DOD’s failure to detect or prevent  these improper payments was the result of weaknesses in the design of key  internal controls, as well as breakdowns in key existing controls. Our data mining of airline ticket data from Bank of America centrally billed  account files and about half of DOD’s fiscal year 2001 and 2002 travel  vouchers identified about 27,000 travel claims totaling over $8 million for  which DOD made potentially improper reimbursements to travelers for  airline tickets that DOD purchased with the centrally billed accounts. Requesting  reimbursement for items that the traveler did not pay for may violate the  False Claims Act and be punishable by imprisonment or a monetary fine, or  both. The traveler told us that he did not notice that he  was paid for expenses he did not incur, even though in one instance,  DFAS overpaid the traveler more than $3,500 for one round-trip ticket  from Washington, D.C., to Singapore. These actions included renting luxury vehicles, such as a  Lincoln Navigator and Mercedes Benz, while on official travel—without  specific authorization to rent a luxury vehicle—and using his  individually billed account to obtain government-rate tickets for his  family members, as the examples illustrate. The 123 improper payments included 109 payments totaling  almost $85,000 that were made to 77 travelers who were paid for airline  tickets they did not purchase, and 14 payments totaling about $13,000 to 14  travelers in which DOD paid the traveler and the airline for two airline  tickets purchased for the same travel. Only four  travelers notified DFAS—and made restitution—on the improper payments  prior to our audit even though typically more than a year had passed since  the improper payment. The Air Force Audit Agency projected that, “This  condition, if not corrected, will result in the Air Force inappropriately  reimbursing individuals at least $6.5 million” over the next 6 years. The additional work demonstrated that  someone with knowledge of the DOD travel system could fraudulently  obtain an airline ticket, and have DOD pay for that ticket, with a centrally  billed account. Lack of Controls Enabled GAO to Obtain an Airline Tickets Using a Fictitious Travel Order

DOD’s failure to verify the validity of travel orders before it issued airline  tickets, and that it created obligations to pay for these tickets, increased  our concerns that DOD would issue, and pay for, airline tickets on the basis  of invalid travel orders. Fraudulent Airline Ticket Transactions Resulting from Compromised Accounts

DOD’s centrally billed accounts require safeguarding because stolen  account numbers can be repeatedly used to fraudulently purchase goods  and services. Between August 2001 and March 2002, a Navy seaman used the centrally  billed account numbers assigned to two Navy GTOs to purchase over 70  unauthorized tickets totaling more than $60,000. A major contributing factor to these instances was that many DOD units  did not adequately protect centrally billed account numbers. At two offices, GTO  officials told us that they did not know how to dispute unauthorized  charges. To obtain reasonable assurance that DOD military and civilian personnel  do not improperly request reimbursement for airline tickets purchased  with centrally billed accounts and reinforce the seriousness of filing false  claims against the government, we recommend that the Secretary of  Defense direct the Secretaries of the Army, Navy, and Air Force, as well as  the heads of all DOD agencies, to implement the following four  recommendations:    Periodically issue guidance to military and civilian personnel reminding  them that the cost of airfare expenses purchased with a centrally billed  account should not be claimed as a reimbursable expense on travel  vouchers, and of the potential penalties for doing so. Our assessment covered the following:   whether DOD improperly reimbursed travelers for the cost of airline  tickets paid using centrally billed accounts,   whether internal controls were effective to prevent the CTO from  issuing unauthorized airline tickets on the basis of invalid travel orders,  and   whether other control weaknesses led to the centrally billed accounts  being compromised and fraudulently used. Determine Whether DOD Improperly Reimbursed Travelers for Tickets DOD Purchased Using the Centrally Billed Accounts

To determine whether DOD improperly reimbursed travelers for airline  tickets that DOD—not the travelers—paid for using the centrally billed  accounts, we reviewed prior audit reports from DOD’s Office of Inspector  General and DOD’s various audit agencies and interviewed DFAS officials. Then to confirm whether the payments were improper we tested  a nonrepresentative selection of 124 travelers from the Army, Marine  Corps, and Navy who submitted 204 travel vouchers.
Why GAO Did This Study

Ineffective management and oversight of the Department of Defense's (DOD) premium class travel and unused airline tickets led to concerns about DOD's overall management of the centrally billed accounts. GAO was asked to determine whether (1) DOD improperly reimbursed travelers for airline tickets DOD paid for using centrally billed accounts, (2) internal controls were effective in preventing issuance of unauthorized airline tickets, and (3) other control weaknesses led to compromised and fraudulently used centrally billed accounts.

What GAO Found

A weak control environment and breakdowns in key controls over centrally billed accounts resulted in DOD paying travelers for airline tickets they did not purchase, issuing and paying for unauthorized airline tickets, and paying for goods and services obtained with compromised centrally billed accounts. Based on mining of limited fiscal year 2001 and 2002 data provided by the Army, Navy, and Marine Corps, GAO identified about 27,000 transactions totaling more than $8 million in which DOD potentially reimbursed travelers for airline tickets paid for by DOD--not the travelers. Requesting reimbursement for items that the traveler knowingly did not pay for may be a crime that could result in imprisonment or a monetary fine, or both. GAO's subsequent tests of a nonrepresentative selection of 124 individuals who submitted 204 of these 27,000 transactions confirmed that DOD improperly paid 91 individuals almost $98,000 for 123 airline tickets DOD purchased with centrally billed accounts. Only 4 travelers voluntarily reimbursed DOD prior to GAO initiating the audit, even though typically, more than a year had passed since the improper payments. Several travelers submitted multiple claims for airline tickets they did not purchase, which could indicate intent to defraud the government. In 2003, the Air Force Audit Agency reported that this same problem existed at the Air Force and estimated that, if not corrected, this problem will cost the Air Force more than $6 million over 6 years. Examples of Potentially Fraudulent Travel Claims Grade/rank Cost Number Nature of cases GS-15 $9,700 13 Traveler claimed he did not notice the additional $9,700 in his bank account. GS-13 3,600 6 Traveler continued to submit false claims after DOD told the traveler to stop requesting reimbursement for airline tickets purchased with centrally billed accounts. The traveler also rented luxury vehicles--such as a Mercedes Benz--while on government travel and approved his own travel vouchers. E-9 1,400 2 Traveler told us he knew of the improper payment, but he was waiting for DOD to request repayment. Source: GAO review of DOD travel data. GAO also determined that key internal controls did not provide DOD reasonable assurance that (1) airline tickets purchased and paid for with the centrally billed accounts were based on valid travel orders and (2) centrally billed account numbers were adequately protected against unauthorized use. To demonstrate weaknesses in DOD's system of internal controls, GAO submitted a fictitious travel order to a commercial travel office to obtain an airline ticket from Washington, D.C., to Atlanta, Ga. DOD issued GAO the airline ticket, established an obligation, and paid for the ticket without detecting the fictitious nature of the request. GAO also found instances where a lack of physical safeguards resulted in the centrally billed account numbers being stolen and used for personal gain. One DOD traveler stole a centrally billed account number to purchase over 70 airline tickets totaling more than $60,000, which he sold at a discounted rate to coworkers and their family members for personal travel. Because DOD disputed those fraudulent charges, DOD did not pay for those tickets. However, not all DOD units dispute unauthorized charges. As a result, DOD is vulnerable to paying for fraudulent charges on compromised centrally billed accounts.