Internal Controls:

State Department Needs to Improve Management of Travel Advances

NSIAD-88-178: Published: Aug 15, 1988. Publicly Released: Aug 23, 1988.

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In response to a congressional request, GAO reviewed the Department of State's efforts to resolve problems in its management of travel advance funds, specifically: (1) current delinquent travel advances and those written off as uncollectible; (2) State's compliance with applicable laws and regulations in managing the funds; (3) the adequacy of State's internal controls over the disbursement of advances and collection of unused balances; and (4) State's implementation of a congressional recommendation concerning travel advance management.

GAO found that: (1) State's overdue or delinquent travel advances increased from about $10 million in 1985 to about $15.4 million in 1987; (2) the number of overdue or delinquent accounts increased from 8,100 in 1985 to 19,800 in 1987; (3) State collected only a small portion of overdue travel advances through payroll deductions and was reluctant to issue dunning notices because of inaccurate data, backlogs in voucher processing, and staff shortages; and (4) State provided documentation for only 6 percent of the travel advances it wrote off in fiscal years (FY) 1986 and 1987, respectively. GAO also found that State: (1) lacked adequate internal controls to monitor travel advances issued worldwide; (2) used irregular techniques, such as transferring account balances to accounts with fictitious names and social security numbers, rather than writing them off or adjusting them; (3) did not assess interest, penalties, or handling charges on delinquent accounts because its accounting system was unable to compute interest and travellers could have incurred expenses against their advances; and (4) failed to review and reconcile individual accounts and records of outstanding advances to ensure prompt recovery.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Effective September 15, 1988, State began to apply the 80-percent limitation on travel advances to all Department personnel, both Foreign Service and Civil Service.

    Recommendation: The Secretary of State should take immediate steps to limit the amount of travel advances to foreign service employees to 80 percent of estimated reimbursable expenses, in conformance with governmentwide regulations.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: State now assesses interest on all advances determined by audit to be delinquent. Those with outstanding travel advances are being notified of the requirement to assess interest in conjunction with payroll withholding/special collection actions not cleared within 30 days of notification.

    Recommendation: The Secretary of State should take immediate steps to assess interest, penalties, and processing charges on all delinquent travel advances, as required by the Debt Collection Act of 1982.

    Agency Affected: Department of State

  3. Status: Closed - Implemented

    Comments: State has established reciprocal agreements with other agencies for collecting indebtedness as prescribed in P.L. 97-365 and Treasury Guidelines for the Federal Employee Offset Program. State refers other delinquent accounts to collection agencies for actions and notifies credit rating bureaus. For tax year 1989, State participated in the IRS Refund Offset Program.

    Recommendation: The Secretary of State should take immediate steps to use available remedies to liquidate delinquent advances to non-State travellers, such as: (1) making appropriate arrangements with other agencies for their help; (2) offsetting income tax refunds; and (3) reporting delinquent debts to consumer reporting agencies.

    Agency Affected: Department of State

  4. Status: Closed - Implemented

    Comments: All requests for travel advances are checked against the most recent listing of outstanding advances to ensure that no prior outstanding advance exists. If an employee has an outstanding advance, for which a voucher has not been submitted along with proper payment, a new travel advance is not issued.

    Recommendation: The Secretary of State should take immediate steps to offset from any future request for travel advances an individual's unliquidated balance from prior advances or deny further advances to anyone with a delinquent account.

    Agency Affected: Department of State

  5. Status: Closed - Implemented

    Comments: State has filed amended reports with Treasury to reflect as uncollectible travel advances of $342,000 and $14,000 for 1986 and 1987, respectively. The original reports had shown the uncollectable amounts to be $660,000 and $26,000 for 1986 and 1987, respectively. Concerning the amounts still shown as uncollectable, State's review identified 10 additional accounts that exceeded the limit.

    Recommendation: The Secretary of State should take immediate steps to file amended reports for FY 1986 and 1987 with the Department of the Treasury to reflect only write-offs that have been properly documented, and reevaluate the documented write-offs that exceed the authorized limits, especially those involving current and former federal employees, with a view toward having these individuals properly liquidate their accounts, rather than having State declare them uncollectible.

    Agency Affected: Department of State

  6. Status: Closed - Implemented

    Comments: State has hired a contractor to review accounting and fiscal operation procedures and internal controls, including the travel advance function. The analysis and recommendations for travel advances have been completed and the contractor has developed desk procedures which encompass proper internal controls.

    Recommendation: The Secretary of State should take immediate steps to perform a detailed evaluation of State internal controls over travel advances, assessing State's vulnerability to fraud, waste, and abuse in the handling of travel advances, and taking corrective action on identified problems.

    Agency Affected: Department of State

  7. Status: Closed - Implemented

    Comments: Independent audit firm has analyzed the financial transactions pertaining to these accounts. State issued: (1) a directive prohibiting the creation of artificial name accounts; (2) a directive prohibiting changes to accounting edits without written approval of the Director of Accounting Policy; and (3) a policy governing advances to FSNs.

    Recommendation: The Secretary of State should take immediate steps to review the bogus transactions, make adjustments to correct the records, assess the extent that laws and regulations may have been violated, and ensure adequate internal controls are in place to prevent any future fictitious accounting entries.

    Agency Affected: Department of State

  8. Status: Closed - Implemented

    Comments: State has initiated action to reconcile individual outstanding travel advances by hiring a contract accountant to handle accounts prior to 1987 and dedicated in-house staff to reconcile 1988 and 1989 accounts.

    Recommendation: The Secretary of State should take immediate steps to reconcile the accounts and records of each individual outstanding travel advance, in line with government-wide regulations, prior to transferring these accounts to the new financial management system.

    Agency Affected: Department of State

  9. Status: Closed - Implemented

    Comments: State has approved 11 additional positions to implement and maintain the new travel advance initiatives. Of these 11 positions, six are for accountants. The remaining five positions are dedicated to establishing and maintaining a central file system.

    Recommendation: The Secretary of State should take immediate steps to ensure that adequate resources are devoted on a continuing basis to properly controlling travel advances.

    Agency Affected: Department of State

  10. Status: Closed - Implemented

    Comments: State has increased its efforts to collect delinquent travel advances through payroll deductions. Travel advances totalling $253,000 have been transferred to payroll for deduction in 1989. Approximately 1,200 dunning notices were sent out in February and March 1989 for advances issued in 1988. State has been able to close 478 accounts totalling $2.8 million.

    Recommendation: The Secretary of State should take immediate steps to make full use of State's authority to collect delinquent advances from employees through payroll deductions.

    Agency Affected: Department of State

  11. Status: Closed - Implemented

    Comments: State provided a more detailed and balanced update on this serious internal control and management issue in its December 1988 report rather than amending the 1987 report.

    Recommendation: The Secretary of State should take immediate steps to amend State's 1987 Federal Managers' Financial Integrity Act report on its management of travel advances to make it accurately reflect the actual status of State's efforts to correct identified weaknesses.

    Agency Affected: Department of State

 

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