Pentagon Cancels Credit Cards

The Defense Department is canceling hundreds of thousands of credit cards. The Education Department is blocking payments to thousands of businesses. Paychecks are being docked to collect unpaid bills.

The Bush administration said Thursday it's making headway in preventing government charge cards from being used at adult clubs, brothels, concerts, sporting events, jewelry and electronics stores — just some of the examples found by congressional and agency investigators since last year.

Despite the encouraging report, much work remains to be done to seriously curb misuse, said Mitchell Daniels, the White House budget director.

"I'm far from satisfied,'' Daniels said in an interview. "You need more than a few public hangings, you need genuine changes in procedures. We're focused intently on reduction of temptation as well as pursuit of past misdeeds.''

Daniels said progress at several agencies has been tempered by departments that have done little. Overall, however, 7 percent of travel card accounts were delinquent as of July, significantly down from 13 percent last January, the White House agency said.

Delinquencies occur when travel card account holders don't pay their bills, since they are individually billed and then must submit vouchers for reimbursement.

Bills for purchase cards — used by those authorized to buy goods and services for their agencies — are paid directly by the government.

Greg Kutz, a financial management director at the General Accounting Office, said credit card abuse will continue to be listed as a major problem at the Pentagon in a report to be issued in January on high-risk financial issues.

Findings of credit card abuse by the GAO, Congress' investigative agency, prompted Sens. Robert Byrd, D-W.Va., and Charles Grassley, R-Iowa, to insert provisions in the Defense Department spending bill to help control such abuse at the Pentagon. The bill has passed both houses of Congress.

The key portion would require credit checks and denial of charge cards to those with a poor credit histories Kutz said.

"History repeated itself,'' said Kutz, because a high percentage of credit card abusers had prior financial problems including bankruptcy, foreclosed mortgages, repossessed autos, credit card defaults, bank fraud and mail fraud.

The White House said the Defense Department, the largest issuer of the cards by far, will have canceled some 400,000 travel cards by the end of this month.


—The Education Department blocked transactions to about 300 types of businesses to prevent the cards from being used for casino visits, limousine rentals and veterinary services, among other improper purchases.

—The Department of Housing and Urban Development has cut the dollar amount in unpaid travel card accounts from $389,000 to $15,000 in the past year.

—The Education and Defense departments are using computer programs to identify suspect transactions.

Daniels has ordered all agencies to report on further progress by Jan. 15.

As of May, OMB said there were 384,000 purchase cards and 2.2 million travel cards in use.

Since the purchase card bills are paid directly by the government, it is fraudulent to use them for personal items.

Even though travel card holders pay their own bills initially, it would be a misuse of the card to use it for personal items, even if no reimbursement was ever sought.

A 1998 law requires that travel cards be used on official trips, and federal regulations encourage agencies to hand them out even to those who travel infrequently.

Travel cards do not carry any interest and cardholders have three months to pay before they're delinquent.

In addition, many travel card users — especially lower-grade enlisted men and women — have walked away from their bills, prompting the government to deduct money from their paychecks.