State derives its authority to grant leave and travel reimbursements to its foreign service employees from the Foreign Service Act of 1980. To implement provisions of the act, the department issued the FAM and the FAH. Travel by State’s civil service employees is generally governed by the General Services Administration’s (GSA) Federal Travel Regulation (FTR), but in some cases is also governed by the FAM. State’s general policy is for its foreign and civil service employees to travel using coach-class accommodations provided by common carriers. However, regulations governing foreign service and civil service travel authorize the use of premium-class travel under specific circumstances. Both foreign service and civil service travel regulations require the agency head or his or her designee to authorize first-class travel in advance. These regulations also require the authorizing official at a post abroad or the executive director of the funding bureau or office domestically to authorize premium-class travel other than first class. Further, in September 2004, the Assistant Secretary of State for Administration sent a memorandum to all State executive directors emphasizing “that it is wrong to authorize premium-class travel on a blanket basis” and “that a separate justification for premium-class travel is required for each trip.” Federal and State travel regulations authorize premium-class accommodation when at least one of the following conditions exists: no space is available in coach-class accommodations, regularly scheduled flights provide only premium-class an employee with a disability or special need requires premium-class security issues or exceptional circumstances, travel lasts in excess of 14 hours without a rest stop, foreign-carrier coach-class air accommodations are inadequate, overall cost savings, such as when a premium-class ticket is less expensive than a coach-class ticket or in consideration of other economic factors, transportation costs are paid in full through agency acceptance of payment from a nonfederal source, or required because of agency mission (e.g., courier). The regulations also allow for the traveler to upgrade to premium-class accommodations, at the traveler’s expense or by using frequent traveler benefits, but the upgrade cannot be charged to the centrally billed account. State has the second largest centrally billed travel card program in the federal government. During fiscal years 2003 and 2004, State used 155 different centrally billed accounts-–143 international and 12 domestic-–to purchase more than $360 million in transportation services, such as airline tickets, train tickets, and bus tickets, for State and other foreign affairs agencies. Each bureau has its own travel budget and is responsible for obligating its travel expenses. The local travel-authorizing official or the executive director of the funding office is responsible for determining the necessity of travel, issuing the travel order, certifying the availability of funds, and recording an obligation against a unit’s appropriated funds. State’s travel management centers (TMC) make airline reservations, issue airline tickets charged to the centrally billed account upon receipt of a signed travel order, and perform a reconciliation between the tickets it issued and tickets charged on the Citibank invoice. To complete this reconciliation process, TMCs are responsible for associating each charge with a specific travel order. The financial management officer (FMO) at overseas posts and resource management’s Global Financial Operations in Charleston, South Carolina, for domestic activity, are generally responsible for reviewing a TMC’s monthly reconciliation, making appropriate changes, and certifying or authorizing Citibank’s invoice for payment. Upon receipt of the TMC’s reconciliation, billed transaction report (BTR), and supporting files, State pays Citibank for the tickets purchased on the centrally billed account. State also pays travelers for nontransportation costs claimed on their individual travel voucher. Figure 1 shows the design of the processes used to issue an airline ticket on centrally billed accounts and reimburse travelers for travel expenses. It also explains the roles of different offices in providing reasonable assurance that airline tickets charged to these cards are appropriate and meet a valid government need. Premium-class travel accounted for almost half of travel expenditures charged to State’s over 260 centrally billed accounts during most of fiscal years 2003 and 2004, including domestic and overseas operations, and this trend continued for fiscal year 2005. On the basis of our statistical sample, we estimate that 67 percent of premium-class travel during April 2003 through September 2004 for State and other foreign affairs personnel was improper--either not properly authorized or properly justified because of breakdowns in key internal controls. Examples of breakdowns in key controls include travelers flying premium-class travel when the travel orders did not authorize premium-class travel; subordinates authorizing their supervisors to take premium-class flights; and travel orders authorizing premium-class travel using criteria of a total flight time of more than 14 hours, even though the actual flight time, including layovers, was less than 14 hours. Also, State’s diplomatic couriers used premium-class travel even when it was not justified. In addition, we found that State’s top executives, including under secretaries and assistant secretaries, often used premium-class travel regardless of the length of the flight. Further, senior State officials told us that the department offered premium-class travel as a benefit to its employees, as part of their human capital initiative, for all flights lasting over 14 hours, which is allowed by federal and State regulations but is costly to taxpayers. However, State did not perform a cost-benefit analysis before offering this benefit. In comparison, agencies— such as DOD—attempt to avoid the significant additional cost associated with premium-class travel on flights lasting more than 14 hours by encouraging employees to take a rest stop en route to their final destination, saving hundreds, sometimes thousands, of tax dollars per trip. Prior to 2002, State policy prohibited the use of premium-class accommodations for permanent change of station travel even when the duration of the travel exceeded 14 hours—a prohibition established by many other agencies with staff stationed overseas. However in 2002, State eliminated that prohibition. Between April 2003 and September 2004, State and other foreign affairs agencies purchased over 32,000 airline tickets costing about $140 million that contained at least one leg of premium-class travel for State and other foreign affairs personnel using State’s centrally billed account travel cards. In addition, we determined that premium-class travel continues to be significant for fiscal year 2005. As discussed later in this report, because State does not obtain or maintain any information on premium-class travel, it cannot monitor its proper use, identify trends, or determine alternate, less expensive means of transportation. As shown in figure 2, premium- class travel represents about 19 percent of the tickets issued, and State’s and other foreign affairs agencies’ spending on premium-class travel represented about 49 percent of the $286 million spent on airfare charged to the centrally billed accounts during the period April 2003 through September 2004. Our analysis excluded all travel transactions at overseas posts that were not procured through the centrally billed travel accounts because it was outside the scope of our request. State told us that at some overseas posts travelers purchase airline tickets using Government Travel Requests (GTR) and purchase orders. Further, the information State provided for some tickets purchased with GTRs did not distinguish between premium- and coach-class tickets. Breakdowns in key internal control activities led to significant numbers of transactions lacking proper authorization and justification for premium- class travel. On the basis of our sample of premium transactions, an estimated 67 percent of premium-class travel was not properly authorized, justified, or both. Specifically, 39 percent of the premium-class airline tickets charged to State’s centrally billed account from April 2003 through September 2004 were not properly authorized. In addition, 28 percent of premium-class transactions that were authorized were not justified in accordance with either federal or State regulations. (See app. I for further details of our statistical sampling test results.) Further, State did not maintain accurate and complete data on the extent of premium-class travel and thus had a lack of controls in place to oversee and manage this travel. Each fiscal year State is required to report to GSA on first-class travel taken by all State and other foreign affairs personnel. However, we found 23 roundtrip first-class tickets valued at more than $85,000, obtained for State or other foreign affairs agencies, that were not reported by State to GSA as required in fiscal years 2003 and 2004. Further, we saw no evidence of external or internal audits of State’s centrally billed travel program. Requiring premium-class travel to be properly authorized is the first step in preventing improper premium-class travel. Federal and State regulations require premium-class travel to be specifically authorized. State travel regulations specify that premium-class travel must be authorized in advance of travel, unless extenuating circumstances or emergencies make prior authorization impossible, in which case the traveler is required to request written approval from the appropriate authority as soon as possible after the travel. Using these regulations, we found that transactions failed the authorization test in the following two categories: (1) the documentation did not specifically authorize premium-class travel or a blanket travel authorization was used to authorize premium-class travel and (2) the travel order authorizing premium-class travel was not signed. Premium-class travel was not specifically authorized. On the basis of our statistical sample, we estimated that the travel orders and other supporting documentation for 13 percent of the premium-class transactions did not specifically authorize the traveler to fly premium class, and thus the travel management center should not have issued the premium-class ticket. We estimated that an additional 17 percent of the transactions were authorized by a blanket authorization, including all diplomatic courier travel. A blanket authorization is not an appropriate vehicle for authorizing premium-class travel because federal and State travel regulations require that all premium-class travel be authorized on a trip-by-trip basis.