[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





 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


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington             ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia                 PETER WELCH, Vermont
THOMAS MASSIE, Kentucky              TONY CARDENAS, California
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan        Vacancy
RON DeSANTIS, Florida

                   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                GERALD E. CONNOLLY, Virginia 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
THOMAS MASSIE, Kentucky              MARK POCAN, Wisconsin
MARK MEADOWS, North Carolina






















                            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

 
 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.
    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 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.
    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 
Republican-Democrat 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.
    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.
    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 
government-wide 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 
unintentionally 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 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 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:]
   
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
   
    
    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.
    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 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.
    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:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    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.
    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----
    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.
    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.
    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 On-Line 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----
    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 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 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 
government-issued 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.
    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.
    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 fraudulent-type 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 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 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.
    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.
    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----
    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 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?
    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?
    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?
    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.]








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