a

GAO

United States Government Accountability Office

Report to the Committee on Homeland 

Security and Governmental Affairs, 

U.S. Senate

March 2006 STATE’S CENTRALLY 

BILLED FOREIGN 

AFFAIRS TRAVEL

Internal Control 

Breakdowns and 

Ineffective Oversight 

Lost Taxpayers Tens of 

Millions of Dollars 

GAO-06-298
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 2006

STATE’S CENTRALLY BILLED FOREIGN 

AFFAIRS TRAVEL 

Internal Control Breakdowns and 

Ineffective Oversight Lost Taxpayers 

Tens of Millions of Dollars 

Highlights of GAO-06-298, a report to the 

Committee on Homeland Security and 

Governmental Affairs, U.S. Senate 

The relative size of the Department

of State’s (State) travel program 

and continuing concerns about

fraud, waste, and abuse in 

government travel card programs 

led to this request to audit State’s 

centrally billed travel accounts. 

GAO was asked to evaluate the 

effectiveness of internal controls 

over (1) the authorization and 

justification of premium-class 

tickets charged to the centrally

billed account and (2) monitoring 

of unused tickets, reconciling 

monthly statements, and 

maximizing performance rebates. 

What GAO Recommends

To improve controls over premiumclass travel, systematically monitor 

unused airline tickets, and provide 

assurance of accurate and timely

payment of the centrally billed 

accounts to maximize rebates, 

GAO is making 18

recommendations to State, 

including that it

• develop a management plan 

requiring audits of State’s 

premium–class travel, 

• modify international travel

management center contracts

to require identification and 

processing of unused 

electronic tickets, 

• establish procedures to either 

pay or dispute transactions on 

the Citibank invoice, and 

• urge other users of State’s 

centrally billed travel accounts 

to comply with existing travel

requirements. 

State concurred with all 18

recommendations. 

Breakdowns in key internal controls, a weak control environment, and 

ineffective oversight of State’s centrally billed travel accounts resulted in 

taxpayers paying tens of millions of dollars for unauthorized and improper 

premium-class travel and unused airline tickets. State’s over 260 centrally 

billed accounts are used by State and other foreign affairs agencies to 

purchase transportation services, such as airline and train tickets. GAO 

found that between April 2003 and September 2004 State’s centrally billed 

accounts were used to purchase over 32,000 premium-class tickets costing 

almost $140 million. Premium-class travel—primarily business-class airline 

tickets—represented about 19 percent of the tickets issued but about 49 

percent of the $286 million spent on airline tickets with State’s centrally 

billed account travel cards. GAO determined that this trend continued for 

fiscal year 2005. GAO found that 67 percent of this premium-class travel was 

not properly authorized, justified, or both. Because premium-class tickets 

typically cost substantially more than coach tickets, improper premium-class 

travel represents a waste of tax dollars. The examples below illustrate 

premium-class travel by senior State executives that was improperly

authorized by annual blanket authorizations. Most of these blanket 

premium-class travel authorizations were signed by subordinates who told 

us they couldn’t challenge the use of premium-class travel by senior 

executives. 

Examples of Improper Authorization by Subordinates of Executive Premium-Class Travel 

Traveler Grade 

Number of premiumclass ticketsCost of premiumclass-tickets

1 Presidential appointee 45 $213,000

2 Senior Executive Service 26 $104,000 

3 Presidential appointee 24 $93,600

Source: GAO. 

Ineffective oversight and control breakdowns also contributed to problems 

with monitoring unused tickets, reconciling monthly statements, and 

maximizing performance rebates. Although federal agencies are authorized 

to recover payments made to airlines for tickets that they ordered but did 

not use, State failed to do so and paid for about $6 million for airline tickets 

that were not used or processed for refund. State was unaware of this 

problem before our review because it neither monitored travelers’ adherence 

to travel regulations nor systematically identified and processed all unused 

tickets. State also failed to reconcile or dispute over $420,000 of 

unauthorized charges before paying its monthly bank invoice and instead 

deducted the amounts from its bill. Because these amounts were not 

properly disputed under the contract terms, State underpaid its monthly bills 

and was thus frequently delinquent. Handling questionable charges in this 

ad hoc manner sharply reduced State’s eligible rebates. Overall, State 

earned only $700,000 out of a possible $2.8 million in rebates that could have 

been earned if it had properly disputed unauthorized charges and paid the 

bill in accordance with the contract. 

www.gao.gov/cgi-bin/getrpt?GAO-06-298.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gregory Kutz at 

(202) 512-7455 or kutzg@gao.gov. 
Page i GAO-06-298 State Travel Cards

Contents

Letter 1

Results in Brief 3

Background 8

Ineffective Controls over Authorization and Justification of 

Premium-Class Travel Led to Wasted Taxpayer Dollars 11

Lack of Oversight and Controls Led to Other Breakdowns 22

Conclusion 28

Recommendations for Executive Action 28

Agency Comments and Our Evaluation 31

Appendixes

Appendix I: Objectives, Scope, and Methodology 34

Evaluating the Effectiveness of Controls over Premium-Class

Travel 34

Data Reliability Assessment 41

Appendix II: Comments from the Department of State 43

Appendix III: GAO Contacts and Staff Acknowledgments 53

Tables Table 1: Examples of Premium-Class Travel Not Authorized or 

Properly Justified 16

Table 2: Examples of Waste Related to Unused Tickets 26

Table 3: State and Other Foreign Affairs Agencies’ Premium-Class 

Travel Populations Subjected to Sampling 36

Table 4: Premium-Class Statistical Sample Results 38

Figures Figure 1: Flowchart of the Centrally Billed Account Travel Card 

Process 10

Figure 2: Premium-Class Tickets Purchased for State and Other 

Foreign Affairs Personnel Charged to State’s Centrally 

Billed Accounts, April 2003 through September 2004 13

Figure 3: Examples of Premium-Class Travel by State and Other 

Foreign Affairs Executives from Washington, D.C. 19

Figure 4: Flowchart of Control Breakdowns in the Unused Ticket 

Process 24
Page ii GAO-06-298 State Travel Cards

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Page 1 GAO-06-298 State Travel Cards

United States Government Accountability Office

Washington, D.C. 20548

A

March 10, 2006 Letr

The Honorable Susan M. Collins

Chairman

The Honorable Joseph I. Lieberman

Ranking Member

Committee on Homeland Security and

Governmental Affairs

United States Senate

This report responds to your request that we audit controls over the travel 

paid for with the Department of State’s (State) over 260 centrally billed 

travel accounts, which includes travel related to a number of foreign affairs 

agencies (e.g., State and other federal agencies located at United States’ 

diplomatic missions abroad). State’s centrally billed travel process is used 

predominantly by State employees; however, other government travelers 

who also use State’s centrally billed accounts reimburse State for their 

travel expenses. While State uses purchase orders and Government Travel 

Requests (GTR) to pay for some airline tickets at overseas posts, as 

requested, our analysis excluded all travel transactions that were not 

procured through State’s over 260 centrally billed travel accounts.1

State leads our government in conducting American diplomacy; its mission 

is based on the Secretary of State’s role as the President’s principal foreign 

policy adviser. State’s mission is to create a more secure, democratic, and 

prosperous world for the benefit of the American people and the 

international community. This mission is carried out through six regional 

bureaus, each of which is responsible for a specific geographic region of 

the world. State operates more than 260 embassies, consulates, and other 

posts worldwide and has over 57,000 employees -– including Foreign 

Service, civil service, and Foreign Service nationals. Additionally, State’s 

posts support other U.S. government agencies, such as the Departments of 

Commerce, Defense (DOD), and Homeland Security, which also use State’s 

centrally billed accounts when overseas. In general, other agencies 

overseas authorize their own travel and State processes the payments 

based on their authorizations. In carrying out this mission, State manages 

the second largest centrally billed travel card program in the federal 

1

 State issues individually billed travel card accounts (IBA) to its civil service and foreign 

service employees. These accounts are primarily intended to pay for other travel-related 

expenses, such as lodging and rental cars.
Page 2 GAO-06-298 State Travel Cards

government, after DOD. About 70 percent of State’s and other foreign 

affairs agencies’ travel is international or at least one flight segment in a 

trip had an origin or destination outside the continental United States. 

Comparatively, State and other foreign affairs agencies spent more on 

premium-class travel than did DOD, both in terms of total dollars spent and 

as a percentage of total airline travel.2

 In light of the relative size of State’s 

program, and the concerns about fraud, waste, and abuse in government 

travel card programs, you requested that we audit premium-class travel and 

other centrally billed travel account activities. Federal travel regulations 

define premium-class travel as any class of accommodation above coach 

class, that is, first or business class.

The centrally billed travel accounts are used by State bureaus, overseas 

posts, and other foreign affairs agencies to purchase transportation 

services such as airline and train tickets, while the individually billed 

accounts are used by individual travelers for lodging, rental cars, and other 

travel expenses. For fiscal years 2003 and 2004, State incurred over 

$400 million in expenses on its centrally billed and individually billed travel 

accounts, with over $360 million charged to its centrally billed accounts. 

Because State disburses funds directly to Citibank under a 

governmentwide travel card contract for charges made to the centrally 

billed accounts, the use of these accounts for improper3

 transportation, 

especially the use of the more expensive premium-class travel, results in 

direct increased cost to the government. Governmentwide, General 

Services Administration’s (GSA) Federal Travel Regulation, and sections 

of the U.S. Department of State’s Foreign Affairs Handbook (FAH) and the 

U.S. Department of State’s Foreign Affairs Manual (FAM), require that 

travelers use coach-class accommodations for official domestic and 

international air travel, except when a traveler is specifically authorized to 

2

 Recognizing that DOD and State have different missions, DOD’s premium-class travel 

represented 1 percent of total DOD airline transactions and 5 percent of total dollars spent 

on airline travel charged to the centrally billed accounts for fiscal years 2001 and 2002.

3

 For this report, we define improper premium-class transactions as those for which 

travelers did not have specific authorization to use premium-class accommodations or those 

transactions that were properly authorized but did not provide specific justification for 

premium-class travel that was consistent with State regulation or policy. We also considered 

transactions improper if premium-class travel was authorized under State policies or 

procedures that were inconsistent with the Federal Travel Regulation or the guidance 

provided in our Standards for Internal Control in the Federal Government (GAO/AIMD-00-

21.3.1) and our Guide for Evaluating and Testing Controls Over Sensitive Payments 

(GAO/AFMD-8.1.2).
Page 3 GAO-06-298 State Travel Cards

use premium class. The travel regulations also state that travelers on 

official government travel must exercise the same standard of care in 

incurring expenses that a prudent person would exercise when traveling on 

personal business.

As you requested, the objective of our audit was to determine the 

effectiveness of State’s internal controls over its centrally billed travel card 

program and determine whether fraudulent, improper, and abusive travel 

expenses exist. Specifically, we evaluated the effectiveness of internal 

controls over (1) the authorization and justification process for premiumclass tickets charged to State’s centrally billed travel accounts and 

(2) State’s monitoring of unused tickets, reconciling monthly statements, 

and maximizing performance rebates. 

To meet our objectives, we (1) reviewed applicable laws, regulations, and 

practices governing travel, including the use of centrally billed travel 

accounts; (2) interviewed State officials on its travel policy and procedures, 

including the use of centrally billed travel and under what circumstances 

premium-class travel is authorized; (3) extracted premium-class and other 

transactions from Citibank databases of charges made to State’s centrally 

billed accounts for fiscal years 2003 and 2004; (4) tested a statistical sample 

of premium-class transactions, 5) used data mining to identify additional 

instances of improper premium-class travel based on the frequency and 

dollar amount of premium-class travel, including premium-class travel by 

senior executives; (6) compared data on unused tickets provided by 

airlines to data provided by Citibank; and (7) conducted other audit work, 

including visits to two overseas locations to evaluate the design and 

implementation of key control procedures and activities. We performed our 

audit work from September 2004 through November 2005 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. A detailed discussion of our 

scope and methodology is presented in appendix I. 

Results in Brief Breakdowns in key internal controls, a weak control environment, and 

ineffective oversight of State’s centrally billed travel accounts resulted in 

taxpayers paying tens of millions of dollars annually for unauthorized and 
Page 4 GAO-06-298 State Travel Cards

improper premium-class travel and unused airline tickets.4 Additionally, 

State failed to properly reconcile or dispute over $420,000 in unauthorized 

charges, which in addition to raising concerns about potential fraud, 

resulted in State failing to earn over $2 million in rebates intended to 

reduce the cost of government travel. These problems occurred because 

State (1) did not have management controls in place to effectively oversee 

and monitor its centrally billed accounts and the extent of premium-class 

travel and (2) treats premium-class travel accommodations as a benefit for 

working for the department.

We determined that breakdowns in key controls led to an estimated 

67 percent5 of premium-class travel by State and other foreign affairs 

personnel during most of fiscal years 2003 and 2004 not being properly 

authorized or justified. Because a premium-class ticket frequently costs 

two to three times the amount of a coach ticket, taxpayers paid tens of 

millions of dollars for premium-class tickets that were not properly 

authorized or justified. For example, our statistical sample included a 

family of four that flew from Washington, D.C., to Moscow for postassignment travel. The business-class tickets cost $6,712 ($1,678 each) and 

the flight lasted about 12 hours, which does not meet the requirements of 

the premium-class flight duration. The cost of coach-class tickets—the 

form of travel required by travel regulations—would have been $1,784 

($446 each), or $4,928 less than the amount actually spent. Further, State 

did not have complete and accurate data on the extent of premium-class 

travel and performed little or no monitoring of this travel. 

State also made management decisions on premium-class travel that 

contributed to increased costs to taxpayers without performing a costbenefit analysis. For example, we found that some of State’s top 

executives, including some under secretaries and assistant secretaries, 

often used premium-class travel regardless of the length of the flight. We 

found that State spent over $1 million dollars on premium-class flights for 

17 senior executives during most of fiscal years 2003 and 2004. Our analysis 

4

 Our audit did not specifically question whether travel charged to State’s centrally billed 

travel accounts was necessary; however, where State failed to produce evidence supporting 

the authorization or justification for the travel, we accurately refer to those travel instances 

as potentially fraudulent. Without evidence to the contrary, potential for fraud exists.

5

 All percentage estimates from this sample of premium-class transactions have 95 percent 

confidence intervals of within plus or minus 10 percentage points of the estimate itself, 

unless otherwise noted.
Page 5 GAO-06-298 State Travel Cards

indicated that most of these flights were domestic or to destinations in 

Western Europe or South America and did not last more than the 14 hours 

required by federal and state regulations to justify use of premium-class 

travel. Further, many of the executives used blanket travel orders signed by 

subordinates to justify purchasing premium-class travel. A blanket 

authorization is effective for all travel during a certain time period. For 

some executives, annual blanket premium-class authorizations were 

completed at the beginning of the fiscal year and covered any travel during 

that fiscal year. A blanket authorization is not an appropriate vehicle for 

authorizing premium-class travel because federal and state travel 

regulations require that all premium-class travel be authorized on a trip-bytrip basis. Also, we continue to consider authorization of premium-class 

travel by employees subordinate to the traveler to be a weak internal 

control due to both the additional cost and the potential for abuse 

associated with premium-class travel. As we have reported in the past, 

travel authorized by subordinates is in effect self authorization, which 

constitutes a lack of controls over executive premium-class travel.

Senior State officials also told us that the department offered premiumclass travel as a benefit to its other employees for flights lasting over 

14 hours, including permanent change of station travel. According to these 

officials, this decision was made to improve morale and was arrived at 

without performing a cost and benefit analysis. Although federal and State 

regulations allow premium-class travel if the flight is over 14 hours without 

a rest stop, agencies—such as DOD—attempt to avoid the significant 

additional cost associated with these flights by encouraging employees to 

take a rest stop en route to their final destination, generally saving 

thousands of dollars per trip. As a result of State’s policy, we found 

numerous examples in our statistical sample in which State and other 

foreign affairs agencies authorized premium-class travel but did not take 

into consideration less expensive forms of travel as an alternative. 

In addition, we found examples where State’s diplomatic courier service 

used premium-class travel under a blanket authorization without specific 

justification. Because we did not have authority to open and inspect 

diplomatic pouches, we were unable to validate the classification 

designations on the packages. Thus, we did not evaluate whether couriers 

were necessary or appropriate or if there were any security issues 

associated with courier service procedures. However, we believe the 

department could potentially save considerable taxpayer dollars if it better 
Page 6 GAO-06-298 State Travel Cards

managed courier use of premium travel. By regulation,6 State is required to 

ensure the secure movement of classified U.S. government documents and 

material across international borders.7

 State’s regulations call for 

diplomatic couriers to personally accompany classified diplomatic 

pouches. State’s practice is to have couriers use premium-class 

accommodations to personally escort cargo carried in diplomatic pouches. 

Some courier transactions appeared in our statistical sample of premium 

travel and data mining of fiscal years 2003 and 2004 transactions and we 

found instances among these of premium-class travel that were not 

properly authorized, justified, or both. While the courier service used 

agency mission requirements to justify premium-class travel by the 

couriers, we found courier transactions where premium-class 

accommodations were used even when the courier was not escorting 

diplomatic pouches and when no other justification for premium-class 

accommodations were specified. When couriers are not escorting 

diplomatic pouches, they must follow the same travel regulations as all 

other State and other foreign affairs employees. We also found that State’s 

Courier Service has begun to institute cost-saving measures for couriers 

that, if expanded, could save substantial taxpayer dollars. These measures 

include the expanded use of cargo carriers (e.g., FedEx), which do not 

require the couriers to purchase passenger tickets when they accompany 

packages in the cargo area and therefore reduce freight costs. 

Ineffective oversight and breakdowns in controls also led to problems with 

State’s other centrally billed travel activities. For example, although federal 

agencies are entitled to recover payments made to airlines for tickets that 

they ordered but did not use, State and other foreign affairs agencies paid 

for about $6 million in airline tickets that were not used and not processed 

for refund. State officials were unaware of this problem before our audit 

because State did not monitor employees’ adherence to travel regulations 

and did not have a systematic process in place for travel management 

centers to identify and process unused tickets. For example, we found that 

State purchased two identical tickets costing over $16,000 for the same 

business and first-class travel between Addis Ababa, Ethiopia, and 

Albuquerque, New Mexico, and one set of tickets valued at over $8,000 was 

wasted and never used. State also failed to reconcile or dispute over 

6

 U.S. Department of State Foreign Affairs Manual (FAM),Vol. 5 and Vol. 12, 

implementation of the Omnibus Diplomatic Security and Antiterrorism Act of 1986.

7

 This report does not focus on the need for couriers or security issues surrounding their 

use.
Page 7 GAO-06-298 State Travel Cards

$420,000 of unauthorized and potentially fraudulent charges before paying 

its travel card account. Instead of disputing these charges with Citibank, 

State simply deducted the amounts from its credit card bill. However, 

because these amounts were not properly disputed, State underpaid its 

monthly bills and was thus frequently delinquent under contract terms. The 

unanticipated consequence of these delinquencies was a substantial 

reduction in the amount of rebates that State would have been eligible to 

receive. Overall, State earned $700,000 out of a possible $2.8 million in 

rebates that could have been earned if it had properly disputed 

unauthorized charges and paid its bills in accordance with the terms of the 

contract.

This report contains 18 recommendations to the Secretary of State aimed at 

reducing improper premium-class travel and travel costs related to State’s 

centrally billed travel accounts. Our recommendations seek to improve the 

internal controls over airline tickets purchased with centrally billed 

accounts so that State has reasonable assurance that premium-class travel 

is authorized, properly justified, and that because of the additional cost, 

minimized to the extent possible. We also recommend that State take a 

series of immediate steps to identify and recover all unused and 

unrefunded tickets. Further, we recommend that State properly dispute 

invalid transactions and pay its centrally billed account on time. Finally, we 

recommend that State take actions to achieve efficiencies in the courier 

service. 

In written comments on a draft of this report, State concurred with all 18 of 

our recommendations and stated that it had taken actions or will take 

actions to address them. However, in its comments, State said that our 

report overstated the amount wasted on premium class travel, and that we 

incorrectly implied that State carelessly implemented business class 

regulations without adequately considering the increased cost of premium 

class travel. We disagree. Our statistical sample clearly demonstrated that a 

majority of State’s premium class travel was neither authorized nor 

justified. Because premium-class travel is frequently two to three times 

more expensive than coach travel, this improper travel resulted in tens of 

millions of dollars of wasted taxpayer resources. Further, State could not 

provide any evidence that it ever collected or analyzed information about 

the costs associated with its premium-class travel practices. In addition, 

the travel practices exemplified in this report clearly demonstrate that the 

tone set by top State Department executives indicate that it treats 

premium-class as an employee benefit regardless of cost and federal law 

and regulation. 
Page 8 GAO-06-298 State Travel Cards

Background State derives its authority to grant leave and travel reimbursements to its 

foreign service employees from the Foreign Service Act of 1980. To 

implement provisions of the act, the department issued the FAM and the 

FAH. Travel by State’s civil service employees is generally governed by the 

General Services Administration’s (GSA) Federal Travel Regulation (FTR), 

but in some cases is also governed by the FAM. State’s general policy is for 

its foreign and civil service employees to travel using coach-class 

accommodations provided by common carriers. However, regulations 

governing foreign service and civil service travel authorize the use of 

premium-class travel under specific circumstances. Both foreign service 

and civil service travel regulations require the agency head or his or her 

designee to authorize first-class travel in advance. These regulations also 

require the authorizing official at a post abroad or the executive director of 

the funding bureau or office domestically to authorize premium-class travel 

other than first class. Further, in September 2004, the Assistant Secretary of 

State for Administration sent a memorandum to all State executive 

directors emphasizing “that it is wrong to authorize premium-class travel 

on a blanket basis” and “that a separate justification for premium-class 

travel is required for each trip.” Federal and State travel regulations 

authorize premium-class accommodation when at least one of the 

following conditions exists:

• no space is available in coach-class accommodations, 

• regularly scheduled flights provide only premium-class 

accommodations,

• an employee with a disability or special need requires premium-class 

accommodations,

• security issues or exceptional circumstances,

• travel lasts in excess of 14 hours without a rest stop, 

• foreign-carrier coach-class air accommodations are inadequate, 

• overall cost savings, such as when a premium-class ticket is less 

expensive than a coach-class ticket or in consideration of other 

economic factors,
Page 9 GAO-06-298 State Travel Cards

• transportation costs are paid in full through agency acceptance of 

payment from a nonfederal source, or

• required because of agency mission (e.g., courier).

The regulations also allow for the traveler to upgrade to premium-class 

accommodations, at the traveler’s expense or by using frequent traveler 

benefits, but the upgrade cannot be charged to the centrally billed account. 

State has the second largest centrally billed travel card program in the 

federal government. During fiscal years 2003 and 2004, State used 155 

different centrally billed accounts8

-–143 international and 12 domestic-–to 

purchase more than $360 million in transportation services, such as airline 

tickets, train tickets, and bus tickets, for State and other foreign affairs 

agencies. Each bureau has its own travel budget and is responsible for 

obligating its travel expenses. The local travel-authorizing official or the 

executive director of the funding office 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 appropriated funds. 

State’s travel management centers (TMC) make airline reservations, issue 

airline tickets charged to the centrally billed account upon receipt of a 

signed travel order, and perform a reconciliation between the tickets it 

issued and tickets charged on the Citibank invoice. To complete this 

reconciliation process, TMCs are responsible for associating each charge 

with a specific travel order. The financial management officer (FMO) at 

overseas posts and resource management’s Global Financial Operations in 

Charleston, South Carolina, for domestic activity, are generally responsible 

for reviewing a TMC’s monthly reconciliation, making appropriate changes, 

and certifying or authorizing Citibank’s invoice for payment. Upon receipt 

of the TMC’s reconciliation, billed transaction report (BTR), and supporting 

files, State pays Citibank for the tickets purchased on the centrally billed 

account. State also pays travelers for nontransportation costs claimed on 

their individual travel voucher. Figure 1 shows the design of the processes 

used to issue an airline ticket on centrally billed accounts and reimburse 

travelers for travel expenses. It also 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.

8

 Although State had over 260 centrally billed accounts during fiscal years 2003 and 2004, 

State actively used 155 of the accounts during this same period.
Page 10 GAO-06-298 State Travel Cards

Figure 1: Flowchart of the Centrally Billed Account Travel Card Process 

Source: GAO.

Traveler

Traveler makes

reservation and

completes travel

request

Traveler

Traveler completes

travel and claims

reimbursement

Approving

official

Approving Official (A/O)

and financial officer

review travel request

and obligate funds

T.O.T.O.T.O.

State

Department

State receives a Billed

Transaction Report (BTR)

and an unresolved transaction

report that includes charges

requiring dispute

State

Department

State reconciles BTR

against obligations (prevalidates

that an obligation exists) and

uploads the information into

State’s accounting system

State

Department

State pays Citibank for

reconciled CBA charges

and pays traveler’s claim 

for nontransportation

expenses

Travel Management

Center (TMC)

TMC views TO in Travel

Manager (TM) software

or as paper copy, checks

for approval and funding, and

compares TO origin/destination

and dates to itinerary

Travel Management

Center

TMC charges the centrally

billed account (CBA)

and issues airline ticket to

traveler. TMC maintains

a file of TO with

invoice/itinerary

Travel Management

Center

TMC reconciles CBA

invoice to its own record

of tickets issued

Citibank

Citibank processes CBA

charges, pays the airlines,

and sends the CBA invoice

to the TMC and the State

Department

Approving

official

Approving official(s)

review and approve

travel expenses on

voucher, and submit

voucher for payment

Traveler

Traveler obtains

travel order (TO), and

provides copies to Travel

Management Center

(TMC)

T.O.

Traveler, approving

official

Travel Management

Center, banks

State Department
Page 11 GAO-06-298 State Travel Cards

Ineffective Controls 

over Authorization and 

Justification of 

Premium-Class Travel 

Led to Wasted 

Taxpayer Dollars

Premium-class travel accounted for almost half of travel expenditures 

charged to State’s over 260 centrally billed accounts during most of fiscal 

years 2003 and 2004, including domestic and overseas operations, and this 

trend continued for fiscal year 2005. On the basis of our statistical sample, 

we estimate that 67 percent of premium-class travel during April 2003 

through September 2004 for State and other foreign affairs personnel was 

improper--either not properly authorized or properly justified because of 

breakdowns in key internal controls. Examples of breakdowns in key 

controls include travelers flying premium-class travel when the travel 

orders did not authorize premium-class travel; subordinates authorizing 

their supervisors to take premium-class flights; and travel orders 

authorizing premium-class travel using criteria of a total flight time of more 

than 14 hours, even though the actual flight time, including layovers, was 

less than 14 hours. Also, State’s diplomatic couriers used premium-class 

travel even when it was not justified. In addition, we found that State’s top 

executives, including under secretaries and assistant secretaries, often 

used premium-class travel regardless of the length of the flight. Further, 

senior State officials told us that the department offered premium-class 

travel as a benefit to its employees, as part of their human capital initiative, 

for all flights lasting over 14 hours, which is allowed by federal and State 

regulations but is costly to taxpayers. However, State did not perform a 

cost-benefit analysis before offering this benefit. In comparison, agencies—

such as DOD—attempt to avoid the significant additional cost associated 

with premium-class travel on flights lasting more than 14 hours by 

encouraging employees to take a rest stop en route to their final 

destination, saving hundreds, sometimes thousands, of tax dollars per trip. 

Prior to 2002, State policy prohibited the use of premium-class 

accommodations for permanent change of station travel even when the 

duration of the travel exceeded 14 hours—a prohibition established by 

many other agencies with staff stationed overseas. However in 2002, State 

eliminated that prohibition.

Extent of Premium-Class 

Travel Is Significant

Between April 2003 and September 2004,9 State and other foreign affairs 

agencies purchased over 32,000 airline tickets costing about $140 million 

that contained at least one leg of premium-class travel for State and other 

foreign affairs personnel using State’s centrally billed account travel cards. 

9

 State’s credit card vendor, Citibank, could not provide the first 6 months of fiscal year 2003 

(October 2002–March 2003) data due to limitations in its archiving capabilities.
Page 12 GAO-06-298 State Travel Cards

In addition, we determined that premium-class travel continues to be 

significant for fiscal year 2005.10 As discussed later in this report, because 

State does not obtain or maintain any information on premium-class travel, 

it cannot monitor its proper use, identify trends, or determine alternate, 

less expensive means of transportation. As shown in figure 2, premiumclass travel represents about 19 percent of the tickets issued, and State’s 

and other foreign affairs agencies’ spending on premium-class travel 

represented about 49 percent of the $286 million spent on airfare charged 

to the centrally billed accounts during the period April 2003 through 

September 2004.11 Our analysis excluded all travel transactions at overseas 

posts that were not procured through the centrally billed travel accounts 

because it was outside the scope of our request. State told us that at some 

overseas posts travelers purchase airline tickets using Government Travel 

Requests (GTR) and purchase orders. Further, the information State 

provided for some tickets purchased with GTRs did not distinguish 

between premium- and coach-class tickets.

10 For fiscal year 2005, on the basis of our analysis of the information available, we 

determined that over 17 percent of the tickets issued (17,000 out of 95,000 tickets, ) and over 

40 percent of the dollars expended ($80 million out of $196 million) were premium-class 

tickets. 

11 Figure 2 includes travel related to State, other U.S. government agencies principally 

engaged in activities abroad, and other domestic departments and agencies with 

international operations. State uses the other foreign affairs agency funds to pay for travel 

paid for using State’s centrally billed accounts. 
Page 13 GAO-06-298 State Travel Cards

Figure 2: Premium-Class Tickets Purchased for State and Other Foreign Affairs Personnel Charged to State’s Centrally Billed 

Accounts, April 2003 through September 2004

Key Internal Controls over 

Premium Travel Were 

Ineffective

Breakdowns in key internal control activities led to significant numbers of 

transactions lacking proper authorization and justification for premiumclass travel. On the basis of our sample of premium transactions,12 an 

estimated 67 percent of premium-class travel was not properly authorized, 

justified, or both. Specifically, 39 percent of the premium-class airline 

tickets charged to State’s centrally billed account from April 2003 through 

September 2004 were not properly authorized. In addition, 28 percent of 

premium-class transactions that were authorized were not justified in 

accordance with either federal or State regulations. (See app. I for further 

details of our statistical sampling test results.) Further, State did not 

maintain accurate and complete data on the extent of premium-class travel 

and thus had a lack of controls in place to oversee and manage this travel. 

Each fiscal year State is required to report to GSA on first-class travel taken 

by all State and other foreign affairs personnel. However, we found 

23 roundtrip first-class tickets valued at more than $85,000, obtained for 

State or other foreign affairs agencies, that were not reported by State to 

19% -

81% -

49% -

51% -

32,000 tickets

Premium class

133,000 tickets

Other class

$140 million

Premium class

$146 million

Other class

Source: GAO analysis of Citibank data.

Percentage of tickets Percentage of dollars

Premium class

Other class

12Our testing excluded all premium-class transactions costing less than $750 because certain 

intra-European flights only offer business-class tickets and therefore are an acceptable 

means of airline travel; however, both federal and State regulations require the traveler to 

certify this fact on their voucher.
Page 14 GAO-06-298 State Travel Cards

GSA as required in fiscal years 2003 and 2004. Further, we saw no evidence 

of external or internal audits of State’s centrally billed travel program.13

Proper Authorization Did Not 

Exist 

Requiring premium-class travel to be properly authorized is the first step in 

preventing improper premium-class travel. Federal and State regulations 

require premium-class travel to be specifically authorized. State travel 

regulations specify that premium-class travel must be authorized in 

advance of travel, unless extenuating circumstances or emergencies make 

prior authorization impossible, in which case the traveler is required to 

request written approval from the appropriate authority as soon as possible 

after the travel. Using these regulations, we found that transactions failed 

the authorization test in the following two categories: (1) the 

documentation did not specifically authorize premium-class travel or a 

blanket travel authorization was used to authorize premium-class travel 

and (2) the travel order authorizing premium-class travel was not signed. 

Premium-class travel was not specifically authorized. On the basis of 

our statistical sample, we estimated that the travel orders and other 

supporting documentation for 13 percent of the premium-class 

transactions did not specifically authorize the traveler to fly premium class, 

and thus the travel management center should not have issued the 

premium-class ticket. We estimated that an additional 17 percent of the 

transactions were authorized by a blanket authorization, including all 

diplomatic courier travel. A blanket authorization is not an appropriate 

vehicle for authorizing premium-class travel because federal and State 

travel regulations require that all premium-class travel be authorized on a 

trip-by-trip basis. In September 2004, State issued a memorandum to all 

executive directors reminding them about the use of blanket orders, 

emphasizing that it is wrong to authorize business-class travel on a blanket 

basis and also reminding the executive directors that a trip-specific 

justification must be provided for each business-class authorization. 

Travel order was not signed. We estimated that 5 percent of premiumclass transactions did not have signed travel authorizations. Ensuring that 

travel orders are signed, and signed by an appropriate official, is a key 

13 We asked State management if there had been any audits or reviews of the centrally billed 

account program, whether internal or external. State officials told us that they did not see 

the centrally billed account program as risky and therefore did not conduct reviews of the 

program. Further, according to the Assistant Special Agent-In-Charge at State’s Office of 

Inspector General (OIG), there had been no travel card investigations during fiscal years 

2002, 2003, and 2004. 
Page 15 GAO-06-298 State Travel Cards

control for preventing improper premium-class travel. If the travel order is 

not signed, or not signed by the individual designated to do so, State cannot 

guarantee that the substantially higher cost of the premium-class tickets 

was properly reviewed to ensure it represented an efficient use of 

government resources. 

Documentation of Valid 

Justification for Premium-Class 

Travel Often Did Not Exist

Another internal control weakness identified in the statistical sample was 

that the justification used for premium-class travel was not provided, not 

accurate, or not complete enough to warrant the additional cost to the 

government. To determine whether premium-class travel was justified, we 

looked at whether there was documented authorization and, if there was, 

whether the authorization for premium-class travel was supported by a 

valid reason. Thirty-nine percent of premium-class transactions were not 

authorized and, therefore, could not have been justified. State asserts that 

even if business-class authorization for some trips was not properly 

documented, the premium travel was nevertheless justified so long as the 

trips were in excess of 14 hours. However, without properly documented 

authorization, we cannot assess the propriety of such travel 

notwithstanding the 14-hour travel rule and therefore must conclude that it 

was unjustified premium-class travel. In addition, 28 percent of premiumclass transactions were authorized but were not supported by valid 

justification.14 Federal and State travel regulations provide that travel in 

excess of 14 hours, without a rest stop en route or a rest period on arrival is 

justification for premium class. We found premium travel included trips 

with such rest stops for flights lasting under 14 hours. 

Table 1 contains specific examples of both unauthorized and unjustified 

travel from both our statistical sample and data mining work. These 

examples illustrate the improper use of premium-class travel and a 

resulting increase in travel costs. More detailed information about some of 

the cases follows the table.

14 An estimated 51 percent of the transactions would have failed justification regardless of 

the authorization status.
Page 16 GAO-06-298 State Travel Cards

Table 1: Examples of Premium-Class Travel Not Authorized or Properly Justified

Source: GAO analysis of premium-class travel transactions and supporting documentation.

a

Source of estimated coach fares is GSA contract fare or expedia.com.

b

Fares do not include all applicable taxes and airport fees.

• Traveler #1 flew from Washington, D.C., to Honolulu, Hawaii. The total 

cost of the trip was $3,228. In comparison, the unrestricted government 

fare from Washington, D.C., to Honolulu was $790. According to State 

regulation, travelers using premium-class travel are not entitled to an 

overnight rest stop en route. Furthermore, the travel was authorized by 

a blanket premium-travel authorization signed by a subordinate of the 

traveler and a separate trip authorization was not included to 

specifically authorize this trip, as required. The travel authorization did 

not provide specific justification for business-class travel and the travel 

was not more than 14 hours. Therefore, the transaction failed 

authorization and justification.

Traveler Source Itinerary

Class of 

ticket

Cost of 

premium 

ticket paid

Estimated 

cost of 

coach-fare 

ticket a, b Reason for exception

1 Data mining Washington, D.C., to 

Honolulu, Hawaii, 

through Canada

Business $3,228 $790 Travel was authorized by a blanket 

authorization. Traveler signed their 

own upgrade. Continuous travel 

without rest stops was less than 14 

hours. Transaction failed 

authorization and justification.

2 Data mining Johannesburg, South 

Africa, to Asmara, 

Eritrea, through 

Frankfurt, Germany

Business $8,353 $2,921 Traveler approved his own travel. 

Traveler flew premium class and was 

reimbursed for lodging for a rest stop 

en route. Transaction failed 

authorization and justification.

3 Data Mining Johannesburg, South 

Africa, to Asmara, 

Eritrea, through 

Frankfurt, Germany

Business $8,353 $2,921 Traveler flew premium class and was 

reimbursed for lodging at a rest stop 

in Frankfurt. Transaction failed 

justification.

4 Data Mining Washington, D.C., to 

Honolulu, Hawaii, 

through San 

Francisco

First class $4,155 $858 Traveler flew first class to Hawaii 

using a travel order that allowed for 

travel to and within Europe. Travel 

was less than 14 hours. Transaction 

failed authorization and justification. 

5 Statistical 

Sample

Washington, D.C., to 

Moscow, Russia

Business $6,712 $1,784 Family of four flew business class 

from Washington, D.C., to Moscow. 

Trip was less than 14 hours. 

Transaction failed justification for 

premium travel.
Page 17 GAO-06-298 State Travel Cards

• Travelers #2 and #3 traveled from Johannesburg to Asmara through 

Frankfurt, at a cost of about $8,353 each, a total of $16,706. Although 

they traveled business class for the entire trip, they were reimbursed for 

a hotel room during the layover in Frankfurt on the return visit, at a cost 

of about $171 each. According to State regulation, travelers using 

premium-class travel are not entitled to a government-funded15 rest stop 

en route. If the travelers had flown coach for this round trip and taken a 

rest stop en route, the airfare would have cost about $2,921 and State 

could have saved about $11,000 for the two tickets. One of these 

travelers approved the travel authorizations for both himself and the 

other traveler.

• Traveler #4 flew first class from Washington, D.C., to Hawaii on a 

blanket travel order that only authorized travel within Europe. Although 

the travel was less than 14 hours, State provided no justification for first 

class, and State did not report the first-class travel to GSA. We found 

that State issued a first-class airline ticket to Hawaii using a blanket 

travel authorization that authorized premium-class accommodations. 

State issued the ticket to an unauthorized destination–Hawaii–because 

the blanket travel order authorized travel to Europe and State’s travel 

officials did not review the blanket authorization to ensure that the 

travel authorization was current, valid, and the trip was to an authorized 

destination. Because State did not follow its own policies for 

authorization and review of travel, the government paid $4,155 for an 

unauthorized trip. 

Management Decisions to 

Offer Premium Travel as a 

Benefit

State’s management allowed top State and other foreign affairs executives 

to use premium-class travel by approving blanket travel orders, similar to a 

blank check. State also allowed premium-class travel as a benefit–without 

considering less expensive alternatives–to other employees for flights 

lasting over 14 hours and for permanent change of station travel, costing 

taxpayers tens of millions of dollars. Further, State’s practice is for 

diplomatic couriers to use premium-class travel accommodations to escort 

diplomatic pouches. 

15 Although the rest stop was not overnight, the travelers arrived in Frankfurt early in the 

day and obtained lodging at government expense to rest while waiting for an evening flight 

from Frankfurt to Johannesburg.
Page 18 GAO-06-298 State Travel Cards

Executive Premium-Class 

Travelers

State’s top executives, including under secretaries and assistant 

secretaries, often used premium-class travel regardless of the length of the 

flight. Our data mining of frequent premium-class travelers showed that 

many of these travelers were senior foreign affairs executives. On the basis 

of this information, we expanded our data mining to include trips taken by 

selected presidential appointees and SES-level foreign affairs staff to 

determine if their travel was authorized and justified according to federal 

and State regulations. In addition to the federal and State regulations, we 

also applied the criteria set forth in our internal control standards16 and 

sensitive payments guidelines17 in evaluating the proper authorization of 

premium-class travel. For example, State travel regulations and policies do 

not restrict subordinates from authorizing their supervisors’ premium-class 

travel, a practice which our internal control standards consider to be 

flawed. Therefore, a premium-class transaction that was approved by a 

subordinate would fail the control test based on our internal control 

standards. State and other foreign affairs agencies paid over $1 million for 

269 premium-class tickets for flights taken by 17 foreign affairs executives 

during April 2003 through September 2004. We found 65 tickets containing 

business- and first-class segments costing about $300,000 that were under 

14 hours. Most of these flights were to destinations within the United 

States, South America, and Western Europe. Further, over $860,000 in 

premium-class trips taken by executives were obtained using blanket 

authorizations. For each premium-class trip, State regulation requires 

specific authorization to fly premium class. In most cases, the blanket 

travel orders authorized premium-class travel for an entire year and were 

signed by subordinates. State officials told us that because the blanket 

authorization allowed premium class, the executives obtained premiumclass tickets even when the trip was under 14 hours. The subordinate 

authorizers told us they could not challenge an under secretary or an 

assistant secretary. Examples of premium-class trips associated with 

improper accommodation and their additional cost to taxpayers are 

included in figure 3 to illustrate the issues associated with executive 

premium-class travel found through our data mining.

16GAO/AIMD-00-21.3.1.

17GAO/AFMD-8.1.2.
Page 19 GAO-06-298 State Travel Cards

Figure 3: Examples of Premium-Class Travel by State and Other Foreign Affairs 

Executives from Washington, D.C. 

Note: GSA fares exclude applicable taxes and fees. 

Other Premium-Class Travelers State also made a management decision to offer premium-class travel to its 

employees as a benefit, resulting in increased costs to taxpayers. Although 

State officials were aware that offering employees rest stops on longer 

flights was often less expensive than premium-class travel, they offered the 

more expensive premium-class travel to employees for all flights lasting 

over 14 hours, which increased costs. For example, one individual in our 

statistical sample flew premium-class roundtrip from Washington, D.C., to 

Tel Aviv at a cost of over $6,000. Although the trip lasted over 14 hours, as 

an alternative to paying the premium-class rates, State could have flown 

this employee coach and paid the cost of an overnight rest stop in London, 

for a total cost of about $2,300 (about $1,600 for the GSA contract airfare 

and $700 in lodging and per diem expenses). Overall, this option could have 

saved taxpayers over $3,700. State officials explained that they made these 

decisions about premium-class travel to improve morale and retain highly 

qualified foreign-service personnel. State officials also believed that, among 

other factors, their decisions about premium-class travel for trips in excess 

of 14 hours have led to increased morale, as reflected in “The Best Places to 

Work” survey. However, State could not provide any empirical evidence 

Source: GAO.

Destination Amount paid GSA fare Potential savings ( = $1,000)

Zurich, Switzerland $8,275 $780 $7,495

Manchester, England $4,473 $800 $3,673

Monterey, California $3,992 $684 $3,308

Oslo, Norway $4,879 $856 $4,023

Vienna, Austria $5,582 $756 $4,826

Frankfurt, Germany $6,173 $1,000 $5,173

Brussels, Belgium $6,328 $1,150 $5,178

Amsterdam, Netherlands $5,833 $630 $5,203

Geneva, Switzerland $6,267 $966 $5,301

London, England $7,215 $650 $6,565
Page 20 GAO-06-298 State Travel Cards

that showed a direct correlation that offering premium-class travel 

increased its scores on the survey or increased retention of foreign-service 

personnel, and could not provide evidence that travel was a metric in the 

“Best Places to Work” survey. In contrast, agencies, such as DOD, attempt 

to avoid the significant additional cost associated with premium-class 

travel on flights lasting more than 14 hours by encouraging employees to 

take a rest stop en route to their final destination, saving hundreds, 

sometimes thousands, of tax dollars per trip. Finally, our testing showed 

that all State employees, not just those in the foreign service that are 

governed by State regulations, were authorized to use premium-class, 

without constraint, when the trip was over 14 hours.

State also decided to offer premium-class travel to foreign service 

employees for permanent change of station moves for all flights that 

exceeded 14 hours, in accordance with federal and State regulations. 

However, State’s decision resulted in increased costs to taxpayers. 

Permanent change of station and similar moves accounted for about 

$17 million (12 percent) of State’s and other foreign affairs agencies’ 

premium-class travel for April 2003 through September 2004. Prior to 2002, 

State policy prohibited the use of premium-class accommodations for 

permanent change of station travel, even when the duration of the travel 

exceeded 14 hours—a prohibition established by many other agencies with 

staff stationed overseas, including DOD. However, in 2002, State eliminated 

that prohibition at a significant cost to taxpayers. We found numerous 

examples in our statistical sample in which premium-class travel was 

properly authorized, and as such these transactions were among the 33 

percent of transactions that were considered to be properly authorized and 

justified. However, it is important to note that because of State’s decision to 

treat premium-class travel as a benefit, State did not consider having the 

travelers take alternative, less expensive forms of travel. 

Premium-Class Travel by 

Diplomatic Couriers18

We found instances where State’s diplomatic couriers lacked proper 18

authorization, justification, or both when flying premium class; therefore, 

we believe State could potentially save considerable taxpayer dollars if it 

more aggressively managed the travel of its couriers. For example, when 

couriers are not on a mission to escort diplomatic pouches or they are 

escorting only cabin-carried diplomatic pouches, they must follow the 

18 As mentioned, we did not evaluate whether couriers were necessary or appropriate or if 

there were any security issues associated with courier service procedures.
Page 21 GAO-06-298 State Travel Cards

same travel regulations explained earlier as all State and other foreign 

affairs employees.19

We tested diplomatic courier transactions in our statistical sample of 

premium-class transactions and performed data mining of fiscal year 2003 

and 2004 transactions. In total, we tested over 20 diplomatic courier 

premium-class transactions. We found control breakdowns similar to those 

described above with blanket authorization and justification of courier 

premium-class travel. Blanket travel orders were used to authorize 

premium-class courier travel for all courier transactions that we tested but, 

as stated, blanket orders do not specifically authorize premium travel as 

required by State regulations. Although the Courier Service used mission 

security requirements to justify premium-class travel by its couriers, we 

found examples of premium-class travel when couriers were returning 

empty-handed, commonly referred to as “deadheading.” In response to 

these findings, Courier Service officials acknowledged that the use of 

premium class is not justified when couriers return empty-handed unless 

the 14-hour rule applies. Courier Service officials also told us that couriers 

may not know when they will be returning empty-handed until they arrive 

at an airport and are told that the post did not complete the expected 

outgoing pouch. By that time, they may not be able to downgrade their 

return ticket to economy class because a foreign airline is unwilling to do 

so, or time does not permit them to return to the gate to change their ticket. 

However, the Courier Service did not indicate on the documentation that it 

provided to us any attempts to downgrade their tickets in a deadheading or 

any other situation where premium-class travel was not justified. Further, 

the Courier Service Deputy Director told us that because there are still 

some problems in this area, they routinely check courier trip reports to 

identify and address any noncompliance. 

We found that State’s Courier Service has begun to institute cost-saving 

measures that, if expanded, could save taxpayer dollars. These measures 

include the expanded use of cargo carriers (e.g., FedEx), which do not 

require the couriers to purchase passenger tickets and charge lower freight 

costs than the commercial airlines. Our analysis of a FedEx study 

19 By regulation, State is required to ensure the secure movement of classified U.S. 

government documents and material across international borders. The Courier Service 

mission is to provide secure transportation of classified documents and materials for the 

federal government. State’s practice is for its diplomatic couriers to use premium-class 

travel accommodations to personally escort diplomatic pouches containing classified U.S. 

government documents and material across international borders.
Page 22 GAO-06-298 State Travel Cards

performed for the Courier Service showed that substantial air cargo 

savings and benefits could be achieved through direct cargo flights with 

multiple stops along a designated route. Although the Courier Service 

initiated the use of cargo carriers in late 2004, expanding this approach to 

the extent practical could achieve substantial savings. However, to achieve 

the additional savings, the Courier Service would need to overcome foreign 

mission resistance to meeting cargo aircraft outside of business hours. 

According to Courier Service officials, foreign mission personnel have been 

unwilling to meet air cargo shipments that arrive outside normal business 

hours and at cargo airports outside city limits. According to State, Mexico 

City has recently indicated a willingness to support cargo flight arrivals at 

Toluca airport. Courier Service officials also told us that while all agencies 

receiving diplomatic pouches should share responsibility for meeting and 

taking custody of diplomatic pouch shipments, the burden has generally 

fallen on State employees. 

Lack of Oversight and 

Controls Led to Other 

Breakdowns

Ineffective oversight and breakdowns in controls also led to problems with 

State’s other centrally billed travel activities. For example, although federal 

agencies are entitled to recover payments made to airlines for tickets that 

they ordered but did not use, State and other foreign affairs agencies paid 

for about $6 million in airline tickets that were not used and not processed 

for refund. We found paper and electronic unused tickets for both domestic 

and international flights. State was unaware of this problem before our 

audit because it did not monitor employees’ adherence to travel regulations 

and did not have a systematic process in place for TMCs to identify and 

process unused tickets. State also failed to reconcile or dispute over 

$420,000 of unauthorized and potentially fraudulent charges before paying 

its account. Instead of disputing these charges with Citibank, State simply 

deducted the amounts from its credit card bill. This action had the 

unanticipated consequence of substantially reducing the amount of rebates 

that State would have been eligible to receive. Thus, State earned only 

$700,000 out of a possible $2.8 million in rebates that could have been 

earned if State disputed unauthorized charges and paid the bill in 

accordance with the terms of the contract with Citibank. 

Ineffective Controls and 

Monitoring Led to 

Numerous Unused Tickets

We asked for data on unused tickets purchased on State’s centrally billed 

accounts from the top six domestic airlines—United, Continental, 

American, Delta, Northwest, and U.S. Airways. All airlines except U.S. 

Airways directly provided us electronic data on unused tickets. Data 
Page 23 GAO-06-298 State Travel Cards

provided by the five airlines and verified against Citibank’s data showed 

that over 2,700 airline tickets with a face value of about $6 million 

purchased with State’s centrally billed accounts were unused and not 

refunded. The airline tickets State purchased, for State and other foreign 

affairs personnel, through the centrally billed accounts are generally 

acquired under the terms of the air transportation services contract that 

GSA negotiates with U.S. airlines. Airline tickets purchased under this 

contract have no advance purchase requirements, have no minimum or 

maximum stay requirements, are fully refundable, and do not incur 

penalties for changes or cancellations. Under this contract, federal 

agencies are entitled to recover payments made to airlines for tickets that 

agencies acquired but did not use.20 While generally there is a 6-year 

statute of limitation on the government’s ability to file an action for 

financial damages based on a contractual right,21 the government also has 

up to 10 years to offset future payments for amounts it is owed.22

State Did Not Monitor Employee 

Adherence to Travel Regulations

During fiscal years 2003 and 2004, State did not implement controls to 

monitor State’s and other foreign affairs employees’ adherence to travel 

regulations requiring notification of TMC or the appropriate State officials 

about unused tickets. Federal and State travel regulations require a traveler 

who purchased a ticket using the centrally billed account either to return 

any unused tickets purchased to the travel management center that 

furnished the airline ticket or to turn in unused tickets immediately upon 

arrival at their post to the administrative officer or, upon arrival in 

Washington, D.C., to the executive officer of the appropriate managing 

bureau or office. This notification of an unused ticket initiates a process to 

submit requests to the airlines for refunds. 

Figure 4 illustrates where control breakdowns can occur if travelers do not 

adhere to State requirements. As shown, once a ticket is charged to the 

centrally billed account and given to the traveler, State has no systematic 

controls to determine independently if the ticket was used—or remains 

unused—unless notified by the traveler. If the traveler does not report an 

unused ticket, the ticket would not be refunded unless TMC monitored the 

status of airline tickets issued electronically and applied for the refunds. 

20 31 U.S.C. § 3726(h).

21 28 U.S.C. § 2415(a).

22 31 U.S.C. § 3716(e).
Page 24 GAO-06-298 State Travel Cards

Figure 4 shows that the failure of the traveler to notify the appropriate 

official of an unused paper ticket would result in the ticket being unused 

and not refunded. Although bank data indicate that State received some 

credits for airline tickets purchased, State did not maintain data in such a 

manner as to allow it to identify the extent of unused tickets and to 

determine whether credits were received. 

Figure 4: Flowchart of Control Breakdowns in the Unused Ticket Process 

State Did Not Have a Process for 

Travel Management Centers to 

Identify All Unused Tickets

State did not have a systematic process in place to monitor whether TMCs 

were consistently identifying and filing for refunds on unused tickets. For 

instance, State contractually required the domestic TMC to identify and 

process all unused electronic tickets. In exchange, the TMC received a fee 

for each refund received for an unused ticket. However, State did not 

Source: GAO.

Travel Management Center issues

tickets and charges

State Department’s centrally

billed accounts

Ticket is

used or

refunded

Was

ticket fully

used?

Did traveler

notify Travel

Management

Center?

Are unused

tickets

identified?

Is the

ticket

electronic?

Does Travel

Management

Center monitor

unused tickets?

Did Travel

Management

Center request

credit for

unused tickets?

Wasted resources, unused tickets not refunded

Yes

Yes No

Yes

Yes Yes

Yes

No

No

No No No
Page 25 GAO-06-298 State Travel Cards

implement procedures to determine whether unused tickets were being 

identified and credits were being received. Instead, State officials took the 

TMC’s monthly report indicating only the total dollar amount of refunds 

submitted to the airlines as evidence of contractual compliance. Unless 

State implements control procedures to verify whether TMCs were 

identifying and filing for refunds on the unused tickets consistently, State 

cannot provide reasonable assurance that all requests for refunds resulted 

in a credit to the government. 

Even when a TMC had procedures in place to identify and process unused 

electronic tickets, State was still unable to identify unused paper tickets. 

For example, by fiscal years 2003 and 2004, State’s domestic TMC and 

TMCs at both of the overseas locations we visited had the capability to 

identify or search the databases of the airlines that participate in electronic 

ticketing or to receive notification from the airlines of unused tickets, and 

subsequently obtain refunds. However, even though the TMCs can identify 

electronic tickets, they cannot independently identify paper tickets, which 

are typically used for international travel.23 State has not implemented a 

systematic process to verify whether a significant portion of airline tickets 

are unused, such as matching tickets issued by TMC with travel vouchers 

submitted by travelers upon completion of their trip. Without such a 

process State will not have reasonable assurance that tickets purchased 

through the centrally billed accounts are used or refunded.

In addition to the $6 million dollars of unused tickets or trip segments we 

identified using the airline data, we estimated that, based on the statistical 

sample, 3 percent of premium-class airline tickets were unused and not 

refunded. This 3 percent estimate is for premium-class tickets only and 

excludes coach accommodations.

Table 2 contains specific examples of tickets that the airlines identified as 

unused that we tested as a part of our statistical sample of premium class 

transactions and data mining selections. Since these tickets were not used, 

they resulted in waste and increased costs to taxpayers. 

23 We found that about 70 percent of State’s foreign affairs travel is international or includes 

at least one flight segment with an origin or destination outside the continental United 

States. 
Page 26 GAO-06-298 State Travel Cards

Table 2: Examples of Waste Related to Unused Tickets

Source: GAO analysis.

State Did Not Dispute 

Unauthorized Transactions 

and Lost Performance 

Rebates

State did not dispute over 320 unauthorized transactions, totaling over 

$420,000, associated with its two primary domestic centrally billed 

accounts during fiscal year 2003 and fiscal year 2004. TMCs reconcile 

transactions on the monthly credit card invoice to the tickets issued by the 

TMC and recorded in the airline reservation system. Disputes are typically 

filed for transactions that neither the TMC nor State identified as having 

issued or authorized. Tickets that do not match could occur for many 

reasons, such as an airline charging the ticket to the wrong credit card 

account, an individual fraudulently obtaining an airline ticket, or the 

merchant or credit card vendor failing to provide enough information to 

allow the transaction to match. State did not have processes or procedures 

in place to file disputes for transactions that failed to reconcile between the 

bank invoice and the computer reservation system. We provided State a list 

of 219 travelers’ names24 associated with the over 320 unauthorized 

transactions to verify that they were State employees or otherwise 

authorized by State or other foreign affairs agencies to travel. According to 

State, 38 of the 219 travelers were individuals for whom State had no 

record of ever working for State as an employee, contractor, or being 

authorized to travel as an invited guest. Thus, these transactions could be 

potentially fraudulent charges. As for the remaining 181 travelers, State 

informed us that while the airline tickets purchased were for individuals 

who are either current or former State employees, contractors, or invited 

Traveler Source Itinerary

Class of 

ticket(s) Price paid Explanation for unused tickets

1 Statistical 

sample 

Albuquerque, NM, to 

Ethiopia and return

First and 

business 

$8,838 Traveler completed travel using a second ticket 

issued for the same trip.

2 Statistical 

sample

Washington, DC, to 

Nigeria

Business $5,503 Traveler went to Senegal instead of Nigeria using a 

different ticket.

3 Statistical 

sample

Buenos Aires, 

Argentina, to Lima, 

Peru

Business $1,327 Traveler used an identical coach-class ticket.

4 Data mining Miami, FL, to Mexico Business $2,254 Traveler went to Chile instead of Mexico using a 

different ticket.

24 We are investigating these transactions to determine if they are fraudulent.
Page 27 GAO-06-298 State Travel Cards

guests, State has no evidence that the trips had been authorized. Thus, 

these trips also could represent potentially fraudulent charges. 

As a result of not disputing unauthorized charges and not paying its bill in 

accordance with the contract, State faced the unanticipated consequence 

of substantially reducing the amount of rebates that it would have been 

eligible to receive. For example, if State had effectively managed the 

domestic accounts and disputed these charges, State could have earned 

over $1 million in rebates. Instead, State earned only about $174,000 in 

performance rebates for its domestic accounts. In contrast, at two overseas 

posts that we visited, State was properly disputing transactions. However, 

as previously noted, State still did not effectively manage its centrally billed 

accounts departmentwide and, consequently, earned only $700,000 out of a 

possible $2.8 million in performance rebates from Citibank. 

The contract that State entered into with Citibank to issue centrally billed 

account travel cards enables State to earn performance rebates based on 

how quickly State pays the monthly bill. To earn the performance rebate, 

State must pay the bill within 30 calendar days from the statement date. 

State earns the maximum performance rebate if it pays the centrally billed 

account—less any disputed charges—on the statement date; for unpaid 

bills, the amount of the rebate decreases each day thereafter. If State pays 

the centrally billed account more than 30 days after the statement date, 

State does not earn a performance rebate. 

Throughout the audit period, State generally submitted payment for its 

domestic centrally billed accounts within the 30 day window; however, 

State frequently failed to pay the entire amount of the bill, leaving 

potentially unauthorized charges unpaid, but not properly disputed. During 

fiscal years 2003 and 2004, State did not dispute any of the previously 

mentioned over 320 unauthorized charges applied to its domestic centrally 

billed accounts, and instead simply deducted the amounts due from its 

credit card bill. If State had disputed these charges, Citibank would have 

given State a 60-day grace period to investigate whether the charges were 

appropriate and the disputed amounts would not have to be paid until the 

investigation was completed. An average person cannot simply determine 

which charges on their credit card bill they are going to pay but must notify 

the bank of any unauthorized charges. Since State did not dispute the 

charges, it was still liable for the amounts associated with these charges 

and simply deducting them from the credit card bill did not relieve State of 

its responsibility for these charges. Consequently, State was not only 

paying for potentially fraudulent charges, but it also lost the performance 
Page 28 GAO-06-298 State Travel Cards

rebates it could have earned by promptly paying its monthly centrally billed 

account bill. 

Conclusion The State department serves a critical role for the federal government and 

in that role State and other foreign affairs employees are required to travel 

extensively, often internationally. However, travel regulations state that 

employees on official government travel must follow published 

requirements and exercise the same standard of care in incurring expenses 

that a prudent person would exercise when traveling on personal business. 

Our work shows that travelers using State’s over 260 centrally billed travel 

accounts often do not meet that standard, which has resulted in millions of 

dollars of unnecessary costs to taxpayers. With the serious fiscal 

challenges facing the federal government, agencies need to do everything 

they can to operate as efficiently as possible. Improved management and 

oversight of the State department’s centrally billed travel program would 

save taxpayers tens of millions of dollars annually. 

Recommendations for 

Executive Action

We are making the following 18 recommendations to improve internal 

control over the authorization and justification of premium-class travel and 

to strengthen the control environment as part of an overall effort to reduce 

improper premium-class travel and unnecessary or inappropriate State 

costs. Because of the substantial cost and sensitive nature of premiumclass travel, we recommend that the Secretary of State direct the 

appropriate officials to implement specific internal control activities over 

the use of premium travel and establish policies and procedures to 

incorporate federal and State regulations as well as guidance specified in 

our Standards for Internal Control and our Guide for Evaluating and 

Testing Controls Over Sensitive Payments. While a wide range of activities 

can contribute to a system that provides reasonable assurance that 

premium-class travel is authorized and justified, at a minimum, the internal 

control activities should include the following:

• Develop procedures to identify the extent of premium-class travel, 

including all business-class travel, and monitor for trends and potential 

misuse. 

• Develop procedures to identify all first-class fares so that State can 

prepare and submit complete and accurate first-class travel reports to 

GSA. 
Page 29 GAO-06-298 State Travel Cards

• Require State to develop a management plan requiring that audits of 

State’s issuance of premium-class travel are conducted regularly, and 

the results of these audits are reported to senior management. Audits of 

premium-class travel should include reviews of whether travel 

management centers adhere to all governmentwide and State 

regulations for issuing premium-class travel.

• Periodically provide notices to travelers and supervisors/managers that 

specifically identify the limitations on premium-class travel, the limited 

situations in which premium-class travel may be authorized, and how 

the additional cost of premium-class travel can be avoided.

• Require that premium-class travel be approved by individuals who are at 

least of the same grade as the travelers and specifically prohibit the 

travelers themselves or their subordinates from approving requests for 

premium-class travel.

• Prohibit the use of blanket authorization for premium-class travel, 

including management decisions offering premium-class travel as a 

benefit to executives and other employees.

• Encourage State department personnel traveling as a result of a 

permanent change of station to take a rest stop en route to their final 

destination to avoid the significant additional cost associated with 

premium-class flights and thus save the taxpayer thousands of dollars 

per trip. 

• Urge other users of State’s centrally billed travel accounts to take 

parallel steps to comply with existing travel requirements.

To promote the economy and efficiency of Courier Service operations, we 

recommend that the Secretary of State direct the Courier Service to take 

the following actions:

• Expand the use of cargo carriers, such as FedEx, to the extent 

practicable.

• Direct foreign missions to assure that organizations using diplomatic 

courier services share responsibility for meeting and accepting air cargo 

shipments of diplomatic pouches.
Page 30 GAO-06-298 State Travel Cards

• Clarify written policy to clearly state that diplomatic couriers must use 

economy class accommodations when in a “dead-head” capacity unless 

relevant exceptions (e.g., 14-hour rule) exist, and enforce the 

requirement.

To recover outstanding claims on unused tickets, we recommend that the 

Secretary of State initiate the following actions: 

• Immediately submit claims to the airlines to recover the $6 million in 

fully and partially unused tickets identified by the airlines and discussed 

in this report.

• Work with the five airlines identified in this report and other airlines 

from which State purchased tickets with centrally billed accounts to 

determine the feasibility of recovering other fully and partially unused 

tickets, the value of the unused portions of those tickets, and initiate 

actions to obtain refunds.

To enable State to systematically identify future unused airline tickets 

purchased through the centrally billed accounts, and improve internal 

controls over the processing of unused airline tickets for refunds, we 

recommend that the Secretary of State direct the appropriate personnel 

within services and agencies to take the following actions:

• Evaluate the feasibility of implementing procedures to reconcile airline 

tickets acquired using the centrally billed accounts to travel vouchers in 

the current travel system.

• Enforce employees’ adherence to existing travel regulations requiring 

notification of unused tickets.

• Modify existing travel management center contracts to include a 

requirement that the international travel management centers establish 

a capability to systematically identify unused electronic tickets in their 

computer reservation systems and file for refunds on the tickets 

identified as unused.

• Routinely compare unused tickets processed by the travel management 

centers to the credits on the Citibank invoice.

To provide assurance of accurate and timely payments of the centrally 

billed accounts and to maximize rebates, we recommend that the Secretary 
Page 31 GAO-06-298 State Travel Cards

of State establish procedures to ensure that all transactions on the Citibank 

invoice are either paid in accordance with the contract or properly 

disputed.

Agency Comments and 

Our Evaluation

In written comments on a draft of this report, State concurred with all 18 of 

our recommendations and said that it is firmly committed to aggressive 

stewardship of the taxpayers’ resources entrusted to the department. 

However, State also commented that our report overstates the problem, 

fails to identify improper travel conducted for other than official 

government travel, identifies only a few instances of unjustified travel, and 

implies incorrectly that State carelessly implemented business-class 

regulations without regard to the increased cost. We disagree.

We do not agree with State’s position that we overstate the nature and 

extent of its control breakdowns and ineffective oversight. State and other 

foreign affairs travelers charged almost $140 million on premium-class 

travel from April 2003 through September 2004. On the basis of our 

statistical sample, 67 percent of premium-class travel was not properly 

authorized, justified, or both. This failure rate and the associated dollars 

spent on premium class travel shows that taxpayers lost tens of millions of 

dollars on improper travel. For example, State issued premium-class 

tickets to a family of four traveling from Washington to Moscow for a 

permanent change of duty station. Although this trip was well under the 

required 14 hours to justify premium-class travel, State purchased the 

premium class accommodations for almost four times the cost of coach 

seats. In addition to the waste exemplified here and elsewhere in our 

report, taxpayers lost millions more because State failed to recover 

payments made to airlines for tickets issued but never used and failed to 

reconcile and dispute other charges properly. For example, State paid for a 

premium-class ticket for roundtrip travel between New Mexico and 

Ethiopia that was neither used nor refunded. These specific examples and 

our overall analysis clearly show how ineffective oversight—not just 

procedural problems—resulted in substantial waste of taxpayers’ dollars. 

As our report clearly explains, we did not specifically question whether 

travel charged to State’s centrally billed travel accounts were necessary. 

Therefore, we purposely did not identify improper travel conducted for 

other than official government travel and thus our report makes no 

conclusions on this matter. 
Page 32 GAO-06-298 State Travel Cards

State’s position that our findings of improper travel are simply the result of 

“procedural problems” and that “only a few instances” of travel were 

conducted outside of the regulations are inconsistent with the facts. In this 

regard, over half of the transactions we tested—not just a few instances—

were not simply the result of procedural problems (e.g., not properly 

authorized), they were unjustified because the travel was conducted 

outside of the regulations. Over half of the travelers improperly flew 

premium-class on trips lasting shorter than 14 hours or flew business class 

and also took a rest stop, which is to be used in lieu of using premium-class 

accommodations to economize travel. For example, one State traveler flew 

premium-class between points in Europe on a trip lasting well short of 

14 hours and also took an unjustified rest stop, which further added lodging 

and subsistence expenses to the total cost of travel. Another traveler flying 

short of 14 hours on a premium-class ticket enjoyed 3 nights of rest upon 

her return. These and other examples of unjustified travel underscore 

problems beyond what State says are simply “deficient procedural 

protocols” and demonstrate how State’s ineffective oversight of premiumclass travel resulted in substantial losses to taxpayers.

Finally, State takes exception with our characterization that it treated 

premium-class travel as an employee benefit. This position, however, is in 

stark contrast to the representations State made throughout our review. 

For example, although State prohibits blanket authorizations for premiumclass travel, many of State’s top executives consistently flew on blanket 

travel orders improperly authorizing premium class from Washington to 

numerous domestic and other destinations that were well below the 14 

hours required to justify such travel. For example, one senior State 

executive completed 45 premium-class trips costing $213,000, many of 

which were under 14 hours, using a blanket travel order. These executive 

travelers set a tone at the top that premium-class travel was in fact a benefit 

to the traveler and not something that should be minimized or used 

sparingly. In addition, during our review, State said that it indeed offered 

premium-class travel as a benefit to its employees and that such travel 

contributed to their improved employee feedback provided to “The Best 

Places to Work” survey. However, State could not provide evidence that 

travel was a metric in that survey. Moreover, regardless of the increased 

cost associated with such moves, State began in 2002 and continues today 

to offer premium-class travel for permanent change of station moves as a 

benefit to its employees and their families. We believe these examples, 

especially the top State executives who gave themselves the benefit of 

flying premium class when federal law and regulations did not allow such 

travel, demonstrate that the tone at the top of the department indicates that 
Page 33 GAO-06-298 State Travel Cards

premium-class travel is in fact a benefit, without specific regard to cost. 

State’s comments are reprinted in appendix II. 

As agreed with your offices, unless you announce the contents of this 

report earlier, we will not distribute it until 30 days from its date. At that 

time, we will send copies to interested congressional committees; the 

Secretary of State, the Director and Deputy Director of the Diplomatic 

Courier Service, and the Director of the Office of Management and Budget. 

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 

http://www.gao.gov.

Please contact me at (202) 512-7455 or kutzg@gao.gov if you or your staffs 

have any questions concerning this report. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Key contributors are listed in appendix III.

Gregory D. Kutz

Managing Director

Forensic Audits and Special Investigations
Page 34 GAO-06-298 State Travel Cards

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

This report responds to your request that we audit and investigate internal 

controls over State’s centrally billed travel accounts, which include travel 

related to the Department of State, other U.S. government agencies 

principally engaged in activities abroad, and other domestic departments 

and agencies with international operations. The objectives of our audit 

were to determine the effectiveness of the Department of State’s internal 

controls over its centrally billed travel card program and determine 

whether fraudulent, improper, and abusive travel expenses exist. 

Specifically we evaluated the effectiveness of State’s internal controls over 

(1) the authorization and justification of premium-class tickets charged to 

State’s centrally billed travel accounts and (2) monitoring unused tickets, 

reconciling monthly statements, and maximizing performance rebates. 

To assess the effectiveness of internal controls over State’s use of the 

centrally billed accounts, we obtained an understanding of the travel 

process, including premium-class travel authorization, unused ticket 

identification, and overall travel card management and oversight, by 

interviewing State officials from Resource Management, Travel and 

Transportation Management Division; Diplomatic Security, Overseas 

Building Operations; Educational and Cultural Affairs; U.S. Consulate, 

Frankfurt, Germany and U.S. Embassy, Pretoria. We also interviewed key 

officials from the American Express, Carlson Wagonlit, and Concorde 

travel management centers. We reviewed General Services 

Administration’s (GSA) Federal Travel Regulations (FTR) and State’s 

Foreign Affairs Manual (FAM) and Foreign Affairs Handbook (FAH). We 

reviewed State’s internal department notices and other travel-related 

guidance. Finally, we conducted “walk-throughs” of the domestic and 

overseas travel processes. 

Evaluating the 

Effectiveness of 

Controls over 

Premium-Class Travel

We audited controls over the authorization and issuance of premium-class 

travel during fiscal years 2003 and 2004. State’s credit card vendor, 

Citibank, could not provide the first 6 months of fiscal year 2003 

(October 2002–March 2003) level III data due to limitations in its archiving 

capabilities. The level III data indicate whether a transaction is premium or 

coach. Therefore, we used 18 months of data from April 2003 through 

September 2004 to select a probability sample of premium-class 

transactions and also used this same time period for our data mining and 

analysis of premium-class transactions. Our assessment covered the 

following:
Appendix I

Objectives, Scope, and Methodology

Page 35 GAO-06-298 State Travel Cards

• The extent to which State used the centrally billed accounts to obtain 

premium-class travel was determined.

• Testing a statistical sample of premium-class transactions to assess the 

implementation of key management controls and processes for 

authorizing and issuing premium-class travel, including approval by an 

authorized official and justification in accordance with regulations. We 

also used data mining to identify other selected transactions throughout 

the premium-class travel transactions to determine if indications of 

improper transactions existed. 

• State’s management policy towards the use of premium-class travel was 

determined. 

Magnitude of PremiumClass Travel

To assess the magnitude of premium-class travel by State and other foreign 

affairs agencies, we obtained from Citibank a database of fiscal years 2003, 

2004, and 2005 travel transactions charged to State’s centrally billed and 

individually billed travel card accounts. The databases contained 

transaction-specific information, including ticket fares, codes used to price 

the tickets—fare basis codes—ticket numbers, names of passengers, and 

numbers of segments in each ticket. We reconciled these data files to 

control totals provided by Citibank and to data reported by GSA on State’s 

centrally billed account activities. We queried the database of positive debit 

transactions (charges) for fare codes that corresponded to the issuance of 

first- and business-class travel, identifying all airline transactions that 

contained at least one leg in which State and other foreign affairs agencies 

paid for premium-class travel accommodations. 

We further limited the first- and business-class transactions to those 

costing more than $750 because many premium-class tickets on intraEuropean flights cost less than $750 and the corresponding coach-class 

tickets were not appreciably less. By eliminating from our population firstand business-class transactions costing less than $750, we avoided the 

possibility of identifying a large number of transactions in which the 

difference in cost was not significant enough to raise concerns of the 

effectiveness of the internal controls. The total number of transactions 

excluded was 1,067, costing approximately $532,000. While we excluded 

premium-class transactions costing less than $750, we (1) did not exclude 

all intra-European flights and (2) potentially excluded unauthorized 

premium-class flights. Limitations of the database prevented a more 
Appendix I

Objectives, Scope, and Methodology

Page 36 GAO-06-298 State Travel Cards

precise methodology of excluding lower-cost first- and business-class 

tickets.

Statistical Sampling and 

Data Mining

Table 3 summarizes the population1 of State and other foreign affairs 

agencies’ airline travel transactions containing at least one premium-class 

leg charged to State’s centrally billed accounts from April 2003 through 

September 2004 and the subpopulation subjected to testing. 

Table 3: State and Other Foreign Affairs Agencies’ Premium-Class Travel Populations Subjected to Sampling 

Source: GAO analysis of Citibank data.

To assess the implementation of key controls over the authorization and 

issuance of premium-class travel, we tested a probability sample of 

premium-class transactions. In general, the population from which we 

selected our transactions for testing was the set of positive debit 

transactions totaling $750 or more for both first- and business-class travel 

that were charged to State’s centrally billed accounts during April 2003 

through September 2004. Because our objective was to test controls over 

travel card expenses, we excluded credits and miscellaneous debits (such 

as fees) that would not have been for ticket purchases from the populations 

tested.

We further limited the population of first- and business-class transactions 

to those without a matching credit. By eliminating transactions with 

matching credits, we avoided selecting a large number of transactions in 

which the potential additional cost of the premium-class ticket was 

mitigated by a credit refund so as not to raise concerns about the 

effectiveness of the internal controls. The total number of transactions 

1

 The total population subject to sampling does not include about 1,650 transactions totaling 

$6.9 million that we identified in data provided by Citibank subsequent to sampling.

Dollars in thousands

Total population of 

premium-class transactions

Excluded transactions 

(premium class costing less 

than $750)

Population subject to sampling 

(premium class costing at least 

$750) Transactions tested

Transactions Dollars Transactions Dollars Transactions Dollars Transactions Dollars

30,268 $133,000 2,799 $11, 700 27,469 $121,300 107 $467
Appendix I

Objectives, Scope, and Methodology

Page 37 GAO-06-298 State Travel Cards

excluded was 2,799, totaling approximately $11.7 million. While we 

excluded premium-class transactions with a matching credit, we did not 

exclude all transactions with a matching credit because sometimes the data 

did not always identify the fare basis codes to allow us to determine if the 

travel was premium or coach. 

To test the implementation of key control activities over the issuance of 

premium-class travel transactions, we selected a probability sample of 

transactions. Specifically, we selected 107 premium-class transactions 

totaling about $467,000. For each transaction sampled, we requested that 

State provide us the travel order, travel voucher, travel itinerary, and other 

related supporting documentation. We used that information to test 

whether documentation existed that demonstrated that State had adhered 

to key internal controls over authorizing and justifying premium-class 

tickets. On the basis of the information State provided, we determined 

whether a valid official approved the premium-class travel and whether the 

premium-class travel was justified in accordance with State regulations. We 

also applied criteria set forth in our internal control standards and sensitive 

payments guidelines in evaluating the proper authorization of premiumclass travel. For example, while State travel regulations and policies do not 

address subordinates authorizing their supervisors’ premium-class travel, 

our internal control standards consider such a policy to be flawed; 

therefore, a premium-class transaction that was approved by a subordinate 

would fail the control test. The results of the samples of these control 

attributes can be projected to the population of transactions at State and 

other foreign affairs agencies as a whole, but not to individual bureaus or 

posts.

With our probability sample, each transaction in the population had a 

nonzero probability of being included, and that probability could be 

computed for any transaction. Each sample element was subsequently 

weighted in the analysis to account statistically for all the transactions in 

the population, including those that were not selected. Because we 

followed a probability procedure based on random selections, our sample 

is only one of a large number of samples that we might have drawn. Since 

each sample could have provided different estimates, we express our 

confidence in the precision of our particular sample’s estimates as 95-

percent confidence intervals (e.g., plus or minus 10 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 
Appendix I

Objectives, Scope, and Methodology

Page 38 GAO-06-298 State Travel Cards

sample of premium-class air travel have sampling errors (confidence 

interval widths) of plus or minus 10 percentage points or less. Table 4 

summarizes the premium-class statistical sample results.

Table 4: Premium-Class Statistical Sample Results

Source: GAO analysis of Citibank data.

Note: Each test is dependent on the result of the prior test(s). For example, if no travel order was 

provided the transaction failed and no other tests were conducted to determine whether the travel 

order was signed. The justification test was dependent on the outcome of the authorization test(s). 

Therefore, since 42 of 107 transactions (39 percent) failed the authorization test, we tested 65 total 

transactions specifically to determine whether there was justification for premium-class travel.

In addition to our statistical sample, we selected other transactions 

identified by our data mining efforts for review. Our data mining identified 

individuals who frequently flew using first- or business-class 

accommodations. For data mining transactions, we also requested that 

State provide us the travel order, travel voucher, travel itinerary, and any 

other supporting documentation that could provide evidence that the 

premium-class travel was properly authorized and justified in accordance 

with State policies. If the documentation provided indicated that the 

transactions were proper and valid, we did not pursue the matter further. 

However, if the documentation was not provided, or if it indicated further 

issues related to the transactions, we obtained and reviewed additional 

documentation about these transactions.

High-Level Officials Our initial data mining efforts identified executives that frequently flew 

first and business class. On the basis of our findings, we expanded our 

selection of high-level officials to include most of State’s top executives, 

Authorization

Controls

Justification

Control

Travel order 

provided?

Travel order 

signed?

Premium travel 

specifically 

authorized?

Premium travel not 

authorized by 

blanket travel 

order?

Trip more than 14 hours 

without a rest stop?

Estimated percentage 

of transactions with 

this particular failure

Failed 4

Passed Failed 5

Passed Passed Failed 13

Passed Passed Passed Failed 17

Passed Passed Passed Passed Failed 28
Appendix I

Objectives, Scope, and Methodology

Page 39 GAO-06-298 State Travel Cards

including presidential appointees and senior executives. We evaluated 

these transactions in the same manner as described above.

Diplomatic Couriers Based on the statistical sample of premium class transactions, we estimate 

that 6 percent of the transactions in the sample population represent travel 

by diplomatic couriers. We also identified courier transactions by data 

mining for travelers that frequently flew first and business class. We found 

six courier transactions in our statistical sample and an additional 16 

transactions identified during data mining for proper authorization and 

justification. We reviewed pertinent laws, federal regulations, and State 

department policies and procedures and interviewed current and former 

Diplomatic Courier Service staff. We also conducted an on-site inspection 

of classified pouch procedures at the Logistics Operations Center and 

observed the FedEx process for inventory, pouching, and packaging of 

classified materials for shipment to London, Paris, and Frankfurt. We did 

not have authorization to open, inspect, and verify that classified pouches 

contained only classified materials. Also, we did not observe and assess 

courier procedures at foreign airports related to accessing the tarmac to 

take custody of outgoing and incoming diplomatic pouch materials. During 

the course of our work, we interviewed Department of State Inspector 

General, Diplomatic Courier Service, and Administrative Logistics 

Management officials and Department of Homeland Security officials 

responsible for customs and border protection. 

Evaluating the Effectiveness 

of Controls over Other 

Centrally Billed Account 

Activities

We also audited the controls over other centrally billed account activities, 

including the identification and processing of unused tickets and disputing 

of unauthorized transactions, during fiscal years 2003 and 2004. Our 

assessment covered

• the magnitude of centrally purchased tickets that were not used and not 

processed for a refund, and

• the extent of unauthorized transactions that were not disputed and of 

the rebates lost, as a result.

To assess the internal controls over these other CBA activities, we first 

applied the fundamental concepts and standards set forth in our Standards 
Appendix I

Objectives, Scope, and Methodology

Page 40 GAO-06-298 State Travel Cards

for Internal Control in the Federal Government2 to the practices followed 

by these units to manage unused tickets and to dispute transactions that 

did not match or that the reconciliation process determined were 

unresolved. Because we determined that controls over unused tickets were 

ineffective, we did not assess these controls.

Magnitude of Unused 

Tickets

To assess the magnitude of tickets charged to the centrally billed accounts, 

which were unused and not refunded, we requested that the six airlines 

that State and other foreign affairs agencies used most frequently provide 

us with data relating to tickets State and other foreign affairs agencies 

purchased during fiscal years 2003 and 2004 that were unused and not 

refunded. These six airlines—American, Delta, Northwest, Continental, 

United, and U.S. Airways—together accounted for about 80 percent of the 

value of total airline tickets State and other foreign affairs agencies 

purchased. To obtain assurance that the tickets the airlines reported as 

unused represented only airline tickets charged to State centrally billed 

accounts, we compared data provided by the airlines to transaction data 

provided by Citibank. Because State does not track whether tickets 

purchased with centrally billed accounts were used, we were unable to 

confirm that the population of unused tickets that the airlines provided was 

complete in that it included all State and other foreign affairs agencies’ 

tickets that were unused and not refunded.

While American, Delta, Northwest, and United provided data that allowed 

us to identify the centrally purchased tickets that were fully unused and not 

refunded and partially used and not refunded, Continental could only 

provide data on fully unused and not refunded tickets and U.S. Airways did 

not provide any data. Because none of the airlines provided data sufficient 

for calculating the exact unused value (residual value), we were limited to 

reporting the amount charged to the centrally billed accounts related to 

both fully unused and partially unused tickets. 

Extent of Unauthorized 

Transactions Not Disputed

To determine the extent of airline tickets that did not reconcile between the 

tickets issued by State’s travel management center and the Citibank invoice 

of tickets purchased on the centrally billed account, we (1) obtained 

2

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).
Appendix I

Objectives, Scope, and Methodology

Page 41 GAO-06-298 State Travel Cards

unresolved transaction reports for State’s largest domestically managed 

centrally billed accounts and (2) verified that the transactions were 

charged to a State centrally billed account using the Citibank transaction 

data. 

Magnitude of Rebates Lost To identify the potential rebates lost3

 on State’s centrally billed accounts, 

we requested that Citibank provide (1) the total amount of rebates earned 

by State on its centrally billed account program for fiscal year 2003 and 

fiscal year 2004, (2) the volume of transactions used by Citibank to 

compute the rebate amounts, and (3) the rebate pricing schedule Citibank 

used to determine the amount of rebates. Using the volume of transactions 

and the rebate pricing schedule provided by Citibank, we calculated the 

highest potential rebate that State could have earned on the centrally billed 

account program. We then compared the potential rebate amounts to the 

actual rebates earned. 

Data Reliability 

Assessment 

We assessed the reliability of the Citibank centrally billed account data by 

(1) performing various testing of required data elements, (2) reviewing 

existing information about the data and system that produced them, and 

(3) interviewing Citibank officials knowledgeable about the data. In 

addition, we verified that totals from the databases agreed with the 

centrally billed account activity reported by GSA. We determined that data 

were sufficiently reliable for the purposes of our report.

To assess the reliability of the unused ticket data provided to us by 

American, Continental, Delta, Northwest, and United Airlines, we 

(1) consulted airline officials knowledgeable about the data and 

3

 According to State, “Citibank pays the Department a performance or payment productivity 

rebate based on calculated “net turndays” for payments. The rebates are not driven directly 

from the actual payment date, but are calculated using accounts receivable average 

balances divided by average daily charge volumes. The specific calculations use a derived 

Average Accounts Receivable, which is the sum of daily accounts receivable (outstanding) 

balances at the end of a cycle divided by the number of days in the cycle month and a Net 

Charge Volume. Net Charge Volume represents all cycle purchases and other charges, less 

credits, divided by billing cycle days. The Average Accounts Receivable is then divided by 

the Average Net Charge Volume which yields the “turndays” factor used to derive the actual 

refund percentage from a pre-established table. Lower turndays yield higher rebate 

percentages and increases in turndays reduce the rebate percentage. The effect of 

undisputed items is that in subsequent billing cycles the Average Accounts Receivable 

number is higher, yielding a higher calculated turnday computation and lower rebate.”
Appendix I

Objectives, Scope, and Methodology

Page 42 GAO-06-298 State Travel Cards

(2) performed testing on specific data elements. In addition, we validated 

that the tickets reported as unused by each airline represented tickets 

centrally purchased by State by comparing each airline’s data to the 

Citibank centrally billed account. We also reviewed the 2003 and 2004 

Notes to the Consolidated Financial Statements for each airline to verify 

that amounts related to unused tickets were included as a liability. We 

concluded that the data were sufficiently reliable for the purposes of this 

report.
Page 43 GAO-06-298 State Travel Cards

Appendix II

Comments from the Department of State ApendxiI
Appendix II

Comments from the Department of State

Page 44 GAO-06-298 State Travel Cards
Appendix II

Comments from the Department of State

Page 45 GAO-06-298 State Travel Cards
Appendix II

Comments from the Department of State

Page 46 GAO-06-298 State Travel Cards
Appendix II

Comments from the Department of State

Page 47 GAO-06-298 State Travel Cards
Appendix II

Comments from the Department of State

Page 48 GAO-06-298 State Travel Cards
Appendix II

Comments from the Department of State

Page 49 GAO-06-298 State Travel Cards
Appendix II

Comments from the Department of State

Page 50 GAO-06-298 State Travel Cards
Appendix II

Comments from the Department of State

Page 51 GAO-06-298 State Travel Cards
Appendix II

Comments from the Department of State

Page 52 GAO-06-298 State Travel Cards
Page 53 GAO-06-298 State Travel Cards

Appendix III

GAO Contacts and Staff Acknowledgments ApendxiI

GAO Contacts Cindy Brown Barnes (202) 512-9345, brownbarnesc@gao.gov

John V. Kelly (202) 512-6926, kellyj@gao.gov

Michael C. Zola (202) 512-3867, zolam@gao.gov

Staff 

Acknowledgments

Key contributors to this report include Cindy Barnes, Felicia Brooks, 

Norman Burrell, Beverly Burke, Jennifer Costello, Francine DelVecchio, 

Abe Dymond, Aaron Holling, Jason Kelly, John V. Kelly, Andrea Levine, 

Barbara Lewis, Jenny Li, Katherine Peterson, Mark Ramage, John Ryan, 

Sidney H. Schwartz, and Michael C. Zola. 

(192145)
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