Where Credit Is Due

eally, some of the things government workers and service members do with their travel cards boggle the mind. There's the Veterans Affairs employee who used it to pay for his daughter's wedding. There are charges for escort services and "gentlemen's clubs," and charges for casino and Internet gambling. Even closing costs for a new home. Army civilian and service members charged some $45,000 for cruises in fiscal 2001. And people use their cards to get cash advances even when they aren't traveling.

Then there are the travelers who use the cards for legitimate travel expenses, but don't pay their bills or pay them late. In the front of the pack is the Fort Jackson soldier who wrote 86 checks-all of which bounced-to pay the balance on a card. As of April, travelers at the largest agencies were collectively $22 million in arrears (meaning their payments were late by 61 days or more). That's the bottom line even though the government has spent more than a year aggressively trying to reduce late payments and defaults.

"The only things the cardholder is supposed to do are use the card only for official reasons and pay on time," says Gregory Kutz, author of General Accounting Office studies on travel card fraud and abuse in the Army (GAO-02-863T) and the Navy (GAO-03-148T).

Simple enough. And, as senior officials, including Defense Comptroller Dov Zakheim, like to point out-often-most travelers are good financial citizens. But those who aren't owed $31 million on their cards at the end of fiscal 2001.

Individual workers aren't the only problem. Some agencies and departments fail to pay their bills on time, too. Centrally billed accounts, the government's equivalent of corporate cards, were about $1 million in arrears as of April. The Defense Department has the worst record on all types of abuse and delinquencies: A task force set up to examine the problem and make recommendations found that more than 14 percent of the department's accounts were overdue in January 2001.

Last, but not at all least,the government owes money to its workers. The 1998 Travel and Transportation Reform Act, which made card use mandatory for travel expenses, also requires agencies to reimburse workers within 30 days after receiving a valid voucher. Some don't. By law, agencies are supposed to pay interest, late fees-or both-to travelers if they don't reimburse them on time. But no one knows how much agencies owe-or how far behind they are. The Defense Finance and Accounting Service told GAO, "We didn't pay interest or penalties."

True, DFAS probably didn't pay interest or penalties. But that's because the agency has no way of tracking its late payments. What's more, most of the delays occur earlier in the process, as a voucher makes its way from the traveler's desk, through the approving official, and then to DFAS. Defense offices have been told to hold on until the Defense Travel System is up and running; that it will automate the process and make it smoother. In the meantime, many installations have inadequate staffing levels and are "holding together the old systems with binding tape," says Kutz, financial management and assurance director at GAO. "There is some correlation between those who are paid late and those who are delinquent."

GAO's audits found, for example, that the California National Guard reimbursed 61 percent of its vouchers (59,000 in fiscal 2001) more than 30 days after submission, and 42 percent of its reimbursements either exceeded or fell short of the right amount.

Defense said that delays in processing "may be a factor in the department's high delinquent payment rates" and "may affect the ability of the traveler to receive payment before the monthly bill is due."

On the civilian side, the General Services Administration's Office of Governmentwide Policy reported to Congress in June that travelers are reimbursed an average of 10 days after submitting a voucher for temporary duty travel, and 18 days after submitting one for relocation. The report says that at the 26 agencies that spend more than $5 million a year on travel and transportation, travelers are reimbursed within 30 days for temporary duty travel expenses 98 percent of the time, and 93 percent of the time for relocation. But GSA also lacks figures on how much agencies are paying travelers in interest and penalties for failing to reimburse them on time-or whether they are paying them at all.

Agencies, not just banks, lose real money here. Some losses, such as delinquencies and write-offs, are deducted from the rebates agencies receive for accounting efficiencies, such as paying their card-issuing banks daily. Defense, for example, was entitled to a $2.1 million rebate in the first quarter of 2001, but ended up $60,000 in the hole. Such failures, says one Capitol Hill observer, result from antiquated financial systems, and "that's where the taxpayers are losing real money."

MAKING GOOD

All this bright light shining on the issue is putting the government under pressure to clean up the mess.

The biggest problems are in the military, where individual account delinquencies have surged as high as 25 percent. The Army is by far the worst. The GAO study found that improper personal use in the Army ranged from 15 percent to 45 percent of transactions at the four sites audited. The highest delinquency rates are among junior enlisted personnel. Service members in the lowest ranks account for 19.5 percent, while Defense's overall delinquency rate is 6.9 percent.

Defense's task force report was released in June, and many steps have been taken since then. Among those taken, in process or under consideration:

• Reducing the number of accounts each manager oversees. Some now are responsible for as many as 1,000. The new maximum will be 300.
• Dropping limits for charges to $2,500, from $5,000, and for cash advances to $250, from $500.
• Increasing late fees to $29, from $20, and imposing them at 75 days instead of 120.
• Increasing penalties to include loss or suspension of security clearance and prosecution.
• Reducing the number of cards issued from 1.6 million to 1.2 million by eliminating unused cards and those reissued to people who are no longer authorized cardholders.
• Reimbursing card expenses directly to the issuing bank.
• Using salary and retirement benefit offsets (similar to garnishment) more widely to recoup overdue payments, including extending them to civilian retirees.

Defense and some civilian agencies also are working to ensure that workers give up their cards before they leave a job or government service. They are promoting legislation that would allow them to make mandatory the practice of making reimbursements directly to the card-issuing bank. Split disbursement, as it's known, is effective in the private sector, says Kutz, and will "take some of the temptation away from the traveler." He cites the case of a Fort McPherson, Ga., GS-12 who took a reimbursement of more than $8,000 for relocation expenses and, instead of paying the card bill, put a down payment on a house.

SETTING LIMITS

What's the secret of success at Health and Human Services, NASA, Social Security, and other agencies, large and small, with low delinquency rates?

John Walker, chief of the travel and accounts payable branch of the Nuclear Regulatory Commission, credits his hands-on approach to the card program. With an admittedly small universe-2,351 cardholders-he checks every report as soon as it comes from the bank. If he suspects trouble, he contacts a high-level official in the traveler's chain of command, the inspector general's office and human resources. The consequences can be anything from verbal counseling to dismissal. In fiscal 2002, he's written only four letters suspending cards.

Walker also credits fast reimbursements at his agency-five days on average-for keeping delinquencies down.

Keeping 2,351 cardholders in line isn't that hard, you may say. How about 46,000? That's how many the Veterans Affairs Department has.

Donna Gentile, the VA's travel card program manager, has headed up an effort that shrunk the department's individual delinquencies (of 61 days late or more) from $260,000 in January to $120,000 in August. The VA first dropped card limits from $15,000 a month to $10,000 a month, and now the limit is $5,000 (unless cardholders have a legitimate reason to spend more). It put merchant code blocks in place, so travelers can no longer use cards at, say, Trak Auto, Six Flags or Payless Shoes. It has aggressively educated new hires about proper card use. The VA allows travelers to direct reimbursement to the bank issuing the card, and is piloting an e-travel program that would make that process more widespread. Employees who take cash advances when not on travel might find their cash limit reduced to $1-without notice. The VA deducts what workers owe from their pay. The department has canceled inactive cards and has fired some employees for misusing them.

The VA also pays its travelers on time, Gentile told those gathered at a Society of Government Travel Professionals meeting in September. Some medical centers still process on paper, and they may be slower to pay, but no one is near the 30-day limit. The department pays its banks daily, earning the maximum rebate.

CLEANING THE SLATE

Undoubtedly, Defense and other civilian agencies will adopt more of the practices that work well at the VA, NRC and elsewhere. There's "no one silver bullet" for this problem, says GAO's Kutz, but it can be brought under control in the short term. Agencies must examine training, infrastructure, policies and accountability. Most of all, he says, they must change the "tone at the top-the lack of management focus and attention."