Today the Governmental Affairs Committee will focus upon waste and mismanagement in the Defense Department’s travel card program.   An important part of this Committee’s mandate is to protect the federal treasury against waste, fraud and abuse. It a time of war, when every dollar is needed to support our troops and to fight terrorism, this mandate becomes particularly critical. It is very troubling that the Defense Department has wasted millions of dollars in unused airline tickets due to sloppy and inadequate internal controls. Every dollar wasted by the Pentagon is a dollar that could be spent on the war against terror.

We will hear testimony that in fiscal years 2001 and 2002, the Department of Defense paid for more than 41,000 airline tickets that it did not use. The Department did not seek and did not obtain refunds for these tickets. Those unused tickets cost taxpayers about $17 million. During the same two-year period, the Defense Department also failed to obtain refunds for the unused portions of more than 82,000 additional tickets.

All in all, the General Accounting Office conservatively estimates that the Defense Department has wasted more than $100 million on unused airline tickets since 1997. This estimate does not include millions of dollars in additional travel card waste uncovered by the GAO. For example, the GAO found that some DOD employees were improperly reimbursed for airline tickets that were originally paid for by the federal government, not by the individual traveler. Thus, the government ended up paying twice for the same ticket: a clear case of waste and mismanagement, and possibly fraud. The GAO referred about 27,000 cases of apparently improper reimbursement to DOD for further investigation.

We in public service have an obligation to treat the public’s money in the same way that we would treat our own. I cannot imagine that any responsible person would buy an airline ticket out of his or her own pocket, not use it, and then not turn it in for a refund. We must demand that federal employees take that same care with the public purse.

I want to acknowledge the work done in this area by Senator Coleman and Senator Levin of this Committee. They have been vigorous in exposing waste, fraud, and abuse in the federal government’s purchase and travel card programs. I am also pleased that we are joined by Senator Chuck Grassley, the chairman of the Finance Committee, and Representative Janice Schakowsky of Illinois, who will be our first witnesses. I would like to thank them, along with Senator Coleman and Senator Levin, for requesting the GAO reports and for all of their hard work on this issue.

Our second panel of witnesses includes representatives of the General Accounting Office, who will discuss the two GAO reports that are being released today.

These reports deal with the Defense Department’s use of centrally billed accounts to purchase airline tickets for its employees. A centrally billed account is essentially a credit card number that employees use to buy airline tickets and other goods and services for official travel. The bill for those charges is paid directly by the government. In fiscal years 2001 and 2002, the years audited by the GAO, the Defense Department spent about $2.4 billion through centrally billed accounts.

The GAO made three key findings regarding centrally billed accounts.  First, it found that a lack of department-wide controls over these accounts resulted in the Defense Department buying millions of dollars in airline tickets that were not used and were not processed for refund. The Department was not even aware of this problem before the GAO investigation because DOD did not maintain data on unused tickets.

The GAO’s second finding was that some airline tickets purchased by the Defense Department through centrally billed accounts were improperly submitted by the traveler for reimbursement.  Again, due to weaknesses in DOD’s financial controls, the Department could not always detect that the government already had paid for the ticket. The GAO found dozens of such cases.

For example, one traveler, a GS-15 employee, was improperly reimbursed for 13 separate airline tickets purchased during a 10-month period. The Defense Department paid this employee approximately $10,000 for tickets that the government, not the traveler, had paid for in the first place.

Finally, the GAO found that weaknesses in DOD’s financial systems made the accounts vulnerable to fraud. Persons with knowledge of the system, whether or not they worked for DOD, could exploit these weaknesses to obtain fraudulently an airline ticket paid for by the government. The GAO investigators demonstrated this weakness by creating a fraudulent travel order using forms they found on-line and fictitious names for the traveler and the approving official. Using this phony travel order, GAO was able to obtain a very real airline ticket and boarding pass from Washington, D.C. to Atlanta, Georgia.

It was alarmingly simple for the GAO investigators to secure a boarding pass in a false name at the airport. They were able to do this by using a credit card in a phony name at an electronic kiosk without even having to show an identification card. This raises concerns about airport security as well as the financial fraud issues that GAO set out to investigate.

Unfortunately, the problems identified by these GAO reports are but one aspect of long-standing deficiencies in the Defense Department’s financial management. That is why since 1995 the Department’s financial management has been consistently on the GAO’s list of high-risk areas that are vulnerable to waste, fraud and abuse.

Our second panel of witnesses also includes representatives from the Defense Department who will respond to GAO’s reports. I am pleased to say that the DOD has concurred with all of the GAO’s recommendations. The Department also has begun the process of seeking refunds from the airlines for the unused tickets identified by GAO. I hope that we will hear how DOD plans to fix the flaws in its travel card program and improve its financial management generally.

I hope that soon the GAO will be able to report to us that DOD financial management has improved substantially. Nine years on GAO’s high-risk list is far too long for a Department responsible for a critical mission and hundreds of billions of taxpayer dollars.

I welcome our witnesses today, and I look forward to hearing their views on this important subject.