The Department of Defense has proposed legislation to increase the “micro-purchase threshold” from $3,000* to $10,000. The micro-purchase threshold is essentially the maximum amount that government employees can charge to their government issued credit cards—called purchase cards—without being required to go through a more rigorous acquisition process. The micro-purchase threshold also applies to fleet cards and integrated payment cards, which are payment solutions that combine two or more functions from different types of cards.
It is important to carefully evaluate these proposed increases because purchases that fall under this threshold can be made without competitive bids simply if the user of the purchase card determines that the price of the purchase is reasonable. Additionally, while government employees are only supposed to make purchases under the micro-purchase threshold for government purposes, past and recent misuses of purchase cards demonstrate that this rule is not always followed.
For example, various agencies have found employees using their purchase cards to make “fraudulent, improper, and abusive” purchases for lap dances, breast implants, lingerie, internet dating services, iPods, and lavish dinners. A congressional hearing in 2014 also found purchase cards being used for gym memberships, gift cards, and services at hair salons. Additionally, less than a year ago, the DoD Inspector General found that DoD cardholders used over $1 million of taxpayer funds for personal use at casinos and strip clubs, all in under a six-month period.
It’s concerning that the DoD is proposing this large increase to the micro-purchase threshold given that the majority of recent purchase card violations are by DoD employees. For instance, POGO received documents in response to a Freedom of Information Act request that show that, in the first half of fiscal year 2015, agencies reported 1,302 instances of abuse, fraud, or waste related to purchase or integrated cards. Of those instances, 1,181 (or over 90 percent) were by DoD employees. This breakdown has been consistent for at least the last two years.
While POGO has previously supported increasing the micro-purchase threshold to $5,000, over tripling the previous threshold seems excessive without clear evidence that the benefits will far outweigh the costs. If employees can waste millions of dollars with a $3,000 maximum threshold and current prevention mechanisms, we don’t want to find out what they can do with a $10,000 threshold.
*Clarification: While the DoD is proposing to increase the $3,000 statutory threshold for micro-purchases, we want to clarify that the current effective micro-purchase threshold is $3,500 due to an adjustment in 2015 to account for inflation.