We appreciate the evaluation and recommendations by the OIG and fully agree that our Board
members and Executive Managers have heightened visibility as corporate leaders. As such, their
compliance with travel policies and procedures is important for avoiding a negative public
perception that travel violations might engender. We also agree that the FDIC must control cost
and that setting a good example demonstrates prudent stewardship to non-executive employees.
We observed, however, that the OIG evaluation was limited to a judgmental sample of 25
vouchers representing two inside Board members and ten executive managers based on the most
frequent travelers and the largest claim amounts during the 27-month review period. We do not
believe that this limited sample, in any way, forms the basis upon which a reader of the report
could extrapolate die findings noted in this report to the entire population of Board member and
Executive Manager travel.
Additionally, the judgmental sample only reviewed five vouchers that had been audited by the
Disbursement Operations Unit (DOU) audit staff (four inside Board members and one EM) although
116 EM vouchers were audited during the period of this evaluation. The DOU audit staff reviewed
vouchers in the judgmental sample by the OIG and noted exceptions on many of these claims along
the lines of lodging amounts exceeding authorized amounts, excessive business calls, improper claims
for foreign lodging taxes, missing receipts, and needed rental justifications. However, since some
of the vouchers were over two years old at the time the audit began, DOF’s decision was that the
DOU staff would not go back to the travelers and seek missing documents or explanations of
excessive lodging claims. The OIG evaluation notes that excessive lodging claims are often due to
hotel conference rates and had the DOU audit staff sought explanations from the travelers, we believe
they would state precisely that, which would be an acceptable explanation to the audit staff.
OIG Recommendation 1: Raise EM travel policy awareness by having DOF provide training on the
following issues: blanket versus specific travel authorizations, actual expense claims, lodging
expenses and lodging tax exemptions, required receipt policy, and telephone charges and alternatives
for international calls.
Management Response: We concur with this recommendation. By July 29, 2005, the CEO and
COO will jointly issue an email to each of the corporation’s executive managers and the offices of the
internal Board members reviewing and emphasizing the items enumerated in Recommendation 1.
OIG Recommendation 2: Revise ETVPS Audit Procedures to ensure they adequately address the
following topics: blanket versus specific travel authorizations, authorization, review and audit
frequency for the COO and CFO travel; actual expense claims; lodging expenses and lodging tax
exemptions; required receipt policy, and telephone charges.
Management Response: We concur with this recommendation and appropriate changes will be
made to the DOF ETV Audit Procedures by July 29, 2005. However, several of the changes we will
make to the Audit Procedures are more formally establishing guidelines that the DOF audit staff has
been following for several years based on agreements made between senior DOF and DSC officials
and concurred with by the DOF Director.
More specifically, the former Division of Supervision (DOS) had an exception to the GTR in place
approved by the DOF Director as allowed in the GTR for so long that we cannot actually find the
written agreement that established the exception to the GTR. That exception was that Associate
Directors and above in DOS could utilize blanket travel authorizations when traveling on actual
Expense. Of the 21 EM vouchers reviewed in your judgmental sample, 19 represented current or
former DOS officials at the grade that had been provided the exception to the GTR by the DOF
Director. The DOF audit staff was well aware of this approved exception and over the years, began to
apply the exception to all EMs. The intent of DOS, at the time they requested the exception was to
keep travel expenses down while at the same time, providing their senior managers the flexibility to
dine with banking officials without having to fund meals in excess of the per diem rate from the
executive’s pockets. DOS also wanted to ensure the proper level of oversight and audit of those
vouchers since, at the time actual expense vouchers were all audited after the fact. As your evaluation
report noted, actual expense amounts generally did not exceed per diem limits.
The DOF staff will review the business need for continued routine actual expense vouchers with our
clients by July 29, 2005.
The DOF Associate Director had also made a decision that was supported by the DOF Director and
provided to the DOU audit staff in 2000 and 2001 amending the DOF ETV Audit Procedures to place
foreign and non-foreign travel in the statistical audit category, as well as eliminating the receipt
requirements for gas and ATM charges and raising the cutoff for actual expense voucher receipt
retention from $25 to $75 except for lodging, rental car, air or rail fares and laundry expenses
consistent with the requirements for per diem reimbursable travel. In early 2005, the GTR was
changed to reflect the above requirement for receipts.
The Associate Director, DOF approved on March 13, 2001 an exception to the Audit Procedures
which made all actual expense vouchers subject to audit by random sample. The DOF Director was
aware of this decision and concurred. This exception was based on a much earlier OIG Audit that led
DOF to replace the 100% voucher audit scheme with a statistical audit program when ETV was
implemented as the cost to perform the 100% audit exceeded the amount of errors detected in the
100% audit by nearly four fold.
The CFO and COO were audited three times during the period of the OIG review and we believe that
having these vouchers subject to the DOF ETV Audit Procedures is sufficient. Only one COO or
CFO audited voucher was observed in your sample, since the sample was judgmentally drawn from
the travelers who traveled frequently and whose claims were of the highest dollar amounts.
OIG Recommendation 3: Conduct a review to determine whether there is a more efficient process
by which lodging tax exemption can be secured, including researching whether the FDIC’s
nationwide travel agency could be tasked with assisting in the process.
Management Response: We concur that obtaining the lodging tax exemption is inconsistent and
have personal experience wherein two individuals checking out of the same hotel at the same time but
with different hotel desk clerks were treated inconsistently by the desk clerks concerning obtaining the
tax exemption. We are also aware that only about 20 States offer tax exemption to government
travelers.
We have studied this issue over time and since most travel authorizations are electronic, asking the
nationwide travel agency to provide the forms when both state and municipalities are involved would
not seem to be a prudent use of the travel agency time and resources. We will, however, add the
lodging tax exemption issue to the reminder that we will provide all Executive Managers by July 29,
2005.
OIG Recommendation 4: Take steps to ensure that DOU staff effectively implements ETV Audit Procedures in conducting travel voucher audits. Steps could include reemphasizing to DOU staff that
DOF management expects a thorough review of EM vouchers selected for audit and will support
travel voucher audit findings, providing refresher training to DOU staff involved in conducting travel
voucher audits, mid performing periodic internal review of EM travel voucher audits to ensure that
DOU audits are effective.
Management Response: We concur with this recommendation. Certainly, DOF management
expects a thorough review of all travelers’ audited vouchers and supports audit findings. We believe
that the updated Audit Procedures discussed in our response to Recommendation 2 above will also
address this recommendation. DOF will share a summary of the OIG evaluation and our response
with the DOU audit staff to ensure that no misunderstanding is present. DOF will also periodically
review the audit process to ensure that process is effective.
OIG Recommendation 5: Through coordination with the Division of Information Technology,
provide guidance to EMs regarding the process for requesting calling cards and cell phones suitable
for international use.
Management Response: Concur. We will also add language to the reminder that we will provide all
Executive Managers by July 29, 2005, for international travelers to minimize communication costs.
If you have any questions regarding our response, please contact Fred Selby at (202) 416-6965.