USDA Employees Used Charge Cards to Create "Kiting Scheme" Says IG

By on July 13, 2003 in Current Events with 0 Comments

“Kiting scheme” isn’t a term normally associated with government employees. It is usually used when referring to activity by organized crime. Unfortunately, in this case, the Inspector General of the Department of Agriculture found it necessary to use the phrase to describe actions by USDA employees.

What is a kiting scheme and how does it work? Here’s how it can work. Take your government credit card, withdraw cash from the bank to pay off a few of your bills, then next month borrow more money from your government credit card to pay off the credit card bill from your first withdrawal. In other words, keep withdrawing more money with the card to pay off the bill from the previous month.

In the random sample checked out by the IG, the agency found 25 employees using the credit card for excessive travel advances. Twelve of the employees never traveled for the government and charged more than $196,000 in six months. According to the IG, there were 63,875 ATM withdrawals by employees during the six month period that cost the agency more than $137,000 in advance fees.

Other employees found many uses for the card in addition to government travel. The IG found:

• 147 automotive payments including individual transactions of $6,000, $2,835, and $2,299.

• 206 internet payments

• Purchases of:

– Tickets to an Ozzy Osbourne concert

– Tatoos

– Cosmetics

– Exotic attire (this apparently from stores called “Men in Motion” and “Skulls Unlimited”; admittedly, we don’t know what products these stores sell but if it was charged during travel the trip must have been interesting.)

– Enrollment in a bartending college

• 900 trips to Wal-Mart, Kmart, and Target

Apparently using the travel card for expenses doesn’t involve much risk for the potential rewards. When the IG contacted the Agriculture Department agencies where the employees worked, it found that “none of these cases had been internally recognized to be potentially abusive.” In effect, employees were getting free use of a great deal of money without paying any interest and without a great chance of getting caught.

The IG did find past instances where employees were disciplined by the agency when they improperly took money from an ATM machine using their travel card. The actions taken ranged from counseling to letters of reprimand to suspension or removal. The IG found little consistency in actions imposed and one recommendation to the agency was to take steps to ensure more uniform disciplinary action penalties.

The IG also found that there were no procedures to require an employee to return the government travel card after leaving the agency. The investigation found cases where employees had left the agency and were still using the card some months after having left the Department.

The recommendations by the Inspector General’s office include creating management controls over use of the card and creating a uniform list of penalties to be used for offenses involving the card.

You can download the entire report from a link on the left hand side of the page.

One argument the USDA may raise in its own defense is that “we’re no worse than HUD.” That may be true. Regular readers will recall a similar report from the Department of Housing and Urban Development delineating problems with the use of government charge cards. You can access the article and report from HUD through the links on the left hand side of the page.

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.


About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.