Transportation:

FAA Budget Policies and Practices

GAO-04-841R: Published: Jul 2, 2004. Publicly Released: Jul 2, 2004.

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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)?

In summary, FAA Order 2500.8A contains the agency's policies for assigning budget expenditures to the F&E, Operations, and Research, Engineering, and Development (RE&D) accounts. In reviewing this order, we found that it is outdated and unclear and that the linkages between FAA's policies and the assignment of budget line items to the F&E and Operations accounts are very general. In addition, the order is not structured by organizational objectives (performance goals), as is part of FAA's fiscal year 2004 budget estimate for F&E. This structural difference makes it difficult to compare the F&E portion of the budget submission with FAA's policies. Additionally, the order lacks the level of detail needed for both FAA officials and appropriators to easily distinguish between F&E (capital) and Operations expenditures. The order also does not reflect FAA's current process for acquiring goods and services (acquisition management), which influences whether an expenditure for a project is categorized as an F&E or an Operations expense. According to our analysis, while FAA's policies for categorizing expenses are very broad and give the agency wide latitude, FAA followed the policies outlined in its 1993 order for the majority of the 17 budget line items identified by the appropriators in FAA's fiscal year 2004 budget submission. FAA concurred with the appropriators that 5 of these budget line items should have been categorized as Operations expenses and said that it would restructure the items in its next budget submission; however, the agency maintained that the remaining 12 items were appropriately categorized as F&E expenses and cited specific agency policies to support the items' placement there. Although FAA's policies for assigning budget line items to the F&E and Operations accounts are very general, our analysis generally supported FAA's categorizations. FAA's budget policies cannot readily be compared with those of NASA and DOD. While the policies of all three agencies use similar budgetary language, the policies cannot be compared in detail because the agencies use different budgetary approaches. Each agency independently developed its own budget format in response to the current administration's direction that federal agencies develop performance-based budgets.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: 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.

    Agency Affected: Department of Transportation

    Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: Department of Transportation

    Status: Closed - Implemented

    Comments: 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.

    Recommendation: 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.

    Agency Affected: Department of Transportation

    Status: Closed - Implemented

    Comments: 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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