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Under Secretary Zakheim Briefs on Government Credit Card Use

Presenters: Dov S. Zakheim, Under Secretary of Defense (Comptroller)
March 27, 2002 1:00 PM EDT

(Special Briefing on Government Credit Card Use. Also participating was Bruce Sullivan, director, DoD Purchase Card Program. The briefing slides are available at http://www.defenselink.mil/news/Mar2002/g020327-D-6570C.html.)

Zakheim: Well, good afternoon. We have a little graphic up there. Good.

Today I'm going to talk about some of the problems you may have heard about associated with the use of government credit cards by DOD personnel. And as I needn't tell you, there's been quite a bit of congressional attention and news media attention on this.

I'm going to focus primarily on how Secretary Rumsfeld is moving very forcefully to correct these problems, which he considers to be very serious, and which he essentially demands correction for. He directed me to lead DOD efforts to analyze these problems, come up with remedies and do so quickly. We are intending to have a package of remedies, either proposed legislation or administrative changes, within 60 days. And when I say "we" I'd better explain.

Immediately upon being asked by the secretary to look into this matter, I spoke to Secretary Aldridge (Undersecretary of Defense (Acquisition, Technology and Logistics) Edward C. "Pete" Aldridge.) As you may or may not know, the travel cards come under my purview; the purchase cards come under Secretary Aldridge's purview. So I spoke to him and to the service secretaries, told them that I wanted to move quickly, and then put together a task force with a mandate to come up with remedies within 60 days. We are not going to let the grass grow under our feet on this one.

The task force is interesting in and of itself. It doesn't only include the various components inside this department; it includes the inspector general and a separate seat for the Criminal Investigative Service. It includes the Office of Personnel Management, it includes the Department of Justice. We're bringing OMB on board as well. So anyone that would have any kind of connection to what we are trying to do here in terms of remedies has been brought in. We are therefore going to eliminate one of the problems that sometimes plagues government efforts, which is, someone has been left out, hasn't been coordinated with and therefore slows up the process. Anybody with any kind of stake is involved. This is just too serious to leave people out.

Now, you see the first item there, punishing wrongdoers. That should be self-evident. But that is not something that started with my conversation with the secretary not long ago. I want to read to you -- because it is so straightforward and reflective of the secretary's attitude and the department's attitude -- a memo that was approved by John Young, our assistant secretary of the Navy. And this was done in August.

And the key paragraph reads as follows: "In addition to revocation of the purchase card, misuse and abuse of the card can have serious disciplinary consequences. For military personnel, such actions are violations of the Uniform Code of Military Justice and may result in court martial, non-judicial punishment or adverse administrative action. For civilian personnel, misuse and abuse constitute misconduct for which the full range of disciplinary measures is available. Additionally, in appropriate instances, failing to comply with purchase card policies and procedures may be considered in the performance evaluation of cardholders." So this was this past summer. And that's pretty serious stuff, because we are serious about this.

The credit card program is a major and essential part of our efforts to improve our business practices. It cuts back on paperwork. It allows for accountability. And there are literally millions of dollars -- billions -- excuse me -- dollars worth of transactions that are expended. This in fact is one of the issues we're looking at. How do you stay on top of all these transactions and make sure that accountability is dealt with properly?

In fiscal year '01, $3.4 billion were expended through travel cards, and another $6.1 (billion) through purchase cards. What it's done is cut our costs, free up funds for critical requirements, and, as I say, create the potential for accountability.

What we're looking for now is better ways of executing that. The issue is not to eliminate the cards. That is going backwards. That is detrimental to government and Defense Department efficiency. What we've got to do is prevent misuse.

It isn't widespread. I think that sometimes people get the impression that there is this overwhelming degree of misuse. It is simply false. For instance, our current delinquency rate is 1.5 percent on credit cards. The private sector is 5 percent. So we're quite a bit ahead of where the private sector is on this. That doesn't mean it's acceptable. No abuse is acceptable. No delinquency is acceptable. But nevertheless, we need to bear that in context.

Also, the total dollar amount of delinquencies has declined from about $20 million to $6.9 million -- again, a step in the right direction.

Q: Between when and when? I'm sorry, Dov.

Zakheim: That was in the past year, if I'm not mistaken.

Now since April of this past year, we've done the following:

Delinquent credit card charges have to be addressed before employee transfers to another -- an employee can transfer to another office or leaves the department. In other words, you can't just skip town and have those delinquent charges somehow dealt with by someone else other than yourself.

Q: And "delinquent" just means they haven't paid it yet?

Zakheim: After 60 days, yeah. We have canceled or deactivated 227,000 credit cards. And I can break that down for you. This is since last summer. We've deactivated 112,000 and we've canceled 115,000 more. So obviously we're canceling cards to prevent misuse. And again, what gets canceled -- the card isn't used a lot; there are questions about it. The card gets canceled.

Q: What's the difference between canceled and deactivated?

Zakheim: Well, deactivated means that if someone has a legitimate use for it, maybe they weren't using it frequently, okay, but they have a legitimate use. Fine, it gets activated again. Canceled means it's canceled.

Q: Does that also include just people who routinely leave the military, retire, or leave civilian employment?

Zakheim: My understanding is yes. I mean, you can't just walk out --

Q: I mean, some of these are just extremely routine. The person -- these are not all deactivated or canceled due to allegations of fraud or --

Zakheim: Oh, no, because that would imply a much greater degree of fraud and abuse than there really is.

Q: How many --

Zakheim: I mean, you know, that's the point. I mean, you've got -- and I can probably try to get you the figures as to what's been canceled as a result of misuse and what's been canceled because people have left, but obviously if we're saying that this isn't widespread, then by definition a lot of it is routine. The point is, we are on top of the use of these cards. That's the real message here.

Q: When the GAO looked at this last year, they said there were 1.7 million DOD credit cards, travel and purchase. Are you saying now that --

Zakheim: We're bringing it down.

Q: -- that number has been reduced to 1.5 million?

Zakheim: That's right -- about. That's my understanding.

Q: About 1.5 million then?

Zakheim: Yeah, a little more than that -- a little lower than that, yeah.

Q: A little lower than that? Do you have the number?

Zakheim: I can get it for you. (Travel Cards issued: 1.4 million; Purchase Cards: 207,025). So we've done that. And we have cases right now that are being investigated, so I can't talk too much about them except give you the number. DCIS, the Criminal Investigation Service, has 17 open investigations right now. It involves about 90 individuals. And they have completed a host of cases against different people.

And just, for example, there was a Florida fellow who pleaded guilty to placing fraudulent charges against 13 government credit cards. He was sentenced to 18 months in prison, $262,000-plus in restitution and fees, and 36 months supervised release. And I could go through this, you know, case after case; the point being that we do prosecute. We do get convictions, and people do pay, either in jail time or in money or both.

Now, the real issue, as I said, is the reforms. What kind of corrective action needs to be taken? Because the problem is, in general, the way it works is someone uses a purchase card. That person's supervisor then has to certify that the card was used properly. Now, what happens, given the huge number of transactions and the huge number of dollars, when you have an individual supervisor who literally has thousands of transactions to certify? And, oh, by the way, that's only part of that person's job; maybe not even the major part of that job.

How often is this person going to catch anything with the best of will? Part of the issue, then, is how do you reduce that person's span of control? We need more people on board supervising these activities.

Another issue is, how do you deal with liability? Let's say a person does something the supervisor checks off. Who's going to be liable? Will the supervisor be liable at all? The best way to encourage people to do things properly is if they know it's ultimately going to come out of their pocket.

In the case of travel cards, that now happens because one fundamental difference between the travel cards and the purchase cards -- with the travel card, you're using a credit card; you pay the bank. And then there are ways to get that person to fork out the money.

The purchase card, you're purchasing for the U.S. government. It's not really something that you're going to be paying for yourself. The government is going to be paying. So it's a different kind of approach in terms of enforceability.

We think we're going to have to come up with a legislative package -- and I'll just give you some of the ideas that are being tossed around. The reason I say that is because there is a formal process. When the task force comes up with an idea, the general counsel's office has to say, "Yes, this accounts properly. This is consistent with law," and so on. It then goes to the Office of Management & Budget and then it goes to the Hill.

So I can't prejudge anybody, but I can throw out some of the ideas that people are at least looking at. One is to spread that pecuniary liability, to make sure that supervisors and card users are all going to be responsible out of their own pockets -- very, very important.

Salary offsets. Right now there are some programs where essentially a person's salary is reduced by the amount of money that person is liable for. But it's not mandatory, so making it mandatory is one fix people are thinking about.

There are a couple of other ideas, actually, as well; a thing called a split disbursement, which, again, would essentially allow the government to take some of the money that's supposed to be reimbursed to the individual and pay it directly to the bank; minimizes the degree to which the bank is exposed to what the individual might or might not pay back. Again, these are all ideas that are being kicked around. They are not ideas that have yet made it to the Hill because of the various steps that have to be taken first.

There are also administrative fixes that we're looking at. One thing to do is to just strengthen the compliance language. The issue is execution. Well, you want to make the language as tough as possible. You could include, for example, the investigation of -- excuse me, we're investigating, rather, the use of terming credit-card abuse a specific offense under the Unified Code of Military Justice. Once you term something a specific offense, you trigger all kinds of activities. So we're looking into that. We're investigating that.

We're looking at the ability to possibly block transactions at the bank, to improve tools for auditor follow-up, just to come up with metrics to see how things are going. Are the abuses coming down? Do we, in fact, have a good handle on where the exact weaknesses are? Increasing prosecution; more referrals to the Department of Justice, the Public Integrity Section, possibly using the state and local courts to prosecute; accelerating electronic billing for purchase cards, another way of minimizing the possibility of fraud.

And then there are some issues of just changing the culture and training, which is up there as well. (Points to chart.) You have to train people to look out for this. You have to convince people that this is a major concern, that the kind of money that can get lost this way is money that can be spent on bombs, bullets, readiness, whatever.

It's not that people do not want to be responsible. It's sometimes they need to be trained how to be responsible. And again, we are looking at the way we are training people to see whether indeed we have gotten that message through as best as we could.

Some other initiatives; again, very, very early stage, but just to show you how seriously we're looking at this. One possibility, suspending people's security clearances. I mean, that is something the government gives to people. If someone is determined to have done something that really is out of line, maybe the security clearance is jeopardized. That'll get people's attention very, very quickly.

So what I'm trying to convey here is, one, we're not sitting still; two, this is something that the secretary really cares about; and three, that we are going to have a package of recommendations, fixes, cultural changes, within the next 60 days; and four, as evidenced from that memo from John Young that I read, this is not something that just started two weeks ago.

Thanks very much. Yeah.

Q: On making a specific issue of jail offense, there are several articles about applying misuse of government funds, theft of government funds, false official statements --

Zakheim: Well, I think the feeling is that by making credit- card abuse explicitly an offense, as opposed to the general misuse of government funds, you probably are tightening things up in a way that would make it more difficult for people to -- you know, people do find ways to -- if there is a loophole, people will jump through it. And if this minimizes the loophole, makes it more difficult for even one person, it's probably worth it. So we're looking at that.

Q: Do you see -- (inaudible) -- as law, so it would take legislation?

Zakheim: That's right. And then that's what I said. I mean, these are all ideas. I should say this, too. We have been in touch with the Hill on this. I've personally called an awful lot of people to give them a sense of what we're trying to do.

And I can say, at least with those folks I've spoken to, both the House side and the Senate side, both Republicans and Democrats, overwhelming support for what we're trying to do. Everybody sees that what we are trying to do is conserve the taxpayers' money, make sure that those who do wrong are punished for it in some way, if they are proved to have done something wrong, and generally to tighten up this whole system.

And so I've been asked, you know, "Are there things you want us to do on the Hill?" And I've said we're working legislative remedies. So, yes, some of these things will require legislation, but certainly the climate on the Hill -- and you, of course, will check for yourself -- is very, very positive on this one.


Q: Just to clarify two points; I'm trying to understand. This today only deals with purchase cards. Travel cards are not included in this?

Zakheim: Yes, both, both, both. I'm interested in both.

Q: Well, there's a whole package of remedies in both travel --

Zakheim: Yeah, now, it's easier in some ways -- this is what I was trying to explain -- to deal with the travel cards, because you basically owe the bank money. It's like a credit card. And therefore, it's easier to garnish wages. It's easier to do all kinds of stuff. The purchase cards, because you're purchasing for the U.S. government, it's slightly different. And we have to make sure that we tighten up on that one every bit as much as on the travel cards.

Q: For those of us who aren't expert on this, could I just ask you to walk us through a typical correct purchase-card transaction --

Zakheim: Sure.

Q: -- how it's supposed to be done and billed and paid for?

Zakheim: Yeah. I mean --

Q: (Inaudible) -- travel card?

Zakheim: Yeah, okay. With a purchase card -- and I've got people here to correct me if I'm wrong -- but it's pretty straightforward. Let's say you have to go out and buy something at Staples; I don't know. Okay, you have a purchase card. You need something for the government. You fill out the form. You go off, you buy something. You've charged it on your -- you have to have permission to use that government card, by the way. For instance, you can't go off and use that card in an antique shop.Q: You can.

Zakheim: But you can't, and you're nailed for it, or a massage parlor or, you know -- I mean, one has to use --

Q: (Inaudible.)

Zakheim: Well, what happens is, people get the cards and they are cleared to use the cards, and then it's not so much pre- authorized transactions. As I understand, it's after the transaction is made, it's certified that it's a proper transaction. Okay, so you hand in your -- am I missing something?

Q: (Inaudible) -- where they actually swipe it.

Zakheim: That's right.

Q: Pre-authorization. And a lot of those merchants are --

Zakheim: Well, the merchants are. And that's where I get to the massage parlor or the antique shop or whatever, because obviously there are merchants that are blocked, okay. So you swipe the card; the merchant is authorized.

Okay, now, that begs the question -- okay, you can buy something at merchant 'x'. You're buying stationery. You're buying, I don't know, staples; staples at Staples or whatever. And the merchant is authorized to sell. But who are you buying it for? Are you buying it for yourself or are you buying it for the government? It's a government card. The merchant is authorized to sell. The card gets swiped. The transaction is made. Now you've got to go back. Your supervisor has to certify that this was a proper purchase, that it wasn't for you; it was for the government.

And here's where we start running into complications. For a start, it's the government that pays. You don't have to pay, okay.

Q: That was my question.

Zakheim: The government pays.

Q: How is this billed?

Zakheim: The government is billed. That's the difference between a travel card and a purchase card. The government is billed on a purchase card. You, as an individual, are billed on your travel card. So the government is billing. Well, why is the government going to pay? It's only going to pay because somebody certified that this was a proper bill.

So you have an official who has thousands of these things. And let's say it's a purchase -- I don't know -- $100, $500, $5,000. But again, we're talking about billions of dollars. We're talking about nearly $10 billion between the purchase card and the travel card -- $6 billion of purchase card. That is a lot, a lot of purchases.

So a harassed supervisor, who's got a lot of other things to do, signs off; end of story. The person who bought it could be, unless prosecuted, or at least investigated, off the hook. We have to tighten up the system. Now, on the travel card side, it's different. You're given a credit card. I've got one here. It's got a U.S. government -- it says "United States of America" on it. And you use that. So you go into a hotel and they swipe the card. You know, you're on government business.

If you don't pay, if I don't pay -- you know, I'm getting a monthly statement from Bank of America, and I have to pay them. And if I don't pay them, after 60 days I'm delinquent.

Q: And you get reimbursed from the government.

Zakheim: And I get reimbursed from the government, okay. So if I don't pay, then there are ways to go after me. My salary can be garnished and so forth.

Q: I'm sorry. On the purchase card, if the harried supervisor never gets around to sending in the paperwork saying that this is a good purchase, then it doesn't get billed? Then it doesn't get paid.

Zakheim: Then it doesn't get paid. But they have to -- you know, but they do pay. And so what invariably happens -- I mean, they do get certified, and therefore they do get paid. So the bills get paid.

Q: So this isn't a problem of the government not paying bills for legal purchases at all.

Zakheim: Well, there's a separate issue, a completely separate issue of the government being late with its payments. And this is something I've talked about and briefed in different fora, something that concerns me generally in terms of our overall financial management picture, which isn't the subject today.

Yes, we pay tens of millions of dollars in interest penalties for being late, and we have to do something about that. That deeply concerns me. But that's a different issue.

Q: Let me clarify one thing.

Zakheim: Yeah.

Q: You said that while this is a serious problem, it's not necessarily widespread.

Zakheim: No, no.

Q: And you've also made the distinction between the travel cards and the purchase cards.

Zakheim: Yes.

Q: Can you give us an idea of -- when we're talking about the potential abuse or misuse of these cards, what kind of -- how many millions or thousands or hundreds of thousands of dollars we're talking about, and how much of it falls into the area of taxpayer money that's being misused, and how much of it falls into this area of people being delinquent on their accounts that they have for the travel cards? Is there a way to characterize that?

Zakheim: I don't have -- I can give you some statistics, not all by any means. In terms of the credit cards generally, we issued -- we currently have 207,000 credit cards issued.

Q: Are you talking about purchase cards?

Zakheim: These are purchase cards, yeah. Okay? No, excuse me, these are the travel cards, these are the credit cards that -- (laughing) -- that's what it says here, so somebody got me wrong!

We have 207,000 credit cards issued, purchase cards, and we spent about $6.1 billion. And the number of purchases was 10.6 million purchases. That's a lot of transactions.

Q: And how many of them were fraudulent?

Zakheim: Well, we have -- we're talking roughly, as I understand it, about -- right now, we're in the region of about 7.5 percent, if I'm not mistaken, which is relatively lower than --

Q: (Off mike.)

Zakheim: Oh, that's the delinquencies, excuse me. Yeah.

Q: Okay. So that --

Q: Delinquent on purchase cards?

Q: No, travel cards. You can't be delinquent on purchase cards.

Zakheim: You can't be delinquent on purchase cards.

Q: Sure you can. If the government doesn't pay its bills --

Zakheim: Oh, the government -- I'm not talking about the government, I'm talking about the individuals.

The purchase card -- the government late payment on purchase cards is a separate issue, which we do --

Q: Right. If you're talking about 207,000, those are purchase cards, those are not travel cards. There are over a million travel cards, right?

Zakheim: That's right. And that's where we have the delinquencies.

Q: Any idea how much of a problem in dollars?

Zakheim: In dollars? Well, I can try to get you an estimate. It's hard to do.

Q: Well, the reason is because the perception -- if you just look at this situation in a cursory way, it gives the impression that there are billions of tax dollars that are being stolen by government employees.

Zakheim: No.

Q: Yeah, some -- (off mike) --

Q: What we'd like to do is replace this perception with some sort of more realistic characterization --

Zakheim: Okay. Just to give you a sense of that, okay -- and I hope this will help -- balances as of December 2001, outstanding balances, was about 368 million. So it's not billions of dollars, for starters. And these are both the centrally billed accounts and the individually billed accounts, and it also includes amounts that are not overdue. So this is the population of it.

The delinquency rate for accounts 60 days past billing is for the individually billed accounts, and as of January 2002, that's 15.4 percent.

Q: (Off mike.)

Zakheim: Yeah.

Q: Sixteen-point-four?

Zakheim: Fifteen-point-four.

Q: Fifteen --

Zakheim: Okay? The total outstanding balance for individually billed accounts, okay -- so that's the individual accounts -- was $174 million. And the amount that was delinquent more than 60 days was $26.9 million. All right? So this is not billions and billions of dollars being bilked by, you know, unethical employees. This is a much smaller number of people and a much smaller amount of money.

Q: And then in this case, these are not tax dollars, because these are dollars individuals owe to credit card companies.

Zakheim: That's correct.

Q: Now can you give us any idea of what the -- what we're talking about in terms of tax dollars --

Zakheim: You mean the purchase cards?

Q: -- from government purchase cards, about what the level of potential fraud is there? Are we talking about tens of thousands of, hundreds of thousands of dollars? Millions of dollars?

Zakheim: Let me see. In the purchase cards, that one, I think, I would have to look up. I don't have --

Q: (Off mike) -- take that question.

Q: But you said --

(Cross talk.)

Zakheim: Could one of my people answer that? Ken, come on up.

Sullivan: We have no statistics as far as how many fraudulent actions are being made with the purchase card. We have, of course, the record of investigations, the results of those, and we have a number of those incidents where we've prosecuted people. But we don't have a handle on, you know, how widespread it is. We don't believe it is. This task force will be looking much closer at what's really going on in place.

Q: Well, maybe you could --

Q: If you added up all the amount of money you've prosecuted people for, how much would it be for use of purchase cards?

Zakheim: Oh, we've got some --

Q: I mean, is this like a hundred million dollars or $2 million?

Zakheim: Well, I can give you some examples, again, of just recent cases, so that'll give you a sense of the magnitude of it. Two hundred and sixty -- this includes fees, by the way, so it'll be less than that. We prosecuted somebody for 262,000 (dollars). We prosecuted somebody for 61,000 (dollars) in restitution; another one, a man in Virginia, 120,000 (dollars); another Virginia man, 70,000 (dollars); another Virginia man, 400,000 (dollars). So, you know -- and that's the biggest one that I see here. So we're not talking about -- this is not going to add up to billions. We're prosecuting individuals, it looks like just from the list that I've had given to me that most of the time it's in tens of thousands of dollars, which, again, is intolerable. (Note: In the last three years approximately $1.4 million in recoveries have resulted from government purchase card fraud and abuse investigations, prosecutions and administrative actions.)

Q: Let me ask you also about a specific case that was cited in the GAO's original report. And they talked about an employee of the Naval Public Works Center who had been charged $12,000 of potentially fraudulently purchases. And the kicker was that they said the worker now was currently employed at the Pentagon. Can you tell us who that is and whether this person -- (inaudible) -- Pentagon?

Zakheim: Well, obviously I can't tell you who it is because -- it's being looked into right now. So once something is being looked into you know, obviously I can't breach that kind of confidentiality. I can tell you that that person doesn't have a card. Okay? That's for sure.

Q: Is that person the subject of an active investigation?

Zakheim: There is work right now looking into how that whole case has been disposed of.


Q: When was the card taken away?

Zakheim: I believe the card was taken away at the time the person transferred, but I may be wrong, it may even have been sooner that.

Q: It wasn't immediately, because the GAO found a charge -- they'd made some charges after leaving San Diego.

Zakheim: Well, when I said transferred, I meant to the Army.

Q: I have a question about travel cards. As I know from bitter personal experience, a lot of times it takes longer for your financial officer to reimburse you than your bill comes due. Do you have any sense of how many of these people are delinquent because they're simply blowing off the payment, and how many are delinquent because they're waiting for reimbursement from their financial officer?

Zakheim: It's one of the issues that the task force is looking into.

I think, quite honestly, I've given you about-- you know, this task force was stood up about a week ago, and I've given you about as much as I can after a week. I guess part of what I was trying to indicate is that we have hit the ground running. We will have to come back and report to you and to -- obviously, not just to you, to the Congress and to our -- and first and foremost for me, the secretary of Defense -- as to what we're doing. And we intend to have a pretty full menu of remedies, we hope, for the kinds of issues you've raised.

I mean, these are not cut and dried issues, they not black and white as you just pointed out. And again, people are well-meaning. By and large -- in fact more than by and large, overwhelmingly, they're honest. A lot of them do put up with exactly what you pointed out. They don't just blow off the payment. As soon as they -- most people pay and then wait to get reimbursed, actually. They take it out of their own hide.

Q: Which is hard if you're a --

Zakheim: Which is hard if you're a relatively low-level civil servant. So again, I think that tarring the Civil Service or the military with this kind of brush is really unfair to an awful lot of people. I'll take one --

Q: The Bank of America wants to cancel its contract. This has been going on for years, and it's tired of all these delinquencies.

Zakheim: Well, we know that Bank of America is in discussions with us, and again, when something like that's going on, I really can't comment at this stage.

Last one. Okay.

Q: I want to make sure I understand the private and public- sector comparison you gave of 1.54 to 5. First of all, what's on either side of that equation? What is 1.5 delinquent?

Zakheim: That is what I have been led to understand -- is the current delinquency rate on our credit cards.

Q: All credit cards, or -- ?

Zakheim: No. Again, the ones that an individual can be delinquent on. So it wouldn't be purchase cards.

Q: So you're thinking 7.5 percent -- did it that way?

Q: And you're comparing that to apples and apples on both sides?

Zakheim: That's my understanding, but I can look into that for you. The 7.5 -- now I don't - (To Sullivan) Do you have a good handle on the difference between the 1.5 and 7.5?

Zakheim: Why don't you come up and explain that one?

Q: Also explain the 15.4. You said individually there were accounts delinquent more than 60 days for 15.4 percent.

Sullivan: Let me talk about purchase cards. On the delinquencies: the department has a chief financial officer counsel that pulls down bank data, right? They look at delinquencies over 60 days after the end of the billing period -- at the time the bill is sent to the individual, on purchase cards. If you look at that statistic, which is 60 days after the end of the cycle, purchase cards have about a 7.5-percent delinquency rate. If you go to -- it's the Federal Financial Institutions Examination Council consolidated reports -- they put out a standard of delinquency for credit cards. Now they don't have corporate cards; they don't have travel cards; they don't -- it's just credit cards in general. Their 60-day delinquency rate -- 60 days delinquent, which is 90 days, is roughly 5 percent. If we look at our statistics in purchase cards, on the same basis, it's 1.5 percent.

Zakheim: And the 15.4 percent that they asked about?

Sullivan: The travel card.

Zakheim: That's the travel card.

Q: And then it would seem that the bigger problem than delinquency is abuse -- fraud. Do you have any comparative figures for DOD versus private sector as far as abuse of --

Zakheim: I don't have that now, but again, I think that's one of the issues that we're trying to address, which is: What are the right metrics? I mean, you're asking a metrics question, essentially. And it turns out -- and again, just from this answer you can see that we've got all kinds of numbers floating around. It's not always clear, certainly, to senior management what numbers relate to what other numbers. And by developing a uniform set of metrics that are meaningful at different levels, we'll be able to address these kinds of questions.

And quite frankly, for me, I've come into this and I have been flooded literally with all these different kinds of considerations. Again, this does go to some extent to the question of culture -- how important is this to how many people? Well, if people allow a supervisor to be swamped, then those who are allowing the supervisor to be swamped clearly need to have some kind of cultural reeducation. Okay? It's not their -- and then, for them the question is, well how do you measure that they're doing things differently? What are the right measures? And that is what this task force -- in part what this task force is going to try to do.

It is a pretty heavy load that they're being asked to bear in 60 days, but on the other hand, I don't think we can let this drag on. I think the secretary and the leadership of the department are clearly concerned about this. It is part of what we consider to be a tightening up and improving financial management. And on this one, we feel that we can't just say, well, we'll come back to you in a year's time. It would be -- we would be letting ourselves down if we did that.

Thanks very much.

Q: Thank you.


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