Service discrediting: misuse, abuse, and fraud in the government purchase card program
Opportunity often creates a thief or an abuser of a government program.
Sergeant (SGT) Andrews has been a government purchase cardholder for two years. Recently tasked with organizing a unit function, he decided to use the card for a number of questionable purchases, including food and alcohol. His rationale in making the purchases was, "I don't remember exactly what you can or can't buy with the card, but I'm doing it for the unit. I'll just accomplish the mission first and ask forgiveness later if I have to."
Specialist (SPC) Benton had been a government purchase cardholder for only six months when she ran into personal financial problems and began using her card to buy a number of items that she then sold or pawned. Among the items SPC Benton pawned were a laptop computer and a personal digital assistant (PDA), both of which should have been placed on the unit property book. Over the next few months, she began purchasing not only work-related items, but merchandise with no military use at all, such as expensive clothing and jewelry. Specialist Benton stopped recording her purchases in her log as required, and worse yet, her approving official (AO) continued approving her purchases each month without reviewing the account statements.
Sergeant First Class (SFC) Calhoun works in a recruiting battalion, and has held a government purchase card (GPC) for over a year. His brother owns an office supply store near post. One year after obtaining the card, SFC Calhoun concocted a scheme with his brother to defraud the government. He used his card to make a number of fictitious purchases, and his brother created a series of phony invoices to cover the nonexistent transactions. The two men divided the proceeds of their nefarious enterprise after the government paid the charges. Seven months into the scheme, SFC Calhoun's supervisor, who was also his AO, confronted him about the suspicious activity, demanding that he produce the thousands of dollars worth of office equipment that he had supposedly purchased, but which had never been seen by anyone in the recruiting station. Though his scheme was exposed, SFC Calhoun was undaunted; he revealed what he had been doing and offered his supervisor, "some of the action" provided he not disclose the misconduct. The supervisor agreed, and continued approving the fraudulent purchases. Losses to the government now exceed $100,000.
While these stories are fictitious, each is an example of misconduct that has occurred within the Department of Defense's (DOD) GPC program. Like many government programs, the GPC program was conceived with the best intentions, but it spawned a variety of unforeseen opportunities for misconduct. While the DOD will continue the program, in large part because the savings outweigh the losses, (2) the need for stronger program controls, more effective responses to misconduct, and better preventive measures against future misconduct have been the subject of intensive study.
This article begins with an overview of the GPC program, including its origin, its training requirements, and its management structure. Next, GPC misconduct will be divided into three categories: misuse, abuse, and complex fraud. The research will then focus on government responses to GPC misconduct, particularly the complexities of military prosecutions. The article then briefly addresses defenses and preventive measures, including a proposed panel instruction to simplify prosecution under the Uniform Code of Military Justice (UCMJ).
II. Origin of the Government Purchase Card Program
The DOD's GPC program is a component of the government-wide commercial purchase card program, implemented to streamline government procurements by providing a convenient and efficient means of making small purchases with minimal administrative requirements. (3) By eliminating the paperwork requirements of the purchase order, the GPC saves the government about twenty dollars per transaction, and saved the DOD an estimated $900 million between 1994 and 2003. (4) The GPC is now the required method of purchasing goods under the micro-purchase limit (5) and is the mandatory means of payment for services obtained from the Defense Automated Printing Service (DAPS). (6) Although the term "IMPAC" has, in many quarters, become synonymous with the GPC program, it is an acronym for the International Merchant Purchase Authorization Card, a registered trademark of US Bank, which provided VISA credit card services to the Army, Air Force, and Defense Agencies until 1998. (7) In the future, IMPAC may recede from the military lexicon. In November 1998, the General Services Administration's (GSA) SmartPay program replaced the IMPAC as the federal government's charge card program. (8) In fiscal year (FY) 2002, the DUD reported that an estimated 207,000 cardholders used purchase cards to make about eleven million transactions, at a cost of nearly seven billion dollars. In December 2003, the GSA reported that the DUD used purchase cards for nearly eleven million transactions, valued at about $6.8 billion, representing forty-five percent of the federal government's FY 2002 purchase card activity. (9)
III. Structure of the Government Purchase Card Program
A. Key Personnel and Their Responsibilities
All DUD personnel may be cardholders; (10) eligibility is not restricted by rank. The DUD GPC program has a six-level supervisory hierarchy, organized as follows: (1) the DUD; (2) the military service; (3) the major command; (4) the installation/organization coordinator; (5) the billing (approving) official; and (6) the cardholder. (11) Of the program's six tiers, levels four through six are most relevant to legal practitioners in the field.
The installation or organization coordinator is the fourth level supervisor, whose primary responsibilities include implementing and administering the program at the local level. This official trains, monitors, and audits GPC use at the installation level, and serves as the liaison between the major command, the bank, the Defense Finance and Accounting Service (DFAS), and installation organizations. (12)
The approving or billing official's primary responsibilities include approval or disapproval of all purchases after reconciliation by the cardholder, ensuring fund accountability, property accountability, certification of invoices, and surveillance of all cardholders within that AO's account. (13) The AO is usually the cardholder's supervisor or in the cardholder's chain of command, but if not, must have the capability to influence the cardholder's performance rating. (14) Unless exempted from the role by the Under Secretary of Defense for Contracting, the AO must also be the billing certifying officer for all account holders within his or her purview. (15) Thus, the AO must certify that all transactions made by the cardholder are legal, and within administrative and fiscal guidelines. (16) In July 2001, the DUD mandated a ratio of no more than seven cardholders to a billing official as the program standard, (17) although the total number of transactions must be considered when determining an acceptable cardholder to billing-official ratio. (18) The Deputy Assistant Secretary for Procurement of the applicable defense agency must approve requests that exceed the seven-to-one ratio. (19)
The cardholder is primarily responsible for safeguarding the card, making only authorized purchases, maintaining a purchase log of all transactions (by using purchase receipts and invoices), and reconciling the log with the AO's records. (20) At a minimum, the purchase card log must contain: the date of purchase; the vendor name; the transaction's dollar amount; a description of items or services ordered; and an indication of whether or not they were received. (21)
B. Training Requirements
The Defense Federal Acquisition Regulation mandates standardized training for all purchase card users. (22) To fulfill this need, a self-paced, DODGPC Tutorial is available on the Defense Acquisition University (DAU) Website. (23) Designed primarily for prospective cardholders and AOs, the ten-part training program has a series of exams throughout the course and a final exam on which the user must achieve seventy percent or better to receive a certificate of completion. The program has an estimated completion time of four hours .