Further, in September 2004, the Assistant Secretary of  State for Administration sent a memorandum to all State executive  directors emphasizing “that it is wrong to authorize premium-class travel  on a blanket basis” and “that a separate justification for premium-class  travel is required for each trip.”  Federal and State travel regulations  authorize premium-class accommodation when at least one of the  following conditions exists:  no space is available in coach-class accommodations,   regularly scheduled flights provide only premium-class   an employee with a disability or special need requires premium-class   security issues or exceptional circumstances,  travel lasts in excess of 14 hours without a rest stop,   foreign-carrier coach-class air accommodations are inadequate,   overall cost savings, such as when a premium-class ticket is less  expensive than a coach-class ticket or in consideration of other  economic factors,  transportation costs are paid in full through agency acceptance of  payment from a nonfederal source, or  required because of agency mission (e.g., courier). Ineffective Controls over Authorization and Justification of Premium-Class Travel Led to Wasted Taxpayer Dollars

Premium-class travel accounted for almost half of travel expenditures  charged to State’s over 260 centrally billed accounts during most of fiscal  years 2003 and 2004, including domestic and overseas operations, and this  trend continued for fiscal year 2005. As shown in figure 2, premium- class travel represents about 19 percent of the tickets issued, and State’s  and other foreign affairs agencies’ spending on premium-class travel  represented about 49 percent of the $286 million spent on airfare charged  to the centrally billed accounts during the period April 2003 through  September 2004. State told us that at some  overseas posts travelers purchase airline tickets using Government Travel  Requests (GTR) and purchase orders. Specifically, 39 percent of the premium-class airline  tickets charged to State’s centrally billed account from April 2003 through  September 2004 were not properly authorized. Lack of Oversight and Controls Led to Other Breakdowns

Ineffective oversight and breakdowns in controls also led to problems with  State’s other centrally billed travel activities. For example, although federal  agencies are entitled to recover payments made to airlines for tickets that  they ordered but did not use, State and other foreign affairs agencies paid  for about $6 million in airline tickets that were not used and not processed  for refund. State was unaware of this problem before our  audit because it did not monitor employees’ adherence to travel regulations  and did not have a systematic process in place for TMCs to identify and  process unused tickets. State also failed to reconcile or dispute over  $420,000 of unauthorized and potentially fraudulent charges before paying  its account. Instead of disputing these charges with Citibank, State simply  deducted the amounts from its credit card bill. Thus, State earned only  $700,000 out of a possible $2.8 million in rebates that could have been  earned if State disputed unauthorized charges and paid the bill in  accordance with the terms of the contract with Citibank. Since these tickets were not used,  they resulted in waste and increased costs to taxpayers. Improved management and  oversight of the State department’s centrally billed travel program would  save taxpayers tens of millions of dollars annually. On the basis of our  statistical sample, 67 percent of premium-class travel was not properly  authorized, justified, or both. Specifically we evaluated the effectiveness of State’s internal controls over  (1) the authorization and justification of premium-class tickets charged to  State’s centrally billed travel accounts and (2) monitoring unused tickets,  reconciling monthly statements, and maximizing performance rebates.
Why GAO Did This Study

The relative size of the Department of State's (State) travel program and continuing concerns about fraud, waste, and abuse in government travel card programs led to this request to audit State's centrally billed travel accounts. GAO was asked to evaluate the effectiveness of internal controls over (1) the authorization and justification of premium-class tickets charged to the centrally billed account and (2) monitoring of unused tickets, reconciling monthly statements, and maximizing performance rebates.

What GAO Found

Breakdowns in key internal controls, a weak control environment, and ineffective oversight of State's centrally billed travel accounts resulted in taxpayers paying tens of millions of dollars for unauthorized and improper premium-class travel and unused airline tickets. State's over 260 centrally billed accounts are used by State and other foreign affairs agencies to purchase transportation services, such as airline and train tickets. GAO found that between April 2003 and September 2004 State's centrally billed accounts were used to purchase over 32,000 premium-class tickets costing almost $140 million. Premium-class travel--primarily business-class airline tickets--represented about 19 percent of the tickets issued but about 49 percent of the $286 million spent on airline tickets with State's centrally billed account travel cards. GAO determined that this trend continued for fiscal year 2005. GAO found that 67 percent of this premium-class travel was not properly authorized, justified, or both. Because premium-class tickets typically cost substantially more than coach tickets, improper premium-class travel represents a waste of tax dollars. Most of these blanket premium-class travel authorizations were signed by subordinates who told us they couldn't challenge the use of premium-class travel by senior executives. Ineffective oversight and control breakdowns also contributed to problems with monitoring unused tickets, reconciling monthly statements, and maximizing performance rebates. Although federal agencies are authorized to recover payments made to airlines for tickets that they ordered but did not use, State failed to do so and paid for about $6 million for airline tickets that were not used or processed for refund. State was unaware of this problem before our review because it neither monitored travelers' adherence to travel regulations nor systematically identified and processed all unused tickets. State also failed to reconcile or dispute over $420,000 of unauthorized charges before paying its monthly bank invoice and instead deducted the amounts from its bill. Because these amounts were not properly disputed under the contract terms, State underpaid its monthly bills and was thus frequently delinquent. Handling questionable charges in this ad hoc manner sharply reduced State's eligible rebates. Overall, State earned only $700,000 out of a possible $2.8 million in rebates that could have been earned if it had properly disputed unauthorized charges and paid the bill in accordance with the contract.