Financial Management
Audit of the Centennial of Flight Commission for Fiscal Year 2002 Gao ID: GAO-03-888R July 31, 2003The Centennial of Flight Commission (Commission) was created on November 13, 1998, by the Centennial of Flight Commemoration Act (Public Law 105-389, as amended by Public Law 106-68). The purpose of the Commission is to commemorate the 100th anniversary of the Wright Brothers' flight at Kitty Hawk, North Carolina, on December 17, 1903. The Commission is to provide recommendations and advice to the President, the Congress, and federal agencies on the most effective ways to encourage and promote national and international participation and sponsorships in commemoration of the centennial of powered flight. We are required by the act to audit the financial transactions of the Commission. This report presents the results of our audit of the Commission's fiscal year 2002 financial transactions, with cumulative information since the Commission's inception. We previously reported the results of our audits on Commission financial transactions for fiscal years 1999 and 2000, and 2001.
We found that all 114 of the Commission's recorded obligations and expenditures during fiscal year 2002 were supported by documentation that was approved by management. In addition, the Commission recorded the receipt of one payment under a licensing agreement for use of the logo of the Centennial of Flight Commission. The Commission recorded no other receipts for user fees, cash donations, or in-kind donations for fiscal year 2002. When comparing Commission transactions recorded by the Federal Aviation Administration, and the National Aeronautics and Space Administration (NASA), which provide administrative support to the Commission, we found a minor error of $937 by NASA in underrecording Commission travel expenses. We also identified an internal control weakness over licensing agreements by the Commission in not monitoring the timely receipt of fees in accordance with the agreements. This resulted in the Commission receiving no minimum quarterly licensing fees for the quarters June 30, 2002, and September 30, 2002, as of May 30, 2003.
RecommendationsOur 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.
Director: Team: Phone:GAO-03-888R, Financial Management: Audit of the Centennial of Flight Commission for Fiscal Year 2002
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July 31, 2003:
The Honorable John McCain:
Chairman:
The Honorable Ernest F. Hollings:
Ranking Minority Member:
Committee on Commerce, Science, and Transportation:
United States Senate:
The Honorable Don Young:
Chairman:
The Honorable James L. Oberstar:
Ranking Minority Member:
Committee on Transportation and Infrastructure:
House of Representatives:
Subject: Financial Management: Audit of the Centennial of Flight
Commission for Fiscal Year 2002:
The Centennial of Flight Commission (Commission) was created on
November 13, 1998, by the Centennial of Flight Commemoration Act
(Public Law 105-389, as amended by Public Law 106-68). The purpose of
the Commission is to commemorate the 100th anniversary of the Wright
Brothers' flight at Kitty Hawk, North Carolina, on December 17, 1903.
The Commission is to provide recommendations and advice to the
President, the Congress, and federal agencies on the most effective
ways to encourage and promote national and international participation
and sponsorships in commemoration of the centennial of powered flight.
We are required by the act to audit the financial transactions of the
Commission. This report presents the results of our audit of the
Commission's fiscal year 2002 financial transactions, with cumulative
information since the Commission's inception. We previously reported
the results of our audits on Commission financial transactions for
fiscal years 1999 and 2000,[Footnote 1] and 2001.[Footnote 2]
The Centennial of Flight Commemoration Act created the Commission and
authorized appropriations to the Commission in specific
amounts[Footnote 3] for fiscal years 1999 through 2004 (Public Law No.
105-389, 112 Stat. 3486, 3494). For fiscal years 1999 through 2001, the
Congress provided in the annual appropriation for the Federal Aviation
Administration (FAA) operations that either a specific amount or a
minimum specified amount should be for the Commission. During our
review of the Commission's fiscal year 2002 transactions, we noticed
that unlike the 3 prior years, FAA's fiscal year 2002 appropriation did
not explicitly provide that any part of FAA's appropriation was for the
Commission. Nevertheless, FAA allotted $900,000 in fiscal year 2002
from its operations account to the Commission. In a separate letter
dated July 10, 2003, we asked the FAA's Chief Counsel about the basis
for FAA's use of its lump sum operations appropriation to fund the
Commission for fiscal year 2002. After considering the Chief Counsel's
views, we will separately report any matter that should be brought to
the Congress' attention.
Results in Brief:
We found that all 114 of the Commission's recorded obligations and
expenditures during fiscal year 2002 were supported by documentation
that was approved by management. In addition, the Commission recorded
the receipt of one payment under a licensing agreement for use of the
logo of the Centennial of Flight Commission. The Commission recorded no
other receipts for user fees, cash donations, or in-kind donations for
fiscal year 2002.
When comparing Commission transactions recorded by FAA, and the
National Aeronautics and Space Administration (NASA), which provide
administrative support to the Commission, we found a minor error of
$937 by NASA in underrecording Commission travel expenses. We also
identified an internal control weakness over licensing agreements by
the Commission in not monitoring the timely receipt of fees in
accordance with the agreements. This resulted in the Commission
receiving no minimum quarterly licensing fees for the quarters June 30,
2002, and September 30, 2002, as of May 30, 2003.
We are making recommendations to the Commission to correct the travel
expense error, strengthen internal controls by monitoring licensing
agreements, and collect licensing fees that are due. The Commission
agreed with our recommendations.
Background:
The Commission was created to provide recommendations and advice to the
President, the Congress, and federal agencies on the most effective
ways to:
(1) encourage and promote national and international participation and
sponsorship by companies, governments, individuals, and organizations
to commemorate the centennial of powered flight;
(2) plan and develop, in coordination with the First Flight Centennial
Commission, the First Flight Centennial Foundation of North Carolina,
and the 2003 Committee of Ohio, programs and activities that are
appropriate to commemorate the 100th anniversary of powered flight;
(3) maintain, publish, and distribute a calendar or register of
national and international programs and projects concerning the dates,
events, and places of historical and commemorative significance
regarding aviation history in general and the centennial of powered
flight in particular;
(4) provide national coordination for celebrations to take place
throughout the United States during the centennial year;
(5) assist in conducting educational, civic, and commemorative
activities relating to the centennial of powered flight throughout the
United States;
(6) encourage the publication of popular and scholarly works on the
history of aviation or the centennial of powered flight; and:
(7) advise the United States with regard to gaining support for and
facilitating international recognition of the importance of aviation
history and attend international meetings regarding such activities.
For fiscal year 2002, FAA made funds available to the Commission by
allotment. Only the administrators of NASA or FAA, or employees
designated to act on their behalf, are authorized by the act to procure
supplies, services, and property, and to make or enter into leases and
other legal agreements on behalf of the Commission. FAA and NASA give
the Commission personnel support and other services without charge. The
Commission reimburses NASA for office space, printing, supplies, and
equipment. NASA and FAA provide accounting services to the Commission,
and FAA provided all procurement services on behalf of the Commission
for fiscal year 2002. The Commission recognizes expenditures when paid.
Scope and Methodology:
We examined all of the Commission's financial transactions
(obligations, expenditures, and receipts) recorded during fiscal year
2002 for proper supporting documentation and management approval.
Because we limited our examination to those transactions recorded for
the Commission by FAA and NASA, the risk exists that there could be
unrecorded transactions not included in our examination. We traced the
recorded transactions to supporting documentation, including
contracts, invoices, credit card receipts, travel vouchers, and copies
of checks. FAA maintains all contracts and supporting documentation for
the Commission's transactions. FAA and NASA processed all of the
Commission's 114 obligation and expenditure transactions and one
receipt transaction recorded during fiscal year 2002.
We also obtained an understanding of the accounting procedures and
related internal controls of the Commission, financial accounting
services provided by the FAA operations office, and other services
provided by NASA. We also performed procedures to determine whether
Commission management had approved the transactions.
We performed our work in Washington, D.C., from April through June 2003
in accordance with U.S. generally accepted government auditing
standards for performance audits. We requested comments on a draft of
this report from the Executive Director of the Centennial of Flight
Commission and received a written response from the Commission, which
incorporated views from FAA and NASA. Those comments are summarized in
a later section and are included as an enclosure to this report.
Minor Errors In Fiscal Year 2001 Commission Records Were Corrected:
As we previously reported,[Footnote 4] the Commission's financial
records for fiscal year 2001 contained some minor errors that resulted
in Commission travel expenditures being understated by a net amount of
$957. We also found that a NASA interagency agreement totaling $122,387
was overpaid by $700 by FAA. In that report we recommended, and the
Commission agreed to (1) correct the understated travel expenditures,
and (2) direct FAA to obtain a refund for the $700 that was overpaid to
NASA. During fiscal year 2002, the $957 of travel expenses were
recorded and a refund of $750 was obtained from NASA.
These errors were caused by the lack of effective reconciliation of
Commission transactions by the Commission, NASA, and FAA to verify that
Commission accounts were complete and accurate. To improve this
situation, we also recommended that the Commission strengthen internal
control by reconciling its record of approved obligations and
expenditures monthly with FAA accounting records maintained on behalf
of the Commission.[Footnote 5] However, due to the small number of
transactions, we agreed with the Commission and FAA that periodic
instead of monthly reconciliation would be sufficient and this was
substantially implemented by September 30, 2002.
Fiscal Year 2002 Audit of Commission Financial Transactions:
We found that all 114 of the Commission's recorded obligations and
expenditures during fiscal year 2002 were supported by documentation
that was approved by management. In addition, the Commission recorded
the receipt of one payment under a licensing agreement for the use of
the logo of the Centennial of Flight Commission. The Commission
recorded no other receipts for user fees, cash donations, or in-kind
donations for fiscal year 2002.
During fiscal year 2002, the Commission expended $89,694 to pay fiscal
year 2000 obligations and $617,247 to pay fiscal year 2001 obligations.
For fiscal year 2002, the Commission received from FAA an allotment of
$900,000 from its operations appropriation and received $1,000 in fees
under a licensing agreement for the Commission's logo. The Commission's
obligations for fiscal year 2002 totaled $899,198 and consisted of:
$380,000 for services related to the Commission's Outreach Plan;
$196,000 for a modification of a fiscal year 2000 contract for Web site
maintenance;
$146,174 for NASA interagency reimbursable services;
$120,000 for online presentations of the Wright brothers' wind tunnel,
1899 and 1901 gliders, and 1903 flyer;
$40,000 for a modification of a fiscal year 2000 contract to develop
timeline and essay content for the Web site;
$14,950 for videos of the 1901 wind tunnel, the 1902 glider, the 1903
flyer, and the 1905 first practical airplane; and:
$2,074 for travel and miscellaneous expenses.
As of September 30, 2002, $479,153 had been expended against the fiscal
year 2002 obligations.
The schedule in table 1 below presents the Commission's appropriations,
receipts, obligations, and expenditures (cash outlays) for fiscal years
1999 through 2002.
Table 1: Centennial of Flight Commission Schedule of Appropriations,
Receipts, Obligations, and Expenditures for Fiscal Years 1999 through
2002 as of September 30, 2002:
[See PDF for image]
Source: Centennial of Flight Commission accounting data.D:
[A] Less rescission of $1,650.
[B] Licensing fee for Commission logo.
[C] These amounts are not available for new obligations but may be used
to adjust existing obligations for up to 5 years when the account is
closed and any remaining balance is cancelled.
[D] Received from the Commission but maintained by FAA on behalf of the
Commission, as adjusted for errors detected during our audit.
[End of table]
Fiscal Year 2002 Audit Findings:
When comparing Commission transactions recorded by FAA and NASA, who
provide administrative support to the Commission, we found a minor
error of $937 by NASA in underrecording Commission travel expenses.
This amount was incorrectly coded to be withdrawn from direct funds
instead of reimbursable funds and NASA is in the process of correcting
this error.
We also identified an internal control weakness over licensing
agreements by the Commission in not monitoring the timely receipt of
fees in accordance with the agreements. This was because fiscal year
2002 was the first year of the agreements, the amount of fees involved
is small, and Commission oversight was lacking. One agreement stated
that a minimum of $500 was to be received by the Commission each
quarter beginning with the June 30, 2002 quarter. We found that the
Commission had received no minimum payments for the June 30, 2002, and
September 30, 2002, quarters as of May 30, 2003. Based upon this
information, the Commission corrected this oversight by contacting the
licensee and is currently in the process of collecting payments due
since the June 30, 2002, quarter.
Recommendations:
We recommend that the Executive Director of the Commission:
Direct NASA to correctly record the Commission travel expenditure of
$937 that was improperly coded and paid out of NASA's direct funds.
Strengthen internal controls over licensing agreements by monitoring
the timely receipt of fees in accordance with the agreements.
Collect licensing fees due the Commission since the beginning of the
June 30, 2002, quarter, in accordance with licensing agreements.
Agency Comments:
The Commission's Executive Director agreed with our recommendations and
stated that the Commission has (1) requested that NASA correctly record
the travel expenditure, (2) developed a spreadsheet to monitor the
timely receipt of licensing fees, and (3) collected licensing fees due
it for the quarters ended June 30 and September 30, 2002. The
Commission's response, which incorporated FAA and NASA views, is
presented as an enclosure to this report.
We are sending copies of this report to the Chairman of the Centennial
of Flight Commission and other interested parties. This report will
also be available on our home page at http://www.gao.gov.
If you or your staffs have any questions, please contact me at (202)
512-6906, or by
e-mail at williamsm1@gao.gov or Roger R. Stoltz, Assistant Director, at
(202) 512-9408, or by e-mail at stoltzr@gao.gov. A key contributor to
this report was Deborah A. Silk.
McCoy Williams:
Director:
Financial Management and Assurance:
Signed by McCoy Williams:
Enclosure:
Enclosure:
Comments from the Centennial of Flight Commission:
Centennial of Flight Commission
300 F Street, SW:
Washington DC 20546-0061
TEL 202 FLT1903:
1903-2003
www.centennialofflight.gov:
July 25, 2003:
Mr. McCoy Williams Director:
Financial Management and Assurance U.S. General Accounting Office
Washington, DC 20548:
Dear Mr. Williams:
We appreciate the opportunity to comment on the draft report containing
the results of your review on the financial transactions of the U.S.
Centennial of Flight Commission (Commission) for fiscal year 2002.
Copies of the draft report were provided to the Federal Aviation
Administration (FAA) and the National Aeronautics and Space
Administration (NASA), and their comments have been incorporated into
this response. The draft report makes three recommendations.
The first recommendation states:
Direct NASA to correctly record the Commission travel expenditure of
$937.00 that was improperly coded and paid out ofNASA's direct funds.
We concur with this recommendation and have requested that NASA
correctly record the $937.00.
The second recommendation states:
Strengthen internal controls over licensing agreements by monitoring
the timely receipt of fees in accordance with the agreements.
We concur with this recommendation. A spreadsheet has been developed
that lists each licensing agreement, date signed, terms of the license,
payments made and the product that is licensed. This spreadsheet will
be kept up to date and will be checked regularly to ensure the terms of
the license are being met and payments made in a timely manner.
The third recommendation states:
Collect licensing fees due the Commission since the beginning of the
June 30, 2002 quarter, in accordance with licensing agreements.
We concur with this recommendation. A check for $2,000.00 dated May 29,
2003, was received from our licensee C. Forbes, Inc. on June 2, 2003.
Sincerely,
Sharon C. Foster
Executive Director:
Signed by Sharon C. Foster:
[End of section]
(195009):
FOOTNOTES
[1] GAO, Financial Management: Audit of the Centennial of Flight
Commission, GAO-02-43R (Washington, D.C.: Oct. 22, 2001).
[2] GAO, Financial Management: Audit of the Centennial of Flight
Commission for FY 2001, GAO-02-730R (Washington, D.C.: June 21, 2002).
[3] The Commemoration Act authorized $250,000 for fiscal year 1999;
$600,000 for fiscal year 2000; $750,000 for fiscal year 2001; $900,000
for both fiscal years 2002 and 2003; and $600,000 for fiscal year 2004.
[4] GAO-02-43R
[5] GAO-02-730R
