Review of Travel Charge Card Delinquencies
Report Number I-2001-001
March 30, 2001
The Government Travel Charge Card Program was created by the General Services Administration (GSA) as a travel and travel transportation payment and expense control system. It includes employee travel charge cards, automated teller machine (ATM) services, and Government Transportation Accounts (GTAs) for use by government employees traveling on official business. 2 The Federal Travel Regulation (FTR) requires employees to use the government contractor-issued travel charge card for official travel expenses unless an exemption has been granted. Bank One is currently under contract to the GSA and the Department to provide travel charge card services.
As of December 2000, 89,880 Department employees had travel charge cards. More than half of those cards were assigned to FBI and INS employees. (See Figure 1)
The Department's average monthly travel charge card activity from January 1999 through December 2000 was $18.3 million. Employees of the FBI and INS were responsible for more than half of the total amount charged. See Figure 2 below.
To administer the travel charge card program, the Department has established a network of coordinators throughout the Department. A Department Agency Program Coordinator, located in the Justice Management Division (JMD), functions as the overall coordinator for the Department's travel card program, working with the components to resolve any issues that they have. JMD also serves as the Department's liaison with Bank One.
Each Department component is responsible for its own travel charge card program and has a designated national coordinator. Within a component, each organizational element-office, sector, service center, facility-has a designated local coordinator. Currently the Department has approximately 3,000 coordinators. These coordinators are responsible for the day-to-day management of the travel charge card program. Bank One provides the national and local coordinators with various reports to help them manage the travel charge card program. These reports list such things as current account balances, charges made by cardholders, accounts that are in the process of being suspended or canceled for non-payment, and accounts that actually have been suspended or canceled. When local coordinators reviewing reports from Bank One become aware of possible misuse of travel charge cards or delinquent payments on the part of the cardholder, they are supposed to resolve the situation, generally by notifying the appropriate supervisory or management official.
When an account becomes 90 days past due, Bank One suspends the account and blocks all transactions until payment is received. If payment has not yet been received once the account becomes 120 days past due, Bank One cancels the account. To have the card reinstated after cancellation, the employee is required to undergo a credit check (which is initially waived as a courtesy to the government). It is difficult to get the card reinstated. When an account has an outstanding balance that is 180 days old, by federal regulation that account is written off as a credit loss to Bank One and is referred to a collection agency or attorney.
Bank One's cumulative net write-offs of Department accounts for the period from November 1998 through December 2000 totaled $1.2 million. This amount represents charges that Department employees were delinquent in paying and which still had not been paid at the time of our review. As shown in Figure 3 below, INS employees are responsible for a disproportionately large amount of the total write-offs.
The individual cardholder, not the Department, is held personally liable for delinquent payments. Various governmental regulations and policies-including the FTR, ethics standards, and policies of various Department components-mandate that the cardholder make payment of financial obligations and that the charge card not be used for personal purposes. Additionally, by signing the cardholder agreement, the employee has made a contractual agreement with Bank One to pay for charges incurred. There also is an implied agreement between the Department and the employee that the employee will use travel reimbursements to pay for travel charges that were incurred. It is in the Department's best interest to ensure that employees pay their travel card charges in a timely manner because of the effect delinquencies can have on operations. Loss of a charge card can limit an employee's ability to travel, and therefore negatively impact the components' missions. Nonpayment of debt also can affect an employee's suitability for continued employment with the Department because financial problems can make employees vulnerable to corrupting influences, a situation that the Department needs to monitor because of the sensitive nature of many of its positions.
Although a high delinquency rate does not have a direct effect on the cost of the travel charge card contract, it does have indirect effects. Contracting banks consider delinquency rates when deciding whether or not to assume a federal agency's contract. Therefore, a high delinquency rate could diminish the available pool of contractors. A high delinquency rate also can affect the amount of the rebates that the contracting bank provides to federal agencies based upon the volume of charges and the timeliness of payment. Because high delinquency rates increase the administrative costs to the bank of collecting the delinquent funds, the contracting bank could reduce the amount of rebates to cover these costs. Under the current contract with Bank One, the Department experiences no direct financial impact when an employee defaults on a bill; however, that will change with an upcoming contract modification being implemented by GSA. Currently the Department receives, from individual travel charge card accounts, a rebate based on the amount of charges made, excluding ATM charges. The GSA contract modification will allow the contracting bank to offset the amount of its credit losses from the travel card program (i.e., the uncollected amounts that are 180 days or more delinquent) from the rebates that the Department has earned.
In fiscal year (FY) 2000, the Department received $4.6 million in rebates for all of its charge card programs (individual travel, GTA, fleet services, and procurement). 3 Approximately $175,000, or 16 percent, of the approximately $1,072,200 in rebates provided for the first quarter of FY 2001 pertained to the individual travel charge card program. Using this percentage, which a Bank One official said was representative, we estimate that approximately $736,000 of the total FY 2000 rebate pertained to the individual travel card program. During that same period, Bank One experienced approximately $550,000 in individual travel card credit losses from Department employee accounts; if the contract modification had been in place during that time period, the Department's rebate would have been reduced from $736,000 to $186,000. If delinquencies in the travel charge card program continue at the current level, under the new contract the Department will experience a substantial decrease in rebates from the individual travel charge card program.