	Millions of Dollars Wasted on Airline Tickets that Were Unused and Not Refunded

Our analysis of limited airline data found that DOD had purchased millions  of dollars in airline tickets that it did not use and did not process for refund. Reimbursements for Improper and Potentially Fraudulent Airline Ticket Claims Could Total Millions of Dollars

We found that breakdown in internal controls resulted in numerous  instances during fiscal years 2001 and 2002 where DOD travelers submitted  improper claims and subsequently received improper reimbursements for  airline tickets they did not purchase. Specifically, DOD did not adequately  protect the centrally billed accounts from being used to purchase airline  tickets based on fictitious travel orders and from being compromised and  used for personal gain. These weaknesses exposed the centrally billed  accounts to increased risk of fraud and abuse. Consequently, we performed additional work during fiscal year 2004 to  determine whether our concerns were warranted, or whether DOD could  detect instances where invalid travel orders are used to obtain airline  tickets. 1). Weaknesses in Design and Implementation of Key Internal Controls Contributed to Fraud, Waste, and Abuse

We found that the lack of interface among DOD’s primary travel systems— travel order, ticket issuance, and travel voucher—was the common  underlying cause and major contributing factor that allowed the fraud,  waste, and abuse we identified to occur without detection. We found that DOD had not designed other procedures to link or reconcile  tickets issued using the centrally billed accounts to the voucher system. Reconciliation  would also enable DOD to detect instances where a traveler submitted a  claim for airfare for which a corresponding ticket was issued using the  centrally billed accounts. Excessive Reliance on Travelers to Report Unused Tickets

Another contributing factor to unused and unrefunded tickets is DOD’s  excessive reliance on travelers to report unused tickets to the CTOs. Lack of Physical Safeguards Exposed Centrally Billed Accounts to Fraudulent Activities

DOD was exposed to fraudulent activities because DOD did not adequately  safeguard the centrally billed account numbers. However, not all CTOs have implemented this safeguard. In response to our testimonies and reports on the individually billed  accounts, the Congress took actions in the fiscal year 2003 appropriations  and authorization acts and the fiscal year 2004 authorization act  requiring (1) the establishment of guidelines and procedures for  disciplinary actions to be taken against cardholders for improper,  fraudulent, or abusive use of government travel cards; (2) the denial of  government travel cards to individuals who are not creditworthy; (3) split  disbursements for paying a portion of the expenses claimed on a travel  voucher directly to the credit card bank and the remainder to the  cardholder; and (4) offset of delinquent travel card debt against the pay or  retirement benefits of DOD civilian and military employees and retirees. The use of a well-controlled individually billed account travel program as  the principal mechanism for acquiring airline tickets will help limit the  government’s financial exposure by reducing the magnitude of unused  tickets and improper payments, and preventing improper and fraudulent  use from inadequate security over centrally billed accounts. In addition, DOD has taken actions to improve management of its centrally  billed account travel program based on the results of our premium class  travel and unused airline ticket reports.
Why GAO Did This Study

In November 2003, GAO testified on the significant level of improper premium class travel purchased with centrally billed accounts. These findings led to concerns over the Department of Defense's (DOD) overall management of the centrally billed account program. At the request of this Committee, Senator Grassley, and Representative Schakowsky, GAO performed work to determine whether DOD controls were adequate to protect the centrally billed accounts from fraud, waste, and abuse. This testimony focuses on whether DOD (1) paid for airline tickets that it did not use and did not process for refund, (2) improperly reimbursed travelers for the cost of airline tickets paid for with centrally billed accounts, and (3) adequately secured access to centrally billed accounts against improper and fraudulent use. This testimony also addresses the internal control breakdowns that led to instances of fraud, waste, and abuse and DOD's corrective actions. In two companion reports issued today, DOD concurred with the 31 recommendations GAO made-- including moving to a well- managed individually billed account program--to improve the management of unused tickets, recover the value of outstanding unused tickets, prevent and detect improper payments, reduce the risk that airline tickets are issued on invalid travel orders, and improve security over the centrally billed accounts.

What GAO Found

A weak control environment and breakdowns of key controls over the centrally billed accounts led to millions of dollars wasted on unused airline tickets, reimbursements to travelers for improper and potentially fraudulent airline ticket claims, and issuance of airline tickets based on invalid travel orders. In some instances where the centrally billed accounts were compromised, DOD did not pay for the airline tickets because DOD disputed those charges. However, not all DOD units disputed unauthorized charges. As a result, DOD is vulnerable to paying for fraudulent charges. A major contributing factor to these problems is that DOD's travel order, ticket issuance, and travel voucher systems are not integrated, and DOD had not designed compensating procedures to reconcile data in these systems. Thus, DOD was unable to detect instances where (1) the absence of a travel voucher might indicate that an airline ticket was unused, (2) travelers improperly claimed reimbursement for tickets they did not purchase, and (3) an authorized individual did not approve the travel order submitted to obtain an airline ticket. Other causes are excessive reliance on DOD travelers to report unused tickets, inadequate voucher review, and weak centrally billed account safeguards.