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