“..._-..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 (aesaaa) Page65 Ordering Iuformatiou The first, fivt~ copies of Mach GAO report. are free. Additional copies are .$2 tide. Orders should be seut to the following address, acc~m- paui~vl Iby a check or money order made out to the Superiutendent. of Documents, when necessary. Orders for 100 or more copies to be maihl to a single addrc3s are discxmnttxl 25 perct?ut. Orders may also be placd by oaJliug (202) 275824 1. i
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)