Travel Cards: Internal Control Weaknesses at DOD Led to Improper 
Use of First and Business Class Travel (06-NOV-03, GAO-04-229T). 
                                                                 
Long-standing financial management problems, coupled with	 
ineffective oversight and management of the Department of	 
Defense's (DOD) travel card program, which GAO has previously	 
reported on, have led to concerns about DOD's use of first and	 
business class airfares. At the request of the Subcommittee on	 
Investigations, Senate Committee on Governmental Affairs, Senator
Grassley, and Representative Schakowsky, GAO performed work to	 
identify problems in DOD's controls over premium class travel.	 
This testimony focuses on (1) the extent of DOD premium class	 
travel, (2) the effectiveness of key internal control activities 
and examples of improper premium class travel resulting from	 
internal control breakdowns, and (3) DOD's control environment	 
over premium class travel. In a companion report being issued	 
today, GAO made numerous recommendations--that DOD concurred	 
with--to strengthen key internal control activities and improve  
the overall control environment.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-229T					        
    ACCNO:   A08832						        
  TITLE:     Travel Cards: Internal Control Weaknesses at DOD Led to  
Improper Use of First and Business Class Travel 		 
     DATE:   11/06/2003 
  SUBJECT:   Air travel allowances				 
	     Data collection					 
	     Defense cost control				 
	     Defense operations 				 
	     Financial management				 
	     Internal controls					 
	     Monitoring 					 
	     Program abuses					 
	     Travel costs					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-04-229T

United States General Accounting Office

                                 GAO Testimony

Before the Permanent Subcommittee on Investigations, Committee on
Governmental Affairs, U.S. Senate

For Release on Delivery Expected at 2:00 p.m. EST Thursday, November 6,
2003

TRAVEL CARDS

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

Statement of Gregory D. Kutz
Director, Financial Management and Assurance

John J. Ryan
Assistant Director, Office of Special Investigations

John V. Kelly
Assistant Director, Financial Management and Assurance

                                       A

GAO-04-229T

Highlights of GAO-04-229T, a testimony before the Permanent Subcommittee
on Investigations, Committee on Governmental Affairs, United States Senate

Long-standing financial management problems, coupled with ineffective
oversight and management of the Department of Defense's (DOD) travel card
program, which GAO has previously reported on, have led to concerns about
DOD's use of first and business class airfares. At the request of this
Subcommittee, Senator Grassley, and Representative Schakowsky, GAO
performed work to identify problems in DOD's controls over premium class
travel. This testimony focuses on (1) the extent of DOD premium class
travel, (2) the effectiveness of key internal control activities and
examples of improper premium class travel resulting from internal control
breakdowns, and (3) DOD `s

November 6, 2003

TRAVEL CARDS

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

Breakdowns in internal controls and a weak control environment resulted in
a significant level of improper premium class travel and millions of
dollars of unnecessary costs being incurred annually. Based on extensive
analysis of records obtained from DOD's credit card issuer-Bank of
America, GAO found that for fiscal years 2001 and 2002, DOD spent almost
$124 million on about 68,000 premium class tickets that included at least
one leg of premium class service, primarily business class. To put the
$124 million into perspective it exceeded the total travel
expenses-including airfare, lodging, and meals-spent by each of 12 major
CFO agencies. The price difference between a premium class ticket and a
coach class ticket ranged from a few dollars to thousands of dollars.

Based on statistical sample testing, GAO estimated that 72 percent of
DOD's fiscal year 2001 and 2002 premium class travel was not properly
authorized, and that 73 percent was not properly justified. GAO estimated
that senior civilian and military employees accounted for almost 50
percent of premium class travel. Further, our data mining showed that 27
of the 28 most frequent premium class travelers were senior DOD officials.
The table below provides examples of unauthorized and/or unjustified
premium class travel compared to what the travel would have cost using
coach class tickets.

Examples of Improper Premium Class Travel control environment over premium
Cost of Estimated class travel. Rank/grade premium cost of coach

of traveler class trips class trips Reason travel was improper

In a companion report being issued today, GAO made numerous
recommendations-that DOD concurred with-to strengthen key internal control
activities and improve the overall control environment.

          GS-15     $35,000 $7,000 Traveler approved own first class      
                                   travel based on                        
                                   medical condition that was later       
                                   determined to not                      
                                    meet stringent first class criteria.  
       Presidential 68,000  17,000    First and business class travel was 
                                                          authorized by a 
        appointee                    subordinate using a blanket order.   

GS-14 and family

21,000 2,500	The travel order authorizing relocation costs for the
traveler and his family did not authorize premium class travel.

           GS-15 3,300 250 First class ticket not authorized by the Secretary 
                           of                                                 
                                             Defense or designee as required. 
           GS-15 4,500 600    18 months after the trip, traveler's supervisor 
                                                                       (not a 
                               medical authority) provided a note regarding a 
                               medical need as the justification for business 
                                                                       class. 

Source: GAO.

Lack of oversight and a weak overall control environment characterized
DOD's management of premium class travel. DOD and the military services
(1) did not have accurate and complete data on the extent of premium class
travel, (2) issued inadequate policies on premium class travel that were
inconsistent with government travel regulations and with each other, (3)
did not issue guidance on how to document the authorization and
justification of

www.gao.gov/cgi-bin/getrpt?GAO-04-229T. premium class travel, and (4)
performed little or no monitoring of this travel.

During the course of our audit, DOD began updating its travel regulations
to

To view the full product, including the scope more clearly articulate and
to make more stringent the circumstances under
and methodology, click on the link above.
For more information, contact Gregory Kutz at which premium class travel
can be authorized.

(202) 512-9095 or [email protected].

Mr. Chairman, Members of the Subcommittee, Senator Grassley, and
Representative Schakowsky:

Thank you for the opportunity to discuss the Department of Defense's (DOD)
management of premium class travel acquired using centrally billed
accounts. Our related report,1 released today and developed at the request
of this Subcommittee, Senator Grassley, and Representative Schakowsky,
describes the problems we identified in DOD's controls over premium class
travel. These problems are illustrative 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-those that are highly vulnerable to fraud, waste, and abuse-a
designation that continues today.2 Due to these vulnerabilities, and our
identification of fraud, waste, and abuse in a series of testimonies3 and
reports4 we issued in fiscal years 2002 and 2003 on DOD's individually
billed travel cards, you asked us to audit controls over the other major
form of payment used by DOD for travel expenses-centrally billed accounts.

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 procure other travel-related expenses,5 while
the individually billed accounts are used by individual travelers for
lodging,

1U.S. General Accounting Office, Travel Cards: Internal Control Weaknesses
at the DOD Led to Improper Use of First and Business Class Travel,
GAO-04-88 (Washington, D.C., Oct. 24, 2003).

2U.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).

3U.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).

4U.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).

5The 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.

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.

Today, I will summarize our work on DOD's use of premium class travel
charged to its centrally billed accounts. Federal travel regulations
define premium class travel as any class of accommodation above coach
class, that is, first or business class. General Services Administration
(GSA) and 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. These regulations restrict premium class travel to limited
circumstances. The regulations state that travelers on official government
business must exercise the same 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, when possible, travelers are to
plan their travel in advance to avoid the necessity for premium class
travel.

My testimony will focus on (1) the extent of premium class travel during
fiscal years 2001 and 2002-the most recently available data at the time of
our work, (2) the effectiveness of key internal control activities and
examples of improper premium class travel resulting from internal control
breakdowns, and (3) DOD's control environment over premium class travel.

Summary	During fiscal years 2001 and 2002, DOD spent almost $124 million
on over 68,000 premium class tickets that included at least one leg in
premium class-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.

During those fiscal years, breakdowns in key internal controls activities
at DOD resulted in a significant level of improper premium class travel.
The two basic internal control activities we tested-proper authorization
and proper justification-were ineffective. Based on our statistical
sample, we estimated that 72 percent of all premium class tickets were not
authorized

and 73 percent were not justified-and therefore improper. Because of the
weaknesses we identified in the control environment and the breakdown in
specific internal control activities, DOD did not detect these improper
transactions. As each premium class ticket cost the government up to
thousands of dollars more than a coach class ticket, unauthorized premium
class travel resulted in millions of dollars of unnecessary costs being
incurred annually.

A contributing factor to those excess costs was that DOD did not track
premium class travel usage, design a strong control environment, or adhere
to important internal control activities that provide reasonable assurance
that DOD premium class travel regulations are consistent with federal
travel regulations and are for authorized purposes only. DOD did not
maintain adequate and accurate premium class travel data. For example,
DOD's first class travel data, which DOD is required to report to GSA
annually, were incomplete, and DOD did not obtain or maintain data on
business class travel. Thus, DOD was not aware of the extent of premium
class travel and did not have data available to identify trends and
determine whether alternate, less expensive means of transportation could
have been used. Other weaknesses in the area of policies and procedures
exacerbated weak internal control procedures and contributed to
ineffective oversight of premium class travel. In particular, DOD and the
services did not issue (1) adequate and consistent policies on premium
class travel, and (2) guidance on how to document the authorization and
justification of premium class travel. Further, DOD had not performed
audits or evaluations of premium class travel, and did not monitor
training provided to travelers, authorizing officials, and commercial
travel offices employees on governmentwide and DOD premium class travel
regulations.

During our audit, DOD officials began to address some of the deficiencies
we identified by updating the Joint Travel Regulations and the Joint
Federal Travel Regulations-DOD's internal travel regulations-in April 2003
to articulate more clearly and to make more stringent the circumstances
under which premium class travel can be authorized. As discussed in the
report released today, DOD concurred with our recommendations to improve
the overall control environment and strengthen key internal control
activities.

  Extent of Premium Class Travel Is Significant

As shown in table 1, DOD spent nearly $124 million on airline tickets that
included at least one leg of premium class service during fiscal years
2001 and 2002. However, because DOD did not maintain centralized data on
premium class travel, we had to extract these data from Bank of America's
databases of DOD centrally billed account travel, which included over 5.3
million transactions for airline tickets valued at over $2.4 billion. Due
to limitations in the information collected on individual transactions, we
were unable to determine the amount of premium class travel by military
service or the amount of premium class travel used for domestic versus
overseas flights.

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

              Number of Dollar amounts transactions (in thousands)

                            First class 1,240 $2,898

                         Business class 66,850 $120,947

                      Total premium travel 68,090 $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 accounted for a very small percentage of
DOD travel overall6-about 1 percent of total DOD airline transactions and
5 percent of total DOD dollars spent on airline travel. However, to put
the $124 million that DOD spent on premium class travel in perspective,
the amount 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 each of 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 the price of a premium class ticket and a
comparable coach class ticket can range from negligible-particularly if

6DOD reported almost $10.8 billion in travel-related expenses for fiscal
years 2001 and 2002 combined.

the traveler traveled within Europe-to thousands of dollars. In one
instance, a traveler's first class flight between Washington, D.C., and
Los Angeles was 14 times, or about $3,000 more than, the price of a
comparable coach class flight at the government fare.

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. GAO's Guide for Evaluating and
Testing Controls Over Sensitive Payments7 considers 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.

  Internal Control Activities Not Effectively Implemented

Control activities occur at all levels and functions of an agency. They
include a wide range of diverse activities such as authorizations,
reviews, approvals, and the production of records and documentation. For
first and business class travel, we tested control activities designed to
provide assurance that premium class travel transactions are (1)
authorized and (2) justified in accordance to the Federal Travel
Regulation (FTR), issued by GSA to implement travel policies for federal
civilian employees and others authorized to travel at government expense,
and DOD's travel regulations, including the Joint Federal Travel
Regulations (JFTR), which applies to uniformed service members, and the
Joint Travel Regulations (JTR), which applies to DOD civilian personnel
who are subject to GSA's travel regulation. These regulations generally
require that premium class travel be specifically authorized in advance of
travel and only under specific circumstances. (See app. I for further
details of GSA and DOD premium class travel regulations.) For example,
although FTR and DOD travel regulations allow premium class travel when
the scheduled flight time is in excess of 14 hours, these regulations
prohibit use of premium class accommodation if the traveler has scheduled
rest stops.

7GAO/AFMD-8.1.2.

In addition to the FTR and DOD regulations, we also applied the criteria
set forth in our internal control standards8 and sensitive payments
guidelines9 in evaluating the proper authorization of premium class
travel. For example, while DOD travel regulations and policies do not
address the issue of subordinates authorizing their supervisors' premium
class travel, our internal control standards consider such a policy to be
flawed from an independence viewpoint. Therefore, a premium class
transaction that was approved by a subordinate would fail the controls
over authorization test. Using these guidelines, we estimated, based on
our statistical sample, that an estimated 72 percent of the DOD centrally
billed travel transactions containing premium class travel for fiscal
years 2001 and 2002 were not properly authorized and that an estimated 73
percent were not properly justified.

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

Estimated percentage failure rate in key internal

Control test controls

Not properly authorized by a designated official at equal or higher
rank/grade to the traveler

o  Premium class travel was not specifically authorized on the 64 travel
order or other supporting documentation

o  Travel order authorizing premium class travel was not signed 6

o  Premium class travel was authorized by a subordinate 2

Not properly justified

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.

As shown in table 2, an estimated 64 percent of premium class transactions
did not contain travel orders that specifically authorized the traveler to
fly premium class, and thus the commercial travel office-a travel agency-

8GAO/AIMD-00-21.3.1. 9GAO/AFMD-8.1.2.

should not have issued the premium class ticket. Another 6 percent of
premium class transactions were related to instances where the travel
order authorizing business class was not signed (left blank) or the travel
order authorizing first class was not signed by the service secretary or
his or her designee, as required by DOD regulations. 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. We also 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 with self-approval and reduces scrutiny of premium class
requests.

Another internal control weakness identified in the statistical sample was
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 and recent changes to DOD regulations state
that in the context of lengthy flights premium class travel should only be
used when exceptional circumstances warrant and alternatives should be
explored to avoid the additional cost of premium class travel. As shown in
table 2, an estimated 72 percent of premium class transactions were not
authorized and therefore because they were not properly authorized they
could not have been justified. An additional two transactions in our
sample which were authorized but not justified in accordance with DOD's
criteria increased our estimate of premium class transactions that were
not justified to 73 percent.

Considering the significant breakdown in key internal controls, it was not
surprising that our audit identified numerous examples of improper premium
class travel that cost DOD significantly more than what would have been
spent on a coach class ticket. Table 3 illustrates a few of the types of
unauthorized and/or unjustified transactions from both our statistical
samples and data mining work, along with a comparison between amounts
actually paid and the comparable coach fares at that time. Without
authorization or adequate justification, these cases illustrate the
improper use of premium class travel and the resulting increase in

travel costs. For further details on the cases shown in table 3, as well
as additional examples of unauthorized and/or unjustified transactions,
please refer to the report that we released today on this subject.10

           Table 3: Examples of Improper Use of Premium Class Travel

                                             Cost of  Estimated 
                                             premium    cost of 
                   Grade/           Class of  ticket coach fare 
Traveler Source rank              ticket             ticketa    Reason for 
                          Itinerary             paid                exception 

     Data GS-14b One-way from  First and $20,943 $2,500c Travel order did not 
                                                           authorize use of   
                                                            premium class     
mining          London to   business                    travel. Traveler   
                                                               obtained       
                 Honolulu for                                   premium class 
                 a                                       tickets on the basis 
                                                                   that these 
                   family of                             tickets were issued  
                     four                                 to other permanent  
                      for                                 change of station   
                  relocation                                 (PCS) moves      
                                                              exceeding       
                                                          14 hours in total   
                                                          travel time. Navy   
                   purposes                                     policy        
                                                          excludes PCS move   
                                                          over 14 hours as a  
                                                         condition under      
                                                         which premium class  
                                                         travel               
                                                          can be authorized.  
                                                          Transaction failed  
                                                          authorization and   
                                                            justification.    

                                                         Travel order did not 
Statistical GS-13 San Diego to  Business 3,695 2,161    authorize business 
                                                                        class 
                                                        travel. Transaction   
        sample       Busan, Korea,                      failed authorization  
                                                        and                   
                       and back                            justification.     
                                                            Travel order      
Statistical GS-13 San Francisco Business        610c    authorizing the    
                                            3,168          traveler to fly    
        sample       to Tokyo, and                      business class on the 
                                                        basis that the flight 
                         back                           exceeded 14 hours was 
                                                             not signed.      
                                                         Transaction failed   
                                                          authorization and   
                                                           justification.     

Statistical GS-13  Tucson to   Business 8,308 4,966 Travel order contained 
                                                         authorization for    
                                                          traveler to fly     
        sample       Bahrain and                       business class on the  
                                                               basis          
                       Bahrain to                      that the flight lasted 
                              Los                       more than 14 hours.   
                       Angeles                         However, the traveler  
                                                          had a layover in    
                                                         London on both the   
                                                        outbound and return   
                                                       portions of the trip,  
                                                       which, per the FTR and 
                                                              JTR, would have 
                                                       precluded the traveler 
                                                                         from 
                                                        traveling in premium  
                                                         class. Transaction   
                                                       passed authorization   
                                                       but failed             
                                                       justification.         

5 Statistical GS-15 Los Angles to First 3,253 238 First Class Ticket not
authorized by the sample Washington, Secretary of Defense or designee as
D.C., and back required.

10GAO-04-88.

(Continued From Previous Page)

                                               Cost of  Estimated 
                                               premium    cost of 
                   Grade/             Class of  ticket coach fare 
Traveler Source rank   Itinerary   ticket      paid    ticketa  Reason for 
                                                                    exception 
            Data   GS-15  Washington,                             
            mining        D.C. to                                 
                          Amsterdam,                              
                          and back                                

Business 4,525 570c	Business class travel authorized but no justification
provided on the order. Over 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. The traveler also flew
coach on a number of trips that lasted longer than his flight from
Washington D.C. to Amsterdam. The traveler admitted that he should not
have traveled business class. Transaction passed authorization but failed
justification.

                                                             Business class   
Statistical Political Washington,  Business 7,450 3,060c travel authorized 
                                                                on basis      
                                                               that travel is 
        sample appointee   D.C. to                                    mission 
                                                             essential, which 
                                                                     is not a 
                                                            DOD criterion for 
      and data           London, then                             authorizing 
                                                               business class 
                                                            travel. Traveler  
        mining             Paris to                           was part of a   
                                                               group of 13    
                                                               attending a    
                            Moscow                            conference in   
                                                                 Moscow.      
                                                            Transaction       
                                                            passed            
                                                            authorization but 
                                                            failed            
                                                             justification.   

Source: GAO analysis of premium class travel transactions and supporting
documentation.

aSource of estimated coach fares is GSA city pair or expedia.com.
bGS designates General Schedule pay schedule.
cFares do not include all applicable taxes and airport fees.

Our work also included data mining to identify the individuals who
traveled premium class most frequently. We identified 28 of the most
frequent premium class travelers from the 68,090 premium class
transactions during fiscal years 2001 and 2002. All but 1 of the 28
frequent travelers were at least GS-13 civilians or O-4 military, that is,
senior DOD personnel. We found that the most frequent travelers were, in
most instances, authorized to obtain premium class travel by people at the
same or higher levels, with 3 of the 28 failing the authorization test
because they or their subordinates authorized their travel orders.
However, we determined that many of the transactions were improper because
their justification was not supported by the documentation provided or did
not adhere to FTR and DOD travel regulations.

Some cases involving frequent travelers were questionable because the
justification documentation was not adequate to determine whether the
transaction met DOD's criteria. We found that 12 of the 28 frequent
premium class travelers justified their more expensive flights with a
medical condition. However, 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 time period. For example, frequent
traveler 1 in table 4 took 14 premium and 31 coach class trips during
fiscal years 2001 and 2002. Many of the coach class trips, for example,
from Washington, D.C., to Honolulu or cities in California were similar in
duration to premium class trips from Washington, D.C., to Frankfurt or
Amsterdam. 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. For further details on the cases shown in table 4,
as well as additional examples of travelers who frequently used premium
travel, please refer to the report that we released today.11

       Table 4: Examples of Travelers Who Frequently Used Premium Travel

                       Number/                                    
                       cost of Justification                      
                                              GAO's concern with  Response by 
            Grade/     premium  provided for  premium class       traveler or 
Traveler  rank                                   travel        traveler's  
                   class trips premium travel                        staff    

GM-14 14/$88,000	Doctor's note claiming Traveler took 45 flights-14
premium and Traveler admitted to inconsistent medical necessity did 31
coach class trips during fiscal years application of medical necessity.
not indicate whether 2001 and 2002. Many coach class trips Traveler
considered extra room premium class travel were similar in duration to
premium class in business class to be more was needed on all trips.
comfortable for long flights. flights or flights of certain duration

PASa 17/$68,000	First and business class travel justified through a
blanket order based on a medical condition

1. Blanket authorization was used to justify first and business class
travel.

2.	Premium travel was authorized by a subordinate.

3. Traveler flew in coach class on some flights.

4. Medical certification not attached to travel orders or vouchers, but a
doctor's note dated 9/11/2001 was provided a month after we requested
additional documentation.

The traveler's aide said that she will get the Deputy Secretary's approval
for first class travel and only schedule the traveler for first or
business class when alternative seating is not available.

11GAO-04-88.

(Continued From Previous Page)

                       Number/                                   
                       cost of  Justification                    
                                                GAO's concern                 
                                                with premium     Response by  
            Grade/     premium   provided for   class            traveler or
Traveler  rank  class trips  premium travel       travel       traveler's  
                                                                    staff     
                                 First class    Travel orders      Traveler   
            GS-15                 travel on     were not signed,  told us he  
                    11/$35,000                  but the            was not    
                                                official         aware that   
                               domestic flights authorizing      first class  
                                                first class      travel had   
                                                travel was       
                                                the traveler        to be     
                                  justified     himself.         approved by  
                                  through a     Further, first    the Under   
                                                class            
                                certification   travel was not   Secretary of 
                                     from       authorized by       the Navy. 
                                                the Under            Traveler 
                                   medical      Secretary of the is no longer 
                                  authority     Navy, as           authorized 
                                                required by      to fly first 
                                                      Navy       class based  
                                                  regulations.    on medical  
                                                                  condition.  

SESb 10/$48,000	Claimed mission essential, so that the traveler would be
ready for meetings upon arrival at destination

1. DOD travel regulations do not list mission essential as a basis to
justify premium class travel.

2. 	Some premium class flights were less than 14 hours.

3. 	Business class was taken on return flights.

4.	Specific justification was not always accurate, for example,
justification for first class travel from Washington, D.C., to Tampa used
to support first class travel from Washington, D.C., to Atlanta.

The traveler said that he did not make his flight arrangements. The
traveler's assistant had no explanation for why some premium class trips
were not authorized, or why the specific justification was not accurate.
The traveler's assistant said that the traveler did not want to leave the
day before to avoid the additional cost of a business class flight.

Source: GAO analysis of premium class travel transactions and supporting
documentation. aPresidential appointment with Senate confirmation. bSenior
Executive Service appointment.

  Weaknesses in Internal Control Environment

GAO's Standards for Internal Control12 states that a positive control
environment is the foundation for all other standards. The importance of
the "tone at the top" or the role of management in establishing a strong
control environment cannot be overstated. However, we found that prior to
us initiating this audit, DOD had not taken actions to encourage a strong
internal control environment over premium class travel. Specifically, DOD
and the military services did not (1) maintain adequate and accurate
premium class travel data, (2) issue adequate policies related to the
approval of premium travel, (3) require consistent documentation to
justify premium class travel, and (4) perform audits or evaluations of
premium class travel and did not monitor training provided to travelers,
authorizing officials, and commercial travel offices employees on
governmentwide and DOD premium class travel regulations. During the course
of our work,

12GAO/AIMD-00-21.3.1.

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.

DOD Did Not Maintain Centralized Management Data on Premium Class Travel

The FTR requires DOD, along with all other executive and legislative
branch agencies, to provide GSA annual reports listing all instances in
which the organization approved the use of first class transportation
accommodations. We found that the Military Traffic Management Command
(MTMC), responsible for tracking DOD's first class travel, understated
DOD's cost and frequency of first class travel reported to GSA. According
to DOD's first class travel reports submitted to GSA for fiscal years 2001
and 2002, DOD civilian and military personnel took less than 1,000 first
class flight segments13 totaling less than $600,000. In contrast, our
analysis of the Bank of America airline transaction data indicates that
DOD purchased more than 1,240 tickets containing over 2,000 separate
segments with first class accommodations. Our analysis also found that
these first class tickets costs of about $2.9 million were almost 5 times
the amount DOD reported to GSA. We found that a number of cities were
omitted from DOD's first class report. For example, while DOD data
indicated that no first class flights were taken into Washington, D.C.,
during fiscal year 2001, Bank of America data identified 88 first class
flights into Washington D.C., during the same time period.

We also found that DOD did not obtain or maintain centralized data on
premium class travel other than first class, i.e., 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
the 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 in Premium Class Travel
traveler is civilian or military. For DOD civilians, GSA's FTR governs
travel

and transportation allowances. DOD's JTR and individual DOD andGuidance
military service directives, orders, and instructions supplement the FTR.

13A flight segment is any portion of a ticket with a separate flight
number.

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 its directives, or require the
military services to revise their travel policies or implementing
guidance, when DOD modified the JTR or JFTR. For example, DOD first issued
the JTR in 1965 and since then has 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. In contrast, DOD Directive 4500.9,
Transportation and Traffic Management, was last revised in 1993 while DOD
Directive 4500.56, Use of Government Aircraft and Air Travel, was last
updated in 1999. Similarly, the Navy Passenger Transportation Manual was
last updated in 1998, the Marine Corps Order P4600.7C Marine Corps
Transportation Manual was last changed in 1992, and while the Air Force
Instruction 24-101 Passenger Movement was last updated in 2002, it
contains some provisions that are contrary to GAO's internal control
standards and sensitive payments guidelines.

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 using different
language. For example,

o 	DOD Directive 4500.9 grants blanket authority for high-ranking
officials to use premium class 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.

o 	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 adopt this authorization. In contrast, DOD's
policies on transportation and traffic management-DOD

Directive 4500.9-states that the use of business class on domestic
travel14 may be authorized when necessitated by mission requirements.15

o 	GSA's 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, even
if the scheduled flight time is in excess of 14 hours. While DOD's JTR and
JFTR that were in effect at the time of our audit should have contained
the same restriction, they were silent as to whether a rest period upon
arrival would exclude a traveler from traveling in premium class. Further,
the services' implementing guidance is inconsistent in their application
of the 14-hour rule.16

DOD Does Not Have a Standard Format for Documenting Premium Class Travel

Because premium travel is to be used only on an exception basis after all
other alternatives have been exhausted, the documentation for
authorization and justification should be held to the highest standards to
provide reasonable assurance that in every case, the substantially higher
premium travel cost is warranted. 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, we found substantial inconsistencies in the
documentation trail indicating that appropriate officials approved premium
class travel based on inadequate documentation.

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 approves the use of premium class
accommodations on a case-by-case basis and specifies that premium travel

14DOD Directive 4500.56, DOD Policy on Use of Government Aircraft and Air
Travel, last updated April 19, 1999, states that all DOD travel outside
the continental United States is subject to the JTR and the JFTR.

15DOD Directive 4500.9, Transportation and Traffic Management, P:
3.4.3.1.3, Dec. 29, 1993.

16The Secretary of the Army policy, last updated in March 2003, adopts the
FTR "rest period upon arrival." limitations, but did not define what is
considered a "rest period." The Navy's OPNAVINST 4650.15, issued in July
1998, prohibits a "rest period en route." Air Force Instruction 24-101
(March 2002) 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 Corps Order 4600.25C
does not address this matter.

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. The
National Institutes of Health (NIH) requires that the traveler, when
requesting premium class travel based on a medical condition, detail the
nature of the disability or special need on an authorization form for
employees with disabilities or other special needs. The authorization form
must be signed by 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, but that
resubmission is necessary to ensure that there continues to be a need for
the premium class travel.

Oversight and Monitoring Needs Improvement

In general, effective oversight activities would include management review
and evaluation of the process for issuing premium class travel and
independent evaluations aimed directly at the effectiveness of internal
control activities. Our internal control standards state that separate
evaluations of control should depend on the assessment of risks and the
effectiveness of ongoing monitoring procedures. As mentioned above, we
consider 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 evaluations of premium class travel. The lack of effective
oversight and monitoring was another contributing factor to DOD and the
services' lacking knowledge of the extent of improper premium class
transactions.

The lack of oversight was 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 were not
adequately informed on governmentwide and DOD travel regulations
concerning when premium class travel is or is not to be authorized. Thus,
it was not surprising that some DOD travelers and authorizing officials
were under the mistaken impression that travel regulations entitled
travelers to

travel in business class when their flights exceed 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. DOD also did not verify whether CTO
employees receive training in DOD premium travel regulations. A
representative from one commercial travel office informed us that they
issue premium class travel if premium class was requested 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 Issued New Regulations to Better Define When Premium Class Travel is
Authorized

During the course of our work, in April 2003, DOD updated the JTR17 and
JFTR18 to articulate more clearly and make more stringent the
circumstances under 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. 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 station, and state
that business class accommodations are not authorized on the return leg of
travel.

Finally, in its revised regulations, 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 department highly vulnerable to fraud,
waste, and abuse. DOD does not have the management controls in place to
identify issues such as improper use of premium class travel. As a result,

17JTR Change 450, April 1, 2003. 18JFTR Change 196, April 1, 2003.

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 appropriately 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 ensure that its travel dollars are
spent in an economical and efficient manner.

Our related report on these issues released today includes recommendations
to DOD. 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 premium class travel. In oral comments on a
draft of this report, DOD officials concurred with our recommendations to
resolve the control weaknesses.

Mr. Chairman, Members of the Subcommittee, Senator Grassley, and Ms.
Schakowsky, this concludes my prepared statement. I would be pleased to
answer any questions that you may have.

Contacts and 	For future contacts regarding this testimony, please contact
Gregory D. Kutz at (202) 512-9095, John J. Ryan at (202) 512-9587, or John
V. Kelly at

Acknowledgments	(202) 512-6926. Individuals making key contributions to
this testimony included Kris Braaten, Beverly Burke, Francine DelVecchio,
Aaron Holling, Jeffrey Jacobson, Julie Matta, Sidney H. Schwartz, and
Tuyet-Quan Thai.

Appendix I

GSA and DOD Premium Class Travel Regulations

DOD travelers must follow a complicated array of premium class travel
guidance. The applicability of specific regulations depends on whether the
traveler is civilian or military. For DOD civilians, GSA's FTR governs
travel and transportation allowances. DOD's JTR and individual DOD and
military 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.

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."
DOD travel regulations also require that authorization for premium class
accommodations be made in advance of the actual travel unless extenuating
circumstances or emergency situations make advance authorization
impossible. DOD regulations also provide that 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. Specifically, the JTR and
JFTR state that first class accommodation is authorized only when at least
one of the following conditions exists:

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

o 	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

o  exceptional security circumstances require such travel.

Appendix I
GSA and DOD Premium Class Travel
Regulations

The JTR and JFTR allow the transportation officer,1 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:

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

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

o 	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;

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

o 	coach class accommodations on authorized/approved foreign carriers do
not provide adequate sanitation or meet health standards;

o 	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;

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

1The 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.

Appendix I
GSA and DOD Premium Class Travel
Regulations

o 	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, if premium class accommodations are authorized, a
rest stop is prohibited.2

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. However, agency mission is not a
DOD criterion for obtaining premium class travel.

2The April 2003 change to the JTR and JFTR states that premium class
travel 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. 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 station, and state that business class
accommodations are not authorized on the return leg of travel.

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

GAO's Mission	The General Accounting Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.

  Obtaining Copies of GAO Reports and Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost
is through the Internet. GAO's Web site (www.gao.gov) contains abstracts
and full-text files of current reports and testimony and an expanding
archive of older products. The Web site features a search engine to help
you locate documents using key words and phrases. You can print these
documents in their entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document files.
To have GAO e-mail this list to you every afternoon, go to www.gao.gov and
select "Subscribe to e-mail alerts" under the "Order GAO Products"
heading.

Order by Mail or Phone	The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out
to the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:

U.S. General Accounting Office 441 G Street NW, Room LM Washington, D.C.
20548

To order by Phone: 	Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud, 	Contact: Web site: www.gao.gov/fraudnet/fraudnet.htm

  Waste, and Abuse in E-mail: [email protected]

Federal Programs Automated answering system: (800) 424-5454 or (202)
512-7470

Public Affairs	Jeff Nelligan, Managing Director, [email protected] (202)
512-4800 U.S. General Accounting Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
*** End of document. ***