Grassley works to prevent abuse of government purchase cards, safeguard hurricane aid dollars

WASHINGTON — Sen. Chuck Grassley said that the guidance issued today by the Office of Management and Budget to control expenditures on government employee purchase cards is helpful but that Congress needs to act to further protect taxpayers from abusive spending.

“It’s good to see the Office of Management and Budget do what it can to keep a check onthe use of purchase cards by government employees,” he said. “Now Congress should also useits authority to reduce the outrageous increase in the purchase card limit that slipped through onthe Katrina spending bill. We should include responsible spending language in additionalhurricane relief legislation that will pass. This way, we can make sure every relief worker can dowhat’s necessary, just like they did after 9-11, without increasing the risks and opportunities forabusive spending.”

Grassley last week protested the increase in the purchase-card limit from $25,000 to$250,000 that was included in the $51.8 billion supplemental spending measure for the HurricaneKatrina relief effort. He relayed his concerns to other lawmakers in a letter that was also signedby Sens. Susan Collins and Joe Lieberman. (Copy-pasted below this news release is the text ofthat letter and the text of today’s announcement by the Office of Management and Budget.)Grassley said that he has worked to include new legislative language in a package ofhealth care assistance items for hurricane victims that is under development by the SenateCommittee on Finance, where he is Chairman. The proposal would limit individual federalemployees to purchases of $50,000 with their government purchase cards unless there is writtensupervisory approval.

Grassley has sought to hold government employees accountable for purchase cardexpeditures since 2000, when he began working with the Government Accountability Office todocument outrageous abuses by employees of the Defense Department. In addition to puttingpressure on Pentagon officials to better audit employee purchases, Grassley has subsequentlyhelped to win annual passage of a requirement for the Defense Department to limit the number ofgovernment cards that could be issued; evaluate the creditworthiness of an individual employeebefore issuing such a card; prohibit the issuance of a card to those found not credit worthy; andestablish guidelines and procedures for disciplinary actions. He has also pursued legislation topermanently apply these requirements and make additional reforms at all federal agencies,though this initiative has not won congressional approval.

OFFICE OF MANAGEMENT AND BUDGET

WASHINGTON, D.C. 20503

FOR IMMEDIATE RELEASE 2005-24
September 13, 2005

OMB ISSUES GUIDANCE FOR KATRINA RELIEF CONTRACTS

As part of its efforts to ensure agency hurricane relief purchases fully comply with Federalregulations, the Office of Management and Budget (OMB) today issued new guidance to Federalagencies’ chief acquisition officers and chief financial officers regarding new streamlinedhurricane procurement policies enacted in the recently-passed hurricane relief supplementalappropriations act. Such guidance is regularly issued following a change to laws that impactagency operations.

Last week, Congress raised the threshold for purchases to $250,000 from $25,000 forprocurements of property or services determined by the head of an executive agency to supportHurricane Katrina rescue and relief operations. Office of Federal Procurement Policy (OFPP)Administrator David H. Safavian and Office of Federal Financial Management (OFFM)Controller Linda M. Combs issued the guidance today for purchases made by the governmentwide purchase card to clarify the management controls in place.

“By cutting the red tape on contracts less than $250,000, we can help get food, water andhousing to victims as soon as possible,” Safavian said. “At the same time, this guidance helpsmake sure that adequate management controls are in place to ensure that taxpayers’dollars are spent efficiently and responsibly in support of disaster victims. Businessesthroughout the private sector – particularly ones in the affected region – will play a criticalrole in the disaster relief effort. After the immediate crisis has subsided, we will re-evaluatethe need for this provision.”

To protect taxpayers’ interests, the new OMB guidance requires agency heads to identify theindividuals who are authorized to use the higher threshold and establish policies for determiningwhether a transaction is “in support of Hurricane Katrina rescue and relief operations” as allowedby Congress. The guidance also requires agencies to conduct follow-up reviews of transactionsand increase their own management controls to mitigate risk under the new streamlinedprocurement authority.

Visit www.whitehouse.gov/omb to view new guidance. For additional information, pleasecontact OMB Communications at 202-395-7254.

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September 8, 2005

Majority Leader William H. Frist
United States Senate
United States Capitol S-230
Washington DC, 20510

Speaker Dennis Hastert
House of Representatives
United States Capitol H-232
Washington DC, 20515

Chairman Thad Cochran
United States Senate
Committee on Appropriations
United States Capitol S-128
Washington DC, 20510

Chairman Jerry Lewis
House of Representatives
Committee on Appropriations
United States Capitol H-218
Washington DC, 20510

Ranking Member Robert Byrd
United States Senate
Committee on Appropriations
United States Capitol S-128
Washington DC, 20510

Ranking Member David Obey
House of Representatives
Committee on Appropriations
United States Capitol H-218
Washington DC, 20510

Dear Colleagues:

Included in the President's emergency FY 2005 supplemental request for HurricaneKatrina aid is a provision raising the limit for emergency "micro-purchases" on governmentcredit cards from $15,000 to $250,000, a more than 1,600% increase. Government-wide, thereare about 250,000 of these cards in use. The Government Accountability Office (GAO)demonstrated as recently as last year that ineffective management oversight and weak internalcontrols led to misuse and abuse of these cards. The GAO has reported finding "numerouspurchases of personal items, such as jewelry, designer leather goods, clothing, stereo equipment,food, and entertainment charged to government purchase cards." Over the years we have beenvery concerned about the flagrant misuse of government purchase cards on the taxpayer dime.

The depth of the tragedy here seems overwhelming. At the same time, however, weshould not allow the immediate needs of this disaster to trump the need for oversight andaccountability for the spending that will occur on these purchase cards.

If history is any lesson, failing to implement sufficient controls will likely allow aid to bediverted away from its intended purpose of benefiting survivors of the hurricane. Wasting moneydoes nothing to help Katrina victims. We are concerned that this provision is too broad and therisks too great with such a staggering increase in micro-purchase authority. Therefore, werequest that this provision be modified to, for example, implement a more reasonable limit,perhaps $50,000 (about three times more than was approved after the 9/11 disaster) and requirethat larger purchases receive prior approval from senior level federal officials.

Sound financial controls are essential in any emergency situation to ensure that aid flowsefficiently, effectively, and appropriately to the victims. Your attention to this matter is criticalto ensuring that this disaster is not compounded by a federal response that is vulnerable to fraud,waste, and abuse.

Sincerely,

Chuck Grassley
United States Senator
Chairman of the Committee on Finance

Susan Collins
United States Senator
Chairman of the Committee on Homeland Security and Governmental Affairs

Joe Lieberman
United States Senator
Ranking Member of the Committee on Homeland Security and Governmental Affairs

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