Lawmaker urges caution in regulating purchase cards

Congress should avoid overregulating the government purchase card program, a key House lawmaker said Tuesday.

Some oversight is necessary to prevent employees from misusing purchase cards, but agencies should refrain from going "overboard," said Rep. Tom Davis, R-Va., chairman of the House Government Reform Committee, in a speech at a Washington conference hosted by VISA U.S.A. Inc. By placing too many restrictions on card holders, agencies risk losing sight of the program's original purpose of simplifying and speeding up the process of buying smaller, routine items, he said.

There was increased scrutiny of purchase cards after a 2000 General Accounting Office survey revealed that Navy personnel used them regularly to buy personal items, including clothes, cosmetics and CDs. To stem fraud or misuse, agencies are cutting down on the number of cards in circulation, reducing the accounts each supervisor monitors, bolstering the process for approving statements and using data-mining techniques to analyze spending patterns.

Congress also is trying to help. Under the fiscal 2004 omnibus appropriations package enacted in January, agencies must "evaluate the creditworthiness" of employees before issuing purchase or travel cards. The law also requires agencies to discipline workers who abuse card privileges. Last week, Sens. Susan Collins, R-Maine, and Russell Feingold, D-Wis., introduced legislation aimed at improving purchase card holders' shopping skills.

The media is overstating the problem of card abuse, and some lawmakers are overreacting to the perceived problem, according to Davis. Academic studies have shown that the majority of program participants are honest, and that a minuscule percentage of card transactions are improper, he said.

Davis cited research by Richard Palmer, a professor at Eastern Illinois University, indicating that government card holders at state and federal levels misuse accounts an average of less than 1 percent. Palmer estimated $170 of misuse for every $1 million spent.

However, Collins noted at a Senate Governmental Affairs Committee hearing last week that the study Davis cited relied on flawed survey techniques, and may not accurately reflect actual card fraud.

If agencies or Congress require program participants to jump through too many hoops to get purchases approved, workers may shy away from using the cards, Davis cautioned. The cards are meant to promote efficiency and have saved the government more than $7 billion, and these savings outweigh any money lost through fraud of misuse, he said.

In addition, the cards are not designed exclusively for acquisition professionals-they are meant to help nonprocurement workers make purchases for routine items such as office supplies, quickly, Davis said. While "smart" shopping skills are helpful, card users have to weigh the benefits of any deals secured against the time spent searching for good prices, he said.

For most purchases, card holders should rely on common sense, Davis added. He urged lawmakers and agencies to "keep an eye on the big picture," and avoid getting too caught up in adding more layers of oversight and regulation.

In an interview with Government Executive following Davis' speech, Tad Fordyce, vice president of commercial solutions at VISA, agreed that card holders should weigh timeliness with benefits gained from price-comparison shopping. But, he said, agencies do have more technological tools available to them now to help analyze card spending patterns and negotiate discounts.

For example, using available technology, agencies can look through purchase card account data to determine employee spending patterns. Armed with data, agencies stand a better chance of negotiating favorable deals and point-of-sale discounts, Fordyce said.

Purchase cards also make financial transactions more transparent, and in that sense, actually help agencies find and remedy inefficient spending habits or fraudulent behavior. "This issue was dealt with because of the increased visibility," Fordyce said.

Bruce Sullivan, vice president of government services at VISA, said agencies could benefit from negotiating better point-of-sale deals, as Collins and Feingold advocated last week. But legislative language requiring credit checks for card holders concerns Sullivan.

Individual credit checks are not necessary for purchase cards, since the ability to handle personal finances bears little relation to an employee's ability to use a centrally billed, government account responsibly, Sullivan said. Many federal workers do not have to use government charge cards, and would return the cards if faced with a credit check, he said.

Davis pledged that he would take a closer look at legislative language requiring these checks, and "make sure it makes sense."