March 28 2014

Feds Get a Card Check

National Review Online

Jillian Kay Melchior

Environmental Protection Agency employees spent taxpayer dollars on gym memberships and gift cards, a new report says. Meanwhile, other suspicious transactions examined from the EPA’s official credit cards included merchant categories for dance halls, daycare, and theater and music, according to a recent report by the agency’s Office of the Inspector General.

The report, issued earlier this month, is the latest in a series of executive-branch audits established by the Government Charge Card Abuse Prevention Act of 2012. In addition to mandating safeguards to prevent waste, fraud, and abuse, the legislation requires any agency that racks up more than $10 million a year in card spending to provide semiannual reports of any violations. Inspectors general will also be required to conduct yearly audits.

The ensuing reports will be grim reading, if the EPA’s audit is any indication. Though the inspector general’s office scrutinized only $152,602 in taxpayer-funded credit-card transactions charged by EPA employees, it found that more than half were “prohibited, improper or erroneous.”

The report also suggests more widespread waste, fraud, and abuse. EPA employees charged more than $29 million in 2012, so if that 52 percent rate of wrongful charges holds steady, it represents the misuse of more than $15 million in taxpayer money.

“In three instances, cardholders . . . purchased gym memberships that required pre-payment for services totaling $2,867,” the report notes. “Two of those purchases were for family memberships, and not just the EPA employee.”

Seven problematic transactions involved gift cards, including the purchase of 20 American Express gift cards, which cost $1,588. In theory, these were supposed to be rewards for superlative performance. But EPA policy explicitly states that “an item or memento given as a non-monetary award must demonstrate the employee-employer relationship (e.g., EPA logo or other appropriate meaning) and must not have monetary value either in terms of being converted to cash or in terms of clearly conveying a sense of cash value,” the report says. Furthermore, there was no third-party oversight ensuring the gift cards actually made it to the employees being honored.

The audit comes only months after John C. Beale, a former EPA employee, was sentenced to 32 months in prison after defrauding the agency of almost $900,000. He had lied to his bosses, claiming he was a CIA spy to explain missing more than two and a half years of work over the past decade.

And last year, the inspector general also discovered that EPA contractors hired to maintain a 700,000-square-foot, taxpayer-funded warehouse had instead converted it into their own personal gym. Pianos, gold-embossed EPA mugs, and passports were also discovered in the warehouse.

The EPA isn’t the only agency recently discovered to have credit-card problems, either.

The Department of Labor’s Office of the Inspector General reported last September that it had “identified 1,123 travel card accounts that were not cancelled in a timely manner, several of which were cancelled more than one year after the employee separated.”

For 37 cards intended specifically for travel expenses, employees had spent more than $50,094 “while not on official travel,” the report noted. For seven accounts, employees had spent $5,367 on unauthorized transactions while they were travelling. “One account incurred more than $10,000 in unauthorized transactions,” the report found.

And at the National Science Foundation, an audit also found that oversight was unsatisfactory. And “a cardholder pleaded guilty in December 2013 to stealing more than $94,000 by using his purchase card to buy electronics, music, and movies for himself and his family,” the January 27 report says.

The report said that JPMorgan Chase, which provides the NSF cards, is capable of blocking transactions with certain merchant categories. But the inspector general “identified some codes, such as babysitting, massage parlors, dating and escort services, and veterinary services, that should have been blocked but were not.” Though auditors didn’t find any purchases from NSF cards at these merchants, the potential for abuse certainly existed.

While it’s helpful that audits are finally looking out for abuse on taxpayer-funded credit cards, it’s a shame that it took a literal act of Congress to catch it.

— Jillian Kay Melchior writes for National Review as a Thomas L. Rhodes Fellow for the Franklin Center. She is also a Senior Fellow at the Independent Women’s Forum.

 

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