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DOT and FAA Lack Adequate Controls Over Their Use and Management of Other Transaction Agreements

Self-initiated
Project ID: 
ZA2017098

Congress has granted several of DOT’s Operating Administrations the authority to enter into Other Transaction Agreements (OTA). These financial instruments give agencies greater flexibility to achieve mission goals. However, because OTAs are generally exempt from Federal laws and regulations governing acquisitions and financial assistance, they can pose greater cost and performance risks than contracts, grants, and cooperative agreements. Accordingly, we initiated this audit to evaluate DOT’s (1) use of OTAs and (2) management of the agreements. We focused our work primarily on the Federal Aviation Administration (FAA) and the Pipeline and Hazardous Materials Safety Administration (PHMSA), the only two DOT agencies actively using their OTA authority. Between fiscal years 2010 and 2014, DOT awarded OTAs worth more than $1.4 billion, with FAA awarding the vast majority.

FAA employs OTAs for a wide range of activities with significant monetary impact. However, because its OTAs are managed by a number of offices and inventoried via several different methods, FAA is unable to track all of them, provide effective oversight, or keep stakeholders fully informed about its use of the agreements. FAA policies also do not specify when it is proper to use an OTA instead of a contract or grant. In contrast, PHMSA uses OTAs for one program and has more rigorous controls over OTA usage. Furthermore, DOT and FAA lack clear, comprehensive policies to adequately manage their OTAs. DOT’s guidance for these agreements is located within a manual primarily designed for grants and cooperative agreements that is undergoing its first major update in 7 years. At FAA, unclear policies, a lack of internal controls, and inconsistent tracking and oversight have led to funding and program vulnerabilities. PHMSA generally follows DOT policy on OTAs and has its own supplemental policies, although we did identify some issues with incomplete documentation.

We made 17 recommendations to improve use and management of OTAs at DOT, FAA, and PHMSA, and identified $2.2 million in funds that could be put to better use and $19,000 in questioned costs. We received a joint response from the Department on behalf of FAA and PHMSA that concurred with our monetary findings and all recommendations. In addition, PHMSA’s follow-up actions allowed us to close one recommendation. Of the 16 remaining recommendations, we consider 15 resolved but open pending completion of planned actions and 1 to be open and unresolved, pending FAA’s reconsideration of its target action date.

Recommendations

Open

Closed

No. 1 to FAA

Develop and implement policies and procedures, including a standard identification method, for tracking other transaction agreements (OTA).

No. 2 to FAA

Develop and implement criteria that: a. Describe when an OTA should be used rather than a contract or grant; b. Require awarding officials to document their rationale for using OTAs rather than contracts or grants.

No. 3 to FAA

Develop and implement policies and procedures to state when Acquisition Management System guidance, FAA financial assistance policies, and other requirements and guidance such as requirements for Independent Government Cost Estimates, including OTAs in Single Audits, and conflicts of interest analysis apply to OTAs.

No. 4 to FAA

Develop and implement policies to report OTA awards that involve Federal funds to USASpending.gov.

No. 5 to FAA

Establish documentation requirements for all types of OTAs, and develop and implement policies and procedures for maintaining complete files for the agreements, including evidence of legal reviews.

No. 6 to FAA

Develop and implement policies and procedures to ensure that OTAs are awarded and administered by properly authorized (warranted) officials, including: a. Creating and regularly maintaining a comprehensive list of awarding officials, the various types of agreements (e.g., contract, grant, OTA, reimbursable agreement, interagency agreement) they are authorized to sign, dollar limits (if any), and the dates the authority began and ended when applicable; b. Clarifying the Acquisition Management System to specify when it is appropriate to use an OTA that is also an interagency agreement or reimbursable agreement, and to specify what warrant authorities are required for officials signing these agreements.

No. 7 to FAA

Assess whether OTAs signed by individuals without proper authorization represent unauthorized commitments, and take appropriate corrective actions.

No. 8 to FAA

Develop and implement policies and procedures to standardize and enforce provisions of Tower Operating Agreement OTAs as a condition of providing air traffic control services, including: a. A procedure to provide for periodic inspections of the tower environment to detect problems that have an impact on FAA contract controllers and respond to them; b. Requiring all airport sponsors to sign Tower Operating Agreements.

$2,200,000
No. 9 to FAA

Renegotiate tower leases requiring rent payments to airport sponsors to secure no-cost leases. Implementation of this recommendation could put $2.2 million in Federal funds to better use.

$19,000
No. 10 to FAA

Recover the $19,000 overpayment to an OTA tower construction recipient, determine whether FAA overpaid other recipients on its tower construction agreements, and recover any overpayments and interest not applied to the construction projects.

No. 11 to FAA

Develop and implement policies and procedures for tower construction OTAs that at a minimum address aligning payments to actual needs and disposing of leftover funds and interest earned on advanced funds.

Closed on 05.24.2019
No. 12 to FAA

Develop a business case for the award of a new OTA, or an extension of the current OTA, to conduct research at and manage the Florida Test Bed that includes the potential for competition and a cost-benefit analysis that examines facility utilization (whether onsite or via remote access) and potential for cost sharing.

Closed on 04.22.2019
No. 13 to FAA

Follow DOT's cybersecurity policy, and track access and usage of OTA-covered information systems, including those at the Florida Test Bed.

No. 14 to OST

Update the Financial Assistance Guidance Manual and other policies to reflect current authorities and oversight needs for OTAs, and clarify which provisions of the manual and other policies apply to these agreements.

No. 15 to OST

Update the Financial Assistance Guidance Manual and other policies to reflect current authorities and oversight needs for OTAs, and clarify which provisions of the manual and other policies apply to these agreements.

Closed on 09.21.2018
No. 16 to PHMSA

Revise and implement policies and procedures for conducting pre-award reviews that assess the price reasonableness of each OTA.

Closed on 09.20.2017
No. 17 to PHMSA

Designate in writing which officials are authorized to award OTAs.