Management Letter: Recommendations for Improvements to MCC's	 
Internal Controls and Policies on Premium Class Air Travel	 
(29-FEB-08, GAO-08-468R).					 
                                                                 
On September 28, 2007, GAO issued a report detailing our findings
of improper and abusive premium class travel governmentwide. The 
audit was performed at the request of the Permanent Subcommittee 
on Investigations, Committee on Homeland Security and		 
Governmental Affairs, U.S. Senate, and Senator Grassley,	 
Committee on Finance, U.S. Senate. As part of the audit, we	 
tested premium class transactions at the Millennium Challenge	 
Corporation (MCC). While our report provided recommendations to  
the General Services Administration (GSA) and the Office of	 
Management and Budget (OMB), the purpose of this letter is to	 
report on specific matters identified during our audit that	 
relate to weaknesses in internal controls at MCC. This letter	 
contains three recommendations that warrant management's	 
consideration.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-468R					        
    ACCNO:   A81190						        
  TITLE:     Management Letter: Recommendations for Improvements to   
MCC's Internal Controls and Policies on Premium Class Air Travel 
     DATE:   02/29/2008 
  SUBJECT:   Accountability					 
	     Air travel allowances				 
	     Federal agencies					 
	     Federal employees					 
	     Financial analysis 				 
	     Financial management				 
	     Government employees				 
	     Internal controls					 
	     Transportation expense claims			 
	     Travel allowances					 
	     Travel costs					 
	     Policies and procedures				 
	     Waste, fraud, and abuse				 

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GAO-08-468R

   

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February 29, 2008: 

Ambassador John J. Danilovich: 

Chief Executive Officer, Millennium Challenge Corporation: 

Subject: Management Letter: Recommendations for Improvements to MCC's 
Internal Controls and Policies on Premium Class Air Travel: 

Dear Ambassador Danilovich: 

On September 28, 2007, GAO issued a report detailing our findings of 
improper and abusive premium class travel governmentwide.[Footnote 1] 
The audit was performed at the request of the Permanent Subcommittee on 
Investigations, Committee on Homeland Security and Governmental 
Affairs, U.S. Senate, and Senator Grassley, Committee on Finance, U.S. 
Senate. As part of the audit, we tested premium class transactions at 
the Millennium Challenge Corporation (MCC). While our report provided 
recommendations to the General Services Administration (GSA) and the 
Office of Management and Budget (OMB), the purpose of this letter is to 
report on specific matters identified during our audit that relate to 
weaknesses in internal controls at MCC. This letter contains three 
recommendations that warrant management's consideration. 

Results in Brief: 

We found that MCC spent about $6.2 million in air travel from July 1, 
2005, through September 30, 2006, of which about $4.8 million included 
at least one leg of a premium class flight. We also found internal 
control breakdowns and control environment weaknesses over MCC's 
premium class travel. Our findings are summarized as follows: 

* MCC was the most frequent user of premium class travel 
governmentwide. Overall, MCC spent about 77 percent of its air travel 
on premium class travel, compared to the overall governmentwide average 
of about 7 percent. On a comparative basis, we found that 83 percent of 
MCC's over-14-hour flights between airports in the United States and 
selected locations in Africa, the Middle East, and parts of Europe were 
in premium class. In contrast, only 3 percent of the Department of 
Defense's (DOD) and the Department of Homeland Security's (DHS) travel 
to the same locations was in premium class. 

* Our statistical sampling of and data-mining work on premium class 
travel at MCC found that none of the 36 MCC premium class transactions 
we tested were properly authorized or justified.[Footnote 2] 
Specifically, in premium class flights occurring prior to February 
2006, MCC officials informed us that premium class authorization was 
provided through blanket authorizations. Flights during this period 
failed our control tests based on a lack of specific authorization. 
Further, of an additional 15 transactions occurring after February 2006 
when premium class travel at MCC was supposed to be authorized on a 
trip-by-trip basis, we found that all 15 still failed our control tests 
due to lack of specific authorization and justification. According to 
MCC officials, specific authorization was not necessary for these trips 
because they were over 14 hours in length. However, the Federal Travel 
Regulation (FTR) still requires specific authorization for premium 
class use, even in situations where flight time exceeds 14 hours. 

* We found that MCC employees improperly used the 14 hour rule to 
qualify for premium class travel. The FTR specified that employees 
qualify to use premium class travel for flights exceeding 14 hours if 
they had no rest stop en route or rest period at their destination. 
However, on 20 of the 36 flights we examined, travelers arrived at 
their destination on a weekend without providing documentation that 
they reported to work before incurring a rest period. This is in 
violation of the FTR. We found additional flights where the traveler 
arrived at a time during the day to allow for a rest period prior to 
reporting to work the next day.[Footnote 3] 

At the end of our discussion on each of these issues, we offer 
recommendations for strengthening MCC's internal controls and travel 
policies. We also referred to you on October 18, 2007, individuals who 
violated federal premium class policy for further review and 
appropriate action. Actions could include, if warranted, repayment of 
the difference between the price of coach and premium class and 
administrative actions. 

In written comments on a draft of this management letter, MCC concurred 
with many of our conclusions and recommendations. However, MCC made 
several objections to factual findings. MCC's objections and our 
response are addressed below. 

Scope and Methodology: 

This letter is based on the work performed during our audit of the 
federal government's use of premium class air travel. To determine the 
magnitude of premium class travel at MCC, we extracted premium class 
transactions from July 1, 2005, through June 30, 2006, from the 
databases provided by Bank of America. Premium class transactions were 
defined as debit air travel transactions that included at least one leg 
of first or business class travel. Our review included charges made to 
both the individually billed accounts, which are travel cards assigned 
to individual travelers for transportation expenses, lodging, and 
miscellaneous expenses, and charges made to centrally billed accounts, 
which are travel cards assigned to the agencies and used primarily to 
procure transportation for travelers. During the period from July 1, 
2005, through September 30, 2006, MCC had a total of nearly 2,000 air 
tickets totaling about $6.2 million, of which about 750 were premium 
class air tickets totaling about $4.8 million. We selected and tested a 
statistical sample of governmentwide premium class travel transactions, 
which included trips taken by MCC employees, and conducted other audit 
work to determine the extent to which this travel was 
improper.[Footnote 4] Because first class travel at MCC was immaterial-
-accounting for only 5 percent of total premium class travel--we did 
not review the completeness of MCC's reporting of first class travel to 
GSA. To identify specific cases of improper or abusive use of premium 
class travel, we used data mining to identify instances in which 
individuals flew many premium class flights during the period or groups 
of individuals flew together in premium class. Because we included 
additional data provided by the bank subsequent to our selection of the 
statistical sample, our data-mining work was performed on data from 
July 1, 2005, through September 30, 2006. We audited 4 MCC transactions 
selected as part of our statistical sample and an additional 32 
transactions selected through data mining. This represents 
approximately 5 percent of premium class air tickets purchased by MCC. 
However, because of the use of a nonrepresentative sample, it is not 
possible to project the extent to which MCC's premium class travel was 
improper. To identify underlying causes contributing to improper 
premium class travel, we reviewed federal laws and regulations and 
MCC's implementing guidance for premium class travel, and interviewed 
MCC officials on the processes and procedures in place to authorize and 
justify premium class travel. Enclosure I contains a summary of when 
federal regulations allow premium class travel to be authorized. We 
also interviewed GSA and OMB officials on their oversight of premium 
class travel. 

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

Frequency of Premium Class Use Highest of All Federal Agencies: 

We found that MCC had the highest frequency of premium class use in all 
of the federal government. Specifically, about $4.8 million of the $6.2 
million MCC spent on airline tickets was spent on tickets with at least 
one leg of premium class travel. In other words, despite the fact that 
MCC is a very small agency that is limited to 300 or fewer employees, 
the amount MCC spent on premium class travel represented the sixth 
largest premium class program in the government by total 
dollars.[Footnote 5] In addition, MCC spent about 77 percent of its air 
travel dollars on premium class flights, far higher than the average of 
7 percent governmentwide. 

Our comparison of long international flights exceeding 14 hours further 
support our analysis that MCC used premium class on these flights more 
frequently compared to other agencies. Specifically, we analyzed over- 
14-hour flights between airports in the United States and selected 
locations in Africa, the Middle East, and far eastern Europe. Our 
analysis indicates that 83 percent of MCC's travel between these 
locations was in premium class. In contrast, 3 percent of DHS's and 
DOD's travel to the same locations were in premium class. 

MCC is also the highest user of premium class travel when compared to 
other federal agencies that have been vested with international 
missions. For flights to the same locations exceeding 14 hours, 25 
percent of the United States Agency for International Development's and 
72 percent of the State Department's travel to the same locations were 
in premium class. 

MCC Allowed Premium Class Tickets to Be Issued Without Specific 
Authorization: 

We found that none of the 36 MCC trips that we tested in our 
statistical sample or through data mining had specific authorization 
for premium class travel. According to the Federal Travel Regulation 
(FTR), agencies must specifically authorize each premium class trip to 
ensure that premium class travel fits criteria defined in the FTR, that 
is, the use of blanket authorization for premium class travel was not 
acceptable. Furthermore, the FTR states that travelers on official 
government travel must exercise the same standard of care in incurring 
expenses that a prudent person would exercise if traveling on personal 
business. Premium class flights are not something travelers are 
entitled to simply because certain conditions exist, and judicious 
approvals of premium class can reduce unnecessary expenses. However, 
MCC's use of premium class travel was not specifically authorized as 
follows: 

* Prior to February 2006, MCC allowed employees to fly business class 
on blanket travel authorizations. Of the 36 trips whose supporting 
documentation we requested during our audit, 21 were taken during the 
period that a blanket authorization policy, which allowed premium class 
travel on all trips exceeding 14 hours, was in effect. All of the 21 
trips had legs exceeding 14 hours and were issued business class 
tickets on blanket travel authorizations allowing premium class travel 
for trips exceeding 14 hours. However, some of the trips included legs 
of travel of less than 14 hours that were also taken in business class. 
These trips cost the government more than $180,000 and failed 
authorization and justification requirements. 

* MCC officials told us that in February 2006, MCC established a policy 
requiring specific authorization for travel on a trip-by trip basis. 
However, our review of an additional 15 premium class trips taken after 
February 2006 showed that the travel authorizations for all 15 trips 
did not specifically authorize premium class travel. MCC officials we 
spoke to believed the trips were proper because they exceeded 14 hours. 
However, the FTR requires specific authorization, even for trips that 
meet criteria for justification. Consequently, none of these 15 trips 
were properly authorized, and therefore none were justified.[Footnote 
6] These 15 improper trips cost the government more than $110,000. 

MCC's Policy and Procedures for Trips Exceeding 14 Hours Does Not 
Follow Federal Regulations: 

We also determined that MCC did not properly apply the 14-hour rule 
when authorizing travel or issuing premium class tickets. According to 
MCC representatives we interviewed, the MCC agent automatically issued 
business class tickets for all employees on trips exceeding 14 hours 
unless the traveler requested otherwise. However, these trips violated 
the FTR and therefore were improper. 

The FTR specifically states that in order to qualify for premium class 
travel for flights lasting 14 hours or more, the traveler could not 
have a rest period en route or a rest period upon arrival.[Footnote 7] 
On the basis of our analysis of the FTR and interviews of GSA 
officials, we determined that if a flight arrived at its destination by 
evening, at such a time that the traveler was provided a reasonable 
opportunity to get a night of rest before working, this constituted a 
rest period and therefore made the traveler ineligible for premium 
class. Similarly, if a traveler returned home in the evening or on a 
weekend, and did not provide evidence that he or she reported directly 
to work, we concluded that the premium class trip was not justified. 
However, as discussed previously, because these trips were not 
specifically authorized, there was no assurance that the travel 
authorizing officials knew whether the traveler had a rest period upon 
arrival. As a result, we found multiple instances where MCC employees 
flew business class, but also had a rest period upon arrival at their 
destination or once they arrived home. Specifically, we found that for 
20 of the 36 trips we examined, the traveler arrived home on a weekend 
without evidence of going to work.[Footnote 8] We also found other 
trips where travelers arrived at their destinations on weekday 
afternoons and likely received rest periods before going to work. For 
example: 

* One MCC traveler flew first and business class from Washington, D.C., 
to Port Villa, Vanuatu--a trip exceeding 14 hours and costing $12,000. 
On the trip to Port Villa, the traveler arrived on a Saturday night 
without evidence of working before taking a rest period. On the return 
trip, the traveler arrived back in Washington, D.C., on a Saturday 
night, and therefore the traveler had a reasonable opportunity for rest 
before work. In addition, no documents were provided to show that 
business class was specifically authorized in advance of the trip. The 
trip included a reasonable opportunity for rest upon arrival at both 
the destination and back home, making the trip ineligible for business 
class according to the FTR. 

In our governmentwide audit, we found that internal policy can 
contribute to an overall control environment that substantially 
restricts premium class travel. For example, DOD's travel policy states 
that premium class flights over 14 hours would be approved only if the 
travel is so urgent that it can not be postponed, nor can alternatives 
be found to reduce the cost. As a result, only 3 percent of DOD's trips 
exceeding 14 hours were taken in premium class during our audit period. 
MCC could save money by adopting a similar policy toward 14-hour 
travel. DHS provides another example of restraint on approving 14-hour 
trips for premium class; like DOD's, only 3 percent of DHS's trips 
exceeding 14 hours were in premium class during our audit period. 
Additionally, when possible, travelers plan their travel in advance to 
avoid having to use premium class travel out of necessity. Attention to 
these details would likely identify some 14-hour trips that, by 
allowing extra time for a rest period or rest stop, alternatively could 
be taken in coach. 

In response to our audit, MCC officials noted on the travel documents 
that, "additional supporting documentation was not required because 
itinerary shows that flight time was in excess of 14 hours." MCC's 
policy and procedures and subsequent inadequate documentation to 
support the travel transactions shows poor internal controls.[Footnote 
9] Thus, there are no mechanisms for management to assure that business 
class travelers are not taking a rest stop or rest period, therefore 
making these trips with insufficient oversight. This lack of scrutiny 
facilitates improper use of premium class travel, and creates 
unnecessary travel costs at taxpayer expense. 

Recommendations for Executive Action: 

To reduce improper premium class travel, we recommend that the Chief 
Executive Officer of the Millennium Challenge Corporation implement 
improved internal controls over the use of premium class travel. While 
a wide range of activities can contribute to a system that provides 
reasonable assurance that premium class travel is properly authorized 
and justified, at a minimum the internal control activities should 
include the following: 

* require specific authorization for the use of premium class, to be 
documented and retained with travel orders; 

* enforce FTR regulations prohibiting premium class travel if the trip 
was over 14 hours and the traveler had a rest stop at destination or a 
rest stop en route; and: 

* prohibit the use of premium class air travel on weekend arrivals, 
except in cases where a traveler documents that he or she will report 
immediately to work upon arrival before incurring a rest period. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this management letter, which are 
reprinted in enclosure II, MCC said it concurred with many of our 
conclusions, including that MCC needed to specifically justify, as well 
as authorize, each premium class trip, and needed to clarify its policy 
to ensure that premium class travel is used only in those cases where a 
rest stop is not feasible for business or medical reasons. However, MCC 
made several objections to our methodology and factual findings, which 
we have addressed below. 

MCC objected that we did not mention policy changes designed to limit 
premium class travel. However, the reason we did not address changes 
made to MCC's premium class policies and procedures is because we 
consider the changes made by MCC ineffective in addressing the MCC 
internal control weaknesses we found. Specifically, MCC says that it 
eliminated the use of blanket orders authorizing premium class travel 
in February 2006, and that all trips taken after February 2006 were 
specifically authorized for business class travel in its e-travel 
system by appropriate supervisors. However, while we found signed 
authorizations for all trips taken after February 2006, none of the 
trips contained specific authorization for the use of premium class on 
the authorization itself or in the notes section of the authorization. 

MCC objected that it had provided us a corrected spreadsheet that was 
not reflected in our management letter. However, we disagreed with the 
corrections they suggested, thus their suggestions were not 
incorporated into our management letter. Among the corrections MCC 
suggested were that some travelers arriving on weekends were justified 
for premium class travel use, that premium class trips taken on blanket 
authorizations were specifically authorized, and that one premium class 
return trip was justified because it was the only flight available. 
However, our control tests define blanket premium class travel as not 
specifically authorized, and MCC provided no documentation supporting 
the rest of their assertions. Therefore, we did not incorporate their 
suggested changes. 

MCC also disagreed with our statement that all 15 of the transactions 
we examined that occurred after February 2006 failed our control tests 
for specific authorization and justification. However, this assertion 
is incorrect. While all 15 of the transactions had travel orders signed 
off on by supervising officials, which was an improvement from the past 
use of blanket travel orders authorizing the use of premium class 
travel, none of the 15 travel orders specifically authorized premium 
class travel. Further, MCC provided no additional evidence that a 
supervisor approved the use of premium class travel subsequent to the 
travel order. 

MCC asserted that the FTR does not require an agency to seek or provide 
documentation that travelers arriving home on a weekend did not incur 
rest periods before reporting to work. However, agencies need to 
provide assurance that all travelers using premium class travel are in 
compliance with FTR requirements, including the requirement that a rest 
stop does not exceed 24 hours. We considered that the transaction 
failed the control test if there was not some evidence that travelers 
arriving on weekends did not report to work before incurring a rest 
period. We repeatedly found that MCC travelers, arriving on weekends 
after traveling in premium class, who would be reasonably expected to 
have rest stops before reporting to work. Agencies need to document 
that travelers have certified that they did not incur rest periods in 
situations where they would be reasonably expected to do so. For 
example, the authorization form could be amended, without undue burden, 
to include a box where a traveler and his/her supervisor could certify 
that a rest period was not being incurred by a traveler traveling in 
business class. 

We disagree with MCC's assertion that a lack of per-segment costs, and 
the inclusion of some coach class legs in ticket prices, significantly 
affected our premium class estimates. Our calculation of premium class 
travel was conducted on a governmentwide scale. As we expressed in 
previous meetings with MCC officials, since the government credit cards 
banks and most agencies do not collect information on the cost of 
airline flights by individual segments of travel, it was not reasonable 
for us to calculate this amount for certain agencies but not others. 
However, our analysis of MCC's premium class flights by segment shows 
that 85 percent of the legs on MCC's premium class flights had premium 
class service codes, while just 9 percent had coach class service 
codes[Footnote 10]. Further, the inclusion of coach class legs among 
premium class tickets should not have significantly affected premium 
class estimates, for MCC or the government. For example, we examined 
the itinerary of an MCC traveler who flew coach class from Washington 
to New York, then business class from New York to Johannesburg. The 
cost for the coach portion of the trip was slightly over $100, 
according to GSA's city-pair contracts, as opposed to over $5,000 for 
the business class portion. For that itinerary, the coach class portion 
was about 2 percent of the total ticket. 

This report contains recommendations to you. The head of a federal 
agency is required by 31 U.S.C. 720 to submit a written statement on 
actions taken on these recommendations. You should submit your 
statement to the Senate Committee on Homeland Security and Governmental 
Affairs and the House Committee on Oversight and Government Reform 
within 60 days of the date of this report. A written statement must 
also be sent to the House and Senate Committees on Appropriations with 
the agency's first request for appropriations made more than 60 days 
after the date of the report. 

This report is intended for use by the management of MCC. We are 
sending copies to the Honorable Carl Levin and the Honorable Norm 
Coleman, Chairman and Ranking Member, Permanent Subcommittee on 
Investigations, Senate Committee on Homeland Security and Governmental 
Affairs, and the Honorable Charles Grassley, Ranking Member, Senate 
Committee on Finance. Copies will be made available to others upon 
request. The report is also available at no charge on GAO's homepage at 
[hyperlink, http://www.gao.gov]. If you or your staff have any 
questions concerning this letter, lease contact me at (202) 512-6722 or 
[email protected]. 

Sincerely yours, 

Signed by: 

Gregory D. Kutz: 

Managing Director, Forensic Audits and Special Investigations: 

Enclosures--2: 

GSA Regulations Governing Premium Class Travel Use: 

The Federal Travel Regulation (FTR), issued by the General Services 
Administration (GSA), implements statutory and Office of Management and 
Budget (OMB) requirements and policies for most federal civilian 
employees and others authorized to travel at government expense. The 
purpose of the FTR is to ensure that official travel is conducted 
responsibly and at minimal administrative expense. Unless exempt by 
specific legislation,[Footnote 11] executive agencies, fully owned 
government corporations, and independent establishments are expected to 
follow the FTR, including its promulgation related to premium class 
travel. The Department of Defense's uniformed servicemembers and 
Department of State employees exempt from the FTR are covered by their 
agencies' travel regulations. 

OMB's general policy related to travel is that the taxpayers should pay 
no more than necessary to transport government officials. Consistent 
with this principle, the FTR states that with limited exceptions, 
travelers must use coach class accommodations for both domestic and 
international travel. Premium class travel can occur only when the 
traveler's agency specifically authorizes the use of such 
accommodations (authorization) and only under specific circumstances 
(justification). Specifically, the FTR states that first class 
accommodation is authorized only when at least one of the following 
conditions exists:[Footnote 12] 

* coach class airline accommodations or premium class other than first 
class airline accommodations are not reasonably available, 

* when use of first class is necessary to accommodate a disability or 
other special need that is substantiated in writing by a competent 
medical authority, 

* exceptional security circumstances require first class travel, or: 

* when required because of agency mission.[Footnote 13] 

The FTR authorizes premium class accommodations other than first class 
(e.g., business class) when at least one of the following conditions 
exists: 

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

* coach class is not available in time to accomplish the mission, which 
is urgent and cannot be postponed; 

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

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

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

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

* transportation is paid in full by a nonfederal source; 

* travel is to or from a destination outside the continental United 
States, and the scheduled flight time (including stopovers) is in 
excess of 14 hours (however, a rest stop en route or a rest period upon 
arrival is prohibited when premium class accommodations are 
authorized); or: 

* when required because of agency mission.[Footnote 14] 

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

Enclosure II: 

Comments from the Millennium Challenge Corporation: 

Millennium Challenge Corporation: 

February 22, 2008: 

Mr. Gregory Kutz: 
Managing Director, Forensic Audits and Special Investigations: 
U.S. Government Accountability Office: 

Dear Mr. Kutz: 

This letter responds to your draft Management Letter: Recommendation 
for Improvements to MCC's Internal Controls and Polices on Premium 
Class Air Travel sent to MCC on February 8, 2008. I was surprised and 
concerned to see that this draft Management Letter makes no mention of 
the policy changes we brought to GAO's attention in our August 20, 2007 
meeting with Scott Wrightson, and subsequently forwarded to GAO in our 
December 5, 2007, letter to you. 

At the August 2007 meeting and in our December 2007 letter, MCC 
provided GAO with documented changes in our travel policy, including 
changes to limit the use of premium class travel to those instances 
where there is a mission critical justification for such travel, or 
where a legitimate medical condition or disability requires it. In 
implementing these changes to our travel policies and procedures, we 
have in many cases gone beyond the requirements of the Federal Travel 
Regulations (FTR) in order to conserve our travel resources for those 
cases where the use of premium class travel has a significant impact on 
the ability of our hard-working staff to accomplish their mission. 

Also, in your initial draft, GAO made a number of factual errors, which 
are repeated in the February 8, 2008, draft. The new draft states 
correctly that before February 2006, MCC used a blanket travel 
authorization, and therefore did not properly authorize or justify 
premium class travel. However, the statement that "of an additional 15 
transactions occurring after February 2006 when premium class travel at 
MCC was supposed to be authorized on a trip-by-trip basis, we found 
that all 15 still failed our control tests due to lack of specific 
authorization and justification" is simply incorrect. While MCC agrees 
that these 15 trips did not have separate and specific justifications, 
all 15 were specifically authorized in MCC's e-travel system by 
appropriate supervisors for business class travel. We explained this at 
the August 2007 meeting with GAO, yet the assertion that these tips 
were not properly authorized is repeated in the most recent draft 
Management Letter without any additional factual basis. 

Furthermore, when reviewing the spreadsheet provided by GAO on the 
trips in question, MCC uncovered a number of factual errors, and in our 
December 2007 letter we provided you with a corrected version of your 
spreadsheet. However, in this draft Management Letter, GAO again has 
failed to correct these facts with the documentation MCC provided, 
which included MCC's revised Travel Policy and the corrected 
spreadsheet. 

We also continue to question the assertion from GAO that a number of 
trips "violated the FTR and therefore were improper" because MCC did 
not document that a rest stop did not occur over a weekend. The FTR 
does not require an agency to seek or provide such proof, and it is 
neither administratively feasible nor reasonable for GAO to ask an 
agency to document for every premium class trip that a rest stop did 
not occur. In effect, GAO is asserting with no evidence that MCC is 
"guilty" of combining rest stops with premium class travel and asking 
MCC to prove its "innocence." 

Finally, in our August 2007 meeting, GAO acknowledged that it counts 
entire round-trip flights as "premium class" even if only one segment 
in one direction of the trip was actually flown in a premium class. MCC 
made clear at that point that we can provide segment by segment data 
showing the actual travel flown in a premium class, but there appeared 
to be no interest on the detailed part of GAO on using this data 
because certain other agencies cannot provide their data on as a 
detailed a basis. As a result, MCC believes that GAO has significantly 
overstates the actual amount of MCC travel that has taken place in 
premium classes, and is ready to provide our data to GAO so that it can 
develop a more accurate estimate. 

Despite these inaccuracies in the GAO draft Management Letter, MCC 
agreed with many of the report's conclusions, including that MCC needed 
to specifically justify, as well as authorize, each premium class trip, 
and needed to clarify our policy to ensure that premium class travel is 
used only in those cases where a rest stop is not feasible for business 
or medical reasons. We have shared our revised policy with you and do 
so again with this letter. We have also attached a document describing 
in more detail the steps that MCC has taken to ensure full compliance 
with the FTR. I hope that the final Management Letter will reflect the 
corrections we are again urging you to make in your characterizations 
of MCC's past premium class travel, as well as the policy changes we 
have made in response to GAO's recommendations. Please do not hesitate 
to contact me at (202) 521-3723 with any specific questions you may 
have regarding our approach to premium class travel. 

Sincerely, 

Signed by: 

Michael Casella: 
Acting Vice President: 
Administration and Finance: 

Enclosures: 

(1) Travel Policies and Procedures (Revised 11-29-07): 
(2) GAO Audit Referral Letter- MCC Corrections (Rev 11-19-07): 
(3) MCC FTR Compliance Fact Sheet: 

[End of section] 

Footnotes: 

[1] GAO, Premium Class Travel: Internal Control Weaknesses 
Governmentwide Led to Improper and Abusive Use of Premium Class Travel, 
GAO-07-1268 (Washington, D.C.: Sept. 28, 2007). 

[2] Four transactions from MCC were selected as part of our statistical 
sample of government premium class transactions. The remaining 32 MCC 
transactions we tested were selected through data mining. 

[3] We defined a weekend arrival as a flight arriving between Friday at 
2 p.m. and Sunday at 8 p.m. 

[4] Our statistical sample included 4 transactions from MCC travelers. 
An additional 32 transactions were selected through data mining. 

[5] As specified by the MCC staffing model. 

[6] We considered an unauthorized trip to automatically be unjustified; 
authorized trips were then tested to see if they were justified. 

[7] The FTR defines a rest period as not in excess of 24 hours, but 
does not define a minimum period that defines a rest period. 

[8] We defined a weekend arrival as a flight arriving between Friday at 
2 p.m. and Sunday at 8 p.m. 

[9] GAO, Standards for Internal Control in the Federal Government, GAO/ 
AIMD-00-21.3.1 (November 1999). 

[10] The remaining 6 percent of flight legs had codes that could have 
been either premium or coach, depending on the airline. 

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

[12] The FTR also allows for the traveler to upgrade to premium class 
accommodations, at the traveler's expense or by using frequent traveler 
benefits. 

[13] 41 C.F.R. 301-10.123. 

[14] 41 C.F.R. 301-10.124. 

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