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Defense to Increase Oversight on Charge Cards

By Jim Garamone
American Forces Press Service

WASHINGTON, June 27, 2002 – The Defense Department is moving aggressively to tighten up oversight of issued purchase and travel cards, DoD Comptroller Dov Zakheim said today.

Zakheim briefed reporters on the findings of a three-month study on the department's charge card program. Defense Secretary Donald H. Rumsfeld ordered the review following reports of charge card misuse and fraud.

Zakheim said the overall instance of misuse or fraud within the department is probably lower than that experienced by private sector companies. He emphasized the vast majority of military and civilian cardholders "play by the rules."

But there have been egregious examples of card misuse and outright fraud within the department, he acknowledged. The department must take steps to educate users about the cards, enforce laws and regulations against misuse and look at other ways of conducting business, he said.

Zakheim said it is important that the department "not throw out the baby with the bathwater." The charge card program saves money, manpower and time and is enormously beneficial to DoD, he said.

"For the government, every time a purchase card is used, you save about $20," he said. "The reason you do is because you're saving time. You can take a purchase card, go out, buy what you need and get it. In the old days, you had to staff it, and it would take two to four weeks. Time is money."

Still, he noted, the department wants to make the system as "pristine" as possible.

Deputy Defense Secretary Paul Wolfowitz issued a June 21 memo that re-emphasized the importance of the program -- and also detailed two things. First, agency heads must report to Zakheim by July 15 with what they have done to deal with current cases of abuse, misuse and delinquencies. Second, Wolfowitz directed the DoD inspector general to coordinate audits and investigations of the charge card programs.

Many other recommendations are in the report, Zakheim said. Some require approval and coordination with other agencies or changes in laws, he said.

Other ideas, however, could be implemented immediately. For one, Zakheim said the agencies within the department must do a better job of training people on the do's and don'ts of purchase and travel cards.

Another step that can be taken now is for agencies to review their regulations, directives and instructions for ambiguities and to try to fix or remove them.

The department will also immediately cancel 100,000 expired travel cards and review another 300,000 for possible cancellation that have been inactive for a year.

The report recommends cutting the oversight that agency program coordinators maintain now. These coordinators may be responsible for more than 1,000 cardholders. Zakheim said the best number is no more than 300.

Other aspects remain to be worked out. One is enforcement. "Now, normally, prosecution is done by the local U.S. Attorney's office," Zakheim said. "But everybody's resource-constrained, including U.S. Attorney's offices, so not everybody can be prosecuted. And the question is, well, how do you pursue and how do you prosecute fraud? Are there any other options out there? The answer is, yes."

The Justice Department's Public Integrity Section will prosecute. Defense will look at pursuing cases in state and local courts provided they could get jurisdiction. Finally, DoD may pursue these cases as civil suits rather than as criminal ones.

Finally, commanders and supervisors must take action in charge card cases. If they do not, they may be held liable.

The department will also step up charge card monitoring. Zakheim said the department would set up computer programs that look for certain indicators of fraudulent use. The technique, called automatic data mining, triggers a closer check.

"Have you ever been to an airport and they made you take your shoes off?" Zakheim asked the reporters. "OK? One of the reasons they'll make you take your shoes off is you arrived late. It's an indicator. Suppose you had a ticket and then you changed it at the last second. Different destination. Off go the shoes."

The purchase-card and travel-card world uses indicators, too, he continued, and so some people figuratively are told to remove their shoes.

Zakheim said charge card reform is just beginning. He said the processes will evolve as consultations occur with various agencies within DoD and without. The department will also examine alternatives such as debit cards and the stored-value card -- like the prepaid phone cards people buy almost anywhere in the world.

"We're attacking this on all fronts," Zakheim said.

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Related Sites:
DoD News Transcript: DoD Briefing on Credit Card Task Force Findings, June 27, 2002
DoD News Release: DoD Moves to Improve Charge Card Programs, June 27, 2002


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