Financial Management

Federal Aviation Administration Lacked Accountability for Major Assets Gao ID: AIMD-98-62 February 18, 1998

This report analyzes the Department of Transportation's Inspector General's audit report on the Federal Aviation Administration's (FAA) statement of financial position, which discusses FAA's assets and liabilities. Because financial statements provide accountability for the expenditure of appropriated funds, this analysis is important to understanding the reliability of reported financial information and the possible consequences of unreliable information. GAO considers the possible program and budgetary implications of questions raised about financial statement data deficiencies cited in the audit report.

GAO noted that: (1) the deficiencies concerning operating materials and supplies and property and equipment cited by the IG impair FAA's ability to efficiently and effectively manage programs that use these assets and expose the agency to waste, fraud, and abuse; (2) in addition, while not a specific focus of the IG report, GAO and others have identified the lack of a reliable cost accounting system as a weakness that prevents FAA from reliably determining costs; (3) the lack of cost accounting information impairs FAA's ability to make effective decisions about resource needs, to adequately control major projects such as the air traffic control (ATC) modernization program, and to identify and avoid waste; (4) for example, without good cost information FAA cannot reliably measure the ATC modernization program's actual cost performance against established baselines, and cannot reliably use information relating to actual cost experiences to improve future cost estimating efforts; (5) the lack of cost accounting information also limits the ability to meaningfully evaluate performance measures in terms of efficiency and cost-effectiveness; (6) the lack of reliable cost information also limits FAA's ability to meaningfully evaluate performance measures in terms of efficiency and cost-effectiveness; (7) overall, the lack of accountability over physical assets means that FAA and Congress may not have accurate financial management information to help make informed decisions about future funding; (8) the lack of accountability is of particular concern in situations such as FAA's where billions of dollars of assets are being acquired in connection with the ATC modernization program; (9) FAA advised GAO that since the IG report was issued on March 27, 1997, it has made significant progress and expended significant resources toward correcting the problems reported by the IG; (10) according to FAA, it has taken or plans corrective actions in three principal areas: (a) operating materials and supplies; (b) property and equipment; and (c) cost systems; (11) FAA informed GAO that it has counted a major portion of operating materials and supplies and property, identified excess items, adjusted its records, and created a Cost Accounting Division; and (12) GAO has not assessed the current status or sufficiency of these actions.

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