Most Army cardholders properly used their travel cards and paid amounts owed to Bank of America promptly. However, we found that the Army's delinquency rate is higher than any other DOD component or executive branch agency in the federal government. As shown in figure 1, for the eight quarters ending March 31, 2002, the Army's delinquency rate fluctuated from 10 to 18 percent, and on average was about 5 percent higher than the rest of DOD and 7 percent higher than federal civilian agencies. As of March 31, 2002, over 11,000 Army cardholders had $8.4 million in delinquent debt. We also found substantial charge-offs of Army travel card accounts. Since the inception of the travel charge card task order between DOD and Bank of America on November 30, 1998, Bank of America has charged off over 23,000 Army travel card accounts with nearly $34 million of bad debt. As shown in figure 2, the travel cardholder's grade (and associated pay) is a strong predictor of delinquency problems. We found that the Army's delinquency and charge-off problems are primarily associated with young, low- and midlevel enlisted military personnel with basic pay levels ranging from $11,000 to $26,000. A more detailed explanation of each of these grades along with their associated basic pay rates is provided in appendix II. These delinquencies and charge-offs have cost the Army millions of dollars in lost rebates, higher fees, and substantial resources spent pursuing and collecting past-due accounts. For example, we estimated that in fiscal year 2001, delinquencies and charge-offs cost the Army $2.4 million in lost rebates, and will cost $1.4 million in increased automated teller machine (ATM) fees annually. Our work also identified numerous instances of potentially fraudulent and abusive activity related to the travel card. We found that during fiscal year 2001 at least 200 Army employees wrote three or more nonsufficient funds (NSF) or “bounced” checks to Bank of America as payment for their travel card bills—a potentially fraudulent act. Appendix III provides a table summarizing 10 examples, along with more detailed descriptions, of cases in which cardholders wrote three or more NSF checks to Bank of America and had their travel card accounts subsequently charged off. For example, in one case, an Army employee from Ft. Jackson, who was convicted for writing NSF checks prior to receiving the government travel card, wrote over 86 NSF checks to Bank of America. Further, we found instances in which cardholders abused their travel cards by using them to purchase a wide variety of personal goods or services that were unrelated to official government travel. As shown in figure 3, government travel cards are clearly marked, “For Official Government Travel Only.” In addition, before receipt of their travel cards, all Army cardholders are required to sign a statement of understanding that the card is to be used only for authorized official government travel expenses. However, as part of our statistical sampling results at the four sites we audited, we estimated that personal use of the government travel card ranged from 15 percent of fiscal year 2001 transactions at one site to 45 percent at another site. Government travel cards were used to pay for such diverse goods and services as dating and escort services; casino and Internet gambling; cruises; tickets to musical and sporting events; personal clothing; closing costs on a home purchase; and, in one case, the purchase of a used automobile. For example, we were able to determine that, during fiscal year 2001, approximately $45,000 was spent Army-wide to purchase cruise packages or to pay for a variety of activities or services on cruise ships. We found that charged-off accounts included both those of (1) cardholders who were reimbursed by the Army for official travel expenses but failed to pay Bank of America for the related charges, thus pocketing the reimbursements, and (2) cardholders who used their travel cards for personal purchases for which they did not pay Bank of America. Appendix IV provides a summary table and supporting narrative describing examples of both types of abusive travel card activity. As detailed in appendix V, we also found instances in which cardholders used their travel cards for personal purposes, but paid their travel card bills when they became due. For example, we found that a Lieutenant Colonel used his travel card to purchase accommodations and tickets to attend the Tournament of Roses in Pasadena, California. These cardholders benefited by, in effect, getting interest-free loans. Personal use of the cards increases the risk of charge-offs related to abusive purchases, which are costly to the government and the taxpayer. We also found several instances of abusive travel card activity where Army cardholders used their cards at questionable establishments such as gentlemen's clubs, which provide adult entertainment. Further, these clubs were used to convert the travel card to cash by supplying cardholders with actual cash or “club cash” for a 10 percent fee. For instance, a cardholder may charge $330 to the government travel card at one of these clubs and receive $300 in cash. Subsequently, the club receives payment from Bank of America for a $330 restaurant charge. For fiscal year 2001, we identified about 200 individuals who charged almost $38,000 at these establishments. For example, we found that 1 cardholder obtained more than $5,000 in cash from these establishments. We found little evidence of documented disciplinary action against Army personnel who misused the card, or that Army travel program managers or supervisors were even aware that Army personnel were using their travel cards for personal use. For example, a civilian employee working at the Pentagon on a classified program used her travel card for personal purchases of about $3,600 and subsequently wrote four NSF checks for over $7,700 to Bank of America. The cardholder's account was subsequently charged-off when the cardholder failed to pay the bill. The employee's supervisor was not aware that the employee had any potentially fraudulent and abusive activity related to the travel card. In another example, a California National Guardsman with over $5,400 of charge-offs associated with authorized travel, for which the Army reimbursed the cardholder, was subsequently promoted from a Major to a Lieutenant Colonel. In addition, we found that 38 of 105 travel cardholders we examined that had their accounts charged-off still had active secret or top-secret clearances as of June 2002. Some of the Army personnel holding security clearances who have had difficulty paying their travel card bills may present security risks to the Army. Army regulations provide that an individual's finances are one of the key factors to be considered in whether an individual should continue to be entrusted with a secret or top-secret clearance. However, we found that Army security officials were unaware of these financial issues and consequently could not consider their potential effect on whether these individuals should continue to receive security clearances. For fiscal year 2001, the Army had significant breakdowns in key internal controls over individually billed travel cards. The breakdowns stemmed from a weak overall control environment, flawed policies and procedures, and a lack of adherence to valid policies and procedures. These breakdowns contributed to the significant delinquencies and charge-offs of Army employee account balances and potentially fraudulent and abusive activity related to the travel cards. At the four units we audited, we found management was focused primarily on delinquencies and often only after severe problems were discovered and major commands began demanding improved performance in reducing the amount of such delinquencies. There were few indications that management placed any emphasis on controls designed to prevent or provide for early detection of travel card misuse. In addition, we identified two key overall control environment weaknesses: (1) the lack of clear, sufficiently detailed policies and procedures and (2) limited travel card audit and program oversight. First, the units we audited used DOD's travel management regulations (DOD Financial Management Regulation, volume 9, chapter 3) as the primary source of policy guidance for management of Army's travel card program. However, in many areas, the existing guidance was not sufficiently detailed to provide clear, consistent travel management procedures to be followed across all Army units. Second, as recognized in the DOD Inspector General's March 2002 summary report on the DOD travel card program, “ecause of its dollar magnitude and mandated use, the DOD travel card program remains an area needing continued emphasis, oversight, and improvement. Independent internal audits should continue to be an integral component of management controls.” However, the DOD Inspector General report noted that only two internal review reports were issued from fiscal year 1999 through fiscal year 2001 concerning the Army's travel card program. We found that this overall weak control environment contributed to design flaws and weaknesses in a number of management control areas needed for an effective travel card program. For example, many problems we identified were the result of ineffective controls over issuance of travel cards. Although DOD's policy allows denial of travel cards for certain groups or individuals with poor credit histories, we found that, without exception, the Army processed all travel card applications it received, regardless of an applicant’s credit history. For the cases we reviewed, we found a significant correlation between travel card fraud, abuse, and delinquencies and individuals with substantial credit history problems. The prior and current credit problems we identified for Army travel cardholders included charged-off credit card and automobile loans, defaulted and foreclosed mortgages, bankruptcies, and convictions for writing NSF checks. Also, agency program coordinators (APCs), who have the key responsibility for managing and overseeing travel cardholders' activities, are essentially set up to fail in their duties because they are given substantial responsibility for a large number of cardholders—for example up to 1,000 cardholders per APC—and little time to do this collateral duty.