Federal Transit Benefits Program:
Ineffective Controls Result in Fraud and Abuse by Federal Workers
GAO-07-724T, Apr 24, 2007
Under the federal transit benefits program, federal employees receive transit benefits (e.g., Metrocheks) to encourage them to commute to work via public transportation. Based on information provided by the Department of Transportation, as of July 2006, the National Capital Region had 120,000 participants claiming roughly $140 million in benefits. Recently, inspectors general (IG) of various agencies have found numerous prior instances of fraud, waste, and abuse in this federal program. Based on both the significance of these IG findings and the amount of federal money spent on transit benefits, GAO was asked to (1) investigate allegations that federal employees in the National Capital Region are involved in fraud and abuse related to the transit benefits program, (2) identify the potential causes of any fraud or abuse that is detected, and (3) estimate the magnitude of fraud and abuse in the National Capital Region in 2006. To address these objectives, GAO identified federal employees selling their transit benefits on the Internet and obtained additional data from these sellers' employing agencies to determine whether more widespread problems existed. GAO also obtained the policies and procedures governing the transit benefits program at each of the employing agencies.
After investigating just 3 days of sales, GAO confirmed that at least 20 federal employees were fraudulently selling their Metrocheks on eBay. Most of the employees GAO interviewed admitted to falsifying their transit benefit applications and fraudulently selling their benefits. One GS-14 Department of the Treasury employee drove to work, parked for free in agency-provided parking, and was still able to collect $105 per month in Metrocheks--most of which he sold on eBay. Posing as buyers, GAO investigators also purchased Metrocheks from 3 federal employees fraudulently selling their benefits on Craigslist, a popular community Web site. GAO investigations revealed additional examples of federal employees inflating their transportation expenses on their transit benefit applications. Many of them admitted to intentionally falsifying their benefit applications to receive excess benefits. For example, a GS-11 Department of Transportation employee admitted to claiming the maximum allowable benefit of $105 per month when his actual commuting cost was only $54. Weaknesses in the design of program controls at the Departments of Commerce, Transportation, State, Homeland Security, Defense, and Treasury, the Internal Revenue Service (IRS), the Patent and Trademark Office, and the U.S. Coast Guard can be associated with the fraudulent and abusive activity we identified. Although GAO did not conduct a comprehensive review of each agency's controls, the results from investigations illustrate flaws in the design of the controls. For example, GAO identified four employees who continued to receive transit benefits even though they were on extended absences from work, but none of the agencies had written policies requiring adjustment of benefits because of leave or travel. Using limited transit benefit records, we found that the possible magnitude of potentially fraudulent transit benefit payments during 2006 in the National Capital Region was more than $17 million. This order of magnitude is based on employees at Commerce, Transportation, Homeland Security, Defense, Treasury, IRS, and the Coast Guard who made false statements by requesting benefits they were not entitled to. Given the number of agencies not covered by our analysis, it is likely that this amount is significantly understated.