    Travel Cards: Control Weaknesses Leave Army Vulnerable to
    Potential Fraud and Abuse (11-OCT-02, GAO-03-169).

    The Army's individually billed travel card program is different
    from the purchase card program in that the cardholder is directly
    responsible for all charges incurred on his or her travel card
    account, and the monthly bill is sent to the cardholder for
    payment. The cardholder is responsible for submitting a properly
    documented voucher and is reimbursed by the Army for all valid
    expenses related to official government travel. The intent of the
    travel card program was to improve convenience for the traveler
    and to reduced the government's costs of administering travel.
    GAO found substantial delinquencies and charge-offs of Army
    travel-card accounts during fiscal year 2001, and delinquencies
    continued into the first half of fiscal year 2002. GAO's analysis
    shows a correlation between delinquency problems and the travel
    cardholder's age and pay grade. GAO found that the Army's
    delinquency and charge-off problems are primarily associated with
    young, low- to mid-level enlisted military personnel. In
    addition, a weak internal control environment compounded by
    instances of delays in processing travel reimbursements to Army
    military and civilian personnel contributed to the high
    delinquency rates. The Army and the Department of Defense have
    taken action to address and focus command- and installation-level
    attention on management of delinquent travel card accounts.
    However, these actions are primarily focused on treating the
    symptoms or "back-end" problems rather than the "front-end" or
    preventive controls. GAO's work identified numerous instances of
    potentially fraudulent and abusive activity related to the travel
    card. During fiscal year 2001, 1,200 of the over 4,200 Army
    account holders who had written at least one nonsufficient funds
    (NSF) check to pay their travel card bill had their accounts
    charged off. In the same period, more than 200 cardholders whose
    accounts were eventually charged off may have also committed bank
    fraud by writing three or more NSF checks to the Bank of America.
    GAO's audit found that weaknesses in the Army's overall control
    environment, including a number of specific controls that were
    either flawed in their design or in their implementation, are the
    root source of the Army's inability to prevent or effectively
    detect the numerous instances of potentially fraudulent and
    abusive travel card related activity previously detected.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-03-169
        ACCNO:   A05284
      TITLE:     Travel Cards: Control Weaknesses Leave Army Vulnerable to
    Potential Fraud and Abuse
         DATE:   10/11/2002
      SUBJECT:   Army personnel
    	     Credit
    	     Credit sales
    	     Fraud
    	     Internal controls
    	     Program abuses
    	     Army Travel Card Program

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    GAO-03-169

                                           A

    Report to Congressional Requesters

    October 2002 TRAVEL CARDS Control Weaknesses Leave Army Vulnerable to
    Potential Fraud and Abuse

    GAO- 03- 169

    Letter 1 Results in Brief 3 Army Has Highest Delinquency and Charge- off
    Rates but Recent

    Actions Have Resulted in Some Improvements 8 Potentially Fraudulent and
    Abusive Travel Card Activity 23 Weak Overall Control Environment and
    Ineffective Travel Card

    Program Controls 39 Statistical Tests of Key Control Activities 53
    Conclusions 59 Matter for Congressional Consideration 60 Recommendations
    for Executive Action 60 Agency Comments and Our Evaluation 64

    Appendixes

    Appendix I: Background 68

    Appendix II: Objectives, Scope, and Methodology 81

    Appendix III: Army Major Command Delinquency Rates 89

    Appendix IV: Army Personnel Grade, Rank, and Associated Basic Pay Rates 90

    Appendix V: Comments from the Department of Defense 91 Tables Table 1:
    Cumulative Charge- offs and Delinquencies by Military

    Service as of March 31, 2002 10 Table 2: Examples of NSF Checks Written on
    Charged- off Accounts 25

    Table 3: Examples of Abusive Activity Where the Account Was Charged Off 29
    Table 4: Examples of Abusive Activity Where the Cardholders Paid

    the Bill 34 Table 5: Average Ratio of Cardholders to APCs at Army Sites

    Audited 43 Table 6: Results of Testing of Key Internal Controls 54 Table
    7: Comparison of Number of Individually Billed Travel

    Cardholders and Related Charges for DOD Versus Total Federal Government
    for Fiscal Year 2001 69 Table 8: Population of Fiscal Year 2001 Travel
    Transactions at Army

    Units Tested 85

    Table 9: Estimate of Fiscal Year 2001 Transactions That Failed Control
    Tests for Approved Travel 86 Table 10: Estimate of Fiscal Year 2001
    Transactions That Failed

    Control Tests for Accurate Travel Voucher Payments 87 Table 11: Estimate
    of Fiscal Year 2001 Transactions That Failed

    Control Tests for Timely Submission and Processing of Travel Vouchers 87
    Table 12: Army Major Command Delinquency Rates (by Quarter) for

    the 2 Years Ending March 31, 2002 89 Table 13: Army Military Grades,
    Ranks, and Associated Basic Pay

    Rates for Fiscal Year 2001 90 Table 14: Army Civilian Grades and
    Associated Basic Pay Rates for

    Calendar Year 2001 90 Figures Figure 1: Army, Non- Army DOD, and Civilian
    Agency Travel Card

    Delinquency Rates for the 2- Year Period Ending March 31, 2002 11 Figure
    2: Army Delinquent and Total Outstanding Travel Card

    Balances by Military Grade and Total Civilian Populations as of September
    30, 2001 13 Figure 3: Fiscal Year 2001 Army Charge- offs by Military
    Grades and

    Total Civilian Populations 14 Figure 4: Army Travel Card Charge- off and
    Recovery History from October 1, 2000, to March 31, 2002 19

    Figure 5: The Army Travel Process 72 Figure 6: Travel Card Application 74
    Figure 7: Required Army and Bank of America Delinquency Process Management
    Actions 78

    Letter

    October 11, 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

    On July 17, 2002, we testified 1 before the Subcommittee on Government
    Efficiency, Financial Management, and Intergovernmental Relations, House
    Committee on Government Reform, on the results of our audit of internal
    controls over travel activity associated with about 430,000 individually
    billed Army travel card accounts, and $619 million in related travel card
    charges for fiscal year 2001. The individually billed travel card program
    is

    significantly different from the purchase card program in that the
    cardholder is directly responsible for all charges incurred on his or her
    travel card account and the monthly bill is sent to the cardholder for
    payment. The cardholder is responsible for submitting a properly
    documented voucher and is reimbursed by the Army for all valid expenses
    related to official government travel. In contrast, all purchase card
    charges are billed directly to the government for monthly payment. The
    intent of the travel card program was to improve convenience for the
    traveler and to reduce the government*s costs of administering travel.
    Appendix I provides additional background information on the Army*s travel
    card program.

    This work was performed 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. This report provides details
    and results of our Army travel card audit, which was summarized in our
    recent testimony.

    1 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).

    The objectives of our audit of the Army*s travel card program were to
    determine (1) the reported magnitude and impact of delinquent and charged-
    off Army travel card accounts for fiscal year 2001 and the first 6 months
    of fiscal year 2002, along with an analysis of related causes and DOD and
    Army corrective actions, (2) whether indications existed of potentially
    fraudulent and abusive activity 2 related to the Army travel card during
    fiscal year 2001, and (3) the effectiveness of the overall control
    environment and key internal controls for the Army*s travel program. We
    analyzed the Army*s account delinquency and charge- off information and

    compared it to non- Army DOD components and other federal agencies. In
    addition, we evaluated the adequacy of selected, specific internal control
    policies, procedures, and activities at four Army installations,
    representing 3 of the Army*s 13 major commands.

    We selected the four installations we audited based on the relative amount
    of travel card activity, the number and percentage of accounts past due,
    and the number and percentage of accounts charged off. For these
    installations, we tested a statistical sample of travel card transactions
    and conducted other audit work to evaluate the design and implementation
    of key internal control procedures and activities. 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 Army as a whole. Through auditing travel card transactions at the four
    installations and data mining of fiscal year 2001 transactions incurred by
    units throughout the Army, we identified numerous examples of potentially
    fraudulent and abusive travel card activity. However, our work was not
    designed to identify, and we cannot determine, the extent of potentially
    fraudulent and abusive activity. 2 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, the only cases we
    characterized as potentially fraudulent were those where cardholders wrote
    three or more nonsufficient fund checks, or wrote checks on closed
    accounts to pay their Bank of America bills. These cases are potentially
    fraudulent because

    they indicate a pattern of activity in apparent violation of one or more
    elements of federal or state criminal code. In addition, for purposes of
    this report, 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 benefiting 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.

    We conducted our audit work from December 2001 through July 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. We
    received comments on a draft of this report from the Under Secretary of

    Defense (Comptroller) dated September 30, 2002. We addressed DOD*s
    comments in the *Agency Comments and Our Evaluation* section and reprinted
    them in appendix V. See appendix II for details on our scope and
    methodology.

    Results in Brief For fiscal year 2001, the Army had significant breakdowns
    in key internal controls over individually billed travel cards. These
    breakdowns

    contributed to the significant delinquencies and charge- offs of Army
    employee account balances and potentially fraudulent and abusive activity
    related to the travel card. The breakdowns resulted primarily from a weak
    overall control environment, flawed policies and procedures, and a lack of
    adherence to valid policies and procedures. We found substantial
    delinquencies and charge- offs of Army travel card accounts during fiscal
    year 2001, and delinquencies continued into the first half of fiscal year
    2002. Upon receipt of their travel cards, all cardholders are required to
    sign a statement of understanding that the card is to be used only for
    authorized official government travel expenses. Most Army cardholders
    properly used their travel cards and paid amounts owed to Bank of America
    timely. However, we found that the Army*s delinquency rate is higher than
    that of any other DOD component or executive branch agency in the federal
    government. For the eight quarters ending March 31, 2002, the Army*s
    delinquency rate fluctuated between 10 and 18 percent, and on average was
    about 5 percent higher than the rest of DOD and 7 percent higher than
    federal civilian agencies.

    In addition, from November 1998 through March 2002, over 23,000 Army
    travel card accounts totaling about $34 million were charged off by Bank
    of America. Our analysis of available data shows a correlation between
    delinquency problems and the travel cardholder*s age and pay grade. We
    found that the Army*s delinquency and charge- off problems are primarily

    associated with young, low- to midlevel enlisted military personnel. In
    addition, a weak control environment compounded by instances of delays in
    processing travel reimbursements to Army military and civilian personnel
    contributed to the high delinquency rates. These delinquencies and charge-
    offs have cost the Army millions of dollars in lost rebates,

    higher fees, and substantial resources spent pursuing and collecting past
    due accounts.

    The Army and DOD have taken action to address and focus command- and
    installation- level attention on management of delinquent travel card
    accounts. Beginning in November 2001, the Army began offsetting wages of
    certain military and civilian employees and the retirement benefits of
    military retirees who had either delinquent or charged- off accounts.
    These and other actions have begun to significantly reduce 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*
    problems, such

    as delinquencies and charge- offs, rather than the *front- end* or
    preventative controls, such as the weak overall internal control
    environment and specific travel program control weaknesses.

    Our work identified numerous instances of potentially fraudulent and
    abusive activity related to the travel card. During fiscal year 2001,
    about 1, 200 of the over 4,200 Army account holders who had written at
    least one nonsufficient funds (NSF) check to pay their travel card bill
    had their accounts charged off. In the same period, more than 200
    cardholders whose accounts were eventually charged off may have also
    committed bank fraud by writing three or more NSF checks to Bank of
    America. In

    one case, an Army employee, who had been convicted for writing NSF checks
    prior to receiving the government travel card, wrote over 86 NSF checks to
    Bank of America. Further, as part of our statistical sampling results at
    the four sites we audited, we estimated that personal use of the travel
    card ranged from 15 percent of fiscal year 2001 transactions at one site
    to 45 percent at another site. Cardholders used their travel cards for a

    wide variety of personal goods or services. For example, government travel
    cards were used for adult entertainment; dating and escort services;
    casino and Internet gambling; cruises; tickets to musical and sporting

    events; personal clothing; closing costs on a home purchase; and, in one
    case, the purchase of a used automobile. We found that charged- off
    accounts included those of both (1) cardholders who were reimbursed by the
    Army for official travel expenses but failed to pay Bank of America for
    the related charges, and thus pocketed the reimbursement, and (2) those
    who used their travel cards for personal purchases for which they did not
    pay Bank of America.

    We also found several instances of abusive travel card activity where Army
    cardholders used their cards at establishments, such as gentlemen*s clubs,
    which provide adult entertainment. Further, in some cases, these clubs

    were used to convert the travel card to cash by supplying cardholders with
    actual cash or *club cash* for a 10 percent fee. To illustrate, a
    cardholder who charged $330 to the government travel card at one of these
    clubs would receive $300 in cash. Subsequently, the club receives a
    reimbursement from Bank of America for a $330 restaurant charge. For
    fiscal year 2001, we identified about 200 individuals who charged almost
    $38,000 at these establishments. For example, we found that one cardholder
    obtained more than $5,000 in cash from these establishments.

    We found little evidence of documented disciplinary action against Army
    personnel who misused the card. Further, in many cases, evidence was
    lacking that Army travel program managers or supervisors were even aware
    that Army personnel were using their travel cards for personal use. For
    example, a civilian employee working at the Pentagon on a classified
    program used her travel card for personal purchases of $3,600 and
    subsequently wrote two NSF checks for over $7,700 to Bank of America. The
    cardholder*s account was subsequently charged off when the cardholder
    failed to pay the bill. The employee*s supervisor was not aware of any
    potentially fraudulent and abusive activity related to the travel card. In
    another example, a California National Guard employee with a $5,400

    charge- off associated with authorized travel, for which the Army
    reimbursed the cardholder, was subsequently promoted from Major to
    Lieutenant Colonel. In addition, we found that 38 of 105 travel
    cardholders we reviewed who had their accounts charged- off still had
    active secret or top- secret clearances as of June 2002. Some of the Army
    personnel holding security clearances who have had difficulty paying their
    travel card bills may present security risks to the Army. Army regulations
    provide that an individual*s finances are one of the key factors to be
    considered in determining whether an individual should continue to be
    entrusted with a secret or top- secret clearance. However, we found that
    Army security officials were unaware of these financial issues and
    consequently could not consider their potential effect on whether these
    individuals should continue to have security clearances.

    Our audit found that weaknesses in the Army*s overall control environment,
    including a number of specific controls that were either flawed in their
    design or in their implementation, are the root causes of the Army*s
    inability to prevent and/ or effectively detect the numerous instances of
    potentially fraudulent and abusive travel card related activity previously
    discussed. Our work demonstrated that the Army has not

    provided for an adequate control infrastructure* primarily human capital
    related* to effectively manage its travel card program. At the four units
    we audited, we found that management was focused primarily on

    delinquencies and often only after severe problems were discovered and
    major commands began demanding improved performance in reducing such
    delinquencies. There were few indications that management emphasized
    controls designed to prevent or provide for early detection of travel card
    misuse. Our audit of seven controls relied on to manage the Army*s travel
    card

    program revealed critical weaknesses. For example, many problems we
    identified were the result of ineffective controls over issuance of travel
    cards. Although DOD*s policy allows exemptions from the use of travel
    cards for certain groups or individuals, we found that without exception
    the Army issued travel cards to all personnel who requested cards

    regardless of their travel or credit history. We found a significant
    correlation between travel card fraud, abuse, and delinquencies and
    individuals with substantial credit history problems. The prior and
    current credit problems we identified for Army travel cardholders included
    charged- off credit card and automobile loans, defaulted and foreclosed

    home mortgages, bankruptcies, and convictions for writing NSF checks.
    Also, agency program coordinators (APC), who have the key responsibility
    for managing and overseeing travel cardholders* activities, are
    essentially set up to fail in their duties because they are given
    substantial responsibility for a large number of cardholders* for example
    up to 1,000 cardholders per APC* and little time to do this collateral
    duty. Military personnel who are responsible for and rated on other job
    responsibilities* such as airport security* are given the APC role as
    *other duty as assigned.* With a high level of APC turnover (particularly
    military APCs,

    which at the locations we audited were reassigned about every 6 months),
    and only minimal time allotted to perform this collateral duty, we found
    that APCs generally were ineffective in carrying out their key travel card
    program management and oversight responsibilities.

    Further, our statistical tests of key internal controls and processes in
    place at four Army locations showed errors in travel voucher processing
    that resulted in both overpayment and underpayment of the amounts that
    travelers should have received for their official travel expenses. In
    addition, substantial delays in travel reimbursements contributed to the

    high delinquency rates for at least one of these locations. Delays in
    reimbursement were often due to the traveler not submitting a travel

    voucher within the required 5 days of completion of travel, and/ or the
    paying office not making payment within the required 30 days. We also
    found a substantial number of California National Guard employees and
    several employees at other units audited who should have been paid late
    fees for late reimbursements. However, the Defense Finance and Accounting
    Service (DFAS) does not have the systems in place to identify late
    payments and thus reported that it made no late fee payments for fiscal
    year 2001.

    This report includes a matter for congressional consideration that would
    provide DOD the ability to require the split disbursement payment process
    for all of its employees. We also provide recommendations to the Army to
    strengthen the overall control environment for the Army*s travel card

    program and improve internal controls. Our recommended actions are in the
    areas of travel card issuance; monitoring, review, and disciplinary
    actions; and travel voucher and payment processes.

    In written comments on a draft of this report, DOD concurred with 23 of
    our recommendations and partially concurred with the remaining 3
    recommendations and described actions completed, under way, or planned to
    implement them. DOD partially concurred with our recommendations

    regarding (1) training APCs to refer cardholders who write NSF checks for
    disciplinary actions, (2) establishing an Army- wide disciplinary action
    policy for abusive travel card activity, and (3) developing a process to
    identify travel reimbursements that exceed the 30- day requirement so that
    individuals not paid within the statutory period are paid late fees in
    accordance with the law. With regard to the first two issues, DOD*s

    response indicated that they have taken or plan to take actions that we
    believe will address the intent of our recommendations. With regard to the
    third issue, DOD agreed that the current systems for processing and
    computing travel vouchers for the Army do not provide for automated means
    of calculating interest due on voucher payments exceeding the 30day
    requirement. DOD also stated that the Defense Travel System (DTS)
    currently being deployed automates the voucher submission process and

    should reduce the instances where reimbursements extend beyond 30 days.
    However, according to the DOD Office of Inspector General, DTS remains at
    high risk of not being an effective solution in streamlining the DOD
    travel management process and is not expected to be deployed until fiscal
    year 2006. Based on this evaluation, we do not consider DTS to be a timely
    or viable solution for identifying those reimbursements outside of the 30-
    day requirement. We continue to recommend that, until DTS is fully

    implemented and operational, DOD develop an interim process to identify

    late reimbursements and pay cardholders the appropriate fees in accordance
    with the law.

    In addition, in one area, although DOD concurred with our recommendation,
    we do not believe that its response indicates full agreement or
    understanding of the intent of the recommendation. Specifically, with
    regard to our recommendation that credit check results be used to make
    decisions on travel card applicants, DOD responded that those with prior
    credit problems are issued a restricted card and that mandatory use of the
    government travel card is required by TTRA. This is

    not correct. Both the DOD FMR and TTRA provide for exemptions from the
    mandatory use requirements under certain conditions, including evidence of
    financial irresponsibility. We continue to believe that until the Army
    takes action to consider past credit problems in determining whether to
    issue government travel cards, it will continue to increase the risk that
    individuals will repeat a pattern of fraud, abuse, and delinquency or
    nonpayment.

    Finally, in concurring with our recommendations regarding the lack of
    segregation of duties and other voucher processing problems at the
    California Army National Guard, DOD indicated that it had a number of
    detective and compensating controls in place. While these appear
    responsive to our recommendations, we have not evaluated the effectiveness
    of their implementation and therefore cannot determine whether these
    measures will resolve the problems we identified.

    Army Has Highest The Army*s travel card delinquency rate and amounts
    charged- off are

    Delinquency and substantially higher than non- Army DOD components and
    civilian agencies

    in the federal government. Cumulative Army charge- offs since the Charge-
    off Rates but

    inception of the travel card program with Bank of America in November
    Recent Actions Have

    1998 are nearly $34 million. Our analysis of available data shows the
    travel Resulted in Some

    cardholder*s age and pay rate are strong predictors of delinquency
    problems. We found that the Army*s delinquency and charge- off problems
    Improvements are primarily related to young, low- and midlevel enlisted
    military employees. Further, as discussed in the following sections of
    this report, weaknesses in the Army*s overall control environment and
    delays and errors in processing and paying valid travel vouchers
    exacerbate the Army*s delinquency problems. The Army*s high delinquency
    and default rates have also 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.
    The

    delinquencies and charge- offs have cost the Army, the federal government,
    and the taxpayers millions of dollars in lost rebates, higher fees, and
    substantial resources spent pursuing and collecting on past due accounts.

    The Army has taken a number of positive actions to address its high
    delinquency and charge- off rates, and results from the first half of
    fiscal year 2002 show a significant drop in charged- off accounts. Most of
    this reduction is attributable to a salary and military retirement offset
    program* similar to garnishment. These offsets began in November 2001.
    Other Army actions included encouraging the use of a split disbursement
    payment process, in which 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. The
    Army*s actions, however, primarily address the symptoms or *back- end*
    result of delinquency and charge- offs after they have already occurred.
    As noted in the remaining sections of this report, the Army*s control

    weaknesses that are the root cause of the problem are generally related to
    the *front- end* management of the travel card program, such as issuing
    the cards and overseeing the proper use of the cards.

    The Army*s Delinquencies Since the inception of the travel charge card
    task order between DOD and

    and Charge- offs Bank of America on November 30, 1998, Bank of America has
    charged off

    over 23,000 Army travel card accounts with nearly $34 million of bad debt.
    As of March 31, 2002, over 11,000 Army cardholders had $8.4 million in
    delinquent debt. The amount of delinquencies and charge- offs at the Army
    is the highest in DOD. Table 1 provides a comparison of cumulative charge-
    offs and delinquencies by military service as of March 31, 2002.

    Table 1: Cumulative Charge- offs and Delinquencies by Military Service as
    of March 31, 2002

    Dollars in millions

    Tot al Net

    Delinquencies DOD

    cumulative Cumulative

    cumulative as of March 31, service

    charge- offs a recoveries a, b charge- offs a

    2002 c Army $33.5 $12.9 $20. 6 $8.4

    Air Force 11.6 4. 7 6.9 5. 0 Navy d 16.6 6. 2 10. 4 6.0 a Cumulative
    charge- offs and recoveries are from November 1998 through March 2002. b
    Recoveries represent amounts recovered through collection actions on
    accounts that have been charged off by Bank of America. 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. d Includes Marine
    Corps.

    Source: GAO analysis of Bank of America and General Services
    Administration data.

    Figure 1 compares delinquency rates 3 among the Army, non- Army DOD
    components including the other military services, and the 23 largest
    civilian agencies. 4

    3 Throughout this report, 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. 4 The civilian agencies
    included in our analysis are the 23 executive branch agencies covered
    under the Chief Financial Officers (CFO) Act, as amended by the Government
    Management Reform Act.

    Figure 1: Army, Non- Army DOD, and Civilian Agency Travel Card Delinquency
    Rates for the 2- Year Period Ending March 31, 2002

    20 Percentage

    18 16 14 12 10

    8 6 4 2 0

    2000 2000

    2001 2001

    2001 2001

    2002 2002

    3rd qtr. 4th qtr.

    1st qtr. 2nd qtr.

    3rd qtr. 4th qtr.

    1st qtr. 2nd qtr.

    Fiscal year

    Governmentwide delinquency rate excluding DOD DOD delinquency rate
    excluding Army Army delinquency rate

    Source: GAO analysis of General Services Administration data.

    As of March 31, 2002, the Army had the highest delinquency rate in the
    federal government. Army*s delinquency rate over the last 2 years
    fluctuated between 10 and 18 percent, and on average was about 5 percent
    higher than the other non- Army DOD components and about 7 percent higher
    than the federal civilian agencies. 5 According to Army officials, the
    nature of the Army*s mission, which includes extensive travel for extended
    periods in remote, often hostile locations around the world, contributes,
    at least in part, to the Army*s high delinquency rate. Appendix III
    provides a breakdown of the Army*s delinquency rates by major command.

    5 We did not analyze in detail the reason that the Army delinquency rates
    are substantially higher than those of the non- Army DOD component
    delinquencies. However, we will be issuing separate reports that include
    analysis of delinquency rates for the departments of the Navy and the Air
    Force.

    Age and Pay Grade Are A number of factors contributed to the Army*s high
    delinquency rates.

    Correlated to Delinquency Many of the problems related directly to the
    control environment at the

    and Charge- off Problems Army and at the sites we visited. Other problems
    related to the

    implementation of the travel card program and a lack of controls over
    travel card use and travel processing. A detailed discussion of the
    control environment and specific internal control issues is provided in
    the following sections of this report. Without proper management control,
    demographics such as the age and pay rates of Army personnel also
    contributed to delinquencies and charge- offs.

    Our analysis of available data showed that there was a correlation between
    certain demographic factors and high delinquency and charge- off rates.
    According to Army representatives, and based on our analysis, most Army
    travel cardholders responsible for delinquencies and charge- offs were
    young (generally married), low- and midlevel enlisted military personnel
    (E- 1- privates to E- 6- staff sergeants), 6 with relatively low incomes
    and little experience in handling personal finances. If these individuals
    get into financial difficulty, they have fewer resources at their disposal
    to pay their travel card balances in full every month.

    6 Appendix IV provides a description of each of these military grades and
    their associated military rankings and pay, along with corresponding
    civilian grade and pay data.

    Figure 2: Army Delinquent and Total Outstanding Travel Card Balances by
    Military Grade and Total Civilian Populations as of September 30, 2001 25

    Dollars in millions 20 15 10

    5 0

    E1- E3 E4- E6 E7- E9 O1- O3 O4- O6 O7- O10 WO1- WO5 Civilian Grade/
    classification

    Delinquent Total outstanding balance

    Source: GAO analysis of Bank of America data.

    In the Army, grades E- 1 through E- 6 account for about 73 percent of all
    military personnel. Consequently, it is not surprising that they have the
    highest outstanding travel card balance. As shown in figure 2, the travel
    cardholder*s grade (and associated pay) is a strong predictor of
    delinquency problems. We found that the Army*s delinquency and chargeoff
    problems are primarily associated with young, low- and midlevel enlisted
    military personnel with basic pay levels ranging from $11,000 to

    $26,000. Delinquency rates were as high as 40 percent and 25 percent for
    E1 to E- 3 and E- 4 to E- 6, respectively, compared to Army civilians
    whose delinquency rate is consistent with rates for federal civilian
    agencies, as shown in figure 1.

    As shown in figure 3, personnel in grades E- 1 through E- 6 account for
    about $8 million of the $10 million in total Army charge- offs for fiscal
    year 2001.

    Figure 3: Fiscal Year 2001 Army Charge- offs by Military Grades and Total
    Civilian Populations 8

    Dollars in millions 7 6 5 4 3 2 1 0

    E1- E3 E4- E6 E7- E9 O1- O3 O4- O6 O7- O10 WO1- Civilian

    Grade/ classification WO5

    Source: GAO analysis of Bank of America data.

    Enlisted personnel in the E- 1 to E- 6 grade level range in rank from
    privates to staff sergeants, respectively, and receive basic pay ranging
    from $11, 033 to $26,253. Although these basic pay rates are supplemented
    with amounts such as housing and food allowances, these salaries may not
    permit payment of excessive personal charges on travel cards. Also, if
    cardholders in these lower grade levels do not receive their travel card
    reimbursements promptly because of either delays in filing their vouchers
    or in voucher processing, they may lack the financial resources to make
    timely required payments on their travel card accounts. Further, as
    discussed later, because of the Army*s failure to take any action to
    exempt personnel with

    poor credit histories from required use of travel cards, these low- and
    midlevel 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. The failure to provide proper
    training and monitoring of travel card use, as well as maintain firm
    credit limits, may also have exacerbated the delinquency rates for these
    individuals.

    High Delinquency and Although the bank generally absorbs the losses
    associated with

    Charge- off Rates Have delinquencies and charge- offs, this problem has
    significant consequences

    Resulted in Increased Costs to the Army. The high delinquency and charge-
    off rates resulted in

    to the Government increased costs in terms of increased fees imposed by
    Bank of America

    following a contract dispute with DOD and the loss of potential refunds
    associated with the program. Other costs are real but not easily
    measurable, such as the increased administrative burden to the Army
    associated with additional resources required to address delinquent and

    charged- off accounts. For example, to effectively manage the travel card
    program, employees with delinquent accounts must be identified, counseled,
    disciplined, and closely monitored. In addition, employees with financial
    problems who also have access to sensitive data may pose a security risk,
    as discussed later in this report. While most employees properly manage
    their travel card accounts and pay their bills on time, the high
    delinquency and charge- off rates may undermine the professional image of
    the Army and its personnel.

    Dispute between Contractor and Unexpectedly high defaults by DOD*s travel
    cardholders, including the

    DOD Army*s, resulted in a 5- month legal dispute with DOD*s contractor,
    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 for
    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 Bank of America 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 because of required *contract and program management policies
    and procedures* associated with higher- than- anticipated credit losses.
    Bank of America officials estimated that 43, 000 DOD employees defaulted
    on more than $59 million in debts. Bank of America only agreed to drop its
    legal dispute with DOD after GSA renegotiated the terms of the master
    contract and DOD renegotiated the related tailored task order for travel
    card services in April 2001. Specifically, under the renegotiated master
    contract and related task order Bank of America was able to reduce

    its financial risk by instituting additional fees, such as higher cash
    advance and late payment fees; offsetting credit losses against rebates;
    facilitating the collection of delinquent and charged- off amounts through
    salary and

    military retirement pay offset; and participating in the split
    disbursement payment process, in which the government pays the bank
    directly.

    Effect of Increased Fees One of the terms of the renegotiation of the task
    order between Bank of America and DOD was an increase in travel card cash
    advance fees from 1.9 percent to 3 percent, or $2, whichever would be the
    higher fee amount,

    effective August 10, 2001. The Army reimburses cash advance fees 7
    incurred by a traveler while on authorized travel. We estimate that this
    contract modification will result in approximately $1.4 million of
    increased costs to the Army each year for the reimbursement of cash
    advance fees. Our estimate was made by applying the increase in the
    advance fees to cash advances made during fiscal year 2001. Other fee
    increases agreed to in the renegotiation increased the cost to the Army,
    such as the fee for expedited travel card issuance, and to delinquent
    cardholders, such as the increase in

    late fees from $20 to $29. 7 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 a fee of a set amount or percentage of the amount of the
    withdrawal.

    Delinquent Account The GSA master contract modification also changed the
    rebate calculation, Payment Affects Rebates to

    making it imperative that the Army improve its payment rates to receive
    the the Army 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 as a result of a combination of both individually
    billed and centrally billed card usage. 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 the closing date on the statement of account
    reduce the rebate amounts. Effective January 2001, one of the terms of 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 8 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 credit losses, significantly affected the
    amount of rebate that the Army received as a result of combined
    individually and centrally billed

    net sales in fiscal year 2001. The Army collected approximately $635, 000
    of the $3 million in rebates for fiscal year 2001 that we estimated that
    the Army would have received, based on fiscal year 2001 dollar volume, had
    individually billed account payments been timely. Prior to the change in
    the way the rebates were calculated, in fiscal year 2000, the Army
    received approximately $2.7 million in rebates from the travel card
    program, net of $450, 000 that was paid to GSA for an industrial funding
    fee (contract administration fee).

    GSA receives a contract administration fee of four basis points or four
    onehundredths of a percent (. 0004)* of net sales on both the individually
    and centrally billed accounts. For fiscal year 2001, GSA received
    approximately $485, 000 for the Army*s net sales. Bank of America pays
    this fee to GSA regardless of whether the agency or service receives any
    rebates. For example, for the last three quarters of fiscal year 2001, the
    Army had negative rebates after the credit loss fees were deducted and GSA
    received approximately $386,000 from Bank of America for those three
    quarters. 8 Net sales consist 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.

    The negative net rebates are carried over to subsequent quarters until
    they can be offset by positive net rebates that the agency earns.

    Army and DOD Have Taken The Army has taken a number of positive actions to
    address its high

    Some Steps to Reduce delinquency and charge- off rates, and results from
    the first half of fiscal

    Delinquencies and Chargeoffs, year 2002 show a significant drop in
    charged- off accounts. Most of this

    but Additional Actions reduction may be attributed to a salary and
    military retirement payment

    offset program* similar to garnishment. This program began to offset Are
    Needed

    amounts from delinquent cardholders* salaries and military retirement
    benefit payments in November 2001. Other Army actions include a limited
    split disbursement payment plan, in which DFAS disburses a portion of a
    travel reimbursement directly to the bank (instead of disbursing the
    entire amount of the reimbursement to the cardholder), and increased
    management attention and focus on the delinquency issue. The Army*s
    actions, however, primarily address the symptoms or *back- end* result of

    delinquency and charge- offs after they have already occurred. As noted in
    the remaining sections of this report, the Army has significant control
    weaknesses, particularly with respect to the front- end management of the
    travel card program, such as issuing the cards and overseeing the proper
    use of the cards, which it has not yet effectively addressed.

    Charge- offs Have Decreased As shown in figure 4, the Army*s charge- offs
    have decreased substantially.

    Figure 4: Army Travel Card Charge- off and Recovery History from October
    1, 2000, to March 31, 2002

    4.0 Dollars in millions

    3.5 3.0 2.5 2.0 1.5 1.0 0.5

    0 2001

    2001 2001

    2001 2002

    2002 1st qtr.

    2nd qtr. 3rd qtr.

    4th qtr. 1st qtr.

    2nd qtr. Fiscal year

    Charge- offs Charge- off recoveries

    Source: GAO analysis of Bank of America data.

    Specifically, although Army delinquency rates have not changed
    substantially in the last 2 years, the total dollars charged off by Bank
    of America have decreased for each of the last four quarters. Figure 4
    also shows that recoveries of charge- offs increased markedly in the
    second quarter of fiscal year 2002. The primary causes of the decrease in
    chargeoffs

    and recent increase in recoveries are DOD*s new salary and military
    retirement benefit offset program as well as other positive steps,
    including encouraging the use of split disbursements and increased
    management focus and attention.

    Salary and Military Retirement Starting in fiscal year 2002, DOD began to
    offset the salary of certain

    Offset Program civilian and military employees and retired military
    members for all

    services, including the Army, for the amounts delinquent or charged off on
    travel card accounts. The DOD salary offset program 9 implements a
    provision of the Travel and Transportation Reform Act of 1998 (TTRA) 10
    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 to the contractor, as a result of delinquencies not disputed
    by the employee, on his or her travel card. 11 With the task order
    modification, DOD agreed with Bank of America to

    implement an offset program. From April 2001 through August 2001, DOD
    worked with the Bank of America to establish protocols and to set up the
    program. In August 2001, Bank of America sent demand letters to
    cardholders with accounts over 90 days delinquent. DFAS processed the
    initial offsets of delinquent accounts in October 2001 in the various DOD
    pay systems. The first deduction was made from the November pay period.
    Collections were paid to Bank of America starting in early December 2001.

    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 charged- off accounts.

    The process takes approximately 2 months from initiating the offset
    through payment to the bank. Specifically, after 90 days delinquency, Bank
    of America sends a demand letter to the individual cardholder that
    requests payment in full within 30 days. The demand letter provides for
    initiating offset if payment is not made in full within 30 days. The
    cardholder may negotiate an installment agreement or may dispute the
    charges with the bank. The cardholder has a right to review all records,
    such as invoices, and to request a hearing if he or she is not satisfied
    with the bank*s disposition of the dispute.

    9 DOD*s salary offset program includes individuals* salaries paid by DOD
    through its active duty, reserve, and civilian pay systems, and retirement
    benefits paid through its military retirement pay system.

    10 Sec. 2( d), Public Law 105- 264, 112 Stat. 2350 (5 U. S. C. 5701 note).
    11 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 the federal government.

    After the 30 days have passed, if payment is not made and the cardholder
    does not dispute the debt, the bank includes the account in the list of
    accounts requested for offset. Individuals in the following categories
    cannot be accepted for offset.

     Civilian employees in bargaining units that have not agreed to offset
    cannot be accepted. According to a DFAS official, as of the end of April
    2002, 789 of 1,227 DOD bargaining units have agreed.

     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 are not currently subject to offset. The authorizing
    statutes for both the Civil Service Retirement System 12 and the Federal
    Employee*s Retirement System 13 specify that retirement benefits may be
    offset only to the extent expressly authorized by federal statutes. TTRA,
    Section 2, provides authority to offset salaries of *employees* of
    agencies but does not provide such authority for civilian employee retiree
    annuitants.

    Once an individual is accepted for offset, the related debt is established
    in the respective pay system and DFAS can deduct up to 15 percent of
    disposable pay. Disposable pay is defined in GSA*s Federal Travel
    Regulation 14 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 monthly for military personnel and retirees and biweekly for
    civilian personnel.

    According to DFAS, from October 2001 through April 2002, Bank of America
    referred 49,014 DOD- wide cases with debt of $72.4 million to DOD

    12 5 U. S. C. section 8346. 13 5 U. S. C. section 8470. 14 41 C. F. R.
    section 301- 54. 2.

    for offset. DOD accepted and started offset for 73 percent of the cases
    and 68 percent of the debt amounts referred. The number and debt amount of
    Army cases forwarded by Bank of America were not available. From November
    2001 through April 2002, DFAS collected $6.3 million from Army military
    and retired military members through the offset program. DFAS was unable
    to provide the amount of collections for civilian employees by military
    service. However, the amount of total collections from November 2001
    through April 2002 for civilian employees of DOD services and agencies was
    about $702,000.

    Split Disbursement Payment DOD has recently encouraged cardholders to make
    greater use of the split

    Process disbursement payment process. This payment method, by which

    cardholders elect to have all or part of their reimbursement sent directly
    to Bank of America, has the potential to significantly reduce
    delinquencies. Split disbursements are a standard practice of many private
    sector companies. DOD reported that for about 27 percent of the travel
    vouchers paid in April 2002 at one of its major disbursing centers,
    cardholders elected this payment option.

    However, the use of the split disbursement payment process by employees is
    currently voluntary, as shown by DOD*s low participation rate. The defense
    authorization bill for fiscal year 2003 passed by the Senate would change
    this by authorizing the Secretary of Defense to require that any part of
    an employee*s travel allowance be disbursed directly to the employee*s
    travel card issuer for payment of official travel expenses. The defense

    authorization bill for fiscal year 2003 passed by the House does not
    contain comparable authority. As of early October 2002, the bill (H. R.
    4546) was in conference.

    Management Focus and In response to the excessive delinquency rate, in
    October 2000, the Vice

    Attention Chief of Staff of the Army issued a directive to cut the Army*s
    delinquencies

    by 50 percent by the end of March 2001. Further, the Vice Chief of Staff
    established a goal of a delinquency rate of no more than 4 percent of
    active cardholders as soon as possible and ordered commanders throughout
    the Army to provide additional attention to the government travel card
    program. 15 Army officials emphasized setting goals, monitoring results,

    15 For performance measurement purposes, the Army is calculating
    delinquency rates using the number of delinquent accounts compared to the
    total number of active accounts. The dollar amount method we used is the
    industry standard and is also used by the CFO Council and by the DOD
    Charge Card Task Force.

    providing feedback, providing training, and coordinating efforts with DOD
    and Bank of America. We have also seen increased management attention and
    focus on reducing delinquencies at the Army command level. For example,
    commanders at both Ft. Bragg locations we audited told us they hold
    monthly meetings to discuss the status of any outstanding delinquencies
    and related corrective actions. Further, the DOD Under Secretary of
    Defense (Comptroller) created a

    DOD- wide Charge Card Task Force in March 2002 to address management
    issues related to DOD*s purchase and travel card programs. The task force
    issued its final report on June 27, 2002. We have reviewed the report and
    believe that many of the actions proposed by the task force will improve
    the controls over the travel card program. For example, as previously
    discussed, we support the provision of the fiscal year 2003 defense
    authorization bill that would authorize DOD to require the use of the
    split disbursement payment process. If enacted and required DOD- wide,
    this authority has the potential to significantly reduce DOD*s and the
    Army*s delinquency rates. Other important task force recommendations
    include

    canceling inactive accounts and expanding the salary offset program.
    However, actions to implement additional *front- end* or preventive
    controls, such as strengthening the critical role of the APCs and denying
    cards to individuals with prior credit problems, were not addressed in the
    report. We believe that strong preventive controls will be critical if DOD
    is to effectively address the high delinquency rates and charge- offs, as
    well as the potentially fraudulent and abusive activity discussed in this
    report. Potentially Fraudulent

    Our review identified numerous instances of potentially fraudulent and and
    Abusive Travel

    abusive activity associated with the Army*s travel card program during
    fiscal year 2001. Failure to implement controls to reasonably prevent such
    Card Activity transactions can increase the Army*s vulnerability to
    additional delinquencies and charge- offs. As discussed previously, about
    $34 million associated with over 23,000 Army accounts was charged off
    since the inception of the travel card program with Bank of America.

    We considered any scheme or pattern of activity related to the use of the
    travel card, in apparent violation of federal or state criminal code, as a
    potentially fraudulent activity. For purposes of this report, the only
    cases we characterized as potentially fraudulent were those where
    cardholders wrote three or more NSF checks or wrote checks on closed
    accounts to pay their Bank of America bills. These cases are potentially
    fraudulent

    because they indicate a pattern of activity in violation of one or more

    elements of federal or state criminal codes. 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.

    For purposes of this report, 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.

    Potentially Fraudulent Our review identified numerous examples of
    potentially fraudulent activity

    Transactions where the cardholders wrote checks against closed checking
    accounts or repeatedly wrote NSF, or *bounced,* checks as payment for
    their travel

    card accounts. Knowingly writing checks against closed accounts or writing
    three or more NSF checks may be bank fraud under 18 U. S. C. 1344. 16
    Further, it is a violation of the Uniform Code of Military Justice (UCMJ)
    17 article 123a when a soldier makes, draws, or utters (verbally
    authorizes) a check, draft, or order without sufficient funds and does so
    with intent to defraud. During fiscal year 2001, of the over 4,200 account
    holders who wrote NSF checks, close to 1,200 Army personnel had their
    accounts charged off. In the same period, more than 200 personnel whose
    accounts were eventually charged off may have committed bank fraud by
    writing three or more NSF checks to Bank of America. Table 2 shows the 10
    cases we selected for review where the cardholders wrote three or more NSF
    checks to Bank of America, and whose accounts were charged off due in part
    to repeated use of NSF checks.

    16 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. 17 UCMJ is a federal law enacted by the
    Congress. UCMJ articles 77- 134 are known as *punitive offenses,* that is,
    specific offenses which, if violated, can result in punishment by court-
    martial.

    Table 2: Examples of NSF Checks Written on Charged- off Accounts Total
    amount (number)

    of NSF Total

    checks in amount

    Documented follow- up/ Cardholder

    FY 2001 charged off Grade Unit Credit history/ problems disciplinary
    action

    1 $269, 301 $35, 883 E- 6 Ft. Jackson Criminal conviction for writing

    Undergoing courtmartial. (86) NSF checks and serious credit

    card delinquency a prior to card issuance.

    2 12, 327 7,942 O- 3 Ft. Hood None. None. (8) 3 7, 737

    3, 257 GS -13 Pentagon Charge- offs and referrals to None. Bank of America

    (4) collection agencies b and serious account paid in full after

    credit card delinquencies prior to we identified it as a card issuance.

    charge- off. 4 6, 099

    7,373 GS- 12 Ft. McPherson Serious credit card Counseled. (3)
    delinquencies prior to card Salary offset program.

    issuance. Mortgage foreclosure and other charge- offs and referrals to
    collection agencies since card issuance.

    5 3, 995 5,259 E- 7 West Virginia Bankruptcy judgment,

    Letter of reprimand. (3) ROTC automobile repossession, and Salary offset
    program.

    serious delinquencies prior to card issuance.

    6 4, 845 3, 380 E- 6 Ft. Hood Referrals to collection agencies

    None. (11) prior to card issuance. 7 2, 709

    7,846 E- 4 Ft. Drum/ Prior charge- off and referral to

    Administrative discharge (3) Ft. Lewis collection agency. for misconduct
    directly related to misuse of the

    travel card. 8 900

    3,104 E- 3 Ft. Drum None prior to travel card None. Honorable (5)
    issuance. Automobile discharge. repossession and delinquencies since 2000.

    9 840 2,137 E- 7 Army National Serious delinquencies prior to

    None. (3) Guard Utah card issuance. Salary offset program.

    10 263 2,763 GS- 5 U. S. Army Referral to collection agency and Counseled.
    (3) Europe serious delinquency before card Salary offset program.

    issuance. a Serious delinquency is defined as 90 or more days past due on
    payment submission.

    b These included referrals to collection agencies for unpaid bills from
    utility companies, cable companies, and department stores. Source: GAO
    analysis.

    Eight of the 10 cardholders included in table 2 had significant credit
    problems prior to card issuance, such as charged- off credit card accounts
    and automobile loans; mortgage foreclosures; bankruptcies; serious
    delinquencies; referrals to collection agencies for unpaid utility bills,
    medical fees, and department store accounts; and, in one case, prior
    criminal convictions for writing NSF checks. The remaining two had similar
    credit problems subsequent to issuance of Bank of America travel cards.
    These examples are illustrative of many of the breakdowns in the
    management and oversight over the Army travel card program, as discussed
    in the following sections of this report. The following provides

    detailed information on some of these cases.  Cardholder #1 was a staff
    sergeant who wrote 86 NSF checks totaling

    almost $270,000 for payment on his Bank of America travel card account for
    charges incurred when the cardholder was not on official government
    travel. This cardholder had a previous criminal record for writing NSF
    checks. The cardholder also had numerous other financial problems,
    including mortgage foreclosure and claims discharged in December 2001 for
    Chapter 7 bankruptcy. Among the claims discharged in bankruptcy was a
    $2,199 claim on the cardholder*s previous

    government travel card issued by American Express and a $114, 750 real
    estate loan. This cardholder applied for and received a new Social
    Security number when he legally changed his name in 1998, and since then
    has had two Social Security numbers* one under each name. The individual
    authorized a credit check at the time of his application for a government
    travel card from Bank of America. However, it appeared that the credit
    check was not performed and the individual was issued a standard card with
    a $10,000 limit in April 1999, instead of a restricted card with a $2,500
    credit limit.

    From July 1999 through November 2000, the cardholder wrote approximately
    86 NSF checks* some on closed or invalid accounts* to Bank of America.
    Industry regulations require that an account be credited immediately upon
    receipt of a check. Consequently, when

    Bank of America posted the NSF checks, the account appeared to have been
    paid, which provided credit to the cardholder to make additional
    purchases. Thus, by writing successively larger NSF checks, which Bank of
    America credited to his travel card account, the staff sergeant was able
    to, in effect, successively increase his credit limit to over $35,000* a
    practice known as *boosting.* He used each of these successive increases
    in his effective credit limit to charge additional items on his travel
    card. Despite the 86 NSF checks and associated

    increases in the cumulative unpaid balance on the cardholder*s government
    travel card account, records we obtained indicate that Bank of America did
    not close this individual*s account until February 2001, when the account
    was charged off. The cardholder was undergoing court- martial in late May
    2002 for NSF checks related to his Bank of America account as well as to
    the Army and Air Force Exchange Services. Bank of America acknowledged
    that it erred in not closing this

    account sooner. This has resulted in the bank changing its policy to
    require accounts to be closed when a cardholder has written three NSF
    checks.  Cardholder #3 currently works at the Pentagon as a GS- 13
    employee on

    a classified program. Because of her position, the cardholder has a
    topsecret clearance. Prior to applying for the Bank of America travel
    card, the employee had credit problems, including several charged- off
    accounts. Because the employee did not authorize a credit check on her
    travel card application, she was given a restricted card with a credit
    limit of $2,500, which should have been issued in *inactive* status and
    only activated when needed for travel. However, Bank of America records
    showed that in July 2000, immediately after receiving the travel card, the
    employee used the card to pay for a personal move and other

    charges totaling more than $3, 600* more than $1, 000 in excess of the
    credit limit on restricted travel cards. The cognizant APC told us that
    while a credit check authorization should have been done for the
    cardholder to exceed the $2,500 credit limit, she could not confirm that
    one was done in this case. In addition, from October 2000 through
    September 2001, the employee

    wrote four NSF checks totaling more than $7, 700 to Bank of America. The
    cardholder*s account had an unpaid balance of $3,257 at the time it was
    charged off in September 2001. Although the cardholder had a restricted
    card that should have been activated only for the first official travel,
    the fact that she was able to use the card immediately upon issuance while
    not on travel indicated that Bank of America issued the

    card in an *active* status. Shortly after our investigators contacted this
    cardholder, she paid her account balance in full. We also found that no
    disciplinary action had been taken against this

    individual. The two APCs were not aware that the employee had problems
    with her account, much less that the account was charged off, until
    contacted by our investigators. The APCs told us they had little time to
    devote to reviewing the over 500 individual accounts for

    which they had oversight responsibilities assigned as a collateral duty.
    In addition, while, according to a Bank of America official, APCs have had
    access to NSF check information in its database since 2000, one of the
    APCs told us she only recently received training on how to identify
    delinquent accounts in Bank of America*s database.

     Cardholder #6 exhibited a pattern of writing NSF checks about once a
    month. During fiscal year 2001, the cardholder wrote 11 NSF checks to Bank
    of America that ranged from $250 to $630. Some checks were written to pay
    charges that appeared to be for personal travel. The cardholder*s account
    balance of $3,380 was charged off in February 2002. Further, when the
    cardholder was assigned from Ft. Hood, Texas, to the U. S. Army Recruiting
    Command in Tampa, Florida, her travel card account was not transferred and
    assigned to the APC responsible for travel card oversight in her new unit.
    Consequently, the APC in Florida was not aware of the cardholder*s
    problems because the cardholder did not appear in any of the Recruiting
    Command*s delinquency reports.

    Abusive Travel Card Activity We found instances of abusive travel card
    activity by Army cardholders that covered charges for a wide variety of
    personal goods and services,

    including cruises; sports and music event tickets; personal clothing
    items; casino and Internet gambling; transactions to obtain cash at adult
    entertainment establishments; and, in one case, the purchase of a used
    automobile. There should be no misunderstanding by Army personnel that

    personal use of the card is not permitted. The standard government travel
    card used by most Army personnel is clearly marked, *For Official
    Government Travel Only* on the face of the card.

    In addition, all Army travel card applicants sign a statement that
    provides, in part, that *I also understand that I am authorized to use the
    card only for those necessary and reasonable expenses incurred by me for
    official travel.* As part of our statistical sampling tests of travel card
    activity at four Army locations, we estimated that 15 percent to 45
    percent of the fiscal year 2001 travel card transactions at those
    locations appeared to be

    for charges not related to official travel and, therefore, were abusive.
    Further, abusive use of the card related to failure to pay Bank of America
    was the result of (1) cardholders who were reimbursed for official travel
    and then did not pay Bank of America and (2) cardholders who used the card
    for personal charges and failed to pay Bank of America.

    Travel Card Abuse due to Failure Our work at four case study sites and our
    Army- wide data mining identified

    to Pay Bank of America Charges numerous examples of abusive travel card
    use where cardholders failed to

    pay their travel card bills. This abusive activity included (1) authorized
    transactions incurred in conjunction with approved travel orders where the
    cardholders received reimbursement but did not pay the bills, leading to
    charge off of the cardholders* accounts, or (2) transactions incurred by

    cardholders that were not associated with approved travel orders where
    unpaid accounts were also charged off. In all cases, we found that
    ineffective monitoring contributed to charge- offs. Specifically, many
    APCs, commanders, and supervisors did not effectively monitor travel card
    usage or address delinquencies timely. We found little documentation
    indicating

    that the APCs, commanders, and supervisors were aware of the problems with
    individual cardholders, conducted follow- up, and took appropriate
    disciplinary actions. Table 3 provides examples of the two types of
    abusive transactions related to nonpayment and the related follow- up and
    disciplinary actions.

    Table 3: Examples of Abusive Activity Where the Account Was Charged Off
    Total

    Transactions Documented charged- off contributing to follow- up/
    Cardholder Grade Unit

    amount charge- off Credit history/ problems

    disciplinary action

    1 a GS- 12 Ft. McPherson $7,373 Used reimbursed travel Serious credit card

    Counseled; salary money for closing costs delinquencies prior to travel
    offset. on a house. Wrote NSF

    card issuance; mortgage checks.

    foreclosure and other charge offs and referrals to collection agencies
    since 2000.

    2 b E- 7 ROTC 5, 259 $4, 100 to Budget- Rent Bankruptcy judgment,

    Letter of reprimand. A- Car for purchase of a

    automobile repossession, and Salary offset. used automobile.

    serious delinquencies prior to travel card issuance, 3 E- 6Army Forces
    2,278 $110 in *club* cash

    Serious credit card and other None. Command from Spearmint Rhino
    delinquencies prior to travel Adult Cabaret.

    card issuance. 4 E- 4Army Reserve 1,253 $500 to Cryptologic, Numerous
    referrals to collection

    None. Command Inc. by spouse for

    agencies prior to travel card Internet gambling.

    issuance. 5 O- 5 California

    5,419 Did not use Serious delinquencies, Salary offset. c National
    reimbursement to pay

    including delinquency on the Guard c

    travel card charges. American Express government

    travel card, prior to travel card issuance.

    (Continued From Previous Page)

    Total Transactions

    Documented charged- off contributing to follow- up/ Cardholder Grade Unit

    amount charge- off Credit history/ problems

    disciplinary action

    6 E- 8 Ft. Bragg, 4, 704 ATM withdrawals in Serious delinquency prior to

    Verbal counseling. Special

    hometown area without travel card issuance. Operations travel order.

    7 E- 4 Ft. Bragg, 8, 709 Numerous charges at

    Serious delinquency prior to None. Forces Wal- Mart Supercenter. travel
    card issuance. Command

    8 E- 3Ft. Drum, 1,058 Cash from Dream Girls None prior. Serious credit
    card

    None. Forces Escort Service. delinquencies in 2002. Command

    9 E- 4Ft. Drum, 10, 029 Numerous personal Referral to collection agency

    None. Forces charges, including

    prior to travel card issuance. Command casino gambling.

    10 E- 4 Ft Drum, 7, 643 Numerous charges at

    Referrals to collection agencies None. Forces local restaurants, gas

    prior to travel card issuance. Command stations, grocery stores, and
    hotels in vicinity of Ft. Drum. a Same as NSF case #4.

    b Same as NSF case #5. c See disciplinary action section for a discussion
    of this cardholder.

    Source: GAO analysis.

    Similar to individuals who wrote NSF checks, many of the 105 cardholders
    that we reviewed whose accounts were charged off had significant prior
    credit problems, such as charged- off credit card account balances and
    automobile loan defaults, and referrals to collection agencies. Many of
    these individuals experienced further credit problems, including mortgage
    foreclosure, after issuance of the government travel card. As shown in
    table 4, some charged- off accounts resulted from the use of the card for

    transactions that were not proper travel expenses covered by valid travel
    orders, while others resulted from official travel expenses that were
    reimbursed but the cardholders failed to pay the bills. The magnitude and
    range of abusive transactions reflect the poor control environment and
    other internal control weaknesses discussed later in this report. The
    following include details of some of these.

     Cardholder #1 was a GS- 12 employee in Army Forces Command at Ft.
    McPherson, Georgia. In August 2000, the cardholder used the card to pay
    for authorized charges associated with a permanent change of station move
    from Qatar to Ft. McPherson. The cardholder did not elect split
    disbursement of his travel reimbursement between himself and

    Bank of America when filing travel vouchers. Thus, the entire
    reimbursement for travel expenses was electronically deposited in the
    cardholder*s checking account. The cardholder did not pay his travel card
    bill, but instead used the reimbursement to, among other things, pay the
    closing costs on the purchase of a home. The cardholder was counseled by
    the APC and his supervisors after his travel card account became
    delinquent, but no disciplinary action was taken. The cardholder is now in
    the salary offset program. The cardholder informed us that he was briefed,
    at the time of card issuance, of his responsibility to make timely
    payments to Bank of America in payment of expenses claimed on approved
    travel vouchers.

     Cardholder #2 was a sergeant first class (E- 7) with an Army Reserve
    Officers* Training Corps unit. Army investigative records showed that in
    January 2001, the cardholder*s spouse used his government travel card to
    make two payments of $2,050 each to Budget Rent- A- Car for the purchase
    of a used automobile. The spouse was able to use the travel card because
    of the general military power of attorney provided to her by the sergeant.
    In addition, several automated teller machine (ATM) withdrawals were made
    using the card at times when the sergeant was not on official travel
    status. The cardholder received a letter of reprimand and subsequently
    retired. In February 2002, after his account was charged off, the
    cardholder*s account was put into the offset program and a portion of his
    annuity automatically withheld for repayment to Bank of America.

     Cardholder #9 was an Army specialist (E- 4) at Ft. Drum and received a
    total of three travel card accounts. Shortly after receiving his first
    card he incurred over $5, 000 in personal charges, including casino
    gambling. He then notified Bank of America that his wallet, which
    contained his

    government travel card and driver*s license, had been stolen and that the
    charges on the card were not made by him and therefore were fraudulent
    charges. Bank of America closed this account, charged off the amount as a
    fraud loss, and issued the soldier a second account. The soldier then
    incurred over $8,000 in personal charges for casino gambling and notified
    Bank of America that this card was lost. Bank of

    America again closed this account and issued a third account to the
    soldier. The soldier incurred approximately $5,000 in personal charges on
    this account, including casino gambling. Bank of America personnel began
    to question the soldier regarding the transactions made on both the first
    and second accounts because both accounts showed transactions at the same
    casino and the signatures on the charge

    receipts were similar to the soldier*s signature. As of April 17, 2002,
    the soldier*s travel card account was in charge- off status, with an
    unpaid balance of $10,029. The soldier told us that he falsified the
    report to Bank of America that his first card was stolen and that the
    charges were fraudulent because he could not pay the bill. He also told us
    that he falsely reported his second card lost again because he could not
    pay the bill. In addition, the soldier stated that he made personal
    charges on the third card, including casino gambling, in hopes of winning
    enough to pay the bill. In October 2000, the soldier received an Article
    15 for misuse of his travel cards. He received a reduction in grade from
    an E- 4 to an E- 1, forfeited a half- month*s pay, and was to serve 45
    days of extra duty beyond his November 30, 2000, discharge date. The
    soldier informed us that the Commander waived the 45 days and he received
    an honorable discharge as an E- 4. In February 2002, the Army enrolled
    this soldier in the offset program. The soldier is currently an E- 5 with
    the Pennsylvania National Guard. According to the National Guard, the
    Army* official personnel file for this soldier contains no information

    concerning any adverse action.  Cardholder #10, another Army specialist
    (E- 4) at Ft. Drum used his

    government travel card to make numerous purchases of personal items
    totaling $2,841 over a 3- month period from May through July 2000. The
    personal items included 38 restaurant charges, 37 charges at gas stations,
    14 charges at grocery stores, and 5 hotel charges in the vicinity of Ft.
    Drum. The specialist, who had received a $10,000 credit limit on his
    government travel card, had an unpaid balance of $7,643 as of

    December 11, 2000. As of April 17, 2002, the travel card was in chargeoff
    status and the specialist no longer worked for the Army. Our review of the
    soldier*s credit report showed that he received his government travel card
    from Bank of America in May 1999. Since that time, the soldier opened
    numerous credit card and other consumer accounts with other vendors,
    almost all of which had unpaid balances and were in

    collection status or had been charged off. We found no evidence that the
    APC detected the soldier*s personal use of the government travel card. As
    a result, the Army could not take timely action to cancel or suspend the
    soldier*s travel card account. We also found no evidence that disciplinary
    action was taken to address personal use of the travel card or the unpaid
    debt once the Army became aware of the problem. In contrast to the
    charged- off accounts discussed above, we found some

    instances where the failure to pay the travel card bill was attributable
    to the delays and errors in processing vouchers and reimbursing the
    travelers.

    This issue is discussed in more detail in a later section on testing of
    key internal controls.

    Travel Card Abuse Where We also found instances in which cardholders used
    their travel cards for

    Cardholder Paid Bank of personal purposes, but paid their travel card
    bills when they became due.

    America These cardholders benefited by, in effect, getting interest- free
    loans. Personal use of the card increases the risk of charge- offs related
    to abusive

    purchases, which are costly to the government and the taxpayer. In
    addition, the high rate of abuse with respect to travel card activity is
    indicative of the weak internal control environment and the failure of the
    APCs to monitor credit card activities, as discussed later in this report.
    Table 4 provides examples of the types of abusive charges we found during

    our review.

    Table 4: Examples of Abusive Activity Where the Cardholders Paid the Bill
    Documented disciplinary Cardholder Unit Grade Vendor Amount Nature of
    transaction

    action

    1 U. S. Army Europe E- 5 Celebrity Cruises $5,192 Reservations for 4 on
    the None. Allied Command Millennium cruise ship, which sails

    to the Bahamas and Caribbean. 2 U. S. Army Reserve

    O- 5 Purdue University 3,998 Accommodations for two for 4 None. Command
    Rose Bowl Tour nights during the Rose Bowl.

    Package includes pep rally, New Year*s Eve event, and premium seats to the
    parade.

    3 U. S. Army Reserve O- 2 Louisiana

    1,395 45 tickets to the Essence Music None. Command Superdome festival on
    July 5, 2001. 4 Army Corps of

    GM- 15 a Georgetown Prep 826 Tennis club membership. None. Engineers
    Tennis Club 5 California National

    E- 4 GEICO 491 Automobile insurance. None. Guard 6 Ft. Bragg, Special

    E- 7 Russell*s For Men 191 Purchases made through a toll- free None.
    Operations number for *fine gifts for men.* 7 Ft. Bragg, Forces E- 5
    Victoria*s Secret 172 Women*s lingerie. None.

    Command 8 Ft. Bragg, Forces E- 4 1- 800- CONTACTS 80 Contacts and contact
    solutions. None. Command 9 Ft. Drum,

    E- 5 Gateway Direct 392 Computer equipment. None. Forces Command 10 Ft.
    Drum,

    E- 6 Sunshine 275 Personal escort service. None. Forces Command
    Entertainment a Equivalent to GS- 15.

    Source: GAO analysis.

    As shown in table 4, cardholders used their travel cards for a wide
    variety of personal goods or services, including cruises, sporting and
    music event tickets, membership dues, and personal clothing items. For
    example, we were able to determine that, during fiscal year 2001,
    approximately $45,000 was spent Army- wide to purchase cruise packages or
    to pay for a variety of

    activities or services on cruise ships. Some individuals who abused their
    travel card privileges held positions where they may have been responsible
    for taking appropriate disciplinary action with respect to travel card
    abuse by personnel within their commands. For example, a Lieutenant
    Colonel used his travel card to

    purchase accommodations and tickets to attend the Tournament of Roses in
    Pasadena, California, as shown in example 2 in table 4. Abusive Travel
    Card Use at Adult

    We also found instances of abusive travel card activity in which Army
    Entertainment Establishments

    personnel used travel cards to obtain cash at establishments, such as
    *gentlemen*s clubs,* instead of following prescribed ATM procedures.
    Specifically, we found cases in which these clubs provided adult
    entertainment services and helped the cardholders circumvent travel card
    ATM cash withdrawal limits, by supplying cardholders with actual cash or

    *club cash* for a 10 percent fee. We were able to identify about 200 Army
    travel cardholders who during fiscal year 2001 charged almost $38,000 on
    their government travel cards at these establishments. Some of these
    individuals also did not pay their related travel card bills, and their
    travel

    card accounts were charged off. DOD*s travel card policy sets limits on
    the amount of cash a cardholder can withdraw using ATMs. Typically, the
    ATM limit is set at $500 for a standard card and $200 for a restricted
    card, meaning that in any 1- month cycle, Army cardholders could only
    obtain cash up to the limit specified on their cards. However, Army
    cardholders circumvented these policies by obtaining cash or club cash at
    a substantial fee from such clubs.

    The gentlemen*s clubs typically sell adult entertainment, many sell
    alcohol, and some sell food. DOD and other federal agencies use merchant
    category codes (MCC) 18 to identify and block merchants in certain
    categories from accepting travel cards as payment for goods and services
    at those establishments. However, some merchants with blocked codes
    circumvented this control by using an allowable MCC to submit cash
    transactions at their establishments. For instance, Crazy Horse Too is an

    entertainment establishment that provides topless dancing and sells
    alcohol, but not food. This establishment allows customers to use their
    travel cards to obtain club cash from the bar for a 10 percent fee. Club
    cash can only be used to tip dancers, waitresses, and bartenders, but
    cannot be exchanged for currency and cannot be used to purchase alcohol.
    Crazy Horse Too codes the club cash that it provides to customers as a
    *bar charge* in the name of its operating company, the Power Company. This

    18 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 merchants* businesses or trades, such as
    airlines, hotels, ATMs, jewelry stores, casinos, gentlemen*s clubs, and
    theaters.

    coding allows these charges to bypass the MCC blocking control. Other
    clubs, such as Cheetahs Lounge Club, provide actual cash instead of club
    cash, and also code the transactions as *bar charges.*

    For example, one cardholder used his restricted travel card to obtain more
    than $5,000 in cash. As discussed previously, a restricted card has a
    maximum credit limit of $2,500 and an ATM cash withdrawal limit of $200
    per monthly statement cycle. In this instance, the cardholder*s restricted
    travel card was activated about 20 days prior to his official travel. The

    cardholder used the card to make numerous ATM cash withdrawals and pay for
    large restaurant and grocery store charges prior to departure for
    government travel. After arrival at his temporary assignment location, the
    cardholder requested that his APC raise his credit limit from $2,500 to
    $10,000 based on his *mission- critical status.* 19 The APC took the
    requested

    action, without reviewing the cardholder*s account history. The cardholder
    then frequented gentlemen*s clubs near his temporary assignment location,
    where he obtained more than $5,000 in cash. The cardholder told our
    investigators that he sent approximately $2,000 to his spouse, leaving him
    with about $3,000 for personal use and entertainment. The cardholder also
    told us the ability to obtain cash from these clubs was common knowledge
    among military personnel at his temporary assignment location. In this
    case, the APC subsequently discovered the abuse of the travel card and
    took steps that resulted in closing the cardholder*s account, and the

    cardholder received an administrative reprimand for unacceptable behavior.

    Few Documented We found that disciplinary actions were taken against the
    cardholders in Disciplinary Actions Taken

    less than half of the cases of cardholder abuse that we reviewed. It is
    against Cardholders Who

    critical that cardholders who misuse their travel cards are identified and
    Misused the Travel Card

    held accountable for their actions. Lacking such an environment, the Army
    is likely to continue to experience the types of potentially fraudulent
    and abusive activity identified in our work. The DOD Financial Management
    Regulation (FMR) states that *commanders or supervisors shall not tolerate
    misuse of the DOD travel cards and cardholders who do misuse their cards
    shall be subject to appropriate disciplinary action.* However, 19 Mission-
    critical status is a determination made by the APC that the cardholder*s
    credit card

    limit needs to be increased or the delinquency process needs to be
    suspended because the cardholder needs the card to travel, but is unable
    to obtain reimbursement* and, therefore, pay the bill* timely.

    DOD and Army policies and procedures do not define appropriate
    disciplinary action to help ensure that consistent punitive actions are
    taken against cardholders who abuse their travel cards. Available
    documentation indicates that commanders or supervisors did not take any
    disciplinary

    actions against the majority of individuals who abused or misused their
    cards during fiscal year 2001. We found little documentation demonstrating
    that APCs forwarded cardholder delinquency information to appropriate
    commanders and supervisors to consider in determining

    whether disciplinary actions were warranted. For the cardholders we
    inquired about, the primary action taken when Army officials identified
    misuse or abuse of the travel card was to counsel cardholders on proper
    use of the card and responsibility for timely payment of travel card
    bills. In some cases, APCs took actions to cancel the cardholder*s travel
    card account. To the extent that more severe disciplinary actions were
    taken, they were often in response to travel card abuse in conjunction
    with other more serious offenses* such as failing to obey orders or drug
    abuse. In these instances, documented disciplinary actions included
    dismissal from the Army and criminal prosecutions resulting in prison
    sentences.

    At the sites we audited, we were not provided any documentation of
    disciplinary actions taken against cardholders in 65 of 105 charge- off
    cases we reviewed. For example, we found one instance in which a
    cardholder (whose account was charged off for more than $5,000) was not
    subject to any disciplinary action, and was subsequently promoted from
    Major to Lieutenant Colonel. As shown in table 3 (cardholder #5), this
    individual had a history of substantial credit problems, including writing
    three NSF checks. In this instance, records indicated that the cardholder
    was

    reimbursed for official travel, but did not pay the travel card bill. The
    individual was subsequently placed in the salary offset program.

    Also, we found little evidence that cardholders faced adverse consequences
    for personal use of the card as long as they paid the bills received from
    Bank of America. For example, we identified cardholder transactions of
    $5,192 for a Celebrity Cruise Line vacation for four people, $2, 195 for a
    stock market investing course, and $1, 395 in tickets to a musical event.
    In these instances, the cardholders essentially obtained interest- free
    loans with no adverse consequences. We saw few indications that
    supervisors were aware that these abusive transactions occurred. To the
    extent that we saw documentation that APCs or supervisors were

    aware of such travel card abuse, we saw little evidence of any
    disciplinary actions.

    Credit Problems Generally We also found many instances in which there was
    no evidence that Army

    Not Referred to Security security officials were informed of travel card
    charge- offs for consideration

    Officials in reevaluating security clearances. Army regulations provide
    that an

    individual*s finances are one of the key factors to be considered in
    whether an individual should continue to be entrusted with a secret or
    top- secret clearance. However, we found that Army security officials were
    unaware of travel card debt problems and, consequently, did not consider
    this information in determining whether these individuals should continue
    to receive their security clearances. Our review of the 105 charge- off
    cases discussed previously showed that of 43 cardholders who had secret or
    topsecret clearances at the time their accounts were charged off, 38
    maintained the same level of clearance as of June 2002. The clearances for
    the remaining 5 cardholders had expired. These financially troubled
    individuals may present security risks to the Army.

    The U. S. Army Central Personnel Security Clearance Facility (commonly
    referred to as Army CAF) is responsible for issuing and updating security
    clearances for Army personnel. Secret clearances are updated every 10
    years and top- secret clearances are updated every 5 years. During the
    interim periods, Army regulations 20 require commanders of personnel with
    clearances, such as secret and top secret, to submit to Army CAF any

    evidence of financial irresponsibility on the part of the personnel that
    would affect their clearance. Such evidence would include information on
    financial impropriety by the security clearance holder, such as excessive
    indebtedness. Army CAF is to evaluate this information and determine

    whether to revoke the clearance. We found that commanders responsible for
    referring evidence of financial irresponsibility information to Army CAF
    were, for the most part, unaware of their subordinates* financial
    problems. We provided the information we collected on individuals with
    charged- off accounts to Army CAF for its consideration in determining
    whether to revoke, change, or renew their security clearances.

    20 U. S. Department of the Army, Regulation 380- 67, Security, Personnel
    Security Program, Chapter 8, *Unfavorable Administrative Actions* (Sept.
    9, 1988).

    Weak Overall Control A weak overall control environment and ineffective
    internal controls over Environment and

    the travel card program contributed to the potentially fraudulent and
    abusive activity related to the travel card and the Army*s high rates of
    Ineffective Travel Card

    delinquency and charge- offs. The foundation of all other controls, a
    Program Controls

    positive control environment provides discipline and structure as well as
    the climate that influences the quality of internal controls. Although we
    observed improvements in the first half of fiscal year 2002, we identified
    several factors that contributed to a weak overall control environment for
    fiscal year 2001, including, as discussed previously, few documented
    disciplinary actions taken against cardholders who abuse the card and a
    lack of management attention and focus on establishing and maintaining the
    organizational structure and human capital needed to support an effective
    Army travel card management program. We found that this

    overall weak control environment contributed to design flaws and
    weaknesses in seven management control areas needed for an effective
    travel card program. Specifically, we identified weaknesses in the Army
    travel program controls related to (1) travel card issuance, (2) APCs*

    capacity to carry out assigned duties, (3) limiting card activation to
    meet travel needs, (4) controls over transferred and *orphan* accounts,
    (5) procedures for terminating accounts when cardholders leave military

    service, (6) segregation of duties to ensure that no one individual can
    control all aspects of a travel transaction, and (7) access controls for
    Bank of America*s travel card database.

    All seven of these areas related to two key overall management weaknesses:
    (1) the lack of clear, sufficiently detailed policies and procedures and
    (2) limited travel card audit and program oversight. First, the units we
    audited used DOD*s travel management regulations (DOD FMR, Volume 9,
    Chapter 3) as the primary source of policy guidance for

    management of Army*s travel card program. However, in many areas, the
    existing guidance was not sufficiently detailed to provide clear,
    consistent travel management procedures to be followed across all Army
    units. Second, as recognized in the DOD Inspector General*s March 2002
    summary report 21 on the DOD travel card program, *[ b] ecause of its
    dollar

    magnitude and mandated use, the DOD travel card program remains an area
    needing continued emphasis, oversight, and improvement. Independent
    internal audits should continue to be an integral component of

    21 U. S. Department of Defense Inspector General, Acquisition: Summary of
    DOD Travel Card Program Audit Coverage, D- 2002- 065 (Washington, D. C.:
    Mar. 18, 2002).

    management controls.* However, the DOD Inspector General report noted that
    only two internal review reports were issued from fiscal year 1999 through
    fiscal year 2001 concerning the Army*s travel card program. These

    reports, issued by the Army*s Assistant Secretary for Financial Management
    (and Comptroller) *s Internal Review Office, covered government travel
    card usage in the Army during fiscal year 2000. In

    addition, each of the Army installations we audited had internal review
    groups that did some level of review of the travel program and identified
    deficiencies in the Army*s travel program at their installations.

    To the extent that oversight reviews were conducted, we saw few
    indications that management took action to address the deficiencies
    auditors identified. For example, the Army*s two fiscal year 2000 internal
    review reports disclosed that existing review procedures were not
    effective in identifying card misuse and identified additional actions
    needed to address travel card abuses, such as unauthorized usage of the
    card and unauthorized cash withdrawals. We identified these same issues in
    our fiscal year 2001 work.

    Ineffective Controls over The Army*s ability to prevent potentially
    fraudulent and abusive

    Issuance of Travel Cards transactions that can eventually lead to
    additional delinquencies and

    charge- offs is significantly weakened if individuals who had histories of
    financial irresponsibility are permitted to receive travel cards. The
    Army*s 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. DOD guidance in FMR, Volume 9, Chapter 3,
    provides that all DOD personnel are to use the travel card to pay for
    official business travel. However, the policy also provides that
    exemptions from using the travel card may be granted under a number of
    circumstances, including for personnel who are denied travel cards for
    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. In addition, the DOD FMR provides that credit
    checks are to be performed on all travel card applicants, unless an
    applicant declines a credit check. We found no evidence that the Army

    exempted any individuals or groups from required acceptance and use of
    travel cards, even those with histories of previous credit problems. In
    July 1999, Bank of America began obtaining credit checks on DOD travel
    card applicants and used the credit history obtained through these checks
    as a basis for determining the type of account* restricted or standard* it

    would provide to new DOD travel applicants. An applicant who did not
    authorize a credit check, or with either no credit history or a history of
    credit problems, is issued a restricted travel card with a $2, 500 credit
    limit. All other applicants are issued standard travel cards with a $10,
    000 credit limit. DOD policy also permits commanders or supervisors to
    raise the credit limits and ATM limits of restricted travel cardholders to
    whatever level they deem necessary to meet mission requirements, except
    when the cardholder declined a credit check. 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 midlevel enlisted Army
    cardholders would not have qualified for credit cards even with the
    restricted limits. 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.

    Consequently, until the Army takes action to prevent applicants with past
    credit problems from receiving government travel cards, it will continue
    to unnecessarily increase the risk that individuals will continue a
    pattern of fraud, abuse, and delinquency or nonpayment. 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 previously, many of the Army travel cardholders
    that we

    audited who wrote numerous NSF checks, were severely delinquent, or had
    their accounts charged off had histories of delinquencies and charge- offs
    relating to other credit cards; defaulted automobile loans that resulted
    in repossession of the vehicles; defaulted mortgage payments and
    foreclosure proceedings on homes; numerous bankruptcies; and, in several
    cases, prior

    arrests and convictions for crimes such as writing bad checks. Unrealistic
    APC

    DOD policy provides that APCs are the primary focal points for day- to-
    day Performance Expectations management of the travel program. However,
    APC duties are generally *other duties as assigned.* As discussed in the
    following sections, the

    sheer number of responsibilities assigned to APCs, coupled with issues
    concerning APC span of control, selection, turnover, training, and
    performance evaluation, result in unrealistic expectations for the
    effectiveness of APCs in carrying out their critical duties. Consequently,

    we found that APCs were generally ineffective in performing their key
    travel program management oversight duties.

    APC Responsibilities As prescribed by DOD*s FMR guidance, APCs *are
    responsible for the dayto- day operations of the DOD Travel Card Program.*
    DOD FMR Volume 9, Chapter 3, 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 any account delinquencies,
    interacting with the bank, and fielding questions about the program from
    both cardholders and supervisors. APCs are also required to monitor
    delinquent cardholders and notify commanders/ supervisors of such
    delinquencies for appropriate action. Further, DOD*s FMR also provides
    that APCs are to receive reports from Bank of America showing cardholder
    transaction activity during the most recent billing cycle. However, DOD*s
    guidance does not further

    specify APC responsibilities for actions based on their review of Bank of
    America reports.

    We were told that individuals were given APC responsibilities as a
    collateral duty. APC estimates of the percentage of time spent on their
    APC responsibilities ranged from 2 percent to as high as 80 percent, with
    most indicating they spent about 5 to 20 percent of their time on APC
    duties. Several of the APCs we interviewed indicated that keeping up with
    their APC responsibilities was a challenge because they were expected to
    perform many other duties as well. For example, at the sites we audited,
    civilians with APC responsibilities were often program or budget analysts

    who worked in the installations* resource management offices. While some
    of the military personnel assigned APC responsibilities at the sites we
    audited had primary job responsibilities that were finance related, such
    as budget and resource managers, others had more mission- related duties.
    For example, one of the APCs at the sites we audited was responsible for
    security at an airport, and another was a transportation officer. At Ft.
    Bragg, Special Operations, entire units, along with the APCs,

    were deployed at the time of our audit. Such deployments make it
    increasingly difficult for military personnel assigned APC duties to carry
    out their responsibilities.

    Few of the APCs we interviewed performed any account transaction reviews
    beyond those conducted in conjunction with delinquencies. Consequently,
    instances of abuse of the travel cards were seldom detected promptly. Some
    units* operating procedures specify that APCs monitor

    credit card activities to identify misuse. For example, in its operating
    procedures, the California National Guard requires that APCs review credit
    card activity to identify misuse, that such misuse be brought to the
    attention of the commanders/ supervisors, and that the commanders/
    supervisors take actions to address the problems. However, one California
    National Guard APC told us that she does not have sufficient

    time available to monitor the travel activity of all the cardholders under
    her purview. Another California National Guard APC told us that, as time
    permits, he monitors the travel card transaction activity of the
    cardholders that are his responsibility on a weekly basis.

    APC Span of Control DOD*s FMR guidance does not address the appropriate
    span of control for an APC* the number of cardholders that an APC should
    be responsible for managing and overseeing. A reasonable span of control
    is critical for effective management and proper travel program oversight.
    Bank of America guidance provides that an optimal span of control is 100
    cardholders per APC. In addition, because APC duties are assigned as
    collateral duties, the span of control should be commensurate with the
    time available to carry out APC responsibilities effectively. As shown in
    table 5, at the four sites we audited, the average ratio of cardholders
    with open accounts to APCs ranged from 65 to 1 to 804 to 1.

    Table 5: Average Ratio of Cardholders to APCs at Army Sites Audited Ft.
    Drum,

    California Ft. Bragg,

    Ft. Bragg, Forces

    National Forces

    Special Span of control

    Command Guard

    Command Operations

    Number of cardholders with open travel card accounts 6,498 4, 022 11,424
    5, 696

    Number of APCs 39 5 120 88 Average ratio of cardholders to APCs 167: 1
    804: 1 95: 1 65: 1

    Source: GAO analysis of Bank of America data.

    The span of control responsibilities for the APCs at the four sites we
    audited ranged from about 5 open accounts to over 1,000. Decisions on the
    optimal span of control must take into account not only the number of
    accounts for which the APC has direct responsibility, but also the number
    of accounts for which another lower- level APC has direct responsibility,
    but for which the higher- level APC has oversight responsibility. 22 For
    example, an APC at the California National Guard site we audited who had
    direct

    responsibility for managing the travel activities of over 1,000
    cardholders also had oversight monitoring responsibility for about another
    400 cardholders. An APC at Ft. Bragg, Forces Command, with direct
    responsibility for managing 287 travel card accounts told us that he was
    in the process of working with Bank of America to identify and deactivate
    the cards of any infrequent travelers within his purview. He reported that
    he hoped to reduce the number of accounts he was responsible for to about
    100. The sites we audited were consistent in that few of the APCs we

    interviewed performed any account transaction reviews beyond those
    conducted in conjunction with delinquencies. Several of the APCs told us
    that they received detailed account transaction activity reports from Bank
    of America. But, outside of reviews of account activity associated with

    delinquencies, they told us that detailed transaction reviews were too
    timeconsuming to carry out for their other cardholders. Another APC we
    talked to, who attempted to compare reports on travel card transactions
    received from Bank of America with valid travel orders for the cardholders
    within

    her purview, said this activity was time- consuming and almost impossible
    to perform for all of the people under her span of control. Failure to
    review available cardholder transaction activity reports available from
    Bank of America and take action to address any inappropriate card usage
    can result in delinquencies and account charge- offs. For example, one APC
    was not aware that a cardholder within his sphere of responsibility made
    multiple personal use transactions, including purchases at Wal- Mart,
    Vitamin World, General Nutrition Center, and

    22 APC responsibilities vary depending on the APC*s level in the Army*s
    organizational hierarchy from headquarters down through the Army*s
    organizational chain of command to the individual Army unit level. That
    is, individuals with APC responsibilities at the Army unit level have
    direct responsibility for monitoring cardholder account activity whereas
    individuals at higher levels in the Army*s organizational hierarchy may
    have responsibility for overseeing the activities of one or more APCs as
    well as direct responsibility for monitoring the account activity of a
    number of cardholders.

    Hecht*s, until 3 months after the cardholder*s name appeared in a
    delinquency report in January 2001. By that time, the cardholder owed
    $5,655 and was from 30 to 59 days delinquent. The cardholder*s account

    was eventually charged- off on August 10, 2001, with a balance of $6, 997.
    APC Selection, Turnover,

    Our internal control standards state that management*s commitment to
    Training, and Performance

    competence and good human capital practices are critical factors in
    Evaluation

    establishing and maintaining a strong internal control environment.
    Specifically, our standards provide that management needs to identify
    appropriate knowledge and skills needed for various jobs and provide
    needed training, as well as candid and constructive counseling, and
    performance appraisals. They also state that establishing appropriate
    human capital practices, including hiring, training, evaluating,
    counseling, and disciplining personnel, is another critical environmental
    factor.

    APC selection and turnover. As discussed previously, the DOD FMR assigns a
    number of key duties for government travel card management to APCs.
    However, neither DOD nor the Army had procedures in place that addressed
    the requisite knowledge and skills needed, or the expected tenure, for
    those selected to carry out these key APC responsibilities. We found that
    APC assignments were based on the commanding officer*s

    judgment as to who could best carry out assigned APC duties. At three of
    the four sites we audited, the individuals assigned overall APC duties for
    the sites were civilians, and the majority of the individuals assigned as
    subordinate- level APCs were military personnel. We did not identify any
    information indicating that individuals appointed as APCs were expected to
    serve in this role for any specified period. We found that civilians
    appointed as APCs generally served longer terms than military APC
    appointees. For example, at the Ft. Bragg Special Operations site we
    audited, we were told that the civilian APC had served for over 2 years in
    this role, while most of the military APCs turned over roughly every 6
    months. At the Ft. Bragg, Forces Command, site we audited, only 1 of the
    11 APCs we attempted to interview who had been in position during fiscal
    year 2001 remained in that position.

    APC training. 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 to the travel card program.
    There are no supporting DOD or Army- wide procedures detailing
    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. A number of the
    APCs we interviewed told us they relied heavily on on- thejob learning and
    other program coordinators for advice on how to carry out their duties
    when they assumed their APC responsibilities. At the Ft. Bragg, Special
    Operations, site we audited, we were told that the command- level APC
    provided training every 3 months and expected all APCs to attend, unless
    they were deployed or on an assignment that would not allow them to attend
    the training. APCs at Ft. Bragg, Special Operations, also told us they
    received annual or semiannual briefings from Bank of America on the
    electronic tools available in its Web- based system containing travel card
    transaction data* EAGLS (Electronic Account Government Ledger System).
    According to the APCs we interviewed, the briefings they received on EAGLS
    included guidance on how to use the system to establish a travel account,
    how to extract individual cardholder delinquency and transaction activity
    reports, and how to contact Bank of America for additional help with the
    Web- based tools. Some of the APCs we talked with reported that they have
    become proficient in, and routinely use, the tools available through EAGLS
    to assist them in their APC duties with respect to delinquency monitoring.
    Other APCs indicated that they either did not use the tools available
    through EAGLS or were not proficient in using them to monitor cardholders*
    travel activities. According to data provided by Bank of America, about 23
    percent of the Army*s APCs have never logged into EAGLS.

    APC performance evaluation. Generally, APC responsibilities were assigned
    as an *other duty assignment.* Individuals serving as APCs had, and were
    rated on, other job duties and responsibilities. The extent to

    which the performance of APCs was recognized as a major duty, and rated as
    such, varied. At Ft. Bragg, Special Operations, none of the individuals
    serving as APCs were rated on how well they performed those duties. At

    the Ft. Drum location, one of the APCs had a position description that
    included *serves as travel card program manager* as a major duty (with the
    recognition that this duty, combined with duties as the unit*s program
    manager for cost accounting, should require about 30 percent of the
    employee*s time).

    Controls over Allowing Army travel cardholders to maintain accounts in an
    active status

    Activating/ Deactivating when not needed for government travel
    unnecessarily exposes the Army to

    Travel Cards to Meet Travel an increased risk of misuse* through
    cardholders either mistakenly or

    Needs intentionally using the card for personal purposes. DOD*s FMR
    provides

    that restricted cards are issued to cardholders in an *inactive* status
    and initially activated only when the cardholders have authorized
    government travel needs. By contrast, standard cards are *active* when
    they are issued to cardholders. DOD policy guidance does not address
    deactivating

    restricted and standard travel cards when not needed for official
    purposes. Lacking overall policy and procedural guidance in this area, we
    found instances in which individual commands or sites established their
    own practices for deactivating cards when cardholders were not on travel.
    For example, the California National Guard*s August 2001 guidance to all
    of its APCs required them to deactivate all travel card accounts for
    cardholders

    not on official travel. In addition, APCs at Ft. Bragg, Special
    Operations, told us that, as a matter of practice, they deactivate the
    cards of cardholders in military grades of E- 5 or below when they are not
    on official travel. Accountability for

    We also found that the Army lacks clear, sufficiently detailed procedures
    Transferred and Orphaned

    with respect to maintaining effective day- to- day accountability for
    Accounts

    cardholders* travel card accounts. Until the Army takes action to work
    with Bank of America to clearly establish accountability for accounts that
    are not under the control of a specific APC, it will continue to be
    vulnerable to undetected, potentially fraudulent, or abusive use of these
    accounts.

    In practice, the Army relies on cardholders to inform the transferring
    location*s APC that they will be moving to another Army unit. After a
    cardholder notifies the transferring APC of his or her upcoming move, the
    APC is to inform the cardholder that he or she is required to report to
    the APC at the new location within 10 days of arrival. If the cardholder
    does not check in with the APC at the gaining location at the end of 10
    days, the losing APC is to deactivate the cardholder*s account. However,
    transferring units* APCs told us that cardholders do not always inform
    them of upcoming moves and, therefore, they do not deactivate the cards
    when the

    cardholders fail to report to the new APC within 10 days. As a result,
    many accounts fell into *limbo* and are also referred to as *orphan
    accounts.* Accounts for transferred cardholders can remain in

    this limbo status for lengthy periods. For example, 2 California National
    Guard accounts out of the 166 that we examined for our statistical tests
    belonged to cardholders who had transferred from their units in 1998 and
    2000, respectively. The responsible APC was not aware that the transfers
    had taken place until we brought the matter to her attention. According to
    Army officials, this breakdown in accountability is one of the

    primary causes for the Army*s large number of orphaned accounts. 23 These
    are Army travel card accounts that are not under the purview of any APC,
    according to Bank of America records. Bank of America officials also told
    us that some of the accounts in this group might not even be Army

    accounts. As shown in appendix III, Bank of America data show that as of
    the end of fiscal year 2001, orphaned accounts had about a 20 percent
    delinquency rate.

    Without an APC assigned to oversee these accounts, orphan accounts pose a
    higher risk of charge- offs. In fiscal year 2001, Bank of America charged
    off 717 accounts of the approximately 7, 479 active orphan Army accounts,
    accounting for almost $1 million. In May 2002, Bank of America issued

    letters to all cardholders in the orphan grouping informing them that
    unless they took action to identify accountable APCs, their accounts would
    be closed.

    Exit Control Procedures for As with transferred employees, neither DOD nor
    Army procedures are

    Separating Employees sufficiently detailed to ensure that APCs are
    notified and take prompt

    action to terminate cardholders* accounts when cardholders leave the Army.
    DOD*s FMR provides that APCs are responsible for terminating travel cards
    when cardholders are dismissed, retire, or are separated from DOD.
    Operating procedures established by individual Army commands and
    installations to notify APCs in the case of retirement, separation, or
    death of employees were neither consistent nor effective.

    In general, we found that APCs relied on cardholders to notify them that
    they were leaving the Army. Some APCs informed us that their units* exit
    procedures for separated, retired, or dismissed employees require that 23
    Bank of America also includes in this grouping accounts inherited from the
    previous

    government travel card contractor that were not linked to any Army command
    and accounts for which the accountable APC left or was relocated without
    having a replacement designated.

    individuals turn in their travel cards as part of the exit process before
    leaving the organizations. For example, the National Guard*s standard
    operating procedures provide that *All departing cardholders that are

    terminating their federal employment status will turn in their Travel
    Charge Card to their APC as a part of their out processing.* However, we
    found instances in which these procedures were difficult to implement. For
    example, a California National Guard official told us that this procedure
    is difficult to implement because some guard employees are hundreds of

    miles from the location of their cognizant APC. The official told us that
    many of the separations from the guard are handled through mail, e- mail,
    and fax, and not through face- to- face contact with unit officials or the
    APC. One APC told us that she sometimes becomes aware that cardholders are

    departing when she receives their travel cards through the mail. If an APC
    does not receive messages or paperwork to cancel the cards, or if there is
    a delay in notifying the APC of the cardholders* departure, the
    cardholders* accounts would remain active and the separated cardholders
    may abuse the cards.

    Due to the lack of procedures to effectively identify and terminate the
    cards of individuals no longer in the Army, we found the following
    examples of separated or retired individuals who abused the travel card.
    These separated or retired Army employees benefited by using travel cards
    to purchase a variety of goods and services and then not paying their
    monthly bills, essentially obtaining the personal items for no cost and
    possibly receiving discounted government rates by using their government
    travel cards.

     A service member (E- 4) assigned to Ft. Knox was released from active
    duty on September 16, 2000, but his travel card was not deactivated at
    that time as required. In May 2001, over 8 months after he separated,
    charges started appearing on his travel card. Charges included ATM
    withdrawals, restaurant charges, and monthly fees for a fraternal
    organization. In addition, the cardholder spent more than $110 at Platinum
    Plus, an adult entertainment establishment. The cardholder continued to
    use the card through August 2001, almost 1 year after he left the service.
    Although the cardholder charged more than $1,125 on the card, he did not
    submit any payments on his Bank of America bills. The account balance was
    charged off in January 2002.

     An air reservist (E- 6) assigned to military postal service was
    discharged on February 4, 2000, but did not turn in his card. The
    individual continued to use his government- issued travel card for
    personal use. In

    fiscal year 2001, the individual made charges totaling approximately
    $5,800 on his travel card, including over $5,000 of cash advances in the
    vicinity of his home in New York. The soldier*s travel card account was
    closed on March 11, 2002, and the unpaid balance of $3,419 was charged
    off.

     A first sergeant (E- 8) at Ft. Hood, Texas, repeatedly used his travel
    card after his retirement on September 30, 2000. During fiscal year 2001,
    he used the travel card for personal goods and services totaling more than
    $8, 000. The charges consisted of almost $2,000 in car rentals, another
    $2,000 in hotel charges, and approximately $2,951 in restaurant charges*
    including a one- time catering charge of $1, 455* primarily in Hawaii and
    Texas. In addition, he spent $1,119 on two cruises with

    Royal Carribean cruise line. Because the Army does not routinely monitor
    cardholders* transaction reports for abusive activity and because this
    particular account was always paid in full, the abusive activities were
    not detected for more than a year. In February 2002, while scanning travel
    card activities of all cardholders under her sphere of responsibility, the
    APC became aware that the cardholder had retired. The APC deactivated the
    cardholder*s account in March 2002.  A sergeant first- class (E- 7)
    retired from the active duty National Guard

    in February 2000, but continued to use the government travel card in
    fiscal year 2001. Subsequent to his retirement, the individual became a
    state guard employee. State employees are not entitled to hold federal
    government travel cards. Bank of America and National Guard records
    indicated that the individual used the government travel card for onbase
    lodging and rental car charges related to official travel with the state
    guard. As of the time of our audit, more than 2 years after the
    cardholder*s retirement, the cardholder*s account was still open, although
    we noted that the account was not delinquent.

    An APC told us that out processing procedures should include APC or
    supervisor verification that the cardholder*s account was closed. In fact,
    her unit has established an informal procedure that has helped ensure that
    APCs receive timely notification of a cardholder*s departure. The
    procedure involves the departing cardholder*s supervisor sending e- mails
    to the cognizant APC notifying him or her of the date the service member
    is leaving and to close the cardholder*s account as of that date.

    We also found that the Army did not have procedures requiring periodic
    comparisons between active travel card accounts and employees to ensure

    that accounts of separated or retired employees are closed. For example,
    each Army unit we visited maintained records of retired, dismissed, and
    separated employees and the respective dates of these actions. However,
    none of the APCs we interviewed compared these records against the list of

    active accounts to identify accounts that should have been closed but were
    not. Periodic reconciliations of the two lists would have enabled the Army
    to identify employees who had left and should no longer have had travel

    cards. Segregation of Duties

    Adequate controls must be in place to ensure that no one individual can
    Controls Were

    control all key aspects of a travel transaction. Such controls are key to
    Compromised at One effectively reducing the risk of error or fraud at the
    four sites we audited. Installation Our observations and walk- throughs
    showed that proper segregation occurred because no one individual was
    responsible for the major functions associated with the voucher approval
    and payment process. Specifically, we found the traveler and person
    approving the travel orders were generally located at the installation,
    whereas a DFAS center prepared the final vouchers and entered the data
    into the DOD travel payment

    system, the Integrated Automated Travel System (IATS). For example, in the
    case of Ft. Drum, located in Watertown, New York, its vouchers were
    processed and paid by the DFAS center in Orlando, Florida. Further, we
    found that no one individual at the DFAS centers was responsible for (1)
    entering payment information into IATS and (2) auditing travel voucher
    summaries for accuracy and completeness.

    However, at the California National Guard, we did identify weaknesses that
    compromised segregation of duties controls. Specifically, controls were
    not in place to prevent California National Guard members, who also served
    as voucher examiners, from validating, approving, and auditing their

    own final travel vouchers and submitting them to DFAS for payment. In
    addition, weak controls over the California National Guard*s usernames and
    passwords for *temporary* voucher examiners further increased the risk
    that voucher examiners could prepare, validate, and receive payment for
    erroneous or fraudulent travel vouchers without detection. Temporary
    voucher examiners* those California National Guard members who are
    employed as voucher examiners on a part- time or intermittent basis* were
    given generic usernames and passwords for accessing IATS. However,
    according to the permanent travel voucher examiners we talked to, these

    generic usernames and passwords for temporary voucher examiners were well
    known to the permanent travel voucher examiners as well.

    Consequently, any of the California National Guard*s permanent travel
    voucher examiners could use one of these well- known generic usernames and
    passwords to access IATS to enter, delete, or modify travel data in the
    system* including data related to their own travel voucher processing and
    payment* without detection. Access Controls over Bank

    Thousands of Bank of America and DOD employees had access to Bank of of
    America*s Travel Card

    America*s travel card transaction data system, known as EAGLS. System
    Computer system access controls are intended to permit authorized users to
    access a 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 user access levels
    include APC- level (APCs requiring access to travel data for cardholders
    under their purview), individual- level (individual travelers requiring
    access to their own travel transaction histories), and bank employee-
    level access (Bank of America employees 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 APC duties or
    after they may have been terminated or transferred. 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 terminated
    or transferred or no longer had APC responsibilities. Over 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 With the weak control environment and related
    program control

    Control Activities weaknesses we identified, it is not surprising that, as
    shown in table 6, we

    found a significant percentage of failures in several of the key control
    activities we statistically tested at the four Army locations we audited.
    We selected four key control activities to test related to basic travel
    transaction

    and voucher processing. Specifically, we tested the implementation of the
    following internal control activities for a statistically valid sample of
    travel card transactions.  Was there a travel order associated with the
    transaction that was

    approved prior to the start of travel?  Was there a travel voucher
    associated with the transaction that was

    properly reviewed to ensure that payment was accurate and properly
    supported?

     Did the traveler submit a travel voucher associated with the transaction
    to the installation travel office for processing within 5 days of
    completion of travel as required by government travel regulations?

     In accordance with TTRA and DOD FMR, was the traveler paid within 30
    days of the date a properly approved travel voucher associated with the
    transaction was submitted for payment? Appendix II includes the specific
    criteria we used to conclude on the effectiveness of these controls.

    Table 6: Results of Testing of Key Internal Controls Percentage of failure

    Travel vouchers Travel

    are submitted vouchers are

    Travel orders Travel voucher

    within 5 days paid within

    are approved reimbursements

    of travel 30 days of

    Army unit prior to travel

    are accurate completion

    submission

    Ft. Drum, Forces Command 0.0 10. 4 21. 9 5. 2

    Ft. Bragg, Special Operations 3.1 7. 3 30. 2 7.3 Ft. Bragg, Forces Command
    6.2 18. 8 38. 5 8. 3

    California National Guard 1. 0 41. 9 27. 9 60.5 Note: The numbers in the
    table represent point estimate percentages for the number of failures in
    the population based on our sampling tests. The confidence intervals for
    our sampling estimates are presented in app. II. Source: GAO analysis.

    The Army*s inability to establish effective controls in several of these
    key control areas, particularly relating to timeliness of payment,
    contributed to its high delinquency rate. As discussed previously, for the
    four locations, we estimate that the percentage of transactions during
    fiscal year 2001 that represented personal use varied from 15 percent at
    one location to 45 percent at another location. 24

    Controls over Travel Order Timely approval of the travel orders is the
    first step in ensuring that travel

    Approval Were Generally is authorized. At three of the four installations
    we audited, the controls

    Effective over travel order approval were effective. We estimate that 0 to
    3 percent

    of transactions at these installations did not have documented evidence
    that travel orders were approved prior to the beginning of travel. At Fort
    Bragg, Forces Command, travel order controls had an estimated 6 percent

    24 Our estimates of the percentage of apparent personal use of the travel
    card at the four sites we audited were: Ft. Bragg, Forces Command (45.0
    percent); Ft. Drum, Forces Command (14.8 percent); Ft. Bragg, Special
    Operations (18.0 percent); and California Army National Guard (29.5
    percent).

    failure rate associated with travel orders that were not approved prior to
    travel. The control breakdown we noted in our sample transactions occurred
    when the travel took place prior to written approval of the travel order.
    For example, one traveler had travel duty from April 8, 2001, to April 19,
    2001, but did not get his travel order approved until April 27, 2001.
    According to Army officials, this often occurred because travelers
    neglected to document the date of verbal travel authorization on their
    written travel orders.

    Controls over Travel Once the travel is complete, the traveler is to
    submit a voucher for all Voucher Review and reimbursable expenses and must
    include receipts for certain claimed

    Accuracy Were Not amounts. The voucher review process is intended to
    ensure that only

    Effective authorized, properly supported travel charges are reimbursed and
    that the

    amounts are accurate and properly calculated. At the four installations
    audited, we estimate that about 7 percent to 42 percent of transactions
    were associated with travel vouchers that were not accurate or were not
    properly supported. The California National Guard had an estimated failure
    rate for voucher review that was two to six times higher than that of the
    other three installations. We found undetected instances of travel voucher
    errors by travelers, voucher reviewers (both installation- level and DFAS-
    level), and DFAS.

    Travel voucher errors result in either over- or underpayments to the
    traveler and create an additional administrative burden for Army and DFAS
    when the traveler must file a supplemental voucher to claim amounts that
    were not paid initially or when the initial travel vouchers are incomplete
    or erroneous. For example, according to DFAS Orlando officials, during
    fiscal year 2001 DFAS Orlando returned an estimated 12,000 vouchers to
    Army installations because of errors or omissions in the initial voucher
    packages submitted to DFAS. Further, delays in paying valid amounts to
    travelers can result in delinquent accounts when the cardholder has not
    been fully reimbursed by the time the monthly travel card bill is
    received. In our samples, we found that most errors were in the following
    categories.

     Missing receipts * We found instances in which voucher packages did not
    include all required receipts to support claims based on DOD and Army
    regulations. DFAS paid the vouchered amounts in these cases despite the
    lack of receipts. For example, for a Ft. Drum cardholder, DFAS paid hotel
    charges on a voucher for which the cardholder did not

    attach the required receipt. At the California National Guard, we found

    that a cardholder was paid for 4 nights of lodging when the receipt was
    for 3 nights.

     Errors in amounts paid * We found instances in which DFAS used an
    incorrect per diem rate 25 for lodging and meals and incidental expenses
    to calculate the reimbursement amount, resulting in both over- and
    underpayments to the traveler. We also found that DFAS made errors in
    calculating reimbursements for ATM fees and car mileage. Most of

    these errors were relatively small in terms of dollar amounts. In one
    instance, we found that DFAS underpaid a cardholder about $814. In this
    case, the cardholder, an E- 8, master sergeant at Ft. Bragg, Special
    Operations, filed a voucher package with required supporting documentation
    for lodging, transportation, and other expenses totaling about $814
    incurred while on extended travel. DFAS erroneously excluded these
    expenses from its reimbursement calculation and consequently understated
    the amount paid to the cardholder by this amount. While the cardholder
    paid his bill from Bank of America that included these expenses, it was
    not until we brought this matter to the attention of Army and DFAS
    officials that the cardholder was reimbursed. In another instance, we
    found that an E- 5 cardholder at Ft. Drum filed a travel voucher with DFAS
    Orlando claiming and receiving reimbursement for taxi fares totaling
    $48.50. However, according to the related travel order, a government
    vehicle was provided. After we brought this matter to its attention, DFAS
    Orlando obtained a $48.50 reimbursement from the cardholder. At the
    California National Guard, we found that a cardholder*s per diem
    reimbursement was less than the allowed amount, and the traveler was paid
    $75 for parking expense when the receipt showed $86.

    The California National Guard*s procedures for reviewing travel vouchers
    differed from the other locations we audited in that the United States
    Property and Fiscal Office (USPFO)* an organizational component of the
    California National Guard* reviews all travel vouchers submitted by
    California National Guard personnel for validity and accuracy before

    submitting voucher payment requests to DFAS. California National Guard
    officials attributed the high error rate to staff shortages in the voucher
    examination branch and difficulty in retaining high- quality personnel in
    these low- paying positions. 25 Per diem is a daily allowance paid to
    travelers in lieu of actual subsistence expenses. Per

    diem rates for various geographic areas are published by GSA.

    For the other Army units we audited, DFAS was responsible for reviewing
    the vouchers for accuracy and proper support prior to payment. We visited
    DFAS Orlando* the DFAS location responsible for processing travel vouchers
    for two of our four test sites. We found that DFAS Orlando made some
    voucher processing errors, which officials at that location attributed, at
    least in part, to the large volume of vouchers processed at that location,
    the number of vacant positions, and the significant amount of overtime

    needed to process vouchers and disburse funds within a 4- to 5- day time
    frame. For example, DFAS Orlando officials reported processing over
    115,000 travel vouchers during fiscal year 2001, averaging approximately
    11,000 vouchers per month, and had six vacancies that they were unable to

    fill. Also, in May 2002, DFAS Orlando reported 912 hours of overtime
    associated with processing 13,422 of the estimated 17, 500 travel vouchers
    received during the month. Travel Processing

    We tested two key areas where prompt action is needed to ensure that
    Timeliness Was a Significant

    travelers are reimbursed for valid expenses within required time frames.
    Problem Resulting in Late

    First, DOD policy requires the traveler to submit a travel voucher within
    5 days of return from travel. 26 We estimated significant failure rates
    for this Payments to Travelers

    requirement at all four installations, ranging from 22 percent to 39
    percent of fiscal year 2001 transactions. When this control failed in our
    sample transactions, the delay in submitting a travel voucher ranged from
    6 days to as long as 228 days. Numerous travelers took up to 3 weeks to
    submit vouchers upon return from travel. Installation officials told us
    that travelers on extended travel for deployment to a war zone do not
    always have an opportunity to file interim vouchers. Also, the officials
    stated that many travelers return from travel, only to leave within a day
    or 2 for annual leave or another business trip and, therefore, do not have
    an opportunity to

    submit their travel vouchers promptly. Delays in filing travel vouchers
    cause delays in travel reimbursements, which can ultimately result in
    delinquent accounts. For example in one of the sampled Ft. Bragg, Special
    Operations, transactions, the cardholder was on extended travel and did
    not file an interim voucher. This traveler*s account became delinquent,
    but he paid the balance due after being

    reimbursed. In another instance, a member of the California National Guard
    who completed travel in February 2001 did not complete a travel 26 DOD*s
    FMR provides that for long- term travel, cardholders are expected to file
    interim vouchers every 30 days.

    voucher until mid- April 2001. It took another 3 months for the voucher to
    arrive at the USPFO facility responsible for processing it. Although DFAS
    paid the voucher 2 days after receipt of the payment request, the
    cardholder*s account was delinquent for the 3 months.

    Second, upon submission of a proper voucher by the employee, DOD has 30
    days in which to make reimbursement without incurring late payment fees
    and charges. Once the approving official receives a properly documented
    travel voucher, the 30- day payment period begins. If payment

    is not made in 30 days, the traveler is owed a late payment fee that is to
    be calculated using, at a minimum, the Prompt Payment Act interest rate,
    as required by TTRA 27 and GSA regulations. 28 GSA*s regulations also
    require the cardholder to be paid 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.

    Failure rates for this control activity ranged from about 5 percent to 8
    percent for three of the four installations we tested, which we considered
    to be partially effective. Delays in these cases were generally attributed
    to the review process at the installation, while DFAS generally made
    payments within 7 days of receipt of the approved voucher package.
    However, the fourth installation, the California National Guard, had an
    estimated 61 percent of transactions that were associated with vouchers
    that were not paid within the 30- day time frame. Given the delays in
    initial

    submission of the vouchers, as discussed previously, these additional
    processing delays will result in travelers receiving payment well after
    they receive their monthly travel card bills. Unless travelers use
    personal funds to pay the bills, many accounts will remain delinquent
    until payment is received. For example, we found that one Ft. Drum travel
    voucher was submitted 34 days after travel ended and another Ft. Drum
    voucher was paid 131 days after the travel ended. A California National
    Guard cardholder did not receive payment for a $3,554 voucher until 36
    days after

    he submitted his voucher. While the cardholder paid Bank of America the
    full amount due following receipt of his reimbursement, the cardholder*s
    account was initially delinquent because it was not paid within the
    required

    30- day time frame. 27 Public Law. 105- 264, Section 2 (g), 112 Stat. 2352
    (Oct. 19, 1998). 28 41 C. F. R. Section 301- 52.20.

    In another case we reviewed, an individual had planned to retire from the
    Army and subsequently withdrew his retirement paperwork and was reassigned
    to another location. DFAS rejected the employee*s travel vouchers for
    reimbursement of official travel expenses because its records showed that
    he had retired. At the time of our audit, approximately 9 months had
    elapsed since the cardholder first sought reimbursement from DFAS, and he
    was still not paid. The individual*s account was seriously delinquent, his
    card was canceled, and he subsequently paid off his account out of his own
    funds* since he had not yet been reimbursed. With respect to the
    California National Guard, in many instances, USPFO

    took more than 30 days from the date of receipt of the travel voucher to
    send a request for voucher payment to DFAS. USPFO officials attributed
    these problems to the lack of qualified voucher examiners. Contrary to
    TTRA and GSA regulations, DFAS did not pay cardholders the

    required late payment fees and charges. According to the DOD FMR, the fees
    and charges are only paid if the traveler claims reimbursement by filing a
    separate voucher claiming the fees and charges. Currently, DFAS does not
    have the systems and data needed to identify and pay applicable fees and
    charges due to travelers who are not reimbursed within 30 days.

    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.

    However, when the Army implemented the travel card as part of its travel
    program, it did not provide the control infrastructure* primarily human
    capital* necessary to manage and oversee the use of government travel
    cards. Consequently, a weak internal control environment in the travel
    program has resulted in a significant level of delinquencies and charge-
    offs of bad debts, and potentially fraudulent and abusive travel card
    activity. This has resulted in millions of dollars of costs to the Army,
    including higher fees, lost rebates, and substantial time pursuing and
    attempting to collect delinquent travel card accounts.

    DOD and the Army have taken positive steps to reduce the delinquencies and
    charge- offs, including establishing a system of wage and retirement
    payment offset for many employees, sending travel reimbursements directly
    to the bank rather than the employee, and making management of the travel
    program a priority for the Army commands. These actions have resulted in
    significant collections of previously charged- off and delinquent

    accounts and improved relations with Bank of America. DOD and the

    Army have also proposed additional steps as reported in the June 27, 2002,
    DOD Charge Card Task Force report to improve the controls over the travel
    card program. However, these Army and DOD actions have primarily addressed
    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 *front- end* or preventive controls. To effectively
    reform the travel program, DOD and the Army will need to work

    to prevent potentially fraudulent and abusive activity and severe credit
    problems with the travel card. Preventive solutions include requiring use
    of the split disbursement payment process by all employees; providing a
    sufficient control infrastructure to effectively manage the program;
    exempting individuals with histories of financial problems from required

    use of travel cards; deactivating cards when employees are not on official
    travel; and providing appropriate, consistent disciplinary action to
    employees who commit fraud or abuse the travel cards.

    Matter for To reduce DOD*s travel card delinquency and charge- off rates,
    particularly

    Congressional the Army*s, which are higher than those of any other
    executive branch agency, the Congress should consider authorizing the
    Secretary of Defense Consideration

    to require using employees* travel allowances to pay the travel card
    issuer directly for charges incurred using the travel card. We believe
    that this action would provide DOD the ability to require use of the split
    disbursement payment process for all of its employees.

    Recommendations for To strengthen the overall control environment and
    improve internal

    Executive Action controls for the Army*s travel card program, we recommend
    that the

    Secretary of the Army 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 Army establish
    specific policies and procedures governing the issuance of individual
    travel cards to military

    and civilian employees, including the following:

     Evaluate the feasibility of extended use of credit checks for all travel
    card applicants.

     For credit check results currently obtained and additional future credit
    checks, use the results to make decisions on travel card applicants.
    Decisions on whether to issue a travel card should consider prior credit
    problems (e. g., bankruptcy; convictions for writing bad checks; and
    defaulted credit cards, home mortgages, and automobile loans).  Provide
    individuals with prior credit problems who are denied travel

    cards with alternative means of travel funding.  Provide individuals with
    no prior credit histories with *restricted* travel

    cards with low credit and ATM limits.  Develop procedures to periodically
    evaluate card usage and close

    accounts of infrequent travelers, which will minimize exposure to fraud
    and abuse.

     Cancel accounts for current infrequent travelers as noted in the Charge
    Card Task Force report.

     Evaluate the feasibility of establishing a policy to activate and
    deactivate cards on predetermined start and end dates, which are tied to
    the cardholders* authorized travel orders. At a minimum, this policy
    should focus on controlling travel card use for the *high- risk* enlisted
    military personnel in the E- 1 to E- 6 grades.

     Develop comprehensive, consistent Army- wide initial training and
    periodic refresher training for travel cardholders, focused 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, Review, and We recommend that the Secretary of the Army
    establish the following

    Disciplinary Actions specific policies and procedures to strengthen
    controls and disciplinary

    actions for improper use of the travel card:  Establish Army guidance on
    who should be given APC responsibilities

    that considers (1) the knowledge, skills, and abilities required to carry
    out these responsibilities effectively, (2) the time required to carry out
    APC responsibilities on a day- to- day basis effectively, and (3) the
    length of time an individual should be required to stay in the APC
    position in light of time required to become proficient in the use of the
    tools relied on to monitor card usage effectively. Army should evaluate
    whether the

    APC position should be full- time.  To avoid high APC turnover, evaluate
    the feasibility of maximizing the use of civilian rather than military
    employees to serve in the role of APC.  Establish guidance on APC span of
    control responsibilities so that such

    responsibilities are properly aligned with time available to ensure
    effective performance.

     Establish procedures to provide assurance that APCs receive training on
    their APC responsibilities, including 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 from approved MCCs.  Train APCs to
    review EAGLS reports to identify cardholders who have

    written NSF checks for payment of their account balances, and refer the
    employees for disciplinary action.  Review, in conjunction with Bank of
    America, individuals with APClevel

    access to EAGLS to limit such access to only those with current APC
    duties.  Establish Army procedures detailing how APCs should carry out
    their

    responsibility to monitor card usage for all cardholders assigned to them.
    Included in the procedures should be development of a data mining program
    enabling APCs to scan a large number of transactions,

    and target potentially inappropriate transactions for further review.

     Establish a requirement for assessing performance of travel monitoring
    and other APC duties as a rating factor on all APCs* performance
    evaluations.  Establish an Army requirement for cognizant APCs to retain
    records

    documenting any cardholder*s fraudulent or abusive usage of the travel
    card and require this information to be provided to the gaining APC when
    the cardholder is transferred.

     Establish appropriate, consistent Army- wide policy as a guide for
    taking disciplinary actions with respect to fraudulent and abusive
    activity and delinquency related to the travel card.

     Refer any travel cardholders with secret or higher level security
    clearances for whom financial problems related to the travel card are
    detected to Army CAF for investigation as to whether the individuals
    should continue to be entrusted with secret or higher clearances.

     Assign responsibility and accountability over cardholders transferring
    between Army units or locations, including cardholders currently in
    *orphan* status. Any accounts not assigned to an APC should be immediately
    canceled.

     Strengthen procedures for any employee discharging from service so that
    all cards are obtained from the cardholders, accounts are closed, and
    repayment of any outstanding debts is arranged.  Develop procedures to
    identify active cards of departed cardholders,

    including comparing cardholder and payroll data. Voucher and Payment

    We recommend that the Secretary of the Army, in partnership with the
    Processes

    Director, Defense Finance Accounting Service, revise the travel voucher
    and payment process by developing a process to monitor and track travel
    reimbursements that exceed the 30- day requirement so that individuals not
    paid within the statutory period are paid late fees in accordance with the
    law.

    To resolve severe voucher process problems specific to one of the units we
    audited, we recommend that the Commander of the California Army National
    Guard take the following actions:

     Evaluate travel card procedures from writing travel orders through
    documenting expenses on the voucher and completing the reimbursement
    process with a goal of reengineering these processes to provide reasonable
    assurance that cardholder reimbursement is made within the 30- day
    requirement.

     Strengthen segregation of duties controls so that voucher examiners
    cannot prepare, validate, and receive payment for erroneous or fraudulent
    travel vouchers without detection. Improved controls should include
    eliminating the use of generic usernames and passwords for accessing the
    travel system. Agency Comments and

    In written comments on a draft of this report, which are reprinted in Our
    Evaluation appendix V, DOD concurred or partially concurred with all of
    our recommendations. DOD partially concurred with our recommendations
    regarding (1) training APCs to refer cardholders who write NSF checks for
    disciplinary actions, (2) establishing an Army- wide disciplinary action
    policy for abusive travel card activity, and (3) developing a process to
    identify travel reimbursements that exceed the 30- day requirement so that
    individuals not paid within the statutory period are paid late fees in
    accordance with the law. Concerning our recommendation that APCs should be
    trained to refer

    cardholders who write NSF checks for disciplinary action, DOD responded
    that commanders of military members, not APCs, determine the appropriate
    action when a cardholder has written an NSF check, and not every case
    should be a referral for disciplinary action. DOD also stated the Army
    intends to publish guidance that will require the APCs to notify
    supervisors/ commanders of incidents of abuse, misuse, delinquency, and
    other events, including NSF checks. This response appears to address the
    intent of our recommendation. We agree that APCs should be trained to
    identify NSF checks and to report cardholders who write NSF checks to the
    appropriate level of command for review and possible further action. The
    supervisors and commanders would still maintain their discretion to select
    the specific disciplinary action, if any, depending on the circumstances
    of individual cases.

    Regarding establishing Army- wide disciplinary action policy for abusive
    travel card activity, DOD stated that the Army already has a strong policy
    in place against theft, fraud, and other intentionally dishonest conduct
    on the part of civilian employees and that it would be inconsistent with
    current

    law for the Army to establish further mandatory requirements that impose
    specific disciplinary actions. With regard to military personnel, DOD
    stated that disciplinary actions are addressed as a matter of command
    discretion. We never contemplated that the policy would prescribe
    mandatory actions.

    Rather, we intended the policy to be a guide of possible disciplinary
    actions to be taken against cardholders. This guidance would also serve as
    an important internal control feature that clearly identifies the
    consequences

    associated with improper and abusive travel card use and would serve as a
    deterrent to such abuse. Further, the policy could include a range of
    actions that would be appropriate for various types of travel card misuse.
    To eliminate any confusion concerning the intent of our recommendation, we
    made a slight modification to the text of the recommendation.

    We also recommended developing a system to identify travel reimbursements
    that exceed the 30- day requirement so that individuals not paid within
    the statutory period are paid late fees in accordance with the law. DOD
    agreed that the current systems for processing and computing travel
    vouchers for the Army do not provide for automated means of calculating
    interest due on vouchers exceeding the 30 days from the proper submission
    date. DOD also stated that the Defense Travel System (DTS) currently being
    deployed automates the voucher submission process and should reduce the
    instances where reimbursements extend beyond 30 days. However, the DOD
    Office of Inspector General concluded in a recent report 29 that DTS
    remains at high risk of not being an effective solution in streamlining
    the DOD travel management process and that it is not expected to be
    deployed until fiscal year 2006. This system has been under development
    since 1998 with substantial schedule delays and cost overruns as well as
    reductions in functionality. Based on this evaluation, we do not consider
    DTS to be a timely or viable solution for identifying those

    reimbursements outside of the 30- day requirement. TTRA and GSA
    regulations require that late fees be paid to those persons reimbursed
    outside of the 30- day requirement. TTRA imposes a duty on agencies to pay
    the late fees and does not condition the payment of late fees on travelers
    identifying late reimbursements and submitting claims for the

    fees. Until DTS is fully implemented and operational, we continue to
    believe that DOD needs to develop an interim process to identify late

    29 Department of Defense Office of the Inspector General, Acquistion:
    Allegations to the Defense Hotline on the Management of the Defense Travel
    System, Report No. D- 2002- 124 (Washington, D. C.: July 1, 2002).

    reimbursements and pay cardholders the appropriate fees in accordance with
    the law. In addition, in one area, although DOD concurred with our
    recommendation, we do not believe that its response indicates full
    agreement or understanding of the intent of the recommendation.
    Specifically, with regard to our recommendation that credit check results
    be used to make decisions on travel card applicants, DOD responded that
    those with prior credit problems are issued restricted cards and that
    mandatory use of the government travel card is required by TTRA. This is
    not correct. Both the DOD FMR and TTRA provide for exemptions from the
    mandatory use requirements under certain conditions, including evidence of
    financial irresponsibility. When an exemption is granted from the
    mandatory use of the travel charge card, the use of personal funds,
    including cash or personal charge card; travel advances; or Government

    Travel Requests may be authorized for payment of travel expenses. We
    continue to believe that until the Army takes action to consider past
    credit problems in determining whether to authorize issuing government
    travel cards, it will continue to increase the risk that individuals will
    repeat a pattern of fraud, abuse, and delinquency or nonpayment. Our
    report includes numerous examples of such individuals, including those who
    were issued restricted cards.

    Finally, in concurring with our recommendations regarding the lack of
    segregation of duties and other voucher processing problems at the
    California Army National Guard, DOD indicated that it had a number of
    detective and compensating controls in place. While these appear
    responsive to our recommendations, we have not evaluated the effectiveness
    of their implementation and therefore cannot determine whether these
    measures will resolve the problems we identified.

    As agreed with your offices, unless you announce the contents of this
    report earlier, we will not distribute it 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 for Acquisition,
    Technology, and Logistics; the Under Secretary of Defense (Comptroller);
    the Secretary of the Army; the Director of the Defense Finance and
    Accounting Service; the U. S. Property and Fiscal Officer, California Army

    National Guard; 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- 9095 or kutzg@ gao. gov, or
    John J. Ryan at (202) 512- 9587 or ryanj@ gao. gov if you or your staffs
    have any questions concerning this report.

    Gregory D. Kutz Director Financial Management and Assurance

    Robert J. Cramer Managing Director Office of Special Investigations

    Appendi Appendi xes x 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 to reduce 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 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 fiscal year. Under the current GSA master
    contract, the Department of Defense (DOD)

    entered into a tailored task order with Bank of America 30 to provide
    travel card services to DOD and the military services, including the Army.
    Table 7 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.

    30 DOD 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
    to renew. The task order also allowed for five additional 1- year options
    under the GSA master contract renewal provisions.

    Table 7: Comparison of Number of Individually Billed Travel Cardholders
    and Related Charges for DOD Versus Total Federal Government for Fiscal
    Year 2001

    Fiscal year 2001 Number of individually

    individually billed travel billed travel cardholders

    card charges Entity

    as of September 30, 2001 (dollars in millions)

    Army 432, 460 $619 Navy (includes Marine Corps) 394, 952 510

    Air Force 501,306 831 Other DOD 86, 922 174 Total DOD 1, 415, 640 $2, 134
    Total federal government 2,132, 031 $3, 634 DOD percentage of total
    government 66% 59%

    Source: Bank of America.

    As shown in table 7, 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 7 also shows that the Army provided
    432,460 individually billed cards to its civilian and military employees
    as of September 2001. These cardholders charged an estimated $619 million
    to their travel cards during fiscal year 2001.

    Travel Card Program The Travel and Transportation Reform Act of 1998
    (Public Law 105- 264) Guidelines

    expanded the use of government travel cards by mandating the use of 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 based on the volume of transactions incurred using
    the card and on cardholders paying their monthly travel card bills on
    time. To help cardholders pay their monthly bills on time, the act also
    requires that

    agencies reimburse cardholders for proper travel claims within 30 days of
    submission of approved travel vouchers by the cardholders. 31 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 with their own implementing
    regulations.

    DOD issued its Financial Management Regulations (FMR), Volume 9, Chapter
    3, Travel Policies and Procedures, which supplements GSA*s travel
    regulations. DOD*s Joint Travel Regulations, Volume 1 (for Uniformed
    Service Members) and Volume 2 (for Civilian Personnel), refer to the FMR
    as the controlling regulation for DOD*s travel cards. Further, the Army
    provided informational pamphlets intended to assist its travelers:
    Pamphlet 55- 16, Transportation and Travel: Civilian Travel and
    Transportation

    Permanent Change of Station Travel; Pamphlet 55- 20, Temporary Duty

    31 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 C. F. R. Section 301- 52.20.

    Travel: Uniformed Services Personnel Travel and Transportation; and
    Pamphlet 55- 22, Civilian Travel and Transportation: Temporary Duty
    Travel. In addition, some of the Army*s individual commands and units

    have issued their own instructions supplementing GSA and DOD guidelines.

    The Army Travel As shown in figure 5, the Army*s travel card management
    program for

    Process 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 5: The Army Travel Process

    Traveler requests travel card B of A

    APC processes travel card issues travel card

    application approved by supervisor and controls credit limits

    Official government travel authorized (travel order)

    Payment

    Traveler charges Merchant

    goods and services (e. g., rental car co.)

    on travel card provides goods/ services

    and charges travel card

    Billing Payment

    Billing

    Traveler prepares

    Payment information

    voucher and provides to supervisor for

    B of A processes review with submission

    Merchant bank to DFAS

    card charges, accepts transaction

    pays merchant deposit slips and

    bank, and bills transfers payment

    traveler DFAS processes and pays b voucher

    B of A credit card data in EAGLS

    APC monitors card usage and delinquencies a by accessing EAGLS

    APC terminates or Traveler leaves

    suspends card service or moves

    for traveler leaving Army or moving

    a See figure 7 for specific actions to be taken by the agency program
    coordinator (APC). b The Defense Finance and Accounting Service (DFAS)
    allows travelers to direct a portion or all proceeds from the
    reimbursement of travel vouchers to Bank of America. Army National Guard
    units process travel vouchers at the units and then send electronic files
    to DFAS authorizing payment.

    Travel Card Issuance and When an Army civilian or military employee or the
    employee*s supervisor

    Termination 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 6,
    the application requires the applicant to provide pertinent information,
    including full name and Social Security number, and identify whether he or
    she is an active, reserve, or guard military member or a civilian employee
    of the Army. 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 travel cards to all applicants for whom it receives completed
    applications signed by the applicants, the applicants* supervisors, and
    the

    APCs.

    Figure 6: Travel Card Application

    Individually Billed Card Account Setup/ Application Form (Department of
    Defense Travel Card Program)

    PART 1: TO BE COMPLETED BY EMPLOYEE (Optional fields are italicized and
    noted by an asterisk) PLEASE TYPE OR PRINT ALL INFORMATION Cardholder name
    as it should appear on the card (First Name , Middle Name or Middle
    Initial and Last Name): Social Security Number: Employment Status: * *
    Active Reserve Guard Civilian Military Rank and Pay Grade/ Civilian Pay
    Grade (example: E- 05, O- 03, GS- 09, WG- 07, etc.): Military Rank:
    Military Pay Grade: * Civilian Pay Grade: * Commercial Office Phone: Home
    Phone: Statement Mailing Address: (Indicate Street or P. O. Box) Card
    Mailing Address*: (if different from statement address) City or APO/ FPO:
    State: City or APO/ FPO*: State*: Zip/ Postal Code: Country: Zip/ Postal
    Code*: Country*: E- mail Address*: Card Delivery*: The card will arrive
    approximately 10 to 14 business days after Bank of America receives the
    application. Expedited card delivery is available, however, the applicant
    will be charged $20. Is expedited card delivery needed? Yes No . Signature
    and Agreement: After reading the attached Agreement between Department of
    Defense Employee and Bank of America, N. A. (USA) (* Agreement*): 1.
    Initial either A or B below; 2. Sign; 3. Obtain your supervisor*s
    approval; and 4. Forward the completed form to your APC. A. ____ By
    signing below, I acknowledge that I have read and

    B. ____ By signing below, I acknowledge that I have read and understand,
    and understand, and agree to be bound by, the terms and conditions of
    agree to be bound by, the terms and conditions of the Agreement; however,
    I do the Agreement including Bank of America*s right to obtain credit not
    authorize Bank of America to obtain credit reports and therefore I will
    not be reports as described in the Agreement. I attest to the best of my
    eligible for a standard account. I attest to the best of my knowledge,
    that the knowledge, that the information I have provided herein is true
    and

    information I have provided herein is true and correct. correct.

    This application is for a Government Card Account, which may be standard
    or restricted, as described in the attached Agreement. I expressly agree
    to accept whichever type of account is established. Applicant*s Signature:
    Date: Supervisor*s Approval Signature: Date: PART 2: TO BE COMPLETED BY
    AGENCY PROGRAM COORDINATOR (APC) PLEASE TYPE OR PRINT ALL INFORMATION
    (Optional fields are italicized and noted by an asterisk) Central Account
    No. 4 4 8 6 * 1 2 * * Account Hierarchy: Specify the complete Hierarchy
    Level (HL) number that pertains to your organization. For example, 0000001
    2000005 3012345. HL1 HL2 HL3 HL4 HL5 HL6 HL7 HL8 0000001 Organization/
    Unit Name: FIPS Code: Is the applicant eligible to obtain Contract City
    Pair airline fares?* +If eligible, participation is*: Yes+ No Mandatory
    Non- mandatory Account Type*: (Check one. If the applicant initialed B in
    the above Signature and Agreement section, then only a restricted card may
    be issued. For a restricted card, if no activation/ deactivation dates are
    provided below, the card will issued in a deactivated status and can only
    be activated by the APC.) Standard Restricted If Restricted, Date to
    Activate: Month Day Year Date to Deactivate: Month Day Year Card Design
    Type*: Cash Access* : Authorized to Receive Travelers Checks*: Standard
    Quasi- Generic Yes No Yes No By signing below, I hereby authorize, on
    behalf of the Agency/ Organization indicated above, that a Government Card
    be issued to the employee named above. PLEASE RETAIN COPY FOR YOUR
    RECORDS. Return copy to: Bank of America, Attn: GCSU, P. O. Box 52304,
    Phoenix, AZ, 85072- 9419, Facsimile: 1.877.217.1033 or 1.888.698.5631 APC:
    Date: Name & Title/ Rank (Please print) Signature Address Line 1: City:
    State: Address Line 2*: Zip Code: Country: Address Line 3*: Commercial
    Telephone: Form: S02D0400/ OC R 24000 Revised: 05/ 29/ 01 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 will
    suggest to the service that the applicant receive a restricted card with a
    credit limit of $2,500 instead of the standard card with a credit limit of
    $10,000. However, as shown in figure 6, the application allows the
    employee to withhold permission for Bank of America to obtain a credit
    report. If this option is selected, Bank of America automatically issues a
    restricted card to the applicant.

    When cardholders leave the Army, they are required to contact their APCs
    and notify them of their planned departure. Based on this notification
    from cardholders, the APCs are to 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
    amount of per diem and any cash advances. Further, the Army 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 For authorized travel, travelers must
    use their cards to pay for allowable

    Travel Expenses expenses, such as hotels and rental cars. The Army
    generally uses a

    centrally billed transportation account to pay for air and rail
    transportation. Also, some units utilize unit cards, a form of centrally
    billed account, in lieu of individually billed travel charge cards for
    meals and lodging for group trips.

    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 25- 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 Within 5 working days of return from travel,
    the cardholder is required to

    Processing 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, the Army 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 a supervisor*s 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.
    If the payment of the approved voucher takes longer than 30 days, the Army
    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.

    For all Army units other than those in the Army National Guard, after the
    supervisor approves a cardholder*s travel voucher package for payment, it
    is sent to a DFAS location for processing and payment. In the Army
    National Guard, guard units process, review, and approve all vouchers at
    that level before they are sent to DFAS for payment. DFAS (or the guard
    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. Once the travel
    information from the voucher has been entered into IATS, the voucher may
    be selected for further review or audit. DFAS travel services supervisors
    audit 2 percent of vouchers under $2,500 and all vouchers $2,500 and
    greater. In addition, vouchers for amounts $20,000 and over are audited
    again by DFAS Indianapolis travel services technicians before payment is
    disbursed. If problems with a voucher are found during the initial entry
    of the information into IATS or during the audit of the information, the
    transaction can be rejected and returned to the cardholder for correction.
    Once the item is successfully processed through IATS, DFAS makes

    payment to the cardholder or to Bank of America and the cardholder, if the
    cardholder elected the split disbursement option whereby part of the
    reimbursement is sent to Bank of America.

    Monitoring Travel Card In addition to controlling the issuance and credit
    limits related to the travel

    Transaction Activity 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 Both the Army and Bank of America have a
    role in managing travel card

    Accounts 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,

    the account is considered delinquent. As summarized in figure 7, there are
    specific actions required by both the Army and Bank of America based on
    the number of days a cardholder*s account is past due.

    Figure 7: Required Army and Bank of America Delinquency Process Management
    Actions

    DOD actions Bank of America actions Statement

    Sends statement to cardholder.

    date 30 days

    45 days

    Sends a delinquency reminder to cardholder.

    55 days

    Sends a pre- suspension letter to the cardholder. APC issues 60- day
    delinquency notification

    60 days

    Suspends the account prohibiting purchases. memorandum to the cardholder
    and

    Mails suspension letter to cardholder. immediate supervisor. Supervisor
    investigates and takes appropriate disciplinary action.

    75 days

    Assesses late fee every 30 days. APC issues 90- day delinquency
    notification

    90 days

    Sends 90- day letter to cardholder memorandum to the cardholder, immediate

    Sends letter to cardholder of intent

    supervisor, and the Company Commander

    to initiate salary offset.

    who investigates and takes appropriate disciplinary action.

    APC issues a 120- day delinquency

    120 days

    Sends a pre- cancellation letter to the cardholder. notification
    memorandum to the Commander. The Commander investigates and takes

    Requests DFAS to offset salary.

    appropriate disciplinary action.

    126 days

    Closes account, mails notice of cancellation letter to cardholder.

    DFAS offsets salary.

    150 days 180 days

    Mails a pre- charge off letter to the cardholder.

    210 days

    Charges off account. Note: Starting in fiscal year 2002, DOD began to
    offset the salary of certain civilian employees, military members, and
    retired military members from all services, including the Army, for the
    amounts delinquent or charged off on travel card accounts. Source: GAO
    analysis.

    The following is a more detailed explanation of the required actions by
    Army 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 an 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 by Bank of
    America 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 his or her 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 the
    same time, Bank of America is to send a pre- cancellation letter to the
    cardholder. 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.

     180 days past due* Bank of America is to send a *pre- charge 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, but is unable to submit vouchers and timely pay his or
    her account, 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
    missioncritical status. Activating this status precludes Bank of America
    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
    missioncritical 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.

    Appendi x 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 cards and associated
    travel processing and

    management for the Department of the Army. Our assessment covered  the
    reported magnitude and impact of delinquent and charged- off Army 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 Army travel card transactions
    during fiscal year 2001 to identify potentially fraudulent and abusive
    activity related

    to the travel card;  the Army*s overall management control environment
    and the design of

    selected Army travel program management controls, including controls over
    (1) travel card issuance, (2) APCs* 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, (6) segregation of duties to ensure
    that no one individual can control all aspects of a travel transaction,
    and (7) 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 four Army
    units* travel activity, including (1) travel order approval, (2) accuracy
    of travel voucher payments, (3) timely submission of travel vouchers by
    travelers to the approving officials, and (4) timely processing and
    reimbursement of travel vouchers by the Army 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), 32
    the GSA*s Federal Travel Regulation, 33 and the DOD FMR, Volume 9, Travel
    Policies and Procedures. We also used as criteria our Standards for
    Internal Control in Federal Government 34 and our Guide to Evaluating and
    Testing Controls Over Sensitive Payments. 35 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 seven areas reviewed.

    To assess the magnitude and impact of delinquent and charged- off
    accounts, we compared the Army*s delinquency and charge- off rates to
    other DOD services and federal 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.

    We also used data mining to identify Army individually billed travel card
    transactions for audit. Our data mining procedures covered the universe of
    individually billed Army travel card activity during fiscal year 2001 and
    identified transactions that we believed were potentially fraudulent or
    abusive. However, our work was not designed to identify, and we did not

    32 The Travel and Transportation Reform Act of 1998 (Public Law 105- 264,
    Oct. 19, 1998) states that, unless specially exempted, federal employees
    are required to 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. 33 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.

    34 U. S. General Accounting Office, Standards for Internal Control in the
    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.

    35 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.

    determine, the extent of any potentially fraudulent or abusive activity
    related to the travel card.

    To assess the overall control environment for the travel card program at
    the Department of the Army, we obtained an understanding of the travel
    process, including travel card management and oversight, by interviewing
    officials from the Office of the Under Secretary of Defense (Comptroller);
    the Department of the Army; DFAS; Bank of America; and GSA. We reviewed
    applicable policies and procedures and program guidance they

    provided. We visited four Army units to gain an understanding of the
    travel process, including the management of travel card usage and
    delinquency. We visited the DFAS Orlando location to gain an understanding
    of the voucher review and payment process used for two of the four Army
    locations we tested. We also assessed actions taken to reduce the severity
    of travel card delinquencies and charge- offs. 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.

    We selected four Army locations for testing controls over travel card
    activity based on the relative size of travel card activity at the 13 Army
    commands and of the units under these commands, the number and

    percentage of delinquent accounts, and the number and percentage of
    accounts written off. We selected two units from Army*s Forces Command
    because that command represented approximately 19 percent of travel card
    activity, 22 percent of the delinquent accounts, and 28 percent of
    accounts charged off during fiscal year 2001 across the Army. We also
    selected an Army National Guard location because the Army National Guard
    represented 13 percent of the total travel card activity, 22 percent of
    the delinquent accounts, and 15 percent of charge- offs for fiscal year
    2001. Special Operations Command represents about 6 percent of Army*s
    charge card activity, 5 percent of the delinquent accounts, and 4 percent
    of Army travel card accounts charged off in fiscal year 2001. Each of the
    units within the commands was selected because of the relative size of the
    unit within the respective command.

    At each of the Army locations we audited we also used our review of
    policies and procedures and the results of our understanding of travel
    processes and other observations to assess the effectiveness of controls
    over segregation of duties among persons responsible for preparing travel
    vouchers, processing and approving travel vouchers, and certifying travel

    voucher payments. In addition, to ensure that work responsibilities were

    properly segregated at the California National Guard so that no single
    individual can perform or control all key aspects of computer- related
    operations, we performed a limited review of security controls in place at
    that location over access to DOD*s Integrated Automated Travel System
    (IATS). California National Guard personnel used this system to record and
    process travel vouchers. We interviewed managers, users, and
    administrators of IATS at the California National Guard and DFAS*s
    Financial Services Office. We also conducted limited observations of the

    IATS keying process at the California National Guard. We also reviewed
    computer system access controls for EAGLS* the system used by Bank of
    America to maintain DOD travel card data. To determine whether these
    controls over 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 Army
    travel card transactions processed through the travel system* including
    the travel order, travel voucher, and payment processes* we obtained and
    used the database of fiscal year 2001 Army travel card transactions.
    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 the four Army units we audited. Each
    sampled transaction was subsequently weighted in the analysis to account

    statistically for all charged transactions at each of the four units,
    including those that were not selected. Table 8 presents the sites
    selected and the number of fiscal year 2001 transactions at each location.
    36

    36 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.

    Table 8: Population of Fiscal Year 2001 Travel Transactions at Army Units
    Tested Number of fiscal year 2001

    Dollar value of fiscal year Army unit tested travel transactions a 2001
    travel transactions a

    Ft. Drum, Forces Command 109, 443 $ 7,281, 275 Ft. Bragg, Forces Command
    128, 583 10,648, 419 Ft. Bragg, Special Operations Command 35, 021 5,035,
    743

    California National Guard 58, 797 5,035, 457

    a Transactions represent charges for sales and cash advances and exclude
    credits, fees, and other miscellaneous debits.

    We performed tests on statistical samples of travel card transactions at
    each of the four case study sites to assess whether the system of internal
    control 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 dates of travel, (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 the
    submission of an approved travel voucher. We considered transactions not
    related to authorized travel to be abuse and incurred for personal
    purposes. The results of the samples of these control attributes, as well
    as the estimate for personal use* or abuse* related to travel card
    activity, 37 can be projected to the population of transactions at the
    respective case study site only, not to the population of travel card
    transactions for all Army cardholders.

    We concluded that a control was effective if both the projected point
    estimate of the failure rate and the upper bound of a one- sided 95
    percent confidence interval associated with the estimate were no more than
    5

    37 At Ft. Bragg, Forces Command, we found that 85 of 189 transactions
    appeared to be personal (projecting to an estimated 45 percent with a 95
    percent confidence interval from 37.8 percent to 52.4 percent). At Ft.
    Drum, Forces Command, we found that 17 of 115 transactions appeared to be
    personal (projecting to an estimated 14. 8 percent with a 95 percent
    confidence interval from 8.9 percent to 22.6 percent). At Ft. Bragg,
    Special Operations, we found that 21 of 117 transactions appeared to be
    personal (projecting to an estimated 18 percent with a 95 percent
    confidence interval from 11. 5 percent to 26.1 percent). At the California
    National Guard we found that 49 of 166 transactions appeared to be
    personal (projecting to an estimated 29.5 percent with a 95 percent
    confidence interval from 22. 7 percent to 37. 1 percent).

    percent. We concluded that a control was ineffective if both the point
    estimate of the failure rate and the lower bound of a one- sided 95
    percent confidence interval associated with the estimate were greater than
    10 percent. Any point estimate between 5 and 10 percent would generate an

    assessment of partially effective. Tables 9 through 11 show (1) the
    results of our tests of key 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. Table 9
    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 9: Estimate of Fiscal Year 2001 Transactions That Failed Control
    Tests for Approved Travel Number of failed

    Estimated failure rate Army unit tested transactions (95% confidence
    interval)

    Ft. Bragg, Forces 6.2% Command 6 of 96 (2.3%, 13.1%)

    Ft. Drum, Forces 0% Command 0 of 96 (0%, 3.8%)

    Ft. Bragg, Special 3.1% Operations Command 3 of 96 (. 6%, 8.9%)

    California National Guard 1.04% 1 of 96 (. 03%, 5.7%)

    Table 10 shows the results of our test for effectiveness of controls in
    place over the accuracy of travel voucher payments.

    Table 10: Estimate of Fiscal Year 2001 Transactions That Failed Control
    Tests for Accurate Travel Voucher Payments

    Number of failed Estimated failure rate Army unit tested transactions (95%
    confidence interval)

    Ft. Bragg, Forces 18. 8% Command 18 of 96 (11.5%, 28.0%)

    Ft. Drum, 10. 4% Forces Command 10 of 96 (5.1%, 18.3%)

    Ft. Bragg, Special 7.3% Operations Command 7 of 96 (3.0%, 14.4%)

    California National 41. 9% Guard 18 of 43 (27.0%, 57.9%)

    Table 11 shows the results of our tests of two 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
    and timely approval and payment processing of the travel voucher. Table
    11: Estimate of Fiscal Year 2001 Transactions That Failed Control Tests
    for

    Timely Submission and Processing of Travel Vouchers Timely voucher
    submission Timely reimbursement to the by employee (5- day rule) traveler
    (30- day rule)

    Estimated Estimated failure

    failure Number

    rate (95% Number

    rate (95% of failed

    confidence of failed

    confidence Army unit tested

    transactions interval)

    transactions interval)

    Ft. Bragg, Forces 38. 5%

    8.3% Command 37 of 96 (28.8%, 49.0%) 8 of 96 (3.7%, 15.8%)

    Ft. Drum, Forces 21. 9%

    5.2% Command 21 of 96 (14.1%, 31.5%) 5 of 96 (1.7%, 11.7%)

    Ft. Bragg, Special Operations

    30. 2% 7.3% Command 29 of 96 (21.2%, 40.4%) 7 of 96 (3.0%, 14.4%)

    California National 27. 9%

    60. 5% Guard 12 of 43 (15.3%, 43.7%) 26 of 43 (44.4%, 75.0%)

    To determine if cardholders were reimbursed within 30 days, we used
    payment dates provided by DFAS. We did not independently validate the
    accuracy of these reported payment dates.

    We briefed the following officials on the details of our review, including
    our objectives, scope, and methodology and our findings and conclusions:
    DOD managers, including officials in DFAS; Army managers, including Office
    of the Assistant Secretary of the Army (Financial Management and
    Comptroller) officials; Army Forces Command and Special Operations Command
    unit commanders; unit- level APCs; Army National Guard Bureau management
    and the California National Guard Adjutant General; and Bank of America
    officials. We incorporated their comments where appropriate. With the
    exception of our limited review of access controls at the California
    National Guard, we did not review the general or application controls
    associated with the electronic data processing of Army travel card
    transactions. We conducted our audit work from December 2001 through July
    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. We received DOD comments on a draft of this report from the
    Under Secretary of Defense (Comptroller) dated September 30, 2002, and
    have reprinted those comments in appendix V.

    Appendi x III

    Army Major Command Delinquency Rates Table 12 shows the travel card
    delinquency rates for Army*s major commands (and other Army organizational
    units at a comparable level) that had outstanding balances over $1 million
    during the 2- year period ending March 31, 2002. The Army*s commands and
    other units are listed in descending order based on their respective
    delinquency rates as of March 31, 2002. The delinquency rates shown
    represent the total amount delinquent (amounts not paid within 61 days of
    the travel card monthly statement closing date) as a percentage of total
    amounts owed by the command*s travel cardholders at a point in time.

    Table 12: Army Major Command Delinquency Rates (by Quarter) for the 2
    Years Ending March 31, 2002 June

    Sept. Dec.

    Mar. June

    Sept. Dec.

    Mar. Command a 2000 2000 2000 2001 2001 2001 2001 2002

    U. S. Army Forces Command 22.2 25.1 28. 7 23.1 18. 6 22.1 30.5 23.7 U. S.
    Army Pacific Command 19.5 25.1 28. 2 19.8 15. 0 18.7 22.5 18.9 U. S. Army
    National Guard 16.9 16.4 22. 9 13.6 13. 4 16.2 20.9 18.4 U. S. Army Europe
    and 7th Army Command 17.8 20.4 21. 1 15.8 13. 0 17.1 22.5 16.9 U. S. Army
    orphan b 16.2 22.2 40. 1 38.1 23. 1 20.4 24.4 16.9 U. S. Army Reserve 14.3
    16.0 20. 9 13.1 11. 6 11.9 21.4 15.3 U. S. Army Recruiting Command 22.5
    19.2 17. 4 20.4 13. 6 13.7 10.6 13.1 U. S. Army Special Operations Command
    16.9 17.4 17. 9 9. 9 10. 1 10. 6 16.6 12.0 U. S. Army Operating Agency 22
    c 8.7 11.1 11. 4 7. 4 7. 0 8. 7 12.2 9. 0 U. S. Army Training and Doctrine
    Command 10.8 11.7 13. 9 8. 8 8. 4 10.2 12.1 8. 2 U. S. Army Medical Corps
    12.3 13.9 14. 8 9. 9 8. 1 8. 0 12.3 7. 7 U. S. Army Intelligence and
    Security Command 10.3 12.1 11. 9 5. 9 5. 6 6. 0 4.2 5. 8 U. S. Army Corps
    of Engineers 4. 8 5.6 6. 5 4.5 3. 3 3.9 5. 8 3.6 U. S. Army Material
    Command 3.4 3. 6 4.4 2. 1 2.1 2. 3 2.4 1. 5 All other commands combined
    8.5 9. 7 11. 1 8.4 5. 9 6.8 7. 2 6.9 Army- wide 13.9 15.5 18. 5 13.3 10. 7
    12.5 16.6 12.8

    a Commands are ranked by the largest percentage of dollars delinquent as
    of March 31, 2002. Commands with a March 31, 2002, balance outstanding
    under $1 million have been combined into *All other commands combined.* b
    U. S. Army orphan accounts are (1) Army travel card accounts that are not
    under the purview of any

    APC and (2) accounts Banks of America inherited from the previous
    government travel card contractor that were not linked to any Army command
    and accounts for which the accountable APC left or was relocated without
    having a replacement designated. c U. S. Army Operating Agency 22 consists
    of various Army headquarters and administrative offices, such as the
    Secretary of the Army, the Assistant Secretary of the Army for Financial
    Management and

    Comptroller, the Army Audit Agency, and the Army Judge Advocate General.
    Source: GAO calculation based on information provided by Bank of America.

    Army Personnel Grade, Rank, and Associated

    Appendi x IV

    Basic Pay Rates Tables 13 and 14 show the grade, rank (where relevant),
    and the associated basic pay rates for 2001 for Army*s military and
    civilian personnel, respectively. The basic 2001 pay rates shown exclude
    other considerations, such as locality pay and any allowances for housing
    or cost of living.

    Table 13: Army Military Grades, Ranks, and Associated Basic Pay Rates for
    Fiscal Year 2001 Military grade Military rank 2001 pay Enlisted personnel

    E- 1 to E- 3 Private $11,033 to $14, 449 E- 4 to E- 6 Corporal to Staff
    Sergeant $17,739 to $26, 253 E- 7 to E- 9 Platoon Sergeant to Sergeant
    Major $31, 563 to $46, 445

    Officers a

    WO- 1 to WO- 5 Warrant Officer $29,302 to $60,152 O- 1 to O- 3 First
    Lieutenant, Second Lieutenant,

    Captain $26, 731 to $45, 339 O- 4 to O- 6 Major, Lieutenant Colonel,
    Colonel $56, 635 to $84, 317 O- 7 to O- 10 General $98, 960 to $132, 826 a
    Officers* ranks includes warrant officers (denoted by WO) and commissioned
    officers (denoted by O).

    Source: U. S. Army.

    Table 14: Army Civilian Grades and Associated Basic Pay Rates for Calendar
    Year 2001 Civilian grade 2001 pay General schedule employees

    GS- 1 to GS- 3 $14,244 to $22, 712 GS- 4 to GS- 5 $19,616 to $28, 535 GS-
    6 to GS- 8 $24,463 to $39, 143 GS- 9 to GS- 12 $33, 254 to $62, 686 GS- 13
    to GS- 15 $57, 345 to $103, 623

    Senior Executive Service

    ES- 01 to ES- 06 $109, 100 to $125, 700 Source: Office of Personnel
    Management.

    Appendi x V Comments from the Department of Defense

    (192066)

    a

    GAO United States General Accounting Office

    Page i GAO- 03- 169 Army Travel Cards

    Contents

    Contents

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    Page 1 GAO- 03- 169 Army Travel Cards United States General Accounting
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    A

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    Appendix I

    Appendix I Background

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    Appendix II

    Appendix II Objectives, Scope, and Methodology

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    Appendix III

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    Appendix IV

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    Appendix V

    Appendix V Comments from the Department of Defense

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    Appendix V Comments from the Department of Defense

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