Travel Cards
Internal Control Weaknesses at DOD Led to Improper Use of First and Business Class Travel Gao ID: GAO-04-88 October 24, 2003Ineffective oversight and management of the Department of Defense's (DOD) travel card program, which GAO has previously reported on, have led to concerns about DOD's use of first and business class airfares. GAO was asked to (1) identify the magnitude of premium class travel, (2) determine if DOD's key internal control activities operated effectively and provide examples of control breakdowns, and (3) assess DOD's monitoring and key elements of the control environment.
Breakdowns in internal controls and a weak control environment resulted in improper first and business class travel and increased costs to taxpayers. Based on extensive analysis of records obtained from Bank of America, GAO found that DOD spent almost $124 million on about 68,000 premium class related tickets--primarily business class--during fiscal years 2001 and 2002. Each premium class ticket costs the government up to thousands of dollars more than a comparable coach class ticket. GAO's work also indicated that civilian supervisors, managers, and executives and senior military officers accounted for almost 50 percent of the premium class transactions, and for 27 of the 28 most frequent premium class travelers. GAO considers travel by high-ranking officials to be a sensitive payment area because of its susceptibility to abuse. Breakdowns in key internal controls resulted in a significant level of improper premium class travel. GAO estimated that 72 percent of DOD's fiscal year 2001 and 2002 premium class travel was not properly authorized, and 73 percent was not properly justified. Further, DOD did not have accurate and complete data on the extent of premium class travel and performed little or no monitoring of this travel. In regard to the control environment, GAO found that DOD (1) issued policies that were inconsistent with General Service Administration governmentwide travel regulations, (2) did not require military services to issue and update premium class policies to implement DOD's travel regulations consistently, and (3) did not issue guidance on how to document the authorization and justification of premium class travel. As a result of GAO's audit, DOD has begun updating its travel regulations to more clearly state when premium class travel can be authorized and to emphasize that it must only be used when exceptional circumstances warrant the additional cost.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-88, Travel Cards: Internal Control Weaknesses at DOD Led to Improper Use of First and Business Class Travel
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Report to Congressional Requesters:
October 2003:
TRAVEL CARDS:
Internal Control Weaknesses at DOD Led to Improper Use of First and
Business Class Travel:
GAO-04-88:
GAO Highlights:
Highlights of GAO-04-88, a report to congressional requesters
Why GAO Did This Study:
Ineffective oversight and management of the Department of Defense‘s
(DOD) travel card program, which GAO has previously reported on, have
led to concerns about DOD‘s use of first and business class airfares.
GAO was asked to (1) identify the magnitude of premium class travel,
(2) determine if DOD‘s key internal control activities operated
effectively and provide examples of control breakdowns, and (3) assess
DOD‘s monitoring and key elements of the control environment.
What GAO Found:
Breakdowns in internal controls and a weak control environment
resulted in improper first and business class travel and increased
costs to taxpayers. Based on extensive analysis of records obtained
from Bank of America, GAO found that DOD spent almost $124 million on
about 68,000 premium class related tickets”primarily business class”
during fiscal years 2001 and 2002. Each premium class ticket costs the
government up to thousands of dollars more than a comparable coach
class ticket. GAO‘s work also indicated that civilian supervisors,
managers, and executives and senior military officers accounted for
almost 50 percent of the premium class transactions, and for 27 of the
28 most frequent premium class travelers. GAO considers travel by high-
ranking officials to be a sensitive payment area because of its
susceptibility to abuse.
Breakdowns in key internal controls resulted in a significant level of
improper premium class travel. GAO estimated that 72 percent of DOD‘s
fiscal year 2001 and 2002 premium class travel was not properly
authorized, and 73 percent was not properly justified.
Examples of Improper Premium Class Travel:
[See PDF for image]
[End of figure]
Further, DOD did not have accurate and complete data on the extent of
premium class travel and performed little or no monitoring of this
travel. In regard to the control environment, GAO found that DOD (1)
issued policies that were inconsistent with General Service
Administration governmentwide travel regulations, (2) did not require
military services to issue and update premium class policies to
implement DOD‘s travel regulations consistently, and (3) did not issue
guidance on how to document the authorization and justification of
premium class travel. As a result of GAO‘s audit, DOD has begun
updating its travel regulations to more clearly state when premium
class travel can be authorized and to emphasize that it must only be
used when exceptional circumstances warrant the additional cost.
What GAO Recommends:
To reduce improper premium class travel and related DOD costs, GAO
makes several recommendations for improving controls over
authorization and justification, policies and procedures, and
monitoring and oversight of first and business class travel.
DOD officials concurred with all of GAO‘s recommendations and said
that some actions have already been initiated.
www.gao.gov/cgi-bin/getrpt?GAO-04-88.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Gregory Kutz at (202)
512-9505 or kutzg@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Extent of Premium Class Travel Is Significant:
Key Internal Controls Were Ineffective:
Lack of Monitoring and Control Environment Weaknesses Contributed to
Improper Use of Premium Class Travel:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Process to Obtain Premium Class Travel:
Appendix III: GAO Contacts and Staff Acknowledgments :
GAO Contacts:
Acknowledgments:
Tables:
Table 1: DOD Premium Class Travel for Fiscal Years 2001 and 2002:
Table 2: Estimate of Fiscal Year 2001 and 2002 DOD Premium Class Travel
Transactions That Failed Control Tests:
Table 3: Examples of Improper Use of Premium Class Travel:
Table 4: Examples of Travelers Who Frequently Used Premium Travel:
Table 5: Fiscal Years 2001 and 2002 DOD Premium Class Travel Population
Subjected to Sampling:
Table 6: Fiscal Years 2001 and 2002 Premium Class Travel Charged to the
Centrally Billed Accounts Adjusted for Coding Errors:
Figures:
Figure 1: Sample Premium Class Authorization Form:
Figure 2: Sample Medical Condition Form:
Figure 3: Standard Process to Obtain Premium Class Travel When Multiple
Classes of Service Are Available:
Letter October 24, 2003:
The Honorable Charles E. Grassley:
Chairman:
Committee on Finance:
United States Senate:
The Honorable Norm Coleman:
Chairman:
Permanent Subcommittee on Investigations:
Committee on Governmental Affairs:
United States Senate:
The Honorable Janice Schakowsky:
House of Representatives:
This report is a continuation of our series of reports on the
Department of Defense's (DOD) management of its various credit card
programs. In fiscal years 2002 and 2003, we issued a series of
testimonies[Footnote 1] and reports[Footnote 2] addressing problems
that the Army, Navy, and Air Force had in managing individually billed
travel card accounts. These testimonies and reports showed high
delinquency rates and significant potential fraud and abuse related to
DOD's travel program. Due to these concerns, you asked us to audit
controls over the other major form of payment used by DOD for travel
expenses--centrally billed accounts. Our audits in these areas provide
examples of DOD's long-standing financial management problems, which
are pervasive, complex, and deeply rooted in virtually all business
operations throughout the department. Such problems led us in 1995 to
put DOD financial management on our list of high-risk areas--areas that
are highly vulnerable to fraud, waste, and abuse--in the federal
government, a designation that continues today.[Footnote 3]
The centrally billed accounts are used by most DOD services and units
to purchase transportation services such as airline and train tickets,
facilitate group travel, and pay for other travel-related
expenses,[Footnote 4] while the individually billed accounts are used
by individual travelers for lodging, rental cars, and other travel
expenses. For fiscal years 2001 and 2002, DOD travelers incurred $7.1
billion in expenses on the centrally billed and individually billed
travel card accounts, with about $2.8 billion related to the use of
centrally billed accounts. This report addresses the first part of your
request related to controls over premium class travel charged to
centrally billed accounts. Federal travel regulations define premium
class travel as any class of accommodation above coach class, that is,
first or business class. We plan to report to you separately on the
results of our overall audit of the controls over the centrally billed
account travel program.
Because DOD disburses funds directly to Bank of America under a
governmentwide travel card contract for charges made to the centrally
billed accounts, the use of these accounts for improper[Footnote 5]
transportation, in particular the more expensive premium class travel,
results in direct increased cost to the government. Governmentwide
General Services Administration (GSA) regulations and internal DOD
regulations state that travelers must use coach class accommodations
for official business air travel--both domestic and international--
except when a traveler is specifically authorized to use premium class.
The regulations also state that travelers on official government travel
must exercise the same standard of care in incurring expenses that a
prudent person would exercise if traveling on personal business.
Premium class flights are not something travelers are entitled to
simply because certain conditions exist. Rather, GSA and DOD require
that, when possible, travelers plan their travel in advance to avoid
the necessity for premium class travel.
As you requested, the objective of our audit was to assess the adequacy
of internal controls over the authorization and issuance of fiscal
years 2001 and 2002 premium class tickets charged to DOD's centrally
billed travel accounts. Specifically, we (1) identified the extent to
which DOD uses the centrally billed travel accounts to purchase premium
class travel, (2) determined if DOD's key internal control activities
operated effectively and provided reasonable assurance that premium
class travel was purchased appropriately and identified examples of
control breakdowns, and (3) assessed DOD's oversight and monitoring of
the use of premium travel and key elements of the control environment.
To meet our objectives, we (1) extracted premium class transactions
from Bank of America databases of charges made to DOD's centrally
billed accounts for fiscal years 2001 and 2002, (2) reviewed federal
laws and regulations and DOD policies and procedures on premium class
travel, and (3) interviewed DOD officials on processes and procedures
in place to authorize and justify premium class travel. We tested a
statistical sample of premium class travel transactions and conducted
other audit work to evaluate the design and implementation of key
internal control procedures and activities. We used data mining to
identify additional instances of improper premium class travel based on
the frequency and dollar amount of premium class travel. Appendix I
provides details on our scope and methodology.
We conducted our audit work from November 2002 through August 2003 in
accordance with U.S. generally accepted government auditing standards,
and we performed our investigative work in accordance with standards
prescribed by the President's Council on Integrity and Efficiency. We
received oral comments on a draft of this report from DOD, Army, Navy,
Marine Corps, and Air Force officials on September 10, 2003. We
addressed the comments in the "Agency Comments and Our Evaluation"
section, and incorporated those comments in the final report where
appropriate.
Results in Brief:
Breakdowns in specific internal controls, ineffective oversight, and a
poor control environment over the use of DOD's premium class travel
resulted in improper first and business class travel and increased
costs to taxpayers. Based on our analysis of charges made to DOD's
centrally billed accounts, we found that for fiscal years 2001 and
2002, DOD spent almost $124 million on over 68,000 airline tickets that
included at least one leg of premium class service, primarily business
class. The price difference between a premium class ticket and a coach
class ticket ranged from a few dollars to thousands of dollars. Based
on our statistical sample, we estimated that senior civilian and
military employees--including senior-level executives and presidential
appointees with Senate confirmation--accounted for almost 50 percent of
premium class travel.
Breakdowns in key internal control activities resulted in a significant
level of improper premium class travel. Specific control breakdowns
included lack of (1) proper authorization of premium class travel--
documentation directing the traveler to fly on official government
business had to specifically mention that the individual could travel
in premium class and the authorizing travel documents had to be signed
by an official who was not the traveler or a subordinate[Footnote 6]--
and (2) proper justification of premium class travel--documentation had
to reflect that the circumstances under which premium class travel was
used were consistent with criteria set out in governmentwide and DOD
regulations or policies. Our statistical sample results showed that an
estimated 72 percent of DOD fiscal year 2001 and 2002 premium class
travel was not properly authorized, and 73 percent was not properly
justified. One example of improper travel we identified was for a DOD
civilian employee and three family members who flew a combination of
first and business class when they relocated from London to Honolulu.
The travel order for the employee and his family did not authorize them
to fly premium class, yet premium class tickets totaling almost $21,000
were issued, compared to an estimated cost of $2,500 for coach class
tickets. Consequently, the government incurred more than $18,000 in
additional cost.
Our data mining work also determined that although frequent premium
class travelers were generally authorized to travel premium class, the
authorization was not properly justified. Of the 28 most frequent first
and business class DOD travelers, only 3 did not receive proper
authorization for this class of travel. These 3 travelers lacked proper
authorization because they either approved their own premium class
travel or had their subordinates do so. However, the 28 most frequent
travelers still had a high rate of improper use of first and business
class travel because their justification--often for mission
requirements or medical condition--was not supported by the
documentation provided or did not adhere to the governmentwide and DOD
travel regulations. In other cases, the justification provided by
frequent travelers was questionable because the documentation was not
adequate to determine whether the transaction met DOD's criteria.
Lack of management oversight and a weak overall control environment
also contributed to improper premium class travel. Specifically, DOD
did not collect data on the extent of business class travel--the bulk
of DOD's premium class travel--and therefore performed little or no
monitoring of this type of travel. In addition, DOD's first class
travel data, which DOD is required to report to GSA annually, were
incomplete. As a result, DOD was not aware of the improper use of
premium class travel and did not have data available to identify trends
and determine whether alternate, less expensive means of transportation
were available. Further, weaknesses in the control environment,
primarily related to policies and procedures, exacerbated weak internal
control procedures and contributed to ineffective oversight of premium
class travel. Specifically, we found that DOD (1) issued polices that
were inconsistent with GSA's governmentwide travel regulations, (2) did
not require the military services to issue and update premium class
policies that consistently implemented DOD's travel regulations, and
(3) did not issue guidance on how to document the authorization and
justification of premium class travel. As a result of our audit, DOD
has begun updating its travel regulations to more clearly articulate
the circumstances under which premium class travel is authorized. In
addition, the updated regulations, in the context of lengthy travel,
emphasize that premium class travel must not be common practice and
that such services should only be used in exceptional circumstances.
This report contains recommendations to DOD aimed at reducing improper
premium class travel and related DOD travel costs. Our recommendations
address the need to improve internal controls to provide reasonable
assurance that authorization and justification for premium class travel
are appropriate, monitor the extent of premium class travel, modify
policies and procedures to make them consistent with GSA regulations,
and issue policies prohibiting subordinates or the travelers themselves
from authorizing the travelers' premium class travel. In oral comments
on a draft of this report, DOD officials concurred with our
recommendations to resolve the control weaknesses. Because two of their
proposed actions represented alternative approaches to mitigate
identified weaknesses, we modified those recommendations to recognize
that the intent of those recommendations could be addressed in
different ways.
Background:
DOD uses a combination of governmentwide and DOD guidance as the policy
and procedural foundation for incurring premium class travel. The
Federal Travel Regulation (FTR), issued by GSA, implements statutory
and Office of Management and Budget (OMB) requirements and policies for
travel by federal civilian employees and others authorized to travel at
government expense, including guidelines governing the use of premium
class travel. The purpose of the FTR is to ensure that official travel
is conducted responsibly and at a minimal administrative expense.
Pursuant to various statutes, DOD issued the Joint Federal Travel
Regulations (JFTR), which applies to uniformed service members, and the
Joint Travel Regulations (JTR), which applies to DOD civilian
personnel. The DOD travel regulation for military personnel mirrors the
GSA regulation, and DOD travel regulations for civilian personnel are
subject to GSA's travel regulation. In addition, each military service
has issued implementing guidelines that, to varying degrees, provide
additional guidance on when premium class travel is authorized.
GSA and DOD regulations authorize the use of premium class travel under
specific circumstances. The JTR and the JFTR limit the authority to
authorize first class travel to the Secretary of Defense, his or her
deputy, or other officials as designated by the Secretary of Defense.
However, while both the JTR and JFTR provide that the authority to
authorize first class travel may be delegated and re-delegated, the
regulations specify that the authority must be delegated to "as high an
administrative level as practicable to ensure adequate consideration
and review of the circumstances necessitating the first class
accommodations." Further guidance is found in a DOD directive on
transportation and traffic management, which specifically states that
the secretaries within their military services and secretariats are the
authorizing authorities for first class travel. The service secretaries
may re-delegate authorizing authority for first class travel to under
secretaries, service chiefs or their vice and/or deputy chiefs of
staff, and four-star major commanders or their three-star vice and/or
deputy commanders, but authorizing authority may not be delegated to
anyone other than these officials. DOD regulations also require that
authorization for premium class accommodations be made in advance of
the actual travel unless extenuating circumstances or emergency
situations make advance[Footnote 7] authorization impossible.
Specifically, the JTR and JFTR state that first class accommodation is
authorized only when at least one of the following conditions exists:
* coach class airline accommodations or premium class other than first
class airline accommodations are not reasonably available;
* the traveler is so handicapped or otherwise physically impaired that
other accommodations cannot be used, and such condition is
substantiated by competent medical authority; or:
* exceptional security circumstances require such travel.
The JTR and JFTR allow the transportation officer,[Footnote 8] in
conjunction with the official who issued the travel order, to approve
premium class travel other than first class. In accordance with the
FTR, DOD restricts premium class travel to the following eight
circumstances:
* regularly scheduled flights between origin and destination provide
only premium class accommodations, and this is certified on the travel
voucher;
* coach class is not available in time to accomplish the purpose of the
official travel, which is so urgent it cannot be postponed;
* premium class travel is necessary to accommodate the traveler's
disability or other physical impairment, and the condition is
substantiated in writing by competent medical authority;
* premium class travel is needed for security purposes or because
exceptional circumstances make its use essential to the successful
performance of the mission;
* coach class accommodations on authorized/approved foreign carriers do
not provide adequate sanitation or meet health standards;
* premium class accommodations would result in overall savings to the
government because of subsistence costs, overtime, or lost productive
time that would be incurred while awaiting coach class accommodations;
* transportation is paid in full by a nonfederal source; or:
* travel is to or from a destination outside the continental United
States, and the scheduled flight time (including stopovers) is in
excess of 14 hours. However, a rest stop is prohibited when travel is
authorized by premium class accommodations.
Both GSA and DOD regulations allow a traveler to upgrade to premium
class other than first class travel at personal expense, through
redemption of frequent traveler benefits. GSA also identified agency
mission as one of the criteria for premium class travel. Appendix II
includes more detailed information concerning the process by which DOD
military and civilian personnel would properly obtain premium class
airline tickets.
Extent of Premium Class Travel Is Significant:
For fiscal years 2001 and 2002, DOD spent nearly $124 million on over
68,000 airline tickets containing at least one leg of premium class
travel.[Footnote 9] Since DOD did not maintain centralized data on
premium class travel, we extracted this information from Bank of
America's fiscal years 2001 and 2002 databases of DOD centrally billed
account travel, which included over 5.3 million transactions for
airline tickets valued at over $2.4 billion. Although we were able to
report this aggregate information, we were unable to obtain any
breakdowns of the data, such as the amount of premium class travel by
military service or the amount of premium class travel used for
domestic versus overseas flights. As discussed later in this report,
because DOD does not obtain or maintain management information on
premium class travel, it cannot monitor its proper use, identify
trends, or determine alternate, less expensive means of transportation.
As shown in table 1, the total dollar amount DOD spent on travel that
included at least one leg of premium class airfare was about $57
million in fiscal year 2001 and about $67 million in fiscal year 2002.
First class travel accounted for 2.4 percent of the total dollars spent
for premium class travel for the 2 fiscal years, while business class
accounted for the remaining 97.6 percent.
Table 1: DOD Premium Class Travel for Fiscal Years 2001 and 2002:
First class; Number of transactions: 2001: 688; Number of
transactions: 2002: 552; Number of transactions: Total: 1,240; Dollar
amounts (in thousands): 2001: $1,302; Dollar amounts (in thousands):
2002: $1,596; Dollar amounts (in thousands): Total: $2,898.
Business class; Number of transactions: 2001: 32,771; Number of
transactions: 2002: 34,079; Number of transactions: Total: 66,850;
Dollar amounts (in thousands): 2001: 55,852; Dollar amounts (in
thousands): 2002: 65,095; Dollar amounts (in thousands): Total:
$120,947.
Total premium travel; Number of transactions: 2001: 33,459; Number of
transactions: 2002: 34,631; Number of transactions: Total: 68,090;
Dollar amounts (in thousands): 2001: $57,154; Dollar amounts (in
thousands): 2002: $66,691; Dollar amounts (in thousands): Total:
$123,845.
Source: GAO analysis of Bank of America data.
Note: Transactions include at least one leg of premium class travel.
[End of table]
DOD's premium class air travel accounts for a very small percentage of
DOD travel overall.[Footnote 10] It represents 1 percent of total DOD
airline transactions and 5 percent of total DOD dollars spent on
airline travel charged to the centrally billed accounts. However, to
put the amount that DOD spends on premium class travel in perspective,
we noted that the $124 million DOD spent on premium class related
travel during these 2 fiscal years exceeded the total travel and
transportation expenses--including airfare, lodging, and meals--spent
by 12 major agencies covered by the Chief Financial Officers Act of
1990, including the Social Security Administration; the Departments of
Energy, Education, Housing and Urban Development, and Labor; and the
National Aeronautics and Space Administration. The difference between a
premium class ticket and a comparable coach class ticket can range from
negligible--particularly if the traveler traveled within Europe--to
thousands of dollars. In one instance, a traveler's first class flight
between Washington and Los Angeles was 14 times, or about $3,000 more
than, the price of a coach class flight.
We also found that higher-ranking civilian personnel and military
officials accounted for a large part of premium class travel. Based on
our statistical sample, we estimated that DOD civilian employees under
the General Schedule (GS) grade GS-13 to GS-15 (supervisors and
managers), Senior Executive Service (SES) (career senior executives),
presidential appointees with Senate confirmation, and DOD senior
military officers O-4 and above accounted for almost 50 percent of
premium class travel. The remaining 50 percent in our statistical
sample comprised mostly other officers, senior enlisted personnel, and
technical or professional staff. We consider travel by high-ranking
officials, in particular senior-level executives, to be a sensitive
payment area because of its susceptibility to abuse or noncompliance
with laws and regulations.[Footnote 11]
Key Internal Controls Were Ineffective:
[See PDF for image]
[End of figure]
Significant breakdowns in key internal control activities resulted in a
significant level of improper premium class travel and increased DOD
travel cost. Specifically, we estimated, based on our statistical
sample, that 72 percent of the DOD centrally billed travel transactions
containing premium class travel for fiscal years 2001 and 2002 were not
properly authorized, and 73 percent were not properly justified. (See
app. I for further details of our statistical sampling test results.)
Using our statistical sample and data mining results, we found numerous
examples of premium class travel without authorization or adequate
justification, illustrating the improper use of premium class travel
and the resulting increase in travel costs. Further, we used data
mining techniques to identify the most frequent users of premium class
travel. Our analysis of these cases showed that almost all were senior-
level employees whose travel, although properly authorized, generally
was not adequately justified.
:
Results of Statistical Sampling Work:
We selected two key transaction-level controls for statistical sampling
testing. As shown in table 2, we estimated that 72 percent of premium
class travel was unauthorized. Because the FTR and DOD regulations
provide that premium class travel must be specifically authorized,
transactions that failed this test also failed the justification test.
In addition, we found two transactions in our statistical sample were
properly authorized but failed the justification test as they were not
supported by the documentation provided or did not adhere to the FTR
and DOD travel regulations.
Table 2: Estimate of Fiscal Year 2001 and 2002 DOD Premium Class Travel
Transactions That Failed Control Tests:
Control test: Not properly authorized by a designated official at equal
or higher rank/grade to the traveler; Estimated percentage failure rate
in key internal controls[A]: 72.
Control test: Not properly justified; Estimated percentage failure rate
in key internal controls[A]: 73.
Source: GAO analysis of DOD premium class travel transactions and
supporting documentation.
Note: Our testing excluded all business class transactions costing less
than $750. We determined that many of these lower dollar transactions
were covered by a blanket authorization for certain intra-European
flights. Although, as discussed in this section, we did not believe the
blanket authorization was valid, we eliminated these transactions from
our sample to avoid possible skewing of the results.
[A] The numbers represent point estimates for the population based on
our sampling tests. Information about the confidence intervals for our
sample estimates is presented in app. I.
[End of table]
Proper Authorization Did Not Exist:
Requiring premium class travel to be properly authorized is the first
step in preventing improper premium class travel. The FTR requires
premium class travel to be specifically authorized. DOD specifies that
premium class travel must be authorized in advance of travel, unless
extenuating or emergency circumstances make authorization impossible,
in which case the traveler is required to request written approval from
the appropriate authority as soon as possible after the travel. In
addition to the FTR and DOD regulations, we also applied the criteria
set forth in our internal control standards[Footnote 12] and sensitive
payments guidelines[Footnote 13] in evaluating the proper authorization
of premium class travel. For example, while DOD travel regulations and
policies do not address subordinates authorizing their supervisors'
premium class travel, our internal control standards consider such
policy to be flawed; therefore, a premium class transaction that was
approved by a subordinate would fail the control test. Using these
guidelines, we found that transactions failed the authorization test in
the following three categories: (1) the premium class airline ticket
was purchased, but the authorization of premium class travel was not
noted on either the travel order or on additional documentation
supporting the travel order, (2) the travel order authorizing premium
class travel was not signed, and (3) premium class travel was
authorized by a subordinate.
Premium class travel not specifically authorized. Based on our
statistical sample, we estimated that the travel order and other
supporting documentation for 64 percent of the premium class
transactions did not specifically authorize the traveler to fly premium
class, and thus the commercial travel office should not have issued the
premium class ticket. Further, we estimated that 5 percent of the
transactions lacking specific authorization were intra-European
flights covered under a blanket authorization issued in February 2002
by the U.S. Army Transportation Management Center, Europe, located in
Germany. The blanket authorization permitted the commercial travel
office to automatically purchase business class tickets on 65 flights
between Frankfurt, Munich, or Stuttgart and other selected European
cities. The blanket authorization stated that business class was
authorized for these routes because it was the lowest unrestricted
fare. Consequently, DOD considered these transactions to have been
authorized. However, we disagree that a blanket authorization can be
used for premium class travel because it is not consistent with GSA and
DOD requirements that all premium class travel be specifically
authorized and, wherever possible, minimized. Further, the importance
of having individual authorization for premium class travel is
illustrated by our independent evaluation of the 65 flights, which
showed that business class tickets were not necessarily equal to or
lower than the cost of unrestricted coach, as claimed in the blanket
authorization. For example, according to the travel agency that served
GAO, the business fare between Munich, Germany, and Tbilisi, Georgia
(located near Turkey), was $3,232 and the unrestricted economy fare was
$992, a difference of $2,240.
Travel order not signed. We also estimated that 6 percent of premium
class transactions were related to instances where the travel order
authorizing business class was not signed at all or the travel order
authorizing first class was not signed by the service secretary or his
designee, as required by DOD regulations. Ensuring that travel orders
are signed by an appropriate official is a key control to preventing
improper premium class travel. If the travel order is not signed, or
not signed by the individual designated to do so, DOD has no assurance
that the substantially higher cost of the premium class tickets was
properly reviewed and represented an efficient use of government
resources.
Premium travel authorized by a subordinate. We estimated that 2 percent
of the premium class transactions involved situations where a
subordinate approved a superior's travel. Although these limited
instances do not necessarily indicate the existence of a significant
systemic problem, allowing subordinates to approve their supervisors'
premium class travel is synonymous to self-approval and reduces
scrutiny of premium class requests. Our internal control standards
state that "Transactions and other significant events should be
authorized and executed only by persons acting within the scope of
their authority. This is the principal means of assuring that only
valid transactions to exchange, transfer, use, or commit resources and
other events are initiated or entered into.":
Valid Justification for Premium Travel Often Did Not Exist:
Another internal control weakness identified in the statistical sample
was that the justification used for premium class travel was not always
provided, not accurate, and/or not complete enough to warrant the
additional cost to the government. As previously stated, premium class
travel is not an entitlement. In fact, recent changes to the DOD
regulations state that premium class travel, in the context of lengthy
flights, should only be used when exceptional circumstances warrant and
that alternatives should be explored to minimize unnecessary premium
class travel. In reviewing whether premium class travel was justified,
we looked at whether there was documented authorization and, if there
was, whether the authorization for premium class travel was supported
by evidence of a valid reason. As shown in table 2, an estimated 72
percent of premium class transactions were not authorized and therefore
could not have been justified. An additional 2 transactions in the
statistical sample were authorized but not justified in accordance with
DOD's criteria. In one instance for example, although the flight time
exceeded 14 hours, the traveler had a layover in route, which should
have precluded the traveler from being authorized premium class travel.
Examples of Improper Use of Premium Class Travel:
Table 3 contains specific examples of unauthorized travel from both our
statistical samples and data mining work. The table also contains
examples of premium class travel that was unjustified. Without
authorization or adequate justification, these cases illustrate the
improper use of premium class travel and the resulting increase in
travel costs. Following the table is more detailed information on some
of these cases.
Table 3: Examples of Improper Use of Premium Class Travel:
Traveler: 1; Source: Data mining; Grade/ rank[A]: GS-14; Itinerary:
One-way from London to Honolulu for a family of four for relocation
purposes; Class of ticket: First and business; Cost of premium ticket
paid: $20,943; Estimated cost of coach fare ticket[B]: $2,500[C];
Reason for exception: Travel order did not authorize use of
first or business class travel. Transaction failed authorization and
justification.
Traveler: 2; Source: Statistical sample; Grade/ rank[A]: GS-15;
Itinerary: Los Angeles to Washington, D.C. and back; Class of ticket:
First; Cost of premium ticket paid: 3,253; Estimated cost of coach fare
ticket[B]: 238[C]; Reason for exception: Travel order did not
authorize first class travel. Transaction failed authorization and
justification.
Traveler: 3; Source: Statistical sample; Grade/ rank[A]: GS-13;
Itinerary: Austin to London and from London to San Diego; Class of
ticket: Business; Cost of premium ticket paid: 4,066; Estimated cost of
coach fare ticket[B]: 1,606; Reason for exception: Travel
order did not authorize business class travel. Transaction failed
authorization and justification.
Traveler: 4; Source: Statistical sample; Grade/ rank[A]: GS-13;
Itinerary: San Diego to Busan, Korea, and back; Class of ticket:
Business; Cost of premium ticket paid: 3,695; Estimated cost of coach
fare ticket[B]: 2,161; Reason for exception: Travel order did
not authorize business class travel. Transaction failed authorization
and justification.
Traveler: 5; Source: Statistical sample; Grade/ rank[A]: O-5;
Itinerary: London to Lisbon, Spain; Class of ticket: Business; Cost of
premium ticket paid: 1,338; Estimated cost of coach fare ticket[B]:
672; Reason for exception: Travel order did not authorize
business class travel. Transaction failed authorization and
justification.
Traveler: 6; Source: Statistical sample; Grade/ rank[A]: GS-13;
Itinerary: Washington, D.C. to Taipei, and back; Class of ticket:
Business; Cost of premium ticket paid: 4,319; Estimated cost of coach
fare ticket[B]: 1,450[C]; Reason for exception: Travel order
authorizing business class travel was not signed. Transaction failed
authorization and justification.
Traveler: 7; Source: Statistical sample; Grade/ rank[A]: GS-13;
Itinerary: San Francisco to Tokyo, and back; Class of ticket: Business;
Cost of premium ticket paid: 3,168; Estimated cost of coach fare
ticket[B]: 610[C]; Reason for exception: Travel order
authorizing business class travel was not signed. Transaction failed
authorization and justification.
Traveler: 8; Source: Data mining; Grade/ rank[A]: CW-4; Itinerary:
Washington, D.C. to Tashkent, Uzbekistan, and back; Class of ticket:
Business; Cost of premium ticket paid: 9,530; Estimated cost of coach
fare ticket[B]: 2,501; Reason for exception: Blanket travel
order authorizing premium class travel was used. Transaction failed
authorization and justification.
Traveler: 9; Source: Statistical sample; Grade/ rank[A]: GS-13;
Itinerary: Tucson to Bahrain and Bahrain to Los Angeles; Class of
ticket: Business; Cost of premium ticket paid: 8,308; Estimated cost of
coach fare ticket[B]: 4,966; Reason for exception: Business
class travel authorized based on flight lasting more than 14 hours;
however, traveler had rest stop en route. Transaction passed
authorization but failed justification.
Traveler: 10; Source: Data mining; Grade/ rank[A]: GS-15; Itinerary:
Washington, D.C. to Amsterdam, and back; Class of ticket: Business;
Cost of premium ticket paid: 4,525; Estimated cost of coach fare
ticket[B]: 570[C]; Reason for exception: Business class travel
authorized but no justification provided on the order. Over 18 months
after the trip occurred, the traveler's supervisor--not a physician--
wrote a note stating that he authorized premium class based on a
medical need. Transaction passed authorization but failed justification
test.
Traveler: 11; Source: Statistical sample; Grade/ rank[A]: Political
appointee; Itinerary: Washington, D.C. to London, then Paris to Moscow;
Class of ticket: Business; Cost of premium ticket paid: 3,485;
Estimated cost of coach fare ticket[B]: 1,530[C]; Reason for
exception: Business class travel authorized on basis that travel is
mission essential, but no additional information provided. Travel was
to a conference in Moscow. Transaction passed authorization but failed
justification.
Source: GAO analysis of premium class travel transactions and
supporting documentation.
[A] GS designates General Schedule pay schedule. O designates a
military oficer. CW designates a military chief warrant officer.
[B] Source of estimated coach fares is GSA city pair or expedia.com.
[C] Fares do not include all applicable taxes and airport fees.
[End of table]
* Traveler #1 is a GS-14 at the Department of the Navy; he along with
three family members flew a combination of first and business class
when they were relocated from London to Honolulu. The cost to the
government for those four first and business class tickets was almost
$21,000, compared to an estimated total cost of about $2,500 for four
coach class tickets. An audit of the travel orders for this trip
indicated that the DOD civilian employee and his family were not
authorized to fly first or business class. Consequently, the traveler
failed both the authorization and the justification test. Despite the
lack of specific authorization, the traveler was issued premium class
tickets for this trip, resulting in additional cost to the government
of more than $18,000. Upon being contacted, the traveler agreed that
his travel order did not specifically state that premium class was
authorized, and stated that he inquired about business class tickets
from the commercial travel office because his flight lasted more than
14 hours. Based on the issuance of premium class tickets for other
permanent change-in-station moves exceeding 14 hours in total travel
time, the commercial travel office issued the premium class tickets to
the traveler.
* Traveler #4 is a GS-13 at the Department of the Navy. In March 2002,
the traveler flew business class round-trip from San Francisco to
Osaka, Japan, where he had an overnight layover before proceeding to
Busan, Korea. The travel order DOD provided us did not authorize
business class travel. Further, because the traveler had an overnight
layover in route to Korea, the 14-hour rule would not apply. The cost
of the ticket was $3,695, compared to an estimated cost of $2,161 for a
comparable unrestricted ticket in coach. Without authorization or valid
justification, the additional $1,534 spent on the business class ticket
was improper.
* Traveler #7 is a GS-13 in the Navy. In March 2002, the traveler flew
business class from San Francisco to Tokyo on a ticket costing $3,168.
Although the flight to Tokyo lasted more than 14 hours, the use of
premium class travel was not properly authorized because the travel
order was not signed by the appropriate official. In comparison, the
estimated cost of an unrestricted government fare in coach was $610.
* Traveler #9 was a GS-13 in the Department of the Army who flew most
of his trip from Tucson to Bahrain and then from Bahrain to Los Angeles
in business class, at a cost of $8,308. The estimated cost of an
unrestricted coach class ticket for the same route was $4,966. The
justification for the additional cost of the business class ticket was
that the flight lasted more than 14 hours. However, the traveler
stopped overnight in London at the government's expense on both the
outbound and return portions of the trip. The FTR and JTR specifically
prohibit premium class flights when the traveler has a rest stop en
route at the government's expense.
* Traveler #10 was a GS-15 in the Department of the Navy who flew
premium class from Washington, D.C., to Amsterdam and back on the basis
of a medical condition. The duration of the flight each way was about 8
hours and cost $4,525. The estimated cost of an unrestricted government
fare coach class ticket for the same route was $570. The supporting
documentation provided to us included a note, written by the traveler's
supervisor, that was prepared more than 18 months after the travel,
stating that the traveler had a medical condition requiring the premium
class ticket. However, the note was not signed by a doctor nor did it
reference a medical professional who recommended the need for premium
class seating. The traveler informed us that his supervisor wrote the
medical note after our inquiry into his case. In addition, none of the
other 9 flights taken by the traveler cited a medical condition, and
the traveler flew coach class on a number of flights that lasted longer
than his flight from Washington, D.C., to Amsterdam. According to the
traveler, he never had been properly authorized to fly business class
on the basis of a medical condition.
* Traveler #11 was a political appointee and a member of the Commission
on the Future of the United States Aerospace Industry (Commission), an
organization that was almost entirely funded by DOD and for which DOD
paid the cost of all airline tickets for Commission members and staff.
The traveler flew business class from Washington, D.C., to London, and
then traveled by rail from London to Brussels and onto Paris. In Paris,
the traveler took a business class flight to Moscow to attend a 2-day
conference. According to the travel order, business class travel was
authorized because it was mission essential. However, the travel order
did not indicate why the cost of business class travel for a trip to a
conference was mission essential. Further, mission essential is not a
DOD criterion for authorizing business class travel. Our data mining
efforts found that DOD paid the travel of a total of 13 individuals--6
commissioners and 7 commission staff--to attend the Moscow conference
after stopping off in London, Brussels, and Paris. The 6 commissioners
flew business class for all of the flights, while the commission staff
flew coach to London and on the return flights, and flew business class
while in Europe. None of the commissioners were government employees;
however, all of the staff were employed by DOD and other agencies. The
average cost of the airline tickets for all 6 commissioners was about
$7,500 while the average cost of the airline tickets for the staff was
about $3,100. The official told us he authorized premium class travel
for the commissioners because they were high-salaried individuals from
the private sector who were donating 10 days of their time to the
government with no compensation. However, neither the FTR nor the DOD
travel regulations authorize premium class travel based on a person's
salary or whether he or she is donating time to the government.
Frequent Premium Class Travelers:
Our work also included data mining to identify the individuals who
traveled premium class most frequently. We analyzed the 68,090 premium
class transactions during fiscal years 2001 and 2002 and identified 28
of the most frequent premium class travelers. As indicated by the
examples in table 4, the frequent travelers were almost all senior DOD
personnel. Specifically, we found that all but 1 of the 28 most
frequent travelers were at least GS-13 civilians or O-4 military
officials. Although these frequent travelers were generally authorized
to fly premium class by someone at the same or a higher level, we
determined that many of the transactions were improper because their
justification was not supported by the documentation provided or did
not adhere to the FTR and DOD travel regulations. Other cases involving
frequent travelers were questionable because the justification
documentation was not adequate to determine whether the transaction met
DOD's criteria.
Table 4: Examples of Travelers Who Frequently Used Premium Travel:
Traveler: 1; Grade/ rank: GM-14; Number/ cost of premium class trips:
14/$88,000; Justification for premium travel: Doctor's note claims
medical necessity; GAO's concern with premium class travel: Traveler
took 45 flights--14 premium and 31 coach class trips during fiscal
years 2001 and 2002. Many coach class trips were similar in duration to
premium class trips; Response by traveler or traveler's staff:
Traveler admitted to inconsistent application of medical necessity.
Traveler considered extra room in business class to be more comfortable
for long flights.
Traveler: 2; Grade/ rank: O-8; Number/ cost of premium class trips: 16/
$68,000; Justification for premium travel: Blanket authorization used
to justify premium class; GAO's concern with premium class travel: 1. A
blanket authorization was used to justify premium class travel; 2.
Premium travel was authorized by a subordinate; 3. Not all premium
class flights met premium class criteria; Response by traveler or
traveler's staff: The general's aide said that in the future he will
pay closer attention to the requirements for premium class travel
before obtaining premium class travel. The general's aide also said
that in the future he will also get an independent authorization for
premium class travel when the criteria for premium class travel are
met.
Traveler: 3; Grade/ rank: PAS[A]; Number/ cost of premium class trips:
17/$68,000; Justification for premium travel: First and business class
travel justified through a blanket order based on medical condition;
GAO's concern with premium class travel: 1. Blanket authorization was
used to justify first and business class travel; 2. Premium travel was
authorized by a subordinate; 3. Traveler flew in coach class on some
flights; Response by traveler or traveler's staff: The traveler's aide
said that she will get the Deputy Secretary's approval for first class
travel and only schedule the traveler for first or business class when
alternative seating is not available.
Traveler: 4; Grade/ rank: PAS[A]; Number/ cost of premium class trips:
15/$70,000; Justification for premium travel: Claimed mission
essential, so that the traveler would be ready for meetings upon
arrival at destination; GAO's concern with premium class travel: 1. DOD
travel regulations do not list mission essential as a basis to justify
premium class travel; 2. Traveler submitted justification and obtained
specific authorization for many trips; however, the justification was
not always accurate and did not consider alternatives to the more
expensive premium class travel; 3. Most flights were less than 14
hours; 4. Some premium class flights were not authorized; Response by
traveler or traveler's staff: Traveler's assistant said that the
traveler flies premium class to minimize his time away from the office.
However, the assistant could not demonstrate a cost savings caused by
lost productivity. Traveler's assistant also said that even though the
flights did not exceed 14 hours, the traveler should be able to fly
premium class because of the importance of the traveler's work. The
traveler's assistant did not explain the reasons some premium class
flights were not authorized.
Traveler: 5; Grade/ rank: GS-15; Number/ cost of premium class trips:
11/$35,000; Justification for premium travel: Medical necessity; GAO's
concern with premium class travel: Travel orders were not signed, but
the official authorizing the travel was the traveler himself. First
class travel was not authorized by the Under Secretary of the Navy, as
required by Navy regulations; Response by traveler or traveler's
staff: Traveler told us he was not aware that first class had to be
approved by the Under Secretary of the Navy. Traveler is no longer
authorized to travel premium class.
Traveler: 6; Grade/ rank: SES[B]; Number/ cost of premium class trips:
10/$48,000; Justification for premium travel: Claimed mission
essential, so that the traveler would be ready for meetings upon
arrival at destination; GAO's concern with premium class travel: 1. DOD
travel regulations do not list mission essential as a basis to justify
premium class travel; 2. Some premium class flights were less than 14
hours; 3. Business class was taken on return flights; 4. Specific
justification was not always accurate; Response by traveler or
traveler's staff: The traveler said that he did not make his flight
arrangements. The traveler's assistant had no explanation for why some
premium class trips were not always authorized, or why the specific
justification was not accurate. The traveler's assistant said that the
traveler did not want to leave the day before to avoid the additional
cost of a business class flight.
Traveler: 7; Grade/ rank: SES; Number/ cost of premium class trips: 13/
$56,000; Justification for premium travel: Medical necessity; GAO's
concern with premium class travel: Medical note and Under Secretary of
the Navy authorization were dated in 1993 and travel was in 2000 and
2001. Current travel order signed by a subordinate; Response by
traveler or traveler's staff: The traveler has retired. The individual
who assisted in assembling the documentation said there was nothing
more current to justify the first class travel than the 1993 doctor's
note and the 1993 Under Secretary of the Navy's authorization.
Source: GAO analysis of premium class travel transactions and
supporting documentation.
[A] Presidential appointment with Senate confirmation.
[B] Senior Executive Service appointment.
[End of table]
Our work indicated that the most frequent travelers were, in most
instances, authorized to obtain premium class travel by people at the
same or higher levels. Only 3 of the 28 most frequent travelers failed
the authorization test because they or their subordinates authorized
their travel orders. More often, justification provided by frequent
travelers failed the justification test or the justification was not
adequate to permit us to determine whether the transaction complied
with the FTR and DOD travel regulations. The following provides further
details on some of the cases in table 4.
* Frequent traveler #1 was a GM-14 at the Navy who took 45 round-trip
flights during our 2-year audit period. The traveler flew business
class on 14 international trips costing about $88,000 but also took 31
domestic trips, in coach class, costing about $12,000. Attached to the
travel order for each trip was a doctor's certification noting that,
for health reasons, the traveler needed to fly in premium class.
However, we found that the medical certification did not indicate
whether premium class travel was needed on all flights or flights of
certain duration, but that many of the traveler's domestic trips, which
he took in coach class, were almost as long as some of the
international flights he took in business class. For example, the
traveler regularly flew in coach class from Washington, D.C., to cities
in California and, in one instance, to Honolulu. The flight times for
individual legs of these trips ranged from about 5 to 7 hours. The
traveler's business class flights included flights from Washington,
D.C., to Frankfurt or Amsterdam. Those flights lasted about 7 hours.
When we discussed the trips with this traveler, he stated that although
some of the domestic flights that he took were similar in duration to
the international flights, his flights to Europe were generally evening
flights and the extra room provided in business class enabled him to be
less confined and to be ready for meetings the next day. The traveler's
discussion with us and the nature of his coach and premium travel
raises questions regarding his medical need to fly business class.
* Frequent traveler # 3 is an assistant secretary of defense in
Washington, D.C., who used a blanket order to authorize and justify
business and first class travel based on an unspecified medical
condition. We identified a total of 17 first and business class tickets
for this traveler totaling nearly $68,000. Neither the travel orders
nor the travel vouchers included a physician's certification
identifying the medical justification to fly first or business class.
In addition, the traveler occasionally flew in coach class. About a
month after we requested additional documentation for these airline
tickets, DOD provided us with a letter from a physician dated September
11, 2001, requesting that the traveler be authorized to fly first class
so that the traveler could stretch his legs. The records DOD provided
concerning the 17 flights indicated that the travel office did not
attempt to satisfy the traveler's need for space by reserving a
bulkhead seat or purchasing two coach seats, in accordance with DOD
requirements. We estimate that the total cost of these flights, if
flown in coach class, would have been about $17,000. The individual who
made the premium class reservations told us that she had not been
trained on the limitations associated with premium class travel. She
also told us that in the future she would get the Deputy Secretary's
approval for first class travel and that she would attempt to limit
premium class travel to instances in which less expensive alternatives
were not available.
* Frequent traveler #5 was a GS-15 in the Navy who took 11 first class
flights totaling over $35,000 from San Diego to east coast cities
including Washington, D.C., during fiscal years 2001 and 2002. The
traveler justified the 11 flights based on a certification from a
medical authority based on his size and medical condition. However,
because his first class travel was not authorized by the Under
Secretary of the Navy, as required by Navy regulations, we contacted
the traveler to obtain further information on his condition. We
estimate that the total cost of these flights if all flown in coach
class would have been about $7,000. According to the traveler, his
condition was not so severe that he would meet the stringent first
class criteria of being "so handicapped or otherwise physically
impaired that other accommodations cannot be used." Consequently, the
traveler told us he was no longer authorized to use first class.
* Traveler #6 in table 4 was a deputy assistant secretary at DOD who
flew premium class on 10 flights from September 2000 through September
2001 at a cost of approximately $48,000. A review of the travel orders
and additional documentation supporting this travel showed that the
individual consistently documented the reasons he needed to fly premium
class. However, sometimes the justification provided did not appear
applicable to the trip in question. For example, during a 12-day period
in late August 2001, the traveler flew business class from Washington,
D.C., to six European cities and South Africa at a cost of over $8,800.
He then flew business class from South Africa to Atlanta, and first
class from Atlanta to Washington, D.C. The documentation supporting the
trip was an order, signed by the military assistant to the under
secretary, that authorized the traveler to fly first class from
Washington, D.C., to Tampa, Florida--destinations that are different
from the itinerary in question. Both the traveler and his former
secretary told us they did not recall making these flight arrangements.
In none of the cases in our statistical sample and data mining for
which authorization for premium class was given based on medical needs
did DOD submit the medical certification for an informed and
independent review. Our analysis found that 12 of the 28 frequent
premium class travelers justified their more expensive flights with a
medical condition. Further, as discussed in the examples, we identified
several anomalies in the application of medical condition
justification, as evidenced by travelers who used both coach and
premium class accommodations during flights of similar duration and
during the same period. This may indicate that additional steps should
be taken to verify the validity of the medical certification. During
testing, an Army official at the Traffic Management Office informed us
that his office forwards all medical certifications to the Surgeon
General for an opinion before recommending to the Secretary of the Army
that approval be granted for first class travel. The official stated
that he did not believe that he was competent to conclude on the
medical certification.
Lack of Monitoring and Control Environment Weaknesses Contributed to
Improper Use of Premium Class Travel:
[See PDF for image]
[End of figure]
DOD and the services performed no monitoring and oversight activities
to obtain assurance that premium class travel was authorized in
accordance with regulations. Further, during fiscal years 2001 and
2002, control environment weaknesses exacerbated already weak key
internal controls described in the previous section. Consequently, DOD
did not have an effective internal control environment, particularly in
regard to policies and procedures, to provide assurance that premium
class travel costs are incurred only when necessary. Specifically, we
found that DOD and the military services did not (1) obtain or maintain
centralized management data on the extent to which military and
civilian personnel used premium class accommodations for their travel,
(2) issue adequate policies related to the approval of premium travel,
and (3) require consistent documentation to justify premium class
travel. Until we initiated this audit, DOD's management had not
provided an appropriate "tone at the top" to encourage the appropriate
use of premium class travel. During the course of our work, DOD updated
the JTR and JFTR in April 2003 to articulate more clearly and to make
more stringent the circumstances under which premium class travel can
be authorized. In addition, the updated JTR and JFTR emphasize, in the
context of lengthy flights, that premium class travel must not be
common practice and must only be used when exceptional circumstances
warrant. The JTR and JFTR also provide examples of when premium class
travel should not be authorized.
Monitoring and Oversight Needs Improvement:
Ineffective oversight of the use of premium class travel was a key
contributor to weaknesses in the overall control environment. In
general, effective oversight activities would include management review
and evaluation of the process for issuing premium class travel and
independent evaluations of the effectiveness of internal control
activities. Program monitoring provides DOD management an opportunity
to obtain reasonable assurance that premium class travel is only
obtained with proper authorization and justification. This is
particularly important because of both the sensitivity and high cost of
premium class travel. However, DOD and the services performed no
monitoring and oversight activity to obtain assurance that premium
class travel was authorized in accordance with rules and regulations.
In addition, as mentioned previously, DOD and the services did not
perform reviews to identify the extent of premium class travel.
Consequently, it is not surprising that DOD and the services were not
aware of the extent of improper premium class transactions.
Our internal control standards state that separate evaluations of
control should depend on the assessment of risks and the effectiveness
of ongoing monitoring procedures. Our Sensitive Payments Guide lists
executive travel as a high-risk area susceptible to abuse or
noncompliance with laws and regulations. However, we found no evidence
of any audits or evaluations of premium class travel. Further, DOD's
failure to adequately monitor premium class travel has resulted in an
environment in which there is limited possibility that improper premium
class travel will be identified.
The lack of oversight is further demonstrated by the fact that
travelers, supervisors/managers, and employees at the commercial travel
offices (CTO) responsible for issuing airline tickets to the travelers
are not adequately informed of governmentwide and DOD travel
regulations concerning premium class travel. DOD officials told us that
they do not verify whether CTO employees receive training in DOD travel
regulations relating to the more expensive premium class travel, and
DOD does not track training provided to CTO staff on premium class
travel. Thus it was not surprising that officials authorizing the
travel and the travelers were not aware of the stringent regulations
associated with premium class travel. For example, several DOD
travelers and officials told us that they thought DOD travel
regulations entitled travelers to business class travel when their
flights exceeded 14 hours. These individuals were not aware that the
FTR provides that, in order to qualify for business class travel,
travelers have to proceed directly to work upon arriving at the duty
location. In addition, several DOD travelers and officials from the
government and CTOs indicated to us that the numerous CTOs with which
DOD contracted did not consistently apply the premium class criteria. A
representative from one CTO informed us that his office issued premium
class travel if premium class was mentioned on the travel order, even
if justification for obtaining premium class travel was flawed, for
example, the flight was not at least 14 hours.
DOD Did Not Maintain Centralized Management Data on Premium Class
Travel:
The Military Traffic Management Command (MTMC), which is responsible
for tracking DOD's first class travel, understated the cost and
frequency of first class travel reported to GSA. In addition, MTMC did
not track, and therefore did not know, the number of business class
trips DOD travelers took during fiscal years 2001 and 2002 or the cost
of these premium class trips. As a result, DOD did not have the data
needed for monitoring and oversight activities or for identifying
trends and determining alternate, less expensive means of
transportation.
The FTR[Footnote 14] requires DOD, along with all other executive and
legislative branch agencies, to provide GSA annual reports listing all
instances in which the organizations approved the use of first class
transportation accommodations. According to the first class travel
reports that MTMC submitted to GSA for fiscal years 2001 and 2002, DOD
civilian and military personnel took less than 1,000 first class flight
segments[Footnote 15] totaling less than $600,000. These data are
supposed to represent all first class transportation expenses, whether
charged on the centrally billed accounts or the individually billed
accounts. According to the individual responsible for compiling this
report, the roughly 1,000 first class segments were identified in what
is essentially a data call process in which MTMC personnel aggregated
information provided by the CTOs on the number and cost of first class
tickets they issued.[Footnote 16]
However, our analysis of Bank of America airline transaction data
indicates that both the number and cost of the first class tickets
reported by DOD are significantly understated. Based on our analysis,
DOD did not report more than half of fiscal years 2001 and 2002 first
class segments. As shown in table 1, we found that DOD used the
centrally billed accounts to purchase 1,240 airline tickets that
contained at least one first class portion. These 1,240 tickets, which
did not include first class tickets purchased using the individually
billed accounts, contained over 2,000 separate segments with first
class accommodations, compared to the less than 1,000 flight segments
DOD reported to GSA. These first class tickets costs of about $2.9
million were almost 5 times the amount DOD reported to GSA.
The differences between the first class travel that we identified and
the amount DOD reported can in part be attributed to omissions in DOD's
methodology for identifying first class tickets. The airlines use a
variety of letter codes to identify first class fares, and we found
that in extracting first class data DOD omitted several of the first
class codes used by some airlines. Further, a comparison of MTMC's
report and our analysis of the Bank of America transaction file showed
that a number of cities were omitted from its analysis of first class
travel. For example, while DOD data indicated that no first class
flight was taken into Washington, D.C., during fiscal year 2001, we
found 88 first class flights into Washington, D.C., during fiscal year
2001, including first class round-trips from Washington, D.C., to
Honolulu, San Francisco, Denver, St. Louis, and Los Angeles.
We also found that DOD did not obtain or maintain centralized data on
premium class travel other than first class, that is, business class.
Consequently, DOD did not know, and was unable to provide us with data
related to, the extent of its premium class travel. As mentioned
previously, we were able to obtain such data through extensive analysis
and extractions of DOD travel card transactions from databases provided
by Bank of America.
Control Environment Is Flawed by Inconsistencies in Premium Class
Travel Guidance:
DOD travelers must follow a complicated array of premium class travel
guidance. The applicability of specific regulations depends on whether
the traveler is civilian or military. For DOD civilians, GSA's FTR
governs travel and transportation allowances. DOD's JTR and individual
DOD and military service directives, orders, and instructions
supplement the FTR. For military personnel, DOD's JFTR governs travel
and transportation allowances. Individual DOD and military service
directives, orders, and instructions supplement the JFTR. The executive
branch policy on the use of first class travel applicable to the FTR,
JTR, and JFTR is found in OMB Bulletin 93-11. When a subordinate
organization issues an implementing regulation or guidance, the
subordinate organization may make the regulations more stringent, but
generally may not relax the rules established by higher-level guidance.
Inconsistencies have accumulated within the various premium class
travel regulations because DOD did not revise DOD directives, or
require the military services to revise their travel policies or
implementing guidance, when it modified the JTR or JFTR. For example,
DOD first issued the JTR in 1965 and since then had modified it 450
times through April 2003, including 30 modifications since October
2000. While the JFTR has had fewer modifications--196 through April
2003--the JFTR has also been modified 30 times since October 2000.
Despite these changes, DOD and the services frequently have not
modified their directives and guidance to reflect these changes. For
example, DOD Directive 4500.9 was last revised in 1993, while DOD
Directive 4500.56 was last updated in 1997. Further, the Navy Passenger
Transportation Manual was last updated in 1998; Marine Corps Order
P4600.7C, Marine Corps Transportation Manual, was last changed in 1992;
and while Air Force Instruction 24-101, Passenger Movement, was last
updated in 2002, it contains some provisions that are contrary to our
Guide for Evaluating and Testing Controls Over Sensitive Payments and
our Standards for Internal Control in the Federal Government.
The proliferation of different internal DOD regulations and a failure
by DOD to clearly explain the relationship of its different regulations
have created confusion for travelers and officials, as evidenced by
instances, discussed previously, in which premium class travel had been
inappropriately approved. Inconsistencies also exist because DOD and
its components have elected to authorize the use of premium class
travel in different circumstances or have described the authorization
to use premium class travel using different language. For example, see
the following:
* DOD Directive 4500.9,[Footnote 17] Transportation and Traffic
Management (last updated in 1993), contains a section establishing the
authority to use premium class flights that differs in several aspects
from GSA's FTR and DOD's JTR and JFTR as well as other directives
issued by DOD. Specifically, DOD Directive 4500.9 grants blanket
authority for high-ranking officials to use premium class travel when
traveling overseas on official government business. This policy
contradicts and is less stringent than the FTR, which does not cite
rank as a condition for obtaining premium class travel. The JTR and
JFTR (both modified in 2003) also do not cite rank as a criterion for
allowing business class travel for international flights. Further,
DOD's General Counsel staff told us this provision was superseded by
DOD Directive 4500.56.
* GSA's FTR authorizes agencies to approve the use of first class or
business class accommodations when required by an agency's mission, but
neither the JTR nor the JFTR adopts this authorization. In contrast,
DOD Directive 4500.9 states that the use of business class on domestic
travel[Footnote 18] may be authorized when necessitated by mission
requirements.[Footnote 19]
* GSA's FTR states that premium other than first class travel may be
authorized when the origin and/or destination of travel is outside the
continental United States and the scheduled flight time is in excess of
14 hours. However, the FTR prohibits premium class travel if the
traveler is authorized a rest stop en route or a rest period upon
arrival at the duty site. In contrast, DOD's JTR and JFTR that were in
effect at the time of our audit did not indicate whether a rest period
upon arrival at the duty station prohibited the authorization of
premium class travel. Both DOD directives on travel (4500.9 and
4500.56) do not directly address whether premium class travel is
allowed if the flight exceeds 14 hours. Further, the services'
implementing guidance is inconsistent in its application of the 14-hour
rule. For example, the Army policy[Footnote 20] adopts the FTR "rest
period upon arrival" limitations, but did not define what is considered
a "rest period." The Navy policy[Footnote 21] prohibits a "rest period
en route." The Air Force policy[Footnote 22] states that Air Force
travelers might be authorized business class accommodations if they are
required to perform a full day (8 hours) of work immediately upon
arrival. Finally, the Marine Corps[Footnote 23] implementing guidance
does not address this matter.
* GSA and DOD travel regulations authorize premium class accommodations
when they are paid for by a nonfederal source. However, the Navy travel
policy[Footnote 24] prohibits the use of first class accommodations
even when those accommodations are paid for by a nonfederal source,
such as when a professional association pays for the travel of a Navy
employee.
DOD Does Not Have a Standard Format for Documenting Premium Class
Travel:
DOD and the services have not defined a standard format for documenting
authorization and justification for premium class travel. Because
premium travel is to be taken only on an exception basis after all
other alternatives have been exhausted, the documentation for
authorization and justification should be held to the highest standards
to provide reasonable assurance that in every case the substantially
higher premium travel cost is warranted. In DOD's case, because
authorization and justification for premium travel is not consistently
documented, it does not have a documentation trail indicating that the
appropriate official approved the travel order and there was adequate
justification for the additional cost associated with a premium class
ticket.
The JTR and JFTR state that approval for premium class travel should be
obtained in advance of travel, except in extenuating/emergency
circumstances that make authorization impossible, and specify the
circumstances under which premium travel is to be permitted. However,
the JTR and JTFR do not provide clear and consistent procedures for
documenting the approval of premium class travel and the type of
supporting documentation to be maintained. In contrast, other federal
agencies have issued clear and consistent guidelines related to the
documentation of premium class travel. For example, the Department of
Agriculture (USDA) approves the use of premium class accommodations on
a case-by-case basis and specifies that premium travel be approved by
the under secretary except when frequent travel benefits are used. The
justification must include the specific circumstances relating to the
criteria, such as a medical justification from a competent medical
authority, which must include a description of the employee's
disability, medical condition, or special need; approximate duration of
the medical condition or special need; and a recommendation of a
suitable means of transportation based on medical condition or special
need. In addition, USDA requires that the traveler prepare a report
documenting first class travel that details the traveler's name,
address, rank, dates of travel with originating and destination cities,
the reason for obtaining first class travel and the costs of both the
coach fare and the first class fare. As shown in figure 1, other
agencies, such as the National Institutes of Health (NIH), have
standard forms that travelers must complete when requesting approval
for any travel other than coach class accommodations. Information
required includes the traveler's identifying information, the reason
for requesting premium class travel, and a comparison of the cost of
premium and coach class travel. Such a form would help eliminate the
failure to obtain specific authorization for premium class travel that
we identified in our statistical testing.
Figure 1: Sample Premium Class Authorization Form:
[See PDF for image]
Source: NIH.
[End of figure]
Further, we found that other agencies used a separate form to document
a medical condition and to justify premium class travel. As shown in
figure 2, the disabilities or other special needs form used by NIH
requires detail on the nature of the disability or special need and the
signature of both the employee and a competent medical authority. NIH's
policies state that the medical statement should specifically address
why it is necessary to use upgraded accommodations. The form also
limits the authority to a period of 6 or 12 months from the initial
date of approval depending on the nature of the disability or special
need. In the instance of a permanent disability, NIH policy is that
authorized use of premium class accommodations is valid for up to 3
years. Resubmission is necessary to ensure that there continues to be a
need for the approval and to keep the authorization records current.
Figure 2: Sample Medical Condition Form:
[See PDF for image]
Source: NIH.
[End of figure]
DOD Issued New Regulations to Better Define When Premium Class Travel
Is Authorized:
During the course of our work, in April 2003, DOD updated the
JTR[Footnote 25] and JFTR[Footnote 26] to articulate more clearly and
make more stringent the circumstances under which premium class travel
may be authorized. In addition, the updated JTR and JFTR emphasize, in
the context of lengthy flights, that premium class travel must not be
common practice and must only be used when exceptional circumstances
warrant. They also provide examples of when premium class travel should
not be authorized.
The revised JTR and JFTR better define the circumstances in which
premium class other than first class travel, that is, business class,
is authorized for DOD travelers on flights to and/or from points
outside the continental United States when the scheduled flight time
exceeds 14 hours. Most notably, the revised regulations prohibit the
use of business class travel when travelers are authorized a "rest
period" or an overnight stay upon arrival at their duty stations. The
modified regulations now explicitly state that business class
accommodations are not authorized on the return leg of travel. This is
a further restriction on premium class travel; before April 2003, DOD
did not expressly prohibit travelers from using premium class travel on
their return trips to the United States.
Finally, in its revised regulations, DOD provides specific guidance on
how the proposed use of business class accommodations should be
considered by officials and travelers. DOD states that, in the context
of authorizing business class accommodations for flights scheduled to
exceed 14 hours, "business class accommodations must not be common
practice" and that such service should be used only in exceptional
circumstances. Further, DOD directs order-issuing officials to
"consider each request for business class service individually." We
agree with DOD that decisions regarding the use of premium class travel
should be made on a case-by-case basis and based on a preference for
coach class.
Conclusions:
The ineffective management and oversight of premium class travel
provides another example of why DOD financial management is one of our
"high-risk" areas, with the DOD highly vulnerable to fraud, waste, and
abuse. DOD does not have the management controls in place to identify
issues such as improper use of premium class travel. As a result,
millions of dollars of unnecessary costs are incurred annually. Because
premium class travel is substantially more costly than coach travel, it
should only be used when absolutely necessary, and the standards for
approval and justification must be high. During our audit, DOD began
taking steps to improve its policies and procedures for premium class
travel. DOD must build on these improvements and establish strong
controls over this sensitive area to provide reasonable assurance that
its travel dollars are spent in an economical and efficient manner.
Recommendations for Executive Action:
We are making the following recommendations to improve internal control
over the authorization and justification of premium class travel and to
strengthen the control environment as part of an overall effort to
reduce improper premium class travel and related DOD costs.
Key Internal Control Activities:
Because of the substantial cost and sensitive nature of premium class
travel, we recommend that the Secretary of Defense direct the
appropriate under secretary of defense, assistant secretary of defense,
or military service officials to direct the implementation of specific
internal control activities over the use of premium travel. While a
wide range of activities can contribute to a system that provides
reasonable assurance that premium class travel is authorized and
justified, at a minimum, the internal control activities should include
the following:
* Reiterate to DOD's personnel the policy that premium class travel be
authorized and justified only on a case-by-case basis.
* Require the travel offices to issue premium class tickets only if
properly authorized and justified and documented accordingly.
* Prohibit the use of blanket authorization for premium class travel.
Overall Program Management and Environment:
We recommend that the Secretary of Defense direct the appropriate under
secretary of defense, assistant secretary of defense, or military
service officials to establish policies and procedures to incorporate
the regulations specified in GSA's FTR as well as guidance specified in
our Standards for Internal Control and our Guide for Evaluating and
Testing Controls Over Sensitive Payments, including the following:
* Develop procedures to identify the extent of premium class travel,
including all business class travel, and monitor for trends and
potential misuse.
* Develop procedures to identify all first class fare codes so that DOD
can prepare complete and accurate first class travel reports.
* Develop a management plan requiring that audits of DOD's issuance of
premium class travel are conducted regularly and the results of these
audits reported to senior management. Audits of premium class travel
should include reviews of whether commercial travel offices adhere to
all governmentwide and DOD regulations for issuing premium class
travel.
* Periodically provide notices to travelers and supervisors/managers
that specifically identify:
* the limitations on premium class travel,
* the limited situations in which premium class travel may be
authorized, and:
* how the additional cost of premium class travel can be avoided.
* Provide training to travelers and supervisors/managers that
identifies DOD's premium class policies and procedures.
* Train or make training materials available to the commercial travel
offices so that they may train their employees on premium class
policies and procedures.
* Require that premium class travel be approved by individuals who are
at least of the same rank/grade as the travelers.
* Specifically prohibit the travelers themselves or their subordinates
from approving requests for premium class travel.
* Use a standardized format or modify the format of the existing travel
order to document the request and authorization of premium class
travel. The standardized form or modified travel order should contain
sufficient information to provide a clear audit trail that documents
why the additional cost of premium class travel was a necessary expense
that could not have been avoided.
* Develop a policy that articulates what constitutes adequate support
to substantiate medical, disability, or special needs. Such a policy
should address the length of time a medical certification is valid.
* Determine the feasibility of requiring that the medical certification
for premium class travel be reviewed by an independent medical
professional to verify that the medical condition justifies the
additional cost of premium class travel.
* Revise DOD's directives on travel, when necessary, to ensure that
they are at least consistent with, or more stringent than, GSA's travel
regulations. For example, issue the update to DOD Directive 4500.9 that
removes the provision authorizing certain presidential appointees and
three-star and four-star generals/admirals to fly premium class on
flights when flying to or from overseas destinations.
* Revise the military service directives, orders, and policies to make
them consistent with the JTR and JFTR.
Agency Comments and Our Evaluation:
On September 10, 2003, DOD, Air Force, Army, Marine Corps, and Navy
officials representing the offices of the under secretaries of defense
for Acquisitions Technology and Logistics, Personnel and Readiness, and
Comptroller provided oral comments on a draft of this report. The
officials said they agreed with the findings presented in the draft
report and generally concurred with our recommendations for resolving
the control weaknesses. The officials explained that because
responsibility for travel program management is spread across three
under secretaries, they were not yet sure who would be responsible for
monitoring implementation of the recommendations.
Those DOD officials pointed out that two of our recommendations could
be addressed in different ways than contemplated in the draft report.
First, they said the justification for premium class travel could be
documented by modifying or augmenting the existing DOD travel order
rather than using a separate form. We have modified the text of these
recommendations to be less prescriptive as to the corrective actions
and instead focus on the intent of the recommendations for having
clear, well-supported justifications and written audit trails of the
authorization to spend additional funds on premium class travel.
Second, in regard to training commercial travel office personnel on
premium class travel limitations, they expressed a preference for DOD
providing training materials to the commercial travel offices so that
they, rather than DOD, could train their personnel, and facilitating
just-in time or other training for commercial travel office personnel.
:
As agreed with your offices, unless you announce the contents of this
report earlier, we will not distribute it until 30 days from its date.
At that time, we will send copies to interested congressional
committees; the Secretary of Defense; the Under Secretary of Defense,
Comptroller; the Secretary of the Army; the Secretary of the Navy; the
Secretary of the Air Force; and the Director of the Defense Finance and
Accounting Service. We will make copies available to others upon
request. In addition, the report will be available at no charge on the
GAO Web site at [Hyperlink, http://www.gao.gov.] http://www.gao.gov.
Please contact Gregory D. Kutz at (202) 512-9505 or [Hyperlink,
kutzg@gao.gov] k [Hyperlink, kutzg@gao.gov ] utzg@gao.gov, John J. Ryan
at (202) 512-9587 or [Hyperlink, ryanj@gao.gov] r [Hyperlink,
ryanj@gao.gov] yanj@gao.gov, or John V. Kelly at (202) 512-6926 or
[Hyperlink, kellyj@gao.gov] k [Hyperlink, kellyj@gao.gov]
ellyj@gao.gov if you or your staffs have any questions concerning this
report. Major contributors to this report are acknowledged in appendix
III.
Gregory D. Kutz:
Director:
Financial Management and Assurance:
Robert J. Cramer:
Managing Director:
Office of Special Investigations:
Signed by Gregory D. Kutz and Robert J. Cramer:
[End of section]
Appendixes:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
We audited the controls over the authorization and issuance of premium
class travel charged to the Department of Defense's (DOD) centrally
billed travel accounts during fiscal years 2001 and 2002. Our
assessment covered the following:
* The extent to which DOD uses the centrally billed travel accounts to
purchase premium class travel.
* Testing a statistical sample of premium class transactions to assess
the implementation of key management controls and processes for
authorizing and issuing premium class travel, including approval by an
authorized official and justification in accordance with regulations.
We also identified other selected transactions throughout the premium
class travel transactions to determine if indications existed of
improper transactions.
* DOD's oversight and monitoring of the use of premium travel and key
elements of the control environment, including the (1) consistency of
premium class travel procedures among the services and (2) adequacy of
documentation to justify the additional cost of premium class travel.
Magnitude of Premium Class Travel:
To assess the magnitude of use of premium class travel, we obtained
from Bank of America a database of fiscal year 2001 and 2002 travel
transactions charged to DOD's centrally billed travel card accounts. We
queried the database to isolate those transactions specifically related
to airline travel. The airline industry uses certain fare and service
codes to indicate the class of service purchased and provided. The
database contained transaction-specific information, including the
fare and service codes used to price the tickets DOD purchased. We
identified the fare basis codes that corresponded to the issuance of
first, business and coach class travel. Using these codes, we selected
all airline transactions that contained at least one leg in which DOD
paid for premium class travel accommodations. We also used these data
to identify the number of transactions in which DOD purchased an
entirely coach class ticket, but the transactions contained at least
one segment of the ticket that was upgraded to a premium class
accommodation.
Evaluate Effectiveness of Controls through Statistical Sampling and
Data Mining:
We tested a statistical sample of premium class transactions to assess
the implementation of key management controls and processes for
approving and issuing premium class travel, and used data mining for
additional examples of transactions that illustrate improper or
questionable premium class travel. The population from which we
selected our transactions for testing was the set of positive debit
transactions for both first and business class travel that were charged
to DOD's centrally billed travel accounts during fiscal years 2001 and
2002. Because our objective was to test controls over travel card
expenses, we excluded credits and miscellaneous debits (such as fees)
that would not have been for ticket purchases from the population of
transactions.
We further limited the business class transactions to those costing
more than $750 because many intra-European flight business class
tickets cost less than $750 and the corresponding coach class tickets
were not appreciably less. By eliminating from our sample business
class transactions less than $750, we avoided the possibility of
selecting a large number of transactions in which the difference in
cost was not significant enough to raise concerns of the effectiveness
of the internal controls. The total number of transactions excluded was
15,887, costing approximately $8 million. While we excluded business
class transactions costing less than $750, we (1) did not exclude all
intra-European flights and (2) potentially excluded nonauthorized
business class flights. Limitations of the database prevented a more
precise methodology of excluding lower cost business class tickets.
To test the implementation of key control activities over the issuance
of premium class travel transactions, we selected a stratified random
probability sample from the subset of centrally billed account
transactions containing at least one premium class leg and in which the
business class ticket cost more than $750. Specifically, we selected 15
first class transactions from a population of 1,240 transactions,
totaling about $3 million, and 122 business class transactions from a
population of about 51,000 transactions, totaling about $113 million.
For each transaction sampled, we requested that DOD provide us the
travel order, travel voucher, travel itinerary, and other related
supporting documentation. We used that information to test whether
documentation existed that demonstrated that DOD had adhered to key
internal controls over authorizing and justifying the premium class
ticket. Based on the information DOD provided, we assessed whether a
valid official approved the premium class travel and whether the
premium class travel was justified in accordance with DOD regulations.
The results of the samples of these control attributes can be projected
to the population of transactions at DOD only, not to individual
services or locations.
Based on the sampled transactions, we also estimated the percentage of
premium class travel taken by civilian supervisors, managers, and
executives, or senior military officers. With this statistically valid
probability sample, each transaction in the population had a nonzero
probability of being included, and that probability could be computed
for any transaction. Each sample element was subsequently weighted in
the analysis to account statistically for all the transactions in the
population, including those that were not selected. Because we followed
a probability procedure based on random selections, our sample is only
one of a large number of samples that we might have drawn. Since each
sample could have provided different estimates, we express our
confidence in the precision of our particular sample's estimates as 95
percent confidence intervals (e.g., plus or minus 7 percentage points).
These are intervals that would contain the actual population value for
95 percent of the samples we could have drawn. As a result, we are 95
percent confident that each of the confidence intervals in this report
will include the true values in the study population. All percentage
estimates from the sample of premium class air travel have sampling
errors (confidence interval widths) of plus or minus 9 percentage
points or less. Table 5 and table 6 summarize the population of DOD
airline travel transactions containing at least one premium class leg
charged to DOD's centrally billed accounts in fiscal years 2001 and
2002 and the subpopulation subjected to testing.
Table 5: Fiscal Years 2001 and 2002 DOD Premium Class Travel Population
Subjected to Sampling (Dollars in Thousands):
Class: First; Total population of premium class transactions:
Transactions: 1,409; Total population of premium class transactions:
Dollars: $2,969; Excluded transactions (business class costing less
than $750): Transactions: -; Excluded transactions (business class
costing less than $750): Dollars: -; Subjected to sampling (first class
and business class costing more than $750): Transactions: 1,409;
Subjected to sampling (first class and business class costing more than
$750): Dollars: $2,969; Transactions tested: Transactions: 15;
Transactions tested: Dollars: $34.
Class: Business; Total population of premium class transactions:
Transactions: 66,681; Total population of premium class transactions:
Dollars: 120,876; Excluded transactions (business class costing less
than $750): Transactions: 15,887; Excluded transactions (business class
costing less than $750): Dollars: $8,149; Subjected to sampling (first
class and business class costing more than $750): Transactions: 50,794;
Subjected to sampling (first class and business class costing more than
$750): Dollars: 112,727; Transactions tested: Transactions: 122;
Transactions tested: Dollars: 289.
Class: Total; Total population of premium class transactions:
Transactions: 68,090; Total population of premium class transactions:
Dollars: $123,845; Excluded transactions (business class costing less
than $750): Transactions: 15,887; Excluded transactions (business class
costing less than $750): Dollars: $8,149; Subjected to sampling (first
class and business class costing more than $750): Transactions: 52,203;
Subjected to sampling (first class and business class costing more than
$750): Dollars: $115,696; Transactions tested: Transactions: 137;
Transactions tested: Dollars: $323.
Source: GAO analysis of Bank of America data.
[End of table]
Table 6: Fiscal Years 2001 and 2002 Premium Class Travel Charged to the
Centrally Billed Accounts Adjusted for Coding Errors (Dollars in
Thousands):
Class: First; Subjected to sampling (first class and business class
costing more than $750): Transactions: 1,409; Subjected to sampling
(first class and business class costing more than $750): Dollars:
$2,969; Subsequently determined premium less than first class:
Transactions: (169); Subsequently determined premium less than first
class: Dollars: ($71); Population adjusted for coding errors:
Transactions: 1,240; Population adjusted for coding errors: Dollars:
$2,898.
Class: Business; Subjected to sampling (first class and business class
costing more than $750): Transactions: 50,794; Subjected to sampling
(first class and business class costing more than $750): Dollars:
112,727; Subsequently determined premium less than first class:
Transactions: 169; Subsequently determined premium less than first
class: Dollars: 71; Population adjusted for coding errors:
Transactions: 50,963; Population adjusted for coding errors: Dollars:
112,798.
Class: Total; Subjected to sampling (first class and business class
costing more than $750): Transactions: 52,203; Subjected to sampling
(first class and business class costing more than $750): Dollars:
$115,696; Subsequently determined premium less than first class:
Transactions: 0; Subsequently determined premium less than first class:
Dollars: 0; Population adjusted for coding errors: Transactions:
52,203; Population adjusted for coding errors: Dollars: $115,696.
Source: GAO analysis of Bank of America data.
[End of table]
In addition to our audit of a DOD-wide statistical sample of
transactions, we also selected other transactions identified by our
data mining efforts for audit. Our data mining identified individuals
who frequently flew using first or business class accommodations,
frequent trips to one location, and trips involving family travel. For
data mining transactions, we also requested that DOD provide us the
travel order, travel voucher, travel itinerary, and any other
supporting documentation that could provide evidence that the premium
class travel was properly authorized and justified in accordance with
DOD policies. If the additional documentation provided indicated that
the transactions were proper and valid, we did not pursue further
documentation of those transactions. If the additional documentation
was not provided or if it indicated further issues related to the
transactions, we obtained and reviewed additional documentation or
information about these transactions.
Control Environment:
To assess the overall control environment for premium class travel, we
obtained an understanding of the travel process, including
authorization of premium class travel, by interviewing officials from
the Department of the Army, Department of the Navy, Department of the
Air Force, and Defense Finance and Accounting Service. We reviewed
applicable policies and procedures and program guidance that they
provided. We visited two Army units, three Navy units, three Air Force
units, and two Marine Corps units to gain an understanding of the
travel process, including the management of premium class travel. We
used as our primary criteria applicable laws and regulations, including
GSA's Federal Travel Regulation and DOD's Joint Travel Regulations and
Joint Federal Travel Regulations. We also used as criteria our
Standards for Internal Control in the Federal Government[Footnote 27]
and our Guide to Evaluating and Testing Controls Over Sensitive
Payments.[Footnote 28] To assess the management control environment, we
applied the fundamental concepts and standards in our internal control
standards to the practices followed by management in the areas
reviewed.
We did not audit the Defense Finance and Accounting Service's centrally
billed travel card payment process. We also did not audit electronic
data processing controls used in processing centrally billed account
transactions. The sites reviewed received paper monthly bills
containing the charges for their purchases and used manual processes
for much of the period we audited, which reduced the importance of
electronic data processing controls.
We briefed DOD managers, including DOD officials in the Office of the
Under Secretary of Defense (Comptroller), the Defense Finance and
Accounting Service, and the Office of Inspector General; Army officials
in the Office of Deputy Chief of Staff for Logistics; Navy officials in
the Office of the Assistant Secretary of the Navy for Financial
Management and Comptroller; Air Force officials in the Office of the
Deputy Chief of Staff for Installation and Logistics; and Marine Corps
officials in the Office of Deputy Chief of Staff for Installations and
Logistics. On August 8, 2003, we provided DOD officials with a draft of
this report. We obtained oral comments from DOD, Air Force, Army,
Marine Corps, and Navy officials representing the offices of the under
secretaries of defense for Acquisitions Technology and Logistics,
Personnel and Readiness, and Comptroller on September 10, 2003. We
summarized those comments in the "Agency Comments and our Evaluation"
section. We conducted our audit work from November 2002 through August
2003, in accordance with U.S. generally accepted government auditing
standards, and we performed our investigative work in accordance with
standards prescribed by the President's Council on Integrity and
Efficiency.
[End of section]
Appendix II: Process to Obtain Premium Class Travel:
The process for obtaining premium class travel begins when a DOD
civilian employee or member of the military or the employee's
supervisor determines that he or she needs to travel and the traveler
is notified to initiate a travel request. If the traveler determines
that he or she needs premium class travel, the traveler submits the
travel request, along with justification for premium travel, to his or
her supervisor for approval. Once the supervisor reviews the travel
request, along with the required supporting documentation, such as a
doctor's note supporting a specific physical condition and the
necessity for premium travel, it is forwarded to the official who signs
the order. For first class travel, the secretary within the military
service or a designee reviews the request and justification for first
class travel for consistency with DOD regulations. In the case of
premium class other than first class transportation, the local
transportation officer or other appropriate authority reviews the
request and justification.
The order-signing official reviews the travel request and documentation
and determines if there is adequate support for the premium travel. If
the travel is properly supported and justified, then the premium class
travel is approved and the official signs the travel request to
generate a travel order. If adequate support does not exist for the
class of travel requested, then the request for premium travel is
denied.
The travel order is issued, signed by the official, and delivered to
the government travel office (GTO),[Footnote 29] or the commercial
travel office (CTO)[Footnote 30] acting on behalf of the government.
Either the GTO or CTO verifies the existence of documentation and
checks for an authorizing signature. The CTO then issues the premium
class ticket and charges the centrally billed account. The CTO is not
supposed to use the centrally billed account to purchase a premium
class ticket until the traveler or the official provides the CTO with a
signed travel order authorizing the premium class travel. Figure 3
provides a graphic description of the process to obtain premium class
travel.
Figure 3: Standard Process to Obtain Premium Class Travel When Multiple
Classes of Service Are Available:
[See PDF for image]
[End of figure]
[End of section]
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
John V. Kelly, (202) 512-6926 Tuyet-Quan Thai, (206) 287-4889:
Acknowledgments:
Staff making key contributions to this report were Kris Braaten,
Beverly Burke, Francine DelVecchio, Lisa Hansen, Kenneth M. Hill, Aaron
Holling, Jeffrey Jacobson, Julie Matta, Karlin Richardson, John Ryan,
Sidney H. Schwartz, and Scott Wrightson.
(192078):
:
FOOTNOTES
[1] U.S. General Accounting Office, Travel Cards: Control Weaknesses
Leave Army Vulnerable to Potential Fraud and Abuse, GAO-02-863T
(Washington, D.C.: July 17, 2002), and Travel Cards: Control Weaknesses
Leave Navy Vulnerable to Fraud and Abuse, GAO-03-148T (Washington,
D.C.: Oct. 8, 2002).
[2] U.S. General Accounting Office, Travel Cards: Control Weaknesses
Leave Army Vulnerable to Potential Fraud and Abuse, GAO-03-169
(Washington, D.C.: Oct. 11, 2002), Travel Cards: Control Weaknesses
Leave Navy Vulnerable to Fraud and Abuse, GAO-03-147 (Washington, D.C.:
Dec. 23, 2002), and Travel Cards: Air Force Management Focus Has
Reduced Delinquencies, but Improvements in Controls Are Needed, GAO-03-
298 (Washington, D.C.: Dec. 20, 2002).
[3] U.S. General Accounting Office, High-Risk Series: An Overview, GAO/
HR-95-1 (Washington, D.C.: February 1995), and High-Risk Series: An
Update, GAO-03-119 (Washington, D.C.: January 2003).
[4] The Air Force is an exception to this general rule. The Air Force
equally uses both centrally billed and individual billed accounts for
purchasing airline transportation.
[5] We define improper premium class travel transactions as those in
which travelers did not have specific authorization to use premium
class accommodations or those transactions that were properly
authorized but did not provide specific justification for premium class
travel that was consistent with DOD regulation or policy. We also
considered transactions improper if premium class travel was authorized
under DOD policy or procedures that were inconsistent with the Federal
Travel Regulation or the guidance provided in our Standards for
Internal Control in the Federal Government (GAO/AIMD-00-21.3.1) and our
Guide for Evaluating and Testing Controls Over Sensitive Payments (GAO/
AFMD-8.1.2).
[6] Although DOD policies do not address subordinates approving their
supervisors' premium class travel, we consider this to be a control
weakness, as it increases the opportunity for high-ranking employees to
bypass internal controls over travel.
[7] First class accommodations may be used without authorization only
when regularly scheduled flights between the authorized origin and
destination (including connecting points) provide only first class
accommodations.
[8] The JFTR delegates to the services the authority to determine who
may approve premium other than first class travel. The service
regulations call for the same authorizing official as the JTR.
[9] In addition to the over 68,000 premium class travel transactions
purchased by DOD, DOD travelers upgraded over 3,100 coach tickets to
business or first class tickets at no cost to the government.
[10] DOD reported almost $10.8 billion in travel-related expenses for
fiscal years 2001 and 2002 combined.
[11] GAO/AFMD-8.1.2.
[12] GAO/AIMD-00-21.3.1.
[13] GAO/AFMD-8.1.2.
[14] This requirement was prescribed at the direction of OMB. See OMB
Bulletin 93-11.
[15] A flight segment is any portion of a ticket with a separate flight
number.
[16] The contracts between DOD services and the CTOs responsible for
issuing tickets to travelers specify that CTOs provide reports to MTMC
on the number and cost of first class tickets.
[17] DOD Directive 4500.9, Transportation and Traffic Management, para.
3.4.3, December 29, 1993.
[18] As noted above, a subsequent DOD directive states that all DOD
travel outside the continental United States is subject to the JTR and
the JFTR.
[19] DOD Directive 4500.9, Transportation and Traffic Management, para.
3.4.3.1.3, December 29, 1993.
[20] Secretary of the Army Travel Policy, para. 3.B.8, last updated on
March 26, 2003.
[21] OPNAVINST 4650.15, ch. 2, enc. 1, para. 5.c (8), issued on July 7,
1998.
[22] Air Force Instruction 24-101, para. 2.7, issued March 25, 2002.
[23] Marine Corps policy guidance, issued as Marine Corps Order
4600.25C on March 15, 1978.
[24] OPNAVINST 4650.15, ch. 2, enc. 1, para. 5.c.(7), July 7, 1998.
[25] JTR Change 450, April 1, 2003.
[26] JFTR Change 196, April 1, 2003.
[27] GAO/AIMD-00-21.3.1.
[28] GAO/AFMD-8.1.2.
[29] The GTO is staffed by government employees who are required to
monitor the activities of the commercial travel office.
[30] The CTO is staffed by employees of a company that has been
contracted to serve as a travel agency for DOD or the military service.
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