Travel Cards: Internal Control Weaknesses at DOD Led to Improper Use of First and Business Class Travel
Published: 2003-10-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Ineffective oversight and management of the Department of Defense's (DOD) travel card program, which GAO has previously reported on, have led to concerns about DOD's use of first and business class airfares. GAO was asked to (1) identify the magnitude of premium class travel, (2) determine if DOD's key internal control activities operated effectively and provide examples of control breakdowns, and (3) assess DOD's monitoring and key elements of the control environment.
section_title: What GAO Found
paragraphs: Breakdowns in internal controls and a weak control environment resulted in improper first and business class travel and increased costs to taxpayers. Based on extensive analysis of records obtained from Bank of America, GAO found that DOD spent almost $124 million on about 68,000 premium class related tickets--primarily business class--during fiscal years 2001 and 2002. Each premium class ticket costs the government up to thousands of dollars more than a comparable coach class ticket. GAO's work also indicated that civilian supervisors, managers, and executives and senior military officers accounted for almost 50 percent of the premium class transactions, and for 27 of the 28 most frequent premium class travelers. GAO considers travel by high-ranking officials to be a sensitive payment area because of its susceptibility to abuse. Breakdowns in key internal controls resulted in a significant level of improper premium class travel. GAO estimated that 72 percent of DOD's fiscal year 2001 and 2002 premium class travel was not properly authorized, and 73 percent was not properly justified. Further, DOD did not have accurate and complete data on the extent of premium class travel and performed little or no monitoring of this travel. In regard to the control environment, GAO found that DOD (1) issued policies that were inconsistent with General Service Administration governmentwide travel regulations, (2) did not require military services to issue and update premium class policies to implement DOD's travel regulations consistently, and (3) did not issue guidance on how to document the authorization and justification of premium class travel. As a result of GAO's audit, DOD has begun updating its travel regulations to more clearly state when premium class travel can be authorized and to emphasize that it must only be used when exceptional circumstances warrant the additional cost.

section_title: Letter
paragraphs: This report is a continuation of our series of reports on the Department of  Defense’s (DOD) management of its various credit card programs. In fiscal  years 2002 and 2003, we issued a series of testimonies and reportsaddressing problems that the Army, Navy, and Air Force had in managing  individually billed travel card accounts. These testimonies and reports  showed high delinquency rates and significant potential fraud and abuse  related to DOD’s travel program. Due to these concerns, you asked us to  audit controls over the other major form of payment used by DOD for  travel expenses—centrally billed accounts. Our audits in these areas  provide examples of DOD’s long-standing financial management problems,  which are pervasive, complex, and deeply rooted in virtually all business  operations throughout the department. Such problems led us in 1995 to put  DOD financial management on our list of high-risk areas—areas that are highly vulnerable to fraud, waste, and abuse—in the federal government, a  designation that continues today.
The centrally billed accounts are used by most DOD services and units to  purchase transportation services such as airline and train tickets, facilitate  group travel, and pay for other travel-related expenses, while the  individually billed accounts are used by individual travelers for lodging,  rental cars, and other travel expenses. For fiscal years 2001 and 2002, DOD  travelers incurred $7.1 billion in expenses on the centrally billed and  individually billed travel card accounts, with about $2.8 billion related to  the use of centrally billed accounts. This report addresses the first part of  your request related to controls over premium class travel charged to  centrally billed accounts. Federal travel regulations define premium class  travel as any class of accommodation above coach class, that is, first or  business class. We plan to report to you separately on the results of our  overall audit of the controls over the centrally billed account travel  program.
Because DOD disburses funds directly to Bank of America under a  governmentwide travel card contract for charges made to the centrally  billed accounts, the use of these accounts for improper transportation, in  particular the more expensive premium class travel, results in direct  increased cost to the government. Governmentwide General Services  Administration (GSA) regulations and internal DOD regulations state that  travelers must use coach class accommodations for official business air  travel—both domestic and international—except when a traveler is  specifically authorized to use premium class. The regulations also state  that travelers on official government travel must exercise the same  standard of care in incurring expenses that a prudent person would  exercise if traveling on personal business. Premium class flights are not  something travelers are entitled to simply because certain conditions exist.  Rather, GSA and DOD require that, when possible, travelers plan their  travel in advance to avoid the necessity for premium class travel.
As you requested, the objective of our audit was to assess the adequacy of  internal controls over the authorization and issuance of fiscal years 2001  and 2002 premium class tickets charged to DOD’s centrally billed travel  accounts. Specifically, we (1) identified the extent to which DOD uses the  centrally billed travel accounts to purchase premium class travel,  (2) determined if DOD’s key internal control activities operated effectively  and provided reasonable assurance that premium class travel was  purchased appropriately and identified examples of control breakdowns,  and (3) assessed DOD’s oversight and monitoring of the use of premium  travel and key elements of the control environment.
To meet our objectives, we (1) extracted premium class transactions from  Bank of America databases of charges made to DOD’s centrally billed  accounts for fiscal years 2001 and 2002, (2) reviewed federal laws and  regulations and DOD policies and procedures on premium class travel, and  (3) interviewed DOD officials on processes and procedures in place to  authorize and justify premium class travel. We tested a statistical sample of  premium class travel transactions and conducted other audit work to  evaluate the design and implementation of key internal control procedures  and activities. We used data mining to identify additional instances of  improper premium class travel based on the frequency and dollar amount  of premium class travel. Appendix I provides details on our scope and  methodology.
We conducted our audit work from November 2002 through August 2003 in  accordance with U.S. generally accepted government auditing standards,  and we performed our investigative work in accordance with standards  prescribed by the President’s Council on Integrity and Efficiency. We  received oral comments on a draft of this report from DOD, Army, Navy,  Marine Corps, and Air Force officials on September 10, 2003. We addressed  the comments in the “Agency Comments and Our Evaluation” section, and  incorporated those comments in the final report where appropriate.
subsections: section_title: Background
paragraphs: DOD uses a combination of governmentwide and DOD guidance as the  policy and procedural foundation for incurring premium class travel. The  Federal Travel Regulation (FTR), issued by GSA, implements statutory and  Office of Management and Budget (OMB) requirements and policies for  travel by federal civilian employees and others authorized to travel at  government expense, including guidelines governing the use of premium  class travel. The purpose of the FTR is to ensure that official travel is  conducted responsibly and at a minimal administrative expense. Pursuant  to various statutes, DOD issued the Joint Federal Travel Regulations  (JFTR), which applies to uniformed service members, and the Joint Travel  Regulations (JTR), which applies to DOD civilian personnel. The DOD  travel regulation for military personnel mirrors the GSA regulation, and  DOD travel regulations for civilian personnel are subject to GSA’s travel  regulation. In addition, each military service has issued implementing  guidelines that, to varying degrees, provide additional guidance on when  premium class travel is authorized.
GSA and DOD regulations authorize the use of premium class travel under  specific circumstances. The JTR and the JFTR limit the authority to  authorize first class travel to the Secretary of Defense, his or her deputy, or  other officials as designated by the Secretary of Defense. However, while  both the JTR and JFTR provide that the authority to authorize first class  travel may be delegated and re-delegated, the regulations specify that the  authority must be delegated to “as high an administrative level as  practicable to ensure adequate consideration and review of the  circumstances necessitating the first class accommodations.” Further  guidance is found in a DOD directive on transportation and traffic  management, which specifically states that the secretaries within their  military services and secretariats are the authorizing authorities for first  class travel. The service secretaries may re-delegate authorizing authority  for first class travel to under secretaries, service chiefs or their vice and/or  deputy chiefs of staff, and four-star major commanders or their three-star  vice and/or deputy commanders, but authorizing authority may not be  delegated to anyone other than these officials. DOD regulations also  require that authorization for premium class accommodations be made in  advance of the actual travel unless extenuating circumstances or  emergency situations make advance authorization impossible. Specifically,  the JTR and JFTR state that first class accommodation is authorized only  when at least one of the following conditions exists: coach class airline accommodations or premium class other than first  class airline accommodations are not reasonably available; the traveler is so handicapped or otherwise physically impaired that  other accommodations cannot be used, and such condition is  substantiated by competent medical authority; or exceptional security circumstances require such travel.
The JTR and JFTR allow the transportation officer, in conjunction with the  official who issued the travel order, to approve premium class travel other  than first class. In accordance with the FTR, DOD restricts premium class  travel to the following eight circumstances: regularly scheduled flights between origin and destination provide only  premium class accommodations, and this is certified on the travel  voucher; coach class is not available in time to accomplish the purpose of the  official travel, which is so urgent it cannot be postponed; premium class travel is necessary to accommodate the traveler’s  disability or other physical impairment, and the condition is  substantiated in writing by competent medical authority; premium class travel is needed for security purposes or because  exceptional circumstances make its use essential to the successful  performance of the mission; coach class accommodations on authorized/approved foreign carriers  do not provide adequate sanitation or meet health standards; premium class accommodations would result in overall savings to the  government because of subsistence costs, overtime, or lost productive  time that would be incurred while awaiting coach class  accommodations; transportation is paid in full by a nonfederal source; or travel is to or from a destination outside the continental United States,  and the scheduled flight time (including stopovers) is in excess of 14  hours. However, a rest stop is prohibited when travel is authorized by  premium class accommodations.
Both GSA and DOD regulations allow a traveler to upgrade to premium  class other than first class travel at personal expense, through redemption  of frequent traveler benefits. GSA also identified agency mission as one of  the criteria for premium class travel. Appendix II includes more detailed  information concerning the process by which DOD military and civilian  personnel would properly obtain premium class airline tickets.
section_title: Extent of Premium Class Travel Is Significant
paragraphs: For fiscal years 2001 and 2002, DOD spent nearly $124 million on over  68,000 airline tickets containing at least one leg of premium class travel.Since DOD did not maintain centralized data on premium class travel, we  extracted this information from Bank of America’s fiscal years 2001 and  2002 databases of DOD centrally billed account travel, which included over  5.3 million transactions for airline tickets valued at over $2.4 billion.  Although we were able to report this aggregate information, we were  unable to obtain any breakdowns of the data, such as the amount of  premium class travel by military service or the amount of premium class  travel used for domestic versus overseas flights. As discussed later in this  report, because DOD does not obtain or maintain management information  on premium class travel, it cannot monitor its proper use, identify trends,  or determine alternate, less expensive means of transportation.
As shown in table 1, the total dollar amount DOD spent on travel that  included at least one leg of premium class airfare was about $57 million in  fiscal year 2001 and about $67 million in fiscal year 2002. First class travel  accounted for 2.4 percent of the total dollars spent for premium class travel  for the 2 fiscal years, while business class accounted for the remaining 97.6  percent.
DOD’s premium class air travel accounts for a very small percentage of  DOD travel overall. It represents 1 percent of total DOD airline  transactions and 5 percent of total DOD dollars spent on airline travel  charged to the centrally billed accounts. However, to put the amount that  DOD spends on premium class travel in perspective, we noted that the $124  million DOD spent on premium class related travel during these 2 fiscal  years exceeded the total travel and transportation expenses—including  airfare, lodging, and meals—spent by 12 major agencies covered by the  Chief Financial Officers Act of 1990, including the Social Security  Administration; the Departments of Energy, Education, Housing and Urban  Development, and Labor; and the National Aeronautics and Space  Administration. The difference between a premium class ticket and a  comparable coach class ticket can range from negligible—particularly if  the traveler traveled within Europe—to thousands of dollars. In one  instance, a traveler’s first class flight between Washington and Los Angeles  was 14 times, or about $3,000 more than, the price of a coach class flight.
We also found that higher-ranking civilian personnel and military officials  accounted for a large part of premium class travel. Based on our statistical  sample, we estimated that DOD civilian employees under the General  Schedule (GS) grade GS-13 to GS-15 (supervisors and managers), Senior  Executive Service (SES) (career senior executives), presidential  appointees with Senate confirmation, and DOD senior military officers O-4  and above accounted for almost 50 percent of premium class travel. The  remaining 50 percent in our statistical sample comprised mostly other  officers, senior enlisted personnel, and technical or professional staff. We  consider travel by high-ranking officials, in particular senior-level  executives, to be a sensitive payment area because of its susceptibility to  abuse or noncompliance with laws and regulations.
section_title: Key Internal Controls Were Ineffective
paragraphs: Internal control activities help ensure that management’s directives are carried  out. The control activities should be effective and efficient in accomplishing the  agency’s control objectives. GAO’s Standards for Internal Control in the  Federal Government (GAO/AIMD-00-21.3.1, November 1999)
Significant breakdowns in key internal control activities resulted in a  significant level of improper premium class travel and increased DOD  travel cost. Specifically, we estimated, based on our statistical sample, that  72 percent of the DOD centrally billed travel transactions containing  premium class travel for fiscal years 2001 and 2002 were not properly  authorized, and 73 percent were not properly justified. (See app. I for  further details of our statistical sampling test results.) Using our statistical  sample and data mining results, we found numerous examples of premium  class travel without authorization or adequate justification, illustrating the  improper use of premium class travel and the resulting increase in travel  costs. Further, we used data mining techniques to identify the most  frequent users of premium class travel. Our analysis of these cases showed  that almost all were senior-level employees whose travel, although properly  authorized, generally was not adequately justified.
subsections: section_title: Results of Statistical Sampling Work
paragraphs: We selected two key transaction-level controls for statistical sampling  testing. As shown in table 2, we estimated that 72 percent of premium class  travel was unauthorized. Because the FTR and DOD regulations provide  that premium class travel must be specifically authorized, transactions that  failed this test also failed the justification test. In addition, we found two  transactions in our statistical sample were properly authorized but failed  the justification test as they were not supported by the documentation  provided or did not adhere to the FTR and DOD travel regulations.
Requiring premium class travel to be properly authorized is the first step in  preventing improper premium class travel. The FTR requires premium  class travel to be specifically authorized. DOD specifies that premium class  travel must be authorized in advance of travel, unless extenuating or  emergency circumstances make authorization impossible, in which case  the traveler is required to request written approval from the appropriate  authority as soon as possible after the travel. In addition to the FTR and  DOD regulations, we also applied the criteria set forth in our internal  control standards and sensitive payments guidelines in evaluating the  proper authorization of premium class travel. For example, while DOD  travel regulations and policies do not address subordinates authorizing  their supervisors’ premium class travel, our internal control standards  consider such policy to be flawed; therefore, a premium class transaction  that was approved by a subordinate would fail the control test. Using these  guidelines, we found that transactions failed the authorization test in the  following three categories: (1) the premium class airline ticket was  purchased, but the authorization of premium class travel was not noted on  either the travel order or on additional documentation supporting the travel  order, (2) the travel order authorizing premium class travel was not signed,  and (3) premium class travel was authorized by a subordinate.
Premium class travel not specifically authorized. Based on our  statistical sample, we estimated that the travel order and other supporting  documentation for 64 percent of the premium class transactions did not  specifically authorize the traveler to fly premium class, and thus the  commercial travel office should not have issued the premium class ticket.  Further, we estimated that 5 percent of the transactions lacking specific  authorization were intra-European flights covered under a blanket  authorization issued in February 2002 by the U.S. Army Transportation  Management Center, Europe, located in Germany. The blanket  authorization permitted the commercial travel office to automatically  purchase business class tickets on 65 flights between Frankfurt, Munich, or  Stuttgart and other selected European cities. The blanket authorization  stated that business class was authorized for these routes because it was  the lowest unrestricted fare. Consequently, DOD considered these  transactions to have been authorized. However, we disagree that a blanket  authorization can be used for premium class travel because it is not  consistent with GSA and DOD requirements that all premium class travel  be specifically authorized and, wherever possible, minimized. Further, the  importance of having individual authorization for premium class travel is  illustrated by our independent evaluation of the 65 flights, which showed  that business class tickets were not necessarily equal to or lower than the  cost of unrestricted coach, as claimed in the blanket authorization. For  example, according to the travel agency that served GAO, the business fare  between Munich, Germany, and Tbilisi, Georgia (located near Turkey), was  $3,232 and the unrestricted economy fare was $992, a difference of $2,240.
Travel order not signed. We also estimated that 6 percent of premium  class transactions were related to instances where the travel order  authorizing business class was not signed at all or the travel order  authorizing first class was not signed by the service secretary or his  designee, as required by DOD regulations. Ensuring that travel orders are  signed by an appropriate official is a key control to preventing improper  premium class travel. If the travel order is not signed, or not signed by the  individual designated to do so, DOD has no assurance that the substantially  higher cost of the premium class tickets was properly reviewed and  represented an efficient use of government resources.
Premium travel authorized by a subordinate. We estimated that 2  percent of the premium class transactions involved situations where a  subordinate approved a superior’s travel. Although these limited instances  do not necessarily indicate the existence of a significant systemic problem,  allowing subordinates to approve their supervisors’ premium class travel is  synonymous to self-approval and reduces scrutiny of premium class  requests. Our internal control standards state that “Transactions and other  significant events should be authorized and executed only by persons  acting within the scope of their authority. This is the principal means of  assuring that only valid transactions to exchange, transfer, use, or commit  resources and other events are initiated or entered into.”
subsections: section_title: Valid Justification for Premium Travel Often Did Not Exist
paragraphs: Another internal control weakness identified in the statistical sample was  that the justification used for premium class travel was not always  provided, not accurate, and/or not complete enough to warrant the  additional cost to the government. As previously stated, premium class  travel is not an entitlement. In fact, recent changes to the DOD regulations  state that premium class travel, in the context of lengthy flights, should  only be used when exceptional circumstances warrant and that alternatives  should be explored to minimize unnecessary premium class travel. In  reviewing whether premium class travel was justified, we looked at  whether there was documented authorization and, if there was, whether  the authorization for premium class travel was supported by evidence of a  valid reason. As shown in table 2, an estimated 72 percent of premium class  transactions were not authorized and therefore could not have been  justified. An additional 2 transactions in the statistical sample were  authorized but not justified in accordance with DOD’s criteria. In one  instance for example, although the flight time exceeded 14 hours, the  traveler had a layover in route, which should have precluded the traveler  from being authorized premium class travel.
section_title: Examples of Improper Use of Premium Class Travel
paragraphs: Table 3 contains specific examples of unauthorized travel from both our  statistical samples and data mining work. The table also contains examples  of premium class travel that was unjustified. Without authorization or  adequate justification, these cases illustrate the improper use of premium  class travel and the resulting increase in travel costs. Following the table is  more detailed information on some of these cases.
Traveler #1 is a GS-14 at the Department of the Navy; he along with three  family members flew a combination of first and business class when  they were relocated from London to Honolulu. The cost to the  government for those four first and business class tickets was almost  $21,000, compared to an estimated total cost of about $2,500 for four  coach class tickets. An audit of the travel orders for this trip indicated  that the DOD civilian employee and his family were not authorized to fly  first or business class. Consequently, the traveler failed both the  authorization and the justification test. Despite the lack of specific  authorization, the traveler was issued premium class tickets for this trip,  resulting in additional cost to the government of more than $18,000.  Upon being contacted, the traveler agreed that his travel order did not  specifically state that premium class was authorized, and stated that he  inquired about business class tickets from the commercial travel office  because his flight lasted more than 14 hours. Based on the issuance of  premium class tickets for other permanent change-in-station moves  exceeding 14 hours in total travel time, the commercial travel office  issued the premium class tickets to the traveler.
Traveler #4 is a GS-13 at the Department of the Navy. In March 2002, the  traveler flew business class round-trip from San Francisco to Osaka,  Japan, where he had an overnight layover before proceeding to Busan,  Korea. The travel order DOD provided us did not authorize business  class travel. Further, because the traveler had an overnight layover in  route to Korea, the 14-hour rule would not apply. The cost of the ticket  was $3,695, compared to an estimated cost of $2,161 for a comparable  unrestricted ticket in coach. Without authorization or valid justification,  the additional $1,534 spent on the business class ticket was improper.
Traveler #7 is a GS-13 in the Navy. In March 2002, the traveler flew  business class from San Francisco to Tokyo on a ticket costing $3,168.  Although the flight to Tokyo lasted more than 14 hours, the use of  premium class travel was not properly authorized because the travel  order was not signed by the appropriate official. In comparison, the  estimated cost of an unrestricted government fare in coach was $610.
Traveler #9 was a GS-13 in the Department of the Army who flew most  of his trip from Tucson to Bahrain and then from Bahrain to Los Angeles  in business class, at a cost of $8,308. The estimated cost of an  unrestricted coach class ticket for the same route was $4,966. The  justification for the additional cost of the business class ticket was that  the flight lasted more than 14 hours. However, the traveler stopped  overnight in London at the government’s expense on both the outbound  and return portions of the trip. The FTR and JTR specifically prohibit  premium class flights when the traveler has a rest stop en route at the  government’s expense.
Traveler #10 was a GS-15 in the Department of the Navy who flew  premium class from Washington, D.C., to Amsterdam and back on the  basis of a medical condition. The duration of the flight each way was  about 8 hours and cost $4,525. The estimated cost of an unrestricted  government fare coach class ticket for the same route was $570. The  supporting documentation provided to us included a note, written by the  traveler’s supervisor, that was prepared more than 18 months after the  travel, stating that the traveler had a medical condition requiring the  premium class ticket. However, the note was not signed by a doctor nor  did it reference a medical professional who recommended the need for  premium class seating. The traveler informed us that his supervisor  wrote the medical note after our inquiry into his case. In addition, none  of the other 9 flights taken by the traveler cited a medical condition, and  the traveler flew coach class on a number of flights that lasted longer  than his flight from Washington, D.C., to Amsterdam. According to the  traveler, he never had been properly authorized to fly business class on  the basis of a medical condition.
Traveler #11 was a political appointee and a member of the Commission  on the Future of the United States Aerospace Industry (Commission), an  organization that was almost entirely funded by DOD and for which  DOD paid the cost of all airline tickets for Commission members and  staff. The traveler flew business class from Washington, D.C., to London,  and then traveled by rail from London to Brussels and onto Paris. In  Paris, the traveler took a business class flight to Moscow to attend a 2- day conference. According to the travel order, business class travel was  authorized because it was mission essential. However, the travel order  did not indicate why the cost of business class travel for a trip to a  conference was mission essential. Further, mission essential is not a  DOD criterion for authorizing business class travel. Our data mining  efforts found that DOD paid the travel of a total of 13 individuals—6  commissioners and 7 commission staff—to attend the Moscow  conference after stopping off in London, Brussels, and Paris. The 6  commissioners flew business class for all of the flights, while the  commission staff flew coach to London and on the return flights, and  flew business class while in Europe. None of the commissioners were  government employees; however, all of the staff were employed by DOD  and other agencies. The average cost of the airline tickets for all 6  commissioners was about $7,500 while the average cost of the airline  tickets for the staff was about $3,100. The official told us he authorized  premium class travel for the commissioners because they were high- salaried individuals from the private sector who were donating 10 days  of their time to the government with no compensation. However, neither  the FTR nor the DOD travel regulations authorize premium class travel  based on a person’s salary or whether he or she is donating time to the  government.
section_title: Frequent Premium Class Travelers
paragraphs: Our work also included data mining to identify the individuals who traveled  premium class most frequently. We analyzed the 68,090 premium class  transactions during fiscal years 2001 and 2002 and identified 28 of the most  frequent premium class travelers. As indicated by the examples in table 4,  the frequent travelers were almost all senior DOD personnel. Specifically,  we found that all but 1 of the 28 most frequent travelers were at least GS-13  civilians or O-4 military officials. Although these frequent travelers were  generally authorized to fly premium class by someone at the same or a  higher level, we determined that many of the transactions were improper  because their justification was not supported by the documentation  provided or did not adhere to the FTR and DOD travel regulations. Other  cases involving frequent travelers were questionable because the  justification documentation was not adequate to determine whether the  transaction met DOD’s criteria.
Our work indicated that the most frequent travelers were, in most  instances, authorized to obtain premium class travel by people at the same  or higher levels. Only 3 of the 28 most frequent travelers failed the  authorization test because they or their subordinates authorized their  travel orders. More often, justification provided by frequent travelers failed  the justification test or the justification was not adequate to permit us to  determine whether the transaction complied with the FTR and DOD travel  regulations. The following provides further details on some of the cases in  table 4.
Frequent traveler #1 was a GM-14 at the Navy who took 45 round-trip  flights during our 2-year audit period. The traveler flew business class  on 14 international trips costing about $88,000 but also took 31 domestic  trips, in coach class, costing about $12,000. Attached to the travel order  for each trip was a doctor’s certification noting that, for health reasons,  the traveler needed to fly in premium class. However, we found that the  medical certification did not indicate whether premium class travel was  needed on all flights or flights of certain duration, but that many of the  traveler’s domestic trips, which he took in coach class, were almost as  long as some of the international flights he took in business class. For  example, the traveler regularly flew in coach class from Washington,  D.C., to cities in California and, in one instance, to Honolulu. The flight  times for individual legs of these trips ranged from about 5 to 7 hours.  The traveler’s business class flights included flights from Washington,  D.C., to Frankfurt or Amsterdam. Those flights lasted about 7 hours.  When we discussed the trips with this traveler, he stated that although  some of the domestic flights that he took were similar in duration to the  international flights, his flights to Europe were generally evening flights  and the extra room provided in business class enabled him to be less  confined and to be ready for meetings the next day. The traveler’s  discussion with us and the nature of his coach and premium travel  raises questions regarding his medical need to fly business class.
Frequent traveler # 3 is an assistant secretary of defense in Washington,  D.C., who used a blanket order to authorize and justify business and first  class travel based on an unspecified medical condition. We identified a  total of 17 first and business class tickets for this traveler totaling nearly  $68,000. Neither the travel orders nor the travel vouchers included a  physician’s certification identifying the medical justification to fly first  or business class. In addition, the traveler occasionally flew in coach  class. About a month after we requested additional documentation for  these airline tickets, DOD provided us with a letter from a physician  dated September 11, 2001, requesting that the traveler be authorized to  fly first class so that the traveler could stretch his legs. The records DOD  provided concerning the 17 flights indicated that the travel office did not  attempt to satisfy the traveler’s need for space by reserving a bulkhead  seat or purchasing two coach seats, in accordance with DOD  requirements. We estimate that the total cost of these flights, if flown in  coach class, would have been about $17,000. The individual who made  the premium class reservations told us that she had not been trained on  the limitations associated with premium class travel. She also told us  that in the future she would get the Deputy Secretary’s approval for first  class travel and that she would attempt to limit premium class travel to  instances in which less expensive alternatives were not available.
Frequent traveler #5 was a GS-15 in the Navy who took 11 first class  flights totaling over $35,000 from San Diego to east coast cities including  Washington, D.C., during fiscal years 2001 and 2002. The traveler  justified the 11 flights based on a certification from a medical authority  based on his size and medical condition. However, because his first  class travel was not authorized by the Under Secretary of the Navy, as  required by Navy regulations, we contacted the traveler to obtain further  information on his condition. We estimate that the total cost of these  flights if all flown in coach class would have been about $7,000.  According to the traveler, his condition was not so severe that he would  meet the stringent first class criteria of being “so handicapped or  otherwise physically impaired that other accommodations cannot be  used.” Consequently, the traveler told us he was no longer authorized to  use first class.
Traveler #6 in table 4 was a deputy assistant secretary at DOD who flew  premium class on 10 flights from September 2000 through September  2001 at a cost of approximately $48,000. A review of the travel orders  and additional documentation supporting this travel showed that the  individual consistently documented the reasons he needed to fly  premium class. However, sometimes the justification provided did not  appear applicable to the trip in question. For example, during a 12-day  period in late August 2001, the traveler flew business class from  Washington, D.C., to six European cities and South Africa at a cost of  over $8,800. He then flew business class from South Africa to Atlanta,  and first class from Atlanta to Washington, D.C. The documentation  supporting the trip was an order, signed by the military assistant to the  under secretary, that authorized the traveler to fly first class from  Washington, D.C., to Tampa, Florida—destinations that are different  from the itinerary in question. Both the traveler and his former secretary  told us they did not recall making these flight arrangements.
In none of the cases in our statistical sample and data mining for which  authorization for premium class was given based on medical needs did  DOD submit the medical certification for an informed and independent  review. Our analysis found that 12 of the 28 frequent premium class  travelers justified their more expensive flights with a medical condition.  Further, as discussed in the examples, we identified several anomalies in  the application of medical condition justification, as evidenced by travelers  who used both coach and premium class accommodations during flights of  similar duration and during the same period. This may indicate that  additional steps should be taken to verify the validity of the medical  certification. During testing, an Army official at the Traffic Management  Office informed us that his office forwards all medical certifications to the  Surgeon General for an opinion before recommending to the Secretary of  the Army that approval be granted for first class travel. The official stated  that he did not believe that he was competent to conclude on the medical  certification.
section_title: Lack of Monitoring and Control Environment Weaknesses Contributed to Improper Use of Premium Class Travel
paragraphs: Management and employees should establish and maintain an environment  throughout the organization that sets a positive and supportive attitude toward  internal control and conscientious management. A positive control environment  is the foundation for all other standards. It provides discipline and structure as  well as the climate which influences the quality of internal control. GAO’s  Standards for Internal Control in the Federal Government (GAO/AIMD-00- 21.3.1, November 1999)
Agency internal control monitoring assesses the quality of performance over  time. It does this by putting procedures in place to monitor internal control on  an ongoing basis as a part of the process of carrying out its regular activities. It  includes ensuring that managers and supervisors know their responsibilities for  internal control and the need to make internal control monitoring part of their  regular operating processes. Ongoing monitoring occurs during normal  operations and includes regular management and supervisory activities,  comparisons, reconciliations, and other actions people take in performing their  duties. GAO’s Internal Control Standards: Internal Control Management and  Evaluation Tool (GAO-01-1008G, August 2001)
DOD and the services performed no monitoring and oversight activities to  obtain assurance that premium class travel was authorized in accordance  with regulations. Further, during fiscal years 2001 and 2002, control  environment weaknesses exacerbated already weak key internal controls  described in the previous section. Consequently, DOD did not have an  effective internal control environment, particularly in regard to policies  and procedures, to provide assurance that premium class travel costs are  incurred only when necessary. Specifically, we found that DOD and the  military services did not (1) obtain or maintain centralized management  data on the extent to which military and civilian personnel used premium  class accommodations for their travel, (2) issue adequate policies related  to the approval of premium travel, and (3) require consistent  documentation to justify premium class travel. Until we initiated this audit,  DOD’s management had not provided an appropriate “tone at the top” to  encourage the appropriate use of premium class travel. During the course  of our work, DOD updated the JTR and JFTR in April 2003 to articulate  more clearly and to make more stringent the circumstances under which  premium class travel can be authorized. In addition, the updated JTR and  JFTR emphasize, in the context of lengthy flights, that premium class travel  must not be common practice and must only be used when exceptional  circumstances warrant. The JTR and JFTR also provide examples of when  premium class travel should not be authorized.
subsections: section_title: Monitoring and Oversight Needs Improvement
paragraphs: Ineffective oversight of the use of premium class travel was a key  contributor to weaknesses in the overall control environment. In general,  effective oversight activities would include management review and  evaluation of the process for issuing premium class travel and independent  evaluations of the effectiveness of internal control activities. Program  monitoring provides DOD management an opportunity to obtain  reasonable assurance that premium class travel is only obtained with  proper authorization and justification. This is particularly important  because of both the sensitivity and high cost of premium class travel.  However, DOD and the services performed no monitoring and oversight  activity to obtain assurance that premium class travel was authorized in  accordance with rules and regulations. In addition, as mentioned  previously, DOD and the services did not perform reviews to identify the  extent of premium class travel. Consequently, it is not surprising that DOD  and the services were not aware of the extent of improper premium class  transactions.
Our internal control standards state that separate evaluations of control  should depend on the assessment of risks and the effectiveness of ongoing  monitoring procedures. Our Sensitive Payments Guide lists executive  travel as a high-risk area susceptible to abuse or noncompliance with laws  and regulations. However, we found no evidence of any audits or  evaluations of premium class travel. Further, DOD’s failure to adequately  monitor premium class travel has resulted in an environment in which  there is limited possibility that improper premium class travel will be  identified.
The lack of oversight is further demonstrated by the fact that travelers,  supervisors/managers, and employees at the commercial travel offices  (CTO) responsible for issuing airline tickets to the travelers are not  adequately informed of governmentwide and DOD travel regulations  concerning premium class travel. DOD officials told us that they do not  verify whether CTO employees receive training in DOD travel regulations  relating to the more expensive premium class travel, and DOD does not  track training provided to CTO staff on premium class travel. Thus it was  not surprising that officials authorizing the travel and the travelers were  not aware of the stringent regulations associated with premium class  travel. For example, several DOD travelers and officials told us that they  thought DOD travel regulations entitled travelers to business class travel  when their flights exceeded 14 hours. These individuals were not aware  that the FTR provides that, in order to qualify for business class travel,  travelers have to proceed directly to work upon arriving at the duty  location. In addition, several DOD travelers and officials from the  government and CTOs indicated to us that the numerous CTOs with which  DOD contracted did not consistently apply the premium class criteria. A  representative from one CTO informed us that his office issued premium  class travel if premium class was mentioned on the travel order, even if  justification for obtaining premium class travel was flawed, for example,  the flight was not at least 14 hours.
section_title: DOD Did Not Maintain Centralized Management Data on Premium Class Travel
paragraphs: The Military Traffic Management Command (MTMC), which is responsible  for tracking DOD’s first class travel, understated the cost and frequency of  first class travel reported to GSA. In addition, MTMC did not track, and  therefore did not know, the number of business class trips DOD travelers  took during fiscal years 2001 and 2002 or the cost of these premium class  trips. As a result, DOD did not have the data needed for monitoring and  oversight activities or for identifying trends and determining alternate, less  expensive means of transportation.
The FTRrequires DOD, along with all other executive and legislative  branch agencies, to provide GSA annual reports listing all instances in  which the organizations approved the use of first class transportation  accommodations. According to the first class travel reports that MTMC  submitted to GSA for fiscal years 2001 and 2002, DOD civilian and military  personnel took less than 1,000 first class flight segments totaling less than  $600,000. These data are supposed to represent all first class transportation  expenses, whether charged on the centrally billed accounts or the  individually billed accounts. According to the individual responsible for  compiling this report, the roughly 1,000 first class segments were identified  in what is essentially a data call process in which MTMC personnel  aggregated information provided by the CTOs on the number and cost of  first class tickets they issued.
However, our analysis of Bank of America airline transaction data indicates  that both the number and cost of the first class tickets reported by DOD are  significantly understated. Based on our analysis, DOD did not report more  than half of fiscal years 2001 and 2002 first class segments. As shown in  table 1, we found that DOD used the centrally billed accounts to purchase  1,240 airline tickets that contained at least one first class portion. These  1,240 tickets, which did not include first class tickets purchased using the  individually billed accounts, contained over 2,000 separate segments with  first class accommodations, compared to the less than 1,000 flight  segments DOD reported to GSA. These first class tickets costs of about  $2.9 million were almost 5 times the amount DOD reported to GSA.
The differences between the first class travel that we identified and the  amount DOD reported can in part be attributed to omissions in DOD’s  methodology for identifying first class tickets. The airlines use a variety of  letter codes to identify first class fares, and we found that in extracting first  class data DOD omitted several of the first class codes used by some  airlines. Further, a comparison of MTMC’s report and our analysis of the  Bank of America transaction file showed that a number of cities were  omitted from its analysis of first class travel. For example, while DOD data  indicated that no first class flight was taken into Washington, D.C., during  fiscal year 2001, we found 88 first class flights into Washington, D.C., during  fiscal year 2001, including first class round-trips from Washington, D.C., to  Honolulu, San Francisco, Denver, St. Louis, and Los Angeles.
We also found that DOD did not obtain or maintain centralized data on  premium class travel other than first class, that is, business class.  Consequently, DOD did not know, and was unable to provide us with data  related to, the extent of its premium class travel. As mentioned previously,  we were able to obtain such data through extensive analysis and  extractions of DOD travel card transactions from databases provided by  Bank of America.
section_title: Control Environment Is Flawed by Inconsistencies in Premium Class Travel Guidance
paragraphs: DOD travelers must follow a complicated array of premium class travel  guidance. The applicability of specific regulations depends on whether the  traveler is civilian or military. For DOD civilians, GSA’s FTR governs travel  and transportation allowances. DOD’s JTR and individual DOD and military  service directives, orders, and instructions supplement the FTR. For  military personnel, DOD’s JFTR governs travel and transportation  allowances. Individual DOD and military service directives, orders, and  instructions supplement the JFTR. The executive branch policy on the use  of first class travel applicable to the FTR, JTR, and JFTR is found in OMB  Bulletin 93-11. When a subordinate organization issues an implementing  regulation or guidance, the subordinate organization may make the  regulations more stringent, but generally may not relax the rules  established by higher-level guidance.
Inconsistencies have accumulated within the various premium class travel  regulations because DOD did not revise DOD directives, or require the  military services to revise their travel policies or implementing guidance,  when it modified the JTR or JFTR. For example, DOD first issued the JTR  in 1965 and since then had modified it 450 times through April 2003,  including 30 modifications since October 2000. While the JFTR has had  fewer modifications—196 through April 2003—the JFTR has also been  modified 30 times since October 2000. Despite these changes, DOD and the  services frequently have not modified their directives and guidance to  reflect these changes. For example, DOD Directive 4500.9 was last revised  in 1993, while DOD Directive 4500.56 was last updated in 1997. Further, the  Navy Passenger Transportation Manual was last updated in 1998; Marine  Corps Order P4600.7C, Marine Corps Transportation Manual, was last  changed in 1992; and while Air Force Instruction 24-101, Passenger  Movement, was last updated in 2002, it contains some provisions that are  contrary to our Guide for Evaluating and Testing Controls Over Sensitive  Payments and our Standards for Internal Control in the Federal  Government.
The proliferation of different internal DOD regulations and a failure by  DOD to clearly explain the relationship of its different regulations have  created confusion for travelers and officials, as evidenced by instances,  discussed previously, in which premium class travel had been  inappropriately approved. Inconsistencies also exist because DOD and its  components have elected to authorize the use of premium class travel in  different circumstances or have described the authorization to use  premium class travel using different language. For example, see the  following:
DOD Directive 4500.9,Transportation and Traffic Management (last  updated in 1993), contains a section establishing the authority to use  premium class flights that differs in several aspects from GSA’s FTR and  DOD’s JTR and JFTR as well as other directives issued by DOD.  Specifically, DOD Directive 4500.9 grants blanket authority for high- ranking officials to use premium class travel when traveling overseas on  official government business. This policy contradicts and is less  stringent than the FTR, which does not cite rank as a condition for  obtaining premium class travel. The JTR and JFTR (both modified in  2003) also do not cite rank as a criterion for allowing business class  travel for international flights. Further, DOD’s General Counsel staff told  us this provision was superseded by DOD Directive 4500.56.
GSA’s FTR authorizes agencies to approve the use of first class or  business class accommodations when required by an agency’s mission,  but neither the JTR nor the JFTR adopts this authorization. In contrast,  DOD Directive 4500.9 states that the use of business class on domestic  travelmay be authorized when necessitated by mission requirements.
GSA’s FTR states that premium other than first class travel may be  authorized when the origin and/or destination of travel is outside the  continental United States and the scheduled flight time is in excess of 14  hours. However, the FTR prohibits premium class travel if the traveler is  authorized a rest stop en route or a rest period upon arrival at the duty  site. In contrast, DOD’s JTR and JFTR that were in effect at the time of  our audit did not indicate whether a rest period upon arrival at the duty  station prohibited the authorization of premium class travel. Both DOD  directives on travel (4500.9 and 4500.56) do not directly address whether  premium class travel is allowed if the flight exceeds 14 hours. Further,  the services’ implementing guidance is inconsistent in its application of  the 14-hour rule. For example, the Army policy adopts the FTR “rest  period upon arrival” limitations, but did not define what is considered a  “rest period.” The Navy policy prohibits a “rest period en route.” The  Air Force policy states that Air Force travelers might be authorized  business class accommodations if they are required to perform a full day  (8 hours) of work immediately upon arrival. Finally, the Marine Corpsimplementing guidance does not address this matter.
GSA and DOD travel regulations authorize premium class  accommodations when they are paid for by a nonfederal source.  However, the Navy travel policyprohibits the use of first class  accommodations even when those accommodations are paid for by a  nonfederal source, such as when a professional association pays for the  travel of a Navy employee.
section_title: DOD Does Not Have a Standard Format for Documenting Premium Class Travel
paragraphs: DOD and the services have not defined a standard format for documenting  authorization and justification for premium class travel. Because premium  travel is to be taken only on an exception basis after all other alternatives  have been exhausted, the documentation for authorization and justification should be held to the highest standards to provide reasonable assurance  that in every case the substantially higher premium travel cost is  warranted. In DOD’s case, because authorization and justification for  premium travel is not consistently documented, it does not have a  documentation trail indicating that the appropriate official approved the  travel order and there was adequate justification for the additional cost  associated with a premium class ticket.
The JTR and JFTR state that approval for premium class travel should be  obtained in advance of travel, except in extenuating/emergency  circumstances that make authorization impossible, and specify the  circumstances under which premium travel is to be permitted. However,  the JTR and JTFR do not provide clear and consistent procedures for  documenting the approval of premium class travel and the type of  supporting documentation to be maintained. In contrast, other federal  agencies have issued clear and consistent guidelines related to the  documentation of premium class travel. For example, the Department of  Agriculture (USDA) approves the use of premium class accommodations  on a case-by-case basis and specifies that premium travel be approved by  the under secretary except when frequent travel benefits are used. The  justification must include the specific circumstances relating to the  criteria, such as a medical justification from a competent medical authority,  which must include a description of the employee’s disability, medical  condition, or special need; approximate duration of the medical condition  or special need; and a recommendation of a suitable means of  transportation based on medical condition or special need. In addition,  USDA requires that the traveler prepare a report documenting first class  travel that details the traveler’s name, address, rank, dates of travel with  originating and destination cities, the reason for obtaining first class travel  and the costs of both the coach fare and the first class fare. As shown in  figure 1, other agencies, such as the National Institutes of Health (NIH),  have standard forms that travelers must complete when requesting  approval for any travel other than coach class accommodations.  Information required includes the traveler’s identifying information, the  reason for requesting premium class travel, and a comparison of the cost of  premium and coach class travel. Such a form would help eliminate the  failure to obtain specific authorization for premium class travel that we  identified in our statistical testing.
Further, we found that other agencies used a separate form to document a  medical condition and to justify premium class travel. As shown in figure 2,  the disabilities or other special needs form used by NIH requires detail on  the nature of the disability or special need and the signature of both the  employee and a competent medical authority. NIH’s policies state that the  medical statement should specifically address why it is necessary to use  upgraded accommodations. The form also limits the authority to a period  of 6 or 12 months from the initial date of approval depending on the nature  of the disability or special need. In the instance of a permanent disability,  NIH policy is that authorized use of premium class accommodations is  valid for up to 3 years. Resubmission is necessary to ensure that there  continues to be a need for the approval and to keep the authorization  records current.
section_title: DOD Issued New Regulations to Better Define When Premium Class Travel Is Authorized
paragraphs: During the course of our work, in April 2003, DOD updated the JTR and  JFTR to articulate more clearly and make more stringent the  circumstances under which premium class travel may be authorized. In  addition, the updated JTR and JFTR emphasize, in the context of lengthy  flights, that premium class travel must not be common practice and must  only be used when exceptional circumstances warrant. They also provide  examples of when premium class travel should not be authorized.
The revised JTR and JFTR better define the circumstances in which  premium class other than first class travel, that is, business class, is  authorized for DOD travelers on flights to and/or from points outside the  continental United States when the scheduled flight time exceeds 14 hours.  Most notably, the revised regulations prohibit the use of business class  travel when travelers are authorized a “rest period” or an overnight stay  upon arrival at their duty stations. The modified regulations now explicitly  state that business class accommodations are not authorized on the return  leg of travel. This is a further restriction on premium class travel; before  April 2003, DOD did not expressly prohibit travelers from using premium  class travel on their return trips to the United States.
Finally, in its revised regulations, DOD provides specific guidance on how  the proposed use of business class accommodations should be considered  by officials and travelers. DOD states that, in the context of authorizing  business class accommodations for flights scheduled to exceed 14 hours,  “business class accommodations must not be common practice” and that  such service should be used only in exceptional circumstances. Further,  DOD directs order-issuing officials to “consider each request for business  class service individually.” We agree with DOD that decisions regarding the  use of premium class travel should be made on a case-by-case basis and  based on a preference for coach class.
section_title: Conclusions
paragraphs: The ineffective management and oversight of premium class travel  provides another example of why DOD financial management is one of our  “high-risk” areas, with the DOD highly vulnerable to fraud, waste, and  abuse. DOD does not have the management controls in place to identify  issues such as improper use of premium class travel. As a result, millions of  dollars of unnecessary costs are incurred annually. Because premium class  travel is substantially more costly than coach travel, it should only be used  when absolutely necessary, and the standards for approval and justification  must be high. During our audit, DOD began taking steps to improve its  policies and procedures for premium class travel. DOD must build on these  improvements and establish strong controls over this sensitive area to  provide reasonable assurance that its travel dollars are spent in an  economical and efficient manner.
Recommendations for 	 We are making the following recommendations to improve internal control  Executive Action 	 over the authorization and justification of premium class travel and to strengthen the control environment as part of an overall effort to reduce  improper premium class travel and related DOD costs.
subsections: section_title: Key Internal Control Activities
paragraphs: Because of the substantial cost and sensitive nature of premium class  travel, we recommend that the Secretary of Defense direct the appropriate  under secretary of defense, assistant secretary of defense, or military  service officials to direct the implementation of specific internal control  activities over the use of premium travel. While a wide range of activities  can contribute to a system that provides reasonable assurance that  premium class travel is authorized and justified, at a minimum, the internal  control activities should include the following:
Reiterate to DOD’s personnel the policy that premium class travel be  authorized and justified only on a case-by-case basis.
Require the travel offices to issue premium class tickets only if properly  authorized and justified and documented accordingly.
Prohibit the use of blanket authorization for premium class travel.
section_title: Overall Program Management and Environment
paragraphs: We recommend that the Secretary of Defense direct the appropriate under  secretary of defense, assistant secretary of defense, or military service  officials to establish policies and procedures to incorporate the regulations  specified in GSA’s FTR as well as guidance specified in our Standards for  Internal Control and our Guide for Evaluating and Testing Controls Over  Sensitive Payments, including the following:
Develop procedures to identify the extent of premium class travel,  including all business class travel, and monitor for trends and potential  misuse.
Develop procedures to identify all first class fare codes so that DOD can  prepare complete and accurate first class travel reports.
Develop a management plan requiring that audits of DOD’s issuance of  premium class travel are conducted regularly and the results of these  audits reported to senior management. Audits of premium class travel  should include reviews of whether commercial travel offices adhere to  all governmentwide and DOD regulations for issuing premium class  travel.
Periodically provide notices to travelers and supervisors/managers that the limitations on premium class travel, the limited situations in which premium class travel may be how the additional cost of premium class travel can be avoided.
Provide training to travelers and supervisors/managers that identifies  DOD’s premium class policies and procedures.
Train or make training materials available to the commercial travel  offices so that they may train their employees on premium class policies  and procedures.
Require that premium class travel be approved by individuals who are at  least of the same rank/grade as the travelers.
Specifically prohibit the travelers themselves or their subordinates from  approving requests for premium class travel.
Use a standardized format or modify the format of the existing travel  order to document the request and authorization of premium class  travel. The standardized form or modified travel order should contain  sufficient information to provide a clear audit trail that documents why  the additional cost of premium class travel was a necessary expense  that could not have been avoided.
Develop a policy that articulates what constitutes adequate support to  substantiate medical, disability, or special needs. Such a policy should  address the length of time a medical certification is valid.
Determine the feasibility of requiring that the medical certification for  premium class travel be reviewed by an independent medical  professional to verify that the medical condition justifies the additional  cost of premium class travel.
Revise DOD’s directives on travel, when necessary, to ensure that they  are at least consistent with, or more stringent than, GSA’s travel  regulations. For example, issue the update to DOD Directive 4500.9 that  removes the provision authorizing certain presidential appointees and  three-star and four-star generals/admirals to fly premium class on flights  when flying to or from overseas destinations.
Revise the military service directives, orders, and policies to make them  consistent with the JTR and JFTR.
section_title: Agency Comments and Our Evaluation
paragraphs: On September 10, 2003, DOD, Air Force, Army, Marine Corps, and Navy  officials representing the offices of the under secretaries of defense for  Acquisitions Technology and Logistics, Personnel and Readiness, and  Comptroller provided oral comments on a draft of this report. The officials  said they agreed with the findings presented in the draft report and  generally concurred with our recommendations for resolving the control  weaknesses. The officials explained that because responsibility for travel  program management is spread across three under secretaries, they were  not yet sure who would be responsible for monitoring implementation of  the recommendations.
Those DOD officials pointed out that two of our recommendations could be  addressed in different ways than contemplated in the draft report. First,  they said the justification for premium class travel could be documented by  modifying or augmenting the existing DOD travel order rather than using a  separate form. We have modified the text of these recommendations to be  less prescriptive as to the corrective actions and instead focus on the intent  of the recommendations for having clear, well-supported justifications and  written audit trails of the authorization to spend additional funds on  premium class travel. Second, in regard to training commercial travel office  personnel on premium class travel limitations, they expressed a preference  for DOD providing training materials to the commercial travel offices so  that they, rather than DOD, could train their personnel, and facilitating just- in time or other training for commercial travel office personnel.
As agreed with your offices, unless you announce the contents of this  report earlier, we will not distribute it until 30 days from its date. At that  time, we will send copies to interested congressional committees; the  Secretary of Defense; the Under Secretary of Defense, Comptroller; the  Secretary of the Army; the Secretary of the Navy; the Secretary of the Air  Force; and the Director of the Defense Finance and Accounting Service. We will make copies available to others upon request. In addition, the report  will be available at no charge on the GAO Web site at http://www.gao.gov.
Please contact Gregory D. Kutz at (202) 512-9505 or kutzg@gao.gov, John J. Ryan at (202) 512-9587 or ryanj@gao.gov, or John V. Kelly at (202) 512-6926  or kellyj@gao.gov if you or your staffs have any questions concerning this  report. Major contributors to this report are acknowledged in appendix III.
section_title: Objectives, Scope, and Methodology
paragraphs: We audited the controls over the authorization and issuance of premium  class travel charged to the Department of Defense’s (DOD) centrally billed  travel accounts during fiscal years 2001 and 2002. Our assessment covered  the following:
The extent to which DOD uses the centrally billed travel accounts to  purchase premium class travel.
Testing a statistical sample of premium class transactions to assess the  implementation of key management controls and processes for  authorizing and issuing premium class travel, including approval by an  authorized official and justification in accordance with regulations. We  also identified other selected transactions throughout the premium  class travel transactions to determine if indications existed of improper  transactions.
DOD’s oversight and monitoring of the use of premium travel and key  elements of the control environment, including the (1) consistency of  premium class travel procedures among the services and (2) adequacy  of documentation to justify the additional cost of premium class travel.
subsections: section_title: Magnitude of Premium Class Travel
paragraphs: To assess the magnitude of use of premium class travel, we obtained from  Bank of America a database of fiscal year 2001 and 2002 travel transactions  charged to DOD’s centrally billed travel card accounts. We queried the  database to isolate those transactions specifically related to airline travel.  The airline industry uses certain fare and service codes to indicate the class  of service purchased and provided. The database contained transaction- specific information, including the fare and service codes used to price the  tickets DOD purchased. We identified the fare basis codes that  corresponded to the issuance of first, business and coach class travel.  Using these codes, we selected all airline transactions that contained at  least one leg in which DOD paid for premium class travel accommodations.  We also used these data to identify the number of transactions in which  DOD purchased an entirely coach class ticket, but the transactions  contained at least one segment of the ticket that was upgraded to a  premium class accommodation.
section_title: Evaluate Effectiveness of Controls through Statistical Sampling and Data Mining
paragraphs: We tested a statistical sample of premium class transactions to assess the  implementation of key management controls and processes for approving  and issuing premium class travel, and used data mining for additional  examples of transactions that illustrate improper or questionable premium  class travel. The population from which we selected our transactions for  testing was the set of positive debit transactions for both first and business  class travel that were charged to DOD’s centrally billed travel accounts  during fiscal years 2001 and 2002. Because our objective was to test  controls over travel card expenses, we excluded credits and miscellaneous  debits (such as fees) that would not have been for ticket purchases from  the population of transactions.
We further limited the business class transactions to those costing more  than $750 because many intra-European flight business class tickets cost  less than $750 and the corresponding coach class tickets were not  appreciably less. By eliminating from our sample business class  transactions less than $750, we avoided the possibility of selecting a large  number of transactions in which the difference in cost was not significant  enough to raise concerns of the effectiveness of the internal controls. The  total number of transactions excluded was 15,887, costing approximately  $8 million. While we excluded business class transactions costing less than  $750, we (1) did not exclude all intra-European flights and (2) potentially  excluded nonauthorized business class flights. Limitations of the database  prevented a more precise methodology of excluding lower cost business  class tickets.
To test the implementation of key control activities over the issuance of  premium class travel transactions, we selected a stratified random  probability sample from the subset of centrally billed account transactions  containing at least one premium class leg and in which the business class  ticket cost more than $750. Specifically, we selected 15 first class  transactions from a population of 1,240 transactions, totaling about  $3 million, and 122 business class transactions from a population of about  51,000 transactions, totaling about $113 million. For each transaction  sampled, we requested that DOD provide us the travel order, travel  voucher, travel itinerary, and other related supporting documentation. We  used that information to test whether documentation existed that  demonstrated that DOD had adhered to key internal controls over  authorizing and justifying the premium class ticket. Based on the  information DOD provided, we assessed whether a valid official approved  the premium class travel and whether the premium class travel was  justified in accordance with DOD regulations. The results of the samples of  these control attributes can be projected to the population of transactions  at DOD only, not to individual services or locations.
Based on the sampled transactions, we also estimated the percentage of  premium class travel taken by civilian supervisors, managers, and  executives, or senior military officers. With this statistically valid  probability sample, each transaction in the population had a nonzero  probability of being included, and that probability could be computed for  any transaction. Each sample element was subsequently weighted in the  analysis to account statistically for all the transactions in the population,  including those that were not selected. Because we followed a probability  procedure based on random selections, our sample is only one of a large  number of samples that we might have drawn. Since each sample could  have provided different estimates, we express our confidence in the  precision of our particular sample's estimates as 95 percent confidence  intervals (e.g., plus or minus 7 percentage points). These are intervals that  would contain the actual population value for 95 percent of the samples we  could have drawn. As a result, we are 95 percent confident that each of the  confidence intervals in this report will include the true values in the study  population. All percentage estimates from the sample of premium class air  travel have sampling errors (confidence interval widths) of plus or minus  9 percentage points or less. Table 5 and table 6 summarize the population  of DOD airline travel transactions containing at least one premium class leg  charged to DOD’s centrally billed accounts in fiscal years 2001 and 2002  and the subpopulation subjected to testing.
In addition to our audit of a DOD-wide statistical sample of transactions,  we also selected other transactions identified by our data mining efforts for  audit. Our data mining identified individuals who frequently flew using first  or business class accommodations, frequent trips to one location, and trips  involving family travel. For data mining transactions, we also requested  that DOD provide us the travel order, travel voucher, travel itinerary, and  any other supporting documentation that could provide evidence that the  premium class travel was properly authorized and justified in accordance  with DOD policies. If the additional documentation provided indicated that  the transactions were proper and valid, we did not pursue further  documentation of those transactions. If the additional documentation was  not provided or if it indicated further issues related to the transactions, we  obtained and reviewed additional documentation or information about  these transactions.
section_title: Control Environment
paragraphs: To assess the overall control environment for premium class travel, we  obtained an understanding of the travel process, including authorization of  premium class travel, by interviewing officials from the Department of the  Army, Department of the Navy, Department of the Air Force, and Defense  Finance and Accounting Service. We reviewed applicable policies and  procedures and program guidance that they provided. We visited two Army  units, three Navy units, three Air Force units, and two Marine Corps units  to gain an understanding of the travel process, including the management  of premium class travel. We used as our primary criteria applicable laws  and regulations, including GSA’s Federal Travel Regulation and DOD’s  Joint Travel Regulations and Joint Federal Travel Regulations. We also  used as criteria our Standards for Internal Control in the Federal  Government and our Guide to Evaluating and Testing Controls Over  Sensitive Payments. To assess the management control environment, we  applied the fundamental concepts and standards in our internal control  standards to the practices followed by management in the areas reviewed.
We did not audit the Defense Finance and Accounting Service’s centrally  billed travel card payment process. We also did not audit electronic data  processing controls used in processing centrally billed account  transactions. The sites reviewed received paper monthly bills containing  the charges for their purchases and used manual processes for much of the  period we audited, which reduced the importance of electronic data  processing controls.
We briefed DOD managers, including DOD officials in the Office of the  Under Secretary of Defense (Comptroller), the Defense Finance and  Accounting Service, and the Office of Inspector General; Army officials in  the Office of Deputy Chief of Staff for Logistics; Navy officials in the Office  of the Assistant Secretary of the Navy for Financial Management and  Comptroller; Air Force officials in the Office of the Deputy Chief of Staff  for Installation and Logistics; and Marine Corps officials in the Office of  Deputy Chief of Staff for Installations and Logistics. On August 8, 2003, we  provided DOD officials with a draft of this report. We obtained oral  comments from DOD, Air Force, Army, Marine Corps, and Navy officials  representing the offices of the under secretaries of defense for Acquisitions  Technology and Logistics, Personnel and Readiness, and Comptroller on  September 10, 2003. We summarized those comments in the “Agency  Comments and our Evaluation” section. We conducted our audit work from  November 2002 through August 2003, in accordance with U.S. generally  accepted government auditing standards, and we performed our  investigative work in accordance with standards prescribed by the  President’s Council on Integrity and Efficiency.
section_title: Process to Obtain Premium Class Travel
paragraphs: The process for obtaining premium class travel begins when a DOD civilian  employee or member of the military or the employee’s supervisor  determines that he or she needs to travel and the traveler is notified to  initiate a travel request. If the traveler determines that he or she needs  premium class travel, the traveler submits the travel request, along with  justification for premium travel, to his or her supervisor for approval. Once  the supervisor reviews the travel request, along with the required  supporting documentation, such as a doctor’s note supporting a specific  physical condition and the necessity for premium travel, it is forwarded to  the official who signs the order. For first class travel, the secretary within  the military service or a designee reviews the request and justification for  first class travel for consistency with DOD regulations. In the case of  premium class other than first class transportation, the local transportation  officer or other appropriate authority reviews the request and justification.
The order-signing official reviews the travel request and documentation  and determines if there is adequate support for the premium travel. If the  travel is properly supported and justified, then the premium class travel is  approved and the official signs the travel request to generate a travel order.  If adequate support does not exist for the class of travel requested, then the  request for premium travel is denied.
The travel order is issued, signed by the official, and delivered to the  government travel office (GTO), or the commercial travel office (CTO)acting on behalf of the government. Either the GTO or CTO verifies the  existence of documentation and checks for an authorizing signature. The  CTO then issues the premium class ticket and charges the centrally billed  account. The CTO is not supposed to use the centrally billed account to  purchase a premium class ticket until the traveler or the official provides  the CTO with a signed travel order authorizing the premium class travel.  Figure 3 provides a graphic description of the process to obtain premium  class travel.
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: Staff making key contributions to this report were Kris Braaten, Beverly  Burke, Francine DelVecchio, Lisa Hansen, Kenneth M. Hill, Aaron Holling,  Jeffrey Jacobson, Julie Matta, Karlin Richardson, John Ryan, Sidney H.  Schwartz, and Scott Wrightson.
section_title: GAO’s Mission
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subsections: section_title: Order by Mail or Phone
section_title: To Report Fraud, Waste, and Abuse in Federal Programs
section_title: Public Affairs