor of New York. I think I chaired criminal
justice, drug policy. And I was fascinated by his zero
tolerance. Man, they threw the book at you. And New York today
has the residual effect of the zero-tolerance policy. People,
you know, were taken to task, prosecuted, gone after.
But we passed the 2012 law, we put tools, and then EPA
can't cite anyone.
Labor--Mr. Lewis, you had cited several. Were there
others--I mean, that was in the Miami instance--terminated?
Anyone prosecuted or disciplined?
Mr. Lewis. To my knowledge, there is no one prosecuted, but
I'd have to get back to you on that. I don't have----
Mr. Mica. We'd like to know because----
Mr. Lewis. --the latest--we did refer all the instances we
found in the Job Corps audit to our investigators. But my
current knowledge is that no one was actually prosecuted.
I am not aware of any departmental employee that's been
fired since this law has been in place for such actions. I
think, in this case, these were contractor employees, and so
they already had more latitude in terms of addressing that than
we would've had in the past with the Federal employees.
Mr. Mica. All right.
Just for the record, I have to put this in, Mr. Connolly.
In my own area in central Florida, I had a housing director and
a director who came in after I had gotten the housing authority
taken over by HUD. It was so mismanaged, they brought in
another housing authority director. Actually, when I came to
office, the first thing was the housing authority director
coming to me complaining that the state attorney was going
after her, and part of it was credit card abuses, making false
payments, and asked me to weigh in for her. I asked her to find
the door because the list of charges were just incredible.
Mr. Connolly. I remember that.
Mr. Mica. Then I go back to having HUD take over the same
housing authority. They put in another housing director, who,
when I found out about his reputation, tried not to get him
appointed. Washington overrode me, Atlanta overrode me,
Jacksonville--they hired him. And we had spent millions to
bring the thing back up; turned it back over. We took--HUD took
control. And within 7, 8 years, he ran it down. I think there
was--there were thousands of dollars of credit card abuses. And
I wish I'd remembered this before we did this hearing today. I
should've had HUD in here. But HUD investigated the IG, made a
criminal referral to the Department of Justice, and they
never--we asked Justice--they never pursued it.
So we have agencies who are abusing--well, some employees
who are abusing the public trust, and we have some mechanisms
to go after them. And then I was--I was just stunned. The
Department of Justice refused to go after them. If you'd gone
in with a mask and a gun held up and taken 10 percent of what
they--what was gone.
But, again, I just have to recall that for the record.
Ms. Richards, you're next. Anyone prosecuted, terminated,
or disciplined in DHS?
Ms. Richards. Sir, I'm aware that some employees have been
disciplined and terminated for credit card abuse. But at DHS
those records would not be managed centrally, so I would not
have the ability to get the scope of all the actions that might
have been taken.
Mr. Mica. Well, if you could review that, let us know for
the record, too. We're leaving that open.
We're trying--we passed the law in 2012 to try to be better
stewards of public money. We can save money--the Air Force has
cited in testimony that you can save money by using these for
small transactions, and there is a lot of benefit, but there
are also a lot of abuses. EPA today, about half of the sampling
abused. Labor, 35 percent on the debit cards. DHS, she hasn't
come totally clean with us, but we'll get the information one
way or the other.
We have our methods, Ms. Richards, of extracting the
information. Just teasing. Just teasing. We will--we are
relying on you to report to us. Again, we would like to kind of
get a better handle on what is taking place and if the law
needs--and my last question, too, to each of you: Is there any
recommendations for tightening up the law?
This is interesting because some of it is poor management
practices or poor administration. Some is not having the proper
protocols in place that are sort of standard and can take the
law to implementation with better understanding and performance
and compliance by Federal employees.
But tell us, if you can, if there's any--any tool missing
or anything we can do.
The other thing, too, is OMB should possibly have some role
in this, or requiring at least that an agency come up with some
set of protocols that are missing in some of the agencies who
are compliant.
So, Ms. Kasper, any recommendations for myself, Mr.
Connolly, the committee?
Ms. Kasper. The law contains many of the controls that are
necessary and almost all the controls that are necessary
regarding purchase cards. The issue at EPA was EPA was not
overseeing to make sure that those actual controls were being
implemented.
Mr. Mica. Again, like Ms. Richards said, lack of
compliance.
Ms. Kasper. Right.
Mr. Mica. Okay. And we might look at some mechanism to
ensure that.
Mr. Lewis?
Mr. Lewis. We haven't found anything that we believe would
require legislation to address. Ours, as well, was simply a
case of, you know, just a complete lack of oversight or
attention to this. And the requirements are already there for
that to be in place.
The focus that this act has put on, you know, the periodic
risk assessments and audits, I think, has been good. And that
is working to start bringing these things to the surface.
Mr. Mica. Well, and you have cited some successes in
bringing about compliance and also implementing the intent and
purpose of the law. And Mr. Lyle with the Air Force has cited
what they've done to try to, again, get the proper use of these
cards.
Ms. Richards, any changes, anything you see we need to do
from a law or procedural standpoint?
Ms. Richards. No, sir, not at this time. The law, very
wisely, puts in place the regular risk assessments and
reporting to the OIGs, and the requirement is for us to take a
look back at what the departments are doing. And I think, as
that plays out over time, it will better inform any changes you
might have to make in the future.
Mr. Mica. Okay.
Mr. Connolly, did you have something?
Mr. Connolly. Yeah, could I just follow up on that, Mr.
Chairman?
First of all, I'll answer your question. Certainly, one
thing that came out of this hearing, for me, is we need an
explicit prohibition on the use of--personal use of these
cards, period. There cannot be any circumstance of un-job-
related use of a credit card that's issued by the government.
That is wrong, and we ought to make it an explicit prohibition,
it seems to me. And it ought to be required of every Federal
agency that issues such cards.
At any rate, that would be certainly one thing I'd answer
to your question in terms of how we might update the law. Other
than that, I'm glad to hear the 2012 law is helpful. We----
Mr. Mica. Does OMB enforce the law or put out any
guidelines? Is that their role? I'm not sure.
Mr. Connolly. Could be.
Mr. Mica. If they're the fiscal--Ms. Kasper? Mr. Lewis?
Mr.----
Ms. Kasper. OMB put out a Circular A-123, and I think it's
Appendix B of that circular. I think it was updated to comply
with the new law.
Mr. Connolly. You mean the 2012 law.
Mr. Mica. The 2012 law.
Ms. Kasper. The 2012 law.
Mr. Mica. And you think that's adequate? I'm not aware of
the provisions.
Ms. Kasper. I'm not aware that there's any issues or
problems with that.
Mr. Mica. Okay.
Mr. Lewis, anything?
Mr. Lewis. No, that's correct. They have put out some
guidance, and they are publishing reports where they are
collecting information from the departments and the IGs on, you
know, what issues we're identifying with purchase cards and the
status of recommendations.
Mr. Mica. Ms. Richards?
Ms. Richards. I agree with my fellow assistant IGs that OMB
has put out additional guidance and they are following up on
publishing the results from the OIGs.
Mr. Mica. But they really don't go back that much to check.
Have you seen them--any compliance of their----
Ms. Richards. OMB puts out the guidance, and it's up to the
individual departments to enforce it.
Mr. Mica. Okay. And you all oversee some of that as
inspector generals.
Mr. Connolly. Mr. Chairman, the only thing that strikes me
here, though--correct me if I'm wrong, but, in a sense, neither
the 2012 law nor the OMB guidance give explicit guidance for
criteria of who gets a card and when can a card be used. Is
that--would that be fair?
Because if I understand you, Ms. Kasper, you were saying
even within EPA there was, kind of, broad discretion about that
guidance. So that would suggest there isn't government-wide
guidance.
Ms. Kasper. I'm not aware of any guidance as to who can get
it or how many can be distributed.
Mr. Connolly. And both Mr. Lewis and Ms. Richards would
agree with that?
Mr. Lewis. Same here. In our current audit, we are looking
at the utilization of these cards because we know some people
have them and they don't use them, so----
Mr. Connolly. Yeah.
Mr. Lewis. --evidently they do not need them.
Ms. Richards. We're also looking at it. And it's a matter
of--in the Department of Homeland Security, because we're
geographically widely dispersed, you would want to have a card
available at a location, but you may not need two cards. So
that's one of the ways that we're looking at it----
Mr. Connolly. Yeah.
Ms. Richards. --to make sure that we minimize the number of
cards out there.
Mr. Connolly. And that's always a challenge for us up here,
too. You don't want to have--you don't want to codify things
like guidance and unwittingly make it impossible to achieve the
savings and the efficiencies such cards can provide. On the
other hand, the absence of any guidance does allow for, even
within an agency, a myriad of standards that can lead to
misuse, deliberate and nondeliberate. And, obviously, that is
of concern to us.
So I would echo the chairman's invitation to all of you to,
if, upon reflection upon this hearing, if you've got
suggestions for how we might improve the law, we would
certainly welcome them.
Thank you, Mr. Chairman, for holding the hearing.
Mr. Mica. Thank you.
Well, one final thing. I'm a renowned tightwad, and I try
to get as much for my buck, whether it's the taxpayers' buck or
my own. Just out of curiosity--like, I use several cards. You
get a cash back with one. Do we--any of you have enough--any
detail in negotiating with these?
Do we get--because, again, right now the Federal
Government's broke. You know, we're borrowing 40 cents on every
dollar, something in that range. So we're--our job is not only
to see that waste, fraud, and abuse is eliminated, but the
maximum revenue we can get in with the least going out.
Mr. Lyle, you're shaking your head ``yes.'' Have you found
some good return for the government and the taxpayer?
Mr. Lyle. Yes. In addition to the transaction savings that
we discussed earlier, we did receive $14.7 million in rebates
this past year.
We're also increasing the use on the government purchase
card above the micro-purchase threshold for preestablished
contract instruments that are pre-priced so that it will
protect the taxpayers' dollars from that perspective. We
wouldn't want government purchase cardholders to go out and
negotiate contracts per se, but if it's pre-priced, we're going
to increase the use of the card up to the simplified
acquisition threshold of $150,000 to take advantage of that
transaction savings as well as the rebates. That's what we're
really going after, is those rebates from U.S. Bank.
Mr. Mica. Okay.
Ms. Richards, DHS, 2012-2013, $2.6 billion in credit card
purchases. Just heard the success story of Air Force. Are you
familiar with any savings?
Ms. Richards. I don't have the dollar figures available,
but the Department does receive a rebate when they use the
purchase cards.
Mr. Mica. Would you also make that part of the record?
Ms. Richards. I will, sir.
Mr. Mica. Again, it's--we're looking for waste, fraud, and
abuse, but we're also looking for savings.
Mr. Lewis and Ms. Kasper?
Mr. Lewis. The same as Ms. Richards. I know there are
rebates, but I do not know the dollar amount for Labor.
Mr. Mica. Okay.
Ms. Kasper?
Ms. Kasper. I also know there are rebates. They get rebates
depending on how fast they pay--they approve the purchase to be
paid. But I don't know exactly----
Mr. Mica. Okay.
Ms. Kasper. --what the amount of rebates was during the
last year.
Mr. Mica. Well, again, this is a small sampling of Federal
agencies. And we appreciate your cooperation. We're looking to
see how a law that we passed in 2012 worked. There are a number
of IG reports dating back to January of this year and
subsequent reports that we've reviewed for this hearing.
I'm pleased that each of you would take time to come in
today, where our job is, again, to be good stewards of taxpayer
dollars, and yours are, too, particularly the inspector
generals--well, all of us--as Federal employees.
Any closing comments, Mr.----
Mr. Connolly. No. Thank you.
Mr. Mica. I thank Mr. Connolly again and the staff for
working during this particular timeframe to make certain we did
this. I think we've done a record number of hearings--
appreciate your cooperation--and many of them like this, meat
and potatoes, but important to the people we represent.
There being no further business before the Subcommittee on
Government Operations, this hearing is adjourned. Thank you.
[Whereupon, at 2:48 p.m., the subcommittee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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