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United States General Accounting Office: 
GAO: 

Report to Congressional Requesters: 

October 2002: 

Travel Cards: 

Control Weaknesses Leave Army Vulnerable to Potential Fraud and Abuse: 

GAO-03-169: 

Contents: 

Letter: 

Results in Brief: 

Army Has Highest Delinquency and Charge-off Rates but Recent Actions 
Have Resulted in Some Improvements: 

Potentially Fraudulent and Abusive Travel Card Activity: 

Weak Overall Control Environment and Ineffective Travel Card Program 
Controls: 

Statistical Tests of Key Control Activities: 

Conclusions: 

Matter for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Background: 

Appendix II: Objectives, Scope, and Methodology: 

Appendix III: Army Major Command Delinquency Rates: 

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

Appendix V: Comments from the Department of Defense: 

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

Table 2: Examples of NSF Checks Written on Charged-off Accounts: 

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

Table 4: Examples of Abusive Activity Where the Cardholders Paid the 
Bill: 

Table 5: Average Ratio of Cardholders to APCs at Army Sites Audited: 

Table 6: Results of Testing of Key Internal Controls: 

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

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

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

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

Table 11: Estimate of Fiscal Year 2001 Transactions That Failed Control 
Tests for Timely Submission and Processing of Travel Vouchers: 

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

Table 13: Army Military Grades, Ranks, and Associated Basic Pay Rates 
for Fiscal Year 2001: 

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

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

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

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

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

Figure 5: The Army Travel Process: 

Figure 6: Travel Card Application: 

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

[End of section] 

United States General Accounting Office: 
Washington, D.C. 20548: 

October 11, 2002: 

The Honorable Charles E. Grassley: 
Ranking Minority Member: 
Committee on Finance: 
United States Senate: 

The Honorable Stephen Horn: 
Chairman: 
The Honorable Janice D. Schakowsky: 
Ranking Minority Member: 
Subcommittee on Government Efficiency, Financial Management and 
Intergovernmental Relations: 
Committee on Government Reform: 
House of Representatives: 

On July 17, 2002, we testified [Footnote 1] before the Subcommittee on 
Government Efficiency, Financial Management, and Intergovernmental 
Relations, House Committee on Government Reform, on the results of our 
audit of internal controls over travel activity associated with about 
430,000 individually billed Army travel card accounts, and $619 million 
in related travel card charges for fiscal year 2001. The individually 
billed travel card program is significantly different from the purchase 
card program in that the cardholder is directly responsible for all 
charges incurred on his or her travel card account and the monthly bill 
is sent to the cardholder for payment. The cardholder is responsible 
for submitting a properly documented voucher and is reimbursed by the 
Army for all valid expenses related to official government travel. In 
contrast, all purchase card charges are billed directly to the 
government for monthly payment. The intent of the travel card program 
was to improve convenience for the traveler and to reduce the 
government’s costs of administering travel. Appendix I provides 
additional background information on the Army’s travel card program. 

This work was performed in response to your request for a comprehensive
examination of the Department of Defense’s (DOD) and the military 
services’ purchase and travel card programs. This report provides 
details and results of our Army travel card audit, which was summarized 
in our recent testimony. 

The objectives of our audit of the Army’s travel card program were to
determine (1) the reported magnitude and impact of delinquent and
charged-off Army travel card accounts for fiscal year 2001 and the 
first 6 months of fiscal year 2002, along with an analysis of related 
causes and DOD and Army corrective actions, (2) whether indications 
existed of potentially fraudulent and abusive activity [Footnote 2] 
related to the Army travel card during fiscal year 2001, and (3) the 
effectiveness of the overall control environment and key internal 
controls for the Army’s travel program. We analyzed the Army’s account 
delinquency and charge-off information and compared it to non-Army DOD 
components and other federal agencies. In addition, we evaluated the 
adequacy of selected, specific internal control policies, procedures, 
and activities at four Army installations, representing 3 of the Army’s 
13 major commands. 

We selected the four installations we audited based on the relative 
amount of travel card activity, the number and percentage of accounts 
past due, and the number and percentage of accounts charged off. For 
these installations, we tested a statistical sample of travel card 
transactions and conducted other audit work to evaluate the design and 
implementation of key internal control procedures and activities. Our 
statistical sample test results can be projected only to the individual 
installations where we performed the testing and cannot be projected to 
the command level or to the Army as a whole. Through auditing travel 
card transactions at the four installations and data mining of fiscal 
year 2001 transactions incurred by units throughout the Army, we 
identified numerous examples of potentially fraudulent and abusive 
travel card activity. However, our work was not designed to identify, 
and we cannot determine, the extent of potentially fraudulent and 
abusive activity. 

We conducted our audit work from December 2001 through July 2002 in
accordance with U.S. generally accepted government auditing standards,
and we performed our investigative work in accordance with standards
prescribed by the President’s Council on Integrity and Efficiency. We
received comments on a draft of this report from the Under Secretary of
Defense (Comptroller) dated September 30, 2002. We addressed DOD’s
comments in the “Agency Comments and Our Evaluation” section and
reprinted them in appendix V. See appendix II for details on our scope 
and methodology. 

Results in Brief: 

For fiscal year 2001, the Army had significant breakdowns in key 
internal controls over individually billed travel cards. These 
breakdowns contributed to the significant delinquencies and charge-offs 
of Army employee account balances and potentially fraudulent and 
abusive activity related to the travel card. The breakdowns resulted 
primarily from a weak overall control environment, flawed policies and 
procedures, and a lack of adherence to valid policies and procedures. 

We found substantial delinquencies and charge-offs of Army travel card
accounts during fiscal year 2001, and delinquencies continued into the 
first half of fiscal year 2002. Upon receipt of their travel cards, all 
cardholders are required to sign a statement of understanding that the 
card is to be used only for authorized official government travel 
expenses. Most Army cardholders properly used their travel cards and 
paid amounts owed to Bank of America timely. However, we found that the 
Army’s delinquency rate is higher than that of any other DOD component 
or executive branch agency in the federal government. For the eight 
quarters ending March 31, 2002, the Army’s delinquency rate fluctuated 
between 10 and 18 percent, and on average was about 5 percent higher 
than the rest of DOD and 7 percent higher than federal civilian 
agencies. 

In addition, from November 1998 through March 2002, over 23,000 Army
travel card accounts totaling about $34 million were charged off by 
Bank of America. Our analysis of available data shows a correlation 
between delinquency problems and the travel cardholder’s age and pay 
grade. We found that the Army’s delinquency and charge-off problems are 
primarily associated with young, low- to midlevel enlisted military 
personnel. In addition, a weak control environment compounded by 
instances of delays in processing travel reimbursements to Army 
military and civilian personnel contributed to the high delinquency 
rates. These delinquencies and charge-offs have cost the Army millions 
of dollars in lost rebates, higher fees, and substantial resources 
spent pursuing and collecting past due accounts. 

The Army and DOD have taken action to address and focus command- and
installation-level attention on management of delinquent travel card
accounts. Beginning in November 2001, the Army began offsetting wages
of certain military and civilian employees and the retirement benefits 
of military retirees who had either delinquent or charged-off accounts. 
These and other actions have begun to significantly reduce the number 
and dollar value of charge-offs during fiscal year 2002. However, these 
actions are primarily focused on treating the symptoms or “back-end” 
problems, such as delinquencies and charge-offs, rather than the “front-
end” or preventative controls, such as the weak overall internal control
environment and specific travel program control weaknesses. 

Our work identified numerous instances of potentially fraudulent and
abusive activity related to the travel card. During fiscal year 2001, 
about 1,200 of the over 4,200 Army account holders who had written at 
least one nonsufficient funds (NSF) check to pay their travel card bill 
had their accounts charged off. In the same period, more than 200 
cardholders whose accounts were eventually charged off may have also 
committed bank fraud by writing three or more NSF checks to Bank of 
America. In one case, an Army employee, who had been convicted for 
writing NSF checks prior to receiving the government travel card, wrote 
over 86 NSF checks to Bank of America. Further, as part of our 
statistical sampling results at the four sites we audited, we estimated 
that personal use of the travel card ranged from 15 percent of fiscal 
year 2001 transactions at one site to 45 percent at another site. 
Cardholders used their travel cards for a wide variety of personal 
goods or services. For example, government travel cards were used for 
adult entertainment; dating and escort services; casino and Internet 
gambling; cruises; tickets to musical and sporting events; personal 
clothing; closing costs on a home purchase; and, in one case, the 
purchase of a used automobile. We found that charged-off accounts 
included those of both (1) cardholders who were reimbursed by the Army 
for official travel expenses but failed to pay Bank of America for the 
related charges, and thus pocketed the reimbursement, and (2) those who 
used their travel cards for personal purchases for which they did not 
pay Bank of America. 

We also found several instances of abusive travel card activity where 
Army cardholders used their cards at establishments, such as 
gentlemen’s clubs, which provide adult entertainment. Further, in some 
cases, these clubs were used to convert the travel card to cash by 
supplying cardholders with actual cash or “club cash” for a 10 percent 
fee. To illustrate, a cardholder who charged $330 to the government 
travel card at one of these clubs would receive $300 in cash. 
Subsequently, the club receives a reimbursement from Bank of America 
for a $330 restaurant charge. For fiscal year 2001, we identified about 
200 individuals who charged almost $38,000 at these establishments. For 
example, we found that one cardholder obtained more than $5,000 in cash 
from these establishments. 

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

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

Our audit found that weaknesses in the Army’s overall control 
environment, including a number of specific controls that were either
flawed in their design or in their implementation, are the root causes 
of the Army’s inability to prevent and/or effectively detect the 
numerous instances of potentially fraudulent and abusive travel card 
related activity previously discussed. Our work demonstrated that the 
Army has not provided for an adequate control infrastructure—primarily 
human capital related—to effectively manage its travel card program. At 
the four units we audited, we found that management was focused 
primarily on delinquencies and often only after severe problems were 
discovered and major commands began demanding improved performance in 
reducing such delinquencies. There were few indications that management
emphasized controls designed to prevent or provide for early detection 
of travel card misuse. 

Our audit of seven controls relied on to manage the Army’s travel card
program revealed critical weaknesses. For example, many problems we
identified were the result of ineffective controls over issuance of 
travel cards. Although DOD’s policy allows exemptions from the use of 
travel cards for certain groups or individuals, we found that without 
exception the Army issued travel cards to all personnel who requested 
cards regardless of their travel or credit history. We found a 
significant correlation between travel card fraud, abuse, and 
delinquencies and individuals with substantial credit history problems. 
The prior and current credit problems we identified for Army travel 
cardholders included charged-off credit card and automobile loans, 
defaulted and foreclosed home mortgages, bankruptcies, and convictions 
for writing NSF checks. 

Also, agency program coordinators (APC), who have the key 
responsibility for managing and overseeing travel cardholders’ 
activities, are essentially set up to fail in their duties because they 
are given substantial responsibility for a large number of 
cardholders—for example up to 1,000 cardholders per APC—and little time 
to do this collateral duty. Military personnel who are responsible for 
and rated on other job responsibilities—such as airport security—are 
given the APC role as “other duty as assigned.” With a high level of 
APC turnover (particularly military APCs, which at the locations we 
audited were reassigned about every 6 months), and only minimal time 
allotted to perform this collateral duty, we found that APCs generally 
were ineffective in carrying out their key travel card program 
management and oversight responsibilities. 

Further, our statistical tests of key internal controls and processes 
in place at four Army locations showed errors in travel voucher 
processing that resulted in both overpayment and underpayment of the 
amounts that travelers should have received for their official travel 
expenses. In addition, substantial delays in travel reimbursements 
contributed to the high delinquency rates for at least one of these 
locations. Delays in reimbursement were often due to the traveler not 
submitting a travel voucher within the required 5 days of completion of 
travel, and/or the paying office not making payment within the required 
30 days. We also found a substantial number of California National 
Guard employees and several employees at other units audited who should 
have been paid late fees for late reimbursements. However, the Defense 
Finance and Accounting Service (DFAS) does not have the systems in 
place to identify late payments and thus reported that it made no late 
fee payments for fiscal year 2001. 

This report includes a matter for congressional consideration that would
provide DOD the ability to require the split disbursement payment 
process for all of its employees. We also provide recommendations to 
the Army to strengthen the overall control environment for the Army’s 
travel card program and improve internal controls. Our recommended 
actions are in the areas of travel card issuance; monitoring, review, 
and disciplinary actions; and travel voucher and payment processes. 

In written comments on a draft of this report, DOD concurred with 23 of
our recommendations and partially concurred with the remaining 3 
recommendations and described actions completed, under way, or planned
to implement them. DOD partially concurred with our recommendations
regarding (1) training APCs to refer cardholders who write NSF checks 
for disciplinary actions, (2) establishing an Army-wide disciplinary 
action policy for abusive travel card activity, and (3) developing a 
process to identify travel reimbursements that exceed the 30-day 
requirement so that individuals not paid within the statutory period 
are paid late fees in accordance with the law. With regard to the first 
two issues, DOD’s response indicated that they have taken or plan to 
take actions that we believe will address the intent of our 
recommendations. With regard to the third issue, DOD agreed that the 
current systems for processing and computing travel vouchers for the 
Army do not provide for automated means of calculating interest due on 
voucher payments exceeding the 30-day requirement. DOD also stated that 
the Defense Travel System (DTS) currently being deployed automates the 
voucher submission process and should reduce the instances where 
reimbursements extend beyond 30 days. However, according to the DOD 
Office of Inspector General, DTS remains at high risk of not being an 
effective solution in streamlining the DOD travel management process 
and is not expected to be deployed until fiscal year 2006. Based on 
this evaluation, we do not consider DTS to be a timely or viable 
solution for identifying those reimbursements outside of the 30-day 
requirement. We continue to recommend that, until DTS is fully 
implemented and operational, DOD develop an interim process to identify 
late reimbursements and pay cardholders the appropriate fees in 
accordance with the law. 

In addition, in one area, although DOD concurred with our 
recommendation, we do not believe that its response indicates full
agreement or understanding of the intent of the recommendation.
Specifically, with regard to our recommendation that credit check 
results be used to make decisions on travel card applicants, DOD 
responded that those with prior credit problems are issued a restricted 
card and that mandatory use of the government travel card is required 
by TTRA. This is not correct. Both the DOD FMR and TTRA provide for 
exemptions from the mandatory use requirements under certain 
conditions, including evidence of financial irresponsibility. We 
continue to believe that until the Army takes action to consider past 
credit problems in determining whether to issue government travel 
cards, it will continue to increase the risk that individuals will 
repeat a pattern of fraud, abuse, and delinquency or nonpayment. 

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

Army Has Highest Delinquency and Charge-off Rates but Recent Actions 
Have Resulted in Some Improvements: 

The Army’s travel card delinquency rate and amounts charged-off are
substantially higher than non-Army DOD components and civilian agencies
in the federal government. Cumulative Army charge-offs since the
inception of the travel card program with Bank of America in November
1998 are nearly $34 million. Our analysis of available data shows the 
travel cardholder’s age and pay rate are strong predictors of 
delinquency problems. We found that the Army’s delinquency and charge-
off problems are primarily related to young, low- and midlevel enlisted 
military employees. Further, as discussed in the following sections of 
this report, weaknesses in the Army’s overall control environment and 
delays and errors in processing and paying valid travel vouchers 
exacerbate the Army’s delinquency problems. The Army’s high delinquency 
and default rates have also resulted in contentious relations with Bank 
of America. The bank threatened to end its participation in the 
program, but eventually agreed to contract modifications that included 
increased fees. The delinquencies and charge-offs have cost the Army, 
the federal government, and the taxpayers millions of dollars in lost 
rebates, higher fees, and substantial resources spent pursuing and 
collecting on past due accounts. 

The Army has taken a number of positive actions to address its high
delinquency and charge-off rates, and results from the first half of 
fiscal year 2002 show a significant drop in charged-off accounts. Most 
of this reduction is attributable to a salary and military retirement 
offset program—similar to garnishment. These offsets began in November 
2001. Other Army actions included encouraging the use of a split 
disbursement payment process, in which DFAS sends a portion of the 
traveler’s reimbursement directly to the bank rather than the 
cardholder, and increased management attention and focus on the 
delinquency issue. The Army’s actions, however, primarily address the 
symptoms or “back-end” result of delinquency and charge-offs after they 
have already occurred. As noted in the remaining sections of this 
report, the Army’s control weaknesses that are the root cause of the 
problem are generally related to the “front-end” management of the 
travel card program, such as issuing the cards and overseeing the 
proper use of the cards. 

The Army’s Delinquencies and Charge-offs: 

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

Table 1: Cumulative Charge-offs and Delinquencies by Military Service 
as of March 31, 2002 (Dollars in millions): 

DOD service: Army; 
Total cumulative charge-offs[A]: $33.5; 
Cumulative recoveries[A,B]: $12.9; 
Net cumulative charge-offs[A]: $20.6; 
Delinquencies as of March 31, 2002[C]: $8.4. 

DOD service: Air Force; 
Total cumulative charge-offs[A]: $11.6; 
Cumulative recoveries[A,B]: $4.7; 
Net cumulative charge-offs[A]: $6.9; 
Delinquencies as of March 31, 2002[C]: $5.0. 

DOD service: Navy[D]; 
Total cumulative charge-offs[A]: $16.6; 
Cumulative recoveries[A,B]: $6.2; 
Net cumulative charge-offs[A]: $10.4; 
Delinquencies as of March 31, 2002[C]: $6.0. 

[A] Cumulative charge-offs and recoveries are from November 1998 
through March 2002. 

[B] Recoveries represent amounts recovered through collection actions 
on accounts that have been charged off by Bank of America. 

[C] Delinquencies represent amounts not paid within 60 days of the 
travel card monthly statement closing date, which is the cutoff date 
for charges to be included in the monthly statement. Under the terms of
the travel cardholder’s agreement with Bank of America, payment of the 
travel card statement is due to Bank of America within 25 to 30 days of 
the statement closing date. 

[D] Includes Marine Corps. 

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

[End of table] 

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

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

[See PDF for image] 

This figure is a multiple line graph. The vertical axis of the graph 
represents percentage from 0 to 20. The horizontal axis of the graph 
represents fiscal year quarters from 2000, third quarter through 2002 
second quarter. The following approximated data is depicted on the 
graph: 

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

Fiscal year: 2000, third quarter; 
Governmentwide delinquency rate excluding DOD: 8.5%; 
DOD delinquency rate excluding Army: 5.5%; 
Army delinquency rate: 11%. 

Fiscal year: 2000, fourth quarter; 
Governmentwide delinquency rate excluding DOD: 7%; 
DOD delinquency rate excluding Army: 9%; 
Army delinquency rate: 15%. 

Fiscal year: 2001, first quarter; 
Governmentwide delinquency rate excluding DOD: 9.5%; 
DOD delinquency rate excluding Army: 12%; 
Army delinquency rate: 18%. 

Fiscal year: 2001, second quarter; 
Governmentwide delinquency rate excluding DOD: 5%; 
DOD delinquency rate excluding Army: 6.5%; 
Army delinquency rate: 13%. 

Fiscal year: 2001, third quarter; 
Governmentwide delinquency rate excluding DOD: 4%; 
DOD delinquency rate excluding Army: 6.5%; 
Army delinquency rate: 10%. 

Fiscal year: 2001, fourth quarter; 
Governmentwide delinquency rate excluding DOD: 4.5%; 
DOD delinquency rate excluding Army: 8%; 
Army delinquency rate: 11%. 

Fiscal year: 2002, first quarter; 
Governmentwide delinquency rate excluding DOD: 6%; 
DOD delinquency rate excluding Army: 9%; 
Army delinquency rate: 16%. 

Fiscal year: 2002, second quarter; 
Governmentwide delinquency rate excluding DOD: 3.5%; 
DOD delinquency rate excluding Army: 7%; 
Army delinquency rate: 13%. 

Source: GAO analysis of General Services Administration data. 

[End of figure] 

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

Age and Pay Grade Are Correlated to Delinquency and Charge-off 
Problems: 

A number of factors contributed to the Army’s high delinquency rates.
Many of the problems related directly to the control environment at the
Army and at the sites we visited. Other problems related to the 
implementation of the travel card program and a lack of controls over
travel card use and travel processing. A detailed discussion of the 
control environment and specific internal control issues is provided in 
the following sections of this report. Without proper management 
control, demographics such as the age and pay rates of Army personnel 
also contributed to delinquencies and charge-offs. 

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

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

[See PDF for image] 

This figure is a multiple vertical bar graph depicting the following 
data: 

Grade/classification: E1-E3; 
Delinquent: approximately $1 million; 
Total outstanding balance: approximately $2 million. 

Grade/classification: E4-E6; 
Delinquent: approximately $5 million; 
Total outstanding balance: approximately $21 million. 

Grade/classification: E7-E9; 
Delinquent: approximately $2 million; 
Total outstanding balance: approximately $11 million. 

Grade/classification: O1-O3; 
Delinquent: approximately $1 million; 
Total outstanding balance: approximately $7 million. 

Grade/classification: O4-O6; 
Delinquent: approximately $0.5 million; 
Total outstanding balance: approximately $7 million. 

Grade/classification: O7-O10; 
Delinquent: approximately $0 million; 
Total outstanding balance: approximately $0.5 million. 

Grade/classification: WO1-WO5; 
Delinquent: approximately $0 million; 
Total outstanding balance: approximately $3 million. 

Grade/classification: Civilian; 
Delinquent: approximately $2 million; 
Total outstanding balance: approximately $22 million. 

Source: GAO analysis of Bank of America data. 

[End of figure] 

In the Army, grades E-1 through E-6 account for about 73 percent of all
military personnel. Consequently, it is not surprising that they have 
the highest outstanding travel card balance. As shown in figure 2, the 
travel cardholder’s grade (and associated pay) is a strong predictor of
delinquency problems. We found that the Army’s delinquency and chargeoff
problems are primarily associated with young, low- and midlevel
enlisted military personnel with basic pay levels ranging from $11,000 
to $26,000. Delinquency rates were as high as 40 percent and 25 percent 
for E-1 to E-3 and E-4 to E-6, respectively, compared to Army civilians 
whose delinquency rate is consistent with rates for federal civilian 
agencies, as shown in figure 1. 

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

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

[See PDF for image] 

This figure is a vertical bar graph depicting the following data: 

Grade/classification: E2-E3; 
Charge-off amount: approximately $1 million. 

Grade/classification: E4-E-6; 
Charge-off amount: approximately $7 million. 

Grade/classification: E7-E9; 
Charge-off amount: approximately $1 million. 

Grade/classification: O1-O3; 
Charge-off amount: approximately $0.5 million. 

Grade/classification: O4-O6; 
Charge-off amount: approximately $0.25 million. 

Grade/classification: O7-O10; 
Charge-off amount: approximately $0 million. 

Grade/classification: WO1-WO5; 
Charge-off amount: approximately $0.25 million. 

Grade/classification: Civilian; 
Charge-off amount: approximately $1 million. 

Source: GAO analysis of Bank of America data. 

[End of figure] 

Enlisted personnel in the E-1 to E-6 grade level range in rank from 
privates to staff sergeants, respectively, and receive basic pay 
ranging from $11,033 to $26,253. Although these basic pay rates are 
supplemented with amounts such as housing and food allowances, these 
salaries may not permit payment of excessive personal charges on travel 
cards. Also, if cardholders in these lower grade levels do not receive 
their travel card reimbursements promptly because of either delays in 
filing their vouchers or in voucher processing, they may lack the 
financial resources to make timely required payments on their travel 
card accounts. Further, as discussed later, because of the Army’s 
failure to take any action to exempt personnel with poor credit 
histories from required use of travel cards, these low- and midlevel 
enlisted military personnel are often issued travel cards even though 
they may already be in serious financial trouble and, therefore, may 
not have been appropriate credit risks. The failure to provide proper
training and monitoring of travel card use, as well as maintain firm 
credit limits, may also have exacerbated the delinquency rates for these
individuals. 

High Delinquency and Charge-off Rates Have Resulted in Increased Costs
to the Government: 

Although the bank generally absorbs the losses associated with 
delinquencies and charge-offs, this problem has significant consequences
to the Army. The high delinquency and charge-off rates resulted in
increased costs in terms of increased fees imposed by Bank of America
following a contract dispute with DOD and the loss of potential refunds
associated with the program. Other costs are real but not easily
measurable, such as the increased administrative burden to the Army
associated with additional resources required to address delinquent and
charged-off accounts. For example, to effectively manage the travel card
program, employees with delinquent accounts must be identified,
counseled, disciplined, and closely monitored. In addition, employees 
with financial problems who also have access to sensitive data may pose 
a security risk, as discussed later in this report. While most employees
properly manage their travel card accounts and pay their bills on time, 
the high delinquency and charge-off rates may undermine the professional
image of the Army and its personnel. 

Dispute between Contractor and DOD: 

Unexpectedly high defaults by DOD’s travel cardholders, including the
Army’s, resulted in a 5-month legal dispute with DOD’s contractor, Bank 
of America, over the continuation of the travel card contract. In 1998, 
under the provisions of the General Services Administration’s (GSA) 
master contract with Bank of America, DOD entered into a tailored task 
order for Bank of America to provide travel card services for a period 
of 2 years, ending November 29, 2000. Under the terms of the task 
order, DOD had three 1-year options to unilaterally renew the Bank of 
America contract. On September 29, 2000, prior to the expiration of the 
initial task order, DOD gave notice to Bank of America that it intended 
to exercise its option to extend the task order for an additional year. 
In November 2000, Bank of America contested the provisions of the DOD 
task order with the GSA contracting officer. Bank of America claimed 
that the task order was unprofitable because of required “contract and 
program management policies and procedures” associated with higher-than-
anticipated credit losses. Bank of America officials estimated that 
43,000 DOD employees defaulted on more than $59 million in debts. Bank 
of America only agreed to drop its legal dispute with DOD after GSA 
renegotiated the terms of the master contract and DOD renegotiated the 
related tailored task order for travel card services in April 2001. 
Specifically, under the renegotiated master contract and related task 
order Bank of America was able to reduce its financial risk by 
instituting additional fees, such as higher cash advance and late 
payment fees; offsetting credit losses against rebates; facilitating 
the collection of delinquent and charged-off amounts through salary and
military retirement pay offset; and participating in the split 
disbursement payment process, in which the government pays the bank 
directly. 

Effect of Increased Fees: 

One of the terms of the renegotiation of the task order between Bank of
America and DOD was an increase in travel card cash advance fees from
1.9 percent to 3 percent, or $2, whichever would be the higher fee 
amount, effective August 10, 2001. The Army reimburses cash advance 
fees [Footnote 7] incurred by a traveler while on authorized travel. We 
estimate that this contract modification will result in approximately 
$1.4 million of increased costs to the Army each year for the 
reimbursement of cash advance fees. Our estimate was made by applying 
the increase in the advance fees to cash advances made during fiscal 
year 2001. Other fee increases agreed to in the renegotiation increased 
the cost to the Army, such as the fee for expedited travel card 
issuance, and to delinquent cardholders, such as the increase in late 
fees from $20 to $29. 

Delinquent Account Payment Affects Rebates to the Army: 

The GSA master contract modification also changed the rebate 
calculation, making it imperative that the Army improve its payment 
rates to receive the full benefits of the program. Under the GSA master 
contract, credit card companies are required to pay a quarterly rebate, 
also known as a refund, to agencies and GSA as a result of a 
combination of both individually billed and centrally billed card 
usage. The rebate to the agency is reduced, or eliminated, if 
significant numbers of an agency’s individual cardholders do not pay 
their accounts timely. Specifically, credit losses or balances that 
reach 180 calendar days past the closing date on the statement of 
account reduce the rebate amounts. Effective January 2001, one of the 
terms of the contract modification changed the way that rebates are 
calculated and how credit losses are handled. If the credit loss of an 
agency’s individually billed travel card accounts exceeds 30 basis 
points—or 30 one-hundredths of a percent (.003)—of net sales [Footnote 
8] on the card, the agency is assessed a credit loss fee, or rebate 
offset, against the rebate associated with both individually billed and 
centrally billed travel card accounts. 

This credit loss fee, or rebate offset, which resulted solely from 
individually billed account credit losses, significantly affected the 
amount of rebate that the Army received as a result of combined 
individually and centrally billed net sales in fiscal year 2001. The 
Army collected approximately $635,000 of the $3 million in rebates for 
fiscal year 2001 that we estimated that the Army would have received, 
based on fiscal year 2001 dollar volume, had individually billed 
account payments been timely. Prior to the change in the way the 
rebates were calculated, in fiscal year 2000, the Army received 
approximately $2.7 million in rebates from the travel card program, net 
of $450,000 that was paid to GSA for an industrial funding fee (contract
administration fee). 

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

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

Army and DOD Have Taken Some Steps to Reduce Delinquencies and 
Chargeoffs, but Additional Actions Are Needed: 

The Army has taken a number of positive actions to address its high
delinquency and charge-off rates, and results from the first half of 
fiscal year 2002 show a significant drop in charged-off accounts. Most 
of this reduction may be attributed to a salary and military retirement 
payment offset program—similar to garnishment. This program began to 
offset amounts from delinquent cardholders’ salaries and military 
retirement benefit payments in November 2001. Other Army actions 
include a limited split disbursement payment plan, in which DFAS 
disburses a portion of a travel reimbursement directly to the bank 
(instead of disbursing the entire amount of the reimbursement to the 
cardholder), and increased management attention and focus on the 
delinquency issue. The Army’s actions, however, primarily address the 
symptoms or “back-end” result of delinquency and charge-offs after they 
have already occurred. As noted in the remaining sections of this 
report, the Army has significant control weaknesses, particularly with 
respect to the front-end management of the travel card program, such as 
issuing the cards and overseeing the proper use of the cards, which it 
has not yet effectively addressed. 

Charge-offs Have Decreased: 

As shown in figure 4, the Army’s charge-offs have decreased 
substantially. 

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

Fiscal year: 2001, first quarter; 
Charge-off: approximately $2.75 million; 
Charge-off recoveries: approximately $1.0 million. 

Fiscal year: 2001, second quarter; 
Charge-off: approximately $3.6 million; 
Charge-off recoveries: approximately $1.75 million. 

Fiscal year: 2001, third quarter; 
Charge-off: approximately $2.25 million; 
Charge-off recoveries: approximately $1.5 million. 

Fiscal year: 2001, fourth quarter; 
Charge-off: approximately $1.6 million; 
Charge-off recoveries: approximately $1.0 million. 

Fiscal year: 2002, first quarter; 
Charge-off: approximately $0.5 million; 
Charge-off recoveries: approximately $0.8 million. 

Fiscal year: 2002, second quarter; 
Charge-off: approximately $0.2 million; 
Charge-off recoveries: approximately $1.6 million. 

Source: GAO analysis of Bank of America data. 

[End of figure] 

Specifically, although Army delinquency rates have not changed 
substantially in the last 2 years, the total dollars charged off by 
Bank of America have decreased for each of the last four quarters. 
Figure 4 also shows that recoveries of charge-offs increased markedly 
in the second quarter of fiscal year 2002. The primary causes of the 
decrease in chargeoffs and recent increase in recoveries are DOD’s new 
salary and military retirement benefit offset program as well as other 
positive steps, including encouraging the use of split disbursements 
and increased management focus and attention. 

Salary and Military Retirement Offset Program: 

Starting in fiscal year 2002, DOD began to offset the salary of certain
civilian and military employees and retired military members for all
services, including the Army, for the amounts delinquent or charged off 
on travel card accounts. The DOD salary offset program [Footnote 9] 
implements a provision of the Travel and Transportation Reform Act of 
1998 (TTRA) [Footnote 10] that allows any federal agency, upon written 
request from the travel card contractor, to collect by deduction from 
the amount of pay owed to an employee (or military member) any amount 
of funds the employee or military member owes to the contractor, as a 
result of delinquencies not disputed by the employee, on his or her 
travel card. [Footnote 11] 

With the task order modification, DOD agreed with Bank of America to
implement an offset program. From April 2001 through August 2001, DOD
worked with the Bank of America to establish protocols and to set up the
program. In August 2001, Bank of America sent demand letters to
cardholders with accounts over 90 days delinquent. DFAS processed the
initial offsets of delinquent accounts in October 2001 in the various 
DOD pay systems. The first deduction was made from the November pay 
period. Collections were paid to Bank of America starting in early 
December 2001. Bank of America can also use the offset program to 
recover amounts that were previously charged off. January 2002 was the 
first month in which Bank of America requested offsets for charged-off 
accounts. 

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

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

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

* Individuals with debts to the federal government or other garnishments
already being offset at 15 percent of disposable pay are considered to 
be in protected status and are not eligible for the offset program. 

* Individuals who cannot be located in the various payroll and military
retirement (active, reserve, retired military, or civilian) systems 
cannot be accepted for offset. 

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

Once an individual is accepted for offset, the related debt is 
established in the respective pay system and DFAS can deduct up to 15 
percent of disposable pay. Disposable pay is defined in GSA’s Federal 
Travel Regulation [Footnote 14] as an employee’s compensation remaining 
after the deduction from an employee’s earnings of any amounts required 
by law to be withheld (e.g., tax withholdings and garnishments). The 
amounts collected are paid to the bank monthly for military personnel 
and retirees and biweekly for civilian personnel. 

According to DFAS, from October 2001 through April 2002, Bank of
America referred 49,014 DOD-wide cases with debt of $72.4 million to 
DOD for offset. DOD accepted and started offset for 73 percent of the 
cases and 68 percent of the debt amounts referred. The number and debt 
amount of Army cases forwarded by Bank of America were not available. 
From November 2001 through April 2002, DFAS collected $6.3 million from 
Army military and retired military members through the offset program. 
DFAS was unable to provide the amount of collections for civilian 
employees by military service. However, the amount of total collections 
from November 2001 through April 2002 for civilian employees of DOD 
services and agencies was about $702,000. 

Split Disbursement Payment Process: 
 
DOD has recently encouraged cardholders to make greater use of the split
disbursement payment process. This payment method, by which cardholders 
elect to have all or part of their reimbursement sent directly to Bank 
of America, has the potential to significantly reduce delinquencies. 
Split disbursements are a standard practice of many private sector 
companies. DOD reported that for about 27 percent of the travel vouchers
paid in April 2002 at one of its major disbursing centers, cardholders
elected this payment option. 

However, the use of the split disbursement payment process by employees
is currently voluntary, as shown by DOD’s low participation rate. The
defense authorization bill for fiscal year 2003 passed by the Senate 
would change this by authorizing the Secretary of Defense to require 
that any part of an employee’s travel allowance be disbursed directly 
to the employee’s travel card issuer for payment of official travel 
expenses. The defense authorization bill for fiscal year 2003 passed by 
the House does not contain comparable authority. As of early October 
2002, the bill (H.R. 4546) was in conference. 

Management Focus and Attention: 

In response to the excessive delinquency rate, in October 2000, the Vice
Chief of Staff of the Army issued a directive to cut the Army’s 
delinquencies by 50 percent by the end of March 2001. Further, the Vice 
Chief of Staff established a goal of a delinquency rate of no more than 
4 percent of active cardholders as soon as possible and ordered 
commanders throughout the Army to provide additional attention to the 
government travel card program. [Footnote 15] Army officials emphasized 
setting goals, monitoring results, providing feedback, providing 
training, and coordinating efforts with DOD and Bank of America. We 
have also seen increased management attention and focus on reducing 
delinquencies at the Army command level. For example, commanders at 
both Ft. Bragg locations we audited told us they hold monthly meetings 
to discuss the status of any outstanding delinquencies and related 
corrective actions. 

Further, the DOD Under Secretary of Defense (Comptroller) created a
DOD-wide Charge Card Task Force in March 2002 to address management
issues related to DOD’s purchase and travel card programs. The task 
force issued its final report on June 27, 2002. We have reviewed the 
report and believe that many of the actions proposed by the task force 
will improve the controls over the travel card program. For example, as 
previously discussed, we support the provision of the fiscal year 2003 
defense authorization bill that would authorize DOD to require the use 
of the split disbursement payment process. If enacted and required DOD-
wide, this authority has the potential to significantly reduce DOD’s 
and the Army’s delinquency rates. Other important task force 
recommendations include canceling inactive accounts and expanding the 
salary offset program. However, actions to implement additional “front-
end” or preventive controls, such as strengthening the critical role of 
the APCs and denying cards to individuals with prior credit problems, 
were not addressed in the report. We believe that strong preventive 
controls will be critical if DOD is to effectively address the high 
delinquency rates and charge-offs, as well as the potentially 
fraudulent and abusive activity discussed in this report. 

Potentially Fraudulent and Abusive Travel Card Activity: 

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

We considered any scheme or pattern of activity related to the use of 
the travel card, in apparent violation of federal or state criminal 
code, as a potentially fraudulent activity. For purposes of this 
report, the only cases we characterized as potentially fraudulent were 
those where cardholders wrote three or more NSF checks or wrote checks 
on closed accounts to pay their Bank of America bills. These cases are 
potentially fraudulent because they indicate a pattern of activity in 
violation of one or more elements of federal or state criminal codes. 
In addition, some of the travel card activity that we categorized as 
abusive may be fraudulent if it can be established that the cardholder 
violated any element of federal or state criminal codes. 

For purposes of this report, we considered abusive travel card activity 
to include (1) personal use of the cards—any use other than for official
government travel—regardless of whether the cardholders paid the bills
and (2) cases in which cardholders were reimbursed for official travel 
and then did not pay Bank of America and thus benefited personally. 

Potentially Fraudulent Transactions: 

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

Table 2: Examples of NSF Checks Written on Charged-off Accounts: 

Cardholder: 1; 
Total amount (number) of NSF checks in FY 2001: $269,301 (86); 
Total amount charged off: $35,883; 
Grade: E-6; 
Unit: Ft. Jackson
Credit history/problems: Criminal conviction for writing NSF checks and 
serious credit card delinquency[A] prior to card issuance. 
Documented follow-up/disciplinary action: Undergoing court-martial. 

Cardholder: 2; 
Total amount (number) of NSF checks in FY 2001: $12,327 (8); 
Total amount charged off: $7,942; 
Grade: O-3; 
Unit: Ft. Hood; 
Credit history/problems: None; 
Documented follow-up/disciplinary action: None. 

Cardholder: 3; 
Total amount (number) of NSF checks in FY 2001: $7,737 (4); 
Total amount charged off: $3,257; 
Grade: GS-13; 
Unit: Pentagon; 
Credit history/problems: Charge-offs and referrals to collection 
agencies[B] and serious credit card delinquencies prior to card 
issuance.
Documented follow-up/disciplinary action: None. Bank of America account 
paid in full after we identified it as a charge-off. 

Cardholder: 4; 
Total amount (number) of NSF checks in FY 2001: $6,099 (3); 
Total amount charged off: $7,373; 
Grade: GS-12; 
Unit: Ft. McPherson; 
Credit history/problems: Serious credit card delinquencies prior to card
issuance. Mortgage foreclosure and other charge-offs and referrals to 
collection agencies since card issuance; 
Documented follow-up/disciplinary action: Counseled. Salary offset 
program. 

Cardholder: 5; 
Total amount (number) of NSF checks in FY 2001: $3,995 (3); 
Total amount charged off: $5,259; 
Grade: E-7; 
Unit: West Virginia ROTC; 
Credit history/problems: Bankruptcy judgment, automobile repossession, 
and serious delinquencies prior to card issuance; 
Documented follow-up/disciplinary action: Letter of reprimand. Salary 
offset program. 

Cardholder: 6; 
Total amount (number) of NSF checks in FY 2001: $4,845 (11); 
Total amount charged off: $3,380; 
Grade: E-6; 
Unit: Ft. Hood; 
Credit history/problems: Referrals to collection agencies prior to card 
issuance; 
Documented follow-up/disciplinary action: None. 

Cardholder: 7; 
Total amount (number) of NSF checks in FY 2001: $2,709 (3); 
Total amount charged off: $7,846; 
Grade: E-4; 
Unit: Ft. Drum/Ft. Lewis; 
Credit history/problems: Prior charge-off and referral to collection 
agency; 
Documented follow-up/disciplinary action: Administrative discharge for 
misconduct directly related to misuse of the travel card. 

Cardholder: 8; 
Total amount (number) of NSF checks in FY 2001: $900 (5); 
Total amount charged off: $3,104; 
Grade: E-3; 
Unit: Ft. Drum; 
Credit history/problems: None prior to travel card issuance. Automobile
repossession and delinquencies since 2000; 
Documented follow-up/disciplinary action: None. Honorable discharge. 

Cardholder: 9; 
Total amount (number) of NSF checks in FY 2001: $840 (3); 
Total amount charged off: $2,137; 
Grade: E-7; 
Unit: Army National Guard Utah; 
Credit history/problems: Serious delinquencies prior to card issuance; 
Documented follow-up/disciplinary action: None. Salary offset program. 

Cardholder: 10; 
Total amount (number) of NSF checks in FY 2001: $263 (3); 
Total amount charged off: $2,763; 
Grade: GS-5; 
Unit: U.S. Army Europe; 
Credit history/problems: Referral to collection agency and serious 
delinquency before card issuance; 
Documented follow-up/disciplinary action: Counseled. Salary offset 
program. 

[A] Serious delinquency is defined as 90 or more days past due on 
payment submission. 

[B] These included referrals to collection agencies for unpaid bills 
from utility companies, cable companies, and department stores. 

Source: GAO analysis. 

[End of table] 

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

* Cardholder #1 was a staff sergeant who wrote 86 NSF checks totaling
almost $270,000 for payment on his Bank of America travel card account
for charges incurred when the cardholder was not on official government 
travel. This cardholder had a previous criminal record for writing NSF 
checks. The cardholder also had numerous other financial problems, 
including mortgage foreclosure and claims discharged in December 2001 
for Chapter 7 bankruptcy. Among the claims discharged in bankruptcy was 
a $2,199 claim on the cardholder’s previous government travel card 
issued by American Express and a $114,750 real estate loan. This 
cardholder applied for and received a new Social Security number when 
he legally changed his name in 1998, and since then has had two Social 
Security numbers—one under each name. The individual authorized a 
credit check at the time of his application for a government travel 
card from Bank of America. However, it appeared that the credit check 
was not performed and the individual was issued a standard card with a 
$10,000 limit in April 1999, instead of a restricted card with a $2,500 
credit limit. 

From July 1999 through November 2000, the cardholder wrote 
approximately 86 NSF checks—some on closed or invalid accounts—to Bank 
of America. Industry regulations require that an account be credited 
immediately upon receipt of a check. Consequently, when Bank of America 
posted the NSF checks, the account appeared to have been paid, which 
provided credit to the cardholder to make additional purchases. Thus, 
by writing successively larger NSF checks, which Bank of America 
credited to his travel card account, the staff sergeant was able to, in 
effect, successively increase his credit limit to over $35,000—a 
practice known as “boosting.” He used each of these successive 
increases in his effective credit limit to charge additional items on 
his travel card. Despite the 86 NSF checks and associated increases in 
the cumulative unpaid balance on the cardholder’s government travel 
card account, records we obtained indicate that Bank of America did not 
close this individual’s account until February 2001, when the account 
was charged off. The cardholder was undergoing court-martial in late 
May 2002 for NSF checks related to his Bank of America account as well 
as to the Army and Air Force Exchange Services. Bank of America 
acknowledged that it erred in not closing this account sooner. This has 
resulted in the bank changing its policy to require accounts to be 
closed when a cardholder has written three NSF checks. 

* Cardholder #3 currently works at the Pentagon as a GS-13 employee on
a classified program. Because of her position, the cardholder has a top-
secret clearance. Prior to applying for the Bank of America travel card,
the employee had credit problems, including several charged-off 
accounts. Because the employee did not authorize a credit check on her
travel card application, she was given a restricted card with a credit
limit of $2,500, which should have been issued in “inactive” status and
only activated when needed for travel. However, Bank of America records 
showed that in July 2000, immediately after receiving the travel card, 
the employee used the card to pay for a personal move and other charges 
totaling more than $3,600—more than $1,000 in excess of the credit 
limit on restricted travel cards. The cognizant APC told us that while 
a credit check authorization should have been done for the cardholder 
to exceed the $2,500 credit limit, she could not confirm that one was 
done in this case. 

In addition, from October 2000 through September 2001, the employee 
wrote four NSF checks totaling more than $7,700 to Bank of America.
The cardholder’s account had an unpaid balance of $3,257 at the time it
was charged off in September 2001. Although the cardholder had a
restricted card that should have been activated only for the first 
official travel, the fact that she was able to use the card immediately 
upon issuance while not on travel indicated that Bank of America issued 
the card in an “active” status. Shortly after our investigators 
contacted this cardholder, she paid her account balance in full. 

We also found that no disciplinary action had been taken against this
individual. The two APCs were not aware that the employee had problems 
with her account, much less that the account was charged off, until 
contacted by our investigators. The APCs told us they had little time 
to devote to reviewing the over 500 individual accounts for which they 
had oversight responsibilities assigned as a collateral duty. In 
addition, while, according to a Bank of America official, APCs have had 
access to NSF check information in its database since 2000, one of the 
APCs told us she only recently received training on how to identify
delinquent accounts in Bank of America’s database. 

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

Abusive Travel Card Activity: 

We found instances of abusive travel card activity by Army cardholders 
that covered charges for a wide variety of personal goods and services,
including cruises; sports and music event tickets; personal clothing 
items; casino and Internet gambling; transactions to obtain cash at 
adult entertainment establishments; and, in one case, the purchase of a 
used automobile. There should be no misunderstanding by Army personnel 
that personal use of the card is not permitted. The standard government 
travel card used by most Army personnel is clearly marked, “For Official
Government Travel Only” on the face of the card. 

In addition, all Army travel card applicants sign a statement that 
provides, in part, that “I also understand that I am authorized to use 
the card only for those necessary and reasonable expenses incurred by 
me for official travel.” As part of our statistical sampling tests of 
travel card activity at four Army locations, we estimated that 15 
percent to 45 percent of the fiscal year 2001 travel card transactions 
at those locations appeared to be for charges not related to official 
travel and, therefore, were abusive. Further, abusive use of the card 
related to failure to pay Bank of America was the result of (1) 
cardholders who were reimbursed for official travel and then did not 
pay Bank of America and (2) cardholders who used the card for personal 
charges and failed to pay Bank of America. 

Travel Card Abuse due to Failure to Pay Bank of America Charges: 

Our work at four case study sites and our Army-wide data mining 
identified numerous examples of abusive travel card use where 
cardholders failed to pay their travel card bills. This abusive 
activity included (1) authorized transactions incurred in conjunction 
with approved travel orders where the cardholders received 
reimbursement but did not pay the bills, leading to charge off of the 
cardholders’ accounts, or (2) transactions incurred by cardholders that 
were not associated with approved travel orders where unpaid accounts 
were also charged off. In all cases, we found that ineffective 
monitoring contributed to charge-offs. Specifically, many APCs, 
commanders, and supervisors did not effectively monitor travel card 
usage or address delinquencies timely. We found little documentation 
indicating that the APCs, commanders, and supervisors were aware of the 
problems with individual cardholders, conducted follow-up, and took 
appropriate disciplinary actions. Table 3 provides examples of the two 
types of abusive transactions related to nonpayment and the related 
follow-up and disciplinary actions. 

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

Cardholder: 1[A]; 
Grade: GS-12; 
Unit: Ft. McPherson; 
Total charged-off amount: $7,373; 
Transactions contributing to charge-off: Used reimbursed travel money 
for closing costs on a house. Wrote NSF checks; 
Credit history/problems: Serious credit card delinquencies prior to 
travel card issuance; mortgage foreclosure and other charge-offs and 
referrals to collection agencies since 2000; 
Documented follow-up/disciplinary action: Counseled; salary offset. 

Cardholder: 2[B]; 
Grade: E-7; 
Unit: ROTC; 
Total charged-off amount: $5,259; 
Transactions contributing to charge-off: $4,100 to Budget-Rent-
A-Car for purchase of a used automobile; 
Credit history/problems: Bankruptcy judgment, automobile repossession, 
and serious delinquencies prior to travel card issuance; 
Documented follow-up/disciplinary action: Letter of reprimand. Salary 
offset. 

Cardholder: 3; 
Grade: E-6; 
Unit: Army Forces Command; 
Total charged-off amount: $2,278; 
Transactions contributing to charge-off: $110 in “club” cash from 
Spearmint Rhino Adult Cabaret; 
Credit history/problems: Serious credit card and other delinquencies 
prior to travel card issuance; 
Documented follow-up/disciplinary action: None. 

Cardholder: 4; 
Grade: E-4; 
Unit: Army Reserve Command; 
Total charged-off amount: $1,253; 
Transactions contributing to charge-off: $500 to Cryptologic, Inc. by 
spouse for Internet gambling; 
Credit history/problems: Numerous referrals to collection agencies 
prior to travel card issuance; 
Documented follow-up/disciplinary action: None. 

Cardholder: 5; 
Grade: O-5; 
Unit: California National Guard[C]; 
Total charged-off amount: $5,419; 
Transactions contributing to charge-off: Did not use reimbursement to 
pay travel card charges; 
Credit history/problems: Serious delinquencies, including delinquency 
on the American Express government travel card, prior to travel card 
issuance; 
Documented follow-up/disciplinary action: Salary offset.[C] 

Cardholder: 6; 
Grade: E-8; 
Unit: Ft. Bragg, Special Operations; 
Total charged-off amount: $4,704; 
Transactions contributing to charge-off: ATM withdrawals in hometown 
area without travel order; 
Credit history/problems: Serious delinquency prior to travel card 
issuance; 
Documented follow-up/disciplinary action: Verbal counseling. 

Cardholder: 7; 
Grade: E-4; 
Unit: Ft. Bragg, Forces Command; 
Total charged-off amount: $8,709; 
Transactions contributing to charge-off: Numerous charges at Wal-Mart 
Supercenter; 
Credit history/problems: Serious delinquency prior to travel card 
issuance; 
Documented follow-up/disciplinary action: None. 

Cardholder: 8; 
Grade: E-3; 
Unit: Ft. Drum, Forces Command; 
Total charged-off amount: $1,058; 
Transactions contributing to charge-off: Cash from Dream Girls Escort 
Service; 
Credit history/problems: None prior. Serious credit card delinquencies 
in 2002; 
Documented follow-up/disciplinary action: None. 

Cardholder: 9; 
Grade: E-4; 
Unit: Ft. Drum, Forces Command; 
Total charged-off amount: $10,029; 
Transactions contributing to charge-off: Numerous personal charges, 
including casino gambling; 
Credit history/problems: Referral to collection agency prior to travel 
card issuance; 
Documented follow-up/disciplinary action: None. 

Cardholder: 10; 
Grade: E-4; 
Unit: Ft. Drum, Forces Command; 
Total charged-off amount: $7,643; 
Transactions contributing to charge-off: Numerous charges at local 
restaurants, gas stations, grocery stores, and hotels in vicinity of 
Ft. Drum; 
Credit history/problems: Referrals to collection agencies prior to 
travel card issuance; 
Documented follow-up/disciplinary action: None. 

[A] Same as NSF case #4. 

[B] Same as NSF case #5. 

[C] See disciplinary action section for a discussion of this 
cardholder. 

Source: GAO analysis. 

[End of table] 

Similar to individuals who wrote NSF checks, many of the 105 cardholders
that we reviewed whose accounts were charged off had significant prior
credit problems, such as charged-off credit card account balances and
automobile loan defaults, and referrals to collection agencies. Many of
these individuals experienced further credit problems, including 
mortgage foreclosure, after issuance of the government travel card. As 
shown in table 4, some charged-off accounts resulted from the use of 
the card for transactions that were not proper travel expenses covered 
by valid travel orders, while others resulted from official travel 
expenses that were reimbursed but the cardholders failed to pay the 
bills. The magnitude and range of abusive transactions reflect the poor 
control environment and other internal control weaknesses discussed 
later in this report. The following include details of some of these. 

* Cardholder #1 was a GS-12 employee in Army Forces Command at Ft. 
McPherson, Georgia. In August 2000, the cardholder used the card to pay 
for authorized charges associated with a permanent change of station 
move from Qatar to Ft. McPherson. The cardholder did not elect split 
disbursement of his travel reimbursement between himself and Bank of 
America when filing travel vouchers. Thus, the entire reimbursement for 
travel expenses was electronically deposited in the cardholder’s 
checking account. The cardholder did not pay his travel card bill, but 
instead used the reimbursement to, among other things, pay the closing 
costs on the purchase of a home. The cardholder was counseled by the 
APC and his supervisors after his travel card account became 
delinquent, but no disciplinary action was taken. The cardholder is now 
in the salary offset program. The cardholder informed us that he was 
briefed, at the time of card issuance, of his responsibility to make 
timely payments to Bank of America in payment of expenses claimed on 
approved travel vouchers. 

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

* Cardholder #9 was an Army specialist (E-4) at Ft. Drum and received a
total of three travel card accounts. Shortly after receiving his first 
card he incurred over $5,000 in personal charges, including casino 
gambling. He then notified Bank of America that his wallet, which 
contained his government travel card and driver’s license, had been 
stolen and that the charges on the card were not made by him and 
therefore were fraudulent charges. Bank of America closed this account, 
charged off the amount as a fraud loss, and issued the soldier a second 
account. The soldier then incurred over $8,000 in personal charges for 
casino gambling and notified Bank of America that this card was lost. 
Bank of America again closed this account and issued a third account to 
the soldier. The soldier incurred approximately $5,000 in personal 
charges on this account, including casino gambling. Bank of America 
personnel began to question the soldier regarding the transactions made 
on both the first and second accounts because both accounts showed 
transactions at the same casino and the signatures on the charge 
receipts were similar to the soldier’s signature. As of April 17, 2002, 
the soldier’s travel card account was in charge-off status, with an 
unpaid balance of $10,029. The soldier told us that he falsified the 
report to Bank of America that his first card was stolen and that the 
charges were fraudulent because he could not pay the bill. He also told 
us that he falsely reported his second card lost again because he could 
not pay the bill. In addition, the soldier stated that he made personal 
charges on the third card, including casino gambling, in hopes of 
winning enough to pay the bill. In October 2000, the soldier received 
an Article 15 for misuse of his travel cards. He received a reduction 
in grade from an E-4 to an E-1, forfeited a half-month’s pay, and was 
to serve 45 days of extra duty beyond his November 30, 2000, discharge 
date. The soldier informed us that the Commander waived the 45 days and 
he received an honorable discharge as an E-4. In February 2002, the 
Army enrolled this soldier in the offset program. The soldier is 
currently an E-5 with the Pennsylvania National Guard. According to the 
National Guard, the Army’ official personnel file for this soldier 
contains no information concerning any adverse action. 

* Cardholder #10, another Army specialist (E-4) at Ft. Drum used his
government travel card to make numerous purchases of personal items 
totaling $2,841 over a 3-month period from May through July 2000. The
personal items included 38 restaurant charges, 37 charges at gas 
stations, 14 charges at grocery stores, and 5 hotel charges in the 
vicinity of Ft. Drum. The specialist, who had received a $10,000 credit 
limit on his government travel card, had an unpaid balance of $7,643 as 
of December 11, 2000. As of April 17, 2002, the travel card was in 
chargeoff status and the specialist no longer worked for the Army. Our 
review of the soldier’s credit report showed that he received his 
government travel card from Bank of America in May 1999. Since that 
time, the soldier opened numerous credit card and other consumer 
accounts with other vendors, almost all of which had unpaid balances 
and were in collection status or had been charged off. We found no 
evidence that the APC detected the soldier’s personal use of the 
government travel card. As a result, the Army could not take timely 
action to cancel or suspend the soldier’s travel card account. We also 
found no evidence that disciplinary action was taken to address 
personal use of the travel card or the unpaid debt once the Army became 
aware of the problem. 

In contrast to the charged-off accounts discussed above, we found some
instances where the failure to pay the travel card bill was 
attributable to the delays and errors in processing vouchers and 
reimbursing the travelers. 

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

Travel Card Abuse Where Cardholder Paid Bank of America: 

We also found instances in which cardholders used their travel cards for
personal purposes, but paid their travel card bills when they became 
due. These cardholders benefited by, in effect, getting interest-free 
loans. Personal use of the card increases the risk of charge-offs 
related to abusive purchases, which are costly to the government and 
the taxpayer. In addition, the high rate of abuse with respect to 
travel card activity is indicative of the weak internal control 
environment and the failure of the APCs to monitor credit card 
activities, as discussed later in this report. 

Table 4 provides examples of the types of abusive charges we found 
during our review. 

Table 4: Examples of Abusive Activity Where the Cardholders Paid the 
Bill: 

Cardholder: 1; 
Unit: U.S. Army Europe Allied Command; 
Grade: E-5; 
Vendor: Celebrity Cruises; 
Amount: $5,192; 
Nature of transaction: Reservations for 4 on the Millennium cruise 
ship, which sails to the Bahamas and Caribbean; 
Documented disciplinary action: None. 

Cardholder: 2; 
Unit: U.S. Army Reserve Command' 
Grade: O-5; 
Vendor: Purdue University Rose Bowl Tour; 
Amount: $3,998; 
Nature of transaction: Accommodations for two for 4 nights during the 
Rose Bowl. Package includes pep rally, New Year’s Eve event, and premium
seats to the parade; 
Documented disciplinary action: None. 

Cardholder: 3; 
Unit: U.S. Army Reserve Command; 
Grade: O-2; 
Vendor: Louisiana Superdome; 
Amount: $1,395; 
Nature of transaction: 45 tickets to the Essence Music festival on July 
5, 2001; 
Documented disciplinary action: None. 

Cardholder: 4; 
Unit: Army Corps of Engineers
Grade: GM-15[A]; 
Vendor: Georgetown Prep Tennis Club; 
Amount: $826; 
Nature of transaction: Tennis club membership; 
Documented disciplinary action: None. 

Cardholder: 5; 
Unit: California National Guard; 
Grade: E-4; 
Vendor: GEICO; 
Amount: $491; 
Nature of transaction: Automobile insurance; 
Documented disciplinary action: None. 

Cardholder: 6; 
Unit: Ft. Bragg, Special Operations; 
Grade: E-7; 
Vendor: Russell’s For Men; 
Amount: $191; 
Nature of transaction: Purchases made through a toll-free number for 
“fine gifts for men;” 
Documented disciplinary action: None. 

Cardholder: 7; 
Unit: Ft. Bragg, Forces Command; 
Grade: E-5; 
Vendor: Victoria’s Secret; 
Amount: $172; 
Nature of transaction: Women’s lingerie; 
Documented disciplinary action: None. 

Cardholder: 8; 
Unit: Ft. Bragg, Forces Command; 
Grade: E-4; 
Vendor: 1-800-Contacts; 
Amount: $80; 
Nature of transaction: Contacts and contact solutions; 
Documented disciplinary action: None. 

Cardholder: 9; 
Unit: Ft. Drum, Forces Command; 
Grade: E-5; 
Vendor: Gateway Direct; 
Amount: $392; 
Nature of transaction: Computer equipment; 
Documented disciplinary action: None. 

Cardholder: 10; 
Unit: Ft. Drum, Forces Command; 
Grade: E-6; 
Vendor: Sunshine Entertainment; 
Amount: $275; 
Nature of transaction: Personal escort service; 
Documented disciplinary action: None. 

[A] Equivalent to GS-15. 

Source: GAO analysis. 

[End of table] 

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

Some individuals who abused their travel card privileges held positions
where they may have been responsible for taking appropriate disciplinary
action with respect to travel card abuse by personnel within their 
commands. For example, a Lieutenant Colonel used his travel card to 
purchase accommodations and tickets to attend the Tournament of Roses
in Pasadena, California, as shown in example 2 in table 4. 

Abusive Travel Card Use at Adult Entertainment Establishments: 

We also found instances of abusive travel card activity in which Army
personnel used travel cards to obtain cash at establishments, such as
“gentlemen’s clubs,” instead of following prescribed ATM procedures.
Specifically, we found cases in which these clubs provided adult
entertainment services and helped the cardholders circumvent travel card
ATM cash withdrawal limits, by supplying cardholders with actual cash or
“club cash” for a 10 percent fee. We were able to identify about 200 
Army travel cardholders who during fiscal year 2001 charged almost 
$38,000 on their government travel cards at these establishments. Some 
of these individuals also did not pay their related travel card bills, 
and their travel card accounts were charged off. 

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

The gentlemen’s clubs typically sell adult entertainment, many sell 
alcohol, and some sell food. DOD and other federal agencies use 
merchant category codes (MCC) [Footnote 18] to identify and block 
merchants in certain categories from accepting travel cards as payment 
for goods and services at those establishments. However, some merchants 
with blocked codes circumvented this control by using an allowable MCC 
to submit cash transactions at their establishments. For instance, 
Crazy Horse Too is an entertainment establishment that provides topless 
dancing and sells alcohol, but not food. This establishment allows 
customers to use their travel cards to obtain club cash from the bar 
for a 10 percent fee. Club cash can only be used to tip dancers, 
waitresses, and bartenders, but cannot be exchanged for currency and 
cannot be used to purchase alcohol. Crazy Horse Too codes the club cash 
that it provides to customers as a “bar charge” in the name of its 
operating company, the Power Company. This coding allows these charges 
to bypass the MCC blocking control. Other clubs, such as Cheetahs 
Lounge Club, provide actual cash instead of club cash, and also code 
the transactions as “bar charges.” 

For example, one cardholder used his restricted travel card to obtain 
more than $5,000 in cash. As discussed previously, a restricted card 
has a maximum credit limit of $2,500 and an ATM cash withdrawal limit 
of $200 per monthly statement cycle. In this instance, the cardholder’s 
restricted travel card was activated about 20 days prior to his 
official travel. The cardholder used the card to make numerous ATM cash 
withdrawals and pay for large restaurant and grocery store charges 
prior to departure for government travel. After arrival at his 
temporary assignment location, the cardholder requested that his APC 
raise his credit limit from $2,500 to $10,000 based on his “mission-
critical status.” [Footnote 19] The APC took the requested action, 
without reviewing the cardholder’s account history. The cardholder
then frequented gentlemen’s clubs near his temporary assignment 
location, where he obtained more than $5,000 in cash. The cardholder 
told our investigators that he sent approximately $2,000 to his spouse, 
leaving him with about $3,000 for personal use and entertainment. The 
cardholder also told us the ability to obtain cash from these clubs was 
common knowledge among military personnel at his temporary assignment 
location. In this case, the APC subsequently discovered the abuse of 
the travel card and took steps that resulted in closing the 
cardholder’s account, and the cardholder received an administrative 
reprimand for unacceptable behavior. 

Few Documented Disciplinary Actions Taken against Cardholders Who
Misused the Travel Card: 

We found that disciplinary actions were taken against the cardholders in
less than half of the cases of cardholder abuse that we reviewed. It is
critical that cardholders who misuse their travel cards are identified 
and held accountable for their actions. Lacking such an environment, 
the Army is likely to continue to experience the types of potentially 
fraudulent and abusive activity identified in our work. The DOD 
Financial Management Regulation (FMR) states that “commanders or 
supervisors shall not tolerate misuse of the DOD travel cards and 
cardholders who do misuse their cards shall be subject to appropriate 
disciplinary action.” However, DOD and Army policies and procedures do 
not define appropriate disciplinary action to help ensure that 
consistent punitive actions are taken against cardholders who abuse 
their travel cards. Available documentation indicates that commanders 
or supervisors did not take any disciplinary actions against the 
majority of individuals who abused or misused their cards during fiscal 
year 2001. We found little documentation demonstrating that APCs 
forwarded cardholder delinquency information to appropriate commanders 
and supervisors to consider in determining whether disciplinary actions 
were warranted. 

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

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

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

Credit Problems Generally Not Referred to Security Officials: 

We also found many instances in which there was no evidence that Army
security officials were informed of travel card charge-offs for 
consideration in reevaluating security clearances. Army regulations 
provide that an individual’s finances are one of the key factors to be 
considered in whether an individual should continue to be entrusted 
with a secret or top-secret clearance. However, we found that Army 
security officials were unaware of travel card debt problems and, 
consequently, did not consider this information in determining whether 
these individuals should continue to receive their security clearances. 
Our review of the 105 charge-off cases discussed previously showed that 
of 43 cardholders who had secret or top secret clearances at the time 
their accounts were charged off, 38 maintained the same level of 
clearance as of June 2002. The clearances for the remaining 5 
cardholders had expired. These financially troubled individuals may 
present security risks to the Army. 

The U.S. Army Central Personnel Security Clearance Facility (commonly
referred to as Army CAF) is responsible for issuing and updating 
security clearances for Army personnel. Secret clearances are updated 
every 10 years and top-secret clearances are updated every 5 years. 
During the interim periods, Army regulations [Footnote 20] require 
commanders of personnel with clearances, such as secret and top secret, 
to submit to Army CAF any evidence of financial irresponsibility on the 
part of the personnel that would affect their clearance. Such evidence 
would include information on financial impropriety by the security 
clearance holder, such as excessive indebtedness. Army CAF is to 
evaluate this information and determine whether to revoke the 
clearance. 

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

Weak Overall Control Environment and Ineffective Travel Card Program 
Controls: 

A weak overall control environment and ineffective internal controls 
over the travel card program contributed to the potentially fraudulent 
and abusive activity related to the travel card and the Army’s high 
rates of delinquency and charge-offs. The foundation of all other 
controls, a positive control environment provides discipline and 
structure as well as the climate that influences the quality of 
internal controls. Although we observed improvements in the first half 
of fiscal year 2002, we identified several factors that contributed to 
a weak overall control environment for fiscal year 2001, including, as 
discussed previously, few documented disciplinary actions taken against 
cardholders who abuse the card and a lack of management attention and 
focus on establishing and maintaining the organizational structure and 
human capital needed to support an effective Army travel card 
management program. We found that this overall weak control environment 
contributed to design flaws and weaknesses in seven management control 
areas needed for an effective travel card program. Specifically, we 
identified weaknesses in the Army travel program controls related to 
(1) travel card issuance, (2) APCs’ capacity to carry out assigned 
duties, (3) limiting card activation to meet travel needs, (4) controls 
over transferred and “orphan” accounts, (5) procedures for terminating 
accounts when cardholders leave military service, (6) segregation of 
duties to ensure that no one individual can control all aspects of a 
travel transaction, and (7) access controls for Bank of America’s 
travel card database. 

All seven of these areas related to two key overall management
weaknesses: (1) the lack of clear, sufficiently detailed policies and
procedures and (2) limited travel card audit and program oversight. 
First, the units we audited used DOD’s travel management regulations 
(DOD FMR, Volume 9, Chapter 3) as the primary source of policy guidance 
for management of Army’s travel card program. However, in many areas, 
the existing guidance was not sufficiently detailed to provide clear, 
consistent travel management procedures to be followed across all Army 
units. Second, as recognized in the DOD Inspector General’s March 2002
summary report [Footnote 21] on the DOD travel card program, “because 
of its dollar magnitude and mandated use, the DOD travel card program 
remains an area needing continued emphasis, oversight, and improvement.
Independent internal audits should continue to be an integral component 
of management controls.” However, the DOD Inspector General report noted
that only two internal review reports were issued from fiscal year 1999
through fiscal year 2001 concerning the Army’s travel card program. 
These reports, issued by the Army’s Assistant Secretary for Financial
Management (and Comptroller)’s Internal Review Office, covered 
government travel card usage in the Army during fiscal year 2000. In
addition, each of the Army installations we audited had internal review
groups that did some level of review of the travel program and 
identified deficiencies in the Army’s travel program at their 
installations. 

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

Ineffective Controls over Issuance of Travel Cards: 

The Army’s ability to prevent potentially fraudulent and abusive
transactions that can eventually lead to additional delinquencies and
charge-offs is significantly weakened if individuals who had histories 
of financial irresponsibility are permitted to receive travel cards. 
The Army’s practice is to facilitate Bank of America issuing travel 
cards—with few credit restrictions—to all applicants regardless of 
whether they have histories of credit problems. DOD guidance in FMR, 
Volume 9, Chapter 3, provides that all DOD personnel are to use the 
travel card to pay for official business travel. However, the policy 
also provides that exemptions from using the travel card may be granted 
under a number of circumstances, including for personnel who are denied 
travel cards for financial irresponsibility. However, DOD’s policy is 
not clear as to what level of financial irresponsibility by a travel 
card applicant would constitute a basis for such an exemption. In 
addition, the DOD FMR provides that credit checks are to be performed 
on all travel card applicants, unless an applicant declines a credit 
check. We found no evidence that the Army exempted any individuals or 
groups from required acceptance and use of travel cards, even those 
with histories of previous credit problems. 

In July 1999, Bank of America began obtaining credit checks on DOD 
travel card applicants and used the credit history obtained through 
these checks as a basis for determining the type of account—restricted 
or standard—it would provide to new DOD travel applicants. An applicant 
who did not authorize a credit check, or with either no credit history 
or a history of credit problems, is issued a restricted travel card 
with a $2,500 credit limit. All other applicants are issued standard 
travel cards with a $10,000 credit limit. DOD policy also permits 
commanders or supervisors to raise the credit limits and ATM limits of 
restricted travel cardholders to whatever level they deem necessary to 
meet mission requirements, except when the cardholder declined a credit 
check. Our analysis of credit application scoring models and credit 
risk scores used by major credit bureaus confirmed that applicants with 
low credit scores due to histories of late payments are poor credit 
risks. Credit bureau officials told us that if their credit rating 
guidelines for decisions on commercial credit card application 
approvals were used to make decisions on travel card applicants, a 
significant number of low- and midlevel enlisted Army cardholders would
not have qualified for credit cards even with the restricted limits. A 
credit history showing accounts with collection agency action or charge-
offs poses an even higher credit risk. Any of these problems can be a 
reason for denying credit in the private sector. 

Consequently, until the Army takes action to prevent applicants with 
past credit problems from receiving government travel cards, it will 
continue to unnecessarily increase the risk that individuals will 
continue a pattern of fraud, abuse, and delinquency or nonpayment. 
Credit industry research and the results of our work demonstrate that 
individuals with previous late payments are much more likely to have 
payment problems in the future. As discussed previously, many of the 
Army travel cardholders that we audited who wrote numerous NSF checks, 
were severely delinquent, or had their accounts charged off had 
histories of delinquencies and charge-offs relating to other credit 
cards; defaulted automobile loans that resulted in repossession of the 
vehicles; defaulted mortgage payments and foreclosure proceedings on 
homes; numerous bankruptcies; and, in several cases, prior arrests and 
convictions for crimes such as writing bad checks. 

Unrealistic APC Performance Expectations: 

DOD policy provides that APCs are the primary focal points for day-to-
day management of the travel program. However, APC duties are generally
“other duties as assigned.” As discussed in the following sections, the
sheer number of responsibilities assigned to APCs, coupled with issues
concerning APC span of control, selection, turnover, training, and 
performance evaluation, result in unrealistic expectations for the 
effectiveness of APCs in carrying out their critical duties. 
Consequently, we found that APCs were generally ineffective in 
performing their key travel program management oversight duties. 

APC Responsibilities: 

As prescribed by DOD’s FMR guidance, APCs “are responsible for the day-
to-day operations of the DOD Travel Card Program.” DOD FMR Volume 9,
Chapter 3, provides that APCs are responsible for a variety of key 
duties, including establishing and canceling cardholder accounts, 
tracking cardholder transfers and terminations, monitoring and taking 
appropriate actions with respect to any account delinquencies, 
interacting with the bank, and fielding questions about the program 
from both cardholders and supervisors. APCs are also required to 
monitor delinquent cardholders and notify commanders/supervisors of 
such delinquencies for appropriate action. Further, DOD’s FMR also 
provides that APCs are to receive reports from Bank of America showing 
cardholder transaction activity during the most recent billing cycle. 
However, DOD’s guidance does not further specify APC responsibilities 
for actions based on their review of Bank of America reports. 

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

While some of the military personnel assigned APC responsibilities at 
the sites we audited had primary job responsibilities that were finance 
related, such as budget and resource managers, others had more mission-
related duties. For example, one of the APCs at the sites we audited 
was responsible for security at an airport, and another was a 
transportation officer. At Ft. Bragg, Special Operations, entire units, 
along with the APCs, were deployed at the time of our audit. Such 
deployments make it increasingly difficult for military personnel 
assigned APC duties to carry out their responsibilities. 

Few of the APCs we interviewed performed any account transaction
reviews beyond those conducted in conjunction with delinquencies.
Consequently, instances of abuse of the travel cards were seldom 
detected promptly. Some units’ operating procedures specify that APCs 
monitor credit card activities to identify misuse. For example, in its 
operating procedures, the California National Guard requires that APCs 
review credit card activity to identify misuse, that such misuse be 
brought to the attention of the commanders/supervisors, and that the
commanders/supervisors take actions to address the problems. However,
one California National Guard APC told us that she does not have 
sufficient time available to monitor the travel activity of all the 
cardholders under her purview. Another California National Guard APC 
told us that, as time permits, he monitors the travel card transaction 
activity of the cardholders that are his responsibility on a weekly 
basis. 

APC Span of Control: 

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

Table 5: Average Ratio of Cardholders to APCs at Army Sites Audited: 

Span of control: Number of cardholders with open travel card accounts; 
Ft. Drum, Forces Command: 6,498; 
California National Guard: 4,022; 
Ft.Bragg, Forces Command: 11,424; 
Ft. Bragg, Special Operations: 5,696. 

Span of control: Number of APCs; 
Ft. Drum, Forces Command: 39; 
California National Guard: 5; 
Ft.Bragg, Forces Command: 120; 
Ft. Bragg, Special Operations: 88. 

Span of control: Average ratio of cardholders to APCs; 
Ft. Drum, Forces Command: 167:1; 
California National Guard: 804:1; 
Ft.Bragg, Forces Command: 95:1; 
Ft. Bragg, Special Operations: 65:1. 

Source: GAO analysis of Bank of America data. 

[End of table] 

The span of control responsibilities for the APCs at the four sites we
audited ranged from about 5 open accounts to over 1,000. Decisions on 
the optimal span of control must take into account not only the number 
of accounts for which the APC has direct responsibility, but also the 
number of accounts for which another lower-level APC has direct 
responsibility, but for which the higher-level APC has oversight 
responsibility. [Footnote 22] For example, an APC at the California 
National Guard site we audited who had direct responsibility for 
managing the travel activities of over 1,000 cardholders also had 
oversight monitoring responsibility for about another 400 cardholders. 
An APC at Ft. Bragg, Forces Command, with direct responsibility for 
managing 287 travel card accounts told us that he was in the process of 
working with Bank of America to identify and deactivate the cards of 
any infrequent travelers within his purview. He reported that he hoped 
to reduce the number of accounts he was responsible for to about
100. 

The sites we audited were consistent in that few of the APCs we 
interviewed performed any account transaction reviews beyond those
conducted in conjunction with delinquencies. Several of the APCs told us
that they received detailed account transaction activity reports from 
Bank of America. But, outside of reviews of account activity associated 
with delinquencies, they told us that detailed transaction reviews were 
too time-consuming to carry out for their other cardholders. Another 
APC we talked to, who attempted to compare reports on travel card 
transactions received from Bank of America with valid travel orders for 
the cardholders within her purview, said this activity was time-
consuming and almost impossible to perform for all of the people under 
her span of control. 

Failure to review available cardholder transaction activity reports 
available from Bank of America and take action to address any 
inappropriate card usage can result in delinquencies and account charge-
offs. For example, one APC was not aware that a cardholder within his 
sphere of responsibility made multiple personal use transactions, 
including purchases at Wal-Mart, Vitamin World, General Nutrition 
Center, and Hecht’s, until 3 months after the cardholder’s name 
appeared in a delinquency report in January 2001. By that time, the 
cardholder owed $5,655 and was from 30 to 59 days delinquent. The 
cardholder’s account was eventually charged-off on August 10, 2001, 
with a balance of $6,997. 

APC Selection, Turnover, Training, and Performance Evaluation: 

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

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

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

APC training. DOD policy provides that travel card training materials 
are to be distributed throughout the department and that APCs are to be
informed of policy and procedural changes to the travel card program.
There are no supporting DOD or Army-wide procedures detailing 
requirements for the extent, timing, and documentation of travel program
training for APCs. APCs are not required to receive training on the 
duties of the position or on how to use available Web-based tools and 
reports from Bank of America before they assume their APC duties. 

A number of the APCs we interviewed told us they relied heavily on on-
the-job learning and other program coordinators for advice on how to 
carry out their duties when they assumed their APC responsibilities. At 
the Ft. Bragg, Special Operations, site we audited, we were told that 
the command-level APC provided training every 3 months and expected all
APCs to attend, unless they were deployed or on an assignment that would
not allow them to attend the training. APCs at Ft. Bragg, Special
Operations, also told us they received annual or semiannual briefings 
from Bank of America on the electronic tools available in its Web-based 
system containing travel card transaction data—EAGLS (Electronic Account
Government Ledger System). According to the APCs we interviewed, the
briefings they received on EAGLS included guidance on how to use the
system to establish a travel account, how to extract individual 
cardholder delinquency and transaction activity reports, and how to 
contact Bank of America for additional help with the Web-based tools. 
Some of the APCs we talked with reported that they have become 
proficient in, and routinely use, the tools available through EAGLS to 
assist them in their APC duties with respect to delinquency monitoring. 
Other APCs indicated that they either did not use the tools available 
through EAGLS or were not proficient in using them to monitor 
cardholders’ travel activities. According to data provided by Bank of 
America, about 23 percent of the Army’s APCs have never logged into 
EAGLS. 

APC performance evaluation. Generally, APC responsibilities were 
assigned as an “other duty assignment.” Individuals serving as APCs had,
and were rated on, other job duties and responsibilities. The extent to
which the performance of APCs was recognized as a major duty, and rated
as such, varied. At Ft. Bragg, Special Operations, none of the 
individuals serving as APCs were rated on how well they performed those 
duties. At the Ft. Drum location, one of the APCs had a position 
description that included “serves as travel card program manager” as a 
major duty (with the recognition that this duty, combined with duties 
as the unit’s program manager for cost accounting, should require about 
30 percent of the employee’s time). 

Controls over Activating/Deactivating Travel Cards to Meet Travel 
Needs: 

Allowing Army travel cardholders to maintain accounts in an active 
status when not needed for government travel unnecessarily exposes the 
Army to an increased risk of misuse—through cardholders either 
mistakenly or intentionally using the card for personal purposes. DOD’s 
FMR provides that restricted cards are issued to cardholders in an 
“inactive” status and initially activated only when the cardholders 
have authorized government travel needs. By contrast, standard cards 
are “active” when they are issued to cardholders. DOD policy guidance 
does not address deactivating restricted and standard travel cards when 
not needed for official purposes. 

Lacking overall policy and procedural guidance in this area, we found
instances in which individual commands or sites established their own
practices for deactivating cards when cardholders were not on travel. 
For example, the California National Guard’s August 2001 guidance to 
all of its APCs required them to deactivate all travel card accounts 
for cardholders not on official travel. In addition, APCs at Ft. Bragg, 
Special Operations, told us that, as a matter of practice, they 
deactivate the cards of cardholders in military grades of E-5 or below 
when they are not on official travel. 

Accountability for Transferred and Orphaned Accounts: 

We also found that the Army lacks clear, sufficiently detailed 
procedures with respect to maintaining effective day-to-day 
accountability for cardholders’ travel card accounts. Until the Army 
takes action to work with Bank of America to clearly establish 
accountability for accounts that are not under the control of a 
specific APC, it will continue to be vulnerable to undetected, 
potentially fraudulent, or abusive use of these accounts. 

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

As a result, many accounts fell into “limbo” and are also referred to as
“orphan accounts.” Accounts for transferred cardholders can remain in 
this limbo status for lengthy periods. For example, 2 California 
National Guard accounts out of the 166 that we examined for our 
statistical tests belonged to cardholders who had transferred from 
their units in 1998 and 2000, respectively. The responsible APC was not 
aware that the transfers had taken place until we brought the matter to 
her attention. 

According to Army officials, this breakdown in accountability is one of 
the primary causes for the Army’s large number of orphaned accounts. 
[Footnote 23] These are Army travel card accounts that are not under 
the purview of any APC, according to Bank of America records. Bank of 
America officials also told us that some of the accounts in this group 
might not even be Army accounts. As shown in appendix III, Bank of 
America data show that as of the end of fiscal year 2001, orphaned 
accounts had about a 20 percent delinquency rate. 

Without an APC assigned to oversee these accounts, orphan accounts pose
a higher risk of charge-offs. In fiscal year 2001, Bank of America 
charged off 717 accounts of the approximately 7,479 active orphan Army 
accounts, accounting for almost $1 million. In May 2002, Bank of 
America issued letters to all cardholders in the orphan grouping 
informing them that unless they took action to identify accountable 
APCs, their accounts would be closed. 

Exit Control Procedures for Separating Employees: 

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

In general, we found that APCs relied on cardholders to notify them that
they were leaving the Army. Some APCs informed us that their units’ exit
procedures for separated, retired, or dismissed employees require that 
individuals turn in their travel cards as part of the exit process 
before leaving the organizations. For example, the National Guard’s 
standard operating procedures provide that “All departing cardholders 
that are terminating their federal employment status will turn in their 
Travel Charge Card to their APC as a part of their out processing.” 
However, we found instances in which these procedures were difficult to 
implement. For example, a California National Guard official told us 
that this procedure is difficult to implement because some guard 
employees are hundreds of miles from the location of their cognizant 
APC. The official told us that many of the separations from the guard 
are handled through mail, e-mail, and fax, and not through face-to-face 
contact with unit officials or the APC. One APC told us that she 
sometimes becomes aware that cardholders are departing when she 
receives their travel cards through the mail. If an APC does not 
receive messages or paperwork to cancel the cards, or if there is a 
delay in notifying the APC of the cardholders’ departure, the 
cardholders’ accounts would remain active and the separated cardholders 
may abuse the cards. 

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

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

* An air reservist (E-6) assigned to military postal service was 
discharged on February 4, 2000, but did not turn in his card. The 
individual continued to use his government-issued travel card for 
personal use. In fiscal year 2001, the individual made charges totaling 
approximately $5,800 on his travel card, including over $5,000 of cash 
advances in the vicinity of his home in New York. The soldier’s travel 
card account was closed on March 11, 2002, and the unpaid balance of 
$3,419 was charged off. 

* A first sergeant (E-8) at Ft. Hood, Texas, repeatedly used his travel 
card after his retirement on September 30, 2000. During fiscal year 
2001, he used the travel card for personal goods and services totaling 
more than $8,000. The charges consisted of almost $2,000 in car 
rentals, another $2,000 in hotel charges, and approximately $2,951 in 
restaurant charges—including a one-time catering charge of 
$1,455—primarily in Hawaii and Texas. In addition, he spent $1,119 on 
two cruises with Royal Caribbean cruise line. Because the Army does not 
routinely monitor cardholders’ transaction reports for abusive activity 
and because this particular account was always paid in full, the abusive
activities were not detected for more than a year. In February 2002,
while scanning travel card activities of all cardholders under her 
sphere of responsibility, the APC became aware that the cardholder had 
retired. The APC deactivated the cardholder’s account in March 2002. 

* A sergeant first-class (E-7) retired from the active duty National 
Guard in February 2000, but continued to use the government travel card 
in fiscal year 2001. Subsequent to his retirement, the individual 
became a state guard employee. State employees are not entitled to hold 
federal government travel cards. Bank of America and National Guard 
records indicated that the individual used the government travel card 
for onbase lodging and rental car charges related to official travel 
with the state guard. As of the time of our audit, more than 2 years 
after the cardholder’s retirement, the cardholder’s account was still 
open, although we noted that the account was not delinquent. 

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

We also found that the Army did not have procedures requiring periodic 
comparisons between active travel card accounts and employees to ensure 
that accounts of separated or retired employees are closed. For example,
each Army unit we visited maintained records of retired, dismissed, and
separated employees and the respective dates of these actions. However,
none of the APCs we interviewed compared these records against the list 
of active accounts to identify accounts that should have been closed 
but were not. Periodic reconciliations of the two lists would have 
enabled the Army to identify employees who had left and should no 
longer have had travel cards. 

Segregation of Duties Controls Were Compromised at One Installation: 

Adequate controls must be in place to ensure that no one individual can
control all key aspects of a travel transaction. Such controls are key 
to effectively reducing the risk of error or fraud at the four sites we 
audited. Our observations and walk-throughs showed that proper 
segregation occurred because no one individual was responsible for the 
major functions associated with the voucher approval and payment 
process. Specifically, we found the traveler and person approving the 
travel orders were generally located at the installation, whereas a 
DFAS center prepared the final vouchers and entered the data into the 
DOD travel payment system, the Integrated Automated Travel System 
(IATS). For example, in the case of Ft. Drum, located in Watertown, New 
York, its vouchers were processed and paid by the DFAS center in 
Orlando, Florida. Further, we found that no one individual at the DFAS 
centers was responsible for (1) entering payment information into IATS 
and (2) auditing travel voucher summaries for accuracy and 
completeness. 

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

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

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

Access Controls over Bank of America’s Travel Card System: 

Thousands of Bank of America and DOD employees had access to Bank of
America’s travel card transaction data system, known as EAGLS. Computer 
system access controls are intended to permit authorized users to 
access a system to perform their assigned duties and preclude 
unauthorized persons from gaining access to sensitive information. 
Access to EAGLS is intended to be limited to authorized users to meet 
their information needs and organizational responsibilities. Authorized 
EAGLS user access levels include APC-level (APCs requiring access to 
travel data for cardholders under their purview), individual-level 
(individual travelers requiring access to their own travel transaction 
histories), and bank employee-level access (Bank of America employees 
may be granted one of five different levels of access depending on 
their assigned duties). The highest level of Bank of America employee 
access to EAGLS is the “super user” level. According to Bank of America 
security officials, this level of access—which provides users the 
ability to add, delete, or modify anything in the system, including 
creating accounts and editing transaction data in the system—should be 
granted to as few individuals as possible. 

We found that 1,127 Bank of America employees had some level of access
to the EAGLS system, including 285 with super user level access. After 
we brought this matter to the attention of Bank of America security 
officials, they reviewed employee access and deactivated access for 655 
employees that they determined should not have had any level of access. 
Further, Bank of America has since initiated periodic reviews to ensure 
that it maintains appropriate levels of employee access. 

In addition, DOD employees retained APC access to EAGLS after 
relinquishing APC duties or after they may have been terminated or
transferred. In a 2000 survey of 4,952 individuals with APC-level 
access to EAGLS, DOD found that approximately 10 percent could not be 
located and may have been terminated or transferred or no longer had APC
responsibilities. Over concern that many of these accounts should be
deactivated, Bank of America has begun a review to determine if DOD
employees with APC-level access no longer have APC responsibilities or
have left the service. 

Statistical Tests of Key Control Activities: 

With the weak control environment and related program control 
weaknesses we identified, it is not surprising that, as shown in table 
6, we found a significant percentage of failures in several of the key 
control activities we statistically tested at the four Army locations 
we audited. We selected four key control activities to test related to 
basic travel transaction and voucher processing. 

Specifically, we tested the implementation of the following internal 
control activities for a statistically valid sample of travel card 
transactions. 

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

* Was there a travel voucher associated with the transaction that was
properly reviewed to ensure that payment was accurate and properly
supported? 

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

* In accordance with TTRA and DOD FMR, was the traveler paid within 30
days of the date a properly approved travel voucher associated with the
transaction was submitted for payment? 

Appendix II includes the specific criteria we used to conclude on the
effectiveness of these controls. 

Table 6: Results of Testing of Key Internal Controls: 

Army unit: Ft. Drum, Forces Command; 
Percentage of failure, Travel orders are approved prior to travel: 0.0; 
Percentage of failure, Travel voucher reimbursements are accurate: 
10.4; 
Percentage of failure, Travel vouchers are submitted within 5 days of 
travel completion: 21.9; 
Percentage of failure, Travel vouchers are paid within 30 days of 
submission: 5.2. 

Army unit: Ft. Bragg, Special Operations; 
Percentage of failure, Travel orders are approved prior to travel: 3.1; 
Percentage of failure, Travel voucher reimbursements are accurate: 7.3; 
Percentage of failure, Travel vouchers are submitted within 5 days of 
travel completion: 30.2; 
Percentage of failure, Travel vouchers are paid within 30 days of 
submission: 7.3. 

Army unit: Ft. Bragg, Forces Command; 
Percentage of failure, Travel orders are approved prior to travel: 6.2; 
Percentage of failure, Travel voucher reimbursements are accurate: 
18.8; 
Percentage of failure, Travel vouchers are submitted within 5 days of 
travel completion: 38.5; 
Percentage of failure, Travel vouchers are paid within 30 days of 
submission: 8.3. 

Army unit: California National Guard; 1.0 41.9 27.9 60.5
Percentage of failure, Travel orders are approved prior to travel: 1.0; 
Percentage of failure, Travel voucher reimbursements are accurate: 
41.9; 
Percentage of failure, Travel vouchers are submitted within 5 days of 
travel completion: 27.9; 
Percentage of failure, Travel vouchers are paid within 30 days of 
submission: 60.5. 

Note: The numbers in the table represent point estimate percentages for 
the number of failures in the population based on our sampling tests. 
The confidence intervals for our sampling estimates are presented in 
app. II. 

Source: GAO analysis. 

[End of table] 

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

Controls over Travel Order Approval Were Generally Effective: 

Timely approval of the travel orders is the first step in ensuring that 
travel is authorized. At three of the four installations we audited, 
the controls over travel order approval were effective. We estimate 
that 0 to 3 percent of transactions at these installations did not have 
documented evidence that travel orders were approved prior to the 
beginning of travel. At Fort Bragg, Forces Command, travel order 
controls had an estimated 6 percent failure rate associated with travel 
orders that were not approved prior to travel. The control breakdown we 
noted in our sample transactions occurred when the travel took place 
prior to written approval of the travel order. For example, one 
traveler had travel duty from April 8, 2001, to April 19, 2001, but did 
not get his travel order approved until April 27, 2001. According to 
Army officials, this often occurred because travelers neglected to 
document the date of verbal travel authorization on their written 
travel orders. 

Controls over Travel Voucher Review and Accuracy Were Not Effective: 

Once the travel is complete, the traveler is to submit a voucher for all
reimbursable expenses and must include receipts for certain claimed
amounts. The voucher review process is intended to ensure that only
authorized, properly supported travel charges are reimbursed and that 
the amounts are accurate and properly calculated. At the four 
installations audited, we estimate that about 7 percent to 42 percent 
of transactions were associated with travel vouchers that were not 
accurate or were not properly supported. The California National Guard 
had an estimated failure rate for voucher review that was two to six 
times higher than that of the other three installations. We found 
undetected instances of travel voucher errors by travelers, voucher 
reviewers (both installation-level and DFAS-level), and DFAS. 

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

* Missing receipts – We found instances in which voucher packages did
not include all required receipts to support claims based on DOD and 
Army regulations. DFAS paid the vouchered amounts in these cases 
despite the lack of receipts. For example, for a Ft. Drum cardholder,
DFAS paid hotel charges on a voucher for which the cardholder did not
attach the required receipt. At the California National Guard, we found 
that a cardholder was paid for 4 nights of lodging when the receipt was
for 3 nights. 

* Errors in amounts paid – We found instances in which DFAS used an 
incorrect per diem rate [Footnote 25] for lodging and meals and 
incidental expenses to calculate the reimbursement amount, resulting in 
both over- and underpayments to the traveler. We also found that DFAS 
made errors in calculating reimbursements for ATM fees and car mileage. 
Most of these errors were relatively small in terms of dollar amounts. 
In one instance, we found that DFAS underpaid a cardholder about $814. 
In this case, the cardholder, an E-8, master sergeant at Ft. Bragg, 
Special Operations, filed a voucher package with required supporting
documentation for lodging, transportation, and other expenses totaling
about $814 incurred while on extended travel. DFAS erroneously excluded 
these expenses from its reimbursement calculation and consequently 
understated the amount paid to the cardholder by this amount. While the 
cardholder paid his bill from Bank of America that included these 
expenses, it was not until we brought this matter to the attention of 
Army and DFAS officials that the cardholder was reimbursed. In another 
instance, we found that an E-5 cardholder at Ft. Drum filed a travel 
voucher with DFAS Orlando claiming and receiving reimbursement for taxi 
fares totaling $48.50. However, according to the related travel order, 
a government vehicle was provided. After we brought this matter to its 
attention, DFAS Orlando obtained a $48.50 reimbursement from the 
cardholder. At the California National Guard, we found that a 
cardholder’s per diem reimbursement was less than the allowed amount, 
and the traveler was paid $75 for parking expense when the receipt 
showed $86. 

The California National Guard’s procedures for reviewing travel vouchers
differed from the other locations we audited in that the United States
Property and Fiscal Office (USPFO)—an organizational component of the
California National Guard—reviews all travel vouchers submitted by
California National Guard personnel for validity and accuracy before
submitting voucher payment requests to DFAS. California National Guard
officials attributed the high error rate to staff shortages in the 
voucher examination branch and difficulty in retaining high-quality 
personnel in these low-paying positions. 

For the other Army units we audited, DFAS was responsible for reviewing
the vouchers for accuracy and proper support prior to payment. We 
visited DFAS Orlando—the DFAS location responsible for processing travel
vouchers for two of our four test sites. We found that DFAS Orlando made
some voucher processing errors, which officials at that location 
attributed, at least in part, to the large volume of vouchers processed 
at that location, the number of vacant positions, and the significant 
amount of overtime needed to process vouchers and disburse funds within 
a 4- to 5-day time frame. For example, DFAS Orlando officials reported 
processing over 115,000 travel vouchers during fiscal year 2001, 
averaging approximately 11,000 vouchers per month, and had six 
vacancies that they were unable to fill. Also, in May 2002, DFAS 
Orlando reported 912 hours of overtime associated with processing 
13,422 of the estimated 17,500 travel vouchers received during the 
month. 

Travel Processing Timeliness Was a Significant Problem Resulting in Late
Payments to Travelers: 

We tested two key areas where prompt action is needed to ensure that
travelers are reimbursed for valid expenses within required time frames.
First, DOD policy requires the traveler to submit a travel voucher 
within 5 days of return from travel. [Footnote 26] We estimated 
significant failure rates for this requirement at all four 
installations, ranging from 22 percent to 39 percent of fiscal year 
2001 transactions. When this control failed in our sample transactions, 
the delay in submitting a travel voucher ranged from 6 days to as long 
as 228 days. Numerous travelers took up to 3 weeks to submit vouchers 
upon return from travel. Installation officials told us that travelers 
on extended travel for deployment to a war zone do not always have an 
opportunity to file interim vouchers. Also, the officials stated that 
many travelers return from travel, only to leave within a day or 2 for 
annual leave or another business trip and, therefore, do not have an 
opportunity to submit their travel vouchers promptly. 

Delays in filing travel vouchers cause delays in travel reimbursements,
which can ultimately result in delinquent accounts. For example in one 
of the sampled Ft. Bragg, Special Operations, transactions, the 
cardholder was on extended travel and did not file an interim voucher. 
This traveler’s account became delinquent, but he paid the balance due 
after being reimbursed. In another instance, a member of the California 
National Guard who completed travel in February 2001 did not complete a 
travel voucher until mid-April 2001. It took another 3 months for the 
voucher to arrive at the USPFO facility responsible for processing it. 
Although DFAS paid the voucher 2 days after receipt of the payment 
request, the cardholder’s account was delinquent for the 3 months. 

Second, upon submission of a proper voucher by the employee, DOD has
30 days in which to make reimbursement without incurring late payment
fees and charges. Once the approving official receives a properly
documented travel voucher, the 30-day payment period begins. If payment
is not made in 30 days, the traveler is owed a late payment fee that is 
to be calculated using, at a minimum, the Prompt Payment Act interest 
rate, as required by TTRA [Footnote 27] and GSA regulations. [Footnote 
28] GSA’s regulations also require the cardholder to be paid an amount 
equal to the amount Bank of America would have been entitled to charge 
the cardholder had the cardholder not paid the bill by the due date. 

Failure rates for this control activity ranged from about 5 percent to 8
percent for three of the four installations we tested, which we 
considered to be partially effective. Delays in these cases were 
generally attributed to the review process at the installation, while 
DFAS generally made payments within 7 days of receipt of the approved 
voucher package. However, the fourth installation, the California 
National Guard, had an estimated 61 percent of transactions that were 
associated with vouchers that were not paid within the 30-day time 
frame. Given the delays in initial submission of the vouchers, as 
discussed previously, these additional processing delays will result in 
travelers receiving payment well after they receive their monthly 
travel card bills. Unless travelers use personal funds to pay the 
bills, many accounts will remain delinquent until payment is received. 
For example, we found that one Ft. Drum travel voucher was submitted 34 
days after travel ended and another Ft. Drum voucher was paid 131 days 
after the travel ended. A California National Guard cardholder did not 
receive payment for a $3,554 voucher until 36 days after he submitted 
his voucher. While the cardholder paid Bank of America the full amount 
due following receipt of his reimbursement, the cardholder’s account 
was initially delinquent because it was not paid within the required 30-
day time frame. 

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

With respect to the California National Guard, in many instances, USPFO
took more than 30 days from the date of receipt of the travel voucher to
send a request for voucher payment to DFAS. USPFO officials attributed
these problems to the lack of qualified voucher examiners. 

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

Conclusions: 

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

DOD and the Army have taken positive steps to reduce the delinquencies
and charge-offs, including establishing a system of wage and retirement
payment offset for many employees, sending travel reimbursements 
directly to the bank rather than the employee, and making management of
the travel program a priority for the Army commands. These actions have
resulted in significant collections of previously charged-off and 
delinquent accounts and improved relations with Bank of America. DOD 
and the Army have also proposed additional steps as reported in the 
June 27, 2002, DOD Charge Card Task Force report to improve the 
controls over the travel card program. However, these Army and DOD 
actions have primarily addressed the symptoms rather than the 
underlying causes of the problems with the program. Specifically, 
actions to date have focused on dealing with accounts that are 
seriously delinquent, which are “back-end” or detective controls rather 
than “front-end” or preventive controls. To effectively reform the 
travel program, DOD and the Army will need to work to prevent 
potentially fraudulent and abusive activity and severe credit problems 
with the travel card. Preventive solutions include requiring use of the 
split disbursement payment process by all employees; providing a 
sufficient control infrastructure to effectively manage the program;
exempting individuals with histories of financial problems from required
use of travel cards; deactivating cards when employees are not on 
official travel; and providing appropriate, consistent disciplinary 
action to employees who commit fraud or abuse the travel cards. 

Matter for Congressional Consideration: 

To reduce DOD’s travel card delinquency and charge-off rates, 
particularly the Army’s, which are higher than those of any other 
executive branch agency, the Congress should consider authorizing the 
Secretary of Defense to require using employees’ travel allowances to 
pay the travel card issuer directly for charges incurred using the 
travel card. We believe that this action would provide DOD the ability 
to require use of the split disbursement payment process for all of its 
employees. 

Recommendations for Executive Action: 

To strengthen the overall control environment and improve internal 
controls for the Army’s travel card program, we recommend that the 
Secretary of the Army take the following actions. We also recommend that
the Under Secretary of Defense (Comptroller) assess the following 
recommendations and, where applicable, incorporate them into or 
supplement the DOD Charge Card Task Force recommendations to improve 
travel card policies and procedures throughout DOD. 

Travel Card Issuance: 

We recommend that the Secretary of the Army establish specific policies
and procedures governing the issuance of individual travel cards to 
military and civilian employees, including the following: 

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

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

* Provide individuals with prior credit problems who are denied travel
cards with alternative means of travel funding. 

* Provide individuals with no prior credit histories with “restricted” 
travel cards with low credit and ATM limits. 

* Develop procedures to periodically evaluate card usage and close
accounts of infrequent travelers, which will minimize exposure to fraud
and abuse. 

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

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

* Develop comprehensive, consistent Army-wide initial training and 
periodic refresher training for travel cardholders, focused on the 
purpose of the program and appropriate uses of the card. The training
should emphasize the prohibitions on personal use of the card, including
gambling, personal travel, and adult entertainment. Such training 
should also address the policies and procedures of the travel order,
voucher, and payment processes. For entry-level personnel, the training
should also include information on basic personal financial management 
techniques to help avoid financial problems that could affect an 
individual’s ability to pay his or her travel card bill. 

Monitoring, Review, and Disciplinary Actions: 

We recommend that the Secretary of the Army establish the following 
specific policies and procedures to strengthen controls and disciplinary
actions for improper use of the travel card: 

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

* To avoid high APC turnover, evaluate the feasibility of maximizing the
use of civilian rather than military employees to serve in the role of 
APC. 

* Establish guidance on APC span of control responsibilities so that 
such responsibilities are properly aligned with time available to ensure
effective performance. 

* Establish procedures to provide assurance that APCs receive training 
on their APC responsibilities, including how to use EAGLS transaction
reports and other available data to monitor cardholder use of the travel
card—for example, reviewing account transactional histories to 
ascertain whether transactions are incurred during periods of 
authorized travel and appear to be appropriate travel expenses and from
approved MCCs. 

* Train APCs to review EAGLS reports to identify cardholders who have
written NSF checks for payment of their account balances, and refer the
employees for disciplinary action. 

* Review, in conjunction with Bank of America, individuals with APC-
level access to EAGLS to limit such access to only those with current 
APC duties. 

* Establish Army procedures detailing how APCs should carry out their
responsibility to monitor card usage for all cardholders assigned to
them. Included in the procedures should be development of a data mining 
program enabling APCs to scan a large number of transactions, and 
target potentially inappropriate transactions for further review. 

* Establish a requirement for assessing performance of travel monitoring
and other APC duties as a rating factor on all APCs’ performance
evaluations. 

* Establish an Army requirement for cognizant APCs to retain records
documenting any cardholder’s fraudulent or abusive usage of the travel
card and require this information to be provided to the gaining APC
when the cardholder is transferred. 

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

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

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

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

* Develop procedures to identify active cards of departed cardholders,
including comparing cardholder and payroll data. 

Voucher and Payment Processes: 

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

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

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

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

Agency Comments and Our Evaluation: 

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

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

Regarding establishing Army-wide disciplinary action policy for abusive
travel card activity, DOD stated that the Army already has a strong 
policy in place against theft, fraud, and other intentionally dishonest 
conduct on the part of civilian employees and that it would be 
inconsistent with current law for the Army to establish further 
mandatory requirements that impose specific disciplinary actions. With 
regard to military personnel, DOD stated that disciplinary actions are 
addressed as a matter of command discretion. 

We never contemplated that the policy would prescribe mandatory actions.
Rather, we intended the policy to be a guide of possible disciplinary 
actions to be taken against cardholders. This guidance would also serve 
as an important internal control feature that clearly identifies the 
consequences associated with improper and abusive travel card use and 
would serve as a deterrent to such abuse. Further, the policy could 
include a range of actions that would be appropriate for various types 
of travel card misuse. To eliminate any confusion concerning the intent 
of our recommendation, we made a slight modification to the text of the 
recommendation. 

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

In addition, in one area, although DOD concurred with our 
recommendation, we do not believe that its response indicates full
agreement or understanding of the intent of the recommendation. 
Specifically, with regard to our recommendation that credit check 
results be used to make decisions on travel card applicants, DOD 
responded that those with prior credit problems are issued restricted 
cards and that mandatory use of the government travel card is required 
by TTRA. This is not correct. Both the DOD FMR and TTRA provide for 
exemptions from the mandatory use requirements under certain 
conditions, including evidence of financial irresponsibility. When an 
exemption is granted from the mandatory use of the travel charge card, 
the use of personal funds, including cash or personal charge card; 
travel advances; or Government Travel Requests may be authorized for 
payment of travel expenses. We continue to believe that until the Army 
takes action to consider past credit problems in determining whether to 
authorize issuing government travel cards, it will continue to increase 
the risk that individuals will repeat a pattern of fraud, abuse, and 
delinquency or nonpayment. Our report includes numerous examples of 
such individuals, including those who were issued restricted cards. 

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

As agreed with your offices, unless you announce the contents of this
report earlier, we will not distribute it until 30 days from its date. 
At that time, we will send copies to interested congressional 
committees; the Secretary of Defense; the Under Secretary of Defense 
for Acquisition, Technology, and Logistics; the Under Secretary of 
Defense (Comptroller); the Secretary of the Army; the Director of the 
Defense Finance and Accounting Service; the U.S. Property and Fiscal 
Officer, California Army National Guard; and the Director of the Office 
of Management and Budget. We will make copies available to others upon 
request. In addition, the report will be available at no charge on the 
GAO Web site at [hyperlink, http://www.gao.gov]. 

Please contact Gregory D. Kutz at (202) 512-9095 or kutzg@gao.gov, or
John J. Ryan at (202) 512-9587 or ryanj@gao.gov if you or your staffs 
have any questions concerning this report. 

Signed by: 

Gregory D. Kutz: 
Director: 
Financial Management and Assurance: 

Signed by: 

Robert J. Cramer: 
Managing Director: 
Office of Special Investigations: 

[End of section] 

Appendix I: Background: 

In 1983, the General Services Administration (GSA) awarded a 
governmentwide master contract with a private company to provide
government-sponsored, contractor-issued travel cards to federal
employees to be used to pay for costs incurred on official business 
travel. The intent of the travel card program was to provide increased
convenience to the traveler and to reduce the government’s cost of 
travel by reducing the need for cash advances to the traveler and the
administrative workload associated with processing and reconciling 
travel advances. The travel card program includes both individually 
billed accounts—accounts held and paid by individual cardholders—and
centrally billed accounts that are used to purchase transportation or 
for the travel expenses of a unit and are paid directly by the 
government. As of the end of fiscal year 2001, over 2.1 million 
individually billed travel cards were issued to federal government 
travelers. These travel cardholders charged $3.6 billion during the 
fiscal year. 

Under the current GSA master contract, the Department of Defense (DOD)
entered into a tailored task order with Bank of America [Footnote 30] 
to provide travel card services to DOD and the military services, 
including the Army. Table 7 provides the number of individually billed 
travel cards outstanding and related dollar amount of travel card 
charges by DOD and its components in relation to the total federal 
government. 

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

Entity: Army; 
Number of individually billed travel cardholders as of September 30, 
2001: 432,460; 
Fiscal year 2001 individually billed travel card charges (dollars in 
millions): $619. 

Entity: Navy (includes Marine Corps); 
Number of individually billed travel cardholders as of September 30, 
2001: 394,952; 
Fiscal year 2001 individually billed travel card charges (dollars in 
millions): $510. 

Entity: Air Force; 
Number of individually billed travel cardholders as of September 30, 
2001: 501,306; 
Fiscal year 2001 individually billed travel card charges (dollars in 
millions): $831. 

Entity: Other DOD; 
Number of individually billed travel cardholders as of September 30, 
2001: 86,922; 
Fiscal year 2001 individually billed travel card charges (dollars in 
millions): $174. 

Entity: Total DOD; 
Number of individually billed travel cardholders as of September 30, 
2001: 1,415,640; 
Fiscal year 2001 individually billed travel card charges (dollars in 
millions): $2,134. 

Entity: Total federal government; 
Number of individually billed travel cardholders as of September 30, 
2001: 2,132,031; 
Fiscal year 2001 individually billed travel card charges (dollars in 
millions): $3,634. 

Entity: DOD percentage of total government; 
Number of individually billed travel cardholders as of September 30, 
2001: 66%
Fiscal year 2001 individually billed travel card charges (dollars in 
millions): 59%. 

Source: Bank of America. 

[End of table] 

As shown in table 7, DOD accounts for about 1.4 million, or 66 percent, 
of the total number of the individually billed travel cards issued by 
the entire federal government, and DOD’s cardholders charged about $2.1 
billion, or about 59 percent, of the federal government’s travel card 
charges during fiscal year 2001. Table 7 also shows that the Army 
provided 432,460 individually billed cards to its civilian and military 
employees as of September 2001. These cardholders charged an estimated 
$619 million to their travel cards during fiscal year 2001. 

Travel Card Program Guidelines: 

The Travel and Transportation Reform Act of 1998 (Public Law 105-264)
expanded the use of government travel cards by mandating the use of 
cards for all official travel unless specifically exempted. The act is 
intended to reduce the overall cost of travel to the federal government 
through reduced administrative costs and by taking advantage of rebates 
from the travel card contractor based on the volume of transactions 
incurred using the card and on cardholders paying their monthly travel 
card bills on time. To help cardholders pay their monthly bills on 
time, the act also requires that agencies reimburse cardholders for 
proper travel claims within 30 days of submission of approved travel 
vouchers by the cardholders. [Footnote 31] Further, the act allows, but 
does not require, agencies to offset a cardholder’s pay for amounts the 
cardholder owes to the travel card contractor as a result of travel 
card delinquencies not disputed by the cardholder. The act calls for
GSA to issue regulations incorporating the requirements of the act. 

GSA incorporated the act’s requirements into the Federal Travel 
Regulation. The Federal Travel Regulation governs travel and 
transportation and relocation allowances for all federal government
employees, including overall policies and procedures governing the use 
of government travel cards. Agencies are required to follow the 
requirements of GSA’s Federal Travel Regulation, but can augment these 
with their own implementing regulations. 

DOD issued its Financial Management Regulations (FMR), Volume 9, 
Chapter 3, Travel Policies and Procedures, which supplements GSA’s 
travel regulations. DOD’s Joint Travel Regulations, Volume 1 (for 
Uniformed Service Members) and Volume 2 (for Civilian Personnel), refer 
to the FMR as the controlling regulation for DOD’s travel cards. 
Further, the Army provided informational pamphlets intended to assist 
its travelers: Pamphlet 55-16, Transportation and Travel: Civilian 
Travel and Transportation Permanent Change of Station Travel; Pamphlet 
55-20, Temporary Duty Travel: Uniformed Services Personnel Travel and 
Transportation; and Pamphlet 55-22, Civilian Travel and Transportation: 
Temporary Duty Travel. In addition, some of the Army’s individual 
commands and units have issued their own instructions supplementing GSA 
and DOD guidelines. 

The Army Travel Process: 

As shown in figure 5, the Army’s travel card management program for
individually billed travel card accounts encompasses card issuance, 
travel authorization, cardholders charging goods and services on their 
travel cards, travel voucher processing and payment, and managing 
travel card usage and delinquencies. 

Figure 5: The Army Travel Process: 

[See PDF for image] 

* Traveler requests travel card; 

* APC processes travel card application approved by supervisor and 
controls credit limits; 

* B of A issues travel card; 

* Official government travel authorized (travel order); 

* Traveler charges goods and services on travel card; 

* Traveler prepares voucher and provides to supervisor for review with 
submission to DFAS; 

* DFAS processes and pays[B] voucher; 

* Merchant (e.g., rental car co.) provides goods/services and charges 
travel card; 

* Merchant bank accepts transaction deposit slips and transfers 
payment; 

* B of A processes card charges, pays merchant bank, and bills 
traveler; 

* B of A credit card data in EAGLS; 

* APC monitors card usage and delinquencies[A] by accessing EAGLS; 

* Traveler leaves service or moves; 

* APC terminates or suspends card for traveler leaving Army or moving. 

[A] See figure 7 for specific actions to be taken by the agency program 
coordinator (APC). 

[B] The Defense Finance and Accounting Service (DFAS) allows travelers 
to direct a portion or all proceeds from the reimbursement of travel 
vouchers to Bank of America. Army National Guard units process travel 
vouchers at the units and then send electronic files to DFAS 
authorizing payment. 

[End of figure] 

Travel Card Issuance and Termination: 

When an Army civilian or military employee or the employee’s supervisor
determines that he or she will need a travel card, the employee 
contacts the unit’s travel card agency program coordinator (APC) to 
complete an individually billed card account application form. As shown 
in figure 6, the application requires the applicant to provide 
pertinent information, including full name and Social Security number, 
and identify whether he or she is an active, reserve, or guard military 
member or a civilian employee of the Army. The applicant is also 
required to initial a statement on the application acknowledging that 
he or she has read and understands the terms of the travel card 
agreement and agrees to be bound by these terms, including a provision 
acknowledging that the card will be used only for official travel. The 
APC is required to complete the portion of the member’s application 
concerning who will be responsible for managing the use and 
delinquencies related to the card. Bank of America is required to issue 
travel cards to all applicants for whom it receives completed 
applications signed by the applicants, the applicants’ supervisors, and 
the APCs. 

Figure 6: Travel Card Application: 

[See PDF for image] 

This figure is a copy of the Individually Billed Card Account 
Setup/Application Form (Department of Defense Travel Card Program), 
issued by Bank of America. 

[End of figure] 

Bank of America issues travel cards with either a standard or restricted
credit limit. If an employee has little or no credit history or poor 
credit based on a credit check performed by Bank of America, Bank of 
America will suggest to the service that the applicant receive a 
restricted card with a credit limit of $2,500 instead of the standard 
card with a credit limit of $10,000. However, as shown in figure 6, the 
application allows the employee to withhold permission for Bank of 
America to obtain a credit report. If this option is selected, Bank of 
America automatically issues a restricted card to the applicant. 

When cardholders leave the Army, they are required to contact their APCs
and notify them of their planned departure. Based on this notification 
from cardholders, the APCs are to terminate the cardholders’ accounts. 

Travel Authorization: 

When a cardholder is required to travel for official government 
purposes, he or she is issued a travel order authorizing travel. The 
travel order is required to specify the timing and purpose of the 
travel authorized. For example, the travel order is to authorize the 
mode of transportation, the duration and points of the travel, and the 
amount of per diem and any cash advances. Further, the Army can limit 
the amount of authorized reimbursement to military members based on the 
availability of lodging and dining facilities at military 
installations. 

Using the Travel Card for Official Travel Expenses: 

For authorized travel, travelers must use their cards to pay for 
allowable expenses, such as hotels and rental cars. The Army generally 
uses a centrally billed transportation account to pay for air and rail
transportation. Also, some units utilize unit cards, a form of 
centrally billed account, in lieu of individually billed travel charge 
cards for meals and lodging for group trips. 

When the travel card is submitted to a merchant, the merchant will 
process the charge through its banking institution, which in turn 
charges Bank of America. At the end of each banking cycle (once each 
month) Bank of America prepares a billing statement that is mailed to 
the cardholder for the amounts charged to the card. The statement also 
reflects all payments and credits made to the cardholder’s account. 
Bank of America requires that the cardholder make payment on the 
account in full within 25-30 days of the statement closing date. If the 
cardholder does not pay his or her monthly billing statement in full, 
and does not dispute the charges within 60 days of the statement 
closing date, the account is considered delinquent. 

Travel Voucher Submission and Processing: 

Within 5 working days of return from travel, the cardholder is required 
to submit a travel voucher claiming legitimate and allowable expenses 
incurred while on travel. Further, the standard is for the cardholder to
submit an interim voucher every 30 days for extended travel of more than
45 days. The amount that cardholders are reimbursed for their meals and
incidental expenses and hotels is limited by geographical rates 
established by GSA. 

Upon submission of a proper voucher by the cardholder, the Army has 30
days in which to make reimbursement without incurring late payment fees.
Cardholders are required to submit their travel vouchers to their
supervisors or other designated approving officials who must review the
vouchers and approve them for payment. If a supervisor’s review finds an
omission or error in a voucher or its required supporting documentation,
the approving official must inform the traveler of the error or 
omission. If the payment of the approved voucher takes longer than 30 
days, the Army is required to pay the cardholder a late payment fee 
plus an amount equal to the amount Bank of America would have been 
entitled to charge the cardholder had the cardholder not paid the bill 
by the due date. 

For all Army units other than those in the Army National Guard, after 
the supervisor approves a cardholder’s travel voucher package for 
payment, it is sent to a DFAS location for processing and payment. In 
the Army National Guard, guard units process, review, and approve all 
vouchers at that level before they are sent to DFAS for payment. DFAS 
(or the guard unit) enters travel information from the approved voucher 
into DOD’s Integrated Automated Travel System (IATS). IATS calculates 
the amount of per diem authorized in the travel order and voucher and 
the amount of mileage, if any, claimed by the cardholder. In addition, 
any other expenses claimed and approved are entered into IATS. Once the 
travel information from the voucher has been entered into IATS, the 
voucher may be selected for further review or audit. DFAS travel 
services supervisors audit 2 percent of vouchers under $2,500 and all 
vouchers $2,500 and greater. In addition, vouchers for amounts $20,000 
and over are audited again by DFAS Indianapolis travel services 
technicians before payment is disbursed. If problems with a voucher are 
found during the initial entry of the information into IATS or during 
the audit of the information, the transaction can be rejected and 
returned to the cardholder for correction. Once the item is 
successfully processed through IATS, DFAS makes payment to the 
cardholder or to Bank of America and the cardholder, if the cardholder 
elected the split disbursement option whereby part of the reimbursement 
is sent to Bank of America. 

Monitoring Travel Card Transaction Activity: 

In addition to controlling the issuance and credit limits related to 
the travel card, APCs are also responsible for monitoring the use of and
delinquencies related to travel card accounts for which they have been
assigned management responsibility. Bank of America’s Web-based 
Electronic Account Government Ledger System (EAGLS) provides on-line
tools that are intended to assist APCs in monitoring travel card 
activity and related delinquencies. Specifically, APCs can access EAGLS 
to monitor and extract reports on their cardholders’ travel card 
transaction activity and related payment histories. 

Managing Delinquent Cardholder Accounts: 

Both the Army and Bank of America have a role in managing travel card
delinquencies under GSA’s master contract. While APCs are responsible
for monitoring cardholders’ accounts and for working with cardholders’
supervisors to address any travel card payment delinquencies, Bank of
America is required to use EAGLS to notify the designated APCs if any of
their cardholders’ accounts are in danger of suspension or cancellation.
When Bank of America has not received a required payment on any travel
cardholder’s account within 60 days of the billing statement closing 
date, the account is considered delinquent. As summarized in figure 7, 
there are specific actions required by both the Army and Bank of 
America based on the number of days a cardholder’s account is past due. 

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

[See PDF for image] 

This figure is an illustration of required Army and Bank of America 
Delinquency Process Management Actions, as follows: 

Statement date: 
Bank of America action: Sends statement to cardholder; 
DOD action: None. 

45 days after statement date: 
Bank of America action: Sends a delinquency reminder to cardholder; 
DOD action: None. 

55 days after statement date: 
Bank of America action: Sends a pre-suspension letter to the 
cardholder; 
DOD action: None. 

60 days after statement date: 
Bank of America action: Suspends the account prohibiting purchases. 
Mails suspension letter to cardholder; 
DOD action: APC issues 60-day delinquency notification memorandum to 
the cardholder and immediate supervisor. Supervisor investigates and 
takes appropriate disciplinary action. 

75 days after statement date: 
Bank of America action: Assesses late fee every 30 days; 
DOD action: None. 

90 days after statement date: 
Bank of America action: Sends 90-day letter to cardholder; Sends letter 
to cardholder of intent to initiate salary offset; 
DOD action: APC issues 90-day delinquency notification memorandum to 
the cardholder, immediate supervisor, and the Company Commander who 
investigates and takes appropriate disciplinary action. 

120 days after statement date: 
Bank of America action: Sends a pre-cancellation letter to the 
cardholder; Requests DFAS to offset salary; 
DOD action: APC issues a 120-day delinquency notification memorandum to 
the Commander; The Commander investigates and takes appropriate 
disciplinary action. 

126 days after statement date: 
Bank of America action: Closes account, mails notice of cancellation 
letter to cardholder; 
DOD action: None. 

150 days after statement date: 
Bank of America action: None. 
DOD action: DFAS offsets salary. 

180 days after statement date: 
Bank of America action: Mails a pre-charge off letter to the 
cardholder; 
DOD action: None. 

210 days after statement date: 
Bank of America action: Charges off account; 
DOD action: None. 

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

Source: GAO analysis. 

[End of figure] 

The following is a more detailed explanation of the required actions by
Army and/or Bank of America with respect to delinquent travel card
accounts. 

* 45 days past due—Bank of America is to send a letter to the cardholder
requesting payment. Bank of America has the option to call the 
cardholder with a reminder that payment is past due and to advise the
cardholder that the account will be suspended if it becomes 60 days past
due. 

* 55 days past due—Bank of America is to send the cardholder a pre-
suspension letter warning that Bank of America will suspend the account 
if it is not paid. If Bank of America suspends an account, the card 
cannot be used until the account is paid. 

* 60 days past due—The APC is to issue a 60-day delinquency notification
memorandum to the cardholder and to the cardholder’s immediate 
supervisor informing them that the cardholder’s account has been 
suspended by Bank of America due to nonpayment. The next day, a 
suspension letter is to be sent by Bank of America to the cardholder
providing notice that the card has been suspended until payment is
received. 

* 75 days past due—Bank of America is to assess the account a late fee. 
The late fee charged by Bank of America was $20 through August 9, 2001. 
Effective August 10, 2001, Bank of America increased the late fee to 
$29 under the terms of the contract modification between Bank of 
America and DOD. Bank of America is allowed to assess an additional 
late fee every 30 days until the account is made current or charged 
off. 

* 90 days past due—The APC is to issue a 90-day delinquency notification
memorandum to the cardholder, the cardholder’s immediate supervisor,
and the company commander (or unit director). The company commander is 
to initiate an investigation into the delinquency and take appropriate 
action, at his or her discretion. At the same time, Bank of America is 
to send a “due process letter” to the cardholder providing notice that 
the account will be canceled if payment is not received within 30 days 
unless he or she enters into a payment plan, disputes charge(s) in 
question, or declares bankruptcy. 

* 120 days past due—The APC is to issue a 120-day delinquency 
notification memorandum to the cardholder’s commanding officer. At
the same time, Bank of America is to send a pre-cancellation letter to 
the cardholder. At 126 days past due, the account is to be canceled by 
Bank of America. Beginning in October 2001, once accounts were 120 days 
past due, Bank of America began sending files to DFAS listing these
accounts for salary offset. 

* 180 days past due—Bank of America is to send a “pre-charge off” or 
last call letter to the cardholder informing him or her that Bank of 
America will charge off the account and report the cardholder to a 
credit bureau if payment is not received. A credit bureau is a service 
that reports the credit history of an individual. Banks and other 
businesses assess the credit-worthiness of an individual using credit 
bureau reports. 

* 210 days past due—Bank of America is to charge off the delinquent
account and, if the balance is $50 or greater, report it to a credit 
bureau. 

Some accounts are pursued for collection by Bank of America’s recovery
department, others are sent to attorneys or collection agencies for
recovery. The delinquency management process can be suspended when a
cardholder’s APC informs Bank of America that the cardholder is on
official travel, but is unable to submit vouchers and timely pay his or 
her account, through no fault of his or her own. Under such 
circumstances, the APC is to notify the Bank of America that the 
cardholder is in mission-critical status. Activating this status 
precludes Bank of America from identifying the cardholder’s account as 
delinquent until 45 days after such time as the APC determines the 
cardholder is to be removed from mission-critical status. According to 
Bank of America, approximately 800 to 1,000 cardholders throughout DOD 
were in this status at any given time throughout fiscal year 2001. 

[End of section] 

Appendix II: Objectives, Scope, and Methodology: 

Pursuant to a joint request by the Chairman and Ranking Minority Member
of the Subcommittee on Government Efficiency, Financial Management and 
Intergovernmental Relations, House Committee on Government Reform, and 
the Ranking Minority Member of the Senate Committee on Finance, we 
audited the controls over the issuance, use, and monitoring of 
individually billed travel cards and associated travel processing and
management for the Department of the Army. Our assessment covered: 

* the reported magnitude and impact of delinquent and charged-off Army
travel card accounts for fiscal year 2001 and the first 6 months of 
fiscal year 2002, along with an analysis of causes and related 
corrective actions; 

* an analysis of the universe of Army travel card transactions during 
fiscal year 2001 to identify potentially fraudulent and abusive 
activity related to the travel card; 

* the Army’s overall management control environment and the design of 
selected Army travel program management controls, including controls 
over (1) travel card issuance, (2) APCs’ capacity to carry out assigned
duties, (3) limiting card activation to meet travel needs, (4) 
transferred and orphan accounts, (5) procedures for terminating 
accounts when cardholders leave military service, (6) segregation of 
duties to ensure that no one individual can control all aspects of a 
travel transaction, and (7) access to Bank of America’s travel card 
database; and; 

* tests of statistical samples of transactions to assess the 
implementation of key management controls and processes for four Army 
units’ travel activity, including (1) travel order approval, (2) 
accuracy of travel voucher payments, (3) timely submission of travel 
vouchers by travelers to the approving officials, and (4) timely 
processing and reimbursement of travel vouchers by the Army and DOD. 

We used as our primary criteria applicable laws and regulations, 
including the Travel and Transportation Reform Act of 1998 (Public Law 
105-264), [Footnote 32] the GSA’s Federal Travel Regulation, [Footnote 
33] and the DOD FMR, Volume 9, Travel Policies and Procedures. We also 
used as criteria our Standards for Internal Control in Federal 
Government [Footnote 34] and our Guide to Evaluating and Testing 
Controls Over Sensitive Payments. [Footnote 35] To assess the 
management control environment, we applied the fundamental concepts
and standards in our internal control standards to the practices 
followed by management in the seven areas reviewed. 

To assess the magnitude and impact of delinquent and charged-off
accounts, we compared the Army’s delinquency and charge-off rates to
other DOD services and federal agencies. We also analyzed the trends in
the delinquency and charge-off data from fiscal year 2000 through the 
first half of fiscal year 2002. 

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

To assess the overall control environment for the travel card program 
at the Department of the Army, we obtained an understanding of the 
travel process, including travel card management and oversight, by 
interviewing officials from the Office of the Under Secretary of 
Defense (Comptroller); the Department of the Army; DFAS; Bank of 
America; and GSA. We reviewed applicable policies and procedures and 
program guidance they provided. We visited four Army units to gain an 
understanding of the travel process, including the management of travel 
card usage and delinquency. We visited the DFAS Orlando location to 
gain an understanding of the voucher review and payment process used 
for two of the four Army locations we tested. We also assessed actions 
taken to reduce the severity of travel card delinquencies and charge-
offs. Further, we contacted one of the three largest U.S. credit 
bureaus to obtain credit history data and information on how credit 
scoring models are developed and used by the credit industry for credit 
reporting. 

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

At each of the Army locations we audited we also used our review of
policies and procedures and the results of our understanding of travel
processes and other observations to assess the effectiveness of controls
over segregation of duties among persons responsible for preparing 
travel vouchers, processing and approving travel vouchers, and 
certifying travel voucher payments. In addition, to ensure that work 
responsibilities were properly segregated at the California National 
Guard so that no single individual can perform or control all key 
aspects of computer-related operations, we performed a limited review 
of security controls in place at that location over access to DOD’s 
Integrated Automated Travel System (IATS). California National Guard 
personnel used this system to record and process travel vouchers. We 
interviewed managers, users, and administrators of IATS at the 
California National Guard and DFAS’s Financial Services Office. We also 
conducted limited observations of the IATS keying process at the 
California National Guard. 

We also reviewed computer system access controls for EAGLS—the system 
used by Bank of America to maintain DOD travel card data. To determine 
whether these controls over EAGLS were effective, we interviewed Bank 
of America officials and observed EAGLS functions and capabilities. 

To test the implementation of key controls over individually billed Army
travel card transactions processed through the travel system—including
the travel order, travel voucher, and payment processes—we obtained and
used the database of fiscal year 2001 Army travel card transactions.
Because our objective was to test controls over travel card expenses, we
excluded credits and miscellaneous debits (such as fees) from the
population of transactions used to select random samples of travel card
transactions to review at each of the four Army units we audited. Each
sampled transaction was subsequently weighted in the analysis to account
statistically for all charged transactions at each of the four units, 
including those that were not selected. Table 8 presents the sites 
selected and the number of fiscal year 2001 transactions at each 
location. [Footnote 36] 

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

Army unit tested: Ft. Drum, Forces Command; 
Number of fiscal year 2001 travel transactions[A]: 109,443; 
Dollar value of fiscal year 2001 travel transactions[A]: $7,281,275. 

Army unit tested: Ft. Bragg, Forces Command; 
Number of fiscal year 2001 travel transactions[A]: 128,583; 
Dollar value of fiscal year 2001 travel transactions[A]: $10,648,419. 

Army unit tested: Ft. Bragg, Special Operations Command; 
Number of fiscal year 2001 travel transactions[A]: 35,021; 
Dollar value of fiscal year 2001 travel transactions[A]: $5,035,743. 

Army unit tested: California National Guard; 
Number of fiscal year 2001 travel transactions[A]: 58,797; 
Dollar value of fiscal year 2001 travel transactions[A]: $5,035,457. 

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

[End of table] 

We performed tests on statistical samples of travel card transactions at
each of the four case study sites to assess whether the system of 
internal control over the transactions was effective, as well as to 
provide an estimate of the percentage of transactions by unit that were 
not for official government travel. For each transaction in our 
statistical sample, we assessed whether (1) there was an approved 
travel order prior to the dates of travel, (2) the travel voucher 
payment was accurate, (3) the travel voucher was submitted within 5 
days of the completion of travel, and (4) the travel voucher was paid 
within 30 days of the submission of an approved travel voucher. We 
considered transactions not related to authorized travel to be abuse 
and incurred for personal purposes. The results of the samples of these 
control attributes, as well as the estimate for personal use—or 
abuse—related to travel card activity, [Footnote 37] can be projected
to the population of transactions at the respective case study site 
only, not to the population of travel card transactions for all Army 
cardholders. 

We concluded that a control was effective if both the projected point
estimate of the failure rate and the upper bound of a one-sided 95 
percent confidence interval associated with the estimate were no more 
than 5 percent. We concluded that a control was ineffective if both the 
point estimate of the failure rate and the lower bound of a one-sided 
95 percent confidence interval associated with the estimate were 
greater than 10 percent. Any point estimate between 5 and 10 percent 
would generate an assessment of partially effective. Tables 9 through 
11 show (1) the results of our tests of key attributes, (2) the point 
estimates of the failure rates for the attributes, and (3) the two-
sided 95 percent confidence intervals for the failure rates for each 
attribute. Table 9 shows the results of our test of the key control 
related to the authorization of travel (approved travel orders were 
prepared prior to dates of travel). 

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

Army unit tested: Ft. Bragg, Forces Command; 
Number of failed transactions: 6 of 96; 
Estimated failure rate (95% confidence interval): 6.2% (2.3%, 13.1%). 

Army unit tested: Ft. Drum, Forces Command; 
Number of failed transactions: 0 of 96; 
Estimated failure rate (95% confidence interval): 0% (0%, 3.8%). 

Army unit tested: Ft. Bragg, Special Operations Command; 
Number of failed transactions: 3 of 96; 
Estimated failure rate (95% confidence interval): 3.1% (.6%, 8.9%). 

Army unit tested: California National Guard; 
Number of failed transactions: 1 of 96; 
Estimated failure rate (95% confidence interval): 1.04% (.03%, 5.7%). 

[End of table] 

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

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

Army unit tested: Ft. Bragg, Forces Command; 
Number of failed transactions: 18 of 96; 
Estimated failure rate (95% confidence interval): 18.8% (11.5%, 28.0%). 

Army unit tested: Ft. Drum, Forces Command; 
Number of failed transactions: 10 of 96; 
Estimated failure rate (95% confidence interval): 10.4% (5.1%, 18.3%). 

Army unit tested: Ft. Bragg, Special Operations Command; 
Number of failed transactions: 7 of 96; 
Estimated failure rate (95% confidence interval): 7.3% (3.0%, 14.4%). 

Army unit tested: California National Guard; 
Number of failed transactions: 18 of 43; 
Estimated failure rate (95% confidence interval): 41.9% (27.0%, 57.9%). 

[End of table] 

Table 11 shows the results of our tests of two key controls related to 
timely processing of claims for reimbursement of expenses related to 
government travel—timely submission of the travel voucher by the 
employee and timely approval and payment processing of the travel 
voucher. 

Table 11: Estimate of Fiscal Year 2001 Transactions That Failed Control 
Tests for Timely Submission and Processing of Travel Vouchers: 

Army unit tested: Ft. Bragg, Forces Command; 
Timely voucher submission by employee (5-day rule), Number of failed 
transactions: 37 of 96; 
Timely voucher submission by employee (5-day rule), Estimated failure 
rate (95% confidence interval): 38.5% (28.8%, 49.0%); 
Timely reimbursement to the traveler (30-day rule), Number of failed 
transactions: 8 of 96; 
Timely reimbursement to the traveler (30-day rule), Estimated failure 
rate (95% confidence interval): 8.3% (3.7%, 15.8%). 

Army unit tested: Ft. Drum, Forces Command; 
Timely voucher submission by employee (5-day rule), Number of failed 
transactions: 21 of 96; 
Timely voucher submission by employee (5-day rule), Estimated failure 
rate (95% confidence interval): 21.9% (14.1%, 31.5%); 
Timely reimbursement to the traveler (30-day rule), Number of failed 
transactions: 5 of 96; 
Timely reimbursement to the traveler (30-day rule), Estimated failure 
rate (95% confidence interval): 5.2% (1.7%, 11.7%). 

Army unit tested: Ft. Bragg, Special Operations Command; 
Timely voucher submission by employee (5-day rule), Number of failed 
transactions: 29 of 96; 
Timely voucher submission by employee (5-day rule), Estimated failure 
rate (95% confidence interval): 30.2% (21.2%, 40.4%); 
Timely reimbursement to the traveler (30-day rule), Number of failed 
transactions: 7 of 96; 
Timely reimbursement to the traveler (30-day rule), Estimated failure 
rate (95% confidence interval): 7.3% (3.0%, 14.4%). 

Army unit tested: California National Guard; 
Timely voucher submission by employee (5-day rule), Number of failed 
transactions: 12 of 43; 
Timely voucher submission by employee (5-day rule), Estimated failure 
rate (95% confidence interval): 27.9% (15.3%, 43.7%); 
Timely reimbursement to the traveler (30-day rule), Number of failed 
transactions: 26 of 43; 
Timely reimbursement to the traveler (30-day rule), Estimated failure 
rate (95% confidence interval): 60.5% (44.4%, 75.0%). 

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

[End of section] 

Appendix III: Army Major Command Delinquency Rates: 

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

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

Command[A]: U.S. Army Forces Command; 
June 2000: 22.2; 
September 2000: 25.1; 
December 2000: 28.7; 
March 2001: 23.1; 
June 2001: 18.6; 
September 2001: 22.1; 
December 2001: 30.5; 
March 2002: 23.7. 

Command[A]: U.S. Army Pacific Command; 
June 2000: 19.5; 
September 2000: 25.1; 
December 2000: 28.2; 
March 2001: 19.8; 
June 2001: 15.0; 
September 2001: 18.7; 
December 2001: 22.5; 
March 2002: 18.9. 

Command[A]: U.S. Army National Guard; 
June 2000: 16.9; 
September 2000: 16.4; 
December 2000: 22.9; 
March 2001: 13.6; 
June 2001: 13.4; 
September 2001: 16.2; 
December 2001: 20.9; 
March 2002: 18.4. 

Command[A]: U.S. Army Europe and 7th Army Command; 
June 2000: 17.8; 
September 2000: 20.4; 
December 2000: 21.1; 
March 2001: 15.8; 
June 2001: 13.0; 
September 2001: 17.1; 
December 2001: 22.5; 
March 2002: 16.9. 

Command[A]: U.S. Army orphan[B]; 
June 2000: 16.2; 
September 2000: 22.2; 
December 2000: 40.1; 
March 2001: 38.1; 
June 2001: 23.1; 
September 2001: 20.4; 
December 2001: 24.4; 
March 2002: 16.9; 

Command[A]: U.S. Army Reserve; 
June 2000: 14.3; 
September 2000: 16.0; 
December 2000: 20.9; 
March 2001: 13.1; 
June 2001: 11.6; 
September 2001: 11.9; 
December 2001: 21.4; 
March 2002: 15.3. 

Command[A]: U.S. Army Recruiting Command; 
June 2000: 22.5; 
September 2000: 19.2; 
December 2000: 17.4; 
March 2001: 20.4; 
June 2001: 13.6; 
September 2001: 13.7; 
December 2001: 10.6; 
March 2002: 13.1. 

Command[A]: U.S. Army Special Operations Command; 
June 2000: 16.9; 
September 2000: 17.4; 
December 2000: 17.9; 
March 2001: 9.9; 
June 2001: 10.1; 
September 2001: 10.6; 
December 2001: 16.6; 
March 2002: 12.0. 

Command[A]: U.S. Army Operating Agency 22[C]: 
June 2000: 8.7; 
September 2000: 11.1; 
December 2000: 11.4; 
March 2001: 7.4; 
June 2001: 7.0; 
September 2001: 8.7; 
December 2001: 12.2; 
March 2002: 9.0. 

Command[A]: U.S. Army Training and Doctrine Command; 
June 2000: 10.8; 
September 2000: 11.7; 
December 2000: 13.9; 
March 2001: 8.8; 
June 2001: 8.4; 
September 2001: 10.2; 
December 2001: 12.1; 
March 2002: 8.2. 

Command[A]: U.S. Army Medical Corps; 
June 2000: 12.3; 
September 2000: 13.9; 
December 2000: 14.8; 
March 2001: 9.9; 
June 2001: 8.1; 
September 2001: 8.0; 
December 2001: 12.3; 
March 2002: 7.7. 

Command[A]: U.S. Army Intelligence and Security Command; 
June 2000: 10.3; 
September 2000: 12.1; 
December 2000: 11.9; 
March 2001: 5.9; 
June 2001: 5.6; 
September 2001: 6.0; 
December 2001: 4.2; 
March 2002: 5.8. 

Command[A]: U.S. Army Corps of Engineers; 
June 2000: 4.8; 
September 2000: 5.6; 
December 2000: 6.5; 
March 2001: 4.5; 
June 2001: 3.3; 
September 2001: 3.9; 
December 2001: 5.8; 
March 2002: 3.6. 

Command[A]: U.S. Army Material Command; 
June 2000: 3.4; 
September 2000: 3.6; 
December 2000: 4.4; 
March 2001: 2.1; 
June 2001: 2.1; 
September 2001: 2.3; 
December 2001: 2.4; 
March 2002: 1.5. 

Command[A]: All other commands combined; 
June 2000: 8.5; 
September 2000: 9.7; 
December 2000: 11.1; 
March 2001: 8.4; 
June 2001: 5.9; 
September 2001: 6.8; 
December 2001: 7.2; 
March 2002: 6.9. 

Command[A]: Army-wide; 
June 2000: 13.9; 
September 2000: 15.5; 
December 2000: 18.5; 
March 2001: 13.3; 
June 2001: 10.7; 
September 2001: 12.5; 
December 2001: 16.6; 
March 2002: 12.8. 

[A] Commands are ranked by the largest percentage of dollars delinquent 
as of March 31, 2002. Commands with a March 31, 2002, balance 
outstanding under $1 million have been combined into “All other 
commands combined.” 

[B] U.S. Army orphan accounts are (1) Army travel card accounts that 
are not under the purview of any APC and (2) accounts Banks of America 
inherited from the previous government travel card contractor that were 
not linked to any Army command and accounts for which the accountable 
APC left or was relocated without having a replacement designated. 

[C] U.S. Army Operating Agency 22 consists of various Army headquarters 
and administrative offices, such as the Secretary of the Army, the 
Assistant Secretary of the Army for Financial Management and 
Comptroller, the Army Audit Agency, and the Army Judge Advocate 
General. 

Source: GAO calculation based on information provided by Bank of 
America. 

[End of table] 

[End of section] 

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

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

Table 13: Army Military Grades, Ranks, and Associated Basic Pay Rates 
for Fiscal Year 2001: 

Military grade: Enlisted personnel: E-1 to E-3; 
Military rank: Private; 
2001 pay: $11,033 to $14,449. 

Military grade: Enlisted personnel: E-4 to E-6; 
Military rank: Corporal to Staff Sergeant; 
2001 pay: $17,739 to $26,253. 

Military grade: Enlisted personnel: E-7 to E-9; 
Military rank: Platoon Sergeant to Sergeant Major; 
2001 pay: $31,563 to $46,445, 

Military grade: Officers[A]: WO-1 to WO-5; 
Military rank: Warrant Officer; 
2001 pay: $29,302 to $60,152. 

Military grade: Officers[A]: O-1 to O-3; 
Military rank: First Lieutenant, Second Lieutenant, Captain; 
2001 pay: $26,731 to $45,339. 

Military grade: Officers[A]: O-4 to O-6; 
Military rank: Major, Lieutenant Colonel, Colonel; 
2001 pay: $56,635 to $84,317. 

Military grade: Officers[A]: O-4 to O-6; 
Military rank: Major, Lieutenant Colonel, Colonel; 
2001 pay: $56,635 to $84,317. 

Military grade: Officers[A]: O-7 to O-10; 
Military rank: General; 
2001 pay: $98,960 to $132,826 

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

Source: U.S. Army. 

[End of table] 

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

Civilian grade: General schedule employees: GS-1 to GS-3; 
2001 pay: $14,244 to $22,712. 

Civilian grade: General schedule employees: GS-4 to GS-5; 
2001 pay: $19,616 to $28,535. 

Civilian grade: General schedule employees: GS-6 to GS-8; 
2001 pay: $24,463 to $39,143. 

Civilian grade: General schedule employees: GS-9 to GS-12; 
2001 pay: $33,254 to $62,686. 

Civilian grade: General schedule employees: GS-13 to GS-15; 
2001 pay: $57,345 to $103,623. 

Civilian grade: Senior Executive Service: ES-01 to ES-06; 
2001 pay: $109,100 to $125,700 

Source: Office of Personnel Management. 

[End of table] 

[End of section] 

Appendix V: Comments from the Department of Defense: 

Under Secretary Of Defense: 
Comptroller: 
1100 Defense Pentagon: 
Washington, DC 20301-1100: 

September 30, 2002: 

Mr. Gregory D. Kutz: 
Director: 
Financial Management and Assurance: 
U.S. General Accounting Office: 
Washington, DC 20548: 

Dear Mr. Kutz: 

This is the Department of Defense (DoD) response to the General 
Accounting Office (GAO) draft report, "GAO-02-986 "Travel Cards: 
Control Weaknesses Leave Army Vulnerable to Fraud and Abuse," August 1, 
2002 (GAO Code 192066)." 

The Department reviewed the draft report and recognizes the intent of 
the recommendations. The Department takes travel and purchase charge 
card abuse and misuse very seriously. At the direction of Secretary 
Rumsfeld, I established a DoD Charge Card Task Force on March 2002 to 
review and analyze the problems with the DoD charge card programs. The 
Task Force completed its review on June 27, 2002, and has developed a 
full range of reforms. Many are well underway. 

We are taking actions to strengthen and enforce internal controls and 
increase the tools available to managers for enforcing those controls. 
These include employing data mining technologies to detect fraudulent 
or abusive charge card transactions. We are also increasing management 
emphasis and personal accountability, enhancing the capability of the 
workforce to accomplish assigned charge card responsibilities to 
include training and recommending minimum skills required for 
performing essential charge card management tools. 

To date, I have directed the cancellation of approximately 400,000 
inactive travel charge card accounts. Travel charge cards in the hands 
of individuals without legitimate need are an unnecessary 
administrative burden and could lead to potential abuse and misuse. We 
have taken other actions including the involuntarily deduction of 
delinquent balances from the pay of military members and civilian 
employees who fail to pay their delinquent travel charge accounts. We 
also are looking at alternatives to the travel charge card such as 
debit and stored value cards. 

Regarding this specific report on the Army's Travel Card program, the 
Department concurs or partially concurs with the majority of the 
recommendations. As mentioned above, many actions have already been 
taken or will soon be taken to implement a number of the 
recommendations. In its draft report, the GAO recommends that the 
Secretary of the Army "establish appropriate, consistent Army-wide 
policy on disciplinary actions that are to be taken with respect to 
fraudulent and abusive activity and delinquency related to the travel 
card." The Department would be inclined to concur with the GAO's 
recommendation to establish, by policy, the nature of the disciplinary 
action to be taken in cases involving either civilian employees or 
military personnel. Nevertheless, in practice, the Department is 
limited by current law as to what further actions it can take in this 
regard. 

Please note that the Army already has a strong Army-wide policy in 
place against theft, fraud, and other intentionally dishonest conduct 
on the part of civilian employees. This policy states that: "It is the 
policy of the Army that any civilian employee found to have engaged in 
theft, fraud, or other intentionally dishonest conduct against the Army 
will be considered for removal from federal service. Any lesser penalty 
will require justifiable mitigating circumstances. It is the duty of 
all supervisors to ensure that this policy is implemented." It would be 
inconsistent with current law for the Army to establish further 
mandatory requirements that impose specific disciplinary actions on 
individual employees. 

With respect to military personnel, commanders at all levels are 
required to exercise their individual discretion in determining the 
appropriate discipline warranted. Orders, policies, or guides that 
infringe upon a commander's discretion are prohibited under the Uniform 
Code of Military Justice. The Manual for Courts-Martial establishes 
those permissible policies and factors for commanders to consider when 
determining appropriate dispositions and punishments for military 
personnel. The Department's civilian leadership is prohibited from 
implementing policies that serve to mandate or require certain 
disciplinary actions or forms of punishment. 

For these reasons, we suggest that the recommendation focus on policies 
that establish when and how commanders are notified of suspected fraud 
or abuse involving travel cards. The enclosure includes detailed 
comments on the recommendations contained in the report. 

The Department appreciates the opportunity to comment on the draft 
report. My staff point of contact on this matter is Mr. Ron Massengill. 
He may be contacted by e-mail: massengr@osd.pentagon.mil or by 
telephone at (703) 697-1101. 

Sincerely, 

Dov S. Zakheim: 

Enclosure: 

GAO Draft Report, GAO-02-986/Code 192066: 

"Travel Cards: Control Weaknesses Leave Army Vulnerable To Fraud And 
Abuse," August 1, 2002: 

Department Of Defense Comments To The GAO Recommendations: 

Overall GAO Recommendation: To strengthen the overall control 
environment and improve internal control for the Army's travel card 
program, the GAO recommended that the Secretary of the Army take the 
following actions. The GAO also recommended that the Under Secretary of 
Defense (Comptroller) assess the following recommendations, and where 
applicable incorporate them into or supplement the DoD Charge Card Task 
Force recommendations to improve travel card policies and procedures 
throughout DoD. 

Recommendation 1: Travel Card Issuance: 

The GAO recommended that the Secretary of the Army establish specific 
policies and procedures governing the issuance of individual travel 
cards to military and civilian employees, including the following: 

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

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

* Individuals with prior credit problems that are denied a travel card 
should either be required to use their own credit card to travel or be 
provided alternative means of travel funding, such as advances. 

* Individuals with no prior credit history should be provided with a 
"restricted" travel card with low credit and ATM limits. 

* Develop procedures to periodically evaluate card usage and close 
accounts of infrequent travelers, which will minimize exposure to fraud 
and abuse. 

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

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

* Develop comprehensive, consistent Army-wide initial training and 
periodic refresher training for travel cardholders, focused on the 
purpose of the program and appropriate uses of the card. The training 
should emphasize the prohibitions on personal use of the card, 
including for 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. (GAO 
Draft Report/pp. 66-68) 

DOD Response: Concur. The Army has either implemented or will soon take 
action to implement the recommended actions. 

* The current process does consider the results of credit checks and 
those with prior credit problems are issued a restricted travel card. 
Commanders must have the flexibility to issue restricted travel cards 
to key personnel on a case-by-case basis. Mandatory use of the 
government travel card is required by the Travel and Transportation 
Reform Act (TTRA) of 1998 (PL 105-264). 

* The Department will evaluate the feasibility of extended use of 
credit checks. There are issues arising from the Fair Credit Reporting 
Act (15 U.S.C. 1681b) that must be addressed. 

* Individuals who decline a credit check, or whose credit check reveals 
a low credit score may still have travel requirements that meet the 
mandatory use conditions of the TTRA. Those individuals are assigned a 
restricted card with half of the spending limit of a standard card. 

* The travel charge card contractor is prohibited from discussing 
credit scores with the APC, but has in the past, recommended or 
strongly recommended issuance of a restricted product based on the 
results of the credit check. This recommendation has been accepted by 
supervisors/commanders in over 99% of the cases. 

* The Department is taking additional measures to address delinquencies 
and abuse, and is exploring alternatives to the charge card that may be 
applicable in situations where there is a poor credit history or no 
credit history. Until those measures are evaluated and available, the 
Department must continue to meet its travel needs through the existing 
charge card program in accordance with the TTRA. 

* Army infrequent traveler accounts are among the 400,000 accounts that 
the Under Secretary of Defense (Comptroller) has directed be canceled 
by the travel charge card contractor in his memorandum dated July 19, 
2002, in accordance with a recommendation of the Charge Card Task 
Force. 

* By September 30, 2002, the Army intends to instruct commanders/ 
supervisors to conduct semi-annual reviews of card usage and cancel 
cards of infrequent travelers. 

* The Army will evaluate the feasibility of requiring the activation/ 
deactivation of card inventories based on the issuance of travel 
orders. In accordance with a recommendation of the Charge Card Task 
Force, the Program Office of the Defense Travel System is evaluating 
whether and how an activation/deactivation capability could be added to 
the Defense Travel System. Currently, there is no automated way to 
accomplish this. 

* By September 30, 2002, the Army intends that the Army travel card 
program manager, will survey major commands to find out which of them 
have high incidents of junior enlisted travel. Based on data such as 
frequency and duration of travel, grade and incidents of delinquency, 
will recommend actions to effectively control this segment of the card 
population. 

* By September 30, 2002, the Army intends to direct commanders and 
supervisors to ensure that cardholders receive training on the 
authorized use of the travel card prior to issuance. In addition to the 
current cardholder agreement, cardholder training available on the 
EAGLS Help Desk website will be used to meet this requirement. This 
training will be documented and, along with a statement of 
understanding signed by the cardholder, will be kept on record for 
future review. Also, in accordance with a recommendation of the Charge 
Card Task Force, a training Compact Disk (CD) is being developed to 
provide the results of the Task Force to travel charge card program 
officials and cardholders DoD wide. The CD is intended to be used both 
as training for new program officials/cardholders and as a quick 
reference tool when questions on proper use and prohibitions arise. 

Recommendation 2: Monitoring, Review, And Disciplinary Actions: 

The GAO recommended that the Secretary of the Army establish the 
following specific policies and procedures to strengthen controls and 
disciplinary actions for improper use of the travel card: 

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

* To avoid high APC turnover, Army should evaluate the feasibility of 
maximizing the use of civilian rather than military employees to serve 
the role of APC. 

* Establish guidance on APC span of control responsibilities so that 
such responsibilities are properly aligned with time available to 
ensure effective performance. 

* Establish procedures to provide assurance that APCs receive training 
on their APC responsibilities, including how to use EAGLS transaction 
reports and other available data to monitor cardholder use of the 
travel card--for example, reviewing account transactional histories to 
ascertain whether transactions are incurred during periods of 
authorized travel and appear to be appropriate travel expenses and from 
approved merchant category codes. 

* APCs should be trained to review EAGLS reports to identify 
cardholders that have written NSF checks for payment of their account 
balances, and refer the employee for disciplinary action. 

* Review, in conjunction with the travel charge card contractor, 
individuals with APC-level access to EAGLS to limit such access to only 
those with current APC duties. 

* Establish Army procedures detailing how APCs should carry out their 
responsibility to monitor card usage for all cardholders assigned to 
them. Included in the procedures should be development of a data-mining 
program enabling APCs to scan a large number of transactions, and 
target potentially inappropriate transactions for further review. 

* Establish a requirement for assessing performance of travel 
monitoring and other APC duties as a rating factor on all APCs' 
performance evaluations. 

* Establish an Army requirement for cognizant APCs to retain records 
documenting any cardholder's fraudulent or abusive usage of the travel 
card and require this information to be provided to the gaining APC 
when the cardholder is transferred. 

* Establish appropriate, consistent Army-wide policy on disciplinary 
actions that are to be taken with respect to fraudulent and abusive 
activity and delinquency related to the travel card. 

* Refer any travel cardholders with secret or higher level of security 
clearance for whom financial problems related to the travel card are 
detected, to Army CAF for investigation as to whether the individual 
should continue to be entrusted with a secret or higher clearance. 

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

* Strengthen procedures for any employee discharging from service so 
that all cards are obtained from the holder, accounts are closed, and 
repayment of any outstanding debts is arranged. 

* Backup procedures should be developed to identify active cards of 
departed cardholders, including comparing cardholder and payroll data. 
(GAO Draft Report/pp.68-70). 

DOD Response: Partially concur. The Army has either implemented or will 
soon take action to implement most of these recommendations. The 
Department has concerns, however, about the recommendations to: (1) 
have APCs identify cardholders with NSF checks and refer them for 
disciplinary action, and (2) establish an Army-wide disciplinary action 
policy for abusive travel card activity. 

* Not later than September 30, 2002, the Army intends to direct 
commanders to ensure that individuals selected to be Agency Program 
Coordinators (APC) possess the knowledge, skills, and abilities to 
carry out the responsibilities of the position. As part of this 
direction, the Army will require that APCs are fully trained prior to 
assuming their duties and receive refresher training on an annual 
basis. This training will be documented for future audit review. 
Training will include a comprehensive block on EAGLS and, in 
particular, the reporting tool as a means to identify abuse and misuse 
and will be provided by the travel charge card contractor trainers or 
qualified Army resources (e.g., HQ DA, MACOM). 

* The Army will instruct commanders to determine the specific span of 
control needed to provide effective account oversight to meet program 
requirements and mission needs and to ensure that the APC function is 
adequately staffed. 

* The Army will evaluate the feasibility of using data from various 
databases (e.g., personnel, pay systems) to verify status and location 
of separating/departed cardholders. In a memorandum dated July 19, 
2002, the Under Secretary of Defense (Comptroller) directed the 
cancellation of existing "orphan" status accounts and established the 
requirement to continually review and cancel these accounts on a semi-
annual basis. Army cardholder accounts currently in the "orphan 
hierarchy" were deactivated on August 13, 2002, and, if the cardholder 
does not respond with requested information, will be canceled on 
October 11, 2002. 

* The Vice Chief of Staff, Army wrote senior Army commanders on August 
13, 2002, on the urgent need to reduce the Army's unacceptably high 
rate of cardholder delinquency and to eliminate card misuse. 

* In a memorandum dated August 9, 2002, the Under Secretary of Defense 
(Comptroller) issued guidance to all Services and Agencies to validate 
the need for APC access to EAGLS system and delete unneeded access. The 
Army is currently working to eliminate ex-APCs from the active EAGLS 
file. The estimated completion date for this effort is September 30, 
2002. 

* Partially concur with the recommendation that "APCs should be trained 
to review EAGLS reports to identify cardholders that have written NSF 
checks for payment of their account balances, and refer the employee 
for disciplinary action." 
- Not later than September 30, 2002, the Army intends to publish 
guidance, outlining general to specific APC responsibilities. It will 
allow commanders to add/delete specific actions to meet their unique 
mission requirements. The guidance will stress that the APC duty should 
be considered a principal duty and that consideration should be given 
to maximizing the use of the civilian workforce, where available, to 
serve as APC. The Army will require APCs to notify supervisors/ 
commanders of incidents of apparent abuse, misuse, delinquency, and 
other events (e.g., NSF checks) that may indicate financial problems 
and may require investigation to determine if the incidents jeopardize 
maintaining a security clearance. In accordance with a recommendation 
of the DoD Charge Card Task Force, the Office of the Inspector General, 
DoD, and the Defense Finance and Accounting Service are working 
cooperatively to determine whether or not data mining techniques can be 
effectively applied to travel card program. Data has been requested 
from the travel charge card contractor for use in developing initial 
indicators.
- However, it should be understood that it is commanders of military 
members, not APCs who make determinations as to what action is 
appropriate based on all the facts. For example, every case involving a 
"NSF" check has its own set of facts. Appropriate actions may include 
oral counseling, written counseling, revocation of the travel card or 
more permanent adverse administrative actions that impact the soldiers 
official record. In serious abuse cases, criminal prosecution under the 
UCMJ may be appropriate. Not every case, however, is a referral "for 
disciplinary action." 

* The Department would be inclined to concur with the GAO's 
recommendation to establish, by policy, the nature of the disciplinary 
action to be taken in cases involving either civilian employees or 
military personnel. Nevertheless, in practice, the Department is 
limited by current law as to what further actions it can take in this 
regard. 
- Please note that the Army already has a strong Army-wide policy in 
place against theft, fraud, and other intentionally dishonest conduct 
on the part of civilian employees. This policy states that: "It is the 
policy of the Army that any civilian employee found to have engaged in 
theft, fraud, or other intentionally dishonest conduct against the Army 
will be considered for removal from federal service. Any lesser penalty 
will require justifiable mitigating circumstances. It is the duty of 
all supervisors to ensure that this policy is implemented." It would be 
inconsistent with current law for the Army to establish further 
mandatory requirements that impose specific disciplinary actions on 
individual employees. 
- With respect to military personnel, commanders at all levels are 
required to exercise their individual discretion in determining the 
appropriate discipline warranted. Orders, policies, or guides that 
infringe upon a commander's discretion are prohibited under the Uniform 
Code of Military Justice. The Manual for Courts-Martial establishes 
those permissible policies and factors for commanders to consider when 
determining appropriate dispositions and punishments for military 
personnel. The Department's civilian leadership is prohibited from 
implementing policies that serve to mandate or require certain 
disciplinary actions or forms of punishment. 

* Concur with the recommendation to establish a requirement for 
assessing performance of travel monitoring and other APC duties as a 
rating factor on all APC performance evaluations. The Department will 
pursue the establishment of APC duties as a rating factor on APC 
performance evaluations in all DoD Components. 

* Concur with the recommendation to refer any travel cardholders with 
secret or higher level of security clearance to Army CAF for 
investigation as to whether the individual should continue to be 
entrusted with a secret or higher clearance. In accordance with a 
recommendation of the Charge Card Task Force, the Office of the Under 
Secretary of Defense (Comptroller) is working with the Office of the 
Assistant Secretary of Defense (Command, Control, Communications and 
Intelligence) to provide guidance to the Components on the suspension 
of access to classified information due to abuse or misuse of 
government charge cards. 

* Concur with the recommendation to strengthen procedures for any 
employee discharging from Service so that all cards are obtained from 
the holder, accounts closed, and repayment of any outstanding debts is 
arranged. 
- For military personnel outprocessing at the Government Travel Card 
and Military Pay Stations, existing requirements are already identified 
in AR 600-8-101, Personnel Processing (In- and Out- and Mobilization 
Processing). All transitioning soldiers are required to complete these 
stations. The travel card is to be destroyed, and any unpaid debts 
processed. Government Travel Cards are also a part of the Installation 
Clearance Record check (DA Form 137-2-R, Item 13, DoD Travel Charge 
Card Program Coordinator, and Section C, Military Pay Processing, Item 
17, Debt Processing). Provisions are in place. 
- The Army has developed functional requirements for automated In and 
Out Processing systems for civilian employees. At present these 
functions are accomplished manually by staffs of local commanders who 
have developed checklists and procedures tailored to the requirements 
at each depot, arsenal or installation. The objective of developing a 
centralized In and Out Processing system is to reengineer and 
standardize the process and save workyears. This objective is part of 
the Army's plan for using technology to improve efficiency. We will 
review the military methodology for outprocessing and adjust our 
requirements to ensure consistency in both military and civilian 
processes when possible. 
- In accordance with a recommendation of the Charge Card Task Force, 
the Department is evaluating ways to ensure cards of those who separate 
from the Department are closed. In addition to requiring turn in of 
cards during routine checkout procedures, the Department is exploring 
how to best develop and distribute lists of separated employees to APCs 
to ensure cards are canceled. 

Recommendation 3: Voucher And Payment Processes: 

The GAO recommended that the Secretary of the Army, in partnership with 
the Director, Defense Finance Accounting Service, revise the travel 
voucher and payment process in the following areas by developing a 
process to monitor and track travel reimbursements that exceed the 30-
day requirement so that individuals not paid within the statutory 
period are paid late fees in accordance with the law. (GAO Draft 
Report/p.70) 

DOD Response: Partially concur. The current systems for processing and 
computing travel vouchers for the Army do not provide for an automated 
means of calculating interest due on vouchers where the reimbursement 
exceeded 30 days from the proper submission date. Manually determining 
and computing interest calculations would detract from the higher 
priority of ensuring vouchers are initially reviewed and paid on time. 
Individuals may submit supplemental vouchers for interest and late fees 
resulting from government error in processing of their voucher. The 
Defense Travel System currently being deployed automates the voucher 
submission process and thus, should further reduce the instances where 
reimbursements extend beyond 30 days. 

* In addition, by September 30, 2002, the Army intends to direct 
leaders at all levels, to ensure that: travelers are trained on the 
proper preparation of settlement claims; travel claims are filed within 
5 days of return from travel; approving officials expedite their review 
of travel claims; and units expedite submission of travel claims to the 
servicing DFAS site for payment. 

Recommendation 4: To resolve severe voucher process problems specific 
to one of the units audited, GAO recommended that the Commander of the 
California Army National Guard take the following actions. 

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

* Strengthen segregation of duties controls so that voucher examiners 
cannot prepare, validate, and receive payment for erroneous or 
fraudulent travel vouchers without detection. Improved controls should 
include eliminating the use of generic usernames and passwords for 
accessing the travel system. (GAO Draft Report/p.71) 

DOD Response: Concur. 

* The California Army National Guard (ARNG) processing times were 
unduly long but the situation have been corrected. The chart below 
reflects the processing time at the United States Property and Fiscal 
Office (USPFO) for California over the past year. The ARNG Operational 
Review Program (ORP) is designed to audit financial and logistical 
controls within State USPFOs. Travel is one of several areas examined. 
A metric, determining whether or not a state is meeting the required 30-
day payment window from the submission of a proper travel claim through 
review, processing and payment of the travel settlement, is being added 
to the audit checklist. The California National Guard will be examined 
under this program in fiscal year 2003. 

* The Integrated Automated Travel System (IATS), which is used for 
computation of travel payments, has systemic controls that segregate an 
examiners ability to compute, audit, certify, authorize, maintain and 
disburse. Automated segregation of duties is preferable, but sometimes 
impractical. Many offices do not have enough personnel assigned to be 
able to implement the automated feature as designed. Travel clerks must 
have several authorities in order to cover for office vacancies, 
illnesses and leave. However, although there may not be separation of 
duties in those states with small staffs, this does not eliminate the 
need for controls. The IATS generates management reports which aid in 
the detection of fraud. Additionally, if disbursements are made without 
travel orders being obligated, this would create unmatched 
disbursements that would be researched and the improper disbursements 
would be found. This control minimizes the opportunity for travel 
office employees to commit fraud. The USPFO for California will also 
periodically review the travel payment records of all voucher examiners 
to ensure no abuses have occurred or could occur undetected. A metric 
is being added to the ORP checklist to determine whether or not 
adequate procedures are in place to minimize the opportunity for travel 
clerks to commit fraud. The California Army National Guard has 
eliminated the practice of issuing generic usernames and passwords. The 
ORP checklist includes a metric evaluating a state's password control 
and protection practices and procedures. The California National Guard 
will be examined under this program in fiscal year 2003. 

Figure: USPFO In-house Travel Voucher Processing Time: 
(Measured from date of receipt to upload to DFAS Indianapolis): 
Average 24 days over the last 18 months: 
Average 4 days over the last 3 months (as of 9 Aug): 

[See PDF for image] 

This figure is a line chart depicting the following approximated data: 

Date: July 2001; 
Number of days: 18. 

Date: August 2001; 
Number of days: 33. 

Date: September 2001; 
Number of days: 36. 

Date: October 2001; 
Number of days: 30. 

Date: November 2001; 
Number of days: 34. 

Date: December 2001; 
Number of days: 54. 

Date: January 2002; 
Number of days: 52. 

Date: February 2002; 
Number of days: 41. 

Date: March 2002; 
Number of days: 25. 

Date: April 2002; 
Number of days: 4. 

Date: May 2002; 
Number of days: 3. 

Date: June 2002; 
Number of days: 5. 

Date: July 2002; 
Number of days: 1. 

[End of figure] 

[End of enclosure] 

[End of section] 

Footnotes: 

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

[2] We defined potentially fraudulent activity as any scheme, or 
pattern of activity, related to the use of a travel card in apparent 
violation of federal or state criminal code. For purposes of this 
report, the only cases we characterized as potentially fraudulent were 
those where cardholders wrote three or more nonsufficient fund checks, 
or wrote checks on closed accounts to pay their Bank of America bills. 
These cases are potentially fraudulent because they indicate a pattern 
of activity in apparent violation of one or more elements of federal or
state criminal code. In addition, for purposes of this report, we 
considered abusive travel card activity to include (1) personal use of 
the card—any use other than for official government travel—regardless 
of whether the cardholder paid the bill and (2) cases in which 
cardholders were reimbursed for official travel and then did not pay 
Bank of America, and thus benefiting personally. Some of the travel 
card activity that we categorized as abusive would be potentially 
fraudulent if it can be established that the cardholder violated any 
element of federal or state criminal code. 

[3] Throughout this report, we calculated delinquency rates using the 
proportion of dollars of accounts delinquent to the total dollars of 
accounts outstanding according to industry standards set by the Federal 
Financial Institutions Examination Council. 

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

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

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

[7] Cash advance fees are also referred to as automated teller machine 
(ATM) fees. ATMs allow cardholders to withdraw cash with a travel card. 
For each cash advance withdrawal, cardholders are charged a fee of a 
set amount or percentage of the amount of the withdrawal. 

[8] Net sales consist of all purchases and other charges less any 
credits, such as returns, other than payments to the accounts. Other 
charges include ATM use, traveler’s checks, and any other fees. 

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

[10] Sec. 2(d), Public Law 105-264, 112 Stat. 2350 (5 U.S.C. 5701 
note). 

[11] Cardholder debts to Bank of America are not subject to the Debt 
Collection Improvement Act of 1996, which is limited to the collection 
of certain debts owed the federal government. 

[12] 5 U.S.C. section 8346. 

[13] 5 U.S.C. section 8470. 

[14] 41 C.F.R. section 301-54.2. 

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

[16] Bank fraud is defined by 18 U.S.C. 1344 as any execution of, or 
attempt to execute, a scheme or artifice to defraud a financial 
institution or to obtain any of the moneys, funds, credits, assets, 
securities, or other assets owned by, or under the custody or control 
of, a financial institution, by means of false or fraudulent pretenses, 
representations, or promises. 

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

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

[19] Mission-critical status is a determination made by the APC that 
the cardholder’s credit card limit needs to be increased or the 
delinquency process needs to be suspended because the cardholder needs 
the card to travel, but is unable to obtain reimbursement—and, 
therefore, pay the bill—timely. 

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

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

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

[23] Bank of America also includes in this grouping accounts inherited 
from the previous government travel card contractor that were not 
linked to any Army command and accounts for which the accountable APC 
left or was relocated without having a replacement designated. 

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

[25] Per diem is a daily allowance paid to travelers in lieu of actual 
subsistence expenses. Per diem rates for various geographic areas are 
published by GSA. 

[26] DOD’s FMR provides that for long-term travel, cardholders are 
expected to file interim vouchers every 30 days. 

[27] Public Law. 105-264, Section 2 (g), 112 Stat. 2352 (Oct. 19, 
1998). 

[28] 41 C.F.R. Section 301-52.20. 

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

[30] DOD contracted with NationsBank of Delaware, N.A., which 
subsequently merged into the Bank of America, N.A., under a Tailored 
Task Order under the GSA Master Contract Award for the travel card 
program. The period of performance under the task order was November 
30, 1998, through November 29, 2000, with three 1-year options to 
renew. The task order also allowed for five additional 1-year options 
under the GSA master contract renewal provisions. 

[31] The act also requires agencies to pay cardholders a late payment 
fee if they do not reimburse cardholders within the 30-day period 
allowed. Specifically, Federal Travel Regulations prescribed by the 
Administrator of General Services require agencies to either (1) 
calculate late payment fees using the prevailing Prompt Payment 
Interest Rate beginning the 31st day after submission of a proper 
travel claim and ending on the date on which payment is made or (2) 
reimburse the traveler a flat fee of not less than the prompt pay 
amount, based on an agencywide average of travel claim payments. In 
addition to the fee required in the items above, the agency must also 
pay the traveler an amount equivalent to any late payment charge that 
the card contractor would have been able to charge the traveler had the 
traveler not paid the bill. 41 C.F.R. Section 301-52.20. 

[32] The Travel and Transportation Reform Act of 1998 (Public Law 105-
264, Oct. 19, 1998) states that, unless specially exempted, federal 
employees are required to use federal travel charge cards for all 
payments of expenses of official government travel, requires the 
government to reimburse employees who have submitted proper vouchers 
within 30 days of submission of the vouchers, and allows for the offset 
of pay for employees with undisputed travel card charge delinquencies 
in an amount up to 15-percent of the amount of disposable pay of the 
employee for a pay period. 

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

[34] U.S. General Accounting Office, Standards for Internal Control in 
the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 
1999). This document was prepared to fulfill our statutory requirement 
under the Federal Managers’ Financial Integrity Act to issue standards 
that provide the overall framework for establishing and maintaining 
internal control and for identifying and addressing major performance 
and management challenges and areas at greatest risk of fraud, waste, 
abuse, and mismanagement. 

[35] U.S. General Accounting Office, Guide to Evaluating and Testing 
Controls Over Sensitive Payments, GAO/AFMD-8.1.2 (Washington, D.C.: May 
1993). This document provides a framework for evaluating and testing 
the effectiveness of internal controls that have been established in 
various sensitive payment areas. 

[36] The populations from which we selected our samples included some 
transactions that were not supported by travel orders or vouchers, such 
as personal charges made by a cardholder. We excluded such transactions 
from our selections for travel order, voucher, and payment process 
controls. However, we included such transactions in order to project 
the percentage of personal use transactions. 

[37] At Ft. Bragg, Forces Command, we found that 85 of 189 transactions 
appeared to be personal (projecting to an estimated 45 percent with a 
95 percent confidence interval from 37.8 percent to 52.4 percent). At 
Ft. Drum, Forces Command, we found that 17 of 115 transactions appeared 
to be personal (projecting to an estimated 14.8 percent with a 95 
percent confidence interval from 8.9 percent to 22.6 percent). At Ft. 
Bragg, Special Operations, we found that 21 of 117 transactions 
appeared to be personal (projecting to an estimated 18 percent with a 
95 percent confidence interval from 11.5 percent to 26.1 percent). At 
the California National Guard we found that 49 of 166 transactions 
appeared to be personal (projecting to an estimated 29.5 percent with a 
95 percent confidence interval from 22.7 percent to 37.1 percent). 

[End of section] 

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