U.S.

Shopping Spree Investigated

July 30, 2001 / 5:58 PM EDT / AP

Congressional investigators agreed Monday to conduct a Pentagon-wide audit, looking for potential abuse of the government credit cards that military and civilian defense workers used last year for 10 million purchases totaling $5.5 billion.

Acting at the behest of Sen. Charles Grassley, R-Iowa, and Rep. Stephen Horn, R-Calif., General Accounting Office investigators said they would pursue the department-wide audit after a preliminary probe of two Navy units in Southern California turned up widespread fraud and abuse. The Pentagon inspector general also is investigating potential abuse of the department's 1.8 million credit cards.

Pentagon officials defended the credit card program Monday before a House government reform panel, insisting that any abuses have been more than offset by savings from reducing the paperwork and bureaucracy needed for purchases of less than $2,500.

Vice Admiral Keith Lippert, who last year headed the agency responsible for the Navy and Marine credit card program, said the rate of abuse and misuse of Navy-issued cards is less than half the commercial benchmark of 0.06 percent to 0.09 percent of dollars spent.

"The greatest strength of the system is employee honesty," Lippert said. "The work force is relied upon to properly use the card and to report misuse."

But the GAO said the two San Diego Navy facilities it examined exercised little control over the $68 million in credit card purchases employees at the two units made last year. The agency said it found numerous questionable purchases, including expensive computer monitors and Palm Pilots that could not be accounted for, as well as gift certificates to Nordstrom and Mary Kay cosmetics.

Capt. Ernest L. Valdes, commander of the Space and Naval Warfare Systems Center in San Diego, defended the computer purchases but conceded the Navy would have saved money buying them in bulk, rather than with credit cards. He said the cosmetics purchase was made with a stolen credit card.

Grassley said there have been more than 500 known cases of fraud involving military credit cards in the past two years. One bank company, he said, had to write off $59 million in fraudulent debts from military credit cards. He cited one case of a Marine Corps sergeant who ran up a $20,000 bill on his military credit card and then left the service with the bill unpaid.

Both Grassley and Horn urged the Pentagon to begin requiring routine credit checks before allowing employees to have government credit cards.

"The no-credit-check-everybody-gets-a-card policy allows the abusers to rob the bank," Grassley said. "And DOD is backing them up."

Gregory D. Kurtz, the GAO's director of financial management and assurance, said the Pentagon should begin limiting the number of people with credit cards. At the two Navy units, he said, 36 percent and 16 percent of the employees had military credit cards, compared to no more than 4 percent of the employees at six large defense contractorin Southern California.

"The more cardholders you have, the harder it is to control," Kurtz said.

Capt. J.E. Surash, commander of the Navy Public Works Center in San Diego, said the number of center employees with military credit cards has been cut 31 percent since last year. He said new controls also have been put in place that require the cardholder, his supervisor and another official to sign off on each monthly statement before it is paid.

"We did a major overhaul of my command in the fall of 2000," Surash said. "It is much improved over what the GAO saw when they did their review."

Horn asked the GAO to report back by Nov. 1 on its Pentagon-wide audit. He said he intends to keep up the pressure to ensure that Defense Secretary Donald H. Rumsfeld lives up to his promise to improve financial accountability at the Pentagon.

"We're not going to just let this drop," said Horn.