    Travel Cards: Internal Control Weaknesses at DOD Led to Improper
    Use of First and Business Class Travel (24-OCT-03, GAO-04-88).

    Ineffective oversight and management of the Department of
    Defense's (DOD) travel card program, which GAO has previously
    reported on, have led to concerns about DOD's use of first and
    business class airfares. GAO was asked to (1) identify the
    magnitude of premium class travel, (2) determine if DOD's key
    internal control activities operated effectively and provide
    examples of control breakdowns, and (3) assess DOD's monitoring
    and key elements of the control environment.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-04-88
        ACCNO:   A08769
      TITLE:     Travel Cards: Internal Control Weaknesses at DOD Led to
    Improper Use of First and Business Class Travel
         DATE:   10/24/2003
      SUBJECT:   Air travel allowances
    	     Financial management
    	     Fraud
    	     Internal controls
    	     Policy evaluation
    	     Travel costs
    	     DOD Travel Card Program

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    GAO-04-88

    United States General Accounting Office

    GAO

                           Report to Congressional Requesters

    October 2003

    TRAVEL CARDS

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

                                           a

    GAO-04-88

    Highlights of GAO-04-88, a report to congressional requesters

    Ineffective oversight and management of the Department of Defense's (DOD)
    travel card program, which GAO has previously reported on, have led to
    concerns about DOD's use of first and business class airfares. GAO was
    asked to (1) identify the magnitude of premium class travel, (2) determine
    if DOD's key internal control activities operated effectively and provide
    examples of control breakdowns, and (3) assess DOD's monitoring and key
    elements of the control environment.

    To reduce improper premium class

    October 2003

    TRAVEL CARDS

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

    Breakdowns in internal controls and a weak control environment resulted in
    improper first and business class travel and increased costs to taxpayers.
    Based on extensive analysis of records obtained from Bank of America, GAO
    found that DOD spent almost $124 million on about 68,000 premium class
    related tickets-primarily business class-during fiscal years 2001 and
    2002. Each premium class ticket costs the government up to thousands of
    dollars more than a comparable coach class ticket. GAO's work also
    indicated that civilian supervisors, managers, and executives and senior
    military officers accounted for almost 50 percent of the premium class
    transactions, and for 27 of the 28 most frequent premium class travelers.
    GAO considers travel by high-ranking officials to be a sensitive payment
    area because of its susceptibility to abuse.

    Breakdowns in key internal controls resulted in a significant level of
    improper premium class travel. GAO estimated that 72 percent of DOD's
    fiscal year 2001 and 2002 premium class travel was not properly
    authorized, and 73 percent was not properly justified.

    Examples of Improper Premium Class Travel

    travel and related DOD costs, GAO makes several recommendations for
    improving controls over authorization and justification, policies and
    procedures, and monitoring and oversight of first and business class
    travel.

    DOD officials concurred with all of GAO's recommendations and said that
    some actions have already been initiated.

                            Cost of     Estimated
            Rank/grade    premium   cost of coach
           of traveler  class trips   class trips Reason travel was improper
              GS-15         $35,000        $7,000 Traveler approved own first
                                                  class travel based on
                                                  medical condition that was
                                                  later determined to not
                                                  meet stringent first class
                                                           criteria.
           Presidential      68,000        17,000    First and business class
                                                   travel was authorized by a
            appointee                             subordinate using a blanket
                                                            order.
                                                             The travel order
            GS-14 and        21,000         2,500      authorizing relocation
                                                                costs for the
              family                              traveler and his family did
                                                     not authorize premium
                                                         class travel.
                                                       First class ticket not
              GS-15           3,300           200 authorized by the Secretary
                                                                           of
                                                    Defense or designee as
                                                           required.

    GS-15 4,500 600	Eighteen months after the trip, the traveler's supervisor
    (not a medical authority) provided a note regarding a medical need as the
    justification for business class.

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

    Further, DOD did not have accurate and complete data on the extent of

    premium class travel and performed little or no monitoring of this travel.
    In

    regard to the control environment, GAO found that DOD (1) issued policies

    that were inconsistent with General Service Administration governmentwide

    travel regulations, (2) did not require military services to issue and
    update

    premium class policies to implement DOD's travel regulations consistently,

    and (3) did not issue guidance on how to document the authorization and

    justification of premium class travel. As a result of GAO's audit, DOD has

    begun updating its travel regulations to more clearly state when premium

    www.gao.gov/cgi-bin/getrpt?GAO-04-88. class travel can be authorized and
    to emphasize that it must only be used

    To view the full product, including the scope when exceptional
    circumstances warrant the additional cost.

    and methodology, click on the link above. For more information, contact
    Gregory Kutz at (202) 512-9505 or kutzg@gao.gov.

    Contents

      Letter

    Results in Brief
    Background
    Extent of Premium Class Travel Is Significant
    Key Internal Controls Were Ineffective
    Lack of Monitoring and Control Environment Weaknesses

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

                                                                       1 3 6 8 10

    22 33 34 36

      Appendixes

    Appendix I: Objectives, Scope, and Methodology 38

    Appendix II: Process to Obtain Premium Class Travel 43

    Appendix III:	GAO Contacts and Staff Acknowledgments 45 GAO Contacts 45
    Acknowledgments 45

    Tables Table 1:

    Table 2:

    Table 3: Table 4:

    Table 5:

    Table 6:

    DOD Premium Class Travel for Fiscal Years 2001 and
    2002
    Estimate of Fiscal Year 2001 and 2002 DOD Premium Class
    Travel Transactions That Failed Control Tests
    Examples of Improper Use of Premium Class Travel
    Examples of Travelers Who Frequently Used Premium
    Travel
    Fiscal Years 2001 and 2002 DOD Premium Class Travel
    Population Subjected to Sampling
    Fiscal Years 2001 and 2002 Premium Class Travel Charged
    to the Centrally Billed Accounts Adjusted for Coding
    Errors

                                           9

                                         11 14

                                           18

                                           40

                                           41

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

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

    A

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

    October 24, 2003

    The Honorable Charles E. Grassley
    Chairman
    Committee on Finance
    United States Senate

    The Honorable Norm Coleman
    Chairman
    Permanent Subcommittee on Investigations
    Committee on Governmental Affairs
    United States Senate

    The Honorable Janice Schakowsky
    House of Representatives

    This report is a continuation of our series of reports on the Department
    of
    Defense's (DOD) management of its various credit card programs. In fiscal
    years 2002 and 2003, we issued a series of testimonies1 and reports2
    addressing problems that the Army, Navy, and Air Force had in managing
    individually billed travel card accounts. These testimonies and reports
    showed high delinquency rates and significant potential fraud and abuse
    related to DOD's travel program. Due to these concerns, you asked us to
    audit controls over the other major form of payment used by DOD for
    travel expenses-centrally billed accounts. Our audits in these areas
    provide examples of DOD's long-standing financial management problems,
    which are pervasive, complex, and deeply rooted in virtually all business
    operations throughout the department. Such problems led us in 1995 to put
    DOD financial management on our list of high-risk areas-areas that are

    1U.S. General Accounting Office, Travel Cards: Control Weaknesses Leave
    Army Vulnerable to Potential Fraud and Abuse, GAO-02-863T (Washington,
    D.C.: July 17, 2002), and Travel Cards: Control Weaknesses Leave Navy
    Vulnerable to Fraud and Abuse, GAO-03-148T (Washington, D.C.: Oct. 8,
    2002).

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

    highly vulnerable to fraud, waste, and abuse-in the federal government, a
    designation that continues today.3

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

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

    3U.S. General Accounting Office, High-Risk Series: An Overview,
    GAO/HR-95-1 (Washington, D.C.: February 1995), and High-Risk Series: An
    Update, GAO-03-119 (Washington, D.C.: January 2003).

    4The Air Force is an exception to this general rule. The Air Force equally
    uses both centrally billed and individual billed accounts for purchasing
    airline transportation.

    5We define improper premium class travel transactions as those in which
    travelers did not have specific authorization to use premium class
    accommodations or those transactions that were properly authorized but did
    not provide specific justification for premium class travel that was
    consistent with DOD regulation or policy. We also considered transactions
    improper if premium class travel was authorized under DOD policy or
    procedures that were inconsistent with the Federal Travel Regulation or
    the guidance provided in our Standards for Internal Control in the Federal
    Government (GAO/AIMD-00-21.3.1) and our Guide for Evaluating and Testing
    Controls Over Sensitive Payments (GAO/AFMD-8.1.2).

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

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

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

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

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

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

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

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

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

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

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

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

    resolve the control weaknesses. Because two of their proposed actions
    represented alternative approaches to mitigate identified weaknesses, we
    modified those recommendations to recognize that the intent of those
    recommendations could be addressed in different ways.

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

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

    emergency situations make advance7 authorization impossible. Specifically,
    the JTR and JFTR state that first class accommodation is authorized only
    when at least one of the following conditions exists:

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

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

    o  exceptional security circumstances require such travel.

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

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

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

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

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

    7First class accommodations may be used without authorization only when
    regularly scheduled flights between the authorized origin and destination
    (including connecting points) provide only first class accommodations.

    8The JFTR delegates to the services the authority to determine who may
    approve premium other than first class travel. The service regulations
    call for the same authorizing official as the JTR.

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

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

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

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

    Extent of Premium Class Travel Is Significant

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

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

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

    Table 1: DOD Premium Class Travel for Fiscal Years 2001 and 2002 Number of
                       transactions Dollar amounts (in thousands)

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

    Source: GAO analysis of Bank of America data.

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

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

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

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

    Key Internal Controls Were Ineffective

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

    11GAO/AFMD-8.1.2.

    Results of Statistical Sampling Work

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

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

                                                             Estimated percentage
                                                              failure rate in key
                                                  Control test internal controlsa

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

    Not properly justified

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

    Note: Our testing excluded all business class transactions costing less
    than $750. We determined that many of these lower dollar transactions were
    covered by a blanket authorization for certain intra-European flights.
    Although, as discussed in this section, we did not believe the blanket
    authorization was valid, we eliminated these transactions from our sample
    to avoid possible skewing of the results.

    aThe numbers represent point estimates for the population based on our
    sampling tests. Information about the confidence intervals for our sample
    estimates is presented in app. I.

    Proper Authorization Did Not Requiring premium class travel to be properly
    authorized is the first step in

    Exist 	preventing improper premium class travel. The FTR requires premium
    class travel to be specifically authorized. DOD specifies that premium
    class travel must be authorized in advance of travel, unless extenuating
    or emergency circumstances make authorization impossible, in which case
    the traveler is required to request written approval from the appropriate
    authority as soon as possible after the travel. In addition to the FTR and
    DOD regulations, we also applied the criteria set forth in our internal
    control standards12 and sensitive payments guidelines13 in evaluating the
    proper authorization of premium class travel. For example, while DOD

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

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

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

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

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

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

    Valid Justification for Premium Another internal control weakness
    identified in the statistical sample was

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

    Examples of Improper Use Table 3 contains specific examples of
    unauthorized travel from both our

    of Premium Class Travel	statistical samples and data mining work. The
    table also contains examples of premium class travel that was unjustified.
    Without authorization or adequate justification, these cases illustrate
    the improper use of premium

    class travel and the resulting increase in travel costs. Following the
    table is more detailed information on some of these cases.

               Table 3: Examples of Improper Use of Premium Class Travel

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

    9 Statistical GS-13 Tucson to   Business 8,308 4,966 Business class travel
                           Bahrain                          authorized based
           sample          and Bahrain                        on flight lasting
                           to Los                            more than 14 hours;
                             Angeles                        however, traveler had
                                                              rest stop en route.
                                                             Transaction passed
                                                              authorization but
                                                            failed justification.

    (Continued From Previous Page)

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

         Data GS-15 Washington, D.C. Business 4,525 570c Business class travel
                    to                                   authorized but no
    mining        Amsterdam, and                        justification provided
                                                               on the order. Over
                          back                           18 months after the trip
                                                              occurred, the
                                                                       traveler's
                                                                 supervisor-not a
                                                                       physician-
                                                         wrote a note stating
                                                         that he authorized
                                                         premium class based on a
                                                                 medical
                                                         need. Transaction passed
                                                                    authorization
                                                         but failed justification
                                                                  test.

                             Washington,                         Business class
    Statistical Political D.C. to      Business 3,485 1,530c travel authorized
                                                                       on
                             London, then                       basis that travel
            sample appointee    Paris                                  is mission
                                                                   essential, but
                                                                  no additional
                              to Moscow                            information
                                                                    provided.
                                                                Travel was to a
                                                                conference in
                                                                Moscow.
                                                                   Transaction
                                                                     passed
                                                                authorization but
                                                                     failed
                                                                 justification.

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

    aGS designates General Schedule pay schedule. O designates a military
    oficer. CW designates a military chief warrant officer.

    bSource of estimated coach fares is GSA city pair or expedia.com.

    cFares do not include all applicable taxes and airport fees.

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

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

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

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

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

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

    traveler, he never had been properly authorized to fly business class on
    the basis of a medical condition.

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

    Frequent Premium Class Travelers

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

    because their justification was not supported by the documentation
    provided or did not adhere to the FTR and DOD travel regulations. Other
    cases involving frequent travelers were questionable because the
    justification documentation was not adequate to determine whether the
    transaction met DOD's criteria.

           Table 4: Examples of Travelers Who Frequently Used Premium Travel

                         Number/
                         cost of
                                   Justification   GAO's concern
                Grade/   premium   for             with premium
                                                                 Response by
    Traveler  rank  class trips premium travel  class travel  traveler or
                                                                 traveler's staff
                                                                         Traveler
                GM-14               Doctor's note                     admitted to
                                                   Traveler took     inconsistent
                       14/$88,000                  45 flights-14      application
                                                   premium and      of medical
                                   claims medical  31 coach         necessity.
                                                   class trips       Traveler
                                                                    considered
                                                   during fiscal  extra room in
                                      necessity    years 2001     business class
                                                   and 2002.        to be more
                                                    Many coach   comfortable for
                                                    class trips   long flights.
                                                       were
                                                    similar in
                                                    duration to
                                                      premium
                                                   class trips.

                                              A blanket        The general's aide
    O-8 16/$68,000     Blanket     1.  authorization was      said that in the
                                                                        future he
                                         used to justify          will pay closer
                       authorization     premium class           attention to the
                                                                     requirements
                                                             for premium class
                      used to justify          travel.       travel before
                                                             obtaining
                                                                premium class
                      premium class   2. Premium travel was      travel. The
                                                                general's aide
                                         authorized by a     also said that in
                                         subordinate.        the future he will
                                                             also get
                                         Not all premium     an independent
                                      3. class flights       authorization for
                                                             premium
                                          met premium class  class travel when
                                              criteria.      the criteria for
                                                             premium
                                                               class travel are
                                                                     met.

                                               Blanket        The traveler's aide
    PASa 17/$68,000   First and    1.  authorization was    said that she will
                                                                          get the
                                           used to justify   Deputy Secretary's
                       business class         first and      approval for first
                                                             class
                           travel          business class         travel and only
                         justified             travel.               schedule the
                                                               traveler for first
                       through a                                or business class
                       blanket        2. Premium travel was      when alternative
                                                                          seating
                       order based on    authorized by a      is not available.
                                         subordinate.
                       medical        3.  Traveler flew in
                       condition             coach class
                                          on some flights.

    (Continued From Previous Page)

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

    PASa 15/$70,000	Claimed mission essential, so that the traveler would be
    ready for meetings upon arrival at destination

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

    2.	 Traveler submitted justification and obtained specific authorization
    for many trips; however, the justification was not always accurate and did
    not consider alternatives to the more expensive premium class travel.

    3. Most flights were less than 14 hours.

    4. Some premium class flights were not authorized.

    Traveler's assistant said that the traveler flies premium class to
    minimize his time away from the office. However, the assistant could not
    demonstrate a cost savings caused by lost productivity. Traveler's
    assistant also said that even though the flights did not exceed 14 hours,
    the traveler should be able to fly premium class because of the importance
    of the traveler's work. The traveler's assistant did not explain the
    reasons some premium class flights were not authorized.

    GS-15 11/$35,000  Medical   Travel orders were not Traveler told us he was
                                              signed, but not aware that first
                        necessity the official                class had to be
                                  authorizing the travel   approved by the Under
                                     was the traveler      Secretary of the Navy.
                                      himself. First        Traveler is no longer
                                     class travel was not  authorized to travel
                                            authorized by     premium class.
                                   the Under Secretary of
                                                the Navy,
                                  as required by Navy
                                  regulations.

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

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

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

    3. 	Business class was taken on return flights.

    4. Specific justification was not always accurate.

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

    SES 13/$56,000  Medical  Medical note and Under  The traveler has retired.
                                             Secretary         The individual who
                      necessity of the Navy            assisted in assembling the
                                authorization were     documentation
                                dated in 1993 and        said there was nothing
                                travel was in               more current to
                                2000 and 2001. Current  justify the first class
                                travel                    travel than the 1993
                                order signed by a      doctor's note and the 1993
                                subordinate.                      Under Secretary
                                                             of the Navy's
                                                             authorization.

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

    aPresidential appointment with Senate confirmation. bSenior Executive
    Service appointment.

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

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

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

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

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

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

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

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

    Lack of Monitoring and Control Environment Weaknesses Contributed to
    Improper Use of Premium Class Travel

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

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

    Monitoring and Oversight Needs Improvement

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

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

    evaluations of premium class travel. Further, DOD's failure to adequately
    monitor premium class travel has resulted in an environment in which there
    is limited possibility that improper premium class travel will be
    identified.

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

    DOD Did Not Maintain Centralized Management Data on Premium Class Travel

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

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

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

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

    14This requirement was prescribed at the direction of OMB. See OMB
    Bulletin 93-11.

    15A flight segment is any portion of a ticket with a separate flight
    number.

    16The contracts between DOD services and the CTOs responsible for issuing
    tickets to travelers specify that CTOs provide reports to MTMC on the
    number and cost of first class tickets.

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

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

    Control Environment Is Flawed by Inconsistencies in Premium Class Travel
    Guidance

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

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

    Movement, was last updated in 2002, it contains some provisions that are
    contrary to our Guide for Evaluating and Testing Controls Over Sensitive
    Payments and our Standards for Internal Control in the Federal Government.

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

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

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

    17DOD Directive 4500.9, Transportation and Traffic Management, para.
    3.4.3, December 29, 1993.

    18As noted above, a subsequent DOD directive states that all DOD travel
    outside the continental United States is subject to the JTR and the JFTR.

    19DOD Directive 4500.9, Transportation and Traffic Management, para.
    3.4.3.1.3, December 29, 1993.

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

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

    DOD Does Not Have a DOD and the services have not defined a standard
    format for documenting Standard Format for authorization and justification
    for premium class travel. Because premium Documenting Premium travel is to
    be taken only on an exception basis after all other alternatives

    have been exhausted, the documentation for authorization and
    justificationClass Travel should be held to the highest standards to
    provide reasonable assurance

    20Secretary of the Army Travel Policy, para. 3.B.8, last updated on March
    26, 2003.
    21OPNAVINST 4650.15, ch. 2, enc. 1, para. 5.c (8), issued on July 7, 1998.
    22Air Force Instruction 24-101, para. 2.7, issued March 25, 2002.
    23Marine Corps policy guidance, issued as Marine Corps Order 4600.25C on
    March 15, 1978.
    24OPNAVINST 4650.15, ch. 2, enc. 1, para. 5.c.(7), July 7, 1998.

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

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

                   Figure 1: Sample Premium Class Authorization Form

                                      Source: NIH.

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

                        Figure 2: Sample Medical Condition Form

                                      Source: NIH.

    DOD Issued New Regulations to Better Define When Premium Class Travel Is
    Authorized

    During the course of our work, in April 2003, DOD updated the JTR25 and
    JFTR26 to articulate more clearly and make more stringent the
    circumstances under which premium class travel may be authorized. In
    addition, the updated JTR and JFTR emphasize, in the context of lengthy
    flights, that premium class travel must not be common practice and must
    only be used when exceptional circumstances warrant. They also provide
    examples of when premium class travel should not be authorized.

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

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

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

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

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

    Recommendations for 	We are making the following recommendations to
    improve internal control over the authorization and justification of
    premium class travel and to

    Executive Action 	strengthen the control environment as part of an overall
    effort to reduce improper premium class travel and related DOD costs.

    Key Internal Control Activities

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

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

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

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

    Overall Program We recommend that the Secretary of Defense direct the
    appropriate under Management and secretary of defense, assistant secretary
    of defense, or military service Environment officials to establish
    policies and procedures to incorporate the regulations

    specified in GSA's FTR as well as guidance specified in our Standards for
    Internal Control and our Guide for Evaluating and Testing Controls Over
    Sensitive Payments, including the following:

    o 	Develop procedures to identify the extent of premium class travel,
    including all business class travel, and monitor for trends and potential
    misuse.

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

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

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

    o  the limitations on premium class travel,

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

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

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

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

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

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

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

    the additional cost of premium class travel was a necessary expense that
    could not have been avoided.

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

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

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

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

    Agency Comments and Our Evaluation

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

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

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

    As agreed with your offices, unless you announce the contents of this
    report earlier, we will not distribute it until 30 days from its date. At
    that
    time, we will send copies to interested congressional committees; the
    Secretary of Defense; the Under Secretary of Defense, Comptroller; the
    Secretary of the Army; the Secretary of the Navy; the Secretary of the Air
    Force; and the Director of the Defense Finance and Accounting Service. We
    will make copies available to others upon request. In addition, the report
    will be available at no charge on the GAO Web site at http://www.gao.gov.

    Please contact Gregory D. Kutz at (202) 512-9505 or kutzg@gao.gov, John J.
    Ryan at (202) 512-9587 or ryanj@gao.gov, or John V. Kelly at (202)
    512-6926
    or kellyj@gao.gov if you or your staffs have any questions concerning this
    report. Major contributors to this report are acknowledged in appendix
    III.

    Gregory D. Kutz
    Director
    Financial Management and Assurance

    Robert J. Cramer
    Managing Director
    Office of Special Investigations

    Appendix I

                           Objectives, Scope, and Methodology

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

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

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

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

    Magnitude of Premium Class Travel

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

                                       Appendix I
                           Objectives, Scope, and Methodology

    Evaluate Effectiveness of Controls through Statistical Sampling and Data
    Mining

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

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

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

                                       Appendix I
                           Objectives, Scope, and Methodology

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

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

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

    Total population of Excluded transactions Subjected to sampling premium
    class (business class costing less (first class and business class
    transactions than $750) costing more than $750) Transactions tested

          Class Transactions Dollars Transactions Dollars Transactions Dollars
                                  Transactions Dollars

                        First 1,409 $2,969 --1,409 $2,969 15 $34

              Business 66,681 120,876 15,887 $8,149 50,794 112,727 122 289

              Total 68,090 $123,845 15,887 $8,149 52,203 $115,696 137 $323

                     Source: GAO analysis of Bank of America data.

                                       Appendix I
                           Objectives, Scope, and Methodology

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

    Subjected to sampling (first class and business class Subsequently
    determined Population adjusted for coding costing more than $750) premium
    less than first class errors

          Class Transactions Dollars Transactions Dollars Transactions Dollars

                      First 1,409 $2,969 (169) ($71) 1,240 $2,898

                     Business 50,794 112,727 169 71 50,963 112,798

                       Total 52,203 $115,696 0 0 52,203 $115,696

    Source: GAO analysis of Bank of America data.

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

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

    Appendix I
    Objectives, Scope, and Methodology

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

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

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

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

    Appendix II

                         Process to Obtain Premium Class Travel

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

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

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

    1The GTO is staffed by government employees who are required to monitor
    the activities of the commercial travel office.

    2The CTO is staffed by employees of a company that has been contracted to
    serve as a travel agency for DOD or the military service.

    Appendix II
    Process to Obtain Premium Class Travel

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

                           Source: GAO analysis of DOD data.

    Appendix III

                         GAO Contacts and Staff Acknowledgments

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

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

    (192078) Page 45

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