More Federal Workers Use, Abuse Office Credit Cards

Under the Clinton administration, the number of federal workers with government-sponsored credit cards has nearly doubled to 1.4 million and thousands of them are using the cards improperly to buy personal goods such as liquor, jewelry and health club memberships, according to government officials.

The General Services Administration, which oversees the use of government property, said the number of federal credit card holders has soared since 1993, when the administration awarded the franchise for government credit cards to American Express.

Officials said credit card abuse has become a widespread problem in the federal bureaucracy, in part because it is so easy for government workers to get virtually limitless credit and then misuse it.

Allegations of credit card misuse are under investigation by several Republican-led congressional committees, and legislation recently was offered in the House to curb personal expenditures by cardholders.

Preliminary findings by congressional investigators show that many agencies fail to monitor how the cards are used and that many government-sponsored credit card accounts are delinquent.

At the National Oceanic and Atmospheric Administration, for example, only one person is assigned to review card charges made by more than 5,000 federal employees, according to NOAA officials.

In most cases, the individual--not the government--is liable when a federal employee fails to repay debts accrued on group credit card accounts, although the government sometimes resorts to garnishing the wages of delinquent cardholders.

Yet even if employees repay American Express for personal purchases, they are violating the terms under which they were given the government-sponsored credit card, investigators said. All cardholders are required to sign a pledge saying they will use the cards strictly for official business.

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Because the cards are intended solely for government business, federal cardholders normally pay no annual fees, nor are they assessed the usual penalties or 2.5% interest charges levied against typical cardholders. They do not undergo a credit check before receiving the cards and they have no credit limit. So overdue bills can amount to an interest-free loan for government workers.

“If you’ve got federal government workers basically amassing debt on their government credit cards and if it turns out those cards are becoming a perk of office, I imagine that would be of interest to the average taxpayer,” said Chairman William F. Clinger Jr. (R-Pa.) of the House Government Reform and Oversight Committee.

An example of the problem lies in the Department of Commerce, where government records show that at least 293 employees were delinquent on their American Express accounts in March 1995.

In one of the most serious cases among senior officials, Carol Hamilton, spokeswoman for Commerce Secretary Ronald H. Brown, owed $10,128--most of it 120 days past due. Eventually her wages were attached and the card was canceled. Hamilton pointed out that she never owed the government any money and the bill has been paid in full.

At the United States Information Agency, an audit found that employees were behind on their payments by a total of $240,000 in January 1995. It also revealed that one employee had charged automotive services totaling $1,977 and another had charged a $1,014 membership at a racquet and health club.

Clinger’s committee is only one of several Republican-led congressional panels looking into the problem. In response to a recent Times story citing an inspector general’s investigation of credit card abuse at the Commerce Department, a number of oversight committees are calling government agencies to task for their management of the cards and other issues related to expense account travel.

Among those investigating the problem is Rep. Robert S. Walker (R-Pa.), chairman of the House Committee on Science; Rep. Steve Horn (R-Long Beach), chairman of Government Reform and Oversight Committee’s subcommittee on government management, information and technology; and Sen. William S. Cohen (R-Me.), chairman of the Senate Government Affairs Committee’s subcommittee on oversight of government management.

In addition, Rep. George W. Gekas (R-Pa.) recently submitted legislation that would abolish the government credit card system, which he dubbed “plastic pork.”

He noted: “These cards, issued exclusively for government travel expenses, have been used instead for the purchase of liquor, jewelry and flowers, as well as for questionable ATM cash advances.”

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From the time the administration awarded the government credit card franchise to American Express on Oct. 1, 1993, the estimated $2.5-billion-a-year contract has been controversial. Diners Club, which previously held the contract, immediately filed an unsuccessful protest.

GSA officials who selected American Express said the contract represented a decision on the part of the administration to greatly expand use of government credit cards and to gradually phase out the use of cash advances for employees traveling on government business.

Alan Zaic, GSA’s director of services acquisition, said the switch from cash advances to credit cards was designed to save money and streamline the system. “Not having these cards is just not an option,” he declared.

But Zaic said improper use of the cards has been a persistent problem that has plagued accounting officers of most agencies. “You are always going to have people who are going to misuse it,” he noted.

Perhaps the most common abuse is the use of government credit cards for personal purchases. Zaic said while everyone who gets a government credit card must agree that it will be used only for official business, many government workers do not abide by that pledge.

Clinger suggested that the administration has encouraged misuse of the cards by giving them to employees who do not routinely travel and therefore, presumably, would have little need for them. One agency told the committee that some employees who do not travel had obtained cards without their supervisors’ knowledge and others continued to use their cards after leaving the federal government.

Zaic noted that while all federal cardholders, like Hamilton, risk having their cards canceled and their pay garnished for persistent failure to pay their American Express bills, the penalties are administered unevenly throughout the bureaucracy.

“The penalties apply government-wide,” Zaic said. “How they are invoked is another story.”