[Congressional Record Volume 149, Number 145 (Thursday, October 16, 2003)]
[Senate]
[Pages S12742-S12744]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Byrd):
  S. 1744. A bill to prevent abuse of Government credit cards; to the 
Committee on Governmental Affairs.
  Mr. GRASSLEY. Mr. President, today I am introducing a bill to help 
curtail abuses of government-issued credit cards throughout the Federal 
Government. I am pleased to join Representative Wilson who is 
introducing an identical measure in the House today and I thank him for 
his interest and work on this important issue. I am also very glad to 
have Senator Byrd co-sponsor my bill. He has been a staunch advocate 
for improved management of government credit programs and I have been 
honored to work with him on this issue in the past.
  As many of my colleagues are aware, I have been working for several 
years to expose abuses of government purchase cards and travel cards, 
starting with the largest user of government charge cards, the 
Department of Defense. Working with the GAO, former subcommittee 
Chairman Horn in the House, and others, we have been able to uncover a 
disturbing number of instances where DOD-issued credit cards have been 
abused. When I say abused, I mean government credit cards were used to 
pay for everything from cars to Caribbean cruises. The list also 
includes furniture, breast implants, and gentleman's clubs.
  So what does all of this mean for the American taxpayer? In the case 
of government purchase cards, it means that hardworking Americans are 
paying for government employees' Christmas shopping. Purchase cards are 
intended to be used to purchase supplies or other items needed by a 
government agency and are paid directly by the agency with taxpayer 
money. However, it is hard to justify payments on a sapphire ring, 
kitchen appliances, and gift certificates to department stores as 
necessary office expenses. Astoundingly, these are examples of charges 
that have been made and paid for out of the taxpayer's pocket with no 
questions asked.
  Government travel cards work differently, but are still subject to 
abuses that negatively impact the American public. They are issued to 
individual employees for use on official travel. The employee must pay 
the bill and is reimbursed by the agency. Unfortunately, government 
travel cards are routinely issued to individuals who have a bad credit 
history or even a record of credit card fraud. This opens up the door 
for abuse. Not only have travel cards been used for questionable travel 
expenses, but travel cards have been used when employees are not on 
official travel to pay for items from gambling and prostitution to 
tickets for a pop music concert by the Backstreet Boys. Some employees 
have committed fraud by repeatedly writing bad checks to pay travel 
card bills and some have taken government funds in reimbursement for 
travel expenses and not paid off their travel card bills.
  When a travel card bill is not paid on time, the agency loses out on 
rebates that the agency would otherwise receive from the credit card 
company. These rebates add up. In fact, in fiscal year 2001, the 
Federal Government received $71 million in rebates, but this amount 
declined in fiscal year 2002 to $69.2 million mainly due to 
delinquencies in paying off travel cards. We're talking real money and, 
especially in a time of budgetary belt-tightening, this trend cannot be 
allowed to continue. In addition, since Bank of America took over the 
DOD charge card contract in 1998, it had to ``charge off'' over $61 
million dollars in bad debt. The military service branches have 
recovered less than $24 million of that amount, leaving almost $40 
million in losses to the credit card company. In fact, the situation 
got so bad that Bank of America considered dropping its account with 
DOD. Although actions by DOD to reduce delinquencies and recover bad 
debt through methods like salary offsets have now improved the 
situation somewhat, this scandal has left a black mark on the 
reputation of the Federal Government. Furthermore, these losses 
inflicted on credit card companies by Federal employees hurt the 
millions of innocent Americans who are credit card customers by raising 
the interest rates and fees the company must charge.

  What we have learned through our investigation of the travel card and 
purchase card programs in the Department of Defense is that these 
abuses were allowed to occur as a result of weak internal controls. The 
revelations about DOD sparked questions about the possibility of 
similar deficiencies in other departments. In fact, subsequent work 
with the GAO and agency Inspectors General has uncovered weak internal 
controls in the travel card and purchase card programs of agencies like 
the Department of Education, the Federal Aviation Administration, the 
Department of Housing and Urban Development, the Department of the 
Interior, and the Department of Agriculture leading to wasteful and 
questionable purchases with taxpayer dollars. We know about HUD 
employees using agency purchase cards for personal shopping sprees at 
stores like Best Buy and JC Penny, FAA employees purchasing individual 
subscriptions to Internet providers and gift cards from Home Depot, and 
Department of Agriculture employees using travel cards to buy a car and 
enroll in bartending school. The list goes on.

[[Page S12743]]

  Clearly, this is a problem that needs to be addressed government-
wide. Ideally, Federal agencies would get their own houses in order. 
Unfortunately, the atrocious abuses that have been uncovered in the 
charge card programs of agency after agency would likely never have 
come to light without congressional oversight. In fact, the positive 
developments we have seen so far in curtailing government credit card 
abuses have been the result of Congress cajoling the bureaucracy to put 
controls in place. The bill I am introducing today would require all 
agencies to promulgate regulations to establish safeguards and internal 
controls to prevent fraud, waste, and abuse of Federal purchase cards 
and travel cards.
  The GAO has now issued an Audit Guide for auditing and investigating 
the internal control of government purchase card programs, which it 
developed based on its experiences auditing various agencies purchase 
card programs. This excellent guide outlines five standards for 
internal control to curtail fraudulent, improper, and abusive 
purchases. These include: establishing a positive control environment 
among agency management and employees, providing for a risk assessment, 
implementing control activities to enforce management directives and 
help ensure actions are taken to reduce risks, recording and 
communicating information to program managers and others who need it, 
and ongoing monitoring. My bill would go a long way to push agencies 
toward the effective management approach GAO has outlined.
  In fact, my bill requires agencies to establish policies for purchase 
card programs, and travel card programs where applicable, that 
incorporate many of the specific recommendations GAO has made to 
various agencies as a result of its investigations. These include: 
training for cardholders as well as approving officials and agency 
program coordinators, establishing who is eligible to be a cardholder 
and limits on how much they can charge, limiting the number of cards 
distributed to those who really need them, establishing requirements 
for documentation and records to support each purchase, cancelling 
cards for employees who leave or transfer, and establishing penalties 
to hold card holders and approving officials accountable for misuse.

  My bill also requires that credit checks be performed before issuing 
a government charge card and that no one found to be not creditworthy 
be issued a government credit card. In my opinion, it is absurb that 
this is not standard practice. Government employees who could never get 
a private credit card due to bad credit, bankrupty, or history of fraud 
will no longer be handed a government charge card with no questions 
asked.
  Finally, my bill would provide that the each agency Inspector General 
will periodically conduct risk assessments of agency purchase card and 
travel card programs and perform periodic audits to identify potential 
fraudulent, improper, and abusive use of cards. We have had great 
success working with Inspectors General using techniques like data 
mining to reveal instances of improper use of government charge cards. 
The information continually provided to the head of each executive 
agency as well as the Director of the Office of Management and Budget 
and the Comptroller General by each agency IG will be an enormous help 
in strengthening and maintaining a rigious system of internal controls 
to prevent future instances of waste, fraud, and abuse with government 
charge cards.
  Due to aggressive congressional oversight and the efforts of talented 
investigators working for the GAO and agency IG's, we now know that 
weak internal control over agency purchase and travel card programs has 
lead to waste, fraud, and abuse across the Federal Government. It has 
come to the point that Congress must intervene to require agencies to 
put in place the policies and procedures necessary to stop the misuse 
of taxpayer dollars and the abuse of the public trust. I wish I could 
say this bill is a silver bullet and that once enacted, all the 
problems with government credit cards will disappear, but I don't 
pretend this is the case. Ultimately, it is up to agency officials and 
program managers to implement best practices for managing purchase card 
and travel card programs. To that end, I would encourage all agencies 
to take a close look at the GAO Audit Guide and use its approach. 
Meanwhile, continued congressional oversight will still be necessary. 
Nevertheless, my bill will serve to kick-start the bureaucracy into 
taking this problem seriously and I believe it will be a big step 
toward putting the lid back on the Federal cookie jar. I know many of 
my colleagues are equally appalled by the many tales of credit card 
fraud and abuse perpetrated on the American public and I would urge 
senators to join me in this effort.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1744

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Credit Card Abuse Prevention 
     Act of 2003''.

     SEC. 2. MANAGEMENT OF PURCHASE CARDS.

       (a) Required Safeguards and Internal Controls.--The head of 
     each executive agency that issues and uses purchase cards and 
     convenience checks shall establish and maintain safeguards 
     and internal controls to ensure the following:
       (1) That there is a record in each executive agency of each 
     holder of a purchase card issued by the agency for official 
     use, annotated with the limitations on single transaction and 
     total credit amounts that are applicable to the use of each 
     such card by that purchase cardholder.
       (2) That the holder of a purchase card and each official 
     with authority to authorize expenditures charged to the 
     purchase card are responsible for reconciling the charges 
     appearing on each statement of account for that purchase card 
     with receipts and other supporting documentation and 
     forwarding such reconciliation to the designated official who 
     certifies the bill for payment in a timely manner.
       (3) That any disputed purchase card charge, and any 
     discrepancy between a receipt and other supporting 
     documentation and the purchase card statement of account, is 
     resolved in the manner prescribed in the applicable 
     Governmentwide purchase card contract entered into by the 
     Administrator of General Services.
       (4) That payments on purchase card accounts are made 
     promptly within prescribed deadlines to avoid interest 
     penalties.
       (5) That rebates and refunds based on prompt payment on 
     purchase card accounts are monitored for accuracy and 
     properly recorded as a receipt to the agency that pays the 
     monthly bill.
       (6) That records of each purchase card transaction 
     (including records on associated contracts, reports, 
     accounts, and invoices) are retained in accordance with 
     standard Government policies on the disposition of records.
       (7) That periodic reviews are performed to determine 
     whether each purchase cardholder has a need for the purchase 
     card.
       (8) That appropriate training is provided to each purchase 
     cardholder and each official with responsibility for 
     overseeing the use of purchase cards issued by an executive 
     agency.
       (9) That each executive agency has specific policies 
     regarding the number of purchase cards issued by various 
     organizations and categories of organizations, the credit 
     limits authorized for various categories of cardholders, and 
     categories of employees eligible to be issued purchase cards, 
     and that those policies are designed to minimize the 
     financial risk to the Federal Government of the issuance of 
     the purchase cards and to ensure the integrity of purchase 
     cardholders.
       (10) That the head of each executive agency evaluate the 
     creditworthiness of an individual before issuing the 
     individual a purchase card, and that no individual be issued 
     a purchase card if the individual is found not creditworthy 
     as a result of the evaluation. Notwithstanding any other 
     provision of law, such evaluation shall include an assessment 
     of an individual's consumer report from a consumer reporting 
     agency as those terms are defined in section 603 of the Fair 
     Credit Reporting Act. The obtaining of a consumer report 
     under this subsection is deemed to be a circumstance or 
     purpose authorized or listed under section 604 of the Fair 
     Credit Reporting Act.
       (11) That each executive agency invalidate the purchase 
     card of each employee who--
       (A) ceases to be employed by the agency immediately upon 
     termination of the employment of the employee; or
       (B) transfers to another unit of the agency immediately 
     upon the transfer of the employee.
       (b) Management of Purchase Cards.--The head of each 
     executive agency shall prescribe regulations implementing the 
     safeguards and internal controls in subsection (a). Those 
     regulations shall be consistent with regulations that apply 
     Governmentwide regarding the use of purchase cards by 
     Government personnel for official purposes.

[[Page S12744]]

       (c) Penalties for Violations.--The regulations prescribed 
     under subsection (a) shall provide for appropriate adverse 
     personnel actions or other punishment to be imposed in cases 
     in which employees of an executive agency violate such 
     regulations or are negligent or engage in misuse, abuse, or 
     fraud with respect to a purchase card, including removal in 
     appropriate cases.
       (d) The Inspector General of each executive agency shall--
       (1) periodically conduct risk assessments of the agency 
     purchase card program and associated internal controls and 
     analyze identified weaknesses and the frequency of improper 
     activity in order to develop a plan for using such risk 
     assessments to determine the scope, frequency, and number of 
     periodic audits of purchase cardholders;
       (2) perform periodic audits of purchase cardholders 
     designed to identify--
       (A) potentially fraudulent, improper, and abusive uses of 
     purchase cards;
       (B) any patterns of improper cardholder transactions, such 
     as purchases of prohibited items; and
       (C) categories of purchases that should be made by means 
     other than purchase cards in order to better aggregate 
     purchases and obtain lower prices;
       (3) report to the head of the executive agency concerned on 
     the results of such audits; and
       (4) report to the Director of the Office of Management and 
     Budget and the Comptroller General on the implementation of 
     recommendations made to the head of the executive agency to 
     address findings during audits of purchase cardholders.
       (e) Definition of Executive Agency.--For the purpose of 
     this section the term ``executive agency'' has the meaning 
     provided in section 4(1) of the Office of Federal Procurement 
     Policy Act (41 U.S.C. 403(1)).
       (f) Relationship to Department of Defense Purchase Card 
     Regulations.--
       (1) The requirements under this section shall not apply to 
     the Department of Defense.
       (2) Section 2784(b) of title 10, United States Code, is 
     amended--
       (A) in paragraph (8), by striking ``periodic audits'' and 
     inserting ``risk assessments of the agency purchase card 
     program and associated internal controls and analyze 
     identified weaknesses and the frequency of improper activity 
     in order to develop a plan for using such risk assessments to 
     determine the scope, frequency, and number of periodic audits 
     of purchase cardholders.''; and
       (B) by adding at the end the following new paragraphs:
       ``(11) That the Secretary of Defense shall evaluate the 
     creditworthiness of an individual before issuing the 
     individual a purchase card, and that no individual be issued 
     a purchase card if the individual is not found creditworthy 
     as a result of the evaluation. Notwithstanding any other 
     provision of law, such evaluation shall include an assessment 
     of an individual's consumer report from a consumer reporting 
     agency as those terms are defined in section 603 of the Fair 
     Credit Reporting Act. The obtaining of a consumer report 
     under this subsection is deemed to be a circumstance or 
     purpose authorized or listed under section 604 of the Fair 
     Credit Reporting Act.
       ``(12) That the Secretary of Defense invalidate the 
     purchase card of each employee who ceases to be employed by 
     the department immediately upon termination of the employment 
     of the employee or transfers to another agency or subunit 
     within the department immediately upon transfer.''.

     SEC. 3. MANAGEMENT OF TRAVEL CARDS.

       Section 2 of the Travel and Transportation Reform Act of 
     1998 (Public Law 105-264; 5 U.S.C. 5701 note) is amended by 
     adding at the end the following new subsection:
       ``(h) Management of Travel Charge Cards.--
       ``(1) Required safeguards and internal controls.--The head 
     of each executive agency that has employees that use travel 
     charge cards shall establish and maintain safeguards and 
     internal controls over travel charge cards to ensure the 
     following:
       ``(A) That there is a record in each executive agency of 
     each holder of a travel charge card issued by the agency for 
     official use, annotated with the limitations on amounts that 
     are applicable to the use of each such card by that travel 
     charge cardholder.
       ``(B) That rebates and refunds based on prompt payment on 
     travel charge card accounts are properly recorded as a 
     receipt of the agency that employs the cardholder.
       ``(C) That periodic reviews are performed to determine 
     whether each travel charge cardholder has a need for the 
     travel charge card.
       ``(D) That appropriate training is provided to each travel 
     charge cardholder and each official with responsibility for 
     overseeing the use of travel charge cards issued by an 
     executive agency.
       ``(E) That each executive agency has specific policies 
     regarding the number of travel charge cards issued by various 
     organizations and categories of organizations, the credit 
     limits authorized for various categories of cardholders, and 
     categories of employees eligible to be issued travel charge 
     cards, and that those policies are designed to minimize the 
     financial risk to the Federal Government of the issuance of 
     the travel charge cards and to ensure the integrity of travel 
     charge cardholders.
       ``(F) That the head of each executive agency evaluates the 
     creditworthiness of an individual before issuing the 
     individual a travel charge card, and that no individual be 
     issued a travel charge card if the individual is found not 
     creditworthy as a result of the evaluation (except that this 
     paragraph shall not preclude issuance of a restricted use 
     travel charge card when the individual lacks a credit 
     history). Notwithstanding any other provision of law, such 
     evaluation shall include an assessment of an individual's 
     consumer report from a consumer reporting agency as those 
     terms are defined in section 603 of the Fair Credit Reporting 
     Act. The obtaining of a consumer report under this subsection 
     is deemed to be a circumstance or purpose authorized or 
     listed under section 604 of the Fair Credit Reporting Act.
       ``(G) That each executive agency ensures that the travel 
     charge card of each employee who ceases to be employed by the 
     agency is invalidated immediately upon termination of the 
     employment of the employee.
       ``(2) Regulations.--The Administrator of General Services 
     shall prescribe regulations governing the implementation of 
     the safeguards and internal controls in paragraph (1) by 
     executive agencies.
       ``(3) Penalties for violations.--The regulations prescribed 
     under paragraph (2) shall provide for appropriate adverse 
     personnel actions or other punishment to be imposed in cases 
     in which employees of an executive agency violate such 
     regulations or are negligent or engage in misuse, abuse, or 
     fraud with respect to a travel charge card, including removal 
     in appropriate cases.
       ``(4) The Inspector General of each executive agency 
     shall--
       ``(A) periodically conduct risk assessments of the agency 
     travel card program and associated internal controls and 
     analyze identified weaknesses and the frequency of improper 
     activity in order to develop a plan for using such risk 
     assessments to determine the scope, frequency, and number of 
     periodic audits of purchase cardholders;
       ``(B) perform periodic audits of travel cardholders 
     designed to identify potentially fraudulent, improper, and 
     abusive uses of travel cards;
       ``(C) report to the head of the executive agency concerned 
     on the results of such audits; and
       ``(D) report to the Director of the Office of Management 
     and Budget and the Comptroller General on the implementation 
     of recommendations made to the head of the executive agency 
     to address findings during audits of travel cardholders.
       ``(5) Definitions.--For purposes of this subsection:
       ``(A) The term `executive agency' means an agency as that 
     term is defined in section 5701 of title 5, United States 
     Code, except that it is in the executive branch.
       ``(B) The term `travel charge card' means the Federal 
     contractor-issued travel charge card that is individually 
     billed to each cardholder.''.

     SEC. 4. REGULATIONS.

       (a) In General.--Not later than 180 days after the date of 
     the enactment of this Act--
       (1) the head of each executive agency shall promulgate 
     regulations to implement the requirements of section 2; and
       (2) the Administrator of General Services shall promulgate 
     regulations required pursuant to the amendments made by 
     section 3.
       (b) Best Practices.--Regulations promulgated under this 
     section shall reflect best practices for conducting purchase 
     card and travel card programs.
                                 ______