SPECIAL AUDIT

Unauthorized Use Prohibited

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• Publié par: Iffe
• Nombre de lectures: 32
• Langue: English

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COMMONWEALTH OF PENNSYLVANIA

SPECIAL AUDIT OF:

PART 1: TRAVEL ON AIRCRAFT OWNED OR CHARTERED BY THE COMMONWEALTH

PART 2: COMMERCIAL FLIGHTS BOOKED THROUGH THE COMMONWEALTH TRAVEL CENTER

FOR THE PERIOD JANUARY 1, 1998, TO DECEMBER 31, 1999

COMMONWEALTH OF PENNSYLVANIA

SPECIAL AUDIT OF:

PART 1: TRAVEL ON AIRCRAFT OWNED OR CHARTERED BY THE COMMONWEALTH

PART 2: COMMERCIAL FLIGHTS BOOKED THROUGH THE COMMONWEALTH TRAVEL CENTER

FOR THE PERIOD JANUARY 1, 1998, TO DECEMBER 31, 1999

TABLE OF CONTENTS

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Letter to the Governor..................................................................................................................1

PART 1: TRAVEL ON AIRCRAFT OWNED OR CHARTERED BY THE COMMONWEALTH

Background ..................................................................................................................................3

Overview of Audit Findings.........................................................................................................3

Finding No. 1 – The Flight Services Division Within the Department of Transportation Billed Commonwealth Agencies at the Same Reduced Rate for Both Business and Nonbusiness Use of State Planes, a Practice That Resulted in Taxpayer Subsidization of Flights Made by the Governor and the Lieutenant Governor for Political or Personal Reasons......................................................................................................5

Finding No. 2 – Although the Governor’s Office Frequently Disregarded the Department of Transportation’s Policy on the Use of State Planes, the Department Made No Effort Either to Enforce Its Policy or to Harmonize Policy and Practice.................9

Finding No. 3 – Members of the Governor’s Cabinet and Other High-Level State Officials Used State and Chartered Aircraft for Numerous Short Trips Without Reasonable Justification and Without Regard to Cost.............................................................12

Finding No. 4 – The Former Secretary of the Department of Community and Economic Development Repeatedly Abused the Privileges of his Office by Using State Aircraft for his Personal Convenience......................................................................................14

Finding No. 5 – Commonwealth Agencies, Including the Governor’s Office, Consistently Failed to Document the Purpose of and Justification for Flights on State Aircraft, Displaying Thereby a Disregard for Both Statutory and Policy Requirements .......17

PART 2: COMMONWEALTH FLIGHTS BOOKED THROUGH THE COMMONWEALTH TRAVEL CENTER

Background ................................................................................................................................20

Overview of Audit Findings.......................................................................................................20

Finding No. 1 – Commonwealth Agencies Exercised Insufficient Control Over Commercial Flight Arrangements, Failing Thereby to Monitor and Contain Costs..............22

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Finding No. 2 – Commonwealth Agencies Paid Little Attention to Practices That Unnecessarily Increased the Costs of Commercial Flights, and They Exercised Insufficient Control Over the Accuracy of Flight-Related Records ........................................30

Exhibit 1 .....................................................................................................................................35

Exhibit 2 .....................................................................................................................................36

Distribution List .........................................................................................................................37

October 3, 2003

The Honorable Edward G. Rendell Governor 225 Capitol Building Commonwealth of Pennsylvania Harrisburg, Pennsylvania 17120 Dear Governor Rendell: The Department of the Auditor General has completed a two-part special audit of travel on aircraft owned or chartered by the Commonwealth (part 1) and commercial flights booked through the Commonwealth Travel Center (part 2). The audit covered the period January 1, 1998, to December 31, 1999. My staff performed the audit under the authority of Section 402 of The Fiscal Code, which states that “[s]pecial audits of the affairs of all departments, boards, commissions or officers, may be made whenever they may, in the judgment of the Auditor General, appear necessary….” We conducted the audit in accordance withGovernment Auditing Standards, issued by the Comptroller General of the United States. The objectives for part 1 of the audit were to determine if the Flight Services Division of the Department of Transportation’s Bureau of Aviation billed Commonwealth agencies at rates commensurate with actual costs and to ascertain whether agencies had, and properly documented, valid reasons for using state-owned or state-chartered aircraft. The objectives for part 2 were to determine if the Commonwealth Travel Center fulfilled its mandate to book commercial flights for Commonwealth employees at the lowest published fares available, if the Department of General Services effectively monitored the Travel Center, and if Commonwealth agencies exercised oversight of employee travel sufficient to ensure that only reasonable and necessary costs were incurred. Our audit approach included directing inquiries to management and staff in applicable Commonwealth agencies to gain an understanding of policies, control procedures, and regulations governing each of the areas under audit. These agencies included the Governor’s and Lieutenant Governor’s Offices, the Department of Transportation, the Department of Community and Economic Development, the Department of General Services, the Department of Labor and Industry, and other agencies, along with the applicable Comptroller’s Offices in the Office of the Budget. We also examined relevant documentation maintained by these agencies supporting operations, costs incurred, Travel Center bookings, and agency and Comptroller’s Office oversight controls.

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The findings in this report reveal serious deficiencies in each of the areas covered by our audit objectives. We discovered that Flight Services did not recover its actual costs; rather, it billed user agencies, including the Governor’s and Lieutenant Governor’s Offices, at the same reduced rate for both business and non-business travel. As a result, taxpayers absorbed costs associated with trips made for political and personal reasons. We noted in particular that the former Secretary of the Department of Community and Economic Development repeatedly used state-owned or state-chartered aircraft to commute between home and office. We found as well that government officials, without documented justification, used these aircraft for short trips that could have been made at less expense by state car. Overall, we found a casual attitude toward documenting the purpose of and justification for flights and toward complying with statutory and policy requirements.

The same casual attitude pervaded agency oversight of commercial flights made by employees. Weaknesses included failing to obtain the lowest or most reasonable airfares available, failing to book flights in advance to obtain lower airfares, failing to limit the number of employees on flights, and failing to maintain adequate documentation justifying employee travel. We also discovered that the Travel Center did not accurately record airline codes designating fare categories and was careless in recording charges for flights booked by nonemployees who participated in the Commonwealth’s trade missions. There was also inadequate oversight by the Department of General Services of the Travel Center’s operations.

We are aware that standards for the appropriate use of state-owned and state-chartered aircraft have been obscured to some extent by inconsistent policies and a lengthy history of various past practices. It is our hope that your administration will review the shortcomings revealed in this audit and put in place standards that require reasonable cost containment as well as accountability, in the form of more precise documentation. These goals also underlie our recommendations on employee travel. We urge agencies to demonstrate a commitment to containing costs by scrutinizing both the need for employee travel and the reasonableness of travel expenses. We also urge the Department of General Services to participate in this process by monitoring the operations of the Commonwealth Travel Center.

Finally, we note that the issuance of this audit report was significantly held up because of numerous lengthy delays on the part of the former administration in responding to requests for information and providing documentation necessary to complete the audit. Moreover, in many instances information initially provided by management turned out to be incomplete, necessitating numerous rounds of follow-up inquiries which further delayed issuance of the report. Such delays notwithstanding, we are confident that our findings and recommendations remain highly relevant and urge that they be carefully considered by your administration.

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Sincerely,

Robert P. Casey, Jr. Auditor General

SPECIAL AUDIT

PART 1: TRAVEL ON AIRCRAFT OWNED OR CHARTERED BY THE COMMONWEALTH PART 2: COMMERCIAL FLIGHTS BOOKED THROUGH THE COMMONWEALTH TRAVEL CENTER

PART 1 Travel on Aircraft Owned or Chartered by the Commonwealth Background Since 1947, the Commonwealth has been authorized by law to acquire aircraft for official use by state agencies and the General Assembly. During calendar years 1998 and 1999, the Commonwealth’s fleet consisted of a 1976 and a 1992 Beechcraft King Air 200 and a 1999 Beechcraft King Air 350. The King Air 350 was the newest member of the fleet, having replaced the 1976 King Air 200 in August 1999. The King Air 200 can carry up to eight passengers, the King Air 350 up to nine. The King Air 350 was purchased to upgrade the fleet and was used primarily by the Governor, 1  was the most frequent traveler on state aircraft who during our audit period. Other elected officials, cabinet secretaries, state legislators, and selected staff members also used state planes. Consistent with constitutional and statutory limitations on our audit authority, our audit was confined to the Office of the Governor, the Office of the Lieutenant Governor, and the agencies under the Governor’s jurisdiction, referred to collectively in our report as “Commonwealth agencies” or “user agencies.” Both state-owned and state-leased aircraft are hangared at the Capital City Airport in New Cumberland. The Flight Services Division of the Department of Transportation’s Bureau of Aviation has overall responsibility for the air operation. Flight Services employs a maintenance crew and pilots, and schedules all flights. Preference in scheduling state plane flights is given to the Governor, his family, and his staff. If a state plane is not available, Flight Services arranges for a chartered flight. Flight Services management periodically calculates and updates rates for the use of state aircraft, and implements a billing methodology designed to recover a portion of costs from user agencies. From the flight log and other documentation it maintains for each flight, Flight Services prepares an invoice that it forwards to the user agency. The agency and its Comptroller’s Office review the invoice and, if the invoice is approved, transmit payment to the Comptroller’s Office in the Department of Transportation. Overview of Audit Findings The purpose of this audit of state aircraft operations was to determine: 1) Did Flight Services bill agencies at rates that were commensurate with actual                                                  1 Governor and Mark Schweiker the Lieutenant Governor during our audit period.Tom Ridge was the

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costs? 2) Did agencies have, and document, valid reasons for using state-owned or state- chartered planes? Far too often, the answer to both questions turned out to be “No.”

We learned, first, that Flight Services billed agencies at a rate that covered only about 25% of its total costs and, second, that this rate applied irrespective of whether a flight had a business or a nonbusiness purpose. As we explain in Finding #1, it appears legitimate for Flight Services, a Commonwealth agency, to charge other agencies a reduced rate when they use state aircraft to conduct Commonwealth business. It is decidedly not legitimate to provide this accommodation when flights are taken for political or personal reasons. The Commonwealth should be bearing none of the costs of these flights.

The Governor, for example, often used state aircraft solely for political travel, or he combined political and business travel in the same flight. The Governor’s political action committee (PAC) should have reimbursed the Commonwealth for the cost of the entire flight if it was wholly political or for the cost attributable to the political portion of the flight if it had a dual political/business purpose. In many, but not all, cases, the PAC did indeed provide payment--but only at the reduced Flight Services rate. The costs of some political flights, however, had not been paid at all as of the date we commenced our audit. When the Governor used state aircraft for personal travel outside Pennsylvania, he--not the Commonwealth--was expected to bear the cost. Yet we discovered that no payment had been made for over a dozen of these flights and, moreover, that the Governor’s Office ascribed to itself the power to decide internally that rates lower even than the Flight Services rate would apply to personal travel.

We found as well that Commonwealth agencies were both woefully negligent in documenting their justifications for travel by state plane and largely indifferent to the importance of such documentation. Repeatedly during our audit, agencies attempted to come up with after-the-fact justifications for flights taken one to two years earlier. It was not surprising therefore that the best some agencies could do was to assert as a general proposition that traveling by plane saved money. In the Governor’s Office this casual attitude toward recordkeeping resulted in failure to identify the nature of flights as business, political, or personal.

Irrespective of documentation, some flights on state and chartered aircraft were unjustified on their face. Among this category of flights, the most inexcusable were those that ferried the Secretary of the Department of Community and Economic Development between his home in Wyomissing and his office in Harrisburg. It hardly seems necessary to point out that state property, purchased with taxpayers’ dollars, may not be used for a public official’s personal convenience. Our category of clearly unjustified flights also included numerous short trips made by members of the Governor’s cabinet and other high-level state officials. The trips in question-- for example, between Harrisburg and State College, Philadelphia, or Washington, D.C.--could as easily, but much more cheaply, have been made by state car.

We are aware that policy inconsistencies and a long history of past practices have contributed to at least some of the irregularities we found in agency use of state aircraft and payment for that use. Therefore, as appropriate, we have recommended that remediation, in the form of clearly articulated procedures and standards, be initiated by the current administration.

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FINDING #1 – The Flight Services Division Within the Department of Transportation Billed Commonwealth A encies at the Same Reduced Rate for Both Business and Nonbusiness Use of State Planes, a Practice That Resulted in Tax a er Subsidization of Flights Made by the Governor and the Lieutenant Governor for Political or Personal Reasons. The acquisition of state aircraft and the charges for their use are governed by Section 5302 of Pennsylvania’s Aviation Code, 74 Pa.C.S.A.§ 5302, and by the Department of Transportation’s policy implementing that provision: 2 The [D]epartment [of Transportation] may purchase or lease and maintain aircraft required for the proper conduct of the business of the Commonwealth agencies….   The total cost, including all ordinary and necessary expenses for the use of such aircraft, shall be charged by the department to the using agency…. (Aviation Code, section 5302) Any State agency…that is furnished aircraft services by Flight Services shall be charged for the ordinary and necessary expenses of the operation of the aircraft based on flight time and the expenses incurred by the pilots, such as time, meals, hotel, etc. (Department of Transportation’s policy, section B.5.a.) There is room for disagreement as to whether these two provisions are compatible, specifically, whether or not the Department of Transportation’s policy complies on its face with the statutory directive to charge “total cost.” Our audit, of course, focused on how Flight Services implemented the policy. What we found is that Flight Services’ actual billing practices resulted in unrecovered costs that greatly exceeded costs charged to the user agencies. There can, we think, be no disagreement that this result is very far indeed from any concept of total cost recovery. Flight Services’ Charges During the period of our audit, Flight Services charged from $535 to $745 an hour for the use of state aircraft. These rates were based almost entirely on costs incurred during time in the air, including pilot time, and a minimum amount of Flight Services’ costs related to their personnel. The rates did not include most of Flight Services’ nonpilot personnel costs, aircraft acquisition costs, overhead costs for hangar space, and routine office expenses. Our review of Flight Services’ accounting records and our discussions with personnel in the Department of Transportation’s Comptroller’s Office disclosed that Flight Services

                                                 2 The Department of Transportation has set out the policy in an internal publication:Master Policy Manual, MPS No. 801, “Operation and Use of Aircraft,” effective August 1, 1989.

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charged user agencies approximately 25 percent of its total cost of operations. 3  from Far expressing concern, Flight Services’ management assured us that operating at a deficit has been the norm since the 1930s. 4    Management also offered its rationale for tolerating a deficit operation: By understating the charges for state-plane flights, Flight Services has made these flights cheaper than flights by chartered aircraft, thus encouraging and maximizing the use of state planes by state agencies. Our own cost comparisons support Flight Services’ contention that its billing methodology has made it more economical for agencies to use state planes rather than chartered ones, the charges for which commonly include time on the ground as well as time in the air. We could not establish conclusively that Flight Services’ policy maximized agencies’ use of state planes. However, we noted as consistent with this claim that the agencies used state planes 745 times during our audit period, compared with 252 flights by chartered aircraft. We acknowledge the reasonableness of charging state agencies a “bargain” rate for flights made in connection with Commonwealth business--as long as this rate covers the cost of fuel and all other incremental costs associated with flying the plane. The Commonwealth has, after all, made a considerable financial investment in property intended to promote the efficient and economical conduct of state business when travel by air is needed. Certainly it is good business practice to encourage the optimal use of this property by making it available to state agencies at a highly competitive rate. Of central importance is the fact that this practice does not result in the misuse of taxpayer funds. When a state agency pays less than total cost for using a state plane in connection with Commonwealth business, the remaining cost is passed on to Flight Services, which is a division of another state agency, the Department of Transportation. Thus, whether attributed to Flight Services or to the user agency, the cost of the flight is being borne, and properly so, by the Commonwealth. This justification does not apply, however, when a state plane is used for a purpose unrelated to Commonwealth business. Nevertheless, during our audit period Flight Services did not distinguish between flights made in connection with Commonwealth business and flights made for political or personal reasons. In the two latter instances, the total cost of a flight should be                                                  3  Comptroller’s Office for the Department of Transportation reported to us that Flight Services’ total cost of The operations for the fiscal year ended June 30, 2000, was $1,927,742. According to the comptroller, Flight Services billed user agencies $494,413, or 25% of total costs. Since Flight Services’ billing methodology for fiscal year 1999-00 was virtually the same as the methodology used during our audit period, 25 percent reasonably expresses the relationship between billings and costs for calendar years 1998 - 99. We also reviewed Flight Services’ revenues and expenditures during our audit period on the Commonwealth’s central accounting system and found that it corroborated the 25 percent figure. 4 This assertion appears somewhat overstated inasmuch as the statutory forerunner of section 5302 of the Aviation Code was not enacted until 1947. More important, the historical record of Flight Services’ billing practices is not altogether clear. Attorney General Official Opinion No. 75-20-B, issued on August 5, 1975, suggests that charging total costs was once the norm. The writer of the opinion remarked that “I am advised by the Department of Transportation that charges to the users of [state] aircraft include apportioned and allocable costs of aircraft rental, fuel, oil, radio repair and maintenance, engine and prop overhaul, salaries, insurance and employe benefits. The charges also include pilot trip expenses. Accordingly, the full cost of use was and is charged by the Department of Transportation…. [C]harges [are] based on computation of full operational expenses .” (Emphasis added.) Short of delving into the historical record for the past 55 years, we cannot trace the evolution of Flight Services’ billing methodologies or of its operating in a deficit condition. We have accepted for purposes of our audit that Flight Services has operated at a deficit for much of its existence and that the billing methodology in use during our audit period was not atypical.

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passed on to the appropriate individual or private entity--that is, the Commonwealth should be reimbursed for all costs. Yet during our audit period Flight Services’ rate was the same irrespective of the purpose of a flight. Flights Made for Political or Personal Reasons problem with applying an across-the- The board reduced rate is best illustrated by examining flights taken for political purposes. Both the Governor’s and the Lieutenant Governor’s offices routinely used state aircraft to travel to political events and billed political action committees (PACs) at the standard Flight Services rate. Each office provided us with a list of PAC reimbursements for political flights on state planes during our two-year audit period. We noted $140,872 in PAC reimbursements for the Governor’s political flights and $44,284 for the Lieutenant Governor’s, or $185,156 in total. Because Flight Services’ billing rate accounted for only about 25 percent of its costs, we estimate that the total cost to the Commonwealth for these flights was $740,624 ($185,156 x 4 = $740,624) and that the unrecovered cost amounted to over a half million dollars ($740,624 - $185,156 = $555,468). Furthermore, as explained in Finding #5, the Governor’s Office routinely allocated Flight Services’ charges to other Commonwealth agencies without proper support. When a flight had a mixed business/political purpose, this practice could potentially have resulted in overbilling the agency for the business portion and underbilling the Governor’s PAC for the political portion. Consequently we conclude that the $555,468 figure represents the Commonwealth’s minimum unrecovered cost. The Governor also used state planes for personal travel. Like cost recovery for political flights, cost recovery for these personal flights was far less than the Commonwealth’s actual costs. We address personal travel more fully in Finding #2. As we pointed out in footnote 4, we have not done a historical review of how billing policies and practices for the use of state planes may have changed over time. Therefore we do not know for how long the Commonwealth has failed to recover fully allocable costs when agencies use the planes for purposes other than Commonwealth business. What we do know is that during our two-year audit period alone, Commonwealth taxpayers subsidized political and personal flights. While this practice may not have been new, it should not continue. When a state plane is used for political or personal reasons, the Commonwealth should ensure that there is full cost recovery.

Recommendation The Flight Services Division should revise its billing methodology by charging a rate that reflects fully allocated costs for flights unrelated to Commonwealth business. We note that the change in administrations earlier this year offers the opportunity for a smooth transition to a new rate.

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