oversight

Audit Controls over Government Travel Cards.

Published by the Department of Education, Office of Inspector General on 2002-03-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

          Audit of Controls over Government Travel Cards



                                 FINAL AUDIT REPORT




                                            ED-OIG/A19-B0010
                                               March 2002



Our mission is to promote the efficiency,                      U.S. Department of Education
effectiveness, and integrity of the                            Office of Inspector General
Department’s programs and operations.                          Operations Internal Audit Team
                                                               Washington, DC
  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, if requested, to
 members of the press and general public to the extent information contained
               therein is not subject to exemptions in the Act.
                                    TABLE OF CONTENTS



                                                                                                            Page

EXECUTIVE SUMMARY...................................................................................... 1

AUDIT RESULTS ...................................................................................................3

        Finding No. 1 -- Individual Travel Cards Were Not Always
              Used Appropriately ............................................................................. 3

                 Recommendations ............................................................................... 6

        Finding No. 2 -- Travel Card Were Not Always Cancelled Timely ............. 6

                 Recommendations ............................................................................... 7

        Finding No. 3 -- Charges to Centrally Billed Accounts Were Not
              Always Appropriately Supported or Reconciled ................................ 7

                 Recommendation................................................................................. 8

OTHER MATTERS.................................................................................................9

BACKGROUND....................................................................................................10

OBJECTIVES, SCOPE, AND METHODOLOGY...............................................11

STATEMENT ON MANAGEMENT CONTROLS .............................................14

ATTACHMENT 1 – Department of Education Response ...................................15
                                       EXECUTIVE SUMMARY

The Travel and Transportation Reform Act of 19981 requires mandatory use of the travel charge card
for all payments of expenses of official Government travel. The Department of Education
(Department) has contracted with Bank of America for travel card services. Department policy
requires all employees who travel more than once a year to apply for an individually billed travel card.
Each principal office (PO) also uses centrally billed travel card accounts for new employees and
invitational travel.

The objectives of our audit were to (1) evaluate internal controls over the administration of the
Department's travel card program, including authorization and payment procedures, (2) determine the
extent of travel card delinquencies and the process for resolving them, and (3) assess appropriateness
of selected charges.

We found the Department needs to enhance controls over the travel card program, including increasing
monitoring and providing training to cardholders on appropriate use of the card. We found individual
travel cards were not always used appropriately, some travel card accounts were not cancelled timely,
and charges to centrally billed accounts were not always appropriately supported or reconciled.
Inappropriate use of travel cards violates the terms of the contract with Bank of America, represents
abuse of a Government-provided resource, and compromises the integrity of the Department. To
correct the weaknesses we identified, we recommend that the Chief Financial Officer:

•     Develop and implement guidelines for monitoring travel card activity to ensure consistent
      application throughout the Department.
•     Ensure planned training is provided to PO executive office staff on monitoring travel card use and
      on the guidelines developed above.
•     Develop and provide training to all Department cardholders to ensure cardholders are informed of
      their responsibilities and the disciplinary actions that may be taken for inappropriate use of the
      card.
•     Take immediate action to cancel the travel card accounts for separated staff.
•     Establish and implement a procedure to receive timely notice from the Human Resources Group
      for all staff who have separated from the Department so accounts can be cancelled.
•     Establish and implement a procedure requiring the POs to periodically review Financial
      Management Policies & Administrative Programs Group's (FMP&APG) listing of open accounts
      and provide FMP&APG with notice of any accounts that should be cancelled.
•     Develop and implement a policy to guide PO staff in reconciling and maintaining adequate
      documentation to support centrally billed account charges.

Our review of travel card delinquencies was limited to cardholder accounts that were cancelled due to
nonpayment. As this issue involves sensitive personnel records and pending actions that are covered


1   Section 2 of Public Law 105-264, October 19, 1998, (5 U.S.C. 5701 note).

ED-OIG/A19-B0010                                                                     Page 1
under the Privacy Act of 1974, 5 U.S.C. § 552a(b), we provided this information to Department
management in a separate memorandum.

The Department concurred with our findings and recommendations and the Other Matter presented.
The full text of the Department’s response is included as Attachment 1 to this audit report. The
Department’s response does not warrant any changes to the draft report.




ED-OIG/A19-B0010                                                                Page 2
                                         AUDIT RESULTS

Overall, we found improvements were needed in the management of the Government travel card
program. Our audit revealed individual travel cards were not always used appropriately, some
travel cards were not canceled timely when staff separated from the Department, and charges to
centrally billed accounts were not always appropriately supported or reconciled. Cardholders
became delinquent and defaulted on outstanding payments, violating the terms of the Bank of
America contract, abusing a Government-provided resource, and compromising the integrity of
the Department. Centrally billed accounts were paid without determining whether all charges
were appropriate.

During our audit, we also noted many inactive open travel accounts. We found 23 percent of all
open individually billed accounts and 66 percent of all open centrally billed accounts had no
charge activity during Fiscal Year (FY) 2001. Although there is no cost to the Department for
maintaining open accounts, the risk for loss or misuse of the travel card exists. The OTHER
MATTERS section of this report contains additional information on this issue.

The Department concurred with our findings and recommendations and the Other Matter
presented. The full text of the Department’s response is included as Attachment 1 to this audit
report. The Department’s response does not warrant any changes to the draft report.



Finding No. 1 – Individual Travel Cards Were Not Always Used
                Appropriately


Individual cardholders did not always use their travel cards appropriately. We reviewed all FY
2001 activity for 110 individual cardholders and found that 746 of the 4,598 individual charges
(16 percent), or $112,344 of the $738,117 total value of the charges reviewed (15 percent), were
inappropriate. Specifically we found that:2

    •   Thirty-four cardholders made purchases and automated teller machine (ATM)
        withdrawals with their travel cards for personal use;
    •   Twenty-five cardholders made ATM withdrawals in excess of allowable amounts for
        official travel expenses; and
    •   Seven cardholders did not always use their travel cards for official travel expenses as
        required.

2
  Some cardholders are represented in more than one category. In addition, since our audit results are based on
high-risk samples, the outcome should not be projected to the universe of Department cardholders or charges. See
the Objectives, Scope, and Methodology section of this audit report for more details on the samples reviewed.

ED-OIG/A19-B0010                                                                                 Page 3
In two cases reviewed, the employees each made personal purchases and ATM withdrawals
exceeding $20,000 during FY 2001. One of these employees did not perform any official travel
during FY 2001 when these charges were incurred. For other employees, we noted inappropriate
retail purchases such as clothing and dining, as well as charges for Internet service provider fees,
wireless service fees, automobile insurance, and personal travel for the employee and family
members. In one case, an employee used the travel card to pay for cemetery/funeral expenses.

Inappropriate use of the travel cards by individuals violates the terms of the contract with Bank
of America, represents abuse of a Government-provided resource, and compromises the integrity
of the Department.


Federal Travel Regulations and Department Policy Guidelines for Travel Card Use

Federal Travel Regulations (FTR) at 41 C.F.R. § 301-51.1 require the mandatory use of the
Government 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 only for 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.3

Department of Education, Guide to Travel Card Policy for the ED Traveler, dated July
21, 2000, Section VI, Misuse/Late Payment of the Travel Card, states:

         The travel card is to be used for official government travel only. The travel card
         must be used for ALL official travel expenses except in those situations where
         use of the card is not feasible. The travel card may NOT be used for personal
         purposes, even if personal charges are paid timely. Personal use of the travel
         charge card is viewed as a violation of the agreement between Bank of America
         and the cardholder and will result in cancellation of card privileges. Individual
         Principal Offices may also take disciplinary actions against an employee for
         abusing the card and/or not paying the bill.

Section I, Overview, states, "Cash withdrawals are limited to $550 a day or $1,100 a week, but
may not exceed 80 percent of the traveler's M&IE [meals and incidental expenses] for the trip."

In addition, the cardholder agreement states that the travel card is to be used for official use only
and not for personal, family or household purposes. The travel card itself includes on its face the
statement, "For Official Government Travel Only."




3
 Unless otherwise specified, all regulatory citations are to the January 19, 2000, volume of the Code of Federal
Regulations.

ED-OIG/A19-B0010                                                                                   Page 4
Department Monitoring of Travel Card Use Was Limited

Prior to August 2001, FMP&APG staff in the Office of the Chief Financial Officer (OCFO) were
the only Department staff with access to Bank of America's on-line monitoring system. Due to
limited staffing resources, FMP&APG staff concentrated travel card monitoring on delinquent
accounts. They provided monthly reports to the PO on accounts to be suspended or cancelled
due to nonpayment. FMP&APG staff also provided a detailed charge history for each cancelled
account and requested Executive Officers to review the report for misuse of the travel card.

Beginning in August 2001, staff in each PO executive office also received on-line access to the
Bank of America system so they could participate in monitoring travel card use by PO staff.
FMP&APG staff plan to conduct training on use of the system for the PO staff, but they have not
yet done so. As of late January 2002, FMP&APG staff are providing a monthly report of all
charges made by PO staff to each Executive Officer to facilitate review for inappropriate card
use. FMP&APG staff stated this report would be provided on a monthly basis until PO staff can
be trained on use of the system.

After the start of our audit, FMP&APG staff took additional action to enhance controls over
travel card charges. For example, the Bank of America system designates Merchant Category
Codes (MCC) for all vendors. These codes can be blocked so purchases cannot be made from
inappropriate vendors. In early FY 2000, FMP&APG staff blocked 257 codes for centrally
billed accounts and 58 codes for individually billed accounts. During the period November 2001
through January 2002, FMP&APG staff designated an additional 20 codes to be blocked for
centrally billed accounts and 174 codes to be blocked for individually billed accounts. This
represents a significant improvement in preventive controls over travel card charges, especially
for the individual accounts. For FY 2001, 618 charges totaling $93,642 were made to MCC that
have now been blocked.


Department Does Not Have a Travel Card Training Program

The Department does not have a travel card training program for new cardholders or refresher
training for existing cardholders. Therefore, travel cardholders may not be aware of all of their
responsibilities under the program and the prohibitions against personal use of the travel card
and the disciplinary actions that may be taken for inappropriate use of the card. During our
review, we asked PO Executive Officers whether they provide training for new cardholders. We
found that although some initial materials may be provided and discussions held, no formal PO-
level training is being provided when travelers first receive their travel cards. We found three
POs that had provided formal travel training sessions for all staff due to problems noted with
travel card use, but such training was a one-time event and not a recurring training program.

The General Services Administration (GSA) has on-line training available for the travel card
program. The course can be accessed by any Internet user, requires about an hour to complete
and concludes with a quiz. Participants may print a certificate to demonstrate they have


ED-OIG/A19-B0010                                                                   Page 5
successfully completed the course. The Department could use this course, or develop its own
course, to ensure travel cardholders are informed of the requirements of the travel card program.


Recommendations:

We recommend the Chief Financial Officer:

1.1    Develop and implement guidelines for monitoring travel card activity to ensure
       consistent application throughout the Department.

1.2    Ensure planned training is provided to PO executive office staff on the Bank of America
       on-line system for monitoring travel card use and on the guidelines developed above.

1.3    Develop and provide training to all Department cardholders to ensure cardholders are
       informed of their responsibilities and the disciplinary actions that may be taken for travel
       card delinquency or misuse. Training should be mandatory for all new cardholders and
       refresher training should be provided to existing cardholders on a periodic basis. Travel
       card issues should be included in the Department's annual ethics training.




Finding No. 2 – Travel Cards Were Not Always Canceled Timely


Travel card accounts were not canceled timely for staff that separated from the Department. As
of December 17, 2001, 32 travel card accounts remained open for staff that separated during FY
2000 and FY 2001. In addition, we identified one employee who separated from the Department
in July 1994 whose travel card account was not cancelled until August 2000.

Department of Education, Desk Reference Guide -- Travel Management, dated 1998, provides
the following procedures for notification when employees separate from the Department:

       Employee Termination and Card Cancellation -- When an employee leaves ED,
       the Executive Office should cut the card in half and forward it with a memo to the
       Agency Program Coordinator [FMP&APG staff] advising of the termination.

Twice during FY 2001, FMP&APG staff sent listings to PO Executive Officers of all open travel
card accounts for PO staff. Executive Officers were asked to provide notice of any accounts that
should be canceled. FMP&APG staff stated these reviews resulted in many accounts being
closed. Although effective, FMP&APG staff have not established a regular schedule for these
reviews.

FMP&APG staff relied on the PO Executive Officers to provide them with notice when
employees separated from the Department. FMP&APG staff did not receive any information
ED-OIG/A19-B0010                                                                    Page 6
directly from the Human Resources Group (HRG) to ensure FMP&APG staff received notice of
all staff leaving the Department. In the 32 cases identified, one former employee continued to
use his travel card after leaving the agency and charged $101 that had not been paid at the time
the account was canceled. The one staff member who left in 1994 incurred charges totaling
$7,075 from January 1999 through May 2000. Charges totaling $3,665 had not been paid at the
time the card was canceled. Inappropriate use of travel cards violates the terms of the contract
with Bank of America, represents abuse of a Government-provided resource and compromises
the integrity of the Department.


Recommendations:

We recommend the Chief Financial Officer:

2.1       Take immediate action to close the accounts identified in the audit.4

2.2       Establish a procedure to receive timely notice from HRG for all staff that have separated
          from the Department so accounts can be canceled upon separation.

2.3       Establish and implement a procedure requiring the POs to periodically review
          FMP&APG's listing of open accounts and provide FMP&APG with notice of any
          accounts that should be cancelled.




Finding No. 3 – Charges to Centrally Billed Accounts Were Not Always
                Appropriately Supported or Reconciled


Charges to centrally billed accounts were not always appropriately supported or reconciled. As
of February 25, 2002, PO staff could not provide supporting documentation for 137 FY 2001
charges valued at $49,124. In addition, our audit identified 12 erroneous charges totaling $3,839
from credits not processed or errors by the travel agent. We noted at least one unsupported or
erroneous charge on 8 of the 14 centrally billed accounts reviewed, indicating management
controls in this area need improvement.

U.S. Department of the Treasury, Financial Management Service, Treasury Financial Manual is
the official publication for financial and accounting and reporting of all receipts and




4
    Details on these accounts were provided to FMP&APG staff on December 17, 2001.

ED-OIG/A19-B0010                                                                     Page 7
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 General Accounting Office's Standards for Internal Control in the Federal Government
includes "appropriate documentation of transactions and internal control" as an example of
control activities. The standards state:

       Internal control and all transactions and other significant events need to be clearly
       documented, and the documentation should be readily available for examination.
       The documentation should appear in management directives, administrative
       policies and operating manuals and may be in paper or electronic form. All
       documentation and records should be properly managed and maintained.

We found charges were unsupported or erroneous charges were not identified, because PO staff
reconciled travel card statements to travel authorizations and/or travel agent itineraries. While
these items supported travel plans, they did not support that the trips were actually taken. We
also found there is no Department policy to guide PO staff on proper reconciliation procedures
or documentation that should be maintained to support the charges. As a result, PO staff paid the
statements without knowing whether all charges were appropriate. The Department was not
receiving credits for travel that did not take place or errors made on the billing statements.


Recommendation:

We recommend the Chief Financial Officer:

3.1    Develop and implement a policy to guide PO staff in reconciling and maintaining
       adequate documentation to support centrally billed account charges.




ED-OIG/A19-B0010                                                                     Page 8
                                         OTHER MATTERS


Many Open Travel Accounts Were Inactive in FY 2001

During our review, we noted many open travel accounts were not active in FY 2001. As of
September 30, 2001, 781 of the 3,324 open individually billed accounts (23 percent), and 49 of
the 74 open centrally billed accounts (66 percent) had no activity during the year. While there is
no cost to the Department for maintaining open accounts, the risk for loss or misuse of the travel
card exists. We found that six of the sampled cardholders did not have any official travel but
made personal purchases and ATM withdrawals totaling $32,648 during FY 2000 and FY 2001.

FTR at 41 C.F.R. § 301-51.1 require the mandatory use of the Government travel card for all
official travel expenses unless an exemption is granted. Under 41 C.F.R. § 301-51.2, GSA has
granted exemptions for the following types of employees

      •    An employee who has an application pending for the travel charge card;
      •    Individuals traveling on invitational travel; and
      •    New appointees.

FTR allow the head of an agency to grant additional exemptions, if the exemption is determined
to be necessary in the interest of the agency. GSA must be notified in writing of any additional
exemptions granted. 41 C.F.R. § 301-70.701 and § 301-70.702

Department of Education, Guide to Travel Card Policy for the ED Traveler, states, "It is the
Department's policy that all ED employees who travel more than once a year apply for the travel
card." There is no policy on canceling travel card accounts when employees no longer travel or
travel very infrequently.

We suggest the Department review the inactive accounts identified in the audit to determine
whether the accounts should be closed.5 In addition, we suggest the Department evaluate its
policy to determine if a more frequent traveler standard should be adopted. As required by the
FTR, the Department should notify GSA of any exemptions granted.




5
    A listing of the inactive accounts was provided to FMP&APG staff on January 6, 2002.

ED-OIG/A19-B0010                                                                           Page 9
                                    BACKGROUND


The Government travel card program is part of the GSA SmartPay program. This program
provides Federal agencies with a new way to pay for commercial goods and services, as well as
travel and fleet related expenses. GSA established contracts with five service providers --
Citibank, First National Bank of Chicago, Mellon Bank, NationsBank (now Bank of America)
and U.S. Bank. The contracts are effective from November 30, 1998, through November 29,
2003, with five one-year options to renew. The Department selected Bank of America as its
SmartPay provider.

Within the Department, the Office of the Chief Financial Officer, Financial Management
Policies & Administrative Programs Group is responsible for administration of the SmartPay
contract for travel. The Department uses two types of travel cards under the program.
Individually billed accounts are issued to individual travelers who are subsequently responsible
for all charges made and for paying the account balance. Centrally billed accounts are similar to
corporate travel cards and are used primarily for invitational travel and new employees who do
not yet have a travel card. Principal offices pay the centrally billed accounts from Department
funds.




ED-OIG/A19-B0010                                                                 Page 10
             OBJECTIVES, SCOPE, AND METHODOLOGY


The objectives of our audit were to:

   1. Evaluate internal controls over the administration of the Department's travel card
      program, including authorization and payment procedures.
   2. Determine the extent of travel card delinquencies and the process for resolving them.
   3. Assess appropriateness of selected charges.

To accomplish our objectives, we obtained an understanding of the controls in place at the
Department over the Government travel card program. We reviewed the Federal Travel
Regulations, the Treasury Financial Manual, Departmental policies and procedures, and General
Accounting 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 travel card statements, travel vouchers and other
documentation available at the Department to evaluate the appropriateness of travel card charges
made.

To perform our audit, we obtained access to the Bank of America Electronic Account
Government Ledger System (EAGLS) for all Department activity. This system includes all
travel card activity for both Individually Billed Accounts (IBA) and Centrally Billed Accounts
(CBA). This is the same system that individual account holders and Principal Office staff may
access to review and monitor travel card activity. We downloaded all travel card transactions for
FY 2001 and determined the following activity occurred during the year (the transactions below
exclude payments and fees assessed):

Account Type          # Accounts         # Transactions            Value of Transactions
Individual                2,543             46,850                     $8,687,014
Central                      25              4,547                     $1,907,397

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's objectives.




ED-OIG/A19-B0010                                                                  Page 11
Details on the sampling methodology used in the audit are as follows:

Individually Billed Accounts (IBA) Reviewed:

We selected IBA to review based on the samples below. We reviewed all FY 2001 activity for
each selected account. Eliminating accounts that occurred in more than one of the categories, we
reviewed a total of 110 different IBA.

   •   Random Sample -- We reviewed 41 IBA based on a random selection of IBA charges
       made during FY 2001.
   •   Stratified Sample of High ATM Use -- We reviewed all 10 accounts with 50 or more
       ATM transactions in the year, and randomly selected 5 accounts each from those with 25-
       49 ATM transactions and 13-24 ATM transactions.
   •   Casino Charges -- We reviewed all 11 accounts with at least one transaction at a casino
       during the year.
   •   Blocked Merchant Category Codes (MCC) -- We reviewed all 17 accounts with 5 or
       more charges to MCC Department staff determined were inappropriate for the travel
       card. Department staff instructed Bank of America to block these codes in November
       2001-January 2002, so the codes were not blocked during the time period of our review.
   •   Cancelled Accounts -- We reviewed all 27 accounts that were cancelled for nonpayment
       during FY 2001, with balances outstanding at the time of cancellation. For these
       accounts, we reviewed all FY 2001 and FY 2000 activity.

For FY 2001, IBA cardholders charged 46,850 transactions valued at $8,687,014, (excluding
payments and fees). We reviewed 4,598 FY 2001 transactions valued at $738,117 (excluding
payments and fees). Our sample represented 10 percent of the total number of transactions and 9
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. We also verified travel vouchers with National Finance Center payment
information to ensure we reviewed all travel vouchers for the period. In cases where IBA
charges were not supported by a travel voucher, we referred these charges to PO Executive
Officers for a determination as to whether the charge was an official travel expense and therefore
an appropriate use of the travel card. The results presented in this report are based on the
responses from the PO Executive Officers.

The distribution of IBA sampled by Principal Office appears on the next page.

Centrally Billed Accounts (CBA) Reviewed:

We reviewed a total of 14 CBA -- 1 CBA for each of the 14 POs where we reviewed IBA
activity. If a PO had more than one CBA, we judgmentally selected one of the headquarters
CBA for each PO. We reviewed all charges for FY 2001 for the CBA with one exception -- the
Office of Elementary and Secondary Education had only one CBA with a very large amount of
activity. We only reviewed activity from the first quarter of FY 2001 for this account.


ED-OIG/A19-B0010                                                                  Page 12
For FY 2001, Department staff charged 4,547 transactions valued at $1,907,397 on all CBA
(excluding payments and fees). We reviewed 2,791 FY 2001 transactions valued at $945,309
(excluding payments and fees). Our sample represented 61 percent of the total number of
transactions and 50 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 determination as to whether the charge was appropriate. The
results presented in this report are based on the responses from the PO Executive Officers.


Distribution of IBA Sampled by PO:

       Office of the Secretary                                            3
       Office of the Under Secretary                                      1
       Office of Civil Rights                                            19
       Office of Special Education/Rehabilitation Services                7
       Office of Intergovernmental & Interagency Affairs                  1
       Office of Management                                               2
       Federal Student Aid                                               51
       Office of Educational Research and Improvement                     6
       Office of Elementary and Secondary Education                       7
       Office of Vocational & Adult Education                             5
       Office of the Chief Information Officer                            1
       National Institute for Literacy                                            1
       Office of Bilingual Education & Minority Language Affairs          1
       Office of Postsecondary Education                                  5

              Total IBA -- 14 PO                                        110


We performed our fieldwork at applicable Department of Education offices in Washington, DC,
during the period October 2001 through February 2002. We held an exit conference with
Department management on February 7, 2002. Our audit was performed in accordance with
Government Auditing Standards appropriate to the scope of the review described above.




ED-OIG/A19-B0010                                                                Page 13
            STATEMENT ON MANAGEMENT CONTROLS


We made a study and evaluation of the Department's management control structure related to the
Government travel card program. Our study and evaluation was conducted in accordance with
Government Auditing Standards. For the purpose of this report, we assessed and classified the
significant management control structure into the following categories:

    •   Authorization
    •   Use
    •   Payment
    •   Cancellation

The Department's management is responsible for establishing and maintaining a management
control structure. In fulfilling this responsibility, estimates and judgments by management are
required to assess the expected benefits and related costs of control procedures. The objectives
of the system are to provide management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized use or disposition and that the transactions are
executed in accordance with management's authorization and recorded properly, so as to permit
effective and efficient operations.

Because of inherent limitations in any management control structure, errors or irregularities may
occur and not be detected. Also, projection of any evaluation of the system to future periods is
subject to the risk that procedures may become inadequate because of changes in conditions, or
that the degree of compliance with the procedures may deteriorate.

Our assessment disclosed the following conditions in the Department's management control
structure over Government travel cards, which, in our opinion, results in more than a relatively
low risk that errors, irregularities and other inefficiencies may occur resulting in inefficient
and/or ineffective performance.

•   Individual travel cards were not always used appropriately. Cardholders made purchases and
    ATM withdrawals with their travel cards for personal use, cardholders made excessive ATM
    withdrawals for official travel expenses, and cardholders did not always use their travel cards
    for official travel expenses as required.
•   Individual travel cards were not always cancelled timely when employees separated from the
    Department.
•   Charges to centrally billed accounts were not appropriately supported or reconciled.

Nonmaterial weaknesses, which in the auditors' judgment are reportable conditions, are included
under the OTHER MATTERS section.


ED-OIG/A19-B0010                                                                   Page 14
                            REPORT DISTRIBUTION LIST
                           CONTROL NO. ED-OIG/A19-B0010


                                                                                  No. of
                                                                                  Copies

Action Official
       Jack Martin, Chief Financial Officer                                        1
       Office of the Chief Financial Officer
       U.S. Department of Education
       Federal Office Building No. 6, Room 4E313
       400 Maryland Avenue, SW
       Washington, DC 20202

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