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  Department Controls Over Travel Expenditures

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## FINAL AUDIT REPORT

![](media/image1.wmf)

**ED-OIG/A19H0009**

**July 2008**

+-------------------------+----------------------+---------------------+
| Our mission is to       | !                    | U.S Department of   |
| promote the efficiency, | [](media/image2.bmp) | Education           |
| effectiveness, and      |                      |                     |
| integrity of the        |                      | Office of Inspector |
| Department\'s programs  |                      | General             |
| and operations.         |                      |                     |
|                         |                      | Washington, DC      |
+-------------------------+----------------------+---------------------+

**NOTICE**

> Statements that managerial practices need improvements, as well as
> other conclusions and recommendations in this report represent the
> opinions of the Office of Inspector General. Determinations of
> corrective action to be taken will be made by the appropriate
> Department of Education officials.
>
> In accordance with the Freedom of Information Act (5 U.S.C. § 552),
> reports issued by the Office of Inspector General are available to
> members of the press and general public to the extent information
> contained therein is not subject to exemptions in the Act.

![](media/image3.png){width="0.9in"
height="0.8604166666666667in"}**UNITED STATES DEPARTMENT OF EDUCATION**

> OFFICE OF INSPECTOR GENERAL

July 1, 2008

##### Memorandum {#memorandum .Enclosure-Number}

**TO:** Lawrence Warder

> Chief Financial Officer

Office of the Chief Financial Officer

**FROM:** Keith West /s/

Assistant Inspector General for Audit Services

**SUBJECT:** Final Audit Report

Department Controls Over Travel Expenditures

Control Number ED-OIG/A19H0009

Attached is the subject final audit report that covers the results of
our review of the Department of Education's (Department) controls over
travel expenditures. We received your comments concurring with the
findings and associated recommendations in our draft report.

Corrective actions proposed (resolution phase) and implemented (closure
phase) by your

office(s) will be monitored and tracked through the Department's Audit
Accountability and

Resolution Tracking System (AARTS). Department policy requires that you
develop a final corrective action plan (CAP) for our review in the
automated system within 30 days of the issuance of this report. The CAP
should set forth the specific action items, and targeted completion
dates, necessary to implement final corrective actions on the findings
and recommendations contained in this final audit report.

In accordance with the Inspector General Act of 1978, as amended, the
Office of Inspector

General is required to report to Congress twice a year on the audits
that remain unresolved after

six months from the date of issuance.

In accordance with the Freedom of Information Act (5 U.S.C. §552),
reports issued by the Office

of Inspector General are available to members of the press and general
public to the extent

information contained therein is not subject to exemptions in the Act.

We appreciate the cooperation given us during this review. If you have
any questions, please

call Michele Weaver-Dugan at (202) 245-6941.

Enclosure

cc: Michael Gordon, Audit Liaison Officer, Financial Management
Operations, OCFO

Brent Hartzel, Staff Assistant, OCFO

TABLE OF CONTENTS

####### [Page]{.underline}

[EXECUTIVE SUMMARY
1](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514514%23_Toc186514514)

[BACKGROUND
3](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514515%23_Toc186514515)

[AUDIT RESULTS
4](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514516%23_Toc186514516)

[FINDING NO.
1](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514517%23_Toc186514517)
Individually Billed Accounts Were Not Always Used Appropriately 5

[FINDING NO.
2](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514518%23_Toc186514518)
Individually Billed Account Travel Expenditure Oversight Activities Need
Improvement 9

[FINDING NO.
3](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514519%23_Toc186514519)
Individually Billed Account Management Practices Should be Enhanced 12

[FINDING NO.
4](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514520%23_Toc186514520)
Improvement is Needed in Oversight of Centrally Billed Accounts 17

[FINDING NO.
5](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514521%23_Toc186514521)
Improvement Is Needed In Overall Travel Program Management Activities 20

[OBJECTIVE, SCOPE, AND METHODOLOGY
26](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514522%23_Toc186514522)

[ATTACHMENT Department Response to Draft
Report](../../../../../../../../C:%5CDOCUME~1%5CMICHEL~1.WEA%5CLOCALS~1%5CTEMP%5CTM_TEMP%5CTM_2%5CAS4.A%20-%20A19H0009%20-%202-7-2007.DOC#__RefHeading___Toc186514522%23_Toc186514522)

**EXECUTIVE SUMMARY**

The objective of our audit was to evaluate the effectiveness of
Department of Education (Department) controls over the appropriateness
of travel expenditures. The Department requires that travel be
authorized only when necessary, to accomplish the purpose of the
Department's mission in the most effective and economical manner.
Official Department travel includes functions such as site monitoring
visits, and participation in training, conferences, and workshops.

The Department's Financial Management Policies and Administrative
Program Group, within the Office of the Chief Financial Officer, is
specifically responsible for the management of the Government travel
program.[^1] Two types of travel charge cards are used under the
program: individually billed accounts (IBA) that are held and paid by
the individual cardholders, and centrally billed accounts (CBA) that are
held and paid for by the Department's Principal Offices (PO).

Overall, our audit found that Department controls over travel
expenditures could be improved. We found that IBA were not always used
appropriately. Specifically, we found inappropriate purchases on the IBA
both during and not during periods of official travel; Automated Teller
Machine (ATM) withdrawals during official travel that exceeded the total
Meals and Incidental Expense Allowance for the trip; ATM withdrawals
that were not associated with official travel; and instances where the
IBA was not used for all required official travel expenses.
Inappropriate use of the travel card violates the terms of the contract
with the travel card provider, represents abuse of a Government-provided
resource, and compromises the integrity of the Department.

We also found that IBA oversight activities need improvement. We found
Department officials did not always ensure that costs claimed on
individual travel vouchers were accurate, allowable, and actually
incurred by the traveler. We noted instances where travel expenditures
claimed were not supported by proper documentation or adequate
explanation. We also found that PO officials' oversight of CBA was not
always effective. Specifically, we found that POs did not always ensure
CBA accounts were used as intended or effectively monitor account
activity, and CBA charges were not always appropriately supported or
reconciled. As a result, improper reimbursements were made to the
cardholders and payments were made for services not received.

In addition, we found that IBA management practices should be enhanced.
Specifically, IBA were not always cancelled for separating cardholders;
infrequently used IBA were not always deactivated timely; IBA were
issued to employees without a bona fide need; and credit worthiness
checks for new IBA applicants had not been implemented timely. We found
that corrective actions in response to prior audit recommendations were
not properly implemented; appropriate disciplinary actions were not
always taken for known misuse of the travel charge card; procedures for
performing quarterly travel voucher audits were not documented and were
not completed in accordance with stated requirements; and inappropriate
Merchant Category Codes (MCC) were not blocked. As a result, the
Department is at increased risk for inappropriate charges, and it may
have set an unwanted precedent that travel card misuse is not deemed
serious.

To correct the weaknesses identified, we recommended that the Chief
Financial Officer, among other things:

-   Require all existing cardholders to take the required refresher
    course immediately, before going to the three-year cycle noted in
    the recently implemented applicable policy;

-   Ensure Executive Offices are aware of and fulfill their monitoring
    responsibilities, and are aware of the tools available to assist
    them and applicable supervisors in the oversight of IBA activity;

-   Develop and implement a mandatory specialized training course for
    the approving, authorizing, and certifying officials;

-   Take immediate action to cancel the accounts noted for separated
    staff;

-   Implement the prior audit recommendation of establishing a procedure
    to receive timely notice from Human Resources Services for all staff
    that have separated from the Department to ensure accounts are
    cancelled upon separation;

-   Develop and implement a policy to guide PO staff in reconciling and
    maintaining adequate documentation to support CBA charges, as
    recommended during the prior audit;

-   Ensure CBA cardholders review and are familiar with Department
    policy

> concerning allowable CBA usage;

-   Develop and implement a process to ensure that corrective actions
    are implemented as agreed upon during audit resolution;

-   Reiterate to Department supervisors their responsibilities
    concerning appropriate corrective actions in cases of known misuse
    of travel cards;

-   Develop and implement formal procedures for conducting quarterly
    travel audits; and

-   Develop and implement a process to periodically review MCC codes to
    reasonably ensure that merchants that do not provide authorized
    travel services are blocked.

In its response to the draft audit report, the Department concurred with
the findings and associated recommendations and provided a corrective
action plan to address each recommendation. The Department's response is
included as an Attachment to this report.

**BACKGROUND**

The Department of Education (Department) requires that travel be
authorized only when necessary, to accomplish the purposes of the
Department's mission in the most effective and economical manner.
Official Department travel includes functions such as site monitoring
visits, and participation in training, conferences, and workshops.

The *Federal Travel Regulation* (FTR) implements statutory requirements
and Executive Branch policies for travel by Federal civilian employees
and others authorized to travel at Government expense. The FTR is
designed to interpret statutory and other policy requirements in a
manner that balances the need to assure that official travel is
conducted in a responsible manner with the need to minimize
administrative costs. The Department's Office of the Chief Financial
Officer (OCFO) has also issued travel related policies and procedures to
address items ranging from authorization to reimbursement for Government
travel expenditures.\
\
The Department's Financial Management Policies and Administrative
Program Group (FMP&APG), within OCFO, is specifically responsible for
the management of the Government travel program.Error: Reference source
not found Two types of travel charge cards are used under the program:
individually billed accounts (IBA) that are held and paid by the
individual cardholders, and centrally billed accounts (CBA) that are
held and paid for by the Department's Principal Offices (PO). During
Fiscal Year (FY) 2006, the Department had 2,025 IBA and 37 CBA with
transaction activity. The total sales volume attributed to these
accounts was \$7.34 million. Bank of America is the Department's travel
card provider.\
\
In 2002, the Office of Inspector General (OIG) evaluated internal
controls over the administration of the Department\'s travel card
program and assessed the appropriateness of selected expenditures during
the *Audit of Controls over Government Travel Cards* (ED-OIG/A19B0010).
The audit found that improvements were needed in the management of the
Government travel card program. Specifically, the audit revealed travel
cards were not always used appropriately, some travel cards were not
canceled timely when staff separated from the Department, and charges to
CBA accounts were not always appropriately supported or reconciled.

This audit was conducted to follow up on the prior audit
recommendations, to evaluate the Department's compliance with applicable
regulations, policies, and procedures, and to determine the
effectiveness of the Department controls to ensure the appropriateness
of travel expenditures.

**AUDIT RESULTS**

Our audit found that Department controls over travel expenditures could
be improved.

Specifically, we found:

1.  IBA were not always used appropriately;

2.  IBA and CBA oversight activities need improvement;

3.  IBA management practices should be enhanced; and

4.  Improvement is needed in overall travel program management
    activities.

Inappropriate purchases and Automated Teller Machine (ATM) withdrawals
were made on the IBA both during and not during periods of official
travel, and the IBA were not always used for required official travel
expenses. Oversight activities designed to ensure that Department funds
were used in an allowable, effective, and economical manner did not
always function as intended. In addition, IBA remained open or active
unnecessarily, and required Office of Management and Budget (OMB)
control activities had not been timely implemented. As a result of
weaknesses in overall travel program management, corrective actions in
response to prior audit recommendations were not properly implemented;
appropriate disciplinary actions were not always taken for known misuse
of the travel charge card; and inappropriate Merchant Category Codes
(MCC) were not blocked.

As a result, improper reimbursements were made to cardholders and
payments were made for services not received. The Department is at
increased risk of inappropriate charges and unauthorized ATM
withdrawals. Lack of appropriate oversight and disciplinary action may
set an unwanted precedent that travel card misuse is not deemed serious.
Inappropriate use of the travel card violates the terms of the contract
with the travel card provider, represents abuse of a Government-provided
resource, and compromises the integrity of the Department.

In its response to the draft audit report, the Department concurred with
the findings and associated recommendations and provided a corrective
action plan to address each recommendation. The Department's response is
included as an Attachment to this report.

**FINDING NO. 1 -- Individually Billed Accounts Were Not Always Used
Appropriately\
**

Individually billed travel card accounts were not always used
appropriately. This included instances where IBA were used for purchases
that did not relate to official government travel, were used for ATM
withdrawals that were either excessive or outside periods of official
travel, and were not used for official travel expenses as required.\
\
During FY 2006, there were 45,134 IBA transactions totaling \$6,422,514
(excluding payments). We reviewed 5,515 transactions (12 percent)
totaling \$1,030,149 (16 percent) from 125 cardholders.[^2] We found
that 93[^3] of 125 cardholders (74 percent) had at least one instance
where the IBA was not used appropriately.[^4] This consisted of 304
charges (6 percent) valued at \$49,500 (5 percent). In addition, we
reviewed expenses claimed on individual travel vouchers for each of the
125 cardholders.

Specifically, we found that:

-   Thirty-four individuals (27 percent) had inappropriate purchases on
    their IBA. This included purchases made both during and not during
    periods of official travel. Overall, we identified 120 inappropriate
    purchases totaling \$18,256. These transactions included charges to
    vendors such as clothing retailers, restaurants within the
    employee's local area of residence or employment, and rental cars
    for personal use.

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-   Twenty-nine individuals (23 percent) made ATM withdrawals during
    official travel that exceeded the total Meals and Incidental Expense
    Allowance (M&IE) for the trip. Overall, these individuals withdrew a
    total of \$46,090, while travel related M&IE for these trips was
    \$28,417. In one case, an employee had 20 travel periods with
    excessive ATM withdrawals. During these travel periods the employee
    was authorized to withdraw \$1,831 per Department policy, but
    actually withdrew \$6,420 (351 percent more than authorized) using
    her IBA.

-   Four individuals (3 percent) made ATM withdrawals that were not
    associated with official travel. The total amount of cash withdrawn
    was \$13,570. One of these individuals had 44 ATM withdrawals
    totaling \$8,560 that were outside of official travel periods.

-   Twenty-six individuals (21 percent) did not use the IBA for all
    official travel expenses. We identified 48 official travel expenses,
    such as lodging and rental cars, totaling \$6,241, paid via other
    methods such as personal credit cards.

This audit included 19 IBA accounts that had inappropriate activity
identified during the prior travel audit.[^5] We found that 8 of the 19
(42 percent) had at least one instance of inappropriate card usage
during our current audit of FY 2006 travel activity.

FTR at 41 C.F.R.[^6] § 301--51.1 require the mandatory use of the
Government contractor-issued travel card for all official travel
expenses unless an exemption is granted. 41 C.F.R. § 301--51.6 states
the travel charge card may be used for only official travel related
expenses. 41 C.F.R. § 301--51.7 states if cardholders use the travel
charge card for purposes other than official travel, agencies may take
appropriate disciplinary action.

OCFO's *Handbook for Travel Policy* (Handbook), dated September 16,
2004, and May 25, 2006,[^7] Chapter VI, Part A, Responsibilities,
states,

> **The Travel Charge Card is to be used only to charge expenses
> incurred in conjunction with official Government travel or to obtain
> authorized ATM (Automated Teller Machine) cash withdrawals\....**
>
> **NO PERSONAL SPENDING IS PERMITTED with the card**. A cardholder may
> not intentionally misuse the travel charge card for personal items,
> even if he/she intends to pay for the personal purchases when the
> monthly billing statement is received....[^8]

In Part B, ATM Program, it states,

> Travel advances related to authorized official travel are obtained by
> using the Travel Charge Card to withdraw cash from Automated Teller
> Machines\....
>
> ...Withdrawals are limited to \$550.00 a day or \$1,100.00 a week, but
> may not exceed **100%** of the traveler's M&IE for the trip.

OCFO Directive 3-106 (Directive), *Travel Card Program*, effective
December 28, 2004, Section VII.A., General Policies, also states, "Cash
withdrawals are limited to \$550.00 a day or \$1,100.00 a week, and may
not exceed 100% of the traveler's M&IE for a single trip...."

Section VI.C of the Directive includes the following responsibilities
for the Executive Offices:

[]{.mark}

1.  Monitor ITCC \[Individual Travel Charge Card\] activity by employees
    within their Principal Office (PO) to ensure travelers' compliance
    with the FTR and ED travel guidance.

2.  Review monthly ITCC management reports and notify supervisors
    immediately of any questionable ITCC charges incurred by their
    employee(s), unauthorized ATM withdrawals, and delinquent payment of
    undisputed account balances.

Section VI.B.1, Responsibilities, Supervisors, states,

> Upon notification from the Executive Office, review ITCC activity by
> employees under their supervision to ensure travelers' compliance with
> the FTR and ED travel guidance.

In addition, the Cardholder Agreement and ITCC Acknowledgement Form that
must be signed by the travel card applicant states that the cardholder
agrees to use the card for official travel and official travel related
expenses only and not use for personal, family or household purposes.
The travel charge card itself includes on its face the statement, "For
Official Government Travel Only."

Section VII.D, Mandatory Use of the ITCC, reiterates the required use of
the ITCC for official travel related expenses, with limited
exceptions[^9] noted.

The issues identified above occurred in part due to IBA cardholder
negligence or lack of familiarity with applicable guidance. For example,
travel cardholders provided responses to questions relating to these
transactions that included the following:

-   The IBA was inadvertently used to pay for personal expenses;

-   The employee did not have the travel card in possession during the
    official trip; and

-   The IBA was used at local restaurants for meals with other
    Department officials.

Although all new travel card applicants are required to take the on-line
training course offered by the General Services Administration, there
was no requirement for refresher training for existing cardholders until
June 2007.

The issues also occurred due to lack of effective oversight by
responsible officials. The FMP&APG generates and provides several
monitoring reports[^10] on a periodic basis to the Executive Officers.
In addition, travel card monitoring reports can be generated by POs at
any time using the Bank of America Electronic Account Government Ledger
System (EAGLS). Our review of Executive Officers' account status in
EAGLS showed that only 1 out of 23 accounts (4 percent) was active[^11]
as of May 4, 2007. Executive Officers indicated that while they may not
use EAGLS on a regular basis, their staff does. However, during our
review we noted only one instance where PO staff or officials identified
improper transactions that were cited above and attempted to implement
corrective action.

Inappropriate use of the travel card violates the terms of the contract
with the travel card provider. It also represents abuse of a
Government-provided resource, and compromises the integrity of the
Department.

**Recommendations**

We recommend the Chief Financial Officer:

1.  Assess the potential costs and benefits associated with development
    and implementation of electronic data mining to improve the
    Department's ability to identify potential inappropriate card usage
    for follow-up and resolution. This could include items such as
    flagging potentially inappropriate transactions to blocked Merchant
    Category Codes, potentially excessive ATM withdrawals per traveler
    by frequency or dollar amount, and comparison of card transaction
    dates to periods of official travel. Develop and implement such a
    program if it is considered cost effective.

2.  Require all existing cardholders to take the required refresher
    course immediately, before going to the three-year cycle noted in
    the recently implemented applicable policy.

3.  Ensure Executive Officers are aware of and actually fulfill their
    monitoring responsibilities, and that they are aware of the tools
    available to assist them and applicable supervisors in the effective
    oversight of IBA activity.

**Department Comments**

The Department concurred with the finding and recommendations.

**FINDING NO. 2 -- Individually Billed Account Travel Expenditure
Oversight Activities Need Improvement\
**

The Department's oversight activities relating to IBA travel
expenditures need improvement. During this audit, we identified
instances where oversight activities designed to ensure that Department
funds were used in an allowable, effective, and economical manner did
not always function as intended. We found Department officials did not
always ensure that costs claimed on individual travel vouchers were
accurate, allowable, and actually incurred by the traveler. This
included validating that claimed expenses were supported by proper
documentation, miscellaneous expenses were appropriately explained and
documented, and calculations were correct. In addition, officials did
not always ensure that expenses were advantageous to the government.

Specifically, we found:

-   Forty-three of 125 individuals (34 percent) had at least one claimed
    item that was not originally supported by proper documentation,
    adequate explanations, or proper calculations. We found PO files
    supporting individual travel did not initially include adequate
    support for 70 claimed items totaling \$20,255. During the course of
    our audit, POs were able to provide additional support for only a
    few of these transactions (8 transactions valued at \$2,980) in
    response to our follow-up requests;

-   Three instances totaling \$2,031[^12] where employees did not
    provide sufficient supporting documentation at the time of voucher
    submission to allow for a determination of whether the Department
    would be inappropriately paying for premium class travel;[^13]

-   Eleven instances where employees who filed local travel vouchers
    either did not have normal daily commuting costs deducted when
    required, did not include sufficient detail on their travel vouchers
    to determine if normal commuting costs should have been deducted, or
    did not include required supporting documentation for their local
    travel expenses; and

-   Fourteen travelers who did not receive pre-approval for
    reimbursement of actual expenses as opposed to established per diem
    rates prior to the commencement of their trip.

In addition, travelers did not always exercise care and reasonableness
when incurring travel related expenses. For example, an employee elected
the option of having the rental agency refuel her rental car instead of
doing so herself. The amount paid for refueling ended up exceeding the
cost of renting the car. In another case, an employee incurred a charge
exceeding \$100 for a single business call.

We also noted that hardcopies of travel vouchers were not consistently
retained. Overall, PO files did not include hardcopy vouchers supporting
travel expenditures for 23 of 125 individuals (18 percent) in our
sample. In addition, trip reports required to be submitted upon
completion of foreign travel were not always maintained by the POs. We
were not provided with reports for 8 of 10 individuals (80 percent) in
our sample that completed foreign travel during FY 2006. Trip reports
for 20 of the 23 foreign trips (87 percent) taken by these individuals
were unable to be provided.

41 C.F.R. § 301--11.25 states the travel cardholder must provide a
lodging receipt and either a receipt for any authorized expenses
incurred costing over \$75, or a reason acceptable to the agency
explaining why he/she is unable to provide the necessary receipt.

The Handbook*,* Chapter VIII, Part C, Approval of Travel Claims,
Certifying Officers, states,

> The traveler's Certifying Officer must certify that:

-   Only official travel expenses are being claimed for reimbursement;

-   The mode of transportation used and claimed is the most cost
    beneficial to the Department; and

-   All travel expenses claimed are the most cost beneficial to the
    Department.

Chapter VIII, Part C, Approval of Travel Claims, Review Items, states,

The Reviewer, Approving Officer, and Certifying Officer should review
the Travel Voucher for *authorized, reasonable expenses in compliance
with Department policies and the FTR*....

The User Guide for the travel system in effect during our audit scope
period stated, "Only in extreme circumstances should a miscellaneous
expense be claimed and justification in the comments section should be
noted."

The Handbook, Chapter II, Part B, Traveler's Responsibilities, states,

> An employee traveling on official business is expected to exercise the
> same care and reasonableness in incurring expenses that a prudent
> person would exercise if traveling on personal business. The traveler
> will limit expenses to those that are essential to the transaction of
> official business....

Chapter III, Part B, Air Carriers, Premium Class Travel, states
travelers are not permitted to use premium class accommodations
(first-class, business-class, or the equivalent) except under certain
conditions.

Chapter III, Part C, Local Transportation, states,

> Travel performed within a 35-mile radius of the employee's official
> duty station or place of daily commute, whichever is the lesser
> distance traveled, is considered local travel.... **[Reimbursement of
> expenses for local travel]{.underline} is authorized only for costs
> incurred above and beyond an employee's normal round trip commuting
> costs**....

41 C.F.R. § 301--11.302, states,

> Requests for authorization for reimbursement under actual expense
> should be made in advance of travel. However, subject to your
> agency\'s policy, after the fact approvals may be granted when
> supported by an explanation acceptable to your agency.

The Handbook, Chapter V, Part A, Authorization Requirements, states,

> Actual expense reimbursement is used only when special circumstances
> exist, i.e., when travel is to an unusually expensive location and per
> diem is inadequate. Use of Actual Subsistence **must be approved in**
> **advance** by the Director, Financial Management Policies and
> Administrative Programs Group (FMP&APG), regardless of the amount of
> increase over the per diem rate. The Director of FMP&APG reserves the
> right to disallow after the fact requests for actual subsistence
> reimbursements....

Chapter VIII, Part D, Travel Voucher Copies, states, "The Certifying
Officer's office should retain original vouchers and receipts on file
for 6 years and 3 months."

Chapter IX, Part C, Trip Report, states,

Upon return from \[foreign\] travel, the traveler must submit a one-page
report of trip activities to the head of the Principal Office, with one
copy each to the Secretary and ITS \[International and Territorial
Services staff\]. This report should include a brief description of the
activities and participants, a summary of specific accomplishments or
outcomes of the travel, a more detailed assessment of implications for
Department programs and/or policies, and, if appropriate, a list of next
steps.

The conditions occurred in part because of incomplete voucher reviews
and unfamiliarity with Department policies and procedures by the
applicable approving officials and travelers.

Ineffective oversight of travel expenditures can result in inappropriate
use of Department resources and violations of Department policies and/or
procedures. Employees may be reimbursed for charges that they did not
actually incur or that were unallowable, or reimbursed for more than
that to which they are actually entitled. Without timely and adequate
monitoring of travel expenditures, a precedent may be set that
inappropriate charges are tolerated by the Department.

**Recommendations**

We recommend the Chief Financial Officer:

2.1 Develop and implement a mandatory specialized training course for
the approving, authorizing, and certifying officials reiterating their
roles and responsibilities. Refresher courses should be provided on a
periodic basis.

2.2 Until a training course is developed and implemented, require the
applicable officials to review the FTR and Department policies and
procedures related to their responsibilities in reviewing travel
vouchers and approving travel expenditures.

**Department Comments**

The Department concurred with the finding and recommendations.

**FINDING NO. 3 -- Individually Billed Account Management Practices
Should be Enhanced**

Our audit found opportunities to enhance account management practices
and reduce related risk exposure to the Department. During this audit,
we noted instances where cards remained open or active unnecessarily,
and required OMB control activities had not been implemented timely.

Specifically, we found:

a.  IBA were not always cancelled timely for separating cardholders;

b.  Infrequently used IBA were not always deactivated timely;

c.  IBA were issued to employees without bona fide need; and

d.  Credit worthiness checks for new IBA applicants had not been
    implemented timely.

The above items occurred in part because corrective actions in response
to our prior audit were not implemented; existing controls were not
always effective in identifying separating cardholders or inactive
accounts and confirming their need for cancellation or deactivation; and
timeframes required to implement new Department policies were excessive.

The above items increase the risk of inappropriate activity under the
Department's travel program. Inappropriate use of travel cards violates
the terms of the contract with the travel card provider, represents
abuse of a Government-provided resource, and compromises the integrity
of the Department.

**Issue 3a -- IBA Were Not Always Cancelled Timely for Separated Staff**

The Department did not always cancel IBA for separated staff in a timely
manner. As of March 9, 2007, four accounts remained open for staff that
separated during FY 2006, ranging between 189 and 282 days since
separation. We found no activity on any of the four accounts after the
respective employee's separation date.

The Directive, Section VI.D, Responsibilities, Agency Travel Charge Card
Program Coordinators, states that this official's responsibilities
include closing accounts for those cardholders that separate from the
agency or request closure.

The Handbook, Chapter VI, Part A, Contractor-Issued Charge Card
Management Procedures, provides the following procedures when employees
separate from the Department:

### ...When an employee leaves the Department, the appropriate Executive Officer should send a notice via e-mail to the Agency Program Coordinator advising of the termination/separation.... 

Our audit noted that OCFO travel staff did not implement an applicable
corrective action from the prior audit.[^14] Recommendation 2.2 states,

> Establish a procedure to receive timely notice from HRG \[Human
> Resources Group\] for all staff who have separated from the Department
> so accounts can be canceled upon separation.

According to FMP&APG staff, no notice is received from HRG. They receive
account termination reports from the Office of the Chief Information
Officer (OCIO). FMP&APG staff believed this process provided timely
notice of employee separation, and based the cancellation of IBA
accounts on these reports.

We noted that each of the separated individuals with an open IBA
separated between the period of May through September 2006. We reviewed
the OCIO Weekly Termination Reports from that period and noted that none
of the staff that had separated were listed on these reports. In an
audit issued by OIG in May 2007,[^15] we identified weaknesses in OCIO's
process for identifying employees that had separated and required
termination of their network account. FMP&APG's reliance on related OCIO
reports could be contributing to delays in cancellations of IBA for
separated employees.

As part of existing procedure, FMP&APG sends a listing of all the open
travel card accounts for each PO to the respective Executive Officer on
a quarterly basis. Executive Officers are requested to verify and
provide notice of any accounts that should be cancelled. As noted above,
this process did not always identify separated employees with open IBA.

As a result, the Department is at risk for inappropriate charges after
separation.

**Issue 3b - Infrequently Used IBA Were Not Deactivated Timely**

The Department did not deactivate inactive IBA in a timely manner. The
process of deactivating IBA is intended to benefit the Department and
protect employees by reducing the risk of inappropriate use during
periods of infrequent travel. As of March 20, 2007, we identified a
total of 371 deactivated accounts, of which 316 had last purchase dates.
We found that 276 accounts (87 percent) were deactivated more than 365
days since the respective last purchase date. Of these:

-   One-hundred thirty accounts (41 percent) were deactivated from 1,001
    to 2,000 days after the last purchase date; and

-   Forty-seven accounts (15 percent) were deactivated from 2,001 to
    2,917 days after the last purchase date.

FMP&APG sends a listing to the Executive Officers annually of all of the
travel cardholders that are identified by the travel card provider as
infrequent travelers. Executive Officers are requested to review the
report and provide feedback on whether the identified accounts can be
deactivated. According to FMP&APG, they did not have any problems
receiving feedback from the Executive Officers.

*Department's Travel Card Management Plan*, OCFO, Financial Management
Policies and Administrative Programs Group, dated March 1, 2006, Version
1.0, states, "Infrequent Traveler Reviews are completed on a yearly
basis...."

The Directive, Section VII.F, states,

> ...a cardholder's supervisor may request the deactivation of an ITCC
> during periods when the employee will not be traveling frequently. The
> supervisor must notify FMP&APG to deactivate the ITCC within a
> reasonable amount of time after determining that the ED employee will
> be traveling infrequently.... The supervisor must notify the employee
> and the Executive Officer by email or other written correspondence to
> initiate deactivation.

Since FMP&APG believed it received timely responses from the Executive
Officers, it could not understand why there were such delays in
deactivating infrequent travelers' accounts. It appears the information
that is received may not be correctly identifying accounts needing to be
deactivated. The Executive Officers may not be thoroughly reviewing the
reports, or may not have the knowledge required to effectively respond
to the reports.

The Department is at increased risk for inappropriate charges for not
deactivating infrequent traveler charge cards timely.

**Issue 3c -- IBA Were Issued To Employees Without a Bona Fide Need**

We found that IBA were issued to employees without a bona fide need. As
of March 20, 2007, a total of 55 open IBA had not been used since their
issuance. Of these accounts:

-   Thirty-six were issued prior to 2000;

-   Eight were issued between 2000 and 2001;

-   Nine were issued between 2002 and 2004;

-   Two were issued between 2005 and 2007;

These accounts were deactivated but remained open.

The Directive*,* Section VII.A, states it is Department policy that all
employees who travel more than twice a year will apply for an IBA.
Section VI.B.4, states supervisors are to ensure that IBA are issued
only to individuals with a bona fide need.

According to FMP&APG, it merely acts as a liaison between the PO and the
travel card provider by forwarding the completed applications after
ensuring that Department requirements, such as training, have been met
by the applicants.

While there is no cost for issuing travel cards, the Department may be
exposed to unnecessary risk for inappropriate charges by issuing travel
cards to employees that do not meet Department guidelines.

**Issue 3d -- Credit Worthiness Check for New Travel Card Applicants Was
Not Implemented Timely**

The Department did not implement a required credit worthiness check for
new travel card applicants in a timely manner. The credit worthiness
check was to be effective beginning in FY 2006 (October 1, 2005). The
credit check was actually implemented on October 15, 2007 \-- over two
years after the required implementation date.

OMB Circular A-123, Appendix B, Chapter 6 -- Credit Worthiness,
effective FY 2006, states,

> ...each agency must assess the credit worthiness of all **new** travel
> card applicants prior to issuing a card.... In order for a first time
> applicant to receive a card to which standard agency restrictions
> apply, a credit score must be obtained for that employee. The credit
> score obtained must be 660 or higher.... For first time travel card
> applicants with a credit score of less than 660, the agency may issue
> a card, but more stringent restrictions will apply....

FMP&APG did not receive notification of the credit worthiness check
requirement for new travel charge card applicants until the OMB Circular
A-123 was issued on August 5, 2005. According to FMP&APG, it takes an
average of six to eight months to update an Administrative
Communications System directive. The process can be further delayed due
to requests for extensions by the Office of the General Counsel and the
employees' Union, and additional time needed by FMP&APG to address and
respond to any comments made by the aforementioned parties involved.

Delays in implementing the required control increased the risk that
ineligible employees may have received travel charge cards without any
additional restrictions. This may place the Department at a higher risk
of inappropriate charges and unauthorized ATM withdrawals.

**Recommendations**

We recommend the Chief Financial Officer:

1.  Take immediate action to close the accounts noted for separated
    staff.

2.  Implement the prior audit recommendation of establishing a procedure
    to receive timely notice from the Human Resources Group for all
    staff that have separated from the Department to ensure accounts are
    cancelled upon separation.

3.  Develop and implement end of FY procedures to deactivate all IBA
    with no activity during the prior FY, and provide Executive Officers
    a listing of deactivated accounts for their POs along with
    instructions for reactivating the charge card if needed.

4.  Reiterate to Department supervisors that travel cards are to be
    issued only to employees with a bona fide need.

5.  Ensure future internal control requirements are implemented in a
    more timely manner.

**Department Comments**

The Department concurred with the finding and recommendations.

**FINDING NO. 4 -- Improvement is Needed in Oversight of Centrally
Billed Accounts**

Overall, we found that PO officials' oversight of CBA activity was not
always effective. We found that POs did not always ensure CBA accounts
were used as intended or effectively monitor account activity, and CBA
charges were not always appropriately supported or reconciled.

During FY 2006, there were 3,727 CBA transactions totaling \$920,862
(excluding payments). We reviewed 1,103 transactions (30 percent) valued
at \$561,746 (61 percent) from a total of 16 POs. Our review
specifically sought to determine whether selected CBA transactions were
allowable, supported, occurred during official travel, and were not
duplicated on IBA accounts. Specifically, we found:

-   Twenty-seven transactions (2 percent) totaling \$23,925 (4 percent)
    where CBA were used inappropriately, charges to CBA were improperly
    reimbursed to employees, or credits were not received. This included
    purchases for items such as boardroom rental, phone lines, and
    related set up materials. It also included travel expenses incurred
    for employees with an open IBA, and transactions for airfare and
    meals paid with Department funds that were also reimbursed to
    employees when they filed travel vouchers. CBA accounts were also
    billed and the Department paid for travel that was not completed and
    for reservations that were not cancelled timely;

-   Seventy-one (6 percent) transactions totaling \$21,121 (4 percent)
    that we could not determine related to official travel due to lack
    of sufficient supporting documentation; and

-   Twenty instances of potential duplicate charges totaling \$5,109.
    This included 3 transactions billed to both a CBA account and a
    traveler's IBA account, and 17 transactions with a matching amount
    at the same merchant where support provided was insufficient to
    distinguish the transactions as unique.

Additionally, the PO files supporting CBA transactions did not include
adequate support for 257 (23 percent) charges in our sample totaling
\$89,143 (16 percent). Overall, 13 of the 16 POs in our review had at
least one charge that was not adequately supported and 11 of 16 POs did
not have adequate support for at least 15 percent of their CBA
transactions on file. POs provided additional support for some of these
transactions in response to our follow-up requests. However, at the
completion of audit fieldwork a total of 121 (11 percent) transactions
valued at \$36,116 (6 percent) were not adequately supported.

U.S. Department of the Treasury, Financial Management Service, *Treasury
Financial Manual,* is the official publication for financial accounting
and reporting of all receipts and disbursements of the Federal
Government. Section 2020.10, Objectives, states,

> The principal objectives of control over disbursements are to ensure
> that all disbursements are legal, proper, and correct and that all
> disbursements are accurately recorded, reported, and reconciled in a
> timely and efficient manner.

Section 2020.30, \"Preaudit of Vouchers,\" states,

> Effective control over disbursements requires the preaudit and
> approval of vouchers before they are certified for payment. The
> principal objectives of the preaudit of a voucher are to determine
> whether...the quantities, prices and amounts are accurate...proper
> forms of documentation were used....

The Handbook, Chapter VI, Part C, Centrally Billed Account, states,

> A CBA is a corporate account issued to Executive Offices and Regional
> Component Heads to be used for the procurement of all passenger
> transportation services by a common carrier or transportation services
> or lodgings when an employee\'s Travel Charge Card cannot be used. A
> CBA must be used for official authorized passenger transportation by
> common carrier for those travelers who have not been issued an
> individual contractor-issued Travel Charge Card or whose travel card
> has been canceled. Use of the CBA for lodging expenses may be
> authorized at the discretion of each Principal Office.

The Directive, Section VI.C.6, Responsibilities, Executive Offices,
states the responsibilities of Executive Offices include implementing
controls to ensure there is no duplicate payment or reimbursement of
travel-related expenses resulting from charges made on IBA and CBA.

Overall, CBA cardholders did not appear aware of Department policy or
did not always ensure that transactions were in accordance with
Department policy. For example, one PO indicated items were charged to
the CBA because there were no Purchase Card holders present. In another
instance, a PO responded that a particular CBA was reserved for
occasions where food and beverage are requested for official events.

Executive Officers generally outlined expectations that each CBA charge
is to be reconciled to the appropriate source documents prior to
payment. However, as noted above, these expected procedures were not
always followed. During the course of this audit, we noted instances
where reconciliation of individual transactions relied upon
documentation other than source receipts identifying actual costs
incurred, such as travel authorizations, or referenced documentation
that showed amounts, travel periods, and destinations that differed from
what was on the CBA. In some cases, individual travel vouchers were
included as support, indicating they may have been used for
reconciliation. Additionally, one PO indicated that supporting
documentation had been lost and that billed costs had been reconciled
back to the Bank of America online system.

A similar finding was noted during our prior audit[^16] and included a
recommendation for the Department to develop and implement a policy to
guide PO staff in reconciling and maintaining adequate documentation to
support centrally billed account charges. Our review of the Department's
action in response to the recommendation found the corrective action had
not been properly implemented.[^17] This likely contributed to the
existence of similar conditions noted in our prior audit.

Weaknesses in oversight contributed to inappropriate card use, improper
reimbursement, and payment for services not received. Failure to obtain
adequate support and perform appropriate account reconciliations
increases the potential for erroneous CBA payments.

**Recommendations**

We recommend the Chief Financial Officer:

1.  Develop and implement a policy to guide PO staff in reconciling and
    maintaining adequate documentation to support CBA charges, as
    recommended during the prior audit.

2.  Review the potential duplicate charges identified during our audit
    and pursue applicable credits as appropriate.

3.  Ensure employees are aware that they are not entitled to
    reimbursement for

> charges paid for by the CBA, and recover amounts that were erroneously
> reimbursed to employees as identified in this audit.

4.  Ensure CBA cardholders review and are familiar with Department
    policy

concerning allowable CBA usage.

5.  Develop, if not already available, and implement required training
    specific to the

responsibilities of CBA cardholders.

**Department Comments**

The Department concurred with the finding and recommendations.

**FINDING NO. 5 -- Improvement Is Needed In Overall Travel Program
Management Activities**

We found further improvement in overall travel program management is
needed. During this audit we noted instances where corrective actions in
response to prior audit recommendations were not properly implemented,
appropriate disciplinary actions were not always taken for known misuse
of travel charge cards, procedures for performing quarterly travel
voucher audits were not documented and were not completed in accordance
with stated requirements, and inappropriate MCC were not blocked.

The above items occurred in part because the Department implemented
measures that did not reflect previously agreed upon corrective actions,
did not comply with established policies and procedures, and had not
reviewed MCC codes for several years.

As a result, the Department is at increased risk for inappropriate
charges, and it may set an unwanted precedent that travel card misuse is
not deemed serious.

**Issue 5a - Corrective Actions in Response to Prior Audit
Recommendations Were Not Properly Implemented**

Corrective actions related to prior audit recommendations were not all
properly implemented. As outlined below, we found corrective actions in
response to two audit recommendations were not properly implemented.

The Corrective Action Plan (CAP) for recommendation 2.2 in the prior
audit stated,

> The Department\'s Office of Management/Human Resources Group
> \[OM/HRG\] implemented a procedure that for employees separating from
> the Department prompt notification will be made to the Travel Card
> program manager so that accounts will be cancelled immediately upon
> separation.

The Department identified the corrective action as completed on June 1,
2002. During this audit, FMP&APG officials indicated they do not receive
notice of employee separation from OM/HRG. However, they stated that
they do receive weekly account termination reports from OCIO and close
IBA based on these reports. As noted in Finding 3a, we reviewed the OCIO
weekly account termination reports and did not identify the four
employees that separated during FY 2006 that still had open IBA as of
March 2007.

The CAP for recommendation 3.1 in the prior audit stated,

> FMP&APG will develop and implement a policy to guide Program Office
> staff in reconciling and maintaining documentation to support CBA
> charges.

The Department identified the corrective action as completed on March 5,
2002. Our review noted that while guidance was e-mailed to Executive
Officers, it was not incorporated into the applicable Department
Directive or Handbook as official policy. While this guidance noted CBA
charges should be reconciled to invoices from the CBA account provider,
it did not provide any specific guidelines for reconciling CBA charges
to supporting documentation, or provide examples of acceptable
supporting documentation. The prior audit noted travel authorizations
and travel agent itineraries as documentation being used to support
expenditures. The guidance issued stated only that documentation to
support that the trip actually took place must be provided to the
Authorizing Official before payment, and that once payment has been
made, the CBA provider invoice should be attached to the supporting
documentation and filed. As noted in Finding 4, our audit has continued
to note weaknesses in this area.

OMB Circular A-50, "Audit Followup," Section 5, states,

> Audit followup is an integral part of good management, and is a shared
> responsibility of agency management officials and auditors. Corrective
> action taken by management on resolved findings and recommendations is
> essential to improving the effectiveness and efficiency of Government
> operations. Each agency shall establish systems to assure the prompt
> resolution and implementation of audit recommendations. These systems
> shall provide for a complete record of action taken on both monetary
> and non-monetary findings and recommendations.

Implementing measures other than the agreed upon corrective actions did
not provide assurance that identified deficiencies were corrected. As a
result, related items identified in the prior travel card audit were
again noted in this review. The Department's vulnerability to
inappropriate and unsupported charges remained higher than necessary.

**Issue 5b-- Appropriate Disciplinary Actions Were Not Taken for Known
Misuse of Travel Charge Cards**

Appropriate disciplinary actions were not taken for known misuse of
travel charge cards. During FY 2006, we identified 10 cancelled IBA
accounts. Six of the accounts were cancelled due to either resignation
or retirement. We could not determine whether the resignations or
retirements were related to misuse of the travel charge card. Five of
these accounts that were cancelled as a result of either resignation or
retirement had past due balances ranging from \$31 to \$9,858 and
totaling \$14,092 at the time of separation. The remaining four accounts
were cancelled specifically due to known misuse or non-payment. We
received no evidence that disciplinary action was taken against three of
the four account holders. []{.mark}

The Directive, Section VI.B.3, Responsibilities, Supervisors, states,

> Initiate appropriate corrective action, up to and including possible
> removal from Federal service, in any case of unauthorized use of an
> ITCC by an employee under his/her direct supervision. This includes
> improper charges, unauthorized ATM withdrawals, and delinquent payment
> of undisputed balances.

The Department's Personnel Manual Instruction (PMI) 751-1, *Discipline
and Adverse Actions*, dated September 5, 2003, provides guidance on
specific disciplinary actions that may be imposed by supervisors based
on the nature of the offense, including suggested actions for travel
card related offenses.

Not taking appropriate disciplinary action for known misuse of travel
cards may set an unwanted precedent that travel card misuse or non
payment of outstanding balances are not deemed serious by the
Department. Failure to take appropriate action could also add additional
unnecessary risk for future inappropriate charges. This risk is
validated by the fact that some travel cardholders that were cited as
having inappropriate charges during the prior audit, were also cited as
having inappropriate IBA usage during this audit. Inconsistent practices
in applying appropriate disciplinary actions create the perception that
actions are not applied fairly, which may present barriers to
appropriate discipline in subsequent cases.

**Issue 5c -- Quarterly Travel Voucher Audits Could Be Improved**

We found that the Department's process for completing quarterly travel
voucher audits could be improved. We specifically noted that procedures
for performing these audits had not been developed, quarterly audits
were not always completed, and the quarterly audits that were completed
were not performed in accordance with stated requirements. Per
Department policy, the quarterly travel voucher audits are conducted to
ensure that applicable Department and government-wide policies are
adhered to.

During this audit, we noted that FMP&APG had not developed formal
procedures for completing quarterly travel voucher audits. There was no
specific guidance provided such as the objective of the audits, which
travel voucher elements should be reviewed, what documentation should be
retained, how results should be compiled, and how reporting should be
completed. Documentation provided by FMP&APG to support completion of
these audits consisted solely of copies of the vouchers selected for
review and a sampling worksheet identifying the number of vouchers
selected. There was no report to summarize results at the individual
voucher level, PO level, or Department-wide level. During our review, we
noted numerous Executive Officers indicated they routinely received
requests for the travel vouchers but they did not receive feedback
related to the outcome of the quarterly audits.

We also found that travel voucher audits were not completed for each
quarter during FY 2006. Specifically, an audit was not conducted during
the third quarter of the fiscal year due to problems with sample
generation.

Finally, we noted that completed quarterly audits were not performed in
accordance with expected requirements. Per sampling worksheets, a two
percent sample of the travel vouchers processed during the quarter was
to be selected for review. However, FMP&APG did not complete this sample
percentage in any of the three quarters where audits were completed due
to problems with obtaining vouchers and supporting documentation.
Department policy requires the audit to be a thorough examination to
ensure that Departmental policy and applicable regulations are being
followed. However, FMP&APG officials indicated the audits focused on
ensuring that common carrier and lodging expenses were documented.

As part of our audit, we reviewed five travel vouchers included in each
of the three quarterly travel voucher audits completed, and identified
the following errors that were not caught:

-   Two taxi fares of less than \$75 were reimbursed as \$75. Receipts
    for both taxi fares were attached to the voucher;

-   Reimbursement was provided for personal telephone usage on a
    non-lodging night;[^18]

-   Full per diem was reimbursed on a travel day, and 75 percent of per
    diem was paid when the traveler was not considered to be in official
    travel status;

-   An official travel expenditure was not paid for with the travel
    charge card as required; and

-   Supporting documentation provided by the PO did not support the
    voucher selected.

The Handbook**,** Chapter VIII, Part C, Travel Voucher Audits, states,

> A random sampling of the Department\'s travel vouchers are selected
> quarterly and receive a thorough examination to ensure that
> Departmental policy and FTR regulations are being followed....

Government Accountability Office *Standards for Internal Control in the
Federal Government*, states,

> Deficiencies found during ongoing monitoring or separate evaluations
> should be communicated to the individual responsible for the function
> and also to at least one level of management above that individual.

With respect to the lack of formal procedures, FMP&APG staff stated they
continued to follow the process that was in place when the Department
began processing travel vouchers in 2002.[^19] They indicated that no
formal guidance was provided to them on conducting such quarterly
audits. FMP&APG staff believes the Department's policy went beyond the
general requirements and that there are no formal policies or
regulations requiring government agencies to conduct travel voucher
audits. They categorized these audits as another layer of control added
to reduce risk.

With respect to the lack of a travel voucher audit in the third quarter
of FY 2006, FMP&APG staff stated a sample was generated in Travel
Manager,[^20] but it failed to produce a listing of travelers, dates,
and amounts. They noted that Travel Manager did not allow generation of
another sample after the initial attempt, therefore the audit was not
conducted.

With respect to completing less than the planned sample, FMP&APG staff
indicated they reviewed what was received from the PO and that their
follow-up efforts to obtain selected vouchers were not always
successful. They stated their original request for vouchers was made to
the Executive Officer, and he or she would forward the request to the
regional offices as appropriate. However, FMP&APG staff stated in
response they received copies of the vouchers via e-mail, FedEx,
interoffice mail, U.S. Mail, and fax. They had hoped to receive one
package from each of the POs and not receive bits and pieces from all
over the country. As a result, they did not compare the vouchers
received to the sampled report.

Finally, FMP&APG officials stated that the quarterly audits focused on
common carrier and lodging expenses because they represented the
majority of the overall travel expenditures.

Without formally documented procedures for performing quarterly audits,
the original intent of ensuring that Department funds are used properly
for authorized travel may not be achieved. Staff may not have a clear
understanding of the specific procedures to be followed when conducting
the audits, and staff new to FMP&APG may have greater difficulty
learning about the process without written procedures to refer to.
Without following-up on documentation that is not provided by POs,
inappropriate charges may be overlooked. Reviewing only readily
available documentation would not provide FMP&APG with an accurate
evaluation of compliance with Department policies. In addition, the PO's
inability to provide requested supporting documentation should be
considered a finding. Without providing for a consistent reporting
process, POs may not implement corrective actions where warranted.

Issue 5d -- Inappropriate Merchant Category Codes Were Not Always
Blocked for IBA and CBA

Inappropriate MCC were not always blocked for individually and centrally
billed accounts. IBA are used for common carrier expenses, lodging
expenses, rental cars and other authorized travel related expenses.
During our review, we noted merchant codes relating to items such as
video game arcades and business and secretarial schools that would
appear to have no relation to official travel that had not been blocked.

A CBA is used for the procurement of passenger transportation services
by a common carrier or transportation services or lodgings when an
employee\'s travel charge card cannot be used. Our review noted MCCs
that were not blocked that would appear inappropriate for CBA usage,
including boat rentals and boat leases, truck and utility trailer
rental, trailer parks and campgrounds, and food stamps.

The Department's *Travel Card Management Plan*, Section 4.6, Ensuring
Effectiveness of Risk Management Controls, states that blocking MCC
codes is one of the best practices to be effective in managing risk.

According to FMP&APG staff, when MCC blocks were implemented in 2002,
there was the thought that there could be a need for the use of these
MCC codes. Staff noted they did not want to cause travelers too much
inconvenience or hardship while in travel status. Blocked MCC codes have
not been reviewed since initially implemented in 2002.

The Department is at risk for inappropriate charges by cardholders to
MCCs related to merchants that do not provide official travel related
services.

**Recommendations**

We recommend the Chief Financial Officer:

1.  Immediately implement the corrective action plans for
    recommendations 2.2 and 3.1 from the prior audit.

2.  Develop and implement a process to ensure that corrective actions
    are implemented as agreed upon during audit resolution.

5.3 Reiterate to Department supervisors their responsibilities
concerning appropriate corrective actions in cases of known misuse of
travel cards, in accordance with the applicable Directive and PMI 751-1.

5.4 Develop and implement formal procedures for conducting quarterly
travel audits. At a minimum, procedures should outline the requirements
for sampling procedures, the complete and thorough review of all
vouchers selected; maintenance of supporting documents for all quarterly
audits performed; and providing feedback to the PO of the results of the
audit.

5.5 Review the listing of MCC codes identified by the OIG that do not
appear to have valid uses for official travel purposes for IBA and CBA
accounts (separately provided). Determine if each of these codes should
be blocked and take appropriate action.

5.6 Develop and implement a process to periodically review MCC codes to
reasonably ensure that merchants that do not provide authorized travel
services are blocked.

**Department Comments**

The Department concurred with the finding and recommendations.

**OBJECTIVE, SCOPE, AND METHODOLOGY**

The objective of our audit was to evaluate the effectiveness of
Department controls over the appropriateness of travel expenditures. To
accomplish our objective, we performed a review of internal control
applicable to the Department's management of the travel program. We
reviewed the Federal Travel Regulations, Department policies and
procedures, and Government Accountability Office *Standards for Internal
Control in the Federal Government.* We conducted interviews with OCFO
and PO management and officials responsible for administering the travel
card program. We also reviewed Bank of America online transaction
data,[^21] CBA travel card statements, travel authorizations and
vouchers,[^22] and supporting documentation for travel expenditures
incurred and reimbursed to evaluate their appropriateness.

To perform our audit, we obtained access to the Bank of America
Electronic Accounting Government Ledger System (EAGLS) for all
Department activity. This system includes all travel card activity for
both IBA and CBA. This is the same system that individual account
holders and PO staff may access to review and monitor travel card
activity. We downloaded all charges made on the travel card accounts
during FY 2006 and determined the following activity during the
year:[^23]

  ------------ ------------ --------------------- ------------------------
  **Account    **Number of  **Number of           **Value of Non-Payment
  Type**       Accounts     Non-Payment           Transactions**
               With         Transactions**        
               Activity**                         

  IBA          2,025        45,134                \$6,422,514

  CBA          37           3,727                 \$920,862

  Total        2,062        48,861                \$7,343,376
  ------------ ------------ --------------------- ------------------------

In order to assure ourselves of the reliability of the data downloaded,
we tested the accuracy and authenticity of the EAGLS database
information by comparing charges listed to travel vouchers, receipts,
and other source documents and supporting records. We validated the
completeness of the data downloaded by tracing additional receipts from
the travel vouchers and other source documents back to the database
information. We also compared monthly totals from our downloaded data to
the monthly totals for the Department posted on the GSA web site. Based
on these tests and assessments, we concluded the data were sufficiently
reliable to be used in meeting the audit objective.

Details on the sampling methodology used in the audit are as follows:

**IBA Reviewed:**

We selected IBA to review based on the samples below. We reviewed all FY
2006 charges for those selected accounts that had less than 20 trips
(local and temporary duty) during FY 2006. For accounts that had 20 or
more trips, we limited our review to the first 20 trips that occurred
during the second and third quarters of FY 2006, chronologically. If an
account was selected based upon identified high-risk transactions, i.e.,
casino charges, ATM usage, or charges to blocked merchant category
codes, we reviewed those specific transactions without limitation.
Eliminating accounts that occurred in more than one of the categories,
we identified 129 different accounts. However, four of the accounts that
were selected based upon the cancelled accounts criteria did not have
any activity other than late and/or payment by phone fees that were not
reviewed. In total, we reviewed 125 unique accounts.

-   **Random Stratified Sample** -- We reviewed a random stratified
    sample of 49 IBA based on volume of charges made during FY
    2006.[^24]

  ------------- ----------------------- ----------------------- -------------
  **Stratum**   **Transaction Range**   **Number of Accounts**  **Number
                                                                Selected**

  1             \$500 - \$5,000         1,381                   18

  2             \$5,001 - \$20,000      334                     24

  3             \$20,001 - \$40,000     24                      5

  4             \$40, 001 - \$50,000    2                       2
  ------------- ----------------------- ----------------------- -------------

-   **Stratified Sample of High ATM Use** -- We reviewed all 7 accounts
    with 26 or more ATM transactions during FY 2006.

-   **Casino Charges** -- We reviewed all 18 accounts that had 1 or more
    casino charge during FY 2006. We eliminated those accounts with
    charges from restaurants within the casino hotels and multiple
    accounts with similar charges from the same location on the same
    date.

-   **Blocked Merchant Category Codes**[^25] -- We reviewed all 43
    accounts with charges to MCC that Department staff determined were
    inappropriate for the travel card. We reduced the number of accounts
    based on transactions we deemed appropriate such as airport parking
    charges, lodging expenses, mass transit, and expenses related to
    hurricane recovery efforts.

-   **Cancelled Accounts** -- We reviewed all 10 accounts that were
    cancelled during FY 2006.

-   **Accounts of Employees Identified with Inappropriate Charges from
    Prior Audit** -- We reviewed all 19 accounts with charge activity
    during FY 2006.

For FY 2006, IBA cardholders charged 45,134 non-payment transactions
valued at \$6,422,514 (excluding payments and fees). We reviewed 5,515
transactions valued at \$1,030,149 (excluding payments and fees). Our
sample represented 12 percent of the total number of transactions and 16
percent of the total value of the transactions charged by IBA
cardholders during the year.

To determine whether IBA charges were appropriate, we traced charges
made to travel vouchers provided by the POs.[^26] We also verified
travel vouchers to the Bank of America data to ensure we reviewed all
travel vouchers for the period. In cases where IBA charges were not
supported by a travel voucher, we referred those charges to PO Executive
Officers for a determination as to whether the charges were for official
travel expenses and therefore appropriate use of the travel card. The
results presented in this report are based on the responses from the PO
Executive Officers.

**Distribution of IBA Sampled by PO:**

  --------------------------------------------------- -------------------
  **Principal Office**                                **Number of IBA
                                                      Sampled**

  Federal Student Aid                                 35

  Office for Civil Rights                             15

  Office of Elementary and Secondary Education        13

  Office of Special Education and Rehabilitation      12
  Services                                            

  Office of the Secretary                             12

  Office of Communications and Outreach               11

  Office of Postsecondary Education                   9

  Office of Management                                4

  Institute of Education Sciences                     3

  Office of the Chief Financial Officer               3

  Office of English Language Acquisition              2

  Office of Planning, Evaluation, and Policy          2
  Development                                         

  Office of Safe and Drug Free Schools                2

  Office of the General Counsel                       1

  Office of Innovation and Improvement                1

  Office of Legislation and Congressional Affairs     1

  Office of the Chief Information Officer             1

  Office of the Deputy Secretary                      1

  Office of Vocational and Adult Education            1

  Total (19 POs)                                      129
  --------------------------------------------------- -------------------

**CBA Reviewed:**

We reviewed a CBA for 16 of the 19 POs with selected IBA cardholders.
Three POs did not have any charge activity on their CBA[^27] accounts
during FY 2006. If a PO had more than one CBA, we reviewed the CBA with
the highest dollar volume of charges during FY 2006. We reviewed all
charges for FY 2006 for the CBA with one exception \-- the Office of the
Secretary. The account we selected for our review had a very large
amount of activity. We limited our review in the Office of the Secretary
to the third quarter of FY 2006 and two high-risk transactions
identified in the fourth quarter.

For FY 2006, Department staff charged 3,727 transactions valued at
\$920,862 on all CBA (excluding payment and fees). We reviewed 1,103 FY
2006 transactions valued at \$561,746 (excluding payments and fees). Our
sample represented 30 percent of the total number of transactions and 61
percent of the total value of the transactions charged on Department CBA
during the year.

As with the IBA reviewed, we matched CBA charges to supporting
documentation provided by the POs. In cases where documentation did not
support charges made, we referred the items to the PO Executive Officers
for their determinations as to whether the charge was appropriate. The
results presented in this report are based on the responses from the PO
Executive Officers.

Our review included the application of the same procedures and analyses
noted above to IBA and CBA activity within OIG. Since OIG is not
independent of its own activities, the results of the review are not
included in this report. We did, however, provide the results of the
review of OIG activity to appropriate Department officials in OCFO who
have oversight over the travel program. In addition, the results were
reported to OIG managers responsible for implementing corrective
actions.

The fieldwork for our audit was conducted at Department offices in
Washington, DC, during the period March 2007 through December 2007. We
held an exit conference with OCFO on January 10, 2008. Our audit was
performed in accordance with generally accepted government auditing
standards appropriate to the scope of the review described above.

ATTACHMENT

# MEMORANDUM

TO: Keith West

Assistant Inspector General for Audit

FROM: Lawrence A. Warder

SUBJECT: Draft Audit Report -- ED-OIG/A19H0009

Department Controls Over Travel Expenditures

OCFO has reviewed the draft audit report entitled "Department Controls
Over Travel Expenditures", ED-OIG/A19H0009. This report provides
Department management with valuable insights concerning travel
expenditures, and we appreciate the opportunity to provide comments on
behalf of the Department. We agree that there are areas for improvement
in the controls over travel expenditures, and we concur with the
findings and recommendations noted in the draft audit report.

# Background

On October 2, 2006, the Department implemented a new e-Gov Travel System
(eTS) based on mandated regulations and recommendations of the
President's Management Agenda. Additionally, in November 2008 the
Department will transition to a new bank card vendor under General
Services Administration (GSA's) Master SmartPay2 contract. The new bank
card vendor will be JP Morgan Chase and will replace the current bank
card vendor, Bank of America.

# Individually Billed Accounts Were Not Always Used Appropriately

The Department concurs with this finding. The Office of the Chief
Financial Officer (OCFO) will research the feasibility of implementing
electronic data mining to improve the Department's ability to identify
potential inappropriate card usage. OCFO will require each existing
cardholder to take a refresher course available on line through GSA's
website and require each cardholder to print and forward the certificate
of completion to OCFO for retention. OCFO will advise Executive Officers
(EXOs) of their monitoring and fulfillment responsibilities surrounding
their oversight of Individually Billed Account (IBA) activity.

# Page 2 -- Keith West

##  Draft Audit Report -- ED-OIG/A19H0009

**Department Controls Over Travel Expenditures**

# 

# Individually Billed Account Travel Expenditure Oversight Activities Need Improvement

The Department concurs with this finding. OCFO will move forward to
develop and implement a specialized training course and subsequent
refresher courses for the approving, authorizing and certifying
officials to reiterate their roles and responsibilities. OCFO will work
with the union to negotiate on making the course mandatory. In the
interim, OCFO will send a global message via email to the applicable
officials regarding their responsibilities with regard to their
familiarization with the Federal Travel Regulations (FTR), the
Department's travel policies and procedures for reviewing travel
vouchers and travel expenditures.

# Individually Billed Account Management Practices Should be Enhanced

The Department concurs with this finding. OCFO has closed the accounts
identified in the audit. OCFO has recommended changes to the
Administrative Communications System (ACS) Directive, Clearance of
Personnel for Separation or Transfer, OM:3-104, regarding the Separation
of Employees and has recommended that the Travel Team be added to the
'check out' process to ensure that separating employees have fulfilled
their travel obligations and the surrendering of the card before
separation. This ACS is still in 'draft' status and is awaiting issuance
by the Office of Management. OCFO will issue procedures to deactivate
all IBAs with no activity during the prior fiscal year (FY) and will
provide EXOs a listing of all deactivated accounts for their respective
PO. The procedures will outline the instructions for reactivating the
charge card if needed. OCFO will reiterate to Department supervisors
that travel cards are to be issued only to those employees with a bona
fide need.

# Improvement is Needed in Oversight of Centrally Billed Accounts

The Department concurs with this finding and steps are already in
development to implement all recommendations noted in the report.

# Improvement is Needed in Overall Travel Program Management Activities

The Department concurs with this finding. OCFO will implement a process
to ensure that future corrective actions are implemented as agreed to
during the audit resolution process. OCFO will reiterate to Department
supervisors their responsibilities concerning appropriate corrections
actions in cases of known misuse of travel cards, in accordance with the
applicable ED Directive and Policy. OCFO will develop and implement
formal procedures regarding audit sampling. OCFO is currently undergoing
a review of Merchant Category Codes (MCC) codes and will develop a
process to periodically

# Page 3 -- Keith West

##  Draft Audit Report -- ED-OIG/A19H0009

**Department Controls Over Travel Expenditures**

review MCC codes to ensure that merchants who do not provide travel
services are blocked.

Thank you for the opportunity to respond. Attached is the proposed
corrective action plan with proposed completion dates. Feel free to
contact me or Constance Davis with questions regarding this response.

> Attachment - Corrective Action Plan

[^1]: Due to a reorganization within OCFO, effective October 1, 2007,
    the Functional Applications Group, Financial Systems Operations, is
    responsible for the management of the Government travel program.

[^2]: Our audit results are based on a combination of random and
    high-risk samples. Therefore, outcomes should not be projected to
    the universe of Department cardholders or their charges. See the
    Objective, Scope, and Methodology section of this audit report for
    more details on the samples reviewed.

[^3]: Some cardholders are represented in more than one category.

[^4]: Cardholders noted with inappropriate charges were referred to the
    applicable Assistant Secretary, or equivalent, for determination as
    to whether administrative action was necessary.

[^5]: Audit of Controls Over Government Travel Cards, March 2002,
    ED-OIG/A19B0010.

[^6]: Unless otherwise specified, all regulatory citations are to
    versions dated July 1, 2005 and July 1, 2006. The pertinent
    provisions are identical in each version.

[^7]: The pertinent provisions are identical in the 2004 and 2006
    versions of the Handbook.

[^8]: Determination of the intent of misuse was beyond the scope of this
    audit.

[^9]: Exceptions include (1) New employees subject to immediate travel;
    (2) Employees who have an application pending for the ITCC; (3)
    Employees traveling on invitational travel; (4) An employee who
    travels less than twice a year; and (5) An employee whose ITCC was
    suspended/canceled due to personal abuse or non-payment. Exceptions
    for certain types of expenses are also noted, including parking,
    local transportation and tips.

[^10]: These reports consist of Delinquency Reports, Pre-Suspension
    Reports, Suspension and Cancellation Reports, Transaction Activity
    Reports, Open Account Listing Reports, Infrequent Traveler Reports,
    and Aging Analysis Reports.

[^11]: The account becomes inactive after 90 days of inactivity.

[^12]: First class accommodations were used for at least one segment of
    the trips.

[^13]: Subsequent to the completion of our fieldwork, one individual was
    able to provide appropriate documentation indicating the Department
    was not charged for his premium class travel.

[^14]: ED-OIG/A19B0010.

[^15]: Termination of EDNet Access for Separated Employees, May 2007,
    ED-OIG/A19G0012.

[^16]: ED-OIG/A19B0010.

[^17]: See additional details in Finding No. 5 of this report.

[^18]: The Handbook permits up to \$7 for personal calls per lodging
    night.

[^19]: Travel vouchers were previously processed by the U.S. Department
    of Agriculture.

[^20]: The electronic travel voucher system in place during the audit
    scope period.

[^21]: Charges for agent fees, late payment fees, and payment by phone
    fees were not reviewed.

[^22]: Includes local travel vouchers.

[^23]: We did not include any travel charges made by the various boards
    and commissions that participate in the Department's travel program,
    as these organizations do not represent a high volume of charges,
    and the staff are not considered Department employees.

[^24]: There were no accounts with total charges greater than \$50,000
    during FY 2006.

[^25]: According to FMP&APG, charges can be processed by blocked MCC
    merchants, usually if within a certain dollar threshold, as
    determined by the charge card provider.

[^26]: Since some of the POs did not maintain hardcopies of the vouchers
    as required, we obtained access to the Travel Manager system in
    place during our scope period and printed the vouchers ourselves for
    those accounts included in our sample.

[^27]: Office of the Deputy Secretary, Office of the Chief Information
    Officer, and Office of Legislation and Congressional Affairs.