	Extent of Premium Class Travel Is Significant

As shown in table 1, DOD spent nearly $124 million on airline tickets that  included at least one leg of premium class service during fiscal years 2001  and 2002. However, to put the  $124 million that DOD spent on premium class travel in perspective, the  amount DOD spent on premium class-related travel during these 2 fiscal  years exceeded the total travel and transportation expenses—including  airfare, lodging, and meals—spent by each of 12 major agencies covered by  the Chief Financial Officers Act of 1990, including the Social Security  Administration; the Departments of Energy, Education, Housing and Urban  Development, and Labor; and the National Aeronautics and Space  Administration. The difference between the price of a premium class ticket and a  comparable coach class ticket can range from negligible—particularly if  the traveler traveled within Europe—to thousands of dollars. Higher-ranking civilian personnel and military officials accounted for a  large part of premium class travel. Internal Control Activities Not Effectively Implemented

Control activities occur at all levels and functions of an agency. Using these guidelines, we estimated, based on our statistical sample, that  an estimated 72 percent of the DOD centrally billed travel transactions  containing premium class travel for fiscal years 2001 and 2002 were not  properly authorized and that an estimated 73 percent were not properly  justified. Considering the significant breakdown in key internal controls, it was not  surprising that our audit identified numerous examples of improper  premium class travel that cost DOD significantly more than what would  have been spent on a coach class ticket. Weaknesses in Internal Control Environment

GAO’s Standards for Internal Controlstates that a positive control  environment is the foundation for all other standards. However, we found that prior  to us initiating this audit, DOD had not taken actions to encourage a strong  internal control environment over premium class travel. Specifically, DOD  and the military services did not (1) maintain adequate and accurate  premium class travel data, (2) issue adequate policies related to the  approval of premium travel, (3) require consistent documentation to justify  premium class travel, and (4) perform audits or evaluations of premium  class travel and did not monitor training provided to travelers, authorizing  officials, and commercial travel offices employees on governmentwide and  DOD premium class travel regulations. As mentioned previously,  we were able to obtain such data through extensive analysis and  extractions of DOD travel card transactions from databases provided by  the Bank of America. The lack of effective  oversight and monitoring was another contributing factor to DOD and the  services’ lacking knowledge of the extent of improper premium class  transactions. DOD Issued New Regulations to Better Define When Premium Class Travel is Authorized

During the course of our work, in April 2003, DOD updated the JTR and  JFTR to articulate more clearly and make more stringent the  circumstances under which premium class other than first class travel, that  is, business class, is authorized for DOD travelers on flights to and/or from  points outside the continental United States when the scheduled flight time  exceeds 14 hours. As a result,  millions of dollars of unnecessary costs are incurred annually. In oral comments on a draft of this report, DOD  officials concurred with our recommendations to resolve the control  weaknesses. Mr. Chairman, Members of the Subcommittee, Senator Grassley, and Ms.  Schakowsky, this concludes my prepared statement.
Why GAO Did This Study

Long-standing financial management problems, coupled with ineffective oversight and management of the Department of Defense's (DOD) travel card program, which GAO has previously reported on, have led to concerns about DOD's use of first and business class airfares. At the request of the Subcommittee on Investigations, Senate Committee on Governmental Affairs, Senator Grassley, and Representative Schakowsky, GAO performed work to identify problems in DOD's controls over premium class travel. This testimony focuses on (1) the extent of DOD premium class travel, (2) the effectiveness of key internal control activities and examples of improper premium class travel resulting from internal control breakdowns, and (3) DOD's control environment over premium class travel. In a companion report being issued today, GAO made numerous recommendations--that DOD concurred with--to strengthen key internal control activities and improve the overall control environment.

What GAO Found

Breakdowns in internal controls and a weak control environment resulted in a significant level of improper premium class travel and millions of dollars of unnecessary costs being incurred annually. Based on extensive analysis of records obtained from DOD's credit card issuer--Bank of America, GAO found that for fiscal years 2001 and 2002, DOD spent almost $124 million on about 68,000 premium class tickets that included at least one leg of premium class service, primarily business class. To put the $124 million into perspective it exceeded the total travel expenses--including airfare, lodging, and meals--spent by each of 12 major CFO agencies. The price difference between a premium class ticket and a coach class ticket ranged from a few dollars to thousands of dollars. Based on statistical sample testing, GAO estimated that 72 percent of DOD's fiscal year 2001 and 2002 premium class travel was not properly authorized, and that 73 percent was not properly justified. GAO estimated that senior civilian and military employees accounted for almost 50 percent of premium class travel. Further, our data mining showed that 27 of the 28 most frequent premium class travelers were senior DOD officials. Lack of oversight and a weak overall control environment characterized DOD's management of premium class travel. DOD and the military services (1) did not have accurate and complete data on the extent of premium class travel, (2) issued inadequate policies on premium class travel that were inconsistent with government travel regulations and with each other, (3) did not issue guidance on how to document the authorization and justification of premium class travel, and (4) performed little or no monitoring of this travel. During the course of our audit, DOD began updating its travel regulations to more clearly articulate and to make more stringent the circumstances under which premium class travel can be authorized.