Defense Management: DOD Needs to Strengthen Internal Controls
over Funds Used to Support USO Activities (05-DEC-03, GAO-04-56).
For more than 60 years, the United Services Organization (USO),
in partnership with the Department of Defense (DOD), has provided
support and entertainment to U.S. armed forces, relying heavily
on private contributions and on funds, goods, and services from
DOD. To assist USO, Congress, beginning in fiscal year 2000,
provided a total of $23.8 million in grants to be awarded through
DOD as seed money for an endowment fund. The availability of
these funds to USO, along with DOD's ongoing support funded in
its regular annual appropriations, represents a substantial
financial commitment. GAO determined (1) the source and amount of
DOD's support to USO in fiscal years 2000-2002 and (2) the
sufficiency of internal controls to provide reasonable assurance
that federal funds are used in an appropriate manner. GAO focused
its audit on USO World Headquarters' activities and audited a
limited selection of USO transactions for the 3 fiscal years.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-56
ACCNO: A08967
TITLE: Defense Management: DOD Needs to Strengthen Internal
Controls over Funds Used to Support USO Activities
DATE: 12/05/2003
SUBJECT: Accounting procedures
Accounting systems
Federal grants
Funds management
Grant monitoring
Internal controls
Questionable payments
Appropriated funds
Financial management
Reimbursements from government
Entertainment expenses
******************************************************************
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GAO-04-56
United States General Accounting Office
GAO Report to the Chairman, Committee on Appropriations, House of
Representatives
December 2003
DEFENSE MANAGEMENT
DOD Needs to Strengthen Internal Controls over Funds Used to Support USO
Activities
GAO-04-56
Highlights of GAO-04-56, a report to the Chairman, Committee on
Appropriations, House of Representatives
For more than 60 years, the United Services Organization (USO), in
partnership with the Department of Defense (DOD), has provided support and
entertainment to U.S. armed forces, relying heavily on private
contributions and on funds, goods, and services from DOD. To assist USO,
Congress, beginning in fiscal year 2000, provided a total of $23.8 million
in grants to be awarded through DOD as seed money for an endowment fund.
The availability of these funds to USO, along with DOD's ongoing support
funded in its regular annual appropriations, represents a substantial
financial commitment.
GAO determined (1) the source and amount of DOD's support to USO in fiscal
years 2000-2002 and (2) the sufficiency of internal controls to provide
reasonable assurance that federal funds are used in an appropriate manner.
GAO focused its audit on USO World Headquarters' activities and audited a
limited selection of USO transactions for the 3 fiscal years.
GAO recommends that the Secretary of Defense develop and implement
improvements in program guidance, record-keeping systems, and tests of
internal controls to improve the accountability and control of funds
December 2003
DEFENSE MANAGEMENT
DOD Needs to Strengthen Internal Controls over Funds Used to Support USO
Activities
During fiscal years 2000 through 2002, DOD provided USO with substantial
appropriated and nonappropriated support, but the total amount cannot be
determined because of limitations in DOD's and USO's record-keeping
systems. GAO identified at least $34.7 million in appropriated funds that
DOD provided to support USO during fiscal years 2000 through 2002. Of this
amount, $20.8 million was in congressionally appropriated grants to help
USO establish the Spirit of Hope Endowment Fund to ensure the continuation
of USO's programs and services. Another $12.1 million was for
reimbursements to USO, and at least $1.8 million was paid directly by DOD
for tour-related expenses such as commercial airfares, visas, and
passports. DOD also provided other appropriated support, such as lodging
and transportation. However, GAO could not determine the total monetary
value of DOD's support from appropriated funds because neither DOD nor USO
has record-keeping systems that aggregate the needed information. DOD also
provides USO with nonappropriated support, largely in the form of in-kind
goods (e.g., food), services (e.g., Internet access), and infrastructure
support (e.g., performance facilities), to help sustain USO's overseas
tours, but the same limitations precluded GAO from determining the total
monetary value.
DOD and USO did not have sufficient financial and management controls to
reasonably ensure that all appropriated funds were used appropriately. DOD
properly awarded grant funds to USO, and USO properly administered these
funds. However, USO did not require its independent auditor to fully test
internal controls over grants or funds reimbursed to USO by DOD, as
required by its agreements with DOD. In terms of reimbursements to USO and
direct payments by DOD, DOD lacked clearly written supplemental guidance
regarding allowable expenses, management oversight in reviewing USO's
invoices, and procedures for capturing reimbursable expenses. In some
cases, these weaknesses resulted in inappropriate expenditures of funds.
As shown in the table below, based on limited testing, GAO found problems
with payments totaling about $433,000, including about $86,000 in improper
expenditures, $3,000 in questionable expenditures, and $344,000 for
unsupported expenditures. Had USO's independent auditor tested internal
controls, the problems GAO identified might have surfaced. As a result of
GAO's audit, DOD stated it has initiated several actions to improve
financial and management controls and to recover funds from USO. As of
September 2003, DOD had recovered about $19,000 from USO in improper
payments for overseas tour expenses.
Examples of Improper, Questionable, or Unsupported Expenses Identified by
GAO Based on Limited Testing (Fiscal Year 2002)
used to support USO's operations. Type of Amount payment Description
Reason Identified
In commenting on a draft of this report, DOD generally concurred with
GAO's recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-56.
Improper Food, liquor, lodging, and first- and business-class travel
Unauthorized or not allowed by DOD or federal travel regulations
$85,967
Questionable Limousine service, airport VIP lounge
No explanation indicating why needed for official government business
3,054
To view the full product, including the scope Unsupported Production
support, celebrity No explanation of or detailed and methodology, click on
the link above. honorarium support for expense 343,910
For more information, contact Sharon Pickup, Total $432,931
(202) 512-9619, or [email protected]. Source: GAO analysis of DOD data.
Contents
Letter
Results in Brief
Background
DOD Provided Substantial Appropriated and Nonappropriated
Support to USO, but Total Amount Cannot Be Determined Sufficient Financial
and Management Controls Did Not Exist to
Assure Appropriate Use of Appropriated Funds Conclusions Recommendations
for Executive Action Agency Comments and Our Evaluation
1
2 3
5
11 24 25 25
Appendix I Scope and Methodology
Appendix II Details of Improper First-Class and Business-Class Travel
Appendix III Comments from the Department of Defense
Appendix IV Staff Acknowledgments
Tables
Table 1: Appropriated Funds Provided by DOD to Support USO
Activities for Fiscal Years 2000 through 2002 7 Table 2: Appropriated
Funds Provided Via Direct Payments by DOD for USO Activities as Identified
by GAO for Fiscal Year 2002 9 Table 3: Examples of Improper Payments for
Items Reimbursed or
Paid by AFEO for USO Tours for Fiscal Year 2002 17 Table 4: Examples of
Questionable Payments for Items Reimbursed or Paid by AFEO for USO Tours
for Fiscal Year 2002 20 Table 5: Examples of Unsupported Payments for
Items Reimbursed
by AFEO for USO Tours for Fiscal Year 2002 21
Page i GAO-04-56 Defense Management
Table 6: Examples of Improper First-Class and Business-Class Travel Paid
by the Armed Forces Entertainment Office Identified by GAO for Fiscal Year
2002
Figure
Figure 1: Flow of DOD Funds to Support USO Activities during Fiscal Years
2000 through 2002
Abbreviations
AFEO Armed Forces Entertainment Office
DOD Department of Defense
GSA General Services Administration
JFTR Joint Federal Travel Regulations
JTR Joint Travel Regulations
O&M operations and maintenance
OMB Office of Management and Budget
OSD Office of the Secretary of Defense
USO United Services Organization
This is a work of the U.S. government and is not subject to copyright
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Page ii GAO-04-56 Defense Management
United States General Accounting Office Washington, DC 20548
December 5, 2003
The Honorable C.W. Bill Young Chairman, Committee on Appropriations House
of Representatives
Dear Mr. Chairman:
For more than 60 years, the United Services Organizations (USO), a
not-for-profit, nongovernmental but congressionally chartered
organization, has offered support and entertainment to the men and women
of America's armed forces and their families. The USO mission is to
enhance the quality of life of the personnel within the U.S. armed forces
community wherever they are based.
Throughout the years, USO has relied on corporate donors and individual
contributors, as well as on funds, goods, and services provided by the
Department of Defense (DOD), to support its operations. With the creation
of a federal charter for USO in 1979, Pub. L. No. 96-165, DOD was granted
statutory authority to make the department's resources available to help
USO achieve its mission. DOD provides both appropriated and
nonappropriated resources to support USO's operations. Appropriated
support is derived from DOD's operations and maintenance (O&M) funds, and
nonappropriated support is provided largely through DOD-donated goods,
services, and infrastructure. DOD's Armed Forces Entertainment Office
(AFEO), through its Armed Forces Professional Entertainment Program, is
primarily responsible for coordinating with USO to deliver overseas
entertainment. Under a contractual arrangement, USO solicits celebrity
entertainers for gratis or reduced rates to perform at overseas DOD
locations. AFEO reimburses USO for certain expenses incurred in securing
celebrity entertainment, including honoraria,1 production support, and
other administrative costs. AFEO and other DOD entities also pay directly
from their respective O&M accounts, referred to as direct payments, for
certain goods and services provided for USO tours, such as commercial
airfare and military airlift services.
1 Honoraria are daily allowances paid for celebrity and noncelebrity
performers, as well as tour managers and producers.
At your request, we determined (1) the source and amount of support
provided to USO during fiscal years 2000 through 2002 and (2) the
sufficiency of the financial and management controls to provide reasonable
assurance that funds were used appropriately.
We focused our audit on DOD's support for activities of the USO World
Headquarters, which operated USO's overseas entertainment tours, and did
not include the activities of chartered, stateside USO affiliates, which
are financially autonomous from the USO World Headquarters. We did not
audit support provided to USO from nonfederal sources. Because of
limitations in AFEO and USO record keeping, we limited our audit to
support provided by DOD during fiscal years 2000 through 2002. To assess
financial and management controls, we evaluated the adequacy of the
overall control environment and management oversight of controls at USO
and AFEO, audited selected transactions between AFEO and USO for fiscal
year 2002, analyzed AFEO's centrally billed account for fiscal year 2002,
and reviewed AFEO's purchase card account for fiscal years 2001 and 2002.
We also reviewed annual audits of USO's consolidated statement of
financial position and the related consolidated statement of activities
and cash flows prepared by an independent audit firm. For more details on
our scope and methodology, see appendix I.
Results in Brief
During fiscal years 2000 through 2002, DOD provided significant
appropriated and nonappropriated support; however, the total amount cannot
be determined because of limitations in DOD's and USO's record-keeping
systems. For this 3-year period, we identified at least $34.7 million in
appropriated funds that DOD used to support USO's activities. Of this
amount, $20.8 million was awarded in congressionally appropriated grants,
which USO used to help fund the Spirit of Hope Endowment Fund, a
restricted fund intended to ensure the continued existence of USO's
programs and services. We also identified another $12.1 million in
reimbursements to USO under its contract with AFEO for such costs as
celebrity honoraria and production expenses for overseas tours, and at
least another $1.8 million in direct payments by AFEO and other DOD
entities for tour-related expenses, such as commercial airfares, visas,
passports, and military airlift services. DOD also provided other
appropriated support such as lodging, transportation, and use of
facilities. However, we could not determine the total monetary value of
DOD's appropriated support because neither DOD nor USO has record-keeping
systems to aggregate or report the needed information. While DOD also
provided nonappropriated support, largely in the form of in-kind goods
(e.g., food and refreshments), services (e.g., Internet and telephone
access), and infrastructure support (some performance facilities), to help
sustain USO's overseas operations, the same limitations precluded us from
determining the total monetary value of this support.
DOD and USO did not have sufficient financial and management controls in
place to provide reasonable assurance that all appropriated funds were
used appropriately. DOD properly awarded grant funds to USO, and USO
appropriately administered these funds. However, USO did not require its
independent auditor to fully test internal controls over grant funds or
funds reimbursed by DOD, as required under agreements with DOD. For
support provided through contract reimbursements and direct payments, AFEO
lacked clear written supplemental guidance regarding allowable expenses,
effective management oversight in reviewing USO invoices, and adequate
procedures for capturing reimbursable expenses. In some cases, these
weaknesses resulted in inappropriate expenditures of funds. Specifically,
based on our limited testing, we found problems with expenditures totaling
about $433,000, including about $86,000 in improper expenditures, about
$3,000 in questionable expenditures, and approximately $344,000 for
unsupported expenditures. For example, AFEO improperly reimbursed USO
about $9,000 for administrative services that had already been paid and
about $1,300 for unallowable food, liquor, and other miscellaneous
expenses. Also, AFEO improperly incurred approximately $67,000 for
first-class and business-class travel expenses that were not authorized in
accordance with DOD and federal travel regulations and around $9,000 for
transportation expenses for unauthorized travelers. These latter expenses
were paid by AFEO, but they should have been billed to and paid by USO. As
a result of our audit, AFEO officials told us they initiated several
actions to improve financial and management controls and to recover funds
from USO. As of September 2003, AFEO had recovered from USO about $19,000
in improper payments it made to support USO's overseas tours.
We are making recommendations to the Secretary of Defense to develop and
implement improvements in program guidance, record-keeping systems, and
tests of internal controls to improve the accountability and control of
funds used to support USO operations. In commenting on a draft of this
report, DOD generally concurred with our recommendations.
Background USO is a congressionally chartered, nonprofit,
nongovernmental, and charitable corporation whose mission is to enhance
the quality of life for U.S. armed forces personnel and their families.
The USO World Headquarters acts as the enabling body for the organization,
sets overall
policy and strategy, is responsible for the operation of overseas USO
centers, and produces overseas celebrity entertainment tours in
partnership with AFEO. From World War II through the Vietnam War, USO and
DOD partnered to enhance troop morale and provide entertainment to
military outposts worldwide. Following the Vietnam War, legislation
establishing USO's federal charter and various DOD directives and
instructions formalized this close association and made DOD resources,
including funds, available to the maximum extent possible to support USO's
mission.2 DOD uses both appropriated and nonappropriated resources to
support USO's operations. Appropriated support is derived from DOD's O&M
funds, and nonappropriated support is provided largely through DOD-donated
goods, services, and infrastructure.
DOD regulations designate (1) the Under Secretary of Defense for Personnel
and Readiness as the official liaison between DOD and USO and (2) AFEO, a
joint-service operation, as the DOD liaison office for USO. AFEO,
established in 1951, administers DOD's Armed Forces Entertainment Program
in partnership with USO. The U.S. Air Force is the executive agent for
AFEO, having assumed that role from the U.S. Army in 1997. AFEO's mission
is to provide free, high quality, live entertainment to U.S. military
personnel and their families stationed overseas. AFEO supplies all
noncelebrity entertainment, and USO is the primary provider of celebrity
entertainment. Noncelebrity entertainment is made up of upand-coming
performers professionally managed by an agent; celebrity entertainment
consists of well-known entertainers, listed in Billboard or with gold or
platinum recordings.
Under a contractual arrangement with AFEO, USO recruits celebrity
performers for the Armed Forces Entertainment Program. AFEO reimburses USO
for certain tour-related expenses such as honoraria, production support,
and other direct costs. In some cases, AFEO and other DOD entities also
make arrangements to support USO overseas tours and pay directly for these
expenses, such as for commercial airfares, visas, passports, and military
airlift services, from their respective O&M accounts. Also, USO has agreed
to pay for certain tour-related costs, for example, paying the difference
between the cost of business-class and
2 Pub. L. No. 96-165, S: 8, 93 Stat. 1267 (1979) (codified as amended at
36 U.S.C. S: 220107 (2002)); DOD/USO Memorandum of Understanding, November
9, 1987; DOD Directive 1330.12, United Services Organizations, Inc.,
November 9, 1987; DOD Directive 1330.12, United Services Organizations,
Inc., November 1, 2000; and DOD Instruction 1330.13, Armed Forces
Professional Entertainment Program Overseas, September 8, 1985.
DOD Provided Substantial Appropriated and Nonappropriated Support to USO, but
Total Amount Cannot Be Determined
first-class air travel and the travel costs for individuals accompanying
performers whose costs are not covered under the contract with AFEO.
Following the 1991 Gulf War, USO faced serious financial problems because
of declining contributions and therefore became concerned about its
continued ability to serve the military. To address these concerns, USO's
Board of Governors established the Spirit of Hope Endowment Fund in 1998.
According to a former USO official, the intent of the fund was to infuse
USO with funds to provide for the perpetuity of its programs and services.
To assist USO, the Congress, beginning in fiscal year 2000, provided a
total of $23.8 million in O&M funds in the form of grants for USO. As of
September 2003, DOD had provided about $20.8 million to USO. USO used
these funds as seed money for the endowment.
During fiscal years 2000 through 2002, DOD provided substantial
appropriated and nonappropriated support, but the total amount cannot be
determined because of limitations in DOD's and USO's record-keeping
systems. For this 3-year period, we identified at least $34.7 million in
appropriated funds that DOD provided to support USO activities in the form
of grants, contract reimbursements, and direct payments. DOD also provided
other appropriated support such as lodging, transportation, and use of
some facilities. However, we could not identify the total monetary value
of DOD's support derived from appropriated funds because neither DOD nor
USO has record-keeping systems to aggregate or report the needed
information. While DOD also provides nonappropriated support, largely in
the form of in-kind goods (e.g., food and refreshments), services (e.g.,
Internet and telephone access), and infrastructure support (some
performance facilities), to help sustain USO's overseas operations, the
same limitations precluded us from determining the total monetary value
for this support.
USO Received Appropriated and Nonappropriated Support from Many DOD Sources
During fiscal years 2000 through 2002, USO received appropriated and
nonappropriated support from a variety of DOD sources. As figure 1 shows,
this appropriated money flowed to USO in the form of grants awarded by the
Office of the Secretary of Defense (OSD) and from contract reimbursements
and direct payments provided by AFEO and other DOD components.
Nonappropriated support was provided largely through in-kind contributions
that included goods (e.g., food and refreshments), services (e.g.,
Internet and telephone access), and infrastructure support (some
performance facilities), contributed by various DOD components.
Figure 1: Flow of DOD Funds to Support USO Activities during Fiscal Years
2000 through 2002
Appropriated Funds We identified at least $34.7 million in appropriated
funds that DOD provided to support USO's activities during fiscal years
2000 through 2002. As table 1 shows, this funding included grants and
contract reimbursements to USO and direct payments by DOD.
Table 1: Appropriated Funds Provided by DOD to Support USO Activities for
Fiscal Years 2000 through 2002
Dollars in millions
Fiscal year Fiscal year Fiscal year
Funding resource 2000 2001 2002 Total
Grants $4.8 $7.5 $8.5 $20.8
Contract reimbursements 4.3 3.5 4.3
a a
Direct payments 1.8
Total appropriated
funds $9.1 $11.0 $ 14.6 $34.7
Grants
Source: GAO analysis of DOD data.
aAFEO officials could not provide a total amount for direct payments made
to support USO's activities during fiscal years 2000 and 2001, because of
limitations in AFEO's record-keeping system; therefore, there are no
entries for those fiscal years.
We also found that DOD components often provide in-kind support, derived
from appropriated funds, to USO for its overseas tours such as
transportation, free lodging, and some office and performance facilities.
During fiscal years 2000 through 2003, the Congress authorized DOD to
provide a total of $23.8 million in grants to support USO's activities. As
of September 2003, in fiscal years 2000 through 2002, DOD had provided a
total of $20.8 million in grants to USO as seed money to fund the Spirit
of Hope Endowment Fund, which is intended to ensure the continued
existence of USO's programs and services. The Congress provided the funds
through DOD's O&M appropriation in four annual defense appropriations
acts.3 The funds, appropriated only for grants to USO, were first
allocated to the Deputy Assistant Secretary of Defense for Personnel
Support, Families and Education. In 1998, USO established the Spirit of
Hope Endowment Fund and, after receiving the grants from DOD, transferred
the funds into the endowment fund. According to USO policy, the USO Board
of Governors established the Spirit of Hope Endowment Fund, which is a
restricted account. Money placed into the fund is to be considered as
principal and must remain in the account. USO can use the
3 Department of Defense Appropriations Act, 2000, Pub. L. No. 106-79, S:
8143, 113 Stat. 1212, 1270 (1999); Department of Defense Appropriations
Act, 2001, Pub. L. No. 106-259,
S: 8112, 114 Stat. 656, 699 (2000); Department of Defense and Emergency
Supplemental Appropriations for Recovery From and Response to Terrorist
Attacks on the United States Act, 2002, Pub. L. No. 107-117, S: 8111, 115
Stat. 2230, 2272 (2002); and Department of Defense Appropriations Act,
2003, Pub. L. No. 107-248, S: 8129, 116 Stat. 1519, 1567 (2002).
Contracts
income (e.g. interest and dividends) that accrues on the balance held in
the endowment fund to support its operations. USO used about $333,000 in
investment income in calendar years 1999 and 2000 for its operations.
AFEO provided USO with about $12.1 million in contract reimbursements
during fiscal years 2000 through 2002. In September 1999, AFEO awarded an
$8.7 million sole source, indefinite delivery, indefinite quantity
contract to USO. 4 The purpose of this contract was to provide celebrity
entertainment for U.S. armed forces at military installations overseas.
The contract performance period was for 3 years (October 1, 1999, to
September 30, 2002) with five 1-year option periods (October 1, 2002, to
September 30, 2007). According to AFEO and Air Force contracting
officials, AFEO spent the entire $8.7 million before the end of the first
3-year period, and it is currently amending the contract to increase the
amount of funding. In addition to the $8.7 million contract, AFEO
negotiated separate purchase orders for costs associated with specific USO
tours. The terms of the $8.7 million contract applied to each of these
separately negotiated purchase orders. Specifically, the contract provided
reimbursements to USO for
o administrative support services-accounting and administrative services
needed to plan and execute overseas tours, including compiling and
submitting voucher packages to AFEO for expense reimbursements;
o celebrity honoraria-payments to celebrity entertainers or groups and
their production and/or tour managers to help defray day-to-day expenses;
and
o other direct costs-tour production and equipment rental costs; travel
costs to include commercial airfare, car rental or bus fares; lodging and
per diem if authorized by DOD's Joint Travel Regulations; miscellaneous
expenses such as shipping, visas, and equipment repair or replacement for
celebrity tours; and a 19 percent management fee, calculated using the
total of other direct costs expended for noncelebrity tours.5
4This type of contract does not specify a firm quantity of supplies or
services (other than a minimum or maximum quantity) and provides for the
issuance of orders for the delivery of supplies or the performance of
tasks during the period of the contract.
5According to AFEO officials, USO generally does not produce noncelebrity
tours. However, USO provides the funds to pay those who are not
celebrities about 70 percent of their honoraria just prior to tour
commencement. USO requests reimbursement for the payments plus a 19
percent fee, after the tours are completed.
Direct Payments AFEO and the Air Mobility Command used appropriated O&M
funds to pay directly for USO tour-related expenses, such as commercial
airfares, visas and passports, and military airlift services. As table 2
shows, during fiscal year 2002 alone, we identified direct payments that
totaled at least about $1.8 million. However, because of record-keeping
limitations, AFEO officials could not assure that these amounts
represented all direct payments.
Table 2: Appropriated Funds Provided Via Direct Payments by DOD for USO
Activities as Identified by GAO for Fiscal Year 2002
Funding source Fiscal year 2002
Direct payments-AFEO
Centrally billed account $783,684
Purchase carda 2,466
Appropriated funds cite 602,212
Direct payments-Air Mobility Command
Appropriated funds cite 412,227
Total direct payments $1,800,589
Source: GAO analysis of DOD data.
aAFEO could not assure that this total includes all funds used in support
of USO overseas tours.
AFEO used its centrally billed account to pay about $783,000 for its
personnel travel expenses and commercial airfares for USO personnel and
tour entertainers; its purchase card account to pay around $2,500 for
visas, passports, and shipping expenses for entertainment equipment; and
its appropriated funds cite to make direct payments totaling about
$602,200 for its personnel travel expenses and airlift services provided
by the U.S. Air Force, Air Mobility Command. We also identified about
$412,000 that the Air Mobility Command paid directly for airlift services
for one USO tour. According to AFEO and Air Mobility Command officials,
the command's airlift services included the movement of passengers and
baggage either on regularly scheduled flights or on special assignment
airlift missions from designated U.S. stateside military locations to
overseas military locations. These special assignment airlift missions
involve chartering a military aircraft for a specific purpose.
Nonappropriated Support DOD components provide nonappropriated support
largely in the form of in-kind goods, services, and infrastructure, such
as food and refreshments, Internet and telephone access, and free office
space, lodging, and some performance facilities, to help sustain USO's
overseas tours.
Total Amount of Support Could Not Be Determined Because of Limitations in
DOD's and USO's Recordkeeping Systems
We could not determine the total amount of appropriated and
nonappropriated support to USO's activities because of limitations in
DOD's and USO's record-keeping systems. Specifically, we were unable to
identify the total value of appropriated support for the fiscal year 2000
through 2002 period because DOD's records were incomplete. For example,
AFEO could not readily provide an accurate accounting of contract
reimbursements or direct payments for charges to its centrally billed and
purchase card accounts, primarily because it did not track and identify
which transactions were for USO celebrity tours and which transactions
were for noncelebrity tours that did not involve USO. (Most federal funds
that are provided to support USO's activities are provided for celebrity
tours. The cost of noncelebrity tours is paid by AFEO.) Our audit of
AFEO's purchase card transactions confirmed that one could not distinguish
between USO and non-USO activities. Without such detail, AFEO could not
provide complete reports on funding for USO's activities.
During our audit, AFEO provided us with total amounts for contract
reimbursements and some direct payments for fiscal year 2002, but it could
not ensure that the totals included all appropriated funds provided in
support of USO's overseas tours. Moreover, AFEO could not provide the same
information for fiscal years 2000 and 2001 because the records for those
years were less complete, and the time and resources required to gather
and verify the information were more than AFEO could expend given the
unit's workload.
Additionally, AFEO could not provide data on how much appropriated funds
were spent for military airlift services to support USO's overseas tours
because neither AFEO nor the Air Mobility Command has record-keeping
systems to aggregate or report the needed information. For example, the
command's records can track and report all airlift services charged to
AFEO, but those records do not indicate whether the services were provided
to support USO's tours, nor do they differentiate between celebrity and
noncelebrity tours. Furthermore, neither AFEO nor the Air Mobility Command
maintains records of the cost of airlift services that other U.S. military
units (such as the Army and the Navy) provided in support of USO's tours.
We also could not identify the monetary value for other support derived
from appropriated funds, such as transportation, free lodging, and some
office and performance facilities provided by military units other than
the Air Mobility Command. We could not identify the value of this support
because neither DOD nor its components have record-keeping systems to
aggregate or report the needed information.
Sufficient Financial and Management Controls Did Not Exist to Assure
Appropriate Use of Appropriated Funds
Finally, we could not identify the value of DOD's nonappropriated support
to USO, provided largely through in-kind contributions that included goods
(e.g., food and refreshments), services (e.g., Internet and telephone
access), and infrastructure support (some performance facilities) again,
because neither DOD nor its components have record-keeping systems to
aggregate or report the needed information. Furthermore, USO's records for
in-kind contributions do not clearly identify all private sector and DOD
contributions.
DOD and USO did not have sufficient financial and management controls in
place to provide reasonable assurance that all appropriated funds were
used appropriately. DOD properly awarded grant funds to USO, and USO
appropriately administered these funds. However, USO did not require its
independent auditor to fully test internal controls over grant funds or
funds reimbursed by DOD, as required under grant and contractual
agreements with DOD. For support provided through contract reimbursements
and direct payments, AFEO lacked clearly written supplemental guidance
regarding allowable expenses, effective management oversight in reviewing
USO invoices, and adequate procedures for capturing reimbursable expenses.
In some cases, these weaknesses resulted in inappropriate expenditures of
funds. Specifically, we found problems with expenditures totaling about
$433,000, including approximately $86,000 in improper expenditures, $3,000
in questionable expenditures, and $344,000 for unsupported expenditures.
As a result of our audit, AFEO officials told us they have initiated
several actions to improve financial and management controls and to
recover funds from USO.
DOD and USO Had Sufficient Procedures for Administering Grants, but USO Did
Not Fully Comply with Audit Requirements
During fiscal years 2000 through 2002, DOD awarded about $20.8 million in
congressionally appropriated grants to USO. DOD properly transferred these
funds. Specifically, before transferring funds, it entered into grant
agreements with USO that included conditions for the use of these funds.
For example, these agreements allowed USO to deposit the funds in the
Spirit of Hope Endowment Fund or use any investment income earned from the
funds for operational expenses.
The agreements also set forth administrative and accounting requirements,
to include compliance with the Office of Management and Budget (OMB)
Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations, as revised June 1997, which implements the Single Audit
Act, as amended.6 The Single Audit Act is intended to promote sound
financial management, including effective internal controls over federal
funds. The single audit is an important tool utilized by federal agencies-
including DOD-to monitor federal awards to nonprofit organizations and
ensure that the federal funds are properly used.7 OMB Circular A-133
S:_.500 requires an audit of the financial statement(s) for the program
receiving federal funds in accordance with generally accepted government
audit standards. The audit should be an organizationwide audit that
focuses on the recipient's internal controls and compliance with laws and
regulations governing federal awards and be designed to test the program's
internal controls in a manner sufficient to illustrate that a low level of
risk exists for the program.8
Furthermore, OMB Circular A-133, subpart B, S:.200, requires nonfederal
entities expending $300,000 or more a year in federal awards to have a
single or program-specific audit conducted for that year in accordance
with the provisions of the circular. Specifically, S:.205 states that the
determination of when an award is expended should be based on when the
activity related to the award occurs. Generally, the activity pertains to
the expenditure or expense transactions associated with grants.
Specifically, the cumulative balance of federal awards for endowment
funds, which are federally restricted, is considered expended in each year
in which the funds are restricted.
Consistent with the grant agreements, USO deposited the entire $20.8
million in grant funds in investment accounts designated specifically for
the Spirit of Hope Endowment Fund, and used investment income earned on
these funds for operational expenses. With respect to these deposits, USO
invested the funds in income-producing assets such as stocks, bonds and
U.S. Treasury bills. USO used about $333,000 drawn
6 31 U.S.C. S: 7501-7507; Office of Management and Budget (OMB) Circular
A-133, Audits of States, Local Governments, and Non-Profit Organizations.
7 Federal awards include grants, loans, loan guarantees, property,
cooperative agreements, interest subsidies, insurance, food commodities,
direct appropriations, and federal cost reimbursement contracts.
8 According to GAO standards, management and employees should establish
and maintain a control environment throughout the organization that sets a
positive and supportive attitude toward internal control. See GAO's
Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1999).
from investment income for operational expenses, and the entire amount of
deposited grant funds remained invested. However, USO did not fully comply
with the agreements' audit requirements in identifying the scope of work
to be performed by its independent auditor in performing annual audits.
While USO arranges for its independent auditor to perform an annual audit,
this audit focuses on verifying the sources and accuracy of amounts
included in USO's financial statements and does not comprehensively test
internal controls on the receipt and use of grant funds or document tests
performed as required by OMB Circular A-133. USO officials initially
believed there was no need for an audit that complied with the Single
Audit Act, since it spent only investment income from the grant funds and
none of the actual grant funds. Based on our review, USO officials now
agree that the act applies and that the annual audit should be performed
in accordance with the act's requirements and OMB Circular A-133.
Internal Control Weaknesses Led to Problem Expenditures for Contract
Reimbursements and Direct Payments
Lack of Clear and Current Written Supplemental Guidance
For contract reimbursements and direct payments, we found significant
problems with DOD and USO controls over these funds. For example, AFEO
lacked clearly written supplemental guidance regarding allowable expenses,
effective management oversight in reviewing USO's invoices, and adequate
procedures for capturing reimbursable expenses. Also, similar to the grant
funds, USO did not fully comply with audit requirements contained in its
contracts with DOD.
At the time of our audit, the guidance in effect concerning the expenses
AFEO will pay in support of USO's overseas tours was not sufficiently
detailed to provide clear, consistent instructions to be followed by AFEO
or USO. This guidance included the contract agreement between AFEO and
USO, general rules regarding AFEO's direct payment accounts, federal
acquisition and travel regulations, and DOD Instruction 1330.13.
AFEO refers to the aforementioned guidance in paying for USO overseas tour
expenses through contract reimbursements and direct charges to its
centrally billed and purchase card accounts. However, as described below,
we found several weaknesses in the guidance.
o Contract reimbursements. The contract between AFEO and USO identifies
the general categories of tour-related expenses for which USO can be
reimbursed to include administrative support services; honoraria; and
other direct costs such as production support/equipment rental, travel,
lodging, and miscellaneous expenses. The contract contains numerous
clauses and statements that indicate reimbursements will be made in the
accordance with Joint Travel Regulations and the Federal Acquisition
Regulation. However, the contract is not specific concerning the types of
costs-such as the type of production support and other incidental direct
costs-and the supporting documentation needed to ensure that AFEO only
pays for costs that are allowable and proper. AFEO officials stated that
they follow additional policies related to the allowable contract
reimbursements for tour-related expenses, such as "thank you" dinners, but
these policies are not documented in writing.
o Centrally billed account. AFEO stated that it uses the account
primarily to pay for commercial airfares for USO personnel and
entertainers covered under invitational travel orders.9 Federal travel
regulations contain stringent circumstances under which first-class and
business-class travel can be authorized. However, according to AFEO and
USO officials, neither has more detailed, written, and program specific
guidance to determine when and how USO will pay for first- or
business-class travel.
o Other direct charges. AFEO provides additional support to USO by
directly charging the cost of travel-related expenses, such as visas and
passports, to its purchase card account, and by allowing its O&M funds
account cite to be charged for Air Mobility Command airlift services.
However, AFEO has no specific program guidance regarding how USO should be
billed for unauthorized travelers on Air Mobility Command flights.
Furthermore, DOD Instruction 1330.13, last updated September 8, 1985,
establishes policy and assigns responsibility for carrying out the Armed
Forces Professional Entertainment Program for entertaining troops
overseas. This instruction states that the Secretary of the Army has
responsibility for administering the program; however, the Air Force
assumed responsibility in fiscal year 1997. An AFEO official acknowledged
that this instruction is out of date. Also, this policy lacks clear
statements regarding expenses that should be paid by AFEO and USO,
respectively.
The lack of sufficient management oversight of funds provided to USO was
also a key internal control problem. For example, AFEO officials generally
did not closely review or question expenses USO submitted for
reimbursement. Additionally, AFEO's review and reconciliation process for
its centrally billed account and billings from the Air Mobility Command
Insufficient Management Oversight
9 Invitational travel orders are prepared for individuals not employed by
the U.S. government who are traveling for official government business.
Individuals taking part in the entertainment program are authorized to
tour based on these orders. These orders contain guidance governing the
conditions under which the individual or group is touring.
was not sufficient to identify airlift expenses that should be charged to
USO. Furthermore, during our audit of contract files at the Air Force
contracting office responsible for administering the contracts between
AFEO and USO, we found no evidence of contract reviews. An Air Force
contracting official stated its office sometimes questioned the need for
some expenses for celebrity tours when modifications to the contracts were
requested. At these times, the expenses were questioned because the
supporting documentation provided to the contracting office by AFEO was
not always adequate. However, according to the Air Force contracting
officer currently responsible for the contracts, the existing workload and
higher priorities require her to perform more detailed oversight of
highdollar defense contracts. Because celebrity tour costs generally
ranged from $10,000 to $300,000, they are given lower priority for
contract oversight.
Furthermore, we found that USO did not perform the type of audit required
under the terms of its contracts with AFEO. Similar to the grant
agreements, the contracts contain a requirement for a single audit that
would focus on USO's internal controls as they relate to the federal funds
provided through contracts to USO to support the Armed Forces
Entertainment Program. USO signed the contracts with AFEO. These contracts
were to provide celebrity entertainment for U.S. armed forces at military
installations overseas, on a fixed price and cost reimbursable basis. When
USO signed these contractual agreements, it agreed to comply with all
contractual requirements. These contractual agreements set forth
accounting requirements to be met in accordance with Federal Acquisition
Regulation 52.215-2, Alternate II, which requires compliance with OMB
Circular A-133. As previously discussed, this circular implements the
Single Audit Act, as amended, and is intended to promote sound financial
management, including effective internal controls over federal funds.
Our review of USO's audited financial statements, discussions with the
independent auditor responsible for performing the audit, and discussions
with USO officials indicated that the single audit requirement set forth
in the contractual agreements was not met. As discussed previously, USO
arranges for an annual audit of its financial statements, but this audit
does not include comprehensive testing of internal controls and the
documentation of tests performed that is required by OMB Circular A-133.
USO officials initially believed there was no need for an audit that
complied with the Single Audit Act, since USO is merely a vendor providing
services for AFEO, but now, based on our audit, it agrees that such an
audit is required.
Payment of Improper, Questionable, and Unsupported Expenses
Improper Expenses
In the absence of strong internal controls, we found numerous instances
where AFEO paid for improper, questionable, and unsupported expenses in
support of USO's overseas celebrity tours. Based on our limited testing of
six celebrity tour files, our analysis of AFEO's centrally billed account,
and our examination of Air Mobility Command records, we identified a total
of about $433,000 in problem expenditures during fiscal years 2000 to 2002
including improper and questionable expenses totaling around $89,021 and
unsupported expenses totaling approximately $344,000. We defined an
expense as improper when an item was not authorized or properly justified
in accordance with the contracts between AFEO and USO, the Joint Travel
Regulations and the Joint Federal Travel Regulations issued by DOD, and
the Federal Travel Regulation issued by the General Services
Administration.10 For example, we found improper reimbursements for
expenses such as alcoholic beverages, meals, lodging, and duplicate
billings for administrative services. AFEO also inappropriately paid for
first-class and business-class travel and some military airlift services.
We identified numerous examples of questionable payments of USO tour costs
by AFEO for items such as limousine services, hotels, and airport VIP
lounge services. We defined a questionable payment as any item that was
reimbursed without documentation showing that the item was necessary for
official government business under the Armed Forces Entertainment Program.
We also identified numerous unsupported payments. We defined an
unsupported payment as any item that was reimbursed without documentation
detailing the nature of the expense and the way the price for the expense
was determined.
We found payments for improper expenses for items such as unallowable
alcoholic beverages, meals, and lodging, honorarium, and production
support for an entertainer who did not participate in a tour for which
expenses were reimbursed, and a duplicate billing for administrative
services. Moreover, AFEO inappropriately paid for first-class and
businessclass travel and some military airlift services. AFEO acknowledged
that these expenses should not have been reimbursed or paid. For example,
AFEO explained that meal expenses for celebrities receiving honorarium are
not reimbursable because the honorarium is intended to help defray the
cost of meals and other essentials, and the invitational travel orders we
reviewed specifically stated that meal expenses were not authorized.
Expenses for alcoholic beverages are never allowable in conjunction with
10 The Joint Federal Travel Regulations apply to uniformed service members
and the Joint Travel Regulations applies to DOD civilian personnel.
government travel. The cost for first-class travel, and the cost for
unauthorized travelers on Air Mobility Command airlifts, should have been
borne by USO. Table 3 highlights the improper payments we identified.
Table 3: Examples of Improper Payments for Items Reimbursed or Paid by
AFEO for USO Tours for Fiscal Year 2002
Improper expenses Reason item was improper Amount
Alcoholic beverages Not allowed under DOD and federal $ 56
travel regulations
Hotel meals Per diem was not authorized for
travelers
Lodging for one individual No travel orders authorizing lodging
expenses
Celebrity honorarium Traveler did not participate in tour
Production support Traveler did not participate in tour
Duplicate billing for Expense already paid 8,894
administrative services
First-class travel First-class travel was not authorized
or properly
documented in accordance with DOD and
federal travel
regulations 29,586
Business-class travel Justification for travel was not
authorized or properly
documented in accordance with DOD and
federal travel
regulations 37,153
Air Mobility Command airlift No travel orders authorizing payment 9,065
services of airlift services
Total improper expenses
identified $85,967
Source: GAO analysis of DOD data.
Improper expenses of particular note are explained in more detail below:
o Duplicate billing for administrative services. In calendar year 2002,
AFEO paid USO twice for administrative expenses associated with overseas
tours. We identified improper payments totaling about $9,000. A USO
contract employee, responsible for preparing the expense reports for
overseas tours, included invoices for these services in several of the
tour files we audited. According to the contract employee, USO officials
directed that the invoices be submitted to AFEO for payment. The Air Force
contracting officials responsible for managing the contract stated that in
accordance with the terms of the contract between AFEO and USO, USO is
paid a monthly administrative fee that covers numerous administrative
tasks, including preparing the expense reports for USO tours.11
Contracting officials stated that the monthly administrative fee
11 The monthly administrative fee was $3,647 from fiscal years 1999
through 2002. It increases incrementally through fiscal year 2007. The
fiscal year 2003 fee is $3,868 per month.
included the cost for all accounting services, including those performed
by the contractor.12 Neither AFEO nor USO could provide an estimate of how
long the double billings occurred. However, one USO official believed that
the contract employee started to submit the invoices with the inception of
the contract in 1999 and ended with the termination of the contractor's
services in May 2003. Based on our review of documentation provided by USO
for calendar years 2001 and 2002, the amount billed could have totaled
$78,000. We found no indication that the individual was paid twice for the
services performed.
o Improper payments for first-class and business-class travel. Our
analysis of AFEO's centrally billed account13 for fiscal year 2002 and
selected tour files revealed numerous instances of improper payments by
DOD for first-class and business-class travel totaling about $66,000.
These first-class and business-class airline tickets were considered
improper because they were not authorized and/or properly justified in
accordance with the Joint Travel Regulations14 and the Joint Federal
Travel Regulations issued by DOD and the Federal Travel Regulation15
issued by the General Services Administration (GSA).
AFEO's policy, while not written, is to authorize up to business-class
travel for overseas flights for USO celebrity tours. According to an AFEO
official, AFEO's policy is to not authorize first-class travel, and the
Director of Services, Air Force Office of Installations & Logistics, the
office to which AFEO reports, is required to approve business-class
travel. If first-class travel is requested, USO is supposed to pay for the
cost of the upgrade from business-class to first-class. However, contrary
to the stated policy and statements made by AFEO officials, this was not
always the case. In each case, we found AFEO purchased and paid for either
the unauthorized first-class or business-class ticket. We found no
instances in which AFEO requested reimbursement from USO for the cost
difference between business-class and first-class airline tickets.
Further, neither AFEO nor USO could provide any documentation that
indicated that USO paid the additional cost of first-class travel at the
time the tickets were purchased.
12 The contractor performed additional tasks for USO, but her primary role
was to prepare invoice packages. According to USO, this comprised the
majority of the individual's work.
13 DOD activities use centrally billed accounts for transportation
purchases such as airline tickets, train tickets, and other travel-related
items.
14 The Joint Travel Regulations authorize travel and transportation
allowances for non-DOD employees on the same basis as DOD employees.
15 41 C.F.R. Parts 300-304.
USO officials stated that they were unaware that first-class airline
tickets were charged to AFEO's centrally billed account for USO tours. USO
officials stated they would have reimbursed AFEO for the cost of the
upgrade from business-class to first-class if AFEO had notified them or if
they were provided documentation of the first-class charges. AFEO
officials acknowledged that closer scrutiny of the documentation received
from USO should have identified those instances in which first-class and
business-class airline tickets were improperly paid by AFEO. Additionally,
AFEO noted that the monthly reconciliation of the centrally billed account
statement to the individual airline ticket transactions16 should have
identified the discrepancies we found. Our review of the monthly
reconciliations showed that first-class travel was clearly identified, but
AFEO failed to seek reimbursement from USO. A more in-depth discussion of
our analysis of the improper first-class and business-class travel we
identified is detailed in appendix II.
o Improper payments for Air Mobility Command Airlift Services. Our
analysis of AFEO-issued invitational travel orders and Air Mobility
Command billing data for airlift services showed that AFEO paid around
$9,000 for airlift services provided by the Air Mobility Command, for
individuals traveling on "no cost" travel orders. According to AFEO, no
cost travel orders are issued to USO tour support personnel and some
entertainers in those cases where AFEO has stated the government will not
pay the transportation costs. These orders enable certain support
personnel or guests of entertainers to utilize government transportation
with the costs of their transportation being the ultimate responsibility
of USO. In cases where AFEO has paid for travel conducted on no cost
orders, it is necessary for USO to reimburse AFEO.
According to AFEO, these improper charges and payments occurred because it
was unaware that the travel was being billed to its appropriated fund
cite. An AFEO official believed that the Air Mobility Command was billing
USO directly for the airlift services. According to an Air Mobility
Command official, its billing system recognizes airlift charges incurred
by AFEO personnel and personnel traveling in support of AFEO's mission,
but the system does not identify if the travel is USO related. Nor can the
Air Mobility Command bill a nongovernmental entity for airlift services
unless that entity has an account in the command's billing system.
16 As part of the reconciliation process, AFEO includes the travelers'
itineraries to match the airline ticket transactions in the summary
statement. The itinerary document identifies the type of airline fare
taken by the traveler (i.e., first-class, business-class, or coach).
Questionable Expenses
We identified numerous examples of questionable payments of USO tour costs
by AFEO totaling about $3,000, as shown in table 4.
Table 4: Examples of Questionable Payments for Items Reimbursed or Paid by
AFEO for USO Tours for Fiscal Year 2002
Questionable expenses Reason item was questionable Amount
Limousine services Appears to be excessive with no
explanation or
documentation showing why it was $1,656
necessary
Miscellaneous hotel expenses for No existing guidance consistent
tour members with DOD and GSA
regulations
Appears excessive with no
Airport VIP lounge explanation or documentation
showing why it was necessary
USO dinner No existing guidance consistent
with DOD and GSA
regulations
No existing guidance consistent
USO tour producer meals with DOD and GSA
regulations
Total questionable expenses
identified $3,054
Source: GAO analysis of DOD data.
More specifically, we found that AFEO paid for
o 19 hours of limousine services from hotels in the Washington, D.C.,
area to Andrews Air Force Base, Maryland, at a cost of $1,656 before an
overseas tour began and
o several USO thank you dinners for the USO entertainers at the end of a
tour.
We could find no documentation to indicate why these expenses were
necessary. For example, concerning the thank you dinners, AFEO officials
said it was their policy, although unwritten, to reimburse USO for one
dinner per tour. Our audit of the documentation indicated that this
practice was inconsistently applied. In one instance, we found that AFEO
disallowed a thank you dinner for one tour, but it paid for several meals
that were classified as thank you dinners for another tour. Additionally,
the documentation was not always adequate to identify whether these
expenses were for meals for celebrities or for other individuals on the
tour. For example, we found that tour managers and a USO tour producer's
meals were reimbursed over a number of days. An AFEO official acknowledged
that there was no existing guidance that identified these items as
allowable expenses. AFEO officials told us that they plan to discontinue
the practice of reimbursing USO for thank you dinners.
Unsupported Expenses
We identified numerous examples of unsupported payments by AFEO totaling
approximately $344,000 for production support for USO tours. Table 5
highlights the unsupported payments we identified.
Table 5: Examples of Unsupported Payments for Items Reimbursed by AFEO for
USO Tours for Fiscal Year 2002
Unsupported expenses Reason item was unsupported Amount
Production supporta Lack of detailed supporting
documentation $260,660
Production tour manager expense Lack of detailed supporting
documentation 56,250
Celebrity honorarium Lack of detailed supporting
documentation 27,000
Total unsupported expenses
identified $343,910
Source: GAO analysis of DOD data.
aWe identified four instances of unsupported production support. The total
amount includes the unsupported expenses for all four instances.
We found that supporting documentation for the six celebrity tour files we
audited was inadequate for a number of invoices, and therefore AFEO had no
assurance that the reimbursed costs were proper. We asked AFEO to provide
additional documentation on these invoices. AFEO could not provide the
necessary documentation and stated that this was the only documentation
USO provided. We asked USO for detailed support for a number of selected
invoices. USO did not have support readily available in its records. In
response to our request for additional documentation, USO contacted the
vendors and received details on several invoices. USO provided additional
support for $43,910 of the $343,910 included in table 5.
For the largest case in our testing, AFEO reimbursed $216,750 for
production support based on a single entry on an invoice. In contrast, our
examination of another invoice for production support included an itemized
list of specific items such as microphone stands, speakers, and stage
supports. Additionally, based on our audit of five noncelebrity tours, we
found that documentation was far more comprehensive in support of the
expenses paid by AFEO.
Additionally, in some instances we were unable to identify which
individuals received celebrity honoraria. We traced names from the
invitational travel orders on the six tours audited but were unable to
verify which individuals were being paid honoraria and which ones were
not. In
some cases, individuals who were part of a celebrity's entourage were
classified as celebrities and received honoraria while others were not.
AFEO agreed that it was not always possible to identify which names listed
on invitational travel orders received honoraria. In one instance,
honoraria and production support costs were charged for 13 individuals,
but the supporting documentation indicated that only 12 individuals
participated in the tour. An AFEO official stated that the individual's
itinerary must have changed and acknowledged that this should have been
documented in the file. Based on available documentation, AFEO was charged
$900 in honoraria and production support costs for an individual who did
not participate in the tour. As a result of our analysis, AFEO verified
that this individual did not participate in the tour, and it is seeking
reimbursement from USO.
USO officials acknowledged the problems we identified with the
transactions we reviewed. They stated they did not have a clear
understanding of AFEO's policy as to which expenses were reimbursable and
which ones were not. They stated that they submitted invoices based on
prior verbal agreements and past practices with AFEO. USO officials stated
that AFEO's practice over the last several years was inconsistent and that
reimbursement for certain expense items was "hit or miss" from one tour to
the next. According to USO officials, it was their intention to submit
invoices and vouchers for expenses in accordance with federal laws and
regulations. However, because they had no specific instructions
identifying which costs were allowable and which costs were not allowable,
it was sometimes frustrating for them to decide what to include as an
expense item in an invoice package.
Actions Taken to Improve Controls over Support Provided to USO
USO and AFEO acknowledged that they need better policies and procedures to
provide reasonable assurance that expenses are authorized in an
appropriate manner and are reimbursable based upon the contracts between
the organizations. As a result of our audit, USO and AFEO officials told
us they have initiated some actions to improve accountability and controls
over federal funds used to support USO's activities and to recover funds
paid by AFEO that USO should have paid. For example, a USO official told
us USO is in the process of developing written guidance for its celebrity
tour managers and accounting staff that specifies those expenses that are
reimbursable under the contracts with AFEO and those that are not.
AFEO officials told us that to improve financial and management controls,
their office, in conjunction with the Air Force Directorate of Services,
is in
the process of drafting an operating instruction for AFEO. They stated
that this operating instruction will address AFEO roles and
responsibilities, overseas areas served, points of contact, promotional
package selection process, tour projections, authorized reimbursements,
invitational travel orders, passports, visas, immunizations, military and
commercial transportation, final payment process, and tour evaluation
forms. Additionally, according to AFEO officials, they have taken the
following actions.
o Established procedures to track those contract reimbursement and
purchase card transactions used to fund USO celebrity tours versus
noncelebrity tours.
o Created a listing of reimbursable items, specified by contract line
item number, allowed and the required documents needed for final payment
processing. The listing was provided to USO, as well as to the U.S. Air
Force contracting office responsible for administering the contracts
between AFEO and USO for a modification to the basic contract.
o Improved controls over the purchase of airline tickets charged to the
centrally billed account by implementing procedures for processing
requests for approval of upgrades to business-class travel through the
U.S. Air Force, Director of Services. According to AFEO officials, they
now document cost comparisons of economy-class airline tickets versus
business-class travel in the AFEO business-class authorization letter. A
copy of the approved upgrade letter will be provided to the contract
travel office and maintained in the individual tour folders with copies of
the annotated invitational travel orders.17 For those portions of overseas
travel that are upgraded to business-class because no other class of
travel is available, the commercial travel office will certify these
circumstances by entering a statement on the itinerary as required by the
Joint Travel Regulations. No prior approval is necessary under these
circumstances. USO will fund any domestic portion of travel that incurs
additional costs above economy- and/or coach-class standards. If any other
type of upgrade is provided, at no additional cost to AFEO, the change in
travel class will be noted with a memorandum for the record and filed in
the tour folder.
o Improved oversight of expenses reimbursed to USO for overseas tours.
According to AFEO officials, now, at least three individuals are reviewing
expense packages for payment certification. First, the applicable AFEO
circuit manager reviews the voucher package to assure receipts and
requests for reimbursement match the itinerary and are appropriate.
17 The commercial travel office is the travel agent contracted by AFEO and
is authorized to issue tickets for commercial transportation.
Conclusions
Second, the AFEO financial advisor reviews the package to assure
reimbursements are authorized and properly documented, then signs the
package as the acceptance officer. Third, either the AFEO administrative
assistant or the AFEO deputy director performs a final review and
certifies the package for payment. The Defense Finance and Accounting Form
250 is prepared and certified by two signatures. Additionally, as of
September 2003, AFEO had recovered about $19,000 in improper and
questionable payments it made to support USO overseas tours.
We have not audited any transactions since AFEO officials stated these
actions have been taken and thus cannot conclude whether these actions
have actually taken place or have resulted in improved financial and
management controls.
As U.S. armed forces continue to be actively engaged in operations
throughout the world, it is important that troop morale is maintained at
high levels. USO's overseas entertainment tours have provided quality
entertainment to the troops, and DOD's financial and in-kind support has
been key to the Armed Forces Professional Entertainment Program's
continued success. When a nongovernmental organization, such as USO,
receives federal funds to assist a government organization, such as DOD,
that organization is accountable for the proper use of the funds. A key
factor in helping achieve that accountability is to implement appropriate
internal controls. However, our audit found that DOD's program lacks
effective financial and management controls to provide reasonable
assurance that federal funds are used consistent with the terms specified
in grant and contract agreements. Neither AFEO nor USO can determine the
total amount of financial or in-kind support DOD provides to sustain USO's
overseas tours. Furthermore, without adequate supplemental guidance to
identify allowable costs for overseas tours and effective management
oversight, AFEO does not have reasonable assurance that it is paying for
only allowable costs and that appropriated funds are being spent in
accordance with federal laws and regulations. Moreover, USO's failure to
fully comply with audit requirements in grant and contract agreements
reduces DOD's assurance that USO has adequate internal controls over
federal program funds, leaving the program vulnerable to fraud, waste, and
abuse. Had USO's independent auditor fully tested internal controls, the
problems we identified might have surfaced. AFEO officials stated they
have taken action to improve management oversight during the review of
invoice packages and to develop written policies and procedures consistent
with DOD and federal travel regulations. Although these actions, if
implemented, should assist AFEO in achieving a stronger
control environment, an earnest commitment by DOD and USO management is
also needed to ensure proper controls and use of DOD funds.
Recommendations for To improve financial and management controls over
support provided to USO, we recommend that the Secretary of Defense direct
the Under
Executive Action
o
o
o
o
o
Agency Comments and Our Evaluation
Secretary of Defense for Personnel and Readiness, in consultation with the
Secretary of the Air Force, to take the following actions.
Develop and implement a record-keeping system capable of reporting all
appropriated and nonappropriated funds, including all in-kind goods,
services, and infrastructure provided by DOD in support of USO overseas
tours and operations. Among other things, this system should clearly
identify airlift services provided in support of USO tours.
Take steps to ensure USO complies with the Single Audit Act as stipulated
in its grant and contractual agreements with DOD, which require an
annual audit that tests internal controls over federal funds to assess
control risk.
Develop and consistently implement supplemental guidance, in
accordance with contract terms, and federal travel and acquisition
regulations, to identify allowable expenses and reimbursements and
appropriate documentation for
o travel-related USO expenses, including commercial air travel,
o honoraria, and
o services and equipment provided for USO.
Identify all expenses AFEO inappropriately paid, which should have been
paid by USO, and request that USO fully reimburse AFEO for the
expenses.
Arrange for DOD's Inspector General to perform internal control audits
periodically to determine if the control weaknesses we identified are
resolved, and report the results of these audits to the Secretary of
Defense
and the Secretary of the Air Force.
In commenting on a draft of this report, the Principal Deputy Under
Secretary of Defense for Personnel and Readiness concurred with four of
our recommendations and partially concurred with the fifth. The Principal
Deputy Under Secretary indicated that actions are underway or completed to
address our recommendations and correct the deficiencies noted in our
report. Furthermore, although he concurred with our first recommendation,
he acknowledged that DOD financial systems do not support an automated
means for reporting the type of information we suggested. However, he
noted that AFEO continues to implement and
improve its record-keeping systems to clearly identify and report USO tour
costs by establishing
o a separate Bank of America centrally billed account for all commercial
transportation costs associated with USO celebrity tours;
o a separate purchase card account for visas, excess baggage, printing,
shipping, and miscellaneous costs associated with USO celebrity tours; and
o an accounting line in the Air Mobility Command billing process to
identify, where possible, military airlift transportation costs associated
with USO celebrity tours.
The Principal Deputy Under Secretary further indicated AFEO has taken
action to identify and recoup expenses inappropriately reimbursed to USO,
and that DOD Instruction 1330.13, Armed Forces Entertainment, will also be
revised to require the military services to submit to AFEO an annual
report identifying appropriated funds, nonappropriated funds, and in-kind
goods or services provided to USO. According to the Principal Deputy Under
Secretary, all actions are to be completed by April 30, 2004.
Finally, the Principal Deputy Under Secretary partially concurred with our
final recommendation, agreeing that periodic internal control audits are
necessary to determine whether control weaknesses we identified are
resolved. He believes, however, that USO's independent auditor's annual
audit, performed in accordance with the Single Audit Act, rather than
audits performed by the DOD Inspector General, would meet the requirement
to test internal controls over federal funds to assess control risk, and
that the DOD Inspector General would provide periodic oversight of the
single audits performed for USO. We agree that these actions meet the
intent of our recommendation.
The Principal Deputy Under Secretary's comments are included in appendix
III of this report.
Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 10 days from the date of this letter. At
that time, we will send copies of this report to interested congressional
committees with jurisdiction over DOD's budget, as well as to the
Secretary of Defense, the Secretary of the Air Force, and the President
and Chief Executive Officer of USO. We will make copies available to
others
on request. In addition, the report will be available at no charge on the
GAO Web site at http://www.gao.gov.
Please contact Sharon L. Pickup on (202) 512-9619 or Greg D. Kutz on
(202) 512-9505 if you or staff have any questions. You may also contact
George F. Poindexter, Assistant Director, on (202) 512-7213, or Darby W.
Smith, Assistant Director, on (202) 512-7803. Major contributors to this
report are listed in appendix IV.
Sharon L. Pickup
Director
Defense Capabilities and Management
Gregory D. Kutz
Director
Financial Management and Assurance
Appendix I: Scope and Methodology
We reviewed the Department of Defense's (DOD) Armed Forces Entertainment
Program and its partnership with the United Services Organization (USO) in
providing U.S. armed forces with celebrity entertainment overseas. We
collected, reviewed, and analyzed relevant program information and
conducted interviews with DOD and USO officials responsible for
administering the Armed Forces Entertainment Program, specifically
officials from the Office of the Under Secretary of Defense (Personnel and
Readiness), Morale, Welfare and Recreation Policy; Armed Forces
Entertainment Office (AFEO); Defense Supply Service-Washington, Department
of the Army; 11th Contracting Squadron, Department of the Air Force,
Bolling Air Force Base, District of Columbia; and USO. Additionally, we
interviewed personnel with the Deloitte and Touche Accounting Firm, the
independent auditing firm responsible for auditing USO's annual
consolidated financial statements and supplemental schedules.
To determine the source and amount of federal funding provided to support
USO, we reviewed and analyzed relevant congressional authorization and
appropriations acts. We also reviewed and analyzed applicable grant
agreements; contract negotiation files; DOD and Air Force operations and
maintenance budget data; USO's annual audited financial statements and
supporting documentation and annual financial reports; AFEO financial
records, including the centrally billed and purchase card accounts; and
Air Mobility Command billing data for passengers and baggage for selected
airlift missions. We discussed discrepancies that existed among the
various financial records with AFEO, USO, Air Force Contracting Squadron,
and Air Mobility Command officials. Other than for the grants, we were
unable to obtain complete appropriated funding data for fiscal years 2000
through 2002 for federal funds provided to USO for overseas tours. We
could not obtain complete funding data because of limitations in DOD's
record-keeping systems, which did not differentiate between costs for
celebrity versus noncelebrity tours. Therefore, AFEO officials agreed to
take the steps necessary to provide, to the extent possible, complete
funding data for fiscal year 2002. However, AFEO officials could not
assure us that the totals included all appropriated funds provided in
support of USO overseas tours. Additionally, they told us they could not
provide the same information for fiscal years 2000 and 2001, because the
records for those years were less complete, and the time and resources
required to gather and verify the information were more than could be
expended given the unit's current workload. DOD officials could not
provide sources and amounts for total nonappropriated support provided to
USO because their recording-keeping systems do not aggregate or report the
needed information. We reviewed USO records for
Appendix I: Scope and Methodology
in-kind contributions, but those records do not clearly distinguish
private sector contributions from federal contributions.
To assess the adequacy of internal controls in place to provide reasonable
assurance that appropriated federal funds are used consistent with the
terms specified, we reviewed applicable federal laws and regulations, DOD
policies and procedures, and GAO's Standards for Internal Control in the
Federal Government.1 Additionally, we audited the contract between USO and
AFEO. We interviewed USO and AFEO officials to gain an understanding of
internal controls, and reviewed the payment process for celebrity and
noncelebrity tours. In gathering this information, we concluded that
internal controls over the payment process were ineffective, and therefore
we limited our auditing to a nonrepresentative selection of tours. We
audited selected USO tour transactions to evaluate the design and
implementation of key internal control procedures and activities. We
selected 11 tours-6 celebrity and 5 noncelebrity tours. We traced expenses
that were paid by AFEO to supporting invoices and receipts, requesting
additional documentation from AFEO as well as from vendors for certain
transactions. In addition to our audit of selected transactions, we looked
at whether indications existed of potentially improper and questionable
transactions as well as invoices that were reimbursed without adequate
documentation. We discussed discrepancies with AFEO, USO or contract
officials at Bolling Air Force, District of Columbia, who were responsible
for administering the contract between USO and AFEO. Additionally, we
interviewed the USO contract accountant to determine the relationship
between accounting fees collected under the contract and those billed as
part of tour expenses that were submitted to AFEO by USO for
reimbursement. Based on our initial review of the tour files, we also
audited AFEO's centrally billed and purchase card accounts for fiscal year
2002.
We audited AFEO's centrally billed account for fiscal year 2002 to
determine if the amount spent on first-class and business-class airline
travel in support of USO tours was in accordance with DOD and federal
policies and procedures. To assess the magnitude of first-class and
business-class travel, we isolated those transactions billed to AFEO's
centrally billed account specifically related to airline travel. We
created a new file that contained only the first-class and business-class
travel billed to AFEO's centrally account. The airline industry uses
certain fare and
1 Standards for Internal Control in the Federal Government
(GAO/AIMD-00-21.3.1).
Appendix I: Scope and Methodology
service codes to indicate the class of service purchased and provided. The
database contained transaction specific information, including the fare
and service code to price the tickets AFEO purchased. Using data-mining
techniques, 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 AFEO paid for first-class and business-class travel accommodations.
We estimated the cost of coach travel using the government rates
established by General Services Administration (GSA). For flights not
covered by GSA, we estimated coach travel using the lowest current rates
identified from Expedia.com. We also analyzed purchase card transactions
for fiscal years 2001 and 2002 to provide reasonable assurance that
charges were in accordance with DOD policies and procedures and in support
of USO tours.
We also reviewed USO's independent auditor's reports and management
letters for calendar years 1996 through 2001, as well as the independent
auditor's work papers for audit work related to USO transactions with AFEO
for calendar year 2001. The 2001 audit was the most recently completed
audit that was available through the end of our field work.
In performing this audit, we used the same accounting records and
financial reports DOD and USO use to manage the Armed Forces Entertainment
Program. We did not independently determine the reliability of all the
reported financial information. However, our recent audits addressing the
reliability of DOD's financial statements question the reliability of
reported financial information.2 Furthermore, our recent audits of DOD's
travel card and purchase card accounts identified weaknesses in the
overall control environments and breakdowns in key
2 U.S. General Accounting Office, Department of Defense: Status of
Financial Management Weaknesses and Progress Toward Reform, GAO-03-931T
(Washington, D.C.: June 25, 2003); U.S. General Accounting Office, DOD
Financial Management: Important Steps Underway But Reform Will Require a
Long-term Commitment, GAO-02-784T (Washington, D.C.: June 4, 2002); U.S.
General Accounting Office, DOD Financial Management: Integrated Approach,
Accountability, Transparency, and Incentives Are Keys to Effective Reform,
GAO-02-537T (Washington, D.C.: Mar. 20, 2002).
Appendix I: Scope and Methodology
controls relied on to manage these programs, leaving them vulnerable to
fraud, waste, and abuse.3
We performed our audit from March 2003 through September 2003 in
accordance with generally accepted government auditing standards.
3 U.S. General Accounting Office, Travel Cards: Internal Control
Weaknesses at DOD Led to Improper Use of First and Business Class Travel,
GAO-04-88 (Washington, D.C.: Oct. 24, 2003); U.S. General Accounting
Office, Purchase Cards: Control Weaknesses Leave the Air Force Vulnerable
to Fraud, Waste, and Abuse, GAO-03-292 (Washington, D.C.: Dec. 20, 2002);
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); U.S. General Accounting Office, Purchase Cards: Navy
Vulnerable to Fraud and Abuse but Is Taking Action to Resolve Control
Weaknesses, GAO-03-154T (Washington, D.C.: Oct. 8, 2002).
Appendix II: Details of Improper First-Class and Business-Class Travel
Table 1 details our analysis of the improper first-class and
business-class travel we identified based on our limited testing. Without
authorization or adequate justification, these cases illustrate the
improper use of first-class and business-class travel and the resulting
increase in travel costs. Following the table is more detailed information
on some of these cases.
Table 6: Examples of Improper First-Class and Business-Class Travel Paid
by the Armed Forces Entertainment Office Identified by GAO for Fiscal Year
2002
Estimated
pretax cost
of
Example Type of Class of Cost of coach fare Reason
tickets travel
number tour tickets tickets was
Itinerary purchased paid improper
Celebrity Los Angeles to 8 first-class $16,658 $1,680 First-class
tickets travel
Washington, D.C., and was not
authorized.
back; San Francisco to
Washington, D.C.;
Philadelphia to
Cincinnati;
Philadelphia
to Dallas
Celebrity Los Angeles to 6 first-class 8,397 1,901 First-class
tickets travel
Washington, D.C., was not
and authorized.
back; San Francisco
to
Washington, D.C.;
Philadelphia to
Cincinnati;
Philadelphia
to Dallas
Celebrity Washington, D.C., 7 business-class 13,488 1,400 Business-class
to
Atlanta to Las tickets was not
Vegas; authorized.
Dallas to
Washington,
D.C.; Boston to
Washington, D.C.,
and
back; and
Albuquerque
to Dallas
Noncelebrity Washington, 3 business-class 2,193 2,193a Lacked specific
D.C., to
Atlanta to Las tickets documentation
Vegas;
Dallas to justifying
Washington, business-
D.C.; Boston class travel.
to
Washington,
D.C., and
back; and
Albuquerque
to Dallas
5 Celebrity Los Angeles to 2 first-class 1,556 720b Only business-
tickets
Washington, class was
D.C., and
back; Pittsburg authorized.
to
Washington,
D.C.
6 Celebrity Los Angeles to 2 business-class 15,660 7,694 Lacked specific
Washington, tickets documentation
D.C.;
Frankfurt, justifying
Germany; business-
Cairo, Egypt, class travel.
and back
Appendix II: Details of Improper First-Class and Business-Class Travel
Estimated
pretax cost
of
Example Type of Class of Cost of coach fare Reason
tickets travel
number tour tickets tickets was
Itinerary purchased paid improper
Celebrity Los Angeles to 1 business-class 8,005 4,085 Lacked specific
Vancouver, British ticket documentation
Columbia; London, justifying
business-
England; Doha, class travel.
Qatar;
Amman, Jordan, and
back
Cairo, 4 Lacked
Noncelebrity Egypt, to business-class 5,052 4,863 specific
Istanbul,
Turkey, to tickets documentation
Athens,
Greece, to justifying
various business-
cities
in Italy class travel.
Cairo, 13
Egypt, to business-class Lacked
Noncelebrity Istanbul, 4,441c 3,650 specific
Turkey tickets documentation
justifying
business-
class travel.
Atlanta and 2 first-class First-class
Little tickets travel
Celebrity Rock, 2,975d 1,402
to was not
Washington, authorized.
D.C.;
New York
and Chicago
to Tulsa,
Okla.
Total $78,425 $29,588
Source: GAO analysis of DOD data.
aEstimated leg of business-class travel.
bEstimated business-class fare.
cEstimated legs of first-class fare.
dEstimated legs of first-class fare.
Example 1 involved five individuals traveling first class at a cost to the
government of $16,658. An audit of the tour files and the travel order
indicated that the travel order specifically states that travel at
government expense shall not exceed the cost of common carrier (i.e., the
rate authorized under the government contract). However, the individuals
were issued first-class tickets for this trip, resulting in an additional
cost to the government of $14,978 compared to an estimated total cost of
about $1,680 for eight coach tickets.
Example 2 involved six individuals traveling first class at a cost to the
government of $8,397. An audit of the tour files and the travel order
indicated that the travel order specifically states that travel at
government expense shall not exceed the cost of common carrier. However,
the individuals were issued first-class tickets for this trip, resulting
in an additional cost to the government of $6,496 compared to an estimated
total cost of about $1,901 for six coach tickets. This tour also had seven
Appendix II: Details of Improper First-Class and Business-Class Travel
individuals traveling business-class at a cost to the government of
$13,488 for domestic flights. According to AFEO, business-class is only
authorized for overseas flights, not domestic flights. This resulted in an
additional cost to the government of $12,088 compared to an estimated cost
of about $1,400 for coach-class tickets.
Example 5 involved two individuals who traveled first class from New
York-LaGuardia to Jacksonville, Florida. Supporting documentation
indicates that business-class was authorized. The cost of two
businessclass tickets amounted to $7201 compared to the two first-class
tickets of $1,556. Without authorization or valid justification, the
additional $836 spent on the first-class ticket was improper. Furthermore,
our audit showed that the difference in the cost of first-class travel and
the cost of economy class can be significant. For example, during a review
of one tour, we found that the cost of one first-class round trip ticket
was $3,982, whereas an economy-class airline ticket for the same trip cost
$280.
GSA and DOD travel regulations specify stringent circumstances under which
premium-class travel (e.g., first-class, business-class) can be
authorized. For example, the Joint Travel Regulations (JTR)2 and the Joint
Federal Travel Regulations (JFTR) limit the authority to authorize
firstclass travel to the Secretary of Defense, his Deputy, or another
authority as designated by the Secretary of Defense. Further, the
delegation of authority to authorize and/or approve first-class travel is
to be held at "as high an administrative level as practicable to ensure
adequate consideration and review of the circumstances necessitating the
first-class accommodations." A DOD directive3 on transportation and
management specifically states that the secretaries for personnel within
the military services and secretariats are the approving authorities for
first-class travel. The military service secretaries may delegate approval
authority for firstclass travel to under secretaries, service chiefs of
staff or their vice and/or deputy chief of staff, and four-star major
commanders or their three-star vice and/or deputy commander. The directive
explicitly states that approving authority cannot be delegated to anyone
lower than these officials. DOD and GSA policies also require that
authorization for premium-class airline accommodations be made in advance
of the actual
1 We derived the estimated coach fares from an online Web site,
www.expedia.com. 2 JTR P:2204 A3 - A5. 3 DOD Directive 4500.9, December
29, 1993.
Appendix II: Details of Improper First-Class and Business-Class Travel
travel unless extenuating circumstances or emergency situations make
advance authorization impossible.
Specifically, JTR and JFTR require that first-class accommodation be
authorized only when:
o coach-class airline accommodations or premium-class other than
firstclass airline accommodations are not reasonably available;
o first-class airline accommodations are necessary because the employee
and/or dependent is so handicapped or otherwise physically impaired that
other accommodations cannot be used, and such condition is substantiated
by competent medical authority; or
o first-class airline accommodations are needed when exceptional
security circumstances require such travel.
JTR and JFTR allow the transportation officer, in conjunction with the
official who issued the travel order, to approve premium-class travel
(i.e. business-class) other than first-class travel. DOD restricts
premium-class travel to the following eight circumstances:
o Regularly scheduled flights between origin and destination provide
only premium-class accommodations and it is certified on the travel
voucher.
o Coach-class travel is not available in time to accomplish the purpose
of the official travel, which is so urgent it cannot be postponed.
o The traveler's disability or other physical impairment requires use of
other than first-class service and the condition is substantiated in
writing.
o Premium-class accommodations are required for security purposes or
because exceptional circumstances make the use essential to the successful
performance of the mission.
o Coach-class service on authorized and/or approved foreign carriers
does 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.
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, a rest stop is prohibited when travel is authorized
by premium-class accommodations.
Both GSA and DOD regulations allow a traveler to upgrade to premiumclass,
other than first-class travel at personal expense, including through
redemption of frequent traveler benefits. GSA also identified agency
mission as one of the criteria for premium-class travel.
Appendix III: Comments from the Department of Defense
Appendix III: Comments from the Department of Defense
Appendix III: Comments from the Department of Defense
Appendix III: Comments from the Department of Defense
Appendix IV: Staff Acknowledgments
Claudia J. Dickey, Stephen P. Donahue, Johnny R. Bowen, Wayne A,. Ekblad,
Kenneth E. Patton, M. Jane Hunt, Nancy L. Benco, and Julio A. Luna made
significant contributions to this report.
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