FAA Financial Management

GAO has included the Federal Aviation Administration (FAA) on its 1999 list of government programs at high risk for waste, fraud, abuse, and mismanagement. Long-standing accounting and financial reporting weaknesses have undermined FAA's ability to manage its operations and have limited the reliability of financial information sent to Congress. These weaknesses include an inability to determine the accuracy of certain amounts reported in FAA's financial statements for fiscal year 1998, including nearly $12 billion in major assets and $9 billion in program costs. This report assesses FAA's property, plant, and equipment and inventory asset accountability problems, which were major reasons for including FAA financial management on GAO's high-risk list. GAO discusses (1) the key issues FAA must resolve to achieve accountability over its property, plant, and equipment inventory and (2) whether FAA is taking appropriate actions to resolve these issues promptly.

GAO noted that: (1) FAA's lack of accountability for PP&E and inventory generally stems from a historical lack of attention to basic recordkeeping, the continuing use of outdated systems that were not designed for financial management, and poor systems of internal controls to prevent and detect errors in accounting for these assets; (2) in order to address these issues for PP&E, FAA needs to determine what assets it has and then reconstruct its records to establish a historical cost baseline for those assets; (3) next it needs to establish adequate systems and controls to account for the assets on an ongoing basis; (4) with regard to inventory, FAA has made improvements in its Logistics Center inventory accounting, but still needs to strengthen its procedures and controls; (5) FAA has taken several actions that are likely to lead to or already have resulted in improved accountability; (6) during fiscal year (FY) 1999, FAA undertook an extensive effort to identify and record the baseline cost of unrecorded PP&E assets and to adjust its detailed records; (7) in FY 1999, FAA began to comprehensively address its systems needs, however, it does not expect full implementation of these new systems until 2001; (8) without systems capable of maintaining PP&E accountability on an ongoing basis, accounting for the acquisition of these assets will continue to require costly, time-consuming manual processes; (9) because these manual processes are inherently prone to error, strong internal controls are needed to ensure accurate accounting; (10) the accuracy of FAA's reported PP&E assets will remain uncertain until FAA establishes baseline costs for previously acquired PP&E and establishes effective systems and controls to properly account for ongoing PP&E activity; (11) as of September 30, 1997, FAA had completed a comprehensive physical inventory of its Logistics Center's operating materials and supplies, and established a baseline of the inventory quantities; (12) in addition, as of September 30, 1998, GAO had assessed the system used to track Logistics Center inventory quantities on an ongoing basis and determined that it was generally reliable; (13) an accurate baseline of FAA's field spares inventory has not been established through a comprehensive physical count that has been verified by independent audit testing; and (14) until an accurate inventory of field spares is taken and verified and inventory accountability procedures and controls are implemented, the reliability of FAA's inventory field spares quantities will be uncertain.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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