REPORT OF AUDIT

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 06379191
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 21
• Document Creation Date: December 28, 2022
• Document Release Date: February 3, 2017
• Case Number: F-2014-02692
• Publication Date: April 13, 2007

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CENTRAL INTELLIGENCE AGENCY
Office of Inspector General
REPORT OF AUDIT
(U) The Agency's Process for Obtaining Refunds
or Credits for Unused Airline Tickets
Report No. 2005-0030-AS
13 April 2007
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(U) Table of Contents
(U) EXECUTIVE SUMMARY 1
(U) BACKGROUND 3
(U) AUDIT RESULTS AND RECOMMENDATIONS 5
(U) Refunds for Unused Airline Tickets Were Not
Requested 5
(UHFOU0) Charges Were Not Reconciled In a Timely
Manner and the CIA May Have Overpaid 8
(U) Payments to Vendors for Centrally Billed Travel
Accounts Do Not Comply With the Promp Pay Act 11
(U) Funding From Airline Ticket Refunds Is Not Being
Deobligated 13
(U) The Agency Does Not Properly Accrue Airline Ticket
Expenses or Refunds 15
(U) Objectives, Scope, and Methodology Exhibit A
(U) Recommendations Exhibit B
(U) Audit Team Members Exhibit C
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Report of Audit
(U) The Agency's Process for Obtaining Refunds
or Credits for Unused Airline Tickets
(U) EXECUTIVE SUMMARY
(U) The objectives of this audit were to determine whether:
� There is an effective process in place to ensure that refunds or credits
for unused airline tickets are received in a timely manner
� The Agency financial statements fairly present outstanding refunds or
credits for unused airline tickets in accordance with generally accepted
accounting principles.
(S) The Agency does not have processes in place to ensure that refunds are obtained
for all unused airline tickets charged to the centrally billed accounts.' Due to enhanced
ticket reservation software implemented in 2004, Central Travel Services (CTS) can
identify unused electronic tickets (e-tickets) and process those for refunds. However, it
does not have a process to identify unused paper tickets. CTS relies on the traveler or
component to return unused paper tickets to CTS for refund processing. There are no
procedures in place to reconcile issued airline tickets to completed travel vouchers in
order to identify unused paper airline tickets charged to the Agency's centrally billed
accounts. In FY 2003 and FY 2004, the Agency may have paid as much as
for paper and electronic airline tickets that were not used and were not refunded.2
1(U) The Agency's centrally billed accounts represen redit card accounts administered by the Agency's
central travel office for charging transportation costs. The charges are reconciled and paid monthly by the CIA, not
by the individual travelers.
2 (U) The Office of the Director of National Intelligence (ODNI) utilizes the Agency's centrally billed accounts for
its official travel. As such, the information in this report includes airline ticket purchases of the ODNI, except where
otherwise noted.
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The Agency does not adhere to the provisions of the
credit card bills associated with the purchase of airline tickets.
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ompt
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Act in paying
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(II U) Obligati s bY df at netickthich refunds are
received are not being deobligated in a timely manner. Miscommunications regarding
responsibilities for a gtingarhn ficket funding contnbuth to the lack of proper
monitoring by the component budget officers and finance officers. When airline ticket
refunds are not deobligated in a timely manner, components lose opportunities to utilize
those funds for other valid requirements
S) Approximately in atile tiktots it of refuruis) for FY 2I)05
were not reflected on the Agency's FY 2005 yearend financial statements) As reported in
the audits of the CIA's FY 2004, FY 2005, and FY 2006 financial statements, the Agency
has not developed procedures to accrue all expense activity.. The Agency has begun to
implement processes to accrue certain expenses based cm estimation methods and
historical trend dam. At the anticipated completion at for the overall project was
originally slated for FY 2006, to date there have been no in developed to
f ate and record accruals for travel-related expenses.

(U) Since the completion of our audit fieldwork, CTS has been promtve m taking
ris to address the issues identified in this report. Although we have not evaluated the
rimact ot the actions taken, the improvements should strantemal controls.
T) This calculation in udesonl h entral tleket exp ii for lb Ag ii
ODN I has been removed.
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(U) BACKGROUND
(S) Airline Ticket Purchases. The CIA purchases airline tickets for its travelers
under a government-wide travel card program. The Government Travel Card (GTC)
program was initiated in 1983 with the express purpose of increasing convenience to
the traveler and lowering the government's costs. The CIA utilizes centrally billed credit card
accounts to pay for airline tickets. (b)(1)
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(S) Central Travel Services, within the Directorate of Support's Global Services, is
responsible for administering the centrally billed travel card accounts and reconciling and
paying the monthly invoices. The CIA has experienced an increased demand for ticketing
and reservation services over the past few years. While the total cost of centrally billed
airline tickets issued by CTS in FY 2002 was only CTS processed nearly
in centrally billed airline tickets in FY 2005.
(U) Airline tickets for Agency travelers are acquired under the terms of the air
transportation services contract that the General Services Administration negotiates with
US-based airlines. Tickets purchased under the contract have no advance purchase
requirements, have no minimum or maximum stay requirements, are fully refundable, and
do not incur penalties for changes or cancellations. Federal government agencies are
entitled to recover payments made to airlines for tickets that they acquire but do not use.4
While generally there is a six-year statute of limitations on the government's ability to file
an action for financial damages based on contractual right,5 the government also has up to
10 years to offset future payments for amounts it is owed.6
(S) GAO Audits.
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4(U) 31 U.S.C. � 3726(h).
5 (U) 28 U.S.C. � 2415(a).
6(U) 31 U.S.C. � 3716(e).
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(U) AUDIT RESULTS AND RECOMMENDATIONS
(U) Refunds for Unused Airline Tickets
Were Not Requested
(S)
(U//FOU0) Inadequate controls over several processes have led to unused airline
tickets not being refunded to the Agency. The Agency has issued guidance and
instructions to inform travelers who purchase tickets using the Agency's centrally billed
accounts that they must return unused tickets immediately to CTS for refund processing.10
However, the Agency did not implement control procedures to monitor whether travelers
were returning unused airline tickets. Prior to 2004, CTS did not have the ability to
determine the status of any airline tickets it issued. Implementation of enhanced ticket
reservation software in 2004 has enabled CTS to identify and automatically request
refunds for unused tickets issued electronically (e-tickets). However, CTS still does not
have the capability to independently determine whether paper tickets were actually used.
(11//FOU0) The CIA does not have a process in place to verify which paper tickets
were unused and should therefore be processed for refunds. Although all domestic travel
utilizes electronic ticketing, many international flights still require a paper ticket. Because
much of CIA travel is international, approximately half of all tickets issued by CTS are
5
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paper tickets." CTS relies solely on the traveler or component to inform them when a
paper ticket is not used. As part of its contractual agreements, the Agency's Travel
Management Companies (TMC) are required to, among other things, process refund
reniiectc
CTS
cannot return the tickets to the airlines because, according to CTS management, the
tickets were not turned in to CTS by the travelers.
(UHFOU0) There are no procedures in place to reconcile issued airline tickets to
completed travel vouchers. Upon approval of a request for travel (RFT) in ,12
component finance officers obligate funds for all costs associated with the trip. The
amount of the airline ticket is paid by CTS with the processing of the centrally billed
credit card invoice. The remainder of the travel cost is paid when the traveler submits an
accounting after the travel has occurred, sometimes several months after the ticket has
been purchased. Airline tickets purchased by CTS are not reconciled to the completed
travel voucher to determine whether the travel actually occurred. Without reconciling the
records, the Agency cannot be certain whether centrally billed account charges represent
airline tickets that are used or unused.
(U//FOU0) Misconceptions by component budget officers and finance officers
contribute to ineffective monitoring of airline expenses and refunds. We sent a
questionnaire to officers in the 10 components that utilized the largest number of centrally
billed airline tickets in FY 2004 and FY 2005.13 Of the offices that responded to
our questionnaire, several finance officers stated that they depend on the travelers to
inform them that trips are cancelled and that it is the travelers' responsibility to return
unused tickets to CTS. One officer stated that her office monitors travel to cancel
obligations when necessary, however, the office does not monitor the account to verify
that a returned ticket is later refunded. The same officer also stated that she believes CTS
I (U) In commenting on a draft of this report, the former Chief, CTS stated that while 53 percent of all airline
tickets issued by CTS in FY 2005 were paper tickets, less than 10 percent of the airline tickets were paper in
FY 2006. He also stated that there will continue to be a decline in the number of paper tickets issued in the coming
years as more airports become e-ticket compliant. It is CTS policy to require e-tickets as its primary mode of
ticketing, if available. CTS feels well positioned for the current movement away from paper airline tickets and
toward the trend of issuing e-tickets and relying on the existing process for tracking unused tickets and refund
transactions.
12(U) The CIA's Travel Re-engineering, Integration, Automation, and Development Program.
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has to pay fo the �Mrline tickets regardless tif hethrhtfp occurred and, if there is a
refimd, it M received at the Agency level and not returned to the componein's budget
Without proper at the Agency cannot be certain that funds for unused airline
fickets are appropriately refunded.
(UHFOU0) The function lity of the Agency's travel �accounting system, is (b)(3)
being fully utilized. is an automated travel system designed to integrate the (b)(3)
ve I accounting process from trip planning through reimbursement enables (b)(3)
linvelers to make eleCtrOthe airline reservations on me with CTS via a reservation
worksheet. Flovvever, after iSS1ling the tickets, CTS is removed from arh future
notifications regarding changes and cancellatu)ns of the trip. If CTS was alerted to the
travel changes and cancellmions, it could be more proactive in its attempts to identify and
collect unused paper tickets
till/FOITO) As a result of our audit, CTS implernmited new procedures to Increase
travelers' awareness of their responsibility to return unused paper tickets to CTS for refund
processmg. CTS now requires any traveler or designee who picks up paper airline tickets
to in a statement that he or she understarlds that paper tickets are to be treated as cash,
and that th I 1return any fully or partially unused paper tickets to CTS to be
processed for a refund. CTS also created a similar statent to be sent via cable to
travelers who request tickets from the flea In addition,
was issued to remind exriplOyeeS of the proper handling nunsed airline
tickets Issued by CTS. The bulletin states that failure to safeguard paper airline -tickets
(including not returning unused portions of airline tickets) may result in the traveler being
(mid liable for the cost of the ticket
Ili/FOLIO
Since t
resources have been directed
second guar
decal-nen and impr processes and to implement autom ted solutions to reduc
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and enhance throughput time. The former Chief, CTS also stated that improvements
already underway, once completed, will satisfy the requirement for having procedures in
place to identify unused tickets. In addition, several modifications have been
requested. These modifications include the addition of fields in the RFT to differentiate
the type of airline ticket issued (paper or e-ticket), a "pop up" reminder to travelers when
modifying travel itineraries to return any unused paper tickets to CTS, and enhanced
reporting functions such as the identification of RFTs without corresponding accounting
vouchers. CTS and Finance are also considering modifying , to include a
certification statement requiring employees to certify that they used their government
tickets as issued and do not have any unused tickets to return to CTS.
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(U//FOU0) Charges Were Not Reconciled in a
Timely Manner and the CIA May Have Overpaid
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(S) As of Februar 2006, CTS's records reflected
a balance
due to
f
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,while credit card statements reflected
a credit
balance of 14
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The credit balance on ecords indicates that,
as of
February 2006, the CIA had
overpaid the credit car invoices. However, CTS's
records indicated
that in
billed airline ticket charges had not yet been paid t
because CTS did not
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recognize the ticket transactions and could not determine
to which
obli ations the
tickets
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should be charged. The difference between the CIA's records
and ecords
has
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not been resolved.
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$ CTS may not be able to resolve the 1 in unreconciled charges from the
nvoices. The unreconciled transactions represent ticket charges and credits
dating back to 2004 that are unrecognizable to CTS because they do not match
transactions in CTS's airline reservation system. Unrecognized transactions can occur for
several reasons, such as an airline charging a ticket to a wrong credit card number, the
airline failing to provide enough information to properly identify a transaction, or an
individual fraudulently obtaining an airline ticket. Because of the lack of identifying
details on many of the individual charges, CTS cannot determine if the transactions are
valid and, if they are, to which obligations the tickets should be charged. Some of the
transactions (both charges and refunds) have no passenger name or travel destination
specified on the credit card invoice. CTS management stated that many of the airline
ticket transactions that lack detailed information are the result of ticket exchanges initiated
at the airport. Because many of these transactions are now several years old, neither
nor the airlines is able to provide additional information to assist CTS in
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properly identifying these charges and refunds. The failure to reconcile these accounts
over the past several years significantly increases the risk for fraud. CTS does not know
if all the tickets charged to the CIA's centrally billed accounts are valid Agency
transactions.
(UHFOU0)
(S)
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S.
(UPTODO) CT si mentmg new processes and poce r o coneile the
outstanding balances and to improve reconcihation procedures going forward. The TMC
recently implentented a software upgrade to assist with the monthly invoice
reconciliations. The neve software allows access to more information from the airl
assist with the proper irktritification of ticket purchases inidated outside of CTS's travel
reservadon system, while allowing for greater processing time for the monthly invoices.
CTS has also dedicated additional resources to submit refund requests more timely,
recimcile the outstanding balances on the credit card accounts, and perform a more
thorough reconciliation of the monthly invoices going forward. Per CTS officials
significant me:Tress has been made in reconciling outstanding balances with
since the completion of our audit fieldwork. In addition. CTS is researching ways for the
TMC to ain information on unrecognized charges without formally disputing thern. with
These actions are positive steps toward strengthening internal controls,
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(U) Payments to Vendors for Centrally (b)(1)
Billed Travel Accounts Do Not Comply (b)(3)
With the Prompt Pay Act
(S) The CIA does not pay interest due to credit card vendors for the centrally billed
travel accounts per the provisions of the Prompt Pay Act.' 5
(U) The Prompt Pay Act requires government agencies to pay vendors within
30 days of receipt of a proper invoice. If such payments are not made on time, agencies
must pay penalty interest computed at a rate established by the Secretary of the Treasury
that is in effect at the time the agencies accrue the obligation to pay the late payment
interest penalties. Agencies are required to pay any penalty interest of $1.00 or more,
regardless of whether the business to which the interest is owed requests such payment.
Unpaid interest continues to accrue, compounding every 30 days for up to one year from
the date payment was due. In addition, per Finance Instruction 02-098, Prompt Payment of
Vendor Invoices Received in the B&Fs, "All Executive branch vendor payments (in excess
of $1.00) and payments to those defined as contractors or vendors, are subject to the
Prompt Pay Act."
(U//FOU01
15 (U) 31 U.S.C. subtitle II
16(5)
� Financial Management, Chapter 39 � Prompt Payment.
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UNFOUG)
trivmees do riot reflect the true dates the Invoices were received, For the
purposes f determining a payment due date and the date upon which any late payment
interest penMty shall begin to accrue, the Am states Mat the head of the agency is deemed
to receive an invoice on either (1) the date on which the place or person designated by the
agency to first receive such IIINOICe aMually receives a proper in or (2) the date of
the invoice, if the agency has failed to annotate the invoice with the date of receipt at e
tirne of actual receipt by the place or person designated by the a,giency to first receive such
invoice. CTS's credit card invoices are sent both electronically and via IIS mail to the
Thies for mitial processing. Because each TMC is designated by the Agency to first
such invoices, the official date of receipt from which the due date should tie
ed is the date each TMC receives the ill-voices. Instead, and incorrectly so, the
date stamped on the paper irivoices is the date that CTS's finance officer receives the
invoices from the TMCs, after the it winces have been reconciled for payment.
(INFOU0) CIA's ne
a al accounting system.
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(U) Funding From Airline Ticket
Refunds Is Not Being Deobligated
(UHFOU0) Obligations established for airline tickets for which refunds are received
are not being deobligated in a timely manner. When a refund is received, CTS records the
"receipt of funds" by reestablishing the obligation for the amount of the refund."
responsible
officers in each component are required, at least monthly, to review unliquidated
obligations that have been outstanding for three months or longer to determine whether
such obligations are still valid. In addition, Agency policy requires the senior certifying
officer for a component to submit, by the first workday after the le day of October of
each year, certification that all open obligations are valid and accurate. In our
questionnaire sent to budget officers and finance officers from the components
utilizing the largest number of centrally billed airline tickets, we asked about the process
of monitoring airline ticket obligations. Of the offices that responded, most officers
stated that they regularly monitor obligations and follow up on open travel obligations to
determine if travel took place. However, in our testing of a judgmental sample of
18 refunds received and recorded by CTS between October 2003 and
December 2005, we found that all of the funds were still obligated as of February 2006.
(UHFOU0) Inaccurate guidance regarding airline ticket obligations contributes to the
lack of proper monitoring. Per Finance Instructiod
CTS will "final flag" the obligation when it expenses
the cost of the ticket, which deobligates any residual value of the ticket portion of the
obligation. CTS did not final flag ticket transactions
to CTS travel expense transactions. Per CTS
personnel, each "teg" ot a trip appears as a separate charge on the monthly credit card bills.
CTS personnel have no way of knowing if any particular airline ticket transaction is the
last one to be processed for that travel obligation. In addition, several offices still utilize
bulk obligations, and a deobligation would cancel all funds associated with any future
airline ticket expenses for that obligation. It is for these reasons that CTS does not "final
flag" airline ticket expenses or refunds. CTS management had discussions with Finance
Policy regarding its rationale for disabling the final flag option and
is awaiting a final decision from Finance Policy.
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( ITCH()) Thor conceptions regarding responsibilities
rthnittOrmg airline ticket obligations. In our communications with budget officers and
La nce officers from the offices that had the most Agency travel, one mance officer
believed that refinbis are received at the Agency level and riot. returned to the componerits
budget. This is not true Airline ticket refunds are credited back to the obligation to
kvhich they were originally charged. A budget officer stated that CTS monitors the ticket
portion of the travel obligation and component officem cannot alter that line of the
obligation. Tri reality. CTS has the ability to increase the ticket portion. of a travel
cthligation if the amount obligated is ncit sufficient to co�er the cost of the ticket.
However, CTS is riot responsible for deobligating those funds if the trip is changed
cancelled. The officer also stated th& if a ticket refund is received, CTS deobligates the
frnwever. CTS does riot believe its officers should be responsible for numitoririg
the components' obligations and does not, under any circurristances, &obligate

comporient funds. These misconceptions contribute to the lack of proper monitoring of
airm twket expense obligations because component budget officers and fmance officers
often. incorrectly assume dig CTS has this responsibility,
ffit/F0110) Accurate obligattori information and effernve moan
uriliquidated obligations are essential to reliable budget reports, budget management,
performance measures, ang financial reporting. When airline ticket refunds are not
deobligated in a timely manner, ecimponeMs lose opportunities to utilize those funds for
ther valid requirements, and Agency financial statements do riot accurately reflect the
status of obligations. Although it is unlikely that the dollar arimunt of airline ticket
refurids &one will ever be material to the
, it may be of significance to the tra el budget of an Agertcy
component. Component budget officers and finance officers need acetwate guidance
regarding their responsibties to deobligate airline ticket obligafions.
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(U) The Agency Does Not Properly Accrue
Airline Ticket Expenses or Refunds
(S) Approximately in airline ticket costs (net of refunds) for FY 2005 (b)(1)
were not reflected on the Agency's FY 2005 yearend financial statements.18 The expenses (b)(3)
were incurred but not paid in FY 2005, and no liability was recorded to reflect these costs.
Federal financial accounting standards require that an entity recognize a liability for the
unpaid amount of goods received from other entities.19 If invoices for those goods are not
available when financial statements are prepared, the amounts owed should be estimated.
(UHFOU0) The Agency no longer records an estimate of accounts receivable for
outstanding airline ticket refunds. In the past, when a ticket refund was requested from
the airlines, CTS would credit a component's budget immediately. CTS would then set
up a receivable that would be cleared when the actual credit appeared on a future credit
card invoice. However, the CIA ceased recording accounts receivable for outstanding
refunds in FY 2002 because the general ledger account was not properly monitored or
maintained. Due to staff reductions and a change
in bank vendors, there was a five-month backlog of credit card invoice reconciliations.
When transactions already set up in accounts receivable were not cleared in a timely
manner as refunds were recorded, accounts receivable was overstated. In addition,
refunds received on the credit card invoices were being credited to the components'
budget a second time�instead of clearing the receivable, creating instances where
officers treated the second credit as part of their budget and spent it.
(UHFOUOI
The Agency has begun to implement processes to accrue certain
expenses based on estimation methods and historical trend data. Although the anticipated
completion date for the overall project was originally slated for FY 2006, to date there
have been no methodologies developed to estimate and record accruals for travel-related
expenses; the audit recommendation remains open.
18 (U) This calculation includes only the centrally billed airline ticket expenses for the Agency, as the activity of the
ODNI has been removed.
19 (U) Statement of Federal Financial Accounting Standards No. I, Accounting for Selected Assets and Liabilities,
paragraph 77.
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Exhibit A
(U) Objectives, Scope, and Methodology
(U) The objectives of this audit were to determine whether:
� There is an effective process in place to ensure that refunds
or credits for unused airline tickets are received in a timely manner.
� The Agency financial statements fairly present outstanding
refunds or credits for unused airline tickets in accordance with
generally accepted accounting principles.
(11//FOU0) We obtained an understanding of the Agency's centrally billed airline
ticket processes by examining prior audit reports; researching Agency travel
regulations; reviewing the policies and procedures of Central Travel Services (CTS);
and interviewing various CTS officials, Travel Management Company contractors, and
component budget officers and finance officers. We evaluated the processes of
identifying and requesting refunds for unused paper and electronic tickets and
determined whether the controls over these processes were properly designed. In
addition, we reviewed the reconciliation process utilized by CTS's
to determine whether the status of the unused tickets is effectively monitored
and whether the refunds are requested and received in a timely manner.
(W/FOU0) We interviewed appropriate officials from CTS's
to obtain an understanding of the process of
recording the associated accounting transactions for the purchase of centrally billed
airline tickets and the refunds anticipated and/or received. We evaluated this process to
determine if the refunds receivable and the spending authority for those funds are
appropriately recorded in the Agency's accounting system and properly reflected on
Agency financial statements.
(W/FOU0) We reviewed data in the Agency's accounting system regarding
airline tickets charged to the centrally billed accounts for fiscal years 2002 through
2005.* We tested a judgmental sample of refunds received to determine timeliness of
the refunds, as well as the accuracy of the general ledger accounts to which the
transactions were recorded. We reviewed expense vouchers for centrally billed airline
tickets along with the statements received from the credit card companies. We
* (U) The Office of the Director of National Intelligence (ODNI) utilizes the Agency's centrally billed travel
accounts for its official travel. As such, the information in this report includes airline ticket purchases of the
ODNI, except for the calculation of the yearend expense accrual, which includes only Agency purchases.
This Exhibit is Unclassified//FOU0
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analyzed refunds that exceeded the original ticket purchase price. We also reviewed
CTS's credit card reconciliations through February 2006.
(U) We sent a questionnaire to budget officers and finance officers in the
components that utilized the largest number of centrally billed airline tickets in
FY 2004 and FY 2005. We analyzed the responses to gain an understanding of their
processes for monitoring airline ticket obligations and refunds.
(U) We also reviewed relevant statutes and Comptroller General decisions related
to the Prompt Pay Act, receipt of vendor rebates, and the period of time government
agencies are allowed to claim refunds for goods and services not received.
(U) The audit was performed from December 2005 to May 2006 in accordance
with generally accepted government auditing standards.
(U) Comments on a draft of this report were received from the former Chief,
Central Travel Services on behalf of Finance, Finance Policy, and Central Travel
Services and were considered in the preparation of this report.
2
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�Exhib
U Ebb Enda -ohs
(b)(5)
Th tIL1SswiH.he included in the I spector
General's se iannual report the Dire r, Central Intelligence Agenes
This Exhibit ' Linda
When Separ d From A
tinFOU0
ment
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Exhibit C
(U) Audit Team Members
(UNFOU0) This audit report was prepared by the Financial Management
Division, Audit Staff, Office of Inspector General.
(b)(3)
Unclassified//FOU0 When Separated
From Attachment
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