H. Rept. 112-376 - 112th Congress (2011-2012)
January 27, 2012, As Reported by the Oversight and Government Reform Committee

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House Report 112-376 - GOVERNMENT CHARGE CARD ABUSE PREVENTION ACT OF 2011




[House Report 112-376]
[From the U.S. Government Printing Office]


112th Congress  }                                       { Rept. 112-376
  2nd Session   }        HOUSE OF REPRESENTATIVES       {        Part 1
=======================================================================
 
          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.

           *       *       *       *       *       *       *

                              ----------                              


     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.