Testimony of 

Janet Rehnquist, Inspector General 

Department of Health and Human Services

INTRODUCTION 
Good morning, Mr. Chairman and Members of the Subcommittee.  I am Janet Rehnquist, 
Inspector General for the Department of Health and Human Services (HHS). The mission of 
the Office of Inspector General (OIG) is to identify ways to improve HHS programs and 
operations and protect them against fraud, waste and abuse.  We do this by conducting 
independent and objective audits, evaluations and investigations, which provide timely, 
useful and reliable information and advice to Department officials, the administration, the 
Congress and the public.  In carrying out our mission, we work with the Department and its 
operating divisions, the Department of Justice (DOJ), other federal and state agencies, and 
the Congress to bring about improvements in HHS programs and operations and prosecute 
and/or recover funds from those who defraud the government. 
I appreciate the opportunity to be part of todays discussion on the oversight and 
management of the government purchase card program and to tell you about the ongoing 
work of the HHS-OIG in reviewing how these cards are being used by HHS employees. 
BACKGROUND 
Approximately five years ago, HHS began using International Merchant Purchase 
Authorization Cards (IMPAC) to eliminate the cumbersome and costly use of procuring 
small purchases with purchase orders.  IMPAC use streamlined Government purchases, 
Subcommittee on Oversight and Investigations 
Hearing  May 1, 2002  Page 1  reduced payment lead time, and reduced paperwork and administrative costs.  The 
cardholders procure items for their respective components but are not personally billed.  The 
credit card company is paid directly with the components appropriated funds.  HHS has 
approximately 7,500 IMPAC cardholders.  A rough estimate is that $151.7 million was spent 
using IMPAC cards during the six month period from January 2001 to June 2001. 
OIG Work Involving IMPAC Cards 
The day after it became public that the Department of Education found fraudulent use of 
IMPAC cards by its employees, my Office of Investigations (OI) initiated a project to 
ascertain whether the IMPAC system was being misused within the Department of Health 
and Human Services.  This review began in late June of 2001.  I consider this review to be an 
essential part of the OIGs duties and responsibilities to oversee Departmental spending, and 
Secretary Thompson has asked me to expedite our review and work with the Department to 
improve the management of this program.  The project is twofold: 1) an ongoing review of 
the purchases made by Departmental IMPAC cardholders and 2) a review of the IMPAC 
systems and procedures utilized by the Department. 
The first part of this review is already underway.  We began by obtaining billing information 
directly from U.S. Bank, the bank that issues and processes the IMPAC purchase cards.  In 
addition to the credit card, the bank also processes IMPAC checks that are associated with 
the card.  Due to U.S. Banks electronic storage limitation, only two years of transaction data 
could be obtained initially.  Our database presently consists of 1.5 million individual 
Subcommittee on Oversight and Investigations 
Hearing  May 1, 2002  Page 2  purchases, and OI continues to expand the material we are reviewing in that database with 
monthly data updates from U.S. Bank. 
The electronic database currently includes all transactions made during the period from 
November 1999 through March 2002 by HHS employees with IMPAC cards.  We are 
reviewing these transactions for unusual purchases made with the cards.  Unusual 
transactions include purchases that do not appear to be business related or are for amounts 
much higher than the typical office expenditure. 
The unusual transactions, along with a complete electronic copy of the cardholders purchase 
history, are referred to the appropriate regional OI office for case development and 
investigation if appropriate.  In many instances, the cases are referred back to the appropriate 
component to ask for supporting documentation before a further inquiry is made.  To date, 
the OIG has made 24 referrals to its regional offices involving possible misuse of the IMPAC 
card by 43 employees.  Twenty-one of these cases have been opened for further inquiry, and 
three have been closed administratively with no criminal activity uncovered. 
RESULTS OF REVIEW 
After approximately six months of review, we have found a number of procurement 
irregularities in the use of the IMPAC card within the Department.  Purchases have been 
made at clothing stores, gas stations, transit authorities, cinemas, florists, toy stores, jewelry 
Subcommittee on Oversight and Investigations 
Hearing  May 1, 2002  Page 3  stores, food establishments (primarily grocery stores and restaurants), and other business 
establishments.  We are currently investigating these transactions for possible misuse. 
The review has also revealed that some cards were misused by HHS employees with their 
supervisors approval.  For example, travel expenses were charged to the card when they 
should be charged to official travel cards.  Fees for individual memberships in professional 
organizations were charged to the card when employees should have paid out-of-pocket for 
these memberships.  The card is also used to purchase food items and bottled water for some 
offices.  Misuses of these types will be referred to the Secretary of HHS for appropriate 
administrative action. 
A review of the electronic data also included a review of the use of IMPAC checks by some 
components within the department.  We found that only some of the components within the 
Department use the IMPAC checks.  The sole purpose of using these checks is to provide a 
form of payment to vendors who will not accept the IMPAC card.  U.S. Bank charges a fee 
of 1.5 percent of the amount of the check for each check written.  IMPAC checks from 
November 1999 through March 2002 total over $13 million. 
Our findings also indicate that checks are being written when the IMPAC credit card should 
have been used.  Because of the 1.5 percent transaction fee, this type of misuse can cause 
taxpayers additional unnecessary expenses.  The review identified instances where the checks 
were being used where a credit card would have been accepted. 
Subcommittee on Oversight and Investigations 
Hearing  May 1, 2002  Page 4  We have also identified several instances in which IMPAC checks were written out to fellow 
employees of the cardholder or, in some instances, the cardholder themselves.  The dollar 
amount and use of these checks raised questions as to the validity of the purchase, i.e., 
whether the purchases were business related or whether they were personal purchases. 
In some instances, the checks are written as reimbursement for appropriate business 
purchases made by fellow employees.  Purchasing items in this manner is an inappropriate 
use of the card.  For example, one component allowed its employees to purchase steel-toed 
shoes for wear at work with the card.  Each employee bought their own shoes and gave the 
receipt to the cardholder who reimbursed the employee with an IMPAC check.  Since the 
purchases were made in this manner, the Government paid the additional bank fee of 1.5 
percent as well as tax.  These fees would not have been charged if the credit card would have 
been used.  It also negated a possible discount arrangement with the vendor for bulk item 
purchases which could have resulted in additional savings for the Government. 
A troubling result of our ongoing review was the realization that HHS has no centralized 
policy or guidelines for the many components within the Department regarding the use of 
IMPAC purchases or the use of IMPAC checks.  Consequently, purchase authorizations and 
oversight varies from component to component within the Department, thereby presenting 
greater opportunity for inappropriate use.  We will be working with the Department to 
determine what steps are necessary to ensure better oversight of the IMPAC program. 
Subcommittee on Oversight and Investigations 
Hearing  May 1, 2002  Page 5  RESULTS OF PRIOR INVESTIGATIONS 
Prior to our current review initiated in June of 2001, our files indicated at least two OI 
investigations involving similar conduct.  A brief summary of these cases follows: 
	 A former administrative technician with the National Institutes of Health was 
sentenced to 10 months in prison followed by 3 years probation, ordered to pay 
$74,140 in restitution, and fined $100 after pleading guilty to theft of Government 
property.  The employee made unauthorized purchases for laptop computers, digital 
cameras, and other electronic equipment using her Government IMPAC card.  She 
sold some items she purchased for cash and kept others for her personal use.  In 
carrying out her scheme, the former employee altered invoices to disguise the 
purchases and forged the certifying officials signature on purchase requests and 
receiving reports. 
	 A former procurement clerk with the Indian Health Service was sentenced to 5 years 
probation, 50 hours of community service, and ordered to pay $6,450 in restitution 
after pleading guilty to embezzling Government funds.  The employee used her 
IMPAC card to rent a car for personal use. 
CONCLUSION 
While our reviews are ongoing, we found that the IMPAC purchases we have reviewed thus 
far appear to be appropriate.  However, our reviews have also shown there is the potential for 
improper use of IMPAC accounts.  Some purchases indicate misuse or possible fraudulent 
Subcommittee on Oversight and Investigations 
Hearing  May 1, 2002  Page 6  actions, i.e., personal purchases, while others appear to violate the components policies and 
guidelines. 
We are pursuing allegations of fraudulent use of these cards for possible criminal 
prosecution.  At the same time, we will be referring those that appear to be instances of 
mismanagement to the Secretary of HHS for review and appropriate administrative action. 
In order to continue to monitor this issue, we have incorporated these reviews into our 
workplan, and we will continue to obtain data updates from U.S. Bank on a monthly basis 
detailing all IMPAC expenditures. 
Additionally, we found inconsistencies in the use of the IMPAC cards among Department 
components because of the lack of a centralized HHS policy with clear guidelines. Once both 
phases of our review are completed, we will be working with the Department to develop 
ways to improve, clarify and correct purchase procedures for the Department, and to help 
ensure these purchase tools are used properly. 
My organization has been part of a broader review of this matter as a member of the 
Presidents Council on Integrity and Efficiency (PCIE) committee.  We have had the 
opportunity to participate in the discussions and development of the guide currently under 
review by members of the Inspector General community, an important effort, which my 
colleague, Johnnie Frazier, is addressing today as part of this hearing. 
Subcommittee on Oversight and Investigations 
Hearing  May 1, 2002  Page 7  At a time when there are increased demands on the Departments finite resources, ensuring 
precision in this method of Government procurement is vital.  Resources not lost to waste, 
fraud and abuse enable the Department and its agencies to better serve the populations of our 
important programs for which they are intended as well as ensuring taxpayer dollars are well 
spent. 
Again, I appreciate the opportunity to appear before you today to discuss our work in this 
important area.  I look forward to continuing to work together with Secretary Thompson and 
the Congress to ensure the departments programs and operations serve the nation with 
integrity, efficiency and effectiveness. 
I welcome your questions. 
Subcommittee on Oversight and Investigations 
Hearing  May 1, 2002  Page 8