[House Report 112-376]
[From the U.S. Government Printing Office]
112th Congress } { Rept. 112-376
2nd Session } HOUSE OF REPRESENTATIVES { Part 1
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GOVERNMENT CHARGE CARD ABUSE PREVENTION ACT OF 2011
_______
January 27, 2012.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Issa, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
[To accompany S. 300]
[Including cost estimate of the Congressional Budget Office]
The Committee on Oversight and Government Reform, to whom
was referred the bill (S. 300) to prevent abuse of Government
charge cards, having considered the same, report favorably
thereon without amendment and recommend that the bill do pass.
CONTENTS
Committee Statement and Views.................................... 1
Section-by-Section............................................... 3
Explanation of Amendments........................................ 4
Committee Consideration.......................................... 5
Application of Law to the Legislative Branch..................... 5
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 5
Statement of General Performance Goals and Objectives............ 5
Federal Advisory Committee Act................................... 5
Unfunded Mandate Statement....................................... 5
Committee Estimate............................................... 5
Budget Authority and Congressional Budget Office Cost Estimate... 6
Changes in Existing Law Made by the Bill as Reported............. 7
Committee Statement and Views
PURPOSE AND SUMMARY
While the use of charge cards has saved the Federal
Government both time and money relative to a paper
reimbursement system, a small number of federal employees have
abused their purchase and travel card privileges, resulting in
unnecessary and sometimes fraudulent expenses. Numerous
Government Accountability Office (GAO) and inspectors general
reports over the last decade have called for additional
controls to prevent waste, fraud, and abuse in the government
charge card program. The Government Charge Card Abuse
Prevention Act of 2011, S. 300, requires the Federal Government
to improve the way it manages purchase cards.
BACKGROUND AND NEED FOR LEGISLATION
Executive Order 12352 directed agencies to develop programs
simplifying the procurement of relatively lower-cost goods and
services.\1\ Executive Order 12931 directed agency heads to
expand the use of government purchase cards.\2\ Each agency is
responsible for establishing its own purchase card program,
within Office of Management and Budget (OMB) guidance,\3\ using
services negotiated by the General Services Administration
(GSA). The Federal Government's purchase card program is
designed to streamline the purchase of goods and services.
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\1\Executive Order 12352, Federal Procurement Reforms, 47 Federal
Register 12125, March 22, 1982.
\2\Executive Order 12931, Federal Procurement Reform, 59 Federal
Register 52387, October 17, 1994.
\3\Office of Management and Budget, Management's Responsibility for
Internal Control, Circular No. A-123, available at http://
www.whitehouse.gov/omb/circulars/a123/a123--appendix--b.pdf.
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Since 1988, federal employees have been required to use
government charge cards for expenses associated with official
government travel.\4\ Each agency is responsible for
establishing its own travel card program, which includes both
individually and centrally billed accounts. Centrally billed
accounts are held by the agency, while individually held
accounts are held by employee cardholders.
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\4\P.L. 105-264.
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While government charge cards have streamlined
micropurchases and travel expenses, government auditors have
over the years documented fraudulent and questionable purchases
made by federal workers, including kitchen appliances, cruises,
and even the tab at gentlemen's clubs. In 2008, GAO estimated
that nearly 41 percent of purchase card transactions failed to
meet basic internal control standards.\5\
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\5\GAO-08-333.
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The Committee believes the Federal Government must improve
the way it manages charge cards used by federal employees. S.
300, based largely on GAO's recommendations, requires agencies
to improve their internal controls for government charge cards,
including the use of appropriate disciplinary action for
employees who abuse charge card privileges. The legislation
also will help ensure the Federal Government benefits from
prompt payment rebates available from charge card vendors.
LEGISLATIVE HISTORY
The Federal Acquisition Streamlining Act streamlined the
administrative costs and burden associated with relatively low-
cost government purchases.\6\ The Travel and Transportation
Reform Act of 1998 required federal employees to use travel
charge cards to cover expenses associated with official
government travel.\7\ Section 738 of the Consolidated
Appropriations Act, 2010, required agencies to evaluate the
credit worthiness of an individual before issuing a government
travel card and to establish procedures for taking disciplinary
actions against employees for improper or fraudulent use of
cards.\8\
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\6\P.L. 103-355.
\7\P.L. 105-264.
\8\P.L. 111-117.
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The Department of Defense is already subject to specific
purchase card guidance.\9\ The National Defense Authorization
Act for Fiscal Year 2000\10\ and the Bob Stump National Defense
Authorization Act for Fiscal Year 2003\11\ mandated that the
Department of Defense implement many of the safeguards and
internal controls for purchase cards instituted by S.300.
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\9\10 U.S.C. 2784.
\10\P.L. 106-65.
\11\P.L. 107-314.
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S. 300 was introduced by Senator Chuck Grassley of Iowa on
February 8, 2011. The bill was referred to the Senate Committee
on Homeland Security and Governmental Affairs, which favorably
reported the bill by voice vote, without amendment, on April
13, 2011.
The legislation was originally introduced in the 111th
Congress as S. 942 on April 30, 2009, favorably reported by the
Senate Committee on Homeland Security and Governmental Affairs
on May 29, 2009, and passed by the Senate by unanimous consent
on October 7, 2009. Subsequently, S. 942 was referred to the
House Committees on Oversight and Government Reform and Armed
Services. Companion legislation, H.R. 2189, was introduced in
the House by Representative Joe Wilson (SC-2) on April 30,
2009, and referred to the House Committees on Oversight and
Government Reform and Armed Services. No further action was
taken on S. 942 or H.R. 2189.
Section-by-Section
Section 1. Short title
Designates the name of the act as the ``Government Charge
Card Abuse Prevention Act of 2011.''
Section 2. Management of purchase cards
Agencies are to establish and maintain safeguards and
internal controls for purchase cards, including: (1) keeping a
record of each card holder and associated transaction limits;
(2) requiring approval and reconciliation of transactions; (3)
ensuring timely and accurate payment; (4) providing appropriate
training to cardholders and administrators; and (5) recovering
erroneous, improper, or illegal purchases. The Office of
Management and Budget (OMB) reviews existing guidance and
prescribes additional guidance as necessary.
Agencies are to take appropriate adverse personnel actions,
including dismissal, for employees who violate purchase card
guidelines or make erroneous, improper, or illegal purchases.
Agencies with annual purchase card transactions totaling
more than $10 million must report to OMB on purchase card
violations. The report must be jointly submitted with the
agency inspector general on a semi-annual basis. Agency
inspectors general will conduct periodic assessments of
purchase card programs, report to the agency head on the
findings, and report to OMB on implementation of any agency
recommendations based on the findings.
The Department of Defense remains subject to existing
statutory guidance for purchase card use in section 2784 of
title 10, United States Code, with additional internal controls
similar to those proposed for other agencies in the bill. The
Department of Defense Inspector General will conduct periodic
assessments of purchase card use, reporting jointly with the
Secretary of Defense to OMB.
Section 3. Management of travel cards
Agencies are to establish and maintain internal controls
for travel cards, including: (1) keeping a record of each card
holder and associated transaction limits; (2) ensuring
appropriate credit of rebates and refunds for prompt payment
and transaction volume; (3) providing appropriate training to
cardholders and administrators; and (4) evaluating the
creditworthiness of employees before issuance. OMB establishes
a minimum credit score for determining the creditworthiness of
an employee. Agencies may issue a restricted use travel card to
an employee who lacks a credit history or has a credit score
below the OMB minimum. OMB reviews existing guidance and
prescribes additional guidance as necessary.
Agencies are to take appropriate adverse personnel actions,
including removal, for employees who violate travel card
guidelines or commit fraud.
Agencies with annual travel card transactions totaling more
than $10 million must report to OMB on purchase card
violations. The report must be jointly submitted with the
agency inspector general on a semi-annual basis. Agency
inspectors general will conduct periodic assessments of travel
card programs, report to the agency head on the findings, and
report to OMB on implementation of any agency recommendations
based on the findings.
Section 4. Management of centrally billed accounts
Agencies with employees who use centrally billed travel
cards are to establish and maintain internal controls to guard
against duplicate payment of charges and secure refunds of
fully or partially used airline tickets. OMB is to review
existing guidance and prescribes additional guidance as
necessary.
Section 5. Construction
Agency heads remain subject to existing financial
management responsibilities in section 3512 of title 31, United
States Code and the Improper Payments Act of 2002 at 3321 note
of title 31, United States Code.
Explanation of Amendments
No amendments were adopted during Committee consideration
of S. 300. Representative Blake Farenthold (TX-27) filed but
did not offer an amendment that would prohibit state and local
governments from imposing taxes on federal employee travel
expenses, making any revenues subject to collection under the
Improper Payments Elimination and Recovery Act of 2010.\12\
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\12\P.L. 111-204.
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Committee Consideration
On October 13, 2011, the Committee met in open session and
ordered reported favorably the bill, S. 300 by unanimous
consent, a quorum being present.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to the terms and conditions of
employment or access to public services and accommodations.
This bill requires the federal government to improve the way it
manages purchase cards. As such this bill does not relate to
employment or access to public services and accommodations.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
(2)(b)(1) of rule X of the Rules of the House of
Representatives, the Committee's oversight findings and
recommendations are reflected in the descriptive portions of
this report.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are reflected in the descriptive portions
of this report.
Federal Advisory Committee Act
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., Section 5(b).
Unfunded Mandate Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandate Reform Act, P.L. 104-4) requires a statement as to
whether the provisions of the reported include unfunded
mandates. In compliance with this requirement the Committee has
received a letter from the Congressional Budget Office included
herein.
Earmark Identification
S. 300 does not include any congressional earmarks, limited
tax benefits, or limited tariff benefits as defined in clause 9
of rule XXI.
Committee Estimate
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
S. 300. However, clause 3(d)(3)(B) of that rule provides that
this requirement does not apply when the Committee has included
in its report a timely submitted cost estimate of the bill
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act.
Budget Authority and Congressional Budget Office Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause (3)(c)(3) of rule XIII of the Rules
of the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for S. 300 from the Director of
Congressional Budget Office:
November 30, 2011.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 300, the Government
Charge Card Abuse Prevention Act of 2011.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
S. 300--Government Charge Card Abuse Prevention Act of 2011
S. 300 would require each executive branch agency to
establish controls regarding the use of government credit cards
issued to federal employees. The bill would require each
agency's inspector general (IG) to assess the risk of illegal
or improper credit card use and to conduct periodic audits to
identify potentially fraudulent activities. The bill also would
allow agencies to dismiss employees who are found guilty of
misusing government credit cards.
CBO estimates that implementing S. 300 would cost less than
$500,000 a year, subject to the availability of appropriated
funds. The bill also could affect direct spending by agencies
not funded through annual appropriations, such as the Tennessee
Valley Authority and the Bonneville Power Administration;
therefore, pay-as-you-go procedures apply. CBO estimates,
however, that any net increase in spending by those agencies
would not be significant. Enacting S. 300 would not affect
revenues.
Under current law, agencies are required to manage the use
of government credit cards by establishing policies and
procedures, conducting oversight, and penalizing unauthorized
use of government cards. Most of the provisions of S. 300 would
codify those current policies and practices. Based on
information from the Office of Management and Budget (which
sets procurement policy), the General Services Administration
(the contract administrator for federal credit cards), and
several agency IGs, CBO estimates that implementing the bill
would lead to a small increase in the administrative costs to
oversee the use of government charge cards.
S. 300 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
On April 26, 2011, CBO transmitted a cost estimate for S.
300 as ordered reported by the Senate Committee on Homeland
Security and Governmental Affairs on April 13, 2011. The two
pieces of legislation are similar and CBO's estimated costs are
the same.
The CBO staff contact for this estimate is Matthew
Pickford. This estimate was approved by Theresa Gullo, Deputy
Assistant Director for Budget Analysis.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
TITLE 10, UNITED STATES CODE
SUBTITLE A--GENERAL MILITARY LAW
* * * * * * *
PART IV--SERVICE, SUPPLY, AND PROCUREMENT
* * * * * * *
CHAPTER 165--ACCOUNTABILITY AND RESPONSIBILITY
* * * * * * *
Sec. 2784. Management of purchase cards
(a) * * *
(b) Required Safeguards and Internal Controls.--Regulations
under subsection (a) shall include safeguards and internal
controls to ensure the following:
(1) * * *
* * * * * * *
(11) That each purchase cardholder and individual
issued a convenience check is assigned an approving
official other than the cardholder with the authority
to approve or disapprove transactions.
(12) That the Department of Defense utilizes
effective systems, techniques, and technologies to
prevent or identify fraudulent purchases.
(13) That the Department of Defense takes appropriate
steps to invalidate the purchase card of each employee
who--
(A) ceases to be employed by the Department
of Defense, immediately upon termination of the
employment of the employee; or
(B) transfers to another unit of the
Department of Defense immediately upon the
transfer of the employee unless the Secretary
of Defense determines that the units are
covered by the same purchase card authority.
(14) That the Department of Defense takes appropriate
steps to recover the cost of any erroneous, improper,
or illegal purchase made with a purchase card or
convenience check by an employee, including, as
necessary, through salary offsets.
(15) That the Inspector General of the Department of
Defense conducts periodic assessments of purchase card
or convenience check programs to identify and analyze
risks of illegal, improper, or erroneous purchases and
payments and uses such risk assessments to develop
appropriate recommendations for corrective actions.
* * * * * * *
(d) Semiannual Report.--The Secretary of Defense and the
Inspector General of the Department of Defense, shall submit to
the Director of the Office of Management and Budget on a
semiannual basis a joint report on illegal, improper, or
erroneous purchases and payments made with purchase cards or
convenience checks by employees of the Department of Defense.
At a minimum, the report shall include the following:
(1) A description of each violation.
(2) A description of any adverse personnel action,
punishment, or other action taken against the employee
for such violation.
(3) A description of actions taken by the Department
of Defense to address recommendations made to address
findings arising out of risk assessments and audits
conducted pursuant to this section.
* * * * * * *
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SECTION 2 OF THE TRAVEL AND TRANSPORTATION REFORM ACT OF 1998
SEC. 2. REQUIRING USE OF THE TRAVEL CHARGE CARD.
(a) * * *
* * * * * * *
(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
the following internal control activities to ensure the
proper, efficient, and effective use of such travel
charge cards:
(A) There is a record in each executive
agency of each holder of a travel charge card
issued on behalf of 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) Rebates and refunds based on prompt
payment, sales volume, or other actions by the
agency on travel charge card accounts are
monitored for accuracy and properly recorded as
a receipt of the agency that employs the
cardholder.
(C) Periodic reviews are performed to
determine whether each travel charge cardholder
has a need for the travel charge card.
(D) Appropriate training is provided to each
travel charge cardholder and each official with
responsibility for overseeing the use of travel
charge cards issued by the executive agency.
(E) Each executive agency has specific
policies regarding the number of travel charge
cards issued for various component
organizations and categories of component
organizations, the credit limits authorized for
various categories of cardholders, and
categories of employees eligible to be issued
travel charge cards, and designs those policies
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) Each executive agency ensures its
contractual arrangement with each servicing
travel charge card issuing contractor contains
a requirement to evaluate the creditworthiness
of an individual before issuing that individual
a travel charge card, and that no individual be
issued a travel charge card if that 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 or pre-paid card when the
individual lacks a credit history or has a
credit score below the minimum credit score
established by the Office of Management and
Budget). The Director of the Office of
Management and Budget shall establish a minimum
credit score for determining the
creditworthiness of an individual based on
rigorous statistical analysis of the population
of cardholders and historical behaviors.
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
(15 U.S.C. 1681a).
(G) Each executive agency utilizes effective
systems, techniques, and technologies to
prevent or identify improper purchases.
(H) 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.
(I) Each executive agency utilizes, where
appropriate, direct payment to the holder of
the travel card contract.
(2) Guidance on management of travel charge cards.--
Not later than 180 days after the date of the enactment
of the Government Charge Card Abuse Prevention Act of
2011, the Director of the Office of Management and
Budget shall review the existing guidance and, as
necessary, prescribe additional guidance for executive
agencies governing the implementation of the
requirements in paragraph (1).
(3) Penalties for violations.--
(A) In general.--Consistent with the guidance
prescribed under paragraph (2), each executive
agency shall provide for appropriate adverse
personnel actions to be imposed in cases in
which employees of the executive agency fail to
comply with applicable travel charge card terms
and conditions or applicable agency regulations
or commit fraud with respect to a travel charge
card, including removal in appropriate cases.
(B) Reports on violations.--The guidance
prescribed under paragraph (2) shall require
each head of an executive agency with more than
$10,000,000 in travel card spending annually,
and each inspector general of such an executive
agency, on a semiannual basis, to submit to the
Director of the Office of Management and Budget
a joint report on violations or other actions
covered by subparagraph (A) by employees of
such executive agency. At a minimum, the report
shall set forth the following:
(i) A description of each violation.
(ii) A description of any adverse
personnel action, punishment, or other
action taken against the employee for
such violation or other action.
(4) Risk assessments and audits.--The inspector
general of each executive agency shall--
(A) conduct periodic assessments of the
agency travel charge card program and
associated internal controls to identify and
analyze risks of illegal, improper, or
erroneous travel charges and payments in order
to develop a plan for using such risk
assessments to determine the scope, frequency,
and number of periodic audits of travel charge
card transactions;
(B) perform periodic analysis and audits, as
appropriate, of travel charge card transactions
designed to identify potentially improper,
erroneous, and illegal uses of travel charge
cards;
(C) report to the head of the executive
agency concerned on the results of such
analysis and audits; and
(D) report to the Director of the Office of
Management and Budget on the implementation of
recommendations made to the head of the
executive agency to address findings of any
analysis or audit of travel charge card
transactions or programs for compilation and
transmission by the Director to Congress and
the Comptroller General.
(5) Definitions.--In this subsection:
(A) The term ``executive agency'' means an
agency as that term is defined in subparagraphs
(A) and (B) of section 5701(1) of title 5,
United States Code.
(B) The term ``travel charge card'' means any
Federal contractor-issued travel charge card
that is individually billed to each cardholder.