Subcommittee on Oversight and Investigations

Committee on Energy and Commerce

U.S. House of Representatives

Hearing on

Oversight and Management of the Government Purchase Card Program:

Reviewing Its Weaknesses and Identifying Solutions

May 1, 2002 - 10:00 a.m.

2322 Rayburn House Office Building

Statement of Howard G. Price

Procurement Analyst

U.S. Department of Commerce

Before the

Subcommittee on Oversight and Investigations,

House Committee on Energy and Commerce

May 1, 2002 - 10:00 a.m.

Good morning Mr. Chairman, Ranking Member Deutsch, and members of the subcommittee. My name is Howard G. Price and I currently serve as a Procurement Analyst with the U. S. Department of Commerce. In August 2000, I was a Supervisory Contract Specialist in the Department’s Office of Acquisition Management, Office of Acquisition Services. I appreciate the opportunity to appear before you today. My testimony is provided as a statement of the facts related to a case of improper use of a Government purchase card.

In August 2000, my duties included serving as a purchase card Approving Official for my employees. As an Approving Official, I was responsible for ensuring the validity and allowability of transactions of cardholders for which I was responsible. I received written notification from the Department’s finance office stating that they had not received the signed monthly purchase card statement of an employee. This notification concerned me because I had not assigned any work to the employee that would require them to use the purchase card. I reviewed the statement and observed that all charges appeared to be not for official purchases.

I immediately contracted Mr. Michael Sade, who at that time was acting Director for the Office of Acquisition Management. After consultation with Mr. Sade, I took the report to the Department’s Inspector General for Investigations and discussed how we should handle. I also began discussion with our Office of Human Resources about their support and guidance related to disciplinary action. The next day an OIG investigator interviewed the employee. When interviewed, the employee confessed to having knowingly made all the listed purchases for personal reasons and without any legitimate government purpose. The employee attributed their actions to personal, financial and legal problems. The same day as the employee’s confession to investigators, the employee was placed on administrative leave. Because the employee’s position of contract specialist requires a high level of ethics and integrity, the employee was subsequently informed that the Government proposed to suspend them indefinitely from their position and in October 2000, the employee was suspended. These actions were deemed appropriate in accordance with the provisions of Title 5 of the United States Code, Chapter 75, the implementing regulations at 5 C. F. R. Part 752, and Department Administrative Order 202-751. The Department’s Offices of General Counsel and Human Resources provided advice and counsel throughout this administrative process.

The Office of Inspector General continued with the investigation while the Department continued with the administrative process. The Justice Department accepted the case for criminal investigation. During the investigation, my office provided information about our procedures for using the government purchase card(s) and identified the manner that the employee deviated from proper procedure.

On December 12, 2000, the employee entered a guilty plea in the U. S. District Court for the District of Columbia to one count of theft of government property. As part of a plea agreement, the employee resigned from federal service on December 12, 2000. The employee was subsequently sentenced to six months imprisonment, followed by home detention for a further two months, and a three-year period of supervised probation. Restitution to the Department in the amount of $46,939.48 was awarded by the court.

This was an unfortunate situation and the Department has implemented additional procedures to detect, prevent and manage Government purchase card fraud at the Department. These procedures are:

1. To prevent cardholders from circumventing the requirement for Approving Official statement review and approval, the Office of the Secretary’s (OS) purchase card Agency Program Coordinator (APC) has instituted a tailored reporting procedure. This procedure is supported by the purchase card service provider and the Commerce BankCard Center. All Approving Officials within the OS now receive monthly “no activity” reports for each of their cardholders. If Approving Officials do not receive card statements for approval by the 30^th of each month, and a “no activity” report has not been received, it is the Approving Official’s responsibility to investigate further.

2. In conjunction with the “no activity” report, a program was implemented for weekly monitoring of OS cardholder activity through service provider’s on-line system. Suspicious and/or questionable cardholder activity is identified by Standard Industrial Classification (SIC) and Merchant Category Code (MCC) identifiers and purchasing patterns. If transactions are identified as suspicious or questionable, formal APC inquiries to the cardholder and Approving Official regarding the transactions are made and resolved accordingly.

Thank you again, Mr. Chairman, for the opportunity to testify before the subcommittee. I would be glad to answer any questions you may have at this time.