oversight

Army Housing: Overcharges and Inefficient Use of On-Base Lodging Divert Training Funds

Published by the Government Accountability Office on 1990-09-28.

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

      “..._-..l..-- * .-_.------.--
.“.“..“”                              ________- ~,   ilrrihtvi StaWs Cbneral Accounting   Office
                                                     Report to the Chairman, Subcommittee                          ‘zc;’
                                                     on Defense, Committee on
                                                     Appropriations, House of
                                                     Representatives




                                                     Overcharges and
                                                     Inefficient Use of On-
                                                     Base Lodging Divert
                                                     Training Funds



                                                                                                          142535




                                                       RESTRIcTED --Not      to be released outside the
                                                       General Accounting Office unless specifically
                                                       approved by the Office of Congressional
                                                       Relations.


CL4O,‘NSIAD-90-241
     -mm-e   .---~--..---._I___   .---   --   -.-..-   -   ..-..   _._.-_.   -_-_----.__-   ..__   -l_,llll-_,.l,ll..-ll_l-l._l_-l---   -----..-   -8

‘\
National Security and
International Affairs Division

B-238071
September 28,199O

The Honorable John P, Murtha
Chairman, Subcommittee on Defense
Committee on Appropriations
House of Representatives
Dear Mr. Chairman:
This report shows that Army training funds were diverted to other usesbecauseof
overcharges and the inefficient use of on-baselodging for temporarily assignedsoldiers.
These conditions occurred becauseof the absenceof effective controls and adequate
management attention.
As you requested, we plan no further distribution of this report until 15 days after its issue
date. At that time we will send copiesto the Chairmen of the House and SenateCommittees
on Armed Servicesand the SenateCommittee on Appropriations; the Director, Office of
Management and Budget; and the Secretariesof Defenseand the Army. Copieswill also be
made available to other interested parties upon request.                    *

Pleasecontact me at (202) 2754141 if you or your staff have any questions concerning this
report. Other major contributors to this report are listed in appendix V.

Sincerely yours,




Richard Davis
Director, Army Issues
                                                                                       ,

Ekecutive Summary


Purpose              The Army spendsbillions of dollars each year to train its military per-
                     sonnel in the individual and collective tasks essential to successon the
                     battlefield. A part of this cost is incurred for per diem paid to soldiers
                     undergoing training while in travel status. In fiscal year 1989, the
                     Army’s costs for off-base per diem alone were about $328 million. Addi-
                     tional per diem costs were incurred for soldiers who received on-base
                     lodging. Becauseof concern about the effective use of training funds,
                     the Chairman of the Subcommitteeon Defense,HouseCommittee on
                     Appropriations, asked GAOto evaluate whether the Army has estab-
                     lished effective controls over per diem costs.

                     All the military serviceshave facilities to lodge personnel who are in
Background           travel status. Someof these facilities have been specifically set aside for
                     unaccompaniedpersonnel who are temporarily assignedfor training.
                     These facilities, known as “transient quarters,” are designated as
                     mission-essentialMorale, Welfare, and Recreation activities and are sup-
                     ported primarily with appropriated funds. Most installations also main-
                     tain more elaborately furnished transient quarters for distinguished
                     visitors and high ranking officers. Transient personnel are assesseda
                     service charge for staying at these facilities. The service charge is either
                     paid directly or reimbursed by the home command as part of the per
                     diem paid to the soldier, often using commandtraining funds. When no
                     government quarters are available, transient personnel receive an
                     increasedper diem allowance to pay for off-base lodging. To obtain the
                     increasedper diem, the travelers must obtain documentation asserting
                     that lodging at government facilities is not available.

                     Becauseof the absenceof effective controls and adequate management
Results in Brief     attention, the Army has overcharged official travelers and their home
                     commandsmillions of dollars for transient lodging and used the excess
                     chargesto subsidize other Morale, Welfare, and Recreation activities.
                     The Army commingled service charges,derived from appropriated
                     funds intended primarily for training, with nonappropriated funds from
                     other Morale, Welfare, and Recreation activities in a single fund. This
                     practice, a violation of congressionalguidance and Department of
                     Defense(DOD) regulations, has the effect of diverting Army training
                     funds to other uses.GAOalso found that the Army
                   6 had used lodging funds collected from transient soldiers to provide ques-
                     tionable amenities for distinguished visitors’ quarters and



                     Page2                                    GAO/NSIAD-BO.241
                                                                           hny O&am bdlfb
                               ExecutiveStunmary




                           l   had paid for more expensive off-base lodgings when there were vacan-
                               cies on base.
                               Thus, the Army has not made the most effective use of appropriated
                               funds to train its soldiers.
                               Army Audit Agency reports indicate that overchargesfor transient
                               lodging and payments for off-base lodging when transient quarters were
                               available are widespread problems.


Principal Findings

Charges for Lodging Army       Army regulations stipulate that transient soldiers must be charged the
Transients Were Inflated       minimum amount neededto operate transient lodgings. In addition, DOD
                               regulations stipulate that lodging receipts must fund improvements in
and Used for Morale,           transient quarters. However, GAOestimates that since the establishment
Welfare, and Recreation        of a single fund for Morale, Welfare, and Recreation activities in 1986,
Activities                     the Training and Doctrine Command and ForcesCommand have accu-
                               mulated over $70 million from inflated charges.SomeArmy installa-
                               tions have overcharged soldiers for transient lodgings and, along with
                               the Army Community and Family Support Center, used the proceedsto
                               subsidize Morale, Welfare, and Recreation activities-for example,
                               officers’ clubs, golf courses,arts and crafts facilities, and lodging facili-
                               ties for visitors. When questioned about the inflated charges,Army
                               headquarters and command officials said that they had increased
                               chargesto generate money for Morale, Welfare, and Recreation activities
                               in light of cuts in appropriated funds for these activities. The officials
                               said that they regarded these funds as essential to the operation of the
                               Army’s Morale, Welfare, and Recreation program.


Charges for Transient          Someof the chargesfor transient quarters were used to provide expen-
Lodging Were Used to           sive amenities such as videocassetterecorders and customized furniture
                               to distinguished visitors’ quarters. OneArmy installation had totally
Provide Questionable           renovated a four-bedroom house for distinguished visitors, supplying
Amenities                      the quarters with customized furnishings, drapes, and carpets at a cost
                               of nearly $144,000. Two custom throw rugs alone cost $3,600. More-
                               over, the installation was planning to spend about $272,000 for special
              *                stationery and landscaping. When GAOquestioned these expenses,the



                               Page3                                     GAO/NSIAIMO-241
                                                                                       Army On-BaseLodsine
                                 ExecutiveSumuuuy




                                 installation adjusted its plans and lowered its cost projections to
                                 $81,600.


Financial Accounts for    A DODdirective stipulates that service chargesreceived for transient
                          lodging should be used to maintain and improve lodging facilities. The
Transient Lodging Are Not directive also implies a requirement to maintain the integrity of tran-
Segregated                sient lodging accounts.However, becausethe guidance is not explicit,
                                 the Army established regulations (210-11,216-l, and 216-6) that permit
                                 the merger of funds generated from transient lodging service charges.
                                 That is, transient lodging accountsare allowed to merge with Morale,
                                 Welfare, and Recreation accountsderived from nonappropriated funds
                                 into a single account. Thus, the financial status of transient lodging
                                 operations cannot be readily determined. For example, income from
                                 interest is not reported in the income statement for transient lodging,
                                 but is credited instead to the total Morale, Welfare, and Recreation
                                 account. As a result, the transient lodging account is not credited with
                                 monies that should be identified for transient lodging’s use. The merger
                                 of transient lodging accountswith other Morale, Welfare, and Recreation
                                 accountsis inconsistent with congressionalcommittee guidance.


Off-Base Per Diem Was            In an effort to reduce training costs,DODrequires the servicesto lodge
Authorized for Transients        transient personnel on basewhenever possible. Only when base facilities
                                 are not available should transients be granted off-base per diem for
When Government                  lodging. However, transient personnel were sometimesgranted the
Facilities Were Available        higher off-base per diem when lodgings set aside for their use were
                                 available.

                                 For example, GAOestimates that during the last quarter of fiscal year
                                 1989, the two Army installations it visited could have avoided about
                                 $600,000 in off-base per diem costs.These costs were incurred because
                                 of inadequate controls over room reservation systems,the underuse of
                                 distinguished visitors’ quarters and other on-baselodgings, and the
                                 lodging of personnel changing assignmentsin quarters set aside for tran-
                                 sients. For example, the Army doesnot recheck room reservations to
                                 take advantage of cancellations or unclaimed reservations, both of
                                 which occur frequently. During a l-month period at one Army installa-
                                 tion, the lodging office authorized off-base per diem for 146 transient
                                 personnel for a total of 1,939 days, when during the sameperiod, 206
                                 reservations were canceledor unclaimed, leaving a total of 6,040 days
                                 available to lodge transient travelers.



                                 Page4                                    GAO/NSIADgO-241
                                                                                       Amy On-BaseLodging
                          GAOrecommendsthat      the Secretary of the Army take the following
Recommendations           actions:
                      . Direct the major commandsand the Army Community and Family Sup-
                        port Center to stop diverting transient lodging funds to Morale, Welfare,
                        and Recreation activities.
                      l Review the Morale, Welfare, and Recreation accountsof the major Army
                        commandsto (1) identify accumulated overpayments for transient
                        lodging, (2) recognizeeach overpayment as a liability to the appropria-
                        tion account initially charged or its successor,(3) charge the overpay-
                        ment to the general fund of the U.S. Treasury as a miscellaneousreceipt
                        if the appropriation account cannot be identified, and (4) develop and
                        implement a repayment plan.
                      . Revi.seArmy Regulations 210-l 1, 216-1, and 216-6 to stipulate that tran-
                        sient lodging funds must be applied only to transient facilities as
                        required by DODdirectives.
                      l Exclude transient lodging funds from the Army’s single fund.
                      . Identify transient lodging operations as a material weaknessin the Sec-
                        retary of the Army’s next Annual Assurance Statement.
                          Additional recommendationsto the Secretary of the Army to improve
                          the effectiveness of transient lodging controls and to more fully use on-
                          base lodgings are discussedin chapters 2 and 3.

                          GAOrecommendsthat    the Secretary of Defenseestablish controls to
                          monitor the Army’s compliance with DODtransient lodging directives.


                          DODgenerally agreed with GAO'Sfindings and recommendationsand said
Agency Comments and       ,that both it and the Army planned corrective actions, including identi-
GAO Evaluation            fying transient lodging operations as a material weaknessin the Secre-
                          tary of the Army’s next Annual Assurance Statement. Also, DODsaid
                          that it is reviewing current transient lodging policies and will clarify
                          procedures and the use of service chargeslevied on personnel who use
                          transient lodging that is financed by appropriated funds.
                          DODdid   not agree with GAO'Srecommendation that overchargesfor tran-
                          sient facilities be returned to either the originating appropriation or to
                          the U.S. Treasury. Instead, it proposesto disburse the funds repre-
                          senting overchargesbasedon a DODlegal determination of the disposi-
                          tion question. GAO'Srecommendation is basedon prior Comptroller
                          General decisionsregarding refunds of overpayments, which held that
                          refunds generally should be returned to the originating appropriation,


                          Page5                                    GAO/NSIAIMM-241
                                                                                Army On-BaseLodeine
Contents


Executive Summary                                                                          2

Chapter 1                                                                                  8
Introduction            Part of Army Training Funds Are Spent on Per Diem
                        Facilities and Managementof Transient Lodging Vary
                                                                                           8
                                                                                           8
                            Among the Services
                        Transient Lodging Accounts .Are Maintained in the MWR
                            Fund
                        Objectives,Scope,and Methodology

Chapter 2
Charges for On-Base     The Army Has Increased Chargesto Transient Personnel
                            to SubsidizeOther Activities
                                                                                          13
Lodging Were Inflated   The Army Has Not SegregatedFinancial Accounts for                 19
and Funds Diverted to       Transient Lodging
Pay for Other           DOD and the Army Have Not Effectively Monitored
                            Operations and Costsfor Transient Lodging
Activities              Conclusions
                        Recommendations
                        Agency Commentsand Our Evamation

Chapter 3                                                                                 26
The Arrny Paid for      Off-Base Per Diem WasGranted When Transient Quarters
                             Were Available
                                                                                          26
More Costly Off-Base    Inefficient Managementof Army Barracks Can Lead to                28
Lodging When On-             UnnecessaryOff-Base Per Diem
Base Lodging Was        Army Internal Control System Is Incomplete                       29
                        Conclusions                                                      30
Available               Recommendations                                                  31
                        Agency Comments                                                  31

Appendixes              Appendix I: Commandsand Units GAO Visited                        32
                        Appendix II: Organizational Relatisonshipof Army                 33
                           Lodging and the MWR Community
                        Appendix III: Army Audit Agency Reports on Lodging               34
                           and MWR Operations
                        Appendix IV: CommentsFrom DOD                                    36
                        Appendix V: Major Contributors to This Report                    66




                        Page0                                GAO/NSIADBO-241
                                                                          Army On-BaseLodging
          Cantfmta




Figures   Figure 1.1: Transient Facility Comparable to Standard   9
              Commercial Lodgings
          Figure 2.1: Hallways of a Four-Bedroom DVQ              16
          Figure 2.2: Living Room of a DVQ                        18
          Figure 2.3: Living Room and Kitchen of a DVQ            18




          Abbreviations

          DOD    Department of Defense
          DVQ    distinguished visitors’ quarters
          FORSCOMForcesCommand
          GAO    General Accounting Office
          MWR    Morale, Welfare, and Recreation
          PCS    permanent changeof station
          TRADOC Training and Doctrine Command


          Page7
Chapter 1

Introduction


                        All the military serviceshave facilities to lodge personnel who are in
                        travel status. Someof these facilities have been specifically set aside for
                        unaccompaniedpersonnel, such as those who are temporarily assigned
                        for training. These facilities, known as “transient quarters,” are desig-
                        nated as mission-essentialMorale, Welfare, and Recreation (MWR) activi-
                        ties and are supported primarily with appropriated funds. Most
                        installations also maintain more elaborately furnished transient
                        quarters for distinguished visitors and high ranking officers. Transient
                        personnel are assesseda service charge for lodging at these on-base
                        facilities, but the service charge is either paid directly, or reimbursed by
                        the home command as part of the per diem to the soldier, often using
                        commandtraining funds. When no government quarters are available,
                        transient personnel receive an increasedper diem allowance to pay for
                        off-base lodging. To obtain the increasedper diem, the travelers must
                        obtain documentation asserting that lodging at government facilities is
                        not available.

                        The Army spendsbillions of dollars each year to train its soldiers in the
Part of Army Training   individual and collective tasks essential to successon the battlefield. A
F’undsAre Spent on      part of this cost is incurred for per diem paid to soldiers undergoing
Per Diem                training while in a travel status. On any given day, about 15,000tran-
                        sient Army personnel are lodged off basewhile on temporary duty. We
                        estimated that in fiscal year 1989, the Army’s costs for off-base per
                        diem alone were about $328 million. To minimize these costs,Depart-
                        ment of Defense(DOD) regulations prohibit the authorization of off-base
                        per diem when government lodgings are available. Consequently, mili-
                        tary basesmaintain facilities specifically for lodging transient
                        personnel.

                        Although all three servicesmaintain lodgings for their transient per-
Facilities and          sonnel, they differ in the kinds of facilities offered. The Army and the
Management of           Air Force maintain separate facilities as transient quarters (known as
Transient Lodging       “visiting officers’ quarters” or “visiting enlisted quarters”). These lodg-
                        ings are comparable in furnishings, facilities, and servicesto those of a
Vary Among the          commercial hotel. (Seefig. 1.1.) The Navy, however, doesnot keep sepa-
Services                rate quarters specifically for transients; its temporary duty personnel
                        are billeted in the bachelor officers’ or bachelor enlisted quarters,
                        sharing the facilities that house personnel permanently assignedto the
            Y           installation.




                        Page8                                     GAO/NSIAD-90-241
                                                                                hy     On-BaseLodging
                                            Chapter1
                                            Introduction




                                                                                   ~.-_- ,,,.,   ,,,,
Flgure 1.1: Tranrient Facility Comparable   ;~@$;~.:::j,..~    -j ‘.’ -:’
                                                              f;.I.(;“:“:.~ Yff”
to Standard Commercial Lodgings                               ..r.




                                            The managementof transient lodging operations and finances also
                                            varies among the services.At Army and Air Force installations, the
                                            sameon-baselodging office managesboth transient quarters and
                                            another type of temporary lodging. This secondtype of temporary
                                            lodging is used mainly as interim lodging for military personnel and
                                            their dependentsmaking permanent changesof station (PCS).In the
                                            Navy, however, temporary lodgings for PCSare managedseparately
                                            from transient quarters by a nonappropriated activity. Moreover, while
                                            the Air Force considerstemporary PCS housing a mission-essential
                                            activity and supports it with appropriated funds, the Army and the
                                            Navy classify such lodging as non-mission essential and support it pri-
                                            marily with nonappropriated funds.
                                            For transient quarters, the Army has divided the managementfunctions
                                            from the accounting functions. Personneloperations for transient
                                            lodging and for temporary lodging for permanent changesof station are
                                            managedby the Army Chief of Engineers.Lodging accounts and
                                            finances, however, are managedby the Community and Family Support
                                            Center, which also managesan installation’s other nonappropriated
                                            activities. (Seeapp. II for the organizational structure of these two
                                            functions.)



                                            Page9                                         GAO/NSIAD-99-241
                                                                                                        Army On-BaseLodging
                        Chapter1
                        Introduction




                        These differences in the services’ managementof transient quarters are
                        reflected in the following differing policies for transient lodging charges:
                    . In the Army, the charge for transient lodging can equal 60 percent of the
                      local per diem for off-base lodgings before higher command approval is
                      required. In the Navy, any charge over $4 a night requires higher com-
                      mand approval.
                    l The Army sets transient lodging chargeson a per-person, per-day basis;
                      the Navy does not charge on weekendswhen maid services are not
                      rendered.

                        In 1985, DOD requested approval from the Subcommitteeon Readiness,
Transient Lodging       HouseCommittee on Armed Services,to establish a single fund for the
Accounts Are            nonappropriated MWR program. The purpose of the single fund is to
Maintained in the       achieve economiesin managing the finances of numerous activities and
                        to allow the program as a whole to be self- supporting; that is, funds
MWR Fund                from profit-making activities are available to offset lossesfrom other
                        activities. In its request, DOD did not list transient lodging among the
                        activities it proposed to include in the single fund. Also, in 1986, the
                        Army sought approval to expand the activities included in its single MWR
                        fund. The Subcommittee approved the Army’s request with strong res-
                        ervations but stipulated that “lodging facilities that are part of the bil-
                        leting mission and properly supported with appropriated funds should
                        not be included in the installation Morale, Welfare, and Recreational
                        Fund.”
                        Even though the SubcommitteeChairman instructed the Army not to
                        include transient lodging in the single fund, it did so nonetheless.The
                        SubcommitteeChairman’s concernswere later echoedby the House
                        Appropriations Committee in 1986 when it criticized the Air Force for
                        “laundering” appropriated funds by moving them between appropriated
                        and nonappropriated accounts.1Also, the HouseCommittee on Armed
                        Servicesexpressedconcern in 1988 about the reimbursement and fund
                        accountability associatedwith the single MWR fund.2




                        ‘H.R.   Rep.No.793,99thCong., 2nd Sess.43-44 (1966).
                        2H.R. Rep. No. 663,lOOth Gong., 2nd Sess. 197-199 (1966).



                        Page10                                                 GAO/NSIAJMO-241
                                                                                            Army On-BaseLodging
                        chapter 1
                        Introduction




Objectives, Scope,and   Becauseof concern about the Army’s use of training funds, the
                        Chairman of the Subcommitteeon Defense,HouseCommittee on Appro-
Methodology             priations, asked us to evaluate whether the Army has established effec-
                        tive controls over per diem costs. In performing this evaluation, we
                        sought to determine whether the Army has implemented adequate con-
                        trols to ensure that the cost of per diem is minimized and that personnel
                        are a’uthorized per diem only when government facilities are not avail-
                        able. We focused on the Army becausein fiscal year 1989, Army per-
                        sonnel accounted for about 73 percent of the transient military
                        personnel paid per diem for off-base lodgings. However, we also did lim-
                        ited work in the Navy and the Air Force, primarily to compare and con-
                        trast polices and procedures for managing lodging operations.
                        To compare and contrast lodging procedures among the services,we vis-
                        ited two of the Army’s largest commands-the Training and Doctrine
                        Command (TRADoc)and ForcesCommand (FoRscoM)-and performed a
                        limited review of information available on the Air Force and the Navy.
                        At each Army command, we conducted work at one Army installation.
                        Our review in the Army also built upon existing Army Audit Agency
                        reports. (Seeapp. III.) The Air Force Audit Agency is completing a
                        report on the managementof lodging operations that has identified a
                        number of managementweaknesses.

                        To obtain overall program and policy information, we reviewed appli-
                        cable DOD regulations and previous studies done by us and by other
                        audit agencies.To gain an understanding of transient lodging proce-
                        dures, we obtained documents and interviewed officials representing
                        numerous activities. (Seeapp. I.) We also gathered information from the
                        Army Audit Agency regarding work it had done on this issue.

                        Wejudgmentally selectedArmy installations within TRADOC      and FORSCOM
                        that had large transient populations. At these units, we reviewed the
                        policies and procedures used to house transient personnel, visited facili-
                        ties used by transient personnel, and reviewed and analyzed usage
                        reports. To calculate the chargesrequired for transient facilities, we
                        reviewed financial reports and planned improvement projects main-
                        tained.by the lodging offices and by the MWRfund managers.
                        To determine the extent of overcharging for on-baselodging within the
                        major commands,we analyzed available financial information and
                        requested explanations from responsible officials. We did not test the
                        accuracy of this information. Becausethe Army does not segregatetran-
                        sient lodging accounts from other MWRaccounts,we estimated the


                        Pace 11                                 GAO/NSIAIHO-241 Army On-Base Lodging
chaptm 1
InMctlon




receipts provided to the single MWR fund from lodging transients. We
basedour estimates on a review of income and expensesummaries sup-
plemented by other financial information provided, applied interest
earned to the account’s beginning balance, and considereddepreciation
expenses.
Our computation of per diem costs that could have been avoided repre-
sents a compilation of all costs resulting from the problems discussedin
chapter 3. We basedthat computation on
the number of authorizations issued to lodge personnel off base com-
pared to available spaceswithin transient lodging facilities during that
sameperiod and
the difference between average off-base lodging costs and the fee
charged for on-basetransient lodging.
We performed our review from July 1989 to March 1990 in accordance
with generally acceptedgovernment auditing standards.




Page12                                  GAO/NSIAD9O-241
                                                     Army On-BaseLodging
Chapter 2

Chargesfor On-BaseLodging WereInflated and
l?bndsDiverted to Pay for Other Activities

                         Training funds paid to someArmy installations for lodging transient
                         personnel have been misused.Although a DOD directive states that ser-
                         vice chargesfor transient lodging are to be applied to transient lodging
                         operations, the Army has not always done so. SomeArmy installations
                         have overcharged for transient lodging and used the overchargesto sub-
                         sidize other MWR activities. We estimate that since 1985, TRADOC and FOR-
                         SCOM have realized about $70 million from inflated transient lodging
                         charges.Also, someinstallations have increased chargesfor transient
                         quarters to provide questionable amenities such as videocassette
                         recorders and customized furniture. The Army has not segregatedfinan-
                         cial accountsfor transient lodging; therefore, the financial status of
                         lodging operations cannot readily be determined. These situations have
                         arisen becauseDOD and the Army have not instituted adequate controls
                         over operations and financial accountsfor transient lodging. Conse-
                         quently, the Army has not made the most effective use of funds appro-
                         priated by the Congressto train Army soldiers.

                         SomeArmy installations have increasedthe chargesfor lodging tran-
The Army Has             sient personnel and used a portion of the payments received to subsidize
Increased Charges to     other MWRactivities and to provide questionable amenities.
Transient Personnel to   A DOD directive states that service chargesfor transient lodging are to be
Subsidize Other          applied to transient lodging operations. Moreover, transient lodging, as a
Activities               mission-essentialactivity, is supposedto provide lodging at the lowest
                         possible price. According to DOD and Army regulations,’ chargesshould
                         cover operating costs for maid and custodial servicesand for amenities
                         not available from appropriated funds.2Chargescan also be used to help
                         defray the cost of minor improvements to transient quarters (e.g., the
                         installation of telephones,televisions, and other amenities). Transient
                         lodging should not be generating profits above and beyond these needs.


Charges to Transient     Command and lodging office officials at both the installation and major
Personnel Have Been      command levels and officials at the Army Community and Family Sup-
                         port Center confirmed that lodging chargeshad been set without regard
Inflated                 to the actual costs of operating and improving transient quarters. They

                         ‘DOD Housing Management Manual (DOD 4166.63-M, June 1988); Billeting Operations (Army Regula-
                         tion 210-11, July 16, 1983), hereafter referred to as “Army lodging regulation;” Army Regulation
                         215-1, updated November 1988.

                         2Most operating expenses (for utilities, maintenance, and so on) and all major construction and repair
                         should be paid with appropriated funds.



                         Page13                                                  GAO/NSIAD-90-241
                                                                                               Army On-BaseLodging
                                                                                                              ,

                          chapter 2
                          Charge6for On-BaseLodgingWereInflat43d
                          andPunti Divertedto Payfor
                          OtherActivities




                          said that the chargeshad been set to generate money for MWR activities
                          in light of reductions in appropriated funds for these activities.3

                          For example, one Army installation established its chargesat about $4
                          and another at $9 (20 percent and 46 percent, respectively) beyond the
                          actual amounts neededto operate and accomplish their 5-year improve-
                          ment projects for transient quarters. Officials at both installations cited
                          command prerogative, rather than a required analysis of need, asjustifi-
                          cation for inflated costs, These overchargesaccount for substantial
                          amounts of per diem costs.We estimated that, as of September30, 1989,
                          MWR funds at FORSCOM and TRAMX:    installations had accumulated over
                          $70 million since 1986 due to overchargesthat were not required for
                          planned lodging improvements.4By the end of fiscal year 1990, this
                          amount may exceed$100 million.
                          Our review of financial records confirmed that excesstransient funds
                          were being used to support MWR activities such as the noncommissioned
                          officers’ clubs, arts and crafts facilities, golf courses,and other sports
                          activities. Moreover, since 1984, TRADOC     and FORSCOM have invested
                          about $23 million of transient lodging funds in the construction of tem-
                          porary PCS housing-a nonappropriated fund activity.

                          The Army Audit Agency has reported similar findings.6 During audits
                          covering 14 installations, the Army Audit Agency noted that lodging
                          chargeshad been increasedto support nonappropriated activities, with
                          no apparent plan to reinvest the money in transient lodging operations.


Charges for Transient     The chargesfor transient quarters at someinstallations have been used
Quarters Have Been Used   to subsidize officers’ clubs. According to Army records and headquar-
                          ters and major command officials, six Army installations have “moved”
for Questionable          $1 to $6 from each daily transient lodging charge to their officers’ club
Objectives                accounts.Thesetransfers were justified as necessaryto cover the costs
                          of the travelers’ breakfasts at the clubs, but lodging officials told us that
                          the transfers had been made whether or not the meals were eaten. At
                          another installation, the accounting office moved $5 of each daily

                          30perations for some MWR activities such as libraries and gymnasiums receive appropriated funds.

                          4This figure represents profits above and beyond what MWR has invested in improving transient
                          quarters.
                          %xnmary Report of Audits of the Installation MWR Fund (AR 87-800, June 30,1987) and planning
                          and Budgeting for the Installation MWR Fund (SW 90800, Dec. 4,198Q).



                          Page14                                                GAO/NSIAIMO-241
                                                                                             Army On-BaseLudgh
chapter2
Chug00forOn-Bme
              LadgIng
                    WereInflated
andFhndaDivertedto Payfor
OtherActivitia




lodging charge to the officers’ club account without offering any meal or
service to travelers in return.
Chargesto transient personnel were also used to subsidize foreign stu-
dents’ staying in transient quarters. Within TRADOC,foreign students are
charged $8 a day, whereas U.S. transient personnel pay the transient
service charge, which ranges from $10 to $36 a day. Similarly, at least
one FORSCOM  installation chargesPCSpersonnel staying in transient
quarters a lower rate than it chargestransient personnel on temporary
duty. At this installation, PCSpersonnel were charged $6 less than tem-
porary duty transients to stay in transient quarters. According to
lodging office officials, commandersbelieved that becausePCSpersonnel
were not on per diem, they could not afford to pay the higher rate.
Costly accommodationsfor distinguished visitors also raise the charges
for other transient quarters. The Army attempts to provide its transient
personnel with facilities comparable to standard commercial lodgings.
(Seefig. 1.1.) At the installations we visited, however, we found that
this standard might have been exceededfor distinguished visitors’
quarters (DVQ), which were furnished with such nonstandard amenities
as customized furniture and videocassetterecorders. (Seefigs. 2.1,2.2,
and 2.3.) Yet, the daily charge for DVQSis usually the sameas for stan-
dard transient quarters.




Page15                                  GAO/NSIAD-90&lArmy On-Base
                                                                 I.K&@
                                         Chapter2
                                         Chargenfor On-BaneLodgingWereInfMxxl
                                         andFundsDivertedto Payfor
                                         OtherActivities




Figure 2,l: H6llway8 of a Four-Bedroom
DVQ




                                         Page16                                 GAO/NSIAD-90-241
                                                                                              Army On-BaseLodging
                            Chapter2
                            Charges for On-Baee
                                              Aging WereInflated
                            andFundsDivertedto Payfor
                            OtherActivities




                              .        .._- ,,.- ,-
Figure 2.1: Continued




                            -.___.     .- ..,,,_,.,
                                               ,,,. -_. ,-,._ ,,, _..,,.


                        Y




                            Page17                                         GAO/NSIAD-SO-241
                                                                                        Amy On-BaseLodging
                                           Chapter2
                                           Chargerfor On&se Ludghg WereInflated
                                           andFund6Divertedto Payfor
                                           OtherActivltiea




Figure 2.2: Livlng Room ot a DVCi




Figure 2.3: Living Room and Kitchen of a
DVQ




                                                                                                !I'
                                                                                                I     i




                                           Since the Army considersDVQSa part of transient lodging operations,
                                           the cost of these DVQSis absorbedby transient lodging. In effect, soldiers


                                           Page18
                      chapter2
                      Chargeafor On-Bee49
                                       LodghgWereIn!lated
                      mdFundoDhmtedtoPayfor
                      OtherActivitiee




                      who stay in standard rooms at transient quarters subsidize the more
                      costly, less profitable DVQS.
                      We found that one Army installation had created a particularly expen-
                      sive DVQ,totally renovating a four-bedroom house and supplying it with
                      customized furnishings, drapes, and carpets at a cost of nearly
                      $144,000. Two custom throw rugs alone cost $3,600. Moreover, the
                      installation was planning to spend about $272,000 for special stationery
                      and landscaping for DVQ.When we questioned these expenses,the instal-
                      lation adjusted its plans and lowered its cost projections to $81,600.
                      At the sameinstallation, a large office spacein transient quarters had
                      been converted into an exercise room with equipment, while a fully
                      equipped gym was located acrossthe street. According to installation
                      officials, the exercise rmrn was provided to meet commercial hotel stan-
                      dards and to ensure that guests were not inconvenienced.Another
                      installation was planning to build a $600,000 dome over a small pool
                      next to a transient facility, the cost to be borne by the transient lodging
                      account.
                      The DODHousing ManagementManual, which stipulates that funds
The Army Has Not      received from lodging transients shall be used to maintain and improve
SegregatedFinancial   lodging facilities, implies a requirement to maintain the integrity of the
Accounts for          related financial account6 However, in the absenceof explicit DOD gui-
                      dance on accounting for lodging funds, the Army, unlike the Navy or the
Transient Lodging     Air Force, has established a single MWRfund that mergestransient
                      lodging accounts with other MWRaccounts.Moreover, the Army system,
                      contrary to congressionalcommittee guidance, allows transient lodging
                      funds to be used for other MLVR   activities. Army policy requires that 90
                      percent of the net income resulting from lodging operations be rein-
                      vested within a &year period to meet the capital expenditure needsof
                      either transient lodging or temporary PCShousing. However, Army
                      policy also stipulates that within the S-year period, transient lodging
                      cash balancesmay be used for the short-term benefit of other MWR
                      programs.
                      As permitted under Army Regulations 210-11,216-l, and 216-6, tran-
                      sient lodging accounts are first combined with the largely nonap-
                      propriated temporary PCShousing accounts,and this combined lodging
                      account is then commingled with the accountsof all MM%activities. The

                      gWhile the manual does not state that funds shall be used “only” or “solely” for transient lodging
                      facilities, the legislative history discwwd in chapter 1 clearly requirea such an interpretation.



                      Page19                                                  GAO/NSW90-241         Army On-Base Lodging
                       Chapter2
                       Chargeafor On-BaseLodgingWereInflated
                       andF+undaDivertedtoPayfor
                       OtherActivities




                       Army’s practice thereby fails to provide controls that preserve the
                       integrity of the transient lodging accounts,and the financial status of
                       lodging operations cannot be readily determined. For example, interest
                       income from transient lodging is not reported in the lodging income
                       statement; it is credited instead to the total MWRaccount. In addition,
                       depreciation expensesare reported in the lodging accounts as reductions
                       to income, but no corresponding lodging reserve account is recognized.
                       The effect of these actions is that the lodging account is not credited
                       with monies that, by non directive, should be identified for transient
                       lodging use. According to officials responsible for the directive, DOD
                       expects the Army to ensure that its guidance is followed. However, DOD
                       has not followed up to check Army compliance.

                       Under DODand Army internal control programs, managementis respon-
DOD and the Army       sible for establishing a comprehensivesystem of controls to ensure that
Have Not Effectively   the organization’s objectives are met and its procedures are efficiently
Monitored Operations   operating. These controls consist, in general terms, of (1) sufficiently
                       specific guidelines (regulations, directives, instructions, and so on) to
and Costs for          achieve objectives; (2) clear, comprehensiveprocedures that properly
Transient Lodging      implement those guidelines under an integrated managementprogram;
                       and (3) a processof program evaluation and monitoring that regularly
                       reviews operations to ensure the proper observanceof procedures and
                       guidance.

                       In reviewing DOD'S and the Army’s controls over transient lodging
                       accounting and operations, we found that neither DODnor the Army had
                       effectively evaluated or monitored transient lodging operations to
                       ensure that lodging costs were kept to the minimum neededfor author-
                       ized operation and minor improvements. DOD and the Army have dele-
                       gated the task of policy enforcement to the major command level. The
                       major commandsresponsible for transient lodging, however, have also
                       declined to be policy enforcers. As a result, the Army has not properly
                       implemented DODdirectives or its own regulations. For example, at the
                       time of our visits, neither FoRSCOMnor TRADOC    lodging organizations had
                       reviewed the justification for transient lodging charges.In fact, neither
                       IWSCOM nor TRADoc    had an up-to-date list of installation charges at the
                       beginning of our review. During our review, Army headquarters offi-
                       cials responsible for transient lodging expressedconcern about the trend
                       of increasing transient lodging charges,especially in the European com-
                       mand, which charges as much as $66 a day for on-baselodging. How-
                       ever, they believed that they lacked the authority to question these



                       Page20
                      Chapt8r2
                      Charge-a
                             for On-BaseLodgingWereInflated
                      andF’undsDivertedto Payfor
                      OtherActivities




                      charges,By default, this internal control check was passedon to the
                      installation level.


                      DOD'Sand the Army’s    controls have not been effective in ensuring an
Conclusions           efficient and effective transient lodging program. The conflict between
                      DODregulations and Army practices concerning the use of transient
                      lodging funds has led to millions of dollars in overchargesand to the
                      misapplication of transient lodging funds. Neither DODnor the Army has
                      established a system of guidelines, program evaluation, and monitoring
                      to ensure that the Army makes proper chargesfor transient lodging and
                      doesnot divert transient lodging proceedsto support MWRactivities.
                      Further, in the absenceof effective guidance and monitoring by the
                      Army, someinstallations have provided DVQSwith questionable and
                      expensive amenities. As a result of this lack of effective controls over
                      per diem costs,the Army has not made the most effective use of funds
                      appropriated by the Congressto train its soldiers.

                      We recommendthat the Secretary of the Army take the following
Recommendations       actions:
                  l Direct the major commandsand the Army Community and Family Sup-
                    port Center to stop diverting transient lodging funds to MWRactivities.
                  l Review the MWRaccountsof the major Army commandsto (1) identify
                    accumulated overpayments for transient lodging, (2) recognizeeach
                    overpayment as a liability to the appropriation account initially charged
                    or its successor,(3) charge the overpayment to the general fund of the
                    U.S. Treasury as a miscellaneousreceipt if the appropriation account
                    cannot be identified, and (4) develop and implement a repayment plan,
                  . ReviseArmy Regulations 210-l 1, 216-1, and 215-5 to stipulate that tran-
                    sient lodging funds must be applied only to transient facilities, as
                    required by DODdirectives.
                  l Exclude transient lodging funds from the Army’s single fund.
                  l Establish controls to monitor Army installations’ compliance with DOD
                    and Army regulations that stipulate that lodging chargesshould not
                    exceedthe minimum amount neededto meet authorized costs and
                    planned improvements.
                  . Provide more specific guidance to commanderson the types and quality
                    of furnishings appropriate for transient quarters.
                      We also recommendthat the Secretary of Defenseestablish controls to
                      monitor the Army’s compliance with DOD'Stransient lodging directives.


                      Page21                                  GAO/NSIAD-90-241
                                                                            Army On-BaseLodging
                              Charge0for ChBaaeLodgingWereInflated
                              andFtwle Dlvwted to Payfor
                              OtherActlvltlea




Agency coments
Our Evaluation
               andthat
                    the
                    generally agreedwith our findings and recommendationsand stated
                              DOD
                                       Amy    will




                          . implement a policy directing the separation of temporary lodging funds
                            from the single fund when DODannouncesits guidance in fiscal year
                            1991,
                          l revise its transient lodging regulations to comply with the guidance to be
                            issued by DODin fiscal year 1991,
                          l develop and implement a reporting system to monitor installations’ com-
                            pliance with regulations governing chargesfor transient lodging, and
                          l issue guidance to commanderson the types and quality of furnishings
                            appropriate for transient lodging.
                              DODalso said that it would develop a program evaluation and monitoring
                              system to ensure the military services’ compliance with its transient
                              lodging regulations.
                              In addition, DODsaid that the Army will review all its transient lodgings
                              to determine the full extent of overchargesto their occupants.The
                              Army expects to complete the review by July 31,199l. DODnoted that
                              the instances of overchargeshad occurred during a period of major
                              policy transition, when it adopted practices to operate nonappropriated
                              fund programs and facilities in a business-likemanner. DODalso pointed
                              out that, over the years, the military serviceshave attempted to meet
                              the government’s responsibility to provide required transient lodging in
                              the absenceof military construction funding.
                              DODdid not agree with our recommendation that overchargesbe
                              returned to either the originating appropriation or to the US. Treasury.
                              Although DODagreed with the intent of our recommendation, it pro-
                              posed,instead, that it disburse the funds representing overcharges
                              basedon DOD’Slegal determination of the disposition question.
                              We continue to believe that our recommendation is sound since it is
                              basedon prior Comptroller General decisionsregarding the handling of
                              overpayments. For example, in DefenseLogistics Agency-Disposition of
                              Funds Paid in Settlement of Contract Action, 67 Comp. Gen. 129 (1987),
                              the Comptroller General decided that generally all collections from
                              sourcesoutside the government for the use of the United States shall be
                              deposited to the general fund of the Treasury. An exception involves
                              collections that are consideredto be refunds. A “refund” is an adjust-
                              ment for previous amounts disbursed or a recovery of an erroneous dis-
                              bursement from appropriation accountsthat are directly related to, and


                              Page22                                  GAO/NSIADBO-241
                                                                                   Army On-BaseLudging
chflpter 2
Charge0for On&se L4dghgWereInflat.43d
andF’undaDivertedto Payfor
OtherActivltlea




reductions of, previously recorded payments from the accounts.Money
is returned from an outside source (the nonappropriated single fund) for
the use of the United States when the excesswas paid in error (when it
constituted an overcharge) and when an adjustment for a previously
disbursed amount is being made. Clearly, the appropriated fund, which
either reimbursed the soldier or directly paid part of the service charge,
is the entity directly affected by the overcharge, and therefore, it should
be credited with the adjustment. When funds cannot be identified as a
refund of monies paid from particular appropriations, the general rule
applies, and refunds must be deposited to the general fund of the Trea-
sury as miscellaneousreceipts.
With respect to the disposition of funds representing overcharges,Army
officials told us that, due to congressionalreluctance to fund transient
housing used for PCSpersonnel and their families, the Army would
prefer to use the overchargesto renovate transient facilities and, as it
has done in the past, to construct temporary PCSfacilities, since funds
for both types of lodging are in the single fund. We do not agree that
funds generatedthrough overchargesin transient lodging should be
used to construct or renovate temporary PCShousing. non regulations do
not allow for this transfer of funds, and more importantly, the Army’s
current practice bypasseslegislative oversight by using appropriated
monies to fund a requirement that the Congresshas been reluctant to
support, Congressionalguidance did not favor including mission-
essential transient lodging in the single fund. Moreover, in January
1986, in a report on nonappropriated fund construction, the MWRPanel
of the Subcommitteeon Readiness,HouseCommittee on Armed Services,
directed that temporary PCShousing be operated on a self-sufficient
basis.
A proposed DODdirective would include temporary PCSlodging as a
mission-essentialactivity. If this directive is adopted, funds generated
by transient lodging could becomeavailable to fund temporary PCS
housing. In essence,DODwould accomplish through a changein regula-
tions, a justification for using appropriated funds for temporary PCS
facilities, thereby circumventing congressionalintent.
DODbelieves that   the Army’s inclusion of transient lodging funds in an
installation’s single fund was not contrary to congressionalguidance,
citing two congressionalactions. In DOD'Sview, the Army reasonably
interpreted the ReadinessSubcommitteeMWRPanel’s September9, 1986,
guidance as authority to designate all rooms used for less than 30 days



Page28                                   GAO/NSIAD-SO-241
                                                      Army on&se meine
chaptm 2
Chargesfor On-Baee
                 LodgingWereInflated
andFundaDherted to Payfor
OtherAetlvltiea




as short-term appropriated fund transient facilities and to include this
activity in the single fund.
In our opinion, the panel’s guidance clearly indicates that the only short-
term transient lodging facilities permitted to be included in the single
fund were recreational facilities. The panel Chairman wrote that

. . .you advised me that if the single fund NAFI [Nonappropriated Fund Instrumen-
tality] is approved, the Army intends to include short-term transient lodging and
accommodationsunder this approach. It is my understanding this would apply to
recreation facilities such as guest houses,the Armed Forces Recreation Centers, cot-
tages and cabins. I approve including such short-term transient lodging facilities in
the single-fund NAFI. Lodging facilitiesat    are part of the billeting mission and
properly supported with appropriated funds should not be included in the Installa-
tion Morale, Welfare, and Recreation Fund. (Emphasis added.)

We believe that the Chairman’s guidance clearly excludes transient
lodging supported by appropriated funds.
DODalso cited the congressionalresponseto      an August 10, 1987, letter
from the Office of the Assistant Secretary of Defensefor Force Manage-
ment and Personnel.In this letter, DODproposed a recategorization of
installations’ MWRprograms, including temporary lodging facilities (in
support of official travel), The letter also encouragedthe servicesto
organize according to the single-fund concept, citing the Army’s suc-
cessful implementation of the concept.According to DOD,congressional
approval of the recategorization was tantamount to approval of the
Army’s inclusion of transient lodging in the single fund.
Our review of DOD’Sletter shows that while it discussesa reclassification
of MWRactivities and certain managementimprovements in their opera-
tion, comments regarding the single fund are very general and do not
specifically refer to transient lodging facilities. Moreover, these com-
ments do not suggestthat the single fund would include all MWRactivi-
ties without exception. For example, the letter states that “most” of
each installation’s nonappropriated fund assetswill be merged. The dis-
cussion on recategorization of MWRactivities (for example, category VIII
to category A and so forth) says nothing regarding the application of
single-fund accounting. Moreover, the Air Force and the Navy have
reclassified transient lodging but have not included it in their “single
funds.” Under such circumstances,a nullification of the Chairman’s gui-
dance that excludes appropriated fund transient lodging from the single
fund cannot be fairly implied.


Page24                                        GAO/NSIAD-90.241
                                                            Amty On-BaseLodging
Chnptm2
Chargesfor On-BaseLodgingWereInflated
andPandsDivertedto Payfor
OtherActiviti~




Given the Army’s reluctance to ensure the integrity of transient lodging
funds, we have added a recommendation to this report that, if adopted,
will result in the exclusion of transient lodging from the Army’s single
fund.




Page26                                  GAO/NSIAIMO-241
                                                     Army On-Baee
                                                                Lodging
Chapter 3

The Army Paid for More Costly Off-Base
I.&lgi.ngWhen On-Baseedging WM Available

                             Although DOD regulations prohibit the lodging of transient personnel in
                             commercial accommodationsoff basewhen government facilities are
                             available, the Army has donejust that becauseof inadequate controls
                             over room reservation systems, inefficient assignmentpriorities for
                             DVQS, and the lodging of personnel changing assignmentsin quarters set
                             aside for transients. Consequently, training funds were spent unnecessa-
                             rily on more expensive off-base lodgings.


                             In an effort to reduce training costs,DOD regulations require the services
Off-Base Per Diem            to lodge transient personnel on baseto the maximum extent possible.1
Was Granted When             Only when installation accommodationsare not available should tran-
Transient Quarters           sients be granted the more expensive off-base per diem (based on local
                             commercial costs) for lodging. To get this increasedper diem, transients
Were Available               must obtain documentation that lodging at government facilities is not
                             available. However,,the Army was granting transient personnel the off-
                             baseper diem when lodgings set aside for their use were available. For
                             example, we estimated that, during the last quarter of fiscal year 1989,
                             the two Army installations we visited could have avoided more than
                             $600,000 in off-base per diem costs.The Army Audit Agency has
                             reported similar findings at a number of Army installations.2


Faulty Reservation System    The Army’s reservation system lacked the controls necessaryto ensure
Fosters Inefficient Use of   the efficient managementof transient quarters. In the Army, the assign-
                             ment of transient quarters for most ranks is managedby lodging offices.
Transient Quarters           The Army’s standard reservation procedures enable transient personnel
                             to call the lodging office at their temporary duty sites at least 16 days
                             before their actual travel to reserve rooms on base.If the reservation
                             system shows no vacancy in transient quarters for the dates requested,
                             the traveler is guaranteed authorization for off-base lodging. After tran-
                             sient personnel arrive, they go to the lodging office to pick up the forms
                             (statements of nonavailability) documenting the lack of quarters.

                             The Army’s reservation system doesnot contain a recheck procedure to
                             take advantage of cancellations or unclaimed reservations, which occur
                             frequently. Transients who have been guaranteed off-base per diem are
                             not required to check with the lodging office again to seewhether rooms

                             ‘The Joint Federal Travel Regulations: Uniformed service Members, Para. U4400 (Change No. 16,


                             2Advbory Report on Transient ILKI-    (SW 89X3, Jan. 11,lQSQ) and Troop Hous      (So 89-204,
                                     1QW.

                             Page 26                                              GAO/NSJAD-QQ-241 Army On-Base Lodging
                             chapter8
                             Tl~eAnayPaidforMoreCoetlyOPf-Base
                             LodglngWhenOn&aeLodglng
                             war,Available




                             have becomeavailable since their first inquiry, which might have been
                             months in advance.As a result, temporary duty travelers were lodged
                             off basewhen transient quarters were available. For example, at one
                             Army installation during a l-month period, the lodging office authorized
                             146 transient personnel off-base per diem for a total of 1,939 days,
                             when during the sameperiod 206 reservations were canceledor
                             unclaimed, leaving a total of 6,040 days available to lodge transient
                             travelers.


The Army’s Inefficient Use   At Army installations, the assignmentof DVQSis usually controlled by
of DVQs Has Increased Per    the protocol office, which limits occupancy to the ranks of colonel and
                             above.At the installations we visited, DVQShad vacancieswhen tran-
Diem Costs                   sient personnel of lower rank were granted off-base per diem for lack of
                             government rooms. The averageusagerate of DVQSfor TRADOCand FOR-
                             SCOMwere much lower than that for other transient temporary duty
                             quarters. For the installations visited, we estimated that the DVQusage
                             rates in fiscal year 1989 were less than 66 percent.
                             Somelodging office officials told us that they believe that if lodging
                             offices were responsible for the assignmentof DVQS,the DVQusagerate
                             could be substantially increased.


Use of Transient Quarters    PCSpersonnel receive an allowance to pay for quarters off base or for
by Army PCSPersonnel         the lower priced temporary PCsquarters on base.DOD'SHousing Manage-
                             ment Manual and the Army’s lodging regulation also allow them to use
Has Denied Rooms to          transient lodging facilities designated for temporary duty transients if
Temporary Duty Travelers     spaceis available. However, someinstallations have allowed PCSper-
                             sonnel to stay in transient lodging quarters, thereby causing the authori-
                             zation of off-base lodging for temporary duty travelers. During 3
                             months at one installation in 1989, PCSpersonnel and their families occu-
                             pied approximately 34 rooms of its transient quarters per month. This
                             occupancy equates to approximately 2,040 spacesthat could have been
                             used by transient personnel. According to our analysis of this period, we
                             estimated that it cost an additional $30,600 to send travelers off base
                             while PCSpersonnel occupied these transient quarters.




                             Page27
                       Chapter8
                       TheArmy Paidfor MoreCostlyOff’-Base
                       LodgingWhenOn&se Lodging
                       WasAvailable




                       The Army’s lodging regulation authorizes installations to lodge tran-
Inefficient            sients in barracks set aside for unaccompaniedpersonnel. Army com-
Management of Army     manders who control these barracks may, at their discretion, set aside
Barracks Can Lead to   spacesfor lodging transients.
Unnecessary Off-Base   Though DODregulations require the maximum use of government facili-
Per Diem               ties before granting off-base per diem, the barracks at one TRADOCinstal-
                       lation we visited were not fully used. These barracks had vacancies
                       while transient personnel able to be housed in them were lodged off
                       base.This condition was the result of the (1) lodging officers’ failure to
                       monitor barracks vacanciesand use the available spacesbefore issuing
                       off-base authorizations and (2) commanders’inefficient assignment
                       procedures.
                       DOD'SJoint   Federal Travel Regulations and the Army’s lodging regula-
                       tion require that facilities for transient personnel be used to the max-
                       imum extent possible. They also require that authorizations for off-base
                       per diem be granted only if adequate facilities are not available on base.
                       The Army’s lodging regulation also requires the lodging office to mon-
                       itor the use of unaccompaniedpersonnel housing. However, the Army
                       has not adequately monitored off-base authorization for unaccompanied
                       personnel housing. Monitoring could result in the discovery of unused
                       facilities as we found at one installation that had just instituted a vali-
                       dation review. As a result of its first check of occupancy figures, the
                       lodging office found that Army commandershad not properly computed
                       the availability of spaceswithin their barracks. On the basis of that
                       review and the managementinitiative of one battalion, somebarracks
                       were realigned, and approximately 90 more spaceswere identified that
                       could be made available to transient personnel. The battalion also found
                       that it could provide quarters to 20 permanent personnel lodged off
                       base.The Army similarly lacks effective control over the commanders’
                       requests for off-base per diem. According to lodging officials, they have
                       the responsibility for granting off-base housing authorizations, but lack
                       the authority to question a commander’smanagementof unaccompanied
                       personnel housing barracks. Therefore, they rely on commanders’
                       requests in authorizing off-base per diem.
                       Lodging officials, however, told us of instances in which commanders
                       had requested off-base authorization to preserve “unit integrity,” that
                       is, in caseswhen an entire unit of transient personnel could not be
                       housed within transient barracks. Lodging officials granted such
                       requests to maintain unit integrity, even though the requests were not
                       properly justified. Command officials explained that training missions


                       Page28                                  GAO/NSIAD90-241
                                                                             Army On-Base
                                                                                        Lodging
                        TheArmy Paidfor MoreCoetlyOff-Ba#e
                        LodgingWhenOn-Baee Lodging
                        WaeAvaUable




                        depend upon transient classesbeing together; however, this requirement
                        was not on the travelers’ orders as required, and when personnel were
                        authorized off-base lodging, they were housed in different motels in the
                        community-a practice that seemsto dispute the argument that unit
                        integrity should be maintained. The Army Audit Agency has reported
                        similar problems, and for a 3-month period at seveninstallations, it esti-
                        mated that $760,000 had been spent for off-base lodging when transient
                        quarters had reported vacancies.3
                        In addition, someunits had diverted barracks spacesto administrative
                        usessuch as storage, study, and supply without approval of the major
                        command as required. For example, at one TRALIOCinstallation, eight
                        spacesin a 48-personbarracks had been diverted and used as study
                        halls or storage areas without proper approval. We also found that
                        FORSCOM  had not approved any of the reported 9,800 unaccompanied
                        personnel housing diversions, although it is required to do so. These
                        inaccuracies and unauthorized diversions could have resulted in tran-
                        sient personnel being denied on-baselodging and receiving off-base per
                        diem. The Army Audit Agency has reported similar problems at a
                        number of locations.4

                        The Army’s internal control system requires all organizations to review
Army Internal Control   internal controls annually to verify that they are in place and working.
System Is Incomplete    Army Regulation 1l-2, governing the internal control system, requires
                        an annual statement of assurancethat adequate internal controls exist
                        to help prevent fraud, waste, mismanagement,and misappropriation in
                        compliance with the 1982 Federal Managers’ Financial Integrity Act.6
                        The annual statement of assurancemust report material weaknesses
                        discovered in the internal controls during the current period, with plans
                        for corrective action and a status report on previously reported
                        unresolved material weaknesses.The regulation also requires that, if
                        audit organizations have reported deficiencies in a program or if the
                        program has been subjected to congressionalhearings, the organization
                        responsible for the program should consider it as potentially having
                        material weaknessesin internal controls.


                        3Troop Housing (SO 89-204, Jan. 23,1989).
                        4Troop Housing (SO 89-204, Jan. 23,1989).
                        6The act requires heads of agencies to make annual examinations of their internal controls and issue
                        annual reports on their systems and plans to correct identified weaknesses.



                        Page29                                                 GAO/NSIAlMO-241
                                                                                             Army On-BaseLodging
              We found that Army Regulation 210-l 1, which governs transient lodging
              operations, has been under revision for a number of years. According to
              Army headquarters officials responsible for this regulation, it will not
              be included in the Army’s internal control system until the revision is
              complete. Army Regulations 216-l and 215-5, which cover the
              accounting for transient lodging, are included in its internal control
              system, but on the basis of our review and the review of the Army Audit
              Agency: transient lodging managers are not assessinginternal control
              weaknesses.This lack of assessmentmay explain why no material
              weaknessesin transient lodging were reported in the Secretary of the
              Army’s Annual Statement of Assurance for fiscal years 1987 through
              1989, even though these problems had been reported previously by the
              Army Audit Agency and somehave been the subject of congressional
              hearings.

              The Army lacks effective control over the managementof transient
Conclusions   quarters to ensure that off-base per diem is only authorized when lower
              cost government facilities are not available. In addition, the Army has
              not ensured the economical use of government facilities. It does not
              require transient personnel to recheck on-basevacanciesbefore their
              arrival to ensure that canceledor unclaimed reservations are used to
              limit off-base per diem. Further, by permitting protocol offices to control
              assignmentof DVQS, the Army doesnot promote economy and efficiency
              within these facilities. The Army also lacks controls to limit the stay of
              PCSpersonnel in transient lodging facilities, to verify occupancy figures
              reported for barracks, and to enforce Army policy on unit integrity and
              the use of barrack space.Consequently, transient lodging facilities have
              not been effectively used, resulting in increasedper diem and therefore,
              increasedtraining costs.
              Becauseof the widespread control weaknessesdiscussedin this report
              and their adverse impact on the Army’s ability to make effective use of
              training funds, we believe that it is important to focus the attention of
              top managementon their ultimate resolution, especially by reporting
              these weaknessesin the Annual Assurance Statement. As Army Regula-
              tion 11-2 states, reporting these problems allows higher levels of man-
              agementto (1) evaluate the adequacy of suggestedand implemented
              corrective actions, (2) make any neededchanges,and (3) monitor the
              corrective actions until they are completed. Identifying transient lodging

              aPlanning and Budgeting for the Installation MWR Fund (SW 90-800, Dec. 4,198Q).



              Page80                                               GAO/NSIAD-90-241
                                                                                 Army On-Base Lodgiug
                        operations as a material weaknesswould help to ensure top manage-
                        ment’s attention.

                        We recommendthat the Secretary of the Army establish controls to
 Recommendations        ensure that installations fully use on-basefacilities before authorizing
                        off-base per diem. At a minimum, these controls should include
                        making authorization of off-base per diem contingent upon a vacancy
                        recheck at somespecified time before arrival,
                        revising room assignmentprocedures to better use DVQS,
                        ensuring that personnel moving to new stations do not displace transient
                        personnel in transient lodging,
                        instituting regular reviews at all installations of the accuracy of bar-
                        racks occupancy rates to ensure the identification of vacanciesfor tran-
                        sient personnel, and
                    .   identifying transient lodging operations as a material weaknessin the
                        Secretary of the Army’s next Annual Assurance Statement.

                        DODagreedwith     our audit findings and recommendations.It stated that
, Agency Comments       the Army will take a number of actions to help ensure the full use of on-
                        base facilities before off-base per diem is authorized, including the
                        following:

                    l The Army will review the current housing reservation system with a
                      view towards improving the use of transient lodging facilities. The
                      review, along with reservation system improvements, is expected to be
                      completed by July 3 1,199 1.
                    l The Army will enforce existing policy requiring that DVQSbe occupied
                      by temporary duty travelers when they are not reserved for distin-
                      guished visitors.
                    . The Army will regularly review barracks occupancy rates at all
                      installations.
                        DODalso said that the Secretary of the Army’s fiscal year 1991 Annual
                        Assurance Statement will identify transient lodging operations as a
                        material weakness.




                        Page81                                   GAO/NSIMMO-241
                                                                              Army On-BaseLodging
Appendix I

Commandsand Units GAO Visited


                 Office of the Assistant Secretary of Defense:
             . Directorate of Construction and Housing (Production and Logistics),
               Washington, DC.
                 Department of the Army:
             l Office of the Chief of Army Reserves,Washington, D.C.
             9 National Guard Bureau, Washington, DC.
             . Office of the Chief of Engineers,Washington,D.C.
             . Army Audit Agency, Washington, D.C., and San Antonio, Texas
             l U.S. Army Community and Family Support Center, Washington, DC.
             . Headquarters, U.S. Army Training and Doctrine Command,Fort Monroe,
               Virginia
             . Fort Lee, Virginia
             l Headquarters, U.S. ForcesCommand,Fort McPherson,Georgia
             . Fort Hood, Texas

                 Department of the Navy:
             . Commander-in-Chief, U.S. Atlantic Fleet, Norfolk, Virginia
             l Naval Military PersonnelCommand,Washington, D.C.
             l U.S. Naval Amphibious Base,Norfolk, Virginia
             . Fleet Combat Training Center, Atlantic Dam Neck, Virginia
                 Department of the Air Force:

             l   Air Force Directorate of Engineering and Housing, Tyndall Air Force
                 Base,Florida
             l   Air Force Audit Agency, Washington, D.C.




                 Page32                                 GAO/NSIAD-90-241
                                                                      Army On-BaseLodging
OrganizationalRelationshipof Army bdging
and the MWR Communiw


                   !J&!f!oh                                                        MWR Commun&


              Chief of Enginwre                                            Deputy Chid of Staff for lbreonnd




                                                      Headquarttun




I       Deputy Chief of Staff Engineer

                                                        Maiw
                                                      Command
                                                                     I       Chputy Chief of Staff Pmonnol
                                                                                                                  /


                      I
r

               Houring Divirion




I   Directorate of Englneerlng and Housing                               Directorate of Pomonriel and Community
                                                                                         Activiuea


                                                      lnatallatiul

                                                                                     MWR
                                                                                       council
                                                                     I
                                                                                           1

         Transkmt Lodging Manager                                    (            MWRFund Manager                     1




                                             Page83                      GAO/NSIAD-9O.241
                                                                                       Amy Oa-Baee
                                                                                                 LoaQuf
Appendix III

Army Audit Agency Reports on Lodging and ’
MWR Operations

               Planning and Budgeting for the Installation Morale, Welfare, and Recre-
               ation Fund (SW 90800, Dec.4, 1989).
               Troop Housing (SO89-204, Jan. 23, 1989).
                 Fort Sam Houston, Texas (SW 89-802, Sept. 6, 1989).
                 XVIII Airborne Corps and Fort Bragg, Fort Bragg, North Carolina
                 (SO88-202, June 13,1988).
                 6th Infantry Division (Light), Fort Richardson, Alaska (SO88-201,
                 May 31,1988).
                 U.S. Army Infantry Center and Fort Benning, Fort Benning, Georgia
                 (SO88-200, Mar. 17, 1988).
                 U.S. Army Field Artillery Center and Fort Sill, Fort Sill, Oklahoma
                 (SW 88-202, Dec. 17, 1987).
                 1st Infantry Division (Mechanized) and Fort Riley, Fort Riley, Kansas
                 (SW 88-201, Dec. 16, 1987).
                 10th Mountain Division (Light Infantry) and Fort Drum, Fort Drum,
                 New York (SO87-204, Sept. 30, 1987).

               Advisory Report: Transient Lodging (SW 89-A3, Jan. 11,1989).
               Morale, Welfare, and Recreation Activities, U.S. Army South (Panama)
               (SW 87-802, Sept. 14, 1987).
               Summary Report of Audits of the Installation Morale, Welfare, and Rec-
               reation Fund (HQ 87-800, June 30, 1987).
                 Fort Dix, New Jersey (NE 87-800, June 10, 1987).
                 Fort Sill, Oklahoma (SW 87-801, May 12, 1987).
                 Fort Jackson, South Carolina (SW 87-801, Jan. 6,1987).

                 Fort Benjamin Harrison, Indiana (MW 87-800, Dec. 3, 1986).
                 Fort Bliss, Texas (SW 86-801, Mar. 17, 1986).



               Page34                                  GAO/NSIAD-fKb241
                                                                     Army On-BaseLd&ng
Anuy Audit AgencyReportaon Ludgingand
MWBoperations




Familv and Troor, Housing:
  Fort Carson and 4th Infantry Division (Mechanized),Fort Carson,
  Colorado (SW 86-8, Dec. 23, 1986).
  7th Infantry Division and Fort Ord, Fort Ord, California (WE 86-12,
  Aug. 20,1986).
  U.S. Army Chemical and Military Police Center and Fort McClellan,
  Fort McClellan, Alabama (SO86-8, Jan. 30,1986).

Installation Facility Management,XVIII Airborne Corps and Fort Bragg,
Fort Bragg, North Carolina (SO86-701, Jan. 7,1986).




Page36                                  GAO/NSLAD-90-241
                                                     Army On-BaseLodgiug
Appendix IV

CommentsF’romDOD


Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.
                                                                        ASSISTANT           SECRETARY          OF DEFENSE
                                                                              WASWINOTON.        D.C.   20301-4000




                                                                                            Auf331      I990
                             IORCC     MANAOLMLNT
                                 AND   ?CRSONNCL




                                             Mr. Frank C. Conahan
                                             Assistant   Comptroller General
                                             U.S. General Accounting   Office
                                             Washington,   DC 20548
                                             Dear Mr. Conahan:
                                                    This is the Department     of Defense (DOD) response to the
                                             General Accounting      Office  (GAO) Draft Report,  "ARMY HOUSING:
                                             Overcharges    and Inefficient    Use of On-Base Lodging Divert
                                             Training   Funds," dated July 6, 1990 (GAO Code 393355/OSD Case
                                             X8285-A).     The DOD generally    concurs with the GAO findings  and
                                             recommendations.
                                                     The Department has taken action          to review,     address,    and
                                            correct     the deficiencies      identified    by the GAO. During the past
                                            several     years, numerous changes have evolved in the management
                                            of nonappropriated          funds as a result    of DOD initiatives        and
                                            congressional       direction.      Therefore,    it should be noted that the
                                            identified      problems occurred       during a period       of major policy
                                            transition      in which the Department adopted practices               to operate
                                            nonappropriated        fund programs and facilities           in a business-like
                                            manner.       Over the years, the Services          have attempted      to meet the
                                            Government's       responsibility     to provide     required    transient
                                            housing     in the absence of military         construction      funding.      During
                                            the time, the Army formulated             and began to put into place the
                                            policies      designed to achieve that result.
                                                    One of the major findings                 in the report      is an outgrowth          of
                                            the period of significant                policy       change.     Specifically,        the
                                            report     states that $70 million                may have been accumulated              over
                                            several     years from transient              billeting       fees in excess of actual
                                            expenses and used for purposes other than transient                              housing.      The
                                            report     recommends these funds be returned                     to the Treasury         or the
                                            originating        appropriation.           While the Department             agrees with the
                                            intent     of the proposed action,                any transfer      should be made on a
                                            detailed      review.       A complete review of all temporary                    duty tran-
                                            sient housing locations              will     be conducted to determine              the extent
                                            of excess billeting            service      charges that were made in violation
                                            of DOD policy.            To the extent excess charges accrued,                    those funds
                                            so identified         will   be disbursed           based on a DOD legal determina-
                                            tion    of the appropriate           disposition         of those funds.




                                                    Page36                                                           GAO/NSIAIMO-241
                                                                                                                                  Army On-BaseLodging
      AppendixIV
      CommentsFromDOD




        As a result    of the GAO review,      the Department     is also
reviewing     the transient     housing policies     currently    in place.    The
DOD will     implement new policies      that clarify     procedures    and use
of service      charges that may be levied        on personnel    using appro-
priated    funds built      and operated transient      housing.
       Detailed     DOD comments on the specific      findings  and recommen-
dations     contained   in the report    are provided    in the enclosure.
Please be assured that the Department           is committed to ensuring
proper use of appropriated        funds.    The Department appreciates     the
opportunity      to comment on the draft     report.
                                       Sincerely,




Enclosure:
As Stated




      Page37                                        GAO/NSIADfJO-241
                                                                  Army On-BaseLd@n3
                            APpendixlv
                            ChnmentaFromDOD




                                         GAO DRAFT REPORT - DATED JULY 5, 1930
                                           GAO CODE %393355, OSD CASE #&285-A
                     ARMY HOUSING:        OVERCSADGESAND INEFFICIENT USE OF ON-BASE
                                          LODGING DIVERT TRAINING FUNDS
                                             DEPARTMENT OR' DEFENSE COMMENTS
                                                            * * * * *
                                                             FINDINGS
                     FINOINQ:          m 9              --       i
                     I5t;rtur.    The GAO observed that all of the Military                      Services   have
                      facilities      to lodge personnel            in travel     status.     The GAO
                     explained      that some of those facilities                 have been specifically
                      set aside for unaccompanied                personnel     who are temporarily
                      assigned    for training.            The GAO reported        that such facilities,
                     known as transient             quarters,      are supported      with appropriated
                      funds.     The GAO noted that some installations                    also maintain     more
                     elaborately        furnished       quarters      for distinguished       visitors    and
                      high ranking        officers.
                     The GAO pointed     out that transient      personnel     pay for lodging     at
                     the on-base facilities       with a per diem allowance        provided     by
                     their    home commands.    The GAO indicated      that,    when Government
                     quarters    are not available,    transient     personnel    receive    an
                     increased    per diem allowance     to pay for off-base        lodging.
Now on pp~2 and 8.    (P. 2, P* lo/GAO Draft Report)
                     DOD Rea~onrq:          Concur.      It should be noted, however, that all
                     Military      Services      have some transient         facilities       to lodge
                     personnel      who travel       in an official       and/or an unofficial          capacity
                     to installations          located     away from their         normal duty station.
                     Some of those facilities              have been specifically            set aside for
                     unaccompanied         personnel     traveling      on official       temporary    duty.
                     The transient         quarters    are authorized        support with appropriated
                     funds and are built,            maintained,      and operated with appropriated
                     funds.     Individuals       who travel       in temporary       duty status    are
                     generally       housed in those quarters,            if available        and deemed
                     adequate and livable.
                     If no personal       amenities      are provided,      there is no service           charge
                     to the individual;         however, if maid service,            televisions,       video
                     players,     upgrades in furniture         and wall      coverings,       and other
                     items    equivalent     to a commercial       hotel are provided,            a service
                     charge is made to the individual              staying     at those facilities          to
                     pay for those amenities           not provided      with appropriated          funds.
                     Transient     personnel      personally    pay the service          charge and then
                     are partially       or fully     reimbursed     from a per diem allowance
                     granted by their        home command. The amount of per diem allowed is




                            Page88                                              GAO/NSIAD-90441
                                                                                              Army On&se Lodging
                        APpea@=N
                        CommentsFromDOD




                 limited,      depending on the geographical            location      of the military
                 installation       visited.     When Government quarters             are not
                 available,      transient     personnel       stay in off-base       commercial
                 lodging      and generally     pay the commercial or corporate                room rate
                 for their      accommodations.       Again, they are reimbursed               for their
                 expenses from their          per diem allowance.           Transient     personnel,     who
                 stay in off-base          commercial    facilities,      must obtain documentation
                 that lodging       at Government facilities          is not available.
                 Many installations          also maintain   other appropriated              fund    quarters
                 for distinguished         visitors   and high ranking   officers.
                 It should also be noted that,     although  transient       quarters   are
                 authorized appropriated     fund support,  actual     funding    of this
                 support has not necessarily     matched authorization        levels.
                 FINDING 8 : A Part of Arm              Ttw          Fundp Arm SVant on Per D~QIB.
                 The GAO noted that the Army spends billions                   of dollars       each year
                 to train   its soldiers           in the individual      and collective        ta$ks
                 essential    to success on the battlefield.                The GAO explained           that
                 a part of this cost is incurred                 for "per diem" and paid to
                 soldiers   undergoing         training      while in a travel     status.        The GAO
                 pointed   out that on any given day, about 15,000 transient                         Army
                 personnel    are lodged off-base             while on temporary       duty for
                 training   and other official             business.     The GAO reported         that,    in
                 FY 1989, the Army's "per diem" costs for personnel                       staying      at
                 commercial     off-installation           locations    were about $328 million.
                 The GAO found that Public              Law and Department       of Defense
                 regulations        prohibit     authorizing      off-base    per diem when
                 Government lodgings            are available.          The GAO noted that, as a
                 result,     military       bases maintain      facilities     specifically for
Now on p.   8.   lodging     transient       personnel.      (p. lo/GAO Draft Report)
                 DOD Reaoonse: Concur.      Public Law, DOD guidance,     and Joint
                 Federal Travel Regulation      state that,   when adequate Government
                 quarters  are not available,      commercial  facilities  may be used.
                 FINDING (;: -tier               mdmaaement            of wient            L?daina Varv
                 pmona the Servicea .             The GAO learned that,           although       all three
                 Military     Departments         maintain    lodgings     for their        transient
                 personnel,       they differ       in the kinds of facilities                offered.      The
                 GAO reported         that the Army and the Air Force maintain                      separate
                 facilities       as transient        quarters.        The GAO noted that these are
                 known as visiting          officers       or visiting     enlisted       quarters      and the
                 lodgings     are     comparable      in furnishings,        facilities,         and services
                 offered     at a commercial          hotel.      The GAO explained,           however, that
                 the Navy does not keep separate quarters                      specifically         for
                 transients;        instead     they provide        temporary      duty personnel




                        Page89                                               GAO/N-z41              Army on-B&MLodghlg
                                                                                                            I
                             AppendixIV
                             CkmnentaFromDoD




                       billeting    in the bachelor   officers  or bachelor enlisted   quarters,
                       sharing   those facilities    with personnel  who are permanently
                       assigned to the installation.
                       The GAO further       found that the management of transient                lodging
                       operations     and finances         also varies       among the Military    Services.
                       The GAO pointed       out that Army and Air Force installations                 have
                       the same on-base lodging             office       managing both transient     quarters
                       and those temporary          lodging      facilities      used mainly as interim
                       lodging    for military        active     duty personnel      and their   dependents
                       who are making a permanent change of station.                      The GAO noted that
                       the Navy has temporary            lodgings        for permanent change of station
                       personnel     managed separately            from transient     quarters   by a
                       nonappropriated       activity.
                       The GAO explained        that the Army has divided             the management and
                       accounting      function     for transient       quarters     between the Army Chief
                       of Engineers       and the U.S. Army Community and Family Support
                       Center.      According     to the GAO, transient           lodging    and temporary
                       lodging     for permanent change of station               personnel    operations    are
                       managed by the Army Chief of Engineers                  organization,      an
                       appropriated       fund activity.       The GAO noted that lodging             accounts
                       and finances,        however, are managed by the Community Family
                       Support Command, an organization               that oversees and provides           Army
                       policy    for nonappropriated        activities.
                       The GAO concluded       that the cited differences             in the Military
                       Services'      management of transient         quarters     are reflected      in
                       different      charges for lodging       transient      personnel.       The GAO found
                       that,     in the Army, the charge for transient              quarters     may equal
                       50 percent      of the local per diem for off-base               lodging   without
                       higher      command approval,     while,    in the Navy, any charge over
Now on pp. 9 and 10.   $4 per night requires         higher command approval.              (pp. ll-12/GAO
                       Draft Report)
See comment 1.         f;i   Re~sp:       Concur:    However! it should be noted that within
                                    the Army Chief of Engineers         has the appropriated        fund
                       billetin;    program management responsibilities.             The U.S. Army
                       Community and Family Support Center is responsible                for
                       nonappropriated     fund financial      management policy      for billeting
                       programs,    in coordination     with the Army Chief of Engineers.
                       The U.S. Army Community and Family Support Center is not a
                       nonappropriated     fund entity,     but a Field    Operating     Agency of the
                       Army Deputy Chief of Staff for Personnel.
                       BINDING 0: Transient Lodaina Account8 Are Maintained in thQ
                       Morale, Welfare and Recreation Fund. The GAO observed that,                              in
                       1985, the DOD obtained    approval    from the Subcommittee    on
                       Readiness,   House Committee on Armed Services,     to establish                 a
                       single   fund for the nonappropriated     morale, welfare,   and




                             Page40                                           QAO/NSIAD-90241ArmyOn-BaeeLodglng
                                      APpendLw
                                             Iv
                                      CummentaFromDOD




                              recreation         program.      According   to the GAO, the purpose of the
                              single     fund was to achieve economies in managing the finances                of
                              numerous activities            and to allow the program, as a whole, to be
                              self supporting--i.e.,              funds from profit-making    activities   are
                              available        to offset     losses from other activities.         The GAO
                              indicated,         however, that the DOD request to the Subcommittee            did
                              not list       transient     lodging     among the activities   it proposed to
                              include      in the single        fund.    The GAO also noted, that in 1985,
                              the Army sought approval               to expand the activities    included  in its
                              morale, welfare,           and recreation      fund.
                              According      to the GAO, the Subcommittee               approved the request          "with
                              strong     reservations'*      and specifically          stipulated      that "lodging
                              facilities       that are . ..properly        supported       with appropriated       funds
                              should not be included           in the morale, welfare,               and recreation
                              fund."       The GAO found that despite             the fact that the Subcommittee
                              Chairman of the Morale, Welfare and Recreation                         Panel instructed
                              the Army not to include            transient      lodging       in the single     fund, the
                              Army     nonetheless      did so.     The GAO pointed           out that the Air Force
                              and the Navy have likewise              included      transient      lodging   in their
                              single     morale,    welfare,     and recreation          funds.
                              The GAO emphasized that,       in 1986, the Subcommittee Chairman's
                              concerns   were later   echoed by another congressional           committee
                              when the House Appropriations         Committee criticized      the Air Force
                              for the "laundering"      of appropriated     funds between appropriated
                              and nonappropriated     funds.     The GAO also cited the House
                              Committee on Armed Services         1988 expression     of concern about
                              reimbursement    and fund accountability        associated   with the single
Nowonp. 10.                   morale, welfare,     and recreation     fund.     (pp. 11-12/GAO Draft
                              Report)
                              &&&maonrtz:          Concur.       The management and control         of
                              appropriated      fund facilities        varies  among the Military         Services
                              due to various       interpretations        of DOD, the Military        Services     and
                              congressional       guidance,      and attempts   by the Military         Services    to
                              maintain     adequate facilities         for the transient      traveler.        The
                              implementation       of the Installation        Morale,   Welfare,      and
                              Recreation     Fund, which was designed to make maximum use of
                              available     nonappropriated        funds at an installation         for the common
                              good, followed       by the recategorizaton        of morale, welfare,           and
                              recreation     programs as agreed between the Department of Defense
                              and the Congress, has caused the Military                Services     to go through
                              a transition      period of readjustment         and reevaluation         of how
                              programs have operated and been managed.
                              In a letter      to the Congress,   dated.August    10, 1987, the Assistant
                              Secretary    of Defense for Force Management and Personnel,              proposed
                              a recategorization      of morale,   welfare,    and recreation      programs
                              and encouraged      the Military   Services   to organize     according     to the




                                      Page41                                             GAO/NSL4D-M-241
                                                                                                      Army On-BaseLodging


              -- ..__.._
                       --_-     -.- -....._-_
                                                                                              ,

      AppendixN
      timmenta pkomDOD




single-fund       concept.     That guidance cited the              Army's successful
implementation        of the single-fund      concept and           the proposed
recategorization        list   of morale, welfare,      and         recreation
programs,      included     the transient   lodging   fund           (official      travel)
as a Category A, morale, welfare,             and recreation              activity.
That recategorization       of military     morale, welfare,      and recreation
programs was approved in congressional            report   language in late
1987 and early 1988.        The Department and the Military          Services
have been implementing        that joint    DOD and congressional      guidance,
which includes       the management of nonappropriated         funds in the
transient   facilities     provided     for personnel    on temporary    duty and
permanent change of station         personnel.
The official        guidance,     in the draft       Department of Defense
Directive       1015.1, address all nonappropriated                fund management,
including       (1) military     morale, welfare,         and recreation         programs,
 (2) civilian       morale, welfare,       and recreation         programs,
 (3) mission       supplemental     funds, and (4) billeting              funds.     The
draft    directive       is in the final        stages of coordination           and will
be implemented         later  this year.          The directive      includes     specific
guidance on the amount and use of service                     charges that
appropriated        fund transient      facilities       may charge and how those
service     charge funds (billeting             funds) may be used to enhance
appropriated        fund transient      facilities       used by temporary          duty
travelers.
In August 1985, prior          to the latest         DOD and congressional
guidance,     the Army notified        the Chairman of the Morale, Welfare
and Recreation      Panel, Subcommittee on Readiness,                      House Armed
Services     Committee on August 6, 1985, that in the absence of
other guidance,       the Army intended           to include         short-term       transient
lodging     and accommodations       under the single-fund                 nonappropriated
fund instrumentality          approach.        Congressman Dan Daniel,                the
Mdrale, Welfare and Recreation                Panel Chairman at that time,
stated in a September 1985 letter                 to the Army, that he agreed
with implementation         of the installation             single     fund concept and
that it would 'I.. .apply to recreation                 facilities         such as guest
houses, the Armed Forces recreation                  lodging       centers,       cottages,
and cabins... approve including               such short-term          facilities        in the
single-fund      NAFI...(however)       . . .lodging      facilities        that are part
of the billeting        mission and properly            supported        with appropriated
funds should not be included              in the Installation              Morale, Welfare,
and Recreation      Fund."
The Army interpreted        that direction     to         mean rooms used for
periods     of less than 30 days duration                could be designated        as
short-term     appropriated     fund transient            facilities      and included
within    the management controls        of the          "Single     Fund."




      Page42                                                GAO/NSIADW241Army ChvBase
                                                                                    Lodging
                            It should be noted that the Navy, the Marine Corps, and the
                            Air Force manage the nonappropriated       fund portion  of the
                            transient    facilities;    however, they do not include  those funds
                            within    the "Single    Fund."
                            m:                &ua8                                  to TrUont           Personnel
                                   -                                    The GAO found that some Army
                            installations        have increased     charges for lodging       transient
                            personnel      and used a portion       of the payments received to
                            subsidize      morale, welfare,      and recreation    activities       and to
                            provide      questionable    amenities.
                            The GAO explained            that DOD directives           state that?transient
                            lodging      service      chargesare         to be applied       to transient       lodging
                            operations.           The GAO further          noted that transient         lodging,      as a
                            mission-essential             activity,      is supposed to provide           lodging     at the
                            lowest possible           price.        According     to the GAO, DOD and Army
                            regulations,          service      charges should cover transient               housing
                            operating         costs for maid and custodial               services    and for amenities
                            not available          from    appropriated        funds.
                            The GAO indicated       that charges can also be used to help defray
                            the cost of minor improvements           to transient    quarters such as
                            installation      of telephones,    televisions,      and other amenities.
                            The GAO concluded       that transient      lodging   should not be generating
                            profits      above and beyond those specified         needs.
                            The GAO estimated        that,   since the establishment            of a single       fund
                            for morale,     welfare,      and recreation       activities     in 1985, the
                            Training    and Doctrine       Command and the Forces Command have
                            accumulated     over $70 million           from "inflated     charges."         The GAO
                            found that some Army installations                have overcharged         soldiers     for
                            transient    lodgings      and used the proceeds to subsidize                 morale,
                            welfare,    and recreation       activities       such as officers         clubs,   golf
                            courses,    arts and crafts        facilities,       and lodging     facilities       for
                            visitors.
                            According    to the GAO, Army officials        said that they increased
                            charges to generate         money for nonappropriated    morale, welfare,
                            and recreation     activities      and to balance cuts in other morale,
                            welfare,   and recreation       accounts.    The GAO added that,   according
                            to these same officials,         these funds were regarded as essential
                            to the operation      of the Army's morale, welfare,       and recreat&on
Nowon   pp. 3 and 13to19.   program.      (pp. 3-4, pp. 16-20, pp. 22/GAO Draft Report)
                            DoD.                  Partially     concur.    The Department   agrees that
                            questionable       amenities      may have been provided.      Although   DOD
                            agrees that some confusion            has existed   in the use and funding       of
                            transient    facilities,        it is imperative    to understand     the policy




                        Y




                                    Page48                                                GAO/NSIAD-90-241
                                                                                                        Army On-k              Lodging
        AppendixIV
        CwunentsPromDOD




evolution  that has been occurring   during the past                        8 years.  The
following  outlines the evolving   events and policies                        that may have
engendered this situation.
The Department       disagrees      that funds generated         from transient
facilities      were the only funds being used to subsidize                 officers
clubs,     golf courses,      arts and crafts      facilities       and lodging
facilities      for visitors.         In FY 1988, the total         net income
generated      before depreciation        from all field        operating
nonappropriated        instrumentality       programs,      less transient      lodging
and guesthouses,         in the Army was $97.0 million.
   ~rta.lJation           Morale. Welfare, and Recreation Fund. In the
    early      198Os, pertinent          billeting       function     policies       were
    developed       within     the Army that included             billeting         funds in the
    Installation          Morale, Welfare,            and Recreation        Fund--the      "Single
    Fund."       The purpose of the "Single                 Fund" was to consolidate
    and allow the installation                   commander the ability            to better
    manage all nonappropriated                   funds including        billeting       funds.
    Prior     to the implementation                of the "Single       Fund," transient
    lodging       (official      temporary         duty) and guesthouse            (permanent
    change of station            travel)       existed     as separate departments
    within      a billeting        fund with no parameters              established        for the
    use of funds created by one or the other departments.
    When the Army began the implementation                of the "Single        Fund,"
    those comments that had been received               from the Chairman,
    Morale,      Welfare and Recreation        Panel were evaluated           and
    interpreted        to mean that short-term       transient      lodging     funds
    were eligible        for inclusion    in the "Single         Fund."    Appropriate
    accounting       program codes were established            to track these
    short-term       transient    lodging   funds.     Concurrently,        those
     facilities,       known as guesthouses,       became eligible        for
     financing     as nonappropriated       fund major construction            projects.
    &elf-Sufficiencv.          in Nonappropriated Fund Prourams. When the
    Army's Community and Family Review Committee adopted
    self-sufficiency           as a traditional       break from the former policy
    of subsidizing         installation        morale support operating      programs
    and minor capital            improvements,      it appeared logical    to add
    guesthouses       as a type of facility            that could be built    with
    monies made available              in lieu of the former subsidies.          Until
    that time, guesthouses               could only be financed    in total     or
    partially       by using funds from the then existing             separate
    installation       billeting         fund or by a loan from the then
    existing       Army Club Fund, with monies to be repaid over time by
    the billeting        fund.




        Page44                                                  GAO/NSL4D-9O-Z41ArmyOn-BaseLodglng
      AppendixIV
      CommenteFromDOD




During that period,         the installation        nonappropriated        fund
instrumentalities        were me,rged into the "Single            Fund."       The
Army Morale Support and Club Funds were merged into the Army
Morale,     Welfare,   and Recreation        Fund; nonappropriated           fund
subsidies      to the installations         were eliminated;         all morale,
welfare,     and recreation       construction,      including      guesthouses,
was focused into one program; and loan programs were
eliminated.        The Army took measures to ensure the continued
existence      of the billeting       fund function       (transient     lodging
and guesthouses)       in the "Single        Fund."
Prior    to total     implementation     of the "Single      Fund," there
existed     seven sets of budget instructions            for various
functional      nonappropriated      fund instrumentalities,        with as
many approval       chains,    compounded by guidance provided          in some
28 different      regulations.       Due to the complexity,        guidance and
a single     set of budget instructions         were developed and
included     in Chapter 19, Army Regulation          215-1, and four basic
regulations      pertaining     to the morale, welfare,        and recreation
program.
                al and DOD Concerns.           With past concerns about
management of nonappropriated             funds and morale, welfare,                 and
recreation      programs being expressed by the Office                   of the
Secretary     of Defense and the Morale, Welfare and Recreation
Panel of the Readiness Subcommittee,                  House Armed Services
Committee,      on implementation       of the "Single         Fund," it became
incumbent on the Army to create the appropriate                       valid     policy
to ensure the continued          existence       of the billeting          fund
function    in the "Single       Fund."       That policy      formulation
resulted    in the development         of the current         Army reinvestment
policy,    which stipulates        90 percent        of the net income
resulting     from billeting       operations       be applied      to capital
expenditure      needs of billeting         for either      transient        lodging     or
guesthouses.        The Army policy       development       was precedent
setting,    since previously        there was no concise reinvestment
policy.     An inherent      feature    of the revised         policy      was that
monies created could be reinvested                 in either     transient       lodging
or guesthouses.        The policy      protects       monies generated          by the
billeting     function     and provides       for "Single      Fund" overhead
expenses,     so that billeting        does not exist         at the expense of
other programs.
Yorale.               n                       am Recateuorization..      The
DOD recategorization       of morale,  welfare,    and recreation
programs was developed       in 1987 and congressionally        approved in
FY 1988.    The recategorization      addressed transient       lodging
 (official  temporary    duty) and guesthouses,      which the Army
interpreted    as allowing     monies created   from those




      Page45                                                GAO/NSIAD&O-241
                                                                         Army On-BaseLodeing
      AppendixIv
      CommentsFromDOD




   operations    to be reinvested   in both programs.   The Army
   initiated    action to array all programs into the new
   designations      effective with the beginning  of FY 1989.
   Qarrent    Arnw Policv Concernina Use of Billetina            Fund%. The
   current     reinvestment     policy requires     appropriate   amounts to be
   reinvested      over a 5-year period;      however, the Army has yet to
   conclude a full       5 years of operation      under the "Single      Fund"
   fiscal    structure,     with the specific     reinvestment    policy   being
   effective      only in FY 1988.     Therefore,      it is appropriate    to
   judge the Army based upon the current             policy.    A reinvestment
   policy    was created when none other existed.
   The report        assumes a much narrower          view in the use of funds
   generated       from service     charges and by limiting          their    use to
   reinvest      solely    into transient     facilities       for temporary       duty
   personnel.         The current    Army policy        and the DOD policy       is
   being clarified         to indicate    how service       charges--received         from
   personnel       staying    at appropriated       fund transient
   facilities--may         be used.
FINDING F:      The   Armv   has Not Seareaated Transient            Lo ainq
pccountB.       T&                                                          that
funds received       from lodging      facilities       must be used to maintain
and improve lodging        facilities.          According   to the GAO, the
directives      imply a requirement          to maintain    the integrity  of the
related    financial     account.
The GAO found that,        in the absence of explicit             DOD guidance on
accounting     for lodging     funds, the Army (unlike            the Navy and the
Air Force),      has established      a single       morale, welfare,      and
recreation     fund which merges transient              lodging   accounts with
morale, welfare,      and recreation        accounts.         The GAO further   found
that the Army system, contrary            to congressional          committee
guidance,    allows transient       lodging      funds to be used for other
morale,    welfare,   and recreation        activities.
The GAO explained       that under the Army practice,      as permitted    by
Army Regulations      210-11, 215-l and 215-5, transient       lodging
accounts are combined with the larger         nonappropriated     permanent
change of station       housing accounts of all the activities        under
the morale,    welfare,     and recreation category.
The GAO concluded    that the Army's practice       fails    to provide
controls   that preserve   the integrity     of the transient      lodging
accounts and the financial      status of lodging       operation,
therefore,    cannot be readily    determined.     The GAO cited an




      Page 46                                            GAO/NSLAD-90-241
                                                                      Army On-BaseLod&ng
                               example where interest   income from transient       lodging is not
                               reported  in the lodging   income statement;    instead,      it is credited
                               to the total   morale, welfare,  and recreation      account.
                               The GAO also         found     that
                                                              depreciation      expenses are reported     in the
                               lodging      accounts      as a reduction to income, while no corresponding
                               lodging    reserve account is recognized.            The GAO further   concluded
                               that the effect       of these actions      is that the lodging account is
                               not credited      with the monies which, by DOD directive,           should be
Now on pp. 4,19, and 20.       identified     for transient    lodging use."        (p. 4, pp. 20-22/GAO
                               Draft Report)
                               m:                  Concur.     The Army did not have a separate,
                               segregated    transient     lodging     account.    The Army does, however,
                               have a policy     to include      those funds within     the "Single  Fund,”   as
                               reported   to the Congress on August 6, 1985, and that funds
                               generated    by the billeting        function    must be reinvested  within  a
                               S-year period.
                               Within that 5-year period,       Army policy      also allows the use of
                               billeting   cash balances    for short-term      benefit    of morale,
                               welfare,   and recreation    programs.       Some billeting    funds have
                               already   been reinvested    and remaining      funds are currently
                               programmed for reinvestment       in billeting       capital purchases and
                               minor construction      or nonappropriated      fund major construction.
                               As noted in the DOD response to Finding            E, prior      to the
                               implementation      of the Installation      Morale, Welfare, and
                               Recreation      Fund or the "Single     Fund" concept,     billeting
                               activities      were included    in the DOD classification          as Category
                               VIII,    Supplemental     Mission Nonappropriated       Fund
                               Instrumentalities.
                               The existing        billeting        fund(s)      included        bachelor       officer
                               quarters,      bachelor       enlisted        quarters,        visiting      officers
                               quarters,      distinguished           visiting      officer         quarters,       and
                               guesthouses.          Each activity           had a separate            income statement,          but
                               funds were commingled in a single                      billeting          nonappropriated         fund
                               instrumentality           without      any particular            reinvestment         criteria.
                               In FY 1987, the first          year of the Installation        Morale, Welfare,
                               Fund operation,       business     codes were developed that specifically
                               defined   the nonapprosriated          fund financial    structure.        Separate
                               business    codes were established         for short-term      and long-term
                               transient    lodging    with Visiting      Officers   Quarters,     Visiting
                               Enlisted    Quarters,     Distinguished     Visiting    Officers    Quarters    and
                               guesthouses     as departments       under Business Code - 81, Short-Term
                               Transient    Lodging     (Category VIII).




                           Y




                                       Page47                                                      GAO/NSIAD4lO.~lAnayO&Base~
                             AppendkIv
                             CommentsFromDOD




                       As noted in the DOD response to Finding              E, after      congressional
                       acceptance      of the Department of Defense letter,             dated August 10,
                       1987, that outlined        the recategorization         of morale, welfare,        and
                       recreation      programs,    the Army realigned       those business        codes and
                       the former eight nonappropriated            categories      into program codes
                       for the new categories.           Those program codes were effective             with
                       FY 1989.       The designations     for short and long-term          transient
                       lodging     were dropped.       Separate profit     and loss results         are
                       provided     for the programs in the current            accounting     policy,   thus
                       establishing       an audit trail.
                                   :     yhf" DOD End x  Ay Have Not Effectivelv    Monitored
                                       Lodoinu CW rat o s a d Costp. The GAO pointed   out that
                       under the DOD and the Army internal                control   programs, management
                       is responsible      for establishing         a comprehensive        system of
                       controls   to ensure that the organization's                objectives        are met and
                       its procedures      are efficiently         operating.      According       to the GAO,
                       these controls      consist,     in general terms, of (1) sufficiently
                       specific   guidelines       (regulations,       directives,      instructions,       etc.)
                       to achieve objectives,          (2) clear,      comprehensive       procedures     that
                       properly   implement those guidelines              under an integrated
                       management program, and (3) a process of program evaluation                          and
                       monitoring    that regularly         reviews operations        to ensure proper
                       observance    of procedures        and guidance.
                       The GAO found that neither           the Department of Defense nor the Army
                       has evaluated       or monitored     transient      lodging    operations     to ensure
                       that lodging     costs are kept to the minimum needed for authorized
                       operation     and minor improvements.            The GAO explained        that the DOD
                       and the Army have delegated the task of policy                   enforcement     to the
                       major command level.          The GAO found that the major commands
                       responsible     for transient      lodging     have also declined         to be policy
                       enforcers.      The GAO concluded,         therefore,      that the Army has not
                       properly    implemented     DOD directives        nor its own regulations.           The
                       GAO asserted      that neither     Forces Command nor Training              and
                       Doctrine    Command lodging       organizations        reviewed the justification
                       for transient       lodging   charges.
                       The GAO stressed     that at the beginning     of its review,        that
                       neither    command had an up-to-date    list   of installation         charges.
                       The GAO pointed     out that Army headquarters      officials       expressed
                       concern about the trend of increasing        transient       lodging    charges,
                       especially    in the European Command, which charges as much as
                       $65 a day for on-base lodging.
                       According    to the GAO, command officials      believed that they lacked
                       the authority      to question   these charges.    The GAO concluded that
                       by default,    this internal     control check was passed on to the
Nowon pp. 20 and 21.   installation     level.     (pp. 4-5, pp. 21- 22/GAO Draft Report)




                             Page48
                                 AppendixIV
                                 CommenteFromDOD




                          DOD RatID-.         Concur.     The DOD will      implement policy,       within
                          1991, requiring      the Military      Services    to evaluate       and monitor
                          temporary    duty transient       housing and related        operations    to ensure
                          proper observance       of regulations       and procedures.        Areas to be
                          evaluated    and monitored      include:     (1) adequacy of accommodations,
                           (2) service    charges,    (3) accounting      procedures,      and (4) billeting
                          funds management policy         review and amendment and implementation.
                          The level    of monitorship       for the Army will        be fixed at the Army
                          headquarters     level with no further         authorization       for delegation.
                          FXNDXNGR:       pff-Bare      Per Diem a8 G anted when Tranaient Quarte rs
                                              . The GAO explayned           that public     law and DOD
                          directives     require     the Military       Services     to lodge transient
                          personnel    on-base to the maximum extent possible.                     According    to
                          the GAO, only when installation               accommodations      are not available
                          should transients         be granted     the more expensive         off-base      per diem
                           (based on local commercial            costs)    for lodging.       The GAO pointed
                          out that,    to get this increased            per diem, transients          must obtain
                          documentation      that lodging        at Government facilities           is not
                          available.       The GAO found that the Army was granting                   transient
                          personnel    the off-base        per diem when lodgings          set aside for their
                          use had vacancies.           The GAO estimated        that,   during the last
                          quarter    of Fiscal      Year 1989, two Army installations,                included    in
                          the GAO review,        could have avoided more than $500,000 in off-base
                          per diem costs.         The GAO observed that the U.S. Army Audit Agency
                          had reported      similar     findings     at a number of Army installations.
                          The GAO attributed        this situation       to (1) inadequate     controls       over
                          room reservation       systems,     (2) inefficient     assignment     priorities
                          for distinguished       visitor    quarters,      and (3) lodging    of personnel
                          changing assignments          in quarters    set aside for transients.            The
                          GAO concluded     that,     as a result    of such practices,      training       funds
                          were spent unnecessarily          on more expensive      off-base    lodging.
Now on pp, 4,26 and 27.
                           (p.5, pp. 25-30, pp. 31-32/GAO Draft Report)
                          POD Flesponsq:       Concur.
                          BINDXNG q:      -ternal        Controls:   Armv Internal       Control    Svstem is
                          Jncomnlete.       The GAO explained        that the Army internal            control
                          system requires       all organizations          to review internal         controls
                          annually    to verify     that they are in place and working.                   The GAO
                          pointed    out that Army Regulation            11-2, which governs the internal
                          control    system, requires        an annual statement            of assurance that
                          adequate controls        exist   to help prevent           fraud,   waste,
                          mismanagement and misappropriation                 in compliance       with the 1982
                          Federal Managers' Financial            Integrity       Act.      The GAO noted that
                          the annual statement          of assurance must report material                weaknesses
                          discovered     in the internal       controls        during the current        period,
                          with plans for corrective           action     and a status        report   on
                          previously     reported     unresolved     material        weaknesses.      The GAO




                                 Page49                                            GAO/NSLMMO-241
                                                                                               Army On-BaseLodging
                           AppendirIv                                                                         r
                           Conunentuhrom DOD




                   further     pointed    out the regulation        also requires     that,    if audit
                   organizations        have reported     deficiencies     in a program or if the
                   program has been subjected           to congressional       hearings,     the
                   organization       responsible    for the program should consider              it as
                   potentially       having material      weaknesses in internal         controls.
                   The GAO found that the Army Regulation              210-11, which governs
                   lodging    operations,   has been under revision            for a number of
                   years.     The GAO reported     that Army headquarters          officials
                   responsible     for the regulation       stated that it will         not be
                   included    in the Army internal        control   system until       the revision
                   is complete.       The GAO reported      that Army Regulations           215-l and
                   215-5, which cover the accounting             for transient     lodging,      are
                   included    in its internal     control     system.
                   Based on the GAO and the Army Audit Agency work, however, the GAO
                   concluded   that transient     lodging managers are not assessing
                   internal   control    weaknesses.      The GAO indicated      that may explain
                   why no material      weaknesses in transient        lodging   were reported    in
                   the Secretary      of the Army's Annual Statement          of Assurance for
                   Fiscal   Year 1987 through Fiscal        Year 1989, even though problems
                   have been reported previously          by the Army Audit Agency and have
                   been the subject      of congressional      hearings.
                   The GAO further       concluded    that,  because of the widespread      control
                   weaknesses identified         in its review and their      adverse impact on
                   the Army's ability        to make effective     use of training    funds, the
                   Army should focus the attention           of top management on their
                   ultimate   resolution,       especially   via the Annual Assurance
Nowonpp.2Oand30.   Statement.      (pp. 30-32/GAO Draft Report)
                   I)oD:                Concur.


                   -1:                     The GAO recommended that the Secretary    of the
                   Army direct     the major commands and the Army Community and Family
                   Support Center to stop diverting      transient  lodging  funds to
Nowonpp.5and21.    morale,   welfare,   and recreation  activities.    (pp. 6-7, pp. 23/GAO
                   Draft Report)
                   DOD w:               Concur.     Within 180 days after         the guidance is
                   promulgate      by the DOD, which will        be during FY 1991, the Army
                   will    implement policy      that will    direct     the future     separation       of
                   temporary     lodging    (non-morale,     welfare,      and recreation)      billeting
                   monies as a separate         nonappropriated       fund category      from the
                   "Single     Fund."




                           Page10                                            GAO/NSIAD@O-Z41
                                                                                         Army On-BnseLdghq
                                AppendixlV
                                CummentaFromDOD




                       WNDATION             a: The GAO recommended that the Secretary                of the
                       Army review the morale, welfare,             and recreation      accounts of the
                       major Army commands to (1) identify               accumulated    overpayments     for
                       transient     lodging,     (2) recognize     each overpayment      as a liability
                       to the appropriation         account initially        charged or, if the
                       appropriation       account cannot be identified,           then to the General
                       Funds of the Treasury         as a miscellaneous        receipt,   and (3) develop
Now on pp. 5 and 21.   and implement a repayment plan.               (pp. 6-7, p. 23/GAO Draft
                       Report)
                       DoD:                 Partially    concur.    The DOD agrees with the intent
                       of the     recommendation,     however, disagrees      with the proposed
                       action     and offers    the following    alternative.
                       The DOD will        conduct a complete review at all Army temporary                 duty
                       transient     housing locations       and determine      the extent     to which
                       transient     billeting      service  charges to occupants        staying      at those
                       facilities      were made in excess of operational            expenses at each
                       location    during the period FY 1987 through FY 1989.                  That review
                       is expected to be accomplished            by July 31, 1991.         Identified
                       excess service         charges will   be disbursed      based on a DOD legal
                       determination         of the appropriate    disposition      of those funds.
                       By July 31, 1991, the Army will             also   conduct a complete review          of
                       all installations     to determine        their    temporary duty transient
                       housing requirements.
                       BE&COMMENDATIQN      3. The GAO recommended that the Secretary           of the
                       Army revise Army'Regulations           210-11   215-1,and   215-5 to stipulate
                       that transient       lodging   funds be applied      only to transient
                       facilities,      as required    by the Defense Department directives,          to
                       include     procedures     to maintain   the integrity    of lodging   accounts.
Now on pp. 5 and 21.    (pp. 6-7, p. 23/GAO Draft Report)
                       POD Reepo sg       Concur.       Within 180 days after         promulgation      of new
                       DOD guidak!e'which     will      occur during FY 1991,         the Army will
                       implement that policy.
                       pECOMMENDATION 4 : The GAO recommended that the Secretary          of the
                       Army establish    controls   to monitor Army installations,    which
                       stipulate    that lodging   charges will  not exceed the minimum amount
                       needed    to meet authorize    costs and planned improvements.
Now on p. 21,           (PP. 6- 7, P. 23/GAO Draft Report)
                       DOD Reaponsa:      Concur.   The Army will          develop and implement a
                       reporting    system to ensure compliance            with DOD guidance.   The
                       planning    of the reporting   system will          begin in September 1990 for
                       implementation     in FY 1991.




                                Page51                                          GAO/NSIAD-90-241
                                                                                              Army On-BaseLodging
                               AppendixIV
                               CommentaFromDOD




                       JtECOMMENDATION 5:    The GAO recommended that the Secretary    of the
                       Army provide  more specific   guidance to commanders on the types
                       and quality  of furnishings   appropriate for transient  quarters.
Now on p, 21.          (pp. 6-7, p. 23/GAO Draft Report)
                       Pnp Rerrnons*:  Concur.  The Army will   issue specific   guidance               to
                       commanders on the types and quality    of furnishings   appropriated
                       for transient  quarters by October 31, 1990.
                       WNDATION          6: The GAO recommended that the Secretary     of
                       Defense establish     controls to monitor the Army's compliance    with
Now on pp. 5 and 21.   the Department's    transient  lodging  directives.  (PP. 6-7, p. 231
                       GAO Draft Report)
                       pop ResDonsg:    Concur.    The DOD will    convene a panel of
                       representatives   from each of the Military        Services   by October 1,
                       1991, to develop a DOD program evaluation          and monitoring    system
                       the objective   of which will     be to regularly    review temporary duty
                       housing and related    operations    on a regular    basis to ensure
                       proper observance    of regulation     and procedures.
                       ~COMMENDATION 7 : The GAO recommended that the Secretary                of the
                       Army establish     controls    to ensure that installations       fully  use
                       on-base facilities       before authorizing   off-base     per diem--at   a
                       minimum including      the following:
                       -   revising     room assignment   procedures      to better    use
                           distinguished     visitors   quarters;
                       -   making authorizations      of off-base       per diem contingent      upon a
                           vacancy re-check      at some specified       time prior  to arrival;
                       -   ensuring      that personnel     moving   to new stations    do not displace
                           transient       personnel;   and
                       -   instituting   regular   review at all installations      of the
                           accuracy of barracks      occupancy rates,   to ensure identification
Now on p. 31               of vacancies    for transient    personnel.    (pp. 6-7, p. 32/ GAO
                           Draft Report)
                       poD Reaponsq:     Concur.    The Secretary        of the Army will   establish
                       controls   to ensure that installations           fully  use on-base
                       facilities   before authorizing     off-base        per diem.
                       -   Current    regulations      require occupancy by temporary       duty
                           travelers     when Distinguished     Visitor    Quarters    are not reserved
                           for distinguished       visitors.    The Army will      enforce the
                           existing    policies    and the Office     of the Chief of Engineers        for
                           Army will     send a message to all commands restating           the policy
                           by September 1, 1990.




                               Page62                                         GAO/NSIAIMO-241
                                                                                           Army On-BaseLod&j
                             AppendixIV
                             CommentaFromDOD




                       -   Current Army policy        is consistent  with DOD
                           Instruction      4165.63-M which requires     15day  advance
                           notification      of a firm temporary duty housing reservation.
                           The Office      of the Chief of Engineers     for Army will  send a
                           message by September 1, 1990 to all commands reiterating
                           current      Army policy.
                       -   The Army will      review and enforce policies        concerning    personnel
                           moving to new stations        use of transient     housing
                           facilities.      The current    Army transient     housing reservation
                           system will    be reviewed to determine        whether it is possible         to
                           improve utilization       of transient    housing facilities       by
                           transient    personnel    with the current     reservation     system.     This
                           review and reservation        system improvements       are expected to be
                           accomplished     by July 31, 1991.       Current Army policy       already
                           complies with DOD Instruction          4165.63M and gives priority
                           placement to transient        temporary personnel.
                       -   The Army will      ensure that the DOD Form 2085, Unaccompanied
                           Personnel    Housing Inventory    and Utilization     Data, is updated
                           in accordance with DOD policy       letter     dated May 17, 1987.       This
                           report    is prepared annually    at the installation      level and is
                           forwarded    to the major command and then provided          to Army
                           Headquarters     for compilation   and use in the planning       cycles.
                                          : The GAO recommended that the Secretary      of the
                       Army identify   transient   lodging operations  as a material   weakness
Now on pp. 5 and 31.   in the Secretary's     next Annual Assurance Statement.    (p. 7, p. 33/
                       GAO Draft Report)
                       poD R~SDU:         Concur.     The Secretary     of Army FY 1991 Annual
                       Assurance    Statement will     identify   transient   lodging operations         as
                       a material    weakness.




                             Page53                                         GAO/NSIAD-30-341
                                                                                          Army On-BaseLodghg
              The following is GAO'Scomment on DOD’Sletter dated August 3 1, 1990.


GAO Comment   the Army Community and Family Support Center.




      Y




              Page54                                GAO/NSIAD-90.241
                                                                  Amy On-Base
                                                                            Lodging
Append)xV

Major Contributms to This Report


National Security and   Charles J, Bonanno,Assistant Director
International Affairs
Division, Washington,
DC.

Norfolk Regional        Thomas A. Pant&ides, Evaluator-in-Charge
Office                  Raul S. Cajulis, Site Senior
                        Patricia P. Sawyer, Evaluator
                        James B. Hayward, Evaluator
                        Tracy M. Whitaker, Evaluator
                        Melissa M. van Tine, Writer-Editor         Y




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