Years of probing by the General Accounting Office, Congress’ investigative arm, revealed misuse of Defense Department government-issued travel cards for charges at brothels, casinos and Internet gambling sites, retail shops, cruise lines and sport ticketing outlets.

While card use at brothels might be the most sensational, it isn’t the biggest problem. The high delinquency rate is, officials said.

Bank of America won the contract in Nov. 30, 1998, to provide the federal government with the travel cards. To date, the Defense Department holds 66 percent of all travel cards issued to federal employees, and 59 percent of all the charges. Last year, DOD issued roughly 1.8 million travel cards.

For the eight quarters ending March 31, the Army’s delinquency rate fluctuated between 10 percent and 18 percent, and on average was about 5 percent higher than the rest of DOD, and 7 percent higher than federal civilian agencies, according to one GAO report. As of March, 11,000 Army cardholders had $8.4 million in delinquent debt.

The quarterly delinquency rate for the Navy Department, which includes the Marine Corps, also fluctuated between 10 percent and 18 percent, and on average was about 6 percentage points higher than other federal agencies, the GAO reported. As of March, more than 8,400 Navy cardholders had $6 million in delinquent debt.

About 9 percent of the Navy’s accounts are delinquent and 12 percent of the Marine Corps’ card accounts post delinquent balances, Comptroller Dionel Aviles told Congress in October.

GAO investigators recently finished an audit on the Air Force, but has yet to finalize its report. The report is due out in January.

Preliminary results indicate the Air Force delinquency rate is around 5 percent, said Michael Weber, the Air Force travel card coordinator. “And yes, we have people who did what they weren’t supposed to,” he said.

Age matters

The report cites youth and financial inexperience as factors in the higher delinquency rates.

“Delinquency rates were as high as 40 percent and 25 percent for E-1 to E-3 and E-4 to E-6, respectively,” GAO investigators wrote.

And the services have failed to exempt personnel with poor and no credit histories, even those in “serious financial trouble,” which also pose credit risks, the GAO reported.

Most Army delinquent accounts were held by those “young [generally married], low- and mid-level enlisted military personnel … with relatively low incomes and little experience in handling personal finances,” the report states.

Same goes for the Navy.

“According to Navy officials, low- and mid-level enlisted military personnel comprise the bulk of the operational forces and are generally young, often deployed, and have limited financial experience and resources,” reads another report on the Navy.

As of Sept. 30, 2001, the Navy delinquency rate of low- and midlevel enlisted personnel was almost 22 percent.

From the moment they sign up for a card, troops are told right from wrong, said Petty Officer 2nd Class Ricky Micou, a Navy musician for 10 years. But he still knows of sailors who use it to buy beer, fix cars or gamble at casinos.

“Part of the problem is the age and maturity level,” Micou said. “And the human factor. You know, maybe they want something but can’t get it, so they use the card.”

Servicemembers don’t need a college degree in financial management to understand they need to pay their bills on time, said Ernest Gregory, principal deputy to the Army’s assistant secretary for finance management, comptroller.

“We pride ourselves on having bright and intelligent soldiers,” said Gregory, adding the number of cardholders who pay their bills on time runs in the 90th percentile.

But there are the wrongdoers, who, even when caught rarely get punished, GAO investigators documented.

GAO investigators also raised the concern that many abusers kept their security clearances. They logged that 38 of 105 Army travel cardholders who had their accounts charged-off still had active secret or top-secret clearances as of June.

Some of the Army personnel holding security clearances who have had difficulty paying their travel card bills may present security risks to the Army. Army regulations provide that an individual’s finances are one of the key factors to be considered in determining whether an individual should continue to be entrusted with a secret or top-secret clearance.

Corrective action

Bank of America and DOD have taken steps to curb delinquency rates and nonpayment, which resulted, for example, in a $59 million loss for Bank of America in 2000.

In October 2001, the bank and Defense Finance and Accounting Service began garnishing wages of employees who failed to pay.

The services work to find and rectify delinquencies before the bank must get involved and individuals’ credit histories are blemished, said Marine Lt. Steven Lowery, deputy budget officer at Marine Corps Base Quantico, Va.

Agency Program Coordinators, called APCs, monitor individual cardholder accounts, match vouchers with payment requests, look for trends and discrepancies, and ensure cardholders are current on accounts, to name a few of their duties.

At 60 days past due, the APC sends a notification letter to the cardholder.

At 90 days, it goes up the chain of command to become the bank’s responsibility. Cardholders get letters indicating they have 30 days to do one of three things: Pay in full, arrange with the bank for a payment plan, or ask for a hearing to contest the charges, said Frank Rago, the travel card program manager for the Army.

At 120 days past due, if cardholders have taken no action, their information is turned over to DFAS. In April 2001, the bank began reporting to credit bureaus the accounts that are 120 days past due.

Each of the services also canceled hundreds of thousands of accounts not used in a year or more. And the Navy is exploring giving sailors and employees a debit or prefunded card.

“We’re reducing the population to those who truly need it and reduce the chance of temptation to use it improperly,” Gregory said.

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