By M.D. Kittle | Wisconsin Reporter
MADISON — There was, arguably, an important overlooked point in an audit last week that showed the Internal Revenue Services’ “lack of aggressive steps” in addressing misuse of government-issued credit cards IRS employees use when traveling.
Almost a side note in the report by the Treasury Inspector General for Tax Administration was the fact that in fiscal 2011 the IRS travel card program had issued about 52,000 individually billed travel card accounts. That’s more than one card for every two IRS employees, a workforce that totaled 97,717 staffers at the end of 2012.
The first question: Why does the IRS need so many credit cards? At a total of $121 million in related charges in fiscal 2011, that’s a lot of travel on the taxpayer’s dime – much of which was spent auditing taxpayers.
In responding to Wisconsin Reporter’s question, the IRS sent out the same statement it had sent to media et al., concerning the Treasury Inspector General’s latest audit.
“As the report indicates, the IRS’s travel card program controls are generally effective with delinquency rates below one percent,” the agency stated. “Though the vast majority of cardholders used their travel cards in an appropriate manner and paid their bills on time, the IRS appreciates TIGTA’s recommendations and we have already implemented a number of them, including monitoring daily ATM limits. We are working to improve our controls and appreciate TIGTA’s support as we implement the recommendations.”
The IRS, which has been stung by charges it has targeted conservative organizations, further explained to Wisconsin Reporter that 52,000 credit cards isn’t out of line when considering the transient nature of many of the agency’s employees. With a horde of revenue officers and auditors fanning the nation, the agency logs a lot of travel miles, an IRS official said.
The second and third questions: How many government-issued credit – or “purchase” cards are out there, and how much waste, fraud and abuse are they racking up?
A lot of plastic
Established in 1998, SmartPay, billed as “charge cards for the federal government,” is the largest charge card program in the world, serving more than 350 federal agencies, organizations and Native American tribal governments, according to GSA’s website. In fiscal 2012, about 95.6 million transactions were made and $29.32 billion was charged on SmartPay cards. The cards are issued through three banks — Citibank, JP Morgan Chase and U.S. Bank.
The numbers in 2012 were down slightly from fiscal 2011, when there were about 100 million transactions and $30.8 billion worth of charges, according to GSA.
Government agencies do earn performance-based refunds in credit card use, and in 2012 alone GSA says agencies earned $306 million in net refunds, which are reinvested in program activities. That’s a lot of frequent flier miles. GSA estimates administrative savings for the purchase card alone is $1.7 billion per year ($70 per transaction) when used in place of the old written purchase orders.
“Purchase cards in the federal government are used for official travel, supplies, and services directly related to agencies’ missions and serving the American people,” wrote GSA spokesman Daniel Cruz in an email to Wisconsin Reporter.
Cruz could not provide statistics on how much fraud and misuse is in the program.
Neither could several federal agencies and lawmakers who spent the better part of the past decade tracking widespread problems in the government credit card program.
A Government Accountability Office audit in 2008 found 41 percent of the credit card transactions it examined did not observe government purchasing rules. And 48 percent of transactions over $2,500 violated federal rules, according to the report.
The long list of misuse and abuse included Debra K. Durfey, a longtime employee at the U.S. Forest Service in Oregon, wrote convenience checks – part of the government’s purchasing program – of more than $640,000 from 2000 to 2006 to her live-in boyfriend. Said boyfriend used the money for gambling, mortgage payments and car expenses, according to the GAO and Justice Department. Durfey was sentenced to 21 months in prison followed by 36 months of supervised release, and ordered to pay $642,319 in restitution.
“Another fraud case involved the U.S. Postal Service, where an unidentified postmaster used his card to charge $1,100 over a 15-month period for ‘various online dating services; while he was under investigation for viewing pornography on a government computer,” according to a April 2008 Washington Post story. “The employee worked out an agreement to remain on sick leave until he retired in 2007 and paid back the money spent on the dating services, according to the GAO report and a Postal Service spokesman.”
The GAO’s findings at the time spurred righteous indignation from Sens. Norm Coleman, R-Minn., and Carl M. Levin, D-Mich., who requested the audit. The senators said money “intended to pay for critical infrastructure, education and homeland security is instead being spent on iPods, lingerie and socializing.”
Oh, yeah, one federal card holder was found to have spent $360 at the Seduccion Boutique in Ecuador to buy “women’s underwear/lingerie for use during jungle training by trainees of a drug enforcement program.” And the Postal Service spent $13,500 in 2006 on a dinner at a Ruth’s Chris Steak House in Orlando, including “over 200 appetizers and over $3,000 of alcohol, including more than 40 bottles of wine costing more than $50 each and brand-name liquor such as Courvoisier, Belvedere and Johnny Walker Gold,” according to the Post article. “The tab came to more than $160 a head for the 81 guests, the report said.”
Tara Andringa, spokeswoman for Levin, said the senator’s office doesn’t have any new information. She recommended Wisconsin Reporter contact Coleman. Coleman, of course, lost his Senate seat to Democrat Al Franken by just a few hundred votes in 2008.
So, it was off to the GAO. Spokesman Chuck Young told Wisconsin Reporter the accountability office hasn’t “done any new work since that 2008 report so we don’t have any updated figures.” He said GSA is the best bet for that information.
GSA apparently doesn’t have abuse/misuse data government-wide.
The law requires federal agencies to place new safeguards and controls on government charge cards used by federal employees.
“There is a broad range controls for purchase card programs including oversight, auditing, mandatory training, and limits per transactions. There are laws, policies, and directives in place that agencies must follow,” the GSA’s Cruz told Wisconsin Reporter.
For example, each card holder must receive training before being issued a card. Every card has a per-transaction and monthly spending limit, as well as the capability to be “blocked” from transactions with various merchant groupings.
Cruz said GSA and the Office of Management and Budget are developing additional guidance to agencies to “reflect requirements due to the recently enacted” Charge Card Abuse Prevention Act.
According to the SmartPay cite, “each agency develops and implements policies related to employee misuse of charge cards.”
“Potential consequences for the cardholder may include: counseling, cancellation of the card, a written warning, notation in employee performance evaluation, reprimand, and/or suspension or termination of employment,” according to the website.
Which leads us back to the IRS’ issues with travel card misuse, however limited those problems may be.
As noted in TIGTA’s audit, “the lack of aggressive steps to address travel card misuse and reevaluate the security clearance and suitability for employment of employees with indications of financial problems present a risk to taxpayers, especially when these IRS employees have access to sensitive taxpayer information.”
The IRS identified more than 1,000 cardholders who misused their travel cards during fiscal years 2010 and 2011, according to the audit. Hundreds of cardholders with evidence of significant financial problems, including non-sufficient funds checks or suspended and charged-off accounts, were not referred for reevaluation of national security clearances and background checks. The majority of those cardholders remained employed by the IRS as of September 2012, according to the audit.
IRS travel cardholders made more than 50,000 ATM withdrawals of the maximum of $110 per day and $1,100 per billing cycle, in compliance with card use rules. The audit did identify 133 instances of cash advances of more than $110 per day and 92 instances of more than $1,100 per cycle.
While the inspector general audit doesn’t include more updated information beyond year 2011, misuse of the federal government’s charge cards in the IRS appears to have continued long after the GAO audit. The remaining question, which government spending trackers and lawmakers can’t seem to answer, is how much misuse and abuse are occurring throughout the federal government’s multi-billion dollar credit card system?
Contact M.D. Kittle at email@example.com