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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 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

Vacancy 

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 

MICHAEL R. TURNER, Ohio 

JUSTIN AMASH, Michigan 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

GERALD E. CONNOLLY, Virginia Ranking 

Minority Member 

JIM COOPER, Tennessee 

MARK POCAN, Wisconsin 

(III) 

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 

(1) 

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. 

2 

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 

3 

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. 

4 

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 RepublicanDemocrat 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. 

5 

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. 

6 

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 governmentwide 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 unintenVerDate Aug 31 2005 14:44 Nov 14, 2014 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\91227.TXT APRIL
7 

tionally 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 

8 

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 

9 

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:] 

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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. 

16 

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:] 

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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 

26 

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:] 

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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. 

33 

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:] 

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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. 

39 

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—— 

40 

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. 

41 

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. 

42 

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 OnLine 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—— 

43 

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 

44 

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 

45 

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 governmentissued 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. 

46 

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. 

47 

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 fraudulenttype 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 

48 

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 

49 

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. 

50 

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. 

51 

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—— 

52 

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 

53 

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? 

54 

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? 

55 

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? 

56 

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.] 

(57) 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

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