A report by the Government Accountability Office examined spending controls across the federal government following reports of credit-card abuse at departments including Defense, Homeland Security and Veterans Affairs.
The review of card spending at more than a dozen departments from 2005 to 2006 found that nearly 41 percent of roughly $14 billion in credit-card purchases, whether legitimate or questionable, did not follow procedure - either because they were not properly authorized or they had not been signed for by an independent third party as called for in federal rules to deter fraud.
For purchases over $2,500, nearly half - or 48 percent - were unauthorized or improperly received.
Out of a sample of purchases totaling $2.7 million, the government could not account for hundreds of laptop computers, iPods and digital cameras worth more than $1.8 million. In one case, the U.S. Army could not say what happened to computer items making up 16 server configurations, each of which cost nearly $100,000.
In one example, CBS News correspondent Chip Reid reports, a forest service employee used her card to funnel $642,000 - money intended to fight forest fires - to her boyfriend who used it for everything from gambling to shopping. The employee is now serving 21 months in prison.
Agencies often could not provide the required paperwork to justify questionable purchases. Investigators also found that federal employees sometimes double-billed or improperly expensed lavish meals and Internet dating for many months without question from supervisors; the charges were often noticed only after auditors or whistle-blowers raised questions.
"Breakdowns in internal controls over the use of purchase cards leave the government highly vulnerable to fraud, waste and abuse," investigators wrote, calling the governmentwide failure rate in enforcing controls "unacceptably high."
"This audit demonstrates that continued vigilance over purchase card use is necessary," the 57-page report stated.
The report calls for the General Services Administration and Office of Management and Budget, both of which help administer the government's credit-card program, to set guidance to improve accounting for purchased items, particularly Palm Pilots, iPods and other electronic equipment that could be easily stolen.
OMB and GSA were also urged to tighten controls over convenience checks, which are a part of the credit-card program, and to remind federal employees that they will be held responsible for any items if the purchases are later deemed improper.
In response, both OMB and GSA agreed with portions of the report. But GSA administrator Lurita Doan noted the vast majority of federal employees use their cards properly and that many oversight measures already are in place. She acknowledged there is room for improvement but added that by using purchase cards the federal government saves about $1.8 billion in administrative costs each year.
"We agree that no level of abuse or misuse is acceptable," Doan wrote.
The GAO study comes amid increasing scrutiny of purchase cards, which are used by 300,000 federal employees and are directly payable by the U.S. government. Minnesota Sen. Norm Coleman requested the investigation, Reid reports.
"These things were being paid at government expense," he said. "Government purchase cards and nobody looked at the bill."
The AP reported Sunday that VA employees last year racked up hundreds of thousands of dollars in government credit-card bills at casino and luxury hotels, movie theaters and high-end retailers such as Sharper Image. Government auditors have been investigating these and similar charges, citing past spending abuses.
In Tuesday's report, investigators did not seek to determine the extent of fraud or waste at each agency. They cited numerous cases of questionable spending, which they said represented what could be found government-wide, including the VA.
"The purchase card is a useful tool for the government, and in no way are we suggesting it shouldn't continue to be used widely," said Gregory D. Kutz, GAO's managing director of forensic audits and special investigations, in a telephone interview. "However, I would say these cases once again show that lack of internal controls cost taxpayers millions of dollars and thus continued focus is needed on improving these controls."
Among the expenditures cited in the report:
In the Internet dating case, a postmaster charged $1,100 over 15 months for two online services, including the Ashley Madison Agency. The expenses went unnoticed for more than a year even though he was under internal investigation for viewing pornography on a government computer. The postmaster was eventually told to repay the Internet charges but faced no disciplinary action.
"Too many government employees have viewed purchase cards as their personal line of credit," said Sen. Norm Coleman, R-Minn., the top Republican on the Senate Homeland Security subcommittee on investigations, which requested the GAO report. "When money that was intended to pay for critical infrastructure, education and homeland security is instead being spent on iPods, lingerie and socializing, we must immediately remedy the problem."
Sen. Carl Levin, D-Mich., who chairs the investigations subcommittee, agreed. "Although internal controls over government credit cards have improved, we still have a long way to go to stop the fraudulent use of these cards," he said.