Travel Cards
Air Force Management Focus Has Reduced Delinquencies, but Improvements in Controls Are Needed Gao ID: GAO-03-298 December 20, 2002Poor oversight and management of the Department of Defense (DOD) travel card program has led to high delinquency rates costing DOD millions in lost rebates and increased ATM fees. As a result, Congress asked GAO to report on (1) the magnitude, impact, and cause of delinquencies, (2) the types of fraudulent and abusive uses of travel cards, and (3) the effectiveness of internal controls over DOD's travel card program. GAO previously reported on travel card management at the Air Force.
Air Force management has reduced travel card delinquencies through greater command attention and the use of travel card audits to identify problems and needed corrective actions. As of March 2002, the Air Force delinquency rate on average was about 5 percentage points lower than the rest of DOD and 1 percentage point higher than the federal civilian agencies. The Air Force's overall delinquency and charge-off problems were primarily associated with lower paid, low- to midlevel enlisted military personnel. Despite these improvements, a weak control environment contributed to significant abuse and potential fraud. For example, many of the problem cases identified were due to ineffective controls over the issuance and cancellation of travel cards and weaknesses in the assignment and training of agency program coordinators. During the period of our review, over 400 Air Force cardholders committed potential bank fraud by writing three or more nonsufficient fund (NSF) checks to Bank of America. Also, many cardholders used their cards for inappropriate purchases, such as cruises and event tickets. A significant relationship also existed between potential travel card fraud, abuse, and delinquencies and individuals with substantial credit history problems. Some cardholders had personal accounts placed in collection while others had filed bankruptcies prior to receiving government travel cards. Also, the issuance of the travel cards to virtually everyone who applied for them compounded these problems. GAO found documented evidence of disciplinary actions in less than half of the cases reviewed where cardholders wrote NSF checks, or their accounts were charged off or placed in salary offset. GAO also found that over half of the cases reviewed involved individuals who still had secret or top-secret security clearances. Other control weaknesses related to the Air Force's failure to provide the necessary agency program coordinator training, and infrequent or nonexistent monitoring of travel card activities. The recently enacted fiscal year 2003 Defense appropriations and authorization acts require the Secretary of Defense to establish guidelines and procedures for disciplinary actions and to deny issuance of travel cards to individuals who are not creditworthy.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-03-298, Travel Cards: Air Force Management Focus Has Reduced Delinquencies, but Improvements in Controls Are Needed
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Report to Congressional Requesters:
December 2002:
TRAVEL CARDS:
Air Force Management Focus Has Reduced Delinquencies, but Improvements
in Controls Are Needed:
GAO-03-298:
GAO Highlights:
Highlights of GAO-03-298, a report to Congressional requesters.
Why GAO Did This Study:
Poor oversight and management of the Department of Defense (DOD) travel
card program has led to high delinquency rates costing DOD millions in
lost rebates and increased ATM fees. As a result, Congress asked GAO to
report on (1) the magnitude, impact, and cause of delinquencies, (2)
the
types of fraudulent and abusive uses of travel cards, and (3) the
effectiveness of internal controls over DOD‘s travel card program. GAO
previously reported on travel card management at the Army and Navy.
This report focuses on travel card management at the Air Force.
What GAO Found:
Air Force management has reduced travel card delinquencies through
greater command attention and the use of travel card audits to identify
problems and needed corrective actions. As of March 2002, the Air
Force
delinquency rate on average was about 5 percentage points lower than
the
rest of DOD and 1 percentage point higher than the federal civilian
agencies. The Air Force‘s overall delinquency and charge-off problems
were primarily associated with lower paid, low- to midlevel enlisted
military personnel.
Despite these improvements, a weak control environment contributed to
significant abuse and potential fraud. For example, many of the problem
cases identified were due to ineffective controls over the issuance and
cancellation of travel cards and weaknesses in the assignment and
training of agency program coordinators. During the period of our
review, over 400 Air Force cardholders committed potential bank fraud
by writing three or more nonsufficient fund (NSF) checks to Bank of
America. Also, as shown in the table, many cardholders used their
cards
for inappropriate purchases, such as cruises and event tickets.
[See PDF for image]
[End of figure]
A significant relationship also existed between potential travel card
fraud, abuse, and delinquencies and individuals with substantial credit
history problems. Some cardholders had personal accounts placed in
collection while others had filed bankruptcies prior to receiving
government
travel cards. Also, the issuance of the travel cards to virtually
everyone
who applied for them compounded these problems.
GAO found documented evidence of disciplinary actions in less than half
of the cases reviewed where cardholders wrote NSF checks, or their
accounts
were charged off or placed in salary offset. GAO also found that over
half
of the cases reviewed involved individuals who still had secret or top-
secret
security clearances. Other control weaknesses related to the Air
Force‘s
failure to provide the necessary agency program coordinator training,
and
infrequent or nonexistent monitoring of travel card activities.
The recently enacted fiscal year 2003 Defense appropriations and
authorization
acts require the Secretary of Defense to establish guidelines and
procedures
for disciplinary actions and to deny issuance of travel cards to
individuals
who are not creditworthy.
What GAO Recommends:
GAO recommendations to DOD and the Air Force include the following:
* Provide sufficient training to agency program coordinators to promote
proper oversight of the travel card program, including effective
monitoring
for inappropriate transactions;
* Review the security clearances of cardholders with financial
problems; and
* Strengthen procedures for canceling cards of employees leaving the
service.
DOD and the Air Force concurred on our recommendations and said that
they had
actions underway to address many of them.
www.gao.gov/cgi-bin/getrpt?GAO-03-298.
To view the full report, including the scope and methodology, click on
the
link above. For more information, contact Gregory Kutz, (202) 512-9505.
[End of section]
Letter:
Results in Brief:
Lower Air Force Travel Card Delinquencies and Charge-offs:
Improved Travel Card Control Environment Contributed to Reduced
Delinquencies:
Further Improvements in Controls Are Needed:
Statistical Tests of Key Control Activities:
Potentially Fraudulent and Abusive Travel Card Activity:
Recent Actions:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Background
Travel Card Program Guidelines:
Air Force Travel Process:
Appendix II: Objectives, Scope, and Methodology:
Appendix III: Air Force Major Command Delinquency Rates:
Appendix IV: Air Force Personnel Grade, Rank, and Associated Basic
Pay Rates:
Appendix V: GAO Contacts and Staff Acknowledgements:
Tables:
Table 1: Quarterly Air Force Travel Card Delinquency Rates for Fiscal
Years 2000 through 2002:
Table 2: Cumulative Charge-offs and Delinquencies by Military Service
between November 30, 1998, and March 31, 2002:
Table 3: Five Major Commands with Highest Outstanding Delinquent
Balance
and Percentage of Total Air Force Delinquencies as of March 31, 2002:
Table 4: APC Span of Control at Selected Air Force Locations in Fiscal
Year 2002:
Table 5: Results of Testing of Key Internal Controls:
Table 6: Examples of Cases in Which Cardholders Wrote Three or More NSF
Checks to Bank of America and Accounts Were Charged Off and/or Placed
in Salary Offset from October 2000 through March 2002:
Table 7: Examples of Abusive Air Force Travel Card Activity (October 1,
2000, to March 31, 2002):
Table 8: Examples of Abusive Travel Card Activity Where Accounts Were
Charged Off and/or Placed in Salary Offset from October 2000 through
March 2002:
Table 9: Examples of Abusive Activity Where the Cardholders Paid Their
Bills from October 2000 through March 2002:
Table 10: Comparison of Number of Individually Billed Travel
Cardholders
and Related Charges for DOD versus Total Federal Government for Fiscal
Year 2001:
Table 11: Population of Fiscal Year 2001 Travel Transactions at
Selected
Air Force Bases:
Table 12: Fiscal Year 2001 Transactions That Failed Control Tests for
Approved Travel Orders:
Table 13: Fiscal Year 2001 Transactions That Failed Control Tests for
Accurate Travel Voucher Review and Reimbursement:
Table 14: Fiscal Year 2001 Transactions That Failed Control Tests for
Timely Submission of Travel Vouchers by Employees (5-day Rule):
Table 15: Fiscal Year 2001 Transactions That Failed Control Tests for
Timely Approval and Payment Processing of Travel Vouchers (30-day Rule)
74:
Table 16: Air Force Major Command Delinquency Rates (by Quarter) for
the
Two Years Ending March 31, 2002:
Table 17: Outstanding Balance and Delinquency Rate as of March 31,
2002,
by Major Air Force Commands:
Table 18: Air Force Military Grades, Ranks, and Associated Basic Pay
Rates for Fiscal Year 2001:
Table 19: Air Force Civilian Grades and Associated Basic Pay Rates for
Calendar Year 2001:
Figures:
Figure 1: Air Force, Non-Air Force DOD, and Civilian Agency Travel Card
Delinquency Rates for the 2-Year Period Ending March 31, 2002:
Figure 2: Army, Navy/Marines, and Air Force Travel Card Delinquency
Rates for the 2-Year Period Ending March 31, 2002 9:
Figure 3: Air Force Delinquent and Total Outstanding Travel Card
Balances for Military and Civilian Employees as of September 30, 2001:
Figure 4: Air Force Delinquency Rate by Military Grade and Civilian
Populations Compared to Air Force‘s Average as of September 30, 2001:
Figure 5: Fiscal Year 2001 Air Force Charge-offs by Military Grade and
Total Civilian Populations:
Figure 6: Air Force Travel Card Charge-off and Recovery History from
October 1, 2000, to March 31, 2002:
Figure 7: Overview Flowchart of the Air Force Travel Process:
Figure 8: Travel Card Application:
Figure 9: Required DOD and Bank of America Delinquency Process
Management Actions:
Letter
December 20, 2002:
The Honorable Charles E. Grassley
Ranking Minority Member
Committee on Finance
United States Senate:
The Honorable Stephen Horn
Chairman
The Honorable Janice D. Schakowsky
Ranking Minority Member
Subcommittee on Government Efficiency,
Financial Management and Intergovernmental Relations
Committee on Government Reform
House of Representatives:
In fiscal year 2001, the Air Force had about 500,000 individually
billed travel card accounts, and about $831 million in related travel
card charges.[Footnote 1] In contrast to the purchase card program,
where charges are billed directly to the government for payment, the
individually billed travel cardholder is directly responsible for all
charges incurred on his or her travel card account and for remitting
payments on the monthly bill. The cardholder is expected to use the
government travel card only for valid expenses related to official
travel and to submit a properly documented voucher to get reimbursed by
the Air Force for valid expenses. The intent of the travel card program
was to improve convenience for the traveler and to reduce the
government‘s costs of administering travel. If properly controlled, the
travel card would provide an efficient and effective method for
administering the travel program. Appendix I provides additional
background information on the Air Force‘s travel card program.
We performed our work in response to your request for a comprehensive
examination of the Department of Defense‘s (DOD) and the military
services‘ purchase and travel card programs. We have previously
testified and reported on the Army‘s[Footnote 2] and Navy‘s[Footnote 3]
controls over their travel card programs. This report provides details
and results of our Air Force travel card audit. The objectives of our
audit of the Air Force‘s travel card program were to determine, for
fiscal year 2001 and the first 6 months of fiscal year 2002, (1) the
reported magnitude and impact of delinquent and charged-off Air Force
travel card accounts, along with an analysis of related causes, (2) the
effectiveness of the overall control environment and key internal
controls for the Air Force‘s travel program, (3) whether indications
existed of potentially fraudulent and abusive activity[Footnote 4]
related to the Air Force travel cards, and (4) whether abusive activity
associated with the travel card is effectively linked to disciplinary
actions and security clearances. To achieve these objectives, we
analyzed Air Force account delinquency and charge-off information and
compared it to non-Air Force DOD components and federal civilian
agencies. We reviewed the adequacy of DOD and Air Force policies and
procedures related to travel card use and tested the effectiveness of
key internal control activities at three Air Force installations. We
also used data mining and analytical procedures to identify and examine
potentially fraudulent and abusive travel card activity. Appendix II
provides details of our objectives, scope, and methodology.
We selected the three installations we audited by first identifying the
three Air Force Commands with the largest number of travel card
transactions, payments, and delinquencies. We then identified one Air
Force installation within each of the three commands based on the
magnitude of travel card transactions, payments, and delinquencies.
Appendix III presents data on delinquency rates by major command. We
tested key control activities, including documented evidence of travel
authorization, accurate travel voucher processing, timely submission of
the travel voucher by the employee, and timely payment of the travel
reimbursement to the employee. Our statistical sample test results can
be projected only to the individual installations where we performed
the testing and cannot be projected to the command level or to the Air
Force as a whole. We used data mining procedures across the universe of
individually billed Air Force travel card activity to identify
potentially fraudulent and abusive travel card activity, based on the
nature, amount, merchant, and other identifying characteristics of the
transactions. While we identified numerous examples of potentially
fraudulent and abusive travel card activity, our work was not designed
to identify, and we cannot determine, the extent of potentially
fraudulent and abusive activity.
We conducted our audit work from January 2002 through mid-November 2002
in accordance with U.S. generally accepted government auditing
standards, and we performed our investigative work in accordance with
standards prescribed by the President‘s Council on Integrity and
Efficiency.
Results in Brief:
The Air Force had substantially lower delinquency rates and fewer
accounts being charged off than the Army and the Navy in fiscal year
2001, and it had lower delinquency rates for the first 6 months of
fiscal year 2002. The Air Force‘s delinquency rates are slightly higher
than the non-DOD federal civilian agencies delinquency rate; however,
the delinquency rate for Air Force civilian employees of 3.6 percent is
1.4 percentage points lower than the estimated 5.0 percent delinquency
rate for civilian agencies. We found that Air Force delinquency rates
were lower than Army and Navy delinquency rates due, in part, to
measures the Air Force has taken, such as increased management
attention and command focus, numerous travel card program audits and
actions on recommendations for corrective action, and greater emphasis
on the split disbursement payment process,[Footnote 5] where all or a
portion of the travel card reimbursement is made directly to the bank.
However, even though the Air Force had lower numbers of delinquent and
charged off accounts than the Army and the Navy, we found control
environment weaknesses and breakdowns in key controls at the three Air
Force installations we audited. We also found instances of potential
fraud and abuse similar to those we found in our Army and Navy work,
such as personal use of the travel card for a variety of goods and
services, including at gentlemen‘s clubs, and failure to pay travel
card bills after reimbursements were received.
Most Air Force travel cardholders used the travel cards for authorized
government travel expenses and paid amounts owed to Bank of America on
time. From November 1998 through March 2002, Bank of America charged
off about 9,000 Air Force travel card accounts totaling approximately
$11.6 million, the lowest among the three services. The Air Force‘s
delinquency and charge-off problems are primarily associated with low-
and midlevel enlisted military personnel. These delinquencies and
charge-offs have cost the Air Force thousands of dollars in lost
rebates, higher fees, and substantial resources spent pursuing and
collecting on delinquent accounts. To address these problems, the Air
Force and DOD began offsetting wages of certain military and civilian
employees in November 2001 as well as retirement benefits of military
retirees whose accounts were delinquent or had been charged off. These
and other actions have significantly reduced the number and dollar
value of charge-offs during fiscal year 2002. However, these actions
are primarily focused on treating the symptoms, or ’back-end“ result of
the problems, such as delinquencies and charge-offs, rather than
addressing weaknesses in the ’front-end“ (preventive) controls.
Further, we found a number of areas where additional improvements in
DOD and Air Force controls are needed. For example, many of the problem
cases we reviewed were related to inadequate training and collateral
duty responsibilities of installation agency program coordinators,
including failure to ensure that all unit program coordinators received
timely training. Other problems were caused by ineffective controls
over (1) the issuance of travel cards and (2) the transfer or
cancellation of accounts when individuals transferred, separated, or
retired. Air Force practice is to facilitate Bank of America issuing
travel cards--with few credit restrictions--to all applicants
regardless of whether they have histories of credit problems. We found
that those who committed travel card fraud and abuse tended to be
individuals who had histories of prior credit problems. The prior and
current credit problems we identified for Air Force travel cardholders
included charged off credit card accounts, bankruptcies, judgments,
collection actions, and multiple nonsufficient fund (NSF), or ’bounced“
checks.
As a result of similar findings from our previous work on DOD travel
card programs, Congress included provisions in the fiscal year 2003
Defense Appropriations Act, Public Law 107-248, to require the
Secretary of Defense to establish guidelines and procedures to (1) deny
the issuance of cards to individuals who are not creditworthy and (2)
prescribe for disciplinary actions to be taken against cardholders for
fraudulent or abusive use of government travel cards.
We identified numerous instances of potentially fraudulent and abusive
travel card activity during fiscal year 2001 and the first 6 months of
fiscal year 2002. During this period, more than 400 Air Force employees
may have committed bank fraud by writing three or more NSF checks. In
addition, Air Force travel cards were used for numerous abusive
transactions that were clearly not related to government travel,
including cruise lines, Internet gambling sites, sporting and concert
events, and gentlemen‘s clubs. For example, Air Force personnel used
their travel cards to make 223 charges totaling over $31,000 for
tickets to activities such as Dallas Cowboys football games, Janet
Jackson and NSYNC concerts, and other Ticketmaster purchases; and 121
Air Force personnel charged nearly $32,000 at gentlemen‘s clubs, such
as Spearmint Rhino, Can Can, Cheetah‘s Lounge, and Déjà Vu Showgirls.
Another form of abuse identified was the failure to pay the travel card
bill. Some individuals used the cards for inappropriate purposes and
failed to pay their accounts. Others abused the travel card by failing
to pay charges associated with official government travel, even though
they have been reimbursed. In addition, we did not find documented
evidence of disciplinary actions against many Air Force personnel who
abused their travel cards. Of the 10 cases that we audited involving
individuals who made improper charges but paid their bills, we found
evidence that only two of these individuals had received disciplinary
action. In addition, of the 58 cases we audited involving individuals
who wrote NSF checks or whose accounts were charged off or put in
salary offset, we found no evidence of disciplinary action for 39 of
the individuals.
Personnel with security clearances who have financial problems may pose
security risks to the Air Force. Of the 58 cases we audited involving
individuals who wrote NSF checks, or had their travel card accounts
charged off or put in salary offset, 32 had active secret or top-secret
clearances as of August 2002. For example, a technical sergeant
maintained his secret clearance even though he used his travel card
reimbursements to support a gambling habit and had his travel account
placed in salary offset. While the individual was warned several times
that the failure to pay his travel card account ’would not be
tolerated,“ he was allowed to continue using his travel card because of
his expertise on C-5 cargo aircraft repairs. To support his gambling
habit, the individual eventually stole and sold protective gear,
including body armor and biochemical and biological masks, which had
been loaded on C-5 aircraft destined for Afghanistan. These thefts were
not discovered, or his security clearance revoked, until after the C-5
aircrafts arrived in Afghanistan during the fall of 2001.
This report includes recommendations to the Air Force and DOD to
strengthen specific internal controls within its travel card program in
the areas of travel card issuance, travel card monitoring, and
disciplinary actions. In oral comments on a draft of this report, DOD
and the Air Force concurred with all of our recommendations and stated
that they had taken action or had actions underway to address many of
them. A detailed discussion of the DOD and Air Force comments is
presented in the ’Agency Comments and Our Evaluation“ section of this
report.
Lower Air Force Travel Card Delinquencies and Charge-offs:
Air Force travel card delinquency rates and amounts charged off were
substantially lower than non-Air Force DOD components, and
delinquencies were about 1 percent higher than non-DOD federal civilian
agencies.[Footnote 6] Cumulative Air Force charge-offs since the
inception of the travel card program with Bank of America in November
1998 are approximately $11.6 million, the lowest of the three services.
Our analysis of available data showed that the travel cardholder‘s rank
and pay rate are strong predictors of delinquency problems. We found
that the Air Force‘s delinquency and charge-off problems are primarily
associated with low and mid-level enlisted military employees. As
discussed in following sections of this report, improvements in the Air
Force‘s overall control environment improved Air Force delinquency
rates, but DOD‘s overall high delinquency and default rates resulted in
contentious relations with Bank of America. The bank threatened to end
its participation in the program, but eventually agreed to contract
modifications that included increased fees. Past delinquencies and
charge-offs have cost the Air Force, the federal government, and the
taxpayers thousands of dollars in lost rebates, and substantial
resources spent pursuing and collecting on past due accounts. We also
estimate that contract modifications will cost the Air Force millions
of dollars in the future due to higher fees.
The Air Force has taken a number of positive actions to address its
delinquency and charge-off rates, and data for the first half of fiscal
year 2002 show a significant drop in charged-off accounts. For example,
this reduction is, in part, attributable to a salary and military
retirement offset program--similar to garnishment--which was initiated
in November 2001. Other Air Force actions included encouraging the use
of the split disbursement payment process, in which the Defense Finance
and Accounting Service (DFAS) sends a portion of the traveler‘s
reimbursement directly to the bank rather than the cardholder, and
increased management attention and focus on the delinquency issue.
However, except for split disbursements, Air Force actions primarily
address the symptoms or back-end result of delinquency and charge-offs
after they have already occurred. As noted in the following sections of
this report, additional emphasis on front-end management of the travel
card program, such as more selective procedures for issuing the cards
and overseeing the proper use of the cards, could further improve the
Air Force travel card program.
The Air Force‘s Delinquencies and Charge-offs:
As of March 31, 2002, approximately 8,000 Air Force cardholders had
over $5 million in delinquent debt. Over the last 2 years, Air Force
delinquency rates fluctuated from 5 to 11 percent and on average were
about 5 percentage points less than the Army‘s and the Navy‘s and 1
percentage point higher than non-DOD federal civilian agencies. The Air
Force has set a goal of no more than a 4 percent delinquency rate. As
discussed later, greater emphasis on commander responsibility and
accountability, contributed, at least in part, to lower Air Force
delinquency rates. Figure 1 compares delinquency rates among the Air
Force, Non-Air Force DOD, and the 23 largest civilian
agencies.[Footnote 7]
Figure 1: Air Force, Non-Air Force DOD, and Civilian Agency Travel Card
Delinquency Rates for the 2-Year Period Ending March 31, 2002:
[See PDF for image]
[End of figure]
In addition, as shown in figure 2, Air Force travel card delinquency
rates for the eight quarters ending March 31, 2002, were significantly
less than Army and Navy travel card delinquency rates.
Figure 2: Army, Navy/Marines, and Air Force Travel Card Delinquency
Rates for the 2-Year Period Ending March 31, 2002:
[See PDF for image]
[End of figure]
Further analysis revealed that Air Force travel card delinquency rates
have decreased from 16.9 percent as of December 31, 1999 to 6.0 percent
as of March 31, 2002. Table 1 shows the decrease in Air Force
delinquency rates since December 1999, as well as the cyclical nature
of Air Force travel card delinquency rates.
Table 1: Quarterly Air Force Travel Card Delinquency Rates for Fiscal
Years 2000 through 2002:
First quarter; Fiscal year 2000: 16.9%; Fiscal year 2001: 10.9%;
Fiscal year 2002: 7.7%.
Second quarter; Fiscal year 2000: 10.2%; Fiscal year 2001: 6.5%;
Fiscal year 2002: 6.0%.
Third quarter; Fiscal year 2000: 6.4%; Fiscal year 2001: 5.3%; Fiscal
year 2002: 4.6%.
Fourth quarter; Fiscal year 2000: 8.2%; Fiscal year 2001: 6.2%;
Fiscal year 2002: 4.9%.
Source: GAO analysis of Bank of America data.
[End of table]
Since the inception of the travel charge card task order between DOD
and Bank of America on November 30, 1998, Bank of America has charged
off about 9,000 Air Force travel card accounts with nearly $11.6
million of bad debt. While not an excellent track record, it is lower
than the Army‘s approximate 23,000 charged-off accounts valued at
nearly $34 million and Navy‘s approximate 13,800 charged-off accounts
valued at nearly $16.6 million. Task order modifications during fiscal
year 2001 allowed Bank of America to institute a salary offset
provision against DOD military personnel whose travel card accounts
were previously charged off or were more than 120 days past due. Table
2 provides a comparison of cumulative charge-offs and delinquencies by
military service as of March 31, 2002.
Table 2: Cumulative Charge-offs and Delinquencies by Military Service
between November 30, 1998, and March 31, 2002:
Dollars in millions.
Air Force; Cumulative charge-offs[A]: $11.6;
Cumulative recoveries[A, B]: $4.7; Net charge-offs[A]: $6.9;
Delinquencies as of March 31, 2002[C]: $5.0.
Navy; Cumulative charge-offs[A]: 16.6; Cumulative
recoveries[A, B]: 6.2; Net charge-offs[A]: 10.4; Delinquencies as of
March 31, 2002[C]: 6.0.
Army; Cumulative charge-offs[A]: 33.5; Cumulative
recoveries[A, B]: 12.9; Net charge-offs[A]: 20.6; Delinquencies as of
March 31, 2002[C]: 8.4.
Source: GAO analysis of Bank of America and General Services
Administration data.
[A] Cumulative charge-offs and recoveries are for November 1998 through
March 2002.
[B] Recoveries represent amounts recovered through collection actions,
which includes salary offsets, on accounts previously charged off. :
[C] Delinquencies represent amounts not paid within 60 days of the
travel card monthly statement closing date, which is the cutoff date
for charges to be included in the monthly statement. Under the terms of
the travel cardholder‘s agreement with Bank of America, payment of the
travel card statement is due to Bank of America within 25 to 30 days of
the statement closing date.
[End of table]
Rank, Grade, and Pay Rates Are Correlated to Delinquency and Charge-off
Problems:
Our analysis showed a correlation between certain demographic factors
and high delinquency and charge-off rates. Available data showed that
the travel cardholder‘s rank or grade (and associated pay)[Footnote 8]
is a strong predictor of delinquency problems. As shown in Figure 3,
Air Force delinquency and charge-off problems are primarily associated
with low-and midlevel enlisted military personnel in grades E-1
(airman) to E-6 (technical sergeant), with relatively low incomes and
little experience in handling personal finances. Appendix V presents
information on military and civilian grades and pay rates.
Figure 3: Air Force Delinquent and Total Outstanding Travel Card
Balances for Military and Civilian Employees as of September 30, 2001:
[See PDF for image]
[End of figure]
Available data indicate that military personnel grades E-1 to E-6
account for about 69 percent of all Air Force military personnel. These
enlisted military personnel have basic pay levels ranging from $11,500
to $27,600. These individuals were responsible for 41 percent of the
total outstanding Air Force travel card balances as of September 30,
2001.
Figure 4 compares the delinquency rates by military grade and civilian
personnel to the average Air Force delinquency rate as of September 30,
2001. As shown, the delinquency rates were as high as 15.7 percent for
E-1 to E-3 and 9.9 percent for E-4 to E-6, compared to the Air Force
overall delinquency rate of 6.2 percent. These rates were markedly
higher than the rates for officers, which was 2.4 percent. These rates
were also substantially higher than that of Air Force civilians, which
at 3.6 percent was 1.4 percentage points lower than the federal
civilian agencies rate shown in figure 1.
Figure 4: Air Force Delinquency Rate by Military Grade and Civilian
Populations Compared to Air Force‘s Average as of September 30, 2001:
[See PDF for image]
[End of figure]
The delinquency rate for military personnel in grades E-4 to E-6 in
particular had an important negative impact on the Air Force‘s
delinquency rate. Specifically, these are senior airmen to technical
sergeants in the Air Force. Pay levels for these personnel, excluding
supplements such as housing, range from $18,600 to $27,600. As shown by
Bank of America data, personnel in grades E-4 to E-6 accounted for 37
percent of the total Air Force outstanding balance. High delinquency
rates for the E-1 through E-6 grades combined with their extensive use
of the travel card have a significant impact on the Air Force wide
delinquency rate.
Figure 5 shows Air Force fiscal year 2001 charge-offs. Charge-off
amounts of about $2.6 million for military personnel in grades E-1
through E-6 accounted for 79 percent of the $3.3 million in total Air
Force charge-offs in fiscal year 2001.
Figure 5: Fiscal Year 2001 Air Force Charge-offs by Military Grade and
Total Civilian Populations:
[See PDF for image]
[End of figure]
An Air Force travel card program official told us that the major
portion of the service‘s travel card delinquencies relates to first-
term enlisted personnel. An Air Force member can normally attain the E-
4 grade within 3-1/2 years in his or her first term. According to Air
Force data, over half of the personnel in grades E-1 to E-6 are in
grades E-4 and below. The official commented that if the members are
not committed to an Air Force career and plan to serve only one tour,
temptation exists to misuse the card before they separate from the Air
Force. In addition, as discussed below, the Air Force did not exempt
personnel with poor credit histories from required use of travel cards.
Consequently, these low and mid-level enlisted military personnel are
often issued travel cards even though they may already be in serious
financial trouble and, therefore, may not have been appropriate credit
risks.
Five Major Air Force Commands Account for Majority of Delinquencies:
As shown in table 3, five Air Force major commands accounted for about
63 percent of the Air Force travel card delinquencies as of March 31,
2002.
Table 3: Five Major Commands with Highest Outstanding Delinquent
Balance and Percentage of Total Air Force Delinquencies as of March 31,
2002:
Air Force major command: Air National Guard; Outstanding delinquent
balance: $901,864; Percentage of total Air Force delinquent balance:
17.8.
Air Force major command: Air Force Reserve Command; Outstanding
delinquent balance: 778,230; Percentage of total Air Force delinquent
balance: 15.4.
Air Force major command: Air Combat Command; Outstanding delinquent
balance: 650,110; Percentage of total Air Force delinquent balance:
12.9.
Air Force major command: Air Mobility Command; Outstanding delinquent
balance: 436,280; Percentage of total Air Force delinquent balance:
8.6.
Air Force major command: Air Force Materiel Command; Outstanding
delinquent balance: 420,982; Percentage of total Air Force delinquent
balance: 8.3.
Air Force major command: Subtotal of above five commands; Outstanding
delinquent balance: $3,187,466; Percentage of total Air Force
delinquent balance: 63.0.
Air Force major command: Total all other commands; Outstanding
delinquent balance: $1,868,523; Percentage of total Air Force
delinquent balance: 37.0.
Source: GAO analysis of Bank of America data.
[End of table]
Air Force National Guard and Air Force Reserve Command officials
attributed their high delinquent balances to the recent activation of
guard and reserve forces, the associated increase in travel card use,
and inadequate employee training on travel voucher preparation. In
addition, the officials explained that National Guard and Reserve
forces that report to duty intermittently may not become aware of
problems with travel voucher accuracy and late submission of payment
vouchers until they report for their next duty assignment--several days
to a month after a problem has occurred. Further, the officials told us
that many of their members have not been trained on proper travel
voucher preparation procedures, and controls over travel card use and
payment of travel card bills are weak. One reserve official cited the
lack of specific guidance for disciplinary action in DOD‘s Financial
Management Regulation as a contributing factor.
According to Air Force officials, the Air Combat Command, Air Force
Materiel Command, and Air Mobility Command have all experienced
significant increases in travel and deployments since September 11,
2001. Our audit work showed instances in which extended travel and
back-to-back deployments resulted in delays in travel voucher
preparation and submission. To reduce delinquencies associated with
late payment of travel card bills by deployed units, the Air Force has
emphasized the use of the split disbursement payment process and
interim travel vouchers.
Delinquency and Charge-off Rates Have Resulted in Increased Costs to
the Government:
Delinquencies and charge-offs within DOD have resulted in increased
costs to the Air Force and the other services. In fiscal year 2001, DOD
entered into an agreement with Bank of America to adjust the terms of
its travel card contract. DOD agreed to increased fees and a change in
rebate calculation. These changes cost the Air Force about $350,000 in
lost rebates on individually billed accounts and centrally billed
accounts in fiscal year 2001, and will cost an estimated $1.6 million
in increased ATM fees annually. Other costs are real but not easily
measurable, such as the increased administrative burden to the Air
Force to identify and address delinquent accounts.
Dispute Between Contractor and DOD:
Unexpectedly high defaults by DOD‘s travel cardholders resulted in a 5-
month legal dispute with Bank of America over the continuation of the
travel card contract. In 1998, under the provisions of the General
Services Administration‘s (GSA) master contract with Bank of America,
DOD entered into a tailored task order with Bank of America to provide
travel card services for a period of 2 years, ending November 29, 2000.
Under the terms of the task order, DOD had three 1-year options to
unilaterally renew the contract. On September 29, 2000, prior to the
expiration of the initial task order, DOD gave notice to Bank of
America that it intended to exercise its option to extend the task
order for an additional year. In November 2000, Bank of America
contested the provisions of the DOD task order with the GSA contracting
officer. Bank of America claimed that the task order was unprofitable
due to required ’contract and program management policies and
procedures“ associated with higher-than-anticipated credit losses,
including an estimated 43,000 DOD employees had defaulted on more than
$59 million in debts. Consequently, in April 2001, the master contract
and the related DOD tailored task order for travel card services were
renegotiated. Specifically, Bank of America was able to increase its
revenue by instituting additional fees, such as higher cash advance and
late payment fees; offsetting credit losses against rebates as
explained later; facilitating the collection of delinquent and charged
off amounts through salary and military retirement pay offset; and
encouraging DOD personnel participation in split disbursements, in
which the government sends part or all of the travel voucher
reimbursements to Bank of America directly.
Effect of Increased Fees:
One of the terms of the renegotiated task order was that, effective
August 10, 2001, the travel card cash advance fee would be increased
from 1.9 percent to 3 percent, with a minimum fee of $2. The Air Force
reimburses all cash advance fees[Footnote 9] related to authorized cash
withdrawals. We estimate that this contract modification will result in
approximately $1.6 million of increased costs to the Air Force each
year. Our estimate was made by applying the new fee structure that went
into effect in mid-August 2001 to cash advances made during fiscal year
2001. Other fee increases agreed to in the renegotiation, such as the
fee for expedited travel card issuance, will also result in additional
cost to the Air Force.
Delinquent Account Payment Affects Rebates to the Air Force:
The GSA master contract modification also changed the rebate
calculation, making it imperative that the Air Force (and the other
services) improve their payment rates to receive the full benefits of
the program. Under the GSA master contract, credit card companies are
required to pay a quarterly rebate, also known as a refund, to agencies
and GSA based on the amount charged to both individually billed and
centrally billed cards. The rebate to the agency is reduced, or
eliminated, if significant numbers of an agency‘s individual
cardholders do not pay their accounts timely. Specifically, credit
losses or balances that reach 180 calendar days past due reduce the
rebate amounts. Effective January 2001, the contract modification
changed the way that rebates are calculated and how credit losses are
handled. If the credit loss of an agency‘s individually billed travel
card accounts exceeds 30 basis points--or 30 one-hundredths of a
percent (.003)--of net sales[Footnote 10] on the card, the agency is
assessed a credit loss fee, or rebate offset, against the rebate
associated with both individually billed and centrally billed travel
card accounts.
This credit loss fee, or rebate offset, which resulted solely from
individually billed account losses, significantly affected the amount
of rebate the Air Force received as a result of combined individually
and centrally billed net sales in fiscal year 2001. In fiscal year
2001, the Air Force collected about $1.4 million of the $1.8 million in
rebates that we estimated it would have received, based on fiscal year
2001dollar volume if the individually billed account payments had been
timely.
Other costs, such as the administrative burden of monitoring delinquent
accounts, are harder to measure, but no less real. For example,
employees with delinquent accounts must be identified, counseled and
disciplined, and their account activity closely monitored. In addition,
employees with financial problems who have access to sensitive data may
pose a security risk, as discussed later in this report.
Air Force Charge-offs Have Decreased:
In addition to having the lowest net charge-off amount of the three
services, $6.9 million, the quarterly dollar amount of Air Force
accounts charged off has decreased substantially. As shown in figure 6,
at the start of fiscal year 2001, the charged off balance greatly
exceeded the recovery amount. Starting in the third quarter of fiscal
year 2001, the amount charged off started to decline so that in the
first quarter of fiscal year 2002, recoveries, for the first time,
exceeded the amounts being charged off. Recoveries also exceeded
charge-offs in the second quarter of fiscal year 2002. The institution
of the salary and military retirement offset program has contributed to
the reduction in Air Force travel card charge-offs, primarily by
eliminating the need to charge off past due balances by transferring
these balances to the salary off-set program.
Figure 6: Air Force Travel Card Charge-off and Recovery History from
October 1, 2000, to March 31, 2002:
[See PDF for image]
[End of figure]
Salary and Military Retirement Offset Program:
Starting in fiscal year 2002, DOD began to offset the retirement
benefits of military retirees and the salaries of certain civilian and
military employees against the delinquent and charged off balances on
travel card accounts. The DOD salary offset program[Footnote 11]
implements a provision of the Travel and Transportation Reform Act of
1998 (TTRA)[Footnote 12] that allows any federal agency, upon written
request from the travel card contractor, to collect by deduction from
the amount of pay owed to an employee (or military member) any amount
of funds the employee or military member owes on his or her travel
cards as a result of delinquencies not disputed by the
employee.[Footnote 13] The salary and military retirement offset
program was implemented DOD-wide.
The offset program came into being as part of the task order
modification. Between April and August 2001, DOD and the Bank of
America worked together to establish program protocols. Starting in
August 2001, the Bank of America sent demand letters to cardholders
whose accounts were more than 90 days delinquent. The Defense Finance
and Accounting Service processed the initial offsets of delinquent
accounts in October 2001 in the various DOD pay systems. The first
deductions were made from the November pay period and paid to Bank of
America starting December 2001. Figure 6 illustrates the initial impact
salary offset had in the first quarter of fiscal year 2002. The Bank of
America can also use the offset program to recover amounts that were
previously charged off. January 2002 was the first month in which Bank
of America requested offsets for such accounts. The effect, shown in
figure 6, was recoveries amounting to over three times more than
charge-offs for the second quarter of fiscal year 2002.
The offset program works as follows. When an account is 90 days
delinquent, Bank of America may send a demand letter to the individual
cardholder requesting payment in full within 30 days. The demand letter
specifies that salary offsets will be initiated if payment is not made
in full within 30 days. The cardholder may negotiate an installment
agreement or dispute the charges with the bank. The cardholder has a
right to review all records such as invoices and to request a hearing
if the bank‘s disposition of the dispute is not satisfactory.
After the 30 days have elapsed, if payment is not made and the
cardholder does not dispute the debt, the bank includes the account in
the list of accounts that it sends to DFAS requesting offsets.
Individuals in the following categories may not be accepted for offset.
* Civilian employees in bargaining units that have not agreed to the
salary-offset program do not qualify for the program. According to a
DFAS official, 1,002 of 1,227 DOD bargaining units had agreed to
participate in the program as of July 2002.
* Individuals with debts to the federal government or other
garnishments already being offset at 15 percent of disposable pay are
considered to be in protected status and are not eligible for the
offset program.
* Individuals who cannot be located in the various payroll and military
retirement (active, reserve, retired military, or civilian) systems
cannot be accepted for offset.
* Civilian retirees. The authorizing statutes for both the Civil
Service Retirement System[Footnote 14] and the Federal Employee‘s
Retirement System[Footnote 15] in effect at the time of our audit
specified that retirement benefits may be offset only to the extent
expressly authorized by federal statutes. TTRA, Section 2, provided
authority to offset salaries of ’employees“ of agencies but does not
provide such authority for civilian employee retiree
annuitants.[Footnote 16]
Once an individual is accepted for offset, the related debt is
established in the appropriate pay system and DFAS can deduct up to 15
percent of disposable pay. Disposable pay is defined in GSA‘s Federal
Travel Regulation[Footnote 17] as an employee‘s compensation remaining
after the deduction from an employee‘s earnings of any amounts required
by law to be withheld (e.g., tax withholdings and garnishments). The
amounts collected are paid to the bank on a monthly basis for military
personnel and retirees and biweekly for civilian personnel. It takes
approximately 2 months from the time an offset is initiated to the
first bank payment.
According to DFAS, from October 2001 through July 2002, Bank of America
referred 53,462 DOD-wide cases with debt of $77.5 million to DOD for
offset. DOD accepted and started offset for 74 percent of the cases and
69 percent of the debt amounts referred. The number and debt amount of
Air Force-specific cases forwarded by Bank of America were not
available. From November 2001 through July 2002, DFAS collected $2.7
million from active and retired Air Force military personnel through
the offset program. During the same period, DOD collected $1.6 million
from all DOD civilian employees. However, DFAS was unable to provide
this amount by military service.
Improved Travel Card Control Environment Contributed to Reduced
Delinquencies:
We found that Air Force management encouraged a culture that emphasized
the importance of integrity and ethical values and was involved in
monitoring travel card delinquencies. According to travel card program
officials and documentation we obtained, Air Force officials, from the
Vice Chief of Staff to wing commanders, have strongly emphasized for
the past 2 to 3 years that the travel card program is a ’commander‘s
program“ and commanders are responsible for managing their delinquency
rates. They explained that officials throughout the Air Force chain of
command have monitored travel card delinquency rates and discussed the
topic at their respective staff meetings. Documentation we obtained
confirmed the use of detailed statistical reports to monitor
installation-level delinquencies. Commanding officers are holding unit
commanders with excessive delinquency rates accountable to make
improvements to reduce delinquencies. Travel card delinquency
statistics are discussed at command staff meetings, and unit commanders
are held accountable for reducing their delinquencies. The importance
of the tone at the top cannot be overstated.
Other factors contributing to the reduction in Air Force delinquency
rates include the following.
* Air Force emphasis on financial management training. Each Air Force
installation has a Financial Services Office with a trained financial
management staff that oversee the travel card program. The Air Force
also provides personal financial training to all inductees, which
includes developing personal budget plans, balancing checkbooks,
preparing tax returns, and financial responsibility. The training also
covers disciplinary action and consequences for financial
irresponsibility by service members. The Air Force also provides
financial counseling and training classes through the Family Services
Centers at each base and contracts for professional counselors and
trainers.
* Travel card program audits. The Assistant Secretary of the Air Force
(Financial Management and Comptroller) requested Air Force Audit Agency
audits of the travel card program, which resulted in recommendations to
management and resultant program improvements. According to a DOD
Inspector General report,[Footnote 18] the Air Force Audit Agency
issued 27 audit reports on the travel card program from fiscal year
1999 through fiscal year 2001. For example, in April 2001, The Air
Force Audit Agency issued an audit report on Travis Air Force Base
(AFB),[Footnote 19] one of the sites we audited. The report identified
numerous systemic problems, including inadequate agency program
coordinator (APC) oversight due to insufficient training, which
resulted in unauthorized transactions not being identified. The Air
Force Audit Agency made numerous recommendations for corrective
actions, and our audit work showed that Travis AFB had taken actions on
many of them.
* DOD and Air Force initiatives. In March 2000, Air Force travel card
delinquency rates were in the double digits--10.2 percent--similar to
the Army and Navy delinquency rates.[Footnote 20] The Air Force
initiated a number of actions in the fall of 2000 to reduce its
delinquency rate. For example, in December 2000, Air Force headquarters
sent an E-mail message to travel card APCs asking them to (1) promote
the split disbursement payment process, (2) turn off accounts for
infrequent travelers, (3) use Bank of America Electronic Account
Government Ledger System (EAGLS) reports to monitor and detect problem
accounts, (4) include procedures to deactivate the travel card when a
member changes duty location, and (5) correct discrepancies between
organizational codes assigned to cardholder accounts and their current
assigned units to ensure accurate reporting and effective monitoring of
accounts. As an aid in correcting organizational coding, the E-mail
included a directory for APCs to use to resolve problems with accounts
that were incorrectly assigned to them--referred to as ’orphan“
accounts--by identifying where those accounts should be properly
assigned.
Further, in response to June and September 2001 DOD policy memorandums
to heads of military departments, the Air Force identified 100,000
travel cards for cancellation due to lack of use. According to an Air
Force headquarters official, approximately 90,000 travel cards were
cancelled in October 2001. In addition, salary offset procedures were
implemented in November 2001, resulting in a significant decrease in
charged-off accounts in the first 6 months of fiscal year 2002. Also in
November 2001, the Air Force Comptroller issued a letter to all major
commands, highlighting the use of the split disbursement payment
process and interim vouchers[Footnote 21] as options for preventing
delinquent balances when members are on long-term deployments.
According to Bank of America data, the Air Force increased the number
of payments remitted to Bank of America via the split disbursement
payment process from 20,487 payments, or 17 percent of all payments,
totaling $12 million in October 2000, to 54,337 payments, or 39 percent
of all payments, totaling $44 million in June 2002. Officials at the
sites we audited told us that they emphasized that cardholders use the
split disbursement payment process. For example, Hill Air Force Base
comptroller personnel told us that they have increased use of the split
disbursement payment process from 23 percent during the fourth quarter
of fiscal year 2001 to 35 percent during the third quarter of fiscal
year 2002. In addition, as of September 17, 2002, Travis AFB
implemented a new policy that made the split disbursement process the
default, or automatic, payment method for all active duty military
employees who use the government travel card with the provision that if
an employee chooses not to use the split disbursement payment method,
approval from the unit commander or first sergeant is required.
Further Improvements in Controls Are Needed:
While the Air Force has made improvements in its control environment
that have resulted in lower delinquency rates than the Army‘s and the
Navy‘s, additional improvements could further reduce Air Force
delinquency rates. In addition, similar to our Army and Navy findings,
control environment weaknesses contributed to significant potential
fraud and abuse of the Air Force travel card. Many of the problem cases
that we reviewed were due to ineffective controls over the issuance of
travel cards and the transfer or cancellation of accounts when
individuals moved to other duty locations, separated, or retired. We
also found that improvements are needed in the assignment and training
of APCs.
Inadequate Controls over Travel Card Issuance:
The Air Force‘s ability to prevent potentially fraudulent and abusive
transactions that can eventually lead to additional delinquencies and
charge-offs is significantly weakened if individuals with histories of
financial irresponsibility are permitted to receive travel cards.
Although the DOD policy provides that all DOD personnel are to use the
travel card to pay for official business travel, the policy also
provides that exemptions may be granted under a number of
circumstances, including financial irresponsibility. However, DOD‘s
policy is not clear as to what level of financial irresponsibility by a
travel card applicant would constitute a basis for such an exemption.
The Air Force‘s practice is to facilitate the issuance of travel cards-
-with few credit restrictions--to all applicants regardless of whether
they have histories of credit problems. We found no evidence that the
Air Force exempted any individuals or groups from required acceptance
and use of travel cards, even those with histories of severe credit
problems.
DOD‘s Financial Management Regulation provides that credit checks be
performed on all travel card applicants, unless an applicant declines
the conduct of a credit check.[Footnote 22] In July 1999, Bank of
America began conducting credit checks on DOD travel card applicants
and used the resulting information as a basis for determining the type
of account--restricted or standard--it would recommend for new DOD
travel applicants.
DOD policy also permits APCs to raise the credit and ATM limits on
restricted cards based on travel requirements. Our analysis of credit
application scoring models and credit risk scores used by major credit
bureaus confirmed that applicants with low credit scores due to
histories of late payments are poor credit risks. Credit bureau
officials told us that if their credit rating guidelines for decisions
on commercial credit card application approvals were used to make
decisions on travel card applicants, a significant number of low-and
mid-level enlisted Air Force cardholders would not even qualify for the
restricted limit cards. A credit history showing accounts with
collection agency action or charge-offs poses an even higher credit
risk. Any of these problems can be a reason for denying credit in the
private sector. However, in DOD individuals with no credit history, or
little credit history, are generally issued restricted cards with lower
credit limits.
Credit industry research and the results of our work demonstrate that
individuals with previous late payments are much more likely to have
payment problems in the future. As discussed in this report, many of
the Air Force travel cardholders that we audited who wrote numerous NSF
checks, had severe prior financial problems, including accounts charged
off, had histories of delinquencies and charge-offs relating to other
credit cards, had accounts in collection, or numerous bankruptcies.
In response to similar findings in our audit of the Army travel card
program and an amendment proposed by Senators Byrd and Grassley, the
Congress included a provision in the Department of Defense
Appropriations Act for fiscal year 2003 requiring the Secretary of
Defense to evaluate whether an individual is creditworthy before
authorizing the issuance of any government charge card.[Footnote 23] If
effectively implemented, this requirement should improve delinquency
rates and reduce potential fraud and abuse.
Inadequate Controls over Travel Card Transfer or Cancellation:
We found numerous examples in which the APCs failed to deactivate or
close accounts when cardholders retired, were dismissed, or separated
from the service, or the APCs failed to take the proper action to
transfer accounts when employees were reassigned to other Air Force
locations. The Air Force lacks sufficient guidance and management focus
in this area. DOD‘s Financial Management Regulation requires APCs to
terminate travel cards when cardholders die, retire, or are dismissed
or separated from DOD. Bank of America has issued procedural guidance
for transferring and terminating cardholder accounts. However, we found
instances in which failure to follow these procedures--specifically
with respect to travel card transfer and termination--resulted in
travel card abuses and charge-offs. The cardholders benefited by using
the travel cards to purchase a variety of goods and services for their
personal use. Some did not pay their monthly bills, thereby essentially
obtaining personal items for no cost. The following examples illustrate
the effect of not taking appropriate actions to transfer, deactivate,
or close travel card accounts.
* A Langley AFB APC failed to close an enlisted member‘s account after
the individual left the service. The member left the service in January
2001, but continued to use his card until March 2001. Because the card
was not canceled immediately upon the member‘s separation, the account
remained open with a $5,000 credit limit allowing the member to charge
unauthorized ATM withdrawals and purchases. The member was not
disciplined because he had already left the service. The APC stated
that she was not aware of the misuse of the travel card until the
account was charged off in April 2002 with an unpaid balance of $3,729.
* At Hill AFB, a senior airman (E-4) transferred to Yokota Air Base,
Japan, in July 2001. The APC was unaware that the individual had
transferred until his travel card account appeared as delinquent on the
Bank of America reports. The APC deactivated the card in September 2001
and made repeated, unsuccessful attempts to contact the individual and
the APC at Yokota Air Base. In January 2002, Bank of America placed the
account totaling $1,918 in salary offset. Although the individual had
continued to appear on Hill AFB delinquency reports, Hill AFB officials
could not take any disciplinary action because the individual was no
longer assigned to them. The account was eventually transferred from
Hill to Yokota Air Base in March 2002. According to EAGLS data, the
individual issued two nonsufficient fund (NSF) checks to Bank of
America in March and April 2002 in payment of his account. Bank of
America closed the account in June 2002.
* Brooks AFB travel card officials failed to cancel the travel card
account when a civilian employee (GS-13) separated from the service in
January 2000 and began working for a private contractor. The civilian
continued to use his travel card after separation, charging over
$17,000 in unauthorized purchases. The charges included approximately
$1,000 in cash advances and several charges for an on-line dating
service. The cardholder was not disciplined for the abuse because he
had separated from the service. Information from EAGLS shows that the
account was closed on September 13, 2002, and as of October 25, 2002,
the account had an unpaid balance of approximately $1,600, which had
not yet been charged off.
Insufficient Commitment to Human Capital Practices:
We found a lack of emphasis on APC training and inadequate monitoring
of APC training at two of our three case study locations--Nellis AFB
and Travis AFB. As in our Army and Navy travel card audits, we found
that Air Force APCs had excessive responsibilities. For example, APC
duties were being assigned as collateral duties and certain APCs were
responsible for as many as 1,200 accounts. We also found excessive
turnover associated with military APCs at Nellis AFB and Travis AFB.
GAO‘s internal control standards state that management‘s commitment to
competence and good human capital practices are critical factors in
establishing and maintaining a strong internal control environment.
Specifically, our standards state that management should identify
appropriate knowledge and skills required for various jobs and should
provide needed training. The standards also state that establishing
appropriate human capital practices, including hiring, training,
evaluating, counseling, and disciplining personnel, is another critical
control environment factor.
Lack of Emphasis and Inadequate Monitoring of APC Training:
The emphasis on APC training varied across the three case study sites.
Nellis AFB did not have a control mechanism in place to help ensure
that all APCs received appropriate training and Travis AFB did not
train APCs in a timely manner. Specifically, Travis AFB APCs told us
that they did not receive timely training on how to access and use Bank
of America EAGLS data to monitor travel card activity when they were
assigned APC duties. However, we determined that Hill AFB had a
mechanism in place to monitor APC training, and it provided that
training in a timely manner.
DOD policy provides that travel card training materials are to be
distributed throughout the department and that APCs are to be informed
of policy and procedural changes relating to the travel card program.
However, neither DOD nor Air Force-wide procedures detail requirements
for the extent, timing, and documentation of travel program training
for APCs. APCs are not required to receive training on the duties of
the position or on how to use available Web-based tools and reports
from Bank of America before they assume their APC duties. The lack of
emphasis on training could negatively impact APCs‘ ability to monitor
delinquencies and promptly detect and prevent potentially fraudulent
and abusive activities.
Excessive APC Turnover and Responsibilities:
As in our Army and Navy work, we determined that most Air Force APC
duties were usually given to military personnel. As a result, APC
positions usually have high turnover rates which, in many cases, have
resulted in less effective performance of APC duties, such as
monitoring cardholder travel card activity. For example, at Nellis AFB,
the average length of assignment for APCs was approximately 12 months,
and at Travis AFB assignments for military APCs were generally from 12
to 15 months. In addition, a Pacific Air Force official reported that
during a recent 3-month period, one base experienced turnover in 18 of
its 30 APC positions. In contrast, at Hill AFB, where most of the APCs
were civilians, the average term for civilian APCs was approximately 20
months.
Further, we found that Air Force APC duties at the locations we audited
were ’other duties as assigned.“ The primary duties for certain APCs
that we interviewed included data systems management and aircraft
maintenance. As prescribed by the DOD Financial Management Regulation,
APCs ’are responsible for the day-to-day operations of the DOD Travel
Card Program.“ Volume 9, Chapter 3 of the DOD Financial Management
Regulation provides that APCs are responsible for a variety of key
duties, including establishing and canceling cardholder accounts,
tracking cardholder transfers and terminations, monitoring and taking
appropriate actions with respect to account delinquencies, interacting
with the bank, and fielding questions about the program from both
cardholders and supervisors. APCs are also required to notify
commanders and supervisors of all travel card misuse so they can take
appropriate actions. Several APCs that we interviewed told us they did
not receive training on the full range of their APC duties until at
least six months after they were assigned APC responsibilities. The
APCs also told us they were not trained in using EAGLS until six months
or more after they were assigned APC responsibilities.
In addition to the part-time nature of APC duties, the number of travel
cardholders assigned to APCs can result in excessive span of control,
which impacts an APC‘s ability to effectively perform monitoring and
oversight. If the span of control is excessive, APCs may not be able to
provide the necessary oversight to prevent the misuse of the travel
cards. Table 4 shows the average span of control and incidences of APCs
with a span of control greater than 100 cardholders.
Table 4: APC Span of Control at Selected Air Force Locations in Fiscal
Year 2002:
Air Force Location: Hill AFB; Average ratio of open cardholder accounts
to APC: 209 to 1; Percent and number of APCs with a span of control
greater than 100 open cardholder accounts: 62% (23).
Air Force Location: Nellis AFB; Average ratio of open cardholder
accounts to APC: 132 to 1; Percent and number of APCs with a span of
control greater than 100 open cardholder accounts: 35% (16).
Air Force Location: Travis AFB; Average ratio of open cardholder
accounts to APC: 264 to 1; Percent and number of APCs with a span of
control greater than 100 open cardholder accounts: 84% (21).
Source: GAO analysis of Air Force data.
[End of table]
As shown in table 4, average APC span of control ratios varied at our
case study locations. We also found that a high percentage of APCs had
a span of control that exceeded Bank of America guidelines of 100
cardholders per APC. While we did not evaluate the guidance provided by
Bank of America, we believe that one APC cannot effectively carry out
all necessary management and oversight responsibilities if he or she,
even working full-time, has responsibility for hundreds of cardholders.
Access Controls over Bank of America‘s Travel Card System:
Thousands of Bank of America and DOD employees had access to Bank of
America‘s travel card transaction data system, known as EAGLS. Computer
system access controls are intended to permit authorized users to
access the system to perform their assigned duties and preclude
unauthorized persons from gaining access to sensitive information.
Access to EAGLS is intended to be limited to authorized users to meet
their information needs and organizational responsibilities.
Authorized EAGLS users include both customers (APCs requiring access to
travel data for cardholders under their purview and individual
travelers requiring access to their own travel transaction histories)
and Bank of America employees who may be granted one of five different
levels of access depending on their assigned duties. The highest level
of Bank of America employee access to EAGLS is the ’super user“ level.
According to Bank of America security officials, this level of access-
-which provides users the ability to add, delete, or modify anything in
the system, including creating accounts and editing transaction data in
the system--should be granted to as few individuals as possible.
We found that 1,127 Bank of America employees had some level of access
to the EAGLS system, including 285 with super user level access. After
we brought this matter to the attention of Bank of America security
officials, they reviewed employee access and deactivated access for 655
employees that they determined should not have had any level of access.
Further, Bank of America has since initiated periodic reviews to ensure
that it maintains appropriate levels of employee access.
In addition, DOD employees retained APC access to EAGLS after
relinquishing their APC duties or after they may have been transferred
or terminated. In a 2000 survey of 4,952 individuals with APC-level
access to EAGLS, DOD found that approximately 10 percent could not be
located and may have been transferred or terminated or no longer had
APC responsibilities. Because of concern that many of these accounts
should be deactivated, Bank of America has begun a review to determine
if DOD employees with APC-level access no longer have APC
responsibilities or have left the service.
Statistical Tests of Key Control Activities:
Of the four key control activities associated with the fiscal year 2001
travel payment process that we tested, we found breakdowns associated
with a lack of documentation to support the accuracy of travel
reimbursements at all three locations and significant breakdowns in
controls at two locations related to requirement for employees to
submit vouchers within 5 days of completing travel. On a positive note,
we found that travel vouchers were almost always paid within 30 days of
submission. As a result, we ruled out late payment of travel vouchers
as a contributing factor to travel card delinquencies at the three Air
Force locations we audited. Our test results also showed that most
travel charges were supported by approved travel orders, indicating
minimal personal use of the travel card. This is considerably lower
than the Army sites we audited, where we estimated that personal
charges were as high as 45 percent at one location. It is also
significantly lower than the Navy sites we audited, where we estimated
that personal charges were as high as 26 percent at one location.
However, as discussed later in this report, our overall Air Force data
mining found several instances of personal use of the government travel
card.
Table 5 below shows the results of our statistical sampling tests.
Appendix II includes the specific criteria we used to conclude on the
effectiveness of these controls.
Table 5: Results of Testing of Key Internal Controls:
Air Force base, major command: Nellis AFB, Air Combat Command;
Percentage of failure: Travel orders are approved prior
to travel: 1; Percentage of failure: Travel voucher reimbursements
are accurate: 16; Percentage of failure: Travel vouchers are submitted
within 5 days of travel completion: 5; Percentage of failure: Travel
vouchers are paid within 30 days of submission: 0.
Air Force base, major command: Travis AFB, Air Mobility Command;
Percentage of failure: Travel orders are approved prior
to travel: 2; Percentage of failure: Travel voucher reimbursements
are accurate: 39; Percentage of failure: Travel vouchers are submitted
within 5 days of travel completion: 17; Percentage of failure: Travel
vouchers are paid within 30 days of submission: 0.
Air Force base, major command: Hill AFB, Air Force Materiel Command;
Percentage of failure: Travel orders are approved prior
to travel: 1; Percentage of failure: Travel voucher reimbursements
are accurate: 13[A]; Percentage of failure: Travel vouchers are
submitted within 5 days of travel completion: 25; Percentage of
failure: Travel vouchers are paid within 30 days of submission: 1.
Source: GAO analysis of Air Force travel process documents.
Note. The numbers in the table represent estimated percentages of
failures in the population based on our sampling tests. The confidence
intervals for our sampling estimates and the basis for our assessment
of the effectiveness of the control activities tested are presented in
app. II.
[A] Hill AFB used two systems to process travel vouchers during fiscal
year 2001. Only travel vouchers processed through the Integrated
Automated Travel System were tested for this attribute.
[End of table]
Controls over Travel Voucher Review and Accuracy:
We found a lack of required receipts for hotel and rental car costs in
the voucher packages associated with a number of transactions in our
sample, indicating that these expenses should not have been reimbursed
to the employees. For the three units we audited, Air Force Financial
Services Offices were responsible for processing vouchers to ensure
that only authorized, properly supported travel charges were reimbursed
and that the expenses claimed were accurately calculated. In our
samples, we found that most errors were in the following categories.
* Missing receipts - At all three case study locations, we found the
majority of errors related to instances in which voucher packages did
not include all required receipts to support claims, based on DOD
regulations. For example, a Nellis AFB cardholder was paid for over
$700 in lodging costs on a voucher for which required receipts were not
attached to the copy of the travel voucher we reviewed. The Nellis AFB
Comptroller told us that he believed the receipts were most likely lost
between the processing of the voucher at Nellis AFB and the filing of
the voucher at the Defense Finance and Accounting Service (DFAS) in
Denver. DFAS Denver officials stated that all of the receipts in the
voucher package were copied for our review. We were unable to determine
whether the missing receipts may have resulted from poor record
retention by DFAS Denver or erroneous payments of expenses without
required receipts. In either case, the process for obtaining and
retaining required receipts was inadequate.
* Errors in amounts paid - We found instances at all three case study
locations in which Financial Services Office personnel used incorrect
per diem rates[Footnote 24] for lodging and meals and incidental
expenses to calculate the reimbursement amount, resulting in
overpayments to the traveler.
Controls over Timely Voucher Submission:
Two of the case study sites we audited--Travis AFB and Hill AFB--had
ineffective controls for ensuring that vouchers were submitted in a
timely manner. DOD policy requires the traveler to submit a travel
voucher within 5 days of return from travel.[Footnote 25] The failure
rates we identified involved late submission of vouchers ranging from 8
to 87 days. Late submission of a travel voucher increases the
likelihood that travel card bills could become due before the employee
receives a reimbursement for travel expenses.
Other Control Weaknesses Identified:
Some of the transactions in our statistical sample could not be
evaluated for key control attributes due to data management problems,
which represent additional control weaknesses. These weaknesses
included data entry errors, such as incorrect social security numbers,
and organizational coding problems related to ’orphan“ accounts--
accounts that fell into limbo because transferring units did not
deactivate travel card accounts when cardholders transferred to new Air
Force units and the cardholders did not check in with the gaining unit
APCs to ensure that their travel card accounts were coded to their new
unit organization codes. When the account of a transferring cardholder
falls into this limbo status, the losing unit continues to receive
reports on the account status, but has no control over the cardholder,
and the gaining unit‘s reports contain no information on the
cardholder‘s account status. Based on our Nellis AFB statistical
testing, we estimated that approximately 2 percent of the fiscal year
2001 transactions were affected by data entry problems and another 4
percent were orphan accounts.
We estimated that approximately 1 percent of the Hill AFB transactions
and 5 percent of the Travis AFB transactions were associated with
orphaned accounts. Our testing did not identify any data entry problems
at either Hill AFB or Travis AFB.
Electronic Data Processing Control Weaknesses in IATS:
Our limited review of selected travel system controls at the three case
study locations found problems in key systems controls, including
access controls, segregation of duties, and transaction histories.
Travel vouchers that we examined at the three test locations were
processed through the Integrated Automated Travel System (IATS), DOD‘s
primary travel voucher processing system. Air Force Audit Agency‘s
February 2002 report on IATS controls identified similar problems at 10
other Air Force locations.[Footnote 26]
Because the IATS performs all processing functions from initiating
travel account records through disbursing travel pay, it is critical
that system controls are in place to protect against fraudulent
payments. Access controls for computer systems must be designed to
provide protection against unauthorized access to computer resources.
One form of access controls is the use of password cracker programs to
test the effectiveness of passwords currently in use. These programs
were not being used at the three sites, therefore making passwords
vulnerable. Another control, required by Air Force Manual 33-223,
Identification and Authentication, is that individual passwords are to
be revised every 90 days. However, we found that this requirement was
not implemented at one of our three case study locations, and
supervisors at Nellis AFB did not follow up to determine if password
change instructions were followed.
We also found a lack of appropriate segregation of duties resulting in
access to incompatible duties in IATS at all three of our test
locations. Users should have access only to data and system functions
required to accomplish their stated responsibilities and they should
not have the ability to perform duties incompatible with their assigned
responsibilities. We found that IATS users at all three case study
locations had conflicting levels of access and, as a result, were able
to not only create travel vouchers, but also to update and audit the
same records. For example, our review of access privileges at Hill AFB
found that assigned privileges for four users afforded them the ability
to perform duties such as creating, updating, and auditing travel
vouchers.
After we called this problem to the attention of the IATS manager, he
immediately revised user access levels to ensure that auditors could
not also create and update travel voucher information. According to the
Air Force Audit Agency report issued in February 2002, this problem is
attributable in some measure to an inherent weakness in the software
design. Although IATS contains various levels of privileges that can be
assigned to individual users, the software design does not effectively
limit access to preclude the assignment of incompatible access
privileges.
In addition, we found that travel voucher data in IATS did not include
transaction histories or audit trails. This problem also was identified
by the Air Force Audit Agency as a systemic problem. Because IATS
software design does not provide the capability to track changes, it is
impossible to obtain transaction histories to determine whether changes
were made, or who may have made changes, to a particular voucher. This
makes the system vulnerable to individuals who could use inappropriate
IATS access to create a fictitious travel voucher, process a payment,
and subsequently delete the travel record. According to the Air Force
Audit Agency report, this problem is being addressed in the design of
WINIATS. WINIATS, a Windows-based software application--is targeted to
replace IATS in June 2003.
Potentially Fraudulent and Abusive Travel Card Activity:
Our work identified numerous instances of potentially fraudulent and
abusive activity associated with the Air Force‘s travel card program
during fiscal year 2001 and the first 6 months of fiscal year 2002,
similar to the types of cases we found in our Army and Navy work. For
purposes of this report, we characterized as potentially fraudulent
those cases where cardholders might have committed bank fraud by
writing three or more NSF checks or by writing checks on closed
accounts to pay their Bank of America bills.
We considered abusive travel card activity to include (1) personal use
of the cards--any use other than for official government travel--
regardless of whether the cardholders paid the bills and (2) cases in
which cardholders were reimbursed for official travel and then did not
pay Bank of America and thus benefited personally. In addition, some of
the travel card activity that we categorized as abusive may be
fraudulent if it can be established that the cardholder violated any
element of federal or state criminal codes. Failure to implement
controls to reasonably prevent such transactions can increase the Air
Force‘s vulnerability to additional delinquencies and charge-offs.
Potentially Fraudulent Transactions:
During the 18-month period covering fiscal year 2001 and the first half
of fiscal year 2002, over 6,300 individuals wrote nonsufficient fund
(NSF) checks, or ’bounced checks,“ to Bank of America as payment for
their travel card bills,[Footnote 27] including over 400 individuals
who wrote three or more NSF checks--potentially fraudulent
acts.[Footnote 28] Potentially fraudulent NSF cases identified in our
work include one individual who had charged over $13,000 to the travel
card account and wrote seven NSF checks to Bank of America. The Air
Force court-martialed the individual and imposed a 90-day confinement
and a reduction in rank. Table 6 includes details on 10 individuals who
committed potentially fraudulent acts by writing three or more NSF
checks to pay their travel card accounts.
Table 6: Examples of Cases in Which Cardholders Wrote Three or More NSF
Checks to Bank of America and Accounts Were Charged Off and/or Placed
in Salary Offset from October 2000 through March 2002:
Cardholder 1; Grade E-6; Unit: Barksdale AFB; Total number/ amount of
NSF checks: 3 for
$3,214, plus 1 forged check for $260; Total charge-off or salary offset
amount: Charge-off; $6,666; Credit history problems: Judgment,
automobile repossession, past due accounts, collection actions, and one
charge-off prior to card issuance; several charge-; offs after card
issuance; Documented disciplinary action: Other than honorable
discharge for travel card abuse.
Cardholder 2; Grade E-3; Unit: Tinker AFB; Total number/ amount of NSF
checks: 7/$23,137; Total charge-off or salary offset amount: Charge-off
$13,908; salary offset; Credit history problems: No credit problems
prior
card issuance; delinquencies, collection actions, and charge-offs after
card
issuance; Documented disciplinary action: Court-martial, 90-day
confinement for travel card abuse.
Cardholder 3; Grade E-6; Unit: Wright-Patterson AFB; Total number for
amount of NSF checks:
3 / $6,235; Total charge-off or salary offset amount: Charge-off;
$7,679; Credit history problems: No credit problems prior to card
issuance; judgment, bankruptcy, and one charge-off after card
issuance; Documented disciplinary action: Court martial, 12 months in
jail, and reduction in rank to E-1 for travel card abuse.
Cardholder 4[A]; Grade E-3; Unit: March AFB; Total number/ amount of
NSF
checks: 4 NSF checks and 3 checks on closed accounts totaling $26,356;
Total charge-off or salary offset amount: Charge-off; $17,436; Credit
history
problems: Bankruptcies and one charge-off prior to card issuance;
automobile repossession, charge-offs and collection actions after card
issuance; Documented disciplinary action: Discharge for travel card
abuse is pending.
Cardholder 5; Grade N/A; Unit: Virginia state employee assigned to
Air National Guard;
Total number/ amount of NSF checks: 4 / $6,048; Total charge-off or
salary offset amount: Charge-off; $2,127; account paid off in June
2002; Credit history problems: No credit problems prior to card
issuance; judgment, charge-offs, collection actions, and delinquencies
after card issuance; Documented disciplinary action: None. Individual
was not an Air Force employee.
Cardholder 6; Grade E-4; Unit: North Carolina Air National Guard;
Total number/ amount
of NSF checks: 4 / $3,022; Total charge-off or salary offset amount:
Charge-off; $3,037; Credit history problems: Collection actions prior
to card issuance; collection actions and charge-offs after card
issuance; Documented disciplinary action: None. Discharged in July
2002 for being absent without leave.
Cardholder 7; Grade E-8; Unit: McChord AFB; Total number/
amount of NSF checks: 4 / $4,058;
Total charge-off or salary offset amount: Charge-off; $4,066;
Credit history problems: Delinquencies and bankruptcy prior to card
issuance; bankruptcy, real estate foreclosure and a charge-off after
card issuance; Documented disciplinary action: None. Individual
retired in July 2001.
Cardholder 8; Grade E-4; Unit: Ft. Walton Beach; Total number/ amount
of NSF checks: 1
NSF check and 7 checks on closed accounts totaling $7,489; Total
charge-off or salary offset amount: Charge-off; $2,111; Credit history
problems: No credit problems prior to card issuance; automobile
repossession, several charge-offs, and collection actions after card
issuance; Documented disciplinary action: None. Individual left the
service in January 2001.
Cardholder 9; Grade E-5; Unit: McChord AFB; Total number/ amount of
NSF checks: 7 /
$4,750; Total charge-off or salary offset amount: Charge-off; $3,781;
salary offset; Credit history problems: A charge-off and collection
action prior to card issuance; charge-offs and collection actions after
card issuance; Documented disciplinary action: None.
Cardholder 10; Grade GS-7; Unit: Hill AFB; Total number/ amount of NSF
checks: 3 /
$5,867; Total charge-off or salary offset amount: Charge-off; $5,952;
Credit history problems: Charge-offs and collection actions prior to
card issuance; redeemed repossession after card issuance; Documented
disciplinary action: None.
Source: GAO analysis of Air Force, Bank of America, and credit history
data.
[A] Cardholder obtained two accounts from Bank of America using
different social security numbers. The first account was opened in
January 2000 and was closed in February 2001 with an unpaid balance of
$4,771, which was subsequently charged off. The cardholder wrote two
checks on a closed account to pay travel card bills associated with
this account.
[End of table]
Of the ten cardholders included in table 6, six had significant credit
problems prior to card issuance, such as charged-off credit card
accounts and automobile loans, bankruptcies, and referrals to
collection agencies for unpaid bills. The following provides detailed
information on some of these cases.
* Cardholder #1 was a reservist technical sergeant (E-6) who served one
weekend each month. Bank of America records showed that the travel card
account was opened on December 22, 1999, and that the individual
subsequently wrote three NSF checks totaling $3,214 in payment of his
travel card bills. In addition, the individual forged a check in the
amount of $260. The individual‘s account was closed on January 9, 2002,
and an unpaid balance of $6,666 was charged off. The individual‘s
credit report showed that he had credit problems prior to issuance of
the government travel card, including repossession of an automobile and
a charged-off account.
Bank representatives had numerous conversations with the individual
about his account. We found that the individual‘s travel card account
was included on monthly delinquency reports. Bank of America ultimately
charged off the travel card account. The individual was discharged from
the Air Force under ’Other Than Honorable Conditions“ for failure to
pay his military travel card bills on time and using his travel card
for unauthorized purposes.
* Cardholder #2 was an airman (E-3) at Tinker AFB, Oklahoma. Bank of
America records showed that the individual‘s account was opened on
August 25, 2000, and that the individual subsequently wrote seven NSF
checks totaling $23,137 in payment of her travel card bills. The
individual submitted NSF checks, which made the account appear to have
available credit--a practice known as ’boosting“--thus enabling the
individual to make cash withdrawals and additional purchases. Bank of
America records also showed that bank representatives had numerous
conversations with the individual about her travel card debt. The
individual‘s account was placed in the salary-offset program on March
19, 2001, with monthly payments of $169. The travel card account was
closed on July 18, 2002, and an unpaid balance of $13,908 was charged
off. The individual‘s credit report showed that the individual did not
have credit problems prior to the issuance of the travel card.
Bank of America notified the squadron about the NSF checks issued in
payment of the individual‘s travel card account. A subsequent Air Force
investigation identified numerous abuses of the travel card, including
multiple uses of the card in 1 day for personal ATM withdrawals, and
187 other instances of misuse totaling approximately $13,700, including
personal purchases at vendors such as Victoria‘s Secret. These findings
resulted in the individual being court-martialed, fined $5,000, and
initially sentenced to confinement on the base for about 135 days;
however, the base commander reduced the sentence to less than 90 days
due to the cardholder‘s pregnancy.
* Cardholder #3 was a technical sergeant (E-6) stationed at Wright-
Patterson AFB, Ohio, and was the APC for his unit. Bank of America
records showed that the individual‘s account was opened on October 10,
1998, and that the cardholder subsequently wrote three NSF checks
totaling $6,235. The individual‘s travel card account was closed on May
3, 2002, and an unpaid balance of $7,679 was charged off. The bank‘s
customer contact log indicates that bank representatives had numerous
conversations with the individual about the delinquent account. The
individual‘s credit report showed significant credit problems prior to
the individual receiving the travel card.
Bank of America notified the squadron that the individual had submitted
several NSF checks to Bank of America. According to an Air Force
official, the problems reported by the bank were especially disturbing
because the individual was a trusted combat veteran with many years of
service, who also functioned as the squadron‘s APC. An Air Force
investigation of the individual‘s travel card abuses revealed that the
individual (1) made approximately $6,000 in personal, nonauthorized
charges, (2) submitted a $4,500 NSF check to the bank to boost the
amount of available credit on his account to permit additional cash
advances, and (3) unrelated to his travel card abuses, the individual
also stole checks in the amount of $7,500 from the U.S. mail. The
individual was court-martialed for travel card abuse and theft of U.S.
mail and sentenced to 1 year in jail, reduced in pay grade to E-1, and
discharged from the military for ’financial difficulties.“:
* Cardholder #4 was an airman (E-3) reservist assigned to March AFB,
California, who was also a full-time DOD employee (GS-9) in a position
involving similar work. Our analysis of Bank of America records showed
that the individual obtained two travel card accounts during two
different periods. The individual issued NSF checks and other checks to
Bank of America on closed accounts in payment of both travel card
accounts. The first account, which was opened in January 2000, was
closed in February 2001 with an unpaid balance of $4,771 that was
subsequently charged off. Air Force officials told us that the
individual obtained the second account in October 2001 by having a
different superior officer, who was unaware of the previous travel card
account, sign the application for the new card. The individual
fraudulently used a relative‘s social security number to apply for the
second travel card account. In payment of his second travel card
account, the individual wrote seven checks to Bank of America,
consisting of four NSF checks totaling $7,131, on an open bank account
and three checks totaling $19,225 on a closed bank account. The
cardholder used NSF checks to make large payments, which enabled him to
boost his available balance and permit cash withdrawals from the
account. An Air Force official stated he was unaware of the problem
because the NSF checks masked the delinquency problem. The individual‘s
second travel card account was closed on June 3, 2002, and an unpaid
balance of $12,665 was charged off. Bank of America‘s customer contact
log indicates that its representatives had numerous conversations with
the individual about this account.
The cardholder resigned his civilian DOD position and was charged with
(1) identity theft related to the use of his relative‘s social security
number, (2) being absent without leave, (3) failure to participate in
monthly training, and (4) financial irresponsibility related to
personal use of the government card when not on military orders. The
individual was in the process of being discharged from his military E-
3 reservist position in October 2002. The individual‘s credit report
showed he had several credit problems, including bankruptcies and a
charge-off prior to his receiving a government travel card.
* Cardholder #5 was a Virginia state employee assigned to the Air
National Guard in Richmond, Virginia. Bank of America records showed
that the individual‘s account was opened on March 18, 1999. The
individual wrote four NSF checks totaling $2,818 and stopped payment on
two checks totaling $3,230 to Bank of America. The individual‘s travel
card account was closed on November 26, 2001, and an unpaid balance of
$2,127 was charged off. The cardholder paid off the account on June 17,
2002. Bank of America records indicate that bank representatives had
numerous conversations with the cardholder about this account. The
individual‘s credit report did not show any significant credit problems
prior to issuance of the card.
The current APC, who assumed that role in July 2001, determined the
individual was delinquent on his government travel card account when he
reviewed Bank of America delinquency reports. The APC referred the
matter to the individual‘s unit commander who subsequently counseled
the individual on ’multiple“ occasions regarding the card‘s use and
delinquency. The APC told us that because the individual was a state
employee and not a member of the Air National Guard, the individual was
not eligible for the Air Force travel card and should not have been
granted a card.
Analysis of Abusive Travel Card Use:
We also found numerous examples of Air Force personnel misusing and
abusing their government travel cards by making transactions that were
clearly not for the purpose of government travel, similar to those we
reported in our Army and Navy reports. As discussed further in appendix
II, we used data mining procedures to identify transactions that we
believed to be potentially fraudulent or abusive based upon the nature,
amount, merchant, and other identifying characteristics of the
transaction. As a result of these procedures, we found instances in
which cardholders abused their travel cards by purchasing a wide
variety of personal goods or services that were unrelated to official
government travel. As shown in table 7, we were able to determine that
during an 18-month period, Air Force cardholders charged approximately
$31,000 to purchase admission to entertainment events, such as NFL
football games and a Janet Jackson concert. We also identified travel
card transactions totaling approximately $14,000 for gambling; $31,000
for cruise packages; and $32,000 coded as purchases at gentlemen‘s
clubs, which provide adult entertainment. The examples shown in table 7
include both instances where the cardholders paid their bills and where
they did not.
Table 7: Examples of Abusive Air Force Travel Card Activity (October 1,
2000, to March 31, 2002):
Category: Cruises; Examples of vendors: Carnival, Celebrity, Norwegian,
and Princess; Number of transactions: 70; Approximate dollar amount: $
31,000.
Category: Gambling; Examples of vendors: GCA*-Global Cash Access, and
www.PROCCY; Number of transactions: 79; Approximate dollar amount:
14,000.
Category: Sports, concerts, and other events; Examples of vendors:
Dallas Cowboys, Backstreet Boys, Janet Jackson, and other Ticketmaster
purchases; Number of transactions: 223; Approximate dollar amount:
31,000.
Category: Gentlemen‘s clubs; Examples of vendors: Spearmint Rhino, Can
Can, Cheetah‘s Lounge, and Déjà Vu Showgirls; Number of transactions:
187; Approximate dollar amount: 32,000.
Category: Legalized brothels; Examples of vendors: 40 Bar Ranch and
Madam Butterfly; Number of transactions: 3; Approximate dollar amount:
1,000.
Source: GAO analysis of Bank of America data.
[End of table]
Our investigative work showed that gentlemen‘s clubs were sometimes
used to convert the travel card to cash by supplying cardholders with
actual cash or ’club cash“ for a 10 percent fee. To illustrate, an Air
Force employee that charged $440 to their government travel card at one
of these clubs, would receive $400 in cash. Such charges are processed
by the establishment‘s merchant bank, and authorized by Bank of
America, in part because the merchant category code (MCC),[Footnote
29]which identifies the nature of the transactions and is to be used by
Bank of America to block improper purchases, are circumvented when the
establishments reported the charges as restaurant, dining, or bar
charges. Subsequently, the club would receive payment for a $440
restaurant charge.
Examples of Travel Card Abuse:
We found cases where individuals used their travel cards for both
official and personal reasons, but failed to pay their accounts,
thereby resulting in accounts that were charged off and/or included in
salary offset and fixed payment plans. Table 8 provides examples of
those cases.
Table 8: Examples of Abusive Travel Card Activity Where Accounts Were
Charged Off and/or Placed in Salary Offset from October 2000 through
March 2002:
Cardholder 1; Grade: E-5; Unit: Idaho Air National Guard; Total
charge-off or salary
offset amount: Charge-off; $7,258; Transactions contributing to charge-
off or salary offset: Employee‘s spouse used his travel card for
Internet gambling; Credit history problems: No prior credit problems.
Due to inability to pay wife‘s excessive gambling debt, the cardholder
filed for bankruptcy; Documented disciplinary action: None.
Cardholder 2; Grade: E-6; Unit: Travis AFB; Total charge-off or salary
offset amount:
Charge-off $1,008; Salary offset; Transactions contributing to charge-
off or salary offset: Failure to pay travel card bill after receiving
reimbursement for government travel expenses; Credit history problems:
Credit card delinquencies prior to card issuance; charge-offs,
collection actions, and automobile repossession after card issuance;
Documented disciplinary action: Counseled, letters of reprimand,
Article 15s, court-martialed and sentenced to 5 years in jail, and
dishonorable discharge for theft of government property.
Cardholder 3; Grade: E-4; Unit: New York Air National Guard; Total
charge-off or salary
offset amount: Salary offset; $6,086; Transactions contributing to
charge-off or salary offset: Personal use including long distance
calls, rental car, and contact lenses; Credit history problems:
Bankruptcy filed and automobile repossession prior to card issuance;
several delinquencies after card issuance; Documented disciplinary
action: Four letters of counseling and intent to discharge related to
failure to pay travel card bills.
Cardholder 4; : GS-15; Unit: Patrick AFB; Total charge-off or salary
offset amount:
Salary offset; $3,174; Transactions contributing to charge-off or
salary offset: Failure to pay travel card bill after receiving
reimbursement for government travel expenses; Credit history problems:
Bankruptcy filed 1 month after travel card issuance and a charge-off in
2002; Documented disciplinary action: None. Balance was paid off on
August 14, 2002, due to GAO scrutiny of account.
Cardholder 5; Grade: E-5; Unit: Langley AFB; Total charge-off or salary
offset amount:
Charge-off; $3,729; Transactions contributing to charge-off or salary
offset: Personal use including ATMs, restaurants, and veterinary
services after separation from the service; Credit history problems:
Judgment prior to card issuance; bankruptcy, multiple charged-off
accounts, and multiple collection actions since card issuance;
Documented disciplinary action: None.
Cardholder 6; Grade: E-5; Unit: Nellis AFB -; transferred to Cannon AFB
in November 2001;
Total charge-off or salary offset amount: Salary offset; $2,224;
Transactions contributing to charge-off or salary offset: Used
government travel card to pay for gambling, adult entertainment at
gentlemen‘s clubs, and miscellaneous personal services; Credit history
problems: Bankruptcy, charge-offs, and collection actions prior to card
issuance; repossession, charge-offs, and delinquency since card
issuance; Documented disciplinary action: Article 15 and reduction in
grade to E-4 for travel card abuse.
Cardholder 7; Grade: O-1; Unit: Nellis AFB; Total charge-off or
salary offset amount:
Salary offset; $7,223; Transactions contributing to charge-off or
salary offset: Spouse made ATM withdrawals and numerous personal
charges at grocery stores, gas stations; 6 NSF checks written to pay
travel card bill; Credit history problems: Automobile repossession
prior to card issuance and credit card delinquencies and charge-offs
since card issuance; Documented disciplinary action: Letter of
admonishment.
Cardholder 8; Grade: E-4; Unit: Nellis AFB; Total charge-off or salary
offset amount:
Salary offset; $446; Transactions contributing to charge-off or salary
offset: ATM withdrawals, wrote 7 NSF checks to pay travel card bill;
Credit history problems: Collection and charge-off actions prior to
card issuance; collection actions, charge-offs, and judgment after card
issuance; Documented disciplinary action: None. Court-martial and
discharge for other than travel card issues.
Cardholder 9; Grade: WG-10[A]; Unit: Hill AFB; Total charge-off or
salary
offset amount:
Charge-off; $3,066; Transactions contributing to charge-off or salary
offset: Failure to pay travel card bill after receiving reimbursement
for government travel expenses; Credit history problems: Credit card
delinquencies and an automobile repossession prior to travel card
issuance. Filed Chapter 7 bankruptcy in June 2002; Documented
disciplinary action: Written documentation of counseling.
Cardholder 10; Grade: WG-10[ A]; Unit: Hill AFB; Total charge-off or
salary offset
amount: Charge-off; $1,029; Transactions contributing to charge-off or
salary offset: Failure to pay travel card bill after receiving
reimbursement for government travel expenses; Credit history problems:
Collections, delinquencies, repossession, and charge-offs prior to
travel card issuance. Bank of America report indicates that cardholder
has filed for bankruptcy; Documented disciplinary action: None.
Source: GAO analysis of Air Force, Bank of America, and credit history
data.
[A] Wage Grade (WG) positions are paid at hourly rates and generally
pertain to government positions, such as maintenance, printing, and
landscaping.
[End of table]
The following examples include details of cases summarized in table 8.
* Cardholder #1 is a staff sergeant (E-5) in the Idaho Air National
Guard who is employed full-time as a juvenile counselor at a county
correctional facility. The cardholder told our investigators that from
December 22, 2000, to February 19, 2001, his wife used his government
travel card without his knowledge or consent. Bank of America records
showed that transactions for the above period totaled over $13,000, of
which over $10,000 was for on-line gambling charges and another $3,000
was for ATM withdrawals. There were also several credits to the
cardholder‘s account totaling over $5,000 from his wife‘s gambling
winnings. The cardholder‘s wife admitted to a gambling addiction and to
using their personal bank debit card and her husband‘s government
travel card to fund her addiction.
Upon discovering his wife‘s abusive use of his government travel card,
the cardholder immediately briefed his commanding officer, who informed
the APC, and the account was closed. The cardholder also contacted Bank
of America to work out a payment plan for the debt but no agreement
could be reached. As a result of his inability to pay the debt incurred
by his wife, the cardholder filed for Chapter 7 bankruptcy. On
September 3, 2001, Bank of America charged off an unpaid balance of
$7,258 on the cardholder‘s travel card account. To date, no criminal
charges have been initiated against the cardholder‘s now ex-wife.
In researching this case, we noted that although DOD has requested that
Bank of America block certain merchant category codes to help prevent
improper travel card transactions, such as transactions for on-line
gambling at www.PROCCY, merchants are able to circumvent such
restrictions by assigning permissible merchant codes to otherwise
improper transactions. For example, in this case, to mask gambling
activity, the on-line gambling establishments with whom the
cardholder‘s wife dealt used the merchant category codes for
’Miscellaneous and Specialty Retail Stores“ and ’Professional Services-
-Not Elsewhere Classified“ instead of the merchant category code for
’Betting--Including Lottery, Gaming Chips, Track Wagers.“ However,
these establishments credited the wife‘s winnings to the cardholder‘s
account using the merchant category code for ’Betting--Including
Lottery, Gaming Chips, Track Wagers.“ Active monitoring by the APC of
ongoing travel card activity would have helped detect the problem
transactions sooner.
* Cardholder #2 was a highly skilled technical sergeant (E-6) at Travis
AFB, California, who held a secret clearance and worked on C-5
aircraft, large cargo aircraft designed for airlifting weapons and
supplies. Our discussions with base officials and our review of the
cardholder‘s personnel file and credit report revealed that the
cardholder had several credit card delinquencies prior to issuance of
the travel card. In March 1998, prior to being assigned to Travis AFB,
the cardholder had received an Article 15[Footnote 30] for wrongfully
using his American Express government travel card for personal gain and
blaming the misuse of the travel card on another family member.
In March 2001, when the individual transferred to Travis AFB, his new
APC noted that the individual‘s travel card account had a past due
balance of $2,257. The APC reported this information to the
cardholder‘s unit commander. At that time, the account was suspended
and Bank of America closed and canceled the cardholder‘s account a week
later. However, Travis AFB officials told us that they asked Bank of
America to keep the individual‘s travel card account open so that he
could travel where necessary to make repairs to downed C-5 aircraft.
The officials told us that the cardholder was one of a few experts who
could supervise repairs on the C-5 aircraft. According to the
officials, when problems arose with the aircraft, repairs had to be
made immediately to get the plane back in the air.
On April 16, 2001, the unit commander counseled the cardholder and gave
him a letter of reprimand for nonpayment of his travel card bill. On
June 25, 2001, the cardholder received another Article 15 for failure
to pay his ’Military Star Account“ with the base Army and Air Force
Exchange Service (AAFES) store. Both Article 15s and the letter of
reprimand contained statements indicating that this behavior would not
be tolerated. It is apparent that this statement on the documents did
not deter the individual from being delinquent, nor did the officials
abide by these statements.
During the fall of 2001, Air Force investigators were notified that
personal protective gear, including body armor and biochemical and
biological protective masks, was missing from C-5s arriving in
Afghanistan. The cardholder came under suspicion as one of a few
individuals with access to C-5 aircraft. During the ensuing
investigation involving the individual, his security badge was revoked
and he had to be escorted to and from his worksite. Shortly thereafter,
Air Force investigators videotaped the individual selling military
protective gear in a town near the base, and the individual was
arrested and charged with theft and sale of government property.
Investigators determined that the individual was addicted to gambling
and had used his government travel card reimbursements and the proceeds
from the sale of stolen government property to finance his gambling
habit. In January 2002, the individual was court-martialed, and in
March 2002, he was convicted of theft and sale of $50,000 in government
property and was dishonorably discharged. He was sentenced to a 5-year
jail term. Air Force investigative and legal officials told us that the
individual‘s failure to pay his travel card debt was considered in the
sentencing decision.
If Travis AFB officials had acted sooner to cancel the technical
sergeant‘s travel card account, revoke his security clearance, and
discharge him from the service, they may have prevented the theft of
critical protective gear needed by troops deployed in Afghanistan.
Travel Card Abuse Where Cardholders Paid Their Bank of America Bills:
Further, we found examples where individuals used their government
travel cards for personal use on purchases of items, such as computers,
entertainment, college tuition, and jewelry, but kept their accounts
current by paying their travel card bills in a timely manner. We
considered these purchases to be abusive travel card activity because
the travel card may only be used for official government travel
expenses. Personal use of the travel card may increase the risk of
charge-offs, which are costly to the government and the taxpayer. In
addition, instances of personal use are indicative of internal control
breakdowns, such as the failure of the APCs to monitor travel card
activities. Table 9 provides details on 10 cases where the cardholders
made personal purchases but paid their accounts.
Table 9: Examples of Abusive Activity Where the Cardholders Paid Their
Bills from October 2000 through March 2002:
[See PDF for image]
Source: GAO analysis of Air Force and Bank of America data.
[End of table]
The instances illustrated in this report clearly represent abusive use
of the government travel card. Air Force personnel are informed that
these types of transactions are not permitted. All Air Force
cardholders are required to sign a statement of understanding that the
card is to be used only for authorized official government travel
expenses.
Abusive Activity Not Effectively Linked to Disciplinary Action and
Security Clearances:
Air Force policy provides commanders with a wide variety of
disciplinary options for addressing misconduct by service members. The
means of discipline include counseling, oral and written reprimands,
creating an unfavorable information file, issuing Article 15s, and
court-martial. The policy leaves the means of discipline and the actual
punishment to the discretion of the individual commander based upon the
facts of each case. However, for the cases involving 58 cardholders
whose accounts involved NSF checks, charge-offs, or salary offsets, we
found documented evidence of disciplinary actions in only 19 cases. Our
analysis of cases where travel card accounts had been charged off, were
in salary offset, or involved NSF checks showed that when the Air Force
took disciplinary actions, those actions ranged from counseling to
court-martial and discharge from the service. In certain cases where
documentation of disciplinary actions was not available, Air Force
officials told us that verbal counseling had been provided, but was not
documented. In other cases where documentation was not available, Air
Force officials claimed that disciplinary actions had been taken, but
records had not been retained because the individuals had transferred
or left the service. At Hill AFB, most of the cases we reviewed
involved civilians. Air Force Instruction 36-704, Discipline and
Adverse Actions, provides guidance on disciplinary action for civilians
who fail to honor valid debts or legal obligations. However, the
guidelines limit disciplinary action to reprimands, even after the
third offense.
In addition, we found that 32 of the 58 most severe abusers of the
travel card still had secret or top secret clearances in August 2002.
According to Air Force Instruction 31-501, Personnel Security Program
Management, military units are responsible for maintaining unfavorable
information files on individuals, and are supposed to notify the
central security facility of instances of financial irresponsibility or
other behavioral problems that may affect an individual‘s security
clearance. However, we determined that the Air Force does not have
consistent procedures in place to link travel card account
delinquencies or charge-off status to an individual‘s security
clearance.[Footnote 31] Some of the Air Force personnel holding
security clearances who have had difficulty paying their travel card
bills may present security risks to the Air Force. We have referred the
names of these individuals to the Air Force Central Adjudication
Facility for appropriate evaluation.
Linking disciplinary actions and security clearances to misuse of
travel cards was recently addressed by the fiscal year 2003 Defense
Appropriations Act. In addition to requiring the Secretary of Defense
to establish guidance and procedures for disciplinary actions, section
8149(c) of the act states that such actions may include (1) review of
the security clearance of the cardholders in cases of misuse of the
government travel card, and (2) modification or revocation of the
security clearance in light of such review.
Recent Actions:
Since March 2002, DOD and the Air Force have taken additional actions
to reduce delinquencies in the travel card program. For example, the
DOD Comptroller established a Charge Card Task Force to address
management issues related to DOD‘s purchase and travel card programs.
The task force issued its final report on June 27, 2002, which called
for additional actions to improve the controls over the travel card
program. However, to date, many of the actions that DOD has taken
primarily address the symptoms rather than the underlying causes of the
problems with the program. Specifically, actions to date have focused
on dealing with accounts that are seriously delinquent, which are ’back
end“ or detective controls rather than preventive controls.
On September 27, 2002, the Air Force Assistant Secretary for Financial
Management (Comptroller) issued a memorandum emphasizing travel card
management tools and policy updates to assist local commanders in the
detection of travel card misuse. Specifically, the memorandum (1)
directed that travel cards that have had no activity within the last 12
months be canceled, (2) emphasized that program coordinators should use
new EAGLS exception reports to help identify suspicious card activity
that may indicate abuse or potential delinquency problems before they
appear on delinquency reports, and (3) noted that the Air Force is
conducting a thorough review of MCCs to ensure that cards cannot be
used at establishments that are not travel related. In addition, Air
Force officials told us they also are considering contracting for data
mining services to support their oversight of the travel card program.
The Congress has recently addressed several of the key issues we
identified in our Army and Navy work. Section 8149(b) of the Department
of Defense Appropriations Act, 2003, requires creditworthiness
evaluations of all potential cardholders and guidelines and procedures
for disciplining individuals for fraudulent and abusive use of
government travel cards. Further, section 1008(a) and (b) of the Bob
Stump National Defense Authorization Act for Fiscal Year 2003 provides
authority for the Secretary of Defense to require (1) use of the split
disbursement process, where any part of a DOD employee‘s or service
member‘s travel reimbursement is paid directly to the travel card-
issuing bank, and (2) deductions of prescribed amounts from salary and
retirement pay of DOD employees or service members who have delinquent
travel card balances and payment of those amounts to the travel card-
issuing bank.
Conclusions:
The intent of the travel card program was to improve convenience for
the traveler and to reduce the government‘s costs of administering
travel. Since implementation of the travel card as part of its travel
program, the Air Force changed its management strategies to oversee the
use of government travel cards. What once was a weak internal control
environment in the travel program has been strengthened, resulting in a
decrease in delinquency rates and charge-offs of bad debts. Despite
these efforts, the Air Force continues to experience potentially
fraudulent and abusive travel card activity.
Air Force and DOD actions addressed many areas in the program needing
improvements. However, DOD and the Air Force will need to implement
further improvements to more effectively prevent potentially fraudulent
and abusive activity and further reduce severe credit problems
associated with the travel card. A focus on additional ’front-end“ or
preventive controls will be paramount. In this regard, section 8149(c)
of the fiscal year 2003 DOD Appropriations Act requires
creditworthiness evaluations of all potential cardholders and
guidelines and procedures for disciplining individuals for fraudulent
and abusive use of government charge cards.
Recommendations for Executive Action:
To strengthen the overall control environment and improve internal
control for the Air Force‘s travel card program, we recommend that the
Secretary of the Air Force take the following actions. We also
recommend that the Under Secretary of Defense (Comptroller) assess the
following recommendations and, where applicable, incorporate them into
or supplement the DOD Charge Card Task Force recommendations to improve
travel card policies and procedures throughout DOD.
Travel Card Issuance:
We recommend that the Secretary of the Air Force establish specific
policies and procedures governing the issuance of individual travel
cards to military and civilian employees, including the following.
* In accordance with recently enacted legislation, provide individuals
who have no prior credit histories ’restricted“ travel cards with low
credit and ATM limits.
* Develop procedures to periodically evaluate the frequency of
cardholders‘ travel card use and close accounts of infrequent travelers
in order to minimize exposure to fraud and abuse. In conjunction with
the periodic reviews, cancel accounts for current infrequent travelers
as noted in the Charge Card Task Force report.
* Evaluate the feasibility of activating and deactivating travel cards,
regardless of whether they are standard or restricted cards, so that
they are available for use only during the period authorized by the
cardholders‘ travel orders. At a minimum, this policy should focus on
controlling travel card use by ’high-risk“ enlisted military personnel
in the E-1 to E-6 grades.
* Develop comprehensive, consistent Air Force-wide initial training and
periodic refresher training for travel cardholders that focuses on the
purpose of the program and appropriate uses of the card. The training
should emphasize the prohibitions on personal use of the card,
including gambling, personal travel, and adult entertainment. Such
training should also address the policies and procedures of the travel
order, voucher, and payment processes. For entry-level personnel, the
training should also include information on basic personal financial
management techniques to help avoid financial problems that could
affect an individual‘s ability to pay his or her travel card bill.
Monitoring and Review Actions:
We recommend that the Secretary of the Air Force establish the
following specific policies and procedures to strengthen controls to
address improper use of the travel card.
* Establish guidance regarding the knowledge, skills, and abilities
required to carry out APC responsibilities effectively.
* Establish guidance on APC span of control responsibilities so that
such responsibilities are properly aligned with time available to
ensure effective performance. Determine whether certain APC positions
should be staffed on a full-time basis rather than as collateral
duties.
* Establish Air Force-wide procedures to provide assurance that APCs
receive training on their APC responsibilities, including requirements
for monitoring cardholders‘ travel card use. The training should
include how to use EAGLS transaction reports and other available data
to monitor cardholder use of the travel card--for example, reviewing
account transactional histories to ascertain whether transactions are
incurred during periods of authorized travel and appear to be
appropriate travel expenses and are from approved MCCs.
* Require agency program coordinators to review EAGLS reports to
identify cardholders who have written NSF checks for payment on their
account balances and refer this data to the employee‘s immediate
supervisor.
* Review, in conjunction with Bank of America, APC-level access to
EAGLS to limit such access to only those individuals with current APC
duties.
* Establish Air Force procedures detailing how APCs should carry out
their responsibility to monitor travel card use for all cardholders
assigned to them. Include in the procedures the development of a data
mining program that would enable APCs to easily identify potentially
inappropriate transactions for further review.
* Enforce controls for canceling accounts after employees transfer to
other units to avoid ’orphan“ accounts that are not subject to
effective management oversight.
* Require cognizant APCs to retain records documenting any cardholder‘s
fraudulent or abusive use of the travel card and require that this
information be provided to the gaining APC when the cardholder is
transferred.
* Review records of individuals whose accounts had been charged off or
placed in salary offset to determine whether they have been referred to
Air Force Central Adjudication Facility for a security review.
* Strengthen procedures regarding employees leaving the service to
assure that all travel card accounts are deactivated or closed and that
repayment of any outstanding debts is arranged. Perform a review to
determine that these procedures are implemented effectively and that
accounts of departed cardholders are deactivated or closed in a timely
manner.
* Develop procedures to identify active cards of departed cardholders,
including comparing cardholder and payroll data.
Agency Comments and Our Evaluation:
In oral comments on a draft of this report, DOD and the Air Force
concurred on all 16 of our recommendations and stated that it had taken
actions or had actions underway to address many of them. For example,
with respect to actions completed, DOD stated that the Air Force
recently implemented procedures to (1) evaluate the frequency of
cardholder travel card use and close travel card accounts that were not
used in the past year and (2) work with Bank of America to perform
semi-annual reviews of travel card use. With respect to actions
underway, (1) the Air Force has started a project to evaluate the
feasibility of deactivating travel cards so that they are available for
use only during periods of authorized travel and (2) DOD is evaluating
travel card training and developing revised policy requirements for APC
span of control and travel card management responsibilities.
As agreed with your offices, unless you announce the contents of this
report earlier, we will not distribute this report until 30 days from
its date. At that time, we will send copies to interested congressional
committees; the Secretary of Defense; the Under Secretary of Defense
(Comptroller); the Secretary of the Air Force; the Assistant Secretary
of the Air Force for Financial Management (Comptroller); the Director
of the Defense Finance and Accounting Service; and the Director of the
Office of Management and Budget. We will make copies available to
others upon request. In addition, the report will be available at no
charge on the GAO Web site at http://www.gao.gov.
Please contact Gregory D. Kutz at (202) 512-9505 or kutzg@gao.gov, John
J. Ryan at (202) 512-9587 or ryanj@gao.gov, or Gayle L. Fischer at
(202) 512-9577 or fischerg@gao.gov, if you or your staffs have any
questions concerning this report. Major contributors to this report are
acknowledged in appendix VI.
Signed by:
Gregory D. Kutz
Director
Financial Management and Assurance:
Signed by:
Robert J. Cramer
Managing Director
Office of Special Investigations:
[End of section]
Appendixes:
Appendix I: Background:
In 1983, the General Services Administration (GSA) awarded a
governmentwide master contract with a private company to provide
government-sponsored, contractor-issued travel cards to federal
employees to be used to pay for costs incurred on official business
travel. The intent of the travel card program was to provide increased
convenience to the traveler and lower the government‘s cost of travel
by reducing the need for cash advances to the traveler and the
administrative workload associated with processing and reconciling
travel advances. The travel card program includes both individually
billed accounts--accounts held and paid by individual cardholders--and
centrally billed accounts that are used to purchase transportation or
are used for the travel expenses of a unit and are paid directly by the
government. As of the end of fiscal year 2001, over 2.1 million
individually billed travel cards were issued to federal government
travelers. These travel cardholders charged $3.6 billion during the
same fiscal year.
Under the current GSA master contract, the Department of Defense
entered into a tailored task order with Bank of America[Footnote 32] to
provide travel card services to DOD and the military services,
including the Air Force. Table 10 provides the number of individually
billed travel cards outstanding and related dollar amount of travel
card charges by DOD and its components in relation to the total federal
government.
Table 10: Comparison of Number of Individually Billed Travel
Cardholders and Related Charges for DOD versus Total Federal Government
for Fiscal Year 2001:
Entity: Air Force; Number of individually billed travel card accounts
as of September 30, 2001: 501,306; Fiscal year 2001 individually billed
travel card charges: $831.
Entity: Navy (includes Marine Corps); Number of individually billed
travel card accounts as of September 30, 2001: 394,952; Fiscal year
2001
individually billed travel card charges: 510.
Entity: Army; Number of individually billed travel card accounts as of
September 30, 2001: 432,460; Fiscal year 2001 individually billed
travel card charges: 619.
Entity: Other DOD; Number of individually billed travel card accounts
as of September 30, 2001: 86,922; Fiscal year 2001 individually
billed travel card charges: 174.
Entity: Total DOD; Number of individually billed travel card accounts
as of September 30, 2001: 1,415,640; Fiscal year 2001 individually
billed
travel card charges: $2,134.
Entity: Total federal government; Number of individually billed travel
card accounts as of September 30, 2001: 2,132,031; Fiscal year 2001
individually billed travel card charges: $3,634.
Entity: DOD percentage of total federal government; Number of
individually billed travel card accounts as of
September 30, 2001: 66%; Fiscal year 2001 individually billed travel
card charges: 59%.
Source: Bank of America data.
[End of table]
As shown in table 10, DOD accounts for about 1.4 million, or 66
percent, of the total number of the individually billed travel cards
issued by the entire federal government, and DOD‘s cardholders charged
about $2.1 billion, or about 59 percent of the federal government‘s
travel card charges during fiscal year 2001. Table 10 also shows that
the Air Force provided 501,306 individually billed cards to its
civilian and military employees as of September 2001. These cardholders
charged an estimated $831 million to their travel cards during fiscal
year 2001.
Travel Card Program Guidelines:
The Travel and Transportation Reform Act of 1998 (Public Law 105-264)
expanded the use of government travel cards by mandating the use of the
cards for all official travel unless specifically exempted. The act is
intended to reduce the overall cost of travel to the federal government
through reduced administrative costs and by taking advantage of rebates
from the travel card contractor. The act requires that agencies
reimburse cardholders for proper travel claims within 30 days of
submission of approved travel vouchers by the cardholders.[Footnote 33]
Further, the act allows, but does not require, agencies to offset a
cardholder‘s pay for amounts the cardholder owes to the travel card
contractor as a result of travel card delinquencies not disputed by the
cardholder. The act calls for GSA to issue regulations incorporating
the requirements of the act.
GSA incorporated the act‘s requirements into the Federal Travel
Regulation. The Federal Travel Regulation governs travel and
transportation and relocation allowances for all federal government
employees, including overall policies and procedures governing the use
of government travel cards. Agencies are required to follow the
requirements of GSA‘s Federal Travel Regulation, but can augment these
regulations with their own implementing regulations.
DOD issued its Financial Management Regulation (FMR), Volume 9, Chapter
3, ’Travel Policies and Procedures,“ to supplement GSA‘s travel
regulations. DOD‘s Joint Travel Regulations, Volume 1, ’Uniformed
Service Members,“ and Volume 2, ’Civilian Personnel,“ refer to the FMR
as the controlling regulation for DOD‘s travel cards.
Air Force Travel Process:
As shown in figure 7, the Air Force‘s travel card management program
for individually billed travel card accounts encompasses card issuance,
travel authorization, cardholders charging goods and services on their
travel cards, travel voucher processing and payment, and managing
travel card usage and delinquencies.
Figure 7: Overview Flowchart of the Air Force Travel Process:
[See PDF for image]
[A] The Defense Finance and Accounting Service allows a traveler to
direct a portion, or all, of the voucher reimbursement to Bank of
America.
[B] See figure 9 for specific actions to be taken by the agency program
coordinator.
[End of figure]
Travel Card Issuance and Termination:
When a Air Force civilian or military employee or the employee‘s
supervisor determines that he or she will need a travel card, the
employee contacts the unit‘s travel card agency program coordinator
(APC) to complete an individually billed card account application form.
As shown in figure 8, the application requires the applicant to provide
pertinent information, including full name and social security number,
and indicate whether he or she is an active, reserve, or a civilian
employee of the Air Force. The applicant is also required to initial a
statement on the application acknowledging that he or she has read and
understands the terms of the travel card agreement and agrees to be
bound by these terms, including a provision acknowledging that the card
will be used only for official travel. The APC is required to complete
the portion of the member‘s application concerning who will be
responsible for managing the use and delinquencies related to the card.
Bank of America is required to issue a travel card to all applicants
for whom it receives completed applications signed by the applicants,
the applicants‘ supervisors, and the APCs.
Figure 8: Travel Card Application:
[See PDF for image]
[End of figure]
Bank of America issues travel cards with either a standard or
restricted credit limit. If an employee has little or no credit history
or poor credit based on a credit check performed by Bank of America,
Bank of America may suggest to the service that the applicant receive a
restricted credit limit of $2,000 instead of the standard credit limit
of $5,000. However, as shown in figure 8, the application allows the
employee to withhold permission for Bank of America to obtain credit
reports. If this option is selected, Bank of America automatically
issues a restricted credit limit card to the applicant.
Before cardholders leave the Air Force, they are required to contact
their APCs and notify them of their planned departure. Based on this
notification from the cardholders, the APCs are to deactivate or
terminate the cardholders‘ accounts.
Travel Authorization:
When a cardholder is required to travel for official government
purposes, he or she is issued a travel order authorizing travel. The
travel order is required to specify the timing and purpose of the
travel authorized. For example, the travel order is to authorize the
mode of transportation, the duration and points of the travel, and the
amounts of per diem and any cash advances. Further, the Air Force can
limit the amount of authorized reimbursement to military members based
on the availability of lodging and dining facilities at military
installations.
Using the Travel Card for Official Travel Expenses:
For authorized travel, travelers must use their cards to pay for
allowable expenses such as hotels, rental cars, and airfare. The travel
card can also be used for meals and incidental expenses or cash can be
obtained from an automatic teller machine.
When the travel card is submitted to a merchant, the merchant will
process the charge through its banking institution, which in turn
charges Bank of America. At the end of each banking cycle (once each
month), Bank of America prepares a billing statement that is mailed to
the cardholder for the amounts charged to the card. The statement also
reflects all payments and credits made to the cardholder‘s account.
Bank of America requires that the cardholder make payment on the
account in full within 30 days of the statement closing date. If the
cardholder does not pay his or her monthly billing statement in full,
and does not dispute the charges within 60 days of the statement
closing date, the account is considered delinquent.
Travel Voucher Submission and Processing:
Within 5 duty days of return from travel, the cardholder is required to
submit a travel voucher claiming legitimate and allowable expenses
incurred while on travel. Further, the standard is for the cardholder
to submit an interim voucher every 30 days for extended travel of more
than 45 days. The amount that cardholders are reimbursed for their
meals and incidental expenses and hotels is limited by geographical
rates established by GSA.
Upon submission of a proper voucher by the cardholder, DOD has 30 days
in which to make reimbursement without incurring late payment fees.
Cardholders are required to submit their travel vouchers to their
supervisors or other designated approving officials who must review the
vouchers and approve them for payment. If the review finds an omission
or error in a voucher or its required supporting documentation, the
approving official must inform the traveler of the error or omission.
After the supervisor approves a cardholder‘s travel voucher package for
payment, the voucher-processing unit at the location to which the
cardholder is assigned processes it. The voucher-processing unit enters
travel information from the approved voucher into DOD‘s Integrated
Automated Travel System (IATS). IATS calculates the amount of per diem
authorized in the travel order and voucher and the amount of mileage,
if any, claimed by the cardholder. In addition, any other expenses
claimed and approved are entered into IATS. If problems with the
voucher are found during the initial entry of the information into IATS
or during audits after the initial entry, the voucher can be rejected
and returned to the cardholder for correction. Once the vouchers are
processed and possibly audited, they are sent to DFAS for payment to
the cardholder or to Bank of America and the cardholder, if the
cardholder elected to use the split disbursement payment process
whereby part of the reimbursement is sent directly to Bank of America.
If the payment of the approved proper voucher takes longer than 30
days, DOD is required to pay the cardholder a late payment fee plus an
amount equal to the amount Bank of America would have been entitled to
charge the cardholder had the cardholder not paid the bill by the due
date.
Monitoring Travel Card Transaction Activity:
In addition to controlling the issuance and credit limits related to
the travel card, APCs are also responsible for monitoring the use of
and delinquencies related to travel card accounts for which they have
been assigned management responsibility. Bank of America‘s Web-based
Electronic Account Government Ledger System (EAGLS) provides on-line
tools that are intended to assist APCs in monitoring travel card
activity and related delinquencies. Specifically, APCs can access EAGLS
to monitor and extract reports on their cardholders‘ travel card
transaction activity and related payment histories.
Managing Delinquent Cardholder Accounts:
Both the Air Force and Bank of America have a role in managing travel
card delinquencies under GSA‘s master contract. While APCs are
responsible for monitoring cardholders‘ accounts and for working with
cardholders‘ supervisors to address any travel card payment
delinquencies, Bank of America is required to use EAGLS to notify the
designated APCs if any of their cardholders‘ accounts are in danger of
suspension or cancellation. When Bank of America has not received a
required payment on any travel cardholder‘s account within 60 days of
the billing statement closing date, it is considered delinquent. As
summarized in figure 9, there are specific actions required by both the
Air Force and Bank of America based on the number of days a
cardholder‘s account is past due.
Figure 9: Required DOD and Bank of America Delinquency Process
Management Actions:
[See PDF for image]
Note: Starting in fiscal year 2002, DOD began to offset the salary of
certain civilian employees and military and retired military members
from all services including the Air Force, for the amounts delinquent
or charged off on travel card accounts.
[End of figure]
The following is a more detailed explanation of the required actions by
the Air Force and/or Bank of America with respect to delinquent travel
card accounts.
* 45 days past due--Bank of America is to send a letter to the
cardholder requesting payment. Bank of America has the option to call
the cardholder with a reminder that payment is past due and to advise
the cardholder that the account will be suspended if it becomes 60 days
past due.
* 55 days past due--Bank of America is to send the cardholder a
presuspension letter warning that Bank of America will suspend the
account if it is not paid. If Bank of America suspends a travel card
account, the card cannot be used until the account is paid.
* 60 days past due--The APC is to issue a 60-day delinquency
notification memorandum to the cardholder and to the cardholder‘s
immediate supervisor, informing them that the cardholder‘s account has
been suspended due to nonpayment. The next day, a suspension letter is
to be sent by Bank of America to the cardholder providing notice that
the card has been suspended until payment is received.
* 75 days past due--Bank of America is to assess the account a late
fee. The late fee charged by Bank of America was $20 through August 9,
2001. Effective August 10, 2001, Bank of America increased the late fee
to $29 under the terms of the contract modification between Bank of
America and DOD. Bank of America is allowed to assess an additional
late fee every 30 days until the account is made current or charged
off.
* 90 days past due--The APC is to issue a 90-day delinquency
notification memorandum to the cardholder, the cardholder‘s immediate
supervisor, and the company commander (or unit director). The company
commander is to initiate an investigation into the delinquency and take
appropriate action, at the company commander‘s discretion. At the same
time, Bank of America is to send a ’due process letter“ to the
cardholder providing notice that the account will be canceled if
payment is not received within 30 days unless he or she enters into a
payment plan, disputes charge(s) in question, or declares bankruptcy.
* 120 days past due--The APC is to issue a 120-day delinquency
notification memorandum to the cardholder‘s commanding officer. At 126
days past due, the account is to be canceled by Bank of America.
Beginning in October 2001, once accounts were 120 days past due, Bank
of America began sending files to DFAS listing these accounts for
salary offset.
* 150 days past due--The point at which DFAS generally initiates action
for salary offset.
* 180 days past due--Bank of America is to send a ’precharge-off“ or
last call letter to the cardholder informing him or her that Bank of
America will charge-off the account and report the cardholder to a
credit bureau if payment is not received. A credit bureau is a service
that reports the credit history of an individual. Banks and other
businesses assess the credit-worthiness of an individual using credit
bureau reports.
* 210 days past due--Bank of America is to charge off the delinquent
account and, if the balance is $50 or greater, report it to a credit
bureau.
Some accounts are pursued for collection by Bank of America‘s recovery
department; others are sent to attorneys or collection agencies for
recovery. The delinquency management process can be suspended when a
cardholder‘s APC informs Bank of America that the cardholder is on
official travel and is unable to submit vouchers and pay his or her
account in a timely manner, through no fault of his or her own. Under
such circumstances, the APC is to notify the Bank of America that the
cardholder is in ’mission-critical“ status. By activating this status,
the Bank of America is precluded from identifying the cardholder‘s
account as delinquent until 45 days after such time as the APC
determines the cardholder is to be removed from mission-critical
status. According to Bank of America, approximately 800 to 1,000
cardholders throughout DOD were in this status at any given time
throughout fiscal year 2001.
[End of section]
Appendix II: Objectives, Scope, and Methodology:
Pursuant to a joint request by the Chairman and Ranking Minority Member
of the Subcommittee on Government Efficiency, Financial Management and
Intergovernmental Relations, House Committee on Government Reform, and
the Ranking Minority Member of the Senate Committee on Finance, we
audited the controls over the issuance, use, and monitoring of
individually billed travel card accounts and associated travel
processing and management for the Department of the Air Force. Our
assessment covered:
* the reported magnitude and impact of delinquent and charged off Air
Force travel card accounts for fiscal year 2001 and the first 6 months
of fiscal year 2002, along with an analysis of causes and related
corrective actions;
* an analysis of the universe of Air Force travel card transactions
during fiscal year 2001 and the first 6 months of fiscal year 2002 to
identify potentially fraudulent and abusive activity related to the
travel card;
* the Air Force overall management control environment and the design
of selected Air Force travel program management controls, including
controls over (1) travel card issuance, (2) agency program coordinators
(APC) capacity to carry out assigned duties, (3) limiting card
activation to meet travel needs, (4) transferred and ’orphan“ accounts,
(5) procedures for terminating accounts when cardholders leave military
service, and (6) access to Bank of America‘s travel card database; and:
* tests of statistical samples of transactions to assess the
implementation of key management controls and processes for three Air
Force units‘ travel card activity including (1) travel order approval,
(2) accuracy of travel voucher payments, (3) the timely submission of
travel vouchers by travelers to the approving officials, and (4) the
timely processing and reimbursement of travel vouchers by the Air Force
and DOD.
We used as our primary criteria applicable laws and regulations,
including the Travel and Transportation Reform Act of 1998 (Public Law
105-264),[Footnote 34] the General Services Administration‘s (GSA)
Federal Travel Regulation,[Footnote 35] and the Department of Defense
(DOD) Financial Management Regulation, Volume 9, ’Travel Policies and
Procedures.“ We also used as criteria our Standards for Internal
Control in Federal Government[Footnote 36] and our Guide to Evaluating
and Testing Controls Over Sensitive Payments.[Footnote 37] To assess
the management control environment, we applied the fundamental concepts
and standards in our internal control standards to the practices
followed by management in the six areas reviewed.
To assess the magnitude and impact of delinquent and charged-off
accounts, we compared the Air Force‘s delinquency and charge-off rates
to those of other DOD services and federal civilian agencies. We also
analyzed the trends in the delinquency and charge-off data from fiscal
year 2000 through the first half of fiscal year 2002.
In addition, we used data mining to select Air Force units for audit
and identify individually billed travel card transactions for further
analysis. Our data mining procedures covered the universe of
individually billed Air Force travel card activity during fiscal year
2001 and the first six months of fiscal year 2002 and identified
transactions that we believed were potentially fraudulent or abusive.
However, our work was not designed to identify, and we did not
determine, the extent of any potentially fraudulent or abusive activity
related to the travel card. In performing our data mining, we obtained
and analyzed information on travel card account status and credit
history, security clearance, and disciplinary action.
To assess the overall control environment for the travel card program
at the Department of the Air Force, we obtained an understanding of the
travel process, including travel card management and oversight, by
interviewing officials from the Office of the Undersecretary of
Defense, Comptroller; Department of the Air Force; Defense Finance and
Accounting Service (DFAS); Bank of America; and GSA. We reviewed
applicable policies, procedures, and program guidance they provided. We
visited three Air Force units to ’walk through“ the travel process,
including the management of travel card use and delinquency. Further,
we contacted one of the three largest U.S. credit bureaus to obtain
credit history data and information on how credit-scoring models are
developed and used by the credit industry for credit reporting.
At each of the Air Force locations we audited we also used our review
of policies and procedures and the results of our ’walk-throughs“ of
travel processes and other observations to assess the effectiveness of
controls over segregation of duties among persons responsible for
issuing travel orders, preparing travel vouchers, processing and
approving travel vouchers, and certifying travel voucher payments.
We performed a limited review of access controls for travel voucher
processing at our three case study locations. We did not assess
electronic signature controls over the electronic data processing of
Air Force travel card transactions. We also reviewed computer system
access controls for the Electronic Account Government Ledger System
(EAGLS)--the system used by Bank of America to maintain DOD travel card
data. To determine whether access controls for EAGLS were effective, we
interviewed Bank of America officials and observed EAGLS functions and
capabilities.
To test the implementation of key controls over individually billed Air
Force travel card transactions processed through the travel system--
including the travel order, travel voucher, and payment processes--we
obtained and used the Bank of America database of fiscal year 2001 Air
Force travel card transactions to review random samples of transactions
at three Air Force locations. Because our objective was to test
controls over travel card expenses, we excluded credits and
miscellaneous debits (such as fees) from the population of transactions
used to select random samples of travel card transactions to review at
each of three Air Force units we audited. Each sampled transaction was
subsequently weighted in the analysis to account statistically for all
charged transactions at each of the three units, including those that
were not selected. We did not verify the accuracy of the data in the
Air Force travel card database.
We selected three Air Force case study locations for testing controls
over travel card activity by first selecting three large commands based
on the number of travel card accounts, outstanding balances, and
delinquencies. The three commands we selected accounted for about 38
percent of the total number of Air Force travel card accounts, 41
percent of the outstanding balance of travel card charges, and about 33
percent of the travel card delinquencies. We selected one installation
from each of these commands for detailed testing based on the volume of
travel card activity and delinquencies. Table 11 presents the sites
selected and the number of fiscal year 2001 transactions at each
location.[Footnote 38]
Table 11: Population of Fiscal Year 2001 Travel Transactions at
Selected Air Force Bases:
Air Force base/command: Nellis AFB; Air Combat Command; Number of
travel: 69,104; Dollar value of travel: $ 7,804,254.
Air Force base/command: Travis AFB; Air Mobility Command; Number of
travel: 105,997; Dollar value of travel: 13,465,225.
Air Force base/command: Hill AFB; Air Force Materiel Command; Number of
travel: 119,533; Dollar value of travel: 18,400,779.
Source: GAO analysis of Bank of America Air Force travel card database.
Note. Transactions represent charges for sales and cash advances and
exclude credits and fees.
[End of table]
We performed tests on statistical samples of travel card transactions
at each of the three case study sites to assess whether the system of
internal controls over the transactions was effective, as well as to
provide an estimate of the percentage of transactions by unit that were
not for official government travel. For each transaction in our
statistical sample, we assessed whether (1) there was an approved
travel order prior to the trip, (2) the travel voucher payment was
accurate, (3) the travel voucher was submitted within 5 days of the
completion of travel, and (4) the travel voucher was paid within 30
days of submission of an approved travel voucher. We considered
transactions not related to authorized travel to be abuse and incurred
for personal purposes. Although we projected the results of our samples
of these control attributes, as well as the estimate for personal use-
-or abuse--related to travel card activity to the population of
transactions at the respective case study locations, the results cannot
be projected to the population of Air Force transactions or the
installations as a whole.
Tables 12 through 15 show (1) the results of our tests of key control
attributes, (2) the point estimates of the failure rates for the
attributes, and (3) the two-sided 95 percent confidence intervals for
the failure rates for each attribute, (4) our assessments of the
effectiveness of the controls, and (5) the relevant lower and upper
bounds of a one-sided confidence interval for the failure rate. All
percentages in these tables are rounded to the nearest percentage
point. We use one-sided confidence bounds to classify the effectiveness
of a control activity. If the 1-sided lower bound does not exceed 5
percent, then the control activity is effective. If the 1-sided lower
bound exceeds 10 percent, then the control is ineffective. Otherwise,
we say that the control is partially effective. Partially effective
controls may include those for which there is not enough evidence to
assert either effectiveness or ineffectiveness. For example, if we were
95 percent confident that the 1-sided lower bound of a failure rate for
a particular control is 3 percent, we would categorize that control
activity as ’effective“ because 3 percent is less than the 5 percent
standard. Similarly, if we were 95 percent confident that the 1-sided
upper bound of a failure rate for a particular control is 72 percent,
we would categorize that control as ’ineffective“ because 72 percent is
greater than the 10 percent standard.
Table 12 shows the results of our test of the key control related to
the authorization of travel--approved travel orders were prepared prior
to dates of travel.
Table 12: Fiscal Year 2001 Transactions That Failed Control Tests for
Approved Travel Orders:
Air Force base/ command.
Nellis AFB; Air Combat Command; Number
of failed transactions: 1 of 96; Estimated failure rate (95% 2-sided
confidence interval)[A]: 1 %; (0 % to 6 %); Assessment of effectiveness
of controls (and relevant bounds of 95% 1-sided confidence intervals):
Effective; upper bound = 5%.
Travis AFB; Air Mobility Command; Number
of failed transactions: 2 of 96; Estimated failure rate (95% 2-sided
confidence interval)[A]: 2%; (0 % to 7 %); Assessment of effectiveness
of controls (and relevant bounds of 95% 1-sided confidence intervals):
Partially effective; lower bound = 0%, or; upper bound = 6%.
Hill AFB; Air Force Materiel Command; Number
of failed transactions: 1 of 96; Estimated failure rate (95% 2-sided
confidence interval)[A]: 1 %; (0 % to 6 %); Assessment of effectiveness
of controls (and relevant bounds of 95% 1-sided confidence intervals):
Effective; upper bound = 5%.
Source: GAO analysis.
[A] The percentages represent point estimates for the population based
on our sampling tests.
[End of table]
Table 13 shows the results of our test for effectiveness of controls in
place over the accuracy of travel voucher payments. Our test work
included determining whether (1) the travel voucher information was
consistent with dates and locations of travel authorized on the related
travel order, (2) per diem was paid in the proper amount, and (3)
transactions for lodging, air fare, and other expenses over $75 were
supported by required receipts.
Table 13: Fiscal Year 2001 Transactions That Failed Control Tests for
Accurate Travel Voucher Review and Reimbursement:
Air Force base/ command.
Nellis AFB; Air Combat Command; Number
of failed transactions: 15 of 96; Estimated
failure rate: 16 %; (9 % to 24 %); Assessment of effectiveness of
controls (and relevant bounds of 95% 1-sided confidence intervals):
Partially effective; lower bound = 10%.
Travis AFB; Air Mobility Command; Number
of failed transactions: 37 of 96; Estimated
failure rate: 39 %; (29 % to 49 %); Assessment of effectiveness of
controls (and relevant bounds of 95% 1-sided confidence intervals):
Ineffective; lower bound = 30%.
Hill AFB; Air Force Materiel Command; Number
of failed transactions: 8 of 61[B]; Estimated
failure rate: 13%; (6 % to 24 %); Assessment of effectiveness of
controls (and relevant bounds of 95% 1-sided confidence intervals):
Partially effective; lower bound = 7%, or; upper bound = 22%.
Source: GAO analysis.
[A] The percentages represent point estimates for the population based
on our sampling tests.
[B] Hill AFB used two systems to process travel vouchers. We included
only the 61 travel vouchers processed through the Integrated Automated
Travel System in our tests for this attribute. The remaining 35
vouchers were processed through the other system, PerDiemAzing, which
DOD is pilot testing as part of its effort to reengineer the current
travel process.
[End of table]
Table 14 shows the results of our tests of key controls related to
timely processing of claims for reimbursement of expenses related to
government travel--timely submission of the travel voucher by the
employee.
Table 14: Fiscal Year 2001 Transactions That Failed Control Tests for
Timely Submission of Travel Vouchers by Employees (5-day Rule):
Nellis AFB; Air Combat Command; Number
of failed transactions: 5 of 96; Estimated
failure rate: 5%; (2% to 12%); Assessment of effectiveness of
controls (and relevant bounds of 95% 1-sided
confidence intervals): Partially effective; lower bound = 2%, or; upper
bound = 11%.
Travis AFB; Air Mobility Command; Number
of failed transactions: 16 of 96; Estimated
failure rate: 17 %; (10% to 26 %); Assessment of effectiveness of
controls (and relevant bounds of 95% 1-sided
confidence intervals): Ineffective; lower bound = 11%.
Hill AFB; Air Force Materiel Command; Number
of failed transactions: 24 of 96; Estimated
failure rate: 25 %; (17 % to 35%); Assessment of effectiveness of
controls (and relevant bounds of 95% 1-sided
confidence intervals): Ineffective; lower bound = 18%.
[End of table]
Source: GAO analysis.
[A] The percentages represent point estimates for the population based
on our sampling tests.
Table 15 shows the results of our tests of key controls related to
timely processing of claims for reimbursement of expenses related to
government travel--timely travel voucher approval and payment
processing. To determine if cardholders were reimbursed within 30 days,
we used the DFAS payment dates. We did not independently validate the
accuracy of these reported payment dates.
Table 15: Fiscal Year 2001 Transactions That Failed Control Tests for
Timely Approval and Payment Processing of Travel Vouchers (30-day
Rule):
Nellis AFB; Air Combat Command; Number of failed transactions: 0 of
96; Estimated
failure rate: 0%; (0% to 4%); Assessment of effectiveness of controls
(and relevant bounds of 95% 1-sided
confidence intervals): Effective; upper bound = 3%.
Travis AFB; Air Mobility Command; Number of failed transactions: 0 of
96; Estimated
failure rate: 0 %; (0% to 4%); Assessment of effectiveness of controls
(and relevant bounds of 95% 1-sided
confidence intervals): Effective; upper bound = 3%.
Hill AFB; Air Force Materiel Command; Number of failed transactions:
1 of 96; Estimated
failure rate: 0 %; (0 % to 6%); Assessment of effectiveness of controls
(and relevant bounds of 95% 1-sided
confidence intervals): Effective; upper bound = 5%.
[End of table]
Source: GAO analysis.
[A] The percentages represent point estimates for the population based
on our sampling tests.
We briefed DOD managers, including DFAS officials in DOD‘s Office of
the Under Secretary of Defense (Comptroller) and Air Force officials in
the office of the Assistant Secretary of the Air Force (Financial
Management and Comptroller); and unit commanders; comptrollers; and
installation agency program coordinators on the details of our audit,
including our findings and their implications. On November 26, 2002, we
requested comments on a draft of this report. We received oral comments
on December 17, 2002, and have summarized those comments in the ’Agency
Comments and Our Evaluation“ section of this report. We conducted our
audit work from January 2001 through mid-November 2002 in accordance
with U.S. generally accepted government auditing standards, and we
performed our investigative work in accordance with standards
prescribed by the President‘s Council on Integrity and Efficiency.
[End of section]
Appendix III: Air Force Major Command Delinquency Rates:
Table 16 shows the travel card delinquency rates for Air Force‘s major
commands (and other Air Force organizational units at a comparable
level) that had outstanding balances over $1 million during the 2-year
period ending March 31, 2002. Commands with a March 31, 2002, balance
outstanding under $1 million have been combined into ’all other
commands.“ The Air Force‘s commands and other units are listed in
descending order based on their respective delinquency rates as of
March 31, 2002.
Table 16: Air Force Major Command Delinquency RatesA (by Quarter) for
the Two Years Ending March 31, 2002:
Major Command: Air Force Special Operations Command; June 2000: 6.4%;
Sept. 2000: 7.5%; Dec. 2000: 10.8%; Mar. 2001: 5.5%; June 2001: 6.6%;
Sept. 2001: 6.0%; Dec. 2001: 10.0%; Mar. 2002: 10.3%.
Major Command: Pacific Air Forces; June 2000: 7.2%; Sept. 2000: 8.6%;
Dec. 2000: 11.8%; Mar. 2001: 9.4%; June 2001: 6.8%; Sept. 2001: 9.4%;
Dec. 2001: 12.2%; Mar. 2002: 9.7%.
Major Command: US Air Forces in Europe; June 2000: 7.2%; Sept. 2000:
9.2%; Dec. 2000: 14.1%; Mar. 2001: 7.5%; June 2001: 6.7%; Sept. 2001:
6.5%; Dec. 2001: 10.9%; Mar. 2002: 7.6%.
Major Command: Air Force Reserve Command; June 2000: 7.9%; Sept. 2000:
10.5%; Dec. 2000: 14.0%; Mar. 2001: 8.2%; June 2001: 6.6%; Sept. 2001:
9.1%; Dec. 2001: 8.1%; Mar. 2002: 7.3%.
Major Command: Air National Guard; June 2000: 8.8%; Sept. 2000: 11.7%;
Dec. 2000: 16.7%; Mar. 2001: 9.4%; June 2001: 6.6%; Sept. 2001: 8.3%;
Dec. 2001: 8.3%; Mar. 2002: 6.5%.
Major Command: Air Intelligence Agency; June 2000: 5.9%; Sept. 2000:
6.6%; Dec. 2000: 8.8%; Mar. 2001: 6.4%; June 2001: 4.7%; Sept. 2001:
5.5%; Dec. 2001: 9.2%; Mar. 2002: 6.4%.
Major Command: Air Combat Command; June 2000: 6.6%; Sept. 2000: 8.5%;
Dec. 2000: 12.1%; Mar. 2001: 7.6%; June 2001: 5.9%; Sept. 2001: 6.2%;
Dec. 2001: 8.1%; Mar. 2002: 6.3%.
Major Command: Air Education and Training Command; June 2000: 7.1%;
Sept. 2000: 8.1%; Dec. 2000: 9.8%; Mar. 2001: 6.8%; June 2001: 5.5%;
Sept. 2001: 5.8%; Dec. 2001: 8.3%; Mar. 2002: 6.1%.
Major Command: Air Mobility Command; June 2000: 6.8%; Sept. 2000: 8.2%;
Dec. 2000: 8.7%; Mar. 2001: 5.1%; June 2001: 4.5%; Sept. 2001: 5.5%;
Dec. 2001: 6.8%; Mar. 2002: 4.9%.
Major Command: Air Force Space Command; June 2000: 4.9%; Sept. 2000:
4.8%; Dec. 2000: 7.3%; Mar. 2001: 4.1%; June 2001: 4.1%; Sept. 2001:
4.1%; Dec. 2001: 6.6%; Mar. 2002: 4.5%.
Major Command: Head Quarters 11th Wing; June 2000: 3.7%; Sept. 2000:
4.9%; Dec. 2000: 5.7%; Mar. 2001: 3.9%; June 2001: 3.2%; Sept. 2001:
4.4%; Dec. 2001: 4.3%; Mar. 2002: 3.8%.
Major Command: Air Force Materiel Command; June 2000: 4.0%; Sept. 2000:
5.5%; Dec. 2000: 7.5%; Mar. 2001: 4.1%; June 2001: 3.5%; Sept. 2001:
3.9%; Dec. 2001: 5.5%; Mar. 2002: 3.6%.
Major Command: All other commands combined; June 2000: 4.6%; Sept.
2000: 6.2%; Dec. 2000: 8.1%; Mar. 2001: 4.3%; June 2001: 4.0%; Sept.
2001: 4.9%; Dec. 2001: 5.2%; Mar. 2002: 4.1%.
Major Command: Air Force-wide; June 2000: 6.4%; Sept. 2000: 8.2%; Dec.
2000: 10.9%; Mar. 2001: 6.5%; June 2001: 5.3%; Sept. 2001: 6.2%; Dec.
2001: 7.7%; Mar. 2002: 6.0%.
Source: GAO calculation based on information provided by Bank of
America.
[A] The delinquency rates shown represent the total amount delinquent
(amounts not paid within 60 days of the travel card monthly statement
closing date) as a percentage of total amounts owed by the command‘s
travel cardholders at that time.
[End of table]
Table 17 shows outstanding balances and delinquency rates by major
command listed in descending order of outstanding balances as of March
31, 2002.
Table 17: Outstanding Balance and Delinquency Rate as of March 31,
2002, by Major Air Force Commands:
Major Air Force command with outstanding balance of $1 million or over:
Air National Guard; Outstanding balance[A]: $13,859,727; Delinquency
rate[A]: 6.5.
Major Air Force command with outstanding balance of $1 million or over:
Air Force Materiel Command; Outstanding balance[A]: 11,755,489;
Delinquency rate[A]: 3.6.
Major Air Force command with outstanding balance of $1 million or over:
Air Force Reserve Command; Outstanding balance[A]: 10,637,088;
Delinquency rate[A]: 7.3.
Major Air Force command with outstanding balance of $1 million or over:
Air Combat Command; Outstanding balance[A]: 10,263,862; Delinquency
rate[A]: 6.3.
Major Air Force command with outstanding balance of $1 million or over:
Air Mobility Command; Outstanding balance[A]: 8,825,579; Delinquency
rate[A]: 4.9.
Major Air Force command with outstanding balance of $1 million or over:
U.S. Air Forces Europe; Outstanding balance[A]: 4,676,442; Delinquency
rate[A]: 7.6.
Major Air Force command with outstanding balance of $1 million or over:
Air Education and Training Command; Outstanding balance[A]: 4,632,847;
Delinquency rate[A]: 6.1.
Major Air Force command with outstanding balance of $1 million or over:
Pacific Air Forces; Outstanding balance[A]: 4,243,264; Delinquency
rate[A]: 9.7.
Major Air Force command with outstanding balance of $1 million or over:
Air Force Space Command; Outstanding balance[A]: 4,096,380; Delinquency
rate[A]: 4.5.
Major Air Force command with outstanding balance of $1 million or over:
Headquarters 11[TH] Wing; Outstanding balance[A]: 2,490,170;
Delinquency rate[A]: 3.8.
Major Air Force command with outstanding balance of $1 million or over:
Air Intelligence Agency; Outstanding balance[A]: 2,422,309;
Delinquency rate[A]: 6.4.
Major Air Force command with outstanding balance of $1 million or over:
Air Force Special Operations; Outstanding balance[A]: 1,678,599;
Delinquency rate[A]: 10.3.
Major Air Force command with outstanding balance of $1 million or over:
All Other Commands Combined; Outstanding balance[A]: 5,074,653;
Delinquency rate[A]: 4.1.
Source: GAO calculation based on information from Bank of America.
[A] Delinquency rates shown represent the total amount delinquent
(amounts not paid within 60 days of the travel card monthly statement
closing date) as a percentage of total amount outstanding for all
travel card accounts in the command at that point in time. :
[End of table]
[End of section]
Appendix IV: Air Force Personnel Grade, Rank, and Associated Basic Pay
Rates:
Tables 18 and 19 show the grade, rank (where relevant), and the
associated basic pay rates for 2001 for Air Force‘s military and
civilian personnel. The basic 2001 pay rates shown exclude other
considerations such as locality pay and any allowances for housing or
cost of living.
Table 18: Air Force Military Grades, Ranks, and Associated Basic Pay
Rates for Fiscal Year 2001:
Military grades: Enlisted personnel.
Military grades: E-1 to E-3; Military rank: Enlisted personnel: Airman;
Fiscal year 2001 pay rates: Enlisted personnel: $11,496 to $15,197.
Military grades: E-4 to E-6; Military rank: Enlisted personnel: Senior
Airman to Technical Sergeant; Fiscal year 2001 pay rates: Enlisted
personnel: $18,591 to $27,571.
Military grades: E-7 to E-9; Military rank: Enlisted personnel: Master
Sergeant to Chief Master Sergeant; Fiscal year 2001 pay rates: Enlisted
personnel: $32,497 to $46,204.
Military grades: Officers.
Military grades: O-1 to O-3; Military rank: Enlisted personnel: Second
Lieutenant, First Lieutenant, and Captain; Fiscal year 2001 pay rates:
Enlisted personnel: $26,470 to $44,738.
Military grades: O-4 to O-6; Military rank: Enlisted personnel: Major,
Lieutenant Colonel, and Colonel; Fiscal year 2001 pay rates: Enlisted
personnel: $56,122 to $83,783.
Military grades: O-7 to O-10; Military rank: Enlisted personnel:
General; Fiscal year 2001 pay rates: Enlisted personnel: $98,980 to
$133,700.
Source: U.S. Air Force.
[End of table]
Table 19: Air Force Civilian Grades and Associated Basic Pay Rates for
Calendar Year 2001:
Civilian grade: General schedule employees.
Civilian grade: GS-1 to GS-3; Calendar year 2001 pay rates: General
schedule employees: $14,244 to $22,712.
Civilian grade: GS-4 to GS-5; Calendar year 2001 pay rates: General
schedule employees: $19,616 to $28,535.
Civilian grade: GS-6 to GS-8; Calendar year 2001 pay rates: General
schedule employees: $24,463 to $39,143.
Civilian grade: GS-9 to GS-12; Calendar year 2001 pay rates: General
schedule employees: $33,254 to $62,686.
Civilian grade: GS-13 to GS-15; Calendar year 2001 pay rates: General
schedule employees: $57,345 to $103,623.
Civilian grade: Senior Executive Service.
Civilian grade: ES-01 to ES-05; Calendar year 2001 pay rates: General
schedule employees: $109,100 to $125,700.
Source: Office of Personnel Management.
[End of section]
Appendix V: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Gayle L. Fischer, (202) 512-9577
Sheila D. M. Miller, (303) 572-7378:
Acknowledgments:
Staff making key contributions to this report include: Mario L.
Artesiano, Paul S. Begnaud, Bertram J. Berlin, Fannie M. Bivins,
Francine M. DelVecchio, Donald H. Fulwider, C. Robin Hodge, Woodward H.
Hunt, Jeffrey A. Jacobson, Jr., Jonathan T. Meyer, Sue Piyapongroj,
John R. Ryan, Sidney H. Schwartz, Robert A. Sharpe, Bennet E. Severson,
and Lisa M. Warde.
(192077):
FOOTNOTES
[1] The travel card program includes both individually billed accounts-
-that is accounts held by individual cardholders, used to purchase
transportation and other related travel services, and paid by
individual cardholders based on reimbursement of expenses incurred
while on official government travel--and centrally billed accounts that
are used for the travel expenses of a unit and are paid directly by the
government. This report covers transactions charged to individually
billed accounts only.
[2] U.S. General Accounting Office, Travel Cards: Control Weaknesses
Leave Army Vulnerable to Potential Fraud and Abuse, GAO-02-863T
(Washington, D.C.: July 17, 2002) and Travel Cards: Control Weaknesses
Leave Army Vulnerable to Potential Fraud and Abuse, GAO-03-169
(Washington, D.C.: Oct. 11, 2002).
[3] U.S. General Accounting Office, Travel Cards: Control Weaknesses
Leave Navy Vulnerable to Fraud and Abuse, GAO-03-148T (Washington,
D.C.: Oct. 8, 2002).
[4] We defined potentially fraudulent activity as any scheme, or
pattern of activity, related to the use of a travel card in apparent
violation of federal or state criminal code. For purposes of this
report, we considered as potentially fraudulent, cases where
cardholders wrote three or more nonsufficient fund checks or checks on
closed accounts to pay their Bank of America bills. We considered
abusive travel card activity to include (1) personal use of the card--
any use other than for official government travel--regardless of
whether the cardholder paid the bill and (2) cases in which cardholders
were reimbursed for official travel and then did not pay Bank of
America, and thus benefited personally. Some of the travel card
activity that we categorized as abusive would be potentially fraudulent
if it can be established that the cardholder violated any element of
federal or state criminal code. In both types of activities in which
the cardholder did not pay the bill, we considered abuses to include
cardholders whose accounts were eventually charged off by Bank of
America or referred to a payment plan by salary offset or other fixed
pay agreement.
[5] Split disbursement payment percentages for the three services as of
June 2002 were 39 percent for the Air Force, 34 percent for the Army,
and 26 percent for the Navy.
[6] We calculated delinquency rates using the proportion of dollars of
accounts delinquent to the total dollars of accounts outstanding,
according to industry standards set by the Federal Financial
Institutions Examination Council.
[7] The civilian agencies included in our analysis are the 23 executive
branch agencies covered under the Chief Financial Officers Act, as
amended.
[8] App. V provides a description of each of these military grades and
their associated military rankings and pay, along with corresponding
civilian grade and pay data.
[9] Cash advance fees are also referred to as automated teller machine
(ATM) fees. ATMs allow cardholders to withdraw cash with a travel card.
For each cash advance withdrawal, cardholders are charged either a set
amount or a percentage of the amount of the withdrawal.
[10] Net sales consists of all purchases and other charges less any
credits, such as returns, other than payments to the accounts. Other
charges include ATM use, traveler‘s checks, and any other fees.
[11] DOD‘s salary offset program covers salaries paid by DOD through
its active duty, reserve, and civilian pay systems, and retirement
benefits paid through its military retirement pay system.
[12] Section 2(d), Public Law 105-264, 112 Stat. 2350 (5 U.S.C. 5701
note).
[13] Cardholder debts to Bank of America are not subject to the Debt
Collection Improvement Act of 1996, which is limited to the collection
of certain debts owed to the federal government.
[14] 5 USC 8346.
[15] 5 USC 8470.
[16] Section 1008 of the Bob Stump National Defense Authorization Act
for Fiscal Year 2003 granted the Secretary of Defense authority to
offset delinquent travel card debt against the retired pay of both
civilian and military DOD retirees. Public Law 107-314 (H.R. Conf. Rep.
No. 107-772).
[17] 41 C.F.R. section 301-54.2.
[18] Department of Defense Office of the Inspector General,
Acquisition: Summary of DOD Travel Card Program Audit Coverage, Report
No. D-2002-065 (Arlington, Va.: Mar. 18, 2002).
[19] Air Force Audit Agency, Government Travel Charge Card Program,
60th Air Mobility Wing, Travis AFB, CA, Report No. WM001042
(Washington, D.C.: Apr. 26, 2001).
[20] In March 2000, the delinquency rates for the three Services were:
Air Force--10.2 percent, Army 16.9 percent, and Navy 11.5 percent.
[21] Interim vouchers permit cardholders to request reimbursement of
their travel expenditures periodically during long deployments, thereby
enabling them to pay monthly travel card bills as they are received,
rather than waiting for a lump sum reimbursement at the end of their
deployment.
[22] DOD Financial Management Regulation, Volume 9, Chapter 3. The
regulation further provides that individuals who do not consent to a
credit check may only receive a restricted card.
[23] Section 8149 (b), Public Law 107-248, 116 Stat., 1519, 1572 does
not define the term creditworthy. However, the conferees on the DOD
appropriations act expressed their view that the statutory prohibition
would permit ’an individual with no credit history to be issued a
restricted-use charge—card.“
[24] Per diem is a daily allowance paid to travelers in lieu of actual
subsistence expenses. GSA publishes per diem rates for various
geographic areas.
[25] DOD‘s Financial Management Regulation provides that for long-term
travel, cardholders are expected to file interim vouchers every 30
days.
[26] Air Force Audit Agency, Controls Over the Integrated Automated
Travel System, F2002-0002-B05400 (Washington, D.C.: Feb. 15, 2002).
[27] Of the over 400 cardholders who wrote three or more NSF checks,
over 100 had accounts that were eventually charged off or put in salary
offset.
[28] Bank fraud is defined by 18 U.S.C. 1344 as any execution of, or
attempt to execute, a scheme or artifice to defraud a financial
institution or to obtain any of the moneys, funds, credits, assets,
securities, or other assets owned by, or under the custody or control
of, a financial institution, by means of false or fraudulent pretenses,
representations, or promises. Further, it is a violation of the Uniform
Code of Military Justice article 123a when a soldier makes, draws, or
utter (verbally authorizes) a check, draft, or order without sufficient
funds and does so with intent to defraud.
[29] MCCs are established by the banking industry for commercial and
consumer reporting purposes. Currently, about 800 category codes are
used to identify the nature of the merchants‘ businesses or trades,
such as airlines, hotels, ATMs, jewelry stores, casinos, gentlemen‘s
clubs, and theatres.
[30] Article 15 of the Uniform Code of Military Justice provides for
non-judicial punishment imposed by a commander and accepted by the
member.
[31] Air Force Instruction 31-501 incorporates the security standards
set forth in DOD publication, 5200.2-R, Personnel Security Program,
which covers ’excessive indebtedness, recurring financial
difficulties, or unexplained affluence.“
[32] The Department of Defense contracted with NationsBank of Delaware,
N.A., which subsequently merged into the Bank of America, N.A., under a
Tailored Task Order under the GSA Master Contract Award for the travel
card program. The period of performance under the task order was
November 30, 1998, through November 29, 2000, with three 1-year
options. The task order also allowed for five additional 1-year options
under the GSA master contract renewal provisions.
[33] The act also requires agencies to pay cardholders a late payment
fee if they do not reimburse cardholders within the 30-day period
allowed. Specifically, Federal Travel Regulations prescribed by the
Administrator of General Services require agencies to either (1)
calculate late payment fees using the prevailing Prompt Payment
Interest Rate beginning the 31ST day after submission of a proper
travel claim and ending on the date on which payment is made or (2)
reimburse the traveler a flat fee of not less than the prompt pay
amount, based on an agencywide average of travel claim payments. In
addition to the fee required in the items above, the agency must also
pay the traveler an amount equivalent to any late payment charge that
the card contractor would have been able to charge the traveler had the
traveler not paid the bill. 41 CFR Section 301-52.20.
[34] Travel and Transportation Reform Act of 1998 (Public Law 105-264,
Oct. 19, 1998) includes requirements that federal employees use federal
travel charge cards for all payments of expenses of official government
travel, requires the government to reimburse employees who have
submitted proper vouchers within 30 days of submission of the vouchers,
and allows for the offset of pay for employees with undisputed travel
card charge delinquencies in an amount up to 15 percent of the amount
of disposable pay of the employee for a pay period.
[35] Federal Travel Regulation, 41 C.F.R., chapters 300-304, issued by
the Administrator of General Services, governs travel and
transportation allowances and relocation allowances for federal
civilian employees.
[36] U.S. General Accounting Office, Standards for Internal Control in
Federal Government, GAO/AIMD-00-21.3.1, (Washington, D.C.: November
1999). This document was prepared to fulfill our statutory requirement
under the Federal Managers‘ Financial Integrity Act to issue standards
that provide the overall framework for establishing and maintaining
internal control and for identifying and addressing major performance
and management challenges and areas at greatest risk of fraud, waste,
abuse, and mismanagement.
[37] U.S. General Accounting Office, Guide to Evaluating and Testing
Controls Over Sensitive Payments, GAO/AFMD-8.1.2, (Washington, D.C.:
May 1993). This document provides a framework for evaluating and
testing the effectiveness of internal controls that have been
established in various sensitive payment areas.
[38] The populations from which we selected our samples included some
transactions that were not supported by travel orders or vouchers, such
as personal charges made by a cardholder. We excluded such transactions
from our selections for travel order, voucher, and payment process
controls. However, we included such transactions in order to project
the percentage of personal use transactions.
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