Defense Department spends more than $100 million on unused airline tickets

The Defense Department has wasted at least $100 million on tickets for flights that employees never boarded, General Accounting Office investigators told lawmakers Wednesday.

GAO has previously reported widespread abuse of individual employee travel cards, which work like credit cards. But the latest research, published in two reports, (GAO-04-576 and GAO-04-398), indicates that problems of waste and abuse extend to travel items, most notably airline tickets, bought using centrally billed Pentagon accounts.

From 1997 to 2003, the Defense Department paid as much as $100 million for plane tickets that went unused, Gregory Kutz, GAO director of financial management and assurance, told the Senate Governmental Affairs Committee. His estimate is based on data provided by five major airlines and the Bank of America, where Defense holds its central credit card accounts.

In fiscal 2001 and 2002 alone, the Pentagon paid at least $21.1 million for nearly 28,000 unused tickets, the data shows. These figures likely underestimate the true extent of waste, Kutz told lawmakers, because the financially strapped airlines lacked incentives to fully report tickets that weren't used.

Of the five major air carriers surveyed, only American Airlines willingly provided data, responding to GAO's request within two weeks, Kutz said. The other carriers (Delta, Northwest, United and US Airways) supplied the data in six to eight weeks, after subpoena threats and letters from lawmakers.

When Defense officials noticed that a ticket went unused, they often tried to obtain a refund, Kutz said. But often the Pentagon had no idea that travelers had canceled trips. The department relied too heavily on employees to report unused tickets, GAO concluded in the reports. Defense also failed to "reconcile the centrally billed accounts to travel claims to determine whether airline tickets were used," GAO found.

In some cases, Defense even paid the credit card bill for the unused ticket and reimbursed the employee purchasing the ticket, doubling the money wasted, Kutz testified. Over fiscal 2001 and 2002, the Pentagon paid out roughly $8 million in erroneous reimbursements to Army, Navy and Marine Corps travelers, GAO concluded.

The watchdog agency researchers uncovered other signs of large-scale fraud. For instance, a GS-15-level Defense employee sought and received reimbursement for 13 plane tickets already billed to a central department account. The employee later claimed he "did not know that he received almost $10,000 more in reimbursement than he paid in travel expenses."

Sen. Charles Grassley, R-Iowa, and Rep. Janice Schakowsky, D-Ill., invited to testify before the Senate Governmental Affairs Committee, called for a culture change at the Pentagon.

"We hold hearings at which officials from the Defense Department come with their tail between their legs admitting they could do better and will fix the specific problem," Grassley said. "What I want to start hearing is how the Defense Department is going to fix its culture of indifference to internal controls and lack of respect for the American taxpayers." JoAnn Boutelle, the Defense Department's deputy chief financial officer, assured lawmakers that she is paying attention to the problems identified. GAO's findings underscore the Pentagon's need for better financial management technology, she said.

The Defense Department has partially completed the Defense Travel System, offering the potential for "substantial improvement" by consolidating outdated systems for writing travel orders, and "numerous computation systems," Boutelle said. The upgraded system has been in the works since 1995 and is scheduled for completion in 2006. To date, it has been installed at 79 of 268 high-volume travel sites.

Defense should also consider stronger punishments for misuse of central travel accounts, said John Ryan, an agent in GAO's Office of Special Investigations. "I don't believe that much time is given to thinking about how they're going to handle punishment," he said.

The Pentagon's lack of control over travel spending also raises security concerns, Ryan and Kutz testified. Four months ago, a GAO investigator posed as a new Defense Department employee and, using fake travel orders signed by a fictitious approving official, obtained an electronic ticket and boarding pass for a Delta flight from the Washington area to Atlanta, Ga.

The investigator had no trouble convincing a Defense commercial travel office to issue the ticket, Ryan said. "They were very accommodating," he said, adding that the assignment was one of the easiest he's completed. "Everything we needed [to create a fictitious travel order] was on Defense's Web site," he noted.

"We've known for some time that the Defense Department's financial management is atrocious," Schakowsky said. "These latest GAO reports show that it is not only irresponsible but dangerous for our country to have the Defense Department continue business as usual."