L L L. Lis i - i - i i A LLL i s

C014F1'I1OLLtEr OGNCrNAL OF THiF ItJITCE SYATCS 136 71, WASIIIGVlON. D.C. Z4sij

bP197798 ., ac ,18CICD 0-156 Search 5, 1980

The Honorable William H. IlarshaRanking Minority Member, Corimittee .t

on Public Works and TransportationHlouse of Representatives

Dear Hr. llarsha;

This is to advise you of out concerns over certainrequirements provided for in the proposed Airport and Air-way System Development Act (Senate bill 1648) and to requestyour support in any actions you or %he Committee may taketo amend the Airport and Airway Development Act of 1970.

iJDEPENDENT AUDIT O GRANTS

Sybsection 20(c) of the Senate bilt would'ccontinuethe requirements now prcvided for in subsection 26(c) ofthe Airport and Airway Development Act of 1970 (49 U.S.C.1726(c)) wbich requires (1) grant recipieiits to, file withthe Comptroller General copies of any independent auditreports relating to the use of grant proceeds, and (2)the Comptrollet' General to report to Congress on the con-tents of these audit reports.

Our experience to date with subsection 26(c)' of theAirport and Airway Development Act leads us to'believethat this subsection should be repealed «and th",.efore weare opposed to subsection 20(c) of the Senate bill,. Wehave yet to receive any independent audit reportvion theuse of grant proceeds. lowever, this is not surpsisingas we are! not ai'qare of any specific requiremrnnts thatrequire grant recipients to obtain audits of the n',\turoreferredto in su.jbsection 26(c) of the act. Iri\add'ttion,the Federal Aviation Administration (FAM%) has adviseVd usthat neither its records nor its audit efforts hbve'dis-closcclkthat grant\rocipient-s have arranged for independentaudits of grant proceeds. Grant recipients really ha'e noneed for independont audits of this nature as FAA or itsdenignatedl contractors audit the disposition of grantproceeds..

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B-i9779shCUD 0-156

REPORTfIG CN TIHE AVAILABILITYOFFUNDS PFEOI 1 NON-FEDERAL. SOURCES

Sutsection 20(e)(1) of the Senate bill would requiregrant recipients at commercial service airports located inair traffic hubs to document to the Comptroller Generalthat adequate funding for airport development projects wasnot available from sources other than Federal Assistance.This subsection would empower the Comptroller General toprescribe the manner and'forrn of such documentation, butas a minimum, this documentation must contain a statemenetof assets, liabilities, capital and surplus or deficit;y astatement of surplus or deficit analysis; and a statementof sourcits and application of funds. Also each year, theComptroller General would be required to provPie a copy ofsuch docuimentation to the Congress along with a report con-taining Any comments, information, or recomrnmendation: onthe operitions and financial condition of grant rccipienta.Subsection 20(e)(2) would require the Comptroller B~eneralto'develp a standard accounting system for grant recipientswithin 160 days of the bill's enactment to ensure the com-patibility of the documentation required by subsection20(e)(1). These provisions were apparently added to thebill to aid the Congreis in determining whether additionalairports, similar to those identified in subsection 23(a)and (b), should be defederalized--that is made ineligiblefor Federal airport development grants--when the proposedact expires on September 30, 1985.

Subsection 20(e)(1.) and (2) if enacted would have asubstantial impact on grant recipients and our Office.First, it appears that a large number of airports would berequired to provide documentation, For example, there areabout 550:air carrier airports, excluding those to be de-fedoreilinid, and over 130 commuter service airports. Manyof them wjiuld be eligible for grants each year under thedistribution formulas provided for in subsection 8(b) of thebill because of the number of passengers enplaned at theseairports and therefore subject each year to the documenta-tion reqtirriments that would be imposed by subsection20(e)(1). Theorepetitive nature of this documentation overthe 5-year life of the proposed act alone could be consideredexcessive/redundant and an unnecessary burden to grantrecipients.

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We believn that nmany of the grant recipientv willbe able to meet the mirtimun documentation requirementeset forth in subsection 20(e)(l) without much difficulty.lost grant recipientse are under the jurisdiction of amunicipal (State, county or local) goverhment and there-fore they generally prepare statements on their airportoperations compatible to the minimum documentation re-quirements to satisfy the governing jurisdiction's needs.

Regarding the establishment of accounting standards tomeet there minimum documentation requirements, we understandthat the American Institute of Certified Public Accountants(AICPA) is currently developing for airports detailed re-porting requirements gor assets, liabilities and fund bal-'ancesl operations and changes in financial position. Apronouncement from the AICPA is due to be issued in the nearfuture. Until this pronouncement is issued and the detailsof the reporting requixements known, our OffiQe would prefernot to get involved in' the development of standards in orderto avoid needless duplication. /Also in the past, this Officehat not developed reporting req'uirementa (accounting stand-ards) for general purpose financ'Al statementn fox organi-zations is the private'sector. This responsibility has beenthe provincc of the Financial Accounting Standards Board, theAICPA, the national Council of Governmental Accounting, orother bodies.

Besides the minimum documentation requirementsiwebelieve additional information will be needed 'to docunmorstthat adequate. funding was not available froin othcr sources.This information would include, but would not necessarilybe limited to, the following: borrowing authority of thegrant recipient, including any limits, and the status ofits current borrowings; thb recipient's authority' and ef-forts to obtain funds'from the local government responsiblefor the.airport; and extensive and detailed information notavailable from 'the financial statements to evaluate \whetherthe airport was operated economically and efficifintfy tomaximize'airport revenues and minimize costs. Certainlythose additional documertation requirements will be timeconsuming and contly to grant recipients.

Substantial additional staff resources would beneeded by our Offica to carry out the requirements G."'; sub-section 20(e)(l) considering the number of grant recipientsthat could be involved and the amount of documentation

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required. Existing resources' could not be reallocatedwithout leaving important review areas uncovered, thusimpairing our ability to effectively serve the Congress.

In the past, when specific information needs haveexisted beyond that available from general purpose finan-cial statements, usually the Federal grantor agency andnot our Office would delinerjte what special purpose re-ports or ducumentation was needed from grant recipients.In this way, we could maintain our role as an independentaudit agency and review an needed (1) the adequacy andaccuracy of any information contained in special reportssubmitted by grant recipients or (2) audit reports pre-pared by others on the grant recipient's operations.Further this type of role is consistent with the size of,and resources available to, this Office.

Although FAA could be charger with specifying whatdocumentation should be required above the minimums speci-fied in subsection 20(e)(1), an FAA study to identifyadditional airports for dofederalization could be a moreeffective and efficient meant' to accomplish the intent ofsubsection 20(c)(l) and (2). If such a study were under-taken, we would of course be available to review FAA'sstudy efforts.

STUDIES ON DEPEDERALIZED AIRPORTS

Section 26 of the Senate bill would require the Sac-retary.of Transportation and the Comptroller General toconduct separate studies to determine whether airports madeineligible for Federal assistance tinder subsections 23(a) or23(b) of the bill could through renegotiation of rates(landing fees) with air carriers or other means make up forthe lost Federal assistance. These studies also would con-sider the advisability of repealing section 1113 of theFederal Aviation Act of 1958 (49 U.s.C. 1513) to permitsuch airports to impose a tax, fee, or head charge.

The requirement for separate studis by both the Sec-retary and the Comptroller General is a duplication ofeffort and does not seem to be the best use of Federalresources. Further, concurrent studies bry this Office andthe Secretary of Transportation would result in constantcompetition in obtaining needed information and records.

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This competition would have an adverse impact on thoserequired to provide needed information and records andmake it difficult to complete the studies within the 9-month time period provided by the bill. Because of theduplication and its adverse impacts, we believe we couldbetter assist the Congress by monitoring the scope,methodology, and implementation of the Secretary's study.As you are aware, we are always willing to work closelywith the Congress by responding to specific requests.

The studies provided in section 26 are intended toprovide a basis for seeking legislative relief should thestudies show that any defederalized airport was havingdifficulty making up the lost Federal assistance. Webelieve an alternative approach exists to address thispotential problem. For example, the Secretary of Trans-portation could be provided with standby authority toeither grant defederalized airports authority to imposea tax, fee, or head charge or reinstate an airport'seligibility for Fuderal assistance should' the Secretaryfind that a defederalized airport was unable to re'placethe Federal funds. This approach would not only eliminatethe need for the studies proposed in the Senate bill, aseach airport would be considered on a case by case basis,but it would also eliminate the need for the Congress to'enact legislation later to provide needed relief. It alsowould be more consistent with our past'''tecommendation thatCongress establish priorities and use their to distributeFederal airport development grants to implement the Nation-al Airport System Plan, considering among other things thefinancial resources of airports. (See our report "Develop-ing a National Airport System: Additional CongressionalGuidance Needed," CED-79-17, Apr. 17, 1979.)

We are confident you will find our concerns overthe above requirements to be reasonable and trust thatyou will support us in any actions you or the Committeemay take. H

We are sending similar letters to the Chairman ofthe full committee and the Chairman and the Ranking Minor-ity Member of the Subcommittee on Aviation. Also we aresending copies of this letter to the Chairman and the

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Ranking Minority Member ot the Senate Committee on Commerce,Science and Transportation; the Secretary of Transportation;and the Administrator, Federal Aviation Administration.

Sincerely yours,

Comptroller Generalof the United States

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cO?.ITrrToLL;rt GENERAL OF TIE UNITED STATESWA$S1I$IlTOtd. O.C. nUB

13.'197798 March 5, 1980CED 0-156

The Honorable Glenn 1*1. AndtrsonChairman, Subcomnittee on Aviation boreCommittee on PublI Wnorks andTransportation told I

House of Representatives

Dear Mr. Chairnan:

This is to advise you of our concerns over certainrequirernents provided for in the proposed Airport and Air-way System Development Act (Senate bill 1648) and to requestyour support in any actions you or the Subcommittee may taketo amend the Airport and Airway Development Act of 1970.

INDEPENDENT AUDIT OF GRANTS

Subsection 20('c) of the Senate bill wodld continuethe r-equirements now provided for in subsection 26(c) ofthe Airport and Airway Development Act of 1970 (49 U.s.C..1726(c)) which requires (1) grant recipients to file withthe Comptroller (eneral copies of any independent auditreports relating'to the use of grant proceeds, and (2),:he Comptroller General to report to Congrens on the con-tents of these audit reports.

Our experience to Qate with subsection 26(c) of theAirport and Airway Development Act leads us to believethat this subsection should be repealed and therefore weate opposed to subsection 20cc) of the Senate bill. Wlehave yet to receive any independent audit reports on theuse of grant proceeds. However, this is not surprisingas we are not aware~of any specific recquiromnnts thatrequire grant recipients to obtain audits of the naturereferred to in subsection 26(c) of the act. 4It'addition,the Federal Aviation Administration (FAA) has adVised usthat no/ither its records nor its audit efforts have dis-closed' that grant recipients have arranged for independentaudits of grant proceeds'. Grant redipients really have noneed for independent audits of this nature as FAA or its i-»designated contractors audit the disposition of grant ,proceeds.

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B-197798CUD 0-156

REPORTING ON THlE AVAILABILITY OFFUNDS FROM NlONl-FEDERIAL SOURCES

Subsection 20(e)(1) of the Senate bill would requiregrant recipients at commercial service airports located inair traffic hubs to document to the Comptroller Generalthat adequate funding for airport development projects wasnot available from sources other than Federal assistance.This subsection would empower the Comptroller General toprescribe tJhe manner and form of such documentation, butas a minImt;', this documentation must contain a statementof assets, "iabilities, capital and surplus or deficit; astatement of surplus or deficit analysis and a statementof sources and application of funds. Also each year, theComptroller General would be required to provide a copy ofsuch documentation to the Congress along with a report con-taining any comments, information, or recommendations on'the operations and financial condition of grant recipient.Subsection 20(e)(2) would require the.Comptroller Generalto develop a standard accounting system for grant recipientswithin 180 days of the bill's enactment to ensure the com-patibility of the documentation required bysaubsection20(e)(1). These provisions were apparently added to thebill to aid the Congress in determining whether additionalairports, similar to those identified in subsection 23(a)and.(b), should be cefederal ized--that is made ineligiblefor Federal airport development grants--wher the proposed.act expires on Septcnrber 30, 1985.

Subsection 20(o)(1) an'd (2) if enacted would have asubstantial impact on grant recipients and our Office.First, it appears that a large number of airports would berequired to provide documentation. For example, there areabout 550 air carrier airports, excluding those to be do-federalized, and over 130 corc.rnuter service airports. Manyof them would be eligible for gLants each year under thedistribution formulas' provided 'for' in subsection 8(h) of thebill because of the number of passengers onplaned at thoseairports and therefore subject each year to the docu6nenta-tion requirementi that would be imposed by subsection20(e)(1). The repetitive nature of this documentation overthe 5-year life of the proposed act alone could be consideredexcessive/redundant and an unnecessary burden to grantrecipients.

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lie believe that many of the grant recipients i-Illbe able to meet the minimum documentation requirementsact forth in subsection 20(c)(1) without much diffi'ulty.Mont grant, recipients are under the jurisdiction of amunicipal (State, county or local) government and there-fore they generally prepare statements on their airportoperations compatible to the minimum documental ion re-quiremonts to satisfy the governing jurisdiction's needs, .A

Regarding the establishment of accounting standards tomeet these minimum documentation requirements, we understandthat the American Institute of Certified Public Accountants(AICPA) is currently developing for airpoics detailed re-porting requirements for assets,.jiabilities and fund bal-'inces; operational and changes in financial position. Apronouncesnent from the AICPA is due to be issued in the nearfuture. Until this pronouncement is issued and the detailsof the reporting' requirements known, our Office would prefernot to get involved in the development of standards in orderto avoid needlesi duplication. Also in tne. past, this Officehas not developer reporting requirements (accounting stand-ards) for general purpose financial statements for organi-zations in the private sector. This responsibility has beenthe province of the Financial Accounting Standardcih Board, theAICPA, the Nlational Council of Governmental Accounting, orother bodies.

.,

Besides the minimum documentation requirements, webelieve additional information will be needed to documentthat adequate funding was not available from other. sou.ces.This information would include, but.-.ould not necessarilybe limited to, the followings borrowing authority of thegrant recipient, including any limits, and the status ofits current borrowings; the recipient's authority and ef-forts to obtain funds from the local government responsitlefor the airport; and extensive and detailed information notavailable from the financial statements to evaluate whetherthe airport was operated economica4iji and efficiently tomaximize airport revenues and minimize costs. Certainlythese additional documentation requirements will be timeconsuming and costly to grant recipients.

Substantial additional staff resources would beneeded by our"Office to carry out the requirements of sub-section 20(e)(1) considering the number of grant recipientsthat could be involved and the amount of documentation

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required, Existing resources could not be reallocatedwithout leaving important review areas uncovered, thusimpairing our ability to effectively serve the Congress.

In the pant, when specific information needs haveexisted beyond that available from general purpose finan-cial statements, usually the Federal grantor agency andnot our Office would delineate what special purpose re-ports or documentation wris needed from grant recipients.In this way, we could maintain our role as an independentaudit agency and review as needed (1) the adequacy andaccuracy of any information contained in special reportssubmitted by grant recipients or (2) audit reports pre-pared by others on the grant recipient's operations.Further this type of role is consistent with the size of,and resources available to, this OY"fice.

Although FAA could be charged with specifying whatdocumentrtion should be required above the minimums speci-fied in subsection 20(c)(1), an FAA study to identifyadditional airports for defederalization could be a moreeffective and efficient means to accomplish the intent ofsubsection 20(c)(1) and (2). If iUchl a sLudy tvore under-ta',en, we would of course be available to ruview FAA'sstudy efforts.

STUDIES ON DEPELURALIZED AIRPORTS

Section 26 of the. Cenatn bill would require the Sec-retary of Transportation and the Comptroller Gereral toconduct sepatate studies to determine whetlhtr airports madeineligible for Fedefal assistance under subsections 23(a) or23(b) of the bill,,could through renegotiation of rates'(landing fees)' with air carriers or other meiAns make up forthe lost Federal assistance. These studies also would con-sider the advisability of repealjng section 1113 of theFederal Aviation Act of 1958 (49 U.S.C. 1513) to permitsuch airports to impose a tax, fee, or head charge.

The requirement for separate studies by both the Sac-tetary and the Comptroller General is a duplication ofeffort and does not seem to be the best use of Federdlresources. Further, concurrent studies by this Office andthe Secretary of Transportation would result in constantcompetition in obtaining needed information and Ltzords.

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This competition would havem an adverse impact on thosngrequired,,to provide needed information and records aeVjmake it difficult to complete the studies within the 9-month time period provided by the bill, Because of theduplication and its adverse impacts, we believe we couldbetter assist the Congress by monitoring the.scope,methodology, and implementation of the Sicretaty' s study.As you are aware, we arc always willing to work closelywith the Congress by responding to specific requests.

The 'studies provided in section 26 are intended toprovide n&basis t ',:F seeking legislative relief should thestudies show ' "-any defederalized airport wias havingdiffic'ulty making up the lost Federal assistance, Webelieve an alternative approach oxi.sts to address thispotential problem. For example, the Secretary of Trans-portation could be provided with stapdby &tuthotity toeither grant lefeceralized airports authoritivto imposea tax, fee, or head charge or reinstate an alrport'seligibility for Federal assistance should the Secretaryfind that a defederalized.air'port was unable to replacethe Federal funds. This approach would not only eliminate'the need for the studies propoE'2d in the Senate bill, aseach airport`would'be consaf (ered on a case by case basis,but, it would also eiiinate (/the need for the Congress toenact legislatiop later tol rovide rneeded relief. It alsoworld be more colaxistent with our past recommendation thatCongress establish priorities and use them to' bis&2ibuteFederajairporu development 9ra(ttt to implement the Nation-al Airport System'Plan, consider','ng among other things thefinancial resources of airports. (See our report "Develop-ing a National Airport System:'DAdditional CongressioilalGuidance Needed," CED-79-17, Ajir. 17, 1979.)

WIe are confident vou will 1ind our concerns over lthe above requirements to b9 reasonable and trust fityou will support us in any actions V'you or the Subc ,:,,6ittee may take.

Vie are sending a similar letter; to the Ranking lMirnor-ity Member of your Subcommittee. Also we arp sending copiesof thin letter to the Chairman and the Ranking Minority

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B-1977913.IED 0-156

Member of the Senate Committtee on Commerce, science andTransportation; the Secretary of Transnortation; and theAdministrator, Federal Aviation Adminnistrationt

Sincerely yours,

Comptroller Generalof the United States

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4,§ -'0;!* -4tllO L LCOMOLLr GEMlAL o0, rTI UNITED STATLtIWN51IINOTON. D.C. 205%;

B-197790 March 5, 1980CED 0-156 1g1s h

The Honorable (1. Gone Snyder ttIQI .Ranking Minority Member, Subcommittee

On AviationCommittee on Public Works and

TransportationHouse of Representatives

Dear Mr. Snyder:

This is to advise you of our concerns ovfer certainrequirements provided for in the proposed Airp6rt and Air-way System Development Act (Senate bill 1648) a'nd to requestyour support in any actions you or the Subcommittee tnay taketo amend the Airport and Airway Development Act of 1970.

INDEPENDENT AUDI'T OF GRANTS

Subsection 20(e) of thci Senate bihl would continuethe requirements now provided fotl in stbsection 26(c) ofthe Airport and Airway Development Act of 1970 (49 U.s.C.1726(c)) which requires (1) 6rant recipients to file withthe Comptroller General copies of'Uany independent auditreports relating to the use of grant proceeds, and (21the Comptroller General to rbport to Congress on the con-tents of these audit reports.

Our experience to date with subsection 26(c) of theAirport and Airway Development Ach leads us to believethat this subsection should be tepealed and therefore weare opposed to subsection 20(c) of the Senate bill. Wehave yet to receive any independentl audit reports on theuse of grant proceedtt nowever, this is notisurprising :'as we are not aware of any specifiu req\iremrints thatrequire grant recipients to obtain audits of the naturereferred to in subsection 26(c) of the act. In addition,the PederaAlAviati.on Administration (FAA) ha:6 advised usthat neither its records nor its audit eff4t1s have dis-closed that grant recipients have arranged for independentaudits of grant proceeds. Grant recipients really have noneed for iniependent audits of this nature as FAA or itsdesignated contractors audit the disposition of grantproceeds.

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REPORTING ON THE AVAILABILITV OFFUNDS FROfl 4ON--FEDERAL SOURCES

Subsection 20(e)(1) of the Senate bill would requiregrant recipients'at commercial service airports loc.Ated inair traffic hubs to document to the Comptroller Genibalthat adequate funding for airport development projects wasnot available from sources other than Pederal assistounc.This subsection would empower the Comptroller Cereorati toprescribe the-manner and form of such documentation, butas a minimum, this documentation must contain a statementof assets, liabilities, capital and surplus or deficit; astatement of surplus or deficit analysis; and a statementof sources and application of funds. Also each year, theComptroller General would be required to provide a copy ofsuch documentation to the Congress along with a report con-taining any comments, information, or recommendations onthe operations and financial condition of grant recipients.subsection 20(e)(2) would require the Comptroller Generalto develop a standard accounting system for grant recipientswithin 180 days of the bill's enactment to ensure the com-patibility of the documentation required by subsection20(e)(1). These provisions were apparently added to thebill to aid the Congress in determining whether additionalairports, similar to those identified in subsection 23(a)and (b), should be defederalized--that is made ineligiblefor Federal airport development grants--when the proposedact expires on September 30, 1985.

Subsection 20(e)(l) and (2) if enactted would have asubstantial impact on grant recipients ;And our Office.First, it appears that a large number of airpotts would berequired to provide documentation. For example, there areabout 550 air carrier airports, excluding those to be de-federalized, and over 130 commuter service airports. Manyof them would be eligible for grants each year under thedistribution formulas provided for in subsection 8tb) of Ikhebill because of the number of passengers enplaned at theseairports and therefore subject each year to the documenta-tion requirements that would be imposed by subsection20(e)(1). The repetitive nature of this doc' -ntation overthe 5-year life of the proposed act alone cou 1 be consideredexcessive/redundant and an unnecessary burden to grantrecipients.

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We believe that many of the grant recipients willbe able to meet the minimum documentation requirementsset forth in subsection 20(e)(1) without much difficulty.Mlost grant recipients are under the jurisdiction of amunicipal (State, county or local) government ard the'ie-fore they generally prepare statements on their airportoperations compatible to the minimum documentation re-quirements to satisfy the governing jurisdiction's needs.

Regarding the establishment of accounting standards tomeet these minimum documentation requirements, we understandthat the American Institute of Certiffid Public Accountants(AICPA) is currently developing for airports detailed re--porting requirements for assets, liabilities and fund bal--ances; operations; and changes in financial position. Apronouncement from the AICPA is due to be issued in the nearfuture. Untilithis pronouncement is issued and the detailsof the reporting requirements known, our Office would prefernot to get involved iii the develupment of standards in orderto avoid needless duplication. Also in ths past, this Officehas not developed reporting requirements (accounting stand-ards) for general'purpose financial statements for organi-zations in the private sector. This responsibility has beenthe province of tile Financial Accounting Standards Board, theAICPA, the National Council of Governmental Accounting, orother bodies.

Besides the ninimun documentation requirements, webelieve additional'information will be needed to documentthat adequate funditfg was not available from other sources.This information woUld include, but would not necessarilybe limited to, the following: borrowing authority of thegrant recipient, including any limits, -and the status ofits current borrowings; the recipient's authority and ef-forts to obtain funds from the local government responsiblefor the airport; and extensive and detailed information notavailable from the financial statements to evalbate whetherthe airport was operated economically and efficiently tomaximize airport revenues and minimize costs. Certainlythese additional documentation requirements will be timeconsuming and costly to grant recipients.

Substantial additional staff resources would beneeded by our Office to carry out the requirements of sub-section 20(e)(1) considering the number of grant recipientsthat could be involved and the amount of documentation

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required. Existing resources could not be reallocatedwithout leaving important review areas uncovered, thusimpairing our ability to effectively serve the Congress.

In the past, when specific information needs haveexisted beyond that availtible from general purpose finan-cial statements, usually the\Federal grantor agency andnot our Office would delineate what special purpose re-ports or documentation was neccded from grant recipients.in this way, we could maintain' our role as an independentaudit agency and review as needed (1) the adequacy andaccuracy of any information contained in special reportssubmitted by grant recipients or (2) audit reports pre-pared by others on the grant recipient's operations.Further this type of role is consistent with the size of,and resources available to, this Office,

Although FAA could be charged with specifying whatdocumentation should be required above the minimums speci-fied in subsection 20(e)(1), an FAA study to identifyadditional airports for defederalization could be a moreeffective and efficient means to accomplish the intent ofsubsection 20(e)(1) and (2). If such a study were under-taken, we would of course be available to review FAA'sstudy efforts.

STUDIES ON DEFEDERALIZED AIRPORTS

Section 26 of the Senate bill would require the Sec-retary. of Transportation and the Comptroller General toconduct separate studies to determine whether airports madeineligible for Federal assistance under subsections 23(a) or23(b) of the bill could through renegotiation of rates(landing fees) with air carriers or other means make up forthe lost Federal assistance. These studies also would con-sider the advisability of repealing section 1113 of theFederal Aviation Act of 1958 (49 U.S.CP 1513) to permitsuch airports to impose a tax, fee, or head charge.

The requirement for separate studies by both the Sec-retary and the Comptroller General is a duplication ofeffort and does not seem to be the best use of Federalresources. Further, concurrent studies by this Office andthe Secretary of Transportation would result in constantcompetition in obtaining needed information and records.

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This competition would have an adverse impact on thoserequired to provide needed information and records andmake it difficult to complete the studies within the 9-month time period provided by the bill. Because of theduplication and its adverse impacts, we believe we couldbetter assist the Congress by monitoring the, scope,methodology, and implementation of the Secretary'd study.As you are aware, we are always willing to work closelywith the Congress by responding to specific requests.

The studies provided in-section 26 are ihtended toprovide a basis for seeking legislative relief should thestudies show that any defederalized airport was havingdifficulty making up the lbst Federal assistance4 We[elieve an alternative approach exists to address thispotential problem4 For example, the Secretary of Trans-pdrtation could be provided with standby, authority toeihher grant defederalited airports authority to imposea Lax, fee, or head charge or reinstate an airport'seligibility for Pederal assistance should the secretaryfinaithat'a defederalized airport was unable to replacethe Cederal funds. This approach would not. only eliminatethe need for the studies proposed in the Senate b ll, aseach \iirport would be considered on a case by cast basis,but it would also eliminate the need for the, Congress toenact legisiation later to provide needed relief. It alsowould be more consistent with our past recommendatIon thatCongresp establish priorities and use them to, distributeFederal iairport development grants to implement the Nation-al Airpott System Plan, considering among other things thefinancial resources of airports, (See our report "Develop-ing a tNat.'onal Airport System: Additional CongressionalGuidance Needed," CED-79-17, Apr. 17, 19*/9.)

We are .confident you will find our concerns overthe ain)ve requirements to be reasonable and trust thatyou will support us in any actions you or the Sub'com-mittee may take,

We are sending copies of this letter to the Chairmanand the Rlankinyl Minority Member of the Senate Committee on

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Commerce, Science and Transportation; the Secretary ofTransportation; and the Administrator, Federal AviationAdministration.

Sincerely yours,

Comptroller Generalof the United States

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0gt*- PS

COMPTROL.LEI GUNEfAL OF TiIl UNITED YTA1ES

A@t ".4/ VIA9IINGTOt4, D.C. 2348

B-197798 March 5, 1980CEDl) 0-156

The Honorable Harold T. Johnson t tChairman, Committee on Public Works -. a

and TransportationHouse of Representatives

Dear lMr. Chairman:

This is to advise you of our concerns over certainrequirements provided for in the proposed Airport and Air-way System Development Act (Senate bill 1648) and to requestyour support in any actions you or the Committee may taketo amend the Airport arid Airway Development Act of 1970.

INDEPENDENT AUDIT OF GRANTS

Subsection 20(c) of the Senate bill would continuethe requirements now provided for in subsection 26(c) ofthe Airport and Airway Development Act of 1970 (49 U.S.C.1726(c)) which requires (1) grant recipients to file withthe Comptroller General copies of any independent auditreports relating to the use of grant proceeds, and (2)the Comptroller General to report to Congress on the con-tents of these audit reports.

Our experience to date with subsection 26(c) of theAirport and Airway Development Act leads us to believethat this subsection should be repealed and therefore weare opposed to subsection 20(c) of the Senate bill. tiehave yet to receive any independent audit reports on the.use of grant proceeds. However, this is not surprisingas we are not aware of any specific requirements thatrequire grant recipients to obtain audits of the naturereferred to in subsection 26(c) of the act. In addition,the Federal Aviation Administration (FAA) has advised usthat neibher its records nor its audit efforts have dis-closed that grant recipients have arranged for independentaudits of grant proceeds. Grant recipients really have noneed for independent audits of this nature as FAA or itsdesignated contractors audit the disposition of grantproceeds.

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REPORTING ON TIHE AVAILABILITYOFFUNDS FROM NON-FEDERAL. SOURCES

Subsection 20(e)(1) of the Selnate bill would requiregrant recipients at commercial service airports located inair traffic hubs to document to the Comptroller Generalthat adequate funding for airport development projects wasnot available from sources other that1 Federal assistance.This sUbsection would empower the Comptroller General toprescribe the manner and form of such documentation, butas a minimum, this documentatiln must contain a statementof assets, liabilities, capital and surplus or deficit; astatement of surplus or deficit analysis; and a statementof sources and application of funds. Also each year, theComptroller General would be, required to provide a copy ofsuch documentation to the Congressjalong with a report con-taining any comments, informationtor recommendations onthe operations and financial c'ondition of grant recipients.Subsection 20(e)(2) would require the Comptroller Geniralto develop a standard accounting s4stem for grant recipientswithin 180 days of the bill's enactment to ennure the com-patibility of the documentation required by subsection20(e)(1). These provisions were apparently added tQ/ thebill to aid the Congress in determining whether additionalairports, similar to those identified in subsection 23(a)and (b), should be defederalized--that is made ineligiblefor Federal airport development grants--when the proposedact expires on September 30, 1985.1

Subsection 20(e)(1) and (2) it enacted would have asubstantial impact on grant recipients and our Office,Pirst, it appears that a large number of airports would berequiredto provide documentation.{ 'or e:ainple, there areabout 550 air carrier airports, excluding those to be de-federalized, and over 130 commuter service airports. Manyof them would be eligible for grants each ye-ar under thedistribution fonmulas provided for in subsection 0(b) of thebill because of the number of passengers enplaned at theseairports and therefore subject each year to the documenta-kion requirements that would be imposed by subsection20(el(1). The repetitive nature of this documentation overthe 5-year life of the proposed ace alone could be consideredexcesslve/re6undant and an unnecessary burden to grantrecipients.

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We believe that many of the grant recipients willbe able to meet the minimum documentation requirementsset forth in subsection 20(e)(l) without much difficulty.,Most gcant recipients are under the jurisdiction of a,municipal (State, county or local) government/!and there-fore they generally prepare statements on their airportoperations compatible to the minimum documentation re-quirements to natisfy the governing jurisdiction's needs.

Regarding';'the establishment of accounting standards tomeet these minimum documentation requirements,. we understandthat the American Institute of Certified Public Accountants(AICPA) is currently developing for airports detailed re-porting requirements for assets, liabilities and fund hal-ances; operations; and changes in financial position. Apronouncement from the AICPA is due to be issued in the nearfuture. Until this pronouncement is issued and the. detailsof the reporting requirements known, our Office would prefernot to yet involved in the development of standards in orderto avoid needless duplication. Also in the past, this Officehas not developed reporting requirements (accounting stand-ards) for general purpose financial strttemefits for organi-zations in the private septor. This responsibility has beenthe province of the Financial Accounting Standards Board, thleAICPA, the National Council of Governmental Accounting, orother bodies.

Besides the minimum documentation requirements, webelieve additional information will be needed to document.that' adequate funding was not available from other souroes.This information would include, but would not necessariljbe limited to, the following: borrowing authority of thigrant recipient, including any limits, and the staCus ofits current borrowings; the recipient's authority and ef-forts to obtain funds from the local government responsiblefor the airport; and extensive and detailed information notavailable fr.om the fInancial statements to evaluate whetherthe airport was operated economically and efficiently tomaximize airport revenues and minimize costs, Certainlythese additional documentation requirements will be timeconsuming and costly to grant recipients.

Subctantial additional staff resourcos would beneeded by our Office to carry out the requirements of sub-section 20(e)(1) considering the number of grant recipientsthat could be involved and the amount of Documentation

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required. -Existing resources could not be reallochtedvithout leaving important review areas uncovered, thusimpairing our ability to effectively serve the Congress.

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In the past, when specific information needs haveexisted beyond that available from general purpose finan-cial statenients, usually the Federal grantor agency andnot our Office would delineate what special purpose re-ports or documentation was needed from grant recipients.In this way, we could maintain our role as an indcpendentaudit agency and review as needed (1) the adnquacy andaccuracy of any information contained in special reportssubmitted by grant recipients or (2) audit reports pre-pared by others on the grant recipient's operationc;.Further this type of role is consistent with the size of,and resources available to, thiS Office.

* Although EtAA could be charged with specifying tihatdocumentation should be required above the minimums speci-fied in subsection 20(e)(1), an FAA study to identifyadditional airports for defederalization could be a moreeffective and efficient means to accomplish the intent ofsubsection 20(e)(1) and (2). If such a study were under-taken, we would of course be available to review FAA'sstudy efforts,

STUDIES ON DEF8DERALIZED AIRPORTS

Section 26 of 'the Senate bill would require the Sic-retary of Transportation and the Comptroller General toconduct separate studies to determine whether airports madeineligible for Federal assistance under subsections 23(a) or23(b) of the bill could through renegotiation of rates(landing fees) with air carriers or other means make up forthe lost Federal assistance, These studies also wtould con-sider the advisability of repealing section 1313 of theFederal Aviation Act of 1958 (49 U.S.C. 1513) to permitsucH airports to impose a tax, fee, or head charge.

The requirement for separate studies by both the Sec-retary and the Comptroller General is a duplication ofeffort and does not seem to be the best use of Federalresources. Further, concurrent studies by this Office andthe Secretary of Transportatton would result in constantcompetition in obtaining needed information and records.

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This competition would have an adverse impact on thoserequired to provide needed information and records andmake it difficult to complete the studies within the 9-month time period provided by the' bill. Because of theduplication and its adverse impacts, wie believe we couldbetter assist the Congress by monitoring the scope,methodology, and implementation of the Secretary's study.As you are aware, we are always willing to work closelywith the Congress by responding to specific requests.

The studies provided in section 26 are intended toprovide a basis for seeking legislative relief should thestudies show that any defederalized airport was havingdifficulty making up the lost Federal assistance. Viebelieve an alternative approach exists to address thispotential problem. For ex.inple, the Secretary of TL'ans-portation could be provided with standby authority toeither grant defederalized airports authority to imposea tax, fee, or head charge or reinstate an airport'seligibility for Federal assistance should the Secretaryfind that a defederalized airport was unable to replacethe Federal funds. This approach would not only eliminatethe need for the studies proposed in the Senate bill, aseach airport would be considered on a case by case basis,but it would also eliminate the need for the Congress toenact legislation-later to provide needed relief. It alsowould be more consistent with our past recommendation thatCongress establish priorities and use them to distributeFederal airport development grants to implement the ,Iation-al Airport System Plan, .considering among other things thefinancial resources of airports. (See our report "Develop'-ing a National Airport System: Additional CongressionalGuidance Needed," CED-79-17, Apr. 17, 1979.)

We are confident you will find our concerns overthe above requirements to be reasonable and trust thatyou will support us in any actions you or the Committeemay take.

We are sending similar letters to the Chairman of theSubcommittee on Aviation and to the ranking minority mem-bers of the full committee and the Aviation Subcommittee.

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Also we are sending copies of this lettea to the Chairmanand the Ranking Minority Member of the Senate Committee onCommerce, Science and Transportation; the Secretary ofTransportation; and the Administrator, Federal AviationAdministration.

Sinc 7 ly yourrys,

Comptroller Generalof the United States

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