Afternoon. Because i submitted my complete testimony for the record, i will and based on your question, will i provide a brief summary of my testimony. First and foremost, we in the air force are committed towards ensuring proper spendinging controls are effectively used in the government wide Purchase Card Program referred to as gpc. In summary, when used p place of written purchase orders, it allows us to reduce delen quent payment charges, save 70 per transaction and obtain rebates that further our ability to execute the mission. In fiscal year 2013, air force units saved 105 million on 1. 5 million transactions and received 14. 7 million in rebates on total expenditures of 1. 2 billion. Through a variety of controls, we are able to monitor the activities over 26,000 card holders spread across Ten Air Force major commands, four field operating agencies and three direct reporting units. Both domestic and overseas. In accomplishing this, we endeavor to work with the office of secretary defense, procurement and ak wii sigs policy and our partners at u. S. Bank and visa to augment the fields ability to protect fraud, abuse and misuse. T the purchase card online pea coles system. It audits 100 of transactions, flags 3 of the high risk transactions for manual audit. Since 2002, the air force agency has conducted eight audits. Two of the most recent occurring in 2012 and 2013. These audits used in conjunction with other measures like data mining reports, ad hoc and scheduled inspections and a host of checks and balances that separate the roles and functions have proven invaluable and the stewardship of the program. Mr. Chairman and ranking member, thank you for the opportunity to testify and i look forward to your questions. Could i just ask mr. Lyle where he is from . I am from maine originally and spent a lot of time in massachusetts. Yep. Youre pretty good with the rs. But charge and card, im from boston. We struggle with those rs. We dont have to bring in an ininterpreter tor, fortunately. Youre accompanied by mr. Hl larry. Did you have an opening statement, sir . Yes, brief comment. Yes. Good afternoon, thank you for the opportunity today to as i respond to your questions regarding the purchase of espresso machines and accessories in koda, japan. We appreciate the matters effecting the readiness of quality of by airmen and their families and remain vigilant. Resource Management Services is somewhat unique because were responsible for funds proepuated by congress as well as none appropriate funds or navs. Theyre generated by recreation activities through sales and fees charged such as the purchase of goods and services and a share of the army and air force services dividends. In 2007, air force services, another proep rated programs migrated from the Government Purchase Card to the nav purchase card to gain further manpower efficiencies and increased rebates. The nav purchase card is used the make authorized purposes for supplies and equipment. In regard to the inquiry into the purchase of espresso machines and accessories, four espresso machines along with accompanying accessories were sourced using none appropriated funds and installed at two activities. At base coffee shop and base club. This was authorized and approved by appropriate officials in acco acco accord answer with procedures. It was determined fair and reasonable based on requirements and competition. Wu will kol and ensure these funds are probably used for all airmen and their families to enjoy. We look forward to your continued partnership and delivering the best quality of life to our airmen and their families. Again, thank you for the opportunity to be here today. I look forward to working with you and the fellow subcommittee members and i welcome any questions you may have. Thank you. Thank you and well get right into the questions since you brought the question up about the air force base, in japan, where they purchased these three machines for 8,000 apiece. This was not proepuated funds. Thats what youre saying . That is correct, sir. Because there was a we get the accounts, some are anecdo anecdotal. 8,000 and that was at one location, but it was not taxpayer money. Was a card used and paid back . From the Nonappropriated Funds, we have specialists and they have certain dollar thresholds. In this case, when you combine all four machines, it exceeded the nav threshold, so we returned to hur partners. Again, press reports, we get them. There are millions of americaning working hard trying to pay their bills, put their kids through school, pay their taxes and mr. Con li and i are trying to separate fact from fiction when it comes to the credit card gone wild stories out there. So, yours is an example of where there was a legitimate expenditure. The press account was not correct as i understand it. That is correct, sir. Again, we want the whole truth and nothing but the whole truth, and again, the proper expenditure of taxpayer dollars, as long as were on coffee and we did espresso machines, actually, i buy just for the record, i buy mcdonalds. Try to get the senior coffee for 1 when its on sale. Im not promoting any product. Id like to do that, too, but im too young. You get free refills, too, at mcdonalds, in any event, that aside, i put out, we absolutely startled when we saw at one starbucks in california, 12,000 worth of purchases. Are you aware that those purchases took place on the credit card, Government Credit cards . Mr. Chairman, your staff shared the list of purchases that you had with us. Weve begun to make some preliminary inquirienquiries. We are going to include those transactions as a separate test. You have not well, again, we have from that one starbucks credit card purchases of 12,000. And i dont begrudge coast guard people or dhs people of you know, where its legitimate business and possibly buying some coffee for meetings, official meetings or guests. Mr. Chairman, coast guard has provided some initial information for us on their look at those purchases and many of those you dont dispute what we have . No. And then the other thing, too, is we found in looking at other dhs entities, there was 31,000 that we found in starbucks across the other entities, i mean, that just jumps out at you, 12,000, one california starbucks location. And the majority of those purchases were to furnish coffee for the dining on cutters while operating at sea. There may be a legitimate purchase requirement, but for the rest of dhs, its 31,000 that weve been able to identify. So, again, if you can document that, if its justified, we dont begrudge. And as i said, some of the purchases seem to be legitimate use of the card to supply the kitchens or gallies on board ships. We will be looking at all of those purchases and will be looking for those types of purpss where the vendors name such as this coffee shops would jump out at you as something you would need to look at. Again, that jumped out 12 at one location. And we have again, a wide variety of coast guard stations. In fact, my wife even had one of the coast guard cutters, the small ones, named after her, were very proud of the coast guard and their service, but that kind of catches your eye. You did testify that we had 329 million in credit card purchases. Is that dhs wide . That is dhs wide, sir. Okay, we have three Inspector General reports here. March for epa of this year. That was miss casper, mr. Lewis was department of labor. April 2014, dhs is january early this year, better part of what were reviewing here today. The other two, well, in the epa report, miss casper, you testified, we calculated about half of the sample purchases, over half. There was something wrong, misuse abuse or noncompliance. Is that correct . Thats correct. And mr. Lewis, you, in your testimony, you just testified you found about 35 of the purposes with a credit card were abusive or noncompliant. That was just with the prepaid debit cards. Could you guesstimate on credit cards . The issue with the travel cards themselves were actually cases where they should have been using the cards and were not, so we lost Government Air fare. We lost 400,000. So, you lost money there. What im trying to do is we had 50 of abuse. Even with the new law, epa use of credit cards, debit cards or credit cards, at least 35 in your review. You have almost half a billion, miss richards, in dhs, you did not speak to what you found as like a percentage of abuse. Is it possible to calculate that or what you reviewed . In 2013, we did a Risk Assessment because it was a follow up from work we had published earlier. So, we didnt test individual transactions in that audit, so i cannot at this time estimate any numbers that purchases would have been inappropriate based o p that work. Well, again, were sorting through some of those figures and thats pretty, i mean, its almost a half a billion dollars and you said you had how many credit cards issues . The department has about 9700 purchase card users. Theres poor management, poor controls. Some was what you had stated that was identified, is that correct . Yes, sir. So, wed have to assume that a number of those purchases were not compliant. I think you spoke about the lack of compliance or lack of training or whatever. Actually, it sounds like a lack of management or administrative oversight and education of employees that causes this. Is that what you found . Weve done a number of audits of this topic over the years, both my office and our office of Emergency Management oversight as well as gao and we have found other the audits that weve done that there have been a lack of controls and oversight, but weve also seen the department take our recommendations and implement them and so, they are working hard to improve their internal control, environment and controls in oversight. Risk assessment last year and were in the process to get them to do that, have you published a manual, set of guidelines . What have you done instead of meetings that you conduct on tra training . We published a number of reports. Youre looking at our latest report from january 2014. Weve published a number of reports, one in 13 and one in 12. I have a copy of your report, but it talks about some of the problems. Its sort of audit or overview of whats going on. Is there a simple guideline you publi publish . We provide recommendations on what they should include in the guidelines. Have they published that to your satisfaction . Yes, they have. Again, we have some compliance at significant levels. Let me see. Mr. Lyle, was it, you testified that we save about, the department of dfs or the air force, you calculate that you save about 70 per transaction by using the credit card or i dont know if you use debit cards, but you dont have the paper work or administrative costs. Is that how you calculate the savings . Yes, as opposed to traditional government contracting. And probably, i just talked to one of my dod contractors from my district who have kind words about federal defense contract i contracti contracting but probably is one of the most difficult to proceed with. Thats where you calculate 70 per transaction. Correct. And you have 1. 2 billion worth of purchases with credit cards just at air force. Just at air force. Thats got to be huge dollars. Weve gone from 12,000 worth of starbucks purchases to 1. 2 and you said 26,000 credit cards at the air force. 26,000 card holders, yes. And why shouldnt dod and the air force be subject to the same provisions of the 2012 law . I cant speak for the entire department of defense, but i know for the air force, were very proud of our accomplishments in that system i talked about during my brief summary thats included in my summary. That system audits 100 of all tra trance actions and 3 of the other items, like gym memberships or hair salons things like that in the card code, if they pop up in this report, theyll flag a risk item and then that will require a manual insight or someone from the card holders supervisor, the approving official or the agency and the Program Coordinator will go in and look at each one of those transactions. Do you conduct that, do you have a system you set up internally or use iing a system that does it for you . Thats a system thats been established within the department of defense and the director of procurement policy, that office administers the system across the department. Is that with a private contractor that operates it . Sir, i have to take that probably would be. Believe that it is. I believe that a private contractor established that system and it rides along with the gpc program. U. S. Bank provided that. Okay. Because i do know some of the credit card folks are incredible. I gave my card to by staff for sandwiches one day. I dont spring that often, but somebody picked up the credit card number and that was at lunchtime. By 7 00, i was called by this happened to be American Express and they said that weve examined your purchases and your wife usually doesnt spend 5,000 at nordstroms and they had contacted me. They canceled the card immediately because someone had gotten the number in six, seven hours and was charging things, so, you have that type of system that can check out . Yes, sir, what youre talk ing about though is a potential fraud abuse that someone unraut rised get the card . Yes, but youre using the same principles. The credit card has do we have anything like that in dhs, youre a huge i dont know that we have a specific program designed, but we have the data and we do do Data Analytics on the day to to identify those might be, i dont know if your model again, we need as many assurances that theyre properly used. Theres some when youre this and other agencies, shes not dhs isnt quite caught up with the force, but half a billion is set, and the 96 , the 4 is usually turnover. 100 of card holders in the system are very confident. About six months earlier this year, weshl down to about 91 to guard against fraud, waste and abuse. We elevated our registration back my question was originally would you have a problem under similar revisions. And we may have to revise some after this hearing, is there any reason air force should be exempt . Because of the internal controls with we have already with the pcoles as well as the 30day audits by the assessing officials as well as by the area, our agency and Program Coordinators, thats been working very well. About. 45 of all of our transactions, we had of those transactions,. 45 , we had some potential risk violations. A total of about 1910. Each one was reviewed and we found that 26 resulted in ucmj or civilian personnel actions well have to take. You do investigate every one of them. Yes. But that still doesnt answer my question as to whether you would object. I guess you cant speak for that policy. I cant speak for the entire department of defense. I would have to take that for the record and ask d pap to answer that, but from an air force perspective, i can see how the act you passed is definitely something thats viable and worthwhile and wed look at it and see how it might well, it has had some successes. We heard the department of labor, but we still have obvious i dont want to say rampant abuse, but significant abuse and we dont have credit cards, Government Credit cards gone wild tamed yet. Left with that, i have more questions, but let me yield to mr. Conley, whos been waiting. Thank you, mr. Chairman. I want i wanted to make sure i followed your answer to the 25,000 espresso machines. What are unproepuated funds. We call them a Nonappropriated Fund. On a base, a golf course, a bowling center, when you buy a hamburger, pay a round of golf, the dollars that airman and family is going to pay, those are Nonappropriated Fund dollars. Generated by those activities. Were government issued purchase cards or debit cards used for that ak cquisition . No, sir. Okay. Let me ask our igs. Is it ever permissible to use a government issued purchase card, debit card or the like for a hair salon session, gym membership, personal gym membership or personal gift cards . Miss casper . Hair salons, we didnt have it in our transactions, but we did some research on the idea of gym membership and there is a comptroller general decision that says in some circumstances, it is permissible if its part of some health and welfare program. Authorized by your employer. Right. Rig. Obviously, its not b. Lets put that aside for a minute. Is it ever permissible to go to a hair salon or your personal gym unrelated to that exemts or purchase gift cards . Not unless it has a government associated and approved use. And are the policies you look at at epa explicit about that prohibition . They are not. That was part of the report, they be more explicit about the use of gym memberships. Epa is in the process of improving their policies in that area, but have not complete d their policies in that area. That doesnt sound complicated. What goes through ones mind, i need groceries tonight. Why not just put it on the government card . Im not saying anyone has ever done that, but clearly, some alarm bell ought to go off in your head, thats not a proper use of a government issued credit card. Normally, you would expect most people to think that, but t there are apparently people that think, you know what . No ones looking at this. Temptation is a different issue. Thats right. I look forward to the epas it is amazing to me, mr. Chairman, they dont have one. But mr. Lewis, what about the department of labor . Same question. I cant think of a case, there would have to be b some nexus and i dont know what that would be in the department of labor. Zwl i suppose if you were the department of labor and you were going to meet queen elizabeth, we might say yeah, get your hair done, but other than that, i cant think of an exceptiemptio a hair salon. We have a look at the general cards across the department, so were still looking at how well thats done. In terms of this audit is there an explicit prohibition in the department of labors own saying you cant use credit cards for those purposes. I d not know what the policy says for the purchase cards in general. Thats what were currently looking at. For what we have looked at in the Job Corps Program, it was explicit at to what you used the cards for. In this case, there were only two uses, but not explicit in prohibited activities. No. Explicit in terms of two only things. In my life, i often will engage in various things and the question that always comes to mind that you ought to ask is what could go wrong with that. So, not having explicit, may not use it for personal purposes. I dont understand whats hard about that, but its as toupd i tounding me they didnt have one. In the case of these debit cards where there were only two uses. Baggag