Federal Transit Benefits Program: Ineffective Controls Result in Fraud and Abuse by Federal Workers
Published: 2007-04-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Under the federal transit benefits program, federal employees receive transit benefits (e.g., Metrocheks) to encourage them to commute to work via public transportation. Based on information provided by the Department of Transportation, as of July 2006, the National Capital Region had 120,000 participants claiming roughly $140 million in benefits. Recently, inspectors general (IG) of various agencies have found numerous prior instances of fraud, waste, and abuse in this federal program. Based on both the significance of these IG findings and the amount of federal money spent on transit benefits, GAO was asked to (1) investigate allegations that federal employees in the National Capital Region are involved in fraud and abuse related to the transit benefits program, (2) identify the potential causes of any fraud or abuse that is detected, and (3) estimate the magnitude of fraud and abuse in the National Capital Region in 2006. To address these objectives, GAO identified federal employees selling their transit benefits on the Internet and obtained additional data from these sellers' employing agencies to determine whether more widespread problems existed. GAO also obtained the policies and procedures governing the transit benefits program at each of the employing agencies.
section_title: What GAO Found
paragraphs: After investigating just 3 days of sales, GAO confirmed that at least 20 federal employees were fraudulently selling their Metrocheks on eBay. Most of the employees GAO interviewed admitted to falsifying their transit benefit applications and fraudulently selling their benefits. One GS-14 Department of the Treasury employee drove to work, parked for free in agency-provided parking, and was still able to collect $105 per month in Metrocheks--most of which he sold on eBay. Posing as buyers, GAO investigators also purchased Metrocheks from 3 federal employees fraudulently selling their benefits on Craigslist, a popular community Web site. GAO investigations revealed additional examples of federal employees inflating their transportation expenses on their transit benefit applications. Many of them admitted to intentionally falsifying their benefit applications to receive excess benefits. For example, a GS-11 Department of Transportation employee admitted to claiming the maximum allowable benefit of $105 per month when his actual commuting cost was only $54. Weaknesses in the design of program controls at the Departments of Commerce, Transportation, State, Homeland Security, Defense, and Treasury, the Internal Revenue Service (IRS), the Patent and Trademark Office, and the U.S. Coast Guard can be associated with the fraudulent and abusive activity we identified. Although GAO did not conduct a comprehensive review of each agency's controls, the results from investigations illustrate flaws in the design of the controls. For example, GAO identified four employees who continued to receive transit benefits even though they were on extended absences from work, but none of the agencies had written policies requiring adjustment of benefits because of leave or travel. Using limited transit benefit records, we found that the possible magnitude of potentially fraudulent transit benefit payments during 2006 in the National Capital Region was more than $17 million. This order of magnitude is based on employees at Commerce, Transportation, Homeland Security, Defense, Treasury, IRS, and the Coast Guard who made false statements by requesting benefits they were not entitled to. Given the number of agencies not covered by our analysis, it is likely that this amount is significantly understated.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss allegations of fraud and abuse  related to the federal government’s transit benefits program. This program  was established by executive order in April 2000, and is intended to reduce  federal employees’ contribution to traffic congestion and air pollution and  to expand their use of public transportation. In the Washington, D.C.,  National Capital Region, federal agencies are required to offer employees  tax-free transit passes for public transportation, to be used exclusively to  cover their actual out-of-pocket commuting expenses. In 2006, employees  could not receive more than $105 per month in transit passes.
Agencies in the National Capital Region can either distribute these transit  passes directly to employees or contract with the Department of  Transportation for distribution. Based on information provided by  Transportation, as of July 2006, the portion of the program they administer  had approximately 250,000 participants who claimed about $250 million  worth of benefits. The National Capital Region constituted the largest part  of this program, with 120,000 participants claiming roughly $140 million  worth of benefits. These numbers do not include agencies that do not  contract with Transportation and administer their own programs. As  shown in figure 1, the transit passes themselves are issued by the  Washington Metropolitan Area Transit Authority (WMATA) in the form of  either Metrocheks, which are paper fare cards, or SmartBenefits, which  are electronic deposits to a transit debit card (called a SmarTrip card).
As shown in the figure, WMATA labels paper Metrocheks with a warning  indicating that they may only be issued to qualified employees by  approved employers and that resale is illegal; SmarTrip cards are printed  with a similar warning. The inspectors general (IG) of various agencies  have identified numerous problems related to the transit benefits program,  including ineligible employees receiving benefits and a lack of policies and  procedures essential to preventing fraud, waste, and abuse.
Based on both the significance of these IG findings and the amount of  federal funds spent on transit benefits, you asked us to (1) investigate  allegations that federal employees in the National Capital Region are  involved in fraud and abuse related to the transit benefit program,   (2) identify the potential causes of any fraud or abuse we detected, and   (3) estimate the magnitude of fraud and abuse in the National Capital  Region during 2006.
To conduct our work, we investigated allegations of Internet sales of  transit benefits by federal employees in the National Capital Region. We  confirmed selected sellers’ federal employment status in consultation with  federal IGs or offices of investigation and through Internet payment  records. We interviewed a nonrepresentative selection of the sellers,  examined their transit benefit applications, and prepared case studies  detailing our findings. To determine whether other individuals at the  sellers’ employing agencies were fraudulently using their benefits, we data  mined a nonrepresentative selection of transit benefit records, compared  employee home and work addresses, conducted further interviews, and  prepared additional case studies. To identify the potential causes of the  fraud and abuse we detected, we reviewed the written transit policies and  procedures at all the case study individuals’ employing agencies. While we  were unable to develop a precise estimate of the magnitude of the  potentially fraudulent transit benefit payments that occurred in the  National Capital Region, we used available data to develop an order of  magnitude estimate. Specifically, we analyzed limited data from the case  study individuals’ employing agencies and records from the National  Finance Center. For more information on the data used to develop our  calculations, see appendix I. It is important to note that we did not  conduct a comprehensive audit of the federal transit benefits program.  Rather, our investigation of allegations concerning individuals selling their  benefits over the Internet led us to conduct limited investigations at  specific agencies. Although we conducted corrective actions concerning  our investigative findings with these agencies, as discussed later in this  testimony, we are not issuing recommendations. We conducted our  investigative work in accordance with standards prescribed by the  President’s Council on Integrity and Efficiency and conducted our audit  work in accordance with generally accepted government auditing  standards.
subsections: section_title: Case Studies Illustrate Fraudulent and Abusive Activity Associated with Federal Transit Benefit Program
paragraphs: Despite signing certifications stating that they will only use their transit  benefits to cover actual out-of-pocket commuting costs, federal employees  in the National Capital Region are committing fraud or violating the False  Statements Act by requesting benefits they do not need and then selling  or using these benefits for personal gain. Specifically, we developed case  studies on individuals employed at Commerce, Transportation, State,  Homeland Security, Defense, Treasury, IRS, Patent and Trademark, and  the Coast Guard. These case studies illustrate how federal employees  fraudulently sold Metrocheks on eBay and Craigslist. Our case studies also  illustrate how federal employees requested benefits in excess of their  actual commuting costs, based on a comparison of their home and work  addresses. In addition, during the course of our investigative work, we  found evidence indicating that a number of individuals are in possession of  federal transit benefits even though these individuals do not appear to  work for the federal government.
subsections: section_title: Federal Employees Must Certify That They Are Eligible for Benefits and Will Not Sell Benefits or Overstate Commuting Costs
paragraphs: Employees at all of the agencies at which we conducted our investigative  work are required to sign a certification statement as part of the transit  benefit application process. As shown in figure 2, this certification  typically confirms that the employee is eligible for benefits, will not sell or  transfer the benefits, and is not requesting more than the needed amount  of benefits. Some certifications also require employees to confirm that  they do not have federally subsidized parking permits. In addition, the  applications contain a false statement warning to inform employees that  any false, fictitious, or fraudulent statements on their signed applications  and may subject them to criminal prosecution.
If requesting SmartBenefits, employees must provide the serial number of  their WMATA-issued SmarTrip card so that their benefits can be directly  deposited to the card. If employees receive paper Metrocheks, they are  required to sign another document when they pick up the Metrocheks.  This form reiterates that the employee will not sell or transfer the  Metrocheks and will not claim excess benefits. In addition, as shown in  figure 1, Metrocheks are labeled with a warning indicating that they may  only be issued to “qualified” employees and that resale is illegal. SmarTrip  Cards feature a similar warning.
section_title: Case Studies Illustrate Fraudulent Sale of Metrocheks on eBay
paragraphs: We identified 58 individuals selling Metrocheks on eBay on July 24,  August 7, and August 23, 2006, and confirmed that at least 20 of these  individuals were in fact federal employees. Collectively, these 20  employees fraudulently sold more than $21,000 worth of Metrocheks over  the last 2 years and could be subject to prosecution for unlawful  conversion under 18 U.S.C. §641. In addition, because the employees we  investigated signed certifications stating that they will only use their  transit benefits to cover actual out-of-pocket commuting costs, they could  be subject to criminal prosecution under the False Statements Act, 18  U.S.C §1001. In subsequent interviews with 13 of the 20 eBay sellers, we  found instances where federal employees received parking benefits in  addition to Metrocheks, were on extended leave from work, or did not  even use public transportation to commute to work. In addition, none of  the individuals we interviewed reported the income generated from the  illegal sale of Metrocheks on their tax returns and they would be required  to report these sales as part of their gross income. Table 1 highlights the  information we obtained on 8 of these individuals through eBay, PayPal  (an Internet payment service), and our interviews. More detailed  information on 4 of the cases follows the table. For a list of all 20 federal  employees selling Metrocheks on eBay, see appendix II.
Case 1: Seller has been employed as a GS-14 specialist at Transportation’s  Federal Motor Carrier Safety Administration since 1990. Seller has  received the maximum amount of transit benefits since he first entered the  transit benefit program in November 2004. Seller explained that he  accumulated excess benefits over time by using other means of  transportation to and from work, including “slugging,” riding with a  neighbor, and driving his motorcycle. Seller readily admitted to selling his  transit benefits on eBay on multiple occasions for personal gain (12 lots of  Metrocheks valued at a total of $1,080), but stated that he did not know it  was illegal to sell his transit benefits—despite the warning printed on  every Metrochek and the certification statement he signed on his  application and each time he picked up his benefits.
Case 3: Seller is a GS-14 information technology specialist and has been  employed by IRS since 2003. Seller has received the maximum amount of  transit benefits since he first entered the transit benefit program in  February 2004. Seller also receives parking benefits from IRS and  accumulated excess benefits over time by driving to work and parking in  an agency-owned parking space for free. Seller admitted to selling his  transit benefits on eBay for personal gain on multiple occasions (three lots  of Metrocheks valued at a total of $930). Seller’s eBay account history also  reflected the sale of computers, and after some questioning by  investigators, seller confessed that he had stolen numerous computers and  computer parts from IRS, which he subsequently sold on eBay. We  referred the case to the Treasury Inspector General for Tax  Administration. The employee has since been placed on administrative  leave indefinitely and without pay and was indicted for theft of  government property on February 7, 2007.
Case 5: Seller is a GS-14 attorney for the Federal Highway Administration  and has been employed at Transportation since 1990. Seller confirmed that  she has received the maximum benefit since first entering the program in  1999. She explained that she accumulated excess benefits in two ways:   (1) she continued to claim transit benefits while on maternity leave and   (2) she works from home at least 1 day a week. Although she has recently  been working from home more frequently, she still claims the maximum  benefit. Seller admitted to selling her transit benefits on eBay on multiple  occasions (six lots of Metrocheks valued at a total of $789), but stated that  she did not know it was illegal to sell her transit benefits—despite the  warning printed on every Metrochek and the certification statement she  signed on her application and each time she picked up her benefits.
Cases 7 and 8: These sellers are a married couple both working for  Defense. The wife, an administrative leading petty officer, has been  receiving almost $100 per month since first entering the program in  September 2005. The husband, a financial technician, has been receiving  the maximum benefit since first entering the program in March 2003. Both  sellers acknowledged that they accumulated excess benefits over time by  driving to work. The husband admitted to selling his transit benefits on  eBay on multiple occasions (61 lots of Metrocheks valued at a total of  $6,000). The wife, although she admitted she used her transit benefit for  personal travel, denied selling her benefits on eBay. However, the names  of both spouses appear on the eBay account selling Metrocheks.
section_title: Investigations Show Federal Employees Fraudulently Sold Metrocheks on Craigslist
paragraphs: Posing as buyers, our investigators purchased $840 worth of benefits from  three federal employees fraudulently selling their Metrocheks via  Craigslist, a popular community Web site. First, investigators purchased  $210 worth of Metrocheks for $160 from a GS-12 State Department  employee who posted on the site. The seller also asked to be paid with  cash because she wanted to buy Christmas presents for her friends. After  purchasing the Metrocheks, investigators identified themselves as a  federal agents conducting investigation and reminded the seller that she  had signed certifications stating that she would not sell transit benefits.  The seller insisted that she did not know it was illegal to sell benefits and  also stated that she was selling extra Metrocheks left over from a previous  government job. However, in e-mail correspondence prior to the sale, the  seller told one of our investigators that she would be able to sell him  benefits on a continuing basis, four times per year. We confirmed that she  receives $255 in Metrocheks four times a year from the State Department.
Investigators next purchased Metrocheks from an Air Force captain who  advertised on the site. The captain corresponded with our investigator  using his military e-mail address, as shown in figure 3.
When our investigator arrived at the meeting spot, he told the captain that  he only had $350 and asked if that would be enough to purchase the entire  $450 worth of Metrocheks. The captain said no, and told our investigator  that his wife had gotten angry at him for accepting less than the agreed- upon fee the last time he sold his transit benefits. Ultimately, our  investigator purchased $420 worth of benefits for $350. After the  exchange, the captain explained that he usually “slugs” to work and  therefore does not use his transit benefits. He also offered to enter into an  ongoing partnership with our investigator to sell his benefits on a quarterly  basis. Our investigator did not identify himself as a federal agent because  the Air Force Office of Special Investigations indicated that it would like  to continue to develop a case against this seller.
Finally, our investigator purchased $210 worth of Metrocheks for $190  from a former GS-11 international trade specialist with Commerce. This  employee resigned from Commerce on and then arranged to sell her  benefits to our investigator one week later. After our investigator  purchased the Metrocheks, the seller explained that she was moving  overseas and would no longer be collecting benefits. She also explained  that she had typically walked to work at Commerce, so she did not really  need the benefits in the first place. Our investigator did not identify  himself as a federal agent because the IG at Commerce wanted to pursue  further action against this seller by withholding her final paycheck.
section_title: Other Investigative Case Studies Illustrate How Federal Employees Abuse the Transit Benefit Program
paragraphs: Further investigation at the agencies where the eBay and Craigslist sellers  worked also demonstrated that federal employees are not using their  transit benefits to cover actual out-of-pocket commuting costs. Through  data mining of information submitted on transit benefit applications, we  found many employees who appeared to provide inaccurate and inflated  commuting cost information on their transit benefit applications. We  developed case studies on 23 of these individuals. Specifically, based on a  comparison of their home and work addresses, these 23 individuals  claimed more benefits than they needed to commute to work. Eleven of  these individuals admitted to deliberately falsifying their applications in  order to obtain excess transit passes for personal use. Table 2 highlights  the information we obtained on 10 of these cases through our data mining  and interviews. More detailed information on 3 of the cases follows the  table. For a list of all 23 individuals, see appendix III.
Case 3: Employee is a GS-8 secretary at Treasury. She has participated in  the transit benefits program since September 2000 and admitted to  knowingly providing false information on her transit benefit application by  claiming the maximum benefit of $105 per month when her actual  commuting cost is $50 per month. As provided on the application signed  by the employee, this false statement may constitute a violation of 18  U.S.C §1001 and renders the employee subject to criminal prosecution.  She further admitted to using her $55 in excess Metrocheks each month to  purchase transit tokens for her son to use to travel to school. Employee  also admitted to selling her excess benefits to Treasury contractors (who  are not eligible to receive federal transit benefits) and to friends in her  community. Employee stated that she deliberately overestimated the  amount of money she needed to commute to and from work on her transit  benefit application in order to have excess benefits to sell to friends.
Case 4: Employee is a GS-14 deputy director at Treasury. Employee has  participated in the transit benefits program since 2003 and admitted to  knowingly providing false information on his transit benefit application by  claiming the maximum benefit of $105 per month when his actual  commuting cost is $60 per month. As provided on the application signed  by the employee, this false statement may constitute a violation of 18  U.S.C §1001 and renders the employee subject to criminal prosecution.  Employee stated that he distributed some of his excess Metrocheks to  friends visiting Washington D.C.
Case 9: Employee is a GS-9 working in the Health and Safety Division at  the Coast Guard. Employee has participated in the transit benefits  program since 1996 and admitted to knowingly providing false information  on her transit benefit application by claiming the maximum benefit of $105  per month when her actual commuting cost is $86 per month. She also  admitted that she accumulated excess benefits by continuing to receive  benefits even though she has been taking extended amounts of leave. As  provided on the application signed by the employee, this false statement  may constitute a violation of 18 U.S.C §1001 and renders the employee  subject to criminal prosecution. She also acknowledged that she  intentionally abused her benefits by using them for personal travel and  distributing them to her sister and friends.
section_title: Nonfederal Employees in Possession of Transit Benefits
paragraphs: Although our objective was to investigate allegations related to federal  employees, our data mining revealed other troubling information related  to the abuse of the transit benefit program by nonfederal employees.  Specifically, through our data-mining efforts, we were able to identify  employees at Commerce, Coast Guard, Treasury, IRS, and Homeland  Security who may have collected transit benefits even though they did not  currently work for the federal government. We requested additional  identification information on these individuals from the agencies and  subsequently found 28 individuals who have received transit benefits even  though they do not appear to work for the agencies, 9 individuals who left  their agencies but did not return their unused benefits, and 4 former  federal employees who continued to receive benefits after leaving their  respective agencies.
Commerce confirmed that one of the individuals we identified  continued to receive transit benefits after separating from the agency.  Records indicate that this employee left the department in 2001, but  Commerce continued to mail her $65 per month in benefits until she  moved to a new address in 2006. Commerce also confirmed that three  of the other individuals we identified separated from the agency, but  did not return their unused transit benefits. For example, one  Commerce employee picked up $300 worth of benefits on July 3, 2006,  and then left the agency on July 5, 2006.
The Coast Guard confirmed that one employee we identified picked up  transit benefits after separating from the agency. In addition, one of the  individuals we asked the Coast Guard to identify has never worked  there; the agency could find no employment records on this individual  even though he picked up transit benefits under Coast Guard’s transit  program.
Treasury confirmed that one employee we identified picked up benefits  at least five times after separating from the agency. In addition,  Treasury confirmed that another employee picked up benefits and then  separated from the agency the very next day, and another picked up  benefits and left the agency 9 days later. Neither of these individuals  returned any of their unused benefits to Treasury. Finally, 25 of the  individuals we asked Treasury to identify have never worked there; the  agency could find no employment records on these individuals even  though they picked up transit benefits under Treasury’s transit  program.
IRS confirmed that four of the employees we identified picked up  benefits and left the agency shortly thereafter without returning  benefits. For example, one employee picked up the $315 worth of  benefits on July 6, 2006, and then left the agency on August 4, 2006. In  addition, one of the individuals we asked IRS to identify has never  worked for IRS; the agency could find no employment records on this  individual even though he picked up transit benefits under IRS’s transit  program.
We did not receive a response from Homeland Security by the close of  our investigation.
section_title: Weaknesses in Program Controls May Contribute to Fraud and Abuse
paragraphs: Weaknesses in the design of program controls at Commerce,  Transportation, State, Homeland Security, Defense, Treasury, IRS, Patent  and Trademark, and the Coast Guard can be associated with the  fraudulent and abusive activity we identified. Each of these agencies has  its own process for management and oversight; there are no  governmentwide policies or standards establishing internal controls for  the federal transit benefit program. Although we did not conduct a  comprehensive review of each agency’s controls, the results from our  interviews and data mining illustrate flaws in the design of the controls.  Figure 4 details the critical elements included in each agency’s written  policies and procedures.
The following are examples of our investigative findings illustrating  weaknesses in the design of agencies’ transit benefit controls.
We interviewed 23 individuals who provided inaccurate commuting costs  on their applications, based on a comparison of their home and work  addresses. However, none of the agencies had written policies in place at  the time of our review requiring an approving official to verify that  employees provided accurate commuting costs. Transportation, Treasury,  State, and Defense do not even require employees to provide their home  addresses on their applications, which may make it even more difficult to  determine whether commuting costs are valid. Furthermore, only three  agencies (IRS, Commerce, and Patent and Trademark) require employees  to provide a commuting cost breakdown to demonstrate that they are  entitled to the benefits they are requesting.
Four employees admitted to us that they continued to receive transit  benefits even though they were on extended absences from work.  However, none of the agencies use information that employees provide in  the normal course of working for the government—such as changes of  address on their W-2 forms, taking annual leave, or traveling on business— to adjust benefits because of leave or travel. In addition, only three  agencies (Transportation, IRS, and State) have an approving official  review employees’ eligibility to receive benefits.
Two employees admitted to us that they received both parking and transit  benefits, but only three agencies (Transportation, Homeland Security, and  Defense) had a process in place to ensure that transit benefit recipients  were not also receiving parking benefits.
We identified four former federal employees who continued to receive  transit benefits even after they left their agencies. However, only two  agencies (Transportation and IRS) ensure that employees who leave the  agencies are removed from the transit benefits distribution list.
We found 28 individuals who have received transit benefits from federal  agencies even though they do not appear to work for these agencies.  However, only three agencies (Transportation, IRS, and State) verify  employee eligibility.
As discussed earlier in this testimony, figure 4 shows that all the agencies  required applicants to sign a written certification stating that they are  eligible to participate in the transit benefits program, that they do not  receive parking benefits, and that their transit benefits will be used for  their work commute only. However, during the course our investigations,  we interviewed four employees at Transportation who all claimed that  they were only asked to provide an oral estimate of their commuting costs.  None of the employees recall filling out or signing an application form. We  asked Transportation to provide us with copies of these applications in  order to validate the employees’ claims. In response, the department  provided us with electronic copies of the applications in question, but  these applications do not contain employee signatures.
section_title: Federal Employees Likely Made More than $17 Million in Potentially Fraudulent Transit Benefit Claims
paragraphs: Using limited employee data and transit benefit records, we determined  that the amount of potentially fraudulently transit benefits claimed during  2006 in the National Capital Region was at least $17 million and likely  millions more. This magnitude is based on the roughly $70 million in  transit benefits claimed by employees at Commerce, Transportation,  Homeland Security, Defense, Treasury, IRS, and the Coast Guard. The  total amount of fraud could be millions more if a similar magnitude of  fraud exists in the dozens of agencies that we did not review, or if the  other types of fraud GAO identified in this investigation could be  quantified.
Our investigations and audit work revealed that many of the employees at  these seven agencies provided inaccurate commuting cost information on  their transit benefit applications. We determined this by examining transit  benefit data for about 4,000 individuals working at the headquarters  offices of these seven agencies and claiming roughly $4 million worth of  benefits. Specifically, we identified a set of zip codes for each of the seven  agency headquarters buildings and found that employees living within  these zip codes could not legitimately claim the maximum allowable  benefit of $105 per month, no matter what combination of Metrobus and  Metrorail they used to commute to their places of employment. Based on  this analysis, we determined that the 4,000 individuals we examined were  not entitled to the maximum transit benefit amount. However, we found  that hundreds of these individuals did in fact request this maximum  amount, claiming more benefits than they needed to commute to work.  Although these individuals may have been eligible for a portion of the  transit benefits they requested, their applications should not have been  approved because they signed certifications stating that they would not  request benefits in excess of their monthly commuting costs (see figure 2).  As provided on the applications submitted by these employees, such  overstated requests constitute a potential violation of the False Statements  Act, 18 U.S.C. §1001. Because of these overstatements, we found that  $1million of the transit benefits that these individuals claimed were  potentially fraudulent. This $1 million represented about 25 percent of the  $4 million claimed by the 4,000 individuals we examined at these seven  agencies. We then applied this fraudulent claim rate to the roughly $70  million claimed by employees participating in the transit benefits program  at the seven agencies in the National Capital Region during 2006.
Based on this collective audit and investigative work, we found that the  seven agencies could have made potentially fraudulent payments totaling  more than $17 million. Given the number of agencies not covered by our  analysis, it is likely that this amount is significantly understated and could  be millions more. In particular, the $17 million in potentially fraudulent  claims does not include the other agencies that contract with  Transportation for distribution or the agencies that administer their own  transit benefits programs. Moreover, this order of magnitude only includes  individuals who work at the headquarters offices of the aforementioned  seven agencies and who claimed the maximum benefit per month. It does  not include individuals who work at offices other than headquarters or  who have potentially made fraudulent claims for less than the maximum  amount. The order of magnitude also excludes many of the other types of  fraud and abuse we reported in our case studies, such as individuals who  claim benefits but do not use them because they use agency parking or  “slug” to work, or individuals who received federal transit benefits even  though they do not work for the federal government. For more  information on the data used to develop our calculations, see appendix I.
section_title: Corrective Actions
paragraphs: During the course of investigation, we communicated the results of our  work to the IGs and/or the offices of special investigation at Commerce,  Transportation, State, Homeland Security, Defense, Treasury, IRS, Patent  and Trademark, and the Coast Guard. At the close of our investigation, we  referred the individuals we identified as fraudulently selling Metrocheks  on eBay and Craigslist to the appropriate agency IG and/or office of  investigation for criminal and/or administrative action. We similarly  referred the individuals who provided inaccurate and inflated commuting  cost information on their applications, the individuals who have received  transit benefits from federal agencies even though they do not appear to  work for the agencies, the individuals who left their agencies but did not  return their unused benefits, and the former federal employees who  continued to received benefits after leaving their respective agencies. In  addition, we held corrective action briefings on April 4, April 17, and April  18, 2007, to provide the agencies with an overview of our investigation and  our findings.
section_title: Conclusion
paragraphs: WMATA now plans to eliminate the Metrochek program and offer only  SmartBenefits by January 2008. Because SmartBenefits are less negotiable  than paper Metrocheks, this action may stop some federal employees from  fraudulently selling their transit benefits. But a switch to SmartBenefits  will not prevent the other types of fraud and abuse we identified. As  shown by our investigation, federal employees have taken advantage of  the lack of effective management, oversight, and control of the program.  For example, unless commuting costs are verified, employees may still  request and receive more benefits than they need. Moreover, as  demonstrated by individuals we interviewed who admitted to deliberately  falsifying their applications for benefits, federal workers can commit  transit benefit fraud without suffering any adverse consequences.  Agencies should take aggressive actions against employees who we  identified as committing fraud, and look to put reasonable controls in  place that can minimize fraud and abuse in this program.
Mr. Chairman and members of the subcommittee, this concludes my  statement. I would be pleased to answer any questions that you or other  members of the subcommittee may have at this time.
section_title: Contacts and Acknowledgments
paragraphs: For further information about this testimony, please contact Gregory D.  Kutz 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 testimony. In addition to the individual named above, Valerie  Blyther, Shafee Carnegie, Jennifer Costello, Paul Desaulniers, Craig  Fischer, Janice Friedeborn, Dennis Fauber, Matthew Harris, Adam Hatton,  Jason Kelly, John Kelly, Barbara Lewis, James Madar, Andrew McIntosh,  Richard McLean, Gertrude Moreland, Crystal Lazcano, Jennifer Leone,  John Ryan, Viny Talwar, Walter Vance, and Tami Weerasingha.
section_title: Appendix I: Potential Magnitude of Fraudulent Payments
paragraphs: To provide an order of magnitude of the employees fraudulently claiming  transit benefits within the National Capital Region, we identified a  selection of federal employees who met a specific set of criteria and  evaluated the validity of their transit benefit application data. First, we  narrowed our scope to seven agencies—Commerce, Treasury, IRS,  Defense, Homeland Security, Coast Guard, and Transportation—where we  identified employees selling their transit benefits on the Internet and for  whom we had sufficient data. We further narrowed our scope by limiting  our analysis to federal employees working at the headquarters buildings of  these seven agencies. We then identified a set of zip codes for each of the  seven agency headquarters buildings. Employees living within these zip  codes could not legitimately claim the maximum allowable benefit of $105  per month, no matter what combination of Metrobus and Metrorail they  used to commute to their places of employment. We identified  approximately 4,000 federal employees at the seven agencies that lived  within these zip codes, and determined that approximately 19 percent of  them may have fraudulently claimed the maximum benefit by providing  false statements on their applications in violation of 18 U.S.C. § 1001.  These potentially fraudulent claims represent about 25 percent of the $4  million claimed by the total selection of 4,000 employees. We then applied  this fraudulent payment rate to the roughly $70 million spent by the seven  agencies on the transit benefit program in the National Capital Region  during 2006 and determined that the possible magnitude of potentially  fraudulent transit benefit payments was more than $17 million.
In this analysis, public transportation costs were calculated as the actual  costs incurred as a result of utilizing a combination of Metrobus and/or  Metrorail to commute to and from a place of employment. We used peak  fares (as opposed to nonpeak fares) for our calculations, because we  assumed that transit benefit participants were working during normal  business hours. We also assumed that the employees did not take any sick  or annual leave and worked at their headquarters offices five days per  week. In other words, we assumed that the employees did not have  alternative work schedules (i.e., they did not work four 10 hour days) and  they did not telecommute.
We used information from the Department of Transportation (which is  responsible for administering the program for the selected agencies) and  the National Finance Center to identify employees from the seven selected  agencies whose homes of record are located within our defined area and  who were also claiming the maximum benefit. To confirm our conclusions  concerning these individuals, we tested a nonrepresentative selection of  our potentially fraudulent cases, identified their home address, and used  the Washington Metropolitan Area Transit Authority’s online Trip Planner  to determine the participant’s actual daily, and then monthly, public  transportation costs. We interviewed these participants and confirmed  that the individuals we selected were not entitled to the maximum benefit.
section_title: Appendix II: Federal Employees Fraudulently Selling Metrocheks on eBay
paragraphs: The table below provides a complete listing of information on all the 20  eBay sellers we identified as federal employees. Note that we did not  interview sellers 14-20.
section_title: Appendix III: Federal Employees Providing Inaccurate Commuting Costs on Transit Benefit Applications
paragraphs: Through data mining of information submitted on transit benefit  applications, we found many employees who appeared to provide  inaccurate and inflated commuting cost information on their transit  benefit applications. The following table provides a complete listing of the  23 individuals we interviewed.