DOD Travel Improper Payments: Fiscal Year 2006 Reporting Was	 
Incomplete and Planned Improvement Efforts Face Challenges	 
(14-DEC-07, GAO-08-16). 					 
                                                                 
Fiscal year 2006 was the first year that the Department of	 
Defense (DOD) reported improper payment information for its	 
travel program under the Improper Payments Information Act of	 
2002 (IPIA). For fiscal year 2006, DOD reported obligations of	 
approximately $8.5 billion for travel. Congress mandated that GAO
assess the reasons why DOD is not fully in compliance with IPIA  
related to travel expenditures. In May 2007, GAO issued an	 
initial report in response to this mandate. To further respond,  
GAO assessed (1) the completeness and accuracy of DOD's fiscal	 
year 2006 IPIA travel disclosure in its performance and 	 
accountability report (PAR), and (2) DOD's planned efforts to	 
improve and refine its processes for estimating and reporting on 
travel improper payments. To complete this work, GAO reviewed	 
DOD's IPIA reporting, IPIA, Office of Management and Budget's	 
(OMB) IPIA implementing guidance, and met with cognizant DOD	 
officials.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-16						        
    ACCNO:   A78913						        
  TITLE:     DOD Travel Improper Payments: Fiscal Year 2006 Reporting 
Was Incomplete and Planned Improvement Efforts Face Challenges	 
     DATE:   12/14/2007 
  SUBJECT:   Cost analysis					 
	     Data integrity					 
	     Defense appropriations				 
	     Defense cost control				 
	     Erroneous payments 				 
	     Payments						 
	     Program evaluation 				 
	     Reporting requirements				 
	     Risk assessment					 
	     Travel						 
	     Travel allowances					 
	     Travel costs					 
	     Cost estimates					 
	     Defense Travel System				 

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GAO-08-16

   

     * [1]Results in Brief
     * [2]Background

          * [3]Improper Payments Information Act of 2002 and OMB Implementi
          * [4]Travel Process at the Department of Defense
          * [5]DOD Travel IPIA Reporting

     * [6]Fiscal Year 2006 Improper Payments Reporting and Estimate fo

          * [7]Travel Disclosure Reported Only DTS-Processed Travel and Exc
          * [8]DTS Improper Payments Estimates Were Not Prepared According

               * [9]Lack of Sampling Plans
               * [10]Incorrect Categorization of Certain Errors
               * [11]Flawed Methodology Used to Estimate Improper Payments at
                 DOD

     * [12]DOD Faces Challenges in Plans to More Fully Assess Travel Im

          * [13]Improper Payments Survey Results Unreliable Due to Limited G

               * [14]Limited Guidance Provided to DOD Components to Direct
                 IPIA A
               * [15]Improper Payment Estimate Process for Non-DTS Travel Is
                 Dece
               * [16]Limited Oversight by Office of the Comptroller
                 Contributes t

          * [17]Office of the Comptroller Taking Steps to Improve Reporting

     * [18]Conclusions
     * [19]Recommendations for Executive Action
     * [20]Agency Comments and Our Evaluation
     * [21]GAO Contact
     * [22]Staff Acknowledgments
     * [23]GAO's Mission
     * [24]Obtaining Copies of GAO Reports and Testimony

          * [25]Order by Mail or Phone

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

Report to Congressional Committees

United States Government Accountability Office

GAO

December 2007

DOD TRAVEL IMPROPER PAYMENTS

Fiscal Year 2006 Reporting Was Incomplete and Planned Improvement Efforts
Face Challenges

GAO-08-16

Contents

Letter 1

Results in Brief 3
Background 4
Fiscal Year 2006 Improper Payments Reporting and Estimate for the DOD
Travel Program Were Incomplete 8
DOD Faces Challenges in Plans to More Fully Assess Travel Improper
Payments 15
Conclusions 25
Recommendations for Executive Action 25
Agency Comments and Our Evaluation 26
Appendix I Scope and Methodology 29
Appendix II Comments from the Department of Defense 31
Appendix III Excerpts from DOD's Fiscal Year 2006 PAR 34
Appendix IV GAO Contact and Staff Acknowledgements 40

Tables

Table 1: DOD's Reported Improper Payment Estimates for Fiscal Year 2006 7
Table 2: Improper Payments Survey Results: Travel, Fiscal Year 2006 17

Figures

Figure 1: Fiscal Year 2006 DTS-Processed Travel 10
Figure 2: DOD Travel Populations for Fiscal Year 2006 22

Abbreviations

DFAS: Defense Finance and Accounting Service: 
DOD: Department of Defense: 
DOD OIG: Department of Defense Office of Inspector General: 
DTS: Defense Travel System: 
IATS: Integrated Automated Travel System: 
IPIA: Improper Payments Information Act of 2002: 
OMB: Office of Management and Budget: 
PAR: Performance and Accountability Report: 
PCS: permanent change of station: 
TDY: temporary duty: 

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United States Government Accountability Office
Washington, DC 20548

December 14, 2007

Congressional Committees

Fiscal year 2006 marks the third year that the Department of Defense
(DOD), as well as other executive branch agencies, were required to report
improper payment information under the Improper Payments Information Act
of 2002 (IPIA).^1 IPIA requires executive agency heads, based on guidance
from the Office of Management and Budget (OMB),^2 to identify programs and
activities susceptible to significant improper payments,^3123 estimate
amounts improperly paid under those programs and activities, and report on
the amounts of improper payments and their actions to reduce them. Fiscal
year 2006 marks the third year that the Department of Defense (DOD), as
well as other executive branch agencies, were required to report improper
payment information under the Improper Payments Information Act of 2002
(IPIA). IPIA requires executive agency heads, based on guidance from the
Office of Management and Budget (OMB), to identify programs and activities
susceptible to significant improper payments, estimate amounts improperly
paid under those programs and activities, and report on the amounts of
improper payments and their actions to reduce them.

DOD obligates billions of dollars annually to fund travel. For fiscal year
2006, DOD reported obligations of approximately $8.5 billion for travel,^4
representing 60 percent of all travel obligations^5 reported by the
federal DOD obligates billions of dollars annually to fund travel. For
fiscal year 2006, DOD reported obligations of approximately $8.5 billion
for travel,^456 representing 60 percent of all travel obligations reported
by the federal government that year. Over the past several years, GAO has
issued numerous reports that highlighted problems with DOD travel
practices that resulted in wasteful spending of millions of dollars and
potentially improper travel, including weak controls over first class
travel, unused airline tickets, and the accuracy of travelers' claims. The
DOD Office of Inspector General (DOD OIG), first reporting on the
department's overall compliance with IPIA in fiscal year 2006, identified
several significant flaws.

^1Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002). Prior to IPIA,
former section 57 of OMB Circular No. A-11 required certain agencies to
submit similar information, including estimated improper payment target
rates, target rates for future reductions in these payments, the types and
causes of these payments, and variances from targets and goals
established. In addition, these agencies were to provide a description and
assessment of the current methods for measuring the rate of improper
payments and the quality of data resulting from these methods. DOD began
reporting improper payment information for military health benefits and
military retirement in fiscal year 2003.

^2Appendix C to OMB Circular No. A-123, Requirements for Effective
Measurement and Remediation of Improper Payments (Aug. 10, 2006).

^3Improper payments are defined as any payment that should not have been
made or that was made in an incorrect amount (including overpayments and
underpayments) under statutory, contractual, administrative, or other
legally applicable requirements. It includes any payment to an ineligible
recipient, any payment for an ineligible service, any duplicate payment,
payments for services not received, and any payment that does not account
for credit for applicable discounts.

^4DOD, Department of Defense Budget for Fiscal Year 2008: Financial
Summary Tables (February 2007).

^5An obligation is a definite commitment that creates a legal liability of
the government for the payment of goods and services ordered or received,
or a legal duty on the part of the United States that could mature into a
legal liability by virtue of actions on the part of the other party beyond
the control of the United States. Payment may be made immediately or in
the future. An expenditure is the actual spending of money-- an outlay. We
use the terms payment and expenditure interchangeably.

Conference Report 109-676,^7 accompanying the Department of Defense
Appropriations Act, 2007,^8 included a requirement for GAO to assess the
reasons why DOD was not fully in compliance with IPIA related to travel
expenditures and make any needed recommendations for corrective action. In
May 2007, we issued an initial report^9 that provided an overview of DOD's
IPIA reporting for fiscal years 2003 through 2006 and a discussion of the
reasons reported by the DOD OIG for why the department was not in
compliance with IPIA for fiscal year 2006. Our objectives for this report
were to assess: (1) the completeness and accuracy of DOD's fiscal year
2006 IPIA travel disclosure in its performance and accountability report
(PAR), and (2) DOD's planned efforts to improve and refine its processes
for estimating and reporting on travel improper payments.

To complete our first objective, we reviewed DOD's fiscal year 2006 PAR,
prior GAO reports, applicable federal laws, prior DOD OIG reports, and OMB
implementing guidance found in OMB Circular No. A-123, Appendix C. We also
met with cognizant DOD officials. To complete our second objective, we
reviewed DOD's annual improper payment survey, met with representatives
from DOD components to determine how each calculated travel improper
payments to be reported, and met with officials from the Office of the
Under Secretary of Defense (Comptroller) (Office of the Comptroller) and
other DOD components. Additional details on our scope and methodology are
presented in appendix I. We conducted our review from November 2006
through September 2007 in accordance with generally accepted government
auditing standards.

^6A recent GAO report shows that DOD has substantially reduced its use of
premium class travel charged to government credit cards since 2004,
following our DOD premium class travel report. See GAO, Premium Class
Travel: Internal Control Weaknesses Governmentwide Led to Improper and
Abusive Use of Premium Class Travel, [29]GAO-07-1268 (Washington, D.C.:
Sept. 28, 2007).

^7H.R. Conf. Rep. No. 109-676, at 94 (Sept. 25, 2006).

^8Pub. L. No. 109-289, 120 Stat. 1257 (Sept. 29, 2006).

^9GAO, Improper Payments Information Act of 2002: Department of Defense
Travel Expenditure Reporting, [30]GAO-07-767R (Washington, D.C.: May 31,
2007).

Results in Brief

In its fiscal year 2006 PAR, DOD reported an estimate of approximately $8
million in travel program improper payments, which DOD reported as
reflecting about 1 percent of reported travel payments for the year. While
this estimate would indicate the program was not at risk of significant
improper payments under OMB guidance, we found that DOD's travel improper
payment disclosure for fiscal year 2006 was incomplete because it
understated the full extent of travel improper payments. The DOD travel
payment data used to assess the program's risk of significant improper
payments only included payments processed by the Defense Travel System
(DTS)--approximately 10 percent of the $8.5 billion of DOD travel program
obligations reported for fiscal year 2006. Nonetheless, DOD's 2006 PAR
describes a travel postpayment review process that may mislead the reader
to believe that the reported travel improper payment estimate represents
more than DTS-processed travel. Further, the travel improper payment
estimate excluded the largest user of DTS, the Army, which would likely
have increased DOD's estimate by over $4 million. Finally, the statistical
sampling methodology and process used by DOD to estimate DTS improper
payments for IPIA reporting as reported for fiscal year 2006 had several
weaknesses and did not result in statistically valid estimates of travel
improper payments.

DOD is taking steps to more fully assess and report on its travel program
for improper payments for future IPIA reporting. DOD's planned assessment
is to be based on an annual Improper Payments Survey conducted by the
Office of the Comptroller. However, our review identified several
weaknesses with the survey and reported results, including limited
guidance on how to estimate travel improper payments and a lack of
oversight and review by the Office of the Comptroller over implementation
of the survey and its results. For example, we noted four components
reported nearly $17 million in travel payments with no associated improper
payments for these payments. While it is possible there may not be any
improper payments in a population, the review process was inadequate to
provide a basis for reporting no improper payments on $17 million in
travel payments. DOD has also established a Program Officer for Improper
Payment and Recovery Auditing and an improper payment working group, and
held a "Department of Defense Improper Payments Information Act
Conference."

We make four recommendations to the Secretary of Defense for the Office of
the Comptroller to improve the usefulness and completeness of IPIA
reporting for the DOD travel program.

We provided a draft of this report to DOD for comment. In its response,
DOD concurred with three of our recommendations and partially concurred
with the fourth. For this recommendation, DOD agreed with the intent of
the recommendation but expressed concern over the level of detailed
guidance called for. DOD referred to a policy memorandum issued on
November 27, 2007, in its response. This document consists of a cover
memorandum, excerpts from Appendix C of OMB Circular No. A-123, and DOD
improper payment component contact information. We continue to believe
that additional guidance is needed. DOD must take action to ensure that
policy guidance is fully and effectively implemented in order to improve
the usefulness and completeness of its IPIA reporting for the travel
program. DOD's comments, along with our evaluation, are discussed in the
Agency Comments and Our Evaluation section of this report. The comments
are also reprinted in their entirety in appendix II. DOD also provided
technical comments, and we made revisions as appropriate.

Background

During fiscal year 2006, DOD reported obligations of over $685 billion,
the second largest amount reported by an executive branch entity. Of this,
travel obligations were $8.46 billion for fiscal year 2006. Travel
includes expenses such as air fare, lodging, per diem, and local
transportation. Travel conducted by DOD represents an estimated 60 percent
of total travel obligations for the entire federal government. Travel is
one of six programs for which IPIA information is reported in DOD's PAR.

Improper Payments Information Act of 2002 and OMB Implementing Guidance

IPIA was enacted in November 2002 with the major objective of enhancing
the accuracy and integrity of federal payments. Guidance for reporting
under IPIA is provided in Appendix C of OMB Circular No. A-123 and
requires agencies to:

           o Review all programs and activities and identify those that are
           susceptible to significant improper payments.
           o Obtain a statistically valid estimate of the annual amount of
           improper payments in those programs and activities.
           o Report estimates of the annual amount of improper payments in
           programs and activities and, for estimates exceeding $10 million,
           implement a plan to reduce improper payments.

           In addition, this guidance instructs agencies to institute a
           systematic method of reviewing all programs and identifying those
           which they believe to be susceptible to significant improper
           payments. The guidance defines "significant erroneous payments"
           ^10 as annual improper payments exceeding both 2.5 percent of
           program payments and $10 million.^11 It further explains that
           agencies must then estimate the gross total of both over- and
           underpayments for those programs identified as susceptible. These
           estimates shall be based on a statistically random sample of
           sufficient size to yield an estimate with a 90 percent confidence
           interval of plus or minus 2.5 percentage points.^12 The guidance
           also requires agencies to consult a statistician to ensure the
           validity of their sample design, sample size, and measurement
           methodology. If an agency cannot determine whether or not a
           payment was proper because of insufficient documentation, OMB
           Circular No. A-123 requires that the payment be considered an
           error.

           According to its guidance, OMB may also determine, on a
           case-by-case basis, whether certain programs should be reported
           even if those programs do not meet established thresholds. In
           February 2007, OMB notified DOD that it was requiring that an
           improper payment error measurement be reported for travel pay in
           the fiscal year 2007 PAR under IPIA due to congressional interest
           and concern regarding this program. For all programs and
           activities susceptible to significant improper payments, agencies
           are to determine an annual estimated amount of improper payments
           made in those programs and activities. If the estimate of improper
           payments exceeds $10 million, the agency must implement a plan to
           reduce the amount of such improper payments. If the improper
           payment estimate is less than $10 million, agencies are still
           required to report the total in their annual PAR.
			  
			  Travel Process at the Department of Defense

           Although there are over 70 types or circumstances of travel at
           DOD, DOD travel is generally segregated into two broad types:
           temporary duty travel (TDY) and permanent change of station (PCS)
           travel. TDY is travel to one or more places away from a permanent
           duty station to perform duties for a period of time and, upon
           completion of assignment, return or proceed to a permanent duty
           station. PCS travel is the assignment, detail, or transfer of a
           member or unit to a different permanent duty station under a
           competent order that does not specify the duty as temporary,
           provide for further assignment to a new permanent duty station, or
           direct return to the old permanent duty station.
			  
^10"Improper payment" and "erroneous payment" have the same meaning under
Appendix C of OMB Circular No. A-123.

^11IPIA does not include a similar threshold for defining significant
improper payments.

^12Agencies may alternatively use a 95 percent confidence interval of plus
or minus 3 percentage points around the estimate of the percentage of
improper payments.

           DOD reported that in a typical year over 3 million DOD personnel
           perform TDY travel and generate over 5 million travel vouchers.
           For fiscal year 2006, DOD reported $8.5 billion was obligated for
           travel. The Institute for Defense Analyses estimates^13 that $7.3
           billion of this amount is for TDY and the remaining $1.2 billion
           is for PCS travel.

           DOD has been working to upgrade its TDY travel system since 1993,
           when the National Performance Review recommended an overhaul of
           DOD's TDY travel system. Long-standing concerns about the
           efficiency and effectiveness of the existing travel systems
           resulted in the development of DTS to be a centralized, integrated
           system used to process TDY travel. DTS is envisioned as being
           DOD's standard end-to-end travel system. The Defense Finance and
           Accounting Service (DFAS) reported that about $1.2 billion was
           processed through DTS in fiscal year 2006.

           In January 2006 we reported^14 on DOD's difficulties implementing
           DTS. DTS was originally intended to be fully implemented by April
           2002, but this date was changed to September 2006--a slippage of
           over 4 years. The report specified two key challenges facing DTS
           in becoming DOD's standard travel system: (1) developing needed
           interfaces and (2) underutilization of DTS at sites where it has
           been deployed.

           Extensive travel is still processed through legacy systems. One
           such system is the Integrated Automated Travel System (IATS),
           which is used by the Army and several other DOD components. IATS
           is a manual travel system where the traveler submits paper travel
           documents (e.g., travel orders, travel voucher, and receipts) for
           entry into IATS. Once the information is entered into IATS, it is
           processed and a travel reimbursement is made to the traveler.
           Under current implementation plans, not all legacy travel systems
           will be eliminated due to current DTS functionality limitations.
           Despite difficulties implementing DTS, the Institute for Defense
           Analyses recently issued a report^15 stating that DTS is the only
           end-to-end system today with the capability to support all DOD
           policy and business rules.
			  
^13Institute for Defense Analyses, Assessment of the Potential to Improve
the Cost-Effectiveness of the Defense Travel System, IDA Paper P-4200
(March 2007).

^14GAO, DOD Business Transformation: Defense Travel System Continues to
Face Implementation Challenges, [31]GAO-06-18 (Washington, D.C.: Jan. 18,
2006).

           DOD Travel IPIA Reporting

           Responsibility for assessing and reporting DOD's improper
           payments, including travel, for IPIA is the responsibility of the
           Office of the Comptroller. In its fiscal year 2006 PAR,^16 DOD
           reported that its current IPIA review did not identify any
           programs or activities at risk of "significant improper payments"
           in accordance with OMB criteria. However, the department also
           reported that civilian, commercial, and travel pay potentially
           were susceptible to improper payments in excess of $10 million and
           reported estimated improper payment information for these
           programs. Further, the department again reported on its sampling
           and corrective actions concerning its military retirement,
           military health benefits, and military pay programs. Table 1 shows
           the information DOD reported for estimated improper payments for
           six programs, including travel pay, in its fiscal year 2006 PAR.

           Table 1: DOD's Reported Improper Payment Estimates for Fiscal Year
           2006
			  
                                                       Improper payments as a 
                           Estimated improper     percentage of total program 
Program             payments (in millions)                        payments 
Commercial pay                      $550.0                            0.2% 
Military health                      140.0                             2.0 
benefits                                                                   
Military pay                          65.9                             0.1 
Civilian pay                          62.8                             0.1 
Military retirement                   48.8                             0.1 
Travel pay                             8.0                             1.0 
Total                               $875.5                                 

           Source: DOD fiscal year 2006 PAR.
			  
^15IDA Paper P-4200, March 2007.

^16DOD, Performance and Accountability Report: Fiscal Year 2006 (Nov. 15,
2006).

           Further, in its 2006 PAR, DOD described the risk assessment
           process for each of the programs or activities that addressed the
           strength of the internal controls in place to prevent improper
           payments and reported on the results in its disclosure. DOD also
           described the statistical sampling and corrective action plans for
           these six programs. Additionally, DOD summarized the improper
           payment reduction outlook for the military retirement, military
           health benefits, and military pay programs. Finally, DOD described
           its improper payments auditing, accountability information,
           information system usage, and statutory and regulatory barriers
           limiting the department's corrective actions. Excerpts from DOD's
           fiscal year 2006 PAR related to improper payments are reprinted in
           appendix III of this report.
			  
			  Fiscal Year 2006 Improper Payments Reporting and Estimate for the
			  DOD Travel Program Were Incomplete

           In its fiscal year 2006 PAR, DOD estimated approximately $8
           million in travel program improper payments, reported as
           reflecting about 1 percent of reported program payments. While
           this estimate would indicate the program was not at risk of
           significant improper payments under OMB guidance, we found that
           DOD's travel improper payments disclosures for fiscal year 2006
           were incomplete as to the full extent of total travel payments
           made by DOD. The estimate information reported by DOD, which DOD
           used to assess the travel program's risk of significant improper
           payments, only included payments from one system, DTS, which
           processed an estimated 10 percent of DOD's travel. Nonetheless,
           DOD's 2006 PAR describes a travel postpayment review process that
           may mislead the reader to believe that the reported travel
           improper payment estimate represents more than DTS-processed
           travel. Further, the travel improper payment estimate excluded the
           largest user of DTS, the Army, which would likely have increased
           DOD's estimate by over $4 million. Finally, the statistical
           sampling methodology and process used by DOD to estimate DTS
           improper payments as reported for fiscal year 2006 had several
           weaknesses and did not result in statistically valid estimates of
           travel improper payments.
			  
			  Travel Disclosure Reported Only DTS-Processed Travel and Excluded
			  Information on Its Largest User

           In its fiscal year 2006 IPIA disclosure for travel, DOD estimated
           $8 million in improper payments for travel pay, which it reported
           as reflecting about 1 percent of DOD reported travel payments.
           Based on our review, we determined that DOD's estimate of travel
           improper payments was derived from approximately 10 percent of the
           $8.5 billion of DOD travel obligations reported by DOD for the
           fiscal year--excluding a significant portion of travel payments
           from the PAR disclosure. Further, the DTS improper payments
           disclosure did not include data on the largest user of DTS, the
           Army. The reporting of only DTS travel pay and the exclusion of
           Army travel pay processed through DTS was incomplete.

           DOD's fiscal year 2006 reporting of travel improper payments based
           on travel processed by DTS (excluding the Army) also excluded
           travel processed in other systems used by several DOD components,
           including the following:

           o In fiscal year 2006, the Army Corps of Engineers used IATS to
           process all travel. According to information provided by DOD, the
           Army Corps of Engineers processed over $239 million in travel
           payments during fiscal year 2006.
           o Air Force officials reported using the Reserve Travel System^17
           to process $1.5 billion in travel pay in fiscal year 2006.
           o The Army utilized IATS to process TDY, PCS, and other types of
           travel payments. The postpayment review of IATS-processed travel,
           completed by DFAS for the Army, indicated approximately $1.4
           million in improper payments for fiscal year 2006, none of which
           were reported in the DOD fiscal year 2006 PAR disclosure.^18

           DOD also did not include Army travel processed using DTS in its
           fiscal year 2006 PAR. The Army is the largest user of
           DTS--processing a reported $437 million of travel through DTS. As
           shown in figure 1, the Army represented about 35 percent of the
           $1.2 billion of total DTS-processed travel in fiscal year 2006.
           The exclusion of Army improper payment information resulted in
           further incomplete reporting of travel improper payments in DOD's
           fiscal year 2006 PAR. Based on the information provided by DOD,
           the addition of Army travel payments processed through DTS would
           have increased estimated improper payments from $7.97 million to
           $12.6 million. DOD officials told us that the results from Army
           DTS postpayment reviews were not included in the PAR because the
           results were not available in time for the reporting deadline. DOD
           acknowledged that the PAR disclosures regarding this exclusion
           could have been improved.
			  
^17The Reserve Travel System processes PCS travel, Air National Guard
travel, and deployments.

^18We did not perform a detailed review of the IATS postpayment review
results; however, we did observe the process and obtained information on
the results of the review in fiscal year 2006.

           Figure 1: Fiscal Year 2006 DTS-Processed Travel

           Moreover, the descriptive information included in DOD's PAR did
           not disclose the limitation to its reported estimates. Within the
           statistical sampling section of the IPIA reporting in DOD's fiscal
           year 2006 PAR, DOD describes reviews of vouchers from IATS and a
           review of travel conducted by the Army Corps of Engineers, but the
           results of these reviews were not actually included in the fiscal
           year 2006 estimate of improper payments. Thus, the descriptive
           information may mislead readers to believe that the travel
           improper payment estimates are based on a larger population than
           is actually reported.

           When we discussed the exclusion of non-DTS travel improper
           payments with Office of the Comptroller staff they explained that
           they believed the August 2006 release of updated guidance by OMB
           (namely Appendix C of OMB Circular No. A-123) modified which
           programs must be reported. In fiscal year 2006, DOD reported three
           new programs--one of which was travel pay. DOD officials explained
           that because only DTS data were readily available for reporting by
           the November 15 deadline, they decided that was to be the only PAR
           input. DOD acknowledged that the disclosure of this reporting
           limitation could have been improved.
			  
			  DTS Improper Payments Estimates Were Not Prepared According to OMB
			  Guidance and Were Not Statistically Valid

           We also found weaknesses in the postpayment review process used to
           estimate improper payments for DTS-processed travel. Under OMB
           guidance, agencies are required to obtain a statistically valid
           estimate of the annual amount of improper payments. However, we
           found that DOD did not have documented sampling plans that
           detailed how the samples were planned, executed, and evaluated to
           derive a statistically valid improper payments estimate for
           DTS-processed travel. We also found that the methodology used to
           estimate sampling results for nine DOD agencies was not
           statistically valid.^19
			  
			    Lack of Sampling Plans

           Appendix C of OMB Circular No. A-123 provides guidance on using
           statistical sampling to estimate improper payments. According to
           the guidance, improper payment estimates shall be based on a
           statistically valid random sample of sufficient size to yield an
           estimate with a 90 percent confidence interval of plus or minus
           2.5 percentage points (agencies may alternatively use a 95 percent
           confidence interval of plus or minus 3 percentage points around
           the estimate of the percentage of improper payments). The guidance
           also requires agencies to consult a statistician to ensure the
           validity of their sample design, sample size, and measurement
           methodology.

           DFAS was responsible for estimating improper payment information
           for over $1.2 billion in fiscal year 2006 DTS payments. DFAS was
           unable to provide us with its DTS postpayment review sampling
           plan, and according to our discussions with DFAS and Office of the
           Comptroller officials, one was not prepared. At the end of our
           fieldwork, DOD provided us a retrospective document describing the
           fiscal year 2006 sampling plan. The plan described information on
           the sampling method, payment and account selection, treatment of
           missing records and errors, and summary reporting. While OMB's
           guidance does not require a sampling plan, our Standards for
           Internal Control in the Federal Government^20 identify control
           activities such as policies, procedures, and mechanisms that
           enforce management's directives and are an integral part of an
           entity's planning, implementing, reviewing, and accountability for
           stewardship of government resources and achieving effective
           results. The lack of a documented sampling plan, before and during
           sampling, is an internal control weakness in the process used by
           DFAS and could result in testing activities not being completed as
           anticipated by management.

^19According to DOD's fiscal year 2006 PAR, the random postpayment sample
reviews were originally performed to satisfy the requirements of
"certifying officers legislation." 31 U.S.C. S3521(b) authorizes heads of
agencies to carry out a statistical sampling procedure, within certain
parameters, to audit vouchers when the head of the agency determines that
economies will result. In general, certifying officers designated in
writing by the agency are financially liable for any improper, illegal, or
incorrect payment made, and each payment made must be audited. However, 31
U.S.C. S3521(c) provides that certifying and disbursing officers are not
liable for payments that are not audited if they were made in good faith
under a statistical sampling procedure. Because of the weaknesses we
describe below, we have doubts that the DTS postpayment sample reviews
constitute a valid statistical sampling procedure under 31 U.S.C. S3521(b)
for payments processed through DTS. We are referring this matter to the
DOD OIG for further review.

^20GAO, Standards for Internal Control in the Federal Government,
[32]GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).

           For example, our review of testing for fiscal year 2006 DTS
           payments raised questions as to the completeness of the testing
           prior to the projections being made that were included in the PAR.
           Based on our review of the DTS postpayment review results
           database, as of March 2007, about 41 percent of the vouchers
           selected for sampling of fiscal year 2006 payments did not include
           an annotation that the review was completed. When we discussed
           this with DFAS and Office of the Comptroller staff, they responded
           by explaining that the population of DTS trips subject to
           postpayment review for any given month will not represent the
           actual DTS trip records settled or paid for that month due to the
           lag between payment and postpayment review. They also stated that
           statistics or population projections will not be reported for any
           incomplete monthly sample. DFAS staff further clarified that the
           fiscal year 2006 reporting was not necessarily based solely on
           fiscal year 2006 transactions. A component's fiscal year 2006
           projection could be based on activity from both fiscal years 2005
           and 2006 due to the timing of postpayment review. For example, a
           component's fiscal year 2006 estimate could be based on
           postpayment review of activity from April 1, 2005, through March
           31, 2006--a 12-month period overlapping 2 fiscal years.

           In order to assess this explanation, we requested additional
           information from DFAS that would detail what audit months of data
           were used to project and report fiscal year 2006 travel improper
           payments. Office of the Comptroller officials told us that they
           were unable to provide further support because the database did
           not have the needed information. If a written sampling plan, with
           appropriate detail, had been developed for fiscal year 2006 DTS
           postpayment review, it is more likely that DFAS would have
           performed procedures to assure that sampling was completed prior
           to projection and that appropriate documentation was maintained.
			  
			    Incorrect Categorization of Certain Errors

           In order to determine the extent of improper payments for travel
           processed through DTS, DFAS officials explained that the DTS
           postpayment review was conducted using a monthly random sample for
           each component and agency. In fiscal year 2006, this methodology
           resulted in the selection of 168 unique samples from 168 distinct
           populations, with each sample varying in size from 20 test items
           for a defense agency to nearly 500 for a large military component.
           DOD reported that it randomly selected vouchers from the monthly
           population of vouchers based on a 95 percent confidence interval
           with a precision of 2.5 percentage points; we did not verify
           whether the data from which the samples were selected were
           complete or the accuracy of the samples taken.

           Once a sample item was selected, DFAS reviewed the selected
           vouchers and recorded the results of its findings in a database.
           The review process included a recalculation of the travel
           entitlement based on information submitted on the travel
           authorization, DTS data, and supporting documents (e.g., travel
           receipts, credit card information, and DOD and federal travel
           regulations). The reviewer considered the overall validity of a
           payment as well as specific items such as appropriate use of
           organization codes, travel dates, per diem rates, airfare rates,
           and correct mathematical calculation on the voucher.

           If an error was found during the postpayment review process, staff
           recorded it in the database. Each error was classified as one of
           four error types (lodging, per diem, reimbursement paid
           incorrectly, or nonmonetary errors). Errors involving lodging, per
           diem, and reimbursement paid incorrectly are all monetary errors,
           and each error type had between 13 and 46 subclassification types
           reviewers used to more accurately describe the error. For example,
           "reimbursement paid incorrectly" errors could be classified as 1
           of 46 more specific error types, such as airfare paid incorrectly,
           mileage paid incorrectly, and mileage over- or underpaid. DFAS
           used the review results and information in the database to
           estimate monthly improper payment amounts for each component and
           agency.

           During our review, we noted what could be an incorrect
           categorization of "receipts not received" as a nonmonetary error.
           OMB guidance states that "when an agency's review is unable to
           discern whether a payment was proper as a result of insufficient
           or lack of documentation, this payment must also be considered an
           error." While DFAS categorized this as a nonmonetary error, this
           type of error could potentially be a monetary error, but was not
           included in the estimate of improper payments.^21 We noted nearly
           200 instances where a payment was categorized as "receipts not
           received"--a nonmonetary error. However, because the monetary
           value of the error was not provided, we were unable to determine
           the effect of this incorrect classification on travel improper
           payments reported in DOD's fiscal year 2006 PAR. When we discussed
           this categorization error with DOD officials, they explained that
           during the review process, DFAS allows a traveler a maximum of 30
           working days to submit receipts that were not available for
           review. During this time, the sample item is considered open and
           the error is categorized as nonmonetary. If after the allotted
           time period the receipts are not provided, the amount is
           considered a monetary error. DOD believes the approximately 200
           cases are likely those where the examiner was awaiting receipts
           for final determination of their propriety. However, on the basis
           of our review, we noted that all of these items had a completed
           date annotated in the database, suggesting they were completed
           audits--not audits awaiting additional documentation. We requested
           additional documentation from DOD that would support its
           assessment of these vouchers. DOD did not provide any
           documentation but did note in a written response to us that "all
           items are reviewed and settled with a determination of whether or
           not they are improper payment errors, and improper payments are
           reported as such. Incorrect or incomplete documentation may relate
           to nonmonetary errors that are also not improper payments (such as
           the wrong form being used or missing elements that are DOD
           internal procedural requirements, but are not required by law to
           support the payment)."
			  
			    Flawed Methodology Used to Estimate Improper Payments at DOD
				 Agencies

           DOD also utilized a flawed methodology to estimate DTS improper
           payments at nine DOD agencies.^22 Information reported for the
           defense agencies in the fiscal year 2006 PAR was prepared by
           totaling the monthly sample results from the nine defense
           organizations and then estimating an improper payment amount based
           on this aggregate data instead of deriving a monthly estimate, and
           then aggregating the estimated results and related confidence
           intervals. As described above, monthly samples were taken by
           component and agency for postpayment review. Despite the
           segmentation of the population during the testing process, the
           information reported by DFAS to the Office of the Comptroller has
           nine defense organizations reported as "other" and uses the sum of
           the nine organizations' sample results to estimate an error
           amount. By selecting samples for each organization separately and
           aggregating the results from the sample to estimate the total
           error rate, estimates made for the organizations were incorrectly
           projected to the population. DFAS reports that for fiscal year
           2007 it will ensure that sample statistics and population
           estimates for defense agencies are computed at the agency level
           and then summarized.

^21DOD travel regulations require submission of receipts for lodging
expenses regardless of amount and for all other expenditures of $75 or
more. These regulations implement Internal Revenue Service requirements
for an "accountable plan."

^22These 9 include 8 defense agencies and 1 unified combatant command.
There are 16 defense agencies in total. Samples were also selected for a
population group labeled "unknown" but from documentation provided,
testing of these samples was not completed nor was an estimate of improper
payments.

           DOD Faces Challenges in Plans to More Fully Assess Travel Improper
			  Payments

           As discussed in the previous section, DOD's process for estimating
           and reporting improper payments for its travel program for
           inclusion in its fiscal year 2006 PAR was significantly flawed.
           Going forward, DOD plans to use the results from its annual
           Improper Payments Survey, conducted by the Office of the
           Comptroller, to determine the extent of improper payments in
           several programs, including travel. The survey of fiscal year 2006
           payments^23 was not prepared in time for inclusion in the fiscal
           year 2006 PAR, in November 2006, but has since been completed. DOD
           plans to use these results for its fiscal year 2007 PAR reporting.
           We reviewed this survey, as a component of the department's risk
           assessment for improper payments in the travel program. Our review
           identified several weaknesses in the survey and reported results
           which, if uncorrected, will limit the department's ability to
           fully assess improper payments in the travel program. We
           identified weaknesses in DOD's guidance regarding the estimation
           of travel improper payments and lack of oversight and review by
           the Office of the Comptroller over implementation of the survey
           and its results. The department is also taking other steps to
           improve its reporting under IPIA. To address reporting issues
           identified in its fiscal year 2006 auditor's report, DOD has
           established a Program Officer for Improper Payment and Recovery
           Auditing. Further, the department is establishing an improper
           payment working group and held a "Department of Defense Improper
           Payments Information Act Conference."
			  
^23DOD officials refer to the improper payments survey of payments made in
fiscal year 2006 as the fiscal year 2007 survey, because it was prepared
in fiscal year 2007. For the purposes of this report, the improper
payments survey of payments made in fiscal year 2006 will be known as the
fiscal year 2006 survey, because it discloses information related to
fiscal year 2006 payments.

           Improper Payments Survey Results Unreliable Due to Limited Guidance
			  and Oversight by the Office of the Comptroller

           DOD assesses its programs, including travel, for improper
           payments, based on its departmentwide annual Improper Payments
           Survey. The survey, distributed annually by the Office of the
           Comptroller, queries DOD components^24 to determine the extent of
           improper payments in several programs, including travel, across
           the department. We reviewed this survey as a component of the
           department's risk assessment for improper payments in the travel
           program. Our review indicated several weaknesses in the survey and
           reported results, including weaknesses in the guidance regarding
           the estimation of travel improper payments and lack of oversight
           and review of the survey and its results. These weaknesses, if
           uncorrected, will limit the department's ability to fully assess
           improper payments in the travel program.
			  
			    Limited Guidance Provided to DOD Components to Direct IPIA Assessment

           In order to more fully assess its travel program for improper
           payments, the Office of the Comptroller issues its annual Improper
           Payments Survey to DOD components. The survey requests that each
           component report to the Office of the Comptroller the amount of
           improper payments for several programs^25 throughout the
           department and to specify additional programs or activities as
           needed. For fiscal year 2006, the Office of the Comptroller issued
           guidance on completion of the IPIA survey to DOD officials. The
           guidance included a cover memorandum which requested that all
           services and agencies review and report on any program or activity
           payment for which the component computed the entitlement.
           Accompanying the memorandum were Appendix C of OMB Circular No.
           A-123, results of the previous year's Improper Payments Survey,
           and a survey template for the component to use to submit survey
           results. The survey for fiscal year 2006 was sent to the
           components in January 2007, with survey results due to the Office
           of the Comptroller by January 26, 2007. The completed survey was
           provided to us in April 2007. DOD also used the survey to report a
           more complete travel population to OMB. This report detailed
           improper payments information for $3.4 billion in travel payments
           rather than the $824 million reported in the PAR. The survey also
           identified $20 million in travel improper payments, a $12 million
           increase from the $8 million reported in DOD's fiscal year 2006
           PAR. Eight entities, other than DFAS, reported information in the
           fiscal year 2006 IPIA survey for travel pay. A summary of the
           improper payment survey results for travel is shown in table 2.
			  
^24The memorandum issuing guidance on completion of the survey of 2006
payments was addressed to the assistant secretaries of the military
departments (Financial Management and Comptrollers), the U.S. Marine Corps
Assistant Deputy Commandant for Programs and Resources, the Inspector
General of the Department of Defense, the directors of defense agencies,
the Commander of the Army Corps of Engineers, and the directors of DOD
field activities.

^25The programs and activities provided were based on the prior year
survey and included total military pay; retired/annuitant pay and
descendent pay; civilian pay; travel pay; health care; commercial pay;
afloat & deployed forces; and intra- and intergovernment payments.

Table 2: Improper Payments Survey Results: Travel, Fiscal Year 2006

                                             Absolute dollar value   Improper 
                          Dollar value total     total of improper    payment 
Program/activity      of FY 2006 payments   payments in FY 2006 percentage 
Navy travel pay                                                            
Travel pay (non-DTS)          $50,038,158              $564,795       1.1% 
by Navy                                                                    
Marine Corp In-House          467,678,749             1,064,000        0.2 
Travel Pay (IATS)                                                          
Marine Corp Travel                144,159                     0        0.0 
Pay (IATS)                                                                 
Total Navy travel pay         517,861,066             1,628,795        0.3 
Army travel pay                                                            
Army-Korea - travel            12,618,749                     0        0.0 
pay                                                                        
Army-Europe - travel            3,936,946                     0        0.0 
pay                                                                        
Army Corps of                 239,350,696                57,279       0.02 
Engineers - travel                                                         
pay                                                                        
Total Army travel pay         255,906,391                57,279       0.02 
Other component                                                            
travel pay                                                                 
Air Force Reserve             101,627,181             4,597,319        4.5 
Travel System travel                                                       
Defense Security                  257,436                     0        0.0 
Service PCS travel                                                         
Total other                   101,884,617             4,597,319        4.5 
components travel pay                                                      
Travel pay processed                                                       
by DFAS                                                                    
IATS                        1,242,918,935             1,456,472        0.1 
DTS Air Force                 355,167,040             5,576,798        1.6 
DTS Navy                      312,163,900               373,029        0.1 
DTS Marine Corps               49,545,238             1,301,866        2.6 
DTS Army                      437,230,722             4,629,209        1.1 
DTS Other DOD                 106,733,572               722,876        0.7 
agencies                                                                   
Total travel pay            2,503,759,407            14,060,250        0.6 
processed by DFAS                                                          
Total travel pay           $3,379,411,481           $20,343,643       0.6% 

Source: DOD survey of fiscal year 2006 payments.

Going forward, considering the complexity of DOD, extent of travel
throughout the department, and information reported in the survey of
fiscal year 2006 payments, the guidance issued by the Office of the
Comptroller does not provide adequate information to allow components to
properly report improper payment information needed for a useful
assessment. Our internal control standards^26 identify information and
communications as one of the five standards for internal control. This
standard states that information should be communicated to those within
the entity in a form that enables them to carry out their
responsibilities. The guidance issued by the Office of the Comptroller to
DOD components does not provide adequate guidance specific to DOD to allow
for components to prepare reliable estimates of improper payments. For
example, while OMB guidance requires that agencies obtain a statistically
valid estimate of the annual amount of improper payments in a program,
Office of the Comptroller guidance does not adequately address sampling
methodologies to employ, or provide contact information on how to seek
assistance with this matter. Further, the guidance does not offer detailed
information on the steps needed to adequately implement IPIA at DOD or
examples of improper payments relevant to DOD.

In addition, the guidance does not provide sufficient procedures on how to
identify or assess risk factors to assist DOD components in identifying
programs and activities vulnerable to improper payments, such as
assessments of internal control, audit report findings, and human capital
risks related to staff turnover, training, or experience. Assessing the
effect of risk conditions identified during the risk assessment plays a
major role in effectively determining the overall risk level of an
agency's operations. Some risk conditions may affect a program or activity
to a greater or lesser degree. Likewise, not all risk conditions may be
relevant to each program or activity. This type of risk identification and
assessment is consistent with our previous recommendation^27 that OMB
establish risk factors in its guidance for agencies to consider, and is
also consistent with our standards of internal control^28 and executive
guide on strategies to manage improper payments,^29 which provides a
framework for conducting a comprehensive risk assessment.

^26[33]GAO/AIMD-00-21.3.1 .

^27GAO, Improper Payments: Agencies' Fiscal Year 2005 Reporting under the
Improper Payments Information Act Remains Incomplete, [34]GAO-07-92
(Washington, D.C.: Nov. 14, 2006).

^28 [35]GAO-AIMD-00-21.3.1 .

  Improper Payment Estimate Process for Non-DTS Travel Is Decentralized

The process each DOD component uses to estimate its travel improper
payments and report to the Office of the Comptroller varies throughout the
department and is largely decentralized. Further complicating the
assessment for travel improper payments are the numerous systems used to
process travel throughout the department. For survey reporting, DFAS
(Indianapolis) is responsible for reporting all travel processed through
DTS and certain payments processed through IATS for Army and some other
defense agencies. The determination of all other travel pay and associated
improper payments is the responsibility of the component that computed the
entitlement. The Office of the Comptroller relies on each component to
determine and report this information. In our review of the fiscal year
2006 Improper Payments Survey, we noted that the survey results were not
always statistically valid and in some cases appear unreasonable. Improved
guidance by the Office of the Comptroller will be necessary to assure that
survey information is reliable and complete for IPIA reporting.

DFAS is responsible for estimating and reporting travel improper payments
for travel processed for the Army by the IATS system. In fiscal year 2006,
DFAS (Indianapolis) did not conduct a statistically valid sample and
review of travel payments processed through IATS. Instead, officials from
DFAS performed limited reviews of IATS vouchers paid to determine if any
such payments were improper. For example, DFAS reviewed payments to
determine if payments for the same travel activity had been paid in both
DTS and IATS--essentially a duplicate payment review. This review found
$1.5 million in improper payments in fiscal year 2006, which was reported
in the survey, as shown previously in table 2. Such DFAS IATS reviews
cannot be used to estimate the value of improper payments to the entire
IATS population.

The Air Force reports improper payment information on travel processed
through the Reserve Travel System. For fiscal year 2005, the Air Force
sought the guidance of the Air Force Audit Agency to determine if the Air
Force had developed and used an effective methodology to estimate and
report the dollar amount of improper travel payments processed through the
Reserve Travel System. The Air Force Audit Agency reported^30 that the
methodology used by the Air Force to estimate Reserve Travel System
improper payments did not meet IPIA requirements. As part of the audit,
the Air Force Audit Agency developed and provided the Air Force with a
statistically valid sampling methodology for centralized reviews that it
reported would meet IPIA reporting requirements.^31 The Air Force told us
that it now follows the sampling methodology developed by the Air Force
Audit Agency. As shown in table 2, utilizing this methodology, the Air
Force estimated nearly $4.6 million in travel improper payments were
processed in fiscal year 2006 by the Reserve Travel System--an improper
payment estimate of approximately 4.5 percent of the $101 million in
payments processed by the Reserve Travel System during this period.
However, after reporting its estimated results in the survey for fiscal
year 2006 payments, the Air Force revised the results of its IPIA review.
In a memo dated August 8, 2007, the Air Force disclosed an underestimation
of total Reserve Travel System payments, revising the reported amount to
$1.5 billion, instead of the $101 million originally reported. Based on a
centralized review, the Air Force projected its improper payments to be
$13.6 million--an error rate of 0.9 percent.^32

29GAO, Strategies to Manage Improper Payments: Learning From Public and
Private Sector Organizations, [36]GAO-02-69G (Washington, D.C.: October
2001).

The Army also has a decentralized review process for non-DTS travel
reimbursements for improper payments. As described above, DFAS
(Indianapolis) is responsible for identifying and reporting Army IATS
payments calculated and disbursed by DFAS. However, the Army also reported
travel improper payments for three other programs or activities in the
fiscal year 2006 improper payments survey: Army--Korea; Army--Europe; and
the Army Corps of Engineers.

           o Staff responsible for the improper payment review for the Korea
           command explained the process they follow to estimate and report
           improper payments, which is completed as part of the internal
           control process and includes an annual inspection. In fiscal year
           2006, this review included a reinspection of every voucher for a
           1-month period. This review discovered few improper payments. The
           future plans for improper payment reviews were unknown when we
           spoke to the Army-Korea staff due to ongoing DTS implementation
           there. In the fiscal year 2006 survey, Army--Korea reported no
           improper payments and over $12.6 million in travel payments.
           o The improper payment review for Army--Europe is even more
           decentralized, with finance officers throughout the region
           preparing improper payment information independently. From our
           discussion with Army--Europe staff, there is no formal process for
           reviewing and reporting improper payment information throughout
           the region beyond the IPIA guidance provided by the Office of the
           Comptroller. In the fiscal year 2006 survey, Army--Europe reported
           no improper payments and over $3.9 million in payments.
           o During fiscal year 2006, the Army Corps of Engineers processed
           all of its travel using IATS. The Army Corps of Engineers finance
           center is responsible for compiling and reporting travel improper
           payments. Officials from the Army Corps of Engineers finance
           center reported that all TDY and PCS vouchers greater than or
           equal to $2,500 were subject to postaudit review, and a sample of
           every 366th TDY voucher less than $2,500 was also reviewed by
           finance center staff. The sampling plan was designed to have a 95
           percent confidence level plus or minus 2 percent. A DFAS
           statistician attested to the validity of the sampling methodology
           used by the Army Corps of Engineers. In the fiscal year 2006
           survey, the Army Corps of Engineers reported $57,279 in travel
           improper payments.

^30Air Force Audit Agency, Improper Payments Information Act of
2002-Travel Payments, F2007-0002-FB1000 (Nov. 20, 2006).

^31The report recommended that the Air Force "select a statistical sample
of payments for review from the Reserve Travel System database. According
to OMB guidance, the sample should be of sufficient size to yield an
estimate with a 90 percent confidence interval of plus or minus 2.5
percent around the erroneous payment estimate."

^32The Air Force also reported that the reviews were still ongoing as of
August 8, 2007, and they were awaiting documentation for 42 vouchers (of
the 463 sample items) in order to complete the audit. However, the Air
Force did not believe these outstanding items would significantly change
the final report.

             Limited Oversight by Office of the Comptroller Contributes to
				 Unreliable Assessment

           Our review indicated weaknesses in the survey and reported results
           for travel were caused, in part, by limited oversight and review
           by the Office of the Comptroller of the survey and its results.
           These weaknesses include a survey that does not consider the
           entire population of travel payments for fiscal year 2006 and
           information reported that appears unreliable. Without improved
           oversight by Office of the Comptroller, the department's future
           reporting under IPIA could be compromised.

           Our internal control standards^33 include monitoring as one of the
           five standards for internal control. The standards provide that
           internal control should generally be designed to assure that
           ongoing monitoring occurs in the course of normal operations and
           includes regular management and supervisory activities,
           comparisons, and reconciliations. During our review of the fiscal
           year 2006 improper payments survey, we noted several weaknesses
           that indicate a lack of appropriate monitoring or oversight by the
           Office of the Comptroller. The most notable weakness we found in
           the survey is the population of travel payments from which
           improper payments were estimated. As shown in figure 2, in fiscal
           year 2006, $8.5 billion was obligated for travel by DOD as
           reported in the DOD budget for fiscal year 2008. The improper
           payments survey for this same time period reported a total travel
           expenditure population of $3.4 billion--a difference of $5.1
           billion. The survey results were more complete than the PAR
           reporting, which reported on approximately $824 million in travel
           payments. The exclusion of such a significant portion of travel
           payments in the survey decreases its effectiveness as an improper
           payments assessment tool and indicates inadequate monitoring of
           the survey process by the Office of the Comptroller. A strong
           internal control environment, particularly monitoring, should have
           included regular reconciliations and comparisons that would have
           brought this discrepancy to management's attention in a timely
           manner.

^33 [37]GAO/AIMD-00-21.3.1 .

Figure 2: DOD Travel Populations for Fiscal Year 2006

The Office of the Comptroller did not clearly define DOD's travel
population before collecting the improper payment information for its
fiscal year 2006 improper payment survey. Because DOD did not clearly
define the full population of travel payments, the full extent of travel
improper payments at the department is unknown. Further, until DOD
establishes guidance with sufficiently detailed procedures on how to
define its population for travel IPIA reporting, future annual reporting
is unlikely to be comparable across fiscal years, which could prevent
users of IPIA information from determining progress made in reducing
improper payments.

When we met with Office of the Comptroller officials in March 2007, we
discussed the importance of a complete travel payment population. At that
time, Office of the Comptroller officials said they were not aware that
the travel payment population was a potential problem. However, after
discussion they agreed to reconcile the difference between the budget
obligation amounts ($8.5 billion) and the payment amounts reported in the
fiscal year 2006 improper payments survey ($3.4 billion). In September
2007, the Office of the Comptroller provided reconciliation information
for approximately $1.9 billion in travel payments and described the
following factors that may have contributed to the remaining variance:

           o classified program expenditures that are not included in IPIA
           reporting,
           o timing differences between obligations and expenditures, and
           o reviews and reporting based on audit month rather than actual
           reporting period (e.g., audit and reporting year may run from
           August through July while the fiscal year is October through
           September).

           As reported in the PAR, DOD travel improper payments appear
           immaterial and the fiscal year 2006 reported travel payment
           population was substantially less than other programs reported on
           by DOD. While this might decrease the focus given to the travel
           program, we do not consider the information reliable and if, for
           example, the total population of $8.5 billion was reported on,
           with an improper error rate of 1 percent as estimated by DOD,
           travel improper payments would be approximately $85 million. This
           is a substantial amount of improper payments and would exceed the
           improper payment estimates for all but two programs as reported in
           fiscal year 2006--military health benefits and commercial pay.

           In addition to the incomplete travel payment population, we noted
           weaknesses in the oversight and review of some data reported in
           the improper payments survey. Four program/activities (Marine Corp
           Travel Pay (IATS), Army-Korea, Army-Europe, and the Defense
           Security Service PCS travel) reported no improper payments on $17
           million in associated travel payments. We did not review vouchers
           to determine if any improper payments existed in this population
           but based on the description of the improper payments review we
           obtained from Army-Korea and Army--Europe, we do not believe the
           review process used provided a reliable basis for IPIA reporting
           for those components. For example, Army-Korea's review only
           considered a review of payments during a 1-month period, instead
           of a statistically valid sample of payments for the fiscal year.
           Additionally, one entity reporting under Army-Europe reported that
           because they preaudit their travel vouchers they have very few
           improper payments. Another official told us that Army-Europe does
           little to identify and report travel improper payments.
           Army-Europe staff told us they were not trained in the proper
           method for reporting improper payment information. While it is
           possible there may not be any improper payments in a population,
           the review process was inadequate to provide a basis for reporting
           no improper payments on $17 million in travel payments. When we
           discussed these concerns, Office of the Comptroller staff informed
           us that they are doing further analysis to determine the accuracy
           and completeness of the information. Further, the staff told us
           that they use variance analysis to determine if the information
           submitted is reasonable based on previously reported information.
			  
			  Office of the Comptroller Taking Steps to Improve Reporting of Travel
			  Improper Payments

           While there are serious challenges facing the Office of the
           Comptroller in the assessment and reporting of travel improper
           payments, the office is taking steps to improve its oversight of
           the IPIA estimating and reporting process. Recently, the Office of
           the Comptroller established a Project Officer for Improper
           Payments and Recovery Auditing. Additionally, the DOD Project
           Officer has established a working group, comprised of
           representatives from numerous components, intended to further
           improve DOD's compliance with IPIA reporting.

           To introduce DOD component participants to improper payment
           issues, including identifying and reporting improper payments,
           establishing and achieving reduction targets, and recovery
           auditing, the Office of the Comptroller held the "Department of
           Defense Improper Payments Information Act Conference." The
           conference, held in May 2007, included presentations by officials
           from OMB, DFAS, Navy, DOD OIG, and Office of the Comptroller.
           Additionally, there was a 3-hour session dedicated to statistical
           analysis, with presentations by OMB and DFAS on statistical
           methodologies. Such conferences or other training activities, if
           held on a regular basis, could serve to better train DOD staff
           responsible for improper payment reporting and help assure that
           information provided to the Office of the Comptroller for
           reporting is reliable and prepared in accordance with OMB and DOD
           guidance.

           Further, the Office of the Comptroller provided us with a draft of
           the "Recommended Post Payment Sampling Plan for Defense Travel
           System, WinIATS & PCS Travel Claims," for fiscal year 2008. This
           sampling plan details the sampling method, selection process,
           treatment of missing records, information on completing the target
           sample, reporting errors, and summary reporting. If implemented
           effectively, this methodology should result in simple random
           sampling of DTS payments by component and the sampling of DOD
           agencies in aggregate. The plan is estimated to reduce the number
           of DTS sample items from approximately 43,600 in fiscal year 2007
           to 17,600 in fiscal year 2008--a 26,000 decrease in tested sample
           items for the year, largely from a reduction in sampling of DOD
           agencies. This decrease should allow DFAS to perform more timely
           postpayment reviews because the number of sample items to be
           reviewed would be less.
			  
			  Conclusions

           Although DOD has made some progress in implementing the
           requirements of IPIA for its travel program, challenges remain in
           ensuring that the complete population of all appropriate travel
           payments has been identified and reviewed to reliably determine
           its susceptibility to significant improper payments. As DOD
           continues to improve its IPIA efforts in the travel program, the
           agency should be better able to identify and report improper
           payments. This is not a simple task and will not be easily
           accomplished, particularly in light of the decentralized nature of
           DOD's travel program. For example, although DTS is intended to
           centralize travel processes at DOD, that goal has not yet been
           achieved, and an estimated 90 percent of DOD's travel payments for
           fiscal year 2006 were computed outside of DTS. Improved guidance
           and oversight by the Office of the Comptroller will be key to
           ensuring that complete and reliable estimates of improper payments
           are reported. With the ongoing imbalance between revenues and
           outlays across the federal government, and the Congress's and the
           American public's increasing demands for accountability over
           taxpayer funds, improving DOD's ability to identify, reduce, and
           recover travel improper payments is even more critical.

			  Recommendations for Executive Action

           In order to improve the usefulness and completeness of IPIA
           reporting for DOD's travel program, we recommend that the
           Secretary of Defense direct the DOD Comptroller to take the
           following four actions:

           o Establish and implement policies and procedures to reliably
           identify the complete population of DOD travel payments.
           o Establish and implement policies and procedures to report a
           valid improper payment estimate for the population.
           o Develop and implement guidance for the preparation of improper
           payment estimates, to include (1) how to compute a statistically
           valid estimate of improper payments, and (2) the consideration of
           risk factors associated with vulnerability to improper payments.
           o Establish and implement policies and procedures specifying
           actions to oversee the data collection process for travel improper
           payments to be included in the annual PAR, including, at a
           minimum: (1) periodic reviews of processes used by components to
           prepare improper payment estimates, and (2) reviews of information
           reported in the improper payment survey to assure that the
           population being reported is complete, and the improper payment
           estimate data reported are reliable and complete.
			  
			  Agency Comments and Our Evaluation

           DOD provided written comments on a draft of this report, which are
           reprinted in appendix II. In its written response, DOD concurred
           with three of the recommendations and partially concurred with the
           fourth. DOD partially agreed with our recommendation that the
           department develop and implement guidance for the preparation of
           improper payments estimates, including how to compute a
           statistically valid estimate of improper payments and the
           consideration of risk factors associated with vulnerability to
           improper payments. Although it concurred with the intent of our
           recommendation, DOD stated that OMB's Circular No. A-123, Appendix
           C, provided guidance for statistical sampling and for identifying
           risk factors and that the decentralized nature of the DOD
           components and the varying systems used for travel pay
           computations make a detailed universal approach impractical. We
           agree that DOD is a decentralized organization, with a wide
           breadth of activities and components. Indeed, this is the primary
           reason for our recommendation that DOD develop and implement
           additional guidance for use by its components. OMB's guidance
           provides a broad framework for use by agencies across the federal
           government. However, individual agencies are responsible for
           implementing OMB's guidance with policies and procedures that meet
           the specific needs of their operations. Therefore, we continue to
           recommend that DOD issue guidance to provide potential sampling
           methodologies, contact information on how to seek assistance with
           this matter, information on the steps needed to adequately
           implement IPIA at the component level, and examples of improper
           payments relevant to DOD. This guidance should be developed in a
           form that enables DOD staff across the broad range of DOD
           activities and components to carry out their responsibilities.

           Further, DOD commented that it had completed action on all
           recommendations. Specifically, DOD stated that a policy memorandum
           issued by the Deputy Chief Financial Officer, dated November 27,
           2007, addressed all needed actions. This document consists of a
           cover memorandum, excerpts from Appendix C of OMB Circular No.
           A-123, and DOD improper payment component contact information. As
           part of our standard recommendation follow-up process, we will
           consider this policy memorandum as well as DOD's progress in
           implementing it throughout the department. It is important that
           DOD takes action to ensure that such policy guidance is fully and
           effectively implemented if DOD is to improve the usefulness and
           completeness of its IPIA report for the travel program.

           DOD also provided technical comments, which we incorporated as
           appropriate.

           We are sending copies of this report to other interested
           congressional committees and to affected federal agencies. Copies
           of this report will be made available to others upon request. In
           addition, this report is available at no charge on the GAO Web
           site at [38]http://www.gao.gov .

           If you or your staff have any questions regarding this report,
           please contact me at (202) 512-9095 or at [39][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 IV.

           McCoy Williams
			  Director, Financial Management and Assurance

           List of Congressional Committees

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Ted Stevens: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Thomas R. Carper: 
Chairman: 
The Honorable Tom Coburn: 
Ranking Member: 
Subcommittee on Federal Financial Management, Government Information, 
Federal Services, and International Security: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Ike Skelton: 
Chairman: 
The Honorable Duncan L. Hunter: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable John P. Murtha: 
Chairman: 
The Honorable C.W. Bill Young: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

           Appendix I: Scope and Methodology

           To assess the completeness and accuracy of the Department of
           Defense's (DOD) fiscal year 2006 Improper Payments Information Act
           of 2002 (IPIA) disclosure for travel improper payments, we
           reviewed the IPIA disclosures in its performance and
           accountability reports (PAR) for fiscal years 2003, 2004, 2005,
           and 2006. We also contacted representatives from DOD Office of
           Inspector General to discuss their assessment of DOD's compliance
           with IPIA for fiscal year 2006. We met with representatives from
           the Office of the Under Secretary of Defense (Comptroller) (Office
           of the Comptroller) to discuss their preparation of IPIA
           disclosure information included in the DOD PAR. We met with and
           obtained supporting documentation from the Defense Finance and
           Accounting Service (DFAS) officials responsible for estimating and
           reporting improper payment information for travel processed by the
           Defense Travel System (DTS). We observed the processing of Army
           travel through the Integrated Automated Travel System (IATS) and
           the postpayment review process for both Army IATS-processed travel
           and DTS-processed travel. We analyzed information provided by DFAS
           officials related to travel postpayment review to determine if it
           was complete and reliable for reporting purposes. We also reviewed
           associated improper payment reporting information. Additionally,
           we reviewed applicable laws, Office of Management and Budget
           guidance, DOD procedural directives, DOD memos, and other guidance
           used by DOD to guide IPIA reporting to determine what legislation
           and guidance was in place.

           To assess DOD's planned efforts to improve and refine its
           processes for estimating and reporting on travel improper payments
           we met with staff from the Office of the Comptroller. We obtained
           information from representatives from Army-Korea, Army-Europe, the
           Army Corps of Engineers, Air Force, and Navy to determine how each
           component reviewed travel payments processed through its
           respective legacy systems for improper payments and the reporting
           of that information to the Office of the Comptroller. We reviewed
           the Improper Payments Survey for fiscal year 2006 payments and met
           with officials from the Defense Travel Management Office and the
           Project Management Office for the Defense Travel System. We
           attended the "Department of Defense Improper Payments Information
           Act Conference."

           We did not independently verify the reliability of all information
           provided. However, we did compare it with other supporting
           documents, when available, to determine data consistency and
           reasonableness. Based on our analysis, we believe the information
           we obtained is sufficiently reliable for its use in this report.

           We conducted this performance audit from November 2006 through
           September 2007 in accordance with generally accepted government
           auditing standards.

           We provided a draft of this report to DOD for comment. DOD
           provided written comments, which are presented in the Agency
           Comments and Our Evaluation section of this report and are
           reprinted in appendix II. DOD also provided technical comments,
           and we made revisions as appropriate.
			  
			  Appendix II: Comments from the Department of Defense
			  
			  Appendix III: Excerpts from DOD's Fiscal Year 2006 PAR
			  
			  Appendix IV: GAO Contact and Staff Acknowledgements
			  
			  GAO Contact

           McCoy Williams, (202) 512-9095 or [40][email protected]

			  Staff Acknowledgments

           In addition to the contact named above, the following individuals
           also made significant contribution to this report: Dianne
           Guensberg, Assistant Director; Sharon Byrd; Francine DelVecchio;
           Heather Dunahoo; and Bradley Klingsporn.
			  
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(195114)

To view the full product, including the scope
and methodology, click on [47]GAO-08-16 .

For more information, contact McCoy Williams at (202) 512-9095 or
[email protected].

Highlights of [48]GAO-08-16 , a report to congressional committees

December 2007

DOD TRAVEL IMPROPER PAYMENTS

Fiscal Year 2006 Reporting Was Incomplete and Planned Improvement Efforts
Face Challenges

Fiscal year 2006 was the first year that the Department of Defense (DOD)
reported improper payment information for its travel program under the
Improper Payments Information Act of 2002 (IPIA). For fiscal year 2006,
DOD reported obligations of approximately $8.5 billion for travel.
Congress mandated that GAO assess the reasons why DOD is not fully in
compliance with IPIA related to travel expenditures. In May 2007, GAO
issued an initial report in response to this mandate. To further respond,
GAO assessed (1) the completeness and accuracy of DOD's fiscal year 2006
IPIA travel disclosure in its performance and accountability report (PAR),
and (2) DOD's planned efforts to improve and refine its processes for
estimating and reporting on travel improper payments. To complete this
work, GAO reviewed DOD's IPIA reporting, IPIA, Office of Management and
Budget's (OMB) IPIA implementing guidance, and met with cognizant DOD
officials.

[49]What GAO Recommends

GAO makes four recommendations to DOD to improve the usefulness and
completeness of IPIA reporting associated with its travel program. DOD
concurred with three of the recommendations and partially concurred with
the remaining one. DOD referred to a recently issued policy memorandum in
its response. Additional action will be needed to fully and effectively
implement this policy.

In its fiscal year 2006 PAR, DOD reported an estimate of approximately $8
million in travel improper payments, reflecting about 1 percent of
reported travel payments. While this estimate would indicate the program
was not at risk of significant erroneous payments under OMB guidance,
DOD's improper payment travel disclosure for fiscal year 2006 was
incomplete. The DOD travel payment data used to assess the program's risk
of significant improper payments only included payments processed by the
Defense Travel System (DTS)--approximately 10 percent of the $8.5 billion
of DOD travel obligations reported for fiscal year 2006. Further, DOD's
2006 PAR described a travel postpayment review process that may mislead
readers to believe that the reported travel improper payment estimate
represents more than DTS-processed travel. The travel improper payment
estimate also excluded the largest user of DTS, the Army, which would
likely have increased DOD's estimate by over $4 million. Finally, the
statistical sampling methodology and process used by DOD to estimate DTS
improper payments as reported for fiscal year 2006 had several weaknesses
and did not result in statistically valid estimates of travel improper
payments.

DOD is taking steps to more fully assess and report on its travel program
for improper payments for future IPIA reporting. DOD's planned assessment
is to be based on an annual Improper Payments Survey conducted by the
Office of the Undersecretary of Defense (Comptroller). However, GAO's
review identified several weaknesses with the survey and reported results,
including limited guidance on how to estimate travel improper payments and
a lack of oversight and review over implementation of the survey and its
results. As shown in the figure below, there were substantial
discrepancies among the travel populations reported in the PAR, improper
payment survey, and fiscal year 2006 travel obligations. The exclusion of
such a significant portion of travel expenditures in the survey decreases
its effectiveness as an improper payments assessment tool. DOD has also
established a Program Officer for Improper Payment and Recovery Auditing,
an improper payment working group, and held a "Department of Defense
Improper Payments Information Act Conference."

DOD Travel Populations for Fiscal Year 2006

References

Visible links
  29. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1268
  30. http://www.gao.gov/cgi-bin/getrpt?GAO-07-767R
  31. http://www.gao.gov/cgi-bin/getrpt?GAO-06-18
  32. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
  33. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
  34. http://www.gao.gov/cgi-bin/getrpt?GAO-07-92
  35. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
  36. http://www.gao.gov/cgi-bin/getrpt?GAO-02-69G
  37. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
  38. http://www.gao.gov/
  39. mailto:[email protected]
  40. mailto:[email protected]
  41. http://www.gao.gov/
  42. http://www.gao.gov/
  43. http://www.gao.gov/fraudnet/fraudnet.htm
  44. mailto:[email protected]
  45. mailto:[email protected]
  46. mailto:[email protected]
  47. http://www.gao.gov/cgi-bin/getrpt?GAO-08-16
  48. http://www.gao.gov/cgi-bin/getrpt?GAO-08-16
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