We found that the Air Force’s  delinquency and charge-off problems are primarily associated with low and  mid-level enlisted military employees. 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. Travel card program audits. 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. If effectively implemented, this requirement  should improve delinquency rates and reduce potential fraud and abuse. This problem also was identified by the  Air Force Audit Agency as a systemic problem. 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. The individual’s credit report did not show any  significant credit problems prior to issuance of the card. 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. 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. 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. 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.
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 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, many cardholders used their cards for inappropriate purchases, such as cruises and event tickets. 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.