	Case Studies Illustrate Fraudulent and Abusive Activity Associated with Federal Transit Benefit Program

Despite signing certifications stating that they will only use their transit  benefits to cover actual out-of-pocket commuting costs, federal employees  in the National Capital Region are committing fraud or violating the False  Statements Act by requesting benefits they do not need and then selling  or using these benefits for personal gain. In subsequent interviews with 13 of the 20 eBay sellers, we  found instances where federal employees received parking benefits in  addition to Metrocheks, were on extended leave from work, or did not  even use public transportation to commute to work. The husband admitted to selling his transit benefits on  eBay on multiple occasions (61 lots of Metrocheks valued at a total of  $6,000). Investigations Show Federal Employees Fraudulently Sold Metrocheks on Craigslist

Posing as buyers, our investigators purchased $840 worth of benefits from  three federal employees fraudulently selling their Metrocheks via  Craigslist, a popular community Web site. Employee has  participated in the transit benefits program since 2003 and admitted to  knowingly providing false information on his transit benefit application by  claiming the maximum benefit of $105 per month when his actual  commuting cost is $60 per month. Neither of these individuals  returned any of their unused benefits to Treasury. Weaknesses in Program Controls May Contribute to Fraud and Abuse

Weaknesses in the design of program controls at Commerce,  Transportation, State, Homeland Security, Defense, Treasury, IRS, Patent  and Trademark, and the Coast Guard can be associated with the  fraudulent and abusive activity we identified. Although we did not conduct a  comprehensive review of each agency’s controls, the results from our  interviews and data mining illustrate flaws in the design of the controls. Figure 4 details the critical elements included in each agency’s written  policies and procedures. Four employees admitted to us that they continued to receive transit  benefits even though they were on extended absences from work. However, none of the agencies use information that employees provide in  the normal course of working for the government—such as changes of  address on their W-2 forms, taking annual leave, or traveling on business— to adjust benefits because of leave or travel. Federal Employees Likely Made More than $17 Million in Potentially Fraudulent Transit Benefit Claims

Using limited employee data and transit benefit records, we determined  that the amount of potentially fraudulently transit benefits claimed during  2006 in the National Capital Region was at least $17 million and likely  millions more. This magnitude is based on the roughly $70 million in  transit benefits claimed by employees at Commerce, Transportation,  Homeland Security, Defense, Treasury, IRS, and the Coast Guard. Given the number of agencies not covered by our  analysis, it is likely that this amount is significantly understated and could  be millions more. We similarly  referred the individuals who provided inaccurate and inflated commuting  cost information on their applications, the individuals who have received  transit benefits from federal agencies even though they do not appear to  work for the agencies, the individuals who left their agencies but did not  return their unused benefits, and the former federal employees who  continued to received benefits after leaving their respective agencies. Appendix I: Potential Magnitude of Fraudulent Payments

To provide an order of magnitude of the employees fraudulently claiming  transit benefits within the National Capital Region, we identified a  selection of federal employees who met a specific set of criteria and  evaluated the validity of their transit benefit application data. We interviewed these participants and confirmed  that the individuals we selected were not entitled to the maximum benefit.
Why GAO Did This Study

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.

What GAO Found

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.