TABLE OF CONTENTS
This report presents the results of our evaluation of the Federal Deposit Insurance Corporationís (FDIC) travel costs. The objective of this evaluation was to determine whether the FDIC and Scheduled Airlines Traffic Offices, Inc. (SatoTravel) are efficiently and effectively managing travel costs and requirements. Additional details on our objective, scope, and methodology are provided in Appendix I.Background
The FDIC executed a contract with SatoTravel, effective September 30, 2002, to perform travel reservation services for FDIC employees. The contract had an initial period of performance expiring on September 30, 2003 and four 1-year options. The FDIC is currently in option year 2, which expires on September 30, 2005. The total compensation ceiling for the 5 year contract period is $900,000. Under the terms of the contract set forth in the Contractorís Pricing Schedule, the FDIC will guarantee a minimum profit to SatoTravel at a percentage of net airline and rail sales, including SatoTravelís costs and expenses, direct and indirect, as well as any profit, fee, or markup.
The Division of Finance (DOF) is responsible for the FDICís travel program and oversight of the SatoTravel contract. The goal of the travel program is to provide efficient reimbursement to employees, incorporate industry best practices, and allow the Corporation to conduct its primary business without distraction and with minimal administrative costs. Anyone authorized to travel on official business for the FDIC is required to follow the FDICís Regular Duty Travel Regulations, which are issued by DOF and can be found on the FDICís internal Web site.Evaluation Results
The FDIC can improve its monitoring and controls over the FDICís travel program. Specifically, DOF suspended a requirement for bank examiners to make lodging reservations through SatoTravel, which, in turn, reduced the amount of rebates the FDIC received under the contract for hotel reservations. As a result, DOF is exceeding the SatoTravel contract compensation ceiling amount. We estimated that the FDIC may exceed the 5-year contract compensation ceiling price by $367,000óa contract increase of 40 percent. In late July 2005, DOA approved additional funding to cover anticipated contract costs through September 2006.
In addition, the FDIC could further reduce travel costs and increase program controls by increasing the number of travelers that:
Further, DOF requires the use of the government-issued travel card only for airfare costs. Requiring the use of the government travel card for all travel costs, including airline, hotel, and car rental would achieve modest savings in the form of rebates from the travel card sponsor bank, strengthen management control over the travel program by providing better information for planning and negotiating travel services, and promote internal consistency.
Finally, most government agencies are required to use the General Services Administrationís (GSA) eTravel Program by 2006. The goal of the eTravel program is to centralize the federal governmentís travel process and reduce administrative travel expenses. Although the FDIC is not required to use the eTravel program, it could improve or eventually replace the FDICís current travel program.
Opportunities to Reduce Travel Costs and Improve Travel Controls and Management
The FDIC has several opportunities to reduce overall travel costs and improve controls and management of the travel program. Currently, DSC examiners are not required to make lodging reservations through SatoTravel. Further, the FDIC could do more to increase: (1) the number of travelers staying in commissionable hotels and (2) the use of SatoTravelís on-line reservation system.
Hotel Reservations for Bank Examiners
DSC examiners are not booking hotel reservations through SatoTravel when they are conducting examinations. As a result, about 70 percent of the FDICís hotel reservations are not being booked through SatoTravel. In May 2004, in response to DSC complaints, DOF changed the FDICís mandatory policy for DSC examiners to book hotels through SatoTravel. Consequently, the FDIC is not receiving rebates from hotel commissions on most FDIC travelersí lodging costs. Further, most FDIC travelersí lodging costs are not included in activity reports that SatoTravel provides to DOF to manage the travel program.
In August 2001, the FDIC contracted with a consultant for a review entitled, Travel and Relocation Best Practices Assessment for the FDIC.[ 1 ] The consultantís report recommended that the FDIC ďmandate use of the FDICís corporate travel agency for all travel arrangements involving airline, hotel, car rental, or delivery service.Ē The consultant indicated that mandatory use of a travel agency would improve management controls over the travel program and enhance the FDICís ability to serve FDIC travelers and administrative staff more efficiently. Thereafter, the FDIC required that all Corporation travelers use the FDICís nationwide travel agency to make all transportation, lodging, and rental car reservations.
In an effort to improve the FDICís travel-related programs and services, DOF conducted a customer service evaluation in August 2003. DOF received a significant number of unfavorable comments from examiners concerning hotel reservations in both rural and metropolitan areas. For example, DSC examiners complained that booking reservations through SatoTravel took an unreasonable amount of time, and in many cases, SatoTravelís reservation system did not include available hotels in small towns. In response to the complaints, SatoTravel and DSC developed a database of information for about 350 hotels where FDIC-supervised banks were located. However, DSC examiners continued to indicate that it was easier and less time-consuming to book their own hotel reservations. In May 2004, DOF officials issued an exception to the travel policies to allow DSC examiners the ability to book their own hotel reservations. Based on our discussions with DOF and DSC, it appears that DOF suspended the travel policy requirement before DSC and SatoTravel had an opportunity to utilize the hotel database.
The FDICís Regular Duty Travel Regulations, Chapter 2, Travel Regulations Overview, section 2.B.1., Employee Responsibilities/Obligations, Part F, requires the use of the FDICís national travel agency to book all transportation, lodging, and rental cars. However, section 2.B.1. also states that the ďpolicy requiring mandatory use of the national travel agency to make hotel reservations while conducting examinations of financial institutions or to make Amtrak rail reservations is suspended indefinitely.Ē[ 2 ] DOF used the wording ďsuspended indefinitelyĒ to have the ability to address this issue at a later time if necessary.
The policy exemption applies to DSC examiners only when they are traveling to conduct a bank examination. All other DSC employees who are not examiners and examiners who are not conducting a bank examination must book hotel reservations through SatoTravel. For the period January 1, 2004 through December 31, 2004, SatoTravel booked $3.4 million in hotel reservations. In contrast, the FDICís Electronic Travel Voucher (ETV) System indicated that DOF had reimbursed FDIC travelers for $10.5 million in hotel expenses for the same period. The difference of $7.1 million indicates that a significant percentage of hotel reservations are not being booked through SatoTravel. DOF has estimated that it pays approximately $100,000 per year more in travel expenses due to the loss of hotel rebates.
For those hotel reservations booked through SatoTravel, the FDIC receives various SatoTravel reports that identify which hotels FDIC employees have reserved, whether FDIC employees are following FDIC travel policies and procedures that relate to hotels for pricing (such as the allowable GSA[ 3 ] lodging rate for each location), and whether FDIC employees are staying at hotels that pay commissions. SatoTravel is required to provide FDIC oversight manager with monthly reports on reservations, refunds, and other travel data for all FDIC travelers. Due to the extent of reservations being made directly by employees, the SatoTravel reports are not complete and could limit FDIC managersí ability to properly manage the travel program.
Contract Compensation Ceiling Amounts
The decision to exempt DSC examiners from using SatoTravel to make lodging reservations contributed to the FDIC exceeding the specified compensation ceiling amounts under its contract with SatoTravel. As of March 2005, the FDIC paid SatoTravel $741,662 in total compensation for the 30-month period (October 2002 through March 2005) when only $700,000 was allowed under the contract through September 30, 2005, the end date of Option Period 2. Table 2 presents contract cost information.
The contract states that SatoTravel ďÖ shall notify the Contracting Officer, in writing, when Contractor has incurred charges to the FDIC, in the aggregate, of seventy-five percent (75%) of each of these dollar amounts.Ē SatoTravel did not notify the FDIC in 2004 when the charges reached the amounts stated in the contract.Table 2: Compensation Ceiling Amounts Compared to Actual Payments
The FDIC SatoTravel contract oversight manager, technical monitor, contract officer, and contract specialist were unaware that the FDIC had exceeded the contract compensation ceiling amounts. The FDICís Acquisition Policy Manual, Chapter 2, Requirements Package, states:
The Contracting Officer and the Oversight Manager are jointly responsible for monitoring the total dollar amount of delivery orders against the approved expenditure authority and, where appropriate, against limits established within the contract for certain services or deliverables. The Contracting Officer will not issue a delivery order that is not in compliance with the contract or that may result in expenditures in excess of the approved expenditure for that contract.
According to a DOA Acquisition Services Branch (ASB) representative, the FDIC is no longer allowing its divisions to spend funds that exceed the amounts specified in the contracts. The Corporation is also requiring more oversight on all contracts to ensure that all terms and conditions are being met and, specifically, that all payments are in accordance with contract limits.
Should SatoTravel costs remain at about $250,000 a year, we estimated that SatoTravel could exceed its contract compensation limit by $367,000 over the full 5 year contract period, approximately a 40-percent increase. In this regard, the SatoTravel contract stated ďÖ the ceiling pricing takes into account certain estimated revenues from third party sources and to the extent such revenues are not realized, appropriate adjustments to the ceiling prices will be made.Ē
On July 29, 2005, the Associate Director, ASB, approved a justification for a non-competitive procurement from DOF for additional funding of $465,000[ 4 ] for the SatoTravel contract. The additional funding will cover expected contract costs through September 2006 (the fourth year of the contract). DOF also provided the following events as justification for the additional funding:
Hotels That Pay Commissions
SatoTravel has agreements with many hotel establishments that offer commissions to SatoTravel based on a percentage of the total FDIC reservations made to the hotel. Thus, when the FDIC travelers book a hotel reservation through SatoTravel, the FDIC receives a commission that is subtracted from the total invoice amount billed to the FDIC. The SatoTravel contract requires SatoTravel to rebate all hotel commissions that they receive directly to the FDIC.
SatoTravelís contract with the FDIC states that SatoTravel shall provide FDIC travelers and travel arrangers with lodging choices but that preference shall be given to hotels that are commissionable. However, the FDICís travel regulations do not require or encourage FDIC employees to book reservations at hotels that offer commissions.
SatoTravel provided us with the top five hotels used by FDIC employees from October 2003 through September 2004. Three of the top five hotels that FDIC employees most often used normally do not pay commissions on reservations.[ 5 ] SatoTravel noted the majority of FDIC travelers ask for a hotel by name. If a traveler does not request a hotel by name, SatoTravel agents will first attempt to reserve a hotel that is in the SatoTravel hotel program. Such hotels guarantee commissions and offer either a rate of 5 percent below per diem or additional amenities with the per diem amount. Hotels participating in the SatoTravel program are contractually obligated to pay SatoTravel commissions.
If the FDIC required all employees, including bank examiners, to book hotel reservations through SatoTravel, the FDIC could receive additional rebates from hotels that participate in the SatoTravel program. For example, if only 50 percent of the bookings were made at hotels that offer rebates, and the FDIC received the average 2003 and 2004 rebate of 3.4 percent, the FDIC could receive about $120,000[ 6 ] annually in additional hotel rebates. Further, SatoTravel stated the FDIC could receive rebates as high as 10 percent of the hotel lodging amount depending on the volume of reservations.
SatoTravelís Web Site Booking System
SatoTravelís contract requires SatoTravel to provide FDIC travelers with the means to make reservations by e-mail, through an on-line booking tool, by faxed request, and by telephone. Each method must provide travelers the ability to make reservations for official travel in accordance with FDIC policies. The on line booking tool, FedTrip, was available to FDIC employees from 2003 until May 2005. However, only 11 percent of FDIC travelers used FedTrip to make travel reservations. SatoTravel is in the process of changing from FedTrip to a new on-line system. Increased use of an on-line booking tool could reduce contract costs and enhance program controls.
Opportunity for reducing contract costs: Currently, SatoTravel has six travel agents and one supervisor assigned to provide travel services to the FDIC. With an increase in usage of the on-line booking tool, the FDIC could reduce its travel costs by reducing the number of designated travel agents that currently provide services to the FDIC. The FDIC pays for all travel agent salaries, benefits, and overhead associated with travel services for the FDIC. A SatoTravel contract representative indicated that SatoTravel could reduce the number of agents assigned to the FDIC contract by one agent for each 15-percent increase in the number of on-line reservations and estimated a savings of about $19,427[ 7 ] annually. If the FDIC increased on-line usage by 45 percent, the FDIC could save the costs for salaries and benefits for three agents, thereby reducing overall travel costs paid to SatoTravel. The SatoTravel contract currently includes no provisions for reducing travel agent charges in response to an increased usage of the on-line booking tool.Marketing of the on-line booking tool: As discussed earlier, only about 11 percent of FDIC travelers used FedTrip. This low usage level could have resulted from a system that is not considered user friendly, inadequate training in the use of FedTrip, or limited encouragement by FDIC management to use the system. According to SatoTravel, other government agencies have experienced a higher usage of on-line booking tools as compared to the FDIC. For example, one government agency reported 98-percent usage of FedTrip.
According to SatoTravel representatives, the success of an on-line system depends on properly training FDIC employees. SatoTravel will offer specific on-line training to FDIC employees. In addition, SatoTravel offers continuous classes to all of its government clients who use an on-line system. Also, SatoTravel has developed a user manual/job aid that will be made available to all users. DOF plans to issue a global e-mail announcing the new on-line system when it is ready for use. DOF will also address the FDICís policy on the use of the new on-line system. DOF does not intend to make use of the on-line system mandatory but will encourage all travelers to use it. It is important that the FDIC adequately market the new on-line system to FDIC travelers to ensure employee buy in.
Contractual requirement for an on-line booking tool: As discussed earlier, the SatoTravel contract required SatoTravel to provide an on-line booking tool to FDIC travelers. As of May 1, 2005, FedTrip was no longer available to FDIC employees for booking travel reservations. Its replacement, Quality Agent, was scheduled to be available on May 1, 2005; however, due to technical complications, FDIC decided that Quality Agent would not work in the FDIC travel environment. Instead, SatoTravel planned to test a system called RESX in several FDIC locations across the country, beginning on September 1, 2005. The test will run for 2 months, and if successful, DOF will implement RESX FDIC-wide. According to DOF, RESX is easier to navigate than QA and will meet the business needs of FDIC travelers.Other Matters for Consideration and Evaluation
The FDIC has other opportunities to reduce travel costs and improve control over its travel program. Specifically, the FDIC could revise its policy to require all employees to use the travel card for all official travel costs, including airline, hotel, and car rental costs. The FDIC should also consider utilizing GSAís eTravel program for FDIC travel needs.
Use of the Travel Card
The FDIC can increase the rebate it receives from the travel card sponsor by requiring employees to charge all airline, hotel, and car rental costs on the travel card. Currently, the FDIC policy requires the mandatory use of the travel card for airline charges only. The airline industry will not allow a traveler to receive a government fare if the reservation is not charged on a government travel card. However, there is no requirement to use the travel card for hotel or car rental charges.
The Travel and Transportation Reform Act of 1998, Public Law 105-264, required that federal employees use a government-issued travel charge card for payment of all expenses relating to official government travel. However, the Act also authorized agency heads or their designees to exempt employees, classes of employees, payments, or classes of payments from the requirements of the Act. Consistent with the Act, and as the result of negotiations with the NTEU, paragraph 2.G.S.C. of the FDICís Regular Duty Travel Regulation allows FDIC employees to use personal credit cards for hotel, rental car, and meal expenses while on regular duty travel to accumulate frequent flyer points or cash rebates associated with the use of such cards. Any changes to this policy would have to be negotiated with the NTEU.
Many credit card issuers provide incentives for the card holders to make charges on their cards. Incentives include reward points for every dollar charged on the card that can be used for free airline tickets, free hotel stays, and various other gifts. Thus, some FDIC employees would rather use their own credit cards to charge official FDIC travel.
A DOF representative estimated that if the FDIC increased its annual government-issued credit card spending from the current level of $17.5 million to $35 million, the FDIC could receive an additional $12,000 in rebates that would decrease the FDICís travel costs. The travel consultant report entitled, Travel and Relocation Best Practices Assessment for the FDIC, also recommended mandatory use of the corporate credit card. Besides increasing the amount of rebates to the FDIC from the sponsor bank, mandatory use of the card would provide the FDIC with better information for monitoring travel costs and planning and negotiating travel services.
GSAís eTravel Program
GSA initiated its eTravel project in November 2001 as one of five e-government initiatives undertaken in response to the Presidentís Management Agenda. eTravel is aimed at improving government operations and is expected to save taxpayers 50 percent in government travel costs over 10 years. GSA is the managing partner of this program in collaboration with other partner agencies. GSA has mandated that all agencies, with a few exceptions such as the Department of Defense, choose from the eTravel-approved contractors by 2006. The goal of eTravel is to consolidate the federal governmentís travel process in a Web-centric service that covers all steps of a travel transaction, including planning and authorizing travel, making reservations, delivering electronic tickets, calculating and approving reimbursements, and archiving data. The goal is to cut administrative expenses by increasing the number of self-service travel transactions.
Although the FDIC is not required to use the eTravel program, it could improve or eventually replace the FDICís current travel program. Accordingly, we believe the FDIC should explore the eTravel program to determine whether it could be a long-term replacement of and improvement over the FDICís current travel program.Recommendations
We recommend that the Director, DOF:
The Director, DOF, provided a written response dated September 12, 2005. DOFís response is presented in its entirety in Appendix II. Appendix III presents a summary of DOFís responses to our recommendations.
DOF agreed with recommendations 2 through 5 and proposed actions sufficient to resolve those recommendations. However, the four recommendations will remain undispositioned and open for reporting purposes until we have a determined that the agreed-to corrective actions have been completed and are effective.
Regarding recommendation 1, DOF stated that it gave considerable thought to reinstating the policy requiring mandatory use of the national travel agency for DSC examiners. However, DOF stated that given the numerous complaints by DSC examiners, the additional time they would have to spend making hotel reservations through SatoTravel, and the negative impact the policy had on examiner morale, DOF does not intend to reinstate the policy at this time. DOFís actions are responsive to the recommendation, and we consider recommendation 1 resolved, dispositioned, and closed.
However, because of DOFís position on recommendation 1 and our estimate that 70 percent of the FDIC hotel reservations are not being booked through SatoTravel, the current management fee pricing structure under the SatoTravel contractís may not be the most cost-effective option for the FDIC. We encourage DOF to review the contract pricing structure to ensure that it reflects the FDICís current business travel model. For example, a transaction-based fee structure may be a more cost-effective option for the FDIC. If DOF determines that the current pricing structure is not the most cost-effective option, DOF should re-solicit a new contract for travel services or renegotiate the contract with SatoTravel.
The objective of this evaluation was to determine whether the FDIC and SatoTravel are efficiently and effectively managing travel costs and requirements.
To accomplish our objective, we:
We evaluated the effectiveness of management controls by reviewing policies and procedures, organizational charts, and the SatoTravel contract, contract invoices, and travel activity reports. Also, we relied on information from ETV to obtain background statistics on FDIC travel activity and to estimate the amount of lodging costs for lodging reservations that were not being made through SatoTravel. We did not perform specific procedures to validate the reliability of data within ETV because it was not significant to our evaluation objective.
We conducted our evaluation field work from March through July 2005 in accordance with generally accepted government auditing standards.
This table presents the management responses on the recommendations in our report and the status of the recommendations as of the date of report issuance.
b Dispositioned Ė The agreed-upon corrective action must be implemented, determined to be effective, and the actual amounts of monetary benefits achieved through implementation identified. The OIG is responsible for determining whether the documentation provided by management is adequate to disposition the recommendation.
c Once the OIG dispositions the recommendation, it can then be closed.