Audit Reports

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FAA Needs To More Accurately Account for Airport Sponsors’ Grandfathered Payments

Self-Initiated
Project ID: 
AV2018041
What We Looked At
The Federal Aviation Administration (FAA) estimates that between 2017 and 2021, there will be a need for approximately $32.5 billion in airport projects eligible for funding from the Federal Airport Improvement Program (AIP) for safety, security, and airfield projects. Federal law requires airports to use revenues for airport capital and operating costs, and allows no expenditures unrelated to the airports. However, the law allows airport sponsors—an airport’s owner/operator, such as the city, county, or State that the airport serves—that have historically used revenues for non-airport purposes—referred to as grandfathered sponsors—to continue to use revenues for these purposes. FAA may limit awards of AIP discretionary grants to grandfathered sponsors that use revenues for non-airport purposes above statutory limits. Due to the limited Federal funds available for airport improvements and the large investments projected for future airport development, we conducted this audit. Our objective was to assess FAA’s oversight of grandfathered sponsors’ compliance with Federal law related to airport revenue payments. Specifically, we assessed FAA’s (1) guidance to airport sponsors on reporting grandfathered payments and (2) process for verifying the accuracy and completeness of sponsor reporting.
 
What We Found
FAA incorrectly reported grandfathered payments due to insufficient guidance to airport sponsors. Four of the eight grandfathered airport sponsors we reviewed did not know how to correctly report their grandfathered payments because FAA has not provided sufficient guidance. Furthermore, FAA did not verify the accuracy of the data in its annual reports on grandfathered sponsors. Specifically, FAA’s data in its annual summary reports on four of eight sponsors’ grandfathered payments from 1995 through 2015 were inaccurate. For example, FAA understated one sponsor’s payments by over $200 million. FAA also understated another sponsor’s payments by over $2.1 billion and did not take into account the $3.7 billion the State returned to this sponsor.
 
Our Recommendations
We provided three recommendations to help FAA improve its oversight of grandfathered sponsors. FAA concurred with all three recommendations.

Recommendations

Open

Closed

No. 1 to FAA

Provide written guidance specifically to grandfathered sponsors on what constitutes a grandfathered payment and how to accurately report grandfathered payments.

No. 2 to FAA

Develop and implement an internal control process to verify the accuracy of reports on grandfathered payments.

$509,727
No. 3 to FAA

In accordance with Federal law, consider the State of Hawaii exceeding its statutory limit on the use of revenues for non-airport purposes as a factor in reducing AIP discretionary funds awarded to the State. Implementation of this recommendation could put $509,727 in funds to better use.