This is the accessible text file for GAO report number GAO-03-298 
entitled 'Travel Cards: Air Force Management Focus Has Reduced 
Delinquencies, but Improvements in Controls Are Needed' which was 
released on December 20, 2002.



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Report to Congressional Requesters:



December 2002:



TRAVEL CARDS:



Air Force Management Focus Has Reduced Delinquencies, but Improvements 

in Controls Are Needed:



GAO-03-298:



GAO Highlights:



Highlights of GAO-03-298, a report to Congressional requesters.  



Why GAO Did This Study:



Poor oversight and management of the Department of Defense (DOD) travel 

card program has led to high delinquency rates costing DOD millions in 

lost rebates and increased ATM fees. As a result, Congress asked GAO to 

report on (1) the magnitude, impact, and cause of delinquencies, (2) 
the 

types of fraudulent and abusive uses of travel cards, and (3) the 

effectiveness of internal controls over DOD’s travel card program. GAO 

previously reported on travel card management at the Army and Navy.  

This report focuses on travel card management at the Air Force.



What GAO Found:



Air Force management has reduced travel card delinquencies through 

greater command attention and the use of travel card audits to identify 

problems and needed corrective actions.  As of March 2002, the Air 
Force 

delinquency rate on average was about 5 percentage points lower than 
the 

rest of DOD and 1 percentage point higher than the federal civilian 

agencies.  The Air Force’s overall delinquency and charge-off problems 

were primarily associated with lower paid, low- to midlevel enlisted 

military personnel.  



Despite these improvements, a weak control environment contributed to 

significant abuse and potential fraud. For example, many of the problem 

cases identified were due to ineffective controls over the issuance and 

cancellation of travel cards and weaknesses in the assignment and 

training of agency program coordinators.  During the period of our 

review, over 400 Air Force cardholders committed potential bank fraud 

by writing three or more nonsufficient fund (NSF) checks to Bank of 

America.  Also, as shown in the table, many cardholders used their 
cards 

for inappropriate purchases, such as cruises and event tickets. 



[See PDF for image]



[End of figure]



A significant relationship also existed between potential travel card 

fraud, abuse, and delinquencies and individuals with substantial credit 

history problems.  Some cardholders had personal accounts placed in 

collection while others had filed bankruptcies prior to receiving 
government 

travel cards.  Also, the issuance of the travel cards to virtually 
everyone 

who applied for them compounded these problems.



GAO found documented evidence of disciplinary actions in less than half 

of the cases reviewed where cardholders wrote NSF checks, or their 
accounts 

were charged off or placed in salary offset.  GAO also found that over 
half 

of the cases reviewed involved individuals who still had secret or top-
secret 

security clearances. Other control weaknesses related to the Air 
Force’s 

failure to provide the necessary agency program coordinator training, 
and 

infrequent or nonexistent monitoring of travel card activities.



The recently enacted fiscal year 2003 Defense appropriations and 
authorization 

acts require the Secretary of Defense to establish guidelines and 
procedures 

for disciplinary actions and to deny issuance of travel cards to 
individuals 

who are not creditworthy.



What GAO Recommends:



GAO recommendations to DOD and the Air Force include the following:

* Provide sufficient training to agency program coordinators to promote 

proper oversight of the travel card program, including effective 
monitoring 

for inappropriate transactions;

* Review the security clearances of cardholders with financial 
problems; and

* Strengthen procedures for canceling cards of employees leaving the 
service.

 

DOD and the Air Force concurred on our recommendations and said that 
they had 

actions underway to address many of them.



www.gao.gov/cgi-bin/getrpt?GAO-03-298.



To view the full report, including the scope and methodology, click on 
the 

link above. For more information, contact Gregory Kutz, (202) 512-9505.



[End of section]



Letter:



Results in Brief:



Lower Air Force Travel Card Delinquencies and Charge-offs:



Improved Travel Card Control Environment Contributed to Reduced 

Delinquencies:



Further Improvements in Controls Are Needed:



Statistical Tests of Key Control Activities:



Potentially Fraudulent and Abusive Travel Card Activity:



Recent Actions:



Conclusions:



Recommendations for Executive Action:



Agency Comments and Our Evaluation:



Appendixes:



Appendix I: Background



Travel Card Program Guidelines:



Air Force Travel Process:



Appendix II: Objectives, Scope, and Methodology:



Appendix III: Air Force Major Command Delinquency Rates:



Appendix IV: Air Force Personnel Grade, Rank, and Associated Basic

Pay Rates:



Appendix V: GAO Contacts and Staff Acknowledgements:



Tables:



Table 1: Quarterly Air Force Travel Card Delinquency Rates for Fiscal 

Years 2000 through 2002:



Table 2: Cumulative Charge-offs and Delinquencies by Military Service 

between November 30, 1998, and March 31, 2002:



Table 3: Five Major Commands with Highest Outstanding Delinquent 
Balance 

and Percentage of Total Air Force Delinquencies as of March 31, 2002:



Table 4: APC Span of Control at Selected Air Force Locations in Fiscal 

Year 2002:



Table 5: Results of Testing of Key Internal Controls:



Table 6: Examples of Cases in Which Cardholders Wrote Three or More NSF 

Checks to Bank of America and Accounts Were Charged Off and/or Placed 

in Salary Offset from October 2000 through March 2002:



Table 7: Examples of Abusive Air Force Travel Card Activity (October 1, 

2000, to March 31, 2002):



Table 8: Examples of Abusive Travel Card Activity Where Accounts Were 

Charged Off and/or Placed in Salary Offset from October 2000 through 

March 2002:



Table 9: Examples of Abusive Activity Where the Cardholders Paid Their 

Bills from October 2000 through March 2002:



Table 10: Comparison of Number of Individually Billed Travel 
Cardholders 

and Related Charges for DOD versus Total Federal Government for Fiscal 

Year 2001:



Table 11: Population of Fiscal Year 2001 Travel Transactions at 
Selected 

Air Force Bases:



Table 12: Fiscal Year 2001 Transactions That Failed Control Tests for 

Approved Travel Orders:



Table 13: Fiscal Year 2001 Transactions That Failed Control Tests for 

Accurate Travel Voucher Review and Reimbursement:



Table 14: Fiscal Year 2001 Transactions That Failed Control Tests for 

Timely Submission of Travel Vouchers by Employees (5-day Rule):



Table 15: Fiscal Year 2001 Transactions That Failed Control Tests for 

Timely Approval and Payment Processing of Travel Vouchers (30-day Rule)		

74:



Table 16: Air Force Major Command Delinquency Rates (by Quarter) for 
the 

Two Years Ending March 31, 2002:



Table 17: Outstanding Balance and Delinquency Rate as of March 31, 
2002, 

by Major Air Force Commands:



Table 18: Air Force Military Grades, Ranks, and Associated Basic Pay 

Rates for Fiscal Year 2001:



Table 19: Air Force Civilian Grades and Associated Basic Pay Rates for 

Calendar Year 2001:



Figures:



Figure 1: Air Force, Non-Air Force DOD, and Civilian Agency Travel Card 

Delinquency Rates for the 2-Year Period Ending March 31, 2002:



Figure 2: Army, Navy/Marines, and Air Force Travel Card Delinquency 

Rates for the 2-Year Period Ending March 31, 2002 		9:



Figure 3: Air Force Delinquent and Total Outstanding Travel Card 

Balances for Military and Civilian Employees as of September 30, 2001:



Figure 4: Air Force Delinquency Rate by Military Grade and Civilian 

Populations Compared to Air Force’s Average as of September 30, 2001:



Figure 5: Fiscal Year 2001 Air Force Charge-offs by Military Grade and 

Total Civilian Populations:



Figure 6: Air Force Travel Card Charge-off and Recovery History from 

October 1, 2000, to March 31, 2002:



Figure 7: Overview Flowchart of the Air Force Travel Process:



Figure 8: Travel Card Application:



Figure 9: Required DOD and Bank of America Delinquency Process 

Management Actions:



Letter

December 20, 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:



In fiscal year 2001, the Air Force had about 500,000 individually 

billed travel card accounts, and about $831 million in related travel 

card charges.[Footnote 1] In contrast to the purchase card program, 

where charges are billed directly to the government for payment, the 

individually billed travel cardholder is directly responsible for all 

charges incurred on his or her travel card account and for remitting 

payments on the monthly bill. The cardholder is expected to use the 

government travel card only for valid expenses related to official 

travel and to submit a properly documented voucher to get reimbursed by 

the Air Force for valid expenses. The intent of the travel card program 

was to improve convenience for the traveler and to reduce the 

government’s costs of administering travel. If properly controlled, the 

travel card would provide an efficient and effective method for 

administering the travel program. Appendix I provides additional 

background information on the Air Force’s travel card program.



We performed our work 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. We have previously 

testified and reported on the Army’s[Footnote 2] and Navy’s[Footnote 3] 

controls over their travel card programs. This report provides details 

and results of our Air Force travel card audit. The objectives of our 

audit of the Air Force’s travel card program were to determine, for 

fiscal year 2001 and the first 6 months of fiscal year 2002, (1) the 

reported magnitude and impact of delinquent and charged-off Air Force 

travel card accounts, along with an analysis of related causes, (2) the 

effectiveness of the overall control environment and key internal 

controls for the Air Force’s travel program, (3) whether indications 

existed of potentially fraudulent and abusive activity[Footnote 4] 

related to the Air Force travel cards, and (4) whether abusive activity 

associated with the travel card is effectively linked to disciplinary 

actions and security clearances. To achieve these objectives, we 

analyzed Air Force account delinquency and charge-off information and 

compared it to non-Air Force DOD components and federal civilian 

agencies. We reviewed the adequacy of DOD and Air Force policies and 

procedures related to travel card use and tested the effectiveness of 

key internal control activities at three Air Force installations. We 

also used data mining and analytical procedures to identify and examine 

potentially fraudulent and abusive travel card activity. Appendix II 

provides details of our objectives, scope, and methodology.



We selected the three installations we audited by first identifying the 

three Air Force Commands with the largest number of travel card 

transactions, payments, and delinquencies. We then identified one Air 

Force installation within each of the three commands based on the 

magnitude of travel card transactions, payments, and delinquencies. 

Appendix III presents data on delinquency rates by major command. We 

tested key control activities, including documented evidence of travel 

authorization, accurate travel voucher processing, timely submission of 

the travel voucher by the employee, and timely payment of the travel 

reimbursement to the employee. 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 Air 

Force as a whole. We used data mining procedures across the universe of 

individually billed Air Force travel card activity to identify 

potentially fraudulent and abusive travel card activity, based on the 

nature, amount, merchant, and other identifying characteristics of the 

transactions. While we identified numerous examples of potentially 

fraudulent and abusive travel card activity, 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 January 2002 through mid-November 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.



Results in Brief:



The Air Force had substantially lower delinquency rates and fewer 

accounts being charged off than the Army and the Navy in fiscal year 

2001, and it had lower delinquency rates for the first 6 months of 

fiscal year 2002. The Air Force’s delinquency rates are slightly higher 

than the non-DOD federal civilian agencies delinquency rate; however, 

the delinquency rate for Air Force civilian employees of 3.6 percent is 

1.4 percentage points lower than the estimated 5.0 percent delinquency 

rate for civilian agencies. We found that Air Force delinquency rates 

were lower than Army and Navy delinquency rates due, in part, to 

measures the Air Force has taken, such as increased management 

attention and command focus, numerous travel card program audits and 

actions on recommendations for corrective action, and greater emphasis 

on the split disbursement payment process,[Footnote 5] where all or a 

portion of the travel card reimbursement is made directly to the bank. 

However, even though the Air Force had lower numbers of delinquent and 

charged off accounts than the Army and the Navy, we found control 

environment weaknesses and breakdowns in key controls at the three Air 

Force installations we audited. We also found instances of potential 

fraud and abuse similar to those we found in our Army and Navy work, 

such as personal use of the travel card for a variety of goods and 

services, including at gentlemen’s clubs, and failure to pay travel 

card bills after reimbursements were received.



Most Air Force travel cardholders used the travel cards for authorized 

government travel expenses and paid amounts owed to Bank of America on 

time. From November 1998 through March 2002, Bank of America charged 

off about 9,000 Air Force travel card accounts totaling approximately 

$11.6 million, the lowest among the three services. The Air Force’s 

delinquency and charge-off problems are primarily associated with low-

and midlevel enlisted military personnel. These delinquencies and 

charge-offs have cost the Air Force thousands of dollars in lost 

rebates, higher fees, and substantial resources spent pursuing and 

collecting on delinquent accounts. To address these problems, the Air 

Force and DOD began offsetting wages of certain military and civilian 

employees in November 2001 as well as retirement benefits of military 

retirees whose accounts were delinquent or had been charged off. These 

and other actions have significantly reduced 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” result of 

the problems, such as delinquencies and charge-offs, rather than 

addressing weaknesses in the “front-end” (preventive) controls.



Further, we found a number of areas where additional improvements in 

DOD and Air Force controls are needed. For example, many of the problem 

cases we reviewed were related to inadequate training and collateral 

duty responsibilities of installation agency program coordinators, 

including failure to ensure that all unit program coordinators received 

timely training. Other problems were caused by ineffective controls 

over (1) the issuance of travel cards and (2) the transfer or 

cancellation of accounts when individuals transferred, separated, or 

retired. Air Force 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. We found 

that those who committed travel card fraud and abuse tended to be 

individuals who had histories of prior credit problems. The prior and 

current credit problems we identified for Air Force travel cardholders 

included charged off credit card accounts, bankruptcies, judgments, 

collection actions, and multiple nonsufficient fund (NSF), or “bounced” 

checks.



As a result of similar findings from our previous work on DOD travel 

card programs, Congress included provisions in the fiscal year 2003 

Defense Appropriations Act, Public Law 107-248, to require the 

Secretary of Defense to establish guidelines and procedures to (1) deny 

the issuance of cards to individuals who are not creditworthy and (2) 

prescribe for disciplinary actions to be taken against cardholders for 

fraudulent or abusive use of government travel cards.



We identified numerous instances of potentially fraudulent and abusive 

travel card activity during fiscal year 2001 and the first 6 months of 

fiscal year 2002. During this period, more than 400 Air Force employees 

may have committed bank fraud by writing three or more NSF checks. In 

addition, Air Force travel cards were used for numerous abusive 

transactions that were clearly not related to government travel, 

including cruise lines, Internet gambling sites, sporting and concert 

events, and gentlemen’s clubs. For example, Air Force personnel used 

their travel cards to make 223 charges totaling over $31,000 for 

tickets to activities such as Dallas Cowboys football games, Janet 

Jackson and NSYNC concerts, and other Ticketmaster purchases; and 121 

Air Force personnel charged nearly $32,000 at gentlemen’s clubs, such 

as Spearmint Rhino, Can Can, Cheetah’s Lounge, and Déjà Vu Showgirls.



Another form of abuse identified was the failure to pay the travel card 

bill. Some individuals used the cards for inappropriate purposes and 

failed to pay their accounts. Others abused the travel card by failing 

to pay charges associated with official government travel, even though 

they have been reimbursed. In addition, we did not find documented 

evidence of disciplinary actions against many Air Force personnel who 

abused their travel cards. Of the 10 cases that we audited involving 

individuals who made improper charges but paid their bills, we found 

evidence that only two of these individuals had received disciplinary 

action. In addition, of the 58 cases we audited involving individuals 

who wrote NSF checks or whose accounts were charged off or put in 

salary offset, we found no evidence of disciplinary action for 39 of 

the individuals.



Personnel with security clearances who have financial problems may pose 

security risks to the Air Force. Of the 58 cases we audited involving 

individuals who wrote NSF checks, or had their travel card accounts 

charged off or put in salary offset, 32 had active secret or top-secret 

clearances as of August 2002. For example, a technical sergeant 

maintained his secret clearance even though he used his travel card 

reimbursements to support a gambling habit and had his travel account 

placed in salary offset. While the individual was warned several times 

that the failure to pay his travel card account “would not be 

tolerated,” he was allowed to continue using his travel card because of 

his expertise on C-5 cargo aircraft repairs. To support his gambling 

habit, the individual eventually stole and sold protective gear, 

including body armor and biochemical and biological masks, which had 

been loaded on C-5 aircraft destined for Afghanistan. These thefts were 

not discovered, or his security clearance revoked, until after the C-5 

aircrafts arrived in Afghanistan during the fall of 2001.



This report includes recommendations to the Air Force and DOD to 

strengthen specific internal controls within its travel card program in 

the areas of travel card issuance, travel card monitoring, and 

disciplinary actions. In oral comments on a draft of this report, DOD 

and the Air Force concurred with all of our recommendations and stated 

that they had taken action or had actions underway to address many of 

them. A detailed discussion of the DOD and Air Force comments is 

presented in the “Agency Comments and Our Evaluation” section of this 

report.



Lower Air Force Travel Card Delinquencies and Charge-offs:



Air Force travel card delinquency rates and amounts charged off were 

substantially lower than non-Air Force DOD components, and 

delinquencies were about 1 percent higher than non-DOD federal civilian 

agencies.[Footnote 6] Cumulative Air Force charge-offs since the 

inception of the travel card program with Bank of America in November 

1998 are approximately $11.6 million, the lowest of the three services. 

Our analysis of available data showed that the travel cardholder’s rank 

and pay rate are strong predictors of delinquency problems. We found 

that the Air Force’s delinquency and charge-off problems are primarily 

associated with low and mid-level enlisted military employees. As 

discussed in following sections of this report, improvements in the Air 

Force’s overall control environment improved Air Force delinquency 

rates, but DOD’s overall high delinquency and default rates 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. Past delinquencies and 

charge-offs have cost the Air Force, the federal government, and the 

taxpayers thousands of dollars in lost rebates, and substantial 

resources spent pursuing and collecting on past due accounts. We also 

estimate that contract modifications will cost the Air Force millions 

of dollars in the future due to higher fees.



The Air Force has taken a number of positive actions to address its 

delinquency and charge-off rates, and data for the first half of fiscal 

year 2002 show a significant drop in charged-off accounts. For example, 

this reduction is, in part, attributable to a salary and military 

retirement offset program--similar to garnishment--which was initiated 

in November 2001. Other Air Force actions included encouraging the use 

of the split disbursement payment process, in which the Defense Finance 

and Accounting Service (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. 

However, except for split disbursements, Air Force actions primarily 

address the symptoms or back-end result of delinquency and charge-offs 

after they have already occurred. As noted in the following sections of 

this report, additional emphasis on front-end management of the travel 

card program, such as more selective procedures for issuing the cards 

and overseeing the proper use of the cards, could further improve the 

Air Force travel card program.



The Air Force’s Delinquencies and Charge-offs:



As of March 31, 2002, approximately 8,000 Air Force cardholders had 

over $5 million in delinquent debt. Over the last 2 years, Air Force 

delinquency rates fluctuated from 5 to 11 percent and on average were 

about 5 percentage points less than the Army’s and the Navy’s and 1 

percentage point higher than non-DOD federal civilian agencies. The Air 

Force has set a goal of no more than a 4 percent delinquency rate. As 

discussed later, greater emphasis on commander responsibility and 

accountability, contributed, at least in part, to lower Air Force 

delinquency rates. Figure 1 compares delinquency rates among the Air 

Force, Non-Air Force DOD, and the 23 largest civilian 

agencies.[Footnote 7]



Figure 1: Air Force, Non-Air Force DOD, and Civilian Agency Travel Card 

Delinquency Rates for the 2-Year Period Ending March 31, 2002:



[See PDF for image]



[End of figure]



In addition, as shown in figure 2, Air Force travel card delinquency 

rates for the eight quarters ending March 31, 2002, were significantly 

less than Army and Navy travel card delinquency rates.



Figure 2: Army, Navy/Marines, and Air Force Travel Card Delinquency 

Rates for the 2-Year Period Ending March 31, 2002:



[See PDF for image]



[End of figure]



Further analysis revealed that Air Force travel card delinquency rates 

have decreased from 16.9 percent as of December 31, 1999 to 6.0 percent 

as of March 31, 2002. Table 1 shows the decrease in Air Force 

delinquency rates since December 1999, as well as the cyclical nature 

of Air Force travel card delinquency rates.



Table 1: Quarterly Air Force Travel Card Delinquency Rates for Fiscal 

Years 2000 through 2002:



First quarter; Fiscal year 2000: 16.9%; Fiscal year 2001: 10.9%; 

Fiscal year 2002: 7.7%.



Second quarter; Fiscal year 2000: 10.2%; Fiscal year 2001: 6.5%; 

Fiscal year 2002: 6.0%.



Third quarter; Fiscal year 2000: 6.4%; Fiscal year 2001: 5.3%; Fiscal 

year 2002: 4.6%.



Fourth quarter; Fiscal year 2000: 8.2%; Fiscal year 2001: 6.2%; 

Fiscal year 2002: 4.9%.



Source: GAO analysis of Bank of America data.



[End of table]



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 about 9,000 Air Force travel card accounts with nearly $11.6 

million of bad debt. While not an excellent track record, it is lower 

than the Army’s approximate 23,000 charged-off accounts valued at 

nearly $34 million and Navy’s approximate 13,800 charged-off accounts 

valued at nearly $16.6 million. Task order modifications during fiscal 

year 2001 allowed Bank of America to institute a salary offset 

provision against DOD military personnel whose travel card accounts 

were previously charged off or were more than 120 days past due. Table 

2 provides a comparison of cumulative charge-offs and delinquencies by 

military service as of March 31, 2002.



Table 2: Cumulative Charge-offs and Delinquencies by Military Service 

between November 30, 1998, and March 31, 2002:



Dollars in millions.



Air Force; Cumulative charge-offs[A]: $11.6; 

Cumulative recoveries[A, B]: $4.7; Net charge-offs[A]: $6.9; 

Delinquencies as of March 31, 2002[C]: $5.0.



Navy; Cumulative charge-offs[A]: 16.6; Cumulative 

recoveries[A, B]: 6.2; Net charge-offs[A]: 10.4; Delinquencies as of 

March 31, 2002[C]: 6.0.



Army; Cumulative charge-offs[A]: 33.5; Cumulative 

recoveries[A, B]: 12.9; Net charge-offs[A]: 20.6; Delinquencies as of 

March 31, 2002[C]: 8.4.



Source: GAO analysis of Bank of America and General Services 

Administration data.



[A] Cumulative charge-offs and recoveries are for November 1998 through 

March 2002.



[B] Recoveries represent amounts recovered through collection actions, 

which includes salary offsets, on accounts previously charged off. :



[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.



[End of table]



Rank, Grade, and Pay Rates Are Correlated to Delinquency and Charge-off 

Problems:



Our analysis showed a correlation between certain demographic factors 

and high delinquency and charge-off rates. Available data showed that 

the travel cardholder’s rank or grade (and associated pay)[Footnote 8] 

is a strong predictor of delinquency problems. As shown in Figure 3, 

Air Force delinquency and charge-off problems are primarily associated 

with low-and midlevel enlisted military personnel in grades E-1 

(airman) to E-6 (technical sergeant), with relatively low incomes and 

little experience in handling personal finances. Appendix V presents 

information on military and civilian grades and pay rates.



Figure 3: Air Force Delinquent and Total Outstanding Travel Card 

Balances for Military and Civilian Employees as of September 30, 2001:



[See PDF for image]



[End of figure]



Available data indicate that military personnel grades E-1 to E-6 

account for about 69 percent of all Air Force military personnel. These 

enlisted military personnel have basic pay levels ranging from $11,500 

to $27,600. These individuals were responsible for 41 percent of the 

total outstanding Air Force travel card balances as of September 30, 

2001.



Figure 4 compares the delinquency rates by military grade and civilian 

personnel to the average Air Force delinquency rate as of September 30, 

2001. As shown, the delinquency rates were as high as 15.7 percent for 

E-1 to E-3 and 9.9 percent for E-4 to E-6, compared to the Air Force 

overall delinquency rate of 6.2 percent. These rates were markedly 

higher than the rates for officers, which was 2.4 percent. These rates 

were also substantially higher than that of Air Force civilians, which 

at 3.6 percent was 1.4 percentage points lower than the federal 

civilian agencies rate shown in figure 1.



Figure 4: Air Force Delinquency Rate by Military Grade and Civilian 

Populations Compared to Air Force’s Average as of September 30, 2001:



[See PDF for image]



[End of figure]



The delinquency rate for military personnel in grades E-4 to E-6 in 

particular had an important negative impact on the Air Force’s 

delinquency rate. Specifically, these are senior airmen to technical 

sergeants in the Air Force. Pay levels for these personnel, excluding 

supplements such as housing, range from $18,600 to $27,600. As shown by 

Bank of America data, personnel in grades E-4 to E-6 accounted for 37 

percent of the total Air Force outstanding balance. High delinquency 

rates for the E-1 through E-6 grades combined with their extensive use 

of the travel card have a significant impact on the Air Force wide 

delinquency rate.



Figure 5 shows Air Force fiscal year 2001 charge-offs. Charge-off 

amounts of about $2.6 million for military personnel in grades E-1 

through E-6 accounted for 79 percent of the $3.3 million in total Air 

Force charge-offs in fiscal year 2001.



Figure 5: Fiscal Year 2001 Air Force Charge-offs by Military Grade and 

Total Civilian Populations:



[See PDF for image]



[End of figure]



An Air Force travel card program official told us that the major 

portion of the service’s travel card delinquencies relates to first-

term enlisted personnel. An Air Force member can normally attain the E-

4 grade within 3-1/2 years in his or her first term. According to Air 

Force data, over half of the personnel in grades E-1 to E-6 are in 

grades E-4 and below. The official commented that if the members are 

not committed to an Air Force career and plan to serve only one tour, 

temptation exists to misuse the card before they separate from the Air 

Force. In addition, as discussed below, the Air Force did not exempt 

personnel with poor credit histories from required use of travel cards. 

Consequently, these low and mid-level 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.



Five Major Air Force Commands Account for Majority of Delinquencies:



As shown in table 3, five Air Force major commands accounted for about 

63 percent of the Air Force travel card delinquencies as of March 31, 

2002.



Table 3: Five Major Commands with Highest Outstanding Delinquent 

Balance and Percentage of Total Air Force Delinquencies as of March 31, 

2002:



Air Force major command: Air National Guard; Outstanding delinquent 

balance: $901,864; Percentage of total Air Force delinquent balance: 

17.8.



Air Force major command: Air Force Reserve Command; Outstanding 

delinquent balance: 778,230; Percentage of total Air Force delinquent 

balance: 15.4.



Air Force major command: Air Combat Command; Outstanding delinquent 

balance: 650,110; Percentage of total Air Force delinquent balance: 

12.9.



Air Force major command: Air Mobility Command; Outstanding delinquent 

balance: 436,280; Percentage of total Air Force delinquent balance: 

8.6.



Air Force major command: Air Force Materiel Command; Outstanding 

delinquent balance: 420,982; Percentage of total Air Force delinquent 

balance: 8.3.



Air Force major command: Subtotal of above five commands; Outstanding 

delinquent balance: $3,187,466; Percentage of total Air Force 

delinquent balance: 63.0.



Air Force major command: Total all other commands; Outstanding 

delinquent balance: $1,868,523; Percentage of total Air Force 

delinquent balance: 37.0.



Source: GAO analysis of Bank of America data.



[End of table]



Air Force National Guard and Air Force Reserve Command officials 

attributed their high delinquent balances to the recent activation of 

guard and reserve forces, the associated increase in travel card use, 

and inadequate employee training on travel voucher preparation. In 

addition, the officials explained that National Guard and Reserve 

forces that report to duty intermittently may not become aware of 

problems with travel voucher accuracy and late submission of payment 

vouchers until they report for their next duty assignment--several days 

to a month after a problem has occurred. Further, the officials told us 

that many of their members have not been trained on proper travel 

voucher preparation procedures, and controls over travel card use and 

payment of travel card bills are weak. One reserve official cited the 

lack of specific guidance for disciplinary action in DOD’s Financial 

Management Regulation as a contributing factor.



According to Air Force officials, the Air Combat Command, Air Force 

Materiel Command, and Air Mobility Command have all experienced 

significant increases in travel and deployments since September 11, 

2001. Our audit work showed instances in which extended travel and 

back-to-back deployments resulted in delays in travel voucher 

preparation and submission. To reduce delinquencies associated with 

late payment of travel card bills by deployed units, the Air Force has 

emphasized the use of the split disbursement payment process and 

interim travel vouchers.



Delinquency and Charge-off Rates Have Resulted in Increased Costs to 

the Government:



Delinquencies and charge-offs within DOD have resulted in increased 

costs to the Air Force and the other services. In fiscal year 2001, DOD 

entered into an agreement with Bank of America to adjust the terms of 

its travel card contract. DOD agreed to increased fees and a change in 

rebate calculation. These changes cost the Air Force about $350,000 in 

lost rebates on individually billed accounts and centrally billed 

accounts in fiscal year 2001, and will cost an estimated $1.6 million 

in increased ATM fees annually. Other costs are real but not easily 

measurable, such as the increased administrative burden to the Air 

Force to identify and address delinquent accounts.



Dispute Between Contractor and DOD:



Unexpectedly high defaults by DOD’s travel cardholders resulted in a 5-

month legal dispute with 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 with 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 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 

due to required “contract and program management policies and 

procedures” associated with higher-than-anticipated credit losses, 

including an estimated 43,000 DOD employees had defaulted on more than 

$59 million in debts. Consequently, in April 2001, the master contract 

and the related DOD tailored task order for travel card services were 

renegotiated. Specifically, Bank of America was able to increase its 

revenue by instituting additional fees, such as higher cash advance and 

late payment fees; offsetting credit losses against rebates as 

explained later; facilitating the collection of delinquent and charged 

off amounts through salary and military retirement pay offset; and 

encouraging DOD personnel participation in split disbursements, in 

which the government sends part or all of the travel voucher 

reimbursements to Bank of America directly.



Effect of Increased Fees:



One of the terms of the renegotiated task order was that, effective 

August 10, 2001, the travel card cash advance fee would be increased 

from 1.9 percent to 3 percent, with a minimum fee of $2. The Air Force 

reimburses all cash advance fees[Footnote 9] related to authorized cash 

withdrawals. We estimate that this contract modification will result in 

approximately $1.6 million of increased costs to the Air Force each 

year. Our estimate was made by applying the new fee structure that went 

into effect in mid-August 2001 to cash advances made during fiscal year 

2001. Other fee increases agreed to in the renegotiation, such as the 

fee for expedited travel card issuance, will also result in additional 

cost to the Air Force.



Delinquent Account Payment Affects Rebates to the Air Force:



The GSA master contract modification also changed the rebate 

calculation, making it imperative that the Air Force (and the other 

services) improve their 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 based on the amount charged to both individually billed and 

centrally billed cards. 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 due reduce the 

rebate amounts. Effective January 2001, 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 10] 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 losses, significantly affected the amount 

of rebate the Air Force received as a result of combined individually 

and centrally billed net sales in fiscal year 2001. In fiscal year 

2001, the Air Force collected about $1.4 million of the $1.8 million in 

rebates that we estimated it would have received, based on fiscal year 

2001dollar volume if the individually billed account payments had been 

timely.



Other costs, such as the administrative burden of monitoring delinquent 

accounts, are harder to measure, but no less real. For example, 

employees with delinquent accounts must be identified, counseled and 

disciplined, and their account activity closely monitored. In addition, 

employees with financial problems who have access to sensitive data may 

pose a security risk, as discussed later in this report.



Air Force Charge-offs Have Decreased:



In addition to having the lowest net charge-off amount of the three 

services, $6.9 million, the quarterly dollar amount of Air Force 

accounts charged off has decreased substantially. As shown in figure 6, 

at the start of fiscal year 2001, the charged off balance greatly 

exceeded the recovery amount. Starting in the third quarter of fiscal 

year 2001, the amount charged off started to decline so that in the 

first quarter of fiscal year 2002, recoveries, for the first time, 

exceeded the amounts being charged off. Recoveries also exceeded 

charge-offs in the second quarter of fiscal year 2002. The institution 

of the salary and military retirement offset program has contributed to 

the reduction in Air Force travel card charge-offs, primarily by 

eliminating the need to charge off past due balances by transferring 

these balances to the salary off-set program.



Figure 6: Air Force Travel Card Charge-off and Recovery History from 

October 1, 2000, to March 31, 2002:



[See PDF for image]



[End of figure]



Salary and Military Retirement Offset Program:



Starting in fiscal year 2002, DOD began to offset the retirement 

benefits of military retirees and the salaries of certain civilian and 

military employees against the delinquent and charged off balances on 

travel card accounts. The DOD salary offset program[Footnote 11] 

implements a provision of the Travel and Transportation Reform Act of 

1998 (TTRA)[Footnote 12] 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 on his or her travel 

cards as a result of delinquencies not disputed by the 

employee.[Footnote 13] The salary and military retirement offset 

program was implemented DOD-wide.



The offset program came into being as part of the task order 

modification. Between April and August 2001, DOD and the Bank of 

America worked together to establish program protocols. Starting in 

August 2001, the Bank of America sent demand letters to cardholders 

whose accounts were more than 90 days delinquent. The Defense Finance 

and Accounting Service processed the initial offsets of delinquent 

accounts in October 2001 in the various DOD pay systems. The first 

deductions were made from the November pay period and paid to Bank of 

America starting December 2001. Figure 6 illustrates the initial impact 

salary offset had in the first quarter of fiscal year 2002. The 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 such accounts. The effect, shown in 

figure 6, was recoveries amounting to over three times more than 

charge-offs for the second quarter of fiscal year 2002.



The offset program works as follows. When an account is 90 days 

delinquent, Bank of America may send a demand letter to the individual 

cardholder requesting payment in full within 30 days. The demand letter 

specifies that salary offsets will be initiated if payment is not made 

in full within 30 days. The cardholder may negotiate an installment 

agreement or dispute the charges with the bank. The cardholder has a 

right to review all records such as invoices and to request a hearing 

if the bank’s disposition of the dispute is not satisfactory.



After the 30 days have elapsed, if payment is not made and the 

cardholder does not dispute the debt, the bank includes the account in 

the list of accounts that it sends to DFAS requesting offsets. 

Individuals in the following categories may not be accepted for offset.



* Civilian employees in bargaining units that have not agreed to the 

salary-offset program do not qualify for the program. According to a 

DFAS official, 1,002 of 1,227 DOD bargaining units had agreed to 

participate in the program as of July 2002.



* 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. The authorizing statutes for both the Civil 

Service Retirement System[Footnote 14] and the Federal Employee’s 

Retirement System[Footnote 15] in effect at the time of our audit 

specified that retirement benefits may be offset only to the extent 

expressly authorized by federal statutes. TTRA, Section 2, provided 

authority to offset salaries of “employees” of agencies but does not 

provide such authority for civilian employee retiree 

annuitants.[Footnote 16]



Once an individual is accepted for offset, the related debt is 

established in the appropriate pay system and DFAS can deduct up to 15 

percent of disposable pay. Disposable pay is defined in GSA’s Federal 

Travel Regulation[Footnote 17] 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 on a monthly basis for military 

personnel and retirees and biweekly for civilian personnel. It takes 

approximately 2 months from the time an offset is initiated to the 

first bank payment.



According to DFAS, from October 2001 through July 2002, Bank of America 

referred 53,462 DOD-wide cases with debt of $77.5 million to DOD for 

offset. DOD accepted and started offset for 74 percent of the cases and 

69 percent of the debt amounts referred. The number and debt amount of 

Air Force-specific cases forwarded by Bank of America were not 

available. From November 2001 through July 2002, DFAS collected $2.7 

million from active and retired Air Force military personnel through 

the offset program. During the same period, DOD collected $1.6 million 

from all DOD civilian employees. However, DFAS was unable to provide 

this amount by military service.



Improved Travel Card Control Environment Contributed to Reduced 

Delinquencies:



We found that Air Force management encouraged a culture that emphasized 

the importance of integrity and ethical values and was involved in 

monitoring travel card delinquencies. According to travel card program 

officials and documentation we obtained, Air Force officials, from the 

Vice Chief of Staff to wing commanders, have strongly emphasized for 

the past 2 to 3 years that the travel card program is a “commander’s 

program” and commanders are responsible for managing their delinquency 

rates. They explained that officials throughout the Air Force chain of 

command have monitored travel card delinquency rates and discussed the 

topic at their respective staff meetings. Documentation we obtained 

confirmed the use of detailed statistical reports to monitor 

installation-level delinquencies. Commanding officers are holding unit 

commanders with excessive delinquency rates accountable to make 

improvements to reduce delinquencies. Travel card delinquency 

statistics are discussed at command staff meetings, and unit commanders 

are held accountable for reducing their delinquencies. The importance 

of the tone at the top cannot be overstated.



Other factors contributing to the reduction in Air Force delinquency 

rates include the following.



* Air Force emphasis on financial management training. Each Air Force 

installation has a Financial Services Office with a trained financial 

management staff that oversee the travel card program. The Air Force 

also provides personal financial training to all inductees, which 

includes developing personal budget plans, balancing checkbooks, 

preparing tax returns, and financial responsibility. The training also 

covers disciplinary action and consequences for financial 

irresponsibility by service members. The Air Force also provides 

financial counseling and training classes through the Family Services 

Centers at each base and contracts for professional counselors and 

trainers.



* Travel card program audits. The Assistant Secretary of the Air Force 

(Financial Management and Comptroller) requested Air Force Audit Agency 

audits of the travel card program, which resulted in recommendations to 

management and resultant program improvements. According to a DOD 

Inspector General report,[Footnote 18] the Air Force Audit Agency 

issued 27 audit reports on the travel card program from fiscal year 

1999 through fiscal year 2001. For example, in April 2001, The Air 

Force Audit Agency issued an audit report on Travis Air Force Base 

(AFB),[Footnote 19] one of the sites we audited. The report identified 

numerous systemic problems, including inadequate agency program 

coordinator (APC) oversight due to insufficient training, which 

resulted in unauthorized transactions not being identified. The Air 

Force Audit Agency made numerous recommendations for corrective 

actions, and our audit work showed that Travis AFB had taken actions on 

many of them.



* DOD and Air Force initiatives. In March 2000, Air Force travel card 

delinquency rates were in the double digits--10.2 percent--similar to 

the Army and Navy delinquency rates.[Footnote 20] The Air Force 

initiated a number of actions in the fall of 2000 to reduce its 

delinquency rate. For example, in December 2000, Air Force headquarters 

sent an E-mail message to travel card APCs asking them to (1) promote 

the split disbursement payment process, (2) turn off accounts for 

infrequent travelers, (3) use Bank of America Electronic Account 

Government Ledger System (EAGLS) reports to monitor and detect problem 

accounts, (4) include procedures to deactivate the travel card when a 

member changes duty location, and (5) correct discrepancies between 

organizational codes assigned to cardholder accounts and their current 

assigned units to ensure accurate reporting and effective monitoring of 

accounts. As an aid in correcting organizational coding, the E-mail 

included a directory for APCs to use to resolve problems with accounts 

that were incorrectly assigned to them--referred to as “orphan” 

accounts--by identifying where those accounts should be properly 

assigned.



Further, in response to June and September 2001 DOD policy memorandums 

to heads of military departments, the Air Force identified 100,000 

travel cards for cancellation due to lack of use. According to an Air 

Force headquarters official, approximately 90,000 travel cards were 

cancelled in October 2001. In addition, salary offset procedures were 

implemented in November 2001, resulting in a significant decrease in 

charged-off accounts in the first 6 months of fiscal year 2002. Also in 

November 2001, the Air Force Comptroller issued a letter to all major 

commands, highlighting the use of the split disbursement payment 

process and interim vouchers[Footnote 21] as options for preventing 

delinquent balances when members are on long-term deployments. 

According to Bank of America data, the Air Force increased the number 

of payments remitted to Bank of America via the split disbursement 

payment process from 20,487 payments, or 17 percent of all payments, 

totaling $12 million in October 2000, to 54,337 payments, or 39 percent 

of all payments, totaling $44 million in June 2002. Officials at the 

sites we audited told us that they emphasized that cardholders use the 

split disbursement payment process. For example, Hill Air Force Base 

comptroller personnel told us that they have increased use of the split 

disbursement payment process from 23 percent during the fourth quarter 

of fiscal year 2001 to 35 percent during the third quarter of fiscal 

year 2002. In addition, as of September 17, 2002, Travis AFB 

implemented a new policy that made the split disbursement process the 

default, or automatic, payment method for all active duty military 

employees who use the government travel card with the provision that if 

an employee chooses not to use the split disbursement payment method, 

approval from the unit commander or first sergeant is required.



Further Improvements in Controls Are Needed:



While the Air Force has made improvements in its control environment 

that have resulted in lower delinquency rates than the Army’s and the 

Navy’s, additional improvements could further reduce Air Force 

delinquency rates. In addition, similar to our Army and Navy findings, 

control environment weaknesses contributed to significant potential 

fraud and abuse of the Air Force travel card. Many of the problem cases 

that we reviewed were due to ineffective controls over the issuance of 

travel cards and the transfer or cancellation of accounts when 

individuals moved to other duty locations, separated, or retired. We 

also found that improvements are needed in the assignment and training 

of APCs.



Inadequate Controls over Travel Card Issuance:



The Air Force’s ability to prevent potentially fraudulent and abusive 

transactions that can eventually lead to additional delinquencies and 

charge-offs is significantly weakened if individuals with histories of 

financial irresponsibility are permitted to receive travel cards. 

Although the DOD policy provides that all DOD personnel are to use the 

travel card to pay for official business travel, the policy also 

provides that exemptions may be granted under a number of 

circumstances, including 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. 

The Air Force’s practice is to facilitate the issuance of travel cards-

-with few credit restrictions--to all applicants regardless of whether 

they have histories of credit problems. We found no evidence that the 

Air Force exempted any individuals or groups from required acceptance 

and use of travel cards, even those with histories of severe credit 

problems.



DOD’s Financial Management Regulation provides that credit checks be 

performed on all travel card applicants, unless an applicant declines 

the conduct of a credit check.[Footnote 22] In July 1999, Bank of 

America began conducting credit checks on DOD travel card applicants 

and used the resulting information as a basis for determining the type 

of account--restricted or standard--it would recommend for new DOD 

travel applicants.



DOD policy also permits APCs to raise the credit and ATM limits on 

restricted cards based on travel requirements. 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 

mid-level enlisted Air Force cardholders would not even qualify for the 

restricted limit cards. 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. However, in DOD individuals with no credit history, or 

little credit history, are generally issued restricted cards with lower 

credit limits.



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 in this report, many of 

the Air Force travel cardholders that we audited who wrote numerous NSF 

checks, had severe prior financial problems, including accounts charged 

off, had histories of delinquencies and charge-offs relating to other 

credit cards, had accounts in collection, or numerous bankruptcies.



In response to similar findings in our audit of the Army travel card 

program and an amendment proposed by Senators Byrd and Grassley, the 

Congress included a provision in the Department of Defense 

Appropriations Act for fiscal year 2003 requiring the Secretary of 

Defense to evaluate whether an individual is creditworthy before 

authorizing the issuance of any government charge card.[Footnote 23] If 

effectively implemented, this requirement should improve delinquency 

rates and reduce potential fraud and abuse.



Inadequate Controls over Travel Card Transfer or Cancellation:



We found numerous examples in which the APCs failed to deactivate or 

close accounts when cardholders retired, were dismissed, or separated 

from the service, or the APCs failed to take the proper action to 

transfer accounts when employees were reassigned to other Air Force 

locations. The Air Force lacks sufficient guidance and management focus 

in this area. DOD’s Financial Management Regulation requires APCs to 

terminate travel cards when cardholders die, retire, or are dismissed 

or separated from DOD. Bank of America has issued procedural guidance 

for transferring and terminating cardholder accounts. However, we found 

instances in which failure to follow these procedures--specifically 

with respect to travel card transfer and termination--resulted in 

travel card abuses and charge-offs. The cardholders benefited by using 

the travel cards to purchase a variety of goods and services for their 

personal use. Some did not pay their monthly bills, thereby essentially 

obtaining personal items for no cost. The following examples illustrate 

the effect of not taking appropriate actions to transfer, deactivate, 

or close travel card accounts.



* A Langley AFB APC failed to close an enlisted member’s account after 

the individual left the service. The member left the service in January 

2001, but continued to use his card until March 2001. Because the card 

was not canceled immediately upon the member’s separation, the account 

remained open with a $5,000 credit limit allowing the member to charge 

unauthorized ATM withdrawals and purchases. The member was not 

disciplined because he had already left the service. The APC stated 

that she was not aware of the misuse of the travel card until the 

account was charged off in April 2002 with an unpaid balance of $3,729.



* At Hill AFB, a senior airman (E-4) transferred to Yokota Air Base, 

Japan, in July 2001. The APC was unaware that the individual had 

transferred until his travel card account appeared as delinquent on the 

Bank of America reports. The APC deactivated the card in September 2001 

and made repeated, unsuccessful attempts to contact the individual and 

the APC at Yokota Air Base. In January 2002, Bank of America placed the 

account totaling $1,918 in salary offset. Although the individual had 

continued to appear on Hill AFB delinquency reports, Hill AFB officials 

could not take any disciplinary action because the individual was no 

longer assigned to them. The account was eventually transferred from 

Hill to Yokota Air Base in March 2002. According to EAGLS data, the 

individual issued two nonsufficient fund (NSF) checks to Bank of 

America in March and April 2002 in payment of his account. Bank of 

America closed the account in June 2002.



* Brooks AFB travel card officials failed to cancel the travel card 

account when a civilian employee (GS-13) separated from the service in 

January 2000 and began working for a private contractor. The civilian 

continued to use his travel card after separation, charging over 

$17,000 in unauthorized purchases. The charges included approximately 

$1,000 in cash advances and several charges for an on-line dating 

service. The cardholder was not disciplined for the abuse because he 

had separated from the service. Information from EAGLS shows that the 

account was closed on September 13, 2002, and as of October 25, 2002, 

the account had an unpaid balance of approximately $1,600, which had 

not yet been charged off.



Insufficient Commitment to Human Capital Practices:



We found a lack of emphasis on APC training and inadequate monitoring 

of APC training at two of our three case study locations--Nellis AFB 

and Travis AFB. As in our Army and Navy travel card audits, we found 

that Air Force APCs had excessive responsibilities. For example, APC 

duties were being assigned as collateral duties and certain APCs were 

responsible for as many as 1,200 accounts. We also found excessive 

turnover associated with military APCs at Nellis AFB and Travis AFB.



GAO’s 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 state that management should identify 

appropriate knowledge and skills required for various jobs and should 

provide needed training. The standards also state that establishing 

appropriate human capital practices, including hiring, training, 

evaluating, counseling, and disciplining personnel, is another critical 

control environment factor.



Lack of Emphasis and Inadequate Monitoring of APC Training:



The emphasis on APC training varied across the three case study sites. 

Nellis AFB did not have a control mechanism in place to help ensure 

that all APCs received appropriate training and Travis AFB did not 

train APCs in a timely manner. Specifically, Travis AFB APCs told us 

that they did not receive timely training on how to access and use Bank 

of America EAGLS data to monitor travel card activity when they were 

assigned APC duties. However, we determined that Hill AFB had a 

mechanism in place to monitor APC training, and it provided that 

training in a timely manner.



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 relating to the travel card program. 

However, neither DOD nor Air Force-wide procedures detail 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. The lack of 

emphasis on training could negatively impact APCs’ ability to monitor 

delinquencies and promptly detect and prevent potentially fraudulent 

and abusive activities.



Excessive APC Turnover and Responsibilities:



As in our Army and Navy work, we determined that most Air Force APC 

duties were usually given to military personnel. As a result, APC 

positions usually have high turnover rates which, in many cases, have 

resulted in less effective performance of APC duties, such as 

monitoring cardholder travel card activity. For example, at Nellis AFB, 

the average length of assignment for APCs was approximately 12 months, 

and at Travis AFB assignments for military APCs were generally from 12 

to 15 months. In addition, a Pacific Air Force official reported that 

during a recent 3-month period, one base experienced turnover in 18 of 

its 30 APC positions. In contrast, at Hill AFB, where most of the APCs 

were civilians, the average term for civilian APCs was approximately 20 

months.



Further, we found that Air Force APC duties at the locations we audited 

were “other duties as assigned.” The primary duties for certain APCs 

that we interviewed included data systems management and aircraft 

maintenance. As prescribed by the DOD Financial Management Regulation, 

APCs “are responsible for the day-to-day operations of the DOD Travel 

Card Program.” Volume 9, Chapter 3 of the DOD Financial Management 

Regulation 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 account delinquencies, interacting 

with the bank, and fielding questions about the program from both 

cardholders and supervisors. APCs are also required to notify 

commanders and supervisors of all travel card misuse so they can take 

appropriate actions. Several APCs that we interviewed told us they did 

not receive training on the full range of their APC duties until at 

least six months after they were assigned APC responsibilities. The 

APCs also told us they were not trained in using EAGLS until six months 

or more after they were assigned APC responsibilities.



In addition to the part-time nature of APC duties, the number of travel 

cardholders assigned to APCs can result in excessive span of control, 

which impacts an APC’s ability to effectively perform monitoring and 

oversight. If the span of control is excessive, APCs may not be able to 

provide the necessary oversight to prevent the misuse of the travel 

cards. Table 4 shows the average span of control and incidences of APCs 

with a span of control greater than 100 cardholders.



Table 4: APC Span of Control at Selected Air Force Locations in Fiscal 

Year 2002:



Air Force Location: Hill AFB; Average ratio of open cardholder accounts 

to APC: 209 to 1; Percent and number of APCs with a span of control 

greater than 100 open cardholder accounts: 62% (23).



Air Force Location: Nellis AFB; Average ratio of open cardholder 

accounts to APC: 132 to 1; Percent and number of APCs with a span of 

control greater than 100 open cardholder accounts: 35% (16).



Air Force Location: Travis AFB; Average ratio of open cardholder 

accounts to APC: 264 to 1; Percent and number of APCs with a span of 

control greater than 100 open cardholder accounts: 84% (21).



Source: GAO analysis of Air Force data.



[End of table]



As shown in table 4, average APC span of control ratios varied at our 

case study locations. We also found that a high percentage of APCs had 

a span of control that exceeded Bank of America guidelines of 100 

cardholders per APC. While we did not evaluate the guidance provided by 

Bank of America, we believe that one APC cannot effectively carry out 

all necessary management and oversight responsibilities if he or she, 

even working full-time, has responsibility for hundreds of cardholders.



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 the 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 users include both customers (APCs requiring access to 

travel data for cardholders under their purview and individual 

travelers requiring access to their own travel transaction histories) 

and Bank of America employees who 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 their APC duties or after they may have been transferred 

or terminated. 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 transferred or terminated or no longer had 

APC responsibilities. Because of 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:



Of the four key control activities associated with the fiscal year 2001 

travel payment process that we tested, we found breakdowns associated 

with a lack of documentation to support the accuracy of travel 

reimbursements at all three locations and significant breakdowns in 

controls at two locations related to requirement for employees to 

submit vouchers within 5 days of completing travel. On a positive note, 

we found that travel vouchers were almost always paid within 30 days of 

submission. As a result, we ruled out late payment of travel vouchers 

as a contributing factor to travel card delinquencies at the three Air 

Force locations we audited. Our test results also showed that most 

travel charges were supported by approved travel orders, indicating 

minimal personal use of the travel card. This is considerably lower 

than the Army sites we audited, where we estimated that personal 

charges were as high as 45 percent at one location. It is also 

significantly lower than the Navy sites we audited, where we estimated 

that personal charges were as high as 26 percent at one location. 

However, as discussed later in this report, our overall Air Force data 

mining found several instances of personal use of the government travel 

card.



Table 5 below shows the results of our statistical sampling tests. 

Appendix II includes the specific criteria we used to conclude on the 

effectiveness of these controls.



Table 5: Results of Testing of Key Internal Controls:



Air Force base, major command: Nellis AFB, Air Combat Command; 

Percentage of failure: Travel orders are approved prior 

to travel: 1; Percentage of failure: Travel voucher reimbursements 

are accurate: 16; Percentage of failure: Travel vouchers are submitted 

within 5 days of travel completion: 5; Percentage of failure: Travel 

vouchers are paid within 30 days of submission: 0.



Air Force base, major command: Travis AFB, Air Mobility Command; 

Percentage of failure: Travel orders are approved prior 

to travel: 2; Percentage of failure: Travel voucher reimbursements 

are accurate: 39; Percentage of failure: Travel vouchers are submitted 

within 5 days of travel completion: 17; Percentage of failure: Travel 

vouchers are paid within 30 days of submission: 0.



Air Force base, major command: Hill AFB, Air Force Materiel Command; 

Percentage of failure: Travel orders are approved prior 

to travel: 1; Percentage of failure: Travel voucher reimbursements 

are accurate: 13[A]; Percentage of failure: Travel vouchers are 

submitted within 5 days of travel completion: 25; Percentage of 

failure: Travel vouchers are paid within 30 days of submission: 1.



Source: GAO analysis of Air Force travel process documents.



Note. The numbers in the table represent estimated percentages of 

failures in the population based on our sampling tests. The confidence 

intervals for our sampling estimates and the basis for our assessment 

of the effectiveness of the control activities tested are presented in 

app. II.



[A] Hill AFB used two systems to process travel vouchers during fiscal 

year 2001. Only travel vouchers processed through the Integrated 

Automated Travel System were tested for this attribute.



[End of table]



Controls over Travel Voucher Review and Accuracy:



We found a lack of required receipts for hotel and rental car costs in 

the voucher packages associated with a number of transactions in our 

sample, indicating that these expenses should not have been reimbursed 

to the employees. For the three units we audited, Air Force Financial 

Services Offices were responsible for processing vouchers to ensure 

that only authorized, properly supported travel charges were reimbursed 

and that the expenses claimed were accurately calculated. In our 

samples, we found that most errors were in the following categories.



* Missing receipts - At all three case study locations, we found the 

majority of errors related to instances in which voucher packages did 

not include all required receipts to support claims, based on DOD 

regulations. For example, a Nellis AFB cardholder was paid for over 

$700 in lodging costs on a voucher for which required receipts were not 

attached to the copy of the travel voucher we reviewed. The Nellis AFB 

Comptroller told us that he believed the receipts were most likely lost 

between the processing of the voucher at Nellis AFB and the filing of 

the voucher at the Defense Finance and Accounting Service (DFAS) in 

Denver. DFAS Denver officials stated that all of the receipts in the 

voucher package were copied for our review. We were unable to determine 

whether the missing receipts may have resulted from poor record 

retention by DFAS Denver or erroneous payments of expenses without 

required receipts. In either case, the process for obtaining and 

retaining required receipts was inadequate.



* Errors in amounts paid - We found instances at all three case study 

locations in which Financial Services Office personnel used incorrect 

per diem rates[Footnote 24] for lodging and meals and incidental 

expenses to calculate the reimbursement amount, resulting in 

overpayments to the traveler.



Controls over Timely Voucher Submission:



Two of the case study sites we audited--Travis AFB and Hill AFB--had 

ineffective controls for ensuring that vouchers were submitted in a 

timely manner. DOD policy requires the traveler to submit a travel 

voucher within 5 days of return from travel.[Footnote 25] The failure 

rates we identified involved late submission of vouchers ranging from 8 

to 87 days. Late submission of a travel voucher increases the 

likelihood that travel card bills could become due before the employee 

receives a reimbursement for travel expenses.



Other Control Weaknesses Identified:



Some of the transactions in our statistical sample could not be 

evaluated for key control attributes due to data management problems, 

which represent additional control weaknesses. These weaknesses 

included data entry errors, such as incorrect social security numbers, 

and organizational coding problems related to “orphan” accounts--

accounts that fell into limbo because transferring units did not 

deactivate travel card accounts when cardholders transferred to new Air 

Force units and the cardholders did not check in with the gaining unit 

APCs to ensure that their travel card accounts were coded to their new 

unit organization codes. When the account of a transferring cardholder 

falls into this limbo status, the losing unit continues to receive 

reports on the account status, but has no control over the cardholder, 

and the gaining unit’s reports contain no information on the 

cardholder’s account status. Based on our Nellis AFB statistical 

testing, we estimated that approximately 2 percent of the fiscal year 

2001 transactions were affected by data entry problems and another 4 

percent were orphan accounts.



We estimated that approximately 1 percent of the Hill AFB transactions 

and 5 percent of the Travis AFB transactions were associated with 

orphaned accounts. Our testing did not identify any data entry problems 

at either Hill AFB or Travis AFB.



Electronic Data Processing Control Weaknesses in IATS:



Our limited review of selected travel system controls at the three case 

study locations found problems in key systems controls, including 

access controls, segregation of duties, and transaction histories. 

Travel vouchers that we examined at the three test locations were 

processed through the Integrated Automated Travel System (IATS), DOD’s 

primary travel voucher processing system. Air Force Audit Agency’s 

February 2002 report on IATS controls identified similar problems at 10 

other Air Force locations.[Footnote 26]



Because the IATS performs all processing functions from initiating 

travel account records through disbursing travel pay, it is critical 

that system controls are in place to protect against fraudulent 

payments. Access controls for computer systems must be designed to 

provide protection against unauthorized access to computer resources. 

One form of access controls is the use of password cracker programs to 

test the effectiveness of passwords currently in use. These programs 

were not being used at the three sites, therefore making passwords 

vulnerable. Another control, required by Air Force Manual 33-223, 

Identification and Authentication, is that individual passwords are to 

be revised every 90 days. However, we found that this requirement was 

not implemented at one of our three case study locations, and 

supervisors at Nellis AFB did not follow up to determine if password 

change instructions were followed.



We also found a lack of appropriate segregation of duties resulting in 

access to incompatible duties in IATS at all three of our test 

locations. Users should have access only to data and system functions 

required to accomplish their stated responsibilities and they should 

not have the ability to perform duties incompatible with their assigned 

responsibilities. We found that IATS users at all three case study 

locations had conflicting levels of access and, as a result, were able 

to not only create travel vouchers, but also to update and audit the 

same records. For example, our review of access privileges at Hill AFB 

found that assigned privileges for four users afforded them the ability 

to perform duties such as creating, updating, and auditing travel 

vouchers.



After we called this problem to the attention of the IATS manager, he 

immediately revised user access levels to ensure that auditors could 

not also create and update travel voucher information. According to the 

Air Force Audit Agency report issued in February 2002, this problem is 

attributable in some measure to an inherent weakness in the software 

design. Although IATS contains various levels of privileges that can be 

assigned to individual users, the software design does not effectively 

limit access to preclude the assignment of incompatible access 

privileges.



In addition, we found that travel voucher data in IATS did not include 

transaction histories or audit trails. This problem also was identified 

by the Air Force Audit Agency as a systemic problem. Because IATS 

software design does not provide the capability to track changes, it is 

impossible to obtain transaction histories to determine whether changes 

were made, or who may have made changes, to a particular voucher. This 

makes the system vulnerable to individuals who could use inappropriate 

IATS access to create a fictitious travel voucher, process a payment, 

and subsequently delete the travel record. According to the Air Force 

Audit Agency report, this problem is being addressed in the design of 

WINIATS. WINIATS, a Windows-based software application--is targeted to 

replace IATS in June 2003.



Potentially Fraudulent and Abusive Travel Card Activity:



Our work identified numerous instances of potentially fraudulent and 

abusive activity associated with the Air Force’s travel card program 

during fiscal year 2001 and the first 6 months of fiscal year 2002, 

similar to the types of cases we found in our Army and Navy work. For 

purposes of this report, we characterized as potentially fraudulent 

those cases where cardholders might have committed bank fraud by 

writing three or more NSF checks or by writing checks on closed 

accounts to pay their Bank of America bills.



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. 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. Failure to implement 

controls to reasonably prevent such transactions can increase the Air 

Force’s vulnerability to additional delinquencies and charge-offs.



Potentially Fraudulent Transactions:



During the 18-month period covering fiscal year 2001 and the first half 

of fiscal year 2002, over 6,300 individuals wrote nonsufficient fund 

(NSF) checks, or “bounced checks,” to Bank of America as payment for 

their travel card bills,[Footnote 27] including over 400 individuals 

who wrote three or more NSF checks--potentially fraudulent 

acts.[Footnote 28] Potentially fraudulent NSF cases identified in our 

work include one individual who had charged over $13,000 to the travel 

card account and wrote seven NSF checks to Bank of America. The Air 

Force court-martialed the individual and imposed a 90-day confinement 

and a reduction in rank. Table 6 includes details on 10 individuals who 

committed potentially fraudulent acts by writing three or more NSF 

checks to pay their travel card accounts.



Table 6: Examples of Cases in Which Cardholders Wrote Three or More NSF 

Checks to Bank of America and Accounts Were Charged Off and/or Placed 

in Salary Offset from October 2000 through March 2002:



Cardholder 1; Grade E-6; Unit: Barksdale AFB; Total number/ amount of 

NSF checks: 3 for 

$3,214, plus 1 forged check for $260; Total charge-off or salary offset 

amount: Charge-off; $6,666; Credit history problems: Judgment, 

automobile repossession, past due accounts, collection actions, and one 

charge-off prior to card issuance; several charge-; offs after card 

issuance; Documented disciplinary action: Other than honorable 

discharge for travel card abuse.



Cardholder 2; Grade E-3; Unit: Tinker AFB; Total number/ amount of NSF 

checks: 7/$23,137; Total charge-off or salary offset amount: Charge-off 

$13,908; salary offset; Credit history problems: No credit problems 
prior 

card issuance; delinquencies, collection actions, and charge-offs after 
card 

issuance; Documented disciplinary action: Court-martial, 90-day 

confinement for travel card abuse.



Cardholder 3; Grade E-6; Unit: Wright-Patterson AFB; Total number for 

amount of NSF checks: 

3 / $6,235; Total charge-off or salary offset amount: Charge-off; 

$7,679; Credit history problems: No credit problems prior to card 

issuance; judgment, bankruptcy, and one charge-off after card 

issuance; Documented disciplinary action: Court martial, 12 months in 

jail, and reduction in rank to E-1 for travel card abuse.



Cardholder 4[A]; Grade E-3; Unit: March AFB; Total number/ amount of 
NSF 

checks: 4 NSF checks and 3 checks on closed accounts totaling $26,356; 

Total charge-off or salary offset amount: Charge-off; $17,436; Credit 
history 

problems: Bankruptcies and one charge-off prior to card issuance; 

automobile repossession, charge-offs and collection actions after card 

issuance; Documented disciplinary action: Discharge for travel card 

abuse is pending.



Cardholder 5; Grade N/A; Unit: Virginia state employee assigned to 

Air National Guard; 

Total number/ amount of NSF checks: 4 / $6,048; Total charge-off or 

salary offset amount: Charge-off; $2,127; account paid off in June 

2002; Credit history problems: No credit problems prior to card 

issuance; judgment, charge-offs, collection actions, and delinquencies 

after card issuance; Documented disciplinary action: None. Individual 

was not an Air Force employee.



Cardholder 6; Grade E-4; Unit: North Carolina Air National Guard; 

Total number/ amount 

of NSF checks: 4 / $3,022; Total charge-off or salary offset amount: 

Charge-off; $3,037; Credit history problems: Collection actions prior 

to card issuance; collection actions and charge-offs after card 

issuance; Documented disciplinary action: None. Discharged in July 

2002 for being absent without leave.



Cardholder 7; Grade E-8; Unit: McChord AFB; Total number/ 

amount of NSF checks: 4 / $4,058; 

Total charge-off or salary offset amount: Charge-off; $4,066; 

Credit history problems: Delinquencies and bankruptcy prior to card 

issuance; bankruptcy, real estate foreclosure and a charge-off after 

card issuance; Documented disciplinary action: None. Individual 

retired in July 2001.



Cardholder 8; Grade E-4; Unit: Ft. Walton Beach; Total number/ amount 

of NSF checks: 1 

NSF check and 7 checks on closed accounts totaling $7,489; Total 

charge-off or salary offset amount: Charge-off; $2,111; Credit history 

problems: No credit problems prior to card issuance; automobile 

repossession, several charge-offs, and collection actions after card 

issuance; Documented disciplinary action: None. Individual left the 

service in January 2001.



Cardholder 9; Grade E-5; Unit: McChord AFB; Total number/ amount of 

NSF checks: 7 / 

$4,750; Total charge-off or salary offset amount: Charge-off; $3,781; 

salary offset; Credit history problems: A charge-off and collection 

action prior to card issuance; charge-offs and collection actions after 

card issuance; Documented disciplinary action: None.



Cardholder 10; Grade GS-7; Unit: Hill AFB; Total number/ amount of NSF 

checks: 3 / 

$5,867; Total charge-off or salary offset amount: Charge-off; $5,952; 

Credit history problems: Charge-offs and collection actions prior to 

card issuance; redeemed repossession after card issuance; Documented 

disciplinary action: None.



Source: GAO analysis of Air Force, Bank of America, and credit history 

data.



[A] Cardholder obtained two accounts from Bank of America using 

different social security numbers. The first account was opened in 

January 2000 and was closed in February 2001 with an unpaid balance of 

$4,771, which was subsequently charged off. The cardholder wrote two 

checks on a closed account to pay travel card bills associated with 

this account.



[End of table]



Of the ten cardholders included in table 6, six had significant credit 

problems prior to card issuance, such as charged-off credit card 

accounts and automobile loans, bankruptcies, and referrals to 

collection agencies for unpaid bills. The following provides detailed 

information on some of these cases.



* Cardholder #1 was a reservist technical sergeant (E-6) who served one 

weekend each month. Bank of America records showed that the travel card 

account was opened on December 22, 1999, and that the individual 

subsequently wrote three NSF checks totaling $3,214 in payment of his 

travel card bills. In addition, the individual forged a check in the 

amount of $260. The individual’s account was closed on January 9, 2002, 

and an unpaid balance of $6,666 was charged off. The individual’s 

credit report showed that he had credit problems prior to issuance of 

the government travel card, including repossession of an automobile and 

a charged-off account.



Bank representatives had numerous conversations with the individual 

about his account. We found that the individual’s travel card account 

was included on monthly delinquency reports. Bank of America ultimately 

charged off the travel card account. The individual was discharged from 

the Air Force under “Other Than Honorable Conditions” for failure to 

pay his military travel card bills on time and using his travel card 

for unauthorized purposes.



* Cardholder #2 was an airman (E-3) at Tinker AFB, Oklahoma. Bank of 

America records showed that the individual’s account was opened on 

August 25, 2000, and that the individual subsequently wrote seven NSF 

checks totaling $23,137 in payment of her travel card bills. The 

individual submitted NSF checks, which made the account appear to have 

available credit--a practice known as “boosting”--thus enabling the 

individual to make cash withdrawals and additional purchases. Bank of 

America records also showed that bank representatives had numerous 

conversations with the individual about her travel card debt. The 

individual’s account was placed in the salary-offset program on March 

19, 2001, with monthly payments of $169. The travel card account was 

closed on July 18, 2002, and an unpaid balance of $13,908 was charged 

off. The individual’s credit report showed that the individual did not 

have credit problems prior to the issuance of the travel card.



Bank of America notified the squadron about the NSF checks issued in 

payment of the individual’s travel card account. A subsequent Air Force 

investigation identified numerous abuses of the travel card, including 

multiple uses of the card in 1 day for personal ATM withdrawals, and 

187 other instances of misuse totaling approximately $13,700, including 

personal purchases at vendors such as Victoria’s Secret. These findings 

resulted in the individual being court-martialed, fined $5,000, and 

initially sentenced to confinement on the base for about 135 days; 

however, the base commander reduced the sentence to less than 90 days 

due to the cardholder’s pregnancy.



* Cardholder #3 was a technical sergeant (E-6) stationed at Wright-

Patterson AFB, Ohio, and was the APC for his unit. Bank of America 

records showed that the individual’s account was opened on October 10, 

1998, and that the cardholder subsequently wrote three NSF checks 

totaling $6,235. The individual’s travel card account was closed on May 

3, 2002, and an unpaid balance of $7,679 was charged off. The bank’s 

customer contact log indicates that bank representatives had numerous 

conversations with the individual about the delinquent account. The 

individual’s credit report showed significant credit problems prior to 

the individual receiving the travel card.



Bank of America notified the squadron that the individual had submitted 

several NSF checks to Bank of America. According to an Air Force 

official, the problems reported by the bank were especially disturbing 

because the individual was a trusted combat veteran with many years of 

service, who also functioned as the squadron’s APC. An Air Force 

investigation of the individual’s travel card abuses revealed that the 

individual (1) made approximately $6,000 in personal, nonauthorized 

charges, (2) submitted a $4,500 NSF check to the bank to boost the 

amount of available credit on his account to permit additional cash 

advances, and (3) unrelated to his travel card abuses, the individual 

also stole checks in the amount of $7,500 from the U.S. mail. The 

individual was court-martialed for travel card abuse and theft of U.S. 

mail and sentenced to 1 year in jail, reduced in pay grade to E-1, and 

discharged from the military for “financial difficulties.”:



* Cardholder #4 was an airman (E-3) reservist assigned to March AFB, 

California, who was also a full-time DOD employee (GS-9) in a position 

involving similar work. Our analysis of Bank of America records showed 

that the individual obtained two travel card accounts during two 

different periods. The individual issued NSF checks and other checks to 

Bank of America on closed accounts in payment of both travel card 

accounts. The first account, which was opened in January 2000, was 

closed in February 2001 with an unpaid balance of $4,771 that was 

subsequently charged off. Air Force officials told us that the 

individual obtained the second account in October 2001 by having a 

different superior officer, who was unaware of the previous travel card 

account, sign the application for the new card. The individual 

fraudulently used a relative’s social security number to apply for the 

second travel card account. In payment of his second travel card 

account, the individual wrote seven checks to Bank of America, 

consisting of four NSF checks totaling $7,131, on an open bank account 

and three checks totaling $19,225 on a closed bank account. The 

cardholder used NSF checks to make large payments, which enabled him to 

boost his available balance and permit cash withdrawals from the 

account. An Air Force official stated he was unaware of the problem 

because the NSF checks masked the delinquency problem. The individual’s 

second travel card account was closed on June 3, 2002, and an unpaid 

balance of $12,665 was charged off. Bank of America’s customer contact 

log indicates that its representatives had numerous conversations with 

the individual about this account.



The cardholder resigned his civilian DOD position and was charged with 

(1) identity theft related to the use of his relative’s social security 

number, (2) being absent without leave, (3) failure to participate in 

monthly training, and (4) financial irresponsibility related to 

personal use of the government card when not on military orders. The 

individual was in the process of being discharged from his military E-

3 reservist position in October 2002. The individual’s credit report 

showed he had several credit problems, including bankruptcies and a 

charge-off prior to his receiving a government travel card.



* Cardholder #5 was a Virginia state employee assigned to the Air 

National Guard in Richmond, Virginia. Bank of America records showed 

that the individual’s account was opened on March 18, 1999. The 

individual wrote four NSF checks totaling $2,818 and stopped payment on 

two checks totaling $3,230 to Bank of America. The individual’s travel 

card account was closed on November 26, 2001, and an unpaid balance of 

$2,127 was charged off. The cardholder paid off the account on June 17, 

2002. Bank of America records indicate that bank representatives had 

numerous conversations with the cardholder about this account. The 

individual’s credit report did not show any significant credit problems 

prior to issuance of the card.



The current APC, who assumed that role in July 2001, determined the 

individual was delinquent on his government travel card account when he 

reviewed Bank of America delinquency reports. The APC referred the 

matter to the individual’s unit commander who subsequently counseled 

the individual on “multiple” occasions regarding the card’s use and 

delinquency. The APC told us that because the individual was a state 

employee and not a member of the Air National Guard, the individual was 

not eligible for the Air Force travel card and should not have been 

granted a card.



Analysis of Abusive Travel Card Use:



We also found numerous examples of Air Force personnel misusing and 

abusing their government travel cards by making transactions that were 

clearly not for the purpose of government travel, similar to those we 

reported in our Army and Navy reports. As discussed further in appendix 

II, we used data mining procedures to identify transactions that we 

believed to be potentially fraudulent or abusive based upon the nature, 

amount, merchant, and other identifying characteristics of the 

transaction. As a result of these procedures, we found instances in 

which cardholders abused their travel cards by purchasing a wide 

variety of personal goods or services that were unrelated to official 

government travel. As shown in table 7, we were able to determine that 

during an 18-month period, Air Force cardholders charged approximately 

$31,000 to purchase admission to entertainment events, such as NFL 

football games and a Janet Jackson concert. We also identified travel 

card transactions totaling approximately $14,000 for gambling; $31,000 

for cruise packages; and $32,000 coded as purchases at gentlemen’s 

clubs, which provide adult entertainment. The examples shown in table 7 

include both instances where the cardholders paid their bills and where 

they did not.



Table 7: Examples of Abusive Air Force Travel Card Activity (October 1, 

2000, to March 31, 2002):



Category: Cruises; Examples of vendors: Carnival, Celebrity, Norwegian, 

and Princess; Number of transactions: 70; Approximate dollar amount: $ 

31,000.



Category: Gambling; Examples of vendors: GCA*-Global Cash Access, and 

www.PROCCY; Number of transactions: 79; Approximate dollar amount: 

14,000.



Category: Sports, concerts, and other events; Examples of vendors: 

Dallas Cowboys, Backstreet Boys, Janet Jackson, and other Ticketmaster 

purchases; Number of transactions: 223; Approximate dollar amount: 

31,000.



Category: Gentlemen’s clubs; Examples of vendors: Spearmint Rhino, Can 

Can, Cheetah’s Lounge, and Déjà Vu Showgirls; Number of transactions: 

187; Approximate dollar amount: 32,000.



Category: Legalized brothels; Examples of vendors: 40 Bar Ranch and 

Madam Butterfly; Number of transactions: 3; Approximate dollar amount: 

1,000.



Source: GAO analysis of Bank of America data.



[End of table]



Our investigative work showed that gentlemen’s clubs were sometimes 

used to convert the travel card to cash by supplying cardholders with 

actual cash or “club cash” for a 10 percent fee. To illustrate, an Air 

Force employee that charged $440 to their government travel card at one 

of these clubs, would receive $400 in cash. Such charges are processed 

by the establishment’s merchant bank, and authorized by Bank of 

America, in part because the merchant category code (MCC),[Footnote 

29]which identifies the nature of the transactions and is to be used by 

Bank of America to block improper purchases, are circumvented when the 

establishments reported the charges as restaurant, dining, or bar 

charges. Subsequently, the club would receive payment for a $440 

restaurant charge.



Examples of Travel Card Abuse:



We found cases where individuals used their travel cards for both 

official and personal reasons, but failed to pay their accounts, 

thereby resulting in accounts that were charged off and/or included in 

salary offset and fixed payment plans. Table 8 provides examples of 

those cases.



Table 8: Examples of Abusive Travel Card Activity Where Accounts Were 

Charged Off and/or Placed in Salary Offset from October 2000 through 

March 2002:



Cardholder 1; Grade: E-5; Unit: Idaho Air National Guard; Total 

charge-off or salary 

offset amount: Charge-off; $7,258; Transactions contributing to charge-

off or salary offset: Employee’s spouse used his travel card for 

Internet gambling; Credit history problems: No prior credit problems. 

Due to inability to pay wife’s excessive gambling debt, the cardholder 

filed for bankruptcy; Documented disciplinary action: None.



Cardholder 2; Grade: E-6; Unit: Travis AFB; Total charge-off or salary 

offset amount: 

Charge-off $1,008; Salary offset; Transactions contributing to charge-

off or salary offset: Failure to pay travel card bill after receiving 

reimbursement for government travel expenses; Credit history problems: 

Credit card delinquencies prior to card issuance; charge-offs, 

collection actions, and automobile repossession after card issuance; 

Documented disciplinary action: Counseled, letters of reprimand, 

Article 15s, court-martialed and sentenced to 5 years in jail, and 

dishonorable discharge for theft of government property.



Cardholder 3; Grade: E-4; Unit: New York Air National Guard; Total 

charge-off or salary 

offset amount: Salary offset; $6,086; Transactions contributing to 

charge-off or salary offset: Personal use including long distance 

calls, rental car, and contact lenses; Credit history problems: 

Bankruptcy filed and automobile repossession prior to card issuance; 

several delinquencies after card issuance; Documented disciplinary 

action: Four letters of counseling and intent to discharge related to 

failure to pay travel card bills.



Cardholder 4; : GS-15; Unit: Patrick AFB; Total charge-off or salary 

offset amount: 

Salary offset; $3,174; Transactions contributing to charge-off or 

salary offset: Failure to pay travel card bill after receiving 

reimbursement for government travel expenses; Credit history problems: 

Bankruptcy filed 1 month after travel card issuance and a charge-off in 

2002; Documented disciplinary action: None. Balance was paid off on 

August 14, 2002, due to GAO scrutiny of account.



Cardholder 5; Grade: E-5; Unit: Langley AFB; Total charge-off or salary 

offset amount: 

Charge-off; $3,729; Transactions contributing to charge-off or salary 

offset: Personal use including ATMs, restaurants, and veterinary 

services after separation from the service; Credit history problems: 

Judgment prior to card issuance; bankruptcy, multiple charged-off 

accounts, and multiple collection actions since card issuance; 

Documented disciplinary action: None.



Cardholder 6; Grade: E-5; Unit: Nellis AFB -; transferred to Cannon AFB 

in November 2001; 

Total charge-off or salary offset amount: Salary offset; $2,224; 

Transactions contributing to charge-off or salary offset: Used 

government travel card to pay for gambling, adult entertainment at 

gentlemen’s clubs, and miscellaneous personal services; Credit history 

problems: Bankruptcy, charge-offs, and collection actions prior to card 

issuance; repossession, charge-offs, and delinquency since card 

issuance; Documented disciplinary action: Article 15 and reduction in 

grade to E-4 for travel card abuse.



Cardholder 7; Grade: O-1; Unit: Nellis AFB; Total charge-off or 

salary offset amount: 

Salary offset; $7,223; Transactions contributing to charge-off or 

salary offset: Spouse made ATM withdrawals and numerous personal 

charges at grocery stores, gas stations; 6 NSF checks written to pay 

travel card bill; Credit history problems: Automobile repossession 

prior to card issuance and credit card delinquencies and charge-offs 

since card issuance; Documented disciplinary action: Letter of 

admonishment.



Cardholder 8; Grade: E-4; Unit: Nellis AFB; Total charge-off or salary 

offset amount: 

Salary offset; $446; Transactions contributing to charge-off or salary 

offset: ATM withdrawals, wrote 7 NSF checks to pay travel card bill; 

Credit history problems: Collection and charge-off actions prior to 

card issuance; collection actions, charge-offs, and judgment after card 

issuance; Documented disciplinary action: None. Court-martial and 

discharge for other than travel card issues.



Cardholder 9; Grade: WG-10[A]; Unit: Hill AFB; Total charge-off or 
salary 

offset amount: 

Charge-off; $3,066; Transactions contributing to charge-off or salary 

offset: Failure to pay travel card bill after receiving reimbursement 

for government travel expenses; Credit history problems: Credit card 

delinquencies and an automobile repossession prior to travel card 

issuance. Filed Chapter 7 bankruptcy in June 2002; Documented 

disciplinary action: Written documentation of counseling.



Cardholder 10; Grade: WG-10[ A]; Unit: Hill AFB; Total charge-off or 

salary offset 

amount: Charge-off; $1,029; Transactions contributing to charge-off or 

salary offset: Failure to pay travel card bill after receiving 

reimbursement for government travel expenses; Credit history problems: 

Collections, delinquencies, repossession, and charge-offs prior to 

travel card issuance. Bank of America report indicates that cardholder 

has filed for bankruptcy; Documented disciplinary action: None.



Source: GAO analysis of Air Force, Bank of America, and credit history 

data.



[A] Wage Grade (WG) positions are paid at hourly rates and generally 

pertain to government positions, such as maintenance, printing, and 

landscaping.



[End of table]



The following examples include details of cases summarized in table 8.



* Cardholder #1 is a staff sergeant (E-5) in the Idaho Air National 

Guard who is employed full-time as a juvenile counselor at a county 

correctional facility. The cardholder told our investigators that from 

December 22, 2000, to February 19, 2001, his wife used his government 

travel card without his knowledge or consent. Bank of America records 

showed that transactions for the above period totaled over $13,000, of 

which over $10,000 was for on-line gambling charges and another $3,000 

was for ATM withdrawals. There were also several credits to the 

cardholder’s account totaling over $5,000 from his wife’s gambling 

winnings. The cardholder’s wife admitted to a gambling addiction and to 

using their personal bank debit card and her husband’s government 

travel card to fund her addiction.



Upon discovering his wife’s abusive use of his government travel card, 

the cardholder immediately briefed his commanding officer, who informed 

the APC, and the account was closed. The cardholder also contacted Bank 

of America to work out a payment plan for the debt but no agreement 

could be reached. As a result of his inability to pay the debt incurred 

by his wife, the cardholder filed for Chapter 7 bankruptcy. On 

September 3, 2001, Bank of America charged off an unpaid balance of 

$7,258 on the cardholder’s travel card account. To date, no criminal 

charges have been initiated against the cardholder’s now ex-wife.



In researching this case, we noted that although DOD has requested that 

Bank of America block certain merchant category codes to help prevent 

improper travel card transactions, such as transactions for on-line 

gambling at www.PROCCY, merchants are able to circumvent such 

restrictions by assigning permissible merchant codes to otherwise 

improper transactions. For example, in this case, to mask gambling 

activity, the on-line gambling establishments with whom the 

cardholder’s wife dealt used the merchant category codes for 

“Miscellaneous and Specialty Retail Stores” and “Professional Services-

-Not Elsewhere Classified” instead of the merchant category code for 

“Betting--Including Lottery, Gaming Chips, Track Wagers.” However, 

these establishments credited the wife’s winnings to the cardholder’s 

account using the merchant category code for “Betting--Including 

Lottery, Gaming Chips, Track Wagers.” Active monitoring by the APC of 

ongoing travel card activity would have helped detect the problem 

transactions sooner.



* Cardholder #2 was a highly skilled technical sergeant (E-6) at Travis 

AFB, California, who held a secret clearance and worked on C-5 

aircraft, large cargo aircraft designed for airlifting weapons and 

supplies. Our discussions with base officials and our review of the 

cardholder’s personnel file and credit report revealed that the 

cardholder had several credit card delinquencies prior to issuance of 

the travel card. In March 1998, prior to being assigned to Travis AFB, 

the cardholder had received an Article 15[Footnote 30] for wrongfully 

using his American Express government travel card for personal gain and 

blaming the misuse of the travel card on another family member.



In March 2001, when the individual transferred to Travis AFB, his new 

APC noted that the individual’s travel card account had a past due 

balance of $2,257. The APC reported this information to the 

cardholder’s unit commander. At that time, the account was suspended 

and Bank of America closed and canceled the cardholder’s account a week 

later. However, Travis AFB officials told us that they asked Bank of 

America to keep the individual’s travel card account open so that he 

could travel where necessary to make repairs to downed C-5 aircraft. 

The officials told us that the cardholder was one of a few experts who 

could supervise repairs on the C-5 aircraft. According to the 

officials, when problems arose with the aircraft, repairs had to be 

made immediately to get the plane back in the air.



On April 16, 2001, the unit commander counseled the cardholder and gave 

him a letter of reprimand for nonpayment of his travel card bill. On 

June 25, 2001, the cardholder received another Article 15 for failure 

to pay his “Military Star Account” with the base Army and Air Force 

Exchange Service (AAFES) store. Both Article 15s and the letter of 

reprimand contained statements indicating that this behavior would not 

be tolerated. It is apparent that this statement on the documents did 

not deter the individual from being delinquent, nor did the officials 

abide by these statements.



During the fall of 2001, Air Force investigators were notified that 

personal protective gear, including body armor and biochemical and 

biological protective masks, was missing from C-5s arriving in 

Afghanistan. The cardholder came under suspicion as one of a few 

individuals with access to C-5 aircraft. During the ensuing 

investigation involving the individual, his security badge was revoked 

and he had to be escorted to and from his worksite. Shortly thereafter, 

Air Force investigators videotaped the individual selling military 

protective gear in a town near the base, and the individual was 

arrested and charged with theft and sale of government property. 

Investigators determined that the individual was addicted to gambling 

and had used his government travel card reimbursements and the proceeds 

from the sale of stolen government property to finance his gambling 

habit. In January 2002, the individual was court-martialed, and in 

March 2002, he was convicted of theft and sale of $50,000 in government 

property and was dishonorably discharged. He was sentenced to a 5-year 

jail term. Air Force investigative and legal officials told us that the 

individual’s failure to pay his travel card debt was considered in the 

sentencing decision.



If Travis AFB officials had acted sooner to cancel the technical 

sergeant’s travel card account, revoke his security clearance, and 

discharge him from the service, they may have prevented the theft of 

critical protective gear needed by troops deployed in Afghanistan.



Travel Card Abuse Where Cardholders Paid Their Bank of America Bills:



Further, we found examples where individuals used their government 

travel cards for personal use on purchases of items, such as computers, 

entertainment, college tuition, and jewelry, but kept their accounts 

current by paying their travel card bills in a timely manner. We 

considered these purchases to be abusive travel card activity because 

the travel card may only be used for official government travel 

expenses. Personal use of the travel card may increase the risk of 

charge-offs, which are costly to the government and the taxpayer. In 

addition, instances of personal use are indicative of internal control 

breakdowns, such as the failure of the APCs to monitor travel card 

activities. Table 9 provides details on 10 cases where the cardholders 

made personal purchases but paid their accounts.



Table 9: Examples of Abusive Activity Where the Cardholders Paid Their 

Bills from October 2000 through March 2002:



[See PDF for image]



Source: GAO analysis of Air Force and Bank of America data.



[End of table]



The instances illustrated in this report clearly represent abusive use 

of the government travel card. Air Force personnel are informed that 

these types of transactions are not permitted. All Air Force 

cardholders are required to sign a statement of understanding that the 

card is to be used only for authorized official government travel 

expenses.



Abusive Activity Not Effectively Linked to Disciplinary Action and 

Security Clearances:



Air Force policy provides commanders with a wide variety of 

disciplinary options for addressing misconduct by service members. The 

means of discipline include counseling, oral and written reprimands, 

creating an unfavorable information file, issuing Article 15s, and 

court-martial. The policy leaves the means of discipline and the actual 

punishment to the discretion of the individual commander based upon the 

facts of each case. However, for the cases involving 58 cardholders 

whose accounts involved NSF checks, charge-offs, or salary offsets, we 

found documented evidence of disciplinary actions in only 19 cases. Our 

analysis of cases where travel card accounts had been charged off, were 

in salary offset, or involved NSF checks showed that when the Air Force 

took disciplinary actions, those actions ranged from counseling to 

court-martial and discharge from the service. In certain cases where 

documentation of disciplinary actions was not available, Air Force 

officials told us that verbal counseling had been provided, but was not 

documented. In other cases where documentation was not available, Air 

Force officials claimed that disciplinary actions had been taken, but 

records had not been retained because the individuals had transferred 

or left the service. At Hill AFB, most of the cases we reviewed 

involved civilians. Air Force Instruction 36-704, Discipline and 

Adverse Actions, provides guidance on disciplinary action for civilians 

who fail to honor valid debts or legal obligations. However, the 

guidelines limit disciplinary action to reprimands, even after the 

third offense.



In addition, we found that 32 of the 58 most severe abusers of the 

travel card still had secret or top secret clearances in August 2002. 

According to Air Force Instruction 31-501, Personnel Security Program 

Management, military units are responsible for maintaining unfavorable 

information files on individuals, and are supposed to notify the 

central security facility of instances of financial irresponsibility or 

other behavioral problems that may affect an individual’s security 

clearance. However, we determined that the Air Force does not have 

consistent procedures in place to link travel card account 

delinquencies or charge-off status to an individual’s security 

clearance.[Footnote 31] Some of the Air Force personnel holding 

security clearances who have had difficulty paying their travel card 

bills may present security risks to the Air Force. We have referred the 

names of these individuals to the Air Force Central Adjudication 

Facility for appropriate evaluation.



Linking disciplinary actions and security clearances to misuse of 

travel cards was recently addressed by the fiscal year 2003 Defense 

Appropriations Act. In addition to requiring the Secretary of Defense 

to establish guidance and procedures for disciplinary actions, section 

8149(c) of the act states that such actions may include (1) review of 

the security clearance of the cardholders in cases of misuse of the 

government travel card, and (2) modification or revocation of the 

security clearance in light of such review.



Recent Actions:



Since March 2002, DOD and the Air Force have taken additional actions 

to reduce delinquencies in the travel card program. For example, the 

DOD Comptroller established a Charge Card Task Force to address 

management issues related to DOD’s purchase and travel card programs. 

The task force issued its final report on June 27, 2002, which called 

for additional actions to improve the controls over the travel card 

program. However, to date, many of the actions that DOD has taken 

primarily address the symptoms rather than the underlying causes of the 

problems with the program. Specifically, actions to date have focused 

on dealing with accounts that are seriously delinquent, which are “back 

end” or detective controls rather than preventive controls.



On September 27, 2002, the Air Force Assistant Secretary for Financial 

Management (Comptroller) issued a memorandum emphasizing travel card 

management tools and policy updates to assist local commanders in the 

detection of travel card misuse. Specifically, the memorandum (1) 

directed that travel cards that have had no activity within the last 12 

months be canceled, (2) emphasized that program coordinators should use 

new EAGLS exception reports to help identify suspicious card activity 

that may indicate abuse or potential delinquency problems before they 

appear on delinquency reports, and (3) noted that the Air Force is 

conducting a thorough review of MCCs to ensure that cards cannot be 

used at establishments that are not travel related. In addition, Air 

Force officials told us they also are considering contracting for data 

mining services to support their oversight of the travel card program.



The Congress has recently addressed several of the key issues we 

identified in our Army and Navy work. Section 8149(b) of the Department 

of Defense Appropriations Act, 2003, requires creditworthiness 

evaluations of all potential cardholders and guidelines and procedures 

for disciplining individuals for fraudulent and abusive use of 

government travel cards. Further, section 1008(a) and (b) of the Bob 

Stump National Defense Authorization Act for Fiscal Year 2003 provides 

authority for the Secretary of Defense to require (1) use of the split 

disbursement process, where any part of a DOD employee’s or service 

member’s travel reimbursement is paid directly to the travel card-

issuing bank, and (2) deductions of prescribed amounts from salary and 

retirement pay of DOD employees or service members who have delinquent 

travel card balances and payment of those amounts to the travel card-

issuing bank.



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. Since implementation of the travel card as part of its travel 

program, the Air Force changed its management strategies to oversee the 

use of government travel cards. What once was a weak internal control 

environment in the travel program has been strengthened, resulting in a 

decrease in delinquency rates and charge-offs of bad debts. Despite 

these efforts, the Air Force continues to experience potentially 

fraudulent and abusive travel card activity.



Air Force and DOD actions addressed many areas in the program needing 

improvements. However, DOD and the Air Force will need to implement 

further improvements to more effectively prevent potentially fraudulent 

and abusive activity and further reduce severe credit problems 

associated with the travel card. A focus on additional “front-end” or 

preventive controls will be paramount. In this regard, section 8149(c) 

of the fiscal year 2003 DOD Appropriations Act requires 

creditworthiness evaluations of all potential cardholders and 

guidelines and procedures for disciplining individuals for fraudulent 

and abusive use of government charge cards.



Recommendations for Executive Action:



To strengthen the overall control environment and improve internal 

control for the Air Force’s travel card program, we recommend that the 

Secretary of the Air Force 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 Air Force establish specific 

policies and procedures governing the issuance of individual travel 

cards to military and civilian employees, including the following.



* In accordance with recently enacted legislation, provide individuals 

who have no prior credit histories “restricted” travel cards with low 

credit and ATM limits.



* Develop procedures to periodically evaluate the frequency of 

cardholders’ travel card use and close accounts of infrequent travelers 

in order to minimize exposure to fraud and abuse. In conjunction with 

the periodic reviews, cancel accounts for current infrequent travelers 

as noted in the Charge Card Task Force report.



* Evaluate the feasibility of activating and deactivating travel cards, 

regardless of whether they are standard or restricted cards, so that 

they are available for use only during the period authorized by the 

cardholders’ travel orders. At a minimum, this policy should focus on 

controlling travel card use by “high-risk” enlisted military personnel 

in the E-1 to E-6 grades.



* Develop comprehensive, consistent Air Force-wide initial training and 

periodic refresher training for travel cardholders that focuses 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 and Review Actions:



We recommend that the Secretary of the Air Force establish the 

following specific policies and procedures to strengthen controls to 

address improper use of the travel card.



* Establish guidance regarding the knowledge, skills, and abilities 

required to carry out APC responsibilities effectively.



* Establish guidance on APC span of control responsibilities so that 

such responsibilities are properly aligned with time available to 

ensure effective performance. Determine whether certain APC positions 

should be staffed on a full-time basis rather than as collateral 

duties.



* Establish Air Force-wide procedures to provide assurance that APCs 

receive training on their APC responsibilities, including requirements 

for monitoring cardholders’ travel card use. The training should 

include how to use EAGLS transaction reports and other available data 

to monitor cardholder use of the travel card--for example, reviewing 

account transactional histories to ascertain whether transactions are 

incurred during periods of authorized travel and appear to be 

appropriate travel expenses and are from approved MCCs.



* Require agency program coordinators to review EAGLS reports to 

identify cardholders who have written NSF checks for payment on their 

account balances and refer this data to the employee’s immediate 

supervisor.



* Review, in conjunction with Bank of America, APC-level access to 

EAGLS to limit such access to only those individuals with current APC 

duties.



* Establish Air Force procedures detailing how APCs should carry out 

their responsibility to monitor travel card use for all cardholders 

assigned to them. Include in the procedures the development of a data 

mining program that would enable APCs to easily identify potentially 

inappropriate transactions for further review.



* Enforce controls for canceling accounts after employees transfer to 

other units to avoid “orphan” accounts that are not subject to 

effective management oversight.



* Require cognizant APCs to retain records documenting any cardholder’s 

fraudulent or abusive use of the travel card and require that this 

information be provided to the gaining APC when the cardholder is 

transferred.



* Review records of individuals whose accounts had been charged off or 

placed in salary offset to determine whether they have been referred to 

Air Force Central Adjudication Facility for a security review.



* Strengthen procedures regarding employees leaving the service to 

assure that all travel card accounts are deactivated or closed and that 

repayment of any outstanding debts is arranged. Perform a review to 

determine that these procedures are implemented effectively and that 

accounts of departed cardholders are deactivated or closed in a timely 

manner.



* Develop procedures to identify active cards of departed cardholders, 

including comparing cardholder and payroll data.



Agency Comments and Our Evaluation:



In oral comments on a draft of this report, DOD and the Air Force 

concurred on all 16 of our recommendations and stated that it had taken 

actions or had actions underway to address many of them. For example, 

with respect to actions completed, DOD stated that the Air Force 

recently implemented procedures to (1) evaluate the frequency of 

cardholder travel card use and close travel card accounts that were not 

used in the past year and (2) work with Bank of America to perform 

semi-annual reviews of travel card use. With respect to actions 

underway, (1) the Air Force has started a project to evaluate the 

feasibility of deactivating travel cards so that they are available for 

use only during periods of authorized travel and (2) DOD is evaluating 

travel card training and developing revised policy requirements for APC 

span of control and travel card management responsibilities.



As agreed with your offices, unless you announce the contents of this 

report earlier, we will not distribute this report 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 

(Comptroller); the Secretary of the Air Force; the Assistant Secretary 

of the Air Force for Financial Management (Comptroller); the Director 

of the Defense Finance and Accounting Service; and the Director of the 

Office of Management and Budget. We will make copies available to 

others upon request. In addition, the report will be available at no 

charge on the GAO Web site at http://www.gao.gov.



Please contact Gregory D. Kutz at (202) 512-9505 or kutzg@gao.gov, John 

J. Ryan at (202) 512-9587 or ryanj@gao.gov, or Gayle L. Fischer at 

(202) 512-9577 or fischerg@gao.gov, if you or your staffs have any 

questions concerning this report. Major contributors to this report are 

acknowledged in appendix VI.



Signed by:



Gregory D. Kutz

Director

Financial Management and Assurance:



Signed by:



Robert J. Cramer

Managing Director

Office of Special Investigations:



[End of section]



Appendixes:



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 lower 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 

are used 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 

same fiscal year.



Under the current GSA master contract, the Department of Defense 

entered into a tailored task order with Bank of America[Footnote 32] to 

provide travel card services to DOD and the military services, 

including the Air Force. Table 10 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 10: Comparison of Number of Individually Billed Travel 

Cardholders and Related Charges for DOD versus Total Federal Government 

for Fiscal Year 2001:



Entity: Air Force; Number of individually billed travel card accounts 

as of September 30, 2001: 501,306; Fiscal year 2001 individually billed 

travel card charges: $831.



Entity: Navy (includes Marine Corps); Number of individually billed 

travel card accounts as of September 30, 2001: 394,952; Fiscal year 
2001 

individually billed travel card charges: 510.



Entity: Army; Number of individually billed travel card accounts as of 

September 30, 2001: 432,460; Fiscal year 2001 individually billed 

travel card charges: 619.



Entity: Other DOD; Number of individually billed travel card accounts 

as of September 30, 2001: 86,922; Fiscal year 2001 individually 

billed travel card charges: 174.



Entity: Total DOD; Number of individually billed travel card accounts 

as of September 30, 2001: 1,415,640; Fiscal year 2001 individually 
billed 

travel card charges: $2,134.



Entity: Total federal government; Number of individually billed travel 

card accounts as of September 30, 2001: 2,132,031; Fiscal year 2001 

individually billed travel card charges: $3,634.



Entity: DOD percentage of total federal government; Number of 

individually billed travel card accounts as of 

September 30, 2001: 66%; Fiscal year 2001 individually billed travel 

card charges: 59%.



Source: Bank of America data.



[End of table]



As shown in table 10, 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 10 also shows that 

the Air Force provided 501,306 individually billed cards to its 

civilian and military employees as of September 2001. These cardholders 

charged an estimated $831 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 the 

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. The act requires that agencies 

reimburse cardholders for proper travel claims within 30 days of 

submission of approved travel vouchers by the cardholders.[Footnote 33] 

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 

regulations with their own implementing regulations.



DOD issued its Financial Management Regulation (FMR), Volume 9, Chapter 

3, “Travel Policies and Procedures,” to supplement GSA’s travel 

regulations. DOD’s Joint Travel Regulations, Volume 1, “Uniformed 

Service Members,” and Volume 2, “Civilian Personnel,” refer to the FMR 

as the controlling regulation for DOD’s travel cards.



Air Force Travel Process:



As shown in figure 7, the Air Force’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 7: Overview Flowchart of the Air Force Travel Process:



[See PDF for image]



[A] The Defense Finance and Accounting Service allows a traveler to 

direct a portion, or all, of the voucher reimbursement to Bank of 

America.



[B] See figure 9 for specific actions to be taken by the agency program 

coordinator.



[End of figure]



Travel Card Issuance and Termination:



When a Air Force 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 8, the application requires the applicant to provide 

pertinent information, including full name and social security number, 

and indicate whether he or she is an active, reserve, or a civilian 

employee of the Air Force. 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 a travel card to all applicants 

for whom it receives completed applications signed by the applicants, 

the applicants’ supervisors, and the APCs.



Figure 8: Travel Card Application:



[See PDF for image]



[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 may suggest to the service that the applicant receive a 

restricted credit limit of $2,000 instead of the standard credit limit 

of $5,000. However, as shown in figure 8, the application allows the 

employee to withhold permission for Bank of America to obtain credit 

reports. If this option is selected, Bank of America automatically 

issues a restricted credit limit card to the applicant.



Before cardholders leave the Air Force, they are required to contact 

their APCs and notify them of their planned departure. Based on this 

notification from the cardholders, the APCs are to deactivate or 

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 

amounts of per diem and any cash advances. Further, the Air Force 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, rental cars, and airfare. The travel 

card can also be used for meals and incidental expenses or cash can be 

obtained from an automatic teller machine.



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 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 duty 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, DOD 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 the 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.



After the supervisor approves a cardholder’s travel voucher package for 

payment, the voucher-processing unit at the location to which the 

cardholder is assigned processes it. The voucher-processing 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. If problems with the 

voucher are found during the initial entry of the information into IATS 

or during audits after the initial entry, the voucher can be rejected 

and returned to the cardholder for correction. Once the vouchers are 

processed and possibly audited, they are sent to DFAS for payment to 

the cardholder or to Bank of America and the cardholder, if the 

cardholder elected to use the split disbursement payment process 

whereby part of the reimbursement is sent directly to Bank of America. 

If the payment of the approved proper voucher takes longer than 30 

days, DOD 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.



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 Air Force 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, it is considered delinquent. As 

summarized in figure 9, there are specific actions required by both the 

Air Force and Bank of America based on the number of days a 

cardholder’s account is past due.



Figure 9: Required DOD and Bank of America Delinquency Process 

Management Actions:



[See PDF for image]



Note: Starting in fiscal year 2002, DOD began to offset the salary of 

certain civilian employees and military and retired military members 

from all services including the Air Force, for the amounts delinquent 

or charged off on travel card accounts.



[End of figure]





The following is a more detailed explanation of the required actions by 

the Air Force and/or Bank of America with respect to delinquent travel 

card accounts.



* 45 days past due--Bank of America is to send a letter to the 

cardholder requesting payment. Bank of America has the option to call 

the cardholder with a reminder that payment is past due and to advise 

the cardholder that the account will be suspended if it becomes 60 days 

past due.



* 55 days past due--Bank of America is to send the cardholder a 

presuspension letter warning that Bank of America will suspend the 

account if it is not paid. If Bank of America suspends a travel card 

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 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 the company commander’s 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 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.



* 150 days past due--The point at which DFAS generally initiates action 

for salary offset.



* 180 days past due--Bank of America is to send a “precharge-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 and is unable to submit vouchers and pay his or her 

account in a timely manner, 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. By activating this status, 

the Bank of America is precluded 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 card accounts and associated travel 

processing and management for the Department of the Air Force. Our 

assessment covered:



* the reported magnitude and impact of delinquent and charged off Air 

Force 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 Air Force travel card transactions 

during fiscal year 2001 and the first 6 months of fiscal year 2002 to 

identify potentially fraudulent and abusive activity related to the 

travel card;



* the Air Force overall management control environment and the design 

of selected Air Force travel program management controls, including 

controls over (1) travel card issuance, (2) agency program coordinators 

(APC) 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, and (6) 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 three Air 

Force units’ travel card activity including (1) travel order approval, 

(2) accuracy of travel voucher payments, (3) the timely submission of 

travel vouchers by travelers to the approving officials, and (4) the 

timely processing and reimbursement of travel vouchers by the Air Force 

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 34] the General Services Administration’s (GSA) 

Federal Travel Regulation,[Footnote 35] and the Department of Defense 

(DOD) Financial Management Regulation, Volume 9, “Travel Policies and 

Procedures.” We also used as criteria our Standards for Internal 

Control in Federal Government[Footnote 36] and our Guide to Evaluating 

and Testing Controls Over Sensitive Payments.[Footnote 37] 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 six areas reviewed.



To assess the magnitude and impact of delinquent and charged-off 

accounts, we compared the Air Force’s delinquency and charge-off rates 

to those of other DOD services and federal civilian 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.



In addition, we used data mining to select Air Force units for audit 

and identify individually billed travel card transactions for further 

analysis. Our data mining procedures covered the universe of 

individually billed Air Force travel card activity during fiscal year 

2001 and the first six months of fiscal year 2002 and identified 

transactions that we believed were potentially fraudulent or abusive. 

However, our work was not designed to identify, and we did not 

determine, the extent of any potentially fraudulent or abusive activity 

related to the travel card. In performing our data mining, we obtained 

and analyzed information on travel card account status and credit 

history, security clearance, and disciplinary action.



To assess the overall control environment for the travel card program 

at the Department of the Air Force, we obtained an understanding of the 

travel process, including travel card management and oversight, by 

interviewing officials from the Office of the Undersecretary of 

Defense, Comptroller; Department of the Air Force; Defense Finance and 

Accounting Service (DFAS); Bank of America; and GSA. We reviewed 

applicable policies, procedures, and program guidance they provided. We 

visited three Air Force units to “walk through” the travel process, 

including the management of travel card use and delinquency. 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.



At each of the Air Force locations we audited we also used our review 

of policies and procedures and the results of our “walk-throughs” of 

travel processes and other observations to assess the effectiveness of 

controls over segregation of duties among persons responsible for 

issuing travel orders, preparing travel vouchers, processing and 

approving travel vouchers, and certifying travel voucher payments.



We performed a limited review of access controls for travel voucher 

processing at our three case study locations. We did not assess 

electronic signature controls over the electronic data processing of 

Air Force travel card transactions. We also reviewed computer system 

access controls for the Electronic Account Government Ledger System 

(EAGLS)--the system used by Bank of America to maintain DOD travel card 

data. To determine whether access controls for 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 Air 

Force travel card transactions processed through the travel system--

including the travel order, travel voucher, and payment processes--we 

obtained and used the Bank of America database of fiscal year 2001 Air 

Force travel card transactions to review random samples of transactions 

at three Air Force locations. Because our objective was to test 

controls over travel card expenses, we excluded credits and 

miscellaneous debits (such as fees) from the population of transactions 

used to select random samples of travel card transactions to review at 

each of three Air Force units we audited. Each sampled transaction was 

subsequently weighted in the analysis to account statistically for all 

charged transactions at each of the three units, including those that 

were not selected. We did not verify the accuracy of the data in the 

Air Force travel card database.



We selected three Air Force case study locations for testing controls 

over travel card activity by first selecting three large commands based 

on the number of travel card accounts, outstanding balances, and 

delinquencies. The three commands we selected accounted for about 38 

percent of the total number of Air Force travel card accounts, 41 

percent of the outstanding balance of travel card charges, and about 33 

percent of the travel card delinquencies. We selected one installation 

from each of these commands for detailed testing based on the volume of 

travel card activity and delinquencies. Table 11 presents the sites 

selected and the number of fiscal year 2001 transactions at each 

location.[Footnote 38]



Table 11: Population of Fiscal Year 2001 Travel Transactions at 

Selected Air Force Bases:



Air Force base/command: Nellis AFB; Air Combat Command; Number of 

travel: 69,104; Dollar value of travel: $ 7,804,254.



Air Force base/command: Travis AFB; Air Mobility Command; Number of 

travel: 105,997; Dollar value of travel: 13,465,225.



Air Force base/command: Hill AFB; Air Force Materiel Command; Number of 

travel: 119,533; Dollar value of travel: 18,400,779.



Source: GAO analysis of Bank of America Air Force travel card database.



Note. Transactions represent charges for sales and cash advances and 

exclude credits and fees.



[End of table]



We performed tests on statistical samples of travel card transactions 

at each of the three case study sites to assess whether the system of 

internal controls 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 trip, (2) the travel voucher payment was 

accurate, (3) the travel voucher was submitted within 5 days of the 

completion of travel, and (4) the travel voucher was paid within 30 

days of submission of an approved travel voucher. We considered 

transactions not related to authorized travel to be abuse and incurred 

for personal purposes. Although we projected the results of our samples 

of these control attributes, as well as the estimate for personal use-

-or abuse--related to travel card activity to the population of 

transactions at the respective case study locations, the results cannot 

be projected to the population of Air Force transactions or the 

installations as a whole.



Tables 12 through 15 show (1) the results of our tests of key control 

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, (4) our assessments of the 

effectiveness of the controls, and (5) the relevant lower and upper 

bounds of a one-sided confidence interval for the failure rate. All 

percentages in these tables are rounded to the nearest percentage 

point. We use one-sided confidence bounds to classify the effectiveness 

of a control activity. If the 1-sided lower bound does not exceed 5 

percent, then the control activity is effective. If the 1-sided lower 

bound exceeds 10 percent, then the control is ineffective. Otherwise, 

we say that the control is partially effective. Partially effective 

controls may include those for which there is not enough evidence to 

assert either effectiveness or ineffectiveness. For example, if we were 

95 percent confident that the 1-sided lower bound of a failure rate for 

a particular control is 3 percent, we would categorize that control 

activity as “effective” because 3 percent is less than the 5 percent 

standard. Similarly, if we were 95 percent confident that the 1-sided 

upper bound of a failure rate for a particular control is 72 percent, 

we would categorize that control as “ineffective” because 72 percent is 

greater than the 10 percent standard.



Table 12 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 12: Fiscal Year 2001 Transactions That Failed Control Tests for 

Approved Travel Orders:



Air Force base/ command.



Nellis AFB; Air Combat Command; Number 

of failed transactions: 1 of 96; Estimated failure rate (95% 2-sided 

confidence interval)[A]: 1 %; (0 % to 6 %); Assessment of effectiveness 

of controls (and relevant bounds of 95% 1-sided confidence intervals): 

Effective; upper bound = 5%.



Travis AFB; Air Mobility Command; Number 

of failed transactions: 2 of 96; Estimated failure rate (95% 2-sided 

confidence interval)[A]: 2%; (0 % to 7 %); Assessment of effectiveness 

of controls (and relevant bounds of 95% 1-sided confidence intervals): 

Partially effective; lower bound = 0%, or; upper bound = 6%.



Hill AFB; Air Force Materiel Command; Number 

of failed transactions: 1 of 96; Estimated failure rate (95% 2-sided 

confidence interval)[A]: 1 %; (0 % to 6 %); Assessment of effectiveness 

of controls (and relevant bounds of 95% 1-sided confidence intervals): 

Effective; upper bound = 5%.



Source: GAO analysis. 



[A] The percentages represent point estimates for the population based 

on our sampling tests.



[End of table]



Table 13 shows the results of our test for effectiveness of controls in 

place over the accuracy of travel voucher payments. Our test work 

included determining whether (1) the travel voucher information was 

consistent with dates and locations of travel authorized on the related 

travel order, (2) per diem was paid in the proper amount, and (3) 

transactions for lodging, air fare, and other expenses over $75 were 

supported by required receipts.



Table 13: Fiscal Year 2001 Transactions That Failed Control Tests for 

Accurate Travel Voucher Review and Reimbursement:



Air Force base/ command.



Nellis AFB; Air Combat Command; Number

of failed transactions: 15 of 96; Estimated 

failure rate: 16 %; (9 % to 24 %); Assessment of effectiveness of 

controls (and relevant bounds of 95% 1-sided confidence intervals): 

Partially effective; lower bound = 10%.



Travis AFB; Air Mobility Command; Number

of failed transactions: 37 of 96; Estimated 

failure rate: 39 %; (29 % to 49 %); Assessment of effectiveness of 

controls (and relevant bounds of 95% 1-sided confidence intervals): 

Ineffective; lower bound = 30%.



Hill AFB; Air Force Materiel Command; Number

of failed transactions: 8 of 61[B]; Estimated 

failure rate: 13%; (6 % to 24 %); Assessment of effectiveness of 

controls (and relevant bounds of 95% 1-sided confidence intervals): 

Partially effective; lower bound = 7%, or; upper bound = 22%.



Source: GAO analysis.



[A] The percentages represent point estimates for the population based 

on our sampling tests.



[B] Hill AFB used two systems to process travel vouchers. We included 

only the 61 travel vouchers processed through the Integrated Automated 

Travel System in our tests for this attribute. The remaining 35 

vouchers were processed through the other system, PerDiemAzing, which 

DOD is pilot testing as part of its effort to reengineer the current 

travel process.



[End of table]



Table 14 shows the results of our tests of 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.



Table 14: Fiscal Year 2001 Transactions That Failed Control Tests for 

Timely Submission of Travel Vouchers by Employees (5-day Rule):



Nellis AFB; Air Combat Command; Number

of failed transactions: 5 of 96; Estimated 

failure rate: 5%; (2% to 12%); Assessment of effectiveness of 

controls (and relevant bounds of 95% 1-sided 

confidence intervals): Partially effective; lower bound = 2%, or; upper 

bound = 11%.



Travis AFB; Air Mobility Command; Number

of failed transactions: 16 of 96; Estimated 

failure rate: 17 %; (10% to 26 %); Assessment of effectiveness of 

controls (and relevant bounds of 95% 1-sided 

confidence intervals): Ineffective; lower bound = 11%.



Hill AFB; Air Force Materiel Command; Number

of failed transactions: 24 of 96; Estimated 

failure rate: 25 %; (17 % to 35%); Assessment of effectiveness of 

controls (and relevant bounds of 95% 1-sided 

confidence intervals): Ineffective; lower bound = 18%.



[End of table]



Source: GAO analysis.



[A] The percentages represent point estimates for the population based 

on our sampling tests.



Table 15 shows the results of our tests of key controls related to 

timely processing of claims for reimbursement of expenses related to 

government travel--timely travel voucher approval and payment 

processing. To determine if cardholders were reimbursed within 30 days, 

we used the DFAS payment dates. We did not independently validate the 

accuracy of these reported payment dates.



Table 15: Fiscal Year 2001 Transactions That Failed Control Tests for 

Timely Approval and Payment Processing of Travel Vouchers (30-day 

Rule):



Nellis AFB; Air Combat Command; Number of failed transactions: 0 of 

96; Estimated 

failure rate: 0%; (0% to 4%); Assessment of effectiveness of controls 

(and relevant bounds of 95% 1-sided 

confidence intervals): Effective; upper bound = 3%.



Travis AFB; Air Mobility Command; Number of failed transactions: 0 of 

96; Estimated 

failure rate: 0 %; (0% to 4%); Assessment of effectiveness of controls 

(and relevant bounds of 95% 1-sided 

confidence intervals): Effective; upper bound = 3%.



Hill AFB; Air Force Materiel Command; Number of failed transactions: 

1 of 96; Estimated 

failure rate: 0 %; (0 % to 6%); Assessment of effectiveness of controls 

(and relevant bounds of 95% 1-sided 

confidence intervals): Effective; upper bound = 5%.



[End of table]



Source: GAO analysis.



[A] The percentages represent point estimates for the population based 

on our sampling tests.



We briefed DOD managers, including DFAS officials in DOD’s Office of 

the Under Secretary of Defense (Comptroller) and Air Force officials in 

the office of the Assistant Secretary of the Air Force (Financial 

Management and Comptroller); and unit commanders; comptrollers; and 

installation agency program coordinators on the details of our audit, 

including our findings and their implications. On November 26, 2002, we 

requested comments on a draft of this report. We received oral comments 

on December 17, 2002, and have summarized those comments in the “Agency 

Comments and Our Evaluation” section of this report. We conducted our 

audit work from January 2001 through mid-November 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.



[End of section]



Appendix III: Air Force Major Command Delinquency Rates:



Table 16 shows the travel card delinquency rates for Air Force’s major 

commands (and other Air Force organizational units at a comparable 

level) that had outstanding balances over $1 million during the 2-year 

period ending March 31, 2002. Commands with a March 31, 2002, balance 

outstanding under $1 million have been combined into “all other 

commands.” The Air Force’s commands and other units are listed in 

descending order based on their respective delinquency rates as of 

March 31, 2002.



Table 16: Air Force Major Command Delinquency RatesA (by Quarter) for 

the Two Years Ending March 31, 2002:



Major Command: Air Force Special Operations Command; June 2000: 6.4%; 

Sept. 2000: 7.5%; Dec. 2000: 10.8%; Mar. 2001: 5.5%; June 2001: 6.6%; 

Sept. 2001: 6.0%; Dec. 2001: 10.0%; Mar. 2002: 10.3%.



Major Command: Pacific Air Forces; June 2000: 7.2%; Sept. 2000: 8.6%; 

Dec. 2000: 11.8%; Mar. 2001: 9.4%; June 2001: 6.8%; Sept. 2001: 9.4%; 

Dec. 2001: 12.2%; Mar. 2002: 9.7%.



Major Command: US Air Forces in Europe; June 2000: 7.2%; Sept. 2000: 

9.2%; Dec. 2000: 14.1%; Mar. 2001: 7.5%; June 2001: 6.7%; Sept. 2001: 

6.5%; Dec. 2001: 10.9%; Mar. 2002: 7.6%.



Major Command: Air Force Reserve Command; June 2000: 7.9%; Sept. 2000: 

10.5%; Dec. 2000: 14.0%; Mar. 2001: 8.2%; June 2001: 6.6%; Sept. 2001: 

9.1%; Dec. 2001: 8.1%; Mar. 2002: 7.3%.



Major Command: Air National Guard; June 2000: 8.8%; Sept. 2000: 11.7%; 

Dec. 2000: 16.7%; Mar. 2001: 9.4%; June 2001: 6.6%; Sept. 2001: 8.3%; 

Dec. 2001: 8.3%; Mar. 2002: 6.5%.



Major Command: Air Intelligence Agency; June 2000: 5.9%; Sept. 2000: 

6.6%; Dec. 2000: 8.8%; Mar. 2001: 6.4%; June 2001: 4.7%; Sept. 2001: 

5.5%; Dec. 2001: 9.2%; Mar. 2002: 6.4%.



Major Command: Air Combat Command; June 2000: 6.6%; Sept. 2000: 8.5%; 

Dec. 2000: 12.1%; Mar. 2001: 7.6%; June 2001: 5.9%; Sept. 2001: 6.2%; 

Dec. 2001: 8.1%; Mar. 2002: 6.3%.



Major Command: Air Education and Training Command; June 2000: 7.1%; 

Sept. 2000: 8.1%; Dec. 2000: 9.8%; Mar. 2001: 6.8%; June 2001: 5.5%; 

Sept. 2001: 5.8%; Dec. 2001: 8.3%; Mar. 2002: 6.1%.



Major Command: Air Mobility Command; June 2000: 6.8%; Sept. 2000: 8.2%; 

Dec. 2000: 8.7%; Mar. 2001: 5.1%; June 2001: 4.5%; Sept. 2001: 5.5%; 

Dec. 2001: 6.8%; Mar. 2002: 4.9%.



Major Command: Air Force Space Command; June 2000: 4.9%; Sept. 2000: 

4.8%; Dec. 2000: 7.3%; Mar. 2001: 4.1%; June 2001: 4.1%; Sept. 2001: 

4.1%; Dec. 2001: 6.6%; Mar. 2002: 4.5%.



Major Command: Head Quarters 11th Wing; June 2000: 3.7%; Sept. 2000: 

4.9%; Dec. 2000: 5.7%; Mar. 2001: 3.9%; June 2001: 3.2%; Sept. 2001: 

4.4%; Dec. 2001: 4.3%; Mar. 2002: 3.8%.



Major Command: Air Force Materiel Command; June 2000: 4.0%; Sept. 2000: 

5.5%; Dec. 2000: 7.5%; Mar. 2001: 4.1%; June 2001: 3.5%; Sept. 2001: 

3.9%; Dec. 2001: 5.5%; Mar. 2002: 3.6%.



Major Command: All other commands combined; June 2000: 4.6%; Sept. 

2000: 6.2%; Dec. 2000: 8.1%; Mar. 2001: 4.3%; June 2001: 4.0%; Sept. 

2001: 4.9%; Dec. 2001: 5.2%; Mar. 2002: 4.1%.



Major Command: Air Force-wide; June 2000: 6.4%; Sept. 2000: 8.2%; Dec. 

2000: 10.9%; Mar. 2001: 6.5%; June 2001: 5.3%; Sept. 2001: 6.2%; Dec. 

2001: 7.7%; Mar. 2002: 6.0%.



Source: GAO calculation based on information provided by Bank of 

America.



[A] The delinquency rates shown represent the total amount delinquent 

(amounts not paid within 60 days of the travel card monthly statement 

closing date) as a percentage of total amounts owed by the command’s 

travel cardholders at that time.



[End of table]



Table 17 shows outstanding balances and delinquency rates by major 

command listed in descending order of outstanding balances as of March 

31, 2002.



Table 17: Outstanding Balance and Delinquency Rate as of March 31, 

2002, by Major Air Force Commands:



Major Air Force command with outstanding balance of $1 million or over: 

Air National Guard; Outstanding balance[A]: $13,859,727; Delinquency 

rate[A]: 6.5.



Major Air Force command with outstanding balance of $1 million or over: 

Air Force Materiel Command; Outstanding balance[A]: 11,755,489; 

Delinquency rate[A]: 3.6.



Major Air Force command with outstanding balance of $1 million or over: 

Air Force Reserve Command; Outstanding balance[A]: 10,637,088; 

Delinquency rate[A]: 7.3.



Major Air Force command with outstanding balance of $1 million or over: 

Air Combat Command; Outstanding balance[A]: 10,263,862; Delinquency 

rate[A]: 6.3.



Major Air Force command with outstanding balance of $1 million or over: 

Air Mobility Command; Outstanding balance[A]: 8,825,579; Delinquency 

rate[A]: 4.9.



Major Air Force command with outstanding balance of $1 million or over: 

U.S. Air Forces Europe; Outstanding balance[A]: 4,676,442; Delinquency 

rate[A]: 7.6.



Major Air Force command with outstanding balance of $1 million or over: 

Air Education and Training Command; Outstanding balance[A]: 4,632,847; 

Delinquency rate[A]: 6.1.



Major Air Force command with outstanding balance of $1 million or over: 

Pacific Air Forces; Outstanding balance[A]: 4,243,264; Delinquency 

rate[A]: 9.7.



Major Air Force command with outstanding balance of $1 million or over: 

Air Force Space Command; Outstanding balance[A]: 4,096,380; Delinquency 

rate[A]: 4.5.



Major Air Force command with outstanding balance of $1 million or over: 

Headquarters 11[TH] Wing; Outstanding balance[A]: 2,490,170; 

Delinquency rate[A]: 3.8.



Major Air Force command with outstanding balance of $1 million or over: 

Air Intelligence Agency; Outstanding balance[A]: 2,422,309; 

Delinquency rate[A]: 6.4.



Major Air Force command with outstanding balance of $1 million or over: 

Air Force Special Operations; Outstanding balance[A]: 1,678,599; 

Delinquency rate[A]: 10.3.



Major Air Force command with outstanding balance of $1 million or over: 

All Other Commands Combined; Outstanding balance[A]: 5,074,653; 

Delinquency rate[A]: 4.1.



Source: GAO calculation based on information from Bank of America.



[A] Delinquency rates shown represent the total amount delinquent 

(amounts not paid within 60 days of the travel card monthly statement 

closing date) as a percentage of total amount outstanding for all 

travel card accounts in the command at that point in time. :



[End of table]



[End of section]



Appendix IV: Air Force Personnel Grade, Rank, and Associated Basic Pay 

Rates:



Tables 18 and 19 show the grade, rank (where relevant), and the 

associated basic pay rates for 2001 for Air Force’s military and 

civilian personnel. The basic 2001 pay rates shown exclude other 

considerations such as locality pay and any allowances for housing or 

cost of living.



Table 18: Air Force Military Grades, Ranks, and Associated Basic Pay 

Rates for Fiscal Year 2001:



Military grades: Enlisted personnel.



Military grades: E-1 to E-3; Military rank: Enlisted personnel: Airman; 

Fiscal year 2001 pay rates: Enlisted personnel: $11,496 to $15,197.



Military grades: E-4 to E-6; Military rank: Enlisted personnel: Senior 

Airman to Technical Sergeant; Fiscal year 2001 pay rates: Enlisted 

personnel: $18,591 to $27,571.



Military grades: E-7 to E-9; Military rank: Enlisted personnel: Master 

Sergeant to Chief Master Sergeant; Fiscal year 2001 pay rates: Enlisted 

personnel: $32,497 to $46,204.



Military grades: Officers.



Military grades: O-1 to O-3; Military rank: Enlisted personnel: Second 

Lieutenant, First Lieutenant, and Captain; Fiscal year 2001 pay rates: 

Enlisted personnel: $26,470 to $44,738.



Military grades: O-4 to O-6; Military rank: Enlisted personnel: Major, 

Lieutenant Colonel, and Colonel; Fiscal year 2001 pay rates: Enlisted 

personnel: $56,122 to $83,783.



Military grades: O-7 to O-10; Military rank: Enlisted personnel: 

General; Fiscal year 2001 pay rates: Enlisted personnel: $98,980 to 

$133,700.



Source: U.S. Air Force.



[End of table]



Table 19: Air Force Civilian Grades and Associated Basic Pay Rates for 

Calendar Year 2001:



Civilian grade: General schedule employees.



Civilian grade: GS-1 to GS-3; Calendar year 2001 pay rates: General 

schedule employees: $14,244 to $22,712.



Civilian grade: GS-4 to GS-5; Calendar year 2001 pay rates: General 

schedule employees: $19,616 to $28,535.



Civilian grade: GS-6 to GS-8; Calendar year 2001 pay rates: General 

schedule employees: $24,463 to $39,143.



Civilian grade: GS-9 to GS-12; Calendar year 2001 pay rates: General 

schedule employees: $33,254 to $62,686.



Civilian grade: GS-13 to GS-15; Calendar year 2001 pay rates: General 

schedule employees: $57,345 to $103,623.



Civilian grade: Senior Executive Service.



Civilian grade: ES-01 to ES-05; Calendar year 2001 pay rates: General 

schedule employees: $109,100 to $125,700.



Source: Office of Personnel Management.



[End of section]



Appendix V: GAO Contacts and Staff Acknowledgments:



GAO Contacts:



Gayle L. Fischer, (202) 512-9577

Sheila D. M. Miller, (303) 572-7378:



Acknowledgments:



Staff making key contributions to this report include: Mario L. 

Artesiano, Paul S. Begnaud, Bertram J. Berlin, Fannie M. Bivins, 

Francine M. DelVecchio, Donald H. Fulwider, C. Robin Hodge, Woodward H. 

Hunt, Jeffrey A. Jacobson, Jr., Jonathan T. Meyer, Sue Piyapongroj, 

John R. Ryan, Sidney H. Schwartz, Robert A. Sharpe, Bennet E. Severson, 

and Lisa M. Warde.



(192077):



FOOTNOTES



[1] The travel card program includes both individually billed accounts-

-that is accounts held by individual cardholders, used to purchase 

transportation and other related travel services, and paid by 

individual cardholders based on reimbursement of expenses incurred 

while on official government travel--and centrally billed accounts that 

are used for the travel expenses of a unit and are paid directly by the 

government. This report covers transactions charged to individually 

billed accounts only.



[2] U.S. General Accounting Office, Travel Cards: Control Weaknesses 

Leave Army Vulnerable to Potential Fraud and Abuse, GAO-02-863T 

(Washington, D.C.: July 17, 2002) and Travel Cards: Control Weaknesses 

Leave Army Vulnerable to Potential Fraud and Abuse, GAO-03-169 

(Washington, D.C.: Oct. 11, 2002).



[3] U.S. General Accounting Office, Travel Cards: Control Weaknesses 

Leave Navy Vulnerable to Fraud and Abuse, GAO-03-148T (Washington, 

D.C.: Oct. 8, 2002).



[4] 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, we considered as potentially fraudulent, cases where 

cardholders wrote three or more nonsufficient fund checks or checks on 

closed accounts to pay their Bank of America bills. 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 benefited 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. In both types of activities in which 

the cardholder did not pay the bill, we considered abuses to include 

cardholders whose accounts were eventually charged off by Bank of 

America or referred to a payment plan by salary offset or other fixed 

pay agreement.



[5] Split disbursement payment percentages for the three services as of 

June 2002 were 39 percent for the Air Force, 34 percent for the Army, 

and 26 percent for the Navy.



[6] 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.



[7] The civilian agencies included in our analysis are the 23 executive 

branch agencies covered under the Chief Financial Officers Act, as 

amended.



[8] App. V provides a description of each of these military grades and 

their associated military rankings and pay, along with corresponding 

civilian grade and pay data.



[9] 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 either a set 

amount or a percentage of the amount of the withdrawal.



[10] Net sales consists 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.



[11] DOD’s salary offset program covers salaries paid by DOD through 

its active duty, reserve, and civilian pay systems, and retirement 

benefits paid through its military retirement pay system.



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

note).



[13] 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 to the federal government. 



[14] 5 USC 8346.



[15] 5 USC 8470.



[16] Section 1008 of the Bob Stump National Defense Authorization Act 

for Fiscal Year 2003 granted the Secretary of Defense authority to 

offset delinquent travel card debt against the retired pay of both 

civilian and military DOD retirees. Public Law 107-314 (H.R. Conf. Rep. 

No. 107-772). 



[17] 41 C.F.R. section 301-54.2. 



[18] Department of Defense Office of the Inspector General, 

Acquisition: Summary of DOD Travel Card Program Audit Coverage, Report 

No. D-2002-065 (Arlington, Va.: Mar. 18, 2002).



[19] Air Force Audit Agency, Government Travel Charge Card Program, 

60th Air Mobility Wing, Travis AFB, CA, Report No. WM001042 

(Washington, D.C.: Apr. 26, 2001).



[20] In March 2000, the delinquency rates for the three Services were: 

Air Force--10.2 percent, Army 16.9 percent, and Navy 11.5 percent.



[21] Interim vouchers permit cardholders to request reimbursement of 

their travel expenditures periodically during long deployments, thereby 

enabling them to pay monthly travel card bills as they are received, 

rather than waiting for a lump sum reimbursement at the end of their 

deployment.



[22] DOD Financial Management Regulation, Volume 9, Chapter 3. The 

regulation further provides that individuals who do not consent to a 

credit check may only receive a restricted card.



[23] Section 8149 (b), Public Law 107-248, 116 Stat., 1519, 1572 does 

not define the term creditworthy. However, the conferees on the DOD 

appropriations act expressed their view that the statutory prohibition 

would permit “an individual with no credit history to be issued a 

restricted-use charge…card.”



[24] Per diem is a daily allowance paid to travelers in lieu of actual 

subsistence expenses. GSA publishes per diem rates for various 

geographic areas. 



[25] DOD’s Financial Management Regulation provides that for long-term 

travel, cardholders are expected to file interim vouchers every 30 

days. 



[26] Air Force Audit Agency, Controls Over the Integrated Automated 

Travel System, F2002-0002-B05400 (Washington, D.C.: Feb. 15, 2002).



[27] Of the over 400 cardholders who wrote three or more NSF checks, 

over 100 had accounts that were eventually charged off or put in salary 

offset.



[28] 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. Further, it is a violation of the Uniform 

Code of Military Justice article 123a when a soldier makes, draws, or 

utter (verbally authorizes) a check, draft, or order without sufficient 

funds and does so with intent to defraud.



[29] MCCs are established by the banking industry for commercial and 

consumer reporting purposes. Currently, about 800 category codes are 

used to identify the nature of the merchants’ businesses or trades, 

such as airlines, hotels, ATMs, jewelry stores, casinos, gentlemen’s 

clubs, and theatres.



[30] Article 15 of the Uniform Code of Military Justice provides for 

non-judicial punishment imposed by a commander and accepted by the 

member.



[31] Air Force Instruction 31-501 incorporates the security standards 

set forth in DOD publication, 5200.2-R, Personnel Security Program, 

which covers “excessive indebtedness, recurring financial 

difficulties, or unexplained affluence.”



[32] The Department of Defense 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. The task order also allowed for five additional 1-year options 

under the GSA master contract renewal provisions.



[33] 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 CFR Section 301-52.20. 



[34] Travel and Transportation Reform Act of 1998 (Public Law 105-264, 

Oct. 19, 1998) includes requirements that federal employees use federal 

travel charge cards for all payments of expenses of official government 

travel, 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.



[35] 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.



[36] U.S. General Accounting Office, Standards for Internal Control in 

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.



[37] 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.



[38] 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.



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