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1995 May Report of the Auditor General of Canada

Assistant Auditor General: David H. Roth
Responsible Auditor: Trevor R. Shaw

Main Points

7.2 Our audit confirmed that there is a low risk of widespread non-compliance with rules governing travel entitlements. Although data are available at the responsibility centre level, information is not organized for senior management to efficiently assess the need for and costs of travel in relation to program benefits. Travel is administered through a system of entitlements. A rule-based system has advantages. However, more emphasis on a values-driven system may lead to more cost-effective travel and better employee morale.

7.3 For the majority of air travel, public servants use economy class. During 1993-94, the Government Travel Service booked more than 230,000 tickets for air travel. Of these, over 93 percent were economy class and less than 7 percent were first class and business class.

7.4 Departments are working to reduce travel costs. Purchasing discounted economy-class tickets through the Government Travel Service saved the government $37.7 million during 1993-94. Opportunities for further savings include greater use of technology to replace travel, arranging direct discounts for air travel, and extended use of charter air services. Automation and streamlined procedures have the potential for improving control and reducing the cost of travel administration. Pursuit of these opportunities will require focussed effort and co-operation among central agencies and departments.

7.5 Hospitality spending of all departments is not significant in total. Half the spending is concentrated in two departments: Foreign Affairs and International Trade, and National Defence.

Introduction

Why We Did This Audit

Audit Objective, Scope and Approach

• link travel and hospitality spending to program needs;
• consider alternatives to travel;
• achieve lowest or optimum cost;
• manage and control travel;
• ensure compliance with directives; and
• exercise accountability for travel and hospitality.

7.9 Interviews, information analysis, observation, and transaction testing were the primary audit techniques we used. Our audit also relied on available studies and internal audit reports. For purposes of comparison, we conducted research on the management of travel in the private sector and in the United States government.

7.10 We reviewed the central functions of the Treasury Board Secretariat and Public Works and Government Services Canada relating to travel. The travel activity in 10 representative departments was examined: Agriculture and Agri-Food Canada; Environment Canada; Foreign Affairs and International Trade; Health Canada; Industry Canada; Fisheries and Oceans Canada; National Defence; Natural Resources Canada; Transport Canada; and Veterans Affairs Canada. These departments account for about 57 percent of the total spent by all departments on travel by public servants.

7.11 We reviewed the hospitality activities of two departments that make up 50 percent of the total hospitality spending by all departments. Those two departments examined were National Defence; and Foreign Affairs and International Trade.

Background Information

7.13 The Treasury Board delegates responsibility for travel administration to deputy heads of departments, who then generally delegate it to their senior financial officers or other heads of services. Responsibility centre managers in departments must manage travel among many other tasks. In practice, many thousands of public servants across hundreds of organizational units and many regions play a part in the administration and results of travel.

7.14 With some exceptions, departments must use the central Government Travel Service to arrange commercial air transportation. According to Public Works and Government Services Canada, travel by 60 percent of all public service employees falls under the central Government Travel Service program. National Defence arranges its own travel, although it is expected to begin using the Government Travel Service during 1995. Foreign Affairs and International Trade uses the Government Travel Service but it also uses other travel agents in Canada for special purposes, as well as travel agents in foreign countries to service Canadian posts abroad.

Perceptions about Travel

• Shrinking budgets require that managers make informed decisions on the need for travel and on who should travel. While some managers express a concern that unnecessary travel is taking place, others are concerned that necessary travel is not taking place.
• Travel can be seen as a privilege. Those who do not travel may see it as a form of reward, the reserve of senior people. But those who must travel frequently may not consider it a "perk" and feel that it takes too much time away from family.
• Travel claims are based, in part, on detailed entitlements set out in various policies. As a result, there are some concerns about the lack of incentive to reduce travel costs and about high costs of travel administration.
• Some managers would prefer fewer rules and more flexibility in approving travel. Others feel that rules of entitlement are neutral and reduce the potential for arbitrariness and inconsistency in the treatment of employees.
• Preparing and processing a travel claim can be time-consuming and frustrating. Solutions to this are being considered by central agencies.

Observations and Recommendations

Need for Communication to Understand Travel and Demonstrate Accountability

Why public servants travel

7.17 Travel also takes place for purposes such as conference attendance and training. Increases or decreases in such travel may have long-term effects on program delivery. For example, scientists and other specialists travel for development and training to keep up-to-date in today's rapidly changing world. Reduced or limited access to travel can impede the development and retention of research and laboratory capabilities.

Accountability for travel

7.19 The Treasury Board Secretariat and departments do not have the framework or process to assemble information that would lead to a comprehensive understanding and appreciation of travel. For example:

• The annual spending Estimates and the Public Accounts of the federal government are not designed to report on travel spending by departments and agencies.
• Information about the purpose, costs and benefits of travel is not readily available. There is no reliable measurement of the cost of travel administration. There is no measurement of the number of trips taken or the amount of time employees spend in travel status.
• Many specialized terms are used that can be difficult to understand without intimate knowledge of government travel. This creates a barrier to effective communication, and arises from a travel directive that serves as a collective agreement with employees.
• Departments do not assess the collective need for travel and its costs. Assessments to focus management attention on areas of risk are not common. Managers may not receive analysis of the results of claim verifications so that systemic problems can be addressed.
• According to a Treasury Board listing of internal audits, only five have been completed since 1988 that deal with travel as the single subject. However, at the time we were completing our audit report, Transport Canada had just completed a report on its first department-wide internal audit of travel. Two other departments began audits of travel in October 1994.

7.21 The challenge for government is to give transparency to program results and costs. Currently, a shift in focus from managing inputs to managing outputs and outcomes is an overall goal of the government. As part of this shift, for management and accountability purposes better information is needed about the benefits and costs of travel.

7.22 Supplying a government-wide report on travel once every three or four years would require agreement on the need for it and co-operation between central agencies and departments to produce it. Such reporting might begin by showing the link between travel and program delivery requirements. This type of information might also support departments when choosing priorities for limited travel dollars and deciding how best to manage costs. Existing data sources could be used to construct meaningful information about travel activity in the federal government. Producing such a report would also require improving the sources of information and, where feasible, using automated travel management systems.

7.23 As information systems become better developed, the Treasury Board Secretariat should consider providing, on a cost-effective basis, public information that would enhance accountability and build a better understanding of government travel in relation to program requirements and costs.

How much is spent on travel?

7.25 According to the central accounting system, departments and agencies spent $808 million on travel for the fiscal year 1993-94 ( Exhibit 7.1 ). Of this total, $622 million (77 percent) was for travel by public servants and $186 million (23 percent) was for non-public servant travel. The total amount spent on travel is less than 1 percent of total annual expenditures and less than 5 percent of spending on departmental operations.

7.26 Because of classification differences (not errors), the $622 million does not include amounts paid for specialized purposes such as travel for moving employees, and travel-related foreign service allowances paid to employees when posted abroad. Two of these allowances, for example, are for education travel and vacation travel assistance.

7.27 Payments under foreign service allowances are classified as part of salary and benefit expenditures and not as travel expenditures. In 1993-94, travel-related allowances totalled $14.5 million at Foreign Affairs and International Trade, primarily made up of vacation travel assistance, leave-related travel and family reunion travel. Similarly, National Defence classified $39 million of travel-related expenditures in categories other than travel. This amount includes aircraft rentals, landing fees, payment for a travel reservation system, and travel assistance for employees. Errors in classifying expenditures can also have an impact on the compilation of travel spending. National Defence incorrectly coded $13 million as travel by non-public servants during the 1993-94 fiscal year.

7.28 Compiling a profile of travel spending by the federal government is not a simple matter. After taking classification differences and known errors into account, the total spent by departments on various forms of public servant travel was over $685 million in 1993-94. This figure answers a question about travel spending, but does not measure all costs relating to travel and does not explain why it is essential. Producing information for accountability will depend on the development of better information for management.

Lack of management information

• the means for management to use travel better to support individual managers when planning and authorizing travel;
• broad detail about travel patterns and costs, for use by central agencies to assess policies and alternatives and to help improve the economy and efficiency of travel; and
• assurance to ministers and the public that government travel is being managed with due regard to prudence and probity.

7.31 Travel administration guidelines issued by the Treasury Board expect that departmental systems will prevent duplication of pre-audit and post-audit of travel claims, compile information on the results from checking claims, and compile and retrieve data that managers can use to improve travel practices. However, the design of departmental systems precludes capturing this type of information in an efficient way that is useful for management.

7.32 Travel forms and claims document the authority for travel and provide evidence in support of payments. Travel claims are of limited use as management information because of their paper format and the need for tedious cross-referencing to assemble information. Potentially useful information about air travel is available in the travel agent reports but departments have shown little interest in them. The reports are voluminous and require manual review to highlight unusual travel. They also require considerable analysis for efficient scrutiny and interpretation by management. A new on-line reporting system is anticipated from the Government Travel Service during 1995 to enable departments to develop the reports they require.

7.33 Automation offers the potential to improve control while reducing the cost of administration. Automated travel management systems are currently being pilot-tested; none are in full use. Unobtrusive controls can be built into automated systems to guide travellers and managers. Electronic systems can provide the opportunity to identify anomalies in trends and sensitive or unusual transactions before travel takes place. Automation also offers the opportunity to share travel information among managers. This may help departments reduce costs by consolidating trips, which, for example, Environment Canada is doing.

7.34 In co-operation with departments, the Treasury Board Secretariat should help specify the information needed to manage travel better. The Secretariat should pursue the implementation of automated travel systems appropriate for government purposes.

The risk of non-compliance with rules of travel entitlements

• There are well-established policies and procedures to begin travel and to limit expenses through prescribed entitlements. However, information is commonly not available for management to scrutinize travel use and costs.
• The government standard for air travel is economy class. More than 93 percent of air travel booked in 1993-94 by the Government Travel Service was at full economy fare or lower.
• Managers are increasingly aware of travel costs; there are indications that responsibility centre managers consider travel requirements and expenditures when developing and controlling their budgets. However, a limitation is the lack of periodic assessments to review the overall need and priorities for travel and whether travel takes place at least cost.
• Travel claims are checked manually and extensively for compliance with entitlements. Use of a single travel service and departmental travel accounts provide a check and balance on air travel transactions. Basic internal controls are in place, but they could be more efficient and effective.
• Budget constraints and potential for public exposure are deterrents to waste and abuse.
• Our tests of travel claims for system compliance revealed no major problems. However, rules for using business-class air travel need further clarification.

Using Information to Show if Expectations Are Being Met

High expectations

7.37 Successive governments have had high expectations about the use of travel. For example, according to 1992 Budget papers, tighter government travel guidelines were to be implemented. Departments were to eliminate first-class air travel, discourage business class, restrict travellers to standard accommodation, continue the 20 percent reduction in the number of foreign trips, reduce the size of delegations, and reduce participation in international meetings and conferences. It was not clear how this was to be accomplished. Departments were expected to comply with this direction in the way they saw best.

7.38 We expected there would be effective monitoring by departments of first-class and business-class air travel based on complete and accurate records. However, this was not evident. Specifically, we found that departments tend not to acquire and aggregate data from the Government Travel Service for analytical purposes. Departments make little use of travel agent reports that detail the booking of upgraded air travel. National Defence does not track first-class and business-class tickets. The Department informed us that these would be a small percentage of total air travel, and that it plans to generate the analytical data in 1995.

7.39 We gathered data and found that over 93 percent of the air travel tickets booked through the Government Travel Service in 1993-94 were at full or discounted economy-class fares ( Exhibit 7.2 ). This shows a high degree of compliance with the government's general standard to fly economy class. Less than one half of one percent of the tickets were first class and less than seven percent were business class. In monetary terms, first-class and business-class bookings amounted to $29.7 million, representing 18 percent of the value of all tickets booked by the Government Travel Service.

Analysis of first-class air travel

7.41 Foreign Affairs and International Trade booked about half of all the first-class air travel arranged through the central Government Travel Service. Of the remaining entities, 54 had no first-class bookings while 37 had at least one. Six entities, including Foreign Affairs and International Trade, had 25 or more first-class bookings .

7.42 The use of first-class air travel at Foreign Affairs and International Trade is due to the nature of operations and the amount of international travel. An examination of the Department's records revealed the following:

• The Department paid $1.6 million for the 353 first-class tickets that were issued through the Government Travel Service in 1993-94. Diplomatic couriers travelling first class for security and other reasons accounted for 269 (77 percent) of the Department's first-class tickets. Starting in April 1994, courier activity has been reduced while the Department assesses alternatives.
• Travel at the minister and deputy minister levels accounted for 32 of the first-class tickets; transportation of other senior officials, including ambassadors and high commissioners, accounted for the remaining 52 tickets. Effective January 1994, one departmental auditor checks all travel claims by senior officials and senior managers. These internal verifications have identified no problems.
• Information is not assembled on the extent to which first-class or business-class tickets are purchased through other travel agents in Canada or abroad.
• The control process with respect to authorizing first-class travel was deficient in Foreign Affairs and International Trade. The Department has informed us that corrective steps will be taken.

7.44 In conclusion, use of first class is concentrated in a few departments. Steps are being taken to reduce its use.

Analysis of business-class air travel

7.46 The use of business-class travel by ministers, deputy ministers and Governor in Council appointees is entirely at their personal discretion. For others, there are various distance or time rules that apply to air travel one way and not to a round trip. Briefly, the rules are the following:

• Starting in 1989, the Treasury Board allows business class to members of the Executive Group (senior managers) when a trip is more than 850 air kilometres one way. This was done because it provides a better environment for working in transit and many managers travel on weekends or after normal working hours.
• Business class is provided to other employees if requested, and when flights exceed 12 continuous hours or one direct flight exceeds 9 hours.
• The Travel Directive also allows business class in exceptional cases or for program-related reasons such as security. Such exceptions are not limited by distance, time or the level of the employee.

7.48 The Treasury Board Secretariat informed us that, while the 1992 Budget directed deputies to reduce the use of business class, it did not eliminate or change the entitlements for represented employees that form part of collective agreements approved by the Treasury Board. And certain executives and equivalents, specified by level, are entitled as a term of employment to travel business class on trips in excess of 850 kilometres one way. Accordingly, it appears that departments were expected to reduce the use of business class although entitlement rules for non-management remained, but departments could adopt different rules for managers.

7.49 At the same time, Treasury Board Secretariat indicated to us that there is no longer one standard rule for senior executives to use business class. This suggests that departments can modify the 850 kilometre rule if they wish, but they would still have to respect the rule as an entitlement. We found that the departments we audited generally retain the 850 kilometre rule as part of their administrative policies. Three departments were noted to have recently replaced this rule, and now permit the use of business class only when total air time will exceed three hours and/or 1,700 kilometres one way.

7.50 Departments are making an effort to reduce the use of business-class air travel. Seven of 10 departments included in our audit reduced the number of business-class reservations over a period of one year. Industry Canada reduced business-class air travel by almost 50 percent. However, a goal of reducing business-class travel in departments overall has yet to be reached. The aggregate bookings of all departments remained almost constant over the 1993 and 1994 fiscal years.

7.51 To diagnose patterns of business-class air travel, we analyzed 6,447 tickets that included flights designated for business-class seating. These were billed by the Government Travel Service to departments from January 1994 to April 1994. Invoices totalled $9.9 million. These tickets contained individual flights designated for business-class seating that made up 10,493 "one-way trips" from point of departure to point of arrival, without stopover ( as defined in Exhibit 7.3 ). This reflects continuous travel one way, the basis for rules of the Treasury Board. In terms of "round trips", approximately 5,500 were taken over the four-month period. About 63 percent of the business-class travel took place in Canada and the United States, and 37 percent involved destinations overseas.

7.52 We measured the use of business class in terms of who was flying and distances flown. On a flight-by-flight basis, more than 72 percent were for distances of less than 3,500 air kilometres one way (generally less than five to six hours). On the basis of trips as defined and shown in Exhibit 7.3 , about 44 percent of business-class use involved air travel of less than 2,000 air kilometres (less than three to four hours) and 15 percent involved less than 850 air kilometres (about 1.5 hours) one way. This analysis indicates that business class is being used for short distances.

7.53 In relation to business-class air travel, specialized terminology, intricate rules and lack of information make it more difficult to achieve compliance with policy. Our analysis shows a risk that up to 25 percent of business-class air travel is inconsistent with basic distance and time rules. This is an issue for the Treasury Board Secretariat and departments to examine further.

7.54 If it were possible to replace all business-class air travel with full economy fares, we estimate the potential saving would be approximately $4 million a year; more if replaced by discounted economy-class fares. However, making such a change would not be easy and business-class travel is desirable from a number of standpoints. The need for travel and the effects on productivity would have to be assessed; entitlements may require renegotiation with employees; and departments would have to implement additional control measures. Upgraded air travel has to be managed in an informed and prudent way.

7.55 In conclusion, the vast majority of public servants use economy class when they fly. The use of first class and business class represents less than 7 percent of air travel. In keeping with fiscal restraint, senior public servants might avoid using business class on short trips. Since senior officials and managers account for more than half the use of upgraded air travel, they may wish to consider the example they set for others. For better management, departments and central agencies could use diagnostic information to periodically monitor the use of upgraded air travel.

7.56 The Treasury Board Secretariat should assess and further clarify the application of policy for business-class travel. Departments should develop better information on the use of upgraded air travel.

Acknowledging the Role of Values in Travel Activity

Values for achieving control

7.58 There are potentially three types of rules that can influence travel activity and costs. Rules of entitlement cover, for example, modes of air transportation, various rates of reimbursement for using personal vehicles and various meal and incidental allowance rates for travel in Canada. Rules of administration include the requirement that a traveller obtain prior authorization to travel, and use an authorized form to submit claims.

7.59 The emphasis in travel management has been on rules of entitlement and administration. Less evident are rules or principles of behaviour based on organizational values. For instance, if a value is to achieve least cost in travel, then a rule of behaviour might be to lead by example. Attempts to recognize and reinforce values through travel practices are not evident. As previously noted, little objective information is readily available to tell management about the nature, costs and results of travel.

7.60 In addition to information, the value judgments of public servants play an important role in management of travel. A fundamental control is the decision by a manager or traveller that a trip will support program delivery at a reasonable cost. This is important given that these decisions are made thousands of times a day across government. However, departments do not conduct self-assessment of the need for travel in achieving program aims.

7.61 Managers judge the need for travel when they plan it and when they authorize travel to take place. Once a trip is authorized, little else remains to the manager's discretion, since rules of entitlement determine modes of transportation and the expenses to be reimbursed.

7.62 The consistent application of shared values such as frugality and prudence could help deal with the complexities of travel management and help motivate better control and cost reduction. Incentives and motivation have a part to play in all aspects of departmental operations, including travel. However, this can be a complex matter in the context of entitlements. The interaction of rules and behaviour has to be carefully studied and considered by the Treasury Board Secretariat. As an illustration, public servants may choose to travel at night or over weekends to save time and money. They may also choose not to request upgraded air travel although entitled to it. Such choices may change when those who have made every effort to economize on transportation are questioned about the cost of a phone call home to say they arrived safely.

7.63 The Treasury Board Secretariat should consider publishing principles of behaviour in government travel that are based on shared values for management in the public service.

Frequent-flyer points

7.65 Frequent-flyer points pose a complex and long-standing problem in government travel. Since point accumulation is not permitted by Treasury Board, it is a problem to ensure that they are not awarded on government-purchased air tickets. The Government Travel Service puts a code in the common air reservation system to signal that a government ticket is not eligible for points. However, this does not prevent the traveller from acquiring points when a ticket is used. Because of the way the point system works, personal use can be made of points accumulated with government tickets whether policy allows them or not. Departments cannot formally control the acquisition and use of points. In our view, it is the value system that serves as the control. Therefore, we feel it is important that public servants understand why a particular policy on travel points exists.

7.66 In prohibiting frequent-flyer points, the government foregoes potential savings. In addition, this policy can be interpreted as being incompatible with public service renewal, which seeks fewer controls on the basis of trust in people and more accountability. Prohibiting the acquisition of points on government travel might be construed as showing lack of confidence that public servants will use accumulated points to reduce the travel costs of their departments and be prepared to account for them.

7.67 The policy on travel bonus points should be assessed by the Treasury Board Secretariat. The reasons for the policy should be explained to public servants.

Reducing Travel Costs and Improving Control

Opportunities to reduce the direct costs of travel

7.69 Data in Exhibit 7.4 suggest that departments are increasing their savings on air fares. Of a possible savings of $50.2 million available at the time of booking flights, public servants collectively realized $37.7 million from discounted fares. Foregone savings of $12.5 million could be explained, for example, by the fact that a lower-fare ticket had restrictions that impeded necessary flexibility for the traveller, or involved payment of overtime and accommodation at a cost higher than the potential savings from a discounted air ticket. The cheapest seat is not always the most sensible and the extent of use of business class may also affect savings. Therefore, an increase in savings on air fares should be viewed as an objective while recognizing that they would not be attainable 100 percent of the time due to operational constraints.

7.70 Although departments show an upward trend in savings, there is room to do better. This is suggested by the wide range in savings among departments and by the fact that 54 percent of economy tickets were acquired at full fare. Departments and central agencies have not conducted reviews to learn why savings are realized or missed in order to improve results. A lack of sufficient information makes it difficult to learn whether air travel is taking place at the least possible cost.

7.71 Measuring savings realized and not realized is helpful for managing travel costs. However, this has limitations. There can be confusion about how savings are now measured and how to interpret them. Moreover, there is no measurement of the savings that could have been realized had public servants booked flights earlier. It is also possible that the upward trend in savings could have been due, in part, to increased price discounts by the airlines. If fare prices increase, public servants will have to increase their efforts to maintain or improve the current level of savings.

7.72 Under existing arrangements, departments acquire air tickets as though they were private citizens. Savings have to be made on each air ticket, one at a time, one public servant at a time. Savings are not automatic on the some 230,000 or more commercial air tickets acquired through the Government Travel Service. Improving the savings may increase the opportunity cost of people's work time and the cost of travel administration. Therefore, the question of alternative strategies arises.

7.73 An alternative strategy would be to establish discounts or flat-rate fares directly with the airlines for city-to-city routes commonly travelled by public servants. At one time, starting in 1990, certain discounts were pre-arranged with airlines. Public Works and Government Services Canada informed us that $5 million to $8 million a year was lost when the discounts were ended by the airlines in 1992. While the government establishes standard discount rates with hotels for accommodation, discounted or special fares are not established with airlines. An exception is National Defence, which arranges directly with airlines discounts ranging from 8 percent to 50 percent on all fare types. These discounts are made possible because the airlines would otherwise be paying standard commission rates to travel agents. We understand that the discounts will be continued when National Defence joins the Government Travel Service.

7.74 Other strategies to explore are charter services, special off-peak rates, and permitting public servants to transfer discounted tickets to other public servants or arranging with airlines to waive penalties when tickets are cancelled.

7.75 Another potential way to reduce travel costs is to evaluate the duplication or extension of National Defence's use of Service Air. This is a charter service provided by a major Canadian carrier, involving continuous flights across Canada. The Department plans to expand Service Air in April 1995. Information obtained from National Defence shows that, during 1993-94:

• $19.8 million was paid for Service Air, and passengers numbered 117,590;
• use of Service Air avoided costs of $10 million over costs of comparable commercial tickets;
• average seat occupancy was 93 percent, ranging from 75 percent to 100 percent; and
• about 75 percent of seat assignments were for duty travel including training, about 23 percent were for personal travel as an earned free perquisite, and about 2 percent represented travel provided for compassionate reasons.

7.77 Finally, travel is expensive and departments are pursuing alternatives. With the advent of technology, travel is no longer the only way to communicate. For example, the government is building shared video-conference facilities in Edmonton. Environment Canada uses telephone conferences, Transport Canada holds monthly video conferences by senior managers, and Veterans Affairs held 130 video conferences during the 1993-94 fiscal year. Departments anticipate further reductions in travel costs as technology advances.

Opportunities to improve control and reduce the cost of travel administration

7.79 The administration of travel is labour- and paper-intensive. While there is no measurement of the cost of travel administration, various sources roughly estimate that the average cost would be between 25 and 35 percent of travel expenditures. Using that range, the government-wide cost to administer travel could be between $170 million and $250 million a year, perhaps higher. Efficiency gains of 10 percent could lower that cost by up to $25 million a year across all departments. A report in 1994 by an outside consultant pointed to the feasibility of achieving savings in that range through automation.

7.80 Another way to appreciate the cost is to consider how much time is spent administering travel. However, central agencies and departments have not conducted studies to determine the time spent planning, arranging, and administering travel. Nonetheless, it is likely that millions of hours are involved across departments. Reducing the time to administer travel by as little as half an hour per event would free employees to serve the public and meet other operational requirements. A combination of automation and simpler ways of obtaining least-cost travel could make a sizable difference.

7.81 In summary, departments are working to reduce travel costs. They are achieving savings in the purchase of air fares. There are opportunities available to reduce the cost of air travel further. Automation and streamlined procedures can improve control and reduce the cost of travel administration. Making travel more efficient and effective requires a combination of many actions by many players. Care must be taken when reducing travel costs to consider program requirements as well as impacts on morale. Until there is better information and better co-ordination among central agencies and departments, the amount of actual cost reduction achieved will not be known.

Reducing foreign travel - lessons learned

7.83 It was not clear what a 20 percent reduction in the number of foreign trips was to accomplish. It was not necessarily to lower government expenditures, since any savings generated by a reduction in foreign trips could be spent by departments in other worthwhile areas, including travel within Canada. This was done to help departments cope with budget restraint.

7.84 The basis for measuring reductions in foreign travel was different from the Travel Directive definitions of travel. According to Treasury Board policy, a trip outside continental North America is defined as "overseas travel". This does not include trips to the United States. However, the foreign travel reduction program treated any trip to the United States as "foreign" for purposes of measuring reductions. The impact of this difference in terminology can be illustrated as follows. A commercial flight from Ottawa to Washington costs less than one to Europe or Asia. However, under the reduction program, one less trip to Washington would count as much toward a 20 percent reduction target as one less trip to Paris or Tokyo. The program may not necessarily have reduced costly overseas travel.

7.85 The effect of the program on travel costs, the level of actual savings achieved, and the extra costs to administer the program were not determined. Departments were not required to report changes in the costs and patterns of travel, including any changes in the duration or destination of trips outside Canada. There was no requirement to correlate the number of foreign trips with costs, savings and operational impacts. The reduction program was also part of the government's intention to increase the use of charters, discounts and other lower-cost fares. Central agencies did not vigorously pursue these areas. However, a special discount of 10 percent on all fares from Canada to foreign destinations was negotiated in 1989 by Public Works and Government Services Canada with two Canada-based airlines. This discount was ended in 1992 by the airlines, while the foreign travel reduction program continued for another two years.

7.86 The foreign travel reduction program ended in April 1994. The program serves to illustrate that attempts to control travel in a narrow or piecemeal way are likely to achieve uncertain, if not limited, results. A more comprehensive approach would pursue options in a co-ordinated way with a view to all costs and program requirements.

Using internal controls more effectively

7.88 While audit trails usually exist, there are limitations or problems in exercising the control process. Checking a travel claim ensures compliance with rules of entitlement but does not assess the need for, and economy of, the travel. Errors are found and corrected during the proof of claims. However, little effort is made to track error rates to find out whether they are at an acceptable level, and to diagnose travel practices for improvement. Moreover, greater use of statistical sampling based on risk assessments could improve the cost-effectiveness of travel administration.

7.89 Our test of travel claims for system compliance also revealed instances of lack of authorization, absence of indication that claims were verified, and poor control over travel advances. However, their small number and the presence of established policies and procedures suggest that these instances represent a low risk.

Role of Central Agencies

Treasury Board Secretariat

7.91 There are two main sets of policies that govern travel by public servants. The central one is the Treasury Board Travel Directive. The other consists of foreign service directives. Both sets are scheduled for review on a three-year cycle and are negotiated separately through the National Joint Council. This Council is a consultative body created in 1944 by an order-in-council. It is a means for representatives of the employer and representatives of the unions to come together and agree on policy for such things as travel, relocation, and isolated posts. The Secretariat devotes one senior analyst to the Travel Directive, and one to the foreign service directives.

7.92 The process to formulate the Travel Directive has evolved over 30 years to closely resemble the process of collective bargaining with employees. In May 1994, the step was added of allowing arbitration for new policy items not resolved through negotiation. A key difference is that employees do not vote on travel policy as they would on a collective agreement. Nonetheless, the Treasury Board deems the Travel Directive binding, as though it were a collectively bargained agreement.

7.93 The Treasury Board Secretariat leads the development of input and negotiations in the National Joint Council that result in the Travel Directive. The Travel Directive contains many rules of entitlement and standard amounts for reimbursing employees who travel in Canada, the United States and some 178 foreign countries. The supporting Travel Administration Guide is useful for clarifying entitlements and outlining expectations for travel administration.

7.94 The Travel Directive aims at achieving fair and consistent reimbursement to employees. For example, entitlement rates to reimburse employees for meals and use of a personal car are based on surveys of actual costs. The Secretariat gauges fairness to employees informally by the number of employee grievances filed with the National Joint Council. There are very few grievances on the subject of travel. The Secretariat also asks for input from departments when there is a review of travel policy, and argues any precedent-setting grievances that might otherwise increase travel costs.

7.95 Policy does not call for systematic government-wide monitoring of travel management or compliance with the Travel Directive. The Secretariat does not obtain information about travel activity and costs to departments. It does not routinely share information on the extent to which departments are using alternatives to travel. The Secretariat does not systematically pursue ways of reducing travel costs, or focus on travel when departments make their annual budget requests. Nor does it monitor the quality of management control over travel, maintain an automated database on component costs of travel, or follow up to determine if departments carry out reviews of the need for and costs of travel as expected by the Travel Administration Guide.

7.96 The Secretariat has been involved in the development of automated-travel expert systems and pilots using automatic teller machines for travel advances. It completed a review of the Travel Directive in November 1994, which reached conclusions similar to those of our audit. The review noted the opportunity to clarify or simplify certain aspects of travel policy. It also found that public servants could make greater use of individual travel cards to reduce travel advances.

7.97 We conclude that there is a well-developed process for issuing the Travel Directive. It is clear and well communicated. The Secretariat would need to do more work to know better whether policy aims are achieved and whether other policy designs would be beneficial to achieving cost-effective travel. We recognize that the Secretariat cannot monitor departmental travel in isolation from other responsibilities, priorities and resources. A review of the Treasury Board Secretariat's overall accountability was under way in 1994.

7.98 The Treasury Board Secretariat should assess possible changes to the Travel Directive and Guide to improve the efficiency and effectiveness of travel and travel administration.

Public Works and Government Services Canada

7.100 The Government Travel Service arranges travel for public servants. Consistent with industry practice and contract arrangements, the agent is not paid for its services by the federal government. Agent revenues come from commissions paid by the travel industry, primarily airlines. The Government Travel Service arranges about 70 percent of commercial air tickets purchased in Canada by all departments and agencies. It looks after only a small portion of hotel reservations and other forms of transportation such as car rentals and rail. The Government Travel Service is not responsible for ensuring that public servants comply with government travel policies. Departments are responsible for this. (See photograph)

7.101 Departments are also responsible for achieving least cost in travel. To help them, the Government Travel Service is required to offer public servants reliable travel arrangements at least cost. The travel agent expects public servants to honour the contract, in particular to make exclusive use of the Government Travel Service for air travel.

7.102 The Travel Management Directorate takes assurance in the fact that it receives few formal complaints about the Government Travel Service from departments. According to its files, there were only 11 complaints from departments in the first six months of 1994.

7.103 We have been advised that surveys of travellers are also conducted by the travel agent operating the Government Travel Service. These also show a high level of satisfaction with service. The Directorate and the Government Travel Service provide training and issue bulletins on contract requirements and the need to reduce travel costs.

7.104 In our view, information about how well the relationship works between the Government Travel Service and the government is limited. While surveys of public servants indicate satisfaction with agent performance, response rates of less than five percent preclude definitive assessment. Moreover, the surveys do not determine whether a traveller knows if he or she got the best possible fare. Departments are looking for added assurance that they are getting least-cost air fares. Since fare audits have been limited, and to give added assurance to departments, the Directorate plans to expand on-line fare audits during 1995 to see that the Government Travel Service provides the lowest possible fares. We note some confusion in departments over terms of the Government Travel Service contract and what individuals should do when they believe a least-cost fare has been missed.

7.105 Public Works and Government Services Canada should develop better ways of measuring the use of travel and progress toward a goal of least-cost travel.

Need for joint effort

7.107 With the emergence of new technology there is a potential to achieve savings by re-engineering activities and simplifying the travel administration process. Neither of the central agencies has carried out studies on how travel could be more efficient and economical. They have not joined forces to assess strategic alternatives; estimated any extra costs incurred as the result of the policy to travel by Canadian carriers; set up a plan to simplify travel administration; and helped to identify the information that would best meet the needs of departmental management. It is not clear whether such tasks are the responsibility of Public Works and Government Services Canada or the Treasury Board Secretariat.

7.108 Combined effort by these two central agencies would help improve travel arrangements and management. For example, assessing and introducing new strategies for air travel would require co-ordination and policy judgments between them. It seems an opportune time to manage travel in a more integrated way given the overriding issue of what government can afford.

7.109 As this audit report was being finalized, an interdepartmental Travel Working Committee and a steering committee of assistant deputy ministers began work in 1995, chaired by Treasury Board Secretariat, with a view to reduced costs of travel and travel administration. This should provide a means for central agencies and departments to clarify responsibilities and to work more closely together.

Hospitality - Tailoring Control to Risk

7.111 In the interest of avoiding travel costs, we confined our audit to headquarters in Ottawa and did not audit hospitality at posts abroad. Instead, we reviewed the findings of the Department's internal auditors.

7.112 Foreign Affairs and International Trade has recognized problems and is working to improve control over hospitality. Early in 1994, it issued revisions to a 23-year-old policy on hospitality outside Canada. The new policy provides standards for expenditure initiation, admissible expenditures, reporting and accounting. A next step is building management information to monitor and assess the benefit and cost of hospitality and to measure compliance with policies of the Department and the Treasury Board. Another weakness was found in the control over stocks in Ottawa, which could be improved by independent reconciliation procedures and reduction in stock levels. The Department told us that steps are being taken to solve these problems. It is too soon to tell if new measures are working. Our Office will conduct follow-up audits.

7.113 National Defence spent $2 million on hospitality in 1993-94. It divides hospitality budgets among 90 account holders, including base commanders and generals. Most budgets are under $1,500 each. Departmental regulations governing hospitality are complete, clear and effectively communicated. However, an internal audit reported in 1988 that the total cost of administering hospitality funds was about $1 million. Our review of this calculation and of the current process indicates that estimated cost to still be valid. This is excessive given the low level of risk involved. The Department recently set up a team with a goal of reducing administrative orders by 50 percent over the next two years, covering all areas of administration, including hospitality.

Conclusion

Response of the Treasury Board Secretariat: The observations and recommendations of the Auditor General will be useful in helping the Treasury Board Secretariat achieve its goal of improving the management of government travel.

The Secretariat already has initiatives underway that will address many of the issues raised by the Auditor General.

The Secretariat has established two interdepartmental committees to provide suggestions on ways to reduce the costs of government travel. These committees are reviewing issues related to the Travel Directive and travel administration, raised by the Auditor General. They are also reviewing the travel practices of other governments and private sector employers. One committee is a senior level steering committee; the other, a working committee of travel and financial experts. Public Works and Government Services Canada are active participants on both committees.

Proposals for policy changes will be discussed with Public Service unions in the National Joint Council during the triennial review of the Travel Directive beginning in the fall of 1995. It will be the aim of the Secretariat to simplify the Directive and maximize savings over the full travel cycle.

Information system improvements and other technological applications, such as a Travel Expert System and ATM access using the Government Travel Card, are being pursued by the Treasury Board Secretariat with Public Works and Government Services Canada and departments.

Response of Public Works and Government Services: In anticipation of the Treasury Board's 1996 triennial review of travel, a departmental Travel Working Committee and separate Assistant Deputy Ministers steering committee, including PWGSC, have been struck. Their focus is on reducing the costs of travel and travel administration. The steering committee's mandate is to provide strategic direction in terms of policy development and the administration of travel, including overseas travel. The objectives of this committee are: to identify means to reduce administrative costs related to travel; to find ways to make travel less expensive; to recommend changes to the Travel Directive to improve efficiency and reduce costs; and to identify data and support necessary for more effective management of travel by the traveller, the manager, within departmental responsibility centres, at the departmental level and across government.

A PWGSC 1994 periodic on-line fares audit indicated that the government travel contractor achieved an excellent performance in offering the lowest applicable fares. In February/March 1995, a fares audit was conducted by a leading airfare audit company involving all departments located in the National Capital Region plus Agriculture Canada in Vancouver B.C. Other similar on-line fare audits will follow during 1995 and will include regional offices as well.

The introduction of Rider's new ReportLink Plus system in the Department, during the next few months, should assist managers in developing reports specific to their needs, thus alleviating manual review of large reports.

Response of the Department of National Defence: We agree with the general audit observation that the cost of travel administration in government can be reduced by automating and streamlining procedures. Our most recent cost saving measures are as follows:

• the development and trial of a claims automation system;
• the introduction of statistical sampling techniques to reduce the number of claims requiring full audit;
• the implementation of a government-wide project to expand the use of the enRoute travel card to obtain advances through the automated teller machine (ATM), which will reduce and simplify the travel process and save interest charges; and
• DND, in conjunction with enRoute, is currently reviewing systems and databases in order to improve the quality of data being exchanged; this exercise should result in a streamlined and less labour-intensive billing, verification and payment process.

Audit Team

Brian Brisson Louis Patry
Rudy Kamel Alain Roussel
Jacques Leduc Amjad Saeed
Rick Lewis Tony Shaw
Horst Loy Asif Siddiqui
Jaak Vankar

For further information, please contact Trevor Shaw, the responsible auditor.