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Highlights

In recent years, Congress has raised concerns about cost growth in the Federal Aviation Administration's (FAA) operating budget. Appropriators noted several expenses in FAA's fiscal year 2004 facilities and equipment (F&E) account budget submission that appeared to be ongoing operating expenses. The House and Senate appropriations subcommittee reports on FAA's fiscal year 2004 budget submission highlighted 17 such budget items and recommended that the expenses for these items either be transferred to the operations budget or not receive funding. As a result of these concerns, the Conference Report accompanying the fiscal year 2004 Omnibus Appropriations Act directed us to conduct an audit of FAA's policies and practices for determining whether an expense should be budgeted in its operating accounts or in the capital account. Specifically, this report addresses the following questions: (1) What are FAA's policies for determining whether an expense--including personnel compensation, benefits, travel, and related expenses--belongs in its capital (F&E) or Operations accounts? (2) How did FAA implement its policies for determining whether 17 specific budget line items identified by appropriators belong in its F&E or Operations accounts, including personnel compensation, benefits, travel, and related expenses? (3) How do FAA's budget policies compare with those of other civilian agencies with large acquisition budgets, such as the National Aeronautics and Space Administration (NASA) and the Department of Defense (DOD)?

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Transportation 1. The Secretary of Transportation should direct the FAA Administrator to clarify FAA's rationale for allocating budget expenditures between its F&E and Operations budget accounts by updating FAA Order 2500.8A in consultation with appropriations committee staff.
Closed - Implemented
FAA's Capital Budget Division manager reported that FAA is still committed to implementing this recommendation. However, FAA Order 2500.8A would have to be modified to incorporate the recommendation. Due to other priorities, FAA has decided to delay implementation until September 30, 2006. As of November 16, 2006, FAA updated FAA Order 2500.8A (2500.8B effective as of October 01, 2006) based on earlier recommendations from the appropriation committee staff.
Department of Transportation 2. The Secretary of Transportation should direct the FAA Administrator to clarify FAA's rationale for allocating budget expenditures between its F&E and Operations budget accounts by clearly distinguishing in the revised order between maintenance programs (Operations) that allow FAA to maintain current capabilities and F&E programs that allow FAA to modernize or add new capabilities.
Closed - Implemented
FAA's Capital Budget Division manager reported that FAA is still committed to implementing this recommendation. However, FAA Order 2500.8A would have to be modified to incorporate the recommendation. Due to other priorities, FAA has decided to delay implementation until September 30, 2006. As of November 16, 2006, FAA updated the recommendation response as follows: The Funding Criteria Order 2500.8B represents the combined efforts of representatives within the Office of Financial Services, the Lines of Business, and Staff Offices. Representatives from all FAA organizations reviewed and recommended revisions to the Order. These efforts help delineate more clearly the funding criteria for Operations, Facilities and Equipment, and Research, Engineering and Development. In addition, FAA has added the Grants-In-Aid for Airports account to the Order. More specifically, the revised Funding Criteria descriptions of the Operations and Facilities and Equipment accounts in paragraphs 8 and 9, respectively, eliminate any ambiguities that may have previously existed.
Department of Transportation 3. The Secretary of Transportation should direct the FAA Administrator to clarify FAA's rationale for allocating budget expenditures between its F&E and Operations budget accounts by revising FAA's budget practices to make it easier for appropriators to track funding when the agency moves funds for individual budget line items from one budget account to another.
Closed - Implemented
FAA's Capital Budget Division manager reported that FAA is still committed to implementing this recommendation. However, FAA Order 2500.8A would have to be modified in order to incorporate the recommendation and due to other priorities, FAA has decided to delay implementation until September 30, 2006. As of November 16, 2006, FAA will include in the FY 2008 President's Budget a list of programs that are moving from one appropriation to another, if applicable. The FAA expects that this will facilitate the Appropriation Committee's tracking of programmatic changes being proposed.

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