OMB memo to federal agencies: Tighten charge card controls

In its audit, the GAO estimated that about 41 percent of the credit card transactions made in 2005 and 2006 failed to meet basic internal control standards. What’s more, the GAO audit found that cardholders used purchase cards to subscribe to Internet dating services, buy video iPods for personal use and pay for lavish dinners that included expensive liquor. (For a copy of the GAO audit, click here.)

“OMB is extremely concerned with the incidences of charge card abuse by federal employees highlighted in GAO’s report,” OMB Director Jim Nussle wrote in a memo to federal agency managers.

In the memo, Nussle reminds federal agencies and departments that they are “responsible for maintaining internal controls which reduce the risk of waste, fraud and abuse in the government charge card programs and for initiating appropriate administrative and/or disciplinary actions for charge card misuse.”

The memo outlines actions that each federal agency must take by June 30 to strengthen their internal controls. Nussle directs agencies to “develop and maintain written policies and procedures for the appropriate use of charge cards (i.e., a charge card management plan) and submit them to OMB on an annual basis. Further, agencies must report data and performance metrics related to charge card management programs, including instances of misuse, to OMB on a periodic basis.”

In his memo, Nussle explains that the OMB will be updating its instructions to agencies regarding management of charge card programs.

OMB “will incorporate financial reimbursement requirements for any improper purchase card transactions made by the cardholder and/or approving officials as well as enhanced semiannual reporting by each agency relating to instances of charge card waste, fraud, and abuse (including the disciplinary and other corrective actions that the agency has taken),” Nussle wrote.

The OMB instructions covering charge cards are at Appendix B to OMB Circular A-123, “Improving the Management of Government Charge Card Programs.”

Overall, government purchasing cards save money

The federal charge card program is huge—transactions with the cards totaled $27 billion in fiscal year 2007. In spite of abuses by a few users, Nussle notes that the federal credit card program saved about $1.8 billion in fiscal 2007. Some of the cost savings were achieved through lower acquisition costs and reduced paperwork.

“Overall, OMB believes misuse of the federal charge card is the exception rather than the rule and most federal employees are using government charge cards responsibly,” Nussle wrote. To view a copy of the OMB memo, click here.

The Project On Government Oversight (POGO) has been researching government credit card abuse since the early 1990s.

“The Project on Government Accountability has expressed its concerns about this federal program for years because it lacks basic checks and balances to ensure accountability,” POGO Executive Director Danielle Brian told GovPro.com.

“Basic rules need to be established governmentwide for federal credit card holders,” Brian said. “These rules include: issuing cards only to individuals who have a documented need to acquire items for the government; the issuance should be conditional to all cardholders receiving training on the program’s key internal controls; no cardholder should be their own authorizing official; and the agencies must confirm that approving officials review cardholder support and certify monthly statements.

“Simple, common sense program controls would go a long way to provide transparency and solvency for the federal purchase card program while providing convenience and efficiency,” Brian added.

Some additional solutions might be at hand. The Senate Homeland Security and Government Affairs Committee recently cleared the “Government Credit Card Abuse Prevention Act” legislation for consideration by the full Senate. The proposed legislation would require all federal agencies to establish certain safeguards and internal controls for government charge card programs, and to establish penalties for violations.