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Report to Congressional Requesters: 

March 2004: 

DOD TRAVEL CARDS: 

Control Weaknesses Led to Millions of Dollars Wasted on Unused Airline 
Tickets: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-398]: 

GAO Highlights: 

Highlights of -GAO-04-398, a report to congressional requesters 

Why GAO Did This Study: 

Ineffective oversight and management of the Department of Defense’s 
(DOD) travel card program, which GAO previously reported on, have led 
to concerns about airline tickets DOD purchased but did not use and for 
which it did not claim refunds. GAO was asked to (1) determine whether, 
and to what extent, airline tickets purchased through the centrally 
billed accounts were unused and not refunded and (2) determine whether 
DOD’s internal controls provided reasonable assurance that all unused 
tickets were identified and submitted for refunds.

What GAO Found: 

Control breakdowns over the centrally billed accounts resulted in DOD 
paying for airline tickets that were not used and not processed for 
refund. DOD was not aware of this problem before our audit and did not 
maintain data on unused tickets. We determined, based on airline data, 
that DOD had purchased—primarily in fiscal years 2001 and 2002—about 
58,000 tickets with a residual (unused) value of more than $21 million 
that remained unused and not refunded as of October 2003. We also 
identified more than 81,000 partially unused airline tickets with a 
purchase price of about $62 million that will require additional 
analysis to determine the residual value. Based on further analysis of 
the limited data, it is possible that DOD purchased at least $100 
million in airline tickets that it did not use and for which it did not 
claim refunds from fiscal years 1997 through 2003.

Fully Unused and Partially Unused Airline Tickets: 

[See PDF for image]

[End of table]

Although GAO asked DOD’s five most frequently used airlines for fiscal 
year 2001 and 2002 unused ticket data, the airlines did not provide 
uniform, complete, or consistent responses. For example, one airline 
did not provide partially unused ticket data, another airline’s fiscal 
year 2001 data covered only September 2001, while yet another airline 
provided data on electronic tickets dating back to November 1998. 
Although additional data on unused tickets may be available from the 
airlines’ archives, our attempts to obtain additional information were 
unsuccessful. 

DOD’s unused ticket problems were caused by a flawed process that 
relied extensively on DOD personnel to report unused tickets to the 
travel offices. Although it appears that many unused tickets were 
processed for a refund, the internal controls DOD had in place did not 
detect millions of dollars of unused airline tickets. Specifically, DOD 
did not systematically implement compensating procedures to identify 
instances in which DOD personnel did not report unused tickets, or 
reconcile the centrally billed accounts to travel claims to determine 
whether airline tickets were used. Although some units had instituted 
a process by fiscal year 2002 to more systematically identify instances 
of unused tickets, the process was not implemented DOD-wide, DOD did 
not verify that units were consistently implementing the process, and 
the process could only identify unused electronic—not paper—tickets. 

What GAO Recommends: 

GAO makes 20 recommendations to DOD, including the following: 

* evaluate the feasibility of requiring DOD personnel to purchase 
airline tickets with their individually billed travel cards, which 
would eliminate DOD’s risk of paying for unused tickets;
* implement procedures to systematically provide reasonable assurance 
that all unused tickets purchased with the centrally billed accounts 
are refunded; and
* submit claims to the airlines to recover the $21 million in known 
unused tickets—DOD might be able to recover more than $100 million for 
unused tickets. 

DOD concurred with all 20 of our recommendations and stated that it had 
taken or will take actions to address these recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-04-398.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Gregory D. Kutz at (202) 
512-9505 or kutzg@gao.gov.

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

Millions of Dollars of Airline Tickets Were Unused and Not Refunded: 

DOD Did Not Implement Effective Controls over Unused Tickets: 

Conclusion: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Known Value of Fully and Partially Unused Tickets and 
Potential Magnitude of Control Weaknesses: 

Types of Data Provided Differed Substantially between Airlines: 

Known Unused Value of Fully and Partially Unused Tickets: 

Possible Magnitude of Unused Tickets Purchased with Centrally Billed 
Accounts: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Acknowledgments: 

Tables: 

Table 1: Known Residual Value of Fully and Partially Unused Airline 
Tickets, November 1998 through December 2002: 

Table 2: Known Residual Value of Fully Unused Airline Tickets, November 
1998 through December 2002: 

Table 3: Known Partially Unused Airline Tickets, November 1998 through 
December 2002: 

Table 4: Type of Data Provided by the Airlines: 

Table 5: Known Value of Unused Tickets by Airline: 

Table 6: Partially Unused Ticket Number and Value: 

Table 7: Fiscal Year 2002 Fully Unused Ticket Ratios: 

Table 8: Analysis of Fiscal Year 2002 Partially Unused Ticket Ratios: 

Figures: 

Figure 1: Value of Tickets Charged to DOD's Centrally Billed Accounts 
by Airline, Fiscal Years 2001 and 2002: 

Figure 2: Possible Control Breakdowns in the Unused Ticket Process: 

Abbreviations: 

CTO: Commercial Travel Office: 

DOD: Department of Defense: 

DTS: Defense Travel System: 

GTO: Government Travel Office: 

Letter March 31, 2004: 

The Honorable Norm Coleman: 
Chairman: 
The Honorable Carl Levin: 
Ranking Minority Member: 
Permanent Subcommittee on Investigations: 
Committee on Governmental Affairs: 
United States Senate: 

The Honorable Charles E. Grassley: 
Chairman: 
Committee on Finance: 
United States Senate: 

The Honorable Janice Schakowsky: 
House of Representatives: 

This report is a continuation of our series of reports on the 
Department of Defense's (DOD) management of its travel card programs. 
In fiscal years 2002 and 2003, we issued a series of testimonies
[Footnote 1] and reports[Footnote 2] addressing problems that the Army, 
Navy, and Air Force had in managing individually billed travel card 
accounts. These testimonies and reports showed high delinquency rates 
and significant potential fraud and abuse related to DOD's travel card 
programs. Due to these concerns, you asked us to audit controls over 
the other major form of payment used by DOD for travel expenses--
centrally billed accounts. In response to your request, we reported
[Footnote 3] in October 2003 that internal control weaknesses over 
DOD's centrally billed accounts led to millions of dollars of improper 
premium class travel and increased costs to taxpayers. These weaknesses 
provide further examples of DOD's long-standing financial management 
problems, which are pervasive, complex, and deeply rooted in virtually 
all business operations throughout the department. Such problems led us 
in 1995 to put DOD financial management on our list of high-risk areas, 
that is, areas that are highly vulnerable to fraud, waste, and abuse, 
a designation that continues today.[Footnote 4] In light of the 
internal control problems with DOD's travel card programs, you asked us 
to expand our work in the area of centrally billed accounts to 
determine (1) whether, and to what extent, airline tickets purchased 
through the centrally billed accounts were still unused and not 
refunded and (2) whether DOD's internal controls provided reasonable 
assurance that all unused tickets were identified and submitted for 
refunds.

To determine the magnitude of tickets purchased through the centrally 
billed accounts during fiscal years 2001 and 2002 that were unused and 
not refunded, we compared data on unused tickets provided by airlines 
(refer to app. II for information on data provided by airlines) to data 
provided by the Bank of America--DOD's credit card bank. The unused 
ticket data came from the five U.S. airlines that provided about 82 
percent of the value of all airline tickets DOD purchased during this 
period. Although we were able to validate that the tickets the airlines 
had on record as being unused were tickets that DOD had purchased with 
its centrally billed accounts, we were unable to confirm the 
completeness of the population of unused tickets we received from four 
of the five airlines. Despite the possibility of understating the 
extent of the problem, we used the airline data to determine the 
possible magnitude of DOD's unused tickets from fiscal years 1997 
through 2003. Further, we reviewed the unused ticket process to 
evaluate whether internal controls over the centrally billed accounts 
were properly designed to identify unused tickets, submit these tickets 
for refunds, and verify that refunds had been received. Appendixes I 
and II provide details on our scope and methodology.

We performed our work from March 2003 through January 2004 in 
accordance with generally accepted government auditing standards. We 
requested comments on a draft of this report from the Secretary of 
Defense or his designee. We received written comments, which are 
reprinted in appendix III of this report.

Results in Brief: 

A lack of departmentwide controls over the centrally billed accounts 
resulted in DOD paying for millions of dollars of airline tickets that 
were not used and not processed for refund. DOD was not aware of this 
problem before our review because it did not maintain data on unused 
tickets. Our analysis of the limited data provided by DOD's five most 
frequently used airlines found that DOD had purchased--primarily in 
fiscal years 2001 and 2002--about 58,000 tickets with a residual 
(unused) value of $21.1 million that remained unused and not refunded 
as of October 2003. In addition, three airlines had not determined the 
residual value of more than 81,000 partially unused tickets, that is, 
at least one leg had not been used, with a total purchase price of more 
than $62 million. These amounts likely understate the value of fully 
and partially unused tickets because only two of the five airlines were 
able to provide us complete data on unused fiscal years 2001 and 2002 
tickets as requested, and one airline did not provide any data for 
partially unused tickets. Based on further assessment of the limited 
data, we determined that it is possible that since 1997, DOD purchased 
more than $100 million in airline tickets with its centrally billed 
accounts that it did not use and did not process for refunds. Airline 
representatives informed us that limitations with the way their data 
are maintained prevented them from providing us with complete and 
consistent data, and our attempts to obtain additional information were 
unsuccessful. Federal agencies are authorized to recover payments made 
to airlines for tickets that agencies ordered but did not use. While 
generally a 6-year statute of limitations applies to the government's 
ability to file an action for money damages based on a contractual 
right, the government also has up to 10 years to offset future payments 
for amounts it is owed.

Millions of dollars in unused tickets have been wasted because DOD did 
not have a systematic process to identify and process unused tickets. 
DOD's flawed process relied extensively on DOD personnel to report 
unused tickets to the travel offices. DOD did not systematically 
implement compensating procedures to identify instances in which DOD 
personnel did not report unused tickets, or reconcile the centrally 
billed accounts to travel claims to determine whether airline tickets 
were used. This failure to reconcile tickets that were centrally 
acquired to travel claims filed by travelers resulted in DOD not being 
able to determine whether the airline tickets it purchased were used. 
Although bank data indicated that DOD received many credits to 
centrally billed accounts, the number and value of tickets the airlines 
reported as unused and not refunded demonstrated that the lack of 
effective internal control procedures led to a waste of scarce 
resources. We identified some improvements during fiscal year 2002, 
when a number of DOD commercial travel offices attempted to implement 
procedures to systematically identify unused electronic tickets within 
their computer reservation systems. However, this process had not been 
implemented DOD-wide and does not address paper airline tickets. 
Further, at locations where this technique was implemented, DOD's 
government travel offices did not have systematic procedures to verify 
that the commercial travel offices consistently identified all unused 
electronic tickets, and that all tickets that had been identified as 
unused resulted in a credit to the centrally billed account.

While we identified significant weaknesses in the controls over DOD's 
centrally billed accounts, improved controls and management of 
individually billed accounts may provide DOD with options to reduce the 
financial exposure resulting from unused tickets that are not properly 
refunded. Specifically, using a well-controlled individually billed 
account program to pay for airline tickets would transfer 
responsibility for all charges to the individual cardholder, thus 
limiting the government's financial exposure and providing an incentive 
to DOD cardholders to properly identify and claim refunds for unused 
tickets. However, DOD would still need to improve controls over its 
centrally billed account structure as not all DOD travelers would have 
access to an individually billed account, such as new employees and 
infrequent travelers.

This report contains 20 recommendations for DOD to reduce the risks 
associated with using the centrally billed accounts to purchase airline 
tickets by considering the feasibility of establishing the individually 
billed account travel card as the primary procurement method for 
transportation. We also recommend that DOD take a series of immediate 
steps to improve controls over the centrally billed account so that in 
the future, it can readily identify and request timely refunds on all 
unused tickets. Finally, we recommend that DOD attempt to recover all 
tickets that are unused and not refunded. To assist DOD in claiming 
refunds or converting the unused tickets to future use, in December 
2003, we provided DOD a list of the unused ticket information we 
received from the airlines. DOD has told us that it is working to 
recover the value of those unused and partially used tickets. In 
written comments on a draft of this report, DOD concurred with all 20 
of our recommendations and stated that it had taken actions or will 
take actions to address these recommendations.

Background: 

The DOD centrally billed travel card program is part of a 
governmentwide travel card program started in 1983 with the express 
purpose of increasing convenience to the traveler and lowering (1) the 
government's cost of travel by reducing the need for cash advances to 
the traveler and (2) the associated administrative costs. The travel 
card program includes both the individually billed accounts--accounts 
held and paid by the individual cardholders--and the centrally billed 
accounts. In general, individual cardholders use the individually 
billed accounts to charge non-transportation-related expenses, while 
most DOD services and units used the centrally billed accounts to 
purchase transportation services such as airline and train tickets and 
to facilitate expenses incurred for group travel.[Footnote 5]

According to Bank of America data, the net value of airline tickets 
charged during fiscal years 2001 and 2002 to DOD's centrally billed 
accounts totaled over $2.4 billion. As shown in figure 1, five U.S. 
airlines--American, Delta, Northwest, United, and US Airways--together 
accounted for more than 82 percent of the dollar value of airline 
tickets purchased by DOD during fiscal years 2001 and 2002. More than 
85 other airlines--both U.S. and foreign carriers--accounted for the 
remaining 18 percent of the value of total airline tickets DOD 
purchased in fiscal years 2001 and 2002. The $2.4 billion is made up of 
more than $2.6 billion in gross airline purchases net of credits 
totaling $233 million, or about 9 percent of gross airline purchases. 
Credits related to tickets that were unused, tickets issued 
erroneously, and charges identified as fraudulent.

Figure 1: Value of Tickets Charged to DOD's Centrally Billed Accounts 
by Airline, Fiscal Years 2001 and 2002: 

[See PDF for image] 

[End of figure] 

The airline tickets DOD purchased through the centrally billed accounts 
are generally acquired under the terms of the air transportation 
services contract that the General Services Administration (GSA) 
negotiates with U.S. airlines. Airline tickets purchased under this 
contract have no advance purchase requirements, have no minimum or 
maximum stay requirements, are fully refundable, and do not incur 
penalties for changes or cancellation. The revenue recognition policy 
for the airlines industry is to recognize ticket sales as a liability 
until the transportation is provided, that is, when the ticket is used. 
The terms of the air transportation services contract also provide that 
contract carriers are to fully refund all unused portions of any 
government contract fare ticket to the activity paying for the ticket, 
the travel management center issuing the ticket, or the individual 
traveler, as appropriate. Because DOD travel regulations require that 
federal and military travelers on official business use a contract 
carrier for official airline travel unless a specific exception 
applies, airline tickets purchased by DOD are typically fully 
refundable.

Federal agencies are authorized to recover payments made to airlines 
for tickets that agencies acquired but did not use.[Footnote 6] While 
generally there is a 6-year statute of limitations on the government's 
ability to file an action for money damages based on a contractual 
right,[Footnote 7] the government also has up to 10 years to offset 
future payments for amounts it is owed.[Footnote 8] Several airlines 
sued GSA after it offset payments due to the airlines for the value of 
airline tickets that GSA claimed were unused. The court upheld GSA's 
authority to administratively offset the payments despite the airlines' 
assertion that provisions printed on the tickets themselves specified a 
shorter time limit in which the government could request a 
refund.[Footnote 9] The court further held that the government's right 
to refunds could not be limited by terms unilaterally imposed by the 
airlines.[Footnote 10]

Millions of Dollars of Airline Tickets Were Unused and Not Refunded: 

As shown in table 1, data provided by five airlines and verified 
against Bank of America's data showed that about 58,000 tickets with a 
value of $21.1 million were purchased with DOD's centrally billed 
accounts but were unused and not refunded. The $21.1 million included 
more than 48,000 tickets valued at $19.2 million that were fully 
unused, and $1.9 million in the residual value of about 10,000 American 
Airlines partially used tickets,[Footnote 11] that is, at least one leg 
had not been used. Based on our assessment of the limited data provided 
by the airlines, it is possible that since fiscal year 1997, DOD 
purchased more than $100 million in airline tickets that were not used 
and not processed for refunds and for which DOD may be entitled to 
refunds or offsets against other payments to those airlines.

Table 1: Known Residual Value of Fully and Partially Unused Airline 
Tickets, November 1998 through December 2002: 

Dollars in millions.

American; 
Number of tickets: 15,877[A]; 
Residual value of tickets: $4.1[A].

Delta; 
Number of tickets: 15,588; 
Residual value of tickets: $6.4.

Northwest; 
Number of tickets: 3,479; 
Residual value of tickets: $2.3[B].

United; 
Number of tickets: 16,283; 
Residual value of tickets: $6.0.

US Airways; 
Number of tickets: 6,719; 
Residual value of tickets: $2.3.

Total; 
Number of tickets: 57,946; 
Residual value of tickets: $21.1.

Source: GAO analysis of Bank of America and airline data.

[A] In total, American Airlines reported 24,013 tickets with residual 
value of more than $6.2 million that were fully or partially unused. 
We excluded 8,136 American Airlines unused tickets totaling more than 
$2.1 million from our analysis because either (1) less than 6 months 
had passed between the time the tickets were purchased and when 
American Airlines provided the file or (2) Bank of America data did 
not confirm whether the tickets were fully or partially unused.

[B] Residual value of $2.3 million represents the amount DOD paid Bank 
of America for those tickets. This amount differs slightly from 
Northwest Airlines' reported fare of $2.1 million. Our analysis 
indicates that Northwest Airlines excluded taxes and fees from its 
reported amount of $2.1 million.

[End of table]

Amount of Fully Unused Tickets Is Significant: 

Table 2 provides further details on the $19.2 million identified as 
being fully unused. Fully unused tickets made up most of the known 
unused tickets value of $21.1 million, which also included the residual 
value of partially unused tickets. As shown in table 2, DOD spent $19.2 
million on more than 48,000 airline tickets that were fully unused and 
not refunded.

Table 2: Known Residual Value of Fully Unused Airline Tickets, November 
1998 through December 2002: 

Dollars in millions.

American; 
Number of fully unused tickets: 6,151; 
Residual value of fully unused[A] tickets: $2.2.

Delta; 
Number of fully unused tickets: 15,588; 
Residual value of fully unused[A] tickets: $6.4.

Northwest; 
Number of fully unused tickets: 3,479; 
Residual value of fully unused[A] tickets: $2.3.

United; 
Number of fully unused tickets: 16,283; 
Residual value of fully unused[A] tickets: $6.0.

US Airways; 
Number of fully unused tickets: 6,719; 
Residual value of fully unused[A] tickets: $2.3.

Total; 
Number of fully unused tickets: 48,220; 
Residual value of fully unused[A] tickets: $19.2. 

Source: GAO analysis of airline data.

[A] Values represent tickets purchased primarily in fiscal years 2001 
and 2002. Of the $19.2 million, $2.4 million represents tickets that 
were not purchased during those 2 fiscal years.

[End of table]

Since DOD was not aware of these unused tickets, and consequently did 
not know their number or dollar value, we requested these data from 
DOD's five most frequently used airlines--American, Delta, Northwest, 
United, and US Airways. Although we asked each airline for consistent 
data on tickets purchased in fiscal years 2001 and 2002 that were 
unused and not refunded, we did not receive uniform, complete, or 
consistent responses. For example, although American Airlines and US 
Airways provided us with data on fully unused tickets for fiscal year 
2002--tickets that were issued to DOD travelers but never traded in at 
a counter--they provided only partial data for fiscal year 2001. Delta 
Airlines provided us information on the status of all tickets DOD 
purchased with its centrally billed accounts during fiscal years 2001 
and 2002, and guidance on how to identify those tickets that were fully 
and partially unused. For more detailed information on the breakdown of 
fully unused tickets by year, and further discussion of the types of 
data we received from the airlines, see appendix II.

Residual Value of Partially Unused Tickets Is Potentially Significant: 

In addition to the $19.2 million in fully unused tickets, DOD failed to 
claim refunds on millions of dollars in airline tickets purchased with 
centrally billed accounts that were partially unused. As in the case of 
fully unused tickets, DOD was not aware of, and therefore did not 
maintain data on, partially unused tickets. Consequently, we had to 
request these data from the airlines.

Partially unused tickets are those tickets that, although used, still 
have residual value as only portions of those tickets were traded in 
for travel. A DOD ticket may be partially unused for several reasons. 
For instance, a ticket can be partially unused when a DOD traveler used 
the ticket for the outbound flight but decided to drive home with 
another DOD traveler. A ticket can also be partially unused if, for 
example, a DOD traveler who was originally scheduled to travel from 
Seattle to Miami and then to San Juan, Puerto Rico, was ordered to 
return home from Miami because of weather problems. In this case, the 
portion of the airline ticket from Miami to Puerto Rico was unused. 
While the portions that have been used represent services rendered by 
the airlines, the portions that are partially used have a residual 
value that can be claimed as a refund. Table 3 summarizes the number 
and purchase price of partially unused tickets, as well as the residual 
value of partially unused tickets where available.

Table 3: Known Partially Unused Airline Tickets, November 1998 through 
December 2002: 

Dollars in millions.

Airline: US Airways: Data not provided. 

Partially unused tickets requiring additional analysis to determine 
residual value: 

Airline: Delta; 
Number of tickets identified as partially unused[A]: 51,294; 
Purchase price of tickets identified as partially unused[A]: $39.3; 
Residual value of tickets identified as partially unused: Not provided.

Airline: Northwest; 
Number of tickets identified as partially unused[A]: 7,420; 
Purchase price of tickets identified as partially unused[A]: 7.6[B]; 
Residual value of tickets identified as partially unused: Not provided.

Airline: United; 
Number of tickets identified as partially unused[A]: 22,823; 
Purchase price of tickets identified as partially unused[A]: 15.2; 
Residual value of tickets identified as partially unused: Not provided.

Subtotal; 
Number of tickets identified as partially unused[A]: 81,537; 
Purchase price of tickets identified as partially unused[A]: $62.1; 
Residual value of tickets identified as partially unused: Not provided.

Known residual value of partially unused tickets not requiring 
additional analysis: 

Airline: American; 
Number of tickets identified as partially unused[A]: 9,726; 
Purchase price of tickets identified as partially unused[A]: $5.8; 
Residual value of tickets identified as partially unused: $1.9.

Total; 
Number of tickets identified as partially unused[A]: 91,263; 
Purchase price of tickets identified as partially unused[A]: $67.9; 
Residual value of tickets identified as partially unused: $1.9. 

Source: GAO analysis of airline data.

[A] Values represent tickets purchased primarily in fiscal years 2001 
and 2002. Of the more than 90,000 tickets totaling $67.9 million, about 
8,500 tickets with total purchase price of $5.2 million were not 
purchased during those 2 fiscal years.

[B] Purchase price of $7.6 million represents Bank of America data on 
ticket price. This amount differs from Northwest Airlines' reported 
fare of $7.2 million. Our analysis indicates that Northwest Airlines 
excluded taxes and fees from its reported amount of $7.2 million.

[End of table]

Over the entire period for which four airlines provided data on 
partially unused tickets--American, Delta, Northwest, and United--we 
identified that more than 91,000 tickets costing about $68 million were 
only partially used. Although Delta, Northwest, and United provided 
data that identified over 81,000 partially unused tickets with a 
purchase price of more than $62 million, these three airlines informed 
us that their ticket data are not maintained in a format that would 
allow them to easily quantify the residual value of these partially 
unused tickets. To do so would require a complex process involving the 
repricing of each of the segments that made up the total purchase 
price--a process the airlines told us would be labor-intensive and 
costly. American Airlines was able to provide the residual value of its 
partially unused tickets--$1.9 million. Further, US Airways did not 
provide us with any data on these types of tickets. As indicated by the 
airlines, substantial work remained to be done to derive an estimate of 
the residual value of partially unused tickets. For more detailed 
information on the breakdown of partially unused tickets by year, see 
appendix II.

Data Indicate That DOD May Have Millions More in Tickets That Are 
Unused and Not Refunded: 

In addition to the millions of dollars in known amounts of unused 
tickets or segments thereof that were not refunded, we used the limited 
airline data to assess that the possible magnitude of outstanding 
unused tickets purchased from 1997 through 2003 was at least $100 
million. As stated previously, federal agencies are authorized to 
recover payments made to airlines for tickets that agencies ordered but 
did not use. Generally a 6-year statute of limitations applies to the 
government's ability to file an action for money damages based on a 
contractual right, but the government also has up to 10 years to offset 
future payments for amounts it is owed. However, airline 
representatives told us that they were concerned about the feasibility 
and costs of retrieving DOD's unused ticket data from their archives.

As you requested, we used the data provided by the airlines to 
determine the possible magnitude of the tickets DOD purchased but did 
not use or claim as a refund since 1997. Using the data that the 
airlines provided for fiscal year 2002, we calculated the total value 
of fully unused tickets as a percentage of total tickets purchased 
using a centrally billed account. We also used the more limited data 
the airlines provided on partially unused tickets for fiscal year 2002 
to gauge the residual value of partially used tickets as a percentage 
of the total purchase value of these tickets. We applied these combined 
results, which on a per airline basis ranged from 1.44 percent to 3.26 
percent, to the total purchase value of tickets purchased with 
centrally billed accounts since 1997 (about $8 billion) and found--
using the lowest estimate of 1.44 percent--that it is possible DOD 
purchased at least $100 million in airline tickets that were unused and 
not refunded during this period. (See app. II for further information 
on our calculations.): 

As discussed previously, DOD was not aware of, and consequently did not 
maintain data on, unused tickets and would therefore have to rely on 
the airlines to provide the relevant data needed to claim refunds. The 
inconsistent and incomplete responses we received from the airlines 
point to the difficulties in determining the total value of unused 
tickets. While the airlines readily provided us with at least 1 year of 
the data we requested, some airline representatives informed us that 
data on tickets purchased prior to the last 18 months have been moved 
to electronic archives, and retrieving data from these archives is 
costly and time-consuming. The process involves restoring from archives 
millions of records of tickets the airlines have issued before they can 
identify tickets purchased with the DOD centrally billed accounts that 
are fully and partially unused. Further, additional work would be 
necessary to determine the value of the unused portions of partially 
unused airline tickets. Finally, the airlines stated that some ticket 
data were not maintained electronically and that generating information 
related to these tickets would involve manually sifting through the 
airlines' ticket coupons. However, unused tickets from these 5 airlines 
and the more than 85 other airlines that DOD uses represent a 
potentially substantial government claim.

DOD Did Not Implement Effective Controls over Unused Tickets: 

Millions of dollars of unused tickets have not been refunded because 
DOD did not have a systematic process to identify and process unused 
tickets. Effective internal controls are the first line of defense in 
safeguarding assets and preventing and detecting fraud, and are an 
integral part of an entity's accountability for government resources. 
However, we found that DOD's flawed process relied extensively on DOD 
personnel to report unused tickets to the travel offices. DOD had not 
systematically implemented procedures to identify instances in which 
travelers failed to notify the commercial travel offices (CTO) and 
their commands of unused tickets, or to ensure that refunds were 
processed once the CTOs received notifications. Although some units had 
instituted a process by fiscal year 2002 to more systematically 
identify instances of unused tickets, the process was not implemented 
DOD-wide and could only be used to identify unused electronic--not 
paper--tickets. Further, in locations where this process had been 
implemented, DOD did not have systematic procedures to verify that the 
CTOs identified all unused electronic tickets and processed these for 
refunds. Because our preliminary assessment determined that current 
operations used to identify and process unused tickets were flawed, we 
did not statistically test current processes and controls.

Inadequate Controls over Unused Ticket Reporting and Processing: 

During fiscal years 2001 and 2002, DOD relied on travelers to report 
unused tickets to the CTOs. DOD travel regulations state that the 
traveler must notify the CTO when a ticket is not used, and DOD's 
Financial Management Regulations further stipulates that it is the 
traveler's responsibility to return unused transportation tickets to 
the CTO for a refund. At some CTOs, each trip itinerary generated at 
the time an airline ticket was issued also contained a reminder to the 
traveler to return all unused tickets to the CTO. Unused ticket 
notification initiates a process whereby requests for refunds can be 
submitted to the airlines. As mentioned above, contract tickets 
purchased by the government are fully refundable. Timely processing of 
refunds ensures that scarce resources are returned to the government.

However, DOD did not implement control procedures to systematically 
determine the extent to which DOD travelers adhered to the unused 
ticket requirements, and to identify instances in which they did not. 
According to bank data, DOD received credits amounting to about 9 
percent of the airline tickets purchased through the CTOs during fiscal 
years 2001 and 2002. Although these data indicate that some DOD 
travelers followed the unused ticket requirements, DOD did not maintain 
data in such a manner as to allow the department to identify the extent 
of noncompliance.

Figure 2 illustrates where control breakdowns can occur if travelers do 
not adhere to DOD requirements and report unused tickets to the CTOs. 
As shown in figure 2, once a ticket is charged to the centrally billed 
account and given to the traveler, DOD has no systematic controls to 
determine that the ticket was used--or remains unused--unless the 
traveler notifies the CTO that the ticket was not used. If the traveler 
does not notify the CTO of an unused ticket, the ticket would not be 
refunded unless the CTO monitored the status of airline tickets issued 
electronically and applied for refunds on all unused tickets. Figure 2 
also shows that the failure to notify the CTO of an unused paper ticket 
would result in the ticket being unused and not refunded. In addition, 
if the CTO identifies or is notified of an unused ticket but fails to 
process a refund, the ticket will also be unused and not refunded.

Figure 2: Possible Control Breakdowns in the Unused Ticket Process: 

[See PDF for image] 

[End of figure] 

DOD services and agencies have sometimes identified unused tickets as 
an indirect result of the procedures they have put in place to monitor 
the status of their obligations. For example, budget officials at the 
Department of the Navy's location in Keyport, Washington, informed us 
that their financial system is programmed to identify all travel orders 
for which corresponding travel vouchers had not been filed 5 days after 
travel was to have been completed. Upon identification of the missing 
travel vouchers, the system automatically produces a list of travelers 
who have not filed their travel claims. Once identified, the finance 
office sends an e-mail reminder to the traveler to file his or her 
travel voucher. According to these officials, the traveler responds by 
filing a voucher or notifying the finance office that the travel was 
canceled and, therefore, the ticket was not used. Rather than relying 
on the traveler to notify the CTO of the unused ticket, the finance 
office gives the notification so that a refund can be processed. 
Similarly, finance officials at Hickam Air Base regularly monitor the 
accounting system for open travel orders (unliquidated obligations) and 
notify the appropriate resource officers to work on these unliquidated 
obligations. These resource officers would in turn remind the travelers 
to file the requisite travel vouchers or notify the CTOs of unused 
tickets.

However, the monitoring of open travel orders is only partially 
effective in identifying unused tickets, as it still relies, to a large 
extent, on the traveler providing notification to the CTO of canceled 
travel. Further, in a report issued in January 2003,[Footnote 12] we 
noted that hundreds of millions of dollars in unliquidated obligations 
were not accounted for because Navy fund managers failed to follow DOD 
regulations that require the periodic review of unliquidated 
obligations exceeding $50,000. These Navy managers cited time 
constraints as one of the obstacles to reviewing these unliquidated 
obligations. In contrast to the unliquidated obligations exceeding 
$50,000 referred to in that report, travel obligations are often valued 
in the thousands and sometimes only in the hundreds of dollars. 
Consequently, it is likely that many of these smaller obligations would 
be of an even lower priority and therefore not reviewed.

Similarly, we found that the monitoring of open travel orders at the 
Air Force is not effective in identifying unused tickets. The Air Force 
records all travel expenses--regardless of whether they were incurred 
with the centrally billed accounts or by the travelers directly--as one 
lump sum obligation. Once a voucher is filed, or a centrally billed 
charge is paid, whichever is sooner, the obligation would be 
liquidated, and the travel order removed from the list of unliquidated 
travel orders. Thus, the liquidation of an obligation is dependent on 
either the filing of a voucher or the payment of a centrally billed 
account, not whether the ticket is used or unused. Consequently, like 
the Navy, it would be difficult for the Air Force to consistently 
identify unused tickets through the monitoring of open travel orders.

We also found that DOD did not have control procedures to provide 
assurance that tickets identified as unused were processed for refunds. 
At 9 of the 10 locations we visited, neither the CTO nor the government 
travel office (GTO) maintained centralized records of unused tickets 
submitted by the travelers. Without a centralized record of unused 
tickets, an unused ticket that had been lost or never processed for 
refund would not be detected. Therefore, neither the CTO nor the GTO 
could certify that all tickets turned in by the travelers were 
processed for refunds. We did note, however, that 6 of the 10 locations 
had implemented procedures to verify that unused tickets processed for 
refunds resulted in credits to the government.

DOD Had Not Designed Procedures to Reconcile Centrally Billed Account 
Tickets to Travel Claims: 

Our internal control standards identify reconciliation as a control 
activity that helps enforce management's directives and ensures that 
actions are taken to address risks. Reconciliation should be performed 
routinely so that problems are detected and corrected promptly and 
differences are not allowed to age, thereby becoming increasingly 
difficult to research. However, we found that DOD did not implement 
reconciliation procedures that link airline tickets purchased with the 
centrally billed account to travel claims submitted by travelers. 
Specifically, when DOD purchased an airline ticket with a centrally 
billed account, DOD did not implement procedures to identify whether 
the traveler has or has not submitted a travel voucher. A lack of a 
travel voucher could indicate that the ticket was unused. Without 
reconciling these two types of records, DOD could not obtain reasonable 
assurance that centrally billed account charges represent airline 
tickets that were eventually used.

DOD regulations require that travelers file travel claims, in the form 
of a travel voucher, within 5 days of the end of travel. The filing of 
a travel claim provides positive confirmation that the travel took 
place. A travel claim also represents the traveler's assertion that the 
transportation mode indicated on the travel order--be it air or land--
was used in the performance of official duty. Only in exceptional 
circumstances would the filing of a travel voucher fail to provide the 
confirmation that an airline ticket provided to the traveler through 
the centrally billed account was not used. For example, mechanical 
problems at one airline could result in the traveler buying another 
ticket on a different airline with an individually billed travel card 
or a personal credit card. In these instances, the ticket acquired 
through the centrally billed account would not be used, and this could 
have been detected through a reconciliation process.

In addition, the positive confirmation provided by the filing of a 
travel voucher indicates that a DOD-wide reconciliation between travel 
vouchers and centrally billed account charges would lead to the 
identification of instances in which travel claims have not been filed 
for travel involving the issuance of a centrally billed airline ticket. 
Such identification would allow DOD to follow up with the travelers to 
determine whether travel was taken, and therefore whether the ticket 
was used. A failure to reconcile tickets that were centrally acquired 
to travel claims filed by travelers resulted in DOD not being able to 
determine whether the airline tickets it purchased were used.

Some DOD Units Have Implemented Procedures to Identify Unused 
Electronic Tickets: 

In the period under audit, some DOD units have made improvements to its 
unused ticket process to compensate for the lack of internal controls 
over the centrally billed account program. By fiscal year 2002, some 
DOD units had established procedures intended to systematically 
identify unused electronic tickets, thus allowing DOD to obtain refunds 
on tickets it otherwise might have missed. At these locations, the 
computer systems used to reserve and purchase flights[Footnote 13] 
allow the CTOs to search the databases of each airline that 
participates in electronic ticketing. Each CTO can customize the 
searches to generate a list of unused electronic tickets directly from 
these computer reservation systems, or manually review data on the 
status of each electronic ticket to identify tickets that are unused.

These procedures enable the CTOs to systematically identify unused e-
tickets without having to receive notification from the travelers. CTOs 
can process requests for refunds directly in the computer reservation 
systems after unused tickets are identified. This on-line capacity 
allows DOD to obtain timely refunds and increases the organization's 
ability to safeguard resources. An increasingly larger portion of all 
tickets issued are issued electronically--data from one large U.S. 
airline indicated that 69 percent of tickets issued during fiscal year 
2002 and as much as 84 percent of tickets issued during fiscal year 
2003 were electronic tickets. Consequently, these procedures increase 
DOD's ability to capture refunds on a large portion of unused tickets. 
This ability to independently identify unused electronic tickets, if 
implemented across the services consistently and properly supervised, 
would allow DOD to partially compensate for the lack of controls in 
ensuring that travelers notify the appropriate office of canceled 
travel.

However, our work found that not all locations implemented this 
capability during fiscal year 2002. This is partly because DOD did not 
incorporate a requirement for this capability into all the contracts it 
issued to the CTOs during fiscal year 2002. For example, the CTO at 
Hickam Air Base did not monitor unused tickets electronically because 
its contract did not require it to do so. In contrast, some locations 
that did not have this requirement in their contracts nevertheless 
implemented this capability through an agreement between the CTO and 
the GTO. High-level DOD officials to whom we reported the status of 
unused tickets informed us that they will require this capability to be 
a part of the new contracts issued under the Defense Travel System 
(DTS). The DTS is intended to be the DOD-wide travel system and replace 
the more than 30 travel systems currently operating within the 
department. However, according to a 2002 DOD Office of Inspector 
General report,[Footnote 14] "the DTS was being substantially developed 
without the requisite requirements, cost, performance, and schedule 
documents and analyses needed as the foundation for assessing the 
effectiveness of the system and its return on investment." The report 
further noted that DOD estimated that deployment would not be completed 
until fiscal year 2006.

In general, we found that the GTOs at locations where the CTOs had put 
this process in place have not implemented control procedures to verify 
that the CTOs consistently identify and file for refunds on unused e-
tickets. For instance, the CTOs at several locations we visited did not 
provide their respective GTOs with inventories of tickets they have 
identified as unused. Therefore, the transportation officers were 
unable to determine that all unused tickets were turned in for refunds. 
As noted above, we found that several transportation officers had 
procedures in place to confirm that the organization receives a credit 
for tickets that have been submitted for refunds. However, this process 
was not implemented at all locations we visited. Consequently, not all 
DOD units could provide assurance that all requests for refunds 
resulted in a credit to the government.

Even if the CTOs can identify all e-tickets, they cannot independently 
identify nonelectronic tickets. Nonelectronic tickets are typically 
used for international travel because many non-U.S. carriers do not 
issue electronic tickets. International travel can sometimes make up as 
much as 25 percent of the total dollar value of a unit's travel. Given 
the inability to identify unused paper tickets, and weaknesses in the 
control procedures over the CTOs, the reconciliation procedures we 
discussed previously will still need to be established to match 
purchases made with centrally billed accounts to travel vouchers that 
have been filed. Unless DOD establishes a procedure to verify whether 
all airline tickets are used, it will not have reasonable assurance 
that airline tickets purchased through the centrally billed account are 
used or refunded.

Improvements in Management of the Individually Billed Accounts Provide 
DOD Options to Minimize Unused Ticket Risks: 

In a series of testimonies[Footnote 15] and reports[Footnote 16] issued 
in fiscal years 2002 and 2003, we addressed problems that the Army, 
Navy, and Air Force had in managing the individually billed account 
travel cards. These testimonies and reports showed high delinquency 
rates and significant potential fraud and abuse related to DOD's 
individually billed travel card program. However, recent improvements 
to the individually billed program point to the possibility of using 
this program as the principal means of acquiring tickets, thereby 
reducing the government's risk of losses from unused tickets arising 
from the use of centrally billed accounts.

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[Footnote 17] 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[Footnote 18] for travel cardholders; and (4) offset of 
delinquent travel card debt against the pay or retirement benefits of 
DOD civilian and military employees and retirees.

In response, DOD has implemented many of the legislatively mandated 
improvements--most notably the implementation of split disbursements 
and salary offsets and the reduction in the numbers of individuals with 
access to the travel cards. According to Bank of America, the 
delinquency rates we noted in our prior reports at the Army, Navy, and 
Air Force have decreased. For example, the delinquency rate at the Navy 
had decreased from an average monthly delinquency rate of about 11 
percent during fiscal year 2002 to an average monthly delinquency rate 
of less than 7 percent in fiscal year 2003. Similarly, during that same 
period the Army's average monthly delinquency rate decreased from about 
14 percent to an average monthly delinquency rate of about 9 percent.

The benefits of using a well-controlled individually billed account 
program as the principal mechanism for acquiring airline tickets are 
twofold. First, in the individually billed account program, the 
cardholder is directly responsible for all charges incurred on his or 
her travel card. In contrast, improper charges to centrally billed 
accounts that are not detected and disputed or authorized charges, such 
as airline tickets that are not used, result in direct financial losses 
to the government in the amount of the face value of the tickets. 
Second, with the use of individually billed accounts to purchase 
tickets, DOD travelers have greater incentive to turn in unused tickets 
because they are responsible for paying the ticket charges. The use of 
individually billed cards to acquire airline tickets would therefore 
help to limit the government's financial exposure.

However, the use of the individually billed accounts to acquire airline 
tickets would only minimize, not eliminate, the necessity of 
implementing internal controls over the centrally billed account 
program. DOD would still need to maintain a centrally billed account 
structure to purchase airline tickets for travelers who have been 
denied individually billed accounts, infrequent travelers whose 
individually billed credit cards have been canceled, and new employees 
who have not yet acquired individually billed accounts.

Conclusion: 

The millions of dollars wasted on unused airline tickets provides 
another example of why DOD financial management is one of our "high-
risk" areas, with DOD highly vulnerable to fraud, waste, and abuse. In 
implementing the centrally billed component of the travel card program, 
DOD relied on a weak process that depended on travelers reporting all 
unused tickets to CTOs. Although many DOD travelers informed the CTOs 
of unused tickets as required, the lack of specific internal control 
procedures to identify instances in which the travelers did not do so 
resulted in DOD paying for thousands of airline tickets that were not 
used and not processed for refunds. During fiscal year 2003, some DOD 
units began implementing procedures to more systematically identify 
unused airline tickets, and in fiscal year 2004, DOD started working to 
recover from the airlines the value of unused tickets we identified. 
DOD must build on these improvements and establish controls over unused 
tickets to improve its ability to control costs and ensure basic 
accountability over scarce resources. In addition, DOD should take 
immediate actions to recover the outstanding value of tickets that were 
fully or partially unused and not refunded.

Recommendations for Executive Action: 

To improve the management DOD's travel resources, we are making the 
following 20 recommendations to DOD officials.

To decrease the risks associated with the use of the centrally billed 
accounts, we recommend that the Secretary of Defense evaluate the 
feasibility of the following two actions: 

* establishing the individually billed account travel card as the 
primary payment mechanism for transportation expenses, and: 

* limiting the use of the centrally billed account travel card to 
procuring transportation expenses for those employees without access to 
individually billed accounts, such as new employees who have not yet 
obtained individually billed account travel cards and employees who do 
not qualify for the use of individually billed account travel cards, 
and for other situations in which the use of an individually billed 
travel card is not practical.

To enable DOD to systematically identify future unused airline tickets 
purchased through the centrally billed accounts, and improve internal 
controls over the processing of unused airline tickets for refunds, we 
recommend that the Secretaries of the Army, Air Force, and Navy and the 
heads of DOD agencies direct the appropriate personnel within services 
and agencies to take the following nine actions: 

* evaluate the feasibility of implementing procedures to reconcile 
airline tickets acquired using the centrally billed accounts to travel 
vouchers in the current travel system;

* modify existing CTO contracts to include a requirement that the CTOs: 

* establish a capability to systematically identify unused e-tickets in 
their computer reservation systems,

* identify all unused tickets based on specified criteria before the 
unused ticket data are removed from the computer reservation systems,

* maintain daily schedules that identify unused tickets and how long 
they have been unused,

* routinely provide the GTOs with unused ticket reports,

* routinely process refunds for tickets identified as unused, and: 

* submit to the GTOs all requests for refunds that have been processed;

* require the GTOs to routinely compare unused tickets processed by the 
CTOs to the credits on the Bank of America invoice; and: 

* require either the GTOs or the units responsible for monitoring the 
CTOs' activities to determine whether the CTOs are consistently 
implementing the procedures to identify unused tickets and process 
these tickets for refunds.

To enable DOD to more effectively monitor unused tickets under the DTS, 
we recommend that the Secretary of Defense direct the appropriate 
personnel to take the following four actions: 

* use the DTS to remind travelers to claim refunds on all unused 
tickets,

* include in future contracts issued for the DTS, a requirement that 
the CTOs establish the capability to: 

* systematically identify unused tickets and: 

* process these tickets for refunds, and: 

* establish, in the DTS, a capability to routinely match travel 
vouchers to tickets issued through the centrally billed accounts.

To recover outstanding claims on unused tickets, we recommend that the 
Under Secretary of Defense (Comptroller) initiate the following five 
actions: 

* immediately submit claims to the airlines to recover the $21 million 
in fully and partially unused tickets identified by the airlines and 
included in this report;

* calculate, with the assistance of the airlines, the residual value of 
the partially unused tickets identified by the airlines and included in 
this report; and: 

* work with the five airlines identified in this report and other 
airlines from which DOD purchased tickets with centrally billed 
accounts to: 

* identify the feasibility of determining the recoverability of other 
fully and partially unused tickets purchased with DOD centrally billed 
accounts,

* determine the value of the unused portions of those tickets, and: 

* initiate actions to obtain refunds.

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, which are reprinted in 
appendix III, DOD concurred with all 20 of our recommendations and 
stated that it had taken actions or will take actions to address these 
recommendations. For example, with respect to actions already taken, 
DOD stated that it has implemented, in the DTS, a capability to 
routinely match travel vouchers to tickets issued through the centrally 
billed accounts. This capability is currently being tested at certain 
pilot sites. With respect to actions under way, DOD had submitted 
claims to the airlines on February 26, 2004, to recover the $21 million 
in fully and partially unused paper and electronic tickets identified 
by the airlines, and stated that it will work with the airlines from 
which it purchased tickets through the centrally billed accounts to 
identify the feasibility of determining the recoverability of other 
fully and partially unused tickets.

As agreed with your offices, unless you announce the contents of this 
report earlier, we will not distribute it until 30 days from its date. 
At that time, we will send copies to interested congressional 
committees; the Secretary of Defense; the Under Secretary of Defense, 
Comptroller; the Secretary of the Army; the Secretary of the Navy; the 
Secretary of the Air Force; and the Director of the Defense Finance and 
Accounting Service. We will make copies available to others upon 
request. In addition, the report will be available at no charge on the 
GAO Web site at [Hyperlink, http://www.gao.gov].

Please contact Gregory D. Kutz at (202) 512-9505 or [Hyperlink, 
kutzg@gao.gov], John J. Ryan at (202) 512-9587 or [Hyperlink, 
ryanj@gao.gov], or John V. Kelly at (202) 512-6926 or [Hyperlink, 
kellyj@gao.gov] if you or your staffs have any questions concerning 
this report. Major contributors to this report are acknowledged in 
appendix IV.

Signed by: 

Gregory D. Kutz: 
Director, Financial Management and Assurance: 

Robert J. Cramer: 
Managing Director, Office of Special Investigations: 

[End of section]

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Pursuant to a joint request by the Chairman and Ranking Minority Member 
of the Permanent Subcommittee on Investigations, Senate Committee on 
Governmental Affairs; the Chairman of the Senate Committee on Finance; 
and Representative Schakowsky, we audited the controls over unused 
airline tickets purchased through the Department of Defense's (DOD) 
centrally billed accounts. Our assessment covered the following: 

* the extent of tickets charged to the centrally billed accounts that 
are unused and not refunded and: 

* whether DOD's internal controls provided reasonable assurance that 
all unused tickets were identified and submitted for refunds.

To assess the magnitude of tickets charged to the centrally billed 
accounts that are unused and not refunded, we obtained from Bank of 
America databases for fiscal years 2001 and 2002 travel transactions 
charged to DOD's centrally billed travel card accounts. The databases 
contained transaction-specific information, including ticket fare, 
ticket number, name of passenger, date and destination of travel, and 
number of segments in each ticket. We reconciled these data files to 
control totals provided by Bank of America and to data reported by the 
General Services Administration as DOD's centrally billed account 
activities. We also requested that the five airlines that DOD used most 
frequently provide us with data relating to tickets DOD purchased 
during fiscal years 2001 and 2002 that were unused and not refunded. 
These five airlines--American, Delta, Northwest, United, and US 
Airways--together accounted for more than 82 percent of the value of 
total airline tickets DOD purchased. To obtain assurance that the 
tickets the airlines reported as unused represented only airline 
tickets charged to DOD centrally billed accounts we compared data 
provided by the airlines to transaction data provided by Bank of 
America. Because DOD does not track whether tickets purchased with 
centrally billed accounts were used, we were unable to confirm that the 
population of unused tickets that the airlines provided was complete, 
that is, it included all DOD tickets that are unused and not refunded.

While the five airlines provided data on unused tickets that allowed us 
to identify which tickets were unused and not refunded, they did not 
provide uniform or consistent data, and their data did not always cover 
the same periods. Specifically, all five airlines provided data that 
enabled us to determine the total purchase price of fully unused 
tickets, and four of the five airlines provided data that enabled us to 
determine the total purchase price of partially unused tickets. Only 
one airline provided us the unused value (residual value) of partially 
unused tickets. Further, while all five airlines provided us 
information on fiscal year 2002 fully unused tickets, the data they 
provided on fully unused tickets covered from 1 to over 4 years. In 
addition, only four airlines provided partially unused ticket data, and 
the data they provided similarly covered from 1 to over 4 years. For 
further details on the type of data received, and our calculations of 
the value of fully unused and partially unused tickets, see appendix 
II. We also reviewed relevant statutes and court decisions related to 
the period of time federal agencies are allowed to claim refunds and 
apply administrative offsets to goods and services they purchased but 
did not receive.

To assess controls over unused tickets, we obtained an understanding of 
the travel process by reviewing DOD's travel regulations and 
interviewing officials from the Departments of the Army, Navy, and Air 
Force. We visited two Army units, three Navy units, three Air Force 
units, and two Marine Corps units to confirm our understanding of the 
travel process. We also interviewed DOD officials at the government 
travel offices and representatives of the commercial travel offices to 
obtain an understanding of the process used to identify unused tickets 
and claim refunds on those tickets. To assess the internal controls 
over unused tickets, we applied the fundamental concepts and standards 
set forth in our Standards for Internal Control in the Federal 
Government[Footnote 19] to the practices followed by these units to 
manage unused tickets. Because we determined that controls over unused 
tickets were ineffective, we did not assess or design statistical 
sampling tests to test these controls.

We briefed DOD managers, including DOD officials in the Office of the 
Under Secretary of Defense (Comptroller), the Defense Finance and 
Accounting Service, and the Office of the Inspector General; Army 
officials in the Office of Deputy Chief of Staff for Logistics; Navy 
officials in the Office of the Assistant Secretary of the Navy for 
Financial Management and Comptroller; Air Force officials in the Office 
of the Deputy Chief of Staff for Installation and Logistics; and Marine 
Corps officials in the Office of Deputy Chief of Staff for 
Installations and Logistics concerning the results of our work. On 
December 19, 2003, we provided DOD officials with a partial list of 
fully and partially unused tickets we received as of that date. On 
February 10, 2004, we requested comments on a draft of this report from 
the Secretary of Defense or his designee. We conducted our audit work 
from March 2003 through January 2004, in accordance with U.S. generally 
accepted government auditing standards.

[End of section]

Appendix II: Known Value of Fully and Partially Unused Tickets and 
Potential Magnitude of Control Weaknesses: 

To determine whether design flaws in controls over purchasing tickets 
using DOD centrally billed accounts resulted in a significant loss of 
federal tax dollars, we contacted DOD's five most frequently used 
airlines and requested that they identify tickets DOD purchased with a 
centrally billed account that had not been used or refunded as of the 
date of our request. While those airlines did not provide consistent 
data concerning unused tickets, they did provide information sufficient 
to allow us to determine the unused value of some of their fully unused 
tickets and the original purchase price of some of the partially unused 
tickets. In addition, one airline provided information on the unused 
value of at least some of its partially unused tickets. Using the 
ratios of the known value of unused tickets to total tickets purchased, 
we were able to assess the potential magnitude of tickets purchased 
with DOD centrally billed accounts that were not used or refunded since 
1997--the first year for which centrally billed account information is 
available from the General Services Administration.

Types of Data Provided Differed Substantially between Airlines: 

We asked DOD's five most frequently used airlines--American, Delta, 
Northwest, United, and US Airways--to provide information on tickets 
purchased by DOD with centrally billed accounts during fiscal years 
2001 and 2002 that had not been used or refunded. As shown in table 4, 
while all the airlines generally provided complete data on fiscal year 
2002 fully unused tickets, the airlines did not provide uniform, 
complete, or consistent responses to our request for fiscal year 2002 
partially unused tickets, or for fully or partially unused ticket data 
for fiscal year 2001. In addition, some airlines provided some 
information on fully and partially unused tickets that were purchased 
in fiscal years 2003, 2000, and 1999.

Table 4: Type of Data Provided by the Airlines: 

Airline: American; 
Type of data: 
* Value of fully unused tickets; 
* Purchase price of partially unused tickets; 
* Unused value of partially unused tickets; 
Period covered: 
* Tickets purchased in the 13-month period from September 2001 through 
September 2002[A].

Airline: Delta; 
Type of data: 
* Status of all tickets issued to DOD; 
Period covered: 
* Tickets purchased during fiscal years 2001 and 2002.

Airline: Northwest; 
Type of data: 
* Value of fully unused tickets; 
* Purchase price of partially unused tickets; 
Period covered: 
* Tickets purchased in fiscal years 2001 and 2002[B].

Airline: United; 
Type of data: 
* Value of fully unused tickets; 
* Purchase price of partially unused tickets; 
Period covered: 
* Electronic tickets: tickets purchased from November 1998 through 
December 2002; 
* Paper tickets: tickets purchased primarily[C] from April 2002 
through December 2002.

Airline: US Airways; 
Type of data: 
* Value of fully unused tickets; 
Period covered: 
* Tickets purchased in the 15-month period from July 2001 through 
September 2002. 

Source: GAO analysis of airline data.

[A] American Airlines also provided data on tickets purchased from 
October through December 2002 that were still unused. We excluded 8,136 
American Airlines unused tickets totaling $2.1 million from our 
analysis because either (1) less than 6 months had passed between the 
time the tickets were purchased and when American Airlines provided the 
file or (2) Bank of America data did not confirm whether the tickets 
were fully or partially unused.

[B] Northwest Airline's file included 88 tickets that were issued in 
fiscal 2000 that were included in fiscal year 2001 Bank of America 
statements.

[C] United Airlines provided information on 9,702 paper tickets; 413 of 
those paper tickets were purchased prior to April 2002.

[End of table]

While American, Delta, Northwest, and United provided some data on 
partially unused tickets, US Airways did not provide any. Further, as 
noted in table 4, while American, Delta, Northwest, and United provided 
data on the total purchase price of tickets that were partially unused, 
American Airlines was the only airline that also provided data on the 
unused value of its partially unused tickets. Table 4 also shows that 
there were inconsistencies among the airlines when it came to providing 
data on unused tickets purchased before, during, and after fiscal year 
2002. The airlines cited difficulties with accessing their historical 
files as the reason for not being able to fully respond to our request. 
The airlines pointed out that to provide additional information, they 
would have had to access information that had been stored in archived 
computer files, and in some instances, the computer files had been 
eliminated and the only documentation that remained were paper records 
of the flights.

Known Unused Value of Fully and Partially Unused Tickets: 

As shown in table 5, airline data showed that DOD used centrally billed 
accounts to purchase about 58,000 tickets with a value of $21.1 million 
that were unused and not refunded. The $21.1 million included more than 
48,000 tickets valued at $19.2 million that were fully unused and about 
10,000 partially unused tickets (i.e., at least one leg had never been 
used) that had an unused value of about $1.9 million. Due to 
differences in the data provided by the airlines, we used three primary 
methods to identify the number and value of tickets that are fully 
unused. Three airlines--Northwest, United, and US Airways--provided us 
with data files that identified a ticket as being fully unused and its 
purchase price. For these airlines, we calculated the unused value of 
fully unused tickets by totaling the purchase price of each of the 
fully unused tickets. American Airlines provided us a file containing 
fully unused and partially unused tickets. To separate partially from 
fully unused, we used Bank of America data. Delta Airlines provided us 
with data on the status of each airline ticket DOD purchased using the 
centrally billed accounts during fiscal years 2001 and 2002 and 
guidance on how to determine whether a ticket is fully used, partially 
unused, or fully unused. To identify fully unused Delta tickets from 
Delta databases, we first identified tickets reported by Delta that 
matched Bank of America data of how many ticket legs were purchased, 
then we used the guidance Delta provided to identify its fully unused 
tickets. Once we identified these tickets, we derived the unused value 
of fully unused Delta Airlines tickets by totaling the purchase price 
of each of the fully unused tickets, similar to the methodology we used 
for the other four airlines.

Table 5: Known Value of Unused Tickets by Airline: 

Dollars in millions.

Known value of fully unused tickets: 

Airline: American[A]; 
Number of tickets identified as fully unused: Fiscal year: 2002: 5,806; 
Number of tickets identified as fully unused: Fiscal year: 2001: 345; 
Number of tickets identified as fully unused: Total: 6,151; 
Unused value of fully unused tickets: Fiscal year: 2002: $2.1; 
Unused value of fully unused tickets: Fiscal year: 2001: $0.1; 
Unused value of fully unused tickets: Total: $2.2.

Airline: Delta; 
Number of tickets identified as fully unused: Fiscal year: 2002: 8,441; 
Number of tickets identified as fully unused: Fiscal year: 2001: 7,147; 
Number of tickets identified as fully unused: Total: 15,588; 
Unused value of fully unused tickets: Fiscal year: 2002: $3.3; 
Unused value of fully unused tickets: Fiscal year: 2001: $3.1; 
Unused value of fully unused tickets: Total: $6.4.

Airline: Northwest; 
Number of tickets identified as fully unused: Fiscal year: 2002: 1,640; 
Number of tickets identified as fully unused: Fiscal year: 2001: 1,839; 
Number of tickets identified as fully unused: Total: 3,479; 
Unused value of fully unused tickets: Fiscal year: 2002: $1.1; 
Unused value of fully unused tickets: Fiscal year: 2001: $1.2; 
Unused value of fully unused tickets: Total: $2.3.

Airline: United[B]; 
Number of tickets identified as fully unused: Fiscal year: 2002: 5,682; 
Number of tickets identified as fully unused: Fiscal year: 2001: 4,044; 
Number of tickets identified as fully unused: Total: 9,726; 
Unused value of fully unused tickets: Fiscal year: 2002: $2.3; 
Unused value of fully unused tickets: Fiscal year: 2001: $1.3; 
Unused value of fully unused tickets: Total: $3.6.

Airline: US Airways[C]; 
Number of tickets identified as fully unused: Fiscal year: 2002: 4,933; 
Number of tickets identified as fully unused: Fiscal year: 2001: 1,786; 
Number of tickets identified as fully unused: Total: 6,719; 
Unused value of fully unused tickets: Fiscal year: 2002: $1.8; 
Unused value of fully unused tickets: Fiscal year: 2001: $0.5; 
Unused value of fully unused tickets: Total: $2.3.

Total fiscal years 2001 and 2002; 
Number of tickets identified as fully unused: Total: 41,663; 
Unused value of fully unused tickets: Total: $16.8.

Other time period[D]; 
Number of tickets identified as fully unused: Total: 6,557; 
Unused value of fully unused tickets: Total: $2.4.

Total value of fully unused tickets; 
Number of tickets identified as fully unused: Total: 48,220; 
Unused value of fully unused tickets: Total: $19.2.

Airline: American[A]; 
Number of tickets identified as fully unused: Fiscal year: 2002: 9,159; 
Number of tickets identified as fully unused: Fiscal year: 2001: 567; 
Number of tickets identified as fully unused: Total: 9,726; 
Unused value of fully unused tickets: Total: $1.9.

Total value of fully and partially unused tickets; 
Number of tickets identified as fully unused: Total: 57,946; 
Unused value of fully unused tickets: Total: $21.1. 

Source: GAO analysis of airline data.

[A] Partial fiscal year 2001 data include September 2001 only.

[B] United Airlines did not provide data on the number and value of 
paper tickets purchased prior to April 2002 that were unused and not 
refunded.

[C] Partial fiscal year 2001 data include data from July 2001 through 
September 2001.

[D] Tickets purchased in fiscal year 2003 and prior to fiscal year 
2001.

[End of table]

Partially Unused Tickets: 

We could not determine the total unused value of partially unused 
tickets for the five airlines we reviewed. Only American Airlines 
calculated the unused value of the partially unused tickets it 
identified. Three airlines--Delta, Northwest, and United--provide the 
original purchase price of the partially unused airlines tickets, and 
US Airways did not provide any information on partially unused tickets. 
To determine the number and total purchase price of partially used 
tickets purchased with DOD centrally billed accounts for which DOD did 
not claim a refund, we followed the same methodology used to derive the 
number and purchase price of fully unused tickets. For example, to 
derive the total purchase price of partially unused American, 
Northwest, and United tickets, we added the purchase: 

price of each of the partially unused tickets.[Footnote 20] For Delta 
Airlines, we applied the guidance Delta representatives provided to 
identify partially unused tickets, then added the purchase price of 
each of these tickets to derive the total. As shown in table 6, our 
analysis of partially unused tickets indicated that DOD travelers did 
not use all of the segments on more than 91,000 tickets DOD purchased 
with centrally billed accounts.

Table 6: Partially Unused Ticket Number and Value: 

Dollars in millions.

American[A]; 
Number of tickets identified as partially unused: 
Fiscal year: 2002: 9,159; 
Number of tickets identified as partially unused: 
Fiscal year: 2001: 567; 
Number of tickets identified as partially unused: Total: 9,726; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2002: $5.5; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2001: $0.3; 
Purchase price of tickets identified as partially unused: Total: $5.8.

Delta; 
Number of tickets identified as partially unused: 
Fiscal year: 2002: 29,483; 
Number of tickets identified as partially unused: 
Fiscal year: 2001: 21,811; 
Number of tickets identified as partially unused: Total: 51,294; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2002: $22.9; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2001: $16.4; 
Purchase price of tickets identified as partially unused: Total: $39.3.

Northwest[B]; 
Number of tickets identified as partially unused: 
Fiscal year: 2002: 3,283; 
Number of tickets identified as partially unused: 
Fiscal year: 2001: 4,137; 
Number of tickets identified as partially unused: Total: 7,420; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2002: $3.2; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2001: $4.4; 
Purchase price of tickets identified as partially unused: Total: $7.6.

United[C]; 
Number of tickets identified as partially unused: 
Fiscal year: 2002: 10,319; 
Number of tickets identified as partially unused: 
Fiscal year: 2001: 3,962; 
Number of tickets identified as partially unused: Total: 14,281; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2002: $8.2; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2001: $1.8; 
Purchase price of tickets identified as partially unused: Total: $10.0.

US Airways; 
Number of tickets identified as partially unused: 
Fiscal year: 2002: [D]; 
Number of tickets identified as partially unused: 
Fiscal year: 2001: [D]; 
Number of tickets identified as partially unused: Total: [D]; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2002: [D]; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2001: [D]; 
Purchase price of tickets identified as partially unused: Total: [D].

Total fiscal years 2001 and 2002; 
Number of tickets identified as partially unused: Total: 82,721; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2002: $39.8; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2001: $22.9; 
Purchase price of tickets identified as partially unused: Total: $62.7.

Other time period[E]; 
Number of tickets identified as partially unused: Total: 8,542; 
Purchase price of tickets identified as partially unused: Total: $5.2.

Total, partially unused; 
Number of tickets identified as partially unused: 
Fiscal year: 2002: 52,244; 
Number of tickets identified as partially unused: 
Fiscal year: 2001: 30,477; 
Number of tickets identified as partially unused: Total: 91,263; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2002: $39.8; 
Purchase price of tickets identified as partially unused: 
Fiscal year: 2001: $22.9; 
Purchase price of tickets identified as partially unused: Total: $67.9. 

Source: GAO analysis of airline data.

[A] Partial fiscal year 2001 data include September 2001 only.

[B] Purchase price of $7.6 million represents Bank of America data on 
ticket price. This amount differs from Northwest Airlines' reported 
fare of $7.2 million. Our analysis indicates that Northwest Airlines 
excluded taxes and fees from its reported amount of $7.2 million.

[C] United Airlines was not able to provide complete data on the number 
and value of paper tickets that were purchased prior to April 2002 but 
were not used or refunded. Consequently, the number and value of 
partially unused United tickets are understated by the number and value 
of paper tickets purchased prior to April 2002 that were partially 
unused, not refunded, and not provided.

[D] Data not provided.

[E] Tickets purchased in fiscal year 2003 and prior to fiscal year 
2001.

[End of table]

Possible Magnitude of Unused Tickets Purchased with Centrally Billed 
Accounts: 

During the period from fiscal year 1997 through 2003, DOD spent about 
$8 billion on airline tickets purchased using centrally billed 
accounts. To assess the potential magnitude of fully and partially 
unused airline tickets purchased using centrally billed accounts since 
1997--the first year that centrally billed account information is 
available from the General Services Administration--we used known 
information related to fiscal year 2002 fully and partially unused 
tickets and applied that information to the tickets purchased from 
fiscal years 1997 through 2001 and in fiscal year 2003. We used fiscal 
year 2002 data because it was the only year for which the airlines 
provided us fairly complete data. This assessment indicates that the 
unused value of fully and partially unused tickets purchased from 
fiscal year 1997 to fiscal year 2003 with DOD centrally billed accounts 
could be at least $115 million.

The magnitude of fully unused tickets could be at least $53 million. As 
shown in table 7, the percentage of fully unused tickets (unused ticket 
value as a percentage of total ticket sales) in fiscal year 2002 for 
DOD's five most frequently used airlines ranged from 0.66 percent for 
United Airlines to 1.11 percent for American Airlines and US Airways.

Table 7: Fiscal Year 2002 Fully Unused Ticket Ratios: 

Dollars in millions.

Airline: American; 
Value of fully unused tickets: $2.1; 
Value of tickets purchased through DOD's centrally billed accounts: 
$189.1; 
Value of fully unused tickets as a percentage of the value of all 
ticket purchases[A]: 1.11%.

Airline: Delta; 
Value of fully unused tickets: $3.4; 
Value of tickets purchased through DOD's centrally billed accounts: 
$334.0; 
Value of fully unused tickets as a percentage of the value of all 
ticket purchases[A]: 1.01%.

Airline: Northwest; 
Value of fully unused tickets: $1.1; 
Value of tickets purchased through DOD's centrally billed accounts: 
$104.8; 
Value of fully unused tickets as a percentage of the value of all 
ticket purchases[A]: 1.01%.

Airline: United; 
Value of fully unused tickets: $2.3; 
Value of tickets purchased through DOD's centrally billed accounts: 
$344.8; 
Value of fully unused tickets as a percentage of the value of all 
ticket purchases[A]: 0.66%.

Airline: US Airways; 
Value of fully unused tickets: $1.8; 
Value of tickets purchased through DOD's centrally billed accounts: 
$159.5; 
Value of fully unused tickets as a percentage of the value of all 
ticket purchases[A]: 1.11%.

Total; 
Value of fully unused tickets: $10.7; 
Value of tickets purchased through DOD's centrally billed accounts: 
$1,132.2. 

Source: GAO analysis of data provided by Bank of America and the 
airlines.

[A] Differences due to rounding of the value of fully unused tickets 
and the total value of tickets purchased through DOD's centrally billed 
accounts.

[End of table]

The substantially lower ratio for United Airlines is attributed to the 
fact that fully unused ticket data from United Airlines did not include 
complete data on paper tickets purchased during the first 6 months of 
fiscal year 2002. If data on fully unused paper tickets were available, 
the ratio of fully unused tickets for United Airlines would be higher. 
To be conservative, we applied the lowest percentage of the value of 
fully unused tickets (United Airlines ratio of 0.66 percent) to the 
value of all airline tickets that DOD purchased from fiscal years 1997 
through 2003 ($8 billion). If the ratio of the value of fully unused 
tickets to the total value of tickets purchased with a centrally billed 
account in fiscal year 2002 was consistent since 1997, the magnitude of 
value of fully unused tickets could be at least $53 million.

The potential magnitude of the unused value of partially unused tickets 
could increase the unused ticket value by at least $62 million. To 
arrive at this assessment, we used the data provided by the airlines on 
partially unused tickets for fiscal year 2002 to calculate the 
estimated unused value of partially unused tickets for each of the four 
airlines that provided partially unused ticket data. The first step was 
to estimate the unused value of partially unused tickets for each of 
the four airlines. We accomplished this by multiplying the total value 
of partially unused tickets by the fiscal year 2002 American Airlines 
ratio of the unused value of partially unused tickets to the total 
purchase price of those tickets.[Footnote 21] We then divided the 
estimated unused value of the partially unused tickets for the four 
airlines by the total fiscal year 2002 ticket sales for those airlines. 
As shown in table 8, if the American Airlines' experience can be 
extrapolated to the other airlines, the unused value of partially 
unused tickets ranges from .78 percent to 2.25 percent of total 
purchases.

Table 8: Analysis of Fiscal Year 2002 Partially Unused Ticket Ratios: 

Dollars in millions.

Airline: US Airways; 
Purchase price: [C]; 
American Airlines unused value ratio[A]: (percentages): [C]; 
Estimated unused value of fiscal year 2002 tickets: [C]; 
Total fiscal year 2002 purchases: [C]; 
Estimated unused value as a percentage of total purchases[B]: [C].

Airline: American; 
Purchase price: $5.5; 
American Airlines unused value ratio[A]: (percentages): 32.73%; 
Estimated unused value of fiscal year 2002 tickets: $1.8; 
Total fiscal year 2002 purchases: $189.1; 
Estimated unused value as a percentage of total purchases[B]: 0.95%.

Airline: Delta; 
Purchase price: $22.9; 
American Airlines unused value ratio[A]: (percentages): 32.73%; 
Estimated unused value of fiscal year 2002 tickets: $7.5; 
Total fiscal year 2002 purchases: $334.0; 
Estimated unused value as a percentage of total purchases[B]: 2.25%.

Airline: Northwest; 
Purchase price: $3.2; 
American Airlines unused value ratio[A]: (percentages): 32.73%; 
Estimated unused value of fiscal year 2002 tickets: $1.0; 
Total fiscal year 2002 purchases: $104.8; 
Estimated unused value as a percentage of total purchases[B]: 0.95%.

Airline: United[D]; 
Purchase price: $8.2; 
American Airlines unused value ratio[A]: (percentages): 32.73%; 
Estimated unused value of fiscal year 2002 tickets: $2.5; 
Total fiscal year 2002 purchases: $344.8; 
Estimated unused value as a percentage of total purchases[B]: 0.78%.

Total; 
Purchase price: $39.8; 
American Airlines unused value ratio[A]: (percentages): --; 
Estimated unused value of fiscal year 2002 tickets: $12.8; 
Total fiscal year 2002 purchases: $972.7; 
Estimated unused value as a percentage of total purchases[B]: --. 

Source: GAO analysis of Bank of American and airline data.

[A] This is the ratio of the unused value of American Airlines 
partially unused tickets to the total purchase price of American 
Airlines partially unused tickets in fiscal year 2002.

[B] Differences due to rounding.

[C] Not provided.

[D] The United Airlines ratio of purchase price of partially unused 
tickets as a percentage of total purchases is understated because, as 
mentioned previously, the information United Airlines provided us did 
not include complete data on paper tickets that were purchased prior to 
April 2002 but were not used or refunded. Consequently, the purchase 
price for United Airlines is understated by the value of paper tickets 
that were purchased prior to April 2002 but were partially unused, not 
refunded, and not provided. In contrast, the total purchases column 
includes all data.

[End of table]

Again, to be conservative, we applied the lowest ratio of unused value 
of partially unused tickets (United Airlines ratio of 0.78 percent) to 
the $8 billion of all airline tickets that DOD purchased from fiscal 
years 1997 through 2003. If the ratio of the unused value of partially 
unused tickets to the total value of tickets purchased with centrally 
billed accounts in fiscal year 2002 was consistent since 1997, the 
magnitude of unused value of partially unused tickets could be at least 
$62 million.

To determine the possible total magnitude of the value of airline 
tickets DOD purchased with centrally billed accounts that were unused 
and not refunded, we added the minimum value of potential fully unused 
tickets to minimum value of potential partially unused tickets. As a 
result, we determined that it was possible that DOD had purchased at 
least $115 million in tickets that were unused and not refunded.

[End of section]

Appendix III: Comments from the Department of Defense: 

UNDER SECRETARY OF DEFENSE 
1100 DEFENSE PENTAGON 
WASHINGTON, DC 20301-1100:

COMPTROLLER:

Mr. Gregory D. Kutz: 
Director:

Financial Management and Assurance:
U.S. General Accounting Office 
Washington, DC 20548:

Dear Mr. Kutz:

This is the Department of Defense (DoD) response to the General 
Accounting Office (GAO) Draft Report, "DoD Travel Cards: Control 
Weaknesses Led to Millions of Dollars Wasted on Unused Airline 
Tickets," dated February 10, 2004, (GAO Code 192106/GAO-04-398). The:

DoD concurs with the 20 recommendations in the draft report and is 
already taking action to correct the noted deficiencies.

The Department appreciates the opportunity to comment on the draft 
report. My staff point of contact is Ms. Jacqueline Jerkins. She may be 
reached by email: jacqueline.jenkins@osd.mil or by telephone at (703) 
697-8282.

Sincerely,

Signed by: 

Dov S. Zakheim:

Enclosure: As stated:

GAO DRAFT REPORT DATED FEBRUARY 10, 2004 GAO-04-398 (GAO CODE 192106):

"DoD TRAVEL CARDS: CONTROL WEAKNESSES LED TO MILLIONS OF DOLLARS WASTED 
ON UNUSED AIRLINE TICKETS":

DEPARTMENT OF DEFENSE COMMENTS TO THE GAO RECOMMENDATIONS:

RECOMMENDATION 1: The GAO recommended that the Secretary of Defense 
evaluate the feasibility of establishing the individually billed 
account travel card as the primary procurement mechanism to paying for 
transportation expenses. (p. 23/GAO Draft Report):

DoD RESPONSE: Concur. The Department will evaluate the feasibility of 
establishing the individually billed account travel card as the primary 
procurement mechanism to pay for transportation expenses. The estimated 
completion date is June 15, 2004.

RECOMMENDATION 2: The GAO recommended that the Secretary of Defense 
evaluate the feasibility of limiting the use of the centrally billed 
account travel card to procure transportation expenses for those 
employees without access to an individually billed account, such as new 
employees who have not yet obtained an individually billed account 
travel card, employees who do no qualify for the use of an individually 
billed account travel card, and other situations in which the use of an 
individually billed travel card is not practical. (p. 23/Draft Report):

DoD RESPONSE: Concur. The Department will evaluate the feasibility of 
limiting the use of the centrally billed account travel card to procure 
transportation expenses. The estimated completion date is June 15, 
2004.

RECOMMENDATION 3: The GAO recommended that the Secretaries of the Army, 
Air Force, and Navy, and the heads of DoD agencies direct the 
appropriate personnel within their chain of command to evaluate the 
feasibility of implementing procedures to reconcile airline tickets 
acquired using the centrally billed accounts to travel vouchers in the 
current travel system. (p. 23/GAO Draft Report):

DoD RESPONSE: Concur. The Defense Finance and Accounting Service (DFAS) 
will evaluate the feasibility of reconciling airline tickets purchased 
on centrally billed accounts to travel vouchers in the current travel 
system with the appropriate personnel within the DoD Components. The 
estimated completion date is May 31, 2004.

RECOMMENDATION 4: The GAO recommended that the Secretaries of the Army, 
Air Force, and Navy, and the heads of DoD agencies direct the 
appropriate personnel within their chain of command to modify existing 
commercial travel office (CTO) contracts to include a requirement that 
the CTO put in place a capability to systematically identify unused e-
tickets in their computer reservation system. (p. 24/GAO Draft Report}:

DoD RESPONSE: Concur. The Under Secretary of Defense (Acquisition, 
Technology and Logistics) (USD(AT&L)) will issue a memorandum requiring 
each DoD Component to review and modify existing CTO contracts to 
include a requirement that the CTO put in place a capability to 
systematically identify unused paper and e-tickets in their computer 
reservation system. The memorandum will be issued by March 31, 2004. 
Additionally, USTRANSCOM will review existing requirements for unused 
tickets procedures defined in the Defense Transportation Regulation 
(DTR) DoD 4500.9 and coordinate appropriate changes with the DoD 
Components. The estimated completion date for the update of the DTR 
Part I (Passenger Movement) is the fourth quarter fiscal year 2004.

RECOMMENDATION 5: The GAO recommended that the Secretaries of the Army, 
Air Force, and Navy, and the heads of DoD agencies direct the 
appropriate personnel within their chain of command to modify existing 
commercial travel office (CTO) contracts to include a requirement that 
the CTO identify all unused tickets based on specified criteria before 
the unused ticket data is removed from the computer reservation system. 
(p. 24/GAO Draft Report):

DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that 
directs the DoD Components to modify existing CTO contracts to include 
a requirement that the CTO identify all unused tickets based on 
specified criteria before the unused paper and e-ticket data is removed 
from the computer reservation system. The memorandum will be issued by 
March 31, 2004. Additionally, USTRANSCOM will review existing 
requirements for unused tickets procedures defined in the Defense 
Transportation Regulation DoD 4500.9 and coordinate appropriate changes 
with the DoD Components. The estimated completion date for the update 
of the DTR Part I (Passenger Movement) is the fourth quarter fiscal 
year 2004.

RECOMMENDATION 6: The GAO recommended that the Secretaries of the Army, 
Air Force, and Navy, and the heads of DoD agencies direct the 
appropriate personnel within their chain of command to modify existing 
commercial travel office (CTO) contracts to include a requirement that 
the CTOs maintain an aged daily schedule of all unused tickets. (p. 23/
GAO Draft Report):

DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that 
directs DoD Components to modify existing CTO contracts to include a 
requirement that the CTOs maintain an aged daily schedule of all unused 
paper and e-tickets. The 
memorandum will be issued by March 31, 2004. Additionally, USTRANSCOM 
will review existing requirements for unused tickets procedures defined 
in the Defense Transportation Regulation DoD 4500.9 and coordinate 
appropriate changes with the DoD Components. The estimated completion 
date for the update of the DTR Part I (Passenger Movement) is the 
fourth quarter fiscal year 2004.

RECOMMENDATION 7: The GAO recommended that the Secretaries of the Army, 
Air Force, and Navy, and the heads of DoD agencies direct the 
appropriate personnel within their chain of command to modify existing 
commercial travel office (CTO) contracts to include a requirement that 
the CTOs routinely provide the government travel offices (GTOs) with 
unused ticket reports. (p. 24/GAO Draft Report):

DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that 
directs the DoD Components to modify existing CTO contracts to include 
a requirement that the CTOs routinely provide the GTOs with unused 
paper and e-ticket reports. The memorandum will be issued by March 31, 
2004. Additionally, USTRANSCOM will review existing requirements for 
unused tickets procedures defined in the Defense Transportation 
Regulation DoD 4500.9 and coordinate appropriate changes with the DoD 
Components. The estimated completion date for the update of the DTR 
Part I (Passenger Movement) is the fourth quarter fiscal year 2004.

RECOMMENDATION 8: The GAO recommended that the Secretaries of the Army, 
Air Force, and Navy, and the heads of DoD agencies direct the 
appropriate personnel within their chain of command to modify existing 
commercial travel office (CTO) contracts to include a requirement that 
the CTOs routinely process refunds for tickets identified as unused. 
(p. 24/GAO Draft Report):

DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that 
directs the DoD Components to modify existing CTO contracts to include 
requirement that the CTOs routinely process refunds for paper and e-
tickets identified as unused. The memorandum will be issued by March 
31, 2004. Additionally, USTRANSCOM will review existing requirements 
for unused tickets procedures defined in the Defense Transportation 
Regulation DoD 4500.9 and coordinate appropriate changes with the DoD 
Components. The estimated completion date for the update of the DTR 
Part I (Passenger Movement) is the fourth quarter fiscal year 2004.

RECOMMENDATION 9: The GAO recommended that the Secretaries of the Army, 
Air Force, and Navy, and the heads of DoD agencies direct the 
appropriate personnel within their chain of command to modify existing 
commercial travel office (CTO) contracts to include a requirement that 
the CTOs submit to the GTOs all requests for refunds that have been 
processed. (p. 24/GAO Draft Report) 

DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that 
directs the DoD Components to modify existing CTO contract to include a 
requirement that the CTOs submit to the GTOs all requests for refunds 
that have been processed. The memorandum will be issued by March 31, 
2004. Additionally, USTRANSCOM will review existing requirements for 
unused tickets procedures defined in the Defense Transportation 
Regulation DoD 4500.9 and coordinate appropriate changes with the DoD 
Components. The estimated completion date for the update of the DTR 
Part I (Passenger Movement) is the fourth quarter fiscal year 2004.

RECOMMENDATION 10: The GAO recommended that the Secretaries of the 
Army, Air Force, and Navy, and the heads of DoD agencies direct the 
appropriate personnel within their chain of command to routinely 
compare unused ticket processed by the CTOs to the credits on the Bank 
of America invoice. (p. 24/GAO Draft Report):

DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that 
directs the DoD Components to routinely compare unused paper and e-
tickets processed by the CTOs to the credits on the Bank of America 
invoice. The memorandum will be issued by March 31, 2004. Additionally, 
USTRANSCOM will review existing requirements for unused tickets 
procedures defined in the Defense Transportation Regulation DoD 4500.9 
and coordinate appropriate changes with the DoD Components. The 
estimated completion date for the update of the DTR Part I (Passenger 
Movement) is the fourth quarter fiscal year 2004.

RECOMMENDATION 11: The GAO recommended that the Secretaries of the 
Army, Air Force, and Navy, and the heads of DoD agencies direct the 
appropriate personnel within their chain of command to require either 
the government travel office or the unit responsible for monitoring the 
CTOs' activities to determine whether the CTO is consistently 
implementing the procedures to identify unused tickets and process 
these tickets for refunds. (p. 24/GAO Draft Report):

DoD RESPONSE: Concur. The USD(AT&L) will issue a memorandum that 
directs the DoD Components to require either the GTO or the unit 
responsible for monitoring the CTOs' activities to determine whether 
the CTO is consistently implementing the procedures to identify unused 
paper and e-tickets and process these tickets for refunds. The 
memorandum will be issued by March 31, 2004. Additionally, USTRANSCOM 
will review existing requirements for unused tickets procedures defined 
in the Defense Transportation Regulation DoD 4500.9 and coordinate 
appropriate changes with the DoD Components. The estimated completion 
date for the update of the DTR Part I (Passenger Movement) is the 
fourth quarter fiscal year 2004.

RECOMMENDATION 12: The GAO recommended that the Secretary of Defense 
direct the appropriate personnel to use the Defense Travel System (DTS) 
to remind travelers to claim refunds on all unused tickets. (p. 25/GAO 
Draft Report):

DoD RESPONSE: Concur. A system change request was submitted to the DTS 
contractor o include an on-line notice to travelers (on both the 
authorization and voucher processes) to return any unused tickets for 
refund.

RECOMMENDATION 13: The GAO recommended that the Secretary of Defense 
direct the appropriate personnel to include in future contracts issued 
for the Defense Travel System, a requirement that the CTO put in place 
the capability to systematically identify unused tickets. (p. 25/GAO 
Draft Report):

DoD RESPONSE: Concur. In February 2004, a requirement for the CTO to 
report unused tickets was included in the DTS Travel Services Contract 
Solicitations. The Defense Travel System currently has a manually 
generated report to identify approved authorizations where a travel 
settlement voucher has not been filed. However, it does not alert the 
approving official. The DTS Program Management Office will generate a 
system change request (SCR) to enhance and monitor unused tickets and 
the submission of travel settlement vouchers to include "flagging" 
capability. The DTS Program Management Office will define the 
requirements and submit the SCR no later than March 31, 2004.

RECOMMENDATION 14: The GAO recommended that the Secretary of Defense 
direct the appropriate personnel to include in future contracts issued 
for the Defense Travel System, a requirement that the CTO put in place 
the capability to process unused tickets for refunds. (p. 25/GAO Draft 
Report):

DoD RESPONSE: Concur. In February 2004, a requirement for the CTO to 
process unused tickets for refunds was included in the DTS Travel 
Services Contract Solicitations.

RECOMMENDATION 15: The GAO recommended that the Secretary of Defense 
direct the appropriate personnel to establish in the Defense Travel 
System, a capability to routinely match travel vouchers to tickets 
issued through the centrally billed accounts. (p. 25/GAO Draft Report):

DoD RESPONSE: Concur. The DTS centrally billed account reconciliation 
module includes the capability to match travel vouchers to tickets. 
This reconciliation module is currently being tested at certain pilot 
sites. It should be noted that this capability is applicable only if 
DTS is used end-to-end (i.e., tickets are obtained through DTS and DTS 
centrally billed account reconciliation module is used to certify 
payment).

RECOMMENDATION 16: The GAO recommended that the Under Secretary of 
Defense (Comptroller) immediately submit claims to the airlines to 
recover the:

$21 million in fully and partially unused tickets identified by the 
airlines and included in this report. (p. 25/GAO Draft Report):

DoD RESPONSE: Concur. The DFAS will submit claims to the airlines to 
recover the $21 million in fully and partially unused paper and e-
tickets identified by the airlines in the report. The estimated 
completion date is February 27, 2004.

RECOMMENDATION 17: The GAO recommended that the Under Secretary of 
Defense (Comptroller) calculate, with the assistance of the airlines, 
the residual value of the partially unused tickets identified by the 
airlines and included in this report.

(p. 25/GAO Draft Report):

DoD RESPONSE: Concur. The DFAS will calculate, with the assistance of 
the airlines, the residual value of the partially unused paper and e-
tickets identified in the report. The estimated completion date is June 
30, 2004.

RECOMMENDATION 18: The GAO recommended that the Under Secretary of 
Defense (Comptroller) work with the five airlines identified in the 
report and other airlines from which DoD purchased tickets through the 
centrally billed accounts to identify the feasibility of determining 
the recoverability of the other fully and partially unused tickets 
purchased with DoD centrally billed accounts. (p. 25/GAO Draft Report):

DoD RESPONSE: Concur. The DFAS will work with the five airlines 
identified in the report and other airlines from which DoD purchased 
tickets through the centrally billed accounts to identify the 
feasibility of determining the recoverability of the other fully and 
partially unused paper and e-tickets purchased with DoD centrally 
billed accounts. The estimated completion date is June 30, 2004.

RECOMMENDATION 19: The GAO recommended that the Under Secretary of 
Defense (Comptroller) work with the five airlines identified in the 
report and other airlines from which DoD purchased tickets through the 
centrally billed accounts to determine the value of the unused portion 
of those other fully and partially unused tickets purchased with DoD 
centrally billed accounts. (p. 25/GAO Draft Report):

DoD RESPONSE: Concur. The DFAS will work with the five airlines 
identified in the report and other airlines from which DoD purchased 
tickets through the centrally billed accounts to determine the value of 
the unused portion of those other fully and partially 
unused paper and e-tickets purchased with DoD centrally billed 
accounts. The estimated completion date is June 30, 2004.

RECOMMENDATION 20: The GAO recommended that the Under Secretary of 
Defense (Comptroller) work with the five airlines identified in the 
report and other airlines from which DoD purchased tickets through the 
centrally billed accounts to initiate actions to obtain refunds of 
other fully and partially unused tickets purchased with DoD centrally 
billed accounts. (p. 25/GAO Draft Report):

DoD RESPONSE: Concur. The DFAS will work with the five airlines 
identified in the report and other airlines from which DoD purchased 
tickets through the centrally billed accounts to initiate actions to 
obtain refunds of other fully and partially unused paper and e-tickets 
purchased with DoD centrally billed accounts. The estimated completion 
date is August 31, 2004.  

[End of section]

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

John V. Kelly, (202) 512-6926 Quan Thai, (206) 287-4889: 

Acknowledgments: 

Staff making key contributions to this report were Beverly Burke, 
Francine DelVecchio, Aaron Holling, Jeffrey Jacobson, Julie Matta, John 
Ryan, and Sidney H. Schwartz.

(192106): 



FOOTNOTES

[1] U.S. General Accounting Office, Travel Cards: Control Weaknesses 
Leave Army Vulnerable to Potential Fraud and Abuse, GAO-02-863T 
(Washington, D.C.: July 17, 2002), and Travel Cards: Control Weaknesses 
Leave Navy Vulnerable to Fraud and Abuse, GAO-03-148T (Washington, 
D.C.: Oct. 8, 2002).

[2] U.S. General Accounting Office, Travel Cards: Control Weaknesses 
Leave Army Vulnerable to Potential Fraud and Abuse, GAO-03-169 
(Washington, D.C.: Oct. 11, 2002); Travel Cards: Control Weaknesses 
Leave Navy Vulnerable to Fraud and Abuse, GAO-03-147 (Washington, D.C.: 
Dec. 23, 2002); and Travel Cards: Air Force Management Focus Has 
Reduced Delinquencies, but Improvements in Controls Are Needed, GAO-03-
298 (Washington, D.C.: Dec. 20, 2002).

[3] U.S. General Accounting Office, Travel Cards: Internal Control 
Weaknesses at DOD Led to Improper Use of First and Business Class 
Travel, GAO-04-88 (Washington, D.C.: Oct. 24, 2003), and Travel Cards: 
Internal Control Weaknesses at DOD Led to Improper Use of First and 
Business Class Travel, GAO-04-229T (Washington, D.C.: Nov. 6, 2003).

[4] U.S. General Accounting Office, High-Risk Series: An Overview, GAO/
HR-95-1 (Washington, D.C.: February 1995), and High-Risk Series: An 
Update, GAO-03-119 (Washington, D.C.: January 2003).

[5] The Air Force is an exception to this general rule. The Air Force 
uses both centrally billed and individually billed accounts for 
purchasing airline transportation.

[6] 31 U.S.C. § 3726(h).

[7] 28 U.S.C. § 2415(a).

[8] 31 U.S.C. § 3716(e).

[9] American Airlines, Inc. v. Austin, 75 F.3d 1535 (Fed. Cir. 1996). 
This case was an appeal of a prior case, American Airlines, Inc. v. 
Austin, 826 F. Supp. 553 (D.D.C. 1993), in which, among other things, 
the court ruled that the government was not entitled to refunds for 
unused tickets that the government could not specifically identify.

[10] American Airlines, Inc. v. Austin, 1541.

[11] Only American Airlines provided us the residual value of partially 
unused tickets.

[12] U.S. General Accounting Office, Defense Budget: Improved Reviews 
Needed to Ensure Better Management of Obligated Funds, GAO-03-275 
(Washington, D.C.: Jan. 30, 2003).

[13] Systems from three domestic companies dominate the U.S. travel 
agent market: Sabre, Galileo, and Worldspan. Each computer system 
allows a travel agency to access participating airlines' schedules, 
fares, and seat availability; to make airline reservations; and to 
issue airline tickets. Although each computer reservation system was 
developed at a different airline, carriers have had to participate in 
each system so that all travel agents have access to an airline's 
flight information. These systems are required to be unbiased in 
providing flight listings so that some airlines are not favored over 
others. 

[14] U.S. Department of Defense, Office of the Inspector General, 
Allegations to the Defense Hotline on the Management of the Defense 
Travel System, Report No. D-2002-124 (Arlington, Va.: July 1, 2002).

[15] GAO-02-863T and GAO-03-148T.

[16] GAO-03-169, GAO-03-147, and GAO-03-298.

[17] Department of Defense Appropriations Act, 2003, Pub. L. No. 107-
248, 116 Stat. 1519 (2002), and the Bob Stump National Defense 
Authorization Act for Fiscal Year 2003, Pub. L. No. 107-314, 116 Stat. 
2458 (2002).

[18] Split disbursement is a process in which DOD pays the travel-card-
issuing bank directly for charges incurred on the travel card and 
claimed on the travel voucher. Additional money owed to the traveler is 
deposited directly into the traveler's bank account. Split 
disbursements are required of all military and civilian personnel. See 
also the National Defense Authorization Act for Fiscal Year 2004, Pub. 
L. No. 108-136, § 1009, 117 Stat. 1392, 1587 (2003), 10 U.S.C. § 2784a.

[19] U.S. General Accounting Office, Standards for Internal Control in 
the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 
1999).

[20] As previously discussed, US Airways did not provide us data on 
partially unused tickets. 

[21] As reported previously, the airlines informed us that to calculate 
the residual value of partially unused tickets, each segment would have 
to be repriced. However, for the purpose of assessing the range of 
possible residual value, we used American Airlines data because 
American Airlines was the only airline that provided us with that type 
of data.

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