State's Centrally Billed Foreign Affairs Travel:

Internal Control Breakdowns and Ineffective Oversight Lost Taxpayers Tens of Millions of Dollars

GAO-06-298: Published: Mar 10, 2006. Publicly Released: Apr 10, 2006.

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The relative size of the Department of State's (State) travel program and continuing concerns about fraud, waste, and abuse in government travel card programs led to this request to audit State's centrally billed travel accounts. GAO was asked to evaluate the effectiveness of internal controls over (1) the authorization and justification of premium-class tickets charged to the centrally billed account and (2) monitoring of unused tickets, reconciling monthly statements, and maximizing performance rebates.

Breakdowns in key internal controls, a weak control environment, and ineffective oversight of State's centrally billed travel accounts resulted in taxpayers paying tens of millions of dollars for unauthorized and improper premium-class travel and unused airline tickets. State's over 260 centrally billed accounts are used by State and other foreign affairs agencies to purchase transportation services, such as airline and train tickets. GAO found that between April 2003 and September 2004 State's centrally billed accounts were used to purchase over 32,000 premium-class tickets costing almost $140 million. Premium-class travel--primarily business-class airline tickets--represented about 19 percent of the tickets issued but about 49 percent of the $286 million spent on airline tickets with State's centrally billed account travel cards. GAO determined that this trend continued for fiscal year 2005. GAO found that 67 percent of this premium-class travel was not properly authorized, justified, or both. Because premium-class tickets typically cost substantially more than coach tickets, improper premium-class travel represents a waste of tax dollars. Most of these blanket premium-class travel authorizations were signed by subordinates who told us they couldn't challenge the use of premium-class travel by senior executives. Ineffective oversight and control breakdowns also contributed to problems with monitoring unused tickets, reconciling monthly statements, and maximizing performance rebates. Although federal agencies are authorized to recover payments made to airlines for tickets that they ordered but did not use, State failed to do so and paid for about $6 million for airline tickets that were not used or processed for refund. State was unaware of this problem before our review because it neither monitored travelers' adherence to travel regulations nor systematically identified and processed all unused tickets. State also failed to reconcile or dispute over $420,000 of unauthorized charges before paying its monthly bank invoice and instead deducted the amounts from its bill. Because these amounts were not properly disputed under the contract terms, State underpaid its monthly bills and was thus frequently delinquent. Handling questionable charges in this ad hoc manner sharply reduced State's eligible rebates. Overall, State earned only $700,000 out of a possible $2.8 million in rebates that could have been earned if it had properly disputed unauthorized charges and paid the bill in accordance with the contract.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: To strengthen States travel oversight program and ensure travel policies are followed consistently, in September 2005, State established a business class travel report, similar to the GSA mandated first class report, which is reviewed by State's Office of Inspector General, as well as bureau executive offices.

    Recommendation: Because of the substantial cost and sensitive nature of premium-class travel, the Secretary of State should direct the appropriate officials to implement specific internal control activities over the use of premium travel and establish policies and procedures to incorporate federal and State regulations as well as guidance specified in our Standards for Internal Control and our Guide for Evaluating and Testing Controls Over Sensitive Payments. While a wide range of activities can contribute to a system that provides reasonable assurance that premium-class travel is authorized and justified, at a minimum, the internal control activities should include developing procedures to identify the extent of premium-class travel, including all business-class travel, and monitor for trends and potential misuse.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: State developed procedures for more complete and comprehensive reports on first class travel. For example, State issued a directive to all posts and bureaus to identify first class fares and ensure each trip is included in the annual first class travel report to GSA. State compiles first class travel reports from the domestic travel management center and each overseas bureau or post and then submits them to GSA.

    Recommendation: Because of the substantial cost and sensitive nature of premium-class travel, the Secretary of State should direct the appropriate officials to implement specific internal control activities over the use of premium travel and establish policies and procedures to incorporate federal and State regulations as well as guidance specified in our Standards for Internal Control and our Guide for Evaluating and Testing Controls Over Sensitive Payments. While a wide range of activities can contribute to a system that provides reasonable assurance that premium-class travel is authorized and justified, at a minimum, the internal control activities should include developing procedures to identify all first-class fares so that State can prepare and submit complete and accurate first-class travel reports to the General Services Administration.

    Agency Affected: Department of State

  3. Status: Closed - Implemented

    Comments: Senior State officials developed steps to evaluate improper payments. Specifically, State incorporated tests of controls over premium class travel into their Improper Payments Act (IPIA) Program which are reported to senior management as part of their Annual Performance and Accountability Report.

    Recommendation: Because of the substantial cost and sensitive nature of premium-class travel, the Secretary of State should direct the appropriate officials to implement specific internal control activities over the use of premium travel and establish policies and procedures to incorporate federal and State regulations as well as guidance specified in our Standards for Internal Control and our Guide for Evaluating and Testing Controls Over Sensitive Payments. While a wide range of activities can contribute to a system that provides reasonable assurance that premium-class travel is authorized and justified, at a minimum, the internal control activities should include requiring State to develop a management plan requiring that audits of State's issuance of premium-class travel are conducted regularly, and the results of these audits are reported to senior management. Audits of premium-class travel should include reviews of whether travel management centers adhere to all governmentwide and State regulations for issuing premium-class travel.

    Agency Affected: Department of State

  4. Status: Closed - Implemented

    Comments: In December 2005, State began a series of special training classes for employees responsible for arranging travel in their offices. In January 2006, State hosted a Town Hall meeting that provided a forum for questions and answers on travel policy. State also placed further emphasis on expanded and tightened criteria required for business and first class travel and reiterated that the only approving official for first class travel is the Under Secretary for Management. State incorporated these specific travel topics into their training at the Foreign Service Institute for General Services Officer, Financial Management Officers, and Senior Officers.

    Recommendation: Because of the substantial cost and sensitive nature of premium-class travel, the Secretary of State should direct the appropriate officials to implement specific internal control activities over the use of premium travel and establish policies and procedures to incorporate federal and State regulations as well as guidance specified in our Standards for Internal Control and our Guide for Evaluating and Testing Controls Over Sensitive Payments. While a wide range of activities can contribute to a system that provides reasonable assurance that premium-class travel is authorized and justified, at a minimum, the internal control activities should include periodically providing notices to travelers and supervisors/managers that specifically identify the limitations on premium-class travel, the limited situations in which premium-class travel may be authorized, and how the additional cost of premium-class travel can be avoided.

    Agency Affected: Department of State

  5. Status: Closed - Implemented

    Comments: State revised its travel regulations, to be effective March 8, 2006, specifying that the designated approving official must not be subordinate to the traveler except that the Executive Secretary may approve the use of first-class or business-class air accommodations for the Secretary and the Deputy Secretary.

    Recommendation: Because of the substantial cost and sensitive nature of premium-class travel, the Secretary of State should direct the appropriate officials to implement specific internal control activities over the use of premium travel and establish policies and procedures to incorporate federal and State regulations as well as guidance specified in our Standards for Internal Control and our Guide for Evaluating and Testing Controls Over Sensitive Payments. While a wide range of activities can contribute to a system that provides reasonable assurance that premium-class travel is authorized and justified, at a minimum, the internal control activities should include requiring that premium-class travel be approved by individuals who are at least of the same grade as the travelers and specifically prohibit the travelers themselves or their subordinates from approving requests for premium-class travel.

    Agency Affected: Department of State

  6. Status: Closed - Implemented

    Comments: State revised the Foreign Affairs Manual to 1) explicitly prohibit the authorization of premium class travel on blanket travel authorizations, 2) emphasize the requirement for trip-specific authorization, and 3) prohibit the travel management center from ticketing premium-class accommodations without the appropriate documentation.

    Recommendation: Because of the substantial cost and sensitive nature of premium-class travel, the Secretary of State should direct the appropriate officials to implement specific internal control activities over the use of premium travel and establish policies and procedures to incorporate federal and State regulations as well as guidance specified in our Standards for Internal Control and our Guide for Evaluating and Testing Controls Over Sensitive Payments. While a wide range of activities can contribute to a system that provides reasonable assurance that premium-class travel is authorized and justified, at a minimum, the internal control activities should include prohibiting the use of blanket authorization for premium-class travel, including management decisions offering premium-class travel as a benefit to executives and other employees.

    Agency Affected: Department of State

  7. Status: Closed - Implemented

    Comments: State issued quarterly notices in March and June of 2006 to encouraged travelers at bureaus and posts to consider the option of traveling economy class and taking a rest stop enroute to their final destination in lieu of traveling premium class when on permanent change of station.

    Recommendation: Because of the substantial cost and sensitive nature of premium-class travel, the Secretary of State should direct the appropriate officials to implement specific internal control activities over the use of premium travel and establish policies and procedures to incorporate federal and State regulations as well as guidance specified in our Standards for Internal Control and our Guide for Evaluating and Testing Controls Over Sensitive Payments. While a wide range of activities can contribute to a system that provides reasonable assurance that premium-class travel is authorized and justified, at a minimum, the internal control activities should include encouraging State department personnel traveling as a result of a permanent change of station to take a rest stop en route to their final destination to avoid the significant additional cost associated with premium-class flights and thus save the taxpayer thousands of dollars per trip.

    Agency Affected: Department of State

  8. Status: Closed - Implemented

    Comments: The Under Secretary for Management issued quarterly directives in March and June of 2006, for both State and other foreign affairs officials assigned to posts and bureaus to comply with the travel requirements and asked travelers to consider taking a rest stop in route rather than fly premium class.

    Recommendation: Because of the substantial cost and sensitive nature of premium-class travel, the Secretary of State should direct the appropriate officials to implement specific internal control activities over the use of premium travel and establish policies and procedures to incorporate federal and State regulations as well as guidance specified in our Standards for Internal Control and our Guide for Evaluating and Testing Controls Over Sensitive Payments. While a wide range of activities can contribute to a system that provides reasonable assurance that premium-class travel is authorized and justified, at a minimum, the internal control activities should include urging other users of State's centrally billed travel accounts to take parallel steps to comply with existing travel requirements.

    Agency Affected: Department of State

  9. Status: Closed - Implemented

    Comments: State initiated cargo routes to Mexico City and Tel Aviv with an estimated cost savings of $421,000 per annum.

    Recommendation: To promote the economy and efficiency of Courier Service operations, the Secretary of State should direct the Courier Service to expand the use of cargo carriers, such as FedEx, to the extent practicable.

    Agency Affected: Department of State

  10. Status: Closed - Implemented

    Comments: State directed that all diplomatic and consular posts implement the existing Department policy for the fair sharing of classified pouch courier escort duties. The directive further stressed that posts personnel abroad must make every effort to support diplomatic courier operations without placing limitations on airport locations or arrival/departure hours when it is in the interest of the U.S. Government or when operationally necessary.

    Recommendation: To promote the economy and efficiency of Courier Service operations, the Secretary of State should direct the Courier Service to direct foreign missions to assure that organizations using diplomatic courier services share responsibility for meeting and accepting air cargo shipments of diplomatic pouches.

    Agency Affected: Department of State

  11. Status: Closed - Implemented

    Comments: State clarified their written policy and directed that when a deadhead sector is known, absent applicable premium class exceptions, ticketing for that sector must be made in economy class. Furthermore, couriers on the road must make every possible effort to downgrade to economy class, when a deadhead segment presents itself, and document that effort on the trip report.

    Recommendation: To promote the economy and efficiency of Courier Service operations, the Secretary of State should direct the Courier Service to clarify written policy to clearly state that diplomatic couriers must use economy class accommodations when in a "dead-head" capacity unless relevant exceptions (e.g., 14-hour rule) exist, and enforce the requirement.

    Agency Affected: Department of State

  12. Status: Closed - Implemented

    Comments: According to State, GSA is working with the airlines to recover unused tickets governmentwide; therefore, GSA will process State departments unused tickets upon receipt of the list of ticket numbers that the airlines identified as fully unused or partially unused. GSA should obtain the list of tickets the week of 25 September 2006.

    Recommendation: To recover outstanding claims on unused tickets, the Secretary of State should immediately submit claims to the airlines to recover the $6 million in fully and partially unused tickets identified by the airlines and discussed in this report.

    Agency Affected: Department of State

  13. Status: Closed - Implemented

    Comments: According to State, GSA is working with the airlines to recover unused tickets governmentwide; therefore, GSA will process State departments unused tickets upon receipt of the list of ticket numbers that the airlines identified as fully unused or partially unused. GSA should obtain the list of tickets the week of 25 September 2006.

    Recommendation: To recover outstanding claims on unused tickets, the Secretary of State should work with the five airlines identified in this report and other airlines from which State purchased tickets with centrally billed accounts to determine the feasibility of recovering other fully and partially unused tickets, the value of the unused portions of those tickets, and initiate actions to obtain refunds.

    Agency Affected: Department of State

  14. Status: Closed - Implemented

    Comments: State established compensating procedures to reconcile tickets issued to vouchers. Specifically, State established procedures for bureaus to review reports from their central financial management system (CFMS) to 1) identify tickets issued for trips that have already been cancelled but for which the credit is not on the report, 2) identify potential duplicate charges for airline tickets, and 3) identify ticket charges for trips that may have been cancelled. Although State did not match airline tickets issued to individual travel vouchers, these compensating controls effectively respond to GAO's recommendation and improves internal controls over State's centrally billed accounts.

    Recommendation: To enable State to systematically identify future unused airline tickets purchased through the centrally billed accounts, and improve internal controls over the processing of unused airline tickets for refunds, the Secretary of State should direct the appropriate personnel within services and agencies to evaluate the feasibility of implementing procedures to reconcile airline tickets acquired using the centrally billed accounts to travel vouchers in the current travel system.

    Agency Affected: Department of State

  15. Status: Closed - Implemented

    Comments: State responded by 1) issuing department notices reminding travelers of their responsibility to return unused tickets, 2) requiring voucher examiners to verify whether a ticket was used or unused, and 3) printing a statement requiring travelers return unused tickets for refund on their travel itinerary, travel authorization, travel voucher, and their leave and earnings statement.

    Recommendation: To enable State to systematically identify future unused airline tickets purchased through the centrally billed accounts, and improve internal controls over the processing of unused airline tickets for refunds, the Secretary of State should direct the appropriate personnel within services and agencies to enforce employees' adherence to existing travel regulations requiring notification of unused tickets.

    Agency Affected: Department of State

  16. Status: Closed - Implemented

    Comments: State requested a change to the contract language for Carlson Wagonlit and American Express - State's largest TMC's, which allowed for specific report requests. State provided us a copy of the report that the TMC's now produce and provide to State for review.

    Recommendation: To enable State to systematically identify future unused airline tickets purchased through the centrally billed accounts, and improve internal controls over the processing of unused airline tickets for refunds, the Secretary of State should direct the appropriate personnel within services and agencies to modify existing travel management center contracts to include a requirement that the international travel management centers establish a capability to systematically identify unused electronic tickets in their computer reservation systems and file for refunds on the tickets identified as unused.

    Agency Affected: Department of State

  17. Status: Closed - Implemented

    Comments: State developed a report that lists unused tickets that were either turned over to or identified by the voucher examiner. State then reconciles the unused tickets against the centrally billed credit card account to verify that a credit was received. If the unused ticket was not already processed for a refund, State sends the ticket to the TMC and the TMC processes the refund. The unused ticket report reflects the unused ticket until such time that the centrally billed travel account is credited for the unused portions.

    Recommendation: To enable State to systematically identify future unused airline tickets purchased through the centrally billed accounts, and improve internal controls over the processing of unused airline tickets for refunds, the Secretary of State should direct the appropriate personnel within services and agencies to routinely compare unused tickets processed by the travel management centers to the credits on the Citibank invoice.

    Agency Affected: Department of State

  18. Status: Closed - Implemented

    Comments: State established procedures to dispute airline ticket transactions that did not reconcile between the vendor invoice and the airline tickets issued by State's travel management center. These procedures increased their rebates. State provided documents to support their reconciliation process.

    Recommendation: To provide assurance of accurate and timely payments of the centrally billed accounts and to maximize rebates, the Secretary of State should establish procedures to ensure that all transactions on the Citibank invoice are either paid in accordance with the contract or properly disputed.

    Agency Affected: Department of State

 

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