oversight

Travel Cards: Internal Control Weaknesses at DOD Led to Improper Use of First and Business Class Travel

Published by the Government Accountability Office on 2003-10-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

               United States General Accounting Office

GAO            Report to Congressional Requesters




October 2003
               TRAVEL CARDS
               Internal Control
               Weaknesses at DOD
               Led to Improper Use
               of First and Business
               Class Travel




GAO-04-88

               a

                                                October 2003


                                                TRAVEL CARDS

                                                Internal Control Weaknesses at DOD Led
                                                to Improper Use of First and Business
Highlights of GAO-04-88, a report to
congressional requesters                        Class Travel



                                                Breakdowns in internal controls and a weak control environment resulted in
Ineffective oversight and                       improper first and business class travel and increased costs to taxpayers.
management of the Department of                 Based on extensive analysis of records obtained from Bank of America, GAO
Defense’s (DOD) travel card                     found that DOD spent almost $124 million on about 68,000 premium class
program, which GAO has                          related tickets—primarily business class—during fiscal years 2001 and 2002.
previously reported on, have led to
concerns about DOD’s use of first
                                                Each premium class ticket costs the government up to thousands of dollars
and business class airfares. GAO                more than a comparable coach class ticket. GAO’s work also indicated that
was asked to (1) identify the                   civilian supervisors, managers, and executives and senior military officers
magnitude of premium class travel,              accounted for almost 50 percent of the premium class transactions, and for
(2) determine if DOD’s key internal             27 of the 28 most frequent premium class travelers. GAO considers travel by
control activities operated                     high-ranking officials to be a sensitive payment area because of its
effectively and provide examples of             susceptibility to abuse.
control breakdowns, and (3) assess
DOD’s monitoring and key                        Breakdowns in key internal controls resulted in a significant level of
elements of the control                         improper premium class travel. GAO estimated that 72 percent of DOD’s
environment.                                    fiscal year 2001 and 2002 premium class travel was not properly authorized,
                                                and 73 percent was not properly justified.

To reduce improper premium class                Examples of Improper Premium Class Travel
travel and related DOD costs, GAO                                Cost of      Estimated
makes several recommendations                    Rank/grade     premium    cost of coach
for improving controls over                      of traveler  class trips     class trips Reason travel was improper
authorization and justification,                 GS-15           $35,000          $7,000 Traveler approved own first class travel based on
                                                                                           medical condition that was later determined to not
policies and procedures, and                                                               meet stringent first class criteria.
monitoring and oversight of first                Presidential     68,000          17,000 First and business class travel was authorized by a
and business class travel.                       appointee                                 subordinate using a blanket order.
                                                 GS-14 and        21,000            2,500 The travel order authorizing relocation costs for the
DOD officials concurred with all of              family                                    traveler and his family did not authorize premium
GAO’s recommendations and said                                                             class travel.
                                                 GS-15             3,300              200 First class ticket not authorized by the Secretary of
that some actions have already                                                             Defense or designee as required.
been initiated.                                  GS-15             4,500              600	 Eighteen months after the trip, the traveler’s
                                                                                           supervisor (not a medical authority) provided a
                                                                                           note regarding a medical need as the justification
                                                                                           for business class.
                                                Source: GAO analysis of premium class travel transactions and supporting documentation.

                                                Further, DOD did not have accurate and complete data on the extent of
                                                premium class travel and performed little or no monitoring of this travel. In
                                                regard to the control environment, GAO found that DOD (1) issued policies
                                                that were inconsistent with General Service Administration governmentwide
                                                travel regulations, (2) did not require military services to issue and update
                                                premium class policies to implement DOD’s travel regulations consistently,
                                                and (3) did not issue guidance on how to document the authorization and
                                                justification of premium class travel. As a result of GAO’s audit, DOD has
                                                begun updating its travel regulations to more clearly state when premium
www.gao.gov/cgi-bin/getrpt?GAO-04-88.
                                                class travel can be authorized and to emphasize that it must only be used
To view the full product, including the scope   when exceptional circumstances warrant the additional cost.
and methodology, click on the link above.
For more information, contact Gregory Kutz at
(202) 512-9505 or kutzg@gao.gov.
Contents




Letter
                                                                                               1
                            Results in Brief 
                                                        3
                            Background                                                                6

                            Extent of Premium Class Travel Is Significant 
                           8
                            Key Internal Controls Were Ineffective 
                                 10
                            Lack of Monitoring and Control Environment Weaknesses 

                              Contributed to Improper Use of Premium Class Travel                    22
                            Conclusions                                                              33
                            Recommendations for Executive Action                                     34
                            Agency Comments and Our Evaluation                                       36


Appendixes
              Appendix I:   Objectives, Scope, and Methodology                                       38
             Appendix II:   Process to Obtain Premium Class Travel                                   43
             Appendix III:	 GAO Contacts and Staff Acknowledgments                                   45
                            GAO Contacts                                                             45
                            Acknowledgments                                                          45


Tables                      Table 1: DOD Premium Class Travel for Fiscal Years 2001 and 

                                     2002
                                                            9
                            Table 2: Estimate of Fiscal Year 2001 and 2002 DOD Premium Class 

                                     Travel Transactions That Failed Control Tests
                  11
                            Table 3: Examples of Improper Use of Premium Class Travel 
              14
                            Table 4: Examples of Travelers Who Frequently Used Premium 

                                     Travel
                                                         18
                            Table 5: Fiscal Years 2001 and 2002 DOD Premium Class Travel 

                                     Population Subjected to Sampling 
                              40
                            Table 6: Fiscal Years 2001 and 2002 Premium Class Travel Charged 

                                     to the Centrally Billed Accounts Adjusted for Coding 

                                     Errors
                                                         41


Figures                     Figure 1: Sample Premium Class Authorization Form                        30
                            Figure 2: Sample Medical Condition Form                                  32
                            Figure 3: Standard Process to Obtain Premium Class Travel When
                                      Multiple Classes of Service Are Available                      44




                            Page i                                    GAO-04-88 DOD Premium Class Travel
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Page ii                                             GAO-04-88 DOD Premium Class Travel
A

United States General Accounting Office
Washington, D.C. 20548



                                    October 24, 2003


                                    The Honorable Charles E. Grassley

                                    Chairman 

                                    Committee on Finance

                                    United States Senate 


                                    The Honorable Norm Coleman

                                    Chairman

                                    Permanent Subcommittee on Investigations

                                    Committee on Governmental Affairs

                                    United States Senate


                                    The Honorable Janice Schakowsky 

                                    House of Representatives 


                                    This report is a continuation of our series of reports on the Department of 

                                    Defense’s (DOD) management of its various credit card programs. In fiscal 

                                    years 2002 and 2003, we issued a series of testimonies1 and reports2

                                    addressing problems that the Army, Navy, and Air Force had in managing 

                                    individually billed travel card accounts. These testimonies and reports 

                                    showed high delinquency rates and significant potential fraud and abuse 

                                    related to DOD’s travel program. Due to these concerns, you asked us to 

                                    audit controls over the other major form of payment used by DOD for 

                                    travel expenses—centrally billed accounts. Our audits in these areas 

                                    provide examples of DOD’s long-standing financial management problems, 

                                    which are pervasive, complex, and deeply rooted in virtually all business 

                                    operations throughout the department. Such problems led us in 1995 to put 

                                    DOD financial management on our list of high-risk areas—areas that are





                                    1
                                      U.S. General Accounting Office, Travel Cards: Control Weaknesses Leave Army Vulnerable
                                    to Potential Fraud and Abuse, GAO-02-863T (Washington, D.C.: July 17, 2002), and Travel
                                    Cards: Control Weaknesses Leave Navy Vulnerable to Fraud and Abuse, GAO-03-148T
                                    (Washington, D.C.: Oct. 8, 2002).
                                    2
                                     U.S. General Accounting Office, Travel Cards: Control Weaknesses Leave Army Vulnerable
                                    to Potential Fraud and Abuse, GAO-03-169 (Washington, D.C.: Oct. 11, 2002), Travel Cards:
                                    Control Weaknesses Leave Navy Vulnerable to Fraud and Abuse, GAO-03-147 (Washington,
                                    D.C.: Dec. 23, 2002), and Travel Cards: Air Force Management Focus Has Reduced
                                    Delinquencies, but Improvements in Controls Are Needed, GAO-03-298 (Washington, D.C.:
                                    Dec. 20, 2002).




                                    Page 1                                              GAO-04-88 DOD Premium Class Travel
highly vulnerable to fraud, waste, and abuse—in the federal government, a
designation that continues today.3

The centrally billed accounts are used by most DOD services and units to
purchase transportation services such as airline and train tickets, facilitate
group travel, and pay for other travel-related expenses,4 while the
individually billed accounts are used by individual travelers for lodging,
rental cars, and other travel expenses. For fiscal years 2001 and 2002, DOD
travelers incurred $7.1 billion in expenses on the centrally billed and
individually billed travel card accounts, with about $2.8 billion related to
the use of centrally billed accounts. This report addresses the first part of
your request related to controls over premium class travel charged to
centrally billed accounts. Federal travel regulations define premium class
travel as any class of accommodation above coach class, that is, first or
business class. We plan to report to you separately on the results of our
overall audit of the controls over the centrally billed account travel
program.

Because DOD disburses funds directly to Bank of America under a
governmentwide travel card contract for charges made to the centrally
billed accounts, the use of these accounts for improper5 transportation, in
particular the more expensive premium class travel, results in direct
increased cost to the government. Governmentwide General Services
Administration (GSA) regulations and internal DOD regulations state that
travelers must use coach class accommodations for official business air
travel—both domestic and international—except when a traveler is
specifically authorized to use premium class. The regulations also state
that travelers on official government travel must exercise the same


3
 U.S. General Accounting Office, High-Risk Series: An Overview, GAO/HR-95-1
(Washington, D.C.: February 1995), and High-Risk Series: An Update, GAO-03-119
(Washington, D.C.: January 2003).
4
 The Air Force is an exception to this general rule. The Air Force equally uses both centrally
billed and individual billed accounts for purchasing airline transportation.
5
 We define improper premium class travel transactions as those in which travelers did not
have specific authorization to use premium class accommodations or those transactions
that were properly authorized but did not provide specific justification for premium class
travel that was consistent with DOD regulation or policy. We also considered transactions
improper if premium class travel was authorized under DOD policy or procedures that were
inconsistent with the Federal Travel Regulation or the guidance provided in our Standards
for Internal Control in the Federal Government (GAO/AIMD-00-21.3.1) and our Guide for
Evaluating and Testing Controls Over Sensitive Payments (GAO/AFMD-8.1.2).




Page 2                                                 GAO-04-88 DOD Premium Class Travel
                    standard of care in incurring expenses that a prudent person would
                    exercise if traveling on personal business. Premium class flights are not
                    something travelers are entitled to simply because certain conditions exist.
                    Rather, GSA and DOD require that, when possible, travelers plan their
                    travel in advance to avoid the necessity for premium class travel.

                    As you requested, the objective of our audit was to assess the adequacy of
                    internal controls over the authorization and issuance of fiscal years 2001
                    and 2002 premium class tickets charged to DOD’s centrally billed travel
                    accounts. Specifically, we (1) identified the extent to which DOD uses the
                    centrally billed travel accounts to purchase premium class travel,
                    (2) determined if DOD’s key internal control activities operated effectively
                    and provided reasonable assurance that premium class travel was
                    purchased appropriately and identified examples of control breakdowns,
                    and (3) assessed DOD’s oversight and monitoring of the use of premium
                    travel and key elements of the control environment.

                    To meet our objectives, we (1) extracted premium class transactions from
                    Bank of America databases of charges made to DOD’s centrally billed
                    accounts for fiscal years 2001 and 2002, (2) reviewed federal laws and
                    regulations and DOD policies and procedures on premium class travel, and
                    (3) interviewed DOD officials on processes and procedures in place to
                    authorize and justify premium class travel. We tested a statistical sample of
                    premium class travel transactions and conducted other audit work to
                    evaluate the design and implementation of key internal control procedures
                    and activities. We used data mining to identify additional instances of
                    improper premium class travel based on the frequency and dollar amount
                    of premium class travel. Appendix I provides details on our scope and
                    methodology.

                    We conducted our audit work from November 2002 through August 2003 in
                    accordance with U.S. generally accepted government auditing standards,
                    and we performed our investigative work in accordance with standards
                    prescribed by the President’s Council on Integrity and Efficiency. We
                    received oral comments on a draft of this report from DOD, Army, Navy,
                    Marine Corps, and Air Force officials on September 10, 2003. We addressed
                    the comments in the “Agency Comments and Our Evaluation” section, and
                    incorporated those comments in the final report where appropriate.



Results in Brief	   Breakdowns in specific internal controls, ineffective oversight, and a poor
                    control environment over the use of DOD’s premium class travel resulted in



                    Page 3                                       GAO-04-88 DOD Premium Class Travel
improper first and business class travel and increased costs to taxpayers.
Based on our analysis of charges made to DOD’s centrally billed accounts,
we found that for fiscal years 2001 and 2002, DOD spent almost
$124 million on over 68,000 airline tickets that included at least one leg of
premium class service, primarily business class. The price difference
between a premium class ticket and a coach class ticket ranged from a few
dollars to thousands of dollars. Based on our statistical sample, we
estimated that senior civilian and military employees—including senior-
level executives and presidential appointees with Senate confirmation—
accounted for almost 50 percent of premium class travel.

Breakdowns in key internal control activities resulted in a significant level
of improper premium class travel. Specific control breakdowns included
lack of (1) proper authorization of premium class travel—documentation
directing the traveler to fly on official government business had to
specifically mention that the individual could travel in premium class and
the authorizing travel documents had to be signed by an official who was
not the traveler or a subordinate6—and (2) proper justification of premium
class travel—documentation had to reflect that the circumstances under
which premium class travel was used were consistent with criteria set out
in governmentwide and DOD regulations or policies. Our statistical sample
results showed that an estimated 72 percent of DOD fiscal year 2001 and
2002 premium class travel was not properly authorized, and 73 percent was
not properly justified. One example of improper travel we identified was
for a DOD civilian employee and three family members who flew a
combination of first and business class when they relocated from London
to Honolulu. The travel order for the employee and his family did not
authorize them to fly premium class, yet premium class tickets totaling
almost $21,000 were issued, compared to an estimated cost of $2,500 for
coach class tickets. Consequently, the government incurred more than
$18,000 in additional cost.

Our data mining work also determined that although frequent premium
class travelers were generally authorized to travel premium class, the
authorization was not properly justified. Of the 28 most frequent first and
business class DOD travelers, only 3 did not receive proper authorization
for this class of travel. These 3 travelers lacked proper authorization


6
 Although DOD policies do not address subordinates approving their supervisors’ premium
class travel, we consider this to be a control weakness, as it increases the opportunity for
high-ranking employees to bypass internal controls over travel.




Page 4                                                GAO-04-88 DOD Premium Class Travel
because they either approved their own premium class travel or had their
subordinates do so. However, the 28 most frequent travelers still had a high
rate of improper use of first and business class travel because their
justification—often for mission requirements or medical condition—was
not supported by the documentation provided or did not adhere to the
governmentwide and DOD travel regulations. In other cases, the
justification provided by frequent travelers was questionable because the
documentation was not adequate to determine whether the transaction met
DOD’s criteria.

Lack of management oversight and a weak overall control environment
also contributed to improper premium class travel. Specifically, DOD did
not collect data on the extent of business class travel—the bulk of DOD’s
premium class travel—and therefore performed little or no monitoring of
this type of travel. In addition, DOD’s first class travel data, which DOD is
required to report to GSA annually, were incomplete. As a result, DOD was
not aware of the improper use of premium class travel and did not have
data available to identify trends and determine whether alternate, less
expensive means of transportation were available. Further, weaknesses in
the control environment, primarily related to policies and procedures,
exacerbated weak internal control procedures and contributed to
ineffective oversight of premium class travel. Specifically, we found that
DOD (1) issued polices that were inconsistent with GSA’s governmentwide
travel regulations, (2) did not require the military services to issue and
update premium class policies that consistently implemented DOD’s travel
regulations, and (3) did not issue guidance on how to document the
authorization and justification of premium class travel. As a result of our
audit, DOD has begun updating its travel regulations to more clearly
articulate the circumstances under which premium class travel is
authorized. In addition, the updated regulations, in the context of lengthy
travel, emphasize that premium class travel must not be common practice
and that such services should only be used in exceptional circumstances.

This report contains recommendations to DOD aimed at reducing improper
premium class travel and related DOD travel costs. Our recommendations
address the need to improve internal controls to provide reasonable
assurance that authorization and justification for premium class travel are
appropriate, monitor the extent of premium class travel, modify policies
and procedures to make them consistent with GSA regulations, and issue
policies prohibiting subordinates or the travelers themselves from
authorizing the travelers’ premium class travel. In oral comments on a draft
of this report, DOD officials concurred with our recommendations to



Page 5                                       GAO-04-88 DOD Premium Class Travel
              resolve the control weaknesses. Because two of their proposed actions
              represented alternative approaches to mitigate identified weaknesses, we
              modified those recommendations to recognize that the intent of those
              recommendations could be addressed in different ways.



Background	   DOD uses a combination of governmentwide and DOD guidance as the
              policy and procedural foundation for incurring premium class travel. The
              Federal Travel Regulation (FTR), issued by GSA, implements statutory and
              Office of Management and Budget (OMB) requirements and policies for
              travel by federal civilian employees and others authorized to travel at
              government expense, including guidelines governing the use of premium
              class travel. The purpose of the FTR is to ensure that official travel is
              conducted responsibly and at a minimal administrative expense. Pursuant
              to various statutes, DOD issued the Joint Federal Travel Regulations
              (JFTR), which applies to uniformed service members, and the Joint Travel
              Regulations (JTR), which applies to DOD civilian personnel. The DOD
              travel regulation for military personnel mirrors the GSA regulation, and
              DOD travel regulations for civilian personnel are subject to GSA’s travel
              regulation. In addition, each military service has issued implementing
              guidelines that, to varying degrees, provide additional guidance on when
              premium class travel is authorized.

              GSA and DOD regulations authorize the use of premium class travel under
              specific circumstances. The JTR and the JFTR limit the authority to
              authorize first class travel to the Secretary of Defense, his or her deputy, or
              other officials as designated by the Secretary of Defense. However, while
              both the JTR and JFTR provide that the authority to authorize first class
              travel may be delegated and re-delegated, the regulations specify that the
              authority must be delegated to “as high an administrative level as
              practicable to ensure adequate consideration and review of the
              circumstances necessitating the first class accommodations.” Further
              guidance is found in a DOD directive on transportation and traffic
              management, which specifically states that the secretaries within their
              military services and secretariats are the authorizing authorities for first
              class travel. The service secretaries may re-delegate authorizing authority
              for first class travel to under secretaries, service chiefs or their vice and/or
              deputy chiefs of staff, and four-star major commanders or their three-star
              vice and/or deputy commanders, but authorizing authority may not be
              delegated to anyone other than these officials. DOD regulations also
              require that authorization for premium class accommodations be made in
              advance of the actual travel unless extenuating circumstances or



              Page 6                                         GAO-04-88 DOD Premium Class Travel
emergency situations make advance7 authorization impossible. Specifically,
the JTR and JFTR state that first class accommodation is authorized only
when at least one of the following conditions exists:

•	 coach class airline accommodations or premium class other than first
   class airline accommodations are not reasonably available;

•	 the traveler is so handicapped or otherwise physically impaired that
   other accommodations cannot be used, and such condition is
   substantiated by competent medical authority; or

• exceptional security circumstances require such travel.

The JTR and JFTR allow the transportation officer,8 in conjunction with the
official who issued the travel order, to approve premium class travel other
than first class. In accordance with the FTR, DOD restricts premium class
travel to the following eight circumstances:

•	 regularly scheduled flights between origin and destination provide only
   premium class accommodations, and this is certified on the travel
   voucher;

•	 coach class is not available in time to accomplish the purpose of the
   official travel, which is so urgent it cannot be postponed;

•	 premium class travel is necessary to accommodate the traveler’s
   disability or other physical impairment, and the condition is
   substantiated in writing by competent medical authority;

•	 premium class travel is needed for security purposes or because
   exceptional circumstances make its use essential to the successful
   performance of the mission;




7
  First class accommodations may be used without authorization only when regularly
scheduled flights between the authorized origin and destination (including connecting
points) provide only first class accommodations.
8
  The JFTR delegates to the services the authority to determine who may approve premium
other than first class travel. The service regulations call for the same authorizing official as
the JTR.




Page 7                                                  GAO-04-88 DOD Premium Class Travel
                    •	 coach class accommodations on authorized/approved foreign carriers
                       do not provide adequate sanitation or meet health standards;

                    •	 premium class accommodations would result in overall savings to the
                       government because of subsistence costs, overtime, or lost productive
                       time that would be incurred while awaiting coach class
                       accommodations;

                    • transportation is paid in full by a nonfederal source; or

                    •	 travel is to or from a destination outside the continental United States,
                       and the scheduled flight time (including stopovers) is in excess of 14
                       hours. However, a rest stop is prohibited when travel is authorized by
                       premium class accommodations.

                    Both GSA and DOD regulations allow a traveler to upgrade to premium
                    class other than first class travel at personal expense, through redemption
                    of frequent traveler benefits. GSA also identified agency mission as one of
                    the criteria for premium class travel. Appendix II includes more detailed
                    information concerning the process by which DOD military and civilian
                    personnel would properly obtain premium class airline tickets.



Extent of Premium   For fiscal years 2001 and 2002, DOD spent nearly $124 million on over
                    68,000 airline tickets containing at least one leg of premium class travel.9
Class Travel Is     Since DOD did not maintain centralized data on premium class travel, we
Significant         extracted this information from Bank of America’s fiscal years 2001 and
                    2002 databases of DOD centrally billed account travel, which included over
                    5.3 million transactions for airline tickets valued at over $2.4 billion.
                    Although we were able to report this aggregate information, we were
                    unable to obtain any breakdowns of the data, such as the amount of
                    premium class travel by military service or the amount of premium class
                    travel used for domestic versus overseas flights. As discussed later in this
                    report, because DOD does not obtain or maintain management information
                    on premium class travel, it cannot monitor its proper use, identify trends,
                    or determine alternate, less expensive means of transportation.



                    9
                     In addition to the over 68,000 premium class travel transactions purchased by DOD, DOD
                    travelers upgraded over 3,100 coach tickets to business or first class tickets at no cost to the
                    government.




                    Page 8                                                  GAO-04-88 DOD Premium Class Travel
                                                As shown in table 1, the total dollar amount DOD spent on travel that
                                                included at least one leg of premium class airfare was about $57 million in
                                                fiscal year 2001 and about $67 million in fiscal year 2002. First class travel
                                                accounted for 2.4 percent of the total dollars spent for premium class travel
                                                for the 2 fiscal years, while business class accounted for the remaining 97.6
                                                percent.



Table 1: DOD Premium Class Travel for Fiscal Years 2001 and 2002

                                                Number of transactions                               Dollar amounts (in thousands)

                                                     2001            2002            Total              2001             2002            Total
First class                                          688               552          1,240            $1,302             $1,596         $2,898
Business class                                  32,771             34,079          66,850            55,852             65,095       $120,947
Total premium travel                            33,459             34,631          68,090           $57,154            $66,691       $123,845
Source: GAO analysis of Bank of America data.

                                                Note: Transactions include at least one leg of premium class travel.


                                                DOD’s premium class air travel accounts for a very small percentage of
                                                DOD travel overall.10 It represents 1 percent of total DOD airline
                                                transactions and 5 percent of total DOD dollars spent on airline travel
                                                charged to the centrally billed accounts. However, to put the amount that
                                                DOD spends on premium class travel in perspective, we noted that the $124
                                                million DOD spent on premium class related travel during these 2 fiscal
                                                years exceeded the total travel and transportation expenses—including
                                                airfare, lodging, and meals—spent by 12 major agencies covered by the
                                                Chief Financial Officers Act of 1990, including the Social Security
                                                Administration; the Departments of Energy, Education, Housing and Urban
                                                Development, and Labor; and the National Aeronautics and Space
                                                Administration. The difference between a premium class ticket and a
                                                comparable coach class ticket can range from negligible—particularly if
                                                the traveler traveled within Europe—to thousands of dollars. In one
                                                instance, a traveler’s first class flight between Washington and Los Angeles
                                                was 14 times, or about $3,000 more than, the price of a coach class flight.



                                                10
                                                 DOD reported almost $10.8 billion in travel-related expenses for fiscal years 2001 and 2002
                                                combined.




                                                Page 9                                                      GAO-04-88 DOD Premium Class Travel
                        We also found that higher-ranking civilian personnel and military officials
                        accounted for a large part of premium class travel. Based on our statistical
                        sample, we estimated that DOD civilian employees under the General
                        Schedule (GS) grade GS-13 to GS-15 (supervisors and managers), Senior
                        Executive Service (SES) (career senior executives), presidential
                        appointees with Senate confirmation, and DOD senior military officers O-4
                        and above accounted for almost 50 percent of premium class travel. The
                        remaining 50 percent in our statistical sample comprised mostly other
                        officers, senior enlisted personnel, and technical or professional staff. We
                        consider travel by high-ranking officials, in particular senior-level
                        executives, to be a sensitive payment area because of its susceptibility to
                        abuse or noncompliance with laws and regulations.11



Key Internal Controls
Were Ineffective         Internal control activities help ensure that management’s directives are carried
                         out. The control activities should be effective and efficient in accomplishing the
                         agency’s control objectives. GAO’s Standards for Internal Control in the
                         Federal Government (GAO/AIMD-00-21.3.1, November 1999)


                        Significant breakdowns in key internal control activities resulted in a
                        significant level of improper premium class travel and increased DOD
                        travel cost. Specifically, we estimated, based on our statistical sample, that
                        72 percent of the DOD centrally billed travel transactions containing
                        premium class travel for fiscal years 2001 and 2002 were not properly
                        authorized, and 73 percent were not properly justified. (See app. I for
                        further details of our statistical sampling test results.) Using our statistical
                        sample and data mining results, we found numerous examples of premium
                        class travel without authorization or adequate justification, illustrating the
                        improper use of premium class travel and the resulting increase in travel
                        costs. Further, we used data mining techniques to identify the most
                        frequent users of premium class travel. Our analysis of these cases showed
                        that almost all were senior-level employees whose travel, although properly
                        authorized, generally was not adequately justified.




                        11
                             GAO/AFMD-8.1.2.




                        Page 10                                           GAO-04-88 DOD Premium Class Travel
Results of Statistical         We selected two key transaction-level controls for statistical sampling
Sampling Work                  testing. As shown in table 2, we estimated that 72 percent of premium class
                               travel was unauthorized. Because the FTR and DOD regulations provide
                               that premium class travel must be specifically authorized, transactions that
                               failed this test also failed the justification test. In addition, we found two
                               transactions in our statistical sample were properly authorized but failed
                               the justification test as they were not supported by the documentation
                               provided or did not adhere to the FTR and DOD travel regulations.



                               Table 2: Estimate of Fiscal Year 2001 and 2002 DOD Premium Class Travel
                               Transactions That Failed Control Tests

                                                                                                                             Estimated percentage

                                                                                                                                 failure rate in key 

                               Control test                                                                                      internal controlsa

                               Not properly authorized by a designated official at equal or                                                       72
                               higher rank/grade to the traveler
                               Not properly justified                                                                                             73
                               Source: GAO analysis of DOD premium class travel transactions and supporting documentation.

                               Note: Our testing excluded all business class transactions costing less than $750. We determined that
                               many of these lower dollar transactions were covered by a blanket authorization for certain intra-
                               European flights. Although, as discussed in this section, we did not believe the blanket authorization
                               was valid, we eliminated these transactions from our sample to avoid possible skewing of the results.
                               a
                                The numbers represent point estimates for the population based on our sampling tests. Information
                               about the confidence intervals for our sample estimates is presented in app. I.


Proper Authorization Did Not   Requiring premium class travel to be properly authorized is the first step in
Exist 	                        preventing improper premium class travel. The FTR requires premium
                               class travel to be specifically authorized. DOD specifies that premium class
                               travel must be authorized in advance of travel, unless extenuating or
                               emergency circumstances make authorization impossible, in which case
                               the traveler is required to request written approval from the appropriate
                               authority as soon as possible after the travel. In addition to the FTR and
                               DOD regulations, we also applied the criteria set forth in our internal
                               control standards12 and sensitive payments guidelines13 in evaluating the
                               proper authorization of premium class travel. For example, while DOD


                               12
                                    GAO/AIMD-00-21.3.1.
                               13
                                    GAO/AFMD-8.1.2.




                               Page 11                                                                    GAO-04-88 DOD Premium Class Travel
travel regulations and policies do not address subordinates authorizing
their supervisors’ premium class travel, our internal control standards
consider such policy to be flawed; therefore, a premium class transaction
that was approved by a subordinate would fail the control test. Using these
guidelines, we found that transactions failed the authorization test in the
following three categories: (1) the premium class airline ticket was
purchased, but the authorization of premium class travel was not noted on
either the travel order or on additional documentation supporting the travel
order, (2) the travel order authorizing premium class travel was not signed,
and (3) premium class travel was authorized by a subordinate.

Premium class travel not specifically authorized. Based on our
statistical sample, we estimated that the travel order and other supporting
documentation for 64 percent of the premium class transactions did not
specifically authorize the traveler to fly premium class, and thus the
commercial travel office should not have issued the premium class ticket.
Further, we estimated that 5 percent of the transactions lacking specific
authorization were intra-European flights covered under a blanket
authorization issued in February 2002 by the U.S. Army Transportation
Management Center, Europe, located in Germany. The blanket
authorization permitted the commercial travel office to automatically
purchase business class tickets on 65 flights between Frankfurt, Munich, or
Stuttgart and other selected European cities. The blanket authorization
stated that business class was authorized for these routes because it was
the lowest unrestricted fare. Consequently, DOD considered these
transactions to have been authorized. However, we disagree that a blanket
authorization can be used for premium class travel because it is not
consistent with GSA and DOD requirements that all premium class travel
be specifically authorized and, wherever possible, minimized. Further, the
importance of having individual authorization for premium class travel is
illustrated by our independent evaluation of the 65 flights, which showed
that business class tickets were not necessarily equal to or lower than the
cost of unrestricted coach, as claimed in the blanket authorization. For
example, according to the travel agency that served GAO, the business fare
between Munich, Germany, and Tbilisi, Georgia (located near Turkey), was
$3,232 and the unrestricted economy fare was $992, a difference of $2,240.

Travel order not signed. We also estimated that 6 percent of premium
class transactions were related to instances where the travel order
authorizing business class was not signed at all or the travel order
authorizing first class was not signed by the service secretary or his
designee, as required by DOD regulations. Ensuring that travel orders are



Page 12                                     GAO-04-88 DOD Premium Class Travel
                                  signed by an appropriate official is a key control to preventing improper
                                  premium class travel. If the travel order is not signed, or not signed by the
                                  individual designated to do so, DOD has no assurance that the substantially
                                  higher cost of the premium class tickets was properly reviewed and
                                  represented an efficient use of government resources.

                                  Premium travel authorized by a subordinate. We estimated that 2
                                  percent of the premium class transactions involved situations where a
                                  subordinate approved a superior’s travel. Although these limited instances
                                  do not necessarily indicate the existence of a significant systemic problem,
                                  allowing subordinates to approve their supervisors’ premium class travel is
                                  synonymous to self-approval and reduces scrutiny of premium class
                                  requests. Our internal control standards state that “Transactions and other
                                  significant events should be authorized and executed only by persons
                                  acting within the scope of their authority. This is the principal means of
                                  assuring that only valid transactions to exchange, transfer, use, or commit
                                  resources and other events are initiated or entered into.”

Valid Justification for Premium   Another internal control weakness identified in the statistical sample was
Travel Often Did Not Exist	       that the justification used for premium class travel was not always
                                  provided, not accurate, and/or not complete enough to warrant the
                                  additional cost to the government. As previously stated, premium class
                                  travel is not an entitlement. In fact, recent changes to the DOD regulations
                                  state that premium class travel, in the context of lengthy flights, should
                                  only be used when exceptional circumstances warrant and that alternatives
                                  should be explored to minimize unnecessary premium class travel. In
                                  reviewing whether premium class travel was justified, we looked at
                                  whether there was documented authorization and, if there was, whether
                                  the authorization for premium class travel was supported by evidence of a
                                  valid reason. As shown in table 2, an estimated 72 percent of premium class
                                  transactions were not authorized and therefore could not have been
                                  justified. An additional 2 transactions in the statistical sample were
                                  authorized but not justified in accordance with DOD’s criteria. In one
                                  instance for example, although the flight time exceeded 14 hours, the
                                  traveler had a layover in route, which should have precluded the traveler
                                  from being authorized premium class travel.



Examples of Improper Use          Table 3 contains specific examples of unauthorized travel from both our
of Premium Class Travel	          statistical samples and data mining work. The table also contains examples
                                  of premium class travel that was unjustified. Without authorization or
                                  adequate justification, these cases illustrate the improper use of premium



                                  Page 13                                      GAO-04-88 DOD Premium Class Travel
                                            class travel and the resulting increase in travel costs. Following the table is
                                            more detailed information on some of these cases.



Table 3: Examples of Improper Use of Premium Class Travel

                                                                   Cost of Estimated
                                                                  premium      cost of
                    Grade/                            Class of       ticket coach fare
Traveler Source     ranka    Itinerary                ticket           paid     ticketb Reason for exception
1        Data       GS-14    One-way from             First and    $20,943     $2,500c Travel order did not authorize use of first
         mining              London to Honolulu business                               or business class travel. Transaction
                             for a family of four for                                  failed authorization and justification.
                             relocation purposes
2        Statistical GS-15   Los Angeles to           First          3,253        238c Travel order did not authorize first class
         sample              Washington, D.C.                                          travel. Transaction failed authorization
                             and back                                                  and justification.
3        Statistical GS-13   Austin to London         Business       4,066       1,606 Travel order did not authorize business
         sample              and from London to                                        class travel. Transaction failed
                             San Diego                                                 authorization and justification.
4        Statistical GS-13   San Diego to Busan, Business            3,695       2,161 Travel order did not authorize business
         sample              Korea, and back                                           class travel. Transaction failed
                                                                                       authorization and justification.
5        Statistical O-5     London to Lisbon,        Business       1,338        672 Travel order did not authorize business
         sample              Spain                                                    class travel. Transaction failed
                                                                                      authorization and justification.
6        Statistical GS-13   Washington, D.C. to      Business       4,319      1,450c Travel order authorizing business class
         sample              Taipei, and back                                          travel was not signed. Transaction failed
                                                                                       authorization and justification.
7        Statistical GS-13   San Francisco to         Business       3,168        610c Travel order authorizing business class
         sample              Tokyo, and back                                           travel was not signed. Transaction failed
                                                                                       authorization and justification.
8        Data       CW-4     Washington, D.C. to      Business       9,530       2,501 Blanket travel order authorizing
         mining              Tashkent,                                                 premium class travel was used.
                             Uzbekistan, and                                           Transaction failed authorization and
                             back                                                      justification.
9        Statistical GS-13   Tucson to Bahrain        Business       8,308       4,966 Business class travel authorized based
         sample              and Bahrain to Los                                        on flight lasting more than 14 hours;
                             Angeles                                                   however, traveler had rest stop en route.
                                                                                       Transaction passed authorization but
                                                                                       failed justification.




                                            Page 14                                          GAO-04-88 DOD Premium Class Travel
(Continued From Previous Page)
                                                                                                 Cost of Estimated
                                                                                                premium      cost of
                               Grade/                                          Class of            ticket coach fare
Traveler Source                ranka           Itinerary                       ticket                paid     ticketb Reason for exception
10            Data             GS-15           Washington, D.C. to             Business             4,525            570c Business class travel authorized but no
              mining                           Amsterdam, and                                                             justification provided on the order. Over
                                               back                                                                       18 months after the trip occurred, the
                                                                                                                          traveler’s supervisor—not a physician—
                                                                                                                          wrote a note stating that he authorized
                                                                                                                          premium class based on a medical
                                                                                                                          need. Transaction passed authorization
                                                                                                                          but failed justification test.
11            Statistical Political            Washington, D.C. to             Business             3,485          1,530c Business class travel authorized on
              sample      appointee            London, then Paris                                                         basis that travel is mission essential, but
                                               to Moscow                                                                  no additional information provided.
                                                                                                                          Travel was to a conference in Moscow.
                                                                                                                          Transaction passed authorization but
                                                                                                                          failed justification.
Source: GAO analysis of premium class travel transactions and supporting documentation.
                                                                   a
                                                                   GS designates General Schedule pay schedule. O designates a military oficer. CW designates a
                                                                   military chief warrant officer.
                                                                   b
                                                                       Source of estimated coach fares is GSA city pair or expedia.com.
                                                                   c
                                                                    Fares do not include all applicable taxes and airport fees.


                                                                   •	 Traveler #1 is a GS-14 at the Department of the Navy; he along with three
                                                                      family members flew a combination of first and business class when
                                                                      they were relocated from London to Honolulu. The cost to the
                                                                      government for those four first and business class tickets was almost
                                                                      $21,000, compared to an estimated total cost of about $2,500 for four
                                                                      coach class tickets. An audit of the travel orders for this trip indicated
                                                                      that the DOD civilian employee and his family were not authorized to fly
                                                                      first or business class. Consequently, the traveler failed both the
                                                                      authorization and the justification test. Despite the lack of specific
                                                                      authorization, the traveler was issued premium class tickets for this trip,
                                                                      resulting in additional cost to the government of more than $18,000.
                                                                      Upon being contacted, the traveler agreed that his travel order did not
                                                                      specifically state that premium class was authorized, and stated that he
                                                                      inquired about business class tickets from the commercial travel office
                                                                      because his flight lasted more than 14 hours. Based on the issuance of
                                                                      premium class tickets for other permanent change-in-station moves
                                                                      exceeding 14 hours in total travel time, the commercial travel office
                                                                      issued the premium class tickets to the traveler.

                                                                   •	 Traveler #4 is a GS-13 at the Department of the Navy. In March 2002, the
                                                                      traveler flew business class round-trip from San Francisco to Osaka,



                                                                   Page 15                                                        GAO-04-88 DOD Premium Class Travel
   Japan, where he had an overnight layover before proceeding to Busan,
   Korea. The travel order DOD provided us did not authorize business
   class travel. Further, because the traveler had an overnight layover in
   route to Korea, the 14-hour rule would not apply. The cost of the ticket
   was $3,695, compared to an estimated cost of $2,161 for a comparable
   unrestricted ticket in coach. Without authorization or valid justification,
   the additional $1,534 spent on the business class ticket was improper.

•	 Traveler #7 is a GS-13 in the Navy. In March 2002, the traveler flew
   business class from San Francisco to Tokyo on a ticket costing $3,168.
   Although the flight to Tokyo lasted more than 14 hours, the use of
   premium class travel was not properly authorized because the travel
   order was not signed by the appropriate official. In comparison, the
   estimated cost of an unrestricted government fare in coach was $610.

•	 Traveler #9 was a GS-13 in the Department of the Army who flew most
   of his trip from Tucson to Bahrain and then from Bahrain to Los Angeles
   in business class, at a cost of $8,308. The estimated cost of an
   unrestricted coach class ticket for the same route was $4,966. The
   justification for the additional cost of the business class ticket was that
   the flight lasted more than 14 hours. However, the traveler stopped
   overnight in London at the government’s expense on both the outbound
   and return portions of the trip. The FTR and JTR specifically prohibit
   premium class flights when the traveler has a rest stop en route at the
   government’s expense.

•	 Traveler #10 was a GS-15 in the Department of the Navy who flew
   premium class from Washington, D.C., to Amsterdam and back on the
   basis of a medical condition. The duration of the flight each way was
   about 8 hours and cost $4,525. The estimated cost of an unrestricted
   government fare coach class ticket for the same route was $570. The
   supporting documentation provided to us included a note, written by the
   traveler’s supervisor, that was prepared more than 18 months after the
   travel, stating that the traveler had a medical condition requiring the
   premium class ticket. However, the note was not signed by a doctor nor
   did it reference a medical professional who recommended the need for
   premium class seating. The traveler informed us that his supervisor
   wrote the medical note after our inquiry into his case. In addition, none
   of the other 9 flights taken by the traveler cited a medical condition, and
   the traveler flew coach class on a number of flights that lasted longer
   than his flight from Washington, D.C., to Amsterdam. According to the




Page 16                                      GAO-04-88 DOD Premium Class Travel
                            traveler, he never had been properly authorized to fly business class on
                            the basis of a medical condition.

                         •	 Traveler #11 was a political appointee and a member of the Commission
                            on the Future of the United States Aerospace Industry (Commission), an
                            organization that was almost entirely funded by DOD and for which
                            DOD paid the cost of all airline tickets for Commission members and
                            staff. The traveler flew business class from Washington, D.C., to London,
                            and then traveled by rail from London to Brussels and onto Paris. In
                            Paris, the traveler took a business class flight to Moscow to attend a 2-
                            day conference. According to the travel order, business class travel was
                            authorized because it was mission essential. However, the travel order
                            did not indicate why the cost of business class travel for a trip to a
                            conference was mission essential. Further, mission essential is not a
                            DOD criterion for authorizing business class travel. Our data mining
                            efforts found that DOD paid the travel of a total of 13 individuals—6
                            commissioners and 7 commission staff—to attend the Moscow
                            conference after stopping off in London, Brussels, and Paris. The 6
                            commissioners flew business class for all of the flights, while the
                            commission staff flew coach to London and on the return flights, and
                            flew business class while in Europe. None of the commissioners were
                            government employees; however, all of the staff were employed by DOD
                            and other agencies. The average cost of the airline tickets for all 6
                            commissioners was about $7,500 while the average cost of the airline
                            tickets for the staff was about $3,100. The official told us he authorized
                            premium class travel for the commissioners because they were high-
                            salaried individuals from the private sector who were donating 10 days
                            of their time to the government with no compensation. However, neither
                            the FTR nor the DOD travel regulations authorize premium class travel
                            based on a person’s salary or whether he or she is donating time to the
                            government.



Frequent Premium Class   Our work also included data mining to identify the individuals who traveled
Travelers                premium class most frequently. We analyzed the 68,090 premium class
                         transactions during fiscal years 2001 and 2002 and identified 28 of the most
                         frequent premium class travelers. As indicated by the examples in table 4,
                         the frequent travelers were almost all senior DOD personnel. Specifically,
                         we found that all but 1 of the 28 most frequent travelers were at least GS-13
                         civilians or O-4 military officials. Although these frequent travelers were
                         generally authorized to fly premium class by someone at the same or a
                         higher level, we determined that many of the transactions were improper



                         Page 17                                      GAO-04-88 DOD Premium Class Travel
                                           because their justification was not supported by the documentation
                                           provided or did not adhere to the FTR and DOD travel regulations. Other
                                           cases involving frequent travelers were questionable because the
                                           justification documentation was not adequate to determine whether the
                                           transaction met DOD’s criteria.



Table 4: Examples of Travelers Who Frequently Used Premium Travel


                    Number/
                    cost of
           Grade/   premium       Justification for   GAO’s concern with premium
Traveler   rank     class trips   premium travel      class travel                         Response by traveler or traveler’s staff
1          GM-14    14/$88,000    Doctor’s note       Traveler took 45 flights—14          Traveler admitted to inconsistent application
                                  claims medical      premium and 31 coach class trips     of medical necessity. Traveler considered
                                  necessity           during fiscal years 2001 and 2002.   extra room in business class to be more
                                                      Many coach class trips were          comfortable for long flights.
                                                      similar in duration to premium
                                                      class trips.
2          O-8      16/$68,000    Blanket             1.   A blanket authorization was     The general’s aide said that in the future he
                                  authorization            used to justify premium class   will pay closer attention to the requirements
                                  used to justify          travel.                         for premium class travel before obtaining
                                  premium class       2.   Premium travel was              premium class travel. The general’s aide
                                                           authorized by a subordinate.    also said that in the future he will also get
                                                      3.   Not all premium class flights   an independent authorization for premium
                                                           met premium class criteria.     class travel when the criteria for premium
                                                                                           class travel are met.
3          PASa     17/$68,000    First and         1.     Blanket authorization was       The traveler's aide said that she will get the
                                  business class           used to justify first and       Deputy Secretary's approval for first class
                                  travel justified         business class travel.          travel and only schedule the traveler for first
                                  through a blanket 2.     Premium travel was              or business class when alternative seating
                                  order based on           authorized by a subordinate.    is not available.
                                  medical condition 3.     Traveler flew in coach class
                                                           on some flights.




                                           Page 18                                                 GAO-04-88 DOD Premium Class Travel
(Continued From Previous Page)

                                Number/
                                cost of
               Grade/           premium              Justification for           GAO’s concern with premium
Traveler       rank             class trips          premium travel              class travel                              Response by traveler or traveler’s staff
                      a
4              PAS              15/$70,000	          Claimed mission 1.                   DOD travel regulations do not    Traveler’s assistant said that the traveler
                                                     essential, so that                   list mission essential as a      flies premium class to minimize his time
                                                     the traveler would                   basis to justify premium class   away from the office. However, the assistant
                                                     be ready for                         travel.                          could not demonstrate a cost savings
                                                     meetings upon      2.	               Traveler submitted               caused by lost productivity. Traveler’s
                                                     arrival at                           justification and obtained       assistant also said that even though the
                                                     destination                          specific authorization for       flights did not exceed 14 hours, the traveler
                                                                                          many trips; however, the         should be able to fly premium class
                                                                                          justification was not always     because of the importance of the traveler’s
                                                                                          accurate and did not consider    work. The traveler’s assistant did not
                                                                                          alternatives to the more         explain the reasons some premium class
                                                                                          expensive premium class          flights were not authorized.
                                                                                          travel.
                                                                                 3.       Most flights were less than 14
                                                                                          hours.
                                                                                 4.       Some premium class flights
                                                                                          were not authorized.
5              GS-15            11/$35,000           Medical                     Travel orders were not signed, but        Traveler told us he was not aware that first
                                                     necessity                   the official authorizing the travel       class had to be approved by the Under
                                                                                 was the traveler himself. First           Secretary of the Navy. Traveler is no longer
                                                                                 class travel was not authorized by        authorized to travel premium class.
                                                                                 the Under Secretary of the Navy,
                                                                                 as required by Navy regulations.
6              SESb             10/$48,000	          Claimed mission 1.                   DOD travel regulations do not    The traveler said that he did not make his
                                                     essential, so that                   list mission essential as a      flight arrangements. The traveler’s assistant
                                                     the traveler would                   basis to justify premium class   had no explanation for why some premium
                                                     be ready for                         travel.                          class trips were not always authorized, or
                                                     meetings upon      2.                Some premium class flights       why the specific justification was not
                                                     arrival at                           were less than 14 hours.         accurate. The traveler’s assistant said that
                                                     destination        3. 	              Business class was taken on      the traveler did not want to leave the day
                                                                                          return flights.                  before to avoid the additional cost of a
                                                                                 4.       Specific justification was not   business class flight.
                                                                                          always accurate.
7              SES              13/$56,000           Medical                     Medical note and Under Secretary          The traveler has retired. The individual who
                                                     necessity                   of the Navy authorization were            assisted in assembling the documentation
                                                                                 dated in 1993 and travel was in           said there was nothing more current to
                                                                                 2000 and 2001. Current travel             justify the first class travel than the 1993
                                                                                 order signed by a subordinate.            doctor’s note and the 1993 Under Secretary
                                                                                                                           of the Navy’s authorization.
Source: GAO analysis of premium class travel transactions and supporting documentation.
                                                                   a
                                                                    Presidential appointment with Senate confirmation.
                                                                   b
                                                                    Senior Executive Service appointment.


                                                                   Our work indicated that the most frequent travelers were, in most
                                                                   instances, authorized to obtain premium class travel by people at the same



                                                                   Page 19                                                        GAO-04-88 DOD Premium Class Travel
or higher levels. Only 3 of the 28 most frequent travelers failed the
authorization test because they or their subordinates authorized their
travel orders. More often, justification provided by frequent travelers failed
the justification test or the justification was not adequate to permit us to
determine whether the transaction complied with the FTR and DOD travel
regulations. The following provides further details on some of the cases in
table 4.

•	 Frequent traveler #1 was a GM-14 at the Navy who took 45 round-trip
   flights during our 2-year audit period. The traveler flew business class
   on 14 international trips costing about $88,000 but also took 31 domestic
   trips, in coach class, costing about $12,000. Attached to the travel order
   for each trip was a doctor’s certification noting that, for health reasons,
   the traveler needed to fly in premium class. However, we found that the
   medical certification did not indicate whether premium class travel was
   needed on all flights or flights of certain duration, but that many of the
   traveler’s domestic trips, which he took in coach class, were almost as
   long as some of the international flights he took in business class. For
   example, the traveler regularly flew in coach class from Washington,
   D.C., to cities in California and, in one instance, to Honolulu. The flight
   times for individual legs of these trips ranged from about 5 to 7 hours.
   The traveler’s business class flights included flights from Washington,
   D.C., to Frankfurt or Amsterdam. Those flights lasted about 7 hours.
   When we discussed the trips with this traveler, he stated that although
   some of the domestic flights that he took were similar in duration to the
   international flights, his flights to Europe were generally evening flights
   and the extra room provided in business class enabled him to be less
   confined and to be ready for meetings the next day. The traveler’s
   discussion with us and the nature of his coach and premium travel
   raises questions regarding his medical need to fly business class.

•	 Frequent traveler # 3 is an assistant secretary of defense in Washington,
   D.C., who used a blanket order to authorize and justify business and first
   class travel based on an unspecified medical condition. We identified a
   total of 17 first and business class tickets for this traveler totaling nearly
   $68,000. Neither the travel orders nor the travel vouchers included a
   physician’s certification identifying the medical justification to fly first
   or business class. In addition, the traveler occasionally flew in coach
   class. About a month after we requested additional documentation for
   these airline tickets, DOD provided us with a letter from a physician
   dated September 11, 2001, requesting that the traveler be authorized to
   fly first class so that the traveler could stretch his legs. The records DOD



Page 20                                        GAO-04-88 DOD Premium Class Travel
   provided concerning the 17 flights indicated that the travel office did not
   attempt to satisfy the traveler’s need for space by reserving a bulkhead
   seat or purchasing two coach seats, in accordance with DOD
   requirements. We estimate that the total cost of these flights, if flown in
   coach class, would have been about $17,000. The individual who made
   the premium class reservations told us that she had not been trained on
   the limitations associated with premium class travel. She also told us
   that in the future she would get the Deputy Secretary’s approval for first
   class travel and that she would attempt to limit premium class travel to
   instances in which less expensive alternatives were not available.

•	 Frequent traveler #5 was a GS-15 in the Navy who took 11 first class
   flights totaling over $35,000 from San Diego to east coast cities including
   Washington, D.C., during fiscal years 2001 and 2002. The traveler
   justified the 11 flights based on a certification from a medical authority
   based on his size and medical condition. However, because his first
   class travel was not authorized by the Under Secretary of the Navy, as
   required by Navy regulations, we contacted the traveler to obtain further
   information on his condition. We estimate that the total cost of these
   flights if all flown in coach class would have been about $7,000.
   According to the traveler, his condition was not so severe that he would
   meet the stringent first class criteria of being “so handicapped or
   otherwise physically impaired that other accommodations cannot be
   used.” Consequently, the traveler told us he was no longer authorized to
   use first class.

•	 Traveler #6 in table 4 was a deputy assistant secretary at DOD who flew
   premium class on 10 flights from September 2000 through September
   2001 at a cost of approximately $48,000. A review of the travel orders
   and additional documentation supporting this travel showed that the
   individual consistently documented the reasons he needed to fly
   premium class. However, sometimes the justification provided did not
   appear applicable to the trip in question. For example, during a 12-day
   period in late August 2001, the traveler flew business class from
   Washington, D.C., to six European cities and South Africa at a cost of
   over $8,800. He then flew business class from South Africa to Atlanta,
   and first class from Atlanta to Washington, D.C. The documentation
   supporting the trip was an order, signed by the military assistant to the
   under secretary, that authorized the traveler to fly first class from
   Washington, D.C., to Tampa, Florida—destinations that are different
   from the itinerary in question. Both the traveler and his former secretary
   told us they did not recall making these flight arrangements.



Page 21                                      GAO-04-88 DOD Premium Class Travel
                         In none of the cases in our statistical sample and data mining for which
                         authorization for premium class was given based on medical needs did
                         DOD submit the medical certification for an informed and independent
                         review. Our analysis found that 12 of the 28 frequent premium class
                         travelers justified their more expensive flights with a medical condition.
                         Further, as discussed in the examples, we identified several anomalies in
                         the application of medical condition justification, as evidenced by travelers
                         who used both coach and premium class accommodations during flights of
                         similar duration and during the same period. This may indicate that
                         additional steps should be taken to verify the validity of the medical
                         certification. During testing, an Army official at the Traffic Management
                         Office informed us that his office forwards all medical certifications to the
                         Surgeon General for an opinion before recommending to the Secretary of
                         the Army that approval be granted for first class travel. The official stated
                         that he did not believe that he was competent to conclude on the medical
                         certification.



Lack of Monitoring and
Control Environment       Management and employees should establish and maintain an environment
                          throughout the organization that sets a positive and supportive attitude toward
Weaknesses                internal control and conscientious management. A positive control environment
Contributed to            is the foundation for all other standards. It provides discipline and structure as
                          well as the climate which influences the quality of internal control. GAO’s
Improper Use of           Standards for Internal Control in the Federal Government (GAO/AIMD-00-
Premium Class Travel      21.3.1, November 1999)

                          Agency internal control monitoring assesses the quality of performance over
                          time. It does this by putting procedures in place to monitor internal control on
                          an ongoing basis as a part of the process of carrying out its regular activities. It
                          includes ensuring that managers and supervisors know their responsibilities for
                          internal control and the need to make internal control monitoring part of their
                          regular operating processes. Ongoing monitoring occurs during normal
                          operations and includes regular management and supervisory activities,
                          comparisons, reconciliations, and other actions people take in performing their
                          duties. GAO’s Internal Control Standards: Internal Control Management and
                          Evaluation Tool (GAO-01-1008G, August 2001)


                         DOD and the services performed no monitoring and oversight activities to
                         obtain assurance that premium class travel was authorized in accordance
                         with regulations. Further, during fiscal years 2001 and 2002, control
                         environment weaknesses exacerbated already weak key internal controls



                         Page 22                                           GAO-04-88 DOD Premium Class Travel
                           described in the previous section. Consequently, DOD did not have an
                           effective internal control environment, particularly in regard to policies
                           and procedures, to provide assurance that premium class travel costs are
                           incurred only when necessary. Specifically, we found that DOD and the
                           military services did not (1) obtain or maintain centralized management
                           data on the extent to which military and civilian personnel used premium
                           class accommodations for their travel, (2) issue adequate policies related
                           to the approval of premium travel, and (3) require consistent
                           documentation to justify premium class travel. Until we initiated this audit,
                           DOD’s management had not provided an appropriate “tone at the top” to
                           encourage the appropriate use of premium class travel. During the course
                           of our work, DOD updated the JTR and JFTR in April 2003 to articulate
                           more clearly and to make more stringent the circumstances under which
                           premium class travel can be authorized. In addition, the updated JTR and
                           JFTR emphasize, in the context of lengthy flights, that premium class travel
                           must not be common practice and must only be used when exceptional
                           circumstances warrant. The JTR and JFTR also provide examples of when
                           premium class travel should not be authorized.



Monitoring and Oversight   Ineffective oversight of the use of premium class travel was a key
Needs Improvement          contributor to weaknesses in the overall control environment. In general,
                           effective oversight activities would include management review and
                           evaluation of the process for issuing premium class travel and independent
                           evaluations of the effectiveness of internal control activities. Program
                           monitoring provides DOD management an opportunity to obtain
                           reasonable assurance that premium class travel is only obtained with
                           proper authorization and justification. This is particularly important
                           because of both the sensitivity and high cost of premium class travel.
                           However, DOD and the services performed no monitoring and oversight
                           activity to obtain assurance that premium class travel was authorized in
                           accordance with rules and regulations. In addition, as mentioned
                           previously, DOD and the services did not perform reviews to identify the
                           extent of premium class travel. Consequently, it is not surprising that DOD
                           and the services were not aware of the extent of improper premium class
                           transactions.

                           Our internal control standards state that separate evaluations of control
                           should depend on the assessment of risks and the effectiveness of ongoing
                           monitoring procedures. Our Sensitive Payments Guide lists executive
                           travel as a high-risk area susceptible to abuse or noncompliance with laws
                           and regulations. However, we found no evidence of any audits or



                           Page 23                                      GAO-04-88 DOD Premium Class Travel
                         evaluations of premium class travel. Further, DOD’s failure to adequately
                         monitor premium class travel has resulted in an environment in which
                         there is limited possibility that improper premium class travel will be
                         identified.

                         The lack of oversight is further demonstrated by the fact that travelers,
                         supervisors/managers, and employees at the commercial travel offices
                         (CTO) responsible for issuing airline tickets to the travelers are not
                         adequately informed of governmentwide and DOD travel regulations
                         concerning premium class travel. DOD officials told us that they do not
                         verify whether CTO employees receive training in DOD travel regulations
                         relating to the more expensive premium class travel, and DOD does not
                         track training provided to CTO staff on premium class travel. Thus it was
                         not surprising that officials authorizing the travel and the travelers were
                         not aware of the stringent regulations associated with premium class
                         travel. For example, several DOD travelers and officials told us that they
                         thought DOD travel regulations entitled travelers to business class travel
                         when their flights exceeded 14 hours. These individuals were not aware
                         that the FTR provides that, in order to qualify for business class travel,
                         travelers have to proceed directly to work upon arriving at the duty
                         location. In addition, several DOD travelers and officials from the
                         government and CTOs indicated to us that the numerous CTOs with which
                         DOD contracted did not consistently apply the premium class criteria. A
                         representative from one CTO informed us that his office issued premium
                         class travel if premium class was mentioned on the travel order, even if
                         justification for obtaining premium class travel was flawed, for example,
                         the flight was not at least 14 hours.



DOD Did Not Maintain     The Military Traffic Management Command (MTMC), which is responsible
Centralized Management   for tracking DOD’s first class travel, understated the cost and frequency of
                         first class travel reported to GSA. In addition, MTMC did not track, and
Data on Premium Class    therefore did not know, the number of business class trips DOD travelers
Travel                   took during fiscal years 2001 and 2002 or the cost of these premium class
                         trips. As a result, DOD did not have the data needed for monitoring and
                         oversight activities or for identifying trends and determining alternate, less
                         expensive means of transportation.




                         Page 24                                       GAO-04-88 DOD Premium Class Travel
The FTR14 requires DOD, along with all other executive and legislative
branch agencies, to provide GSA annual reports listing all instances in
which the organizations approved the use of first class transportation
accommodations. According to the first class travel reports that MTMC
submitted to GSA for fiscal years 2001 and 2002, DOD civilian and military
personnel took less than 1,000 first class flight segments15 totaling less than
$600,000. These data are supposed to represent all first class transportation
expenses, whether charged on the centrally billed accounts or the
individually billed accounts. According to the individual responsible for
compiling this report, the roughly 1,000 first class segments were identified
in what is essentially a data call process in which MTMC personnel
aggregated information provided by the CTOs on the number and cost of
first class tickets they issued.16

However, our analysis of Bank of America airline transaction data indicates
that both the number and cost of the first class tickets reported by DOD are
significantly understated. Based on our analysis, DOD did not report more
than half of fiscal years 2001 and 2002 first class segments. As shown in
table 1, we found that DOD used the centrally billed accounts to purchase
1,240 airline tickets that contained at least one first class portion. These
1,240 tickets, which did not include first class tickets purchased using the
individually billed accounts, contained over 2,000 separate segments with
first class accommodations, compared to the less than 1,000 flight
segments DOD reported to GSA. These first class tickets costs of about
$2.9 million were almost 5 times the amount DOD reported to GSA.

The differences between the first class travel that we identified and the
amount DOD reported can in part be attributed to omissions in DOD’s
methodology for identifying first class tickets. The airlines use a variety of
letter codes to identify first class fares, and we found that in extracting first
class data DOD omitted several of the first class codes used by some
airlines. Further, a comparison of MTMC’s report and our analysis of the
Bank of America transaction file showed that a number of cities were
omitted from its analysis of first class travel. For example, while DOD data


14
     This requirement was prescribed at the direction of OMB. See OMB Bulletin 93-11.
15
     A flight segment is any portion of a ticket with a separate flight number.
16
  The contracts between DOD services and the CTOs responsible for issuing tickets to
travelers specify that CTOs provide reports to MTMC on the number and cost of first class
tickets.




Page 25                                                    GAO-04-88 DOD Premium Class Travel
                            indicated that no first class flight was taken into Washington, D.C., during
                            fiscal year 2001, we found 88 first class flights into Washington, D.C., during
                            fiscal year 2001, including first class round-trips from Washington, D.C., to
                            Honolulu, San Francisco, Denver, St. Louis, and Los Angeles.

                            We also found that DOD did not obtain or maintain centralized data on
                            premium class travel other than first class, that is, business class.
                            Consequently, DOD did not know, and was unable to provide us with data
                            related to, the extent of its premium class travel. As mentioned previously,
                            we were able to obtain such data through extensive analysis and
                            extractions of DOD travel card transactions from databases provided by
                            Bank of America.



Control Environment Is      DOD travelers must follow a complicated array of premium class travel
Flawed by Inconsistencies   guidance. The applicability of specific regulations depends on whether the
                            traveler is civilian or military. For DOD civilians, GSA’s FTR governs travel
in Premium Class Travel     and transportation allowances. DOD’s JTR and individual DOD and military
Guidance                    service directives, orders, and instructions supplement the FTR. For
                            military personnel, DOD’s JFTR governs travel and transportation
                            allowances. Individual DOD and military service directives, orders, and
                            instructions supplement the JFTR. The executive branch policy on the use
                            of first class travel applicable to the FTR, JTR, and JFTR is found in OMB
                            Bulletin 93-11. When a subordinate organization issues an implementing
                            regulation or guidance, the subordinate organization may make the
                            regulations more stringent, but generally may not relax the rules
                            established by higher-level guidance.

                            Inconsistencies have accumulated within the various premium class travel
                            regulations because DOD did not revise DOD directives, or require the
                            military services to revise their travel policies or implementing guidance,
                            when it modified the JTR or JFTR. For example, DOD first issued the JTR
                            in 1965 and since then had modified it 450 times through April 2003,
                            including 30 modifications since October 2000. While the JFTR has had
                            fewer modifications—196 through April 2003—the JFTR has also been
                            modified 30 times since October 2000. Despite these changes, DOD and the
                            services frequently have not modified their directives and guidance to
                            reflect these changes. For example, DOD Directive 4500.9 was last revised
                            in 1993, while DOD Directive 4500.56 was last updated in 1997. Further, the
                            Navy Passenger Transportation Manual was last updated in 1998; Marine
                            Corps Order P4600.7C, Marine Corps Transportation Manual, was last
                            changed in 1992; and while Air Force Instruction 24-101, Passenger



                            Page 26                                       GAO-04-88 DOD Premium Class Travel
Movement, was last updated in 2002, it contains some provisions that are
contrary to our Guide for Evaluating and Testing Controls Over Sensitive
Payments and our Standards for Internal Control in the Federal
Government.

The proliferation of different internal DOD regulations and a failure by
DOD to clearly explain the relationship of its different regulations have
created confusion for travelers and officials, as evidenced by instances,
discussed previously, in which premium class travel had been
inappropriately approved. Inconsistencies also exist because DOD and its
components have elected to authorize the use of premium class travel in
different circumstances or have described the authorization to use
premium class travel using different language. For example, see the
following:

•	 DOD Directive 4500.9,17 Transportation and Traffic Management (last
   updated in 1993), contains a section establishing the authority to use
   premium class flights that differs in several aspects from GSA’s FTR and
   DOD’s JTR and JFTR as well as other directives issued by DOD.
   Specifically, DOD Directive 4500.9 grants blanket authority for high-
   ranking officials to use premium class travel when traveling overseas on
   official government business. This policy contradicts and is less
   stringent than the FTR, which does not cite rank as a condition for
   obtaining premium class travel. The JTR and JFTR (both modified in
   2003) also do not cite rank as a criterion for allowing business class
   travel for international flights. Further, DOD’s General Counsel staff told
   us this provision was superseded by DOD Directive 4500.56.

•	 GSA’s FTR authorizes agencies to approve the use of first class or
   business class accommodations when required by an agency’s mission,
   but neither the JTR nor the JFTR adopts this authorization. In contrast,
   DOD Directive 4500.9 states that the use of business class on domestic
   travel18 may be authorized when necessitated by mission requirements.19


17
 DOD Directive 4500.9, Transportation and Traffic Management, para. 3.4.3, December 29,
1993.
18
 As noted above, a subsequent DOD directive states that all DOD travel outside the
continental United States is subject to the JTR and the JFTR.
19
 DOD Directive 4500.9, Transportation and Traffic Management, para. 3.4.3.1.3,
December 29, 1993.




Page 27                                             GAO-04-88 DOD Premium Class Travel
                      •	 GSA’s FTR states that premium other than first class travel may be
                         authorized when the origin and/or destination of travel is outside the
                         continental United States and the scheduled flight time is in excess of 14
                         hours. However, the FTR prohibits premium class travel if the traveler is
                         authorized a rest stop en route or a rest period upon arrival at the duty
                         site. In contrast, DOD’s JTR and JFTR that were in effect at the time of
                         our audit did not indicate whether a rest period upon arrival at the duty
                         station prohibited the authorization of premium class travel. Both DOD
                         directives on travel (4500.9 and 4500.56) do not directly address whether
                         premium class travel is allowed if the flight exceeds 14 hours. Further,
                         the services’ implementing guidance is inconsistent in its application of
                         the 14-hour rule. For example, the Army policy20 adopts the FTR “rest
                         period upon arrival” limitations, but did not define what is considered a
                         “rest period.” The Navy policy21 prohibits a “rest period en route.” The
                         Air Force policy22 states that Air Force travelers might be authorized
                         business class accommodations if they are required to perform a full day
                         (8 hours) of work immediately upon arrival. Finally, the Marine Corps23
                         implementing guidance does not address this matter.

                      •	 GSA and DOD travel regulations authorize premium class
                         accommodations when they are paid for by a nonfederal source.
                         However, the Navy travel policy24 prohibits the use of first class
                         accommodations even when those accommodations are paid for by a
                         nonfederal source, such as when a professional association pays for the
                         travel of a Navy employee.



DOD Does Not Have a   DOD and the services have not defined a standard format for documenting
Standard Format for   authorization and justification for premium class travel. Because premium
                      travel is to be taken only on an exception basis after all other alternatives
Documenting Premium
                      have been exhausted, the documentation for authorization and justification
Class Travel          should be held to the highest standards to provide reasonable assurance


                      20
                           Secretary of the Army Travel Policy, para. 3.B.8, last updated on March 26, 2003.

                      21
                           OPNAVINST 4650.15, ch. 2, enc. 1, para. 5.c (8), issued on July 7, 1998.

                      22
                           Air Force Instruction 24-101, para. 2.7, issued March 25, 2002. 

                      23
                           Marine Corps policy guidance, issued as Marine Corps Order 4600.25C on March 15, 1978. 

                      24
                           OPNAVINST 4650.15, ch. 2, enc. 1, para. 5.c.(7), July 7, 1998. 





                      Page 28                                                    GAO-04-88 DOD Premium Class Travel
that in every case the substantially higher premium travel cost is
warranted. In DOD’s case, because authorization and justification for
premium travel is not consistently documented, it does not have a
documentation trail indicating that the appropriate official approved the
travel order and there was adequate justification for the additional cost
associated with a premium class ticket.

The JTR and JFTR state that approval for premium class travel should be
obtained in advance of travel, except in extenuating/emergency
circumstances that make authorization impossible, and specify the
circumstances under which premium travel is to be permitted. However,
the JTR and JTFR do not provide clear and consistent procedures for
documenting the approval of premium class travel and the type of
supporting documentation to be maintained. In contrast, other federal
agencies have issued clear and consistent guidelines related to the
documentation of premium class travel. For example, the Department of
Agriculture (USDA) approves the use of premium class accommodations
on a case-by-case basis and specifies that premium travel be approved by
the under secretary except when frequent travel benefits are used. The
justification must include the specific circumstances relating to the
criteria, such as a medical justification from a competent medical authority,
which must include a description of the employee’s disability, medical
condition, or special need; approximate duration of the medical condition
or special need; and a recommendation of a suitable means of
transportation based on medical condition or special need. In addition,
USDA requires that the traveler prepare a report documenting first class
travel that details the traveler’s name, address, rank, dates of travel with
originating and destination cities, the reason for obtaining first class travel
and the costs of both the coach fare and the first class fare. As shown in
figure 1, other agencies, such as the National Institutes of Health (NIH),
have standard forms that travelers must complete when requesting
approval for any travel other than coach class accommodations.
Information required includes the traveler’s identifying information, the
reason for requesting premium class travel, and a comparison of the cost of
premium and coach class travel. Such a form would help eliminate the
failure to obtain specific authorization for premium class travel that we
identified in our statistical testing.




Page 29                                       GAO-04-88 DOD Premium Class Travel
Figure 1: Sample Premium Class Authorization Form




Source: NIH.




                                        Page 30     GAO-04-88 DOD Premium Class Travel
Further, we found that other agencies used a separate form to document a
medical condition and to justify premium class travel. As shown in figure 2,
the disabilities or other special needs form used by NIH requires detail on
the nature of the disability or special need and the signature of both the
employee and a competent medical authority. NIH’s policies state that the
medical statement should specifically address why it is necessary to use
upgraded accommodations. The form also limits the authority to a period
of 6 or 12 months from the initial date of approval depending on the nature
of the disability or special need. In the instance of a permanent disability,
NIH policy is that authorized use of premium class accommodations is
valid for up to 3 years. Resubmission is necessary to ensure that there
continues to be a need for the approval and to keep the authorization
records current.




Page 31                                      GAO-04-88 DOD Premium Class Travel
Figure 2: Sample Medical Condition Form




Source: NIH.




                                          Page 32   GAO-04-88 DOD Premium Class Travel
DOD Issued New                 During the course of our work, in April 2003, DOD updated the JTR25 and
Regulations to Better Define   JFTR26 to articulate more clearly and make more stringent the
                               circumstances under which premium class travel may be authorized. In
When Premium Class Travel      addition, the updated JTR and JFTR emphasize, in the context of lengthy
Is Authorized                  flights, that premium class travel must not be common practice and must
                               only be used when exceptional circumstances warrant. They also provide
                               examples of when premium class travel should not be authorized.

                               The revised JTR and JFTR better define the circumstances in which
                               premium class other than first class travel, that is, business class, is
                               authorized for DOD travelers on flights to and/or from points outside the
                               continental United States when the scheduled flight time exceeds 14 hours.
                               Most notably, the revised regulations prohibit the use of business class
                               travel when travelers are authorized a “rest period” or an overnight stay
                               upon arrival at their duty stations. The modified regulations now explicitly
                               state that business class accommodations are not authorized on the return
                               leg of travel. This is a further restriction on premium class travel; before
                               April 2003, DOD did not expressly prohibit travelers from using premium
                               class travel on their return trips to the United States.

                               Finally, in its revised regulations, DOD provides specific guidance on how
                               the proposed use of business class accommodations should be considered
                               by officials and travelers. DOD states that, in the context of authorizing
                               business class accommodations for flights scheduled to exceed 14 hours,
                               “business class accommodations must not be common practice” and that
                               such service should be used only in exceptional circumstances. Further,
                               DOD directs order-issuing officials to “consider each request for business
                               class service individually.” We agree with DOD that decisions regarding the
                               use of premium class travel should be made on a case-by-case basis and
                               based on a preference for coach class.



Conclusions	                   The ineffective management and oversight of premium class travel
                               provides another example of why DOD financial management is one of our
                               “high-risk” areas, with the DOD highly vulnerable to fraud, waste, and
                               abuse. DOD does not have the management controls in place to identify


                               25
                                    JTR Change 450, April 1, 2003.
                               26
                                    JFTR Change 196, April 1, 2003.




                               Page 33                                     GAO-04-88 DOD Premium Class Travel
                        issues such as improper use of premium class travel. As a result, millions of
                        dollars of unnecessary costs are incurred annually. Because premium class
                        travel is substantially more costly than coach travel, it should only be used
                        when absolutely necessary, and the standards for approval and justification
                        must be high. During our audit, DOD began taking steps to improve its
                        policies and procedures for premium class travel. DOD must build on these
                        improvements and establish strong controls over this sensitive area to
                        provide reasonable assurance that its travel dollars are spent in an
                        economical and efficient manner.



Recommendations for 	   We are making the following recommendations to improve internal control
                        over the authorization and justification of premium class travel and to
Executive Action 	      strengthen the control environment as part of an overall effort to reduce
                        improper premium class travel and related DOD costs.



Key Internal Control    Because of the substantial cost and sensitive nature of premium class
Activities              travel, we recommend that the Secretary of Defense direct the appropriate
                        under secretary of defense, assistant secretary of defense, or military
                        service officials to direct the implementation of specific internal control
                        activities over the use of premium travel. While a wide range of activities
                        can contribute to a system that provides reasonable assurance that
                        premium class travel is authorized and justified, at a minimum, the internal
                        control activities should include the following:

                        •	 Reiterate to DOD’s personnel the policy that premium class travel be
                           authorized and justified only on a case-by-case basis.

                        •	 Require the travel offices to issue premium class tickets only if properly
                           authorized and justified and documented accordingly.

                        • Prohibit the use of blanket authorization for premium class travel.



Overall Program         We recommend that the Secretary of Defense direct the appropriate under
Management and          secretary of defense, assistant secretary of defense, or military service
                        officials to establish policies and procedures to incorporate the regulations
Environment             specified in GSA’s FTR as well as guidance specified in our Standards for
                        Internal Control and our Guide for Evaluating and Testing Controls Over
                        Sensitive Payments, including the following:



                        Page 34                                      GAO-04-88 DOD Premium Class Travel
•	 Develop procedures to identify the extent of premium class travel,
   including all business class travel, and monitor for trends and potential
   misuse.

•	 Develop procedures to identify all first class fare codes so that DOD can
   prepare complete and accurate first class travel reports.

•	 Develop a management plan requiring that audits of DOD’s issuance of
   premium class travel are conducted regularly and the results of these
   audits reported to senior management. Audits of premium class travel
   should include reviews of whether commercial travel offices adhere to
   all governmentwide and DOD regulations for issuing premium class
   travel.

•	 Periodically provide notices to travelers and supervisors/managers that
   specifically identify

   • the limitations on premium class travel,

   •	 the limited situations in which premium class travel may be
      authorized, and

   • how the additional cost of premium class travel can be avoided.

•	 Provide training to travelers and supervisors/managers that identifies
   DOD’s premium class policies and procedures.

•	 Train or make training materials available to the commercial travel
   offices so that they may train their employees on premium class policies
   and procedures.

•	 Require that premium class travel be approved by individuals who are at
   least of the same rank/grade as the travelers.

•	 Specifically prohibit the travelers themselves or their subordinates from
   approving requests for premium class travel.

•	 Use a standardized format or modify the format of the existing travel
   order to document the request and authorization of premium class
   travel. The standardized form or modified travel order should contain
   sufficient information to provide a clear audit trail that documents why




Page 35                                      GAO-04-88 DOD Premium Class Travel
                         the additional cost of premium class travel was a necessary expense
                         that could not have been avoided.

                      •	 Develop a policy that articulates what constitutes adequate support to
                         substantiate medical, disability, or special needs. Such a policy should
                         address the length of time a medical certification is valid.

                      •	 Determine the feasibility of requiring that the medical certification for
                         premium class travel be reviewed by an independent medical
                         professional to verify that the medical condition justifies the additional
                         cost of premium class travel.

                      •	 Revise DOD’s directives on travel, when necessary, to ensure that they
                         are at least consistent with, or more stringent than, GSA’s travel
                         regulations. For example, issue the update to DOD Directive 4500.9 that
                         removes the provision authorizing certain presidential appointees and
                         three-star and four-star generals/admirals to fly premium class on flights
                         when flying to or from overseas destinations.

                      •	 Revise the military service directives, orders, and policies to make them
                         consistent with the JTR and JFTR.



Agency Comments and   On September 10, 2003, DOD, Air Force, Army, Marine Corps, and Navy
                      officials representing the offices of the under secretaries of defense for
Our Evaluation        Acquisitions Technology and Logistics, Personnel and Readiness, and
                      Comptroller provided oral comments on a draft of this report. The officials
                      said they agreed with the findings presented in the draft report and
                      generally concurred with our recommendations for resolving the control
                      weaknesses. The officials explained that because responsibility for travel
                      program management is spread across three under secretaries, they were
                      not yet sure who would be responsible for monitoring implementation of
                      the recommendations.

                      Those DOD officials pointed out that two of our recommendations could be
                      addressed in different ways than contemplated in the draft report. First,
                      they said the justification for premium class travel could be documented by
                      modifying or augmenting the existing DOD travel order rather than using a
                      separate form. We have modified the text of these recommendations to be
                      less prescriptive as to the corrective actions and instead focus on the intent
                      of the recommendations for having clear, well-supported justifications and
                      written audit trails of the authorization to spend additional funds on



                      Page 36                                      GAO-04-88 DOD Premium Class Travel
premium class travel. Second, in regard to training commercial travel office
personnel on premium class travel limitations, they expressed a preference
for DOD providing training materials to the commercial travel offices so
that they, rather than DOD, could train their personnel, and facilitating just-
in time or other training for commercial travel office personnel.


As agreed with your offices, unless you announce the contents of this 

report earlier, we will not distribute it until 30 days from its date. At that 

time, we will send copies to interested congressional committees; the 

Secretary of Defense; the Under Secretary of Defense, Comptroller; the 

Secretary of the Army; the Secretary of the Navy; the Secretary of the Air 

Force; and the Director of the Defense Finance and Accounting Service. We

will make copies available to others upon request. In addition, the report 

will be available at no charge on the GAO Web site at http://www.gao.gov.


Please contact Gregory D. Kutz at (202) 512-9505 or kutzg@gao.gov, John J.

Ryan at (202) 512-9587 or ryanj@gao.gov, or John V. Kelly at (202) 512-6926 

or kellyj@gao.gov if you or your staffs have any questions concerning this 

report. Major contributors to this report are acknowledged in appendix III.





Gregory D. Kutz 

Director

Financial Management and Assurance





Robert J. Cramer

Managing Director

Office of Special Investigations





Page 37                                       GAO-04-88 DOD Premium Class Travel
Appendix I

Objectives, Scope, and Methodology



                       We audited the controls over the authorization and issuance of premium
                       class travel charged to the Department of Defense’s (DOD) centrally billed
                       travel accounts during fiscal years 2001 and 2002. Our assessment covered
                       the following:

                       •	 The extent to which DOD uses the centrally billed travel accounts to
                          purchase premium class travel.

                       •	 Testing a statistical sample of premium class transactions to assess the
                          implementation of key management controls and processes for
                          authorizing and issuing premium class travel, including approval by an
                          authorized official and justification in accordance with regulations. We
                          also identified other selected transactions throughout the premium
                          class travel transactions to determine if indications existed of improper
                          transactions.

                       •	 DOD’s oversight and monitoring of the use of premium travel and key
                          elements of the control environment, including the (1) consistency of
                          premium class travel procedures among the services and (2) adequacy
                          of documentation to justify the additional cost of premium class travel.



Magnitude of Premium   To assess the magnitude of use of premium class travel, we obtained from
Class Travel           Bank of America a database of fiscal year 2001 and 2002 travel transactions
                       charged to DOD’s centrally billed travel card accounts. We queried the
                       database to isolate those transactions specifically related to airline travel.
                       The airline industry uses certain fare and service codes to indicate the class
                       of service purchased and provided. The database contained transaction-
                       specific information, including the fare and service codes used to price the
                       tickets DOD purchased. We identified the fare basis codes that
                       corresponded to the issuance of first, business and coach class travel.
                       Using these codes, we selected all airline transactions that contained at
                       least one leg in which DOD paid for premium class travel accommodations.
                       We also used these data to identify the number of transactions in which
                       DOD purchased an entirely coach class ticket, but the transactions
                       contained at least one segment of the ticket that was upgraded to a
                       premium class accommodation.




                       Page 38                                      GAO-04-88 DOD Premium Class Travel
                               Appendix I

                               Objectives, Scope, and Methodology





Evaluate Effectiveness of      We tested a statistical sample of premium class transactions to assess the
Controls through Statistical   implementation of key management controls and processes for approving
                               and issuing premium class travel, and used data mining for additional
Sampling and Data Mining       examples of transactions that illustrate improper or questionable premium
                               class travel. The population from which we selected our transactions for
                               testing was the set of positive debit transactions for both first and business
                               class travel that were charged to DOD’s centrally billed travel accounts
                               during fiscal years 2001 and 2002. Because our objective was to test
                               controls over travel card expenses, we excluded credits and miscellaneous
                               debits (such as fees) that would not have been for ticket purchases from
                               the population of transactions.

                               We further limited the business class transactions to those costing more
                               than $750 because many intra-European flight business class tickets cost
                               less than $750 and the corresponding coach class tickets were not
                               appreciably less. By eliminating from our sample business class
                               transactions less than $750, we avoided the possibility of selecting a large
                               number of transactions in which the difference in cost was not significant
                               enough to raise concerns of the effectiveness of the internal controls. The
                               total number of transactions excluded was 15,887, costing approximately
                               $8 million. While we excluded business class transactions costing less than
                               $750, we (1) did not exclude all intra-European flights and (2) potentially
                               excluded nonauthorized business class flights. Limitations of the database
                               prevented a more precise methodology of excluding lower cost business
                               class tickets.

                               To test the implementation of key control activities over the issuance of
                               premium class travel transactions, we selected a stratified random
                               probability sample from the subset of centrally billed account transactions
                               containing at least one premium class leg and in which the business class
                               ticket cost more than $750. Specifically, we selected 15 first class
                               transactions from a population of 1,240 transactions, totaling about
                               $3 million, and 122 business class transactions from a population of about
                               51,000 transactions, totaling about $113 million. For each transaction
                               sampled, we requested that DOD provide us the travel order, travel
                               voucher, travel itinerary, and other related supporting documentation. We
                               used that information to test whether documentation existed that
                               demonstrated that DOD had adhered to key internal controls over
                               authorizing and justifying the premium class ticket. Based on the
                               information DOD provided, we assessed whether a valid official approved
                               the premium class travel and whether the premium class travel was
                               justified in accordance with DOD regulations. The results of the samples of


                               Page 39                                       GAO-04-88 DOD Premium Class Travel
                                                              Appendix I

                                                              Objectives, Scope, and Methodology





                                                              these control attributes can be projected to the population of transactions
                                                              at DOD only, not to individual services or locations.

                                                              Based on the sampled transactions, we also estimated the percentage of
                                                              premium class travel taken by civilian supervisors, managers, and
                                                              executives, or senior military officers. With this statistically valid
                                                              probability sample, each transaction in the population had a nonzero
                                                              probability of being included, and that probability could be computed for
                                                              any transaction. Each sample element was subsequently weighted in the
                                                              analysis to account statistically for all the transactions in the population,
                                                              including those that were not selected. Because we followed a probability
                                                              procedure based on random selections, our sample is only one of a large
                                                              number of samples that we might have drawn. Since each sample could
                                                              have provided different estimates, we express our confidence in the
                                                              precision of our particular sample's estimates as 95 percent confidence
                                                              intervals (e.g., plus or minus 7 percentage points). These are intervals that
                                                              would contain the actual population value for 95 percent of the samples we
                                                              could have drawn. As a result, we are 95 percent confident that each of the
                                                              confidence intervals in this report will include the true values in the study
                                                              population. All percentage estimates from the sample of premium class air
                                                              travel have sampling errors (confidence interval widths) of plus or minus
                                                              9 percentage points or less. Table 5 and table 6 summarize the population
                                                              of DOD airline travel transactions containing at least one premium class leg
                                                              charged to DOD’s centrally billed accounts in fiscal years 2001 and 2002
                                                              and the subpopulation subjected to testing.



Table 5: Fiscal Years 2001 and 2002 DOD Premium Class Travel Population Subjected to Sampling (Dollars in Thousands)

                       Total population of                    Excluded transactions          Subjected to sampling
                         premium class                     (business class costing less (first class and business class
                          transactions                             than $750)               costing more than $750)        Transactions tested
Class              Transactions                  Dollars    Transactions           Dollars    Transactions       Dollars Transactions     Dollars
First                         1,409               $2,969                 -               -           1,409        $2,969             15       $34
Business                    66,681               120,876           15,887          $8,149           50,794       112,727           122        289

Total                       68,090              $123,845           15,887          $8,149           52,203      $115,696           137      $323
Source: GAO analysis of Bank of America data.




                                                              Page 40                                          GAO-04-88 DOD Premium Class Travel
                                                         Appendix I

                                                         Objectives, Scope, and Methodology





Table 6: Fiscal Years 2001 and 2002 Premium Class Travel Charged to the Centrally Billed Accounts Adjusted for Coding Errors
(Dollars in Thousands)

                                      Subjected to sampling
                                 (first class and business class         Subsequently determined             Population adjusted for coding
                                     costing more than $750)            premium less than first class                    errors
Class                               Transactions              Dollars     Transactions           Dollars       Transactions             Dollars
First                                            1,409         $2,969             (169)             ($71)             1,240             $2,898
Business                                        50,794       112,727                169                 71           50,963            112,798

Total                                           52,203      $115,696                  0                  0           52,203           $115,696
Source: GAO analysis of Bank of America data.


                                                         In addition to our audit of a DOD-wide statistical sample of transactions,
                                                         we also selected other transactions identified by our data mining efforts for
                                                         audit. Our data mining identified individuals who frequently flew using first
                                                         or business class accommodations, frequent trips to one location, and trips
                                                         involving family travel. For data mining transactions, we also requested
                                                         that DOD provide us the travel order, travel voucher, travel itinerary, and
                                                         any other supporting documentation that could provide evidence that the
                                                         premium class travel was properly authorized and justified in accordance
                                                         with DOD policies. If the additional documentation provided indicated that
                                                         the transactions were proper and valid, we did not pursue further
                                                         documentation of those transactions. If the additional documentation was
                                                         not provided or if it indicated further issues related to the transactions, we
                                                         obtained and reviewed additional documentation or information about
                                                         these transactions.



Control Environment	                                     To assess the overall control environment for premium class travel, we
                                                         obtained an understanding of the travel process, including authorization of
                                                         premium class travel, by interviewing officials from the Department of the
                                                         Army, Department of the Navy, Department of the Air Force, and Defense
                                                         Finance and Accounting Service. We reviewed applicable policies and
                                                         procedures and program guidance that they provided. We visited two Army
                                                         units, three Navy units, three Air Force units, and two Marine Corps units
                                                         to gain an understanding of the travel process, including the management
                                                         of premium class travel. We used as our primary criteria applicable laws
                                                         and regulations, including GSA’s Federal Travel Regulation and DOD’s
                                                         Joint Travel Regulations and Joint Federal Travel Regulations. We also
                                                         used as criteria our Standards for Internal Control in the Federal



                                                         Page 41                                             GAO-04-88 DOD Premium Class Travel
Appendix I

Objectives, Scope, and Methodology





Government1 and our Guide to Evaluating and Testing Controls Over
Sensitive Payments.2 To assess the management control environment, we
applied the fundamental concepts and standards in our internal control
standards to the practices followed by management in the areas reviewed.

We did not audit the Defense Finance and Accounting Service’s centrally
billed travel card payment process. We also did not audit electronic data
processing controls used in processing centrally billed account
transactions. The sites reviewed received paper monthly bills containing
the charges for their purchases and used manual processes for much of the
period we audited, which reduced the importance of electronic data
processing controls.

We briefed DOD managers, including DOD officials in the Office of the
Under Secretary of Defense (Comptroller), the Defense Finance and
Accounting Service, and the Office of Inspector General; Army officials in
the Office of Deputy Chief of Staff for Logistics; Navy officials in the Office
of the Assistant Secretary of the Navy for Financial Management and
Comptroller; Air Force officials in the Office of the Deputy Chief of Staff
for Installation and Logistics; and Marine Corps officials in the Office of
Deputy Chief of Staff for Installations and Logistics. On August 8, 2003, we
provided DOD officials with a draft of this report. We obtained oral
comments from DOD, Air Force, Army, Marine Corps, and Navy officials
representing the offices of the under secretaries of defense for Acquisitions
Technology and Logistics, Personnel and Readiness, and Comptroller on
September 10, 2003. We summarized those comments in the “Agency
Comments and our Evaluation” section. We conducted our audit work from
November 2002 through August 2003, in accordance with U.S. generally
accepted government auditing standards, and we performed our
investigative work in accordance with standards prescribed by the
President’s Council on Integrity and Efficiency.




1
 GAO/AIMD-00-21.3.1.
2
 GAO/AFMD-8.1.2.




Page 42                                       GAO-04-88 DOD Premium Class Travel
Appendix II

Process to Obtain Premium Class Travel



               The process for obtaining premium class travel begins when a DOD civilian
               employee or member of the military or the employee’s supervisor
               determines that he or she needs to travel and the traveler is notified to
               initiate a travel request. If the traveler determines that he or she needs
               premium class travel, the traveler submits the travel request, along with
               justification for premium travel, to his or her supervisor for approval. Once
               the supervisor reviews the travel request, along with the required
               supporting documentation, such as a doctor’s note supporting a specific
               physical condition and the necessity for premium travel, it is forwarded to
               the official who signs the order. For first class travel, the secretary within
               the military service or a designee reviews the request and justification for
               first class travel for consistency with DOD regulations. In the case of
               premium class other than first class transportation, the local transportation
               officer or other appropriate authority reviews the request and justification.

               The order-signing official reviews the travel request and documentation
               and determines if there is adequate support for the premium travel. If the
               travel is properly supported and justified, then the premium class travel is
               approved and the official signs the travel request to generate a travel order.
               If adequate support does not exist for the class of travel requested, then the
               request for premium travel is denied.

               The travel order is issued, signed by the official, and delivered to the
               government travel office (GTO),1 or the commercial travel office (CTO)2
               acting on behalf of the government. Either the GTO or CTO verifies the
               existence of documentation and checks for an authorizing signature. The
               CTO then issues the premium class ticket and charges the centrally billed
               account. The CTO is not supposed to use the centrally billed account to
               purchase a premium class ticket until the traveler or the official provides
               the CTO with a signed travel order authorizing the premium class travel.
               Figure 3 provides a graphic description of the process to obtain premium
               class travel.




               1
                The GTO is staffed by government employees who are required to monitor the activities of
               the commercial travel office.
               2
                The CTO is staffed by employees of a company that has been contracted to serve as a travel
               agency for DOD or the military service.




               Page 43                                              GAO-04-88 DOD Premium Class Travel
                                                           Appendix II

                                                           Process to Obtain Premium Class Travel





Figure 3: Standard Process to Obtain Premium Class Travel When Multiple Classes of Service Are Available


                Start

                                                                Yes
                Traveler                                                       Secretary
                                               Traveler
       Traveler completes travel            Is request for              Secretary or designee                                               Legend
          request and includes                first class                reviews request and
        justification for premium               travel?                    documentation.
                   travel.
                                                                                                                                     Traveler         Official
                                                     No

                                                                                                                                                        C
                                                                                                                                     Secretary    Commercial
                                                                                                                                                  Travel Office
                                                                                                                                                     (CTO)

                                                                                                No                                              C/G
                                                Official                                                      Traveler
                                                                               Traveler
                                                                                                                                    Commercial Travel Office or
                                      Official reviews request and           Traveler has            Traveler is denied premium      Government Travel Office
                                                                          provided adequate                                                 (GTO)
                                             documentation                 support for class            class travel and starts
                                                                               of travel?                   process over.

                                                                                     Yes




                                                                                                     Process complete

                                                 C/G                            C/G                             C
         Official    Secretary                CTO or GTO                     CTO or GTO                        CTO

      Travel order is issued and        Approved travel order is          GTO or CTO verifies        CTO issues premium class
     Secretary/designee or official    delivered to GTO or CTO.       existence of documentation,       ticket and charges
      signs indicating approval.                                       and checks for signature.      centrally billed account.




Source: GAO analysis of DOD data.




                                                           Page 44                                                       GAO-04-88 DOD Premium Class Travel
Appendix III

GAO Contacts and Staff Acknowledgments 




GAO Contacts	      John V. Kelly, (202) 512-6926
                   Tuyet-Quan Thai, (206) 287-4889



Acknowledgments	   Staff making key contributions to this report were Kris Braaten, Beverly
                   Burke, Francine DelVecchio, Lisa Hansen, Kenneth M. Hill, Aaron Holling,
                   Jeffrey Jacobson, Julie Matta, Karlin Richardson, John Ryan, Sidney H.
                   Schwartz, and Scott Wrightson.




(192078)           Page 45                                   GAO-04-88 DOD Premium Class Travel
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