	Navy Has High Delinquency and Charge-off Rates but Recent Actions Have Resulted in Some Improvements

The Navy’s delinquency rate was slightly lower than the Army’s, which is  the highest delinquency rate in the federal government. As of March 31, 2002, over 8,000 Navy  cardholders had collectively $6 million in delinquent debt. In addition, as discussed  later in this report, the Navy did not exempt personnel with poor credit  histories from required use of travel cards. Most of this  reduction may be attributed to a salary and military retirement payment  offset program—similar to garnishment—started in November 2001. Of these, over 250 might have committed bank fraud by  writing three or more NSF checks to Bank of America during either fiscal  year period. Table 6 provides examples of the types of abusive charges we found during  our review. We have reported similar problems with the Army travel card program and  in our testimony on the Navy travel card program. Our audit found that 27 of 57 travel  cardholders we examined whose accounts were charged off or placed in  salary offset as of March 2002 still had active secret or top-secret security  clearances in August 2002. As discussed previously, many of the Navy travel cardholders that we  audited who wrote numerous NSF checks, were severely delinquent, or had  their accounts charged off had histories of delinquencies and charge-offs  relating to other credit cards, accounts in collection, and numerous  bankruptcies. As a result, the cardholder was overpaid by more than $1,700. The fiscal year 2003 Department of Defense Appropriations  Act requires the Secretary of Defense to establish guidelines and  procedures for disciplinary actions to be taken against cardholders for  improper, fraudulent, or abusive use of the government travel card and to  deny issuance of the government travel card to individuals who are not  creditworthy. Our assessment covered  the reported magnitude and impact of delinquent and charged-off Navy  travel card accounts for fiscal year 2001 and the first 6 months of fiscal  year 2002, along with an analysis of causes and related corrective  actions;  an analysis of the universe of Navy 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 Navy’s overall management control environment and the design of  selected Navy 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, and (6) access for 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 Navy units’ travel  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 Navy and DOD.
Why GAO Did This Study

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

What GAO Found

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