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Gov't Credit Cards for Katrina Expenses Raise Abuse Fears

Lawmakers and watchdog groups worry that allowing federal employees to charge up to $250,000 on their government-issued credit cards for Hurricane Katrina (search)-related expenses will lead to a repeat of past abuses.

Some of the cards in the past were used to pay for prostitutes, gambling activity, even breast implants, government audits have shown.

"People are concerned this is a risk," said Greg Kutz, managing director of special investigations at the General Accountability Office, which conducts audits at the request of Congress.

About 250,000 federal employees have government credit cards, which typically have a purchase limit of $2,500. At the request of the Bush administration, Congress increased the credit line to $250,000 as part of a massive Katrina recovery bill approved last week. The aim is to make it easier to speed aid to victims.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, said the "outrageous increase" was "slipped" into the bill. He is seeking to insert language in a Katrina health bill that would reduce the limit in most cases to $50,000.

Responding to initial criticism, the White House issued new guidelines this week saying agencies must designate in writing which of their staff will receive the new spending privileges. Purchases of more than $50,000 must be preapproved by a senior manager.

"Substantial financial controls already exist but we are currently looking at what additional protections might be useful. If in working with Congress, agencies, and state and local leaders it is determined that additional safeguards are required, then we'll put them in place," Alex Conant, spokesman for the Office of Management and Budget, said Wednesday.

Critics say the additional oversight is needed because the cards offer special opportunities for abuse.

Purchases are billed directly to the government, making it difficult to recover losses from wayward federal employees intent on fraud because of the time lag from the purchase date to subsequent billing.

Cronyism also is a danger, as officials have more leeway under the higher limit to purchase more expensive supplies from politically connected companies without the benefit of open bidding and competition. Even if they're detected, time-strapped agency directors often don't pursue disciplinary action, according to audit reports.

In recent years, several GAO audits found hundreds of thousands of dollars of improper expenditures at the Pentagon and other agencies, from purchases of remote control helicopters and airline tickets to Palm Pilots and $2,500 flat-panel computer monitors. Someone even bought a dog.

Navy personnel also in 2002 used separate government travel cards to hire prostitutes at brothels, gamble and attend New York Yankees and Los Angeles Lakers games. One civil employee ran up nearly $35,000 in personal expenses over two years, including breast enlargement surgery for his girlfriend.

The GAO has noted improvements in agency oversight since then, including reducing the number of government cards from more than 500,000 to 250,000 to limit the potential for fraud from lower-level government employees. The Pentagon also has said it installed software to help track when potentially suspect purchases are made.

But as recently as last year, the GAO cited continuing oversight problems at the Veterans Health Administration and said it had no way of knowing — without conducting specific audits — whether improvements at other agencies are actually in effect and working.

The concerns prompted Grassley, as well as Senate Homeland Security Committee Chairwoman Susan Collins, R-Maine, and Connecticut Sen. Joe Lieberman, the top Democrat on that committee, last week to urge congressional leaders to officially lower the cap to $50,000 to ensure full compliance.

Collins has also signaled separately she might consider creating a special inspector general to monitor spending and no-bid contracts.

"Imagine the fraud we could see," said Danielle Brian, executive director of the watchdog group Project on Government Oversight, noting that recent abuses involved cards with much smaller purchase limits of $2,500.

"For bigger purchases involved in the rebuilding effort, that should involve competition and serious planning. Instead we have far too many people with far too much access to money without any organization or effective oversight," she said.