Travel Cards:

Control Weaknesses Leave Navy Vulnerable to Fraud and Abuse

GAO-03-147: Published: Dec 23, 2002. Publicly Released: Jan 24, 2003.

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Poor oversight and management of DOD's travel card program has led to high delinquency rates, costing DOD millions in lost rebates and increased ATM fees. As a result, the Congress asked GAO to report on (1) the magnitude, impact, and cause of delinquencies, (2) the types of fraudulent and abusive uses of the travel card, and (3) the effectiveness of internal controls over DOD's travel card program. GAO previously reported on travel card management at the Army. This report focuses on travel card management at the Navy, including the Marine Corps.

As of March 31, 2002, over 8,000 Navy cardholders had $6 million in delinquent debt. For the prior 2 years, the Navy's average delinquency rate of 12 percent was nearly identical to that of the Army, which had the highest federal agency delinquency rate. Since November 1998, Bank of America had charged off nearly 14,000 Navy accounts totaling almost $17 million, and placed many more in a salary offset program similar to garnishment. During the period covered under this review, over 250 Navy personnel might have committed bank fraud by writing three or more nonsufficient fund (NSF) checks to Bank of America. In addition, as shown in the table, many cardholders abusively used the card for inappropriate purchases including prostitution and gambling without Navy management being aware of it. Many of these purchases were made when individuals were not on travel. The Navy's overall delinquency and charge-off problems were primarily associated with lower-paid, low-to midlevel enlisted military personnel. A significant relationship also existed between travel card fraud, abuse, and delinquencies and individuals with substantial credit history problems. For example, some cardholders had accounts placed in collections while others had filed bankruptcies prior to receiving the card. The Navy's practice of authorizing issuance of the travel card to virtually anyone who asked for it compounded these problems. We also found inconsistent documented evidence of disciplinary actions against cardholders who wrote NSF checks, or had their accounts charged off or put in salary offset. Further, almost one-half of these cardholders still had, as of August 2002, active secret or top-secret clearances. Other control breakdowns related to the Navy's failure to provide the necessary staffing and training for effective oversight, and infrequent, or nonexistent, monitoring of travel card activities. As a result of these and similar findings in the Army travel card program, the recently enacted fiscal year 2003 Defense Appropriations Act included provisions requiring the Secretary of Defense to establish guidelines and procedures for disciplinary actions and to deny issuance of the travel card to individuals who are not creditworthy.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Under Secretary of Defense should 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.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In response to this recommendation, DOD incorporated the recommendations in GAO reports on travel and purchase cards in the Department of Defense Charge Card Task Force Status Report signed December 18, 2002, referred to within DOD as Management Initiative Decision (MID) 904. MID 904 also provided a mechanism for addressing recommendations in the Navy travel card report, which was issued after MID 904 was released. Specifically, MID 904 transitioned responsibility for implementation and management of the Task Force recommendations from the OUSD(C) Performance and Management Excellence Directorate to the appropriate organizations. DOD established a Senior Steering Group charged with ensuring successful implementation of MID 904 and created Integrated Product Teams (IPT) to create solutions based upon Senior Steering Group strategic direction. GAO staff participation in Air Force purchase card conferences in January and February 2003 and the DOD IPT strategic planning conference on March 21, 2003, confirmed that DOD charge card corrective actions were planned or underway to address all GAO report recommendations, including recommendations in the Navy travel card report. Further, DOD has focused senior management attention on developing appropriate solutions to identified problems, establishing implementation schedules that incorporate actions on GAO audit recommendations, and monitoring corrective actions.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including investigating and, if warranted, taking appropriate disciplinary actions against cardholders who wrote three or more NSF checks to Bank of America.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: In February 2003, the Assistant Secretary of the Navy, Financial Management and Comptroller, responded to our recommendation by directing Navy commands to investigate and, if warranted, take appropriate disciplinary actions against cardholders who wrote three or more non-sufficient fund checks to Bank of America.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including establishing guidance requiring APCs to review EAGLS reports to identify cardholders who have written NSF checks for payment of their account balances, and refer these employees for counseling or disciplinary action.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: In February 2003, the Assistant Secretary of the Navy, Financial Management and Comptroller, announced policy changes to strengthen controls over Navy travel card management. The new policy directed APCs to review the Bank of America's Returned Check Charges Exception Report to identify cardholders who have written NSF checks and report those cases to the individuals' commands for further actions.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including establishing Navy-wide procedures to provide assurance that APCs receive training on their APC responsibilities. The training should include how to use EAGLS transaction reports and other available data to monitor cardholder use of the travel card--for example, reviewing account transaction histories to ascertain whether transactions are incurred during periods of authorized travel and appear to be appropriate travel expenses and are from approved MCCs.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: DOD FMR requires that individuals appointed as APCs have the analytic and computer skills and access necessary to utilize the reports provided on the card provider's electronic system, and that the APCs must be able to have access to and the ability to relate sensitive information to the chain of command for determination of appropriate action. Navy's program oversight requires the APC to use reports available through the custom reporting tool within the bank system to proactively monitor the program. NAVSUP 4200.99 requires that APCs receive initial training as well as refresher training every two years. Also, level III APCs, or their alternate, are required to attend APC conferences. Navy APCs monitor the travel card program for delinquency, credit limit review, and program compliance.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including establishing guidance on APC span-of-control responsibilities so that such responsibilities are properly aligned with time available to ensure effective performance. The Secretary should also determine whether certain APC positions should be staffed on a full-time basis rather than as collateral duties.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: The Department of the Navy eBusiness Operations Office responsible for managing the travel card program issued revised policies and procedures in September 2003 for the travel charge card. The new policy, which has the force and effect of Navy regulations, contains guidelines for the assignment of unit APCs. The new policies and procedures instruct commanders and commanding officers to give consideration to the number of cardholder accounts and the frequency and length of official travel when determining if the APC should be assigned as a full time duty.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including establishing guidance regarding the knowledge, skills, and abilities required to carry out APC responsibilities effectively.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: DOD FMR adds appointment considerations to APC responsibilities. Commanders and supervisors should consider the volume of workload associated with the APC responsibilities in determining how many personnel may be needed to fulfill the associated workload. Other factors, such as the frequency of travel and historic delinquency rate of the organization should be taken into account. Individuals appointed as APCs should have the analytic and computer skills and access necessary to utilize the reports provided on the card provider's electronic system. The APCs must be able to have access to the ability to relate sensitive information to the chain of command for determination of appropriate action. Commanders and supervisors should consider assignment of APC duties to civilian personnel where practical in order to avoid the loss of knowledge of program responsibilities in high turnover military positions.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures governing the issuance of individual travel cards to military and civilian employees, including developing comprehensive, consistent Navy-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.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: Navy developed comprehensive Navy-wide computer-based initial training for cardholders. Navy also issued policies requiring that travel cardholders be provided with training on travel card policy and procedures and cardholder responsibilities at the time of submission of an application for a travel card. The policy requires that the cardholder's Agency Program Coordinator maintain documentation of successful completion of this training. Further, Navy also made cardholder refresher available through video teleconferencing several times a month. This course is also part of the mandatory training for travel cardholders.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures governing the issuance of individual travel cards to military and civilian employees, including evaluating the feasibility of activating and deactivating all cards, regardless of whether they are standard or restricted cards, so that cards are available for use only during the periods authorized by the cardholders' travel orders. At a minimum, this policy should focus on controlling travel card use by "high-risk" enlisted military personnel in the E-1 to E-6 grades.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: In February 2003, the Assistant Secretary of the Navy, Financial Management and Comptroller, issued policy directing applicable major commands to immediately deactivate travel cards for all personnel not scheduled for official travel. These cards are to be activated 10 days before travel is to begin and deactivated immediately upon the conclusion of official travel.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures governing the issuance of individual travel cards to military and civilian employees, including cancelling accounts for current infrequent travelers, as noted in the Charge Card Task Force report, in order to minimize exposure to fraud and abuse.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: On July 19, 2002, the Office of the Under Secretary of Defense Comptroller directed the services to close all government travel credit card accounts that have expired or have not had activity for the 12 months before end of April 2002. In September 2002, the Navy eBusiness Operations Office issued its own directive informing Navy commands that all Navy travel card accounts that meet the criteria in the Comptroller memorandum informing Navy commands that Navy cards meeting the criteria will be closed beginning with the September 17, 2002 cycle. Similarly, the Marine Corps issued its own order on closing accounts of infrequent travelers on September 27, 2002.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures governing the issuance of individual travel cards to military and civilian employees, including developing procedures to periodically evaluate frequency of card usage to identify accounts of infrequent travelers.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: In response, the Navy eBusiness Operations Office, which is responsible for managing the Navy travel card program, developed comprehensive Navy-wide computer-based initial training for cardholders. The Navy eBusiness Operations Office also issued policies requiring that travel cardholders be provided with training on travel card policy and procedures and cardholder responsibilities at the time of submission of an application for a travel card. The policy also requires that the cardholder's Agency Program Coordinator maintain documentation of successful completion of this training. Further, the Navy eBusiness Operations Office also developed refresher cardholder training, available through video teleconferencing, and available several times a month. This course is also part of the mandatory training for travel cardholders.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures governing the issuance of individual travel cards to military and civilian employees, including providing individuals with no prior credit histories with "restricted" travel cards with low credit and ATM limits.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: Effective in 2005, DOD issued an amendment to their FMR that provided that, when requested by the applicant, and as directed by the commander or supervisor, DOD's credit card contractor is to issue a restricted travel card to requestors with low or no credit score. The Navy also adopted operating instructions consistent with this DOD guidance.

    Recommendation: To strengthen the overall control environment and improve internal control for the Navy's travel card program, the Secretary of the Navy should take the following actions.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: The Navy, in conjunction with DOD, has taken actions that substantively address 24 of the 25 recommendations in this report. Consequently, we consider this overall recommendation closed as implemented.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including establishing Navy procedures to develop a data mining program to further facilitate APCs' ability to identify potentially inappropriate transactions for further review.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: OPNAVINST 4650.16, 2 March 2004, establishes policy and procedures for effective management and oversight of the Navy's travel card program. Under this guidance, APCs are responsible for reviewing standard reports in EAGLS specifically designed to help identify travel card misuse or abuse.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including establishing Navy-wide procedures requiring that supervisors and commanders notify APCs of actions taken with respect to delinquent cardholders.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: OPNAVINST 4650.16, dated 2 March 2004, establishes requirements for APCS to obtain and document all cases of abuse and delinquency as well as any disciplinary actions taken to include Non-Judicial Punishment and collection activity. Also, APCs are required to retain the records for 36 months.

    Recommendation: To ensure that travel vouchers are consistently reviewed prior to processing, the Commander of Puget Sound Naval Shipyard should conduct periodic review to assess the effectiveness of the new procedures in reducing the frequency and amount of voucher errors.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: The Navy's Puget Sound Naval Shipyard implemented procedures for the commercial travel office to conduct periodic reviews of shipyard travel voucher data the travel voucher/claims system. Specifically, the shipyard established and implemented procedures for sampling travel voucher data in the travel voucher system for accuracy. In July 2007, the inspector general verified that the shipyard had procedures in place to conduct periodic reviews of the accuracy of travel voucher data in the travel voucher system.

    Recommendation: To ensure that travel vouchers are consistently reviewed prior to processing, the Commander of Puget Sound Navel Shipyard should issue procedures to clearly assign responsibilities for reviewing the accuracy of the travel vouchers.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: Puget Sound Naval Shipyards implemented procedures requiring for the commercial travel office to review the accuracy of draft shipyard personnel travel vouchers before they are submitted for payment. Further, new procedures require the Personnel Support Detachment in Bremerton to verify vouchers are completed properly, authorized, and validated. The Navy IG office verified in July 2007 that these procedures were in place and operating.

    Recommendation: To improve travel voucher accuracy, commanders at each unit should identify causes of the high error rates related to travel voucher review and provide refresher training to ensure that voucher examiners and auditors are informed and can accurately apply travel regulations and updates.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Not Implemented

    Comments: Navy did not provide evidence that they identified the causes of voucher errors Navy-wide and implemented procedural changes to reduce the risk of errors. Recommendation closed & not implemented.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including developing a management plan to ensure that audits of the Navy travel card program are conducted regularly, and the results are reported to senior management.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: On October 1, 2005, the DOD Comptroller issued the Department of Defense Government Charge Card Guidebook for Establishing and Managing Purchase, Travel, and Fuel Card Programs. The Charge Card Guidebook establishes business rules for each program which address many of the weaknesses identified in our audits. For example, the Guidebook mandates direct involvement of senior military leaders and civilian managers and requires them to ensure that effective management controls, including proper separation of duties among personnel, are in place, order investigations when appropriate, and follow up on investigation results. The Guidebook states that management controls should effectively identify, correct, and address fraud, waste, and abuse and it describes key steps in investigations of suspicious activity and provides examples of credit card misuse. In addition, the Guidebook requires periodic audits and risk assessments to identify sources of fraud, waste, and abuse.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including reviewing in conjunction with Bank of America, individuals with APC- level access to EAGLS to limit such access to only those with current APC duties.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: Bank of America security officials 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.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to stengthen controls and disciplinary actions for improper use of the travel card, including developing procedures to identify active cards of separated cardholders, including comparing cardholder and payroll data.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: In February 2003, the Assistant Secretary of the Navy, Financial Management and Comptroller, directed Navy commands to perform periodic reviews to ensure that accounts of separated cardholders are deactivated or closed in a timely manner.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including performing periodic review of exit procedures to determine that accounts of separated cardholders are deactivated or closed in a timely manner.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: In February 2003, the Assistant Secretary of the Navy, Financial Management and Comptroller, directed Navy commands to perform periodic reviews to ensure that accounts of separated cardholders are deactivated or closed in a timely manner.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including strengthening procedures used to process employees separating from the service to ensure that all accounts are deactivated or closed, and repayment of any outstanding debts is arranged.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: In February 2003, the Assistant Secretary of the Navy, Financial Management and Comptroller, responded to our recommendation by issuing new policies directing Navy commands to perform periodic review of active travel card accounts and listings of current employees, to identify open accounts assigned to separated or retired employees, and to take actions to ensure that accounts of separated cardholders are deactivated or closed in a timely manner.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including reviewing records of individuals whose accounts have been charged off or placed in salary offset to determine whether they have been referred to DON CAF for security reviews.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: OPNAVINST 4650.16, 2 March 2004, establishes policy and procedures for effective management and oversight of the Navy's travel card program. APCs are to brief commanding officers at least quarterly on the status of the program using a designated reporting format. Some of the items the APC are to report on include, delinquent cardholder accounts and actions taken to resolve the delinquency, numbers of restricted cards, number and value of delinquent accounts, and number of cards canceled as a result of non-payment or abuse--including the number of personnel on a reduced payment plan and the number on salary offset. The instructions place responsibility for discipline of personnel that abuse the travel card program, to include administrative actions related to any security concerns, on commanders, commanding officers, and officers in charge. Navy's instructions are consistent with DOD's 2005 amendment to the FMR. These actions substantially complete and are consistent with the intent of GAO's recommendation.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including establishing appropriate, consistent Navy-wide procedures as a guide for taking disciplinary actions with respect to fraudulent and abusive activity and delinquency related to the travel card.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: OPNAVINST 4650.16, 2 March 2004, establishes policy and responsibility for effective management and oversight of the Navy's travel card program. The instructions place responsibility for discipline of personnel that abuse the travel card program on commanders, commanding officers, and officers in charge. DOD also issued sample guidelines for disciplinary actions. Furthermore, Navy established policy providing guidance on appropriate disciplinary actions for travelers with abusive activity related to the travel card. Navy's internal controls over the travel account, in conjunction with the DOD guidelines, substantially responds to GAO's recommendation.

    Recommendation: The Secretary of the Navy should establish specific policies and procedures to strengthen controls and disciplinary actions for improper use of the travel card, including establishing a Navy requirement for cognizant APCs to retain records documenting cardholders' fraudulent or abusive use of the travel card.

    Agency Affected: Department of Defense: Department of the Navy

    Status: Closed - Implemented

    Comments: In February 2003, the Assistant Secretary of the Navy, Financial Management and Comptroller, issued new policy directing the APCs to retain records of fraudulent and abusive use of the travel cards. Further, Navy's OPNAVNST 4650.16, dated 2 March 2004, provides that APCs are to retain such records for 36 months.

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