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United States General Accounting Office: 
GAO: 

Testimony: 

Before the Subcommittee on Government Efficiency, Financial Management 
and Intergovernmental Relations, Committee on Government Reform, House
of Representatives: 

For Release on Delivery: 
Expected at 2 p.m.: 
Tuesday, October 8, 2002: 

Travel Cards: 

Control Weaknesses Leave Navy Vulnerable to Fraud and Abuse: 

Statement of Gregory D. Kutz: 
Director, Financial Management and Assurance: 

John J. Ryan: 
Assistant Director, Office of Special Investigations: 

GAO-03-148T: 

Mr. Chairman, Members of the Subcommittee, and Senator Grassley: 

Thank you for the opportunity to discuss the Department of the Navy’s
(including the United States Marine Corps) internal controls over the
government travel card program. This subcommittee held a hearing in May
2001 that identified substantial delinquencies and charge-offs related 
to the Department of Defense (DOD) travel card. As a result of your 
hearing and our work on internal control over purchase card 
transactions at two Navy sites,[Footnote 1] and continuing concern 
about fraud, waste, and abuse in DOD’s use of both travel and purchase 
cards, you requested more comprehensive audits of both programs. We 
previously testified on the Army travel card program in July 2002. 
[Footnote 2] This written statement discusses the results of our Navy 
travel card program audit. We plan to follow up on this testimony and 
issue a detailed report with recommendations on the results of our 
audit. We will report to you separately on the results of our Air Force 
travel card audit. 

The intent of the travel card program, which is administered by a
contractor (Bank of America), was to improve convenience for the 
traveler and to reduce the government’s costs of administering travel.
During fiscal year 2001, the Navy had about $510 million in travel card
charges and about 395,000 individually billed travel card accounts at 
the end of fiscal year 2001. [Footnote 3] The individually billed 
travel card program is significantly different from the purchase card 
program in that cardholders are directly responsible for all charges 
incurred on their travel cards 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 Navy for all valid 
expenses related to official government travel. In contrast, all 
purchase card charges are billed directly to the government for monthly 
payment. 

Today, I will provide my perspective on (1) the reported magnitude and
impact of delinquent and charged-off Navy travel card accounts for 
fiscal year 2001 and the first 6 months of fiscal year 2002, along with 
an analysis of related causes, (2) potentially fraudulent and abusive 
activity related to the Navy travel card during the same period, (3) 
whether abusive activity associated with the travel card is effectively 
linked to disciplinary actions and security clearances, (4) the 
effectiveness of the overall control environment and key internal 
controls for the Navy’s travel program, and (5) the status of DOD and 
Navy corrective actions. Details on our scope and methodology are 
included in appendix I. 

In summary, the Navy’s average delinquency rate of about 12 percent over
the last 2 years is nearly identical to the Army’s, which has the 
highest delinquency rate in DOD, and about 6 percentage points higher 
than that of federal civilian agencies. The Navy’s overall delinquency 
and charge-off problems, which have cost the Navy millions in lost 
rebates and higher fees, are primarily associated with lower-paid, 
enlisted military personnel. In addition, lack of management emphasis 
and oversight has resulted in management failure to promptly detect and 
address instances of potentially fraudulent and abusive activities 
related to the travel card program. For example, during fiscal year 
2001 and the first 6 months of fiscal year 2002, over 250 Navy 
personnel might have committed bank fraud by writing three or more 
nonsufficient fund (NSF) checks to Bank of America, while many others 
abused the travel card program by failing to pay Bank of America 
charges and/or using the card for inappropriate transactions such as 
for prostitution and gambling. However, because Navy management was 
often not aware of these activities, disciplinary actions were not 
consistently taken against these cardholders. We also found a 
significant relationship between travel card fraud, abuse, and
delinquencies and individuals with substantial credit history problems. 
For example, many cardholders whose accounts were charged off or put in
salary offset [Footnote 4] had bankruptcies and accounts placed in 
collection prior to receiving the card. The Navy’s practice of 
authorizing a travel card to be issued to virtually anyone who asked 
for it compounded an already existing problem by giving those with a 
history of bad financial management additional credit. While we found 
that Navy management had taken some corrective actions to address 
delinquencies and misuse, additional preventive solutions are necessary 
if Navy is to effectively address these issues. 

Travel Card Delinquencies and Charge-offs: 

Most Navy cardholders properly used their travel cards and paid amounts
owed to Bank of America in a timely manner. However, as shown in
figure 1, the Navy’s average delinquency rate was nearly identical to 
the Army’s, which, as we have previously testified, is the highest 
delinquency rate in the government. The Navy’s quarterly delinquency 
rate fluctuated from 10 to 18 percent, and on average was about 6 
percentage points higher than that of federal civilian agencies. As of 
March 31, 2002, over 8,400 Navy cardholders had $6 million in 
delinquent debt. 

Figure 1: Navy/Marine Corps v. Army, Other DOD, and Non-DOD Civilian 
Agencies’ Travel Card Delinquency Rates for the 2 Year Period Ending 
March 31, 2002: 

[See PDF for image] 

The figure is a multiple line graph representing travel card 
delinquency rates for four entities for the two year period ending 
March 31, 2002. The vertical axis of the graph represents percent from 
0 to 100. The horizontal axis of the graph represents fiscal year 
quarters from FY 2000 third quarter through FY2002 second quarter. 
The four entities depicted are: 
Navy/Marine Corps; 
Army; 
Other DOD; 
Non-DOD civilian. 

Source: Bank of America and General Services Administration data. 

[End of figure] 

We also found substantial charge-offs of Navy travel card accounts. 
Since the inception of the travel charge card task order between DOD 
and Bank of America on November 30, 1998, Bank of America has charged 
off over 13,800 Navy travel card accounts with $16.6 million of bad 
debt. Recent task order modifications allow Bank of America to 
institute a salary offset against DOD military personnel members whose 
travel card accounts were previously charged off or are more than 120 
days past due. As a result, as of July 31, 2002, Bank of America had 
recovered $5.2 million in Navy government travel card bad debts. The 
high level of delinquencies and charge-offs have also cost the Navy 
millions of dollars in lost rebates, higher fees, and substantial 
resources spent pursuing and collecting past due accounts. For example, 
we estimate that in fiscal year 2001, delinquencies and charge-offs 
cost the Navy $1.5 million in lost rebates, and will cost about $1.3 
million in increased automated teller machines (ATM) fees [Footnote 5] 
annually. 

As shown in figure 2, the travel cardholder’s rank or grade [Footnote 
6] (and associated pay) is a strong predictor of delinquency problems. 
We found that the Navy’s overall delinquency and charge-off problems 
are primarily associated with young, low- and mid-level enlisted 
military personnel with basic pay levels ranging from $12,000 to 
$27,000. 

Figure 2: Navy Delinquent and Total Outstanding Travel Card Balances 
for Military and Civilian Employees as of September 30, 2001: 

[See PDF for image] 

This figure is a bar graph that illustrates Navy delinquent and total 
outstanding travel card balances for military and civilian employees as 
of September 30, 2001. The vertical axis of the graph represents 
dollars in millions from 0 to 25. The horizontal axis of the graph 
represents rank or grade. The following data is depicted (amounts are 
approximated): 

E1-3: 
Delinquent: $1 million; 
Total outstanding balances: $2 million. 

E-4-6: 
Delinquent: $4 million; 
Total outstanding balances: $20 million. 

E7-9: 
Delinquent: $1 million; 
Total outstanding balances: $6 million. 

W01-05: 
Delinquent: $0. 
Total outstanding balances: $1 million. 

O1-3: 
Delinquent: $0.5 million; 
Total outstanding balances: $1 million. 

O4-8: 
Delinquent: $0.5 million; 
Total outstanding balances: $6 million. 

O7-10: 
Delinquent: $0; 
Total outstanding balances: $0.3 million. 

Civilian: 
Delinquent: $1 million; 
Total outstanding balances: $15 million. 

Source: GAO analysis of Bank of America data. 

[End of figure] 

According to Navy officials, low- and mid-level enlisted military 
personnel comprise the bulk of the operational forces and are generally 
young, often deployed, and have limited financial experience and 
resources. It is therefore not surprising to see a higher level of 
outstanding balances and delinquent amounts due for these personnel. 
Figure 2 also shows that, in contrast, the delinquency rate for 
civilians employed by the Navy is substantially lower. As of September 
30, 2001, the delinquency rate of low and mid-level enlisted personnel 
was almost 22 percent, compared to a Navy civilian rate of slightly 
more than 5 percent. This rate is comparable to the non-DOD civilian 
delinquency rate of 5 percent. 

The case study sites we audited exhibited this pattern. For example, at
Camp Lejeune, a principal training location for Marine air and ground
forces, over one-half of the cardholders are enlisted personnel.
Representative of the Navy’s higher delinquency rate, Camp Lejeune’s
quarterly delinquency rate for the 18-month period ending March 31, 
2002, averaged over 15 percent and was close to 10 percent as of March 
31, 2002. In contrast, at Puget Sound Navy Shipyard, where the mission 
is to repair and modernize Navy ships, civilian personnel earning more 
than $38,000 a year made up 84 percent of total government travel card 
holders and accounted for 86 percent of total fiscal year 2001 travel 
card transactions. This site’s delinquency rate had declined to below 5 
percent as of March 31, 2002. 

In combination with these demographic factors, a weak overall control 
environment, flawed policies and procedures, and a lack of adherence to
valid policies and procedures contributed to the significant 
delinquencies and charge-offs. Further discussion of these breakdowns 
is provided later in this testimony. 

Potentially Fraudulent and Abusive Travel Card Activity: 

Our work identified numerous instances of potentially fraudulent 
[Footnote 7] and abusive activity [Footnote 8] related to the travel 
card. During fiscal year 2001 and the first 6 months of fiscal year 
2002, over 5,100 Navy employees wrote at least one nonsufficient fund 
(NSF), or “bounced” check, to Bank of America as payment for their 
travel card bills. Of these, over 250 [Footnote 9] wrote 3 or more NSF
checks, a potentially fraudulent act. [Footnote 10] Appendix III 
provides a table summarizing 10 examples, along with more detailed 
descriptions of selected cases in which cardholders might have 
committed fraud by writing 3 or more NSF checks to Bank of America. 
These 10 accounts were subsequently charged-off [Footnote 11] or placed 
in salary offset or voluntary fixed payment agreements with Bank of 
America. 

We also found that the government cards were used for numerous abusive
transactions that were clearly not for the purpose of government 
travel. As discussed further in appendix I, we used data mining tools 
to identify transactions we believed to be potentially fraudulent or 
abusive based upon the nature, amount, merchant, and other identifying 
characteristics of the transaction. Through this procedure, we 
identified thousands of suspect transactions. Table 1 illustrates a few 
of the types of abusive transactions and the amounts charged to the 
government travel card in fiscal year 2001 and the first 6 months of 
fiscal year 2002 that were not for valid government travel. Government 
travel cards were used for purchases in categories as diverse as 
legalized prostitution services, jewelry, gentlemen’s clubs, gambling, 
cruises, and tickets to sporting and other events. The number of 
instances and amounts shown includes both cases in which the 
cardholders paid the bills and instances in which they did not pay the 
bills. 

Table 1:Examples of Navy-wide Abusive Travel Card Activity, Fiscal Year 
2001 through March 31, 2002: 

Category: Legalized brothels; 
Examples of vendors: James Fine Dining, Chicken Ranch; 
Number of transactions: 80; 
Dollar amount: $13,250. 

Category: Jewelry; 
Examples of vendors: Kay Jewelers, Zales Jewelers; 
Number of transactions: 199; 
Dollar amount: 20,800. 

Category: Gentlemen’s clubs; 
Examples of vendors: Spearmint Rhino, Mr. Magoo’s Lounge, Cheetah’s 
Lounge; 
Number of transactions: 247; 
Dollar amount: 28,700. 

Category: Gambling, including Internet; 
Examples of vendors: www.proccy2, Seinpost Holding, GCA (cash advance); 
Number of transactions: 80; 
Dollar amount: 34,250. 

Category: Cruises; 
Examples of vendors: Carnival, Disney, Norwegian, Princess; 
Number of transactions: 72; 
Dollar amount: 38,300. 

Category: Entertainment (sporting events, theatre, concerts); 
Examples of vendors: NY Yankees, LA Lakers, Atlanta Braves, Phantom of 
the Opera, other Ticketmaster purchases; 
Number of transactions: 502; 
Dollar amount: 71,400. 

Source: GAO analysis of Bank of America data. 

[End of table] 

We found that 50 cardholders used their government travel card to
purchase over $13,000 in prostitution services from two legalized 
brothels in Nevada. Charges were processed by these establishments’ 
merchant bank, and authorized by Bank of America, in part because a 
control afforded by the merchant category code (MCC), [Footnote 12] 
which identifies the nature of the transactions and is used by DOD and 
other agencies to block improper purchases, was circumvented by the 
establishments. In these cases, the transactions were coded to appear 
as restaurant and dining or bar charges. For example, the merchant 
James Fine Dining, which actually operates as a brothel known as Salt 
Wells Villa, characterizes its services as restaurant charges, which 
are allowable and not blocked by the MCC control. According to one 
assistant manager at the establishment, this is done to protect the 
confidentiality of its customers. Additionally, the account balances 
for 11 of the 50 cardholders purchasing services from these 
establishments were later charged off or put into salary offset. For 
example, one sailor, an E-2 seaman apprentice, charged over $2,200 at 
this brothel during a 30-day period. The sailor separated from the 
Navy, and his account balance of more than $3,600 was eventually 
charged off. 

We also found instances of abusive travel card activity where Navy 
cardholders used their cards at establishments such as gentlemen’s 
clubs, which provide adult entertainment. Further, these clubs were 
used to convert the travel card to cash by supplying cardholders with 
actual cash or “club cash” [Footnote 13] for a 10 percent fee. For 
example, we found that an E-5 second class petty officer circumvented 
ATM cash withdrawal limits [Footnote 14] by charging, in a single 
transaction, $2,420 to the government travel card and receiving $2,200 
in cash. Subsequently, the club received payment from Bank of America 
for a $2,420 restaurant charge. Another cardholder, an E-7 chief petty 
officer, obtained more than $7,000 in cash from these establishments. 
For fiscal year 2001 and through March 2002, 137 Navy cardholders made 
charges totaling almost $29,000 at these establishments. 

These transactions represented abusive use of the travel cards that were
clearly unrelated to official government travel. There should be no
misunderstanding by Navy personnel that personal use of the card is not
permitted. In fact, the standard government travel card used by most 
Navy personnel is clearly marked “For Official Government Travel Only” 
on the face of the card. Additionally, upon receipt of their travel 
cards, all Navy cardholders are required to sign a statement of 
understanding that the card is to be used only for authorized official 
government travel expenses. 

However, as part of our statistical sampling results at the three sites 
we audited, we estimated that personal use of the government travel card
ranged from almost 7 percent of fiscal year 2001 transactions at one 
site to over 26 percent at another site. [Footnote 15] As shown in 
appendix V, cardholders who abused the card but paid the bill also used 
the government travel cards for the same transaction types discussed in 
table 1. 

Personal use of the card also increases the risk of charge-offs related 
to abusive purchases, which are costly to the government and the 
taxpayer. Our work found that charged-off accounts included both those 
of (1) cardholders who were reimbursed by the Navy for official travel 
expenses but failed to pay Bank of America for the related charges, 
thus pocketing the reimbursement, and (2) those who used their travel 
cards for personal purchases for which they did not pay Bank of 
America. Appendix IV provides a summary table and supporting narrative 
describing examples of abusive travel card activity where the account 
was charged off or placed in salary offset or voluntary fixed payment 
agreements with Bank of America. 

Furthermore, as detailed by the 10 examples in appendix V, we also found
instances in which cardholders used their travel cards for personal
purposes, but paid their travel card bills when they became due. For
example, an E-5 second class petty officer reservist, whose civilian job
was with the U.S. Postal Service, admitted making phony charges of over
$7,200 to operate his own limousine service. In these transactions, the
sailor used the travel card to pay for bogus services from his own
limousine company during the first few days of the card statement cycle.
By the second day after the charges were posted, Bank of America would
have deposited funds—available for the business’ immediate use—into the
limousine business’ bank account. Then, just before the travel card bill
became due, the limousine business credited the charge back to the
sailor’s government travel card and repaid the funds to Bank of America.
This series of transactions had no impact on the travel card balance, 
yet allowed the business to have an interest-free loan for a period. 
This pattern was continued over several account cycles. Navy officials 
were unaware of these transactions until we brought them to their 
attention and are currently considering what, if any, action should be 
taken against the cardholder. 

Abusive Travel Card Activity Not Consistently Linked to Disciplinary 
Action and Security Clearances: 

We did not always find documented evidence of disciplinary actions taken
by Navy commanders and supervisors against cardholders who wrote NSF
checks or had their accounts charged off or placed in salary offset. Of 
the 57 cardholders fitting these categories that we selected through 
data mining, we did not find any documented evidence that 37 had been
disciplined. For example, a lieutenant commander (O-4) with the Naval 
Air Reserve used his travel card for personal purchases in California 
and frequent personal trips to Mexico. The individual did not pay his 
account when due and was placed in salary offset in October 2001. 
Although the agency program coordinator (APC) responsible for program 
oversight had apprised management of this officer’s abuse of the travel 
card, and had initiated actions to take away the cardholder’s security 
clearance, management had not taken any administrative action against 
this cardholder. In addition, of the 10 individuals who abused the card 
but paid their bills, only 1 was disciplined. Appendixes III, IV, and V 
provide further details of the extent of disciplinary actions taken 
against some of the cardholders we examined. 

In addition, we found that 27 of these same 57 travel cardholders we
examined whose accounts were charged off or placed in salary offset as 
of March 31, 2002, still had active secret or top-secret security 
clearances in August 2002. Some of the Navy personnel holding security 
clearances who have had difficulty paying their travel card bills may 
present security risks to the Navy. DOD rules provide that an 
individual’s finances are one of the factors to be considered in 
whether an individual should be entrusted with a security clearance. 
However, we found that Navy security officials were unaware of these 
financial issues and consequently could not consider their potential 
effect on whether these individuals should continue to receive a 
security clearance. We have referred cases identified from our audit to 
the U.S. Navy Central Adjudication Facility (commonly referred to as 
Navy CAF) for its continued investigation. 

Key Internal Control Breakdowns: 

For fiscal year 2001, we identified significant breakdowns in key 
internal controls over individually billed travel cards. The breakdowns 
stemmed from a weak overall control environment, a lack of focus on 
oversight and management of the travel card program, and a lack of 
adherence to valid policies and procedures. These breakdowns 
contributed to the significant delinquencies and charge-offs of Navy 
employee account balances and potentially fraudulent and abusive 
activity related to the travel card. In contrast, one Navy unit we 
audited with a low average delinquency rate (4 percent) attributed its 
relative success to constant monitoring of delinquencies and to some 
monitoring of inappropriate travel card use. 

We found that in fiscal year 2001, management at the three case study
locations we audited focused primarily on reducing delinquencies. In
general, management placed little emphasis on controls designed to
prevent, or provide for early detection of, travel card misuse. In 
addition, we identified two key overall control environment weaknesses: 
(1) the lack of clear, sufficiently detailed Navy travel card policies 
and procedures and (2) limited internal travel card audit and program 
oversight. First, the units we audited used DOD’s travel management 
regulations (DOD Financial Management Regulation, volume 9, chapter 3) 
as the primary source of policy guidance for management of Navy’s 
travel card program. In many areas, the existing guidance was not 
sufficiently detailed to provide clear, consistent travel management 
procedures to be followed. Second, as recognized in the DOD Inspector 
General’s March 2002 summary report [Footnote 16] on the DOD travel 
card program, “[b]ecause of its dollar magnitude and mandated use, the 
DOD travel card program requires continued management emphasis, 
oversight, and improvement by the DOD. Independent internal audits 
should continue to be an integral component of management controls.” 
However, no internal review report had been issued since fiscal year 
1999 concerning the Navy’s travel card program. 

We found that this overall weak control environment contributed to 
design flaws and weaknesses in a number of management control areas 
needed for an effective travel card program. For example, many problems 
we identified were the result of ineffective controls over issuance of 
travel cards. Although DOD’s policy allows an exemption from the 
requirement to use travel cards for certain groups or individuals with 
poor credit histories, we found that the Navy’s practice was to 
facilitate Bank of America issuing travel cards—with few credit 
restrictions—to all applicants regardless of whether they have a 
history of credit problems. For the cases we reviewed, 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 Navy travel 
card holders included charged-off credit cards, bankruptcies, 
judgments, accounts in collections, and repeated use of NSF checks. 

Also, a key element of internal control, which, if effectively 
implemented, may reduce the risk and occurrence of delinquent accounts, 
is frequent account monitoring by the APC. However, some APCs, who have 
the key responsibility for managing and overseeing travel card holders’ 
activities, were essentially set up to fail in their duties. Some were 
assigned APC responsibilities as collateral duties and given little 
time to perform these duties, while other full-time APCs had 
responsibilities for a large number of cardholders. When an APC is 
unable to focus on managing travel card usage because of the high 
number of cardholders or the extent of other duties, the rate of 
delinquency and potentially abusive and fraudulent transactions is 
adversely affected. For example, at Camp Lejeune, where the delinquency 
rate was over 15 percent, the six APCs we interviewed were given the 
role as “other duty as assigned,” with most spending less than 20 
percent of their available time to perform their APC responsibilities. 

In addition, a lack of management focus and priority on ensuring proper
training for APCs resulted in some APCs being unfamiliar with the
capabilities of Bank of America’s credit card database that would help
them to manage and oversee the travel card program. For example, one
APC did not know that she could access reports that would help identify
credit card misuse and thus enable the responsible supervisors or
commanders to counsel cardholders before they became delinquency
problems. With the large span of control, minimal time allotted to 
perform this duty, and lack of adequate training, we found that APCs 
generally were ineffective in carrying out their key travel card 
program management and oversight responsibilities. 

In contrast, a Navy unit we visited—Patuxent River—showed that constant 
monitoring of delinquency by a knowledgeable APC contributed to a lower 
delinquency rate. The APC at this unit had responsibility for 
approximately 1,200 to 1,500 active travelers monthly, but APC duties
were her only responsibility. The APC informed us that she constantly
monitored the government travel card program. For example, she reviewed 
delinquency reports several times a month to identify and promptly 
alert cardholders and supervisors about the status of delinquent 
accounts. She also told us that less frequently, but still on a monthly 
basis, she monitored transactions in the Bank of America database for 
improper and abusive uses of the card and sent out notices to the 
cardholders and the cardholders’ supervisors if such transactions were 
identified. She also emphasized the use of the split disbursement 
payment process [Footnote 17] (split disbursements) whenever possible. 
Consequently, the delinquency rate for this unit was consistently lower 
than the Navy-wide rate and the civilian agency rate. 

Another area of weakness in internal controls relates to the process 
over the cancellation and/or deactivation of cards in case of death, 
retirement, or separation from the service. These ineffective controls 
allowed continued use of the government travel card for personal 
purposes, which in some instances led to charge-offs, thereby 
contributing to increased costs to the government. For example: 

* In one Navy unit, a cardholder died in October 1999. However, 
ineffective controls over the notification process resulted in the APC 
not being aware that this had occurred. Therefore, the APC did not take 
actions to cancel this individual’s government travel card account. 
Consequently, in October 2000, when the old card was about to expire, 
Bank of America mailed a new card to the address of record. When the 
card was returned with a forwarding address, the bank remailed the card 
and the personal identification number used to activate the card to the 
new address without performing other verification procedures. The card 
was activated in mid-December 2000, and within a month, 81 fraudulent 
transactions for hotel, food, and gas totaling about $3,600 were 
charged to the card. In January 2001, in the course of her monthly 
travel card monitoring, the APC noticed suspicious charges in the 
vicinity of the cardholder’s post-of-duty. The APC took immediate 
action to deactivate the card, thus preventing additional charges from 
occurring. Upon learning of the cardholder’s death from further 
discussion with the cardholder’s unit, the APC immediately reported the 
case to a Bank of America fraud investigator. Investigations revealed 
that a family member of the cardholder might have made these charges. 
No payment was ever made on this account, and the entire amount was 
subsequently charged off. We referred this case to the U.S. Secret 
Service Credit Card Task Force for further investigation and 
potential prosecution. 

* A chief warrant officer (W-3) at Naval Air Systems Command Atlantic
repeatedly used his travel card after his retirement on December 1, 
2000. The cardholder currently works for a private company. The 
cardholder used the government travel card, since his retirement, to 
make charges totaling $44,000 for hotels, car rentals, restaurants, and 
airline tickets. In a number of instances, the cardholder was able to 
obtain the government rate—which can be substantially lower than the 
commercial rate—for lodging in San Diego, Philadelphia, and Cincinnati. 
Because the Navy does not routinely monitor cardholders’ transaction 
reports for abusive activity and because this particular account was 
always paid in full, they did not detect the abusive activity. Bank of 
America data showed that the cardholder’s account was still open in 
early September 2002 and thus available for further charges. 

* In another instance, a mechanic trainee at the Puget Sound Naval 
Shipyard was convicted of a felony conviction for illegal possession of 
a firearm in October 2000 and placed on indefinite suspension by his 
employer in November 2000. However, neither the security office, which 
took action against the employee, nor the office where the individual 
worked notified the APC to cancel or deactivate the cardholder’s 
government travel card account. Following his suspension, the 
cardholder used the government travel card to make numerous cash 
withdrawals and gas purchases totaling almost $4,700. The APC was not 
aware of these abusive charges until the monthly delinquency review 
identified the account as being delinquent. The account balance of 
$1,600 was subsequently charged off in January 2002. Although security 
officers at the Puget Sound Naval Shipyard referred the case to Navy 
CAF in October 2000, our work indicated as of August 2002, the 
suspended employee continued to maintain a secret clearance, despite 
the account charge-off and felony conviction. 

Table 2 summarizes our statistical tests of four key control activities
related to basic travel transaction and voucher processing at three Navy
locations. We concluded that the control was effective if the projected
failure rate was from 0 to 5 percent. If the projected failure rate was 
from 6 to 10 percent, we concluded that the control was partially 
effective. We considered controls with projected failure rates greater 
than 10 percent to be ineffective. 

Table 2: Results of Testing of Key Internal Controls: 

Navy unit: Camp Lejeune, U.S. Marine Forces Atlantic; 
Travel orders are approved prior to travel (Percentage of failure): 11; 
Travel voucher reimbursements are accurate (Percentage of failure): 33; 
Travel vouchers are submitted within 5 days of travel completion 
(Percentage of failure): 11; 
Travel vouchers are paid within 30 days of submission (Percentage of 
failure): 3. 

Navy unit: Patuxent River Air Station, Air Systems Command; 
Travel orders are approved prior to travel (Percentage of failure): 3; 
Travel voucher reimbursements are accurate (Percentage of failure): 35; 
Travel vouchers are submitted within 5 days of travel completion 
(Percentage of failure): 36; 
Travel vouchers are paid within 30 days of submission (Percentage of 
failure): 1. 

Navy unit: Puget Sound Naval Shipyard, Sea Systems Command; 
Travel orders are approved prior to travel (Percentage of failure): 
49[A]; 
Travel voucher reimbursements are accurate (Percentage of failure): 40; 
Travel vouchers are submitted within 5 days of travel completion 
(Percentage of failure): 34; 
Travel vouchers are paid within 30 days of submission (Percentage of 
failure): 1. 

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 
appendix I of this testimony. 

[A] The high failure rate is attributable to management’s failure to 
maintain copies of the original signed travel orders, which were sent 
to the travelers. 

Source: GAO analysis. 

[End of table] 

Although we found significant failure rates at all three case study 
sites for the requirement that vouchers be filed within 5 working days 
of travel completion, this did not have an impact on these units’ 
delinquency rates. However, we found substantial errors in travel 
voucher processing that resulted in both overpayment and underpayment 
of the amount that cardholders should have received for their official 
travel expenses. At times, these errors were substantial in comparison 
with the total voucher amounts. For example, we found data entry errors 
that resulted, in one case, in an overpayment of more than $1,700 to 
the traveler. In another case, failure to carefully scrutinize 
supporting documentation resulted in an overpayment to a traveler of 
more than $1,000 for cell phone calls, for which the traveler did not 
submit detailed documentation to support what were claimed to be calls 
made for business purposes. As a result of our work, the Navy unit has 
taken actions to recover these overpayments. 

Corrective Actions: 

DOD has taken a number of actions focused on reducing delinquencies. 
For example, the Department of the Navy had established a goal of a
delinquency rate of no more than 4 percent. [Footnote 18] Beginning in 
November 2001, DOD implemented a system of wage and retirement payment 
offset for many employees. It also began encouraging the use of split
disbursements—a payment process by which cardholders elect to have all
or part of their reimbursements sent directly to Bank of America. This
payment method is a standard practice of many private sector employers.
Although split disbursements have the potential to significantly reduce
delinquencies, this payment process is strictly voluntary at DOD.
According to Bank of America, split disbursements accounted for 30
percent of total payments made by Navy employees in June 2002. This rate
represented a large increase over fiscal year 2001, when only 16 
percent of Navy payments were made through split disbursements. As a 
result of these actions, the Navy experienced a significant drop in 
charged-off accounts in the first half of fiscal year 2002. 

The Navy has also initiated actions to improve the management of travel
card usage. The Navy has a three-pronged approach to address travel card
issues: (1) provide clear procedural guidance to APCs and travelers,
available on the Internet, (2) provide regular training to APCs, and (3)
enforce proper use and oversight of the travel card through data mining 
to identify problem areas and abuses. Further, to reduce the risk of 
card misuse, the Navy has also begun to deactivate cards while 
travelers are not on travel status and close a number of inactive 
cards, and plans to close inactive cards semi-annually to eliminate 
credit risk exposure. The Navy is also pursuing the use of “pre-funded” 
debit or stored value cards for high-risk travelers—funds would be 
available on the cards when travel orders were issued in an amount 
authorized on the order. 

Further, the DOD Comptroller created a DOD Charge Card Task Force to
address management issues related to DOD’s purchase and travel card
programs. We met with the task force in June 2002 and provided our
perspectives on both programs. The task force issued its final report on
June 27, 2002. To date, many of the actions that DOD has taken primarily
address the symptoms rather than the underlying causes of the problems
with the program. Specifically, actions to date have focused on dealing
with accounts that are seriously delinquent, which are “back-end” or
detective controls rather than preventive controls. To effectively 
reform the travel program, DOD and the Navy will need to work to prevent
potentially fraudulent and abusive activity and severe credit problems 
with the travel card. We are encouraged that the DOD Comptroller 
recently took action to deactivate the travel cards of all cardholders 
who have not been on official government travel within the last 6 
months. However, additional preventive solutions are necessary if DOD 
is to effectively address these issues. 

To that end, we will be issuing a related report in this area with 
specific recommendations, including a number of preventive actions 
that, if effectively implemented, should substantially reduce 
delinquencies and potentially fraudulent and abusive activity related 
to Navy travel cards. For example, we plan to include recommendations 
that will address actions needed in the areas of exempting individuals 
with histories of financial problems from the requirement to use a 
travel card; providing sufficient infrastructure to effectively manage 
and provide day-to-day monitoring of travel card activity related to 
the program; deactivating cards when employees are not on official 
travel; taking appropriate disciplinary action against employees who 
commit fraud or abuse of the travel card; ensuring that information on 
travel card fraud or abuse of cardholders with secret or top-secret 
security clearances is provided to appropriate security officials for 
consideration in whether such clearances should be suspended or 
revoked; and moving towards mandating use of the split disbursement 
payment process. The defense authorization bill for fiscal year 2003 
passed by the Senate reflected a move in this direction. This bill 
would change the voluntary use of split disbursements 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 September 12, 2002, the bill (H.R.
4546) was in conference. 

Mr. Chairman, Members of the Subcommittee, and Senator Grassley, this
concludes my prepared statement. I would be pleased to respond to any
questions that you may have. 

Contact and Acknowledgments: 

For further information regarding this testimony, please contact Gregory
D. Kutz at (202) 512-9505 or kutzg@gao.gov or John J. Ryan at (202) 512-
9587 or ryanj@gao.gov. 

[End of section] 

Appendix I: Scope and Methodology: 

We used as our primary criteria applicable laws and regulations, 
including the Travel and Transportation Reform Act of 1998, [Footnote 
19] the General Services Administration’s Federal Travel Regulation, 
[Footnote 20] and the DOD Financial Management Regulations, Volume 9, 
Travel Policies and Procedures. We also used as criteria our Standards 
for Internal Control in the Federal Government [Footnote 21] and our 
Guide to Evaluating and Testing Controls Over Sensitive Payments. 
[Footnote 22] To assess the management control environment, we applied 
the fundamental concepts and standards in our internal control 
standards to the practices followed by management at our three case 
study locations. 

To assess the magnitude and impact of delinquent and charged-off 
accounts, we compared the Navy’s delinquency and charge-off rates to
those of other DOD services and agencies and federal civilian agencies. 
We also analyzed the trends in the delinquency and charge-off data from 
the third quarter of fiscal year 2000 through the first half of fiscal 
year 2002. In addition, we obtained and analyzed Bank of America data 
to determine the extent to which Navy travel card holders wrote NSF 
checks to pay their travel card bills. We also obtained documented 
evidence of disciplinary action against cardholders with accounts that 
were in charge-off or salary offset status or had NSF checks written in 
payment of those accounts. We accepted hard copy file information and 
verbal confirmation by independent judge advocate general officials as 
documented evidence of disciplinary action. 

We also used data mining to identify Navy individually billed travel 
card transactions for audit. Our data mining procedures covered the 
universe of individually billed Navy travel card activity during fiscal 
year 2001 and the first 6 months of fiscal year 2002, and identified 
transactions that we believed were potentially fraudulent or abusive. 
However, our work was not designed to identify, and we did not 
determine, the extent of any potentially fraudulent or abusive activity 
related to the travel card. 

To assess the overall control environment for the travel card program 
at the Department of the Navy, we obtained an understanding of the 
travel process, including travel card management and oversight, by 
interviewing officials from the Office of the Undersecretary of Defense 
(Comptroller), Department of the Navy, Defense Finance and Accounting 
Service (DFAS), Bank of America, and the General Services 
Administration, and by reviewing applicable policies and procedures and 
program guidance they provided. We visited three Navy units to “walk 
through” the travel process, including the management of travel card 
usage and delinquency, and the preparation, examination, and approval 
of travel vouchers for payment. 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. 

To test the implementation of key controls over individually billed Navy
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 Navy travel card transactions to
review random samples of transactions at three Navy locations. Because
our objective was to test controls over travel card expenses, we 
excluded credits and miscellaneous debits (such as fees) from the 
population of transactions used to select a random sample of travel 
card transactions to audit at each of the three Navy case study units. 
Each sampled transaction was subsequently weighted in the analysis to 
account statistically for all charged transactions at each of the three 
units, including those that were not selected. 

We selected three Navy locations for testing controls over travel card
activity based on the relative amount of travel card activity at the 
three Navy commands and at the units under these commands, the number 
and percentage of delinquent accounts, and the number and percentage of
charged-off accounts. Each of the units within the commands was selected
because of the relative size of the unit within the respective command. 

Table 3 presents the sites selected and the universe of fiscal year 2001
transactions at each location.[Footnote 23]: 

Table 3: Universe of Fiscal Year 2001 Travel Transactions at Navy Units 
Tested: 

Navy unit tested: Camp Lejeune, U.S. Marine Forces Atlantic; 
Number of fiscal year 2001 travel transactions[A]: 14,209; 
Dollar value of fiscal year 2001 travel transactions[A]: $1,747,316. 

Navy unit tested: Patuxent River Air Station, Air Systems Command; 
Number of fiscal year 2001 travel transactions[A]: 179,547; 
Dollar value of fiscal year 2001 travel transactions[A]: $20,335,864. 

Navy unit tested: Puget Sound Naval Shipyard, Sea Systems Command; 
Number of fiscal year 2001 travel transactions[A]: 80,583; 
Dollar value of fiscal year 2001 travel transactions[A]: $11,025,669. 

[A] Transactions represent charges for sales and cash advances and 
exclude credits and fees. 

Source: GAO analysis based on Bank of America data. 

[End of table] 

We performed tests on statistical samples of travel card transactions at
each of the three case study sites to assess whether the system of 
internal control over the transactions was effective, as well as to 
provide an estimate, by unit, of the percentage of transactions that 
were not for official government travel. For each transaction in our 
statistical sample, we assessed whether (1) there was an approved 
travel order prior to the trip, (2) the travel voucher payment was 
accurate, (3) the travel voucher was submitted within 5 days of the 
completion of travel, and (4) the travel voucher was paid within 30 
days of 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, can be projected to the population of 
transactions at the respective test case study site only, [Footnote 24] 
not to the population of travel card transactions for all Navy 
cardholders. Table 4 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 4: Estimate of Fiscal Year 2001 Transactions That Failed Control 
Tests for Approved Travel: 

Navy unit tested: Camp Lejeune; 
Approved travel order, Number of failed Transactions: 11 of 96; 
Approved travel order, Estimated failure rate (95% confidence 
interval): 11.5% (5.9%, 19.6%). 

Navy unit tested: Patuxent River Air Station; 
Approved travel order, Number of failed Transactions: 3 of 96; 
Approved travel order, Estimated failure rate (95% confidence 
interval): 3.1% (0.6%, 8.9%). 

Navy unit tested: Puget Sound Naval Shipyard; 
Approved travel order, Number of failed Transactions: 47 of 96; 
Approved travel order, Estimated failure rate (95% confidence 
interval): 49.0% (38.6%, 59.4)%. 

Source: GAO analysis. 

[End of table] 

Table 5 shows the results of our test for effectiveness of controls in 
place over the accuracy of travel voucher payments. 

Table 5: Estimate of Fiscal Year 2001 Transactions that Failed Control 
Tests for Accurate Travel Voucher Payments: 

Navy unit tested: Camp Lejeune; 
Effective voucher review and accurate reimbursement to traveler, Number 
of failed transactions: 14 of 43; 
Effective voucher review and accurate reimbursement to traveler, 
Estimated failure rate (95% confidence interval): 32.6% (19.1%, 48.5%). 

Navy unit tested: Patuxent River Air Station; 
Effective voucher review and accurate reimbursement to traveler, Number 
of failed transactions: 34 of 96; 
Effective voucher review and accurate reimbursement to traveler, 
Estimated failure rate (95% confidence interval): 35.4% (25.9%, 45.8%). 

Navy unit tested: Puget Sound Naval Shipyard; 
Effective voucher review and accurate reimbursement to traveler, Number 
of failed transactions: 38 of 96; 
Effective voucher review and accurate reimbursement to traveler, 
Estimated failure rate (95% confidence interval): 39.6% (29.8%, 50.1%). 

Source: GAO analysis. 

[End of table] 

Table 6 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. 

Table 6: Estimate of Fiscal Year 2001 Transactions that Failed Control 
Tests for Timely Submission and Processing of Travel Vouchers: 

Navy unit tested: Camp Lejeune; 
Timely voucher submission by employee (5-day rule),Number of failed 
transactions: 11 of 96; 
Timely voucher submission by employee (5-day rule),Estimated failure 
rate (95% confidence interval): 11.5% (5.9%, 19.6%); 
Timely reimbursement to the traveler (30-day rule), Number of failed 
transactions: 3 of 96; 
Timely reimbursement to the traveler (30-day rule), Estimated failure 
rate (95% confidence interval): 3.1% (0.6%, 8.9%). 

Navy unit tested: Patuxent River Air Station; 
Timely voucher submission by employee (5-day rule),Number of failed 
transactions: 35 of 96; 
Timely voucher submission by employee (5-day rule),Estimated failure 
rate (95% confidence interval): 36.5% (26.9%, 46.9%); 
Timely reimbursement to the traveler (30-day rule), Number of failed 
transactions: 1 of 96; 
Timely reimbursement to the traveler (30-day rule), Estimated failure 
rate (95% confidence interval): 1.0% (0.03%, 5.7%). 

Navy unit tested: Puget Sound Naval Shipyard; 
Timely voucher submission by employee (5-day rule),Number of failed 
transactions: 33 of 96; 
Timely voucher submission by employee (5-day rule),Estimated failure 
rate (95% confidence interval): 34.4% (25.0%, 44.8%); 
Timely reimbursement to the traveler (30-day rule), Number of failed 
transactions: 1 of 96; 
Timely reimbursement to the traveler (30-day rule), Estimated failure 
rate (95% confidence interval): 1.0% (0.03%, 5.7%). 

Source: GAO analysis. 

[End of table] 

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 DOD managers, Navy managers, including the Assistant
Secretary of the Navy (Financial Management and Comptroller) officials,
unit commanders, and APCs; and Bank of America officials on the details 
of our audit, including our findings and their implications. We
incorporated their comments where appropriate. We did not audit the
general or application controls associated with the electronic data
processing of Navy travel card transactions. We conducted our audit work
from January 2002 through September 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. Following this 
testimony, we plan to issue a report, which will include 
recommendations to DOD and the Navy for improving internal controls 
over travel card activity. 

[End of section] 

Appendix II: Navy Personnel Grade, Rank, and Associated Basic Pay 
Rates: 

Tables 7, 8, and 9 show the grade, rank (where relevant), and the
associated basic pay rates for fiscal year 2001 for the Navy’s and 
Marine Corp’s military personnel and civilian personnel. 

Table 7: Navy Military Grades, Ranks, and Associated Basic Pay Rates 
for Fiscal Year 2001: 

Military grade, Enlisted personnel: E-1 to E-3; 
Military rank: Seaman recruit to seaman; 
Fiscal year 2001 pay: $11,976 to $14,973. 

Military grade, Enlisted personnel: E-4 to E-6; 
Military rank: Petty officer 3rd class to 1st class; 
Fiscal year 2001 pay: $17,931 to $26,860. 

Military grade, Enlisted personnel: E-7 to E-9; 
Military rank: Chief petty officer to master chief petty officer; 
Fiscal year 2001 pay: $31,739 to $45,514. 

Military grade, Officers[A]: WO-2 to WO-4; 
Military rank: Warrant officer; 
Fiscal year 2001 pay: $37,722 to $53,514. 

Military grade, Officers[A]: O-1 to O-3; 
Military rank: Ensign to lieutenant; 
Fiscal year 2001 pay: $27,398 to $44,649. 

Military grade, Officers[A]: O-4 to O-6; 
Military rank: Lieutenant commander to captain; 
Fiscal year 2001 pay: $54,476 to $83,982. 

Military grade, Officers[A]: O-7 to O-10; 
Military rank: Admiral; 
Fiscal year 2001 pay: $98,257 to $127,695. 

[A] Officers’ ranks include warrant officers (denoted by WO) and 
commissioned officers (denoted by O). 

Source: U.S. Navy. 

[End of table] 

Table 8: Marine Corp Military Grades, Ranks, and Associated Basic Pay 
Rates for Fiscal Year 2001: 

Military grade, Enlisted personnel: E-1 to E-3; 
Military rank: Private to lance corporal; 
Fiscal year 2001 pay: $11,871 to $15,093. 

Military grade, Enlisted personnel: E-4 to E-6; 
Military rank: Corporal to staff sergeant; 
Fiscal year 2001 pay: $17,675 to $26,018. 

Military grade, Enlisted personnel: E-7 to E-9; 
Military rank: Gunnery sergeant to sergeant major or master gunnery 
sergeant; 
Fiscal year 2001 pay: $31,533 to $46,646. 

Military grade, Officers[A]: WO-2 to WO-4; 
Military rank: Warrant officer; 
Fiscal year 2001 pay: $32,098 to $59,587. 

Military grade, Officers[A]: O-1 to O-3; 
Military rank: 2nd lieutenant to captain; 
Fiscal year 2001 pay: $25,653 to $45,120. 

Military grade, Officers[A]: O-4 to O-6; 
Military rank: Major, lieutenant colonel, and colonel; 
Fiscal year 2001 pay: $56,951 to $85,628. 

Military grade, Officers[A]: O-7 to O-10; 
Military rank: General; 
Fiscal year 2001 pay: $98,484 to $130,200. 

[A] Officers’ ranks include warrant officers (denoted by WO) and 
commissioned officers (denoted by O). 

Source: U.S. Navy. 

[End of table] 

Table 9: Navy Civilian Grades and Associated Basic Pay Rates for Fiscal 
Year 2001: 

Civilian grade, General schedule employees: GS-1 to GS-3; 
Fiscal year 2001 pay: $16,181 to $20,093. 

Civilian grade, General schedule employees: GS-4 to GS-5; 
Fiscal year 2001 pay: $22,559 to $25,241. 

Civilian grade, General schedule employees: GS-6 to GS-8; 
Fiscal year 2001 pay: $28,131 to $34,625. 

Civilian grade, General schedule employees: GS-9 to GS-12; 
Fiscal year 2001 pay: $38,240 to $55,455. 

Civilian grade, General schedule employees: GS-13 to GS-15; 
Fiscal year 2001 pay: $65,949 to $91,667. 

Civilian grade, Senior executive service: ES-01 to ES-06; 
Fiscal year 2001 pay: $111,650 to $125,700. 

Note: Basic pay rates shown are the midpoint of the range of pay for 
each grade and does not factor in locality pay received in geographic 
areas with higher cost-of-living. 

Source: Office of Personnel Management. 

[End of table] 

[End of section] 

Appendix III: NSF Checks Written to Bank of America: 

Table 10: Examples of Cases in Which Cardholders Wrote Three or More 
NSF Checks During Fiscal Year 2001 and the First 6 Months of Fiscal 
Year 2002 and Accounts Were Subsequently Charged Off or Referred to 
Salary Offset or Voluntary Fixed Pay Terms: 

Cardholder: 1; 
Total amount (number) of NSF checks: $61,004 (12)
Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): SO — $20,535; 
Grade: E-5; 
Unit: U.S. Pacific Fleet, Honolulu; 
Credit history problems: Multiple bankruptcies and numerous charge-offs 
prior to card issuance; 
Documented disciplinary action: Administrative counseling/warning. 

Cardholder: 2; 
Total amount (number) of NSF checks: 37,150 (15); 

Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): FP — $4,094; 
Grade: E-6; 
Unit: Naval Recruiting, Omaha; 
Credit history problems: Multiple judgments and merchandise repossession
prior to card issuance; 
Documented disciplinary action: None. 

Cardholder: 3; 
Total amount (number) of NSF checks: 23,894 (9); 
Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): SO — $11,310; 
Grade: E-6; 
Unit: U.S. Marine Corps, Marine Aircraft Group 12, Japan; 
Credit history problems: Charged-off and referral to collection prior 
to card issuance; one account in collection and one charged off prior 
to card issuance; 
Documented disciplinary action: Dishonorable discharge for misconduct 
directly related to travel card misuse. 

Cardholder: 4. 
Total amount (number) of NSF checks: 22,873 (11); 
Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): CO — $2,579; 
Grade: E-4; 
Unit: U.S. Transportation Command, Illinois; 
Credit history problems: None prior to card issuance; 
Documented disciplinary action: Prosecution pending for travel card 
misuse and absence without leave. 

Cardholder: 5; 
Total amount (number) of NSF checks: 20,052 (9); 
Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): CO — $4,589; account in SO; 
Grade: E-5; 
Unit: Mobile Inshore Undersea Warfare, San Jose; 
Credit history problems: Charged-off account prior to card issuance; 
delinquencies since card issuance; 
Documented disciplinary action: None; promotion to E-6 after charge-off;
pending investigation for desertion, theft and issuance of NSF checks. 

Cardholder: 6; 
Total amount (number) of NSF checks: 18,148 (13); 
Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): CO — $7,229; 
Grade: GS-11; 
Unit: Navy Inventory Control Point – Mechanicsburg; 
Credit history problems: Bankruptcies and charge-offs prior to card 
issuance; delinquencies since card issuance; 
Documented disciplinary action: None; cardholder retired. 

Cardholder: 7; 
Total amount (number) of NSF checks: 10,908 (16); 
Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): CO — $1,381; 
Grade: E-5; 
Unit: Navy Seals, San Diego; 
Credit history problems: None prior to card issuance; delinquencies 
since card issuance; 
Documented disciplinary action: Administrative action related to travel 
card abuse; honorable discharge. 

Cardholder: 8; 
Total amount (number) of NSF checks: 8,231 (6); 
Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): SO — $4,530; account paid off Sept. 2002; 
Grade: E-8; 
Unit: U.S. Marine Corps, Camp Lejeune; 
Credit history problems: Charged-off account prior to card issuance; 
Documented disciplinary action: Counseling; article 15 pending for 
credit card misuse. 

Cardholder: 9; 
Total amount (number) of NSF checks: 5,785 (4); 
Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): CO — $4,923l 
Grade: E-4; 
Unit: Navy and Marine Corps Reserve Center, Bessemer; 
Credit history problems: Bankruptcies and judgment prior to card 
issuance; serious delinquencies since card issuance; 
Documented disciplinary action: None. 

Cardholder: 10; 
Total amount (number) of NSF checks: 3,250 (12); 
Total amount charged-off (CO), in salary offset (SO) or voluntary fixed 
pay (FP): CO — $5,347; account in FP; 
Grade: E-4; 
Unit: Naval Air Warfare Center, Patuxent River; 
Credit history problems: Bankruptcy and charged-off account prior to 
card issuance; delinquencies since card issuance; 
Documented disciplinary action: None. 

Note: NSF includes those accounts with nonsufficient funds, closed 
accounts, stop payment orders, and those accounts not located. 

Source: GAO analysis. 

[End of table] 

The 10 cardholders in table 10 wrote a total of 107 checks that were
returned by Bank of America because they were NSF, drawn on closed
accounts, and/or had payments stopped for other reasons. These checks
totaled over $211,000. Eight of the 10 cardholders had significant 
credit problems prior to card issuance, such as charged-off multiple
bankruptcies, charged-off credit card accounts, accounts in collection, 
and serious delinquencies. Two of the cardholders did not have credit
problems prior to card issuance, one of which, experienced serious
financial problems after issuance of the Bank of America travel card. 
The following provides detailed information on some of these cases. 

* Cardholder #1 was a petty officer second class with the U.S. Pacific 
Fleet in Honolulu. The cardholder wrote 12 NSF checks totaling more than
$61,000 for payment on his Bank of America travel card account. These
checks were written partly to cover charges incurred while on official
travel, but records showed that the cardholder made many more charges
at convenience stores, restaurants, gas stations, and travel agencies 
in the vicinity of his hometown. An examination of the cardholder’s 
credit history also revealed that, prior to receiving his government 
travel card in May 2000, the cardholder filed multiple bankruptcies and 
had multiple charge-offs. Despite his financial history, the cardholder 
was issued a standard card, with a credit limit of $5,000, instead of a 
restricted card with a lower credit limit. 

From March 2001 through December 2001, the cardholder wrote about one
NSF check a month, with three of these NSF checks totaling more than
$12,500 written in the month of December 2001 alone. Industry 
regulations require that an account be credited immediately upon 
receipt of a check. Consequently, when Bank of America posted the NSF 
checks, the accounts appeared to have been paid, which provided credit 
to the cardholder to make additional purchases. Thus, by writing NSF 
checks, and submitting NSF payments over the phone, which Bank of 
America had to credit to his travel card account, the petty officer was 
able to, in effect, increase his credit limit to more than $20,000—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. However, despite the repeated NSF checks written 
throughout 2001, the individual was able to continue making charges 
through December 2001. 

Bank of America subsequently notified the cardholder’s APC of the NSF
check problems. Because the cardholder was considered a good sailor, he
was given administrative counseling for potential fraud and abuses 
related to his travel card. The terms of the administrative counseling 
specified that the cardholder would face a court-martial and be 
separated from the Navy in case of continued abuse of the credit card 
or any other misconduct. 

* Cardholder #5 is a petty officer (E-05) assigned to the Naval Reserve
Forces in San Jose. Prior to receiving the Bank of America travel card 
in June 2000, the individual had a number of unpaid accounts with other
creditors. The individual was given a restricted card with a credit 
limit of $2,000, which should have been issued in “inactive” status and 
only activated when needed for travel. However, records showed that the
cardholder was able to make about 130 separate purchases and ATM
transactions in the vicinity of his hometown while not on official 
travel. These transactions totaled more than $5,000. In addition, from 
September 2000 through December 2001, the cardholder wrote eight NSF 
checks and one stop payment check totaling $20,051 to Bank of America. 
During fiscal year 2001, not a single valid payment was made to the 
Bank of America for this account. The cardholder had an unpaid balance 
of $4,922 at the time his account was charged off in July 2002. The 
cardholder also had three other unrelated charge-offs in July 2002. 

We found no documentation that disciplinary actions had been taken
against the cardholder. The APC assigned to the cardholder told us that 
he had received little training for his APC responsibility, which is a 
collateral duty. He recalled advising the cardholder once to pay off 
his travel card balance. Although a Bank of America official informed 
us that access to NSF check information had been available to APCs 
since 2000, the APC said he was not aware of the NSF checks written by 
the cardholder. The APC also informed us that he was not aware that the 
cardholder’s account was charged off until he was notified by Bank of 
America. Despite having his Bank of America account charged-off and 
other financial problems, the cardholder was recently promoted from 
petty officer second class (E-5) to petty officer first class (E-6). 
[Footnote 25] His account had been referred to salary offset. 

[End of section] 

Appendix IV: Abusive Travel Card Activity Where Accounts Were Charged 
Off or Placed in Salary Offset: 

Table 11: Examples of Abusive Travel Card Activity Where Accounts Were 
Charged-Off or Placed in Salary Offset: 

Cardholder: 1; 
Grade: E-5; 
Unit: U.S. Marine Corps Reserve, Camp Lejeune; 
Total amount charged-off (CO) or in salary offset (SO): CO – $19,971; 
Transactions contributing to chargeoff or salary offset: Did not use 
reimbursement to pay travel card charges; numerous large cash 
withdrawals; 
Credit history problems: Account charge-offs, referral to collection 
agency, and other account delinquency prior to card issuance; 
Documented disciplinary action: None; courtmartial being considered. 

Cardholder: 2; 
Grade: E-7; 
Unit: Naval Shore Intermediate Maintenance Activity, Mayport; 
Total amount charged-off (CO) or in salary offset (SO): SO – 11,190; 
Transactions contributing to chargeoff or salary offset: ATM 
withdrawals totaling $15,000 from October 2000 through July 2001; 
nearly $7,000 in cash and other expenses at Platinum Plus and Mr. Magoo 
gentlemen’s clubs; 
Credit history problems: Bankruptcy, account charge-offs and serious 
credit card delinquency prior to card issuance; 
Documented disciplinary action: None. 

Cardholder: 3; 
Grade: E-4; 
Unit: LeMoore Naval Air Station; 
Total amount charged-off (CO) or in salary offset (SO): CO – 8,036; 
Transactions contributing to chargeoff or salary offset: Over $6,250 of 
computer equipment from Best Buy and other Web sites; 
Credit history problems: Numerous unpaid accounts prior to card 
issuance and charge-off on the American Express card; 
Documented disciplinary action: Administrative discharge in lieu of 
court-martial for misuse of the travel card and other offenses. 

Cardholder: 4; 
Grade: O-5; 
Unit: Naval and Marine Corps Reserve Center, Washington, D.C. 
Total amount charged-off (CO) or in salary offset (SO): SO – 5,678; 
Transactions contributing to chargeoff or salary offset: Over $700 
worth of candles and cookware; over $1,400 charged to D.B. 
Entertainment, which owns Baby Dolls and other adult entertainment 
clubs; 
Credit history problems: Numerous account charge-offs, delinquencies, 
and bankruptcy prior to card issuance; 
Documented disciplinary action: None. 

Cardholder: 5; 
Grade: E-3; 
Unit: Marine Forces Reserve, San Diego; 
Total amount charged-off (CO) or in salary offset (SO): CO – 4,041; 
Transactions contributing to chargeoff or salary offset: $3,800 at 
local restaurants and $1,400 in ATM withdrawals over a 2-month period; 
Credit history problems: Serious delinquencies, unpaid accounts, and
referrals to collection agencies prior to card issuance; 
Documented disciplinary action: Court-martialed for misuse of the 
government travel card; appeal ongoing. 

Cardholder: 6; 
Grade: O-6; 
Unit: Naval and Marine Corps Reserve Center, Washington, D.C. 
Total amount charged-off (CO) or in salary offset (SO): CO – 3,511; 
Transactions contributing to chargeoff or salary offset: $2,000 in cash 
withdrawals and nearly $1,500 at local grocery and drug stores; 
Credit history problems: None; 
Documented disciplinary action: None. 

Cardholder: 7; 
Grade: WS-10[A]; 
Unit: Puget Sound Naval Shipyard, Naval Sea Systems Command; 
Total amount charged-off (CO) or in salary offset (SO): CO - 3,243; 
Transactions contributing to chargeoff or salary offset: Numerous 
personal charges, including groceries, gasoline, cash advances, and 
$150 at Bethel Animal Hospital; 
Credit history problems: None prior; serious credit card delinquencies 
and mortgage foreclosure in 2001 and 2002; 
Documented disciplinary action: Removal from employment due to 
unauthorized absence and travel card misuse. 

Cardholder: 8; 
Grade: GS-12; 
Unit: Naval Air Systems Command, Patuxent River; 
Total amount charged-off (CO) or in salary offset (SO): SO – 1,202; 
Transactions contributing to chargeoff or salary offset: Airline 
tickets totaling $608; 
Credit history problems: Serious delinquencies, account charge-offs,
mortgage foreclosure in 2000, bankruptcies prior to and since card 
issuance; 
Documented disciplinary action: None. 

Cardholder: 9; 
Grade: O-05; 
Unit: Marine Forces Reserve, New Orleans; 
Total amount charged-off (CO) or in salary offset (SO): SO – 1,674; 
Transactions contributing to chargeoff or salary offset: Car rental 
transactions and numerous charges at local restaurants; 
Credit history problems: Serious delinquencies prior to and since card
issuance; 
Documented disciplinary action: None. 

Cardholder: 10; 
Grade: E-06; 
Unit: U.S. Marine Corps, Camp Lejeune; 
Total amount charged-off (CO) or in salary offset (SO): CO – 672; 
Transactions contributing to chargeoff or salary offset: Unauthorized 
use of card for charges associated with permanent change of station 
move; 
Credit history problems: Serious delinquency and bad debts at the time 
of card issuance; 
Documented disciplinary action: None. 

[A] Wage supervisors designation used to denote supervisory workers on 
hourly salary. 

Source: GAO analysis. 

[End of table] 

Eight of the 10 cardholders included in table 11 had significant credit
problems prior to card issuance, such as charged-off credit card 
accounts, mortgage foreclosures, bankruptcies, serious delinquencies, 
unpaid accounts, and referrals to collection agencies. One cardholder 
had similar problems subsequent to issuance of the Bank of America 
travel card. 

* Cardholder #1 was a sergeant (E-05) with the U.S. Marine Corps Reserve
assigned at Camp Lejeune. Despite a history of credit problems, which
included several charged-off and delinquent commercial credit accounts,
Bank of America issued the cardholder a standard card, with a credit 
limit of $10,000, in March 2000. The cardholder was deployed to Europe 
in August 2000 and his credit limit was increased to $20,000. Within a 
month of his deployment, the cardholder had charged $10,700 to the card,
including $8,500 in ATM withdrawals. Although the cardholder received
reimbursements for his travel expenses, he failed to settle his account 
in full. In December 2000, the cardholder informed the APC that his 
account was 30 days past due and promised to pay the full outstanding 
balance. He again failed to do so and his account balance of $11,467 
went delinquent in January 2001. The APC did not deactivate the travel 
card account but put the cardholder in “mission critical” status and 
raised the credit limit to $25,000 so the cardholder would have access 
to funds to return to the United States. Consequently, when the account 
was closed on February 8, 2001, the outstanding balance had increased 
to $19,971. The APC admitted to us that he failed to carefully monitor 
this account. No disciplinary action was taken against the cardholder, 
who had returned to civilian life; however, judicial action against the 
cardholder is pending. We have referred this matter to the DOD’s Office 
of Inspector General for appropriate action. 

In addition, our review indicated that the cardholder might have filed a
fraudulent travel voucher in January 2001. This travel voucher claimed
reimbursement for expenses in Germany over the holiday period from late
December 2000 to early January 2001, allegedly for official purposes.
However, Bank of America data showed that the government travel card
belonging to this cardholder was used to make transactions in the 
vicinity of the traveler’s hometown during this holiday period. It 
appeared that the cardholder might have returned to the United States 
for the holiday, yet continued to claim expenses as if he was still in 
Germany, a potentially fraudulent act. 

* Cardholder #3 was a petty officer third class assigned to the LeMoore
Naval Air Station in California. Our review indicated that the 
cardholder had numerous unpaid cable, medical, and communication 
accounts and serious delinquency of more than $5,000 on his personal 
credit card account prior to receiving the travel card. The unit to 
which the cardholder was assigned had a policy of activating the 
government travel card only when a cardholder travels. However, from 
February through April 2001, while not on travel, the cardholder 
purchased over $6,250 worth of electronic and computer equipment from 
Best Buy and various Web sites using the government travel card. The 
cardholder did not pay his balance and thus came to the attention of 
the APC when his name appeared in the delinquency report. Upon 
determining that the cardholder was able to use the card when not on 
travel, the APC contacted Bank of America, which was unable to inform 
the APC as to who had activated the account. The cardholder’s balance 
of more than $8,000 was charged off, and he was granted an 
administrative separation in lieu of a court-martial for offenses 
unrelated to the travel card misuse, including absence without leave, 
making false statements, and stealing government property of less
than $100. 

* Cardholder #4 was a commander (O-05) with the Naval Reserves assigned
to the Naval and Marine Corps Reserve Center in Washington, D.C. Our
review showed that Bank of America issued the cardholder a standard
card in May 2000, although the cardholder’s credit history indicated
serious financial problems before and at the time of card issuance. For
example, in October 1998, the cardholder filed Chapter 7 bankruptcy with
only $37,169 in assets against $542,063 in liabilities. Further, in 
January 2000, right before the Bank of America card was issued, an 
account with a balance of more than $30,000 was charged off. This high-
ranking Navy officer continued, since the issuance of the government 
travel card, a pattern of delinquencies on numerous accounts, and in 
one instance had merchandise repossessed for nonpayment. 

During fiscal year 2001 and the first 3 months of fiscal year 2002, the
cardholder used the government travel card to make numerous personal
transactions. Transactions included more than $1,400 to D.B. 
Entertainment, which owns Baby Dolls Saloon, a gentlemen’s club in
Dallas, and more than $700 to Wearever cookware and Partylite Gifts, a
manufacturer of candles and candle accessories. A delinquency letter was
sent to the cardholder on August 9, 2002, when the account was 120 days
past due; however, no documentation existed to indicate that any action
was taken prior to this date. Although the cardholder had been placed in
salary offset, no other disciplinary action had been taken against the
cardholder. 

[End of section] 

Appendix V: Abusive Travel Card Activity Where Cardholders Paid the 
Bills: 

Table 12 shows cases of travel card use for personal expenses where the
cardholder paid the bill. 

Table 12: Examples of Abusive Travel Card Activity Where the 
Cardholders Paid the Bills: 

Cardholder: 1; 
Unit: PEO Theatre Air and Surface, Naval Sea Systems Command, 
Washington D.C. 
Grade: GS-15; 
Vendor: Seinpost Holdings; 
Amount: Over $23,000 in charges; 
Nature of transaction: 35 transactions for Internet gambling; 
Documented disciplinary action: Written reprimand. 

Cardholder: 2; 
Unit: Mobile Inshore Undersea Warfare, Newport; 
Grade: E-5; 
Vendor: Cardholder’s Limousine Service; 
Amount: $8,622; 
Nature of transaction: Bogus charges of $7,222 to cardholder’s own 
limousine company; 
Documented disciplinary action: None. 

Cardholder: 3; 
Unit: Portsmouth Naval Shipyard; 
Grade: WG-10[A]; 
Vendor: Herbal Life; 
Amount: $6,758; 
Nature of transaction: 17 purchases of vitamins and health supplements; 
Documented disciplinary action: None. 

Cardholder: 4; 
Unit: Naval Undersea Warfare Center, Newport; 
Grade: ND-05[B]; 
Vendor: Carnival Cruise; 
Amount: $3,790; 
Nature of transaction: Alaskan cruise for 2 for 7 nights; 
Documented disciplinary action: None. 

Cardholder: 5; 
Unit: U.S. Naval Academy, Annapolis
Grade: MIDN[C]; 
Vendor: Best Buy; 
Amount: $2,442; 
Nature of transaction: Home electronics; 
Documented disciplinary action: None. 

Cardholder: 6; 
Unit: U.S. Marine Corps, Camp Pendleton; 
Grade: E-07; 
Vendor: United Vacation; 
Amount: $1,326; 
Nature of transaction: United Airlines plane ticket for cardholder’s 
spouse; 
Documented disciplinary action: None. 

Cardholder: 7; 
Unit: U.S. Marine Corps, Camp Pendleton; 
Grade: E-06; 
Vendor: DeAngelo Tax Service; 
Amount: $800; 
Nature of transaction: For preparation of 1997 through 2000 tax 
returns; 
Documented disciplinary action: None. 

Cardholder: 8; 
Unit: Naval Reserves Forces Command, Virginia; 
Grade: E-07; 
Vendor: Ticketmaster; 
Amount: $460; 
Nature of transaction: 4 concert tickets to the Backstreet Boys; 
Documented disciplinary action: None. 

Cardholder: 9; 
Unit: Norfolk Naval Air Station; 
Grade: E-04; 
Vendor: Fredricks of Hollywood; 
Amount: $184; 
Nature of transaction: Women’s lingerie; 
Documented disciplinary action: None. 

Cardholder: 10; 
Unit: Naval Medical Research Center, San Antonio; 
Grade: E-4; 
Vendor: GTEAir; 
Amount: $148; 
Nature of transaction: Airplane telephone call; 
Documented disciplinary action: None. 

[A] Wage grade system used for workers who are on hourly salary. 

[B] Scientific and engineering career path equivalent to GS-14 to GS-
15. 

[C] Midshipmen are cadets in training to become Navy officers. They may 
receive stipends while in college. 

Source: GAO analysis. 

[End of table] 

[End of section] 

Footnotes: 

[1] U.S. General Accounting Office, Purchase Cards: Control Weaknesses 
Leave Two Navy Units Vulnerable to Fraud and Abuse, GAO-01-995T 
(Washington, D.C.: July 30, 2001); Purchase Cards: Control Weaknesses 
Leave Two Navy Units Vulnerable to Fraud and Abuse, GAO-02-32 
(Washington, D.C.: Nov. 30, 2001); and q Purchase Cards: Continued
Control Weaknesses Leave Two Navy Units Vulnerable to Fraud and Abuse, 
GAO-02-506T (Washington, D.C.: Mar. 13, 2002). 

[2] U.S. General Accounting Office, Travel Cards: Control Weaknesses 
Leave Army Vulnerable to Potential Fraud and Abuse, GAO-02-863T 
(Washington, D.C.: July 17, 2002). 

[3] The travel card program includes both individually billed 
accounts—that is, accounts held by and paid by individual cardholders 
based on reimbursement of expenses incurred while on official 
government travel—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. This testimony covers transactions 
charged to individually billed accounts only. 

[4] This program, similar to a garnishment, allows DOD to collect 
amounts owed by payroll deduction. 

[5] For each cash withdrawal at ATMs, cardholders are charged a fee of 
a set amount or percentage of the amount of the withdrawal. 

[6] A more detailed explanation of each of these grades along with 
their associated basic pay rates is provided in appendix II. 

[7] 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. 

[8] 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, thus benefiting personally. In both types of 
activities in which the cardholder did not pay the bill, we considered 
abuses to include those situations in which cardholders’ accounts were 
eventually charged off by Bank of America, or referred to salary offset 
or a fixed pay agreement. 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. 

[9] Of the over 250 cardholders who wrote 3 or more NSF checks, 100 had 
accounts that were eventually charged off or put in salary offset. 

[10] Knowingly writing checks against closed accounts or writing three 
or more NSF checks is potential bank fraud under 18 U.S.C. 1344. 
Further, it is a violation of the Uniform Code of Military Justice 
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. 

[11] Some cardholders whose accounts were charged off have since been 
referred to the salary offset program or entered into fixed payment 
agreement with Bank of America. 

[12] MCCs are established by the banking industry for commercial and 
consumer reporting purposes. Currently, about 800 category codes are 
used to identify the nature of the merchants’ businesses or trades, 
such as airlines, hotels, ATMs, jewelry stores, casinos, gentlemen’s 
clubs, and theatres. 

[13] Club cash is used to tip dancers, waitresses, and bartenders, but 
cannot be exchanged for currency. 

[14] Typically, the ATM limit for a 1-month cycle is set at $500 for a 
standard card and $200 for a restricted card. 

[15] We considered personal use to include (1) any transaction charged 
to the government travel card that was not supported by a valid travel 
order and (2) any transaction for which the Navy was unable to provide 
supporting documentation. The following are the personal use estimates 
for the 3 case study locations: Camp Lejeune, U.S. Marine Forces 
Atlantic, 26.6 percent; Patuxent River Air Station, Air Systems 
Command, 10.8 percent; and Puget Sound Naval Shipyard, Sea Systems 
Command, 6.6 percent. 

[16] Department of Defense Office of Inspector General , Acquisition: 
Summary of DOD Travel Card Program Audit Coverage, D-2002-065 
(Washington, D.C.: Mar. 18, 2002). 

[17] Split disbursement is a payment method by which cardholders elect 
to have all or part of their reimbursements sent directly to Bank of 
America. 

[18] For this delinquency rate calculation, the Navy is using the 
number of delinquent accounts compared to the total number of active 
accounts. The dollar amount method we used to calculate delinquency 
rates is the industry standard and was also used by the DOD Charge Card 
Task Force. 

[19] Travel and Transportation Reform Act of 1998 (Public Law 105-264, 
Oct. 19, 1998) includes requirements that federal employees use federal 
travel charge cards for all payments of expenses of official government 
travel and that employees be reimbursed within 30 days of submitting 
proper travel vouchers. The act also 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. 

[20] Federal Travel Regulation, 41 Code of Federal Regulations, 
chapters 300-304, issued by the Administrator of General Services, 
governs travel and transportation allowances and relocation allowances 
for federal civilian employees. 

[21] Standards for Internal Control in Federal Government (GAO/AIMD-00-
21.3.1) was prepared to fulfill our statutory requirement under 31 
U.S.C. 3512 (c), (d), 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. 

[22] Guide to Evaluating and Testing Controls Over Sensitive Payments 
(GAO/AFMD-8.1.2) provides a framework for evaluating and testing the 
effectiveness of internal controls that have been established in 
various sensitive payment areas. 

[23] The universes 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 used to test travel order, voucher, and payment 
process controls. However, we included such transactions to project the 
percentage of personal use transactions. 

[24] At Camp Lejeune, we found that 38 of 143 transactions appeared to 
be personal (projecting to an estimated 26.6 percent with a 95 percent 
confidence interval from 19.5 percent to 34.6 percent). At Patuxent 
River Air Station, we found that 13 of 120 transactions appeared to be 
personal (projecting to an estimated 10.8 percent with a 95 percent 
confidence interval from 5.9 percent to 17.8 percent). At Puget Sound 
Naval Shipyard, we found that 8 of 121 transactions appeared to be 
personal (projecting to an estimated 6.6 percent with a 95 percent 
confidence interval from 2.9 percent to 12.6 percent). 

[25] Subsequent to his promotion, the cardholder did not report to 
duty. His command is taking action to declare him a deserter. He is 
also a subject of law enforcement agencies’ investigations. 

[End of section] 

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