Premium Class Travel: Internal Control Weaknesses Governmentwide 
Led to Improper and Abusive Use of Premium Class Travel 	 
(28-SEP-07, GAO-07-1268).					 
                                                                 
Previous GAO work on widespread improper premium class travel at 
the Department of Defense (DOD) and the Department of State	 
(State) have led to concerns as to whether similar improper	 
travel exists in the rest of the federal government.		 
Consequently, GAO was asked to (1) determine the magnitude of	 
premium class travel governmentwide and the extent such travel	 
was improper, (2) identify internal control weaknesses that	 
contributed to improper and abusive premium class travel, and (3)
report on specific cases of improper and abusive premium class	 
travel. GAO analyzed bank data and performed statistical sampling
to quantify the extent premium class travel was improper. GAO	 
also performed data mining, reviewed travel regulations, and	 
interviewed agency officials.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1268					        
    ACCNO:   A76892						        
  TITLE:     Premium Class Travel: Internal Control Weaknesses	      
Governmentwide Led to Improper and Abusive Use of Premium Class  
Travel								 
     DATE:   09/28/2007 
  SUBJECT:   Accountability					 
	     Air travel allowances				 
	     Federal agencies					 
	     Federal employees					 
	     Financial analysis 				 
	     Financial management				 
	     Government employees				 
	     Internal controls					 
	     Transportation expense claims			 
	     Travel allowances					 
	     Travel costs					 
	     Policies and procedures				 
	     Waste, fraud, and abuse				 

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GAO-07-1268

   

     * [1]Results in Brief
     * [2]Background
     * [3]Extent of Governmentwide Improper Premium Class Travel Is Si

          * [4]Governmentwide Premium Class Travel Use

     * [5]Key Transaction-Based Controls Are Ineffective

          * [6]Executive Premium Class Use

     * [7]Ineffective Oversight and Internal Control Weaknesses Contri

          * [8]Lack of Monitoring and Oversight Exists over Premium Class T
          * [9]Weak Control Environment Exists with Respect to Premium Clas
          * [10]Agencies Exempt from the FTR Incurred Costly Premium Class T

     * [11]Case Studies of Improper and Abusive Premium Class Travel Hi

          * [12]Examples of Improper and Abusive Use of Premium Class Travel
          * [13]Frequent Travelers
          * [14]Abusive Premium Class Travel by Groups

     * [15]Conclusions
     * [16]Recommendations for Executive Action
     * [17]Agency Comments and Our Evaluation
     * [18]Magnitude of Premium Class Travel and the Extent Such Travel
     * [19]Underlying Causes of Improper and Abusive Premium Class Usag
     * [20]Data Mining Improper and Abusive Premium Class Travel
     * [21]Data Reliability
     * [22]GAO Contact
     * [23]Acknowledgments
     * [24]GAO's Mission
     * [25]Obtaining Copies of GAO Reports and Testimony

          * [26]Order by Mail or Phone

     * [27]To Report Fraud, Waste, and Abuse in Federal Programs
     * [28]Congressional Relations
     * [29]Public Affairs

                 United States Government Accountability Office

Report to Congressional Requesters

GAO

September 2007

PREMIUM CLASS TRAVEL

 Internal Control Weaknesses Governmentwide Led to Improper and Abusive Use of
                              Premium Class Travel

[30]GAO-07-1268

PREMIUM CLASS TRAVEL

  Internal Control Weaknesses Governmentwide Led  to Improper and Abusive  Use
  of Premium Class Travel

    What GAO Found

Breakdowns in internal controls and a weak control environment resulted in
at least $146 million in improper first and business class travel
governmentwide. The federal government spent over $230 million on about
53,000 premium class tickets from July 1, 2005, through June 30, 2006.
Premium class tickets are costly--for example, a Department of Agriculture
(USDA) executive flew business class from Washington, D.C., to Zurich,
Switzerland, at a cost of $7,500 compared to $900 for a coach class
ticket. Based on statistical sampling, GAO estimated that 67 percent of
premium class travel was not properly authorized, justified, or both.

While business class travel accounted for 96 percent of all premium class
travel, many agencies informed us that they did not track, and thus did
not know the extent of, business class travel. OMB and GSA also did not
require reporting of business class travel. GAO found large differences in
premium class guidance governmentwide, with some agencies issuing less
restrictive guidance that were tailored for executive travel. For example,
the FTR allows premium class travel for flights over 14 hours if properly
authorized. However, executives at the Foreign Agricultural Service
frequently used "mission critical" to justify flights to Western Europe
that typically lasted less than 10 hours. Other agencies, such as State
and the Millennium Challenge Corporation (MCC), automatically approved
premium class travel for all flights over 14 hours. GAO's analysis of
flights involving destinations in the United States and Africa, the Middle
East, and parts of Europe lasting 14 hours or more showed that 72 and 83
percent, respectively, of State's and MCC's flights involving these
locations were in premium class. In contrast, 3 percent of all DOD's and
the Department of Homeland Security's flights to the same locations were
in premium class.

The examples below represent specific cases of improper and abusive use of
premium class, including employees of entities not subject to the FTR that
have issued policies that resulted in the purchase of costly premium class
travel. For example, the U.S. Postal Service (USPS) allows all members of
the board to fly first class whenever they are on business.

        Examplesof Improper, Abusive, and Wasteful Premium Class Travel

Cost of premium Agency ticket(s) Reason travel wasimproper or abusive

USDA $163,000   o  Executive had  subordinate authorize  25 premium  class
flights.

o Executive  used "mission  critical"  to justify  10  of the  25  flights
lasting less than 14 hours to Western Europe.

DOD 105,000  o Executive flew premium class 15 times claiming a medical
condition.

o Medical condition was documentation with a note signed by a DOD
employee, not a physician as required by DOD regulations.

State 46,000 o Family of 8 flew premium class to relocate from Washington, 
                D.C.,                                                         
                to Eastern Europe. Coach tickets would have cost $12,000.     
USPS   2,200 o A member of the board flew first class round trip from      
                Washington,                                                   
                D.C., to Los Angeles. Comparable coach price was $400.        

Contents

  Letter 1

[31]Results in Brief 4 [32]Background 7 Extent of Governmentwide  Improper
Premium Class Travel Is

[33]Significant 10 [34]Key Transaction-Based  Controls Are Ineffective  13
Ineffective Oversight and Internal Control Weaknesses Contributed

[35]to Improper  and  Abusive Premium  Class  Travel 17  Case  Studies  of
Improper and Abusive Premium Class Travel

[36]Highlight Extent and Nature  of Control Breakdowns 20  [37]Conclusions
28 [38]Recommendations for Executive Action 28 [39]Agency Comments and Our
Evaluation 30

[40]Appendix I Objectives, Scope, and Methodology

[41]Appendix II Background

Appendix III Comments from the Office of Management and Budget

      [42]Appendix IV Comments from the General Services Administration 41

[43]Appendix V GAO Contact and Staff Acknowledgments

  Tables

Table 1: Selected Agencies' Use of Premium Class for 14-Hour

[44]Flights to Africa, the Middle East, and Europe 13 Table 2: Results  of
Statistical Sampling of Premium Round-trip

[45]Airline Ticket Transactions 14 [46]Table  3: Examples of Improper  and
Abusive Premium Class Travel 21

    Page i GAO-07-1268 Premium Class Travel

Table 4: Examples of Abusive Activity by Frequent Premium Class    
[47]Travelers                                                           24 
[48]Table 5: Examples of Abusive Activity by Group Travelers            26 
Table 6: Premium Class Flights Governmentwide and at Selected              
         [49]Agencies from July 1, 2005, through June 30, 2006             38 

Abbreviations

DOD              Department of Defense                                     
FAM              Foreign Affairs Manual                                    
FAS              Foreign Agricultural Service                              
FDIC             Federal Deposit Insurance Corporation                     
FRB              Federal Reserve Board                                     
FTR              Federal Travel Regulations                                
GSA              General Services Administration                           
JFTR             Joint Federal Travel Regulations                          
JTR              Joint Travel Regulations                                  
MCC              Millennium Challenge Corporation                          
OMB              Office of Management and Budget                           
PCS              permanent change of station                               
SES              Senior Executive Service                                  
TDY              Temporary Duty Travel                                     
USAID            United States Agency for International Development 
USDA             Department of Agriculture                                 
USPS             United States Postal Service                              

This is a work of the U.S. government and is not subject to copyright
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separately.

United States Government Accountability Office
Washington, DC 20548

September 28, 2007

The Honorable Carl Levin
Chairman
The Honorable Norm Coleman
Ranking Member
Permanent Subcommittee on Investigations
Committee on Homeland Security and Governmental Affairs
United States Senate

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

The serious fiscal challenges facing the federal government dictate that
agencies do everything they can to operate as efficiently as possible.
With respect to government travel, employees on official government travel
are expected to follow published guidelines related to when and how
premium (first and business) class travel should be undertaken. Due to the
high cost of premium class travel, the General Services Administration's
(GSA) Federal Travel Regulations (FTR) ^[50]1 includes specific guidelines
meant to restrict premium class use. For example, agencies can provide
business class travel for agency mission; when an individual has a
physical disability that is certified by a medical professional; or a
flight is to or from a destination outside the continental United State,
exceeds 14 hours, and is taken without a rest stop en route or at
destination (i.e., the 14-hour rule). While travelers who meet these or a
number of other criteria stated in the FTR may qualify for premium class,
GSA directs agencies to evaluate each application, decide whether the
circumstances warrant it, and issue specific authorization before the
traveler can travel premium
class. To safeguard taxpayer's money, the regulations state that agencies
are to conduct all travel as responsibly as possible. For their part,
travelers are told to exercise the same standard of care in incurring
expenses that a prudent person would exercise if traveling on personal
business. However, in 2003 and again in 2006, we reported that weaknesses
in internal controls at the Department of Defense (DOD) ^[51]2 and the
Department of State (State) ^[52]3 led to improper use of premium class
travel, that is, travel that was unauthorized or unjustified. Premium
class flights are of special concern because they often cost thousands of
dollars more than the coach class alternatives. Subsequently, questions
have arisen as to whether improper and abusive ^[53]4 premium class travel
was also occurring in other federal government agencies. This report
responds to your request that we provide the results of our audit and
investigative work on the use of premium class travel governmentwide.

^1The FTR, located in Subtitle F of Chapter 41 of the Code of Federal
Regulations, implements both statutory and Office of Management and Budget
requirements and policies for travel by federal civilian employees and
others authorized to travel at government expense. In addition, three
other major sets of federal travel regulations existed: (1) the Department
of Defense's (DOD) Joint Federal Travel Regulations for uniformed members,
(2) DOD's Joint Travel Regulations for civilian personnel, and (3) the
Department of State's Foreign Affairs Manual and Foreign Affairs Handbook.
These implementing guidelines are generally consistent with the GSA's
guidance related to premium class travel.

Specifically, we (1) determined the magnitude of premium class travel
governmentwide and the extent such travel was improper, (2) identified
internal control weaknesses that contributed to improper and abusive
premium class travel, and (3) reported on specific cases of improper and
abusive premium class travel.

To determine the magnitude of premium class travel, we extracted premium
round-trip airline ticket transactions from July 1, 2005, through
June 30, 2006, from the databases provided by the four banks that supplied
travel cards to federal government employees--Bank of America, Citibank,
JPMorgan Chase, and US Bank. We drew and tested a statistical sample of
premium class travel transactions and conducted other audit work to
determine the extent to which this travel was improper. We included in our
statistical sample premium class transactions from all executive agencies,
wholly owned federal government corporations, and independent
establishments as defined by the United States Code. ^[54]5 We excluded
transactions by employees or individuals approved to travel for the
legislative and judicial branches, executive entities with statutory
authority over their own travel that are not subject to the FTR, and
entities under treaty with the United States, and premium class travel
obtained as a result of mileage upgrades because they did not result in a
cost to the federal government.

^2GAO, Travel Cards: Internal Control Weaknesses at DOD Led to Improper Use
of First and Business Class Travel, GAO-04-88 (Washington, D.C.: Oct. 24,
2003), and Travel Cards: Internal Control Weaknesses at DOD Led to
Improper Use of First and Business Class Travel, GAO-04-229T (Washington,
D.C.: Nov. 6, 2003).

^3GAO, State's Centrally Billed Foreign Affairs Travel: Internal Control
Breakdowns and Ineffective Oversight Lost Taxpayers Tens of Millions of
Dollars, GAO-06-298 (Washington, D.C.: Mar. 10, 2006).

^4For this report, we define improper premium class travel transactions as
those transactions 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 the FTR, and with DOD's and State's
travel policies. We also consider transactions to be improper if premium
class travel was authorized under agency policies and procedures that were
inconsistent with the FTR 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). We define as abusive premium class travel those
transactions that may not have violated regulations, but nevertheless may
involve behavior that is deficient or improper when compared with behavior
a prudent person would consider reasonable and necessary given the
circumstances of the travel, the cost of the travel, or both.

To identify underlying causes contributing to improper premium class
travel, we reviewed federal laws and regulations and selected agencies'
implementing guidance, and interviewed agency officials on their agencies'
approval processes for premium class travel. We also interviewed GSA and
Office of Management and Budget (OMB) officials on their oversight of
premium class travel. To identify whether variances existed in how
agencies used premium class travel, we calculated the extent to which
federal agencies flew premium class for flights over 14 hours to selected
locations. We used data mining to identify the most egregious examples of
premium class travel, including instances of high-priced or frequent
premium class travel by the same individual from July 1, 2005, through
September 30, 2006. This period includes an additional 3 months of data
subsequent to the period included in our statistical sample. Our case
studies included premium class travel by individuals from executive
entities with statutory authority over their own travel that are not
subject to the FTR, and also included information obtained through
investigations of specific allegations regarding possible premium class
travel abuse received through GAO's FraudNET hotline. Appendix I provides
further detail on our scope and methodology.

^5 U.S.C. 104, 5 U.S.C. 105, and 31 U.S.C. 9101. Due to the difficulty of
perfectly extracting transactions from all entities that should be
excluded from the sample population, the possibility exists that one of
these transactions could be selected. However, if transactions from
entities that should have been excluded from the sample population were
selected, they were replaced. See app. I for further details of our scope
and methodology.

We conducted our audit work from July 2006 through August 2007 in
accordance with U.S. generally accepted government auditing standards, and
we performed our investigative work during the same period in accordance
with standards prescribed by the President's Council on Integrity and
Efficiency. A detailed discussion of our scope and methodology is
presented in appendix I.

                                Results in Brief

A weak control environment and breakdowns in specific internal control
procedures resulted in at least $146 million in improper first and
business class travel by executive branch agencies over the 12-month
period ending June 30, 2006. ^[55]6 Specifically, of the $230 million the
federal government ^[56]7 spent on over 53,000 premium class airline
tickets (including at least one leg of premium class travel) from July 1,
2005, through June 30, 2006, 67 percent were either not properly
authorized, not properly justified, or both. According to GSA data, the
government fare for business class travel ^[57]8 is typically more than 5
times the price of coach class travel for comparable routes, with some
tickets costing more than 10 times as much. First class travel can be even
more costly. For example, we found that a round-trip first-class ticket
from Washington, D.C., to London cost over $12,000 compared to a business
class ticket that would have about $6,000, or a coach class ticket that
would have cost less than $800. Further, our testing indicated that senior
executives (senior-level executives and presidential appointees with
Senate confirmation) accounted for 15 percent of premium class travel
while constituting about one-half of 1 percent of the federal workforce.

^6The projection of improper premium class travel was the result of a
statistical sample. We used lower bound estimates using the percentage of
premium class transactions that were improperly authorized, justified, or
both because it is more conservative both by percentage and dollars
because we used a lower bound estimate. The midpoint estimate of improper
travel was $167 million.

^7The population for governmentwide premium class travel includes premium
class transactions from all executive agencies, wholly owned federal
government corporations, and independent establishments as defined by the
United States Code.

^8GSA negotiates government fares for business class travel for a limited
number of international routes. Consequently, we were able to compare only
the coach class fare against the business class fare for these routes.
Because a negotiated fare does not exist for first class tickets, we did
not calculate the difference between the average coach and the average
first class ticket.

The breakdowns in specific internal controls demonstrated by the instances
of improper premium class travel identified through our statistical sample
were exacerbated by a weak control environment. While agencies collected
and reported on first class travel, agency officials informed us that they
did not collect information on--and thus were not aware of the extent
of--business class travel. OMB and GSA do not require reporting of premium
class travel other than first class, despite the fact that we estimate
that business class travel accounted for 96 percent of governmentwide
premium class travel. We further found that no central oversight existed
over agencies' implementing guidance, and thus it was not surprising that
inconsistent policies and procedures existed for premium class travel
across the federal government. For example, some agencies had policies and
procedures that permitted approving premium class travel without properly
considering the final costs to the taxpayers. Specifically, State's
policies and procedures allowed foreign affairs travelers to continue to
be automatically approved for premium class for all trips over 14 hours, a
practice that we have previously questioned because of the increased costs
to the taxpayers. ^[58]9 Similarly, Millennium Challenge Corporation's
(MCC) policies and procedures violated the requirements of the FTR by
allowing employees to fly business class without specific authorization
whenever the flight exceeded 14 hours. We found that more than 70 percent
of State's and 85 percent of MCC's over 14-hour flights to Africa, the
Middle East, and selected locations in Europe were in premium class. In
contrast, only 3 percent of DOD and Department of Homeland Security travel
to these same locations was carried out using premium class, which
resulted in millions of dollars of savings for these agencies.

Contrary to the FTR, we also found that some agencies that were required
to adhere to the FTR issued premium class policies in such a way as to
allow individuals to travel in first or business class because of their
positions in the organization. In addition, we also found that federal
entities exempt from the FTR also followed similar practices. Listed below
are examples of agencies subject to the FTR and exempt from the FTR that
permitted senior executives to travel premium class:

o At the Department of Agriculture's (USDA) Foreign Agricultural Service
(FAS), policies and procedures permitted senior executives to use mission
critical, the 14-hour rule, or both to travel premium class while
non-executive employees taking the same flight flew coach class. For
example, in December 2005, a FAS executive traveled from Washington, D.C.,
to Hong Kong and back in business class, a ticket that cost the government
over $6,900. In contrast, 11 other FAS employees did not travel in premium
class, even though they were qualified to do so under the 14-hour rule.
Instead, the 11 employees traveled on the same plane in coach at the cost
of less than $1,400 per ticket.
^9State's premium  class  travel  could  decrease in  the  future  based  on
corrective actions taken by State during  the period under audit based  on
our previous audit findings.

        o The United States Postal Service's (USPS) premium class policy
          allows members of the Board of Governors to travel first class to
          any destination. Using this policy, a member of the board flew
          first class from Washington, D.C., to Los Angeles at a cost of
          $2,200 compared to $400 in coach.
        o Our case studies provide further illustrations of the extent and
          nature of improper premium class travel. In each case study below,
          premium class tickets cost the taxpayers tens of thousands of
          dollars more than their equivalents in coach class--the required
          class of travel with a few exceptions. Our case studies included
          multiple premium class trips by senior executives and costly group
          travel that were improper and abusive.

     o A senior executive at FAS took 10 premium class trips from Washington,
       D.C., to Geneva, Paris, and other destinations in Western Europe from
       July 1, 2005, through September 30, 2006. In violation of USDA's
       policies and procedures, these trips were authorized by the
       executive's subordinate--tantamount to self-authorization. These
       tickets were not only improper, but because these tickets totaled more
       than $62,000 compared to less than $9,000 in coach, the $53,000
       difference between business and coach class travel was abusive.
     o A group of 21 employees from the Office of the United States Trade
       Representative traveled from Washington, D.C., to Hong Kong to attend
       an international trade meeting. These tickets, which were purchased in
       business class, cost about $100,000 compared to just $32,000 if these
       individuals had flown coach. No document existed that authorized these
       employees for premium class travel, and therefore the trips were
       unauthorized and unjustified.
     o One DOD traveler flew 15 times in premium class costing the government
       over $100,000 from July 1, 2005, through September 30, 2006. According
       to the travel orders for these trips, the official had a medical
       condition that justified the majority of the trips. However, the
       medical justification provided by DOD was a letter signed by a DOD
       employee citing a non-life-changing surgery that occurred in 2001. DOD
       could not produce a

physician's statement documenting the traveler's need to fly premium
class. According to DOD regulations, flying premium class based on a
medical condition requires a physician's certification.

This report contains recommendations to OMB and GSA aimed at minimizing
improper and abusive premium class travel and related governmentwide
travel costs. Our recommendations address the need to

(1) improve internal controls to properly authorize and justify premium
class travel, including prohibiting subordinates or the travelers
themselves from authorizing premium class travel, and (2) establish
procedures to require compiling governmentwide data and monitoring of the
extent of premium class travel, including business class. In cases where
recommendations apply only to certain agencies, we are issuing separate
letters to the heads of these agencies discussing specific control
weaknesses we observed and the related corrective actions required.
Further, we are referring all cases of improper and abusive travel we
identified to the respective agency management and inspector general's
office for further actions, including, if warranted, repayment of the
difference between premium class and coach class travel and disciplinary
actions against those who have abused premium class travel.

In written comments on a draft of this report, OMB and GSA generally
agreed with our findings and recommendations. GSA stated they did not have
the statutory authority to address one of our recommendations, and we
modified the language of the recommendation to allow GSA to address the
intent of the recommendation under its statutory authority. OMB and GSA
stated that they had taken actions or will take actions to address all our
recommendations.

Background

The FTR, issued by GSA, implements statutory and OMB requirements and
policies for most federal civilian employees and others authorized to
travel at government expense. The purpose of the FTR is to ensure that
official travel is conducted responsibly and at minimal administrative
expense. Unless exempt by specific legislation, ^[59]10 executive
agencies, wholly owned
government corporations, and independent establishments are expected to
follow the FTR, including its promulgation related to premium class
travel. DOD's uniformed servicemembers and State employees exempt from the
FTR are covered by their agencies' travel regulations.

^10A number of federal agencies are exempt from the FTR. For example, the
USPS is exempt through 5 U.S.C. 104 and 5 U.S.C. 5701. The Federal Reserve
Board (FRB) also claimed exemption from the FTR under Section 10 of the
Federal Reserve Act, which provides that "employment, compensation, leave,
and expenses" of board employees are "governed solely by the provisions of
the Federal Reserve Act." Both USPS and FRB use their respective
exemptions to promulgate their own travel policies.

OMB's general policy related to travel is that the taxpayers should pay no
more than necessary to transport government officials. Consistent with
this principle, the FTR states that with limited exceptions, travelers
must use coach class accommodations for both domestic and international
travel. Premium class travel can occur only when the traveler's agency
specifically authorizes the use of such accommodations (authorization) and
only under specific circumstances (justification). Specifically, the FTR
states that first class accommodation is authorized only when at least one
of the following conditions exists ^[60]11:

     o coach class airline accommodations or premium class other than first
       class airline accommodations are not reasonably available,
     o when use of first class is necessary to accommodate a disability or
       other special need that is substantiated in writing by a competent
       medical authority,
     o when exceptional security circumstances require first class travel, or

          o when required because of agency mission. ^[61]12
          o The FTR authorizes premium class accommodations other than first
            class (business class) when at least one of the following
            conditions exists:

     o regularly scheduled flights between origin/destination points provide
       only premium class, and this is certified on the travel voucher;
     o coach class is not available in time to accomplish the mission, which
       is urgent and cannot be postponed;

^11The FTR  also  allows  for  the  traveler  to  upgrade  to  premium  class
accommodations at the  traveler's expense  or by  using frequent  traveler
benefits.

^12 41 C.F.R. 301-10.123.

     o premium class travel is necessary to accommodate the traveler's
       disability or other physical impairment, and the condition is
       substantiated in writing by competent medical authority;
     o premium class travel is needed for security purposes or because
       exceptional circumstances make its use essential to the successful
       performance of the mission;
     o coach class accommodations on authorized/approved foreign carriers do
       not provide adequate sanitation or meet health standards;
     o premium class accommodations would result in overall savings to the
       government because of subsistence costs, overtime, or lost productive
       time that would be incurred while awaiting coach class accommodations;
     o transportation is paid in full by a nonfederal source;
     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 en route or a rest period
       upon arrival is prohibited when travel is authorized by premium class
       accommodations); or
     o when required because of agency mission. ^[62]13

As specified above, employees traveling in premium class have to meet both
authorization and justification requirements to qualify, meaning that
employees who, for example, traveled premium class on a trip exceeding 14
hours would violate the FTR if they traveled premium class without
receiving specific authorization to do so. Agencies subject to the FTR
have generally issued internal policies and procedures to clarify the
premium class travel provisions of the FTR, implement these provision, or
both. When issuing implementing policy, agencies have to follow executive
branch policy, which specifies that a subordinate organization seeking to
establish implementing regulation or guidance may make the regulations
more stringent but not relax the rules established by higher-level
guidance. For example, an agency's implementing policy related to premium
class travel because of disability can require that the traveler provides
medical certification that is updated annually, but cannot waive the
requirement that a certification by a competent medical authority be
provided.

^1341 C.F.R. 301-10.124.

DOD and State have also issued their own detailed implementing policies
and procedures that cover all aspects of travel, from authorization to
reimbursement to regulations for premium class. DOD issues the Joint
Federal Travel Regulations (JFTR) for uniformed service members not
covered by the FTR, and also updates the Joint Travel Regulations (JTR),
which implements the FTR for DOD civilian employees. Similarly, State's
Foreign Affairs Handbook and Foreign Affairs Manual (FAM) represent major
sets of policies and procedures related to travel reimbursements to
Foreign Service employees pursuant to the Foreign Service Act of 1980.
With respect to premium class travel, the regulations contained in the
JTR, the JFTR, and the FAM are generally consistent with the FTR.

  Extent of Governmentwide Improper Premium Class Travel Is Significant

For 12 months of travel from July 1, 2005, through June 30, 2006, the
government spent more than $230 million on over 53,000 airline tickets
that contained at least one leg of premium class travel. ^[63]14 Using
statistical sampling, we estimated that at least $146 million of this
premium class travel was unauthorized or unjustified. In addition, our
statistical sample population contained a number of flights taken by
government executives. Specifically, we found that senior executives
(senior-level executives and presidential appointees with Senate
confirmation), who constituted about one-half of 1 percent of the federal
workforce, accounted for 15 percent of premium class travel.

    Governmentwide Premium Class Travel Use

The government bought more than 53,000 premium class tickets totaling over
$230 million during a 12-month period from July 1, 2005, to June 30, 2006.
We identified premium class tickets as any ticket that contained at least
one leg of travel in first or business class. Since the government did not
maintain centralized data on premium class travel, we extracted ticket
information from the government credit card banks' databases of government
individually and centrally billed account travel, which included over 6.1
million transactions for airline tickets valued at almost $3.4 billion.

Although premium class travel represented less than 1 percent of the total
flights taken governmentwide, the high cost of premium class tickets
meant that premium class travel accounted for nearly 7 percent of total
dollars spent on government airline travel. In some instances, the price
difference between a business class and comparable coach class ticket may
be negligible--particularly if the traveler traveled within Europe.
However, on routes where GSA had awarded a government fare for economy and
business classes, an average business class ticket in fiscal year 2006
cost more than 5 times the cost of a coach class ticket. For example, a
traveler's one-way business class ticket from Madrid to Washington, D.C.,
was over 7 times the price of a coach class ticket. First class tickets
can be even more costly. For example, another traveler from the Federal
Reserve Board (FRB) flew first class between Washington, D.C., and London
for more than $12,000, or more than 16 times the price of a coach class
flight. To put the total amount spent on premium class travel into
perspective, the over $230 million the government spent on premium class
travel during these 12 months exceeded the travel expenses on the
government travel cards of most individual government agencies, including
major executive agencies such as the Departments of Agriculture, Energy,
Health and Human Services, Labor, Transportation, and the Treasury.

^14We included in our analysis premium class tickets that were acquired as a
result of a purchase. Premium class accommodations obtained as part of an
upgrade using frequent flyer miles represented no cost to the government
and thus were not included in our analysis.

Premium class travel usage also varied significantly across federal
agencies, both in the total amount and frequency with which premium class
travel was used. Some agencies spent only a fraction of total airline
expenditures on premium class, while premium class travel at other
agencies was substantial. Data provided by the travel card banks showed
that while DOD was the second largest user of premium class travel based
on total dollars, it had substantially reduced its use of premium class
travel charged to the government credit cards since 2004, following our
DOD premium class audit. ^[64]15 Specifically, DOD's premium class charges
decreased from more than $124 million over fiscal years 2001 and 2002, or
more than $60 million annually, to slightly over $23 million in the
12-month period ending June 30, 2006--about 1 percent of its air travel
expenditures. In contrast, tickets bought by State for foreign affairs
agency travelers continued to account for the largest portion of
governmentwide premium class travel. Our data showed that the over $140
million that State spent on nearly 30,000 premium class tickets for
foreign affairs agency travelers represented over 60 percent of its total
air expenditures
during this period. ^[65]16 This amount, which is comparable to our
previous finding at State, could decrease in the future based on actions
taken by State based on our previous audit findings and subsequent to the
data period we audited. For detailed breakdown of agencies' overall use of
premium class travel, see appendix II.

^15GAO-04-88.

Table 1 shows the results of our analysis of the frequency at which
selected agencies purchased premium class tickets for flights involving
airports in the United States and locations in Africa, the Middle East,
and parts of Europe that likely lasted more than 14 hours. As shown, large
differences existed in agencies' use of premium class flights to these
locations. For example, 3 percent of DOD and Department of Homeland
Security travelers flying to these locations flew premium class. In
contrast, 72 percent of State's foreign affairs agency travelers and 83
percent of MCC's travelers flying to these same locations flew premium
class.

^16During the period under audit, State began to take corrective actions to
address the recommendations we issued as part of our audit of State's
premium class travel during fiscal years 2003 and 2004. Additional work
needs to be performed in the future to see whether these actions resulted
in a significant reduction in premium class travel.

Table 1: Selected Agencies'  Use of Premium Class  for 14-Hour Flights  to
Africa, the Middle East, and Europe

     Number of Total number Percentage of premium class of tickets to tickets
       in tickets to 14-hour 14-hour premium Agency locations locations class

Department of Homeland Security 170 6,600

Department of Defense 1,810 54,650

Department of Agriculture 230 1,060

United States Agency for International Development 330 1,340

Department of Commerce 230 800

Department of the Treasury 270 450

Department of State (for foreign affairs agency travelers) 8,870 12,270

Millennium Challenge Corporation 450 540

Source: GAO analysis of bank data.

Notes: The percentage of tickets to 14-hour locations in Africa, the
Middle East, and Europe is most likely understated. Due to the lack of
complete data on travel dates, we had to use a conservative methodology
that likely overestimated the population of tickets that qualified as
14-hour tickets. For example, if a flight had an origin or destination in
the United States and the 14-hour location in Africa, the Middle East, or
Europe, we considered that flight to have been a 14-hour flight, and thus
included it in the total number of 14-hour tickets. For example, if a
traveler flew from Washington, D.C., to Frankfurt; spent a few days to
perform work; then flew to Kuwait, we would have considered the trip to be
a 14-hour trip. However, in reality, the trip from Washington, D.C., to
Frankfurt was less than 14 hours, and similarly the trip from Frankfurt to
Kuwait would have been less than 14 hours, and thus each trip would not
have qualified as a 14-hour trip. By overestimating the total number of
tickets for 14-hour locations, we are underestimating the percentage of
trips to these locations that were premium class.
  
  Key Transaction-Based Controls Are Ineffectiv
  
Of the over $230 million in governmentwide premium class travel, we
estimated that 67 percent of trips were improperly authorized, justified,
or both. In all, the government likely spent at least $146 million on
premium class travel that was improper. ^[66]17 As shown in table 2, we
selected two key transaction-level controls--proper authorization and
proper justification-- for statistical sampling. Using these attribute
tests, we estimated that 28 percent of governmentwide premium class travel
was not properly
authorized. Because premium class travel must first be authorized before
it can be justified, transactions that failed authorization also failed
justification. We also estimated, based on statistical sampling, that
another 38 percent (a total of 67 percent) of premium class travel was not
properly justified.

^17Because of changes in airfares, we could not estimate with an acceptable
level of statistical reliability the amount that could have been saved if
these trips were taken in coach class.

Table 2: Results  of Statistical  Sampling of  Premium Round-trip  Airline
Ticket Transactions

Estimated percentage failure Control test rate in key controls^a

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

                Not properly justified, authorized, or both 67^b

     o Failed because premium class travel was not 28 properly authorized
     o Failed because of improper use of the 14-hour 38 rule or other
       justification

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

Note: Our testing excluded all business class transactions costing less
than $750 because they were immaterial and frequently involved
intra-European flights on airlines that offered only business class
accommodation.

^aBecause 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 results
as 95 percent confidence intervals (i.e., plus or minus 10 percentage
points). These are the 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 of plus or minus 10 percentage points or less. In addition
to percentage estimates, we also estimate the lower bound for the cost of
unauthorized/unjustified premium class travel. This lower bound of $146
million is based on the one-sided 95 percent confidence interval for our
sample estimate of $167 million spent on unauthorized premium class
travel, unjustified premium class travel, or both. So, based on our
sample, we are 95 percent confident that the actual amount is at least
$146 million.

^bDetail does not sum to total due to rounding.

As shown in table 2, 28 percent of governmentwide premium class travel was
not properly authorized. Authorization failures fell into the following
categories:

     o Blanket travel authorizations. According to the FTR, premium class
       travel has to be specifically authorized. Consequently, blanket
       premium class authorization did not pass the specific authorization
       test.

          o Subordinate authorizations. The FTR does not forbid subordinates
            from approving their superior's premium class travel. However,
            applying the
          o criteria set forth in our internal control standards ^[67]18 and
            sensitive payments guidelines, ^[68]19 premium class transactions
            that were approved by subordinates reduced scrutiny of premium
            class travel and amounted to self-approval, and thus would fail
            the control test.

          o No travel authorization. In a number of instances, agencies were
            not able to provide a travel authorization corresponding to a
            trip in our sample.
          o Table 2 also shows that an estimated 67 percent of transactions
            failed the justification test. As the FTR requires specific
            authorization for all premium class travel, the 28 percent of
            transactions that failed the authorization test automatically
            failed the justification test. Thirty-six additional transactions
            (38 percent) failed justification, mostly due to improper use of
            the 14 hour-rule. The failures are as follows:

     o In four instances, travelers used the 14-hour rule to justify premium
       class travel, even though supporting documentation showed that flight
       time was less than 14 hours. ^[69]20
     o In 29 instances, the traveler had a rest stop en route or rest period
       upon arrival at the destination city, upon returning home, or both.
       Travelers with rest stops en route or at destination are not qualified
       for premium class travel. ^[70]21 Despite our request, agencies did
       not provide supporting documentation in these instances to indicate
       that the travelers reported to work and thus met the 14-hour
       criterion.

^18GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).

^19GAO, Guide for Evaluating and Testing Controls Over Sensitive Payments,
GAO/AFMD-8.1.2 (Washington, D.C.: May 1993).

^20 State specifies that premium class flights can be justified if the most
expeditious routing is more than 14 hours. Consequently, if the traveler
obtained premium class flight by taking a routing that is not the most
expeditious, we failed the transaction.

^21The FTR states that a rest period en route or upon arrival would
invalidate the need for premium class travel. Our interview with GSA
officials further confirmed that if a flight arrived at its destination
(either on the outbound or return) by the evening, at such a time that the
traveler was provided a reasonable opportunity to get a night of rest, the
traveler had a rest stop on arrival and should not be entitled to premium
class travel for that particular itinerary. Similarly, DOD policy states
that the 14-hour rule can only be used to justify a trip when the trip was
so unexpected that the traveler was unable to have a rest en route or at
destination. DOD policy also states that travelers are ineligible for
business class accommodations if an "overnight rest period occurs at the
TDY location before beginning work."

o In three instances, the premium class flights failed justification
because the agency did not provide us with supporting documentation
required by the agency's own premium class policy as justification for
premium class travel.

    Executive Premium Class Use

Our Sensitive Payments Guide ^[71]22 states that senior government
executives are subject to intense scrutiny in the event of "any
impropriety or conflict of interest, real or perceived, regardless of how
much money, if any, is involved." According to the guide, travel by
high-ranking officials, for example members of the Senior Executive
Service (SES), generals, admirals, and political appointees, is a
sensitive payment area because it poses a high level of risk of
impropriety. However, our sample indicated that high-ranking officials,
including SES (career senior executives) and presidential appointees, were
using premium class travel at a higher rate than other federal employees.
These high-ranking officials made up about one-half of 1 percent of the
federal workforce yet accounted for 15 percent of premium class travel in
our sample population. ^[72]23

As stated previously, we consider premium class authorizations that were
signed by subordinates to be tantamount to self-authorization. This is
particularly true when travel by government executives is authorized by
subordinates. Nevertheless, we found that some premium class flights taken
by executives we looked at were approved by subordinates of the travelers.
For example, a presidential appointee at the Department of the Treasury
(Treasury) took 12 trips during the audit period that were authorized by a
subordinate.

Our data mining also found instances in which senior executives used
mission critical as justification for trips that did not qualify for
premium class under the 14-hour rule. Frequently, those trips were
authorized by subordinates, and the frequency of abusive travel by
executives indicates that in these cases premium class was used as a
perquisite for certain
senior executives. For example, a senior executive at USDA took 25 premium
class trips totaling $163,000 from July 1, 2005, through September 30,
2006. Fifteen of the 25 trips, taken to destinations in Asia and Africa,
were justified using the 14-hour rule. The remaining 10 trips to Western
Europe were justified using mission critical as the criterion. All of this
executive's premium class authorizations were not properly authorized
because they were signed by a subordinate.

^22GAO/AFMD-8.1.2.

^23The government does not collect information on air travel by rank/grade.
Consequently, there is no empirical evidence to document the rate at which
government executives travel. Therefore if government executives traveled
more frequently than other government employees, this higher use of
premium class travel would not be statistically significant. However, if
government executives accounted for 15 percent of governmentwide air
travel, the average number of tickets a government executive would use
would be 69 round-trip tickets per year, or more than 1 round-trip ticket
per week.

  Ineffective Oversight and Internal Control Weaknesses Contributed to Improper
  and Abusive Premium Class Travel

A weak control environment further exacerbated breakdowns in specific
controls that led to at least $146 million in estimated improper premium
class travel. Many agencies did not capture data related to business class
travel, and therefore did not know the extent of premium class travel.
Further, premium class policies and procedures existed that allowed
potential abuse of premium class travel. We also found that several
government entities, such as USPS, the Federal Deposit Insurance
Corporation (FDIC), and FRB, which have their own pay structures and are
exempt from the FTR, issued premium class travel guidance that was less
restrictive. Consequently, while premium class travel at these agencies
was properly authorized and justified according to the agencies' own
policies, many of the trips were taken at increased costs to the
taxpayers.

    Lack of Monitoring and Oversight Exists over Premium Class Travel Use

The FTR ^[73]24 requires all executive branch agencies to provide GSA
annual reports listing all instances in which the organizations approved
the use of first class transportation accommodations, which GSA then
forwards to OMB. However, agencies are not required to report on the use
of premium class other than first class, despite the fact that business
class travel accounted for nearly 96 percent of premium class travel
governmentwide during the 12-month period under audit. We also found that
OMB, GSA, and many agencies did not collect data on, and therefore were
not aware of, the extent governmentwide use of premium class travel prior
to our audit.

We found that business class travel is not tracked at the agency level
even though it accounts for almost all premium class travel. Officials at
several agencies we interviewed generally informed us that they did not
track, and thus were not aware of, the extent of their business class
travel. Agency
officials also cited the lack of a business class reporting requirement as
one of the reasons why they did not track business class travel. For
example, officials at USDA and Treasury were not aware of the extent of
business class travel at their respective agencies. Without knowing how
much they spent on premium class travel, agencies cannot effectively
manage their travel budgets so that they can prudently safeguard
taxpayers' dollars.

^24This requirement was prescribed at the direction of OMB. See OMB Bulletin
93-11.

We also found that neither OMB nor GSA obtained the data needed to track
premium class travel other than first class governmentwide. As a result,
the government did not have adequate data with which to identify the
extent of any abusive travel in the federal government. Further, without
all premium class data, OMB and GSA did not have the means to determine
whether agencies are adhering to OMB's requirements that the taxpayers pay
no more than necessary to transport government officials. As a result of
similar GAO findings, ^[74]25 in early 2006 State responded to GAO's
recommendations by issuing a directive requiring officials at the
department to track business class travel. ^[75]26

GSA officials informed us that they did not know of any legislative
impediment to requiring reporting on business class travel, though they
expect that the amount of data would be much more extensive than for first
class. GSA officials pointed to a decline in the use of first class travel
since OMB started requiring reporting for this class of travel. They told
us that the scrutiny associated with reporting requirements may have
caused some agencies to restrict first class travel.

    Weak Control Environment Exists with Respect to Premium Class Policies and
    Procedures

We found that no single agency, neither GSA nor OMB, has the central
responsibility for oversight of premium class policies across federal
agencies. Neither GSA nor OMB currently reviews agency policies regarding
premium class travel. GSA officials informed us that agencies are expected
to manage premium class travel and that they should be provided
flexibility to do so. GSA officials saw their role as advisory, that is,
they would generally advise when asked as to whether a particular agency
was required to follow the FTR, or whether premium class travel could be
authorized in specific situations. Officials at GSA informed us
that they did not make determinations as to whether an agency implementing
guidance adhered to the spirit of the FTR. Similarly, OMB does not oversee
agencies' implementing guidance on premium class travel.

^25GAO-06-298.

^26We have not performed work to determine the results of the  implementation
of this policy.

Without central oversight, it is therefore not surprising that we found
different interpretation and implementation of premium class policies
governmentwide. Some agencies, such as DOD, have made policy changes
designed to limit the use of premium class travel consistent with the
spirit of the FTR. Other agencies, however, have implemented the travel
regulations in ways that allow more frequent use of premium class travel.
For example, FAS's and Treasury's policies allowed employees to use
"mission critical" or "exceptional circumstances" as criteria for premium
class travel less than 14 hours. In December 2005, in one instance, a FAS
executive traveled from Washington, D.C., to Hong Kong and back in
business class, a ticket that cost the government over $6,900. However, 11
other FAS employees traveled in coach class at a cost of less than $1,400
per ticket, despite the flight lasting over 14 hours. Data mining we
performed at these agencies found that the mission critical criterion is
typically used by senior executives to justify less than 10-hour trips to
Western Europe. Allowing senior officials to define their travel as
mission critical can have a substantial effect on overall travel costs. A
department travel policy allowing officials to justify their travel as
mission critical contributed to FAS spending nearly $2 million (about 30
percent) of its total air dollars on premium class tickets, with a large
proportion going to fund executive premium class travel. We also found
that while the FTR requires physician's certification for premium class
travel based on disability, it did not require annual recertification.
Consequently, we found an instance where the doctor's note for a
non-life-changing illness was dated 3 years prior to the authorization for
premium class travel.

The variance in implementing guidance we observed was an important factor
in explaining the variances in the use of premium class governmentwide, as
shown in table 1. Specifically, we found that premium class travel was
taken less frequently at agencies where existing policies and procedures
emphasized the importance of minimizing excess travel costs. For example,
DOD's travel policy states that premium class flights over 14 hours would
be approved only if the travel is so urgent that it can not be postponed
or if alternatives did not exist. In contrast, MCC officials informed us
that its procedures permitted automatically providing travelers with
premium class for trips over 14 hours, without necessarily requiring
specific authorization. A comparison between these two agencies' use of
premium class travel to the same locations found that MCC travelers flew
to these locations in premium class 83 percent of the time, compared to
DOD's use of premium class travel to the same locations only 3 percent of
the time.

Agencies Exempt from the FTR Incurred Costly  Premium Class Travel

Our audit of premium class travel by selected
agencies that are exempt from the FTR found premium
class policies that allowed more permissive use of
premium class travel, resulting in higher travel costs to the
government. For example, we found that some of these agencies' policies
allowed business or first class travel for flights less than 14 hours, and
other agencies' policies allowed premium class travel based on an
individual's position in the organization. For example:

     o At USPS, members of the Board of Governors are allowed to travel first
       class whenever they fly. For example, a member of the Board of
       Governors flew first class from Baltimore to San Francisco and back at
       a cost of $1,900 when a coach class ticket would have cost $500. USPS
       also allows all other officers to travel in business class overseas,
       regardless of the length of the flight.
     o At FRB, all members of the board are allowed to travel business class
       for all international flights and all domestic flights exceeding 5
       hours. In addition, there are limited instances in which FRB permits
       the use of first class. For example, a member of the Board of
       Governors of the Federal Reserve System and another FRB employee flew
       first class from Washington, D.C., to London and back at a cost of
       $25,000. Comparable business class tickets would have cost $12,000 and
       coach class tickets would have cost $1,500.
     o At FDIC, employees are allowed to travel premium class for
       international flights over 6 hours. For example a deputy director of
       FDIC flew business class from Washington, D.C., to London and back at
       a cost of $7,200 while a coach class ticket would have cost $800.

  Case Studies of Improper and Abusive Premium Class Travel Highlight Extent and
  Nature of Control Breakdowns

To illustrate the effects of control breakdowns, we also data mined
premium class travel data provided by the banks. Based on these
techniques, and our statistical sampling, we found numerous examples of
premium class travel without authorization or adequate justification.
Further, we used data mining 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, even when properly authorized,
generally was not adequately justified. We also identified cases where
groups of individuals traveled in premium class together to a single
location. However, in the instances we examined, we found no justification
showing that all members of the group needed to travel in premium class.
Given the high cost of premium class tickets, unnecessary premium class
group trips can be very costly to the government.

Examples of Improper and Abusive Use of Premium Class Travel

Table 3 contains specific examples of abusive travel from both our
statistical sample and data mining, all of which were unauthorized,
unjustified, or both. These cases illustrate the improper
and abusive use of premium class travel. Following the table is more
detailed information on some of these cases.

         Table 3: Examples of Improper and Abusive Premium Class Travel

Grade/rank/ Traveler Agency title^a Estimated

cost of

Cost of coach Itinerary ticket ticket^b Reason for exception

State Special agent Washington, $12,200
D.C., to Sydney
and back

$2,200  o Travel order did not provide specific authorization for business
class travel.

o Transaction failed authorization and justification.^c

2 USDA Presidential Washington,     7,500 1,000 o Premium class travel     
                                                     authorization was        
           appointee   D.C., to                      signed by a subordinate. 
                       Geneva and back             o Travel was to Geneva, a  
                                                     flight lasting 10 hours. 
                                                   o Flight was justified     
                                                     using the                
                                                     "exceptional             
                                                     circumstance" criterion. 
                                                     Agency policy            
                                                   o specifically prohibits   
                                                     the                      
                                                     use of this criterion to 
                                                     justify flights to       
                                                     Western Europe.          
                                                     Transaction failed       
                                                   o authorization and        
                                                     justification.           
3 USDA     SES      Washington,     7,500   900 o Premium class travel     
                                                     authorization was        
                       D.C., to Zurich               signed by a subordinate. 
                       and back                    o Flight was justified     
                                                     using the                
                                                     "exceptional             
                                                     circumstance" criterion. 
                                                     Agency policy            
                                                   o specifically prohibits   
                                                     the                      
                                                     use of this criterion to 
                                                     justify flights to       
                                                     Western Europe.          
                                                     Traveler flew to London  
                                                   o in business              
                                                     class and had a          
                                                     one-night stopover in    
                                                     London before returning  
                                                     home.                    
                                                     Transaction failed       
                                                   o authorization and        
                                                     justification.           

                                                                    Estimated
                                                                      cost of
Traveler     Grade/rank/               Cost of    coach         Reason for 
Agency       titlea          Itinerary ticket     ticketb        exception 

State GS-14 Washington
D.C., to Tel
Aviv and back

6,300 1,500  o Most direct route for this flight, as required by agency
regulations, is less than 14 hours.

     o Flight, including a lengthy layover, was justified using the 14-hour
       criterion.
     o Transaction passed authorization but failed justification.

Transportation^d Presidential Washington,
appointee D.C., to Seoul
and back

6,200 1,300  o Blanket travel order authorizing premium class was used.

o Transaction failed authorization and justification.

MCC Assistant Washington,
general D.C., to Tbilisi
counsel and back

7,000 1,200  o No specific authorization exists for premium class travel.

o Transaction failed authorization and justification.

Education^e GS-13 Washington,
D.C., to Athens
and back

5,400 1,500  o Business class travel authorized based on flight exceeding
14 hours.

o Portions of the flight were in first class and unauthorized.

     o Using most direct route, trip would have lasted 12 hours.
     o Transaction failed authorization and justification.

8 DOD E-6  Cairo to   5,400 800 o Travel was in first class, which was not 
             Washington,             specifically authorized on the travel    
             D.C.                    order.                                   
                                   o DOD claimed that the first class price   
                                     was the same as coach. However, our      
                                     work showed that the government rate     
                                     from Cairo to Washington, D.C., is less  
                                     than one-sixth the cost of the first     
                                     class                                    
                                     ticket purchased.                        
                                   o Transaction failed authorization and     
                                     justification.                           

State FO-02 Washington, 3,200 700  o Premium class travel authorized D.C.,
to Tel because trip exceeded 14 hours.

^Aviv  o Travel took place as part of a permanent change of station move,
where the traveler did not have to report immediately to work.

o Transaction passed authorization but failed justification.

                                                                    Estimated
                                                                      cost of
Traveler     Grade/rank/               Cost of    coach         Reason for 
Agency       titlea          Itinerary ticket     ticketb        exception 

10 DOD GS-13 El Paso, Texas, 2,200 800  o Business class travel authorized
to Washington, because of traveler's medical condition.

^D.C., and back  o Medical condition was documented by a doctor's note
over 3 years old.

o Transaction passed authorization but failed justification.

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

Note: Amounts rounded to the nearest hundreds.

^aRank/grade/title includes rank/grade information from the General
Schedule, State, and DOD.

^bSource of estimated coach fares is GSA city pair or expedia.com. Fares do
not include applicable taxes and airport fees.

^cSubsequent to the date of this transaction, State changed its policy to
forbid the use of blanket travel authorizations for premium class travel.
This policy was designed to prevent transactions like the one in this case
study.

^dDepartment of Transportation.

^eDepartment of Education.

     o Traveler #1 is a special agent with State who flew premium class from
       Washington, D.C., to Sydney, Australia, and back at a cost of more
       than $12,000, more than five times as much as a comparable coach class
       ticket of $2,200. The authorization provided as part of the travel
       order applied to a different trip. Despite repeated requests, State
       did not provide us with the proper support for the premium class
       travel. Consequently, the trip failed both authorization and
       justification.
     o Traveler #3 is a member of the SES at USDA's FAS, who flew business
       class from Washington, D.C., to Zurich and back. The total cost of the
       business class ticket was $7,500, compared to $900 in coach. The
       travel orders authorizing premium class travel were signed by the
       traveler's subordinate and thus failed the authorization criteria.
       Further, despite the flight taking less than 14 hours, including a
       layover, the traveler used the exceptional circumstances criteria,
       permitted under FAS policy to enable "a senior policy/program official
       to more effectively carry out the agency mission involving critical
       trade negotiations, market development, and sales efforts, or
       sensitive meetings," to justify the premium class travel. However, FAS
       policy specifically prohibits the use of business class for travel to
       destinations in Western Europe. In addition, on the return trip, the
       traveler took a one-night stopover in London on a Saturday after
       flying in premium class and then proceeded to Washington the next day.

    Frequent Travelers

Our data mining of premium class travel from July 1, 2005, through
September 30, 2006, found additional examples of abusive premium class
travel taken by frequent premium class travelers, often executives. As
mentioned previously, some trips taken by executives were approved by
their subordinates and were therefore improperly authorized. In addition,
trips taken by frequent travelers that were unauthorized and unjustified
cost the government up to $100,000 or more per traveler during the 15month
period we audited. More detailed information about some of the cases
follows table 4.

Table 4: Examples of Abusive Activity by Frequent Premium Class Travelers

Case Number Total cost study Agency Rank/ grade of tickets of tickets
Details

USDA SES 25 $163,000  o All premium class travel was authorized by a
subordinate of the traveler.

     o In 10 of the 25 trips, traveler used "exceptional circumstances"
       criterion to justify traveling premium class to locations in Western
       Europe where flight time is less than 14 hours. However, agency policy
       specifically forbids business class flights to Western Europe.
     o The traveler's Western Europe trips cost more than $62,000 in premium
       class compared to less than $9,000 in coach class.
     o On the remaining trips lasting over 14 hours, traveler did not provide
       documentation justifying the use of the exceptional circumstances
       criterion, as required by agency policy, or that work was conducted
       upon arrival, as required by the FTR.

Treasury Presidential 21 129,000   o Traveler  claimed that trips  lasting
less than 10 hours were appointee mission critical.

     o Traveler's subordinate authorized 12 of the 21 trips. Another 7 trips
       were not specifically authorized.
     o Nineteen trips failed authorization and consequently justification.

3 DOD Presidential 15 105,000  o Premium class generally justified through
a medical appointee condition.

     o The only evidence of the medical condition is a note signed by a peer
       of the traveler, not a physician.
     o DOD's policy states that premium class travel can only be authorized
       for medical reasons if a competent authority certifies that a medical
       need exists and premium class is necessary.

Case Number Total cost study Agency Rank/ grade of tickets of tickets
Details

African SES 10 56,000  o Tickets accounted for seven trips, some of which
were Development authorized for premium class travel, while others were
not.

^Foundation  o Of the three properly authorized trips, two were justified
with "special need." However, the foundation was not able to provide
documentation of what constituted the traveler's special need.

Education GS-15 9 42,000  o The traveler took several premium class  trips
that were authorized after the travel had already occurred.

     o One trip was justified using the 14-hour criterion; however, the trip
       was under 14 hours.
     o Other premium class trips were taken without specific authorization.

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

     o Traveler #2 was a presidential appointee from Treasury who bought 21
       tickets in premium class at a total cost to the government of
       $129,000. Seven premium class tickets were not specifically
       authorized, and 12 were authorized by a GS-12 subordinate and were
       therefore improper. Further, the traveler took three trips in first
       class despite being specifically authorized for business class travel.
       Treasury's implementing guidance provides for premium class travel on
       trips that are mission critical. We found that on trips of less than
       10 hours, the traveler claimed to be preparing briefing materials or
       reviewing materials en route that justified the use of the
       mission-critical criteria.
     o Traveler #3 bought 15 premium class tickets costing the government
       over $100,000 from July 1, 2005, through September 30, 2006. According
       to the travel orders for these trips, the official had a medical
       condition that justified the majority of the trips. However, the only
       documentation of the traveler's medical condition was a note signed by
       a peer of the traveler at DOD. According to DOD regulations, flying
       premium class based on a medical condition requires a physician's
       certification. However, DOD could not produce a physician's statement
       documenting the traveler's need to fly premium class.

    Abusive Premium Class Travel by Groups

We also found that some agencies' policies and procedures allowed abusive
travel by groups of employees--sometimes as many as 20 employees or more.
In particular, we found several instances where groups of employees
traveled to overseas destinations to attend meetings, conferences, or
trade negotiations. In one instance, a group trip in premium class
resulted in about $200,000 in increased costs to the American taxpayers.

We also found instances where State and Department of Justice (Justice)
authorized employees and their families to travel premium class in
permanent change of station (PCS) moves. As reported previously, ^[76]27
while State believed such practice to be necessary because it improves
employee morale, we question the need to provide premium class travel for
PCS. In particular, we note that although federal and State regulations
allow premium class travel if the flight is over 14 hours without a rest
stop, DOD had issued regulations prohibiting premium class travel for PCS,
unless for physical handicap or medical reasons. Specifically, DOD had
determined that premium class travel is permitted only for flights over 14
hours if and only if the Temporary Duty Travel (TDY) purpose/mission is so
unexpected and urgent it cannot be delayed or postponed, and a rest period
cannot be scheduled en route or at the TDY site before starting work. This
decision is consistent with the prudent traveler's principle and with
DOD's new guidelines on the 14-hour rule, issued in early 2006. Table 5
contains specific examples of premium travel by group travelers. More
detailed information about some of the cases follows the table.

Table 5: Examples of Abusive Activity by Group Travelers
                                   Comparable
Case      Number Total cost coach class
study         of of tickets    pricing Details                             
Agency    people                                                           
1    State        32 $293,000 $124,000 o From January 2006 through June    
                                          2006, 32 agents traveled            
                                            from Washington, D.C., to Liberia 
                                                     in premium class for the 
                                                purpose of providing security 
                                                protection for a foreign head 
                                          of state.                           
                                          o Five travelers had no             
                                          authorization for premium class     
                                          use.                                
                                          o Three trips had duplicate tickets 
                                          without evidence of a               
                                          refund.                             
                                          o Seventeen travelers arrived home  
                                          on Saturday after                   
                                           traveling in premium class without 
                                                    evidence of reporting for 
                                          duty before a rest period.          

United States 21 99,000
Trade
Representative

31,000  o A group of 21 employees of the United States Trade
Representative traveled premium class in December 2005 to Hong Kong for an
international trade meeting.

o None of the transactions were authorized for use of premium class travel
and were therefore not justified.
                                                                   Comparable
Case                        Number Total cost    coach class     
study Agency             of people  of tickets           pricing   Details 

USDA 8 50,000 8,000  o A group of eight USDA employees traveled from
Washington, D.C., Baltimore, or Atlanta to Geneva to attend a ministerial
conference. The longest flight lasted less than 11 hours.

     o All traveled using FAS's budget.
     o FAS policy prohibits the use of business class travel on Western
       European flights.

4 State 8 46,000 12,000 o A family of eight was authorized to travel       
                             premium class                                    
                             from Washington, D.C., to Eastern Europe as part 
                             of a PCS                                         
                             move.                                            
                             Federal and State travel regulations allow       
                           o premium class                                    
                             travel if the flight is over 14 hours without a  
                             rest stop.                                       
                             However, PCS moves typically involve a rest stop 
                             en route                                         
                             or a rest stop at destination, and thus should   
                             not                                              
                             necessitate premium class travel.                
                           o Prior to 2002, State policy prohibited the use   
                             of premium                                       
                             class accommodations for PCS travel even when    
                             the                                              
                             duration of the travel exceeded 14 hours.        
                             However, in 2002,                                
                             State eliminated that prohibition.               

Justice 9 35,000 4,000  o Nine Justice travelers flew under 14 hours
one-way from cities in the United States to Frankfurt or back in premium
class.

     o Flights were justified as being over 14 hours based on the travelers'
       transferring to military aircraft in Frankfurt and continuing travel.
     o Justice provided no documentation for military air travel taken by any
       travelers.
     o Two flights were not authorized for premium class.

Justice 5 22,000 6,000  o A family of five was authorized to travel from
St. Louis to Sydney as part of a PCS move.

     o All members of the family traveled premium class.
     o PCS moves typically involve a rest stop en route or a rest stop at
       destination, and thus should not necessitate premium class travel.

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

^27GAO-06-298.

     o Case study 1 relates to a group of 32 agents who took 40 premium class
       trips from Washington, D.C., to Liberia to provide security protection
       to a foreign head of state from January 1, 2006, through June 15,
       2006. We found five trips that had no authorization for the travelers
       to fly in premium class, and three trips that had duplicate tickets
       covering at least part of the traveler's itinerary. In addition, we
       found that 17 travelers arrived back in the United States on Saturday
       afternoon after flying in business class. There was no evidence any of
       the travelers went to work before taking a weekend rest period.
     o Case study 2 involves a group of 21 travelers from the United States
       Trade Representative Office within the Executive Office of the
       President. The travelers each flew from Washington, D.C., to Hong Kong
       in December 2005 in business class to attend a World Trade
       Organization meeting at a total cost to the government of nearly
       $100,000. The travelers ranged in grade from GS-9 to SES. None of the
       travelers were authorized to fly premium class, and therefore the use
       of premium class was improper. According to GSA's city pair contract
       for this itinerary, the tickets would have cost about $31,000 in coach
       class.

As shown in table 5, the differences between premium and coach class
travel are made even more striking the larger the size of the group that
is approved to travel premium class. The high cost of premium class travel
by groups necessitates close scrutiny of whether it is absolutely
necessary for the whole group to travel in premium class. Even a mix of
premium class and coach class accommodations would represent significant
savings to the government as opposed to everyone traveling premium class.
As such, we are referring all cases of improper and abusive travel we
identified to the respective agency management and inspector general's
office for possible administrative actions to be taken against employees
who abuse premium class travel use and repayment of the difference between
premium class and coach class travel.

                                  Conclusions

With the serious fiscal challenges facing the federal government, agencies
must maximize their ability to manage and safeguard valuable taxpayers'
dollars. Recognizing the high cost of premium class travel, GSA and
federal agencies have issued a series of policies providing that such
travel should be taken as a last resort. However, our audit shows that
some federal agencies and other federally related entities did not adhere
to this policy. In fact, some entities appeared to provide premium class
as a perquisite to senior-level executives. Individuals that abusively use
premium class travel at taxpayers' expense should be held accountable for
the taxpayer dollars they waste. We are encouraged that DOD has taken
steps to significantly curtail unnecessary use of premium class travel,
potentially saving millions of dollars. Going forward, it will be
important for other agencies to follow DOD's lead and take steps to
restrict the use of premium class travel to only truly exceptional
circumstances.

  Recommendations for Executive Action

We are making the following eight recommendations to improve internal
control over the authorization and justification of premium class travel
and to strengthen monitoring and oversight of premium
class travel as part of an overall effort to reduce improper and abusive
premium class travel
and related government travel costs. We will also issue separate letters
to USDA, MCC, Treasury, and FRB on actions needed to address specific
control weaknesses we identified through our audit.

We recommend that the Director of OMB:

     o Instruct agencies that premium class travel requests for their
       senior-level executives must be approved by someone at least at the
       same level as the traveler or an office designated to approve premium
       class travel for all senior-level executives.
     o Establish policies and procedures to initially require all federal
       agencies to collect data on the use of all premium class travel,
       including business class, and submit the information to GSA annually
       until a risk-based framework is developed.

          o Using the premium class data collected by GSA, consider
            developing a risk-based framework containing requirements as to:

               o Reporting business class travel to GSA. For example, OMB
                 might want to consider only requiring entities to report
                 business class travel when business class travel exceeds a
                 percentage of total travel.
               o Performing audits of premium class travel programs,
                 including a review of executive travel.

We recommend that the Administrator of GSA take actions necessary to help
agencies comply with the FTR governing the use and reporting of premium
class travel, including the following:

     o Require that agencies develop and issue internal guidance that
       explains when mission criteria and the intent of that mission call for
       premium class accommodations.
     o Require agencies to define what constitutes a rest period upon
       arrival.
     o Require that the physician's certification related to medical
       requirements for premium class travel be updated annually unless the
       physical impairment is a lifelong impairment.
     o Establish an office for travel management within GSA to review agency
       policies and procedures, identify areas where agency policies and
       procedures do not adhere to federal regulations, and issue
recommendations to agencies to bring their policies and procedures into
compliance.

o Based on the premium class data collected from agencies, determine if
the government should

     o clarify guidance concerning authorizing premium class travel only when
       less costly means of transportation are not practical and
     o limit the use of premium class travel for PCS moves to those necessary
       as a result of physical handicap, medical reasons, or security
       reasons, or if the trip is taken at no additional cost to the
       government.

  Agency Comments and Our Evaluation

In written comments on a draft of this report, OMB concurred with our
recommendations and stated that it is important to educate and remind
federal travelers of the policies and regulations that govern federal
travel to ensure that the most economic means of travel are used when
conducting the government's business. OMB stated that it is working with
GSA to require that premium class travel for senior-level executives be
approved by someone at the same level as the traveler, or by an office
specifically authorized to approve premium class travel. OMB further
stated that GSA is preparing agency guidance for collecting and reporting
premium class travel, and that OMB will begin working with GSA and
agencies to develop a risk-based reporting and review framework consistent
with Appendix A to OMB Circular A-123.

In written comments on a draft of this report, GSA concurred with many of
our findings and recommendations and said that it will use a number of the
report's findings to improve the FTR to ensure enhanced accountability and
control of the use of premium class travel accommodations by federal
employees. GSA said that these improvements will include requiring
agencies to designate premium class approving officials, requiring
agencies to develop internal definitions of mission critical and rest
periods, and requiring physician's notes to be updated unless the physical
impairment is a lifelong impairment. GSA will also be collecting business
class travel data from agencies starting in fiscal year 2008.

GSA did suggest that one of our recommendations could be addressed in a
different way than contemplated in the draft report. GSA pointed out that
it does not have clear statutory authority to establish central oversight
offices for travel management. To address the intent of the
recommendation, GSA informed us that with OMB support, it created the
Center for Policy Evaluation and Compliance. GSA stated that the Center
for Policy Evaluation and Compliance will seek to identify areas within
agencies' policies and procedures that are not consistent with
governmentwide standards. The center will be responsible for suggesting
improvements to agencies. We have modified the language of this
recommendation to adhere to GSA's current statutory authority and keep the
intent of our original recommendation, which is that GSA takes a proactive
role in reviewing agency policies and procedures for possible
discrepancies with the FTR.

GSA's and OMB's comments are reprinted in appendixes III and IV.

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 of this report to the Director of OMB and
the Administrator of GSA. We will make copies available to others upon
request. In addition, this report will be available at no charge on GAO's
[77]Web site at http://www.gao.gov.

If you or your staff have any questions concerning this report, please
[78]contact me at (202) 512-6722 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on the
last page of this report. GAO staff who made major contributions to this
report are listed in appendix V.

Gregory D. Kutz
Managing Director
Forensic Audits and Special Investigations

Appendix I: Objectives, Scope, and Methodology

To assess controls over the authorization and issuance of governmentwide
premium class travel, we used premium class travel transactions charged to
the federal government's centrally billed and individually billed accounts
during the 12-month period ending June 30, 2006.

  Magnitude of Premium Class Travel and the Extent Such Travel Was Improper

To assess the magnitude of use of premium class travel, we obtained from
Bank of America, Citibank, JP Morgan Chase, and U.S. Bank government
travel charge card databases that contained travel transactions charged to
the federal government for the 12 months ending June 30, 2006. The
databases contained airline transactions and nonairline transactions
charged to both the centrally and individually billed travel card
accounts. We queried the databases to identify transactions specifically
related to travel. The databases also contained transaction-specific
information, including the passenger name, the ticket price, and the fare
and service codes used to price the tickets 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 the federal
government paid for premium class travel accommodations. We excluded from
our audit premium class travel accommodations obtained as a result of
upgrades, as these tickets did not result in costs to the federal
government.

As you requested, our audit covered premium class usage at executive
federal agencies and federally related entities. The population under
audit consists of transactions by travelers approved to use the government
travel card, except for employees and individuals whose travel was
approved by legislative or judicial entities and entities covered by
treaty with the U.S. government. Agencies included in the audit include
executive agencies as described in the Federal Travel Regulations (FTR),
including Chief Financial Officers Act agencies, other major executive
agencies, independent federally related establishments, and wholly owned
government corporations. As further detailed below, we performed
statistical sampling on these entities to assess their internal controls
and adherence to the FTR. However, to determine whether incidences of
costly premium class travel occurred at other federally related entities,
we expanded our data mining to premium class transactions of mixed
corporations, such as the Federal Deposit Insurance Corporation, and other
establishments specifically exempt from the FTR, such as the United States
Postal Service.

We tested a statistical sample of premium class transactions to assess
whether premium class travel was properly authorized and properly
justified, and to project the results of these tests to the population of
governmentwide premium class travel. The population from which we selected
our transactions for testing was the set of debit transactions for both
first and business class travel that were charged during the 12 months
ending June 30, 2006. Because our objective was to test controls over
travel card expenses, we excluded transactions where half or more of the
ticket had been refunded. While these trips may not have been properly
authorized or justified, the amounts credited back to the government may
have been for the premium class portion of the ticket. We also excluded
refunded ticket transactions and miscellaneous debits (such as fees) that
would not have been for ticket purchases from the population of
transactions we reviewed.

We further limited the business class transactions to those costing $750
or more because many intra-European flight business class tickets cost
less than $750 and are for flights for which there is only a single
premium class cabin. 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 about the effectiveness of the
internal controls. While we excluded business class transactions costing
less than $750, we (1) did not exclude all intra-European single cabin
flights and (2) potentially excluded unauthorized business class flights
costing less than $750. Limitations of the database, specifically a lack
of visibility between single- and multicabin aircraft, prevented a more
precise methodology of excluding lower-cost business class tickets. For
security reasons, we did not include in our projection or data mining
selections premium class transactions related to agency-identified
sensitive assignments and secretive details.

To test the implementation of key control activities over the issuance of
premium class travel transactions, we selected a random probability sample
from the subset of centrally billed and individually billed account
transactions containing at least one premium class segment and for which
the business class ticket cost at least $750. We initially selected 192
premium class travel transactions. Seventy-nine transactions were excluded
because they were out of the scope of the sample. ^[79]1 The final sample
size of reviewed, in-scope transactions was 96, totaling about
$391,000. We overselected initially because of the difficulty of perfectly
extracting transactions from all government corporations and
establishments that should be excluded from the sample population. For
each sample transaction, we requested that the entities provide the travel
authorization, travel voucher, travel itinerary, and other related
supporting documentations demonstrating justification for premium travel
arrangements. We also requested information on the rank or grade of the
traveler. Based on the information provided, we assessed whether premium
class travel was properly authorized and whether the premium class travel
was justified in accordance with the FTR or other applicable travel
regulations. If, after repeated requests, the entities did not provide us
with the supporting documentation, we concluded that the premium class
travel was improper. The results of the samples of these control
attributes can be projected to the population of transactions
governmentwide, not to any particular individual executive agency, federal
corporation, or independent federally related entity.

^1Specifically, transactions were excluded because they were paid for by
agencies that were not part of the scope of our work, such as some
government corporations or entities not subject to federal regulations
governing premium class travel, or were not paid for by the
U.S. government.

Based on the sampled transactions, we also estimated the percentage of
premium class travel taken by federal executives, that is, presidential
appointees or members of the Senior Executive Service. With this
statistically valid probability sample, each transaction in the population
had a 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 results as 95 percent
confidence intervals (i.e., plus or minus 10 percentage points). These are
the 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 of plus
or minus 10 percentage points or less. In addition to percentage
estimates, we also estimate the lower bound for the cost of
unauthorized/unjustified premium class travel. This lower bound of $146
million is based on the one-sided 95 percent confidence interval for our
sample estimate of $167 million spent on unauthorized premium class
travel, unjustified premium class travel, or both. So, based on our
sample, we are 95 percent confident that the actual amount is at least
$146 million.

  Underlying Causes of Improper and Abusive Premium Class Usage

We performed a limited assessment of the control environment over premium
class travel by obtaining an understanding of the premium class travel
authorization and ticketing process at selected agencies. We interviewed
officials from the General Services Administration (GSA), Department of
Defense (DOD), Department of State (State), Department of Agriculture, and
Millennium Challenge Corporation. We also reviewed applicable policies and
procedures and program guidance that they provided. We used as our primary
criteria applicable laws and regulations that address governmentwide
premium class travel, including the Office of Management and Budget's
(OMB) mandated controls as implemented by GSA's FTR; DOD's Joint Federal
Travel Regulations and Joint Travel Regulations for uniformed members and
civilian personnel, respectively; as well as State's Foreign Affairs
Manual and Foreign Affairs Handbook, which govern travel of U.S. members
of the Foreign Service. We also used as criteria our Standards for
Internal Control in the Federal Government and our Guide to Evaluating and
Testing Controls over Sensitive Payments. Finally, we conducted
"walk-throughs" of the travel process at selected agencies and federally
related entities. We also interviewed GSA and OMB officials on their
oversight of premium class travel.

To determine the frequency with which agencies used premium class travel
for flights exceeding 14 hours, we identified airport codes in Africa, the
Middle East, and far eastern Europe that would necessitate flights of 14
hours or more if traveling from the United States. ^[80]2 We analyzed the
banks' databases to extract flights involving locations in the United
States with the selected airports. We then compared the premium class
flights to these locations to all flights taken to these locations
governmentwide and for selected agencies.

  Data Mining Improper and Abusive Premium Class Travel

In addition to our audit of a governmentwide statistical sample of
transactions, we also selected other transactions identified by our
data-mining efforts for audit. Our data mining identified additional
examples of premium class travel by senior-level executives, individuals
who frequently travel using premium class accommodations, and premium
trips involving groups with four or more people. For this
nonrepresentative data-mining selection, we also requested that the
entities provide the
travel authorization, travel voucher, travel itinerary, and other related
supporting documentations demonstrating justification for premium travel
arrangements. If the documentation was not provided, or if it indicated
further issues related to the transactions, we obtained and reviewed
additional documentation about these transactions.

^2We did not include in our analysis airports in Asia and South America
because some flights to Asia from cities in the West Coast of the United
States would not meet the 14-hour criteria and likewise for flights from
and to South America.

  Data Reliability

We assessed the reliability of the data provided by the four travel card
banks by (1) performing various electronic testing of required data
elements, such as transaction amounts and account numbers;

(2) reviewing financial statements of the four banks for information about
the data and systems that produced them; and (3) interviewing officials
knowledgeable about the data at the four banks. In addition, we verified
that totals from the databases agreed with the total travel card activity
provided to and published in GSA data on travel, in totality and for
selected agencies. We determined that data were sufficiently reliable for
the purposes of our report.

We conducted our audit work from July 2006 through August 2007 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.

Appendix II: Background

Overall, government travel is managed as part of GSA's SmartPay program.
The SmartPay program began in 1998 as a way to streamline purchasing, as
well as providing an expeditious way to pay for travel expenses. Under
this program, banks provide travel cards to government agencies and
applicable employees for travel purposes. Travel cards provided directly
to the agencies are known as the centrally billed accounts, and are
typically used to purchase transportation services such as airline and
train tickets, facilitate group travel, and pay for other travel-related
expenses. The individually billed accounts, provided directly to
individual travelers, are used for lodging, rental cars, and in many
agencies for transportation services.

Four banks provide travel cards under the SmartPay program: Bank of
America, Citibank, JP Morgan Chase, and U.S. Bank. According to GSA data,
Bank of America and Citibank handle over 94 percent of SmartPay travel
card transactions. In the 12 months ending June 2006, total GSA SmartPay
travel card purchases totaled about $6.9 billion. Nearly $3.4 billion of
the total travel card purchases were for airline travel. Premium class
flights accounted for over $230 million, or 7 percent, of the total spent
on airline travel.

Subsequent to our selection of the statistical sample, the banks provided
us with additional data related to premium class travel in the 3 months
from July 1, 2006, through September 30, 2006. Our analysis of the
additional bank data indicates that premium class travel usage stayed
consistent among federal agencies. Table 6 provides information on the
premium class travel of selected agencies from July 1, 2005, through June
30, 2006.

Table 6: Premium Class Flights Governmentwide and at Selected Agencies from July
                         1, 2005, through June 30, 2006

      Total amount of Percentage of Total number of Percentage of air premium
      class expenditures in premium class tickets that were Agency/department
          tickets (in millions) premium class tickets purchased premium class

                         Governmentwide $232.9 7 53,100

Department of State 142.4 61 29,700

                       Department of Defense 23.1 1 7,600

                  Department of Homeland Security 10.0 5 3,000

                    Department of the Treasury 6.9 10 1,400

Department of Commerce 5.2 13 1,000

                 Millennium Challenge Corporation 3.8 77 600 38

United States Agency for International Development 3.2 27 600

                      Department of Agriculture 3.1 4 700

              Source: GAO analysis of government credit card data.

Appendix III: Comments from the Office of Management and Budget

Appendix IV: Comments from the General Services Administration

Appendix V: GAO Contact and Staff Acknowledgments

  GAO Contact

Gregory D. Kutz, (202) 512-6722 or [81][email protected]

In addition to the contact above, Tuyet-Quan Thai, Assistant Director;

  Acknowledgements
  
Beverly Burke; Sunny Chang; Paul Desaulniers; Leslie Jones; John Kelly;
Barbara Lewis; Mark Ramage; John Ryan; Lindsay Welter; and Scott Wrightson
made key contributions to this report.

(192220)

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U.S.  Government  Accountability  Office,  441  G  Street  NW,  Room  7149
Washington, DC 20548

References

Visible links
  30. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1268
  77. http://www.gao.gov/
  78. mailto:[email protected]
  81. mailto:[email protected]
  82. http://www.gao.gov/
  83. http://www.gao.gov/
  84. http://www.gao.gov/fraudnet/fraudnet.htm
  85. mailto:[email protected]
  86. mailto:[email protected]
  87. mailto:[email protected]
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