DOD Travel Cards
Control Weaknesses Resulted in Millions of Dollars of Improper Payments Gao ID: GAO-04-576 June 9, 2004Ineffective management and oversight of the Department of Defense's (DOD) premium class travel and unused airline tickets led to concerns about DOD's overall management of the centrally billed accounts. GAO was asked to determine whether (1) DOD improperly reimbursed travelers for airline tickets DOD paid for using centrally billed accounts, (2) internal controls were effective in preventing issuance of unauthorized airline tickets, and (3) other control weaknesses led to compromised and fraudulently used centrally billed accounts.
A weak control environment and breakdowns in key controls over centrally billed accounts resulted in DOD paying travelers for airline tickets they did not purchase, issuing and paying for unauthorized airline tickets, and paying for goods and services obtained with compromised centrally billed accounts. Based on mining of limited fiscal year 2001 and 2002 data provided by the Army, Navy, and Marine Corps, GAO identified about 27,000 transactions totaling more than $8 million in which DOD potentially reimbursed travelers for airline tickets paid for by DOD--not the travelers. Requesting reimbursement for items that the traveler knowingly did not pay for may be a crime that could result in imprisonment or a monetary fine, or both. GAO's subsequent tests of a nonrepresentative selection of 124 individuals who submitted 204 of these 27,000 transactions confirmed that DOD improperly paid 91 individuals almost $98,000 for 123 airline tickets DOD purchased with centrally billed accounts. Only 4 travelers voluntarily reimbursed DOD prior to GAO initiating the audit, even though typically, more than a year had passed since the improper payments. Several travelers submitted multiple claims for airline tickets they did not purchase, which could indicate intent to defraud the government. In 2003, the Air Force Audit Agency reported that this same problem existed at the Air Force and estimated that, if not corrected, this problem will cost the Air Force more than $6 million over 6 years. Examples of Potentially Fraudulent Travel Claims Grade/rank Cost Number Nature of cases GS-15 $9,700 13 Traveler claimed he did not notice the additional $9,700 in his bank account. GS-13 3,600 6 Traveler continued to submit false claims after DOD told the traveler to stop requesting reimbursement for airline tickets purchased with centrally billed accounts. The traveler also rented luxury vehicles--such as a Mercedes Benz--while on government travel and approved his own travel vouchers. E-9 1,400 2 Traveler told us he knew of the improper payment, but he was waiting for DOD to request repayment. Source: GAO review of DOD travel data. GAO also determined that key internal controls did not provide DOD reasonable assurance that (1) airline tickets purchased and paid for with the centrally billed accounts were based on valid travel orders and (2) centrally billed account numbers were adequately protected against unauthorized use. To demonstrate weaknesses in DOD's system of internal controls, GAO submitted a fictitious travel order to a commercial travel office to obtain an airline ticket from Washington, D.C., to Atlanta, Ga. DOD issued GAO the airline ticket, established an obligation, and paid for the ticket without detecting the fictitious nature of the request. GAO also found instances where a lack of physical safeguards resulted in the centrally billed account numbers being stolen and used for personal gain. One DOD traveler stole a centrally billed account number to purchase over 70 airline tickets totaling more than $60,000, which he sold at a discounted rate to coworkers and their family members for personal travel. Because DOD disputed those fraudulent charges, DOD did not pay for those tickets. However, not all DOD units dispute unauthorized charges. As a result, DOD is vulnerable to paying for fraudulent charges on compromised centrally billed accounts.
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-04-576, DOD Travel Cards: Control Weaknesses Resulted in Millions of Dollars of Improper Payments
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Report to Congressional Requesters:
June 2004:
DOD TRAVEL CARDS:
Control Weaknesses Resulted in Millions of Dollars of Improper
Payments:
GAO-04-576:
GAO Highlights:
Highlights of GAO-04-576, a report to congressional requesters
Why GAO Did This Study:
Ineffective management and oversight of the Department of Defense‘s
(DOD) premium class travel and unused airline tickets led to concerns
about DOD‘s overall management of the centrally billed accounts. GAO
was asked to determine whether (1) DOD improperly reimbursed travelers
for airline tickets DOD paid for using centrally billed accounts, (2)
internal controls were effective in preventing issuance of unauthorized
airline tickets, and (3) other control weaknesses led to compromised
and fraudulently used centrally billed accounts.
What GAO Found:
A weak control environment and breakdowns in key controls over
centrally billed accounts resulted in DOD paying travelers for airline
tickets they did not purchase, issuing and paying for unauthorized
airline tickets, and paying for goods and services obtained with
compromised centrally billed accounts. Based on mining of limited
fiscal year 2001 and 2002 data provided by the Army, Navy, and Marine
Corps, GAO identified about 27,000 transactions totaling more than $8
million in which DOD potentially reimbursed travelers for airline
tickets paid for by DOD”not the travelers. Requesting reimbursement for
items that the traveler knowingly did not pay for may be a crime that
could result in imprisonment or a monetary fine, or both. GAO‘s
subsequent tests of a nonrepresentative selection of 124 individuals
who submitted 204 of these 27,000 transactions confirmed that DOD
improperly paid 91 individuals almost $98,000 for 123 airline tickets
DOD purchased with centrally billed accounts. Only 4 travelers
voluntarily reimbursed DOD prior to GAO initiating the audit, even
though typically, more than a year had passed since the improper
payments. Several travelers submitted multiple claims for airline
tickets they did not purchase, which could indicate intent to defraud
the government. In 2003, the Air Force Audit Agency reported that this
same problem existed at the Air Force and estimated that, if not
corrected, this problem will cost the Air Force more than $6 million
over 6 years.
Examples of Potentially Fraudulent Travel Claims:
[See PDF for image]
[End of table]
GAO also determined that key internal controls did not provide DOD
reasonable assurance that (1) airline tickets purchased and paid for
with the centrally billed accounts were based on valid travel orders
and (2) centrally billed account numbers were adequately protected
against unauthorized use. To demonstrate weaknesses in DOD‘s system of
internal controls, GAO submitted a fictitious travel order to a
commercial travel office to obtain an airline ticket from Washington,
D.C., to Atlanta, Ga. DOD issued GAO the airline ticket, established an
obligation, and paid for the ticket without detecting the fictitious
nature of the request. GAO also found instances where a lack of
physical safeguards resulted in the centrally billed account numbers
being stolen and used for personal gain. One DOD traveler stole a
centrally billed account number to purchase over 70 airline tickets
totaling more than $60,000, which he sold at a discounted rate to
coworkers and their family members for personal travel. Because DOD
disputed those fraudulent charges, DOD did not pay for those tickets.
However, not all DOD units dispute unauthorized charges. As a result,
DOD is vulnerable to paying for fraudulent charges on compromised
centrally billed accounts.
What GAO Recommends:
To prevent DOD from paying for airline tickets twice, GAO continues to
recommend that DOD evaluate the feasibility of requiring DOD personnel
to use individually billed travel cards to purchase airline tickets.
GAO makes 11 new recommendations to improve DOD management of centrally
billed accounts including the following:
* determine the feasibility of establishing control procedures to
validate the authenticity of travel orders prior to issuing airline
tickets purchased with the centrally billed accounts;
* implement physical safeguards over centrally billed account numbers;
and
* recover payments made to travelers who were improperly reimbursed
for airline tickets that DOD paid for with centrally billed accounts.
DOD concurred with all 11 recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-576.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Greg Kutz at
202-512-9505 or kutzg@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD Made Improper Payments for Potentially Fraudulent Travel Claims:
Key Internal Controls over Issuance and Payment of Airline Tickets Are
Inadequate:
Centrally Billed Accounts Were Compromised and Used to Purchase Airline
Tickets for Personal Use:
Conclusion:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Tables:
Table 1: Improper and Potentially Fraudulent Travel Claims Identified by
GAO:
Table 2: Improper Payments Recovered by DFAS:
Table 3: Results of Statistical Sampling Tests of Proper Issuance of
Airline Tickets:
Table 4: Results of Statistical Sampling Tests of Proper Payment of
Airline Tickets:
Table 5: Airline Ticket Transactions that CTOs Identified as
Unauthorized and DOD Either Did Not Dispute or Did Not Track Their
Resolution:
Table 6: Estimated Failure Rates for Control Tests for Fiscal Year 2001
and 2002 Airline Ticket Transactions:
Figures:
Figure 1: Flowchart of the Payment of Centrally Billed Accounts and
Individual Travel Vouchers:
Figure 2: Boarding Pass for Airline Ticket Charged to a Centrally
Billed Account for Fictitious Traveler:
Letter June 9, 2004:
The Honorable Susan M. Collins:
Chairman:
Committee on Governmental Affairs:
United States Senate:
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 the last in our series of reports on the Department of
Defense's (DOD) management of its various credit card programs. In
fiscal years 2002 and 2003, we issued a series of testimonies[Footnote
1] and reports[Footnote 2] addressing problems that the Army, Navy, and
Air Force had in managing individually billed travel card accounts.
These testimonies and reports showed high delinquency rates and
significant potential fraud and abuse related to DOD's travel card
program. Due to these concerns, you asked us to audit controls over the
other major form of payment used by DOD for travel expenses--centrally
billed accounts. In response to your request, we first reported in
October 2003[Footnote 3] that internal control weaknesses over DOD's
centrally billed accounts have led to millions of dollars of improper
premium class travel and increased costs to taxpayers. In our second
report on control weaknesses over the centrally billed accounts, issued
in March 2004,[Footnote 4] we further identified millions of dollars in
airline tickets DOD purchased that were unused and not refunded. These
two reports provided examples of why DOD financial management is on our
list of high-risk areas,[Footnote 5] areas that are highly vulnerable
to fraud, waste, and abuse.
In light of these internal control problems, you asked us to perform
additional work on controls over the centrally billed
accounts.[Footnote 6] Specifically, you asked us to determine for
fiscal years 2001 and 2002 whether (1) DOD improperly reimbursed
travelers for the cost of airline tickets paid using centrally billed
accounts, (2) internal controls were effective to prevent the
commercial travel office (CTO) from issuing unauthorized airline
tickets on the basis of invalid travel orders, and (3) other control
weaknesses led to compromised and fraudulently used centrally billed
accounts.
To achieve these objectives, we compared airline ticket purchases
reported by the Bank of America--DOD's credit card bank--to limited
data provided by the Army, Navy, and Marine Corps on travel vouchers
that were filed during fiscal years 2001 and 2002. The purpose of the
comparison was to identify instances where voucher data indicated that
DOD made improper payments to travelers for airline tickets that DOD--
not the traveler--had purchased using DOD's centrally billed accounts.
We used only Army, Navy, and Marine Corps travel voucher data because
the Air Force voucher data was not structured in a way that enabled us
to analyze the type of expenses claimed on a travel voucher. After
identifying a pool of about 27,000 improper payments, we tested a
nonrepresentative selection of 124 Army, Navy, and Marine Corps
travelers who submitted 204 travel vouchers during fiscal years 2001
and 2002.
We also evaluated the effectiveness of controls over airline ticket
issuance at one Air Force, one Army, one Marine Corps, one Navy, and
one Defense Finance and Accounting Service (DFAS) location. We selected
these units because they were among the largest dollar volume locations
for airline tickets purchased with centrally billed accounts during
fiscal years 2001 and 2002. For these units, we tested a statistical
sample of airline tickets to evaluate whether the design and
implementation of internal control procedures were effective in
preventing airline tickets from being issued, and paid for, on the
basis of invalid travel orders--that is, travel orders that were not
signed by the properly designated authorizing official. Our statistical
sample test results can be projected as a whole to the five locations
at which we selected airline tickets to review. They cannot be
projected to each location separately, to the individual service, or to
DOD as a whole. To illustrate the vulnerability of the weaknesses in
internal controls over airline ticket issuance, we prepared a
fictitious travel order and submitted it to a CTO to test whether we
could obtain an airline ticket and whether DOD would create an
obligation and pay for the ticket. We also performed data mining to
determine whether DOD's centrally billed accounts were compromised and
used fraudulently for personal gain. However, our work was not designed
to identify, and we cannot determine, the extent of potentially
fraudulent and abusive activity. Appendix I provides further details on
our scope and methodology.
We requested comments from the Secretary of Defense or his designee on
a draft of this report. We reprinted those comments in appendix II. We
conducted our audit work from June 2003 through May 2004 in accordance
with U.S. generally accepted government auditing standards. We
performed our investigative work in accordance with standards
prescribed by the President's Council on Integrity and Efficiency.
Results in Brief:
A weak control environment and breakdowns in key controls over the
centrally billed accounts resulted in DOD paying travelers for airline
tickets they did not purchase, issuing and paying for unauthorized
airline tickets, and paying for personal goods and services obtained
with compromised centrally billed accounts. While we cannot project the
extent of this problem due to limitations in the data that DOD could
provide us, these weaknesses have led to potential fraud, waste, and
abuse in substantial amounts that could total millions of dollars.
Our work identified numerous instances where DOD travelers submitted--
and DOD reimbursed--improper and potentially fraudulent claims for
airline tickets that DOD, and not the travelers, paid for using
centrally billed accounts. During fiscal years 2001 and 2002, DOD made
potentially improper reimbursements on about 27,000 travel claims
totaling more than $8 million to DOD travelers for airline tickets they
did not purchase. We identified the $8 million based on data mining of
limited fiscal year 2001 and 2002 data provided by the Army, Navy, and
Marine Corps. Further, the Air Force Audit Agency estimated that this
problem, if not fixed, will cost the Air Force more than $6 million
over the next 6 years.
Our tests on a nonrepresentative selection of 124 travelers who
submitted 204 of the 27,000 travel claims confirmed that DOD made
improper payments to 91 travelers for 123 airline tickets totaling
almost $98,000. The improper payments were made to 77 travelers who
were paid about $85,000 for airline tickets that DOD had purchased with
the centrally billed accounts. Another 14 payments costing $13,000 were
improper because DOD paid for two airline tickets for the same travel-
-that is, DOD used the centrally billed account to purchase an airline
ticket and the traveler purchased another airline ticket for the same
travel, and was reimbursed by DOD. In these cases, some airline tickets
remained unused and not refunded, a problem we addressed in a previous
report.[Footnote 7] The remaining 32 travelers did not receive improper
payments.
Four of the travelers who received the improper payments reimbursed DOD
for the erroneous payments prior to DOD or GAO notifying them about the
improper payments. One traveler, a GS-13 employee, received improper
payments after submitting 12 vouchers in a 27-month period requesting
reimbursements for airline tickets totaling about $7,000 that DOD had
purchased using a centrally billed account. A further review of that
traveler's records showed that DOD had informed the traveler on six
occasions that the airline tickets were purchased with a centrally
billed account and should not be claimed as a reimbursable expense on
the voucher. However, the traveler ignored these repeated warnings and
continued to request reimbursements and was improperly paid $3,600 for
six airline tickets DOD purchased with a centrally billed account. We
determined that inadequate reviews of travel vouchers, lack of
reconciliation between centrally billed account charges and travel
claims, and at some locations, differences in policies as to when a
ticket should be charged to the centrally billed account, enabled
travelers to submit potentially fraudulent claims and receive improper
payments.
We also determined that weaknesses in the design and implementation of
key internal controls intended to prevent DOD from issuing and paying
for unauthorized airline tickets contributed to the improper payments.
Specifically, our analysis of the design of DOD's centrally billed
account controls determined that these controls do not provide
reasonable assurance that airline tickets are issued only on the basis
of valid travel orders or that DOD only pays for airline tickets that
have been approved by someone who has been authorized to do so. Our
assessment of the weaknesses in the design of the internal controls was
confirmed by the results of our statistical sample of airline ticket
transactions at five DOD locations that we tested. At those locations,
we determined that existing control procedures did not provide
reasonable assurance that DOD would detect unauthorized airline tickets
charged to centrally billed accounts, or prevent payment for airline
tickets that were not properly authorized. Consequently, it was not
surprising that DOD ticket issuance controls did not detect a
fictitious travel order we submitted to request an airline ticket, and
DOD voucher payment controls did not prevent DOD from paying for an
airline ticket that was obtained using the fictitious travel order.
DOD also lacked adequate physical controls over the centrally billed
account numbers, which are Bank of America credit card accounts that
can be used to purchase items from merchants who take phone or Internet
orders. Specifically, a number of locations we visited printed the full
centrally billed account numbers on the travelers' itineraries, or left
them in insecure locations. DOD's failure to maintain adequate controls
over the centrally billed account numbers has contributed to these
accounts being compromised and used to fraudulently purchase airline
tickets. A military service member, for example, used the centrally
billed account number that was included on travel itineraries to
purchase over 70 tickets totaling more than $60,000, which he sold at a
discounted rate to coworkers and their family members. As a result of
the investigation, the seaman admitted culpability, lost all pay, and
received a dishonorable discharge and 5 years confinement. Because DOD
disputed these charges, which the CTOs identified as unauthorized in
the reconciliation process intended to identify airline tickets that
the CTO did not order, DOD received refunds from the Bank of America
for these fraudulently obtained airline tickets. However, officials at
a number of locations we visited did not dispute unauthorized airline
tickets that were identified by the CTOs. By not disputing the
unauthorized charges identified by the CTO, DOD had no assurance that
the amount it paid Bank of America did not contain fraudulent charges
that were the result of compromised accounts.
As we have previously reported,[Footnote 8] improved controls and
management of individually billed accounts would provide DOD with
options to reduce the financial exposure resulting from the weaknesses
in the controls over DOD's centrally billed accounts. 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. 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 includes 11 recommendations for DOD to reduce the risks
associated with using the centrally billed accounts to purchase airline
tickets. The recommendations include DOD taking a series of immediate
steps to improve controls over centrally billed accounts so that, in
the future, it can prevent or detect improper payments to travelers for
airline tickets not paid for by the traveler. We also recommend that
DOD implement internal controls to verify that travel orders are valid
before tickets are issued. Finally, we recommended that DOD safeguard
centrally billed accounts from being compromised and used fraudulently.
In written comments on a draft of this report, DOD concurred with our
11 recommendations and stated that it had taken actions or will take
actions to address them.
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 the
government's cost of travel by reducing the need for cash advances to
the traveler, and 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 nontransportation travel-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 pay expenses incurred for group travel.[Footnote 9]
During fiscal years 2001 and 2002, DOD travelers charged more than $7.1
billion in expenses to the travel card program, with about $2.8 billion
related to the use of the centrally billed accounts. Unlike the actual
credit cards issued to individuals and some unit credit cards, there
are no actual credit cards for the centrally billed accounts used to
purchase transportation services. Instead, Bank of America issues
account numbers to the government travel office (GTO) for use by the
CTO--under contract with each DOD service or service location to
provide travel services to military and other DOD personnel--to enable
transportation charges on these accounts.
Responsibility for making travel arrangements and paying the expenses
associated with travel is shared between the DOD local components,
contractors, and DFAS--the DOD component responsible for making nearly
all of DOD's payments. The local travel-authorizing official or the
resource manager at the DOD component is responsible for determining
the necessity of travel, issuing the travel order, certifying the
availability of funds, and recording an obligation against a unit's
appropriation. The CTO makes airline reservations, issues airline
tickets and charges the centrally billed account upon receipt of a
signed travel order, and performs reconciliation between tickets it
issued and tickets charged on the Bank of America invoice. The CTO is
responsible, in the reconciliation process, for identifying each charge
as being associated with a specific travel order. Within each DOD
component, the GTO is generally responsible for reviewing the CTO's
reconciliation, making the appropriate changes, certifying or
authorizing the Bank of America's invoice for payment, and filing
disputes with Bank of America for charges that the CTO did not record
as having issued. After the CTO and GTO perform their monthly
reconciliation, the charges are sent to DFAS for payment. Figure 1
shows the design of the processes used to issue an airline ticket on a
centrally billed account and reimburse travelers for travel expenses,
and explains the roles of different offices in providing reasonable
assurance that airline tickets charged to these cards are appropriate
and meet a valid government need.
Figure 1: Flowchart of the Payment of Centrally Billed Accounts and
Individual Travel Vouchers:
[See PDF for image]
[End of figure]
Prior to paying the Bank of America invoice, DFAS is responsible for
verifying fund availability for each airline ticket presented on the
invoice. This process, known as prevalidation, involves DFAS checking
each airline charge against the services' accounting systems to
determine that the travel had been approved, and an obligation had been
recorded, before approving the corresponding charge for payment. If an
obligation exists for the travel order but the amount is not adequate
to cover the charge, DFAS is allowed to increase the obligation up to
$2,500 to pay for the ticket charge if DFAS is in possession of a valid
obligating document. If an obligation has not been recorded in the
services' accounting systems, but a valid obligation document exists,
DFAS can also create an automatic obligation up to $2,500 to pay for
the ticket charge. If an obligation needs to be created or increased by
more than $2,500, DFAS is required to notify the unit and allow the
unit 10 calendar days to record the obligation before DFAS is allowed
to create the obligation on the unit's behalf.[Footnote 10]
At the conclusion of travel, the traveler is responsible for preparing
his or her DD Form 1351-2, a travel voucher form, within 5 working days
after completion of travel to claim reimbursement for official travel.
Travelers are to enter all reimbursable expenses on their travel
vouchers, and attach all receipts for lodging expenses and for all
other expenses over $75. Even if someone else prepares the voucher, the
traveler is responsible for the truth and accuracy of the information.
According to DOD's Financial Management Regulation, when the travelers
sign the form (and this signature authority must never be delegated),
they attest that the statements are true and complete, and that they
are aware of their liability for filing a false claim. The travel
voucher the traveler signs contains a bolded penalty statement that
provides, "there are severe criminal and civil penalties for knowingly
submitting a false, fictitious, or fraudulent claim (U.S. Code, Title
18, Sections 287 and 1001 and Title 31, Section 3729)."
The authorizing or approving officials review the travel claim for
appropriateness, then forward the travel claim to the voucher-
processing unit, which might be located at the unit or at DFAS. The
voucher-processing unit determines what payments the traveler is
entitled to receive and computes the amounts, which are then certified
for payment. DFAS then pays the vouchers, generally through an
electronic fund transfer directly to the traveler's bank account.
DOD Made Improper Payments for Potentially Fraudulent Travel Claims:
We found numerous instances during fiscal years 2001 and 2002 where DOD
travelers submitted travel vouchers and were improperly reimbursed for
airline tickets they did not purchase. DOD's failure to detect or
prevent these improper payments was the result of weaknesses in the
design of key internal controls, as well as breakdowns in key existing
controls. The weaknesses included inadequate travel voucher review,
lack of reconciliation between centrally billed account charges--and
payments for those charges--and travel claims, and differences in
policies as to when an airline ticket should be charged to an
individually billed account as opposed to a centrally billed account.
These weaknesses were exacerbated by a monitoring system that primarily
focused on making payments within prescribed time frames, rather than
on making proper and accurate payments.
Improper and Potentially Fraudulent Travel Claims:
Whoever, in any matter within the jurisdiction of the executive,
legislative, or judicial branch of the Government of the United States,
knowingly and willfully (1) falsifies, conceals, or covers up by any
trick, scheme, or device a material fact; (2) makes any materially
false, fictitious, or fraudulent statement or representation; or (3)
makes or uses any false writing or document knowing the same to contain
any materially false, fictitious, or fraudulent statement or entry;
shall be fined under this title or imprisoned not more than 5 years, or
both. (taken from U.S. Code, Title 18, Section 1001, Statements or
Entries Generally).
Our data mining of airline ticket data from Bank of America centrally
billed account files and about half of DOD's fiscal year 2001 and 2002
travel vouchers identified about 27,000 travel claims totaling over $8
million for which DOD made potentially improper reimbursements to
travelers for airline tickets that DOD purchased with the centrally
billed accounts. Because the travelers had not purchased most of the
airline tickets we tested, the travelers should not have requested
reimbursements, nor should DOD have paid the travelers for the cost of
those tickets. Requesting reimbursement for items that the traveler did
not pay for may violate the False Claims Act and be punishable by
imprisonment or a monetary fine, or both.
From the 27,000 potential improper travel claims, we tested a
nonrepresentative selection of 124 travelers to whom DOD made 204
travel claim reimbursements that may have contained improper payments.
As will be discussed further, the tests we performed on the
nonrepresentative selection of 124 travelers confirmed that DOD
improperly paid 91 travelers for 123 airline tickets. As will be
discussed in detail later, the 123 improper payments included 109
payments that were made to 77 travelers who were paid for airline
tickets they did not purchase, and 14 payments in which DOD purchased
two airline tickets for the same travel. Thirteen of the 77 travelers
we identified submitted multiple travel vouchers requesting
reimbursements for the cost of airline tickets that they did not
purchase, which might indicate intent to defraud the government. The
remaining improper payments were also potentially fraudulent if the
traveler intentionally filed false claims or kept the improper payments
after they realized that the payment was improper. The other 64
travelers received improper reimbursement for a single ticket. One
traveler admitted to us that he knew DOD had improperly reimbursed him
for two airline tickets that DOD purchased for his travel in April 2002
and June 2002, but did not notify DOD because he was waiting for DOD to
request him to refund the improper payments. Most travelers we
interviewed told us that they were not aware that the government had
paid them hundreds, and sometimes thousands, of dollars for expenses
that they claimed but did not incur. In many instances, the airline
ticket receipt or invoice used to support the travelers' claims
contained the 16-digit centrally billed account number, indicating that
the airline tickets were paid for using the centrally billed accounts.
Table 1 shows eight illustrative examples of the 77 travelers who we
identified in this review as submitting improper and potentially
fraudulent travel claims.
Table 1: Improper and Potentially Fraudulent Travel Claims Identified
by GAO:
Case: 1;
Rank/grade: GS-15;
Number/value of improper payments: 13 for $9,700;
Dates of Travel: August 2001 to May 2002;
Nature of the case: Within a 9-month period, the traveler claimed, and
DOD paid, 13 airline tickets that DOD purchased with a centrally billed
account. Traveler represented that he did not know that he received
almost $10,000 more in reimbursement than he paid in travel expenses;
Disposition of the case: After GAO notified DOD of this traveler, the
Navy Medical Inspector General substantiated that the traveler made
seven false claims for airline tickets. The Navy Audit Service is
conducting further review of the traveler.
Case: 2;
Rank/grade: GS-13;
Number/value of improper payments: 6 for $3,600;
Dates of Travel: March 2001 to June 2003;
Nature of the case: Within a 27-month period, the traveler submitted 12
vouchers claiming about $6,800 in airline tickets DOD purchased with
the centrally billed accounts. Despite DFAS notification that it was
refusing payments on five of the first six claims it received, the
traveler submitted six additional claims. In addition, the traveler
rented luxury vehicles, and used his individually billed travel card
to purchase airline tickets for family members at the discounted
government rate and make various other unauthorized charges;
Disposition of the case: After GAO notified DOD of this traveler, the
traveler received collection notices in late fiscal year 2003 demanding
the traveler repay three of the six improper payments totaling more
than $2,100. Because DFAS did not complete a full audit of all the
traveler's vouchers, DFAS did not find the three other claims. DFAS
had started payroll deduction to collect for the three improper
payments DFAS had identified.
Case: 3;
Rank/grade: GS-14;
Number/value of improper payments: 5 for $3,400;
Dates of Travel: May 2001 to July 2002;
Nature of the case: Traveler represented that the improper payments
were an oversight because he also charged airline tickets to his
individually billed accounts and that he did not notice the improper
payments that were deposited to his account;
Disposition of the case: DFAS responded to our referral by sending
five collection notices to the traveler in October 2003. The traveler
repaid DOD $3,600 in November 2003.
Case: 4;
Rank/grade: O-5;
Number/value of improper payments: 5 for $1,600;
Dates of Travel: December 2001 to May 2002;
Nature of the case: Some of the traveler's airline tickets were charged
to the centrally billed accounts and others to the traveler's
individually billed account. The traveler represented that she did not
notice the improper payments;
Disposition of the case: DFAS sent collection notices as a result of
our audit in October 2003. The traveler had repaid DOD $1,600 as of
November 2003.
Case: 5;
Rank/grade: E-9;
Number/value of improper payments: 2 for $1,400;
Dates of Travel: April 2002 to June 2002;
Nature of the case: The traveler represented that he submitted claims
for the airline tickets because he thought that the airfare was charged
to his individually billed account. However, after the traveler found
out that he received the improper payments, he did not notify DOD;
Disposition of the case: DFAS sent collection notices in September
2003 as a result of our audit. Traveler repaid DOD $1,400 in October
2003.
Case: 6;
Rank/grade: GS-15;
Number/value of improper payments: 1 for $3,700;
Dates of Travel: January 2002;
Nature of the case: Traveler represented that airfares are typically
charged to his individually billed account, and that it was an
oversight that he did not notice that the government had deposited into
his checking account an additional $3,700 for an airline ticket that
was purchased by the government--not the traveler;
Disposition of the case: DFAS sent collection notices in September
2003 as a result of our audit. Traveler repaid DOD $3,700 in October
2003.
Case: 7;
Rank/grade: O-6;
Number/value of improper payments: 1/$800;
Dates of Travel: February 2002;
Nature of the case: Traveler represented that he was told that the
airfare would be billed to his individual government travel card
because it was short notice travel. Traveler represented that he did
not notice the improper payment;
Disposition of the case: DFAS sent the traveler a collection notice in
September 2003 in response to our audit. The traveler repaid DOD $800
in February 2004.
Case: 8;
Rank/grade: GS-15;
Number/value of improper payments: 1 for $600;
Dates of Travel: May 2002;
Nature of the case: The traveler represented that he did not notice the
improper payments because most of his airline tickets were charged to
the individually billed account;
Disposition of the case: DFAS sent the traveler a collection notice in
September 2003 in response to our audit. The traveler repaid the DOD
$600 in October 2003.
Source: GAO analysis of Bank of America and limited voucher data, and
review of supporting documentation.
[End of table]
The 8 travelers identified in table 1 did not notify DFAS after they
had received improper payments, and only 4 of the 77 travelers that we
determined had received improper payments voluntarily refunded the
improper payments. The following provides detailed information on three
of the cases identified in table 1.
* Traveler number 1 was a GS-15 who submitted travel vouchers claiming
reimbursements for 13 tickets totaling almost $10,000 between August
2001 and May 2002. The traveler told us that he did not notice that he
was paid for expenses he did not incur, even though in one instance,
DFAS overpaid the traveler more than $3,500 for one round-trip ticket
from Washington, D.C., to Singapore. The traveler explained he did not
notice the improper payments because he typically maintained a high
balance in his bank account, and his wife paid all the bills. In
November 2003, after we requested information from the Navy related to
the traveler, the Navy Office of Medical Inspector General started an
investigation. The Inspector General concluded that the traveler
violated DOD travel regulations in wrongfully claiming air
transportation expenses. The investigation found that the traveler was
liable for seven improper reimbursements totaling about $7,300. The
Navy Audit Service has expanded its review of the traveler for the
additional improper payments that we identified. We referred this case
to DOD's Office of the Inspector General so that it can take any action
it deems appropriate, including referral of the matter to the relevant
U.S. Attorney for further consideration.
* Traveler number 2 is a GS-13 acquisition specialist who, between
April 2001 and July 2003, submitted 12 claims totaling $6,800 for
airline tickets that were charged to the centrally billed accounts;
that is, airline tickets he did not purchase. DFAS denied payments on
five claims that were submitted for travel in fiscal years 2001 and
early fiscal year 2002, and notified the traveler in writing that
payment was denied because he did not personally incur the airfare
expense. However, the traveler submitted seven additional vouchers in
late fiscal year 2002 and in fiscal year 2003 requesting payments for
airline tickets he did not purchase. Although one more voucher was
denied, overall, the traveler received six improper payments totaling
more than $3,600. Despite being repeatedly informed that his airfare
was not a reimbursable expense, the traveler indicated that the $3,600
in improper payments were honest mistakes, and he believed that these
tickets were charged to his individually billed account, and should be
claimed on the vouchers.
In addition, the traveler took other questionable actions related to
his travel. These actions included renting luxury vehicles, such as a
Lincoln Navigator and Mercedes Benz, while on official travel--without
specific authorization to rent a luxury vehicle--and using his
individually billed account to obtain government-rate tickets for his
family members, as the examples illustrate.
* The traveler scribbled his own name as the approving official for the
voucher to disguise the fact that he was approving his own voucher. DOD
policy requires that each travel voucher be reviewed for accuracy and
approved by the supervisor. The signature of the approving official
certifies that the vouchers are accurate, and that the expenses are to
be paid.
* While on official travel the traveler rented luxury vehicles without
special authorization documenting the need for why he needed a luxury
vehicle. For example, while on travel for 2 days in Atlanta in July
2003, the traveler rented a Lincoln Navigator for more than $300.
* In August 2003, the traveler used his individually billed account--a
government credit card--to purchase government-rate tickets for two
family members to travel from Richmond, Va., to Frankfurt, Germany,
while the traveler was on official government travel for 9 days at that
location. By using the government credit card, the traveler was able to
obtain unrestricted coach class tickets for $546 per person, compared
to an unrestricted coach class fare available to the public of more
than $2,800 per person. On that 9-day trip, the government paid more
than $1,000 for his rental car. Further review of the supporting
documentation submitted with his travel voucher indicated that the
traveler rented a luxury class car--Mercedes Benz--for use while at his
travel destination.
* Although the traveler informed us that he was aware the individually
billed credit card assigned him was reserved for official government
use only, he used the card on several occasions to make purchases at
gas stations and restaurants when he was not on travel status and to
charge a recurring monthly rental fee of $30 for a musical instrument.
As a result of our audit, in July and September 2003, the traveler
received collection vouchers demanding the traveler reimburse DOD more
than $2,100 for the overpayments on three vouchers. As of November
2003, DFAS had started collection payroll deductions to collect the
$2,100 in improper payments. However, because DFAS did not audit all
the vouchers of this traveler, DFAS did not know that this traveler had
requested other improper and potentially fraudulent claims. Because of
the potential fraud, we have also referred this case to the DOD Office
of the Inspector General.
* Traveler number 6 was a GS-15 who in February 2002 submitted a travel
voucher requesting reimbursement for an airline ticket that DOD, and
not the traveler, purchased using the centrally billed account. The
ticket was an international ticket costing more than $3,700 for travel
from Huntsville, Ala., to Tel Aviv, Israel. The traveler asserted that
he did not notice the more than $3,700 overpayment in his bank account
until he received a collection notice from DFAS in September 2003. The
traveler stated that he assumed all his airline tickets were purchased
with his individually billed account. We found that the policy at the
duty station where the traveler was assigned required that all airline
tickets purchased for travel within the continental United States be
purchased using the individually billed accounts, while international
travel was paid for using the centrally billed account. We found that
this policy may have contributed to at least three other improper
payments for airfare related to international travel at this duty
station. Because of the potential fraud, we referred this case to the
DOD Office of the Inspector General.
Amount of Improper and Potentially Fraudulent Travel Claims Is Likely
Millions of Dollars:
During fiscal years 2001 and 2002, DOD spent almost $10.8 billion on
travel and transportation expenses for DOD military and civilian
personnel.[Footnote 11] Significant limitations related to DOD travel
and transportation data files prevented us from accurately estimating
the total number and dollar value of the improper payments DOD made for
airfare paid with a centrally billed account. It is likely that these
false claims are millions of dollars annually. The Army, Navy, and
Marine Corps provided us with files totaling about $4.5 billion that
contained their fiscal year 2001 and 2002 travel voucher information,
representing about half of the voucher payments DOD would have made
during this 2-year period. These files identified the dates of travel
and type of travel expenses that were incurred and contained separate
fields for the traveler's per diem expenses and transportation
expenses. By comparing the Bank of America centrally billed account
files containing the ticket price, passenger names, and travel dates,
to the travel voucher files, we were able to data mine for instances
where DOD purchased an airline ticket with the centrally billed
accounts and the traveler may have been improperly reimbursed for the
cost of the airline tickets. Our analyses of the Army's, Navy's, and
Marine Corps' fiscal years 2001 and 2002 travel and transportation
expenses identified about 27,000 travel claims containing airline
tickets valued at more than $8 million during that 2-year period that
were potentially improper. Similarly, the Air Force Audit Agency had
reported that if not corrected, improper payments would cost the Air
Force $6.5 million over 6 years.
To determine whether DOD improperly paid travelers for the airline
tickets purchased with centrally billed accounts, we tested a
nonrepresentative selection of 124 travelers who submitted 204 travel
claims that may have contained improper payments totaling about
$154,000. The 124 travelers were chosen based primarily on the amount
and frequency of the potential improper payments. We tested a
nonrepresentative selection of travelers because we could not obtain
assurance that the data files provided by the Army, Navy, and Marine
Corps were complete and reliable. Further, the Air Force travel voucher
data did not contain detailed information to enable us to perform
improper payment analysis. Due to these data limitations, we were
unable to test a statistically valid sample of improper payments.
Consequently, we could not project the magnitude of the improper
payments.
As shown in table 2, our tests, which consisted of comparing what the
travelers claimed on the travel vouchers to charges made to the
centrally billed accounts, confirmed that DOD made improper payments to
91 travelers for 123 travel claims containing airline tickets totaling
almost $98,000. The 123 improper payments included 109 payments
totaling almost $85,000 that were made to 77 travelers who were paid
for airline tickets they did not purchase, and 14 payments totaling
about $13,000 to 14 travelers in which DOD paid the traveler and the
airline for two airline tickets purchased for the same travel. These
instances could occur if, for example, the airline did not have a
record that the ticket was issued on the centrally billed account when
the traveler arrived at the airport, resulting in the traveler having
to purchase another ticket. Emergency circumstances, such as weather
problems, have also resulted in travelers purchasing another airline
ticket even when a ticket was already purchased on the centrally billed
account. Because DOD purchased two tickets for the same travel, the
centrally billed ticket was typically unused and not refunded. The
remaining 32 travelers did not submit improper or potentially
fraudulent claims.
Table 2: Improper Payments Recovered by DFAS:
Total improper payments[A];
Number of Travelers: 91;
Number of Payments: 123;
Total value of payments: $97,800.
Total improper payments[A]: Repayments prior to GAO audit;
Number of Travelers: (15);
Number of Payments: (17);
Total value of payments: ($14,600).
Total improper payments[A]: Repayments initiated by GAO audit;
Number of Travelers: (46);
Number of Payments: (63);
Total value of payments: ($42,700).
Total recoveries of improper payments[B];
Number of Travelers: 61;
Number of Payments: 80;
Total value of payments: $57,300.
Outstanding improper payments;
Number of Travelers: 30;
Number of Payments: 43;
Total value of payments: $40,500.
Source: GAO analysis of DOD documentation.
[A] The 123 in improper payments include 14 payments--made to 14
travelers--costing about $13,000 where DOD paid for two airline tickets
for the same travel--that is, DOD used the centrally billed account to
purchase an airline ticket and the traveler purchased another airline
ticket for the same travel, and was reimbursed by DOD.
[End of table]
Our testing also determined that 15 of the 77 travelers had refunded
DOD almost $15,000 for 17 improper payments prior to our audit. Only
four travelers notified DFAS--and made restitution--on the improper
payments prior to our audit even though typically more than a year had
passed since the improper payment. Eleven other travelers made
restitution after DFAS detected the overpayments based on postpayment
audits DFAS performed--that is, audits it conducted after payments had
been made. In addition, on the basis of findings from our audit, DOD
collected almost $43,000 from 46 travelers for 63 additional improper
airfare payments. As shown in table 2, DOD is in the process of
recovering 43 improper payments totaling more than $40,000 that we
identified. We referred the 27,000 potentially improper payments to DOD
for further review.
Further evidence exists that DOD improperly reimbursed travelers for
the cost of a substantial number of airline tickets purchased with
centrally billed accounts in the portion of DOD's travel and
transportation expenses that we did not analyze, either because the
data were not provided, or the data were not in the format to allow
analysis. For example, the Air Force did not provide data in a format
that would help us identify instances in which the Air Force reimbursed
travelers for the cost of an airline ticket purchased with a centrally
billed account. Our work indicated that the Air Force did not have a
uniform policy as to whether a ticket should be charged to the
centrally billed accounts as opposed to the individually billed
accounts. This could create confusion and expose the Air Force to an
even higher risk than the other services, which provided us with usable
voucher data of improper payments. While the other military services
typically use the centrally billed accounts to purchase airline
tickets, Air Force officials told us that the Air Force uses both types
of accounts to purchase airline tickets. Further, work performed by the
Air Force Audit Agency[Footnote 12] in 2003 on a sample of travel
vouchers filed at 40 Air Force locations found that the Air Force
inappropriately reimbursed travelers for 142 airline tickets totaling
almost $82,000 that were purchased with the centrally billed accounts.
The Air Force Audit Agency projected that, "This condition, if not
corrected, will result in the Air Force inappropriately reimbursing
individuals at least $6.5 million" over the next 6 years. Although the
millions of dollars of improper payments account for a very small
percentage of DOD travel overall, they nevertheless represented wasted
resources in a time of increasing fiscal constraint.
Improper Payments Resulted from Inadequate Review of Travel Vouchers,
Lack of Adequate Reconciliations, and Inconsistent Policies Over the
Use of Centrally Billed Accounts:
Transactions and other significant events need to be clearly documented
and the documentation should be readily available for examination.
Agency internal control should be flexible to allow agencies to tailor
control activities to fit their special needs. GAO's Standards for
Internal Control in the Federal Government (GAO/AIMD-00-21.3.1,
November 1999).
We determined that weaknesses in both the design and execution of DOD's
system of internal controls permitted DOD to make these improper
payments. We found that DOD relies on the approving official's review
of travel vouchers as the key control to prevent travelers from
claiming unauthorized expenses--such as airline tickets purchased with
a centrally billed account--on a travel voucher. However, we determined
that many approving officials did not conduct adequate reviews of the
travel vouchers and the supporting documentation before authorizing the
vouchers for payment. Many of the airline receipts submitted as
supporting documentation for improper claims clearly showed that the
airline ticket was purchased using the centrally billed accounts. In
these instances, if the approving officials had conducted careful
review of the travel vouchers and supporting documentation, the
official would have noted that the traveler was not entitled to the
travel reimbursement. Further, the reviewing officials should have been
knowledgeable about local and component policy that called for the use
of centrally billed accounts to purchase the airline tickets that were
claimed as a reimbursable expense on the vouchers.
In addition, DOD travel and transportation systems do not contain edit
checks (system controls) to help detect false claims and prevent
improper payments when the first line of defense--the approving
official's review of the travel voucher--does not detect the false
claims. Specifically, DOD's current travel order, ticket issuance, and
travel voucher systems are not integrated, and DOD has not implemented
other control procedures to compare key data in the different systems
to help detect false claims overlooked in the travel voucher review
process. Further, DFAS officials informed us that post audit reviews,
which are designed to detect erroneous voucher payments, were not
conducted by all of the disbursing centers for the payments being
audited. Thus, DOD has not established, or effectively implemented,
compensating controls to detect improper payments in instances where
the approving officials fail to detect false claims made on a travel
voucher. If DOD had designed such a system, DOD would be able to detect
instances where the traveler submitted a claim for an airline ticket
purchased using a centrally billed account. These weaknesses in the
design of internal controls prevented DOD from detecting claims for
reimbursement that travelers should not have claimed.
The failure of DOD systems to detect and prevent improper payments is
exacerbated by the fact that the primary performance measure DOD uses
to monitor the effectiveness of the centrally billed account program is
whether DFAS pays the Bank of America invoices within 30 days of their
receipt. According to DOD officials, DOD has not established a
performance measure to monitor the accuracy of payments. For example,
DOD does not have a measure to determine whether centrally billed
account payments--and the related payments for airline tickets claimed
on the travel vouchers--are accurate.
DOD officials informed us that the Defense Travel System (DTS), which
is currently under development, will include a capability to routinely
match travel vouchers to tickets issued through the centrally billed
accounts. In 1995, DOD established the DTS program management office to
develop DTS as a DOD-wide travel and transportation system that would
replace the more than 30 travel systems currently operating within the
department. DTS was originally scheduled to be fully operational in
2002, and it was to provide an integrated process of preparing travel
orders and making travel arrangements, including airline reservations,
and filing and paying travel vouchers. However, according to a 2002 DOD
Office of Inspector General report,[Footnote 13] DTS has experienced
cost increases and schedule delays. According to the program management
office, DTS should be implemented for about 80 percent of DOD personnel
by 2006.
Key Internal Controls over Issuance and Payment of Airline Tickets Are
Inadequate:
We found weaknesses in key internal control activities designed to
provide DOD reasonable assurance during fiscal years 2001 and 2002 that
(1) airline tickets were issued on the basis of valid travel orders and
(2) payments were made only for authorized airline tickets.
Specifically, DOD did not provide the CTOs with the tools to determine
that the travel orders used as a basis for charging airline tickets to
the centrally billed accounts were valid--that is, the individuals who
signed the travel orders had the authority to do so. In addition, the
design of internal controls was not effective in providing assurance
that DOD only paid the Bank of America for tickets that were issued on
the basis of valid travel orders. Our statistical sampling at five DOD
locations confirmed that, lacking effective design of internal
controls, these five locations as a whole could not provide assurance
that only authorized airline tickets were charged to the centrally
billed accounts. Our concerns with these weaknesses in internal
controls led us to perform additional work to determine if these
control weaknesses could be exploited. The additional work demonstrated
that someone with knowledge of the DOD travel system could fraudulently
obtain an airline ticket, and have DOD pay for that ticket, with a
centrally billed account.
DOD Units Issued Airline Tickets Using Centrally Billed Accounts
without Verifying Validity of Travel Orders:
Transactions and other significant events should be authorized and
executed only by persons acting within the scope of their authority.
This is the means to provide assurance that only valid transactions to
commit resources are initiated and entered into. GAO's Standards for
Internal Control in the Federal Government (GAO/AIMD-00-21.3.1,
November 1999).
We found that DOD did not design internal controls to provide assurance
that airline tickets were issued only on the basis of valid travel
orders. Specifically, DOD did not have a policy to provide the CTOs
with the tools necessary to determine whether the individuals who
signed the travel orders authorizing the CTOs to charge the airline
tickets on the centrally billed accounts had the authority to do so.
According to DOD's travel regulations, a travel order is valid only
after it has been authorized--signed--by an individual, such as a
supervisor or resource advisor, who had been delegated the authority to
authorize or approve travel. Requiring airline tickets purchased with
centrally billed accounts to be issued based on valid travel orders is
the first step in preventing DOD from purchasing airline tickets that
are not for official government business. However, the CTOs at the
locations we visited informed us that DOD had not provided them with a
list of approving officials, or these officials' signature cards, to
aid in determining the validity of the travel orders. Consequently, the
CTOs could not provide assurance that the airline tickets they charged
to the centrally billed accounts were authorized.
Despite the weakness in design, we performed statistical tests of 96
transactions selected from five DOD locations to determine the extent
to which airline tickets charged to the centrally billed accounts
during fiscal years 2001 and 2002 were issued on the basis of valid
travel orders. Our statistical sample was selected from the population
of airline ticket transactions charged to the centrally billed accounts
at one Air Force, one Army, one Navy, one Marine Corps, and one Defense
Finance and Accounting Service location (for further details on the
methodology used to select the units to be tested, see app. I). As
shown in table 3, we estimated that the five DOD locations as a whole
could not provide assurance that 82 percent of the airline tickets
charged to the centrally billed accounts were issued on the basis of
valid travel orders.
Table 3: Results of Statistical Sampling Tests of Proper Issuance of
Airline Tickets:
Control test: Travel order not provided;
Estimated percentage failure rate [A]: 3.
Control test: Travel order was not signed;
Estimated percentage failure rate [A]: 9.
Control test: Travel order provided and signed, but no delegation of
authority was available to support that the travel order was signed by
an official with the authority to do so;
Estimated percentage failure rate [A]: 70.
Control test: Airline ticket not properly issued;
Estimated percentage failure rate [A]: 82.
Source: GAO analysis of DOD airline ticket transactions and supporting
documentation.
[A] These are estimates for the population based on our statistical
sample. Information about the confidence intervals for our sample
estimates is presented in appendix I.
[End of table]
DOD financial regulations require that individuals be delegated in
writing the authority to authorize travel. However, as shown in table
3, the primary reason why the five locations as a whole did not have
reasonable assurance that the airline tickets purchased with the
centrally billed accounts were for valid government travel was that,
although the orders were provided and were signed, the locations could
not provide evidence that the individual who approved the travel orders
had been delegated the authority to do so. Additionally, we estimate
that we did not have reasonable assurance that 3 percent of airline
ticket transactions were not properly issued because DOD could not
provide us a copy of the travel order authorizing the travel. We also
estimate that we did not have reasonable assurance that another 9
percent of airline ticket transactions were not properly issued because
the travel order authorizing the issuance of the airline ticket,
although provided, was not signed.
The results in table 3 can only be projected to the five locations as a
whole, and cannot be projected to the entire population of airline
tickets charged to the centrally billed accounts. See appendix I for
further discussion of the results of our testing. As mentioned, DOD did
not design control procedures to validate travel order authenticity
before issuing tickets on the centrally billed accounts. The fact that
our tests at these locations could not confirm that tickets charged to
the centrally billed accounts were supported by travel orders signed by
individuals with delegated authority to do so further buttressed our
concern that the lack of internal controls might expose DOD to
increased risk of fraud and abuse.
At least two options exist for DOD to determine that an authorized
individual signed the travel order before issuing a ticket using the
centrally billed accounts. One method involves using an electronic
travel authorization system to restrict travel approval to individuals
who are authorized to do so, and prevent travel orders from being
approved by individuals who are not. DOD has told us that the Defense
Travel System, now under development, has these controls; however, as
previously discussed, the system will not be fully operational until
fiscal year 2006. In the interim, some DOD locations we visited had
implemented electronic travel authorization systems to generate travel
orders. However, they did not always have security controls in place to
provide assurance that access to these systems was restricted to
individuals who had delegation of authority to approve travel orders.
For example, a system administrator of one of the systems used by the
Marine Corps Reserves to issue travel orders informed us that he
sometimes gave approval authority to individuals who requested access
through phone calls or e-mail. Without a rigorous process for
determining that only individuals who have the proper delegation of
authority receive access, the organization did not have assurance that
only authorized individuals have access to travel authorization
capability.
Another method of validating the authenticity of a travel order would
be to provide the CTOs copies of, or access to, the delegation of
authority to approve travel orders. The CTO could use this list to
verify that the approving official had the authority to authorize the
travel. Some CTO officials informed us that it would not be practical
to validate every travel order prior to issuing the airline tickets
because of the number of tickets they issue every day. However, without
such capabilities, the CTOs could not determine whether the individual
who authorizes the CTO to expend federal funds by charging the airline
tickets to the centrally billed accounts had the authority to do so.
Obligation Controls Are Not Effective:
Even if, as discussed previously, DOD had not designed controls to
verify the validity of travel orders before airline tickets are charged
to the centrally billed accounts, DOD could have designed effective
compensating controls to provide reasonable assurance that it only paid
for airline tickets that were issued based on valid travel orders. Such
a compensating control would require that DOD determine the validity of
travel orders used as a basis to charge airline tickets to the
centrally billed accounts prior to paying the Bank of America. However,
we estimated that the five locations we tested statistically did not
have effective compensating controls to obtain reasonable assurance
that the tickets paid for with a centrally billed account were for
authorized travel.
To provide reasonable assurance that DOD only pays for expenses that
have been properly authorized, the Department of Defense appropriations
act for fiscal year 1995[Footnote 14] required DOD to develop a plan to
match disbursements to corresponding obligations before making
payments. Matching payments with corresponding obligations provides
assurance that funds are spent in accordance with the purposes and
limitations set by Congress, and that fraudulent disbursements or
erroneous payments are detected prior to payments. The process of
determining whether an obligation exists prior to payments is referred
to as prevalidation. DFAS prevalidates airline tickets charged to
centrally billed accounts by verifying that an obligation for the
travel order that authorized the airline tickets on the Bank of
America's invoice had been created in a DOD component's accounting
system.[Footnote 15] By verifying that an obligation exists before
making payment, the prevalidation process identifies instances where
obligations have not been established. DOD officials overseeing the
centrally billed credit card program informed us that they rely on
prevalidation to be a compensating control because, as mentioned
previously, the CTOs do not validate the travel order before charging a
ticket to the centrally billed account. If implemented properly,
prevalidation would provide DOD reasonable assurance that each airline
ticket charged to the centrally billed accounts was authorized by a
valid travel order. An effective way of implementing prevalidation is
for DOD to determine, prior to paying the Bank of America invoice,
whether transactions that fail prevalidation fail because of a clerical
or other error, or whether the travel order was not valid.
However, the method in which DOD implemented prevalidation decreased
its effectiveness in identifying unauthorized and potentially
fraudulent airline tickets and preventing payments for these tickets.
Specifically, DOD did not require that research be conducted on airline
ticket transactions that failed prevalidation. Although some DOD units,
such as a number of Navy units, require that DFAS return all airline
ticket transactions that failed the prevalidation test to the units
that created the travel order so that an obligation can be recorded,
this is not a DOD-wide practice. DOD's Financial Management Regulation
allows DFAS to record a new obligation, or increase an existing
obligation, up to $2,500 for transactions that failed prevalidation if
DFAS possesses a valid obligating document. The Financial Management
Regulation defines a valid obligating document to include a travel
order. However, as discussed previously, the CTOs do not determine the
validity of these travel orders, and our testing demonstrated that in
about 82 percent of sampled airline ticket transactions there was not
evidence available indicating that the approving official had the
authority to authorize the travel. Thus, if a traveler provides the CTO
a travel order, DFAS does not perform additional work to determine the
validity of the travel order. Consequently, DFAS does not have
reasonable assurance that the obligation it created based on the travel
order the CTO provided was approved by someone who has the authority to
authorize the travel.
Being aware of this flaw in the design of the prevalidation process, we
tested a statistical sample of 96 airline tickets issued at the five
locations to determine whether, in the absence of well-designed
controls, an obligation existed at the time of prevalidation to confirm
that the travel order was a valid order. On the basis of the results of
our statistical sampling, we estimate that there is not reasonable
assurance in about 48 percent of the airline ticket transactions that
an obligation existed at the five locations prior to when the airline
tickets were prevalidated for payment.
Table 4: Results of Statistical Sampling Tests of Proper Payment of
Airline Tickets:
Control test: Obligation data not provided;
Estimated percentage failure rate [A]: 30.
Control test: Obligation data provided, but obligation did not exist at
the time of prevalidation;
Estimated percentage failure rate [A]: 18.
Control test: Airline tickets not properly paid;
Estimated percentage failure rate [A]: 48.
Source: GAO analysis of DOD airline ticket airline ticket transactions
and supporting documentation.
[A] These are estimates for the population based on our statistical
sample. Information about the confidence intervals for our sample
estimates is presented in appendix I.
[End of table]
As shown in table 4, we estimate that in 30 percent of airline ticket
transactions, the five locations--primarily the Army and Air Force--
were not able to provide evidence supporting when the obligations were
recorded. Additionally, in an estimated 18 percent of airline ticket
transactions, while the date of the recording of the obligation was
provided, the obligation was established after the Bank of America
invoice was prevalidated. In our statistical sample, we repeatedly
requested the military services to provide this evidence over a 6-month
period. The results in table 4 can be projected only to the five
locations as a whole. They cannot be projected to the entire population
of airline tickets charged to the centrally billed accounts, or to each
of the five sites individually.
Lack of Controls Enabled GAO to Obtain an Airline Tickets Using a
Fictitious Travel Order:
DOD's failure to verify the validity of travel orders before it issued
airline tickets, and that it created obligations to pay for these
tickets, increased our concerns that DOD would issue, and pay for,
airline tickets on the basis of invalid travel orders. To determine
whether these weaknesses could be exploited, we performed additional
work to determine whether our concerns were warranted, or whether DOD
could detect instances where invalid travel orders were used to obtain
airline tickets. To test our concerns, in February 2004, we completed a
DOD travel order using fictitious names for the traveler and approving
official and had a GAO employee sign the travel order as the approving
official using the fictitious name. We then called a CTO assigned to
one of the five locations where we performed statistical sample testing
and requested the CTO to purchase a round trip airline ticket from
Washington, D.C., to Atlanta, Ga. and faxed the fictitious travel order
to the CTO. After receipt of the fictitious travel order, the CTO
issued the airline ticket and charged it to a centrally billed account.
The CTO then notified us that the ticket was issued and on the day of
the scheduled flight, we went to the airline's ticket counter at the
airport to pick up a boarding pass (see figure 2).
Figure 2: Boarding Pass for Airline Ticket Charged to a Centrally
Billed Account for Fictitious Traveler:
[See PDF for image]
[End of figure]
Finally, we determined whether DFAS would establish an obligation to
pay for the airline ticket we obtained using the fictitious travel
order. We obtained and reviewed the documentation used to reconcile the
Bank of America invoice containing the airline ticket. This
documentation indicated that neither the CTO nor the GTO was aware that
the travel order that the CTO used as the basis to charge the airline
ticket to the centrally billed account was fictitious. We then obtained
and reviewed the documentation used to pay the Bank of America invoice
containing the airline ticket in question. That review showed that DFAS
recorded an obligation for the fictitious travel order and paid for the
airline ticket. The ease with which this could be done and the
ineffective controls buttressed our concerns that DOD does not have an
adequately designed or effectively implemented internal control
structure over travel tickets funded through the centrally billed
accounts.
Centrally Billed Accounts Were Compromised and Used to Purchase Airline
Tickets for Personal Use:
An agency must establish physical controls to secure and safeguard
vulnerable assets. Examples include security for and limited access to
assets such as cash, securities, inventories, and equipment, which
might be vulnerable to risk of loss or unauthorized use. Access to
resources and records should be limited to authorized individuals, and
accountability for their custody and use should be assigned and
maintained. GAO's Standards for Internal Control in the Federal
Government (GAO/AIMD-00-21.3.1, November 1999).
During fiscal years 2001 and 2002, some centrally billed accounts were
compromised and used fraudulently to purchase airline tickets.
Fraudulent use of the accounts occurred because many DOD units did not
restrict access to the centrally billed account numbers to authorized
personnel. Although the accounts were compromised, in many instances,
the government incurred no losses because (1) the CTO reconciliation
process identified these tickets as being unauthorized and (2) the GTOs
disputed and received credit for the unauthorized airline tickets that
the CTOs had identified. Timely and consistent filing of disputes is an
effective way of detecting fraudulent activities resulting from
compromised accounts. However, we found that 5 of 11 DOD units we
visited did not file disputes with Bank of America on unauthorized
airline ticket transactions throughout fiscal years 2001 and 2002. We
found that of the reconciliation:
packages[Footnote 16] associated with the 96 statistical sample
transactions we tested the 5 DOD locations where we performed
statistical sampling did not file disputes for more than 60 airline
ticket transactions totaling more than $27,000. Without disputing or
researching these apparent unauthorized airline ticket transactions,
DOD cannot determine the proper disposition of airline ticket
transactions that CTOs identified as unauthorized.
Fraudulent Airline Ticket Transactions Resulting from Compromised
Accounts:
DOD's centrally billed accounts require safeguarding because stolen
account numbers can be repeatedly used to fraudulently purchase goods
and services. We found that DOD did not adequately safeguard these
account numbers from unauthorized access, resulting in instances where
the accounts were compromised and used fraudulently to purchase airline
tickets. We determined that the centrally billed accounts were
compromised, and that unauthorized use had occurred, when individuals
who did not work for the CTO--and therefore did not have the authority
to charge airline tickets to the centrally billed accounts--used these
accounts to purchase airline tickets and other services for personal
use. The following examples illustrate this improper use.
* Between August 2001 and March 2002, a Navy seaman used the centrally
billed account numbers assigned to two Navy GTOs to purchase over 70
unauthorized tickets totaling more than $60,000. More than 70 tickets
were detected by the GTO during its reconciliation process, and
referred to the Naval Criminal Investigative Service after a GTO
official suspected that the account had been compromised. The Naval
Criminal Investigative Service (NCIS), which conducted an
investigation, believed the seaman obtained the centrally billed
accounts printed on his itinerary, called the airlines, and purchased
the tickets by giving them the centrally billed account numbers. Some
of the airline tickets were obtained for the seaman's personal travel,
but in many instances, the tickets were sold at a discounted rate to
other Navy personnel and their family members. As a result of the
investigation, the seaman admitted culpability, lost all pay, received
a dishonorable discharge, and 5 years confinement. The government did
not incur losses because the Bank of America reimbursed the government
for the fraudulent charges.
* Between July 2000 and October 2000, a Marine Corps member (E-4) used
the centrally billed account number printed on his itinerary to
fraudulently purchase 11 airline tickets and a hotel accommodation
totaling $3,360. These airline tickets and hotel accommodation were
obtained from priceline.com and expedia.com for this person and three
other individuals. The charges were discovered by the CTO and referred
to the NCIS by the GTO. According to NCIS, the traveler initially
denied culpability to fraudulently using the centrally billed accounts
to acquire the airline tickets and hotel accommodation, but later
disclosed the names of two coconspirators. The traveler received
nonjudicial punishment of garnishing a half-month of his salary and a
one-grade reduction to lance corporal. The government did not incur
losses because the Bank of America reimbursed the government for the
fraudulent charges.
A major contributing factor to these instances was that many DOD units
did not adequately protect centrally billed account numbers. Of the 11
CTOs we visited to observe control procedures and conduct statistical
sampling, 8 printed the centrally billed accounts credit card number
used to purchase the airline ticket on the trip itinerary that was
given to each traveler along with the airline ticket. In these
instances, the CTOs could have safeguarded these accounts by limiting
the accounts' identity to the last four digits or simply not printing
the account number on the travelers' copy of the itinerary. In fiscal
year 2003, some CTOs improved their safeguards of the centrally billed
account numbers by printing only the last four digits of the credit
account number. However, not all CTOs have implemented this safeguard.
We also found that copies of these itineraries were maintained at CTO
offices that were accessible to any traveler who required assistance
with travel reservations. Further, at the Pentagon, the GTO stored the
reconciliation packages in boxes with the centrally billed account
numbers prominently written on the outside of the boxes in an office
that was not secured. Failure to safeguard centrally billed account
numbers creates unnecessary risks that expose the government to
fraudulent activities.
Some Locations Did Not Dispute Potentially Fraudulent Airline Ticket
Transactions:
In the above cases, DOD discovered the fraudulent activities and
averted losses to the government because the disputes had been promptly
filed once the airline tickets were identified as unauthorized charges.
For example, in the first case we discussed in the previous section,
the GTO official disputed the 70 unauthorized airline tickets on the
monthly invoices in which they appeared, and the government did not pay
for the unauthorized airline tickets. In addition, because of the
pattern that existed concerning how those tickets were ordered, the
individual who perpetuated the fraud was identified and disciplined. If
the GTO did not file disputes, the GTO would not have documented the
series of events that led to the detection of the fraudulent
activities. However, we found that a number of locations we visited did
not research or file disputes with Bank of America for airline tickets
that the commercial travel offices identified as unauthorized charges.
Failure to file disputes meant that the GTO could not determine whether
the airline ticket transactions were fraudulent, and in essence, the
GTO waived opportunities to avoid paying invalid charges.
Our observations, inquiries, and statistical testing determined that
DOD does not always dispute unauthorized charges. At two offices, GTO
officials told us that they did not know how to dispute unauthorized
charges. For example, a Marine Corps official at Henderson Hall
informed us that he did not know about the dispute process at the time
he took over responsibility for reviewing for unauthorized airline
ticket transactions. Similarly, the GTO official responsible for
reviewing CTO reconciliation at the DFAS office where we conducted
statistical sampling informed us that she never received training in
the dispute process, and that in fact, she did not know what a dispute
form looked like, and did not know where to get one.
Five of the 11 locations that we visited did not dispute unauthorized
airline ticket transactions identified by CTOs throughout fiscal years
2001 and 2002. Two locations that did not file disputes--the Marine
Corps Reserves unit in New Orleans and DFAS office in Indianapolis--
were locations where we conducted statistical sampling. In addition,
three other locations where we performed general control testing did
not file disputes for unauthorized airline ticket transactions
throughout fiscal years 2001 and 2002. The locations that filed
disputes could not provide evidence that they did it consistently. For
example, while GTO officials at the Navy Reserve unit in New Orleans
informed us that they filed disputes for all unauthorized airline
ticket transactions, these officials were not able to locate dispute
forms for a number of the centrally billed accounts they managed.
Similarly, the U.S. Army Service Center at the Pentagon could not
provide documentation showing why disputes were not filed for some
unauthorized airline ticket transactions.
In addition, our review of DOD's reconciliation packages associated
with the 96 statistical sample airline transactions found that DOD did
not consistently or effectively disputed transactions related to 22
reconciliation packages. In particular, our review showed that DOD did
not file, did not have documentation that it filed, or did not track
the final disposition of more than 60 airline transactions that the
CTOs identified as unauthorized. Table 5 lists some airline
transactions charged to the centrally billed accounts that the CTOs
identified as unauthorized and for which the GTOs did not dispute or
track to their final disposition.
Table 5: Airline Ticket Transactions that CTOs Identified as
Unauthorized and DOD Either Did Not Dispute or Did Not Track Their
Resolution:
Location: U.S. Army Service Center;
Itinerary: Unknown - not in Bank of America database;
Amount: $4,130.
Location: Navy Reserves, New Orleans;
Itinerary: Colorado Springs to Honolulu to Colorado Springs;
Amount: 3,500.
Location: Navy Reserves, New Orleans;
Itinerary: Riverton, Wyoming to Kansas City, Missouri and return;
Amount: 1,220.
Source: A comparison between CTO reconciliation packages and Bank of
America invoices.
[End of table]
Without tracking the status of disputed airline transactions and
determining the final disposition of disputed airline ticket
transactions, DOD had no assurance that provisional credits[Footnote
17] that the Bank of America provided when the GTO disputes an
unauthorized charge would not be reversed if the airline claimed that
the airline ticket was a valid charge. DOD officials told us that they
did not track disputed airline ticket transactions because the Bank of
America does not assign a common reference number to each disputed
airline ticket transaction and use that reference number for all
subsequent correspondence with DOD related to that disputed
transaction. Rather, DOD officials stated that because of the volume of
disputed airline ticket transactions that exist and the fact that Bank
of America assigns a new reference number every time it corresponds
with DOD on a disputed transaction, they cannot follow the ultimate
disposition of a disputed transaction.
Reviewing unauthorized airline ticket transactions, filing disputes for
unauthorized charges, and tracking the ultimate disposition of those
disputed airline ticket transactions are key steps in detecting
fraudulent charges and protecting taxpayer resources. Although some
discrepancies can ultimately be traced to tickets actually purchased by
DOD, other discrepancies occurred because the centrally billed accounts
were compromised and used fraudulently. As the cases we discussed show,
filing disputes was an effective means to identify unauthorized charges
and ultimately avoid paying for tickets that travelers had obtained
using compromised centrally billed accounts. Consequently, without
researching and/or filing disputes for unauthorized charges, DOD cannot
reduce its financial risk associated with unauthorized charges.
Improvements in DOD's Management of Travel Card Programs Provide DOD
with Alternatives in Purchasing Airline Tickets:
During fiscal years 2002 and 2003, we issued a series of
testimonies[Footnote 18] and reports[Footnote 19] that focused on
problems that the Army, Navy, and Air Force had in managing the
individually billed travel card accounts. These testimonies and reports
showed high delinquency rates and significant potential fraud and abuse
related to DOD's individually billed travel card program. However, we
recently issued a report[Footnote 20] that recognized improvements that
DOD has made in the management of the individually billed accounts.
These improvements point to the possibility of using this program as
the principal means of acquiring tickets, thereby reducing the
government's risk of losses arising from the use of centrally billed
accounts.
In response to our testimonies and reports on the individually billed
accounts, Congress took actions in the fiscal year 2003 appropriations
and authorization acts[Footnote 21] and the fiscal year 2004
authorization act[Footnote 22] 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 23] 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 number 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 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.
Although these rates are still substantially above the Army's and
Navy's goal of 4.5 percent, the proper implementation of split
disbursements should continue to reduce these delinquency rates.
As previously presented in our report on unused airline tickets, the
use of a well-controlled individually billed account program as the
principal mechanism for acquiring airline tickets will help 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.
In addition, DOD has taken actions to improve management of its
centrally billed account travel program based on the results of our
premium class travel and unused airline ticket reports. Specifically,
DOD commissioned a task force to establish policies and procedures
intended to help prevent improper use of premium class travel. The
March 16, 2004, report by the premium class task force contained
corrective actions in the areas of policy and controls of travel
authorization, ticket issuance, and internal control and oversight to
address our findings. According to the report, many of the task force's
recommendations have been implemented. In the area of unused tickets,
DOD has issued claim letters to five airlines demanding repayment of
the over $21 million in unused tickets.
Conclusion:
DOD did not design effective controls, or effectively implement key
existing controls, over the centrally billed component of the travel
card program to adequately protect DOD from unauthorized use. We found
that DOD's monitoring system for the centrally billed accounts
primarily focused on making payments on time--not making timely and
accurate payments. In this report, we identified that DOD paid for the
same airline tickets twice, purchased airline tickets without adequate
knowledge concerning the validity of the request, and did not safeguard
account numbers from unauthorized use. Earlier this year, we also
reported that DOD did not have adequate controls over the authorization
of premium class travel, and allowed millions of dollars to be wasted
on airline tickets that were unused and not refunded. These examples
demonstrate why DOD financial management is one of our "high-risk"
areas, and why DOD is highly vulnerable to fraud, waste, and abuse. DOD
has, however, recognized the control weaknesses we have identified in
this and previous reports, and has taken actions to address some of
these weaknesses. Specifically, DOD has demanded that many of those
travelers we identified as receiving improper payment reimburse the
government for payments to which they were not entitled, started to
better safeguard centrally billed account numbers, and taken action to
resolve other control weakness we identified. DOD must build on these
improvement initiatives and implement internal controls that can
provide reasonable assurance to both DOD senior management and the
taxpayers that the billions of dollars in travel expenses paid for with
centrally billed accounts is spent prudently.
Recommendations for Executive Action:
To improve the management of DOD's centrally billed travel card
program, we reaffirm a previous recommendation we made for executive
action. Specifically, to detect improper claims for tickets travelers
did not purchase, and prevent DOD from making improper payments on
these invalid claims, we continue to recommend that the Secretary of
Defense consider the feasibility of using DOD individually billed
accounts as the primary means of obtaining airline tickets for DOD
military and civilian personnel. As we previously recommended, DOD
should use centrally billed accounts to purchase airline tickets for
military and civilian personnel who do not have a DOD individually
billed account travel card or who have significant restrictions on
their individually billed accounts.
In addition, to improve the management of DOD's centrally billed travel
card program, we are making the following 11 new recommendations.
To obtain reasonable assurance that DOD military and civilian personnel
do not improperly request reimbursement for airline tickets purchased
with centrally billed accounts and reinforce the seriousness of filing
false claims against the government, we recommend that the Secretary of
Defense direct the Secretaries of the Army, Navy, and Air Force, as
well as the heads of all DOD agencies, to implement the following four
recommendations:
* Periodically issue guidance to military and civilian personnel
reminding them that the cost of airfare expenses purchased with a
centrally billed account should not be claimed as a reimbursable
expense on travel vouchers, and of the potential penalties for doing
so.
* Direct the CTOs to mark all airline tickets purchased with a
centrally billed account as "non-reimbursable."
* Periodically issue guidance to officials responsible for processing
travel vouchers instructing them on how to determine if an airline
ticket was purchased with a centrally billed account or an individually
billed account.
* Consider taking disciplinary action against employees who submit or
allow the submission of falsely stated travel vouchers, and, if
warranted, refer the matter to the U.S. Attorney for further
consideration.
To recover previous improper payments and identify further improper
payments, we recommend that the Secretary of Defense direct the
Secretaries of the Army, Navy, and Air Force, as well as the heads of
all DOD agencies, to implement the following two actions:
* Send collection letters requesting reimbursements to all travelers
identified as having been paid for airline tickets they did not
purchase, and follow up to ensure that they reimburse the government
for the improper payments.
* Review the 27,000 instances of potential improper payments that we
referred to in this report and determine whether DOD improperly paid
those travelers for airline tickets purchased with the centrally billed
account. If DOD made improper payments, take actions necessary to
recover the costs of the airline tickets.
To provide DOD with reasonable assurance that airline tickets purchased
with a DOD centrally billed account are for properly authorized
official DOD business, we recommend that the Secretary of Defense
direct the Secretaries of the Army, Navy, and Air Force, as well as the
heads of all DOD agencies, to implement the following three
recommendations:
* Determine the feasibility of establishing control procedures to
validate the authenticity of travel orders prior to issuing airline
tickets purchased with a centrally billed account. Examples of how to
validate the authenticity of travel orders include the following:
* An electronic travel authorization process that limits approval of
travel orders to designated officials. This could be accomplished by
implementing the Defense Travel System across DOD, provided that DTS
contains functionality to enable only designated authorizing officials
to approve travel orders.
* A paper travel authorization process that is augmented by a system
that provides the CTO with the capability to determine that the
individual who approved a travel order can authorize the traveler to
travel.
* Instruct the CTO that it can use a centrally billed account to
purchase airline tickets only if the CTO can obtain reasonable
assurance that the travel order was properly authorized. If the CTO
cannot obtain such reasonable assurance, the CTO should direct the
traveler to purchase the ticket with his or her DOD individually billed
account travel card.
* Consider the feasibility of prohibiting DFAS from establishing an
obligation for airline tickets purchased with centrally billed accounts
that failed DFAS' prevalidation process without obtaining positive
confirmation that an obligation should be established from the unit
that authorized the travel.
To prevent DOD's centrally billed account numbers from being
compromised and help detect instances where they were, we recommend
that the Secretary of Defense direct the Secretaries of the Army, Navy,
and Air Force, as well as the heads of all DOD agencies, to implement
the following two recommendations:
* Direct CTOs to stop printing the centrally billed account number in
its entirety on travel itineraries and any other documents that are
accessible by individuals who do not need to know the account number.
* Establish procedures to ensure that all airline ticket transactions
identified as discrepancies by the CTOs are properly disputed,
including performing any necessary follow-up actions to ensure that DOD
receives appropriate credits.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, which are reprinted in
appendix II, DOD concurred with all 11 of our recommendations and
stated that it had taken actions or will take actions to address these
recommendations. On the basis of DOD's comment that most tickets are
issued electronically, we modified our recommendation concerning
marking airline tickets as "non-reimbursable" to instead mark
itineraries for which the tickets were purchased with centrally billed
accounts as "non-reimbursable." With respect to actions already taken,
DOD has collected, or is in the process of collecting, reimbursements
from travelers identified as having been reimbursed for airline tickets
they did not purchase. With respect to actions under way, DOD is
renegotiating contracts with the commercial travel offices to include a
statement on the travelers' itineraries to indicate whether an airline
ticket was purchased using the centrally billed account or the
individually billed account and to stop printing the entire centrally
billed account numbers on the travelers' itineraries.
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 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; the Director of
DFAS, and interested congressional committees. 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], John V. Kelly at (202) 512-6926 or [Hyperlink,
kellyj@gao.gov], or Tuyet-Quan Thai at (206) 287-4889 or [Hyperlink,
thait@gao.gov] if you or your staffs have any questions concerning this
report. Major contributors to this report are acknowledged in appendix
III.
Signed by:
Gregory D. Kutz, Director,
Financial Management and Assurance:
Signed by:
Robert J. Cramer,
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, Committee on
Governmental Affairs, United States Senate; the Chairman of the Senate
Committee on Finance; and Representative Schakowsky, we audited the
controls over the Department of Defense's (DOD) centrally billed
accounts. Our assessment covered the following:
* whether DOD improperly reimbursed travelers for the cost of airline
tickets paid using centrally billed accounts,
* whether internal controls were effective to prevent the CTO from
issuing unauthorized airline tickets on the basis of invalid travel
orders, and:
* whether other control weaknesses led to the centrally billed accounts
being compromised and fraudulently used.
Determine Whether DOD Improperly Reimbursed Travelers for Tickets DOD
Purchased Using the Centrally Billed Accounts:
To determine whether DOD improperly reimbursed travelers for airline
tickets that DOD--not the travelers--paid for using the centrally
billed accounts, we reviewed prior audit reports from DOD's Office of
Inspector General and DOD's various audit agencies and interviewed DFAS
officials. We also obtained from Bank of America databases of fiscal
years 2001 and 2002 airline ticket 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 travel segments in each ticket. We also requested that the services
provide us with databases containing travel voucher data in sufficient
detail, broken down by the type of expense, such as per diem,
transportation expense, and other miscellaneous expense. To identify
the pool of potential improper payments we compared the transportation
expense data obtained from the services' voucher data to the Bank of
America's data on airline tickets purchased using the centrally billed
accounts to identify instances where DOD might have made improper
reimbursements to the travelers for airline tickets they did not
purchase. Then to confirm whether the payments were improper we tested
a nonrepresentative selection of 124 travelers from the Army, Marine
Corps, and Navy who submitted 204 travel vouchers. The 124 travelers
were selected primarily based on the amount of the potential improper
payments and the frequency with which the travelers submitted potential
improper payments.
We were not able to select a statistical sample of potential duplicate
payments because of the limitations in the data DOD provided us. These
limitations also prevented us from identifying all potential improper
payments or to estimate their magnitude. Specifically, although the
Army, Navy, and Marine Corps provided us with travel voucher data,
weaknesses in DOD's financial management systems mean that these
services cannot provide assurance that the travel voucher data they
provided us contain complete data on fiscal years 2001 and 2002
vouchers. Further, we were not able to obtain assurance that the
services accurately coded all airfare payments claimed on the travel
vouchers as transportation expenses and not as other miscellaneous
expenses. Finally, the Air Force did not provide us with data in the
format we requested. Consequently, we were unable to analyze Air Force
data.
Evaluate Effectiveness of Internal Controls Over Airline Ticket
Issuance:
To assess whether internal controls were effective to prevent the CTO
from issuing unauthorized airline tickets on the basis of invalid
travel orders, we obtained an understanding of the travel process by
reviewing DOD's financial and travel regulations. 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 GTOs and representatives of the CTOs
to obtain an understanding of the process used to issue tickets,
perform reconciliation between Bank of America invoices and CTO's
records, file disputes, and make payments to Bank of America for the
centrally billed account invoices.
We tested a statistical sample of 96 airline ticket transactions to
determine whether (1) the CTO issued airline tickets only on the basis
of valid travel orders and (2) DOD paid for airline tickets on the
basis of valid travel orders. The population from which we selected our
airline ticket transactions for testing was the set of airline ticket
transactions charged to the centrally billed accounts at five locations
during fiscal years 2001 and 2002. The five locations comprise one Air
Force, one Army, one Marine Corps, one Navy, and one DFAS location. The
locations were selected based on the number and amount of airline
tickets charged to the centrally billed account activities. Because our
objective was to test controls over airline ticket purchases, we
excluded credits and miscellaneous debits (such as fees) from the
population of airline ticket transactions.
For each transaction sampled, we requested that DOD provide us with the
travel order, travel voucher, travel itinerary, delegation of authority
to approve travel order, obligation document, reconciliation package,
and other related supporting documentation. Based on the information
DOD provided, we assessed whether the travel order was signed by the
properly designated official before an airline ticket was issued on the
travel order, and whether an obligation was created for the airline
ticket in the services' accounting system before the Bank of America
invoice was prevalidated. For those transactions for which DOD was
unable to provide us with supporting documentation to demonstrate that
the travel order was approved by a properly designated authorizing
official, or that an obligation existed, we considered the transaction
to have failed the proper issuance or proper payment test,
respectively. The results of the samples of these control attributes
can be projected to the population of airline ticket transactions at
these five locations, but not to individual services or locations, or
to DOD as a whole.
With this statistically valid probability sample, each transaction in
the population had a nonzero probability of being included, and that
probability could be computed for any transaction. Each sample element
was subsequently weighted in the analysis to account statistically for
all the airline ticket transactions in the population, including those
that were not selected. Because we followed a probability procedure
based on random selections, our sample was only one of a large number
of samples that we might have drawn. Since each sample could have
provided different estimates, we express our confidence in the
precision of our particular sample's estimates as 95 percent confidence
intervals (e.g., plus or minus 7 percentage points). These are
intervals that would contain the actual population value for 95 percent
of the samples we could have drawn. As a result, we are 95 percent
confident that each of the confidence intervals in this report will
include the true values in the study population. All percentage
estimates from the sample of airline transactions charged to the
centrally billed accounts have sampling errors (confidence interval
widths) of plus or minus 10 percentage points or less. Table 6
summarizes the results of our testing.
Table 6: Estimated Failure Rates for Control Tests for Fiscal Year 2001
and 2002 Airline Ticket Transactions:
Key purchase card control: Travel order provided and signed by a
properly authorized approving official;
Point estimate[A]: 82%.
Key purchase card control: Obligation data provided and obligation
existed for airline tickets prior to prevalidation of Bank of America
invoice;
Point estimate[A]: 48%.
Source: GAO analysis of DOD documentation.
[A] These are point estimates for the populations based on our
statistical sample.
[End of table]
Because of the potential impact of a weak internal control process, we
conducted additional investigative work to determine the significance
of those control weaknesses. Specifically, we designed a test to
determine if someone who did not work for DOD could obtain an airline
ticket from a CTO using on a fictitious travel order and without
entering a DOD facility. We also wanted to test whether DOD would
authorize payment for an airline ticket requested in this manner. To
perform this test, we completed a DOD travel order using fictitious
names for the traveler and approving official. We then called a DOD CTO
from a telephone not associated with a government facility requesting a
round trip airline ticket from Washington, D.C., to Atlanta, Ga., and
faxed the CTO the travel order we generated. Several days before our
scheduled travel the CTO notified us that the ticket had been issued.
On the day of the scheduled flight, we went to the airline's ticket
counter at the airport to pick up a boarding pass. We then obtained and
reviewed the CTO's reconciliation for the Bank of America invoice
containing the ticket and DFAS payment records to determine whether an
obligation was recorded. We also monitored the centrally billed account
to determine whether a credit was issued for the unused portion of the
airline ticket we requested.
Other Control Weaknesses:
To assess whether other control weaknesses contributed to the centrally
billed accounts being compromised and fraudulently used, we obtained an
understanding of the safeguards over the centrally billed accounts and
the process used to dispute airline ticket transactions that the CTOs
identified as being unauthorized at the 11 locations we visited. We
data mined centrally billed accounts data provided by Bank of America
for airline ticket transactions that could be potentially fraudulent.
We asked DOD to provide us with supporting documentation and
explanations on the potentially fraudulent airline ticket transactions.
We also reviewed the reconciliation packages associated with the 96
statistical sample transactions we tested to determine whether DOD
properly filed disputes for airline ticket transactions the CTOs
identified as being unauthorized.
We briefed DOD managers, including DOD officials in the Office of the
Under Secretary of Defense (Comptroller), DFAS, 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
Installations 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 April 19, 2004, we requested comments on a
draft of this report from the Secretary of Defense or his designee. We
conducted our audit work from June 2003 through May 2004 in accordance
with U.S. generally accepted government auditing standards.
[End of section]
Appendix II: 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 Resulted in Millions of Dollars of Improper Payments," dated
April 19, 2004, (GAO Code 192119/GAO-04-576). The DoD concurs with the
11 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. Barbara Rice. She may be
reached by email at barbara.rice@osd.mil or by telephone at (703) 697-
3192.
Sincerely,
Signed by:
Lawrence J. Lanzillotta,
Acting:
Enclosure: As stated:
GAO DRAFT REPORT DATED APRIL 19, 2004 GAO-04-576 (GAO CODE 192119):
"DOD TRAVEL CARDS: CONTROL WEAKNESSES RESULTED IN MILLIONS OF DOLLARS
OF IMPROPER PAYMENTS":
DEPARTMENT OF DEFENSE COMMENTS TO THE GAO RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy, and Air Force as well as the
heads of all DoD agencies to periodically issue guidance to military
and civilian personnel reminding them that the cost of airfare expenses
purchased with a centrally billed account should not be claimed as a
reimbursable expense on travel vouchers, and of the potential penalties
for doing so.
(p. 36/GAO Draft Report):
DOD RESPONSE: Concur. The Comptroller will issue guidance to the
Secretaries of the Army, Navy, and Air Force as well as heads of all
DoD agencies to remind their military and civilian personnel to not
claim centrally billed account (CBA) purchases on travel vouchers and
to return unused airline tickets to their activities. A system
modification to the Defense Travel System (DTS) has been generated to
notify the traveler that the cost of air and rail tickets is not
reimbursable to the individual if the tickets were paid for using the
CBA. Expected completion date is May 31, 2004.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy, and Air Force as well as the
heads of all DoD agencies to direct the CTOs to mark all airline
tickets purchased with a centrally billed account as "non-
reimbursable." (p. 37/Draft Report):
DOD RESPONSE: Partially concur. The DoD believes that marking all
airline tickets purchased with a centrally billed account as 'non-
reimbursable' is not feasible. The ticketing by the CTO occurs at the
beginning or midway in the travel process. The reminder of 'non-
reimbursement' should be accomplished prior to submission of the
traveler's settlement. In today's environment, the majority of airline
tickets are e-tickets vice paper tickets. On occasions where a paper
ticket is issued, the traveler's ticket is exchanged for a boarding
pass. Additionally, the CTOs can not exercise control over what data
and information the airline-specific reservation system imprints on a
paper ticket. A memorandum from the Acting Under Secretary of Defense
(Acquisition, Technology, and Logistics) (USD (AT&L)) will be
distributed by May 31, 2004, to the Secretaries of the Army, Navy, and
Air Force as well as the heads of DoD agencies to require CTOs to
include a statement on travelers' itineraries to indicate whether the
ticket was purchased using a CBA or individually billed account (IBA).
The target completion date is August 15, 2004, but it is possible that
some CTO contract modifications could take longer. The contract
modifications for CTOs servicing activities using DTS will be
in two phases. The first phase of the contract modifications for CTOs
servicing activities will be the DTS Small Business CTO solicitation.
This is planned for award during the fourth quarter of fiscal year (FY)
2004 with implementation beginning first quarter FY 2005. The second
phase is the award of the DTS Worldwide solicitations and is planned to
follow during second quarter of FY 2005.
RECOMMENDATION 3: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy, and Air Force as well as the
heads of all DoD agencies to periodically issue guidance to DFAS
officials responsible for processing travel vouchers instructing them
on how to determine if an airline ticket was purchased with a centrally
billed account or an individually billed account. (p. 37/Draft Report):
DOD RESPONSE: Concur. The Defense Finance and Accounting Service (DFAS)
processes travel vouchers for the majority of the Army and Defense
Agencies and is evaluating options to identify airline tickets
purchased on the CBA or an IBA. A collaborative approach is being
evaluated for those Military Components where travel claims are
approved and reimbursements are calculated by that Component. It is
anticipated that the evaluation for all Components will be completed by
October 31, 2004.
RECOMMENDATION 4: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy, and Air Force as well as the
heads of all DoD agencies to consider taking disciplinary action
against employees who submit or allow the submission of falsely stated
travel vouchers, and, if warranted, refer to the U.S. Attorney for
further consideration. (p. 37/Draft Report):
DOD RESPONSE: Concur. Employees are already subject to appropriate
disciplinary or administrative actions in cases of fraud against the
Government. This includes referral for criminal prosecution either
under the Uniform Code of Military Justice, in the case of military
personnel, or to the appropriate United States Attorney for
prosecution, in the case of civilian personnel. Commanders and
supervisors are expected to be aware of these remedies in cases of
fraud against the government committed by military personnel or
civilian employees. It is also expected that commanders and supervisors
would take appropriate disciplinary or administrative action in cases
of demonstrable fraud. The Department will evaluate whether it is
necessary to remind commanders and supervisors of the procedures that
already exist to impose administrative or disciplinary action in cases
of submission of fraudulent travel vouchers. Estimated completion date
is September 30, 2004.
RECOMMENDATION 5: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy, and Air Force as well as the
heads of all DoD agencies to send collection letters requesting
reimbursements to all travelers identified as having been paid for
airline tickets they did not purchase, and follow-up to ensure that
they reimburse the government for the improper payments. (p. 37/Draft
Report):
DOD RESPONSE: Concur. The Defense Finance and Accounting Service
(DFAS), Travel Card Program Management Office (TCPMO), in conjunction
with the Military Components and Defense Agencies, is sending
collection letters to travelers identified as having been reimbursed
for airline tickets they did not purchase. The DFAS will continuously
follow-up to ensure that the government is reimbursed for the improper
payments.
RECOMMENDATION 6: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy and Air Force as well as the heads
of all DoD agencies to review the 27,000 instances of potential
improper payments that the GAO referred to in this report and determine
whether DoD improperly paid those travelers for airline tickets
purchased with the centrally billed account. If DoD made improper
payments, the GAO recommended taking actions as necessary to recover
the costs of the airline tickets. (p. 37/Draft Report):
DOD RESPONSE: Concur. The DFAS TCPMO has coordinated with the GAO to
receive information concerning the 27,000 transactions and will
disseminate it to the respective components/agencies for review and
collection of improper payments. The estimated completion date is
December 31, 2004.
RECOMMENDATION 7: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy and Air Force as well as the heads
of all DoD agencies to determine the feasibility of establishing
control procedures to validate the authenticity of travel orders prior
to issuing airline tickets with a centrally billed account. (p. 38/
Draft Report):
DOD RESPONSE: Concur. The DTS is currently deployed and operational at
over 2000 sites. Full operating capability is expected to be achieved
in FY 2006. DTS provides automated certification that requires
electronic authenticity of travel orders by specific approving
officials. For those components not currently using DTS, a memorandum
from the Acting USD (AT&L) will be distributed by May 31, 2004, to the
Secretaries of the Army, Navy, and Air Force as well as the heads of
DoD agencies to establish a collaborative effort to evaluate the
feasibility of establishing control procedures to validate the
authenticity of travel orders prior to issuing airline tickets with a
centrally billed account. If non-DTS control procedures are deemed to
be feasible, specific procedures will be identified, developed, and
promulgated with a target completion date of August 15, 2004.
RECOMMENDATION 8: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy, and Air Force as well as the
heads of all DoD agencies to instruct the CTO that it can use a
centrally billed account to purchase airline tickets only if the CTO
can obtain reasonable assurance that the travel order was properly
authorized. If the CTO cannot obtain such reasonable assurance, the GAO
recommends the CTO direct the traveler to purchase the ticket with his
or her DoD individually billed account travel card. (p. 38/Draft
Report):
DOD RESPONSE: Concur. The DoD agrees that instructions should be
provided to the CTOs to use CBAs only if reasonable assurance can be
obtained that the travel order is properly authorized. The Department
will evaluate the alternatives available for the CTOs to ensure travel
orders are properly authorized and to the extent possible implement
procedures until such time DTS is fully deployed. This will be
undertaken in conjunction with the effort described in the response to
Recommendation 7; therefore the estimated completion date to determine
feasibility and to identify methods of assurance is August 15, 2004.
The CTO contract modifications, if required, could take longer. Once
DTS is fully deployed, it will generate authorizations that are
digitally authenticated and are in full compliance of DoD policies and
guidelines. The CTO will have complete assurance that these
authorizations may be used for payment of travel services under a
centrally billed account, or an individually billed account, as
applicable. Full operating capability of DTS is expected to be achieved
in FY 2006.
RECOMMENDATION 9: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy, and Air Force as well as the
heads of all DoD agencies to consider the feasibility of prohibiting
DFAS from establishing an obligation for airline tickets purchased with
centrally billed accounts that fail DFAS' prevalidation process without
obtaining positive confirmation that an obligation should be
established from the unit that authorized the travel. (p. 38/Draft
Report):
DOD RESPONSE: Concur. The DFAS will study the feasibility of
prohibiting the establishment of an obligation for airline tickets
purchased with centrally billed accounts that failed DFAS'
prevalidation process without obtaining positive confirmation that an
obligation should be established from the unit that authorized the
travel. This must be viewed in the scope of the Prompt Pay Act to
ensure that increases in interest payments are not the unintended
result. The estimated completion date is December 31, 2004.
RECOMMENDATION 10: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy, and Air Force as well as the
heads of all DoD agencies to direct CTOs to stop printing the centrally
billed account number in its entirety on travel itineraries and any
other documents that are accessible by individuals who do not need to
know the account number. (p. 39/Draft Report):
DOD RESPONSE: Concur. Discussions and CTO contract modifications are
underway to ensure that CTOs do not print centrally billed account
numbers on travel itineraries or other documents. In addition, a
memorandum from the Acting USD(AT&L) directing this will be distributed
to the Secretaries of the Army, Navy, and Air Force, and to the heads
of Defense agencies by May 31, 2004. Implementation dates will vary
depending on difficulty of negotiating CTO contract modifications. The
DTS Small Business CTO solicitation is planned for award during the
fourth quarter of FY 2004 with implementation beginning first quarter
FY 2005. The award of the DTS Worldwide solicitations are planned to
follow during second quarter of FY 2005.
RECOMMENDATION 11: The GAO recommended that the Secretary of Defense
direct the Secretaries of Army, Navy, and Air Force as well as the
heads of all DoD agencies to establish procedures to ensure that all
airline ticket transactions identified as discrepancies by the CTOs are
properly disputed, including performing any necessary follow-up actions
to assure that DoD receives appropriate credits. (p. 39/Draft Report):
DOD RESPONSE: Concur. A memorandum from the Acting (USD(AT&L)
emphasizing the procedures to ensure that all airline ticket
transactions identified as discrepancies by the CTOs are properly
disputed and follow-up actions are performed will be distributed to the
Secretaries of the Army, Navy, and Air Force, and to the heads of
Defense agencies by May 31, 2004. The Department has notified employees
through comments on their leave and earnings statement of their
responsibilities to return unused airline tickets to their activities
and will be publishing an update to the Department of Defense Financial
Management Regulation (DoDFMR), Volume 9. The estimated completion date
is September 30, 2004. Additionally, the DTS CBA reconciliation module
includes the capability to match travel vouchers to tickets. This
reconciliation module is currently being tested operationally at
certain pilot sites, with an anticipated release for deployment in the
fourth quarter of FY 2004. 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 the DTS CBA reconciliation module is used to certify
payment). The goal is for all DoD entities to be using this DTS
capability by FY 2006.
[End of section]
Appendix III: 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,
Matthew Brown, Francine DelVecchio, Aaron Holling, Jeffrey Jacobson,
Barbara Lewis, Julie Matta, Kristen Plungas, John Ryan, and Sidney H.
Schwartz.
(192119):
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, DOD Travel Cards: Control
Weaknesses Led to Millions of Dollars Wasted on Unused Airline Tickets,
GAO-04-398 (Washington, D.C.: Mar. 31, 2004).
[5] 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).
[6] The centrally billed account program consists of two components:
transportation cards and unit cards. Centrally billed account
transportation cards are used to purchase transportation, such as
airline and train tickets, and account for about 97 percent of the
money spent with centrally billed accounts. Centrally billed account
unit cards are used to pay for different types of travel expenses,
including hotels and meals, and account for less than 3 percent of
money spent with centrally billed accounts. Because DOD did not spend
much money with unit cards, we did not specifically review the internal
controls over the unit cards.
[7] GAO-04-398.
[8] GAO-04-398.
[9] 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.
[10] The amount and type of obligation that DFAS can create also
depends on its agreement with each service.
[11] Of the roughly $10.8 billion in travel and transportation expenses
incurred by DOD in fiscal years 2001 and 2002, about $2.8 billion were
for charges to centrally billed accounts. The remaining $8.0 billion
was for airline and other transportation expenses such as hotels, per
diem, car rentals, and other miscellaneous expenses that many travelers
would have charged to their individually billed accounts, or, if they
did not have individually billed accounts, paid using other means.
[12] Air Force Audit Agency, Centrally Billed Accounts for Travel,
F2003-0003-FB1000 (Washington, D.C., Apr. 24, 2003).
[13] 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).
[14] Department of Defense Appropriations Act, 1995, Pub. L. No. 103-
335, §8137, 108 Stat. 2599, 2654 (Sept. 30, 1994).
[15] DOD's financial regulations require that DOD components record an
obligation within 10 days of an obligation having been incurred.
[16] Upon receipt of the Bank of America invoice, the CTO reconciles
ticket charges on the invoice to records of tickets they issued. To
test whether DOD filed disputes for all transactions that should be
disputed, we reviewed the reconciliation packages associated with the
96 statistical sample transactions.
[17] Upon receipt of a disputed transaction, the Bank of America issues
a provisional credit while it researches the merits of the dispute.
Depending on the results of the research, the Bank of America reverses
the provisional credit and either provides a refund or affirms the
original charge.
[18] GAO-02-863T and GAO-03-148T.
[19] GAO-03-169, GAO-03-147, and GAO-03-298.
[20] U.S. General Accounting Office, DOD Travel Cards: Control
Weaknesses Led to Millions of Dollars Wasted on Unused Airline Tickets,
GAO-04-398 (Washington, D.C.: Mar. 31, 2004).
[21] 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).
[22] National Defense Authorization Act for Fiscal Year 2004, Pub. L.
No. 108-136, 117 Stat. 1392 (2003).
[23] 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 mandatory for all military and civilian personnel.
See 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.
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