DOD Travel Cards
Control Weaknesses Led to Millions of Dollars Wasted on Unused Airline Tickets Gao ID: GAO-04-398 March 31, 2004Ineffective oversight and management of the Department of Defense's (DOD) travel card program, which GAO previously reported on, have led to concerns about airline tickets DOD purchased but did not use and for which it did not claim refunds. GAO was asked to (1) determine whether, and to what extent, airline tickets purchased through the centrally billed accounts were unused and not refunded and (2) determine whether DOD's internal controls provided reasonable assurance that all unused tickets were identified and submitted for refunds.
Control breakdowns over the centrally billed accounts resulted in DOD paying for airline tickets that were not used and not processed for refund. DOD was not aware of this problem before our audit and did not maintain data on unused tickets. We determined, based on airline data, that DOD had purchased--primarily in fiscal years 2001 and 2002--about 58,000 tickets with a residual (unused) value of more than $21 million that remained unused and not refunded as of October 2003. We also identified more than 81,000 partially unused airline tickets with a purchase price of about $62 million that will require additional analysis to determine the residual value. Based on further analysis of the limited data, it is possible that DOD purchased at least $100 million in airline tickets that it did not use and for which it did not claim refunds from fiscal years 1997 through 2003. Although GAO asked DOD's five most frequently used airlines for fiscal year 2001 and 2002 unused ticket data, the airlines did not provide uniform, complete, or consistent responses. For example, one airline did not provide partially unused ticket data, another airline's fiscal year 2001 data covered only September 2001, while yet another airline provided data on electronic tickets dating back to November 1998. Although additional data on unused tickets may be available from the airlines' archives, our attempts to obtain additional information were unsuccessful. DOD's unused ticket problems were caused by a flawed process that relied extensively on DOD personnel to report unused tickets to the travel offices. Although it appears that many unused tickets were processed for a refund, the internal controls DOD had in place did not detect millions of dollars of unused airline tickets. Specifically, DOD did not systematically implement compensating procedures to identify instances in which DOD personnel did not report unused tickets, or reconcile the centrally billed accounts to travel claims to determine whether airline tickets were used. Although some units had instituted a process by fiscal year 2002 to more systematically identify instances of unused tickets, the process was not implemented DOD-wide, DOD did not verify that units were consistently implementing the process, and the process could only identify unused electronic--not paper--tickets.
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-04-398, DOD Travel Cards: Control Weaknesses Led to Millions of Dollars Wasted on Unused Airline Tickets
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Report to Congressional Requesters:
March 2004:
DOD TRAVEL CARDS:
Control Weaknesses Led to Millions of Dollars Wasted on Unused Airline
Tickets:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-398]:
GAO Highlights:
Highlights of -GAO-04-398, 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 previously reported on, have led
to concerns about airline tickets DOD purchased but did not use and for
which it did not claim refunds. GAO was asked to (1) determine whether,
and to what extent, airline tickets purchased through the centrally
billed accounts were unused and not refunded and (2) determine whether
DOD‘s internal controls provided reasonable assurance that all unused
tickets were identified and submitted for refunds.
What GAO Found:
Control breakdowns over the centrally billed accounts resulted in DOD
paying for airline tickets that were not used and not processed for
refund. DOD was not aware of this problem before our audit and did not
maintain data on unused tickets. We determined, based on airline data,
that DOD had purchased”primarily in fiscal years 2001 and 2002”about
58,000 tickets with a residual (unused) value of more than $21 million
that remained unused and not refunded as of October 2003. We also
identified more than 81,000 partially unused airline tickets with a
purchase price of about $62 million that will require additional
analysis to determine the residual value. Based on further analysis of
the limited data, it is possible that DOD purchased at least $100
million in airline tickets that it did not use and for which it did not
claim refunds from fiscal years 1997 through 2003.
Fully Unused and Partially Unused Airline Tickets:
[See PDF for image]
[End of table]
Although GAO asked DOD‘s five most frequently used airlines for fiscal
year 2001 and 2002 unused ticket data, the airlines did not provide
uniform, complete, or consistent responses. For example, one airline
did not provide partially unused ticket data, another airline‘s fiscal
year 2001 data covered only September 2001, while yet another airline
provided data on electronic tickets dating back to November 1998.
Although additional data on unused tickets may be available from the
airlines‘ archives, our attempts to obtain additional information were
unsuccessful.
DOD‘s unused ticket problems were caused by a flawed process that
relied extensively on DOD personnel to report unused tickets to the
travel offices. Although it appears that many unused tickets were
processed for a refund, the internal controls DOD had in place did not
detect millions of dollars of unused airline tickets. Specifically, DOD
did not systematically implement compensating procedures to identify
instances in which DOD personnel did not report unused tickets, or
reconcile the centrally billed accounts to travel claims to determine
whether airline tickets were used. Although some units had instituted
a process by fiscal year 2002 to more systematically identify instances
of unused tickets, the process was not implemented DOD-wide, DOD did
not verify that units were consistently implementing the process, and
the process could only identify unused electronic”not paper”tickets.
What GAO Recommends:
GAO makes 20 recommendations to DOD, including the following:
* evaluate the feasibility of requiring DOD personnel to purchase
airline tickets with their individually billed travel cards, which
would eliminate DOD‘s risk of paying for unused tickets;
* implement procedures to systematically provide reasonable assurance
that all unused tickets purchased with the centrally billed accounts
are refunded; and
* submit claims to the airlines to recover the $21 million in known
unused tickets”DOD might be able to recover more than $100 million for
unused tickets.
DOD concurred with all 20 of our recommendations and stated that it had
taken or will take actions to address these recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-398.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gregory D. Kutz at (202)
512-9505 or kutzg@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Millions of Dollars of Airline Tickets Were Unused and Not Refunded:
DOD Did Not Implement Effective Controls over Unused Tickets:
Conclusion:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Known Value of Fully and Partially Unused Tickets and
Potential Magnitude of Control Weaknesses:
Types of Data Provided Differed Substantially between Airlines:
Known Unused Value of Fully and Partially Unused Tickets:
Possible Magnitude of Unused Tickets Purchased with Centrally Billed
Accounts:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Tables:
Table 1: Known Residual Value of Fully and Partially Unused Airline
Tickets, November 1998 through December 2002:
Table 2: Known Residual Value of Fully Unused Airline Tickets, November
1998 through December 2002:
Table 3: Known Partially Unused Airline Tickets, November 1998 through
December 2002:
Table 4: Type of Data Provided by the Airlines:
Table 5: Known Value of Unused Tickets by Airline:
Table 6: Partially Unused Ticket Number and Value:
Table 7: Fiscal Year 2002 Fully Unused Ticket Ratios:
Table 8: Analysis of Fiscal Year 2002 Partially Unused Ticket Ratios:
Figures:
Figure 1: Value of Tickets Charged to DOD's Centrally Billed Accounts
by Airline, Fiscal Years 2001 and 2002:
Figure 2: Possible Control Breakdowns in the Unused Ticket Process:
Abbreviations:
CTO: Commercial Travel Office:
DOD: Department of Defense:
DTS: Defense Travel System:
GTO: Government Travel Office:
Letter March 31, 2004:
The Honorable Norm Coleman:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Permanent Subcommittee on Investigations:
Committee on Governmental Affairs:
United States Senate:
The Honorable Charles E. Grassley:
Chairman:
Committee on Finance:
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 travel 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 card
programs. 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. In response to your request, we reported
[Footnote 3] in October 2003 that internal control weaknesses over
DOD's centrally billed accounts led to millions of dollars of improper
premium class travel and increased costs to taxpayers. These weaknesses
provide further 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,
that is, areas that are highly vulnerable to fraud, waste, and abuse,
a designation that continues today.[Footnote 4] In light of the
internal control problems with DOD's travel card programs, you asked us
to expand our work in the area of centrally billed accounts to
determine (1) whether, and to what extent, airline tickets purchased
through the centrally billed accounts were still unused and not
refunded and (2) whether DOD's internal controls provided reasonable
assurance that all unused tickets were identified and submitted for
refunds.
To determine the magnitude of tickets purchased through the centrally
billed accounts during fiscal years 2001 and 2002 that were unused and
not refunded, we compared data on unused tickets provided by airlines
(refer to app. II for information on data provided by airlines) to data
provided by the Bank of America--DOD's credit card bank. The unused
ticket data came from the five U.S. airlines that provided about 82
percent of the value of all airline tickets DOD purchased during this
period. Although we were able to validate that the tickets the airlines
had on record as being unused were tickets that DOD had purchased with
its centrally billed accounts, we were unable to confirm the
completeness of the population of unused tickets we received from four
of the five airlines. Despite the possibility of understating the
extent of the problem, we used the airline data to determine the
possible magnitude of DOD's unused tickets from fiscal years 1997
through 2003. Further, we reviewed the unused ticket process to
evaluate whether internal controls over the centrally billed accounts
were properly designed to identify unused tickets, submit these tickets
for refunds, and verify that refunds had been received. Appendixes I
and II provide details on our scope and methodology.
We performed our work from March 2003 through January 2004 in
accordance with generally accepted government auditing standards. We
requested comments on a draft of this report from the Secretary of
Defense or his designee. We received written comments, which are
reprinted in appendix III of this report.
Results in Brief:
A lack of departmentwide controls over the centrally billed accounts
resulted in DOD paying for millions of dollars of airline tickets that
were not used and not processed for refund. DOD was not aware of this
problem before our review because it did not maintain data on unused
tickets. Our analysis of the limited data provided by DOD's five most
frequently used airlines found that DOD had purchased--primarily in
fiscal years 2001 and 2002--about 58,000 tickets with a residual
(unused) value of $21.1 million that remained unused and not refunded
as of October 2003. In addition, three airlines had not determined the
residual value of more than 81,000 partially unused tickets, that is,
at least one leg had not been used, with a total purchase price of more
than $62 million. These amounts likely understate the value of fully
and partially unused tickets because only two of the five airlines were
able to provide us complete data on unused fiscal years 2001 and 2002
tickets as requested, and one airline did not provide any data for
partially unused tickets. Based on further assessment of the limited
data, we determined that it is possible that since 1997, DOD purchased
more than $100 million in airline tickets with its centrally billed
accounts that it did not use and did not process for refunds. Airline
representatives informed us that limitations with the way their data
are maintained prevented them from providing us with complete and
consistent data, and our attempts to obtain additional information were
unsuccessful. Federal agencies are authorized to recover payments made
to airlines for tickets that agencies ordered but did not use. While
generally a 6-year statute of limitations applies to the government's
ability to file an action for money damages based on a contractual
right, the government also has up to 10 years to offset future payments
for amounts it is owed.
Millions of dollars in unused tickets have been wasted because DOD did
not have a systematic process to identify and process unused tickets.
DOD's flawed process relied extensively on DOD personnel to report
unused tickets to the travel offices. DOD did not systematically
implement compensating procedures to identify instances in which DOD
personnel did not report unused tickets, or reconcile the centrally
billed accounts to travel claims to determine whether airline tickets
were used. This failure to reconcile tickets that were centrally
acquired to travel claims filed by travelers resulted in DOD not being
able to determine whether the airline tickets it purchased were used.
Although bank data indicated that DOD received many credits to
centrally billed accounts, the number and value of tickets the airlines
reported as unused and not refunded demonstrated that the lack of
effective internal control procedures led to a waste of scarce
resources. We identified some improvements during fiscal year 2002,
when a number of DOD commercial travel offices attempted to implement
procedures to systematically identify unused electronic tickets within
their computer reservation systems. However, this process had not been
implemented DOD-wide and does not address paper airline tickets.
Further, at locations where this technique was implemented, DOD's
government travel offices did not have systematic procedures to verify
that the commercial travel offices consistently identified all unused
electronic tickets, and that all tickets that had been identified as
unused resulted in a credit to the centrally billed account.
While we identified significant weaknesses in the controls over DOD's
centrally billed accounts, improved controls and management of
individually billed accounts may provide DOD with options to reduce the
financial exposure resulting from unused tickets that are not properly
refunded. Specifically, using a well-controlled individually billed
account program to pay for airline tickets would transfer
responsibility for all charges to the individual cardholder, thus
limiting the government's financial exposure and providing an incentive
to DOD cardholders to properly identify and claim refunds for unused
tickets. However, DOD would still need to improve controls over its
centrally billed account structure as not all DOD travelers would have
access to an individually billed account, such as new employees and
infrequent travelers.
This report contains 20 recommendations for DOD to reduce the risks
associated with using the centrally billed accounts to purchase airline
tickets by considering the feasibility of establishing the individually
billed account travel card as the primary procurement method for
transportation. We also recommend that DOD take a series of immediate
steps to improve controls over the centrally billed account so that in
the future, it can readily identify and request timely refunds on all
unused tickets. Finally, we recommend that DOD attempt to recover all
tickets that are unused and not refunded. To assist DOD in claiming
refunds or converting the unused tickets to future use, in December
2003, we provided DOD a list of the unused ticket information we
received from the airlines. DOD has told us that it is working to
recover the value of those unused and partially used tickets. In
written comments on a draft of this report, DOD concurred with all 20
of our recommendations and stated that it had taken actions or will
take actions to address these recommendations.
Background:
The DOD centrally billed travel card program is part of a
governmentwide travel card program started in 1983 with the express
purpose of increasing convenience to the traveler and lowering (1) the
government's cost of travel by reducing the need for cash advances to
the traveler and (2) the associated administrative costs. The travel
card program includes both the individually billed accounts--accounts
held and paid by the individual cardholders--and the centrally billed
accounts. In general, individual cardholders use the individually
billed accounts to charge non-transportation-related expenses, while
most DOD services and units used the centrally billed accounts to
purchase transportation services such as airline and train tickets and
to facilitate expenses incurred for group travel.[Footnote 5]
According to Bank of America data, the net value of airline tickets
charged during fiscal years 2001 and 2002 to DOD's centrally billed
accounts totaled over $2.4 billion. As shown in figure 1, five U.S.
airlines--American, Delta, Northwest, United, and US Airways--together
accounted for more than 82 percent of the dollar value of airline
tickets purchased by DOD during fiscal years 2001 and 2002. More than
85 other airlines--both U.S. and foreign carriers--accounted for the
remaining 18 percent of the value of total airline tickets DOD
purchased in fiscal years 2001 and 2002. The $2.4 billion is made up of
more than $2.6 billion in gross airline purchases net of credits
totaling $233 million, or about 9 percent of gross airline purchases.
Credits related to tickets that were unused, tickets issued
erroneously, and charges identified as fraudulent.
Figure 1: Value of Tickets Charged to DOD's Centrally Billed Accounts
by Airline, Fiscal Years 2001 and 2002:
[See PDF for image]
[End of figure]
The airline tickets DOD purchased through the centrally billed accounts
are generally acquired under the terms of the air transportation
services contract that the General Services Administration (GSA)
negotiates with U.S. airlines. Airline tickets purchased under this
contract have no advance purchase requirements, have no minimum or
maximum stay requirements, are fully refundable, and do not incur
penalties for changes or cancellation. The revenue recognition policy
for the airlines industry is to recognize ticket sales as a liability
until the transportation is provided, that is, when the ticket is used.
The terms of the air transportation services contract also provide that
contract carriers are to fully refund all unused portions of any
government contract fare ticket to the activity paying for the ticket,
the travel management center issuing the ticket, or the individual
traveler, as appropriate. Because DOD travel regulations require that
federal and military travelers on official business use a contract
carrier for official airline travel unless a specific exception
applies, airline tickets purchased by DOD are typically fully
refundable.
Federal agencies are authorized to recover payments made to airlines
for tickets that agencies acquired but did not use.[Footnote 6] While
generally there is a 6-year statute of limitations on the government's
ability to file an action for money damages based on a contractual
right,[Footnote 7] the government also has up to 10 years to offset
future payments for amounts it is owed.[Footnote 8] Several airlines
sued GSA after it offset payments due to the airlines for the value of
airline tickets that GSA claimed were unused. The court upheld GSA's
authority to administratively offset the payments despite the airlines'
assertion that provisions printed on the tickets themselves specified a
shorter time limit in which the government could request a
refund.[Footnote 9] The court further held that the government's right
to refunds could not be limited by terms unilaterally imposed by the
airlines.[Footnote 10]
Millions of Dollars of Airline Tickets Were Unused and Not Refunded:
As shown in table 1, data provided by five airlines and verified
against Bank of America's data showed that about 58,000 tickets with a
value of $21.1 million were purchased with DOD's centrally billed
accounts but were unused and not refunded. The $21.1 million included
more than 48,000 tickets valued at $19.2 million that were fully
unused, and $1.9 million in the residual value of about 10,000 American
Airlines partially used tickets,[Footnote 11] that is, at least one leg
had not been used. Based on our assessment of the limited data provided
by the airlines, it is possible that since fiscal year 1997, DOD
purchased more than $100 million in airline tickets that were not used
and not processed for refunds and for which DOD may be entitled to
refunds or offsets against other payments to those airlines.
Table 1: Known Residual Value of Fully and Partially Unused Airline
Tickets, November 1998 through December 2002:
Dollars in millions.
American;
Number of tickets: 15,877[A];
Residual value of tickets: $4.1[A].
Delta;
Number of tickets: 15,588;
Residual value of tickets: $6.4.
Northwest;
Number of tickets: 3,479;
Residual value of tickets: $2.3[B].
United;
Number of tickets: 16,283;
Residual value of tickets: $6.0.
US Airways;
Number of tickets: 6,719;
Residual value of tickets: $2.3.
Total;
Number of tickets: 57,946;
Residual value of tickets: $21.1.
Source: GAO analysis of Bank of America and airline data.
[A] In total, American Airlines reported 24,013 tickets with residual
value of more than $6.2 million that were fully or partially unused.
We excluded 8,136 American Airlines unused tickets totaling more than
$2.1 million from our analysis because either (1) less than 6 months
had passed between the time the tickets were purchased and when
American Airlines provided the file or (2) Bank of America data did
not confirm whether the tickets were fully or partially unused.
[B] Residual value of $2.3 million represents the amount DOD paid Bank
of America for those tickets. This amount differs slightly from
Northwest Airlines' reported fare of $2.1 million. Our analysis
indicates that Northwest Airlines excluded taxes and fees from its
reported amount of $2.1 million.
[End of table]
Amount of Fully Unused Tickets Is Significant:
Table 2 provides further details on the $19.2 million identified as
being fully unused. Fully unused tickets made up most of the known
unused tickets value of $21.1 million, which also included the residual
value of partially unused tickets. As shown in table 2, DOD spent $19.2
million on more than 48,000 airline tickets that were fully unused and
not refunded.
Table 2: Known Residual Value of Fully Unused Airline Tickets, November
1998 through December 2002:
Dollars in millions.
American;
Number of fully unused tickets: 6,151;
Residual value of fully unused[A] tickets: $2.2.
Delta;
Number of fully unused tickets: 15,588;
Residual value of fully unused[A] tickets: $6.4.
Northwest;
Number of fully unused tickets: 3,479;
Residual value of fully unused[A] tickets: $2.3.
United;
Number of fully unused tickets: 16,283;
Residual value of fully unused[A] tickets: $6.0.
US Airways;
Number of fully unused tickets: 6,719;
Residual value of fully unused[A] tickets: $2.3.
Total;
Number of fully unused tickets: 48,220;
Residual value of fully unused[A] tickets: $19.2.
Source: GAO analysis of airline data.
[A] Values represent tickets purchased primarily in fiscal years 2001
and 2002. Of the $19.2 million, $2.4 million represents tickets that
were not purchased during those 2 fiscal years.
[End of table]
Since DOD was not aware of these unused tickets, and consequently did
not know their number or dollar value, we requested these data from
DOD's five most frequently used airlines--American, Delta, Northwest,
United, and US Airways. Although we asked each airline for consistent
data on tickets purchased in fiscal years 2001 and 2002 that were
unused and not refunded, we did not receive uniform, complete, or
consistent responses. For example, although American Airlines and US
Airways provided us with data on fully unused tickets for fiscal year
2002--tickets that were issued to DOD travelers but never traded in at
a counter--they provided only partial data for fiscal year 2001. Delta
Airlines provided us information on the status of all tickets DOD
purchased with its centrally billed accounts during fiscal years 2001
and 2002, and guidance on how to identify those tickets that were fully
and partially unused. For more detailed information on the breakdown of
fully unused tickets by year, and further discussion of the types of
data we received from the airlines, see appendix II.
Residual Value of Partially Unused Tickets Is Potentially Significant:
In addition to the $19.2 million in fully unused tickets, DOD failed to
claim refunds on millions of dollars in airline tickets purchased with
centrally billed accounts that were partially unused. As in the case of
fully unused tickets, DOD was not aware of, and therefore did not
maintain data on, partially unused tickets. Consequently, we had to
request these data from the airlines.
Partially unused tickets are those tickets that, although used, still
have residual value as only portions of those tickets were traded in
for travel. A DOD ticket may be partially unused for several reasons.
For instance, a ticket can be partially unused when a DOD traveler used
the ticket for the outbound flight but decided to drive home with
another DOD traveler. A ticket can also be partially unused if, for
example, a DOD traveler who was originally scheduled to travel from
Seattle to Miami and then to San Juan, Puerto Rico, was ordered to
return home from Miami because of weather problems. In this case, the
portion of the airline ticket from Miami to Puerto Rico was unused.
While the portions that have been used represent services rendered by
the airlines, the portions that are partially used have a residual
value that can be claimed as a refund. Table 3 summarizes the number
and purchase price of partially unused tickets, as well as the residual
value of partially unused tickets where available.
Table 3: Known Partially Unused Airline Tickets, November 1998 through
December 2002:
Dollars in millions.
Airline: US Airways: Data not provided.
Partially unused tickets requiring additional analysis to determine
residual value:
Airline: Delta;
Number of tickets identified as partially unused[A]: 51,294;
Purchase price of tickets identified as partially unused[A]: $39.3;
Residual value of tickets identified as partially unused: Not provided.
Airline: Northwest;
Number of tickets identified as partially unused[A]: 7,420;
Purchase price of tickets identified as partially unused[A]: 7.6[B];
Residual value of tickets identified as partially unused: Not provided.
Airline: United;
Number of tickets identified as partially unused[A]: 22,823;
Purchase price of tickets identified as partially unused[A]: 15.2;
Residual value of tickets identified as partially unused: Not provided.
Subtotal;
Number of tickets identified as partially unused[A]: 81,537;
Purchase price of tickets identified as partially unused[A]: $62.1;
Residual value of tickets identified as partially unused: Not provided.
Known residual value of partially unused tickets not requiring
additional analysis:
Airline: American;
Number of tickets identified as partially unused[A]: 9,726;
Purchase price of tickets identified as partially unused[A]: $5.8;
Residual value of tickets identified as partially unused: $1.9.
Total;
Number of tickets identified as partially unused[A]: 91,263;
Purchase price of tickets identified as partially unused[A]: $67.9;
Residual value of tickets identified as partially unused: $1.9.
Source: GAO analysis of airline data.
[A] Values represent tickets purchased primarily in fiscal years 2001
and 2002. Of the more than 90,000 tickets totaling $67.9 million, about
8,500 tickets with total purchase price of $5.2 million were not
purchased during those 2 fiscal years.
[B] Purchase price of $7.6 million represents Bank of America data on
ticket price. This amount differs from Northwest Airlines' reported
fare of $7.2 million. Our analysis indicates that Northwest Airlines
excluded taxes and fees from its reported amount of $7.2 million.
[End of table]
Over the entire period for which four airlines provided data on
partially unused tickets--American, Delta, Northwest, and United--we
identified that more than 91,000 tickets costing about $68 million were
only partially used. Although Delta, Northwest, and United provided
data that identified over 81,000 partially unused tickets with a
purchase price of more than $62 million, these three airlines informed
us that their ticket data are not maintained in a format that would
allow them to easily quantify the residual value of these partially
unused tickets. To do so would require a complex process involving the
repricing of each of the segments that made up the total purchase
price--a process the airlines told us would be labor-intensive and
costly. American Airlines was able to provide the residual value of its
partially unused tickets--$1.9 million. Further, US Airways did not
provide us with any data on these types of tickets. As indicated by the
airlines, substantial work remained to be done to derive an estimate of
the residual value of partially unused tickets. For more detailed
information on the breakdown of partially unused tickets by year, see
appendix II.
Data Indicate That DOD May Have Millions More in Tickets That Are
Unused and Not Refunded:
In addition to the millions of dollars in known amounts of unused
tickets or segments thereof that were not refunded, we used the limited
airline data to assess that the possible magnitude of outstanding
unused tickets purchased from 1997 through 2003 was at least $100
million. As stated previously, federal agencies are authorized to
recover payments made to airlines for tickets that agencies ordered but
did not use. Generally a 6-year statute of limitations applies to the
government's ability to file an action for money damages based on a
contractual right, but the government also has up to 10 years to offset
future payments for amounts it is owed. However, airline
representatives told us that they were concerned about the feasibility
and costs of retrieving DOD's unused ticket data from their archives.
As you requested, we used the data provided by the airlines to
determine the possible magnitude of the tickets DOD purchased but did
not use or claim as a refund since 1997. Using the data that the
airlines provided for fiscal year 2002, we calculated the total value
of fully unused tickets as a percentage of total tickets purchased
using a centrally billed account. We also used the more limited data
the airlines provided on partially unused tickets for fiscal year 2002
to gauge the residual value of partially used tickets as a percentage
of the total purchase value of these tickets. We applied these combined
results, which on a per airline basis ranged from 1.44 percent to 3.26
percent, to the total purchase value of tickets purchased with
centrally billed accounts since 1997 (about $8 billion) and found--
using the lowest estimate of 1.44 percent--that it is possible DOD
purchased at least $100 million in airline tickets that were unused and
not refunded during this period. (See app. II for further information
on our calculations.):
As discussed previously, DOD was not aware of, and consequently did not
maintain data on, unused tickets and would therefore have to rely on
the airlines to provide the relevant data needed to claim refunds. The
inconsistent and incomplete responses we received from the airlines
point to the difficulties in determining the total value of unused
tickets. While the airlines readily provided us with at least 1 year of
the data we requested, some airline representatives informed us that
data on tickets purchased prior to the last 18 months have been moved
to electronic archives, and retrieving data from these archives is
costly and time-consuming. The process involves restoring from archives
millions of records of tickets the airlines have issued before they can
identify tickets purchased with the DOD centrally billed accounts that
are fully and partially unused. Further, additional work would be
necessary to determine the value of the unused portions of partially
unused airline tickets. Finally, the airlines stated that some ticket
data were not maintained electronically and that generating information
related to these tickets would involve manually sifting through the
airlines' ticket coupons. However, unused tickets from these 5 airlines
and the more than 85 other airlines that DOD uses represent a
potentially substantial government claim.
DOD Did Not Implement Effective Controls over Unused Tickets:
Millions of dollars of unused tickets have not been refunded because
DOD did not have a systematic process to identify and process unused
tickets. Effective internal controls are the first line of defense in
safeguarding assets and preventing and detecting fraud, and are an
integral part of an entity's accountability for government resources.
However, we found that DOD's flawed process relied extensively on DOD
personnel to report unused tickets to the travel offices. DOD had not
systematically implemented procedures to identify instances in which
travelers failed to notify the commercial travel offices (CTO) and
their commands of unused tickets, or to ensure that refunds were
processed once the CTOs received notifications. Although some units had
instituted a process by fiscal year 2002 to more systematically
identify instances of unused tickets, the process was not implemented
DOD-wide and could only be used to identify unused electronic--not
paper--tickets. Further, in locations where this process had been
implemented, DOD did not have systematic procedures to verify that the
CTOs identified all unused electronic tickets and processed these for
refunds. Because our preliminary assessment determined that current
operations used to identify and process unused tickets were flawed, we
did not statistically test current processes and controls.
Inadequate Controls over Unused Ticket Reporting and Processing:
During fiscal years 2001 and 2002, DOD relied on travelers to report
unused tickets to the CTOs. DOD travel regulations state that the
traveler must notify the CTO when a ticket is not used, and DOD's
Financial Management Regulations further stipulates that it is the
traveler's responsibility to return unused transportation tickets to
the CTO for a refund. At some CTOs, each trip itinerary generated at
the time an airline ticket was issued also contained a reminder to the
traveler to return all unused tickets to the CTO. Unused ticket
notification initiates a process whereby requests for refunds can be
submitted to the airlines. As mentioned above, contract tickets
purchased by the government are fully refundable. Timely processing of
refunds ensures that scarce resources are returned to the government.
However, DOD did not implement control procedures to systematically
determine the extent to which DOD travelers adhered to the unused
ticket requirements, and to identify instances in which they did not.
According to bank data, DOD received credits amounting to about 9
percent of the airline tickets purchased through the CTOs during fiscal
years 2001 and 2002. Although these data indicate that some DOD
travelers followed the unused ticket requirements, DOD did not maintain
data in such a manner as to allow the department to identify the extent
of noncompliance.
Figure 2 illustrates where control breakdowns can occur if travelers do
not adhere to DOD requirements and report unused tickets to the CTOs.
As shown in figure 2, once a ticket is charged to the centrally billed
account and given to the traveler, DOD has no systematic controls to
determine that the ticket was used--or remains unused--unless the
traveler notifies the CTO that the ticket was not used. If the traveler
does not notify the CTO of an unused ticket, the ticket would not be
refunded unless the CTO monitored the status of airline tickets issued
electronically and applied for refunds on all unused tickets. Figure 2
also shows that the failure to notify the CTO of an unused paper ticket
would result in the ticket being unused and not refunded. In addition,
if the CTO identifies or is notified of an unused ticket but fails to
process a refund, the ticket will also be unused and not refunded.
Figure 2: Possible Control Breakdowns in the Unused Ticket Process:
[See PDF for image]
[End of figure]
DOD services and agencies have sometimes identified unused tickets as
an indirect result of the procedures they have put in place to monitor
the status of their obligations. For example, budget officials at the
Department of the Navy's location in Keyport, Washington, informed us
that their financial system is programmed to identify all travel orders
for which corresponding travel vouchers had not been filed 5 days after
travel was to have been completed. Upon identification of the missing
travel vouchers, the system automatically produces a list of travelers
who have not filed their travel claims. Once identified, the finance
office sends an e-mail reminder to the traveler to file his or her
travel voucher. According to these officials, the traveler responds by
filing a voucher or notifying the finance office that the travel was
canceled and, therefore, the ticket was not used. Rather than relying
on the traveler to notify the CTO of the unused ticket, the finance
office gives the notification so that a refund can be processed.
Similarly, finance officials at Hickam Air Base regularly monitor the
accounting system for open travel orders (unliquidated obligations) and
notify the appropriate resource officers to work on these unliquidated
obligations. These resource officers would in turn remind the travelers
to file the requisite travel vouchers or notify the CTOs of unused
tickets.
However, the monitoring of open travel orders is only partially
effective in identifying unused tickets, as it still relies, to a large
extent, on the traveler providing notification to the CTO of canceled
travel. Further, in a report issued in January 2003,[Footnote 12] we
noted that hundreds of millions of dollars in unliquidated obligations
were not accounted for because Navy fund managers failed to follow DOD
regulations that require the periodic review of unliquidated
obligations exceeding $50,000. These Navy managers cited time
constraints as one of the obstacles to reviewing these unliquidated
obligations. In contrast to the unliquidated obligations exceeding
$50,000 referred to in that report, travel obligations are often valued
in the thousands and sometimes only in the hundreds of dollars.
Consequently, it is likely that many of these smaller obligations would
be of an even lower priority and therefore not reviewed.
Similarly, we found that the monitoring of open travel orders at the
Air Force is not effective in identifying unused tickets. The Air Force
records all travel expenses--regardless of whether they were incurred
with the centrally billed accounts or by the travelers directly--as one
lump sum obligation. Once a voucher is filed, or a centrally billed
charge is paid, whichever is sooner, the obligation would be
liquidated, and the travel order removed from the list of unliquidated
travel orders. Thus, the liquidation of an obligation is dependent on
either the filing of a voucher or the payment of a centrally billed
account, not whether the ticket is used or unused. Consequently, like
the Navy, it would be difficult for the Air Force to consistently
identify unused tickets through the monitoring of open travel orders.
We also found that DOD did not have control procedures to provide
assurance that tickets identified as unused were processed for refunds.
At 9 of the 10 locations we visited, neither the CTO nor the government
travel office (GTO) maintained centralized records of unused tickets
submitted by the travelers. Without a centralized record of unused
tickets, an unused ticket that had been lost or never processed for
refund would not be detected. Therefore, neither the CTO nor the GTO
could certify that all tickets turned in by the travelers were
processed for refunds. We did note, however, that 6 of the 10 locations
had implemented procedures to verify that unused tickets processed for
refunds resulted in credits to the government.
DOD Had Not Designed Procedures to Reconcile Centrally Billed Account
Tickets to Travel Claims:
Our internal control standards identify reconciliation as a control
activity that helps enforce management's directives and ensures that
actions are taken to address risks. Reconciliation should be performed
routinely so that problems are detected and corrected promptly and
differences are not allowed to age, thereby becoming increasingly
difficult to research. However, we found that DOD did not implement
reconciliation procedures that link airline tickets purchased with the
centrally billed account to travel claims submitted by travelers.
Specifically, when DOD purchased an airline ticket with a centrally
billed account, DOD did not implement procedures to identify whether
the traveler has or has not submitted a travel voucher. A lack of a
travel voucher could indicate that the ticket was unused. Without
reconciling these two types of records, DOD could not obtain reasonable
assurance that centrally billed account charges represent airline
tickets that were eventually used.
DOD regulations require that travelers file travel claims, in the form
of a travel voucher, within 5 days of the end of travel. The filing of
a travel claim provides positive confirmation that the travel took
place. A travel claim also represents the traveler's assertion that the
transportation mode indicated on the travel order--be it air or land--
was used in the performance of official duty. Only in exceptional
circumstances would the filing of a travel voucher fail to provide the
confirmation that an airline ticket provided to the traveler through
the centrally billed account was not used. For example, mechanical
problems at one airline could result in the traveler buying another
ticket on a different airline with an individually billed travel card
or a personal credit card. In these instances, the ticket acquired
through the centrally billed account would not be used, and this could
have been detected through a reconciliation process.
In addition, the positive confirmation provided by the filing of a
travel voucher indicates that a DOD-wide reconciliation between travel
vouchers and centrally billed account charges would lead to the
identification of instances in which travel claims have not been filed
for travel involving the issuance of a centrally billed airline ticket.
Such identification would allow DOD to follow up with the travelers to
determine whether travel was taken, and therefore whether the ticket
was used. A failure to reconcile tickets that were centrally acquired
to travel claims filed by travelers resulted in DOD not being able to
determine whether the airline tickets it purchased were used.
Some DOD Units Have Implemented Procedures to Identify Unused
Electronic Tickets:
In the period under audit, some DOD units have made improvements to its
unused ticket process to compensate for the lack of internal controls
over the centrally billed account program. By fiscal year 2002, some
DOD units had established procedures intended to systematically
identify unused electronic tickets, thus allowing DOD to obtain refunds
on tickets it otherwise might have missed. At these locations, the
computer systems used to reserve and purchase flights[Footnote 13]
allow the CTOs to search the databases of each airline that
participates in electronic ticketing. Each CTO can customize the
searches to generate a list of unused electronic tickets directly from
these computer reservation systems, or manually review data on the
status of each electronic ticket to identify tickets that are unused.
These procedures enable the CTOs to systematically identify unused e-
tickets without having to receive notification from the travelers. CTOs
can process requests for refunds directly in the computer reservation
systems after unused tickets are identified. This on-line capacity
allows DOD to obtain timely refunds and increases the organization's
ability to safeguard resources. An increasingly larger portion of all
tickets issued are issued electronically--data from one large U.S.
airline indicated that 69 percent of tickets issued during fiscal year
2002 and as much as 84 percent of tickets issued during fiscal year
2003 were electronic tickets. Consequently, these procedures increase
DOD's ability to capture refunds on a large portion of unused tickets.
This ability to independently identify unused electronic tickets, if
implemented across the services consistently and properly supervised,
would allow DOD to partially compensate for the lack of controls in
ensuring that travelers notify the appropriate office of canceled
travel.
However, our work found that not all locations implemented this
capability during fiscal year 2002. This is partly because DOD did not
incorporate a requirement for this capability into all the contracts it
issued to the CTOs during fiscal year 2002. For example, the CTO at
Hickam Air Base did not monitor unused tickets electronically because
its contract did not require it to do so. In contrast, some locations
that did not have this requirement in their contracts nevertheless
implemented this capability through an agreement between the CTO and
the GTO. High-level DOD officials to whom we reported the status of
unused tickets informed us that they will require this capability to be
a part of the new contracts issued under the Defense Travel System
(DTS). The DTS is intended to be the DOD-wide travel system and replace
the more than 30 travel systems currently operating within the
department. However, according to a 2002 DOD Office of Inspector
General report,[Footnote 14] "the DTS was being substantially developed
without the requisite requirements, cost, performance, and schedule
documents and analyses needed as the foundation for assessing the
effectiveness of the system and its return on investment." The report
further noted that DOD estimated that deployment would not be completed
until fiscal year 2006.
In general, we found that the GTOs at locations where the CTOs had put
this process in place have not implemented control procedures to verify
that the CTOs consistently identify and file for refunds on unused e-
tickets. For instance, the CTOs at several locations we visited did not
provide their respective GTOs with inventories of tickets they have
identified as unused. Therefore, the transportation officers were
unable to determine that all unused tickets were turned in for refunds.
As noted above, we found that several transportation officers had
procedures in place to confirm that the organization receives a credit
for tickets that have been submitted for refunds. However, this process
was not implemented at all locations we visited. Consequently, not all
DOD units could provide assurance that all requests for refunds
resulted in a credit to the government.
Even if the CTOs can identify all e-tickets, they cannot independently
identify nonelectronic tickets. Nonelectronic tickets are typically
used for international travel because many non-U.S. carriers do not
issue electronic tickets. International travel can sometimes make up as
much as 25 percent of the total dollar value of a unit's travel. Given
the inability to identify unused paper tickets, and weaknesses in the
control procedures over the CTOs, the reconciliation procedures we
discussed previously will still need to be established to match
purchases made with centrally billed accounts to travel vouchers that
have been filed. Unless DOD establishes a procedure to verify whether
all airline tickets are used, it will not have reasonable assurance
that airline tickets purchased through the centrally billed account are
used or refunded.
Improvements in Management of the Individually Billed Accounts Provide
DOD Options to Minimize Unused Ticket Risks:
In a series of testimonies[Footnote 15] and reports[Footnote 16] issued
in fiscal years 2002 and 2003, we addressed problems that the Army,
Navy, and Air Force had in managing the individually billed account
travel cards. These testimonies and reports showed high delinquency
rates and significant potential fraud and abuse related to DOD's
individually billed travel card program. However, recent improvements
to the individually billed program point to the possibility of using
this program as the principal means of acquiring tickets, thereby
reducing the government's risk of losses from unused tickets arising
from the use of centrally billed accounts.
In response to our testimonies and reports on the individually billed
accounts, the Congress took actions in the fiscal year 2003
appropriations and authorization acts[Footnote 17] requiring (1) the
establishment of guidelines and procedures for disciplinary actions to
be taken against cardholders for improper, fraudulent, or abusive use
of government travel cards; (2) the denial of government travel cards
to individuals who are not creditworthy; (3) split
disbursements[Footnote 18] for travel cardholders; and (4) offset of
delinquent travel card debt against the pay or retirement benefits of
DOD civilian and military employees and retirees.
In response, DOD has implemented many of the legislatively mandated
improvements--most notably the implementation of split disbursements
and salary offsets and the reduction in the numbers of individuals with
access to the travel cards. According to Bank of America, the
delinquency rates we noted in our prior reports at the Army, Navy, and
Air Force have decreased. For example, the delinquency rate at the Navy
had decreased from an average monthly delinquency rate of about 11
percent during fiscal year 2002 to an average monthly delinquency rate
of less than 7 percent in fiscal year 2003. Similarly, during that same
period the Army's average monthly delinquency rate decreased from about
14 percent to an average monthly delinquency rate of about 9 percent.
The benefits of using a well-controlled individually billed account
program as the principal mechanism for acquiring airline tickets are
twofold. First, in the individually billed account program, the
cardholder is directly responsible for all charges incurred on his or
her travel card. In contrast, improper charges to centrally billed
accounts that are not detected and disputed or authorized charges, such
as airline tickets that are not used, result in direct financial losses
to the government in the amount of the face value of the tickets.
Second, with the use of individually billed accounts to purchase
tickets, DOD travelers have greater incentive to turn in unused tickets
because they are responsible for paying the ticket charges. The use of
individually billed cards to acquire airline tickets would therefore
help to limit the government's financial exposure.
However, the use of the individually billed accounts to acquire airline
tickets would only minimize, not eliminate, the necessity of
implementing internal controls over the centrally billed account
program. DOD would still need to maintain a centrally billed account
structure to purchase airline tickets for travelers who have been
denied individually billed accounts, infrequent travelers whose
individually billed credit cards have been canceled, and new employees
who have not yet acquired individually billed accounts.
Conclusion:
The millions of dollars wasted on unused airline tickets provides
another example of why DOD financial management is one of our "high-
risk" areas, with DOD highly vulnerable to fraud, waste, and abuse. In
implementing the centrally billed component of the travel card program,
DOD relied on a weak process that depended on travelers reporting all
unused tickets to CTOs. Although many DOD travelers informed the CTOs
of unused tickets as required, the lack of specific internal control
procedures to identify instances in which the travelers did not do so
resulted in DOD paying for thousands of airline tickets that were not
used and not processed for refunds. During fiscal year 2003, some DOD
units began implementing procedures to more systematically identify
unused airline tickets, and in fiscal year 2004, DOD started working to
recover from the airlines the value of unused tickets we identified.
DOD must build on these improvements and establish controls over unused
tickets to improve its ability to control costs and ensure basic
accountability over scarce resources. In addition, DOD should take
immediate actions to recover the outstanding value of tickets that were
fully or partially unused and not refunded.
Recommendations for Executive Action:
To improve the management DOD's travel resources, we are making the
following 20 recommendations to DOD officials.
To decrease the risks associated with the use of the centrally billed
accounts, we recommend that the Secretary of Defense evaluate the
feasibility of the following two actions:
* establishing the individually billed account travel card as the
primary payment mechanism for transportation expenses, and:
* limiting the use of the centrally billed account travel card to
procuring transportation expenses for those employees without access to
individually billed accounts, such as new employees who have not yet
obtained individually billed account travel cards and employees who do
not qualify for the use of individually billed account travel cards,
and for other situations in which the use of an individually billed
travel card is not practical.
To enable DOD to systematically identify future unused airline tickets
purchased through the centrally billed accounts, and improve internal
controls over the processing of unused airline tickets for refunds, we
recommend that the Secretaries of the Army, Air Force, and Navy and the
heads of DOD agencies direct the appropriate personnel within services
and agencies to take the following nine actions:
* evaluate the feasibility of implementing procedures to reconcile
airline tickets acquired using the centrally billed accounts to travel
vouchers in the current travel system;
* modify existing CTO contracts to include a requirement that the CTOs:
* establish a capability to systematically identify unused e-tickets in
their computer reservation systems,
* identify all unused tickets based on specified criteria before the
unused ticket data are removed from the computer reservation systems,
* maintain daily schedules that identify unused tickets and how long
they have been unused,
* routinely provide the GTOs with unused ticket reports,
* routinely process refunds for tickets identified as unused, and:
* submit to the GTOs all requests for refunds that have been processed;
* require the GTOs to routinely compare unused tickets processed by the
CTOs to the credits on the Bank of America invoice; and:
* require either the GTOs or the units responsible for monitoring the
CTOs' activities to determine whether the CTOs are consistently
implementing the procedures to identify unused tickets and process
these tickets for refunds.
To enable DOD to more effectively monitor unused tickets under the DTS,
we recommend that the Secretary of Defense direct the appropriate
personnel to take the following four actions:
* use the DTS to remind travelers to claim refunds on all unused
tickets,
* include in future contracts issued for the DTS, a requirement that
the CTOs establish the capability to:
* systematically identify unused tickets and:
* process these tickets for refunds, and:
* establish, in the DTS, a capability to routinely match travel
vouchers to tickets issued through the centrally billed accounts.
To recover outstanding claims on unused tickets, we recommend that the
Under Secretary of Defense (Comptroller) initiate the following five
actions:
* immediately submit claims to the airlines to recover the $21 million
in fully and partially unused tickets identified by the airlines and
included in this report;
* calculate, with the assistance of the airlines, the residual value of
the partially unused tickets identified by the airlines and included in
this report; and:
* work with the five airlines identified in this report and other
airlines from which DOD purchased tickets with centrally billed
accounts to:
* identify the feasibility of determining the recoverability of other
fully and partially unused tickets purchased with DOD centrally billed
accounts,
* determine the value of the unused portions of those tickets, and:
* initiate actions to obtain refunds.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, which are reprinted in
appendix III, DOD concurred with all 20 of our recommendations and
stated that it had taken actions or will take actions to address these
recommendations. For example, with respect to actions already taken,
DOD stated that it has implemented, in the DTS, a capability to
routinely match travel vouchers to tickets issued through the centrally
billed accounts. This capability is currently being tested at certain
pilot sites. With respect to actions under way, DOD had submitted
claims to the airlines on February 26, 2004, to recover the $21 million
in fully and partially unused paper and electronic tickets identified
by the airlines, and stated that it will work with the airlines from
which it purchased tickets through the centrally billed accounts to
identify the feasibility of determining the recoverability of other
fully and partially unused tickets.
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].
Please contact Gregory D. Kutz at (202) 512-9505 or [Hyperlink,
kutzg@gao.gov], John J. Ryan at (202) 512-9587 or [Hyperlink,
ryanj@gao.gov], or John V. Kelly at (202) 512-6926 or [Hyperlink,
kellyj@gao.gov] if you or your staffs have any questions concerning
this report. Major contributors to this report are acknowledged in
appendix IV.
Signed by:
Gregory D. Kutz:
Director, Financial Management and Assurance:
Robert J. Cramer:
Managing Director, Office of Special Investigations:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Pursuant to a joint request by the Chairman and Ranking Minority Member
of the Permanent Subcommittee on Investigations, Senate Committee on
Governmental Affairs; the Chairman of the Senate Committee on Finance;
and Representative Schakowsky, we audited the controls over unused
airline tickets purchased through the Department of Defense's (DOD)
centrally billed accounts. Our assessment covered the following:
* the extent of tickets charged to the centrally billed accounts that
are unused and not refunded and:
* whether DOD's internal controls provided reasonable assurance that
all unused tickets were identified and submitted for refunds.
To assess the magnitude of tickets charged to the centrally billed
accounts that are unused and not refunded, we obtained from Bank of
America databases for fiscal years 2001 and 2002 travel transactions
charged to DOD's centrally billed travel card accounts. The databases
contained transaction-specific information, including ticket fare,
ticket number, name of passenger, date and destination of travel, and
number of segments in each ticket. We reconciled these data files to
control totals provided by Bank of America and to data reported by the
General Services Administration as DOD's centrally billed account
activities. We also requested that the five airlines that DOD used most
frequently provide us with data relating to tickets DOD purchased
during fiscal years 2001 and 2002 that were unused and not refunded.
These five airlines--American, Delta, Northwest, United, and US
Airways--together accounted for more than 82 percent of the value of
total airline tickets DOD purchased. To obtain assurance that the
tickets the airlines reported as unused represented only airline
tickets charged to DOD centrally billed accounts we compared data
provided by the airlines to transaction data provided by Bank of
America. Because DOD does not track whether tickets purchased with
centrally billed accounts were used, we were unable to confirm that the
population of unused tickets that the airlines provided was complete,
that is, it included all DOD tickets that are unused and not refunded.
While the five airlines provided data on unused tickets that allowed us
to identify which tickets were unused and not refunded, they did not
provide uniform or consistent data, and their data did not always cover
the same periods. Specifically, all five airlines provided data that
enabled us to determine the total purchase price of fully unused
tickets, and four of the five airlines provided data that enabled us to
determine the total purchase price of partially unused tickets. Only
one airline provided us the unused value (residual value) of partially
unused tickets. Further, while all five airlines provided us
information on fiscal year 2002 fully unused tickets, the data they
provided on fully unused tickets covered from 1 to over 4 years. In
addition, only four airlines provided partially unused ticket data, and
the data they provided similarly covered from 1 to over 4 years. For
further details on the type of data received, and our calculations of
the value of fully unused and partially unused tickets, see appendix
II. We also reviewed relevant statutes and court decisions related to
the period of time federal agencies are allowed to claim refunds and
apply administrative offsets to goods and services they purchased but
did not receive.
To assess controls over unused tickets, we obtained an understanding of
the travel process by reviewing DOD's travel regulations and
interviewing officials from the Departments of the Army, Navy, and Air
Force. We visited two Army units, three Navy units, three Air Force
units, and two Marine Corps units to confirm our understanding of the
travel process. We also interviewed DOD officials at the government
travel offices and representatives of the commercial travel offices to
obtain an understanding of the process used to identify unused tickets
and claim refunds on those tickets. To assess the internal controls
over unused tickets, we applied the fundamental concepts and standards
set forth in our Standards for Internal Control in the Federal
Government[Footnote 19] to the practices followed by these units to
manage unused tickets. Because we determined that controls over unused
tickets were ineffective, we did not assess or design statistical
sampling tests to test these 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 the 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 concerning the results of our work. On
December 19, 2003, we provided DOD officials with a partial list of
fully and partially unused tickets we received as of that date. On
February 10, 2004, we requested comments on a draft of this report from
the Secretary of Defense or his designee. We conducted our audit work
from March 2003 through January 2004, in accordance with U.S. generally
accepted government auditing standards.
[End of section]
Appendix II: Known Value of Fully and Partially Unused Tickets and
Potential Magnitude of Control Weaknesses:
To determine whether design flaws in controls over purchasing tickets
using DOD centrally billed accounts resulted in a significant loss of
federal tax dollars, we contacted DOD's five most frequently used
airlines and requested that they identify tickets DOD purchased with a
centrally billed account that had not been used or refunded as of the
date of our request. While those airlines did not provide consistent
data concerning unused tickets, they did provide information sufficient
to allow us to determine the unused value of some of their fully unused
tickets and the original purchase price of some of the partially unused
tickets. In addition, one airline provided information on the unused
value of at least some of its partially unused tickets. Using the
ratios of the known value of unused tickets to total tickets purchased,
we were able to assess the potential magnitude of tickets purchased
with DOD centrally billed accounts that were not used or refunded since
1997--the first year for which centrally billed account information is
available from the General Services Administration.
Types of Data Provided Differed Substantially between Airlines:
We asked DOD's five most frequently used airlines--American, Delta,
Northwest, United, and US Airways--to provide information on tickets
purchased by DOD with centrally billed accounts during fiscal years
2001 and 2002 that had not been used or refunded. As shown in table 4,
while all the airlines generally provided complete data on fiscal year
2002 fully unused tickets, the airlines did not provide uniform,
complete, or consistent responses to our request for fiscal year 2002
partially unused tickets, or for fully or partially unused ticket data
for fiscal year 2001. In addition, some airlines provided some
information on fully and partially unused tickets that were purchased
in fiscal years 2003, 2000, and 1999.
Table 4: Type of Data Provided by the Airlines:
Airline: American;
Type of data:
* Value of fully unused tickets;
* Purchase price of partially unused tickets;
* Unused value of partially unused tickets;
Period covered:
* Tickets purchased in the 13-month period from September 2001 through
September 2002[A].
Airline: Delta;
Type of data:
* Status of all tickets issued to DOD;
Period covered:
* Tickets purchased during fiscal years 2001 and 2002.
Airline: Northwest;
Type of data:
* Value of fully unused tickets;
* Purchase price of partially unused tickets;
Period covered:
* Tickets purchased in fiscal years 2001 and 2002[B].
Airline: United;
Type of data:
* Value of fully unused tickets;
* Purchase price of partially unused tickets;
Period covered:
* Electronic tickets: tickets purchased from November 1998 through
December 2002;
* Paper tickets: tickets purchased primarily[C] from April 2002
through December 2002.
Airline: US Airways;
Type of data:
* Value of fully unused tickets;
Period covered:
* Tickets purchased in the 15-month period from July 2001 through
September 2002.
Source: GAO analysis of airline data.
[A] American Airlines also provided data on tickets purchased from
October through December 2002 that were still unused. We excluded 8,136
American Airlines unused tickets totaling $2.1 million from our
analysis because either (1) less than 6 months had passed between the
time the tickets were purchased and when American Airlines provided the
file or (2) Bank of America data did not confirm whether the tickets
were fully or partially unused.
[B] Northwest Airline's file included 88 tickets that were issued in
fiscal 2000 that were included in fiscal year 2001 Bank of America
statements.
[C] United Airlines provided information on 9,702 paper tickets; 413 of
those paper tickets were purchased prior to April 2002.
[End of table]
While American, Delta, Northwest, and United provided some data on
partially unused tickets, US Airways did not provide any. Further, as
noted in table 4, while American, Delta, Northwest, and United provided
data on the total purchase price of tickets that were partially unused,
American Airlines was the only airline that also provided data on the
unused value of its partially unused tickets. Table 4 also shows that
there were inconsistencies among the airlines when it came to providing
data on unused tickets purchased before, during, and after fiscal year
2002. The airlines cited difficulties with accessing their historical
files as the reason for not being able to fully respond to our request.
The airlines pointed out that to provide additional information, they
would have had to access information that had been stored in archived
computer files, and in some instances, the computer files had been
eliminated and the only documentation that remained were paper records
of the flights.
Known Unused Value of Fully and Partially Unused Tickets:
As shown in table 5, airline data showed that DOD used centrally billed
accounts to purchase about 58,000 tickets with a value of $21.1 million
that were unused and not refunded. The $21.1 million included more than
48,000 tickets valued at $19.2 million that were fully unused and about
10,000 partially unused tickets (i.e., at least one leg had never been
used) that had an unused value of about $1.9 million. Due to
differences in the data provided by the airlines, we used three primary
methods to identify the number and value of tickets that are fully
unused. Three airlines--Northwest, United, and US Airways--provided us
with data files that identified a ticket as being fully unused and its
purchase price. For these airlines, we calculated the unused value of
fully unused tickets by totaling the purchase price of each of the
fully unused tickets. American Airlines provided us a file containing
fully unused and partially unused tickets. To separate partially from
fully unused, we used Bank of America data. Delta Airlines provided us
with data on the status of each airline ticket DOD purchased using the
centrally billed accounts during fiscal years 2001 and 2002 and
guidance on how to determine whether a ticket is fully used, partially
unused, or fully unused. To identify fully unused Delta tickets from
Delta databases, we first identified tickets reported by Delta that
matched Bank of America data of how many ticket legs were purchased,
then we used the guidance Delta provided to identify its fully unused
tickets. Once we identified these tickets, we derived the unused value
of fully unused Delta Airlines tickets by totaling the purchase price
of each of the fully unused tickets, similar to the methodology we used
for the other four airlines.
Table 5: Known Value of Unused Tickets by Airline:
Dollars in millions.
Known value of fully unused tickets:
Airline: American[A];
Number of tickets identified as fully unused: Fiscal year: 2002: 5,806;
Number of tickets identified as fully unused: Fiscal year: 2001: 345;
Number of tickets identified as fully unused: Total: 6,151;
Unused value of fully unused tickets: Fiscal year: 2002: $2.1;
Unused value of fully unused tickets: Fiscal year: 2001: $0.1;
Unused value of fully unused tickets: Total: $2.2.
Airline: Delta;
Number of tickets identified as fully unused: Fiscal year: 2002: 8,441;
Number of tickets identified as fully unused: Fiscal year: 2001: 7,147;
Number of tickets identified as fully unused: Total: 15,588;
Unused value of fully unused tickets: Fiscal year: 2002: $3.3;
Unused value of fully unused tickets: Fiscal year: 2001: $3.1;
Unused value of fully unused tickets: Total: $6.4.
Airline: Northwest;
Number of tickets identified as fully unused: Fiscal year: 2002: 1,640;
Number of tickets identified as fully unused: Fiscal year: 2001: 1,839;
Number of tickets identified as fully unused: Total: 3,479;
Unused value of fully unused tickets: Fiscal year: 2002: $1.1;
Unused value of fully unused tickets: Fiscal year: 2001: $1.2;
Unused value of fully unused tickets: Total: $2.3.
Airline: United[B];
Number of tickets identified as fully unused: Fiscal year: 2002: 5,682;
Number of tickets identified as fully unused: Fiscal year: 2001: 4,044;
Number of tickets identified as fully unused: Total: 9,726;
Unused value of fully unused tickets: Fiscal year: 2002: $2.3;
Unused value of fully unused tickets: Fiscal year: 2001: $1.3;
Unused value of fully unused tickets: Total: $3.6.
Airline: US Airways[C];
Number of tickets identified as fully unused: Fiscal year: 2002: 4,933;
Number of tickets identified as fully unused: Fiscal year: 2001: 1,786;
Number of tickets identified as fully unused: Total: 6,719;
Unused value of fully unused tickets: Fiscal year: 2002: $1.8;
Unused value of fully unused tickets: Fiscal year: 2001: $0.5;
Unused value of fully unused tickets: Total: $2.3.
Total fiscal years 2001 and 2002;
Number of tickets identified as fully unused: Total: 41,663;
Unused value of fully unused tickets: Total: $16.8.
Other time period[D];
Number of tickets identified as fully unused: Total: 6,557;
Unused value of fully unused tickets: Total: $2.4.
Total value of fully unused tickets;
Number of tickets identified as fully unused: Total: 48,220;
Unused value of fully unused tickets: Total: $19.2.
Airline: American[A];
Number of tickets identified as fully unused: Fiscal year: 2002: 9,159;
Number of tickets identified as fully unused: Fiscal year: 2001: 567;
Number of tickets identified as fully unused: Total: 9,726;
Unused value of fully unused tickets: Total: $1.9.
Total value of fully and partially unused tickets;
Number of tickets identified as fully unused: Total: 57,946;
Unused value of fully unused tickets: Total: $21.1.
Source: GAO analysis of airline data.
[A] Partial fiscal year 2001 data include September 2001 only.
[B] United Airlines did not provide data on the number and value of
paper tickets purchased prior to April 2002 that were unused and not
refunded.
[C] Partial fiscal year 2001 data include data from July 2001 through
September 2001.
[D] Tickets purchased in fiscal year 2003 and prior to fiscal year
2001.
[End of table]
Partially Unused Tickets:
We could not determine the total unused value of partially unused
tickets for the five airlines we reviewed. Only American Airlines
calculated the unused value of the partially unused tickets it
identified. Three airlines--Delta, Northwest, and United--provide the
original purchase price of the partially unused airlines tickets, and
US Airways did not provide any information on partially unused tickets.
To determine the number and total purchase price of partially used
tickets purchased with DOD centrally billed accounts for which DOD did
not claim a refund, we followed the same methodology used to derive the
number and purchase price of fully unused tickets. For example, to
derive the total purchase price of partially unused American,
Northwest, and United tickets, we added the purchase:
price of each of the partially unused tickets.[Footnote 20] For Delta
Airlines, we applied the guidance Delta representatives provided to
identify partially unused tickets, then added the purchase price of
each of these tickets to derive the total. As shown in table 6, our
analysis of partially unused tickets indicated that DOD travelers did
not use all of the segments on more than 91,000 tickets DOD purchased
with centrally billed accounts.
Table 6: Partially Unused Ticket Number and Value:
Dollars in millions.
American[A];
Number of tickets identified as partially unused:
Fiscal year: 2002: 9,159;
Number of tickets identified as partially unused:
Fiscal year: 2001: 567;
Number of tickets identified as partially unused: Total: 9,726;
Purchase price of tickets identified as partially unused:
Fiscal year: 2002: $5.5;
Purchase price of tickets identified as partially unused:
Fiscal year: 2001: $0.3;
Purchase price of tickets identified as partially unused: Total: $5.8.
Delta;
Number of tickets identified as partially unused:
Fiscal year: 2002: 29,483;
Number of tickets identified as partially unused:
Fiscal year: 2001: 21,811;
Number of tickets identified as partially unused: Total: 51,294;
Purchase price of tickets identified as partially unused:
Fiscal year: 2002: $22.9;
Purchase price of tickets identified as partially unused:
Fiscal year: 2001: $16.4;
Purchase price of tickets identified as partially unused: Total: $39.3.
Northwest[B];
Number of tickets identified as partially unused:
Fiscal year: 2002: 3,283;
Number of tickets identified as partially unused:
Fiscal year: 2001: 4,137;
Number of tickets identified as partially unused: Total: 7,420;
Purchase price of tickets identified as partially unused:
Fiscal year: 2002: $3.2;
Purchase price of tickets identified as partially unused:
Fiscal year: 2001: $4.4;
Purchase price of tickets identified as partially unused: Total: $7.6.
United[C];
Number of tickets identified as partially unused:
Fiscal year: 2002: 10,319;
Number of tickets identified as partially unused:
Fiscal year: 2001: 3,962;
Number of tickets identified as partially unused: Total: 14,281;
Purchase price of tickets identified as partially unused:
Fiscal year: 2002: $8.2;
Purchase price of tickets identified as partially unused:
Fiscal year: 2001: $1.8;
Purchase price of tickets identified as partially unused: Total: $10.0.
US Airways;
Number of tickets identified as partially unused:
Fiscal year: 2002: [D];
Number of tickets identified as partially unused:
Fiscal year: 2001: [D];
Number of tickets identified as partially unused: Total: [D];
Purchase price of tickets identified as partially unused:
Fiscal year: 2002: [D];
Purchase price of tickets identified as partially unused:
Fiscal year: 2001: [D];
Purchase price of tickets identified as partially unused: Total: [D].
Total fiscal years 2001 and 2002;
Number of tickets identified as partially unused: Total: 82,721;
Purchase price of tickets identified as partially unused:
Fiscal year: 2002: $39.8;
Purchase price of tickets identified as partially unused:
Fiscal year: 2001: $22.9;
Purchase price of tickets identified as partially unused: Total: $62.7.
Other time period[E];
Number of tickets identified as partially unused: Total: 8,542;
Purchase price of tickets identified as partially unused: Total: $5.2.
Total, partially unused;
Number of tickets identified as partially unused:
Fiscal year: 2002: 52,244;
Number of tickets identified as partially unused:
Fiscal year: 2001: 30,477;
Number of tickets identified as partially unused: Total: 91,263;
Purchase price of tickets identified as partially unused:
Fiscal year: 2002: $39.8;
Purchase price of tickets identified as partially unused:
Fiscal year: 2001: $22.9;
Purchase price of tickets identified as partially unused: Total: $67.9.
Source: GAO analysis of airline data.
[A] Partial fiscal year 2001 data include September 2001 only.
[B] Purchase price of $7.6 million represents Bank of America data on
ticket price. This amount differs from Northwest Airlines' reported
fare of $7.2 million. Our analysis indicates that Northwest Airlines
excluded taxes and fees from its reported amount of $7.2 million.
[C] United Airlines was not able to provide complete data on the number
and value of paper tickets that were purchased prior to April 2002 but
were not used or refunded. Consequently, the number and value of
partially unused United tickets are understated by the number and value
of paper tickets purchased prior to April 2002 that were partially
unused, not refunded, and not provided.
[D] Data not provided.
[E] Tickets purchased in fiscal year 2003 and prior to fiscal year
2001.
[End of table]
Possible Magnitude of Unused Tickets Purchased with Centrally Billed
Accounts:
During the period from fiscal year 1997 through 2003, DOD spent about
$8 billion on airline tickets purchased using centrally billed
accounts. To assess the potential magnitude of fully and partially
unused airline tickets purchased using centrally billed accounts since
1997--the first year that centrally billed account information is
available from the General Services Administration--we used known
information related to fiscal year 2002 fully and partially unused
tickets and applied that information to the tickets purchased from
fiscal years 1997 through 2001 and in fiscal year 2003. We used fiscal
year 2002 data because it was the only year for which the airlines
provided us fairly complete data. This assessment indicates that the
unused value of fully and partially unused tickets purchased from
fiscal year 1997 to fiscal year 2003 with DOD centrally billed accounts
could be at least $115 million.
The magnitude of fully unused tickets could be at least $53 million. As
shown in table 7, the percentage of fully unused tickets (unused ticket
value as a percentage of total ticket sales) in fiscal year 2002 for
DOD's five most frequently used airlines ranged from 0.66 percent for
United Airlines to 1.11 percent for American Airlines and US Airways.
Table 7: Fiscal Year 2002 Fully Unused Ticket Ratios:
Dollars in millions.
Airline: American;
Value of fully unused tickets: $2.1;
Value of tickets purchased through DOD's centrally billed accounts:
$189.1;
Value of fully unused tickets as a percentage of the value of all
ticket purchases[A]: 1.11%.
Airline: Delta;
Value of fully unused tickets: $3.4;
Value of tickets purchased through DOD's centrally billed accounts:
$334.0;
Value of fully unused tickets as a percentage of the value of all
ticket purchases[A]: 1.01%.
Airline: Northwest;
Value of fully unused tickets: $1.1;
Value of tickets purchased through DOD's centrally billed accounts:
$104.8;
Value of fully unused tickets as a percentage of the value of all
ticket purchases[A]: 1.01%.
Airline: United;
Value of fully unused tickets: $2.3;
Value of tickets purchased through DOD's centrally billed accounts:
$344.8;
Value of fully unused tickets as a percentage of the value of all
ticket purchases[A]: 0.66%.
Airline: US Airways;
Value of fully unused tickets: $1.8;
Value of tickets purchased through DOD's centrally billed accounts:
$159.5;
Value of fully unused tickets as a percentage of the value of all
ticket purchases[A]: 1.11%.
Total;
Value of fully unused tickets: $10.7;
Value of tickets purchased through DOD's centrally billed accounts:
$1,132.2.
Source: GAO analysis of data provided by Bank of America and the
airlines.
[A] Differences due to rounding of the value of fully unused tickets
and the total value of tickets purchased through DOD's centrally billed
accounts.
[End of table]
The substantially lower ratio for United Airlines is attributed to the
fact that fully unused ticket data from United Airlines did not include
complete data on paper tickets purchased during the first 6 months of
fiscal year 2002. If data on fully unused paper tickets were available,
the ratio of fully unused tickets for United Airlines would be higher.
To be conservative, we applied the lowest percentage of the value of
fully unused tickets (United Airlines ratio of 0.66 percent) to the
value of all airline tickets that DOD purchased from fiscal years 1997
through 2003 ($8 billion). If the ratio of the value of fully unused
tickets to the total value of tickets purchased with a centrally billed
account in fiscal year 2002 was consistent since 1997, the magnitude of
value of fully unused tickets could be at least $53 million.
The potential magnitude of the unused value of partially unused tickets
could increase the unused ticket value by at least $62 million. To
arrive at this assessment, we used the data provided by the airlines on
partially unused tickets for fiscal year 2002 to calculate the
estimated unused value of partially unused tickets for each of the four
airlines that provided partially unused ticket data. The first step was
to estimate the unused value of partially unused tickets for each of
the four airlines. We accomplished this by multiplying the total value
of partially unused tickets by the fiscal year 2002 American Airlines
ratio of the unused value of partially unused tickets to the total
purchase price of those tickets.[Footnote 21] We then divided the
estimated unused value of the partially unused tickets for the four
airlines by the total fiscal year 2002 ticket sales for those airlines.
As shown in table 8, if the American Airlines' experience can be
extrapolated to the other airlines, the unused value of partially
unused tickets ranges from .78 percent to 2.25 percent of total
purchases.
Table 8: Analysis of Fiscal Year 2002 Partially Unused Ticket Ratios:
Dollars in millions.
Airline: US Airways;
Purchase price: [C];
American Airlines unused value ratio[A]: (percentages): [C];
Estimated unused value of fiscal year 2002 tickets: [C];
Total fiscal year 2002 purchases: [C];
Estimated unused value as a percentage of total purchases[B]: [C].
Airline: American;
Purchase price: $5.5;
American Airlines unused value ratio[A]: (percentages): 32.73%;
Estimated unused value of fiscal year 2002 tickets: $1.8;
Total fiscal year 2002 purchases: $189.1;
Estimated unused value as a percentage of total purchases[B]: 0.95%.
Airline: Delta;
Purchase price: $22.9;
American Airlines unused value ratio[A]: (percentages): 32.73%;
Estimated unused value of fiscal year 2002 tickets: $7.5;
Total fiscal year 2002 purchases: $334.0;
Estimated unused value as a percentage of total purchases[B]: 2.25%.
Airline: Northwest;
Purchase price: $3.2;
American Airlines unused value ratio[A]: (percentages): 32.73%;
Estimated unused value of fiscal year 2002 tickets: $1.0;
Total fiscal year 2002 purchases: $104.8;
Estimated unused value as a percentage of total purchases[B]: 0.95%.
Airline: United[D];
Purchase price: $8.2;
American Airlines unused value ratio[A]: (percentages): 32.73%;
Estimated unused value of fiscal year 2002 tickets: $2.5;
Total fiscal year 2002 purchases: $344.8;
Estimated unused value as a percentage of total purchases[B]: 0.78%.
Total;
Purchase price: $39.8;
American Airlines unused value ratio[A]: (percentages): --;
Estimated unused value of fiscal year 2002 tickets: $12.8;
Total fiscal year 2002 purchases: $972.7;
Estimated unused value as a percentage of total purchases[B]: --.
Source: GAO analysis of Bank of American and airline data.
[A] This is the ratio of the unused value of American Airlines
partially unused tickets to the total purchase price of American
Airlines partially unused tickets in fiscal year 2002.
[B] Differences due to rounding.
[C] Not provided.
[D] The United Airlines ratio of purchase price of partially unused
tickets as a percentage of total purchases is understated because, as
mentioned previously, the information United Airlines provided us did
not include complete data on paper tickets that were purchased prior to
April 2002 but were not used or refunded. Consequently, the purchase
price for United Airlines is understated by the value of paper tickets
that were purchased prior to April 2002 but were partially unused, not
refunded, and not provided. In contrast, the total purchases column
includes all data.
[End of table]
Again, to be conservative, we applied the lowest ratio of unused value
of partially unused tickets (United Airlines ratio of 0.78 percent) to
the $8 billion of all airline tickets that DOD purchased from fiscal
years 1997 through 2003. If the ratio of the unused value of partially
unused tickets to the total value of tickets purchased with centrally
billed accounts in fiscal year 2002 was consistent since 1997, the
magnitude of unused value of partially unused tickets could be at least
$62 million.
To determine the possible total magnitude of the value of airline
tickets DOD purchased with centrally billed accounts that were unused
and not refunded, we added the minimum value of potential fully unused
tickets to minimum value of potential partially unused tickets. As a
result, we determined that it was possible that DOD had purchased at
least $115 million in tickets that were unused and not refunded.
[End of section]
Appendix III: Comments from the Department of Defense:
UNDER SECRETARY OF DEFENSE
1100 DEFENSE PENTAGON
WASHINGTON, DC 20301-1100:
COMPTROLLER:
Mr. Gregory D. Kutz:
Director:
Financial Management and Assurance:
U.S. General Accounting Office
Washington, DC 20548:
Dear Mr. Kutz:
This is the Department of Defense (DoD) response to the General
Accounting Office (GAO) Draft Report, "DoD Travel Cards: Control
Weaknesses Led to Millions of Dollars Wasted on Unused Airline
Tickets," dated February 10, 2004, (GAO Code 192106/GAO-04-398). The:
DoD concurs with the 20 recommendations in the draft report and is
already taking action to correct the noted deficiencies.
The Department appreciates the opportunity to comment on the draft
report. My staff point of contact is Ms. Jacqueline Jerkins. She may be
reached by email: jacqueline.jenkins@osd.mil or by telephone at (703)
697-8282.
Sincerely,
Signed by:
Dov S. Zakheim:
Enclosure: As stated:
GAO DRAFT REPORT DATED FEBRUARY 10, 2004 GAO-04-398 (GAO CODE 192106):
"DoD TRAVEL CARDS: CONTROL WEAKNESSES LED TO MILLIONS OF DOLLARS WASTED
ON UNUSED AIRLINE TICKETS":
DEPARTMENT OF DEFENSE COMMENTS TO THE GAO RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
evaluate the feasibility of establishing the individually billed
account travel card as the primary procurement mechanism to paying for
transportation expenses. (p. 23/GAO Draft Report):
DoD RESPONSE: Concur. The Department will evaluate the feasibility of
establishing the individually billed account travel card as the primary
procurement mechanism to pay for transportation expenses. The estimated
completion date is June 15, 2004.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
evaluate the feasibility of limiting the use of the centrally billed
account travel card to procure transportation expenses for those
employees without access to an individually billed account, such as new
employees who have not yet obtained an individually billed account
travel card, employees who do no qualify for the use of an individually
billed account travel card, and other situations in which the use of an
individually billed travel card is not practical. (p. 23/Draft Report):
DoD RESPONSE: Concur. The Department will evaluate the feasibility of
limiting the use of the centrally billed account travel card to procure
transportation expenses. The estimated completion date is June 15,
2004.
RECOMMENDATION 3: The GAO recommended that the Secretaries of the Army,
Air Force, and Navy, and the heads of DoD agencies direct the
appropriate personnel within their chain of command to evaluate the
feasibility of implementing procedures to reconcile airline tickets
acquired using the centrally billed accounts to travel vouchers in the
current travel system. (p. 23/GAO Draft Report):
DoD RESPONSE: Concur. The Defense Finance and Accounting Service (DFAS)
will evaluate the feasibility of reconciling airline tickets purchased
on centrally billed accounts to travel vouchers in the current travel
system with the appropriate personnel within the DoD Components. The
estimated completion date is May 31, 2004.
RECOMMENDATION 4: The GAO recommended that the Secretaries of the Army,
Air Force, and Navy, and the heads of DoD agencies direct the
appropriate personnel within their chain of command to modify existing
commercial travel office (CTO) contracts to include a requirement that
the CTO put in place a capability to systematically identify unused e-
tickets in their computer reservation system. (p. 24/GAO Draft Report}:
DoD RESPONSE: Concur. The Under Secretary of Defense (Acquisition,
Technology and Logistics) (USD(AT&L)) will issue a memorandum requiring
each DoD Component to review and modify existing CTO contracts to
include a requirement that the CTO put in place a capability to
systematically identify unused paper and e-tickets in their computer
reservation system. The memorandum will be issued by March 31, 2004.
Additionally, USTRANSCOM will review existing requirements for unused
tickets procedures defined in the Defense Transportation Regulation
(DTR) DoD 4500.9 and coordinate appropriate changes with the DoD
Components. The estimated completion date for the update of the DTR
Part I (Passenger Movement) is the fourth quarter fiscal year 2004.
RECOMMENDATION 5: The GAO recommended that the Secretaries of the Army,
Air Force, and Navy, and the heads of DoD agencies direct the
appropriate personnel within their chain of command to modify existing
commercial travel office (CTO) contracts to include a requirement that
the CTO identify all unused tickets based on specified criteria before
the unused ticket data is removed from the computer reservation system.
(p. 24/GAO Draft Report):
DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that
directs the DoD Components to modify existing CTO contracts to include
a requirement that the CTO identify all unused tickets based on
specified criteria before the unused paper and e-ticket data is removed
from the computer reservation system. The memorandum will be issued by
March 31, 2004. Additionally, USTRANSCOM will review existing
requirements for unused tickets procedures defined in the Defense
Transportation Regulation DoD 4500.9 and coordinate appropriate changes
with the DoD Components. The estimated completion date for the update
of the DTR Part I (Passenger Movement) is the fourth quarter fiscal
year 2004.
RECOMMENDATION 6: The GAO recommended that the Secretaries of the Army,
Air Force, and Navy, and the heads of DoD agencies direct the
appropriate personnel within their chain of command to modify existing
commercial travel office (CTO) contracts to include a requirement that
the CTOs maintain an aged daily schedule of all unused tickets. (p. 23/
GAO Draft Report):
DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that
directs DoD Components to modify existing CTO contracts to include a
requirement that the CTOs maintain an aged daily schedule of all unused
paper and e-tickets. The
memorandum will be issued by March 31, 2004. Additionally, USTRANSCOM
will review existing requirements for unused tickets procedures defined
in the Defense Transportation Regulation DoD 4500.9 and coordinate
appropriate changes with the DoD Components. The estimated completion
date for the update of the DTR Part I (Passenger Movement) is the
fourth quarter fiscal year 2004.
RECOMMENDATION 7: The GAO recommended that the Secretaries of the Army,
Air Force, and Navy, and the heads of DoD agencies direct the
appropriate personnel within their chain of command to modify existing
commercial travel office (CTO) contracts to include a requirement that
the CTOs routinely provide the government travel offices (GTOs) with
unused ticket reports. (p. 24/GAO Draft Report):
DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that
directs the DoD Components to modify existing CTO contracts to include
a requirement that the CTOs routinely provide the GTOs with unused
paper and e-ticket reports. The memorandum will be issued by March 31,
2004. Additionally, USTRANSCOM will review existing requirements for
unused tickets procedures defined in the Defense Transportation
Regulation DoD 4500.9 and coordinate appropriate changes with the DoD
Components. The estimated completion date for the update of the DTR
Part I (Passenger Movement) is the fourth quarter fiscal year 2004.
RECOMMENDATION 8: The GAO recommended that the Secretaries of the Army,
Air Force, and Navy, and the heads of DoD agencies direct the
appropriate personnel within their chain of command to modify existing
commercial travel office (CTO) contracts to include a requirement that
the CTOs routinely process refunds for tickets identified as unused.
(p. 24/GAO Draft Report):
DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that
directs the DoD Components to modify existing CTO contracts to include
requirement that the CTOs routinely process refunds for paper and e-
tickets identified as unused. The memorandum will be issued by March
31, 2004. Additionally, USTRANSCOM will review existing requirements
for unused tickets procedures defined in the Defense Transportation
Regulation DoD 4500.9 and coordinate appropriate changes with the DoD
Components. The estimated completion date for the update of the DTR
Part I (Passenger Movement) is the fourth quarter fiscal year 2004.
RECOMMENDATION 9: The GAO recommended that the Secretaries of the Army,
Air Force, and Navy, and the heads of DoD agencies direct the
appropriate personnel within their chain of command to modify existing
commercial travel office (CTO) contracts to include a requirement that
the CTOs submit to the GTOs all requests for refunds that have been
processed. (p. 24/GAO Draft Report)
DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that
directs the DoD Components to modify existing CTO contract to include a
requirement that the CTOs submit to the GTOs all requests for refunds
that have been processed. The memorandum will be issued by March 31,
2004. Additionally, USTRANSCOM will review existing requirements for
unused tickets procedures defined in the Defense Transportation
Regulation DoD 4500.9 and coordinate appropriate changes with the DoD
Components. The estimated completion date for the update of the DTR
Part I (Passenger Movement) is the fourth quarter fiscal year 2004.
RECOMMENDATION 10: The GAO recommended that the Secretaries of the
Army, Air Force, and Navy, and the heads of DoD agencies direct the
appropriate personnel within their chain of command to routinely
compare unused ticket processed by the CTOs to the credits on the Bank
of America invoice. (p. 24/GAO Draft Report):
DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that
directs the DoD Components to routinely compare unused paper and e-
tickets processed by the CTOs to the credits on the Bank of America
invoice. The memorandum will be issued by March 31, 2004. Additionally,
USTRANSCOM will review existing requirements for unused tickets
procedures defined in the Defense Transportation Regulation DoD 4500.9
and coordinate appropriate changes with the DoD Components. The
estimated completion date for the update of the DTR Part I (Passenger
Movement) is the fourth quarter fiscal year 2004.
RECOMMENDATION 11: The GAO recommended that the Secretaries of the
Army, Air Force, and Navy, and the heads of DoD agencies direct the
appropriate personnel within their chain of command to require either
the government travel office or the unit responsible for monitoring the
CTOs' activities to determine whether the CTO is consistently
implementing the procedures to identify unused tickets and process
these tickets for refunds. (p. 24/GAO Draft Report):
DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that
directs the DoD Components to require either the GTO or the unit
responsible for monitoring the CTOs' activities to determine whether
the CTO is consistently implementing the procedures to identify unused
paper and e-tickets and process these tickets for refunds. The
memorandum will be issued by March 31, 2004. Additionally, USTRANSCOM
will review existing requirements for unused tickets procedures defined
in the Defense Transportation Regulation DoD 4500.9 and coordinate
appropriate changes with the DoD Components. The estimated completion
date for the update of the DTR Part I (Passenger Movement) is the
fourth quarter fiscal year 2004.
RECOMMENDATION 12: The GAO recommended that the Secretary of Defense
direct the appropriate personnel to use the Defense Travel System (DTS)
to remind travelers to claim refunds on all unused tickets. (p. 25/GAO
Draft Report):
DoD RESPONSE: Concur. A system change request was submitted to the DTS
contractor o include an on-line notice to travelers (on both the
authorization and voucher processes) to return any unused tickets for
refund.
RECOMMENDATION 13: The GAO recommended that the Secretary of Defense
direct the appropriate personnel to include in future contracts issued
for the Defense Travel System, a requirement that the CTO put in place
the capability to systematically identify unused tickets. (p. 25/GAO
Draft Report):
DoD RESPONSE: Concur. In February 2004, a requirement for the CTO to
report unused tickets was included in the DTS Travel Services Contract
Solicitations. The Defense Travel System currently has a manually
generated report to identify approved authorizations where a travel
settlement voucher has not been filed. However, it does not alert the
approving official. The DTS Program Management Office will generate a
system change request (SCR) to enhance and monitor unused tickets and
the submission of travel settlement vouchers to include "flagging"
capability. The DTS Program Management Office will define the
requirements and submit the SCR no later than March 31, 2004.
RECOMMENDATION 14: The GAO recommended that the Secretary of Defense
direct the appropriate personnel to include in future contracts issued
for the Defense Travel System, a requirement that the CTO put in place
the capability to process unused tickets for refunds. (p. 25/GAO Draft
Report):
DoD RESPONSE: Concur. In February 2004, a requirement for the CTO to
process unused tickets for refunds was included in the DTS Travel
Services Contract Solicitations.
RECOMMENDATION 15: The GAO recommended that the Secretary of Defense
direct the appropriate personnel to establish in the Defense Travel
System, a capability to routinely match travel vouchers to tickets
issued through the centrally billed accounts. (p. 25/GAO Draft Report):
DoD RESPONSE: Concur. The DTS centrally billed account reconciliation
module includes the capability to match travel vouchers to tickets.
This reconciliation module is currently being tested at certain pilot
sites. It should be noted that this capability is applicable only if
DTS is used end-to-end (i.e., tickets are obtained through DTS and DTS
centrally billed account reconciliation module is used to certify
payment).
RECOMMENDATION 16: The GAO recommended that the Under Secretary of
Defense (Comptroller) immediately submit claims to the airlines to
recover the:
$21 million in fully and partially unused tickets identified by the
airlines and included in this report. (p. 25/GAO Draft Report):
DoD RESPONSE: Concur. The DFAS will submit claims to the airlines to
recover the $21 million in fully and partially unused paper and e-
tickets identified by the airlines in the report. The estimated
completion date is February 27, 2004.
RECOMMENDATION 17: The GAO recommended that the Under Secretary of
Defense (Comptroller) calculate, with the assistance of the airlines,
the residual value of the partially unused tickets identified by the
airlines and included in this report.
(p. 25/GAO Draft Report):
DoD RESPONSE: Concur. The DFAS will calculate, with the assistance of
the airlines, the residual value of the partially unused paper and e-
tickets identified in the report. The estimated completion date is June
30, 2004.
RECOMMENDATION 18: The GAO recommended that the Under Secretary of
Defense (Comptroller) work with the five airlines identified in the
report and other airlines from which DoD purchased tickets through the
centrally billed accounts to identify the feasibility of determining
the recoverability of the other fully and partially unused tickets
purchased with DoD centrally billed accounts. (p. 25/GAO Draft Report):
DoD RESPONSE: Concur. The DFAS will work with the five airlines
identified in the report and other airlines from which DoD purchased
tickets through the centrally billed accounts to identify the
feasibility of determining the recoverability of the other fully and
partially unused paper and e-tickets purchased with DoD centrally
billed accounts. The estimated completion date is June 30, 2004.
RECOMMENDATION 19: The GAO recommended that the Under Secretary of
Defense (Comptroller) work with the five airlines identified in the
report and other airlines from which DoD purchased tickets through the
centrally billed accounts to determine the value of the unused portion
of those other fully and partially unused tickets purchased with DoD
centrally billed accounts. (p. 25/GAO Draft Report):
DoD RESPONSE: Concur. The DFAS will work with the five airlines
identified in the report and other airlines from which DoD purchased
tickets through the centrally billed accounts to determine the value of
the unused portion of those other fully and partially
unused paper and e-tickets purchased with DoD centrally billed
accounts. The estimated completion date is June 30, 2004.
RECOMMENDATION 20: The GAO recommended that the Under Secretary of
Defense (Comptroller) work with the five airlines identified in the
report and other airlines from which DoD purchased tickets through the
centrally billed accounts to initiate actions to obtain refunds of
other fully and partially unused tickets purchased with DoD centrally
billed accounts. (p. 25/GAO Draft Report):
DoD RESPONSE: Concur. The DFAS will work with the five airlines
identified in the report and other airlines from which DoD purchased
tickets through the centrally billed accounts to initiate actions to
obtain refunds of other fully and partially unused paper and e-tickets
purchased with DoD centrally billed accounts. The estimated completion
date is August 31, 2004.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
John V. Kelly, (202) 512-6926 Quan Thai, (206) 287-4889:
Acknowledgments:
Staff making key contributions to this report were Beverly Burke,
Francine DelVecchio, Aaron Holling, Jeffrey Jacobson, Julie Matta, John
Ryan, and Sidney H. Schwartz.
(192106):
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, Travel Cards: Internal Control
Weaknesses at DOD Led to Improper Use of First and Business Class
Travel, GAO-04-88 (Washington, D.C.: Oct. 24, 2003), and Travel Cards:
Internal Control Weaknesses at DOD Led to Improper Use of First and
Business Class Travel, GAO-04-229T (Washington, D.C.: Nov. 6, 2003).
[4] 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).
[5] The Air Force is an exception to this general rule. The Air Force
uses both centrally billed and individually billed accounts for
purchasing airline transportation.
[6] 31 U.S.C. § 3726(h).
[7] 28 U.S.C. § 2415(a).
[8] 31 U.S.C. § 3716(e).
[9] American Airlines, Inc. v. Austin, 75 F.3d 1535 (Fed. Cir. 1996).
This case was an appeal of a prior case, American Airlines, Inc. v.
Austin, 826 F. Supp. 553 (D.D.C. 1993), in which, among other things,
the court ruled that the government was not entitled to refunds for
unused tickets that the government could not specifically identify.
[10] American Airlines, Inc. v. Austin, 1541.
[11] Only American Airlines provided us the residual value of partially
unused tickets.
[12] U.S. General Accounting Office, Defense Budget: Improved Reviews
Needed to Ensure Better Management of Obligated Funds, GAO-03-275
(Washington, D.C.: Jan. 30, 2003).
[13] Systems from three domestic companies dominate the U.S. travel
agent market: Sabre, Galileo, and Worldspan. Each computer system
allows a travel agency to access participating airlines' schedules,
fares, and seat availability; to make airline reservations; and to
issue airline tickets. Although each computer reservation system was
developed at a different airline, carriers have had to participate in
each system so that all travel agents have access to an airline's
flight information. These systems are required to be unbiased in
providing flight listings so that some airlines are not favored over
others.
[14] U.S. Department of Defense, Office of the Inspector General,
Allegations to the Defense Hotline on the Management of the Defense
Travel System, Report No. D-2002-124 (Arlington, Va.: July 1, 2002).
[15] GAO-02-863T and GAO-03-148T.
[16] GAO-03-169, GAO-03-147, and GAO-03-298.
[17] Department of Defense Appropriations Act, 2003, Pub. L. No. 107-
248, 116 Stat. 1519 (2002), and the Bob Stump National Defense
Authorization Act for Fiscal Year 2003, Pub. L. No. 107-314, 116 Stat.
2458 (2002).
[18] Split disbursement is a process in which DOD pays the travel-card-
issuing bank directly for charges incurred on the travel card and
claimed on the travel voucher. Additional money owed to the traveler is
deposited directly into the traveler's bank account. Split
disbursements are required of all military and civilian personnel. See
also the National Defense Authorization Act for Fiscal Year 2004, Pub.
L. No. 108-136, § 1009, 117 Stat. 1392, 1587 (2003), 10 U.S.C. § 2784a.
[19] U.S. General Accounting Office, Standards for Internal Control in
the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November
1999).
[20] As previously discussed, US Airways did not provide us data on
partially unused tickets.
[21] As reported previously, the airlines informed us that to calculate
the residual value of partially unused tickets, each segment would have
to be repriced. However, for the purpose of assessing the range of
possible residual value, we used American Airlines data because
American Airlines was the only airline that provided us with that type
of data.
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