Employees' Travel Claims (Correspondence, 02/06/95, GAO/AIMD-95-71R).

Pursuant to an agency request, GAO provided information to the
Department of State on Title 2 and Title 7 of its Policy and Procedures
Manual pertaining to the processing of employee travel claims. GAO noted
that: (1) Title 2 does not prohibit the retention of supporting travel
documentation by federal employees, but sufficient controls are needed
to ensure that retiring or transferring employees submit the documents
to the agency upon separation; (2) the State proposal provides several
controls for forgoing the submission of supporting documentation to
validate travel claims, but State should ensure that certifying officers
are aware that they can request the supporting documentation prior to
certification if they need it; (3) State should analyze the costs and
benefits of reimbursing employees on a flat-rate basis before
implementing the rate; (4) State should ensure that the software for
electronic signatures can be validated in its automated accounting
system; and (5) State should emphasize its new claims processing system
and employees' retention of travel documentation in its financial
integrity reports.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-95-71R
     TITLE:  Employees' Travel Claims
      DATE:  02/06/95
   SUBJECT:  Auditing procedures
             Documentation
             Travel allowances
             Internal controls
             Federal records management
             Federal agency accounting systems
             Expense claims
             Claims processing
             Computer software verification and validation
IDENTIFIER:  National Performance Review
             Joint Financial Management Improvement Program
             
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Cover
================================================================ COVER



February 1995


GAO/AIMD-95-71R

Employees' Travel Claims

(922212)


Abbreviations
=============================================================== ABBREV

  GSA - General Services Administration
  IRS - Internal Revenue Service
  JFMIP - Joint Financial Management Improvement Program
  NIST - National Institute of Standards and Technology
  NPR - National Performance Review

Letter
=============================================================== LETTER


B-259229

February 6, 1995

Mr.  Larry Eisenhart
Deputy Chief Financial Officer
Department of State

Dear Mr.  Eisenhart: 

This letter responds to your September 8, 1994, request that we
provide you an interpretation of the requirements in Title 2,
"Accounting," and Title 7, "Fiscal Procedures," of GAO's Policy and
Procedures Manual for Guidance of Federal Agencies, pertaining to
processing employee travel claims.  As described in your letter, the
Department of State is attempting to streamline its system for
processing employee travel claims in response to the National
Performance Review (NPR) initiative to simplify administrative
processes.  As you know, in line with the NPR initiative, the Joint
Financial Management Improvement Program (JFMIP) is examining
governmentwide travel procedures with a view toward streamlining the
processes.  Although the JFMIP project began recently, we feel that
as it progresses, it should provide useful information that you
should consider regarding your proposed system. 

In your request, you mentioned that the General Services
Administration (GSA)\1 waived several items in your proposal provided
your proposal did not conflict with the requirements of the GAO
Policy and Procedures Manual.  You also requested an opinion from the
Internal Revenue Service (IRS) on whether the flat-rate lodging
reimbursement contained in your proposal constitutes income to the
traveler for income tax purposes.  If it did, the Department would
incur additional costs to (1) track and report those reimbursements
as income to IRS and the traveler and (2) withhold taxes.  Subsequent
to your request, you received an opinion from IRS that the
reimbursement did not constitute income to the traveler for income
tax reporting purposes. 

To supplement the information in your request letter, we contacted
your staff to discuss the proposal in more detail.  However, we did
not perform any tests of your current or proposed system, and
consequently, our response only addresses your proposal conceptually
and does not address whether your present system is capable of
accommodating the proposal. 

As discussed in this letter, we identify two concerns regarding your
proposal and offer four additional control procedures to alleviate
the concerns.  Based on our understanding of your proposal, we have
no objection to its implementation provided that the four additional
controls we suggest are effectively implemented. 


--------------------
\1 GSA is responsible for issuing employee travel regulations which
are published in its manual titled "Federal Travel Regulations."


   DEPARTMENT OF STATE'S PROPOSAL
------------------------------------------------------------ Letter :1

You propose to eliminate the need for employees to forward documented
receipts with travel vouchers for certification for all lodging,
transportation, and other expenses and instead require employees to
maintain the documents at their current duty stations.  Also, the
proposal calls for employees to be reimbursed at the maximum lodging
amount on a flat-rate basis, compared to the current practice of
reimbursing employees for actual lodging costs, up to the maximum
allowed. 

You also propose to automate your travel system\2 after an
anticipated 1-year testing period.  The Department could adopt, with
modifications, the commercial software, "Travel Manager Plus," from
Federal Software Company located in Reston, Virginia.  Under this
system, employees would submit their travel vouchers electronically
for approval and certification without the supporting documents
attached.  Employees will attest to claims with electronic
signatures.  As we understand it, the lodging expense amounts will be
listed separately on the voucher, and the traveler would attest that
commercial lodging was used.  Also, all expenses under $75 would be
summarized on the vouchers appearing on the electronic screen for
approval.  However, your staff stated that the detailed data
supporting each item under $75 would also be maintained in the
electronic system and could be called up from the system for review
by the person approving or certifying the voucher.  The detailed data
would be maintained on file electronically with the electronic
voucher for the same period.  To certify a travel claim for payment,
only the voucher and its summary information would be transferred to
the Department's automated accounting system for processing. 

Your staff told us that going to a flat-rate lodging amount would
reduce the administrative effort to separately record all actual
lodging costs incurred, submit receipts, and examine the voucher and
lodging receipts to determine accuracy of the claim.  Your staff also
pointed out that a flat-rate lodging amount would be consistent with
how meals and related incidental amounts are currently reimbursed to
travelers. 

As we understand it, each travel voucher would be examined for
approval by the traveler's supervisor or another equivalent official,
usually assigned to the traveler's duty station.  That official would
have access to the documentary support if he or she wishes to see it. 
The official's approval, done electronically, would indicate that the
(1) travel was actually taken and was considered official business
and (2) charges seem reasonable.  Your staff further explained that
the vouchers and related detail would be forwarded electronically to
the certifying officers, either in the traveler's official duty
station for travelers assigned overseas or in Washington headquarters
for travelers stationed stateside.  Each voucher would be certified
electronically as to propriety, correctness, and accuracy. 

In addition, your staff stated that post audit statistical samples
would be taken (initially each month) at the official duty station
for travelers assigned overseas or at headquarters for travelers
assigned stateside and will conform to the requirements of Title 7 of
the GAO Policy and Procedures Manual.  All travel vouchers certified
for payment during the month would be stratified by type of travel
and dollar amount.  The sample selected for post audit is intended to
be based on a 90-percent confidence level.\3 Your staff explained
that for each voucher in the sample, the traveler would be asked to
forward all documentary support.  Once the duty station or
headquarters receives the documents, the voucher would be fully
examined to determine propriety and accuracy of all amounts. 

Your staff also explained that a substantial training effort will be
undertaken to ensure that the Department's staff effectively
implement the proposal.  Part of the training, they explained, will
be devoted to staff who travel and will focus on document retention
and storage procedures and will specify the applicable requirements
in Title 8, "Records Retention," of the GAO Policy and Procedures
Manual and the General Services Administration's "General Records
Schedules."


--------------------
\2 Many overseas offices will continue to operate a manual system;
however, the paper forms and certain manual procedures used in the
automated system would be implemented in the manual systems. 

\3 The confidence level is the degree of assurance that the sample
results will be the same as the universe of all items being tested. 
Initially, during the testing phase, a sample having a greater than
90-percent confidence level would be selected. 


   GAO'S ASSESSMENT OF THE
   PROPOSAL:  ADDITIONAL CONTROLS
   WOULD CONSTITUTE AN EFFECTIVE
   SYSTEM DESIGN
------------------------------------------------------------ Letter :2

Regarding titles 2 and 7, your request raises four issues:  (1)
whether it is appropriate for the traveler to retain documents
supporting his or her own travel claims, (2) whether reimbursement
for lodging can be made properly at the maximum allowable amount on a
flat-rate basis, (3) whether designated officials will have
sufficient detail and support needed to approve and certify travel
vouchers without access to hard copy supporting documentary evidence,
such as receipts, and (4) whether the electronic signatures used by
the traveler and in the approval and certification functions contain
the necessary controls to ensure data integrity.  Regarding your
question about summary totals, we believe that such totals on an
individual voucher or computerized screen as you propose is not an
issue.  Title 7 does not preclude approval or certification of such
summary totals if the information on each item constituting a summary
total is readily available to the reviewing official and maintained
on file electronically with the voucher. 


      THE TRAVELER RETAINING
      SUPPORTING DOCUMENTATION
---------------------------------------------------------- Letter :2.1

Regarding the first issue, Title 2, appendix II, "Internal Control
Standards," requires that all transactions be clearly documented and
that the documentation be readily available for examination.  Your
proposal does not eliminate the need for documentary evidence
supporting lodging, transportation, and other expenses related to
employee travel.  The only difference is that your proposal calls for
traveling employees to maintain relevant supporting documents at
their respective duty stations or program offices rather than
submitting them with the vouchers as they now do.  Thus, the current
practice of retaining the documentation (the voucher and all
supporting evidence) at the traveler's official duty station for a
traveler assigned overseas or in Washington headquarters for a
traveler stationed stateside would be modified.  However, the results
of the sample along with all supporting documentation selected in the
sample for post audit review would be maintained centrally at the
traveler's duty station or headquarters.  The vouchers and related
information not selected in the sampling process would be stored
electronically. 

While Title 2 does not preclude supporting documentation from being
filed at the location of the employee who completes the travel, we
raised the question of how the Department would be assured of
obtaining the supporting documentation should employees retire or
leave the agency.  Your staff stated that employees either retiring
or leaving the agency would be required to go through formal
check-out procedures before receiving their last salary payment.  One
of the requirements for completing a proper check-out would be to
obtain clearance from the travel unit.  To ensure that all official
documents supporting claims are maintained by the agency for the
required documentation retention period (usually 3 years), the unit
would, under the proposal, require the employee to submit all
supporting documentation related to travel completed within the
retention period to obtain clearance.  The supporting documents would
be retained at the traveler's duty station or program office. 


      LODGING REIMBURSEMENT ON A
      FLAT-RATE BASIS
---------------------------------------------------------- Letter :2.2

On the second issue, the GAO Policy and Procedures Manual does not
address lodging reimbursement based on a flat-rate basis.  However,
such a flat-rate basis poses a risk that the government would incur
more costs than it would otherwise.  Travelers who incur minimal
lodging costs by staying at a government facility/military base or
low cost lodging would, in many instances, receive excessive travel
stipends under the proposal, especially if they stay at that location
for an extended period.  We do not believe that federal employees
should receive maximum flat-rate per diem under those circumstances. 

We believe the Department should analyze the costs and benefits of
going to a flat-rate basis for lodging before the decision is made to
implement it.  The analysis should include consideration of the cost
to process travel vouchers as well as a review of past travel
authorizations and claims by employees compared to the maximum
amounts allowed.  If the difference is minimal, justification would
exist for going to such a rate.  If the difference is material, the
Department should reconsider going to such a rate or establish a
procedure to ensure that travelers incur at least a significant
portion of the flat-rate amount or, if not, are reimbursed at the
actual costs incurred. 


      APPROVING AND CERTIFYING
      PAYMENT WITHOUT SUPPORTING
      DOCUMENTS
---------------------------------------------------------- Letter :2.3

Related to the third issue, Title 7 requires that approval and
certification of payments to be based on sufficient evidence that
clearly establishes the validity of a claim against the government. 
Traditionally, approval and certification of payment on travel
vouchers has been based on review of the supporting documentary
receipts that accompany the voucher.  Supporting documentation
assists in determining the propriety and accuracy of the claim. 

Title 7 does not preclude the approval or certification of travel
vouchers without supporting documentation attached if adequate
controls compensate for the absence of attached documentation.  Your
proposal provides for several compensating controls.  The approving
official, who usually would be the traveler's supervisor, should know
that the travel actually occurred and the purpose of it, and will
review the charges for reasonableness.  He or she will have access to
the supporting documentary receipts if needed for review.  Also, a
post audit statistical sampling procedure would be conducted to test
vouchers for accuracy, propriety, and sufficiency of underlying
documentation.  If these controls are effectively implemented,
management should have reasonable assurances that the approval and
certification functions are operating as they should. 

Although not delineated in the proposal, a certifying officer may,
because of his or her responsibility, upon review of a voucher
request that the supporting documentation be provided prior to actual
certification.  We believe that this certifying officer's
responsibility should be made clear to the Department's staff so that
they are aware that the request may be made. 


      ELECTRONIC SIGNATURES
---------------------------------------------------------- Letter :2.4

Electronic signatures generated and validated in data processing
systems should provide necessary data integrity by helping to ensure
against system errors and irregularities.  Electronic signatures that
are (1) unique to the signers, (2) under the signer's sole control,
(3) capable of being verified, and (4) linked to the data in such a
way that if the data are changed the signature is invalidated\4 can
provide such integrity.  The National Institute of Standards and
Technology\5 (NIST) has established procedures for the evaluation and
approval of certain electronic signature techniques that are
necessary to achieve the above four control objectives. 

As we have indicated, we have not reviewed any systems currently in
operation at the Department nor the methodology used to generate and
validate the electronic signatures in your automated accounting
system.  However, as we understand the Travel Manager Plus
software,\6 some of the key control features itemized above for
effective signatures are not achieved through that software.  For
example, the signatures are not generated in accordance with the
procedures outlined in the applicable Federal Information Processing
Standard.  Also certain techniques necessary for effective control
are not used in the signature verification process.  We do not
sanction electronic signature systems that use algorithms and
techniques not approved by NIST.\7 Your staff stated that the
Department will be working with the vendor of the Travel Manager Plus
software, as the Air Force is currently doing, to move towards
implementing the four previously mentioned characteristics of valid
electronic signatures. 


--------------------
\4 These four items are discussed in 71 Comp.  Gen.  109 (1991). 

\5 Under the requirements of the Computer Security Act, NIST is
responsible for establishing standards for federal computer systems
that process sensitive but unclassified information. 

\6 We have reviewed the electronic signature generation and
validation methodology in the modified Travel Manager Plus software
currently being implemented by the Air Force. 

\7 RCAS Authentication (GAO/AFMD-93-70R, May 4, 1993). 


      ADDITIONAL PROCEDURES WOULD
      ALLEVIATE INTERNAL CONTROL
      CONCERNS
---------------------------------------------------------- Letter :2.5

We support initiatives to create a government that works better and
costs less.  At the same time, we believe that agencies have the
responsibility to protect the government's interest.  Improvements to
streamline the employee travel payment process should be made only
within a framework of adequate, cost-effective controls that
reasonably ensure that payment transactions are properly authorized
and sufficient records of these transactions are maintained. 
Although Titles 2 and 7 allow flexibility to permit agencies to
implement payment systems best suited for their needs, the preceding
discussion has identified two potential problems that could arise
under your proposal. 

To address these potential problems, and to minimize the risk of
irregularities and errors, your proposal should include the following
four additional procedures or controls. 

1. An analysis of the costs and benefits of going to a flat-rate
basis for lodging should be made before implementing such a rate. 
The analysis should include a review of past travel authorizations
and claims by employees compared to the maximum amount allowed.  The
findings of the analysis should provide the justification for (a)
going to a flat-rate basis, (b) remaining on an actual reimbursement
basis, or (c) going to a modified flat-rate basis where travelers
receive the (1) flat-rate if they incur a significant portion of the
maximum amount or (2) actual costs incurred. 

2. A segment of the training which highlights the certifying
officer's responsibility and the fact that he or she may, upon review
of a voucher, request that the supporting documentation be provided
prior to actual certification. 

3. The electronic signature generation and validation process should,
upon completion of your staff's work with the vendor,\8 contain the
four previously mentioned characteristics for the signature of the
traveler, approving official, and certifying officer. 

4. You should particularly emphasize the new system during the annual
reviews of internal controls under the Federal Managers' Financial
Integrity Act the first year the system is operational.  In future
years, special emphasis should be placed on determining if travelers
are maintaining supporting travel documentation at their duty
stations for the records retention period. 


--------------------
\8 We are working with the Air Force to resolve our electronic
signature generation and validation concerns.  When these concerns
are satisfactorily resolved and your implementation parallels their
system, reasonable assurance should exist over the signature
generation and validation process. 


---------------------------------------------------------- Letter :2.6

I hope our comments are helpful as you look for ways to streamline
your administrative processes and reduce the cost of government.  If
you have any questions or would like to discuss these matters
further, please contact Bruce Michelson, Assistant Director, at (202)
512-9366. 

Sincerely yours,

John W.  Hill, Jr.
Director, Financial Management
 Policies and Issues

*** End of document. ***