oversight

FHFA's Use of Government Travel Cards

Published by the Federal Housing Finance Agency, Office of Inspector General on 2014-03-20.

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

         Federal Housing Finance Agency
             Office of Inspector General




         FHFA’s Use of
    Government Travel Cards




Audit Report  AUD-2014-010  March 20, 2014
                                            March 20, 2014


TO:                 Mark Kinsey, Chief Financial Officer

FROM:               Russell A. Rau, Deputy Inspector General for Audits


SUBJECT:            Audit of FHFA’s Use of Government Travel Cards


Summary

On October 5, 2012, the President signed into law the Government Charge Card Abuse
Prevention Act of 2012 (Charge Card Act), Public Law 112-194. The Charge Card Act requires
all executive branch agencies to establish and maintain safeguards and internal controls for
charge cards. The Office of Management and Budget (OMB) provided supplemental guidance
through Memorandum M-13-21, Implementation of the Government Charge Card Abuse
Prevention Act of 2012 (September 6, 2013). The guidance requires each agency head to provide
an annual certification that the appropriate policies and controls are in place or that corrective
actions have been taken to mitigate the risk of fraud and inappropriate charge card practices. The
annual certification should be included as part of the existing annual assurance statement under
the Federal Managers’ Financial Integrity Act of 1982 (31 U.S.C. § 3512(d)(2)).

Under the Charge Card Act, Inspectors General (IG) must perform risk assessments and may, if
necessary, perform an audit.1 Status reports on an agency’s implementation of its IG’s purchase
and travel card audit recommendations, if any, must be submitted to OMB by January 31, 2014,
for compilation and transmission to Congress and the Comptroller General of the United States.

Accordingly, the Federal Housing Finance Agency’s (FHFA or Agency) Office of Inspector
General (OIG) completed an audit of FHFA’s use of purchase cards and submitted the final
report to OMB on January 31, 2014.2 This audit report reflects the ongoing efforts of the OIG to
monitor FHFA’s compliance with the Charge Card Act.




1
    41 U.S.C. § 1909(d)(1).
2
 OIG, FHFA’s Use of Government Purchase Cards (January 31, 2014; AUD-2014-006). Accessed March 5,
2014, at http://www.fhfaoig.gov/Content/Files/AUD-2014-006.pdf.


       Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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Background

           OIG’s Activity Pursuant to the Charge Card Act

The Charge Card Act requires each agency with more than $10 million in purchase card
spending during the prior fiscal year to jointly report with its OIG to OMB on a semiannual basis
regarding employee violations of agency policies on card use, as well as certain other actions
taken by the agency’s employees.3 OIG conducted a periodic risk assessment as required and
found that FHFA’s purchase and travel card spending in FY 2013 did not exceed $10 million.
Additionally, the Government Accountability Office provides audit coverage of FHFA’s travel
card transactions as part of its annual audit of FHFA’s financial statements required by the
Housing and Economic Recovery Act of 2008. Nonetheless, OIG’s periodic risk assessment
determined that audits of FHFA’s purchase card spending and travel card spending were
warranted due to the absence of targeted OIG audit coverage. Therefore, OIG conducted this
audit to assess FHFA compliance with laws and regulations related to the use of travel cards with
particular emphasis on mitigation of the risk of fraud and inappropriate charge card practices. As
mentioned previously, OIG has already reported on the results of its audit of purchase card
spending unrelated to travel.

           Travel Card Program

FHFA participates in the government-wide General Services Administration (GSA) SmartPay
Travel Card program. Benefits of the SmartPay Travel Card program include:

          Cardholder access to GSA City Pair Program reduced airfares;
          Reduced travel processing costs;
          Refunds for card usage; and
          Individually billed account travel cards that are tax exempt in Puerto Rico, the U.S.
           Virgin Islands, and 11 states.

Under the GSA SmartPay master contract, Citibank is a provider of commercial charge card
payment solutions to federal agencies. FHFA participates in the GSA SmartPay program through
Treasury’s master contract with Citibank. Since July 1, 2009, Treasury’s Bureau of the Fiscal
Service’s Administrative Resource Center has provided travel card administrative services to
FHFA. FHFA’s Office of Budget and Financial Management is responsible for managing the
travel card program and ensuring that the program complies with applicable laws, regulations,
policies, and procedures.




3
    Id. § 1909(c)(3).


       Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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As an independent federal agency, FHFA is not subject to the Federal Travel Regulation (FTR).4
However, as a matter of administrative convenience, FHFA generally follows the FTR.

When FHFA employees are required to travel, they prepare travel authorizations for approval by
their approving officials. A travel authorization must be prepared and approved prior to incurring
travel expenses. After the completion of travel, employees must prepare and submit travel
vouchers for approval by their authorized approving officials to obtain reimbursement for
expenses incurred during travel. As of February 26, 2014, a total of 194 FHFA employees were
authorized travel cardholders. Of these FHFA cardholders, 69, or 35.6%, were able to approve
their own travel authorizations due to the frequency with which they travel. Upon completion of
travel, these “self-approvers” must have their vouchers approved by their designated approving
official. During fiscal year 2013, FHFA travel cardholders executed more than 10,000 travel card
transactions totaling approximately $2.1 million. During this same period, FHFA travel
cardholders also obtained 147 cash advances totaling $28,345.70.

         OMB Circular A-123 and OMB Memorandum M-13-21

OMB Circular A-123, Management’s Responsibility for Internal Control, defines management’s
responsibility for internal control in federal agencies.5 The Circular defines control standards,
including a standard related to control activities that, among other things, requires that internal
controls be documented. The circular also requires that internal control be monitored and that
deficiencies found in internal control should be reported to responsible management officials.

Appendix B of OMB Circular A-123, Improving the Management of Government Charge Card
Programs, originally issued in 2005, prescribes policies and procedures to agencies regarding
how to maintain internal controls that reduce the risk of fraud, waste, and error in government
charge card programs. FHFA issues an annual Charge Card Management Plan to comply with
OMB Circular A-123. The Agency’s Charge Card Management Plan summarizes key charge
card data and outlines policies and procedures critical to the management of FHFA’s charge card
program to ensure that FHFA follows a system of internal controls and mitigates the potential for
fraud, misuse, and/or delinquency.

OMB Memorandum M-13-21, Implementation of the Government Charge Card Abuse
Prevention Act of 2012, provides supplemental guidance to Appendix B of OMB Circular A-123
related to implementation of the Charge Card Act, including requirements for:

        Federal agencies to establish certain safeguards and internal controls for the
         government charge card program; and

4
  The FTR, promulgated by the Administrator of the General Services Administration (GSA), is contained in 41
CFR 300-304. The FTR implements statutory requirements and Executive branch policies for travel by federal
civilian employees and others authorized to travel at government expense.
5
 The Government Accountability Office’s Standards for Internal Control in the Federal Government,
November 1999, states that internal control is an integral component of an organization’s management that
provides reasonable assurance that the following objectives are being achieved: effectiveness and efficiency of
operations, reliability of financial reporting, and compliance with applicable laws and regulations.


     Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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       Reports on purchase (including travel cards) or integrated card violations, and
        penalties for violators, including removal when circumstances warrant.

Objective

The overall objective of the audit was to assess FHFA’s use of government travel cards. The
specific objective was to determine whether FHFA complied with applicable travel card laws
and regulations and whether the Agency has implemented adequate travel card internal controls
to help avoid fraud and inappropriate charge card practices.

Finding: FHFA Can Further Strengthen Controls Over Official Employee Travel

OIG did not identify misuse or fraudulent travel card transactions during the audit. OIG further
notes that with limited exceptions FHFA has implemented adequate safeguards and internal
controls with respect to travel cards. The audit identified instances of noncompliance with
applicable travel regulations, policies, and procedures. Specifically,

       FHFA travelers did not always obtain trip authorizations prior to traveling and incurring
        travel expenses on travel cards;
       FHFA travelers did not always create and submit travel vouchers in a timely manner
        upon completion of travel using travel cards; and
       Cash advances using the travel cards exceeded FHFA limits and did not always
        correspond in timing with the dates of the travel.

Several control weaknesses contributed to this noncompliance. Increased management
attention to these areas will result in the further strengthening of controls that will assist
FHFA with improving compliance with applicable travel card regulations, policies, and
procedures.

        Cardholders Did Not Always Obtain Travel Authorization Prior to Incurring Expenses

FHFA can enhance controls related to cardholder travel authorizations. Specifically, FHFA
travel cardholders did not always obtain approved travel authorizations prior to the trip departure
dates. For example, 258 of 2,306, or 11%, of FHFA cardholder travel authorizations during 2013
were not approved prior to the travel occurring. The 258 authorizations totaled $336,750.98. For
203, or 9% of the authorizations totaling $273,340.36, the travelers did not even create the travel
authorization (regardless of approval) prior to the trip departure dates. The FTR requires that
individuals obtain approved authorization prior to incurring travel expenses. At FHFA,
employees/travelers designated as “Self-approvers” submitted 170 of the 258 travel
authorizations, or 65.9%, of travel authorizations that were not approved prior to the trip
departure dates. Self-approvers also submitted 148 of 203 travel authorizations, or 72.9%, of
travel authorizations that were not created prior to the trip departure dates. Self-approvers did
obtain annual limited open authorizations to incur certain expenses throughout the year. Other
FHFA travelers, however, should create individual trip authorizations prior to travel to ensure
that FHFA appropriately obligates (i.e., reserves) funds prior to expenses being incurred.

    Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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Travel authorizations serve as an important travel control in that the authorization provides
evidence that employee travel spending, including use of the travel card, is necessary and
properly approved. In the absence of approved travel authorizations in advance of travel or with
such a significant number of self-approvers, the risk of unauthorized expenses increases. FHFA
should remind employees and approving officials of their responsibilities as travelers and
authorizers. A properly and timely prepared and approved travel authorization is an effective
control to ensure that all travel is necessary for completing the mission of the Agency and in
accordance with the FTR and FHFA travel policies and procedures.

       Travel Vouchers Were Not Submitted by Travelers in a Timely Manner

FHFA travelers did not always submit travel vouchers in a timely manner after travel
completion. Specifically, the audit identified a total of 84 travel vouchers for $107,401.36, or
4.2%, of all travel vouchers for FY 2013 that were created more than 30 days after trip
completion. FHFA policies and procedures require travelers to submit travel vouchers five days
after trip conclusion or every 30 days for those on continuous travel. These requirements are
further promulgated by the FTR and are in place to reduce the risk of delinquency. Failure to
create and submit travel vouchers in a timely manner increases the risk that FHFA travelers will
not be reimbursed for travel expenses in a timely manner, which could subsequently result in
travelers becoming delinquent on their government travel cards. In order to reduce
noncompliance and delinquencies, FHFA should remind all travelers, upon trip completion, to
promptly create travel vouchers and submit them for approval.

       Controls over Cash Advances

OIG identified 42 instances when cash advances exceeded FHFA’s $210 daily limit and two
instances when FHFA employees obtained cash advances several days after returning from travel
and over three weeks prior to their next trips. The FTR also states that the use of cash advances
should be minimized. FHFA’s Charge Card Management Plan identifies a $210/daily and a
$1,050/weekly cash advance limit. During the audit period, three cardholders (who were frequent
travelers) took a total of 42 cash advances for $14,283 that exceeded FHFA’s daily limits. This
was possible because these cardholders did not have appropriately configured cash advance
limits within Citibank’s system due to the limits not being configured properly at card re-
issuance. FHFA has contacted Citibank and requested that it correct this immediately. OIG
recommends that FHFA perform a periodic review of cardholder cash advance limits to ensure
that card limits comply with FHFA’s policies and procedures.

OIG also identified that two FHFA employees obtained two travel card cash advances totaling
$462 outside of acceptable travel windows. For example, one employee obtained a cash advance
8 days after a previous trip concluded and 23 days before the next trip. FHFA’s Citibank Travel
Charge Card – Frequently Asked Questions states that travelers may obtain cash advances for
estimated out-of-pocket expenses shortly before travel occurs. OIG does not consider the two
instances misuse or abuse because the employees were frequent travelers and the cash advances
were taken in reasonable proximity to the approved travel. The timing of the advances, however,
is questionable and warrants that FHFA reiterate to employees that travelers should only obtain
cash advances shortly before travel.


    Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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Conclusion

While overall FHFA implemented sound internal controls, it can enhance compliance with travel
and travel card regulations, policies, and procedures.

Recommendations

OIG recommends that FHFA enhance travel and travel card controls to improve compliance with
applicable regulations, policies, and procedures by:

       1. Notifying employees that all travel should have properly approved authorizations
          prior to commencing travel.
       2. Notifying employees to complete travel vouchers in a timely manner upon
          completion of travel.
       3. Performing a periodic review of travel cardholder ATM limits.
       4. Notifying employees that they should obtain cash advances either during or
          immediately preceding travel.

FHFA provided comments (see Attachment A) agreeing with OIG’s recommendations.
Attachments B and C contain OIG’s evaluation of FHFA’s comments.




    Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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Scope and Methodology

In order to accomplish its objective, OIG:

          Obtained relevant policies, procedures, and data related to FHFA’s travel card
           program;
          Interviewed FHFA officials and reviewed relevant guidance; and
          Analyzed FHFA’s travel card transactions for compliance with laws, regulations, and
           FHFA policies and procedures.

OIG conducted its fieldwork at FHFA’s offices in Washington, DC. The scope of the audit was
October 2012 through September 2013.

OIG assessed the reliability of data received for this audit as determined necessary by
corroborating the information with other source data. OIG considered the risk of fraud as it
related to the audit objective.

OIG assessed the internal controls related to the audit objective. Specifically, OIG evaluated
the control standards that were significant to the audit objective, including control activities,
information and communication, and monitoring. The findings were not considered significant to
the audit objective but were disclosed in order to facilitate compliance with the requirements set
forth by the Charge Card Act.

OIG performed fieldwork for this audit from January 2014 through March 2014 in accordance
with generally accepted government auditing standards. Those standards require that audits be
planned and performed to obtain sufficient, appropriate evidence to provide a reasonable basis
for the findings and conclusions based on the audit objective. OIG believes that the evidence
obtained provides a reasonable basis for the findings and conclusions included herein, based on
the audit objective.

OIG appreciates the cooperation of FHFA staff in completing the audit. This audit was led by
Kevin Carson, Audit Director, and Theodore Kirby, Auditor-in-Charge, who was assisted by
Anya Maffei-Philbert, Auditor

cc:       Melvin L. Watt, Director
          Edward DeMarco, Senior Deputy Director
          Eric Stein, Special Advisor and Acting Chief of Staff
          Richard Hornsby, Chief Operating Officer
          John Major, Internal Controls and Audit Follow-up Manager

Attachments:
     Attachment A:         FHFA’s Comments on OIG’s Findings and Recommendations
     Attachment B:         OIG’s Response to FHFA’s Comments
     Attachment C:         Summary of FHFA’s Comments on the Recommendations


      Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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Attachment A

FHFA’s Comments on OIG’s Findings and Recommendations




   Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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Attachment B

OIG’s Response to FHFA’s Comments

On March 10, 2014, FHFA provided comments to a draft of this report, agreeing with OIG’s
recommendations and identifying specific actions it would take to address the recommendations.
FHFA agreed to send an email to staff notifying them of the FHFA-OIG audit findings and
recommendations, and outlining the staff’s responsibilities in processing travel documents and
obtaining cash advances. Additionally, FHFA will discuss these issues as part of the roll out of
the new travel management system. FHFA agreed to complete these actions by June 30, 2014.
FHFA also agreed to work with Treasury’s Bureau of the Fiscal Service and Citibank to perform
a periodic review of travel cardholder ATM limits. FHFA will conduct the review annually
beginning September 30, 2014.

OIG considers the planned actions sufficient to resolve the recommendations, which will remain
open until OIG determines that the agreed-upon actions are completed and responsive to the
recommendations. OIG considered the Agency’s full response (attached as Appendix A) in
finalizing this report. Appendix C provides a summary of management’s comments on the
recommendations and the status of agreed-upon actions.




    Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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Attachment C

Summary of FHFA’s Comments on the Recommendations

This table presents management’s response to the recommendations in OIG’s report and the
status of the recommendations as of when the report was issued.

                                                          Expected
Rec.                                                     Completion    Monetary     Resolved:       Open or
                                                                                              a            b
No.          Corrective Action: Taken or Planned            Date       Benefits     Yes or No       Closed
1.      FHFA will send an email to staff notifying      6/30/2014     $0           Yes             Open
        them of the FHFA-OIG audit findings and
        recommendations, and outlining their
        responsibilities in processing travel
        documents.
2.      FHFA will send an email to staff notifying      6/30/2014     $0           Yes             Open
        them of the FHFA-OIG audit findings and
        recommendations, and outlining their
        responsibilities in processing travel
        documents.
3.      FHFA agreed to work with Treasury’s Bureau      9/30/2014     $0           Yes             Open
        of the Fiscal Service and Citibank to perform
        a periodic review of travel cardholder ATM
        limits.
4.      FHFA will send an email to staff notifying      6/30/2014     $0           Yes             Open
        them of the FHFA-OIG audit findings and
        recommendations, and outlining their
        responsibilities in processing travel
        documents.

a
 Resolved means: (1) Management concurs with the recommendation, and the planned, ongoing, and completed
corrective action is consistent with the recommendation; (2) Management does not concur with the recommendation,
but alternative action meets the intent of the recommendation; or (3) Management agrees to the OIG monetary
benefits, a different amount, or no amount ($0). Monetary benefits are considered resolved as long as management
provides an amount.
b
  Once OIG determines that the agreed-upon corrective actions have been completed and are responsive, the
recommendations can be closed.




       Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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Additional Information and Copies

For additional copies of this report:

      Call: 202–730–0880
      Fax: 202–318–0239
      Visit: www.fhfaoig.gov


To report potential fraud, waste, abuse, mismanagement, or any other kind of criminal or
noncriminal misconduct relative to FHFA’s programs or operations:

      Call: 1–800–793–7724
      Fax: 202–318–0358
      Visit: www.fhfaoig.gov/ReportFraud
      Write:
                FHFA Office of Inspector General
                Attn: Office of Investigation – Hotline
                400 Seventh Street, S.W.
                Washington, DC 20024




    Federal Housing Finance Agency Office of Inspector General • AUD-2014-010 • March 20, 2014
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