Airport Improvement Program:

Better Management Needed for Funds Provided Under Letters of Intent

RCED-94-100: Published: Feb 2, 1994. Publicly Released: Mar 3, 1994.

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Pursuant to a congressional request, GAO reviewed the Federal Aviation Administration's (FAA) use of letters of intent (LOI) to fund projects under its Airport Improvement Program (AIP).

GAO found that: (1) FAA has significantly increased its use of LOI to fund AIP projects since fiscal year 1988 and plans to double the amount of LOI in fiscal years 1994 through 1999; (2) LOI constitute an increasing percentage of total AIP obligations; (3) LOI use has increased because airport sponsors can avoid competing with other projects for funds in future years and LOI are more flexible than AIP single-year or multiyear grants; (4) FAA could more effectively manage its LOI by ensuring that they are used to significantly improve airport capacity, establishing criteria defining a significant improvement, and establishing program performance goals and measurements; (5) FAA has not analyzed how projects funded under LOI affect the national airport system; (6) FAA has used LOI without congressional approval to fund projects at small airports and auxiliary airport facilities because it could not issue multiyear grants; (7) FAA has incorrectly assumed that AIP discretionary funds would not decrease and has not reserved sufficient discretionary funds to meet the immediate needs of the national airport system; and (8) FAA failure to pay LOI on time and in full can jeopardize new LOI-backed bond financing.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: FAA has developed a policy on the criteria it will use to award letters of intent. This policy was published in the Federal Register on October 31, 1994.

    Recommendation: To ensure that letters of intent are used in accordance with congressional direction, the Secretary of Transportation should direct the Administrator, FAA, to set a timetable to establish a goal for improving systemwide capacity and a definition of a significant capacity enhancement in relation to this goal, and analyze projects proposed for letters of intent against this goal and definition.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: FAA responded that if it identifies a need to expand LOI eligibility beyond projects that comport with existing statutory criteria, it will seek congressional approval. FAA is formulating a revised policy statement to further clarify the types of projects that it intends to approve for LOI. While FAA previously considered both ground and air capacity improvements as appropriate for LOI, FAA's revised policy will emphasize air capacity projects only.

    Recommendation: To ensure that letters of intent are used in accordance with congressional direction, the Secretary of Transportation should direct the Administrator, FAA, to provide justification and obtain approval from Congress if the agency wants to expand the statutory criteria for the use of letters of intent beyond projects that significantly enhance systemwide capacity.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: FAA is strengthening the analysis for projects being considered for LOI by increasing its emphasis on more rigorous analyses of the sponsor's financial commitment and the benefit/cost ratio of the projects. Also, FAA plans to analyze the airport for which LOI is requested and estimate the current hours of annual flight delay and then determine the systemwide impact of the project in terms of reduced annual aircraft and passenger delays at current and future airport activity levels.

    Recommendation: To ensure that letters of intent are used in accordance with congressional direction, the Secretary of Transportation should direct the Administrator, FAA, to plan commitments under letters of intent for each fiscal year on the basis of more conservative assumptions about future discretionary funding levels in the Airport Improvement Program.

    Agency Affected: Department of Transportation

 

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