**[Talking Points on Federal Credit Card Abuse Prevention Act (Rep. Joe
Wilson)]{.underline}**

#### [Why the bill is needed]{.underline}

\- this bill was introduced in light of recent news reports that the
U.S. Department of Agriculture completed a random audit of 300 out of
55,000 credit cards and discovered \$7.7 million in unauthorized
charges.

\- similar abuses were reported at the U.S. Department of Defense last
year, and a provision was included in the FY 2003 Defense Authorization
bill (H.R. 4546) regarding credit card abuses at the agency; this
provision, while signed into law, only deals with the Department of
Defense and not other federal agencies.

\- recent cases of credit card abuse only came to light after a random,
internal audit, or audit by GAO.

\- many agencies have more credit cards than employees.

\- some agencies give credit limits of \$25,000 or more to employees.

\- widespread media coverage of credit card abuse reflects poorly on the
federal government requiring Congress to act on this issue.

## What the bill does

\- the bill is modeled after the language in 10 U.S.C. § 2784.

**- this new legislation covers all federal agencies within the
executive branch and covers both travel and purchase cards.**

**- it requires quarterly audits by the agency's inspector general of at
least 10% of the agency's credit card holders.**

**- the bill requires periodic reviews by the inspector general to
determine whether an employee actually needs a credit card.**

**- the bill requires the head of each agency to reduce the number of
credit card holders by 10% and to issue credit cards only to employees
deemed creditworthy.**

\- the bill requires the head of each agency to implement internal
procedures to provide oversight of the credit cards and punishments for
unauthorized use.

## Recent Actions

\- OMB and GAO have made the following recommendations to all federal
agencies: limiting the number of credit cards issued, training employees
on credit card use, and using periodic audits; however more needs to be
done (OMB required all federal agencies to submit a review and remedial
plans for credit card use by June 1, 2002).

Note that these numbers are for the fiscal year beginning in October:

# (purchase cards are charged to the agency and travel cards are for personal accounts)

# FY 2002 Purchase Card Summary 

\- 25,752,314 purchases totaling \$15,247,501,991.12.

\- 392,576 purchase cardholders

# FY 2003 Purchase Card Summary (current as of May 2003)

\- 16,817,938 credit card purchases totaling \$10,147,708,570.94

\- 331,719 purchase cardholders

### 

### **FY 2002 Travel Card Summary**

\- 46,216,308 purchases totaling \$6,418,535,195.22

\- 2,146,714 travel cardholders

**[FY 2003 Travel Card Summary (current as of May 2003)]{.underline}**

\- 25,114,081 purchases totaling \$3,901,478,590.57

\- 1,925,589 travel cardholders

**FY 2002: 2,539,290 total cards, 71,968,622 purchases worth
\$21,666,037,186.34.**

[Examples of Government misuse of credit cards]{.underline}:

# Government-wide abuse

"Under the Clinton administration, the number of federal workers with
government-sponsored credit cards has nearly doubled to 1.4 million and
thousands of them are using the cards improperly to buy personal goods
such as liquor, jewelry and health club memberships, according to
government officials. . . . Officials said credit card abuse has become
a widespread problem in the federal bureaucracy, in part because it is
so easy for government workers to get virtually limitless credit and
then misuse it." Sara Fritz, [More federal workers use, abuse office
credit cards; ethics: many among the 1.4 million allowed to charge have
bought personal goods, Congress weighs reforms]{.underline}, Los Angeles
Times, March 16, 1996, at A1.

"No one has an overall figure on government credit card fraud, but from
reports of agencies themselves and Congress's watchdog, the General
Accounting Office, it appears widespread. . . . Speaking of the fraud
problem, House Energy and Commerce Committee Chairman Billy Tauzin
(R-La.) says that, 'because of the poor internal controls in place at
Federal agencies, we have no idea how big the problem actually may be. .
. .' \[A\]gencies have dragged their feet in revoking cards or have
failed even to review transactions until they felt heat from Congress. .
. . Agency heads are \[not\] instituting simple controls to prevent
fraud. They should not wait until Congress pushes them." Daniel
Gottlieb, [Agencies lax in controlling credit card fraud and
abuse]{.underline}, PURCHASING, June 6, 2002, at 21.

# Department of Defense

"U.S. military personnel aren't paying off their government credit
cards, saddling Bank of America Corp. with more than \$60 million in
unpaid debt since 1998. . . . Congressional investigators found that
some cards were used to pay for prostitution, jewelry, cruises and New
York Yankee games." Sarah Lunday, [Military personnel aren't paying off
credit cards]{.underline}, Milwaukee Journal Sentinel, Nov. 17, 2002, at
15A.

# Department of Agriculture

"Agriculture Department employees used government credit cards to pay
tuition for bartender school, to buy Ozzy Osbourne concert tickets,
lingerie and tattoos and to make a down payment on a car. A random audit
by the department's inspector general of just 300 of the 55,000
department employees who carry the government credit cards showed they
had charged \$7.7 million in personal purchases in a six-month period
from Oct. 1, 2001 to March 31, 2002." Emily Gersema, [Audit: concert
tickets, tattoos put on Ag Dept. credit cards]{.underline}, Savannah
Morning News, July 12, 2003, at 1A.

# U.S. Navy

"When Bank of America Corp. made an agreement in 1998 with the Defense
Department to offer travel credit cards to America's fighting men and
women, it never expected it would be charging off more than 13,800
accounts with \$16.6 million of bad debt. But that is what has happened.
Navy cardholders alone, who number more than 8,400, had \$6 million of
delinquent debt . . . . 'Issuing credit cards willy-nilly, with no
credit checks, no controls, no accountability, and monthly spending
limits of up to \$100,000, is a recipe for disaster,' Sen. Grassley said
during his testimony \[before the House Government Reform
subcommittee\]." Sarah Lockyer, [Pentagon Cards Leave Bank of America
with Heap of Bad Debt]{.underline}, AMERICAN BANKER, Oct. 10, 2002, Vol.
167, Issue 195 at 4.

# U.S. Air Force

"Credit cards issued to Air Force personnel were used for a down payment
on a sapphire ring, a Las Vegas casino party where drinks were plentiful
and for mounting a deer head at the Air Force Academy after a road kill
accident, congressional investigators have found. . . . One of every
seven Air Force employees were given the cards, the office said, and
credit limits, 12 to 20 times higher than actual spending, were far too
high. The Air Force problems were similar to previous abuses by the Army
and Navy. Investigators found that cardholders who abused their credit
cards often were not disciplined. . . . Besides the credit card report,
Congress' investigative arm found abuse of Air Force travel cards. . . .
The travel cards, designed for official travel and entertainment, were
used for cruises, gambling, sporting events, concerts, adult lounges and
Dallas Cowboy football games. 'As of March 31, 2002, approximately 8,000
Air Force cardholders had over \$5 million in delinquent debt' on the
travel cards, . . ." [Air Force misusing credit cards - Investigation
shows personnel ran up \$5 million in debt on gambling,
leisure]{.underline}, Journal - Gazette, Dec. 20, 2002, at 2A.

# Department of Interior 

"Auditors found cases where employees used cards to pay phone bills and
rent, to have their cars repaired and to buy household furnishings and
jewelry. They also found instances where charge cards were used to get
wire transfer cash advances, sometimes thousands of dollars, from
casinos." Robert Gehrke, [Interior employees charged casino cash,
jewelry to taxpayers; The department takes steps to stop credit-card
abuse that led to 40 firings since 1998]{.underline}, The Grand Rapids
Press, April 11, 2002, at A12.

## U.S. Army

"Nearly 200 Army personnel used government charge cards to get \$38,000
in cash to spend on 'lap dancing and other forms of entertainment' at
strip clubs near military bases, . . . . The GAO report found that
government cards had been used for personal purchases of more than
\$100,000 for computers and other electronic equipment, \$45,000 for
cruises, and \$7,373 for closing costs on a home. In addition, it
questioned purchases of fine china, cigars, wine, a trip to Las Vegas,
Internet and casino gambling, and two pictures of Elvis Presley bought
at his Graceland mansion in Memphis." David Pace, [GAO: Army credit
cards go beyond call of duty; Report claims rampant abuses, cites lap
dances]{.underline}, Chicago Tribune, July 18, 2002, at 11.

# Department of Education

"Education department workers misused their cards several times to buy
pornographic materials from an Internet site. Their purchases raised no
alarms at the agency but were detected by congressional auditors." David
Pace, [Federal employees charge it to Uncle Sam - Pentagon isn't alone
in employee abuse of plastic, review shows]{.underline}, Seattle Times,
August 15, 2001, at A2.

"The Education Department blocked transactions to about 300 types of
businesses to prevent use of cards for casino visits, limousine rentals
and veterinary services, among other improper purchases." [Government
reduces fraud in agency use of credit cards]{.underline}, New York
Times, October 18, 2002, at A27; [see also]{.underline} Glenda Cooper,
[Education Dept. credit cards seized in anti-fraud effort]{.underline},
Washington Post, July 18, 2001, at A27.

## U.S. Attorney's Office

"\[A\]n employee in the U.S. Attorney's Office in Los Angeles charged
nearly a half-million dollars in personal expenses over three years to
her government card before she was caught, court records show." David
Pace, [Federal employees charge it to Uncle Sam - Pentagon isn't alone
in employee abuse of plastic, review shows]{.underline}, Seattle Times,
August 15, 2001, at A2.

## Space and Naval Warfare Systems Command

"\[T\]he now notorious example of a government employee at the Space and
Naval Warfare Systems Command using a government-issued card to buy
breast implants for his girlfriend 'brings tremendous pressure on the
program' and paints a picture of an 'irresponsible government,' \[said
Joseph Kull, deputy controller of OMB's Office of Federal Financial
Management\]." Dan Caterinicchia, [OMB checks card use]{.underline},
FEDERAL COMPUTER WEEK, May 13, 2002.

## Los Alamos National Laboratory

"Los Alamos National Laboratory officials acknowledge the lab is working
cooperatively with federal investigators looking into the abuse of
lab-issued 'purchase' cards, which are credit cards that can be used for
low-value purchases. . . . At that time, the lab estimated the amount of
misappropriated funds was about \$2,500." Adam Rankin, [LANL Confirms
Credit Card Probe]{.underline}, Albuquerque Journal, November 1, 2002,
at 1.