oversight

Cash Management: Diners Club Business Travel Management Program Needs Improvement

Published by the Government Accountability Office on 1990-04-30.

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

         April   1990
                                   CASH
                                   MANAGEMENT
                                   Diners Club Business
                                   Travel Management
                                   Program Needs
                                   Improvement




         GAO/AFMD-90-66




..” ,.                  ..,   .,   ,..,   . --“.....
Accounting and Financial
Management Division

B-238532

April 30, 1990

The Honorable Edward R. Roybal
Chairman, Subcommittee on Treasury,
  Postal Service, and General Government
Committee on Appropriations
House of Representatives

Dear Mr. Chairman:

In House Report 101-170, dated July 25, 1989, you requested that we study the difficulties
surrounding the government’s use of credit cards. This report summarizes the key benefits
and problems associated with the Diners Club business travel management program.

As agreed with your office, unless you publicly announce its contents earlier, we plan no
further distribution of this report until 30 days from the date of this letter. At that time, we
will send copies to the Director of the Office of Management and Budget; the Acting
Administrator, General Services Administration; the Secretary of Defense; and other
interested parties. Copies will also be made available to others upon request.

This report was prepared under the direction of Jeffrey C. Steinhoff, Director, Financial
Management Systems and Audit Oversight, who can be reached at (202) 275-9454. Other
major contributors to this report are listed in appendix I.

Sincerely yours,




Donald H. Chapin
Assistant Comptroller General
Executive Summm


                   The federal government spends billions of dollars annually on employee
Purpose            travel and transportation expenses. To better manage its travel-related
                   cash management activities, the government entered into a contract
                   with a private company for a travel and transportation payment and
                   expense control system, namely, the Diners Club business travel man-
                   agement program.

                   On July 25, 1989, the Chairman of the Subcommittee on Treasury, Pos-
                   tal Service, and General Government, House Committee on Appropria-
                   tions, asked GAO to study the difficulties surrounding the government’s
                   use of credit cards, such as the Diners Club individual charge card. This
                   report summarizes the key benefits and problems associated with the
                   Diners Club business travel management program.


                   The General Services Administration (GSA) awarded a governmentwide
Background         contract to Citibank (South Dakota), N.A., in August 1983, for Diners
                   Club charge cards and centrally billed accounts. Individual charge cards
                   are issued, without credit checks, to federal employees identified by
                   their agencies as frequent travelers to pay for travel expenses. Centrally
                   billed accounts are generally noncard accounts, which agencies may use
                   to purchase transportation tickets for employees not designated to
                   receive individual charge cards, such as new employees and infrequent
                   travelers. Additionally, selected cardholders participating in a pilot pro-
                   gram at the Department of Justice used their Diners Club charge cards
                   to obtain cash advances from an automated teller machine (ATM).

                   At the end of fiscal year 1989, approximately 520,000 federal employ-
                   ees had Diners Club charge cards, and 79 agencies had centrally billed
                   accounts, resulting in total charges of about $577 million and $397 mil-
                   lion, respectively. A second contract was awarded to Citibank in August
                   1988. The government has the option to renew the contract for up to
                   four additional, consecutive, 12-month periods.

                   GAO reviewed certain aspects of the Diners Club business travel manage-
                   ment program at eight federal agencies.


                   The agencies in GAO'S review believe that they have generally benefited
Results in Brief   from employee use of Diners Club individual charge cards. The charge
                   card, for example, has enabled some agencies to reduce the need for
                   large travel advances and has improved the government’s cash flow.



                   Page2                                  GAO/AFMKHWMDiners ClubTmvelProgram
                           Executive Summary




                           The charge card also enables employees to carry less cash when travel-
                           ing on official business.

                           Most of these agencies, however, are not taking full advantage of the
                           benefits offered by the Diners Club individual charge card program.
                           Also, employees have not been surveyed on the charge card program to
                           assess their concerns. Additionally, GAO found that the charge cards are
                           sometimes used by employees for unauthorized purposes, and some
                           employees do not pay their bills on time. Agencies also are experiencing
                           problems reconciling their Diners Club centrally billed accounts for pay-
                           ment, which contributes to increased interest costs. Further, the ATM
                           pilot program may not be the most cost-effective method of issuing cash
                           travel advances and needs improved controls.



Principal Findings

Charge CartzlProgram Can   The agencies in GAO'S review are generally satisfied with the adrninistra-
                           tive and cash management benefits associated with the Diners Club indi-
 x Erkct:lIr;lal
P-D,,,.C:   A,

                           vidual charge card program. The program has enabled some agencies to
                           improve the government’s cash flow, reduce administrative costs and
                           time, and obtain valuable travel expense data. (See chapter 2.)


Agencies Can Better        Most of the agencies in GAO'S review are not taking full advantage of the
                           benefits offered by the Diners Club individual charge card program. For
Utilize Charge Card        example, some agencies have not fully implemented the GSA travel regu-
Program                    lation to limit travel advances and make greater use of the charge card.
                           Agencies can also better assure federal employees that their travel
                           voucher reimbursements are processed in time for them to pay their
                           Diners Club bills when due.

                           Furthermore, GAO found some instances of federal employees (1) using
                           their Diners Club charge cards for personal purposes and (2) not paying
                           their bills on time. Although these types of activities were not wide-
                           spread, they can be an embarrassment to the government and are con-
                           trary to the agreement that was established between the government
                           employee and Diners Club for using the card. (See chapter 2.)




                           Page 3                                GAO/AFlUMWM Dlnem Club 7hvel Frvgr8m
                             Executive Summary




Reconciling Centrally        Although GSA intended that the Diners Club centrally billed accounts be
                             used primarily by infrequent travelers, agencies also use these accounts
Billed Accounts Is a         to pay for the transportation tickets of frequent travelers. GAO found
Problem                      that some of the agencies in its review could not reconcile some of the
                             charges on their centrally billed accounts to information in their travel
                             management center’s accounting systems because they lacked sufficient
                             supporting documentation. Also, some of these agencies are not per-
                             forming timely analyses of past due amounts involving unsupported
                             charges to determine their validity. Failure to research these amounts in
                             a timely manner results in interest penalties being assessed by Diners
                             Club. (See chapter 3.)


ATM Pilot Program May        Although employees participating in the Justice ATM pilot program gen-
                             erally consider the ATM a convenient method of obtaining cash advances,
Not Be Most Cost-Effective   GAO found that this program may not be the most cost-effective com-
                             pared to other methods. GAO'S review of a Justice cost analysis showed
                             that the Treasury check method may be more cost-effective. GAO is also
                             concerned about inadequate internal controls over the ATM program.
                             (See chapter 4.)


                             GAO recommends that the Director of the Office of Management and
Recommendations              Budget (OMB)issue a directive to the heads of agencies and departments
                             on the Diners Club business travel management program. This directive
                             would require (1) GSA to survey federal employees on their views
                             regarding the program and (2) agencies to comply with existing policies
                             governing the Diners Club business travel management program and
                             related travel policies and procedures. (See chapters 2 and 3.) GAO also
                             recommends that the Administrator of General Services and the Secre-
                             tary of Defense establish regulations for the Diners Club ATM program.
                             (See chapter 4.)


                             GSAconcurred with the recommendation GAO made to it in this report. In
Agency Comments              addition, the Internal Revenue Service and the Department of Justice
                             generally agreed with the findings and conclusions relating to their Din-
                             ers Club business travel management program. Their comments are
                             incorporated where appropriate. While OMB and the Department of
                             Defense did not provide GAO with official comments on this report, GAO
                             discussed the report with OMBstaff and Department of Defense officials.
                             and they indicated general agreement with the recommendations made
                             to their agencies in this report.


                             Page 4                               GAO/AFIKDB@g6Dinera Club Travel Prognun
Page 5   GAO/APlMDMM Dine- Club Travel Program
Contents


Executive Summary                                                                             2

Chapter 1                                                                                     8
Introduction           Travel Policies and Procedures
                       Diners Club Business Travel Management Program
                                                                                              9
                                                                                             10
                       Objectives, Scope, and Methodology                                    12

Chapter 2                                                                                    15
Individual Charge      Individual Charge Card Program Beneficial to
                            Government
                                                                                             15
Card Program Needs     Employee Views Have Not Been Surveyed                                 19
Strengthening          Agencies Could Have Made Greater Use of Individual                    20
                            Charge Card Program
                       Agency Role in Monitoring Unauthorized Charge Card                   -26
                            Use and in Collecting Delinquent Payments Unclear
                       Conclusions                                                           28
                       Recommendation                                                        29
                       Agency Comments and Our Evaluation                                    29

Chapter 3                                                                                    31
Agencies Are           Overview of Centrally Billed Accounts
                       Centrally Billed Account Reconciliation Problems
                                                                                             31
                                                                                             32
Experiencing           Conclusions                                                           35
Problems Reconciling   Recommendation                                                        36
                       Comments of Cognizant Officials                                       36
Centrally Billed
Accounts
Chapter 4                                                                                    37
ATM Program Needs      Overview of ATM Pilot Program
                       ATM Pilot Program Benefits
                                                                                             37
                                                                                             38
Strengthening          ATM Pilot Program Problems                                            38
                       Conclusions -                                                         44
                       Recommendations                                                       44
                       Agency Comments and Our Evaluation                                    45

Appendix               Appendix I: Major Contributors to This Report                         46




                       Page 0                              GAO/AFMD-WM Dlnezs Clab Tnvel Program
         Contents




Tables   Table 2.1: Agencies’ Travel Advance Policies and                           21
              Procedures
         Table 2.2: Average Processing Times for Travel Voucher                     23
             Reimbursements
         Table 4.1: Department of Justice Cost Analysis of Travel                   39
             Advance Methods
         Table 4.2: Department of Justice Cost Analysis as Revised                  41
             by GAO

Figure   Figure 1.1: Travel and Transportation    Expenses for Fiscal                8
              Years 1980 Through 1988




         Abbreviations

         ATM        automated teller machine
         GAO        General Accounting Office
         GSA        General Services Administration
         OME3       Office of Management and Budget


         P-7                                     GAO/-        Innen clmb Tlmvel program
Chapter 1

Introduction


                                         The federal government spends billions of dollars annually on employee
                                         travel and transportation. Whether investigating a plane crash, inspect-
                                         ing a meat plant, or participating in a disarmament conference, govern-
                                         ment employees must travel to fulfill their varied responsibilities. In the
                                         past 8 years, travel and transportation costs have almost doubled, rising
                                         from about $3.3 billion in 1980 to $6 billion in 1988. (See figure 1.1.)


Figure 1.l : Travel and Transportation
Expenses for Fiscal Years 1980 Through   8000 Dolhn In mllllons
1988




                                         2oao

                                         1000


                                            0                                                         -..--.


                                            lH0        lsel         1082      1m          1904       19M         1SH        1967           19BB
                                            FM Ywn
                                         Source: Datafrom OMB’s Object Class Analysts, Budget of the United States Government for fiscal
                                         years 1980 through 1988.


                                         Given the enormous amount the government spends on travel and trans-
                                         portation, it is essential that effective cash management be in place to
                                         control these disbursements. Poor management of these funds could
                                         result in additional costs to the government. To better manage its travel-
                                         related cash management activities, the government has looked to the
                                         private sector in recent years for improved cash management tech-
                                         niques. One such initiative it has adopted is the Diners Club business
                                         travel management program. This report discusses the benefits and
                                         problems associated with the government’s use of this travel manage-
                                         ment program.




                                         Page 8                                             GAO/AFMMO46 Diners Club Travel Program
                          Chapter I
                          Introduction




                          The Office of Management and Budget (OMB) is responsible for evaluat-
Travel Policies and       ing, formulating, and coordinating management procedures and program
Procedures                objectives within and among federal departments and agencies. OMB has
                          issued several policy directives since 1982 that required agencies to con-
                          trol the amount of outstanding travel advances. Specifically, agencies
                          were directed to limit travel advances to the minimum amount of out-of-
                          pocket expenses that an employee was expected to incur.

                          OMB Bulletin 88-17, dated July 22, 1988, entitled “Limiting   Travel
                          Advances to Manage Cash More Effectively,” provides governmentwide
                          policy on minimizing travel advances without imposing a personal finan-
                          cial burden on travelers. Specifically, the bulletin requires agencies to

                      l limit cash advances to estimated out-of-pocket expenses such as meals
                        and incidental expenses and miscellaneous expenses for taxis, tolls, and
                        parking;
                      l establish internal financial controls for notifying travelers with out-
                        standing travel advances to file their travel vouchers and to repay any
                        outstanding amounts; and
                      . offer government contractor issued travel charge cards to employees
                        who are expected to travel at least twice a year (frequent travelers).

                          The General Services Administration (GSA) is responsible for establishing
                          federal travel regulations for civilian employees. It is also the central
                          purchasing agent for the federal government. On April 12, 1989, GSA
                          issued temporary regulation A-34,’ which implements OMB Bulletin 88-
                          17.

                          In the case of uniformed military personnel, the Department of Defense
                          Per Diem, Travel, and Transportation Allowance Committee is responsi-
                          ble for establishing the Joint Federal Travel Regulations. On
                          September 30,1988, the Deputy Secretary of Defense issued a memoran-
                          dum directing Department of Defense components to implement OMB
                          Bulletin 88-17.




                          ‘This temporary regulation was madea part of the FederalTravel Regulationson March 23. 1990(4 1
                          C.F.R.Part 301-10).The provisions in GSAtemporary regulation A-34 that are relevant to this report
                          were incorporatedwithout substantivechangesin the FederalTravel Regulations.For the purposeof
                          this report, we refer to the temporary regulation which wa9 in effect at the time of our review



                          Page 9                                            GAO/APMD-9086 Diners Club Travel Program
                          chapter 1
                          lntruduction




                          GSA has assisted in efforts to limit travel advances by contracting with a
Diners Club Business      financial services company to provide federal employees with travel
Travel Management         charge cards. Specifically, in August 1983, GSA entered into a 5-year con-
Program                   tract with Citibank (South Dakota), N.A. (North America)’ for the Din-
                          ers Club business travel management program. This program was
                          designed to reduce government administrative costs, simplify payment
                          procedures, and improve services for travelers. GSA awarded a second
                          contract to Diners Club on August 30, 1988. This contract, effective
                          November 30,1988, was for a l-year term with four consecutive l-year
                          options to renew. The contract was renewed for another year on
                          October 30, 1989.

                          Under the Diners Club business travel management program, federal
                          employees may use their individual Diners Club cards to charge major
                          travel expenses, such as lodging, meals, rental vehicles, and transporta-
                          tion tickets. The program also provides federal agencies the option of
                          establishing a separate, centralized account with Diners Club for the
                          purchase of passenger transportation tickets for employees not desig-
                          nated to receive individual charge cards, such as new employees and
                          infrequent travelers. In addition, under a pilot program, certain federal
                          employees were permitted to use their Diners Club charge cards to
                          obtain cash travel advances from automated teller machines (ATMS).

                          At the end of fiscal year 1989, approximately 520,000 federal employ-
                          ees had Diners Club individual charge cards, and 79 agencies had cen-
                          trally billed accounts, resulting in total charges of about $577 million
                          and $397 million, respectively. In addition, during a lo-month period
                          from September 1988 to June 1989, over 500 Justice employees partici-
                          pated in an ATM pilot program, withdrawing over $120,000 in cash
                          travel advances.


Individual Charge Cards   Diners Club individual charge cards are available to employees identi-
                          fied by their agencies as frequent travelers. Employees electing to
                          receive a card must complete an application for agency approval and for
                          submission to Diners Club for processing. By signing the application,
                          employees agree to use the charge card only for official government
                          travel and not for personal purposes. The charge card is issued in the
                          employee’s name.


                          2Forthe purposeof this report, the contractor,Citibank (South Dakota),N.A., is referred to as Diners
                          Club.



                          PAge 10                                            GAO/AF%DOM6 Diners Club Travel Program
                          The Diners Club charge card is provided at no cost to the employee or
                          the government. Diners Club does not perform credit checks, report
                          delinquent accounts to commercial credit bureaus, or charge interest or
                          late fees. The charge card has no preset spending limit, and employees
                          are not liable for purchases made with lost or stolen cards. In addition,
                          employees receive free travel accident insurance of $150,000 and free
                          baggage insurance of $1,250. Furthermore, some localities such as
                          San Francisco, California, and Baltimore, Maryland, offer federal trav-
                          elers exemptions from hotel taxes when payment for lodging is made
                          with the Diners Club charge card.

                          Upon completion of travel, the employee must submit a travel voucher
                          to his/her agency for reimbursement of allowable charges made with the
                          Diners Club card. Federal Travel Regulations limit reimbursements to
                          expenses that are for official travel purposes and to amounts within the
                          per diem allowance established by GSA. The employee is responsible for *
                          paying Diners Club for all charges on his/her card. Payment is due to
                          Diners Club within 25 days of the billing statement date.


Agency Centrally Billed   Federal agencies may establish centrally billed accounts with Diners
                          Club for one or more designated offices within the agency to purchase
Accounts                  transportation tickets for employees not designated to receive individual
                          charge cards, such as new employees and infrequent travelers. Charge
                          cards are generally not issued for centrally billed accounts. GSA intended
                          that these accounts be used to supplement the Diners Club individual
                          charge card, rather than be the primary means of purchasing transpor-
                          tation tickets for agency employees.

                          Diners Club directly bilIs agencies for charges incurred on their centrally
                          billed accounts. These charges are subject to the provisions of the
                          Prompt Payment Act of 1982, as amended (31 U.S.C. Chapter 39), which
                          generally require that agencies pay interest penalties to vendors when
                          payments on commercial invoices are late.


ATM Program               The objectives of the Diners Club ATM program are to disburse author-
                          ized cash travel advances to federal employees in participating agencies
                          and to provide these employees with a convenient method for obtaining
                          cash travel advances. These employees must apply for and receive a
                          personal identification number before their Diners Club charge cards
                          will be activated for ATM use. In September 1988, the Department of Jus-
                          tice began a pilot test of the ATM program.


                          P8ge 11                               GAO/AlWMO&3 Dinem Club Travel Program
                         chapter1
                         Introduction




                         Justice employees participating in the pilot program may obtain a cash
                         advance at approximately 32,000 Citishare ATMS located throughout the
                         United States (including Puerto Rico and the Virgin Islands), Canada,
                         Japan, and the United Kingdom. When a Diners Club cardholder obtains
                         a travel advance from an ATM, Diners Club bills the cardholder for the
                         amount of the withdrawal and any related transaction charge.

                         A $6.00 fee is charged for each cash withdrawal during the ATM pilot
                         program. This fee can be claimed on the employee’s travel voucher for
                         reimbursement, if the associated withdrawal was related to authorized
                         travel.

                         On March 7, 1990, GSA modified the contract with Diners Club to make
                         the ATM program available to all agencies. Under the contract modifica-
                         tion, Diners Club will charge a fee of 4 percent of each ATM withdrawal.


Objectives, Scope, and   government’s cash management program-controlling          cash advances
Methodology              and payments for travel through initiatives such as the Diners Club
                         business travel management program. The Chairman of the Subcommit-
                         tee on Treasury, Postal Service, and General Government, House Com-
                         mittee on Appropriations, requested in a July 25, 1989, House Report3
                         accompanying the Committee’s appropriations bill for the Department
                         of the Treasury, the U.S. Postal Service, the Executive Office of the
                         President, and certain independent agencies, that we study the difficul-
                         ties surrounding the government’s use of credit cards4 In an October 16,
                          1989, meeting, we briefed Subcommittee staff regarding our ongoing
                         work on the Diners Club business travel management program. As we
                         agreed with Subcommittee staff at that time, we are issuing our report
                         to meet the Chairman’s request. Specifically, our objectives were to iden-
                         tify the benefits and problems associated with the government’s use of
                         the Diners Club (1) individual charge cards, (2) centrally billed accounts,
                         and (3) ATM program.

                         Our work was conducted at the headquarters location of the Department
                         of the Treasury’s Internal Revenue Service and Bureau of Alcohol,
                         Tobacco, and Firearms; the Department of Transportation’s United


                         3HouseReport 101-170,dated July 25,1989, pp. 63-64.
                         4Weare also performing a separatereview of the benefits and problemsassociati wxh the govern-
                         ment’suseof the small purchasescredit card program.This report will be issuedlater u1the year.



                         Page 12                                         GAO/AFMD~          JXners Club Travel Program
chapter 1
introduction




States Coast Guard, Federal Highway Administration, and Federal Avia-
tion Administration; the Department of Agriculture’s Forest Service; and
the United States Army Services Center for the Armed Forces. These
departments were selected because they account for over half of the
government’s travel and transportation expenses. Within these depart-
ments, we selected agencies with Diners Club business travel manage-
ment programs that appeared to have a wide range of potential benefits
and problems.

In evaluating the benefits and problems surrounding the government’s
use of the Diners Club individual charge card program, we interviewed
agency travel management officials about the program’s impact on their
agencies’ travel operations. We also discussed with these officials the
comments and problems, if any, employees expressed to them about the
program. We reviewed agency Diners Club reports on individual
purchases made by employees to identify potential problems in using
the card. We also reviewed agency travel policies and procedures to
determine whether they are in compliance with the GSA travel regulation
limiting travel advances to meals and incidental expenses and miscella-
neous expenses for taxis, tolls, and parking. To determine whether agen-
cies are processing travel voucher reimbursements in a timely manner,
we reviewed a random sample of travel vouchers submitted by employ-
ees from January 1989 through June 1989. We also reviewed agency
responses to a June 27, 1989, letter from the GSADirector for Travel
Management requesting comments and suggestions on the Diners Club
contract.

In evaluating the government’s use of the Diners Club centrally billed
account program, we interviewed agency travel management officials on
the benefits and problems arising from this program. We also obtained
the views of agency travel management center personnel on their role
and any problems they have in reconciling the agency’s centrally billed
accounts for payment. Additionally, we examined the billing statements
of the agencies during the period of October 1988 through June 1989 to
identify potential problems in reconciling the bills for payment.

In evaluating the Diners Club ATM program, we interviewed Justice
travel management officials about the pilot program’s benefits and
problems. We also obtained their views on the benefits and problems of
using ATMS to obtain travel advances. We reviewed the summary results
of an April 1989 Justice survey to obtain user views on the ATM pro-
gram. To determine if the pilot program had adequate internal controls,
we randomly selected a sample of 124 ATM cash withdrawals made by 48


Page 13                              GAO/AF’MDW-66 Dhera Club Travel Program
Chapter 1
Introduction




employees during the lo-month period from September 1988 to June
1989. We also reviewed a cost analysis prepared by Justice comparing
the Diners Club ATM method with traditional travel advance methods.
Additionally, we obtained the views of officials from the Department of
the Treasury’s Cash Management Division because Justice asked them
to review its ATMcost analysis.

We interviewed Diners Club officials on the government’s use of their
business travel management program. We analyzed the results of a pri-
vate study commissioned by Diners Club in August 1987 regarding the
impact of the Diners Club charge card program on the federal govem-
ment. To determine whether employees and agencies are paying their
Diners Club bills on time, we examined the September 30, 1989, Diners
Club Delinquency Performance Report. This report, which covers all
agencies, lists delinquent amounts for the Diners Club individual charge
card and centrally billed account programs by agency. We then inter-
viewed selected agencies that accounted for the greatest dollar value of
delinquencies to determine the reasons for late payments. We also
reviewed Diners Club data on interest penalties assessed to agencies that
were late in paying their Diners Club centrally billed accounts.

Additionally, we interviewed officials at OMB, GSA, and Treasury’s Cash
Management Division on the impact of the Diners Club business travel
management program on the government. We reviewed travel policies
and procedures and studies issued by these agencies relating to this pro-
gram. We also reviewed the GSA contract with Diners Club and related
documents. In addition, we examined the results of a December 1987
study on the Diners Club business travel management program con-
ducted by the President’s Council on Management Improvement.

We conducted our fieldwork between January 1989 and March 1990 in
Washington, D.C. Our work was performed in accordance with generally
accepted government auditing standards.

We provided a draft of this report for comment to OMB, GSA, the Depart-
ment of Defense, the Internal Revenue Service, and the Department of
Justice. These agencies, except for OMBand the Department of Defense,
provided us with official oral comments, which are included in the
report where appropriate. We discussed the draft report with OMB staff
and Department of Defense officials and incorporated their comments
where appropriate.




Page 14                               GAO/AFMD-90-66Lhers ClubTravel Program
Chapter 2

Individual Charge Card Program
Needs Strengthening

                    Employee use of the government contractor issued travel charge card
                    can help reduce the federal government’s need to borrow money to meet
                    its travel expenses and thereby reduces the interest charges on these
                    borrowings. Thus, the government could save money if federal employ-
                    ees made greater use of their Diners Club individual charge cards in lieu
                    of cash advances when traveling on official business. The Diners Club
                    individual charge card program also offers an opportunity to reduce
                    administrative costs associated with processing travel documents.

                    Most of the agencies in our review, however, are not taking full advan-
                    tage of the benefits offered by the Diners Club individual charge card
                    program. For example, some agencies have not fully implemented the
                    GSA travel regulation to limit travel advances and make greater use of
                    the Diners Club charge card. In addition, agencies have not provided
                    federal employees adequate assurance that employee travel voucher
                    reimbursements can be processed in time to meet the existing payment
                    standard. Also, employees have not been surveyed on the program to
                    assess their concerns.

                    Furthermore, we found that some federal employees use their Diners
                    Club individual charge cards for personal purposes, and some are delin-
                    quent in paying their bills. While the government is not financially liable
                    for employee charges, these types of activities are contrary to the agree-
                    ment that was established between the employee and Diners Club for
                    using the card.


                    The agencies in our review were generally satisfied with the cash man-
Individual Charge   agement and administrative benefits associated with the Diners Club
Card Program        individual charge card program. Also, in responding to a June 1989 let-
Beneficial to       ter from GSA requesting comments and suggestions on the Diners Club
                    contract, most agencies stated that they were satisfied with the quality
Government          of service provided by Diners Club. For example, an official at the
                    Department of the Treasury commented that Diners Club processed new
                    applications promptly, produced accurate management information
                    reports, and maintained exceptional customer service. Our review, how-
                    ever, disclosed that agencies generally do not have information quanti-
                    fying the benefits of the Diners Club individual charge card program.

                    The Diners Club individual charge card program was designed to assist
                    the federal government in achieving specific travel-related cash manage-
                    ment improvements. These improvements include improving cash flow,



                    Page 15                               GAO/AF’MDM     LHneraClub ‘Ihvel F+rogmm
Chapter 2
Individual Charge Card Program
NeedsStrengthening




reducing administrative costs and time, and providing expense analyses.
Each of these improvements is discussed below.

Improving cash flow: According to agency travel management officials
at four of the seven agencies in our review, employee use of the Diners
Club individual charge card had helped the federal government reduce
outstanding travel advances. By providing employees with an altema-
tive means of paying for their travel expenses, the government can limit
travel advances without imposing financial burdens on employees.
When an agency’s outstanding travel advance is lowered, its source of
funds-the    Department of the Treasury-has     an improved cash flow
and a higher cash reserve on which to earn interest. Specifically, the
government will be able to invest unneeded cash in special bank
accounts that earn interest and will be able to delay borrowing funds
from the public, thus reducing interest on borrowed funds. The other .
three agencies in our review did not mention any interest savings associ-
ated with the individual charge card program.

Reducing administrative costs and time: Officials from five of the seven
agencies in our review also told us that employee use of the Diners Club
individual charge card helps the government achieve administrative
savings. For example, limiting travel advances for employees with a
Diners Club individual charge card may enable agencies to reduce the
number of travel advance requests that they process. The remaining two
agencies did not mention any administrative savings from the charge
card program.

Employee use of the Diners Club individual charge card also helps the
government reduce its use of U.S. Government Transportation Requests’
and the administrative costs associated with processing them. Our
review indicated that some agencies still use Government Transporta-
tion Requests. A private study commissioned by Diners Club in August
1987 calculated the agency cost of processing an individual Government
Transportation Request to be $13.30. On the other hand, there are no
apparent costs to the government when employees use their Diners Club
charge cards to purchase transportation tickets, except for the cost of
processing employee travel voucher reimbursements. The government,
however, incurs this cost regardless of the method used to purchase
transportation tickets.

‘GovernmentTransportation Requests(StandardForm 1169)are usedto pay for transportation ser-
vices from airline, railroad, and bus vendors(commoncarriers). There are two types of Government
Transportation Requests:(1) individual and (2) centrally billed.



Page 16                                          GAO/APMD-90-66Diners Club Travel Program
                           Chapter 2
                           hdividualChu%eCardpro(pun
                           NeedsStreagthening




                           In addition, employee use of the Diners Club individual charge card can
                           reduce the amount of time that agencies spend in reconciling Govem-
                           ment Transportation Requests and Diners Club centrally billed accounts.
                           Most of the agencies in our review experienced problems reconciling
                           their Diners Club centrally billed accounts for payment. (See chapter 3.)

                           Providing expense analyses: Participation in the charge card program
                           also provides the government with a variety of Diners Club management
                           reports on employee travel, such as the number and types of their travel
                           expenditures. Agencies can use these reports in budgeting travel
                           expenses. Also, according to OMB and GSAtravel management officials,
                           Diners Club reports are helpful in negotiating discounts with common
                           carriers and hotel establishments.


Charge Card Benefits       While officials from five of the seven agencies we reviewed said the Din-
                           ers Club individual charge card program has reduced their cash flow
Generally Not Quantified   and/or improved their administrative productivity, they generally did
                           not have information quantifying the benefits of the program. The
                           Bureau of Alcohol, Tobacco, and Firearms and the Coast Guard were the
                           only agencies in our review that had information on savings attributable
                           to the individual charge card program. Specifically, an official at the
                           Bureau of Alcohol, Tobacco, and Firearms told us that the agency has
                           reduced its outlay of travel advances by about $80,000 annually since
                           the agency implemented the Diners Club charge card program in Novem-
                           ber 1984. This official also told us that the agency has reduced its num-
                           ber of imprest funds* from 40 to 33 funds. In addition, according to a
                           Coast Guard status report on financial management improvement, the
                           Diners Club individual charge card program enabled the agency to
                           reduce the amount of cash required in its imprest funds by about
                           $278,090 in 1989. The reductions in cash requirements at the Bureau of
                           Alcohol, Tobacco, and Firearms and the Coast Guard resulted from a
                           combination of two programs-e mployees obtaining travel advances in
                           the form of travelers checks by charging their Diners Club individual
                           charge cards.

                           Our review also showed that OMB and GSA did not have information
                           quantifying the benefits of the Diners Club individual charge card pro-
                           gram. Neither agency, for example, had any data on reductions in out-
                           standing travel advances. This type of information can be useful in

                           *Animprestfund is a cash fund with an authorizedcashierresponsiblefor receivingmonk and
                           making!3mallcaahdisbursements.



                           P8ge 17                                       GAO/AFadDBod6 Diners Club Travel Program
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Individual Charge Card Program
NeedeStrengthening




measuring cash savings attributable            to the Diners Club charge card
program.

However, in discussions with officials at the Department of the Trea-
sury, we learned that agencies are supposed to report yearly interest
savings from cash management initiatives, such as the Diners Club indi-
vidual charge card program, to Treasury-the       central agency responsi-
ble for monitoring such initiatives in the federal government. Agencies
are to report these interest savings to Treasury’s Cash Management
Division using a formula3 provided by Treasury.

For fiscal year 1989, Treasury’s Automated CashMan Summary Report
showed cash management savings of about $2.4 million attributable to
the Diners Club individual charge card program for 37 agencies. How-
ever, a Treasury official told us that some agencies did not report inter-
est savings derived from the Diners Club individual charge card
program.

We believe that the savings agencies report to Treasury for the Diners
Club individual charge card program are inaccurate. Specifically, Trea-
sury officials told us that they assumed that the interest savings to the
government resulted from agencies not having to issue travel advances.
This is not a valid assumption because some employees who use their
Diners Club charge cards receive travel advances as well, although these
may be limited to meals and incidental expenses and miscellaneous
expenses, such as taxis, tolls, and parking.

We believe the Treasury formula used to calculate cash management
savings provides the government an indication of the benefits to be
derived from employee use of the Diners Club individual charge card
program. However, this formula does not take into consideration the
amount of travel advances provided to employees who also use their
Diners Club charge cards while on travel. Also, the formula does not
consider the administrative cost savings associated with processing
fewer travel advances.

An accurate assessment of the monetary benefits offered by the charge
card program can be useful to OMB and GSA in determining the effective-
ness of the charge card program as a cash management tool Information
quantifying the benefits of the program can also be used by agencies to

3Theformula for calculating intent savingsis: cashflow divided by 250 work days muhplied by
the benefit days multiplied by the prevailing Treasury interest rate.



Page 18                                         GAO/AFMD90-66 Diners Club Travel Program
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                       identify problems they are having in achieving the cash management
                       benefits offered by the program.


                       The Diners Club individual charge card program offers employees an
Employee Views Have    alternative means of paying for travel expenses and thereby reduces the
Not Been Surveyed      need for personal funds or government travel advances. Also, the charge
                       card enables employees to make travel plans on short notice and to
                       carry less cash when traveling on official business.

                       Although most travel management officials we interviewed told us that
                       they believe their employees are generally satisfied with the Diners Club
                       individual charge card program, the agencies in our review have not
                       surveyed employees on their views regarding the program. In addition,
                       neither OMB nor GSAhas conducted a governmentwide survey of
                       employee reactions to the program.

                       A survey of employee views on the Diners Club charge card program
                       can be useful to agencies in identifying any problems employees may
                       have in using their charge cards and in taking prompt action to resolve
                       them. Also, OMB and GSAcan use the survey results to evaluate the pro-
                       gram’s effectiveness.


Nonacceptance of the   The Diners Club individual charge card is accepted worldwide at over 1
                       million locations, including major hotel/motel chains, most military base
Charge Card            quarters and clubs, and all GE+contracted car rental agencies. However,
                       some agency officials indicated that the charge card program has not
                       been well accepted by their employees because the Diners Club charge
                       card is not accepted at some establishments, such as low to moderate
                       cost restaurants, and at some remote destinations to which employees
                       travel.

                       For example, in responding to a June 1989 letter from GSA requesting
                       comments and suggestions on the Diners Club contract, the Administra-
                       tive Officer at the Inter-American Foundation informed GSA that many
                       of the hotels and restaurants visited by its staff in Latin America and
                       the Caribbean do not accept credit cards. In addition, travel manage-
                       ment officials at the U.S. Coast Guard informed us that the Diners Club
                       charge card is not accepted at many military service facilities and over-
                       seas locations in Europe and Africa.




                       Page 19                               GAO/AFMD-9046 Diners Club Travel Program
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                            Diners Club recognizes that there are some locations where the charge
                            card is not accepted. To address this concern, Diners Club has asked
                            travelers to help them identify establishments that do not honor the
                            charge card so that it may extend coverage to them. For example, in
                            response to requests from employees at the Forest Service, Diners Club
                          , has added restaurants adjacent to the national forests as well as conces-
                            sionaire restaurants in the forests.

                           Additionally, a Diners Club representative told us that Diners Club is
                           trying to make it easier for federal employees to eat at low to moderate
                           cost restaurants that do not accept the Diners Club card by offering
                           agencies the ATM program. The ATM program allows agencies to permit
                           selected employees to use their Diners Club cards to obtain a cash
                           advance from an ATM. This program is discussed in chapter 4.


                           Most of the agencies in our review could have made greater use of the
Agencies Could Have        Diners Club individual charge card program as illustrated by the
Made Greater Use of        following.
Individual Charge     . Some agencies have not fully implemented the GSAtravel regulation to
Card Program            limit travel advances to meals and incidental expenses and miscellane-
                        ous expenses because of union agreements which prevent such limita-
                        tions. Implementation of this travel regulation would encourage
                        employees to make greater use of the Diners Club individual charge
                        card.
                      l Most agencies do not know whether they can process their employees’
                        travel voucher reimbursements in time to meet the 25 working-day stan-
                        dard. Consequently, employees may be reluctant to use the Diners Club
                        individual charge card to pay for their travel expenses.
                      l Most agencies use their Diners Club centrally billed accounts to purchase
                        transportation tickets for their employees, rather than have their
                        employees use their Diners Club individual charge cards to purchase
                        these tickets,

                           By not making greater use of the Diners Club individual charge card
                           program, agencies are not taking full advantage of the travel-related
                           cash management benefits and administrative savings offered by the
                           program.




                          'Page20                                GAO/APMD-WM Dhem Club ‘Ravel Program
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Need to Fully Implement               A key factor in realizing the benefits offered by the Diners Club individ-
GSA Travel Regulation                 ual charge card program is agency implementation of GSA travel regula-
                                      tion A-34, “Limiting Travel Advances to Manage Cash More
                                      Effectively.” This regulation, issued on April 12, 1989, requires agencies
                                      to (1) limit travel advances to meals and incidental expenses and miscel-
                                      laneous expenses for taxis, tolls, and parking and (2) offer the Diners
                                      Club individual charge card to employees who are expected to travel at
                                      least twice a year. By cutting back on travel advances, agencies
                                      encourage their employees to use the Diners Club charge card because
                                      the card provides them an alternative means of paying for their travel
                                      expenses and thereby reduces the need for personal funds or govem-
                                      ment travel advances.

                                      Our analysis of agency travel policies and procedures disclosed that,
                                      except for the Internal Revenue Service, the agencies in our review have
                                      issued regulations limiting travel advances in accordance with GSA travel
                                      regulation A-34. In fact, several agencies imposed limitations which are
                                      stricter than those issued by GSA. The Forest Service, for example, issued
                                      travel regulations in September 1985 limiting travel advances for
                                      employees who have or who are expected to obtain a Diners Club charge
                                      card to not more than $20 per day for meals and incidental expenses
                                      plus an amount to cover local transportation expenses. (See table 2.1.)
                                      The Forest Service regulations further state that the traveler may
                                      receive a larger advance when traveling to an area where the Diners
                                      Club charge card may not be accepted.

Tablo 2.1: Agencies’ Travel Advance
Policies and Procedures                                          Daily advance limitation for   Daily advance limitation for
                                      Aw=Y                       Diners Club cardholders        infrequent travelers
                                      Alcohol, Tobacco, and      $25 M&IE and miscellaneous      100% estimated travel
                                         Firearms
                                      Army                       M&IE and miscellaneous         80% estimated travel
                                      Coast Guard                M&IE plus a maximum of $50     80% estimated travel
                                                                 for other incrdentals
                                      Federal Aviation           M&IE and miscellaneous         80% estimated travel unless
                                         Administration                                         financial hardship then 100%
                                      Federal Highway            M&IE and miscellaneous         80% estimated travel unless
                                         Administration                                         financial hardship then 100%
                                      Forest Service             $20 M&IE and miscellaneous     80% estimated travel
                                      Internal Revenue Service   100% estimated travel          100% estimated travel
                                      Legend
                                      M&E = Meals and inctdental expenses




                                      Page 2 1                                       GAO/APMD9088 Dinera Club Travel Program
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                          Agency officials at the Internal Revenue service told us that GSA travel
                          regulation A-34 was issued too late for it to be incorporated into the
                          agency’s contract with its union. According to these officials, the con-
                          tract, which was signed on May 2, 1989, permits union members to
                          receive travel advances covering 100 percent of estimated travel
                          expenses. The agency also has an internal policy of treating union and
                          non-union employees the same. Thus, all employees may receive travel
                          advances covering 100 percent of estimated travel expenses.

                          During the course of our review, Diners Club representatives told us
                          that the Internal Revenue Service was not the only agency with a union
                          agreement which prevents it from limiting travel advances to meals and
                          incidental expenses and miscellaneous expenses. For example, travel
                          management officials at the Departments of Agriculture and Housing
                          and Urban Development told us that they also have union agreements in
                          place which allow some employees to obtain travel advances of 80 per-
                          cent or more of estimated travel costs.

                          All of the agencies in our review offer the Diners Club charge card to
                          employees who are expected to travel at least twice a year. Also, the
                          travel policies at some of these agencies state that if employees decline
                          to apply for a card or lose their charge card privileges due to delin-
                          quency, they are still subject to the same cash advance limitations as
                          employees who opt to use the Diners Club charge card.


Need to Ensure Timely     According to some of the travel management officials we interviewed, a
                          major concern of their employees is that they may not be reimbursed for
Processing of Travel      travel expenses incurred in time to pay their Diners Club bills when they
Voucher Reimbursemen.ts   are due. To address this concern, OMB has established a governmentwide
                          standard for agencies to use in processing travel voucher reimburse-
                          ments. This standard, which is contained in OMB Bulletin 88-17 and
                          incorporated in GSA travel regulation A-34, requires agencies to pay
                          travel vouchers within 25 working days after the end of a trip or travel
                          period for which a voucher is filed. Agencies are required to establish
                          internal policies and procedures to meet this standard. Agency compli-
                          ance with the OMBstandard will enable most travelers to be reimbursed
                          in time to pay their Diners Club bills when they are due. In the event
                          travelers are not reimbursed in time to pay Diners Club, they should
                          notify Diners Club of the delay so that their cards will not be suspended
                          or cancelled for late payments. As mentioned earlier, Diners Club does
                          not assess interest penalties on late payments.



                          Page 22                               GAO/AiTtiB9086 Diners Club Travel Rogram
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                                          The agencies in our review, however, generally did not know whether
                                          they were in compliance with the OMB standard for processing travel
                                          voucher reimbursements. This is because they do not perform periodic
                                          reviews to determine how long it takes them to process travel voucher
                                          reimbursements from the time an employee completes a trip to when
                                          payment is made. We, therefore, calculated this time interval by ran-
                                          domly selecting a sample of 50 travel vouchers for each of the agencies
                                          in our review, except for the Bureau of Alcohol, Tobacco, and Firearms
                                          and the Forest Service. Our sample at the Bureau of Alcohol, Tobacco,
                                          and Firearms was limited to 35 travel vouchers reviewed during the sur-
                                          vey phase of our assignment. In addition, we did not review any travel
                                          vouchers for the Forest Service because they are located at the Depart-
                                          ment of Agriculture’s National Finance Center, in New Orleans, Louisi-
                                          ana, which we did not visit. The results of our sample analysis are
                                          shown in table 2.2. Except for the Internal Revenue Service, the agen-
                                          cies in our review paid employees within an average of 35 calendar
                                          days, which amounts to 25 working days, after the end of a trip.

Table 2.2: Average Processing limes for
Travel Voucher Reimbursements             Average number of calendar days
                                                                                     End of travel to
                                                                                          employee           Submission of
                                                                                      submission of voucher to approving
                                                                               voucher to approving official to date check
                                          Agency/organizational       unir                    official              issued                         Total
                                          Internal Revenue Service
                                             (National Office Resource
                                             Management)                                                14                         25                39
                                          Coast Guard                                                   16                          18               34
                                          Army (Military District of
                                             Washington)                                                11                          17               28
                                          Federal Highway
                                             Administration                                             8                           18               26
                                          Federal Aviation
                                             Administration                                             9                           16               25
                                          Alcohol, Tobacco, and
                                             Firearms (agencywide)                                      5                           18               23
                                          aThe travel vouchers we revlewed relate to the headquarters   Iocatlon of the agencies rn our   review

                                          unless otherwise Indcated.


                                          For those vouchers we reviewed, the Internal Revenue Service took an
                                          average of 39 calendar days to pay its employees-4 days in excess of
                                          the OMB standard. Travel management officials at the Internal Revenue
                                          Service indicated that one of the reasons for this delay is that employees
                                          do not promptly submit their vouchers to approving officials. The



                                          Page 23                                              GAO/AP?dBW86 Diners Club Travel Program
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                            approving officials, in turn, are slow in submitting the vouchers to the
                            travel office.

                            While the agencies in our review, except for the Internal Revenue Ser-
                            vice, on average met the OMB standard for processing travel voucher
                            reimbursements, the vouchers we reviewed could have been paid faster
                            had employees been more prompt in submitting them to approving offi-
                            cials. As indicated in table 2.2, the time interval between completion of a
                            trip to when the employee submitted the voucher to the approving offi-
                            cial ranged from an average of 5 calendar days to an average of 16 cal-
                            endar days.

                            Timely processing of travel voucher reimbursements is a critical element
                            for the success of the Diners Club individual charge card program. Hav-
                            ing the data to demonstrate that employees can be reimbursed for their
                            travel expenses within the 25 working-day standard may help agencies
                            alleviate any employee reluctance to use the Diners Club card.

                            Periodic reviews of agency processing time for travel voucher reim-
                            bursements to employees will enable agencies to determine whether
                            they meet the OMBstandard of 25 working days after the end of travel.
                            Agencies that do not meet the standard need to take prompt action in
                            identifying the cause of this problem so that it may be corrected. These
                            agencies may also need to (1) establish time frames for when the
                            employee and the approving official should submit the travel voucher
                            for processing and (2) monitor compliance with these time frames.


Need to Encourage           The headquarters locations of most of the agencies in our review used
                            their Diners Club centrally billed accounts to purchase transportation
Employee Use of Charge      tickets for their employees. Only two agencies-the Federal Highway
Cards
-. _ for Transportatior I   Administration and the Bureau of Alcohol, Tobacco, and Firearms-
Tickets                     relied primarily on their employees to use their Diners Club charge cards
                            to purchase transportation tickets. The other agencies chose to use cen-
                            trally billed accounts because employees may be reluctant to use their
                            Diners Club charge cards for the purchase of transportation tickets. Spe
                            cifically, some of the travel management officials we interviewed told us
                            that they believe their employees did not want to be responsible for
                            large Diners Club bills.

                            As discussed in the previous section, employees were also concerned
                            that they might not be reimbursed by their agencies in time to pay their
                            Diners Club bills when they were due. For example, a problem can arise


                            Page 24                               GAO/AFMDBO-66Diners Club Travel Program
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when a traveler uses the Diners Club charge card to purchase plane tick-
ets for a 3-week trip to Europe, 2 days before the trip and at the end of
the billing cycle. The bill for the tickets can arrive before the traveler
returns and payment can be due before the agency reimburses the trav-
eler. For Diners Club to be paid on time, the employee would have to pay
the bill from personal funds or the employee could contact Diners Club
about the delay in payment, as discussed previously.

We asked the Diners Club program coordinators at the Federal Highway
Administration and the Bureau of Alcohol, Tobacco, and Firearms
whether their employees were having any problems in using their Din-
ers Club charge cards to purchase transportation tickets. They told us
that they were not aware of any major problems. The program coordina-
tor at the Federal Highway Administration, for example, told us that he
had not received any written or verbal complaints from employees who
used their cards to purchase transportation tickets in the past 3 years.

Employee use of the Diners Club charge card to purchase transportation
tickets can enable agencies to achieve administrative savings by mini-
mizing the time spent in reconciling Diners Club centrally billed accounts
for payment. During our review, some agency travel management offi-
cials told us that the reconciliation process is both costly and time-
consuming. Also, as we discussed in chapter 1, GSA intended that fre-
quent travelers use their Diners Club cards to purchase transportation
tickets.

We recognize, however, that agency efforts to encourage employees to
purchase their transportation tickets may not be well received by some
employees. We believe one reason for this is that employees would now
have to assume responsibility for verifying the accuracy of their trans-
portation charges for payment, something agencies have failed to do
adequately with centrally billed accounts. (See chapter 3.) Also, billing
errors can occur, and these require time and effort to resolve.

A program to encourage employees to use their Diners Club charge cards
to purchase transportation tickets could include explanations to employ-
ees on (1) why the program is important to the agency and how it may
benefit the employee, (2) how the program works, and (3) what to do
when problems arise. Agencies may also want to consider testing the
program at selected locations before they implement it agencywide.




Page 25                               GAO/AFMBBO86 Diners Club Travel Program
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                        Individual charge Card RoIpam
                        NeedsStrengthening




                        Our review disclosed instances of unauthorized use of the card. Specifi-
Agency Role in          tally, while not widespread, we noted instances of some employees
Monitoring              using their Diners Club individual charge card for personal purposes,
Unauthorized Charge     We also noted that some employees were delinquent in paying their Din-
                        ers Club bills. Agencies, however, were uncertain of their role and
Card Use and in         responsibilities with respect to these problems.
Collecting Delinquent
                        When employees apply for a Diners Club charge card, they agree to use
Payments Unclear        the card only for official government travel and not for personal pur-
                        poses. The employees are also supposed to pay their bills within 25 days
                        after the date of the billing statement. If the account remains unpaid 30
                        days after the billing date, Diners Club sends follow-up reminders to the
                        cardholder. The Diners Club criteria for suspension and cancellation are
                        60 and 120 days past due, respectively. Diners Club must notify the
                        agency coordinator of any proposed action to suspend or cancel an       .
                        employee’s charge card. It may then refer the delinquent account to a
                        commercial agency for collection.

                        Our review of Diners Club account transaction reports, which list the
                        detailed charges of individual employees, disclosed instances where
                        cardholders used their Diners Club charge cards for personal purposes.
                        We noted, for example, cases involving cardholders using their cards to
                        make personal purchases from the Home Shopping Club, flower shops.
                        department stores, and at local restaurants. Some of these purchases
                        were made by cardholders who were not on travel. Our review, how-
                        ever, showed that these types of purchases are not widespread. For
                        example, our review of the March 1989 Diners Club account transaction
                        report for the Internal Revenue Service disclosed only 15 possible
                        instances of unauthorized use of the card out of a total of about 800
                        transactions. Nonetheless, these types of purchases can portray the gov-
                        ernment worker as taking advantage of the program. For example, alle-
                        gations in the past year that a former top aide at the Department of
                        Housing and Urban Development used a government-issued Diners Club
                        charge card for personal purchases did not project a positive image of
                        the government work force.

                        We also noted that federal employees did not always pay their Diners
                        Club bills on time. Specifically, the September 30, 1989, Diners Club
                        Delinquency Performance Report showed that of the $79.4 million owed
                        to Diners Club by federal employees, $4.3 million (or 5.4 percent) was 60
                        days past due and $2.1 million (or 2.6 percent) was 120 days past due.




                        Page 20                               GAO/APMDBO-00Dinem Club Travel Program
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In addition, the Diners Club Delinquency Performance Report showed
that Diners Club has written off about $4.3 million as uncollectible since
the program’s inception in 1983 through September 1989. A Diners Club
representative indicated that the uncollectible rate among federal
employees is slightly higher than that of their credit card customers in
the private sector. Our review of the Diners Club Delinquency Perform-
ance Report disclosed that employees of six agencies-the Department
of the Army, the Federal Deposit Insurance Corporation, the US. Army
Corps of Engineers, and the Departments of the Navy, Transportation,
and Agriculture-    accounted for $2.3 million or 53 percent of the Diners
Club write-offs in the federal government. It should be noted that four
of these agencies-the Departments of the Army, Navy, Transportation,
and Agriculture-    are among the agencies with the greatest number of
Diners Club cardholders, accounting for about 49 percent of the cards
issued.

Diners Club officials believe the primary reason for the lack of payment
among federal employees is that agencies do not help Diners Club collect
delinquent amounts owed. They told us that agency program coordina-
tors generally do not assist them in pursuing collection of delinquent
amounts owed Diners Club, especially if these amounts exceed allowable
government travel expenses and involve personal purchases. Although
Diners Club officials believe agencies are supposed to assist them in the
collection of delinquent amounts, two of the agency program coordina-
tors we interviewed said they do not have to assist Diners Club. Federal
Travel Regulations do not cover this situation and the contract terms
with Diners Club do not mandate agency assistance. Specifically, the GSA
contract states, “The appropriate Government agency office . . . may
assist in the collection process of individual delinquent accounts after
the account becomes sixty days past due at the request of the
contractor.”

We found that agency monitoring of employee purchases and payment
activities varied from nonexistent to extensive reviews. Of the seven
agencies in our review, three-the Forest Service, the Federal Aviation
Administration, and the Army-did      not perform any reviews to ensure
that purchases were for official government purposes and that bills
were promptly paid. Travel management officials at these agencies indi-
cated that they did not have the staff resources to monitor the Diners
Club charge card program.




Page 27                               GAO/~90-00     Dinerw Club Travel Program
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              The remaining four agencies performed limited to extensive reviews of
              employee purchases and payment activities. For example, the headquar-
              ters location of the Internal Revenue Service has an extensive monitor-
              ing program. Specifically, it had a full-time program coordinator who
              was responsible for reviewing the monthly purchases of employees and
              determining whether they pay on time. The agency program coordinator
              contacts the employee’s supervisor if she notes any blatant misuse of
              the Diners Club charge card, such as using the charge card to make
              purchases from the Home Shopping Club. Also, if an employee’s bill is
              delinquent, the agency coordinator calls the employee’s supervisor to
              discuss whether the employee’s charge card privileges should be
              cancelled.

              Although the government is not financially liable for the charges
              incurred by federal employees using their Diners Club charge cards,
              unauthorized use of the card and delinquent payments by employees
              can be an embarrassment to the government. This is especially true
              when the government reimburses the traveler but the traveler keeps the
              money, instead of paying Diners Club. These types of instances are con-
              trary to the agreement that was established between the employee and
              Diners Club and portray the government worker as taking advantage of
              the program.

              Furthermore, employee failure to pay delinquent amounts owed Diners
              Club could cause the government to incur a cost in the future when pro-
              viding employees a credit card for travel. Specifically, companies bid-
              ding on the next contract may charge the government a fee to cover
              anticipated losses associated with delinquent accounts or increase con-
              tract costs to cover these losses.


              The agencies we reviewed generally believe that the Diners Club individ-
Conclusions   ual charge card program has enabled them to achieve specific travel-
              related cash management improvements and administrative savings
              such as reducing the amount of cash required in imprest funds and the
              number of travel advance requests they process. However, to ensure
              effective implementation of the Diners Club individual charge card pro-
              gram and to realize further savings from the program will require a con-
              certed effort by all agencies to more fully implement and ensure
              compliance with travel policies and procedures affecting the program.

              The agencies in our review also had not surveyed their employees on
              their views regarding the Diners Club individual charge card program.


              Page 28                              GAO/AF’MDM    Dlnern Club Travel Program
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                      Agencies need to be aware of any problems and concerns employees may
                      have in using the Diners Club charge card so that corrective actions can
                      be taken.

                      Further, instances of unauthorized employee use of the card and delin-
                      quent amounts owed Diners Club by individual employees can be an
                      embarrassment to the government and are contrary to the agreement
                      between individual employees and Diners Club. However, the agencies’
                      role in monitoring instances of unauthorized charge card use and in col-
                      lecting delinquent payments of individual employees is not clear.


                      To ensure effective implementation of the Diners Club individual charge
Recommendation        card program and to realize additional cash management benefits
                      offered by this program, we recommend that the Director of the Office
                      of Management and Budget issue a directive to the heads of agencies
                      and departments on the government’s use of the Diners Club business
                      travel management program. This directive would require that GSA sur-
                      vey federal employees on their views regarding the program and that
                      agencies comply with existing policies governing the Diners Club indi-
                      vidual charge card program and related travel policies and procedures
                      including the following:

                      limit travel advances to meals and incidental expenses and miscellane-
                      ous expenses, such as taxis, tolls, and parking;
                      pay employee travel reimbursements within 25 working days after the
                      completion of a trip;
                      develop a program to encourage employees to use their Diners Club indi-
                      vidual charge cards to purchase transportation tickets; and
                      quantify the cash management benefits attributable to the Diners Club
                      individual charge card program.

                      The directive should also clearly define the agencies’ role and responsi-
                      bilities with respect to employees who use their Diners Club individual
                      charge cards for personal purposes and/or are delinquent in paying Din-
                      ers Club.


                      GSA was concerned with a recommendation       in our draft report that
Agency Comments and   directed it to revise the Diners Club contract to include the role and
Our Evaluation        responsibilities of agencies with respect to employees who use their Din-
                      ers Club individual charge cards for personal purposes and/or are delin-
                      quent in paying Diners Club. GSA believed that such a change to the


                      Page 29                              GAO/AFMD9O-00 Dlnem Club Travel Program
Chapter 2
Individual Charge Card Program
NeedaStrengthening




contract would be costly to implement and would not be the most appro-
priate means of communicating the role and responsibilities of agencies
on this matter. in response to GSA’s concerns, we modified the recom-
mendation to OMB to include in its directive a clear definition of the role
and responsibilities of agencies regarding such employees. While OMB did
not provide us with official comments to this report, our discussions
with cognizant OMB staff indicated agreement with this change.

Additionally, OMB staff agreed with the points in our recommendation.
They stated that OMB plans to issue a directive that will expand on the
objectives of OMB Bulletin 88-17 and address the issues in our
recommendation.




Page 30                               GAO/APblDMM    Dinero Club ‘Ihvel FVogram
Chapter 3

AgenciesAre Experiencing Problems
ReconcilingCentrally Billed Accounts

                        Diners Club centrally billed accounts provide federal agencies a means
                        of purchasing transportation tickets for infrequent travelers and non-
                        cardholders. As discussed in chapter 2, many agencies are using cen-
                        trally billed accounts for frequent travelers as well. Some agencies,
                        however, are unable to reconcile their centrally billed accounts for pay-
                        ment because they lack sufficient supporting documentation and are not
                        performing timely analyses of past due amounts involving unsupported
                        charges to determine whether they should be paid. Consequently, the
                        government is incurring unnecessary interest penalties when Diners
                        Club centrally billed account bills are not paid on time.


                        GSA temporary   regulation 3, which was made a part of the Federal
Overview of Centrally   Travel Regulations on March 23, 1990 (41 C.F.R. Part 301-15), provided
Billed Accounts         that agencies may establish Diners Club centrally billed accounts for one
                        or more designated offices within the agency to purchase transportation
                        tickets for employees not designated to receive individual charge cards,
                        such as new employees and infrequent travelers. These accounts are
                        intended to supplement Diners Club individual charge cards rather than
                        be the primary means of purchasing transportation tickets for all
                        agency employees.

                        Under the centrally billed account program, the traveler or his or her
                        representative notifies the agency’s travel management center’ of the
                        need for transportation tickets. The purchase of transportation tickets
                        through the travel management center must be supported by a valid
                        travel authorization from the traveler’s organizational unit. The travel
                        management center purchases transportation tickets from common car-
                        riers by charging the agency’s Diners Club centrally billed account. Din-
                        ers Club then bills the agency for the charges.

                        Prior to paying the monthly bill, agencies and their travel management
                        centers go through a process known as reconciliation to validate the
                        charges on the bill. During this process, the agency’s travel management
                        center matches the individual charges on the Diners Club bill to informa-
                        tion in its travel accounting system. The travel management center’s
                        accounting system contains pertinent information on the individual tick-
                        ets issued to the agency, such as the traveler’s name, the travel authori-
                        zation number, the ticket number, and the common carrier. This
                        matching process is generally automated. That is, Diners Club provides

                        ‘A travel managementcenter is a commercialtravel furn under contract to GSAthat provides reser-
                        vations, ticketing, and related travel managementservicesfor official travelers.



                        Page 31                                          GAO/AFMD9O-M Dinera Club Travel Program
                         Chapter 3
                         Agencies Are Elxperiencing Problems
                         Reconciling Centrally Billed Accounts




                         the agency’s travel management center with a magnetic tape containing
                         information on the individual charges for the billing period. This tape is
                         then matched against information in the travel management center’s
                         accounting system to produce a matched and an unmatched report. Roth
                         reports are provided to the agency’s travel office along with copies of
                         the employees’ travel authorizations and travel itineraries for verifica-
                         tion and subsequent payment. The unmatched report has to be
                         researched further by the agency’s travel office, in conjunction with the
                         travel management center, to determine if the charges are valid.

                         The Diners Club centrally billed accounts provide agencies with an alter-
                         native method of purchasing transportation tickets for travelers. These
                         accounts also enable agencies to reduce their use of Government Trans-
                         portation Requests. Some of the agencies in our review also believe that
                         the Diners Club centrally billed accounts provide them better travel con-
                         trol by consolidating the bills from common carriers into one monthly
                         statement listing all charges. Additionally, agencies can save on check
                         processing costs by making one payment to Diners Club instead of multi-
                         ple payments to common carriers.

                         As we discussed in chapter 2, most of the agencies in our review relied
                         primarily on their Diners Club centrally billed accounts to purchase
                         transportation tickets, rather than on employees using their Diners Club
                         charge cards. One of the reasons these agencies chose to use the cen-
                         trally billed accounts is that employees may be reluctant to use their
                         Diners Club charge cards for the purchase of transportation tickets.

                         In addition, some of the agencies in our review chose to use the Diners
                         Club centrally billed accounts because of the rebate2 offered by their
                         travel management centers. A GSAcontracting official told us that some
                         travel management centers offer agencies a rebate as an incentive for
                         selecting a travel management center.


                         According to GSAofficials, federal agencies have had problems recon-
Centrally Billed         ciling their Diners Club bills for payment since the program’s implemen-
Account Reconciliation   tation in 1983. While some progress has been made in addressing these
Problems                 problems through automation of certain travel information, problems
                         remain. Also, some of the agencies in our review are not performing
                         timely analyses of past due amounts owed Diners Club.


                         ‘The rebateis a refund on a portion of the total dollar amountof ticket activity.



                         Page 32                                             GAO/APMDHMO Dberm Club Travel Program
Chapter 3
Agencies Are Experiencing Problems
Reconciling Centrally Billed Accounts




Our review of agency monthly billing statements showed that agencies
have problems reconciling the charges on their Diners Club bills to infor-
mation in their travel management centers’ travel accounting systems.
For example, Diners Club billed the headquarters location of the Inter-
nal Revenue Service, in March 1989, for current charges totaling
$490,400. Of this amount, the agency’s travel management center was
unable to provide support for 6.7 percent of the charges, or $32.971.
Consequently, the Internal Revenue Service withheld payment of this
amount. In commenting on our report, an Internal Revenue Service offi-
cial told us that this amount was subsequently paid after time-
consuming research by the agency and its travel management center.

Travel management officials at the Internal Revenue Service told us that
they had difficulty in reconciling their Diners Club bills for payment
because they did not receive sufficient supporting documentation-that
is, employee travel authorizations and travel itineraries from their
travel management center. Most of the other agencies in our review indi-
cated that they experienced similar reconciliation problems. One of the
reasons given by agency officials as to why they lack sufficient docu-
mentation is that some travelers do not notify their travel management
centers of changes in their travel itineraries. For example, problems can
arise when travelers do not notify their travel management centers
when exchanging issued transportation tickets for tickets purchased at
the airport to a different destination. In this situation, Diners Club bills
the agency for the new ticket, but the travel management center cannot
match this ticket charge with one in its travel accounting system
because the ticket was not purchased through the agency’s travel man-
agement center.

Also, travel management centers do not always forward employee travel
authorizations and travel itineraries to agencies’ travel offices in a
timely manner so that they can perform the necessary verifications for
payment. Furthermore, some agencies are charged transportation tick-
ets that do not belong to them. For example, travel management officials
at the Federal Highway Administration told us that some of their
monthly statements contained charges that belonged to the Federal Avi-
ation Administration.

In addition, a Department of Transportation official told us that Diners
Club is not providing them the necessary support to pay past due
amounts. Specifically, Diners Club has not been responsive to the
Department’s problems with incorrect and incomplete bills. This has
prompted the Department to discontinue using the Diners Club centrally


Page 33                                 GAO/AFMB90-66 Diners Club Travel Program
                       Chapter 3
                       Agendea Are Experiendng Problema
                       Recondling Centrally Billed Accounts




                       billed accounts, which a Department official estimated totaled
                       $4 or $5 million annually. Specifically, in a December 22, 1989, memo-
                       randum, the Department of Transportation’s Assistant Secretary for
                       Administration advised key management officials in each of the Depart-
                       ment’s components to use centrally billed Government Transportation
                       Requests in lieu of the Diners Club centrally billed accounts. The
                       changeover, effective January 1, 1990, applies to all the Department’s
                       headquarters locations.

                       A Diners Club representative agreed that there were some problems in
                       the past with the Department of Transportation and its travel manage-
                       ment center involving the centrally billed accounts. Although the repre-
                       sentative believed most of these problems had been resolved, this
                       representative told us that Diners Club is going to ask Transportation
                       officials to encourage employees to use their Diners Club charge cards to
                       purchase transportation tickets.

                       We believe that some progress was made to address agency problems in
                       reconciling centrally billed accounts when GSA’S contracts with the
                       travel management centers were revised to require these centers to
                       assist agency travel offices in the reconciliation process. Also, in its
                       1988 contract with GSA,Diners Club agreed to provide agency travel
                       management centers with magnetic tapes of accounting and billing infor-
                       mation. In the past, agencies had to reconcile using hard copies of the
                       monthly billing statements.

                       As more employees use their Diners Club individual charge cards, agen-
                       cies’ reconciliation problems would decrease because fewer charges will
                       appear on agencies’ centrally billed accounts. As discussed in chapter 2,
                       encouraging employees to use their Diners Club individual charge card
                       to purchase transportation tickets can enable agencies to achieve admin-
                       istrative savings by minimizing the time spent to reconcile Diners Club
                       centrally billed accounts.


Past Due Amounts Not   Our review of the Diners Club Delinquency Performance Report also
                       showed that agencies have been delinquent (30 or more days) in paying
Analyzed Promptly      their Diners Club centrally billed accounts. For example, it showed that
                       agencies owed $68.1 million as of September 30, 1989. Of this amount,
                       $31 .l million or 46 percent was 30 or more days past due. Five agen-
                       cies-the Army National Guard and the Departments of the Army,
                       Navy, Transportation, and Agriculture-accounted       for $22.5 million, or
                       almost 72 percent of the centrally billed account delinquencies.


                       Page 34                                GAO/AIWD90-00 Diners Club Travel Program
              Chapter 3
              Agendas Are Experiencing Problems
              Rmondhg Centrally Billed Accounts




              One of the reasons provided by the agencies in our review as to why
              they were late in paying Diners Club is that they tended to focus pri-
              marily on current charges due rather than total charges due on their
              monthly billing statements. Specifically, some agencies were more con-
              cerned about having adequate support for current charges on the bill so
              that they could make payment to Diners Club rather than researching
              past due amounts involving unsupported charges to determine their
              validity. Some agency travel management officials also told us that they
              did not have the time and resources to research past due amounts.

              In addition, an official at the Department of the Navy-one of the agen-
              cies accounting for the majority of the centrally billed account delin-
              quencies-told    us that a computer software problem caused it to be late
              in paying Diners Club. Further, a difference of opinion between the
              Department of Agriculture and Diners Club on when the payment was
              due was given as a reason by Agriculture officials for late payments. An
              Agriculture official told us that this billing problem was resolved in a
              February 23, 1990, meeting with Diners Club officials. At this meeting,
              Agriculture and Diners Club officials agreed that Agriculture will pay
              late charges when a payment is made more than 30 days after a valid
              invoice is received by the Department’s National Finance Center from its
              travel management center. They also agreed that a bill is considered
              paid on the day Treasury issues a check. Diners Club had considered the
              date of payment to be the time payment was posted.

              By not paying their bills on time, agencies are incurring interest penal-
              ties. For example, Diners Club officials informed us that agencies were
              assessed a total of $154,592 in interest penalties during the 1l-month
              period from October 1988 through August 1989.


              Some federal agencies are unable to reconcile their Diners Club centrally
Conclusions   billed accounts. These problems stem largely from the lack of sufficient
              supporting documentation. Also, agencies are not performing timely
              analyses of past due amounts to determine whether they should be paid.

              The federal government has made some progress in addressing problems
              with its Diners Club centrally billed accounts by requiring the travel
              management centers to assist agency travel offices in reconciling their
              centrally billed accounts and by providing the centers with magnetic
              tapes of accounting and billing information.




              Page 35                               GA0/AlWLb9040 Diners Club Travel Program
                      chapter 3
                      Agencies Are Experiencing Problem
                      Reconciling Centrally Billed Accounts




                      Requiring employees to use their Diners Club individual charge card to
                      purchase transportation tickets would reduce the number of charges on
                      the Diners Club centrally billed accounts. In addition, agencies need to
                      perform timely reviews of past due amounts involving unsupported
                      charges. Valid charges should be paid promptly to avoid unnecessary
                      interest penalties assessed by Diners Club, while invalid charges should
                      be brought to Diners Club’s attention so that they may be removed from
                      future bills.


                      Based on the results of our review, we recommend that the Director of
Recommendation        the Office of Management and Budget issue, as part of the directive dis-
                      cussed in chapter 2, a requirement to the heads of agencies and depart-
                      ments to ensure prompt review of past due amounts on the Diners Club
                      centrally billed accounts. This requirement should ensure that unsup- -
                      ported items on these accounts are researched to determine the validity
                      of charges.


Comments of           discussions with cognizant OMB staff indicated agreement with our rec-
Cognizant Officials   ommendation for a requirement to the heads of agencies and depart-
                      ments to ensure prompt review of past due amounts on Diners Club
                      centrally billed accounts.




                      Page 36                                 GAO/APMDW   Diners Club Travel Program
ATM Program NeedsStrengthening


                        The Diners Club ATM program offers the federal government an alterna-
                        tive to traditional methods of issuing cash travel advances-travelers
                        checks, cash imprest funds, and Treasury checks. However, our review
                        of the Justice ATM pilot program showed that (1) it may not be the most
                        cost-effective compared to other methods of issuing travel advances to
                        employees and (2) there were some instances of unauthorized ATM with-
                        drawals. As a result, the government may be incurring additional costs
                        by using the ATM program.


Overview of ATM Pilot   Department of Justice to test the ATM in issuing authorized government
Program                 cash advances. As discussed in chapter 1, Justice employees can use
                        their Diners Club charge cards to obtain authorized cash travel advances
                        through the Citishare ATM network. The pilot program, which began on
                        September 1, 1988, is expected to provide (1) access to ATMS, (2) accept-
                        able billing and collection procedures, and (3) reduced administrative
                        time and costs. The pilot program also provides GSAan indication of the
                        benefits and problems of the ATM program.

                        The Department of Justice wanted to test the Diners Club ATM program
                        primarily because it was not satisfied with the travelers check program
                        offered by Citicorp/Diners Club.’ In particular, the Department was not
                        receiving daily sales information on the travelers check program, and
                        Citicorp travelers checks were not accepted at some remote locations.
                        Also, in commenting on our report, a Justice official told us that other
                        equally important factors in Justice’s interest in the ATM pilot program
                        included traveler convenience, reduced collection activity on outstand-
                        ing travel advances, and reduced imprest fund balances.

                        The Department selected four organizational units-the Civil Rights
                        Division, the Office of Professional Responsibility, the Justice Manage-
                        ment Division Audit Staff, and the Antitrust Division-to     participate in
                        the pilot program. These groups were selected because they had a his-
                        tory of responsible travel management. In addition, as part of its pilot
                        program, Justice surveyed employees participating in the program on
                        the benefits and problems they experienced in using ATMS and prepared
                        a cost analysis comparing the ATM method with three traditional meth-
                        ods of issuing travel advances.


                        ‘GSA awardedCiticorp/Diners Club a contract in 1983to provide Citicorp travelers checksto federal
                        employeeselectingthis methodof receiving travel advances.



                        Page 37                                          GAO/MMD-90-66 Dinera Club Travel Program
                    Chapter 4
                    ATM Program NeedaStrengthening




                    The Department of Justice is generally satisfied with the Diners Club
ATM Pilot Program   ATM pilot program. According to Justice travel management officials, the
Benefits            program has contributed to reductions in the Department’s cash require-
                    ments and its administrative costs for processing travel advances. For
                    example, Justice officials said it has helped reduce (1) the number and
                    dollar amount of travel advances issued through imprest funds, (2) the
                    number of Treasury checks disbursed for travel advances, and (3) the
                    number of advances issued through the Citicorp travelers check pro-
                    gram. However, these officials could not quantify the savings attribut-
                    able to the ATM program.

                    Justice travel management officials also believe that under the ATM
                    method, employees tend to limit their cash withdrawals to what is
                    needed because they know they will be billed directly by Diners Club for
                    the amount withdrawn. They also know they can get more cash from an
                    ATM, if necessary. Otherwise, these officials believed that employees
                    using traditional travel advance methods tend to request the maximum
                    amount of cash allowable because they only have one opportunity to get
                    cash before they go on travel.

                    Additionally, Justice travel management officials told us that program
                    participants have benefited from the flexibility and ease with which
                    cash can be obtained from an ATM. For example, employees have 24-hour
                    access to approximately 32,000 ATMs located throughout the United
                    States (including Puerto Rico and the Virgin Islands), Canada, Japan,
                    and the United Kingdom. Program participants responding to an April
                    1989 Justice survey generally rated the ATM as a “convenient” method
                    of obtaining cash for travel purposes.

                    In commenting on our report, a Justice official told us that the ATM pro-
                    gram embraces the goals of OMB Bulletin 88-17. This official said the pro-
                    gram reduces Treasury and agency cash outlays, enhances monitoring of
                    travel advances, and reduces the need for agency resources dedicated to
                    travel advance administration, collection, and reconciliation.


                    While the Diners Club ATM pilot program offers some potential for cash
ATM Pilot Program   management savings to the government, our review identified several
Problems            problems that GSAneeds to address before agencies implement the ATM
                    program. We found that




                    Page 38                               GAO/AFMIMO4   Diners Club Travel Program
                                          Chapter 1
                                          ATM Program NeedsStrengthening




                                        0 the AT&Iprogram may not be the most cost-effective compared to other
                                          methods available to the government for issuing travel advances to fed-
                                          eral employees, and
                                        . Justice did not adequately monitor the ATM program to address unautho-
                                          rized ATM withdrawals.

                                          In addition, we found that during the ATM pilot program, the government
                                          was held liable for delinquent amounts owed by employees on ATM
                                          withdrawals.


ATM Program May Not Be                    The contract modification between GSAand Diners Club included a pro-
                                          vision that the ,4TMmethod not be used when there is a reasonable,
Most Cost-Effective                       lower cost alternative available. The Department of Justice prepared a
Method                                    cost analysis comparing the ATM method with three traditional methods
                                          of issuing travel advances -travelers checks, cash imprest funds, and
                                          Treasury checks. This analysis focused on three types of costs associ-
                                          ated with processing travel advances-organization     cost, finance cost,
                                          and Treasury cost. Organization cost represents costs to the employee’s
                                          organizational unit for preparing and reviewing the traveler’s paper
                                          work, including the cost of picking up the travel advance. Finance cost
                                          represents costs to the employing agency’s central finance office for
                                          processing the travel advance through the imprest fund/travel office.
                                          Treasury cost represents interest costs to Treasury for advancing funds.
                                          According to the Justice cost analysis, the Diners Club ATM program is
                                          the most cost-effective method for disbursing travel advances at $6.00
                                          per transaction. (See table 4.1.)

Table 4.1: Department of Justice Cost
Analysis of Travel Advance Methods                                         Organization       Finance    Treasury     Total
                                          Travel advance method                     cost          cost       cost      cost
                                          Travelers check                         $12.37         $3.43       $2.80   $16.60
                                          Cash Imprest fund                        16.20          3.50        4 25    23.95
                                          Treasurv check                            4.43          2.09        4 55     11.07
                                          Diners/ATM                                6.00             0           0      6.00


                                          However, our review of the Justice cost analysis disclosed that -Justice
                                          did not accurately reflect the cost of the ATM method.

                                        . The Justice cost analysis understated the organization cost of the ATM
                                          method by $3.15. This amount, which was included in each of the three




                                          Page 39                                      GAO/AFMDM66 Dinem Club Travel Program
    Chapter 4
    ATM Program NeedsStrengthening




    traditional methods of issuing travel advances, represents the adminis-
    trative cost of processing and reviewing the employee’s travel authori-
    zation and would be applicable regardless of the method used to
    disburse travel advances. A Justice official agreed that this cost should
    be added to the ATM method.

l   The Justice cost analysis overstated the organization cost of the cash
    imprest fund method by $4.05. This amount was added to the cash
    imprest fund method to account for the additional time to pick up the
    travel advance using this method versus the travelers check method.
    However, it takes the same amount of time to pick up the advance using
    either the cash imprest fund or travelers check methods. According to
    Treasury officials, Justice agreed that the discrepancy was an error.

    In addition, the Department of Justice did not provide us sufficient doc-
    umentation to support the Treasury costs for the three traditional meth-
    ods of issuing travel advances. However, based on discussions we had
    with the Department of the Treasury’s Cash Management Division,? we
    learned that the Treasury costs in the Justice analysis represent interest
    cost to Treasury on amounts owed to Justice by employees with out-
    standing travel advances. Treasury officials informed Justice that this
    was not an acceptable means of determining the cost of issuing a travel
    advance. We agree with Treasury on this matter. Specifically, we believe
    the interest cost on amounts owed to Justice by employees with out-
    standing travel advances is a cost of collecting outstanding advances
    rather than of issuing advances. We also believe that if Justice wanted
    to include the cost of collecting outstanding travel advances in its cost
    analysis, it should have included this cost for each of the methods of
    issuing travel advances, including the Diners ATM program.

    However, the government does incur an interest cost when the Treasury
    disburses funds for travel advances in the form of travelers checks, cash
    imprest funds, and Treasury checks. Using a formula provided to us by
    Treasury and assuming an average cash advance of $150, an interest




    “The Departmentof Justice askedTreasury’sCashManagementDivision to review its cost analysts{It
    the Diners Club ATM method.



    Page 40                                        GAO/AFMD-~O~~D~~~IB
                                                                   Club TravelProgram
                                        Chapter 4
                                        ATM Program     NeedsStrengthening




                                        rate of 7 percent, and 45 benefit (float) days, i we calculated the Trea-
                                        sury cost to be S1.3 1. This cost should be added to the Treasury cost of
                                        each of the three traditional methods of issuing travel advances.

                                        Based on our analysis of the Justice cost analysis and our calculation of
                                        the Treasury cost, the Treasury check method appears to be the most
                                        cost-effective method available to Justice for disbursing travel
                                        advances. (See table 4.2.)
Table 4.2: Department of Justice Cost
Analysis as Revised by GAO                                                      Organiza;c+s+          Finance          Treasury      Total
                                        Travel advance method                                              cost             cost      cost
                                        Travelers check                                 $12 37            $3 43            $1 31     517.11
                                        Cash lmprest fund                                12.15             3 50              1 31    - 16.96
                                        Treasury check                                     4.43            2 09              1 61”      8.13
                                        Diners/ATM                                         9.15                 0               0       9.15
                                        aThe Treasury cost of $1 61 mcludes a cost of S.30 to Issue a Treasury check.


                                        The cost-effectiveness of using the ATM will depend largely on the organ-
                                        ization and finance costs of individual agencies. These costs will vary by
                                        agency. Also, in determining the cost-effectiveness of each method of
                                        issuing travel advances, agencies may want to consider the cost of rec-
                                        onciling, monitoring, and collecting travel advances, which may also
                                        vary from agency to agency. As we discussed in chapter 1, under the
                                        recent contract modification with Diners Club that made the ATM pro-
                                        gram available to all agencies, the $6.00 service fee was replaced with a
                                        fee of 4 percent of each ATM withdrawal. In addition, each agency’s par-
                                        ticipation in the ATM program is subject to GSA'S approval and to any
                                        conditions which it may impose.


Unauthorized Withdrawals                Our review showed that some employees participating in the .ITV pilot
Made From ATMs                          program used their Diners Club charge cards to make unauthorized
                                        withdrawals from the .4TMs.Based on Justice’s policies and procedures
                                        for implementing the ATM pilot program, we define “unauthorized” with-
                                        drawals as (1) obtaining a withdrawal when not on travel, (2) making
                                        early withdrawals 5 or more days before the travel departure date.




                                        “The formula for calculating interest costto the Treasury is as follows: averagecashadvancemulti-
                                        plied by the daily interest rate multiplied by the numberof benefit days. A cashadvance of %1.50was
                                        usedbecause it representsthe averageATM withdrawal, accordingto Justice.The daily merest rate
                                        is calculatedby dividing the prevailing Treasury interest rate by 360 days.The 45 benefit days are
                                        the averagenumberof days by which the cash flow is delayed.An interest rate of 7 percentwas used
                                        to correspond with the prevailing Treasury interest rate at the time the Justice costanalysis was
                                        peI-fOIllWd.




                                        Page 41                                              GAO/AFMD-90-66Diners Club Travel Program
  Chapter 4
  ATM Program NeedsStrengthening




  (3) withdrawing more than the maximum travel advance allowed, and
  (4) using the ATM more than once a week. As a result, the government
  may be incurring additional administrative costs on ATM withdrawals.

  According to the Justice agreement with Diners Club, the ATM program is
  supposed to be used solely for the purpose of obtaining advance funds
  for officially approved and authorized travel. Obtaining cash for any
  other purpose is prohibited. The Justice agreement also states that the
  Assistant Attorney General for Administration can subject cardholders
  making unauthorized ATM withdrawals to disciplinary actions ranging
  from a reprimand to dismissal. The rights and responsibilities of
  employees participating in the ATM pilot program are contained in (1) the
  employee cardholder agreement with Diners Club and (2) a Justice
  Application and Briefing Package, dated June 1988.

  We reviewed a sample of 124 ATM withdrawals              made by 48 Justice
  employeesJ and found the following.

. Two individuals did not file a travel voucher, indicating that they may
  not have been on travel during the time of the withdrawal.
. Nine individuals made withdrawals ranging from 6 to 23 days before
  they went on travel. The Justice Application and Briefing Package
  states that the traveler should schedule the withdrawal as close to the
  travel departure date as possible so that the traveler is not billed before
  being reimbursed. However, the Application and Briefing Package does
  not specify the number of days before departure the traveler should
  schedule the ATM withdrawal. We selected 5 days as the maximum rea-
  sonable number of days prior to departure on a trip to make a
  withdrawal.
. Twenty-three individuals withdrew amounts exceeding the maximum
  travel advance allowed by Justice for the travel period. For example,
  one of the individuals, who was on travel for 2 days and allowed an ATM
  withdrawal of $50, withdrew amounts totaling $300. The Justice Appli-
  cation and Briefing Package states that program participants are
  authorized a maximum ATM withdrawal of $25 per day when on official
  travel.
. Thirteen individuals made more than one ATM withdrawal a week. For
  example, two individuals made three withdrawals on the same day-
  one individual withdrew a total of $340, while the other individual
  withdrew $430. Given the current ATM service fee of $6.00 per transac-
  tion, each of these individuals owed Diners Club a total of $18.00. The

  %omeof the 48 employeesin our samplemademorethan one type of unauthorized wxhdrawal.



  Page 42                                      GAO/AF’MDM       Diners Club Travel Progran
                         Chapter 4
                         ATM Program NeedsStrengthening




                         Justice briefing package instructed employees to limit their withdrawals
                         to one a week.

                         The Justice Deputy Assistant Director for Financial Operations Service,
                         who has primary responsibility for monitoring the ATM program, indi-
                         cated that she was not fully aware of the problems we identified in our
                         sample. As part of her monitoring activities, she reviews the monthly
                         Diners Club report of ATM withdrawals. However, she did not verify the
                         information in the report with the employee’s travel authorization and
                         travel voucher to ensure that Am withdrawals were for authorized pur-
                         poses and within allowable amounts.

                         This type of verification needs to be done, at least on a statistical sample
                         basis. By doing this, Justice will have assurance that employees do not
                         claim more than the amount allowed for the travel period. This is espe-
                         cially important now that the ATM service fee is 4 percent of each with-
                         drawal. Since the traveler can claim this fee on his or her travel voucher
                         for reimbursement, ATM withdrawals over the maximum amount allowed
                         for the travel period will result in additional costs to the government if
                         not detected by the agency when reviewing the travel voucher. For
                         example, if a traveler is allowed a maximum ATM travel advance of
                         $125.00 for a 5-day trip but withdrew $200.00, the government would
                         pay a service fee of $8.00 rather than $6.00.


Government Was Liable    According to the agreement between GSAand Diners Club on the ATM
                         pilot program, the Department of Justice is financially liable for delin-
for Delinquent Amounts   quent (75 days past due) amounts owed by employees participating in
A--,   -J
vweu                     the pilot program. Justice recovered these amounts from the employee
                         through salary offsets.

                         During our review, Justice identified three employees who were more
                         than 75 days past due in paying Diners Club for ATM withdrawals.
                         According to a Justice official, all but one of these individuals paid Din-
                         ers Club prior to the start of salary offsets. In the remaining case, the
                         individual withdrew a total of $800 over a period of 8 days when not on
                         travel. This individual was referred to Justice’s Office of Professional
                         Responsibility for disciplinary action. According to this official, Justice
                         paid Diners Club the $800 owed by the individual and subsequently
                         recovered these funds through employee salary offsets.

                         Based on our review of the ATM pilot program, we were concerned about
                         (1) the risk to the government for ATM withdrawals which might become


                         Page43                                 GAO/AFMDBO46 Diners Club Travel Pmgmm
                    Chapter 4
                    ATM Program Need Strengthening




                    delinquent and (2) the availability and source of government funds to
                    pay Diners Club for delinquent amounts owed. Also, during our review
                    of the Diners Club charge card program, agencies told us that they
                    would be interested in implementing the ATM program but were con-
                    cerned about being liable for delinquent amounts owed by cardholders.

                    We informed GSAand Diners Club of our concerns on this matter. On
                    March 7, 1990, GSAmodified the contract with Diners Club to make the
                    ATM program available to all agencies. Under the contract modification,
                    Diners Club removed the government’s liability for delinquent amounts
                    owed by employees.


                    The Diners Club ATM program provided the Department of Justice an
Conclusions         alternative method for disbursing travel advances to employees. Also,
                    the program enabled the Department to reduce its cash requirements
                    and its administrative costs for processing travel advances. The ATM
                    program at Justice may not be the most cost-effective compared with
                    the traditional methods of disbursing travel advances. However, the
                    cost-effectiveness of this program at other agencies will depend upon
                    their individual organization and finance costs.

                    GSA and the Department of Defense Per Diem, Travel, and Transporta-
                    tion Allowance Committee need to establish requirements for agencies
                    interested in implementing the ATM program that include (1) performing,
                    and submitting for review, a cost analysis comparing the ATM method
                    with other methods of issuing travel advances and (2) establishing a
                    monitoring program to avoid excessive administrative service fee costs
                    resulting from unauthorized ATM withdrawals.


                    We recommend that the Administrator of General Services and the Sec-
Recommendations     retary of Defense establish regulations for the Diners Club ATM program.
                    These regulations should contain provisions requiring agencies inter-
                    ested in implementing the Diners Club ATM program to take the following
                    actions.

                  . Perform a cost analysis comparing the ATM method with other methods
                    of issuing travel advances- travelers checks, imprest fund, and Trea-
                    sury checks. Agencies should be required to submit their analysis to GSA
                    for its review and consideration when deciding whether or not to
                    approve an agency for participation in the ATM program.



                    Page 44                              GAO/AFbUb9O436Diners
                                                                          ClubTravelProgram
                          chpter 4
                          AT’M Program NeedsStrengthening




                      l   Establish controls to ensure that ATM withdrawals   are for authorized
                          purposes and within allowable amounts.


                          Because of concerns expressed by GSAon the wording of our draft rec-
Agency Comments and       ommendation regarding approval of the agencies’ cost analyses, we clar-
Our Evaluation            ified our recommendation to indicate that GSAcan use these analyses in
                          deciding whether or not to approve an agency for participation in the
                          Diners Club ATM program. GSAconcurred with this change. In addition,
                          the Department of Justice generally agreed with the findings and con-
                          clusions in this report relating to its ATM pilot program. Its comments are
                          incorporated where appropriate.

                          While OMBand the Department of Defense did not provide us with offi-
                          cial comments on this report, our discussions with OMBstaff and Depart-
                          ment of Defense officials indicate general concurrence with the
                          recommendations in this chapter. In addition, Department of Defense
                          officials informed us that the Department has already initiated action on
                          the recommendation to it. Specifically, the Department’s Deputy Comp-
                          troller (Management Systems) issued a March 26, 1990, memorandum to
                          Department of Defense components on the use of ATMS for travel
                          advances. This memorandum requests that the Director of the Per Diem,
                          Travel, and Transportation Allowance Committee, modify the travel
                          regulations accordingly to allow reimbursement of the 4 percent admin-
                          istrative fee. Also, the memorandum states that prior to implementing
                          the ATM program, Department of Defense components must undertake a
                          cost-benefit analysis to determine whether the program is preferable to
                          other travel advance arrangements.




                          P8ge 45                               GAO/AFlKD9O-fMlDiners Club Travel Program
Appendix I

Major Contributors to This Report


                       Robert A. Pewanick, Senior Assistant Director, (202) 275-95 10
Accounting and         Helen Lew, Evaluator-in-Charge
Financial Management   Marlena M. Middleton, Accountant
                       Miguel A. Castillo, Accountant
Division,
Washington, D.C.




(901481)               P8ge40                               GAO/AF’MD9086 Diners Club Travel Pmgran
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