Audit: Pentagon Credit Cards Used for Adult Services, Gambling

Mike Randall • March 16, 2017

Military and civilian Pentagon employees indulged their vices by charging government-issued credit cards more than 5,000 times for services such as escorts and gambling, according to a forthcoming report from the Department of Defense Office of Inspector General.

Politico first broke the story May 6, citing an official who was briefed on the report. The official said even though government cards were used to pay for the expenses, taxpayer money was not used because the employees reimbursed the Pentagon.

NBC News reported the Inspector General’s audit focused on “4,437 transactions in which cardholders charged a total of $952,258 at casinos and an additional 900 charges totaling $96,576 at strip clubs” between July 2013 and June 2014.

Regulations already in place

In September 2013, the Executive Office of the President Office of Management and Budget issued a memo to the heads of executive departments and agencies. It detailed how the Government Charge Card Abuse Prevention Act of 2012 would be implemented, with Inspectors General auditing their departments.

Former Director of the Office of Management and Budget Sylvia Burwell , who replaced Kathleen Sebelius as Secretary of the Department of Health and Human Services in June 2014.

“Under the Charge Card Act,” Former Director Sylvia M. Burwell wrote, “IGs will conduct periodic risk assessments of agency purchase cards (including convenience checks), combined integrated card programs and travel card programs to analyze the risks of illegal, improper or erroneous purchases.“

The Charge Card Act requires all Inspectors Generals of agencies with travel expenditures of $10 million or more to review and evaluate programs that might be making “improper, illegal or erroneous” payments.

Findings of the audits, along with recommendations to prevent improper card use, are reported to the Director of the Office of Management and Budget and Congress.

Result of the audit, history of abuse

Action was taken against 364 of the cardholders, NBC News reported, while 79 are still waiting. Most of the them were counseled on card usage, but at least one military officer was demoted.

The charges did not break any laws because no taxpayer money was lost as a result of the purchases. However, the card usage did go against regulation.

In March 2008, a Government Accountability Office report stated that internal controls needed strengthening to reduce fraudulent, improper and abusive purchases. The GAO “found numerous instances of fraud, waste and abuse related to the purchase card program at dozens of agencies across the government,” according to the report.

“[In 2008, The GAO] found numerous instances of fraud, waste and abuse related to the purchase card program at dozens of agencies across the government.”

A similar incident occurred last year, albeit on a smaller scale, when the Department of Labor’s Inspector General audited Job Corps.

According to a report released April 29, 2014, the review “identified $249,477 in questioned costs due to center staff and students using the cards for personal gain and $116,633 in wasteful spending on unnecessary merchant fees and unused card balances.”

Additionally, the review found frequent card suspensions due to late or nonexistent payments cost Job Corps at least $496,258 in lost governmental discounts on airfare and fees and $39,747 in “unsupported travel expenses.”

Photo credit: albanygamblinghelp.org

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About the Author

Mike Randall

Mike Randall is most knowledgeable in the areas of credit scores and credit cards, having written on those topics and others for the past eight years. He graduated from California State University with a degree in English literature, and he has an extensive background in personal finance studies. When he's not keeping readers informed of changes in the subprime market, Mike’s hobbies include sailing and gourmet cooking. Connect with Mike on Google+.