FAA Oversight Is Inadequate To Ensure Proper Use of Los Angeles International Airport Revenue for Police Services and Maximization of Resources
As one of the busiest airports in the Nation, Los Angeles International Airport (LAX) generated nearly $822 million in airport revenues and received nearly $45 million in grant funding from the Federal Aviation Administration (FAA) in 2012. FAA is responsible for providing oversight to ensure that airports such as LAX meet Federal obligations regarding using airport revenue for airport-only purposes, and maximizing self-sustainability to decrease airports’ reliance on Federal grant funds. Several Members of Congress asked us to review allegations of revenue diversion at LAX, which is operated by Los Angeles World Airports (LAWA), an independent department of the City of Los Angeles.
We found that FAA’s oversight did not prevent LAWA from using more than $8 million in LAX revenues and funding—about $7.87 million for services provided by the Los Angeles Police Department (LAPD), and over $360,000 in administrative grant charges—without adequate documentation or support for these charges. In addition, LAWA spent approximately $192,000 of airport revenue on unauthorized LAPD personnel working at LAX. Our review also found that LAWA could not demonstrate that it met Federal requirements to be as self-sustaining as possible in establishing rental rates for its non-aeronautical land leases. In particular, three of the leases we reviewed were below fair market value estimates, resulting, in one case, in LAWA missing up to approximately $558,000 in potential additional rental income. Finally, we detected about $49 million in financial reporting discrepancies between the amounts LAWA reported in its statutorily required annual financial reports to FAA and its internal financial reports. According to LAWA, the discrepancies were due, in part, to data integrity issues.
We made six recommendations to improve FAA’s oversight of airport revenue and the airport’s self-sustainability. FAA concurred with five recommendations and partially concurred with one recommendation. FAA provided reasonable planned actions and timeframes for all recommendations.