Premium Class Travel: Internal Control Weaknesses Governmentwide Led to Improper and Abusive Use of Premium Class Travel
Released: 2007-10-03T00:00:00

Letter

Background

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.

Extent of Governmentwide Improper Premium Class Travel Is Significant

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.

Governmentwide Premium Class Travel Use

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.

Key Transaction- Based Controls Are Ineffective

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.

Executive Premium Class Use

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.

Ineffective Oversight and Internal Control Weaknesses Contributed to Improper and Abusive Premium Class Travel

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.

Lack of Monitoring and Oversight Exists over Premium Class Travel Use

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.

Weak Control Environment Exists with Respect to Premium Class Policies and Procedures

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.

Case Studies of Improper and Abusive Premium Class Travel Highlight Extent and Nature of Control Breakdowns

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.

Frequent Travelers

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.

Abusive Premium Class Travel by Groups

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.

Conclusions

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.

Executive Action

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.

Agency Comments and Our Evaluation

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.

Appendix I: Objectives, Scope, and Methodology

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.

Magnitude of Premium Class Travel and the Extent Such Travel Was Improper

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.

Underlying Causes of Improper and Abusive Premium Class Usage

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.

Data Mining Improper and Abusive Premium Class Travel

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.

Data Reliability

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.

Appendix II: Background

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.

Appendix III: Comments from the Office of Management and Budget

Appendix IV: Comments from the General Services Administration

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact

Acknowledgments

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.