United States General Accounting Office

Washington, DC 20548

May 24, 2001

The Honorable Dan Burton

Chairman, Committee on

 Government Reform

House of Representatives

Dear Mr. Chairman:

I am writing in response to your March 22, 2001, letter asking for our views on the

merits of allowing federal employees to keep and use the frequent flyer miles

received on official travel as an aid in efforts to recruit and retain employees. You

also asked us to obtain the views of the Foreign Service Officers Association on this

issue.

A few months ago, a task team of GAO staff began looking informally into whether

GAO should seek legislative authority to allow its employees, as well as perhaps

other federal employees, to keep for their personal use frequent flyer miles received

as a result of official travel. The purpose of such authority would be to help GAO and

other agencies better compete with the private sector in recruiting and retaining topquality employees. The team reviewed the current federal policy on this issue,

determined how that policy was being implemented, compared the federal policy to

the private sector’s practice, and informally obtained the views of officials from

several federal agencies on the current policy and possible changes to it. While the

current policy covers frequent traveler benefits, including those offered by airlines,

hotels, and car rental vendors, our review was limited to frequent flyer benefits.

However, we recognize that all of these are promotional benefits offered to the

general public at no additional cost to the government.

To carry out our informal inquiry, we reviewed relevant federal legislation and

regulations and previous Comptroller General decisions. We obtained information on

our own units’ application of the federal frequent traveler policy as it applies to

frequent flyer miles and interviewed representatives from several federal

organizations, including the Departments of Defense (DOD), the Interior, and Justice;

the General Services Administration (GSA); the Internal Revenue Service (IRS); the

Securities and Exchange Commission (SEC); and the U.S. Postal Service. We chose

GSA because it is responsible for the governmentwide policy on federal travel, DOD

and the Postal Service because they have so many employees, and the other agencies

because we understood that they had explored forming or had formed programs to

capture and use frequent flyer miles for government travel. At your request, we also
Page 2

talked to a representative from the Foreign Service Officers Association. Finally, we

obtained information on the private sector’s plans and practices in this area from the

National Business Travel Association, an organization consisting of travel service

providers and corporate travel managers, and a limited literature review. We did not

discuss frequent flyer issues with the airlines, but we did review relevant policies and

procedures posted on their Internet Web sites. Moreover, given the informal nature

of our review, we did not obtain official agency comments on the information we are

providing in this letter; however, we did discuss its contents with representatives

from the agencies we contacted.

In summary, current federal policy prohibits most federal employees from retaining

for personal use frequent flyer miles received on official travel and requires federal

agencies to encourage, promote, and facilitate the use of such miles to reduce the

government’s travel costs. Governmentwide data are not readily available on the

extent to which this policy is implemented or on what savings can be attributed to it.

However, our experience, as well as that of several other federal agencies, indicates

that the policy is difficult to implement, primarily for two reasons. First, the airlines--

which regard frequent flyer miles as belonging to the individual traveler, not the

organization that pays for the travel--are generally unwilling to create separate official

and personal frequent flyer accounts for individual travelers. Second, employees are

often reluctant to provide their employers with account statements detailing both

official and personal travel. In addition, practical constraints and the burden and cost

of administering the program limit its benefits to the government. For example, free

frequent flyer tickets are not always available when needed. Furthermore, according

to GSA, even if federal agencies made more aggressive efforts to capture and use

their employees’ official travel miles, the airlines might respond by reducing or

eliminating the discount the federal government currently receives on contract

airfares. GSA reports that this discount has saved the government over $2 billion

annually. The private sector, by contrast, commonly allows its employees to keep the

frequent flyer miles they receive on business travel, giving private companies,

including government contractors, a competitive edge over federal agencies in this

area.

Overall, in our view, while the current federal policy was well intentioned, its

implementation is fraught with difficulties, and the competition to attract and retain

skilled employees has increased such that Congress should consider changing the

federal government’s policy to allow employees to keep any frequent flyer miles

received on government travel. However, if this is done, it will be important for

agencies to effectively implement controls over the need for travel and the selection

of routes and carriers consistent with the government’s overall best interests.

Changing the federal policy could increase the travel costs of some agencies that now

capture and use their employees’ official travel miles, and we do not know whether or

how the airlines would respond to such a change. Allowing employees to keep their

official travel miles would be consistent with the airlines’ position that frequent flyer

miles belong to the individual traveler. Above all, a change in the current policy

would boost federal employees’ morale and help the government attract and retain

top-quality employees. In this regard, we believe, Congress should consider making
Page 3

any such policy change retroactive so that employees can benefit from any unused

miles accumulated to date.

Current Federal Frequent Traveler Policy

Under current federal laws and regulations, the frequent traveler benefits1

 received by

a federal employee in conjunction with official travel are generally considered

government property, and the employee may not retain the benefits for personal use.

As a result, the employee should accept the benefits on behalf of the government and

turn them over to the employee's agency. The agency should then integrate the

benefits into its travel plans to maximize their value to the government.

Initially, this policy was enunciated and followed in a number of prior Comptroller

General decisions. These decisions were based on the fundamental rule of law that a

federal employee is obligated to account for any gift, gratuity, or benefit received

from private sources incident to the performance of official duty. Any such gifts,

gratuities, or benefits tendered to the employee are viewed as having been received

on behalf of the government.2

In 1994, Congress enacted a statute designed to help realize to the maximum extent

practicable cost savings for official travel from frequent traveler benefits. The statute

directed the Administrator of GSA to issue guidelines to ensure that agencies

promote, encourage, and facilitate the use of frequent traveler programs offered by

airlines, hotels, and car rental vendors by federal employees who engage in official

travel.3

 This act specifically provides that any awards granted under such a frequent

traveler program accrued through official travel shall be used only for official travel.4

GSA has incorporated these policies into the Federal Property Management

Regulations5

 and the Federal Travel Regulation,6 applicable to most federal civilian

employees. Similarly, the Joint Federal Travel Regulations,7

 applicable to members of

 1

These include the benefits offered by airlines, hotels, and car rental vendors.

2

See 67 Comp. Gen. 79 (1987) (quoting B-199656, July 15, 1981); and 63 Comp. Gen. 229 (1984). See

also, 63 Comp. Gen. 233 (1984); B-215826, Jan. 23, 1986; and B-257525, Nov. 30, 1994.

3

Federal Acquisition Streamlining Act of 1994, P.L. 103-355, § 6008, 102 Stat. 3367 (1994), 5 U.S.C. §

5702, note.

4

P.L. 103-355, § 6008(b). GSA issued Bulletin FTR 17, Oct. 24, 1995, advising agencies of the provisions

of P.L. No. 103-355, § 6008 and reminding them of the existing provisions of the Federal Travel

Regulation concerning cost-saving opportunities provided by the use of frequent traveler benefits. In

Bulletin FTR 17, GSA also encouraged agencies to establish programs under the Government

Employees Incentive Awards Act, 5 U.S.C. §§ 4501-4507, to reward employees who take the initiative

to accrue travel savings, and GSA offered its program as a guide in establishing such reward programs.

5

41 C.F.R. § 101-25.103-2.

6

41 C.F.R. part 301-53.

7

Paragraph U2010B.
Page 4

the uniformed services, recognize that promotional material received by a uniformed

service member traveling on official business at government expense belongs to the

government and must be relinquished in accordance with service regulations.8

Legislation would be required to change the government's general policy to allow

civilian employees and uniformed service members to retain for personal use

frequent traveler benefits accrued on official travel. Such legislation would be

necessary to repeal the current requirement that such benefits be used only for

official travel9

 and to affirmatively authorize employees and members to retain for

personal use these benefits that are now considered the property of the government.

Use of Frequent Flyer Miles for Official Travel Is Difficult and Appears

Limited

Comprehensive governmentwide data are not readily available on the extent to which

federal agencies capture and use frequent flyer miles for official travel. GSA officials

told us that they do not collect such data. However, our task team did obtain

information on GAO’s practices, as well as those of several other federal

organizations. This information follows.

GAO’s Experience

GAO has never had a centralized, formal program to reduce its travel costs by

capturing and using its employees’ official travel miles. Several years ago, we pilottested a program in one of our headquarters units but soon discontinued it for a

variety of reasons. These reasons, which have also discouraged other headquarters

units, include the airlines’ refusal to establish separate official and personal travel

accounts for employees, employees’ reluctance to participate, administrative burdens

and costs, and limited savings. Furthermore, few frequent flyer seats were available

at desired travel times, transfers of free tickets to other employees took time and

effort, and employees who flew on different airlines often took a long time to

accumulate enough miles for free trips.

Although we never set up a GAO-wide program to capture and use frequent flyer

miles, several of our field offices tried to establish such programs. Of these, the

majority discontinued their efforts for the same reasons that discouraged our

headquarters units. Two field offices did, however, establish programs and continue

to operate them, yet their dollar savings have been very limited. One office saved

$6,600 over about 33 months. This office has many employees with enough miles on

single carriers for free trips, but these miles have been difficult to use because few

seats have been available when employees have needed to travel. Furthermore, in

past years, the unit’s savings were reduced by the $50 fee that the contract carrier

charged for reservations made less than 3 weeks in advance. Accumulating sufficient

 8

There are some federal organizations that are not covered by § 6008 of P.L. 103-355 and also have their

own property disposal authority. One such organization we are aware of that does not prohibit its

employees from retaining frequent flyer benefits for their personal use is the U.S. Postal Service.

9

§ 6008 of P.L. 103-355.
Page 5

frequent flyer miles for this unit's employees has become more problematic since the

government contracted with a different carrier for one of the unit’s most heavily

traveled routes. The other field office, which reported saving about $32,000 over 6

years, also noted that multiple changes in contract carriers have made it more

difficult to accumulate and effectively use frequent flyer miles.

Experiences of Other Federal Organizations

The other federal organizations we contacted had varied approaches to capturing and

using frequent flyer benefits for official travel. A representative from one--the U.S.

Postal Service, which is not subject to the travel rules that apply to most federal

agencies--said that the Service does not prohibit its employees from making personal

use of the frequent flyer miles received on official travel.

In 1998, the Department of the Interior considered establishing a frequent traveler

program that would have been managed by a contractor. However, the Department

rejected the contractor’s proposal as too expensive and difficult to implement.

Interior believed that the fees the contractor would have charged were excessive and

the savings were uncertain. In addition, under the contractor’s proposal, Interior

would have had to provide the contractor with data on the frequent flyer miles

received by its employees. It would have had to obtain the data from the employees

because the airlines would not provide the information to the agency.

An Interior Department representative told us that some of its bureaus use frequent

flyer benefits to enable their employees to take training and attend conferences

because their budgets do not cover non-program-related travel. Therefore, if frequent

flyer miles received on program-related travel were not captured and used for this

type of travel, the bureaus might not be able to send their employees to these types of

events. At the same time, if employees were allowed to retain the frequent flyer

benefits, they might be willing to use some of their miles for such travel on a

voluntary basis.

GSA, IRS, and the Department of Justice have established gain-sharing programs that

enable frequent travelers to share in the savings they achieve in airfares, lodging

costs, or both. Under these programs, employees can obtain cash awards based on

savings they can document by using free tickets from airline frequent flyer programs

or by securing lodging rates below the maximum amounts allowed.

According to GSA officials, GSA considered establishing a frequent traveler program

in the early 1990s but abandoned the idea because the airlines would neither pool the

miles received by GSA employees for the agency’s use nor provide data to GSA on the

miles its employees received. In 1995, however, GSA established a voluntary gainsharing program under which employees who use free tickets awarded for official

travel miles or secure lodging at less than the established lodging rates can receive

cash awards of up to half the amount saved for the government. GSA reported that

from January 1995 through September 2000, almost $823,000 was saved under the

program, and employees received about half that amount in cash awards. These

savings do not take into account the costs of administering the gain-sharing program,

which GSA officials believe were minimal. However, GSA officials view the program
Page 6

as a limited success because the savings are low relative to GSA's overall travel costs,

which totaled about $190 million for the last 6 years. In addition, GSA officials

believe that most of the savings are from the lodging portion of the program rather

than from the use of frequent flyer miles.

IRS established a program similar to GSA's in 2000 at the request of the National

Treasury Employees Union. Employees can accrue savings by such means as using

frequent flyer miles to obtain free airline tickets, sharing hotel rooms with coworkers,

or staying with friends or relatives. IRS travel officials did not have data on the

savings achieved through their program because the program is less than a year old.

However, they view the program as a success. They said employees like the program

and most of the savings are in lodging costs.

The Justice Department established its gain-sharing program at the beginning of fiscal

year 1996. Like GSA and IRS, Justice shares savings its employees achieve by using

frequent flyer miles and obtaining lodging at reduced costs. The program is

discretionary, and Justice components can choose whether they want to include

frequent flyer savings, lodging savings, or both. Administrative support staff who

assist travelers who achieve savings can also share in the savings awards. According

to Justice, it saved about $70,000 in fiscal year 1996 and $202,000 in fiscal year 1997

and paid cash awards equaling about half of the savings. Again, these financial

benefits do not factor in the gain-sharing program’s administrative costs. Justice did

not provide savings data beyond fiscal year 1997.

According to a representative from DOD, the Department does not have a

departmentwide frequent traveler program and has no data on the extent to which its

components have such programs. He said that in the mid-1990s, his command

attempted to, but could not, find an effective program for capturing and using

employees' official frequent flyer miles anywhere in DOD. He believes the use of free

tickets awarded for frequent flyer miles in DOD is spotty at best. He cited many of

the same practical difficulties with implementing the current federal policy that we

and other agencies identified, including the reluctance of both the airlines and

employees to provide frequent flyer data to the government and the problems with

tracking and using miles for official travel. He also identified another difficulty--the

time and expense associated with taking disciplinary action against employees who

violate the current policy by making personal use of miles received on official travel.

He said his agency completed a demotion action against an employee for personal

use of miles, but assistance from the airlines was difficult to obtain. Such action, he

maintained, was not cost-effective. These difficulties, combined with a departmental

emphasis on adopting private-sector practices, have led DOD to prepare draft

legislation that would abolish the current restriction and allow military and civilian

employees governmentwide to retain for personal use frequent flyer benefits received

on official travel. He said that DOD has discussed its proposal with other federal

agencies, which have been supportive. DOD is currently considering submitting its

proposal to the Office of Management and Budget.

An SEC representative informed us that SEC began using a contractor’s software 2 to

3 years ago to facilitate the use of frequent flyer mileage. She said that employees’

participation in SEC’s frequent flyer program is voluntary and that SEC’s savings have
Page 7

been minimal, in part because frequent flyer tickets do not give travelers flexibility in

arranging their travel. Specifically, she said that it is difficult for SEC employees to

obtain seating using frequent flyer tickets because many trips are scheduled,

canceled, or changed at the last minute. Finally, she said that SEC is likely to

discontinue its contract because the savings, minus the contractor’s 30-percent

commission, are not sufficient to offset SEC’s “hidden” management and oversight

costs and employees have not been enthusiastic about participating in the program.

The Private Sector’s Practices

According to the results of three recent surveys, the private sector commonly allows

its employees to retain for personal use frequent flyer miles received on business

travel. This practice may give the private sector, including government contractors,

an advantage over the federal government in recruiting and retaining employees.

While small compared with the higher salaries companies often pay, this advantage

may nonetheless influence the job choices of some employees, especially if they are

frequent travelers.

In April 2001, the National Business Travel Association surveyed its members via the

Internet on frequent traveler programs. According to the Association, 200 companies

responded. Of these, 98 percent said they do not recover frequent traveler benefits

received by employees on business travel for their companies, and 95 percent said

they have no plans to do so. According to the Association, most companies do not

want to become involved in capturing these benefits because it is too difficult to

track miles or points received.

In May 2000, the Bureau of National Affairs reported the results of a 1999 survey of

about 1,800 companies on their business travel policies. These companies, about 450

of which responded to the survey, represented a cross section of U.S. employers: 34

percent were manufacturing companies, 36 percent were nonmanufacturing (e.g.,

service) businesses, and about 30 percent were other establishments, such as health

care facilities, educational institutions, and government agencies. Seventy percent of

the companies had fewer than 1,000 employees, and the remainder had more.

According to the survey, most employers with business travelers allowed their

workers to keep frequent flyer miles received on business travel for their own use.

About two-thirds of the responding companies reported specifically allowing their

employees to retain the miles for their personal use, about 20 percent reported having

no policy at all, and under 10 percent reported requiring their employees to relinquish

mileage received to the company. A few companies reported having gain-sharing

programs similar to GSA’s, IRS’, and Justice’s.

The findings from these two surveys appear consistent with the results of an

American Express survey of business travel management, reported in July 1999 by

Business Travel News, a business travel industry publication. According to the

article discussing this survey, the trend in the private sector was away from collecting

frequent flyer awards, and the number of corporations doing so was declining.

Specifically, the survey showed that the proportion of companies managing and using

frequent flyer miles received by their travelers fell from 9 percent in 1994 to 4 percent

in 1996. According to the article, “most companies neither want the headache of
Page 8

tracking miles nor the disincentive that taking them away might present to

employees.” In addition, the article discussed the views of the travel services

manager of a company that was using a contractor to aggressively track and use

frequent flyer miles for company business. Although this approach was saving the

company 10 percent of its overall air travel costs, the manager said he would rather

receive discounts from the airlines than deal with frequent flyer miles.

These survey results are also consistent with the experience of one large corporation

that we contacted in 1994 after learning that it had established a program to capture

and use for company travel frequent flyer miles received by employees on company

business. The company later told us that it had discontinued the program because of

its adverse effect on employee morale. In April 2001, we contacted the company

again, and a representative told us that the company continues to allow its employees

to make personal use of frequent flyer miles received on company travel.

Views on Frequent Flyer Issue

You asked for our views on this issue as well as those of the Foreign Service Officers

Association. I will discuss the Association’s views first.

In April 2001, the Director of Congressional Affairs for the Foreign Service Officers

Association told us that the Association would support legislation that would allow

federal employees to keep for personal use frequent flyer miles earned on official

travel. He said the Association recognizes that many foreign service officers

frequently travel long distances and would therefore receive considerable benefits

from such legislation. However, he noted that these officers are often assigned to

hardship locations that require difficult travel. He also said that if this type of

legislation is not feasible, the Association’s members would like to be able to use

their frequent flyer miles to upgrade to business class on long flights.

In our view, the current federal policy on frequent flyer miles was well intentioned as

a potential means for reducing federal travel costs and promoting economy in

government. We recognize that federal agencies, including GAO, might be able to

achieve some additional savings by taking more advantage of frequent flyer miles for

government travel. However, the practical obstacles to achieving significantly

greater savings are such that few agencies have overcome them without creating

incentives, such as gain-sharing plans, that have generally reduced the government’s

savings by half. Additionally, more aggressive efforts to use frequent flyer miles to

reduce the government’s travel costs could, according to GSA, jeopardize its ability to

negotiate significant savings under its contract air carrier program. This negotiated

travel program saves the government over $2 billion annually. GSA officials

responsible for the program told us they believe the savings achieved through this

program far outweigh the benefits the government would gain through more

aggressive efforts to capture and use frequent flyer miles for official travel. We do

not know how a change in the current federal policy to permit individual use would

affect GSA’s ability to negotiate savings in contract airfares. However, a change

would not seem likely to have a negative impact, since, in contrast to the current

policy, it would be consistent with the airlines’ position that frequent flyer miles

belong to the individual traveler.
Page 9

Changing the federal policy on frequent flyer miles would have some disadvantages

for the government. First, it would eliminate any savings that certain agencies

currently achieve by implementing the policy. In addition, some employees who now

travel on free tickets obtained with frequent flyer miles might no longer be able to

travel when funds for air travel were not available or were in short supply. However,

these disadvantages would, we believe, be far outweighed by the advantages of a

change, both to federal employees and to the government. A change would eliminate

the current disparity in practice between the private sector and the government and

would put federal employees on a par with their private-sector counterparts,

including federal contractor personnel, in this area. Like private-sector employees,

federal employees who put up with flight delays and cancellations and travel on their

own time to meet work schedules would then feel that they were being compensated,

in part, for these frustrations and sacrifices. Establishing parity between the federal

government and the private sector in this area would also aid the government in

recruiting and retaining top-quality employees.

If the current policy is changed to allow federal civilian and military employees to

retain their official travel miles for personal use, controls over the need for travel and

the selection of routes and carriers would have to be effectively implemented. These

controls are designed to prevent employees from selecting certain carriers to earn

miles or otherwise undercutting the government’s negotiated fare agreements with

major carriers.

Today, millions of frequent flyer miles earned on official travel are going unused,

benefiting neither the government nor its employees. Changing the federal frequent

flyer policy—and changing it retroactively so that employees can take advantage of

these unused miles--would boost federal employees’ morale and strengthen the

federal government’s ability to compete with the private sector. We therefore

believe Congress should consider allowing federal employees to keep and make

personal use of the frequent flyer miles they have already received and will receive

for official travel. In order to assist the Committee, we have enclosed draft

legislation that would accomplish this objective (see enc. I).

If you have any questions on the information we are providing or if we can be of

further assistance, please call me on (202) 512-5500 or John H. Anderson, Jr.,

Managing Director, Physical Infrastructure Issues, on (202) 512-2834.

Sincerely yours,

David M. Walker

Comptroller General

Of the United States
Page 11

Enclosure I

Draft Legislation

 Be it enacted by the Senate and House of Representatives of the United States in

Congress assembled,

SEC. 1. Section 5702 of title 5, United States Code, is amended –

(1) by redesignating subsection (c) as subsection (d); and

(2) by inserting after subsection (b) the following new subsection (c):

“(c) Notwithstanding the provisions of subsection (d), promotional items an

employee (including a justice or judge) receives as a consequence of using travel or

transportation services procured by the United States or accepted pursuant to 31

U.S.C. § 1353 may be retained by the employee for personal use. Promotional items

include only those obtained under the same terms as those offered to the general

public and at no additional cost to the government. Promotional items include but

are not limited to frequent flyer miles, upgrades, and access to carrier clubs or

facilities.”

SEC. 2. Section 404 of title 37, United States Code, is amended –

(1) by redesignating subsection (j) as subsection (k); and

(2) by inserting after subsection (i) the following new subsection:

 “(j) Promotional items a member receives as a consequence of using travel or

transportation services procured by the United States or accepted pursuant to 31

U.S.C. § 1353 may be retained by the member for personal use. Promotional items

include only those obtained under the same terms as those offered to the general

public and at no additional cost to the government. Promotional items include but

are not limited to frequent flyer miles, upgrades, and access to carrier clubs or

facilities.”

SEC. 3. Section 6008 of the Federal Acquisition Streamlining Act of 1994, Public Law

103-355 (5 U.S.C. § 5702, note), is repealed.

SEC. 4. Sections 1 and 2 of this act shall apply to promotional items received prior to

the effective date of this act.

Sectional Analysis

Section 1 of this legislation would amend section 5702 of title 5, United States Code

(Per diem, employees traveling on official business). This amendment would

authorize federal civilian employees, including justices and judges, who receive

promotional items incident to using government procured travel or transportation

services, or such services accepted from non-Federal sources pursuant to 31 U.S.C. §

1353, to retain such promotional items for personal use. The travel or transportation

services from which the promotional benefits accrue are intended to include services

provided by airlines, hotels, and rental car vendors. The Administrator of the General

Services Administration would be expected to prescribe regulations under existing

authority in 5 U.S.C. § 5707 to protect the government from incurring excess costs or
Page 12

improper selection of travel or transportation providers for the benefit of the

employee.

Enclosure I

Section 2 of this legislation would amend section 404 of title 37, United States Code

(Travel and Transportation Allowances). This amendment would provide the same

treatment for members of the uniformed services. The Secretaries of the services

concerned under existing authority in 37 U.S.C. § 404 would be expected to prescribe

regulations similar to those prescribed by the Administrator of General Services.

Section 3 of the legislation would repeal section 6008 of the Federal Acquisition

Streamlining Act of 1994, Pub. L. 103-355, 108. Stat. 3367 (1994) (5 U.S.C. § 5702 note).

Section 6008 requires the Administrator of the General Services Administration to

issue guidelines to ensure that agencies promote, encourage, and facilitate the use of

frequent traveler programs offered by airlines, hotels, and car rental vendors by

Federal employees who engage in official travel, for the purpose of realizing cost

savings for official travel. Section 6008 also provides that any awards granted under

such a frequent traveler program accrued through official travel shall be used only for

official travel. It would be necessary to repeal section 6008 since its provisions

conflict with the purposes of sections 1 and 2 of the proposed legislation.

Section 4 would make it clear that the legislation is applicable to any unused

promotional benefits received by an employee or service member prior to the

effective date of the legislation as well as to such benefits received on and after the

effective date of the legislation.