Premium Class Travel: Internal Control Weaknesses Governmentwide Led to Improper and Abusive Use of Premium Class Travel
Published: 2007-09-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Previous GAO work on widespread improper premium class travel at the Department of Defense (DOD) and the Department of State (State) have led to concerns as to whether similar improper travel exists in the rest of the federal government. Consequently, GAO was asked to (1) determine the magnitude of premium class travel governmentwide and the extent such travel was improper, (2) identify internal control weaknesses that contributed to improper and abusive premium class travel, and (3) report on specific cases of improper and abusive premium class travel. GAO analyzed bank data and performed statistical sampling to quantify the extent premium class travel was improper. GAO also performed data mining, reviewed travel regulations, and interviewed agency officials.
section_title: What GAO Found
paragraphs: Breakdowns in internal controls and a weak control environment resulted in at least $146 million in improper first and business class travel governmentwide. The federal government spent over $230 million on about 53,000 premium class tickets from July 1, 2005, through June 30, 2006. Premium class tickets are costly--for example, a Department of Agriculture (USDA) executive flew business class from Washington, D.C., to Zurich, Switzerland, at a cost of $7,500 compared to $900 for a coach class ticket. Based on statistical sampling, GAO estimated that 67 percent of premium class travel was not properly authorized, justified, or both. While business class travel accounted for 96 percent of all premium class travel, many agencies informed us that they did not track, and thus did not know the extent of, business class travel. OMB and GSA also did not require reporting of business class travel. GAO found large differences in premium class guidance governmentwide, with some agencies issuing less restrictive guidance that were tailored for executive travel. For example, the FTR allows premium class travel for flights over 14 hours if properly authorized. However, executives at the Foreign Agricultural Service frequently used "mission critical" to justify flights to Western Europe that typically lasted less than 10 hours. Other agencies, such as State and the Millennium Challenge Corporation (MCC), automatically approved premium class travel for all flights over 14 hours. GAO's analysis of flights involving destinations in the United States and Africa, the Middle East, and parts of Europe lasting 14 hours or more showed that 72 and 83 percent, respectively, of State's and MCC's flights involving these locations were in premium class. In contrast, 3 percent of all DOD's and the Department of Homeland Security's flights to the same locations were in premium class. There are examples representing specific cases of improper and abusive use of premium class, including employees of entities not subject to the Federal Travel Regulations that have issued policies that resulted in the purchase of costly premium class travel.

section_title: Letter
paragraphs: The serious fiscal challenges facing the federal government dictate that  agencies do everything they can to operate as efficiently as possible. With  respect to government travel, employees on official government travel are  expected to follow published guidelines related to when and how premium  (first and business) class travel should be undertaken. Due to the high cost  of premium class travel, the General Services Administration’s (GSA)  Federal Travel Regulations (FTR) includes specific guidelines meant to  restrict premium class use. For example, agencies can provide business  class travel for agency mission; when an individual has a physical  disability that is certified by a medical professional; or a flight is to or from  a destination outside the continental United State, exceeds 14 hours, and  is taken without a rest stop en route or at destination (i.e., the 14-hour  rule). While travelers who meet these or a number of other criteria stated  in the FTR may qualify for premium class, GSA directs agencies to  evaluate each application, decide whether the circumstances warrant it,  and issue specific authorization before the traveler can travel premium  class. To safeguard taxpayer’s money, the regulations state that agencies  are to conduct all travel as responsibly as possible. For their part, travelers  are told to exercise the same standard of care in incurring expenses that a  prudent person would exercise if traveling on personal business. However,  in 2003 and again in 2006, we reported that weaknesses in internal controls  at the Department of Defense (DOD) and the Department of State (State)led to improper use of premium class travel, that is, travel that was  unauthorized or unjustified. Premium class flights are of special concern  because they often cost thousands of dollars more than the coach class  alternatives. Subsequently, questions have arisen as to whether improper  and abusivepremium class travel was also occurring in other federal  government agencies. This report responds to your request that we  provide the results of our audit and investigative work on the use of  premium class travel governmentwide.
Specifically, we (1) determined the magnitude of premium class travel  governmentwide and the extent such travel was improper, (2) identified  internal control weaknesses that contributed to improper and abusive  premium class travel, and (3) reported on specific cases of improper and  abusive premium class travel.
To determine the magnitude of premium class travel, we extracted  premium round-trip airline ticket transactions from July 1, 2005, through  June 30, 2006, from the databases provided by the four banks that supplied  travel cards to federal government employees—Bank of America,  Citibank, JPMorgan Chase, and US Bank. We drew and tested a statistical  sample of premium class travel transactions and conducted other audit  work to determine the extent to which this travel was improper. We  included in our statistical sample premium class transactions from all  executive agencies, wholly owned federal government corporations, and  independent establishments as defined by the United States Code. We  excluded transactions by employees or individuals approved to travel for  the legislative and judicial branches, executive entities with statutory  authority over their own travel that are not subject to the FTR, and entities  under treaty with the United States, and premium class travel obtained as  a result of mileage upgrades because they did not result in a cost to the  federal government.
To identify underlying causes contributing to improper premium class  travel, we reviewed federal laws and regulations and selected agencies’  implementing guidance, and interviewed agency officials on their agencies’  approval processes for premium class travel. We also interviewed GSA and  Office of Management and Budget (OMB) officials on their oversight of  premium class travel. To identify whether variances existed in how  agencies used premium class travel, we calculated the extent to which  federal agencies flew premium class for flights over 14 hours to selected  locations. We used data mining to identify the most egregious examples of  premium class travel, including instances of high-priced or frequent  premium class travel by the same individual from July 1, 2005, through  September 30, 2006. This period includes an additional 3 months of data  subsequent to the period included in our statistical sample. Our case  studies included premium class travel by individuals from executive  entities with statutory authority over their own travel that are not subject  to the FTR, and also included information obtained through investigations  of specific allegations regarding possible premium class travel abuse  received through GAO’s FraudNET hotline. Appendix I provides further  detail on our scope and methodology.
We conducted our audit work from July 2006 through August 2007 in  accordance with U.S. generally accepted government auditing standards,  and we performed our investigative work during the same period in  accordance with standards prescribed by the President’s Council on  Integrity and Efficiency. A detailed discussion of our scope and  methodology is presented in appendix I.
subsections: section_title: Background
paragraphs: The FTR, issued by GSA, implements statutory and OMB requirements and  policies for most federal civilian employees and others authorized to travel  at government expense. The purpose of the FTR is to ensure that official  travel is conducted responsibly and at minimal administrative expense.  Unless exempt by specific legislation, executive agencies, wholly owned  government corporations, and independent establishments are expected  to follow the FTR, including its promulgation related to premium class  travel. DOD’s uniformed servicemembers and State employees exempt  from the FTR are covered by their agencies’ travel regulations.
OMB’s general policy related to travel is that the taxpayers should pay no  more than necessary to transport government officials. Consistent with  this principle, the FTR states that with limited exceptions, travelers must  use coach class accommodations for both domestic and international  travel. Premium class travel can occur only when the traveler’s agency  specifically authorizes the use of such accommodations (authorization)  and only under specific circumstances (justification). Specifically, the FTR  states 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, when use of first class is necessary to accommodate a disability or other  special need that is substantiated in writing by a competent medical  authority, when exceptional security circumstances require first class travel, or when required because of agency mission.
The FTR authorizes premium class accommodations other than first class  (business class) when at least one of the following conditions exists:  regularly scheduled flights between origin/destination points provide only  premium class, and this is certified on the travel voucher; coach class is not available in time to accomplish the mission, which is  urgent and 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;  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 en route or a rest period upon arrival is prohibited  when travel is authorized by premium class accommodations); or when required because of agency mission.
As specified above, employees traveling in premium class have to meet  both authorization and justification requirements to qualify, meaning that  employees who, for example, traveled premium class on a trip exceeding  14 hours would violate the FTR if they traveled premium class without  receiving specific authorization to do so. Agencies subject to the FTR have  generally issued internal policies and procedures to clarify the premium  class travel provisions of the FTR, implement these provision, or both.  When issuing implementing policy, agencies have to follow executive  branch policy, which specifies that a subordinate organization seeking to  establish implementing regulation or guidance may make the regulations  more stringent but not relax the rules established by higher-level guidance.  For example, an agency’s implementing policy related to premium class  travel because of disability can require that the traveler provides medical  certification that is updated annually, but cannot waive the requirement  that a certification by a competent medical authority be provided.
DOD and State have also issued their own detailed implementing policies  and procedures that cover all aspects of travel, from authorization to  reimbursement to regulations for premium class. DOD issues the Joint  Federal Travel Regulations (JFTR) for uniformed service members not  covered by the FTR, and also updates the Joint Travel Regulations (JTR),  which implements the FTR for DOD civilian employees. Similarly, State’s  Foreign Affairs Handbook and Foreign Affairs Manual (FAM) represent  major sets of policies and procedures related to travel reimbursements to  Foreign Service employees pursuant to the Foreign Service Act of 1980.  With respect to premium class travel, the regulations contained in the JTR,  the JFTR, and the FAM are generally consistent with the FTR.
section_title: Extent of Governmentwide Improper Premium Class Travel Is Significant
paragraphs: For 12 months of travel from July 1, 2005, through June 30, 2006, the  government spent more than $230 million on over 53,000 airline tickets  that contained at least one leg of premium class travel. Using statistical  sampling, we estimated that at least $146 million of this premium class  travel was unauthorized or unjustified. In addition, our statistical sample  population contained a number of flights taken by government executives.  Specifically, we found that senior executives (senior-level executives and  presidential appointees with Senate confirmation), who constituted about  one-half of 1 percent of the federal workforce, accounted for 15 percent of  premium class travel.
subsections: section_title: Governmentwide Premium Class Travel Use
paragraphs: The government bought more than 53,000 premium class tickets totaling  over $230 million during a 12-month period from July 1, 2005, to June 30,  2006. We identified premium class tickets as any ticket that contained at  least one leg of travel in first or business class. Since the government did  not maintain centralized data on premium class travel, we extracted ticket  information from the government credit card banks’ databases of  government individually and centrally billed account travel, which  included over 6.1 million transactions for airline tickets valued at almost  $3.4 billion.
Although premium class travel represented less than 1 percent of the total  flights taken governmentwide, the high cost of premium class tickets  meant that premium class travel accounted for nearly 7 percent of total  dollars spent on government airline travel. In some instances, the price  difference between a business class and comparable coach class ticket  may be negligible—particularly if the traveler traveled within Europe.  However, on routes where GSA had awarded a government fare for  economy and business classes, an average business class ticket in fiscal  year 2006 cost more than 5 times the cost of a coach class ticket. For  example, a traveler’s one-way business class ticket from Madrid to  Washington, D.C., was over 7 times the price of a coach class ticket. First  class tickets can be even more costly. For example, another traveler from  the Federal Reserve Board (FRB) flew first class between Washington,  D.C., and London for more than $12,000, or more than 16 times the price of  a coach class flight. To put the total amount spent on premium class travel  into perspective, the over $230 million the government spent on premium  class travel during these 12 months exceeded the travel expenses on the  government travel cards of most individual government agencies,  including major executive agencies such as the Departments of  Agriculture, Energy, Health and Human Services, Labor, Transportation,  and the Treasury.
Premium class travel usage also varied significantly across federal  agencies, both in the total amount and frequency with which premium  class travel was used. Some agencies spent only a fraction of total airline  expenditures on premium class, while premium class travel at other  agencies was substantial. Data provided by the travel card banks showed  that while DOD was the second largest user of premium class travel based  on total dollars, it had substantially reduced its use of premium class  travel charged to the government credit cards since 2004, following our  DOD premium class audit.Specifically, DOD’s premium class charges  decreased from more than $124 million over fiscal years 2001 and 2002, or  more than $60 million annually, to slightly over $23 million in the 12-month  period ending June 30, 2006—about 1 percent of its air travel  expenditures. In contrast, tickets bought by State for foreign affairs agency  travelers continued to account for the largest portion of governmentwide  premium class travel. Our data showed that the over $140 million that  State spent on nearly 30,000 premium class tickets for foreign affairs  agency travelers represented over 60 percent of its total air expenditures  during this period. This amount, which is comparable to our previous  finding at State, could decrease in the future based on actions taken by  State based on our previous audit findings and subsequent to the data  period we audited. For detailed breakdown of agencies’ overall use of  premium class travel, see appendix II.
Table 1 shows the results of our analysis of the frequency at which  selected agencies purchased premium class tickets for flights involving  airports in the United States and locations in Africa, the Middle East, and  parts of Europe that likely lasted more than 14 hours. As shown, large  differences existed in agencies’ use of premium class flights to these  locations. For example, 3 percent of DOD and Department of Homeland  Security travelers flying to these locations flew premium class. In contrast,  72 percent of State’s foreign affairs agency travelers and 83 percent of  MCC’s travelers flying to these same locations flew premium class.
section_title: Key Transaction- Based Controls Are Ineffective
paragraphs: Of the over $230 million in governmentwide premium class travel, we  estimated that 67 percent of trips were improperly authorized, justified, or  both. In all, the government likely spent at least $146 million on premium  class travel that was improper. As shown in table 2, we selected two key  transaction-level controls—proper authorization and proper justification—  for statistical sampling. Using these attribute tests, we estimated that 28  percent of governmentwide premium class travel was not properly  authorized. Because premium class travel must first be authorized before  it can be justified, transactions that failed authorization also failed  justification. We also estimated, based on statistical sampling, that another  38 percent (a total of 67 percent) of premium class travel was not properly  justified.
As shown in table 2, 28 percent of governmentwide premium class travel  was not properly authorized. Authorization failures fell into the following  categories:
Blanket travel authorizations. According to the FTR, premium class  travel has to be specifically authorized. Consequently, blanket premium  class authorization did not pass the specific authorization test.
Subordinate authorizations. The FTR does not forbid subordinates from  approving their superior’s premium class travel. However, applying the  criteria set forth in our internal control standards and sensitive payments  guidelines, premium class transactions that were approved by  subordinates reduced scrutiny of premium class travel and amounted to  self-approval, and thus would fail the control test.
No travel authorization. In a number of instances, agencies were not able  to provide a travel authorization corresponding to a trip in our sample.
Table 2 also shows that an estimated 67 percent of transactions failed the  justification test. As the FTR requires specific authorization for all  premium class travel, the 28 percent of transactions that failed the  authorization test automatically failed the justification test. Thirty-six  additional transactions (38 percent) failed justification, mostly due to  improper use of the 14 hour-rule. The failures are as follows:  In four instances, travelers used the 14-hour rule to justify premium class  travel, even though supporting documentation showed that flight time was  less than 14 hours.
In 29 instances, the traveler had a rest stop en route or rest period upon  arrival at the destination city, upon returning home, or both. Travelers  with rest stops en route or at destination are not qualified for premium  class travel. Despite our request, agencies did not provide supporting  documentation in these instances to indicate that the travelers reported to  work and thus met the 14-hour criterion.
In three instances, the premium class flights failed justification because  the agency did not provide us with supporting documentation required by  the agency’s own premium class policy as justification for premium class  travel.
subsections: section_title: Executive Premium Class Use
paragraphs: Our Sensitive Payments Guide states that senior government executives  are subject to intense scrutiny in the event of “any impropriety or conflict  of interest, real or perceived, regardless of how much money, if any, is  involved.” According to the guide, travel by high-ranking officials, for  example members of the Senior Executive Service (SES), generals,  admirals, and political appointees, is a sensitive payment area because it  poses a high level of risk of impropriety. However, our sample indicated  that high-ranking officials, including SES (career senior executives) and  presidential appointees, were using premium class travel at a higher rate  than other federal employees. These high-ranking officials made up about  one-half of 1 percent of the federal workforce yet accounted for 15 percent  of premium class travel in our sample population.
As stated previously, we consider premium class authorizations that were  signed by subordinates to be tantamount to self-authorization. This is  particularly true when travel by government executives is authorized by  subordinates. Nevertheless, we found that some premium class flights  taken by executives we looked at were approved by subordinates of the  travelers. For example, a presidential appointee at the Department of the  Treasury (Treasury) took 12 trips during the audit period that were  authorized by a subordinate.
Our data mining also found instances in which senior executives used  mission critical as justification for trips that did not qualify for premium  class under the 14-hour rule. Frequently, those trips were authorized by  subordinates, and the frequency of abusive travel by executives indicates  that in these cases premium class was used as a perquisite for certain  senior executives. For example, a senior executive at USDA took 25  premium class trips totaling $163,000 from July 1, 2005, through  September 30, 2006. Fifteen of the 25 trips, taken to destinations in Asia  and Africa, were justified using the 14-hour rule. The remaining 10 trips to  Western Europe were justified using mission critical as the criterion. All of  this executive’s premium class authorizations were not properly  authorized because they were signed by a subordinate.
section_title: Ineffective Oversight and Internal Control Weaknesses Contributed to Improper and Abusive Premium Class Travel
paragraphs: A weak control environment further exacerbated breakdowns in specific  controls that led to at least $146 million in estimated improper premium  class travel. Many agencies did not capture data related to business class  travel, and therefore did not know the extent of premium class travel.  Further, premium class policies and procedures existed that allowed  potential abuse of premium class travel. We also found that several  government entities, such as USPS, the Federal Deposit Insurance  Corporation (FDIC), and FRB, which have their own pay structures and  are exempt from the FTR, issued premium class travel guidance that was  less restrictive. Consequently, while premium class travel at these  agencies was properly authorized and justified according to the agencies’  own policies, many of the trips were taken at increased costs to the  taxpayers.
subsections: section_title: Lack of Monitoring and Oversight Exists over Premium Class Travel Use
paragraphs: The FTR requires all executive branch agencies to provide GSA annual  reports listing all instances in which the organizations approved the use of  first class transportation accommodations, which GSA then forwards to  OMB. However, agencies are not required to report on the use of premium  class other than first class, despite the fact that business class travel  accounted for nearly 96 percent of premium class travel governmentwide  during the 12-month period under audit. We also found that OMB, GSA,  and many agencies did not collect data on, and therefore were not aware  of, the extent governmentwide use of premium class travel prior to our  audit.
We found that business class travel is not tracked at the agency level even  though it accounts for almost all premium class travel. Officials at several  agencies we interviewed generally informed us that they did not track, and  thus were not aware of, the extent of their business class travel. Agency  officials also cited the lack of a business class reporting requirement as  one of the reasons why they did not track business class travel. For  example, officials at USDA and Treasury were not aware of the extent of  business class travel at their respective agencies. Without knowing how  much they spent on premium class travel, agencies cannot effectively  manage their travel budgets so that they can prudently safeguard  taxpayers’ dollars.
We also found that neither OMB nor GSA obtained the data needed to  track premium class travel other than first class governmentwide. As a  result, the government did not have adequate data with which to identify  the extent of any abusive travel in the federal government. Further,  without all premium class data, OMB and GSA did not have the means to  determine whether agencies are adhering to OMB’s requirements that the  taxpayers pay no more than necessary to transport government officials.  As a result of similar GAO findings, in early 2006 State responded to  GAO’s recommendations by issuing a directive requiring officials at the  department to track business class travel.
GSA officials informed us that they did not know of any legislative  impediment to requiring reporting on business class travel, though they  expect that the amount of data would be much more extensive than for  first class. GSA officials pointed to a decline in the use of first class travel  since OMB started requiring reporting for this class of travel. They told us  that the scrutiny associated with reporting requirements may have caused  some agencies to restrict first class travel.
section_title: Weak Control Environment Exists with Respect to Premium Class Policies and Procedures
paragraphs: We found that no single agency, neither GSA nor OMB, has the central  responsibility for oversight of premium class policies across federal  agencies. Neither GSA nor OMB currently reviews agency policies  regarding premium class travel. GSA officials informed us that agencies  are expected to manage premium class travel and that they should be  provided flexibility to do so. GSA officials saw their role as advisory, that  is, they would generally advise when asked as to whether a particular  agency was required to follow the FTR, or whether premium class travel  could be authorized in specific situations. Officials at GSA informed us  that they did not make determinations as to whether an agency  implementing guidance adhered to the spirit of the FTR. Similarly, OMB  does not oversee agencies’ implementing guidance on premium class  travel.
Without central oversight, it is therefore not surprising that we found  different interpretation and implementation of premium class policies  governmentwide. Some agencies, such as DOD, have made policy changes  designed to limit the use of premium class travel consistent with the spirit  of the FTR. Other agencies, however, have implemented the travel  regulations in ways that allow more frequent use of premium class travel.  For example, FAS’s and Treasury’s policies allowed employees to use  “mission critical” or “exceptional circumstances” as criteria for premium  class travel less than 14 hours. In December 2005, in one instance, a FAS  executive traveled from Washington, D.C., to Hong Kong and back in  business class, a ticket that cost the government over $6,900. However, 11  other FAS employees traveled in coach class at a cost of less than $1,400  per ticket, despite the flight lasting over 14 hours. Data mining we  performed at these agencies found that the mission critical criterion is  typically used by senior executives to justify less than 10-hour trips to  Western Europe. Allowing senior officials to define their travel as mission  critical can have a substantial effect on overall travel costs. A department  travel policy allowing officials to justify their travel as mission critical  contributed to FAS spending nearly $2 million (about 30 percent) of its  total air dollars on premium class tickets, with a large proportion going to  fund executive premium class travel. We also found that while the FTR  requires physician’s certification for premium class travel based on  disability, it did not require annual recertification. Consequently, we found  an instance where the doctor’s note for a non-life-changing illness was  dated 3 years prior to the authorization for premium class travel.
The variance in implementing guidance we observed was an important  factor in explaining the variances in the use of premium class  governmentwide, as shown in table 1. Specifically, we found that premium  class travel was taken less frequently at agencies where existing policies  and procedures emphasized the importance of minimizing excess travel  costs. For example, DOD’s travel policy states that premium class flights  over 14 hours would be approved only if the travel is so urgent that it can  not be postponed or if alternatives did not exist. In contrast, MCC officials  informed us that its procedures permitted automatically providing  travelers with premium class for trips over 14 hours, without necessarily  requiring specific authorization. A comparison between these two  agencies’ use of premium class travel to the same locations found that  MCC travelers flew to these locations in premium class 83 percent of the  time, compared to DOD’s use of premium class travel to the same  locations only 3 percent of the time.
Agencies Exempt from the  Our audit of premium class travel by selected agencies that are exempt  FTR Incurred Costly  Premium Class Travel  from the FTR found premium class policies that allowed more permissive  use of premium class travel, resulting in higher travel costs to the  government. For example, we found that some of these agencies’ policies  allowed business or first class travel for flights less than 14 hours, and  other agencies’ policies allowed premium class travel based on an  individual’s position in the organization. For example:
At USPS, members of the Board of Governors are allowed to travel first  class whenever they fly. For example, a member of the Board of  Governors flew first class from Baltimore to San Francisco and back at a  cost of $1,900 when a coach class ticket would have cost $500. USPS also  allows all other officers to travel in business class overseas, regardless of  the length of the flight.
At FRB, all members of the board are allowed to travel business class for  all international flights and all domestic flights exceeding 5 hours. In  addition, there are limited instances in which FRB permits the use of first  class. For example, a member of the Board of Governors of the Federal  Reserve System and another FRB employee flew first class from  Washington, D.C., to London and back at a cost of $25,000. Comparable  business class tickets would have cost $12,000 and coach class tickets  would have cost $1,500.
At FDIC, employees are allowed to travel premium class for international  flights over 6 hours. For example a deputy director of FDIC flew business  class from Washington, D.C., to London and back at a cost of $7,200 while  a coach class ticket would have cost $800.
section_title: Case Studies of Improper and Abusive Premium Class Travel Highlight Extent and Nature of Control Breakdowns
paragraphs: To illustrate the effects of control breakdowns, we also data mined  premium class travel data provided by the banks. Based on these  techniques, and our statistical sampling, we found numerous examples of  premium class travel without authorization or adequate justification.  Further, we used data mining 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, even when properly authorized,  generally was not adequately justified. We also identified cases where  groups of individuals traveled in premium class together to a single  location. However, in the instances we examined, we found no  justification showing that all members of the group needed to travel in  premium class. Given the high cost of premium class tickets, unnecessary  premium class group trips can be very costly to the government.
Examples of Improper and 	 Table 3 contains specific examples of abusive travel from both our  Abusive Use of Premium  Class Travel 	 statistical sample and data mining, all of which were unauthorized,  unjustified, or both. These cases illustrate the improper and abusive use of  premium class travel. Following the table is more detailed information on  some of these cases.
Traveler #1 is a special agent with State who flew premium class from  Washington, D.C., to Sydney, Australia, and back at a cost of more than  $12,000, more than five times as much as a comparable coach class ticket  of $2,200. The authorization provided as part of the travel order applied to  a different trip. Despite repeated requests, State did not provide us with  the proper support for the premium class travel. Consequently, the trip  failed both authorization and justification.
Traveler #3 is a member of the SES at USDA’s FAS, who flew business  class from Washington, D.C., to Zurich and back. The total cost of the  business class ticket was $7,500, compared to $900 in coach. The travel  orders authorizing premium class travel were signed by the traveler’s  subordinate and thus failed the authorization criteria. Further, despite the  flight taking less than 14 hours, including a layover, the traveler used the  exceptional circumstances criteria, permitted under FAS policy to enable  “a senior policy/program official to more effectively carry out the agency  mission involving critical trade negotiations, market development, and  sales efforts, or sensitive meetings,” to justify the premium class travel.  However, FAS policy specifically prohibits the use of business class for  travel to destinations in Western Europe. In addition, on the return trip,  the traveler took a one-night stopover in London on a Saturday after flying  in premium class and then proceeded to Washington the next day.
subsections: section_title: Frequent Travelers
paragraphs: Our data mining of premium class travel from July 1, 2005, through  September 30, 2006, found additional examples of abusive premium class  travel taken by frequent premium class travelers, often executives. As  mentioned previously, some trips taken by executives were approved by  their subordinates and were therefore improperly authorized. In addition,  trips taken by frequent travelers that were unauthorized and unjustified  cost the government up to $100,000 or more per traveler during the 15 month period we audited. More detailed information about some of the  cases follows table 4.
Traveler #2 was a presidential appointee from Treasury who bought 21  tickets in premium class at a total cost to the government of $129,000.  Seven premium class tickets were not specifically authorized, and 12 were  authorized by a GS-12 subordinate and were therefore improper. Further,  the traveler took three trips in first class despite being specifically  authorized for business class travel. Treasury’s implementing guidance  provides for premium class travel on trips that are mission critical. We  found that on trips of less than 10 hours, the traveler claimed to be  preparing briefing materials or reviewing materials en route that justified  the use of the mission-critical criteria.
Traveler #3 bought 15 premium class tickets costing the government over  $100,000 from July 1, 2005, through September 30, 2006. According to the  travel orders for these trips, the official had a medical condition that  justified the majority of the trips. However, the only documentation of the  traveler’s medical condition was a note signed by a peer of the traveler at  DOD. According to DOD regulations, flying premium class based on a  medical condition requires a physician’s certification. However, DOD  could not produce a physician’s statement documenting the traveler’s need  to fly premium class.
section_title: Abusive Premium Class Travel by Groups
paragraphs: We also found that some agencies’ policies and procedures allowed  abusive travel by groups of employees—sometimes as many as 20  employees or more. In particular, we found several instances where  groups of employees traveled to overseas destinations to attend meetings,  conferences, or trade negotiations. In one instance, a group trip in  premium class resulted in about $200,000 in increased costs to the  American taxpayers.
We also found instances where State and Department of Justice (Justice)  authorized employees and their families to travel premium class in  permanent change of station (PCS) moves. As reported previously, while  State believed such practice to be necessary because it improves employee  morale, we question the need to provide premium class travel for PCS. In  particular, we note that although federal and State regulations allow  premium class travel if the flight is over 14 hours without a rest stop, DOD  had issued regulations prohibiting premium class travel for PCS, unless for  physical handicap or medical reasons. Specifically, DOD had determined  that premium class travel is permitted only for flights over 14 hours if and  only if the Temporary Duty Travel (TDY) purpose/mission is so  unexpected and urgent it cannot be delayed or postponed, and a rest  period cannot be scheduled en route or at the TDY site before starting  work. This decision is consistent with the prudent traveler’s principle and  with DOD’s new guidelines on the 14-hour rule, issued in early 2006. Table  5 contains specific examples of premium travel by group travelers. More  detailed information about some of the cases follows the table.
Case study 1 relates to a group of 32 agents who took 40 premium class  trips from Washington, D.C., to Liberia to provide security protection to a  foreign head of state from January 1, 2006, through June 15, 2006. We  found five trips that had no authorization for the travelers to fly in  premium class, and three trips that had duplicate tickets covering at least  part of the traveler’s itinerary. In addition, we found that 17 travelers  arrived back in the United States on Saturday afternoon after flying in  business class. There was no evidence any of the travelers went to work  before taking a weekend rest period.
Case study 2 involves a group of 21 travelers from the United States Trade  Representative Office within the Executive Office of the President. The  travelers each flew from Washington, D.C., to Hong Kong in December  2005 in business class to attend a World Trade Organization meeting at a  total cost to the government of nearly $100,000. The travelers ranged in  grade from GS-9 to SES. None of the travelers were authorized to fly  premium class, and therefore the use of premium class was improper.  According to GSA’s city pair contract for this itinerary, the tickets would  have cost about $31,000 in coach class.
As shown in table 5, the differences between premium and coach class  travel are made even more striking the larger the size of the group that is  approved to travel premium class. The high cost of premium class travel  by groups necessitates close scrutiny of whether it is absolutely necessary  for the whole group to travel in premium class. Even a mix of premium  class and coach class accommodations would represent significant savings  to the government as opposed to everyone traveling premium class. As  such, we are referring all cases of improper and abusive travel we  identified to the respective agency management and inspector general’s  office for possible administrative actions to be taken against employees  who abuse premium class travel use and repayment of the difference  between premium class and coach class travel.
section_title: Conclusions
paragraphs: With the serious fiscal challenges facing the federal government, agencies  must maximize their ability to manage and safeguard valuable taxpayers’  dollars. Recognizing the high cost of premium class travel, GSA and  federal agencies have issued a series of policies providing that such travel  should be taken as a last resort. However, our audit shows that some  federal agencies and other federally related entities did not adhere to this  policy. In fact, some entities appeared to provide premium class as a  perquisite to senior-level executives. Individuals that abusively use  premium class travel at taxpayers’ expense should be held accountable for  the taxpayer dollars they waste. We are encouraged that DOD has taken  steps to significantly curtail unnecessary use of premium class travel,  potentially saving millions of dollars. Going forward, it will be important  for other agencies to follow DOD’s lead and take steps to restrict the use  of premium class travel to only truly exceptional circumstances.
section_title: Executive Action
paragraphs: and to strengthen monitoring and oversight of premium class travel as part  of an overall effort to reduce improper and abusive premium class travel  and related government travel costs. We will also issue separate letters to  USDA, MCC, Treasury, and FRB on actions needed to address specific  control weaknesses we identified through our audit.
We recommend that the Director of OMB:  Instruct agencies that premium class travel requests for their senior- level executives must be approved by someone at least at the same  level as the traveler or an office designated to approve premium class  travel for all senior-level executives.
Establish policies and procedures to initially require all federal  agencies to collect data on the use of all premium class travel,  including business class, and submit the information to GSA annually  until a risk-based framework is developed.
Using the premium class data collected by GSA, consider developing a  risk-based framework containing requirements as to:
Reporting business class travel to GSA. For example, OMB might  want to consider only requiring entities to report business class  travel when business class travel exceeds a percentage of total  travel.
Performing audits of premium class travel programs, including a  review of executive travel.
We recommend that the Administrator of GSA take actions necessary to  help agencies comply with the FTR governing the use and reporting of  premium class travel, including the following:
Require that agencies develop and issue internal guidance that explains  when mission criteria and the intent of that mission call for premium  class accommodations.
Require agencies to define what constitutes a rest period upon arrival.
Require that the physician’s certification related to medical  requirements for premium class travel be updated annually unless the  physical impairment is a lifelong impairment.
Establish an office for travel management within GSA to review agency  policies and procedures, identify areas where agency policies and  procedures do not adhere to federal regulations, and issue  recommendations to agencies to bring their policies and procedures  into compliance.
Based on the premium class data collected from agencies, determine if clarify guidance concerning authorizing premium class travel only  when less costly means of transportation are not practical and  limit the use of premium class travel for PCS moves to those  necessary as a result of physical handicap, medical reasons, or  security reasons, or if the trip is taken at no additional cost to the  government.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, OMB concurred with our  recommendations and stated that it is important to educate and remind  federal travelers of the policies and regulations that govern federal travel  to ensure that the most economic means of travel are used when  conducting the government’s business. OMB stated that it is working with  GSA to require that premium class travel for senior-level executives be  approved by someone at the same level as the traveler, or by an office  specifically authorized to approve premium class travel. OMB further  stated that GSA is preparing agency guidance for collecting and reporting  premium class travel, and that OMB will begin working with GSA and  agencies to develop a risk-based reporting and review framework  consistent with Appendix A to OMB Circular A-123.
In written comments on a draft of this report, GSA concurred with many of  our findings and recommendations and said that it will use a number of  the report’s findings to improve the FTR to ensure enhanced  accountability and control of the use of premium class travel  accommodations by federal employees. GSA said that these improvements  will include requiring agencies to designate premium class approving  officials, requiring agencies to develop internal definitions of mission  critical and rest periods, and requiring physician’s notes to be updated  unless the physical impairment is a lifelong impairment. GSA will also be  collecting business class travel data from agencies starting in fiscal year  2008.
GSA did suggest that one of our recommendations could be addressed in a  different way than contemplated in the draft report. GSA pointed out that  it does not have clear statutory authority to establish central oversight  offices for travel management. To address the intent of the  recommendation, GSA informed us that with OMB support, it created the  Center for Policy Evaluation and Compliance. GSA stated that the Center  for Policy Evaluation and Compliance will seek to identify areas within  agencies’ policies and procedures that are not consistent with  governmentwide standards. The center will be responsible for suggesting  improvements to agencies. We have modified the language of this  recommendation to adhere to GSA’s current statutory authority and keep  the intent of our original recommendation, which is that GSA takes a  proactive role in reviewing agency policies and procedures for possible  discrepancies with the FTR.
GSA’s and OMB’s comments are reprinted in appendixes III and IV.
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 of this report to the Director of OMB and the  Administrator of GSA. We will make copies available to others upon  request. In addition, this report will be available at no charge on GAO’s  Web site at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-6722 or kutzg@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To assess controls over the authorization and issuance of governmentwide  premium class travel, we used premium class travel transactions charged  to the federal government’s centrally billed and individually billed  accounts during the 12-month period ending June 30, 2006.
subsections: section_title: Magnitude of Premium Class Travel and the Extent Such Travel Was Improper
paragraphs: To assess the magnitude of use of premium class travel, we obtained from  Bank of America, Citibank, JP Morgan Chase, and U.S. Bank government  travel charge card databases that contained travel transactions charged to  the federal government for the 12 months ending June 30, 2006. The  databases contained airline transactions and nonairline transactions  charged to both the centrally and individually billed travel card accounts.  We queried the databases to identify transactions specifically related to  travel. The databases also contained transaction-specific information,  including the passenger name, the ticket price, and the fare and service  codes used to price the tickets 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 the federal government paid for  premium class travel accommodations. We excluded from our audit  premium class travel accommodations obtained as a result of upgrades, as  these tickets did not result in costs to the federal government.
As you requested, our audit covered premium class usage at executive  federal agencies and federally related entities. The population under audit  consists of transactions by travelers approved to use the government  travel card, except for employees and individuals whose travel was  approved by legislative or judicial entities and entities covered by treaty  with the U.S. government. Agencies included in the audit include executive  agencies as described in the Federal Travel Regulations (FTR), including  Chief Financial Officers Act agencies, other major executive agencies,  independent federally related establishments, and wholly owned  government corporations. As further detailed below, we performed  statistical sampling on these entities to assess their internal controls and  adherence to the FTR. However, to determine whether incidences of  costly premium class travel occurred at other federally related entities, we  expanded our data mining to premium class transactions of mixed  corporations, such as the Federal Deposit Insurance Corporation, and  other establishments specifically exempt from the FTR, such as the United  States Postal Service.
We tested a statistical sample of premium class transactions to assess  whether premium class travel was properly authorized and properly  justified, and to project the results of these tests to the population of  governmentwide premium class travel. The population from which we  selected our transactions for testing was the set of debit transactions for  both first and business class travel that were charged during the 12 months  ending June 30, 2006. Because our objective was to test controls over  travel card expenses, we excluded transactions where half or more of the  ticket had been refunded. While these trips may not have been properly  authorized or justified, the amounts credited back to the government may  have been for the premium class portion of the ticket. We also excluded  refunded ticket transactions and miscellaneous debits (such as fees) that  would not have been for ticket purchases from the population of  transactions we reviewed.
We further limited the business class transactions to those costing $750 or  more because many intra-European flight business class tickets cost less  than $750 and are for flights for which there is only a single premium class  cabin. 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 about the effectiveness of the internal controls. While we  excluded business class transactions costing less than $750, we (1) did not  exclude all intra-European single cabin flights and (2) potentially excluded  unauthorized business class flights costing less than $750. Limitations of  the database, specifically a lack of visibility between single- and  multicabin aircraft, prevented a more precise methodology of excluding  lower-cost business class tickets. For security reasons, we did not include  in our projection or data mining selections premium class transactions  related to agency-identified sensitive assignments and secretive details.
To test the implementation of key control activities over the issuance of  premium class travel transactions, we selected a random probability  sample from the subset of centrally billed and individually billed account  transactions containing at least one premium class segment and for which  the business class ticket cost at least $750. We initially selected 192  premium class travel transactions. Seventy-nine transactions were  excluded because they were out of the scope of the sample. The final  sample size of reviewed, in-scope transactions was 96, totaling about  $391,000. We overselected initially because of the difficulty of perfectly  extracting transactions from all government corporations and  establishments that should be excluded from the sample population. For  each sample transaction, we requested that the entities provide the travel  authorization, travel voucher, travel itinerary, and other related supporting  documentations demonstrating justification for premium travel  arrangements. We also requested information on the rank or grade of the  traveler. Based on the information provided, we assessed whether  premium class travel was properly authorized and whether the premium  class travel was justified in accordance with the FTR or other applicable  travel regulations. If, after repeated requests, the entities did not provide  us with the supporting documentation, we concluded that the premium  class travel was improper. The results of the samples of these control  attributes can be projected to the population of transactions  governmentwide, not to any particular individual executive agency, federal  corporation, or independent federally related entity.
Based on the sampled transactions, we also estimated the percentage of  premium class travel taken by federal executives, that is, presidential  appointees or members of the Senior Executive Service. With this  statistically valid probability sample, each transaction in the population  had a 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 results as 95 percent  confidence intervals (i.e., plus or minus 10 percentage points). These are  the 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 of plus or minus  10 percentage points or less. In addition to percentage estimates, we also  estimate the lower bound for the cost of unauthorized/unjustified premium  class travel. This lower bound of $146 million is based on the one-sided 95  percent confidence interval for our sample estimate of $167 million spent  on unauthorized premium class travel, unjustified premium class travel, or  both. So, based on our sample, we are 95 percent confident that the actual  amount is at least $146 million.
section_title: Underlying Causes of Improper and Abusive Premium Class Usage
paragraphs: We performed a limited assessment of the control environment over  premium class travel by obtaining an understanding of the premium class  travel authorization and ticketing process at selected agencies. We  interviewed officials from the General Services Administration (GSA),  Department of Defense (DOD), Department of State (State), Department  of Agriculture, and Millennium Challenge Corporation. We also reviewed  applicable policies and procedures and program guidance that they  provided. We used as our primary criteria applicable laws and regulations  that address governmentwide premium class travel, including the Office of  Management and Budget’s (OMB) mandated controls as implemented by  GSA’s FTR; DOD’s Joint Federal Travel Regulations and Joint Travel  Regulations for uniformed members and civilian personnel, respectively;  as well as State’s Foreign Affairs Manual and Foreign Affairs Handbook,  which govern travel of U.S. members of the Foreign Service. 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. Finally, we conducted “walk-throughs” of the travel process at  selected agencies and federally related entities. We also interviewed GSA  and OMB officials on their oversight of premium class travel.
To determine the frequency with which agencies used premium class  travel for flights exceeding 14 hours, we identified airport codes in Africa,  the Middle East, and far eastern Europe that would necessitate flights of  14 hours or more if traveling from the United States. We analyzed the  banks’ databases to extract flights involving locations in the United States  with the selected airports. We then compared the premium class flights to  these locations to all flights taken to these locations governmentwide and  for selected agencies.
section_title: Data Mining Improper and Abusive Premium Class Travel
paragraphs: In addition to our audit of a governmentwide statistical sample of  transactions, we also selected other transactions identified by our data- mining efforts for audit. Our data mining identified additional examples of  premium class travel by senior-level executives, individuals who  frequently travel using premium class accommodations, and premium trips  involving groups with four or more people. For this nonrepresentative  data-mining selection, we also requested that the entities provide the  travel authorization, travel voucher, travel itinerary, and other related  supporting documentations demonstrating justification for premium travel  arrangements. If the documentation was not provided, or if it indicated  further issues related to the transactions, we obtained and reviewed  additional documentation about these transactions.
section_title: Data Reliability
paragraphs: We assessed the reliability of the data provided by the four travel card  banks by (1) performing various electronic testing of required data  elements, such as transaction amounts and account numbers;   (2) reviewing financial statements of the four banks for information about  the data and systems that produced them; and (3) interviewing officials  knowledgeable about the data at the four banks. In addition, we verified  that totals from the databases agreed with the total travel card activity  provided to and published in GSA data on travel, in totality and for  selected agencies. We determined that data were sufficiently reliable for  the purposes of our report.
We conducted our audit work from July 2006 through August 2007 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: Appendix II: Background
paragraphs: Overall, government travel is managed as part of GSA’s SmartPay program.  The SmartPay program began in 1998 as a way to streamline purchasing,  as well as providing an expeditious way to pay for travel expenses. Under  this program, banks provide travel cards to government agencies and  applicable employees for travel purposes. Travel cards provided directly  to the agencies are known as the centrally billed accounts, and are  typically used to purchase transportation services such as airline and train  tickets, facilitate group travel, and pay for other travel-related expenses.  The individually billed accounts, provided directly to individual travelers,  are used for lodging, rental cars, and in many agencies for transportation  services.
Four banks provide travel cards under the SmartPay program: Bank of  America, Citibank, JP Morgan Chase, and U.S. Bank. According to GSA  data, Bank of America and Citibank handle over 94 percent of SmartPay  travel card transactions. In the 12 months ending June 2006, total GSA  SmartPay travel card purchases totaled about $6.9 billion. Nearly       $3.4 billion of the total travel card purchases were for airline travel.  Premium class flights accounted for over $230 million, or 7 percent, of the  total spent on airline travel.
Subsequent to our selection of the statistical sample, the banks provided  us with additional data related to premium class travel in the 3 months  from July 1, 2006, through September 30, 2006. Our analysis of the  additional bank data indicates that premium class travel usage stayed  consistent among federal agencies. Table 6 provides information on the  premium class travel of selected agencies from July 1, 2005, through     June 30, 2006.
section_title: Appendix III: Comments from the Office of Management and Budget
section_title: Appendix IV: Comments from the General Services Administration
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact above, Tuyet-Quan Thai, Assistant Director;  Beverly Burke; Sunny Chang; Paul Desaulniers; Leslie Jones; John Kelly;  Barbara Lewis; Mark Ramage; John Ryan; Lindsay Welter; and Scott  Wrightson made key contributions to this report.