The Good Life on the State’s Credit: The Challenge of Managing Payments

- March 25, 2014 7:00 AM
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creditcards

It is sad to say that my daily noontime routine is not a three-martini lunch, but spending a blissful hour away from outside interruptions on various pieces of cardio equipment watching Skip Bayless and Stephen A. Smith argue the smallest points in the longest and loudest way possible on ESPN’s “First Take.” My colleagues, my students and my wife know that this is my “middle-aged me time” and that without my hour of exercise escape, the other 23 hours are made less productive and less enjoyable for me—and for those around me. I’ve also had some of my best conversations with colleagues and students across two treadmills (and yes, with my earbuds out!) when working out at our university’s wellness center, and I’ve made many friends from across campus and in the wider community from my hour a day spent there.

In fact, one of the best discoveries I made in the past year happened while I was having my lunchtime cardio fix. This was because a gentleman I have personally admired for some time for his expertise and outspokenness on government at all levels became a regular at our university’s wellness center. His name is C.B. Forgotston, and he is one of the most respected government watchdogs out there today. C.B.’s been in the media spotlight, appearing on “60 Minutes” and major news outlets around the globe. And for the students walking on the treadmill next to him, they likely had no idea that the bearded senior citizen alongside them has been—and still is—one of the biggest “rooter-outers” of government corruption and waste in the entire country.

C.B. has a way of being very prescient about issues that will come to the fore in state politics here in Louisiana and is relentless in holding public officials across the state accountable. As a former chief counsel to the State House Appropriations Committee, a veteran political consultant, and a Fellow of the Institute of Politics at Loyola University in New Orleans, Mr. Forgotston is well-qualified to speak out on good government. And being that we’re Louisiana, despite our recent push for improved ethics, well, we seem to specialize in bad government. Even for a small state, we still seem to lead the nation with unethical—and boneheaded—public officials (and yes, having our 86 year-old convicted ex-Governor, who also happens to be an ex-reality show star and a new father, Edwin Edwards, running for Congress in 2014 just keeps our reputation in tact and in the news).

Last December, Mr. Forgotston wrote a commentary calling attention to the abuse of credit cards by state employees and calling upon our state legislators to take action to severely limit their use. Now, with our Louisiana Legislature in session, C.B. has criticized the lawmakers for the lack of action to put new limitations on credit card use and abuse on the legislative agenda, stating that: “I’m sure there are many public servants who don’t abuse credit cards. However, the abuse has become so rampant that drastic action is necessary.”

How bad is the abuse of credit cards here in our state? Two recent cases have focused media attention on the issue.

We’ve recently seen the Louisiana Community Development Authority fire its Executive Director, Steve Dicharry. In this instance, a media report from Lee Zurik, Chief Investigative Reporter for the local Fox affiliate in New Orleans, found that Mr. Dicharry had used his state credit card for numerous questionable expenditures. These included items such as airfares for his girlfriend and a vacation condo rental for the two of them, and even cash advances. To date, Dicharry has been asked to pay back $15,000, but the questionable purchases he made totaled well over $100,000 in the past five years. In an ironic twist, Lee Zurick concluded his investigative piece with the fact that not only had Mr. Dicharry used his state credit card in questionable and likely illegal ways, but because he failed to pay his bill on time, the state incurred approximately $6,000 in finance charges and late fees from the card company.

And just this past week, we’ve had an even perhaps more unbelievable case come to light involving the misuse of a state credit card. This case involves Delrice Jermaine Augustus, who served as head of the Audit Bureau for Louisiana’s Department of Child and Family Services. He has been arrested on 38 counts of malfeasance in office after an audit of the audit director found that he had used his assistant’s state credit card to buy over $25,000 in electronics for his personal use and likely, for sale to others. The purchases only came to light after the card was flagged when Augustus used it to buy two gift cards. However, over the past two years, Mr. Augustus had used the state card to buy a wide array of electronics—Apple computers, iPhones, iPads, flat-screen televisions, and DVDs. He even bought a dishwasher for his house on the state credit card and had it delivered to his residence.  Louisiana Inspector General Stephen Street commented that: “It is hard to fathom how an audit director at a large state agency could engage in this sort of blatant theft, but that is exactly what happened here. This case is particularly shocking because of the position of high trust that Mr. Augustus holds at DCFS.” Both Mr. Augustus and his unnamed assistant are on paid administrative leave, with further legal and personnel actions pending additional investigations into whether there has been more abuse of state credit cards within the audit unit.

So what are we to make of cases like these? Talking with Mr. Forgotston about this issue while hanging off a treadmill—he is adamant that no state employees should be issued credit cards, period. Rather, he is calling for state workers to either make use of their personal credit cards and then file for reimbursement following a thorough review process (with the “float” time allowing for employees to be paid for legitimate expenses before their due dates) or to only make purchases through agency accounts. While many government purchases today are routinely made through “corporate accounts” with major retailers, such as when buying office supplies through an Office Depot or Staples, the former option is problematic for many public employees. This is because requirements to make purchases on their personal credit cards may cause them to incur additional finance charges from adding their “work” purchases to their “personal” balances. Further, due to credit limits on their account, they may either not have the available credit for work purchases, or alternatively, the work purchases may squeeze-out the credit necessary for them to use for their personal needs.

What I would offer is this piece of free management consulting advice on the matter of employee use of credit cards, both in Louisiana and for any government agency. The convenience of credit needs to be there for workers to be able to do their jobs and deliver services in many, many cases. And today, we’re not just talking about credit cards, we’re looking at payment apps that will allow workers to pay simply by waving their smartphones. So, there’s really no turning back the credit spigot, and there simply won’t be a return to “the good old days” of limited payment options for state purchases. Rather, the tech trends and the demands for services will mean that having hundreds, thousands, tens of thousands of agency employees properly manage and handle credit will be more important than ever before, for all levels of government. The keys to properly doing so lie in having proper organizational and technical controls in place. For the card-servicing companies and issuing banks, being able to provide such oversight in a reliable, consistent fashion will become increasingly important in this environment (recall that in our second Louisiana case, the auditor’s misuse of the credit card to buy gift cards—a prohibited item—triggered the entire chain of events that uncovered the extent of his alleged malfeasance). And for public sector agencies, the goal should be to have the right mix of education and training, along with easily communicated and readily understandable policies and procedures for credit card usage, in place. When combined with the technical assistance that can be provided by the card issuer, these a priori means of control are far more valuable and vital than anything that can be done after the fact when unauthorized/questionable card usage comes to light.

In the end, the problems associated with credit card fraud and abuse in government agencies is not by any means limited to Louisiana—or to just state government. Such cases unfortunately do occur all too regularly at every level of government, and not just here in the U.S, but across much of the first-world. However, we here in Louisiana do tend to have these spectacular cases involving questionable ethics that keep our reputation for having scoundrels and schemers in charge very much alive. And so until a government, any government, realistically tackles not just its management practices, but its real organizational culture, all the tech tools and protocols possible will not prevent possible abuse and the attendant sure bad publicity. Unfortunately, in a “Breaking Bad” world where employees of all organizations increasingly have issues with debt, divorce, drugs and alcohol, gambling, and various other forces that can “turn” an honest employee into a dishonest one, these kinds of issues should be at the forefront of agency executives.

So, thanks to my friend C.B. Forgotston for shining the spotlight on this issue. Unfortunately, there will likely never be a shortage of government waste, fraud and abuse stories that should keep you—and me—busy for years to come. And for everyone out there who might be heading to your workout place, one thing that I always remind my students of is the fact that today, networking doesn’t just happen where you might anticipate it. Sometimes, the best contacts you might make—that can lead to jobs, sales, bargains, and other opportunities can happen anywhere—even when you are sweating at level 8 on a treadmill.

Comments

  • Barbara:

    What about using purchase orders as we had to do in the past or expense reports? Are those obsolete? They’ll find a way to steal if they use any kind of credit card. By being so blatant says how unafraid they are. They are very bold and think nothing of stealing.

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