Control Weaknesses Leave Navy Vulnerable to Fraud and Abuse
GAO-03-148T: Published: Oct 8, 2002. Publicly Released: Oct 8, 2002.
This testimony discusses the Department of the Navy's internal controls over the government travel card program. The Navy's average delinquency rate of 12 percent over the last 2 years is nearly identical to the Army's, which has the highest delinquency rate in the Department of Defense, and 6 percentage points higher than that of federal civilian agencies. The Navy's overall delinquency and charge-off problems, which have cost the Navy millions in lost rebates and higher fees, are primarily associated with lower-paid, enlisted military personnel. In addition, lack of management emphasis and oversight has resulted in management failure to promptly detect and address instances of potentially fraudulent and abusive activities related to the travel card program. During fiscal year 2001 and the first 6 months of fiscal year 2002, over 250 Navy personnel might have committed bank fraud by writing three or more nonsufficient fund checks to Bank of America, while many others abused the travel card program by failing to pay Bank of America charges or using the card for inappropriate transactions such as for prostitution and gambling. However, because Navy management was often not aware of these activities, disciplinary actions were not consistently taken against these cardholders. GAO also found a significant relationship between travel card fraud, abuse, and delinquencies and individuals with substantial card history problems. Many cardholders whose accounts were charged off or put in salary offset had bankruptcies and accounts placed in collection prior to receiving the card. The Navy's practice of authorizing a travel card to be issued to virtually anyone who asked for it compounded an already existing problem by giving those with a history of bad financial management additional credit. Although GAO found that Navy management had taken some corrective actions to address delinquencies and misuse, additional preventive solutions are necessary if Navy is to effectively address these issues.