Ask The Lawyer

By Debra Roth

Government credit card misuse

Bookmark and Share

The use of government purchase cards has expanded at a rapid rate. Spurred by legislative and regulatory reforms designed to increase the use of purchase cards for small acquisitions, the volume of government purchase card transactions grew from $527 million in 1993 to $18.7 billion in 2007.

While the use of purchase cards has been credited with reducing administrative costs, audits of agency purchase card programs have found varying degrees of waste, fraud and abuse.

For example, a 2008 Government Accountability Office audit at NASA found employee charges for seemingly personal items, including custom-engraved iPods and a Christmas tree. One former employee pleaded guilty to embezzlement in 2007 after spending more than $157,000 on jewelry, electronics and an air conditioner for her home. At least 160 cases of card abuse were referred to NASA investigators during fiscal 2007 and 2008, with 25 of those resulting in disciplinary action.

Credit card misuse is not unique to NASA. Employees from other agencies come to me seeking legal assistance when they face administrative action after misusing their cards. The most common risk factor I see: Agencies failed to implement adequate safeguards against card misuse, even as their purchase programs grew. And employees have been able to squeak improper purchases through the system.

Each agency is responsible for establishing its own purchase card program. Within guidelines from the Office of Management and Budget, an agency establishes internal rules and regulations for purchase card use and management, decides which of its employees are to receive cards, and handles billing and payment.

OMB guidelines clearly identify the responsibilities of charge card managers:

First, cardholder statements and supporting documents, such as invoices and receipts, are to be reviewed to monitor delinquency and misuse. This is common sense — but audits have shown agencies often neglect their review of supporting documentation for purchases.

Second, agencies must ensure that all key procurement functions are not handled by a single person. For example, when having goods shipped, the same person should not both approve and place the order.

Third, OMB requires training for everyone who participates in a purchase card program.

OMB also requires disciplinary action for misuse. Administrative charges of misconduct can include failure to safeguard a credit card, unauthorized use of a card, failure to pay debts on a balance, and failure to follow instructions for reporting loss or theft of a card.

It’s when an agency fails to follow these guidelines that it can get into legal hot water. When an employee faces removal or other disciplinary action and comes to me to defend him before the Merit Systems Protection Board, the first thing I look for is whether the agency properly trained the employee on its purchase card policies. If the employee wasn’t trained, I see a loophole to challenge the disciplinary action.

More employees seem to be challenging disciplinary actions against them. My firm handled about 10 cases last year — up from previous years.

To protect themselves, agencies should be able to document not only the offense but the training every employee issued a card received. They should have a signed statement that the employee received, read and understood the agency rules governing card use. But the agency does not have to prove that the misconduct was intentional unless the nature of the charge requires it, such as falsification of documents or fraud.

Greg Rinckey, a former military and federal attorney, is managing partner of Tully Rinckey PLLC, a law firm with offices in Albany, N.Y., and Washington. E-mail your legal questions to askthelawyer@federaltimes.com.