The State Department kept millions of dollars worth of travelers checks in unlocked cabinets and piled on floors in an operation so lax that more than $59,000 was embezzled and $307,780 cannot be accounted for, the department's inspector general reports.
And congressional investigators said State Department controls on travel advances were so disorganized that $15 million in such payments are delinquent."The department just can't seem to get its act together on these very basic financial management functions," said Rep. Jack Brooks, D-Texas, chairman of a House Government Operations panel which convened hearings Wednesday to explore the situation.
"In testimony before the subcommittee in October 1985, the State Department admitted that its travel operations were a mess and promised prompt corrective behavior," Brooks said. "Now it is two and a half years later and things are still out of hand."
The inspector general's report said that although operations have improved, procedures still are not in place to fully protect an inventory of some $3 million in travelers checks.
"If these deficiencies cannot be corrected the risk of loss to the department is so high that travelers check operations should be discontinued," the report said.
Reporting on a surprise audit of the State Department's principal cashier's office conducted last Aug. 21, the inspector general's office found "an almost total lack of internal control."
The report, a copy of which was made available to The Associated Press, said inspectors found there was no inventory of travelers checks, no written operating procedures, no controlled custody of funds, minimal physical security in the cashier's office and improperly trained and supervised personnel.
The cashier's operation was so disorganized that State Department records could not be used to determine how much money had been embezzled, the report said.
Instead, investigators had to rely on the records of Citicorp, the issuer of the checks.
"As of Aug. 21 no documented procedures for cashiering operations existed," the report said. "There were no procedures for end-of-day closing and funds reconciliation, sequential issuance of travelers checks, accounting for funds or even the handling of all funds all of which are rudimentary requirements for the most basic controls.
"Eventually the lack of controls permitted an employee to embezzle funds," it said.
"On Aug. 21, we observed travelers checks stored in an unlocked supply cabinet and on the floor in the cashier's office," the report said.
"All of the boxes of travelers checks (20 or more boxes) had been opened and checks had been issued randomly out of the boxes rather than a first-in, first-out system for issuance," it said.
The Aug. 21 audit, the inspector general's report said, showed $87,320 was missing and cashed, of which at least $59,000 was found to be embezzled.
It said the remaining $28,320 cannot be located because of State Department processing errors and is still under investigation.
"An additional $307,780 in travelers checks are missing, but not yet cashed," the report said, adding that this includes five bundles of $1,000 checks valued at $250,000.
Investigators have not been able to learn if these checks were embezzled, misplaced, or accidentally or intentionally destroyed, the report said.
But it said that because the missing travelers checks are negotiable, the State Department remains liable for the missing amounts until the checks are accounted for.
Purchase agreement forms used to account for the travelers checks and pay the issuing company were found lying loose on an unused desk mixed in with other papers, the report said.
It said documents used to account for travelers checks that had been issued were found on top of file cabinets, in file drawers, "some in bundles and some loose in no particular order."
In addition, it said some accountable department officers "never knew that travelers checks had almost the same vulnerability as cash."