Army 'Purchase' Cards Paid For Escorts, Pizza, Phones, GAO Said

Washington -- Army personnel misused government credit cards last year to pay for dating services, pizzas and at least $2,400 in L.L. Bean Inc. parkas, the General Accounting Office said in a report.

The Army's system for monitoring use of cards for purchases under $2,500 is flawed, permitting numerous cases of fraudulent, wasteful or improper transactions, GAO said in a review of card use at four U.S. installations and by the Texas National Guard.

The examination by the investigating arm of Congress follows a Pentagon Inspector General examination of the 13-year-old "purchase" card program -- the Defense Department's bid to streamline its acquisition process. An earlier GAO review disclosed similar abuses at two naval facilities in San Diego.

"Based on our identification of a number of potentially fraudulent cases at installations we audited, we believe that the number of cases involving potentially fraudulent transactions could be significant," GAO said in the report.

The Pentagon wouldn't comment, said spokesman Glenn Flood. Officials said controls on the card's uses must be tightened to prevent a loss of public support as Congress considers the biggest military spending increase in 35 years.

The Pentagon issued 207,025 cards to personnel who made 10.6 million purchases totaling $6.1 billion last year. The cards are for purchases of $2,500 or less, such as office supplies and equipment or smaller military items that don't require the paperwork and approval process for larger acquisitions.

Citigroup Inc. and U.S. Bancorp process transactions before military officials review and certify the purchase. Minneapolis- based U.S. Bancorp is the parent of U.S. Bank.

"A weakened overall control environment and breakdown in key government control activities leave the Army vulnerable to potentially fraudulent, improper and abusive purchases," the report said. "A major contributor to the weak, overall control environment is ineffective oversight."

The report is to be released tomorrow during a hearing of the House Government Reform subcommittee on government efficiency.

Pentagon Comptroller Dov Zakheim in March, responding to the earlier criticisms, set up a task force that issued 25 recommendations to tighten controls.

"Although the task force believes that most purchase cardholders are using the card appropriately, audits and investigations reveal more problems than are acceptable in a mature program," the task force report said.

Congressional investigators reviewed 258,000 transactions in 2001 at Fort Hood, Texas; Fort Benning, Georgia; the Army Soldier, Biological, Chemical Command, Natick, Massachusetts; Eisenhower Army Medical Center, Fort Gordon, Georgia; and various locations of the Texas National Guard.

The agency culled the Army transactions from the records of 10 million purchases by the military.

All the location lacked effective internal procedures to set up a system that would deter fraud or abuse, GAO said.

The GAO investigation discovered a card user at an undisclosed location charged $630 on June 15, 2001, for a New Jersey-based escort service. The transaction was approved while the person was a billing officer at the base, the GAO said.

A Fort Hood civilian who left the Army in early 2001 charged $524 for pizza and prepaid telephone cards in June 2001. The approving official failed to review documentation or discover the cardholder left the service, GAO said. The card was active as of December 2001.

A civilian working with a vendor at an unidentified base made 62 unauthorized purchases of $12,832 in six months for car repairs, gas and groceries. The fraud was undetected because the approving official didn't review records until the GAO audit.

At the Eisenhower Army Medical Center, a cardholder, the approving officer and several soldiers colluded to buy an about $100,000 in products such as electronic game stations, computers, digital cameras, a 32-inch television and stereo system for their use. Criminal investigators began a review after the GAO audit.

A Fort Benning military cardholder spent $30,000 for personal goods and cash advances in 178 transactions before and after he retired. "It appears the approving official's certification was only a rubber stamp and did not notice charges were continuing after the cardholder retired," GAO said.

Fort Hood paid improper mobile telephone charges because no one was monitoring, GAO said. One cell phone user who had a $79.95 per-month plan with 650 minutes of airtime exceeded the plan by $1,040, $795 and $523 in three months last year.

"Fort Hood officials told us the excessive charges occur because units do not have the appropriate monthly plan" and stem from personal use, GAO said.

At the Natick, Massachusetts, command, a card holder bought 10 L.L. Bean Gore-Tex parkas for $2,400 for employees who worked outside in the cold. "These jackets were not used solely for official use," GAO said. "The employee were allowed to take the jackets home and wear them in off-duty hours."

Time to shut this program down. DoD has been ineffective in dealing with this problem and it's growing. Dealing with soldiers abusing their Government card was my single most time consuming problem as a commander, and I had little power to stop it pre-emptively because of the requirements imposed on unit leaders to issue a soldier a government card for official travel in order to forego the cost and hassle to the DoD of paying travel advances. The previous method of paying soldiers travel advances, then presenting receipts along with a travel claim may not have been more efficient for the financiers but it was more effective at keeping people from cheating the taxpayers out of money.

Hard to imagine Officers/senior enlisted would pull this kind of crap- 18-19 yr. old wet behind the ears pvts, but grown-ups?

Actually, as a group, they are the worst offenders, partly because they comprise the largest demographic of cardholders and mostly because they have grown up with a credit card mentality. It's astonishing how some officers and NCOs can lead and manage young soldiers, yet have trouble managing their own financial affairs. In this negative respect, they are a microcosm of our society as whole.

Just think if could audit ALL Gov. offices, as well as Congressional and Senatorial offices...let's not forget the Judicial branch!

I suspect we could fund the War on Terror if we could just STOP the current level of FRAUD being perpetrated.

Now, let's talk jail time and reimbursement from the GOV. retirement funds....

This fraud problem just baffles me. It is a strong indication of faulty program design.

I developed, implemented, and managed a purchasing card program for a Fortune 300 company. Management expected us to be beyond the "bleeding edge" in innovation, so we were in uncharted waters in our program design. Domestically, about 60 operations were brought on-line; a card program was developed for our Australian subsidiary; individual locations and exploration personnel in Asia, Africa, and South America were rolled in. Cardholders comprised approximately 15% of the workforce, with the majority issued to hourly personnel - miners, diesel mechanics, and the like. In general, management was discourage from participation. The average monthly credit limit was $5k but many were in the $10k to $30k region. Training and management buy-in resulted in an accelerated ramp-up and immediate returns. Three years into the program we had captured over 50% of all financial transactions within the company, in the process going from thousands of checks per month to one EFT. Needless to say, AP and accounting were less than inclined to offer support.

During this period we had 3 case of fraud involving about 15 transactions. Most fraud was detected within 24 hours of the transaction. Within 60 days of the fraudulent transaction, restitution was complete and the employee terminated. Several features were responsible: 1) cardholder training; 2) a binding legal agreement; 3) individual and program-wide restrictions based on vendor Merchant Category Code (MCC); and 4) dedicated 24/7 support. In short, we did our homework and designed a program that gave the policy committee an immediate and measurable return. I don't know why I shouldn't expect the fed to equal or exceed my success.

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