IG: More Than 1,000 IRS Employees Misused Government Charge Cards; Wrote 325 Bad Checks

June 13, 2013 - 12:59 PM
Citibank

(AP Photo)

(CNSNews.com) - The Treasury Inspector General for Tax Administration revealed in a recently released audit report that in fiscal years 2010 and 2011 more than 1,000 Internal Revenue Service employees misused government charge cards issued by Citibank.

The report said that during the two years in question agency employees sent Citibank a total of 325 bad checks written on personal accounts that had insufficient funds to cover them, that agency officials with top-secret security clearances had their charge accounts suspended for failure to pay the balances, and that the IRS had a tendency of being “overly lenient” in disciplining those who misued the cards.

Despite the more than 1,000 IRS employees who misused the charge cards, the inspector general's report found that the IRS did a "generally effective" job in controlling its employees use of the cards.

"We found that the IRS was generally effective in implementing travel card controls," said the IG report. "However, in some instances controls were not implemented effectively, which increased the risk for misuse and resulted in some travel card misuse going undetected."

The report, which is dated April 18, 2013, was released on May 29.

IRS employees who misused charge cards included an executive-level official, a criminal investigator, and multiple employees with security clearances.

“We found that 15 cardholders with either secret or top-secret clearances had their travel accounts suspended due to their failure to pay outstanding balances,” said the IG report. “Two other cardholders with secret and top-secret clearances presented NSF [non-sufficient funds] checks to Citibank for payment of their travel card balance.”

These were not the only IRS officials who wrote non-sufficient-fund checks after passing government background checks.

“In addition,” said the inspector general, “94 cardholders serving public trust positions requiring moderate and high-level background checks wrote one or more NSF checks, and 36 had their accounts charged off [written off as a loss by Citibank] due to their failure to pay outstanding balances.

“For example,” said the IG, “a tax compliance officer wrote seven NSF checks in FY 2011 while occupying a position that required a moderate-risk background investigation.”

The inspector general determined that the IRS had detected most, but not all, of the bad checks that IRS employees sent to Citibank. “Our analysis of the NSF check control review for FY 2011 found that the IRS identified 110 (99 percent) of 111 of the NSF checks that we identified during our review,” said the IG report. “However, during the FY 2010 NSF check control review, we found that the IRS did not identify 77 (36 percent) of 214 NSF checks due to errors in extraction. This occurred because the IRS did not select the correct NSF code in the Citibank transaction data.”

Under a law signed by President Bill Clinton in 1998, federal employees are required to use “a Government-issued travel charge card” to pay for most official government travel and travel-related expenses. The IRS uses Citibank to provide these cards, which are divided into two types: centrally billed cards and individually billed cards. Citibank bills the IRS directly for centrally billed cards, and bills the individual employees, who are then reimbursed by the IRS, for individually billed cards. IRS employees are not permitted to use their Citibank IRS travel cards for anything other than official government travel and travel-related expenses. The IG report focused on the individually billed cards used by IRS employees.

“By accepting the travel card, employees agree to use it only for official travel and related expenses while away from their official duty station for which they will submit a travel voucher for reimbursement,” said the IG report.

The report said that examples of misuse or abuse of the travel card could include, among other things, use of the card by someone other than the cardholder, use while not on official travel, purchases from an unauthorized merchant, and failure to pay on time.

According to the inspector general, by the end of fiscal 2011 there were 51,974 IRS employees carrying Citibank IRS travel cards. Those 51,974 charge-card carrying IRS employees outnumbered, for example, the 34,622 people who, according to the Census Bureau, live in Beverly Hills, Calif. Collectively, in fiscal 2011, the IG reported, they charged $121 million in travel expenses to American taxpayers.

Generally, the inspector general discovered that the more than 50,000 IRS employees carrying government charge card did not misuse them. “The vast majority of cardholders use their travel cards in an appropriate manner and paid their bills on time, which was evidenced by the low IRS travel card delinquency rates,” said the IG. “However, the CCS Branch identified over 1,000 cases of travel card misuse during FYs 2010 and 2011.”

When the inspector general’s auditors examined a sample of 30 cases of travel card misuse to see how the IRS handled the offending employees, they discovered that the IRS tended to be lenient in its discipline.

“While the CCS Branch correctly referred misuse cases to Labor Relations, disciplinary actions against employees were typically less severe than those recommended by the IRS’s penalty guidelines in approximately half of the 30 cases reviewed,” said the report.

Background clearances were not reevaluated for employees who wrote bad checks or had their cards “charged off.”

“In addition,” said the IG, “the IRS lacked standard policies for referring employees who misused their travel cards to security personnel to determine if background checks, security clearances, and suitability for employment determinations required reevaluation. As a result, employees who wrote NSF checks or had suspended or charged-off accounts received little or no disciplinary action in response to their misuse and did not have their background clearances reevaluated for suitability for employment.”

The IG determined that in about half of the specific cases it reviewed the IRS was “overly lenient” with the credit-card misusing employee.

“However, we determined that an overly lenient approach was taken in approximately half of the 30 cases we reviewed,” said the IG. “The lack of aggressive steps taken to address travel card misuse and the lack of a subsequent reevaluation of employee background checks and clearances reduces the overall effectiveness of controls over the travel card program and provides a reduced deterrent factor for travel card misuse.”

The inspector general’s bottom line conclusion in this area was that the IRS is more tolerant of its own employees who misuse government charge cards than it is of American taxpayers who fail to pay their taxes in a timely manner.

“Of particular concern is the fact that the IRS ask taxpayers to voluntarily pay taxes owed in a timely manner and yet was more tolerant when its employees became delinquent and defaulted on outstanding payments, violated the terms of the Citibank contract, abused a Government-provided resource (travel funding), and compromised the integrity of the IRS.”