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

A number of factors contributed to the Army’s high delinquency rates. We found that the Army’s delinquency and charge- off problems are primarily associated with young, low- and midlevel  enlisted military personnel with basic pay levels ranging from $11,000 to  $26,000. We have also seen increased management attention  and focus on reducing delinquencies at the Army command level. During fiscal year 2001, of the over 4,200 account  holders who wrote NSF checks, close to 1,200 Army personnel had their  accounts charged off. In the same period, more than 200 personnel whose  accounts were eventually charged off may have committed bank fraud by  writing three or more NSF checks to Bank of America. The  cardholder is now in the salary offset program. In this instance, records indicated that the cardholder was  reimbursed for official travel, but did not pay the travel card bill. Weak Overall Control Environment and Ineffective Travel Card Program Controls

A weak overall control environment and ineffective internal controls over  the travel card program contributed to the potentially fraudulent and  abusive activity related to the travel card and the Army’s high rates of  delinquency and charge-offs. The APC deactivated the cardholder’s account in March 2002. 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. Specifically, actions to date have focused on dealing  with accounts that are seriously delinquent, which are “back-end” or  detective controls rather than “front-end” or preventive controls. Our assessment covered  the reported magnitude and impact of delinquent and charged-off Army  travel card accounts for fiscal year 2001 and the first 6 months of fiscal  year 2002, along with an analysis of causes and related corrective  actions;  an analysis of the universe of Army travel card transactions during fiscal  year 2001 to identify potentially fraudulent and abusive activity related  to the travel card;   the Army’s overall management control environment and the design of  selected Army travel program management controls, including controls  over (1) travel card issuance, (2) APCs’ capacity to carry out assigned  duties, (3) limiting card activation to meet travel needs, (4) transferred  and orphan accounts, (5) procedures for terminating accounts when  cardholders leave military service, (6) segregation of duties to ensure  that no one individual can control all aspects of a travel transaction, and  (7) access  to Bank of America’s travel card database; and  tests of statistical samples of transactions to assess the implementation  of key management controls and processes for four Army units’ travel  activity, including (1) travel order approval, (2) accuracy of travel  voucher payments, (3) timely submission of travel vouchers by travelers  to the approving officials, and (4) timely processing and reimbursement  of travel vouchers by the Army and DOD.
Why GAO Did This Study

The Army's individually billed travel card program is different from the purchase card program in that the cardholder is directly responsible for all charges incurred on his or her travel card account, and the monthly bill is sent to the cardholder for payment. The cardholder is responsible for submitting a properly documented voucher and is reimbursed by the Army for all valid expenses related to official government travel. The intent of the travel card program was to improve convenience for the traveler and to reduced the government's costs of administering travel. GAO found substantial delinquencies and charge-offs of Army travel-card accounts during fiscal year 2001, and delinquencies continued into the first half of fiscal year 2002. GAO's analysis shows a correlation between delinquency problems and the travel cardholder's age and pay grade.

What GAO Found

GAO found that the Army's delinquency and charge-off problems are primarily associated with young, low- to mid-level enlisted military personnel. In addition, a weak internal control environment compounded by instances of delays in processing travel reimbursements to Army military and civilian personnel contributed to the high delinquency rates. The Army and the Department of Defense have taken action to address and focus command- and installation-level attention on management of delinquent travel card accounts. However, these actions are primarily focused on treating the symptoms or "back-end" problems rather than the "front-end" or preventive controls. GAO's work identified numerous instances of potentially fraudulent and abusive activity related to the travel card. During fiscal year 2001, 1,200 of the over 4,200 Army account holders who had written at least one nonsufficient funds (NSF) check to pay their travel card bill had their accounts charged off. In the same period, more than 200 cardholders whose accounts were eventually charged off may have also committed bank fraud by writing three or more NSF checks to the Bank of America. GAO's audit found that weaknesses in the Army's overall control environment, including a number of specific controls that were either flawed in their design or in their implementation, are the root source of the Army's inability to prevent or effectively detect the numerous instances of potentially fraudulent and abusive travel card related activity previously detected.