Financial Management: Audit of the Centennial of Flight
Commission (22-OCT-01, GAO-02-43R).
The Centennial of Flight Commission was created on November 13,
1998, by the Centennial of Flight Commemoration Act. The purpose
of the Commission is to provide recommendations and advice to the
President, Congress, and federal agencies on the most effective
ways to encourage and promote national and international
participation and sponsorships in commemoration of the centennial
of powered flight. All 45 of the Commission's recorded financial
transactions for fiscal years 2000 and 1999 obligations and
expenditures were supported by documentation that was approved by
management. The Commission recorded no donations, user fees, or
in-kind donations for fiscal years 1999 and 2000. Also, the
Commission's obligations exceeded its fiscal year 2000
appropriation of $600,000 by $29,729.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-02-43R
ACCNO: A02359
TITLE: Financial Management: Audit of the Centennial of Flight
Commission
DATE: 10/22/2001
SUBJECT: Internal controls
Financial statement audits
Budget authority
Noncompliance
Airport and Airways Trust Fund
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GAO-02-43R
GAO- 02- 43R Centennial of Flight Commission
United States General Accounting Office Washington, DC 20548
October 22, 2001 The Honorable Ernest F. Hollings Chairman The Honorable
John McCain Ranking Minority Member Committee on Commerce, Science, and
Transportation United States Senate
The Honorable Don Young Chairman The Honorable James L. Oberstar Ranking
Democratic Member Committee on Transportation and Infrastructure House of
Representatives
Subject: Financial Management: Audit of the Centennial of Flight Commission
The Centennial of Flight Commission was created on November 13, 1998, by the
Centennial of Flight Commemoration Act (Public Law 105- 389, as amended by
Public Law 106- 68). The purpose of the Commission is to provide
recommendations and advice to the President, the Congress, and federal
agencies on the most effective ways to encourage and promote national and
international participation and sponsorships in commemoration of the
centennial of powered flight. We are required by the act to audit the
financial transactions of the Commission. This report presents the results
of our audit for the fiscal years ended September 30, 2000 and 1999.
Results in Brief
We found that all 45 of the Commission?s recorded financial transactions for
fiscal years 2000 and 1999 obligations and expenditures were supported by
documentation that was approved by management. The Commission recorded no
donations, user fees, or in- kind donations for fiscal years 2000 and 1999.
We found that the Commission?s obligations exceeded its fiscal year 2000
appropriation of $600,000 by $29,729. The Commission?s lack of a
reconciliation process between the records used by the Commission to track
obligations and expenditures and the accounting records maintained by the
Federal Aviation
GAO- 02- 43R Centennial of Flight Commission Page 2 Administration (FAA) on
behalf of the Commission contributed to the $29,729
overobligation in fiscal year 2000. Thus, the Commission, or the FAA on
behalf of the Commission, must report a violation of the Antideficiency Act
(31 U. S. C. 1341 (a)) as required by the Office of Management and Budget
(OMB) Circular No. A- 34,
Instructions on Budget Execution.
We are making recommendations to the Commission to correct its financial
records, to report and address the Antideficiency Act violation, and to
improve its internal accounting control.
Background
The Commission was created to provide recommendations and advice to the
President, the Congress, and federal agencies on the most effective ways to:
(1) encourage and promote companies, governments, individuals, and
organizations? national and international participation and sponsorships in
commemoration of the centennial of powered flight;
(2) plan and develop, in coordination with the First Flight Centennial
Commission, the First Flight Centennial Foundation of North Carolina and the
2003 Committee of Ohio, programs and activities that are appropriate to
commemorate the 100th anniversary of powered flight;
(3) maintain, publish, and distribute a calendar or register of national and
international programs and projects concerning the dates, events, and places
of historical and commemorative significance regarding aviation history in
general and the centennial of powered flight in particular;
(4) provide national coordination for celebrations to take place throughout
the United States during the centennial year;
(5) assist in conducting educational, civic, and commemorative activities
relating to the centennial of powered flight throughout the United States;
(6) encourage the publication of popular and scholarly works on the history
of aviation or the centennial of powered flight; and
(7) advise the United States with regard to gaining support for and
facilitating international recognition of the importance of aviation history
and attend international meetings regarding such activities.
The Congress provided the Commission with a specific budgetary authority as
part of the annual appropriation for FAA Operations (Airport and Airways
Trust Fund) for fiscal year 2000 and as part of the FAA Operations
appropriation for fiscal year 1999. The FAA made the funds available to the
Commission by allotment. Only the
GAO- 02- 43R Centennial of Flight Commission Page 3 administrators of the
National Aeronautics and Space Administration (NASA) or the
FAA, or employees designated to act on their behalf, are authorized by the
act to procure supplies, services, and property, and to make or enter into
leases and other legal agreements on behalf of the Commission. The FAA and
NASA give the Commission personnel support, office space, and other services
without charge. The FAA provided all accounting and procurement services on
behalf of the Commission for fiscal years 2000 and 1999. Expenditures were
recognized when paid.
Scope and Methodology
We examined all recorded financial transactions (obligations and
expenditures) of the Commission for fiscal years 2000 and 1999, for proper
supporting documentation and management approval. We limited our examination
to those transactions recorded for the Commission, and therefore, the risk
exists that there could be unrecorded transactions not included in our
examination. We traced the recorded transactions to supporting
documentation, including contracts, purchase orders, invoices, credit card
statements, and travel vouchers. The FAA processed 45 obligation and
expenditure transactions against the fiscal year 2000 and 1999
appropriations. All contracts and supporting documentation for these
transactions are maintained by the FAA. We also obtained an understanding of
the accounting procedures and internal controls of the Commission, financial
accounting services provided by the FAA operations office, and other
services provided by NASA. We performed procedures to determine whether the
transactions had been approved by Commission management. We performed our
work in Washington, D. C., from June through August 2001 in accordance with
U. S. generally accepted government auditing standards for performance
audits. The Commission and FAA officials provided comments on a draft of
this report. Those comments are summarized in a later section and are
included as an enclosure to this letter.
Audit of Commission Financial Transactions
We found that all 45 of the Commission?s recorded financial transactions for
fiscal years 2000 and 1999 obligations and expenditures were supported by
documentation that was approved by management. The Commission recorded no
donations, user fees, or in- kind donations for fiscal years 2000 and 1999.
The schedule in table 1 below presents the Commission?s appropriations,
obligations for contracts and purchase orders, unobligated amounts, and
expenditures for cash outlays for fiscal years 2000 and 1999 as of September
30, 2000.
GAO- 02- 43R Centennial of Flight Commission Page 4
Table 1: Centennial of Flight Commission Schedule of Appropriations,
Obligations, and Expenditures for Fiscal Years 2000 and 1999 as of September
30, 2000
Total as of September 30, 2000 Fiscal year 2000 Fiscal year 1999
Appropriations $850, 000 $600, 000 $250, 000 Less: obligations (contractual)
879,387 629,729 249,658 Unobligated (overobligated) $( 29,387) $( 29,729)
$342 Expenditures through September 30, 2000 (cash outlays) $256, 141 $6,483
$249, 658
Source: Centennial of Flight Commission accounting data received from the
Commission but maintained by the FAA on behalf of the Commission, as
adjusted for errors detected during our audit.
In fiscal year 1999, the Commission received an allotment of the FAA
operations appropriation totaling $250,000. The Commission?s obligations of
$249,658 comprised $209,324 for the design and delivery of visual identities
for a logo, letterhead, posters, and banners and $40,334 for the purchase of
computer equipment. As of September 30, 2000, all fiscal year 1999
obligations had been expended.
In fiscal year 2000, the Commission received an allotment of the FAA
operations (Airport and Airways Trust Fund) appropriation totaling $600,000.
The Commission?s obligations of $629,729 consisted of:
! $29,948 for a modification of the fiscal year 1999 contract to develop a
logo,
! $203,709 for contractor services to develop a Commission web site,
! $342,699 for contractor services to maintain the web site,
! $49,234 for contractor services by the Library of Congress to complete a
bibliography of the Wright brothers, and
! $4,139 for travel and miscellaneous expenses. As of September 30, 2000,
only $6,483 had been expended against the above obligations.
We identified a fiscal year 2000 contract obligation of $29,948 that had
been erroneously charged to the fiscal year 1999 appropriation in the
records used by the Commission. When charged to its fiscal year 2000
appropriation, total Commission obligations amounted to $629,729, which
exceeded its appropriation by $29,729. In addition, we identified a $40,334
fiscal year 1999 contract that had not been charged to the Commission?s
fiscal year 1999 appropriation in the records described above. When the
above changes are made, the total obligations for fiscal year 1999 are
$249,658, and total obligations for fiscal year 2000 are $629,729, as shown
in table 1. The Commission is taking the steps necessary to charge a $40,334
computer hardware contract to fiscal year 1999, charge a $29,948 computer
support contract
GAO- 02- 43R Centennial of Flight Commission Page 5 modification to fiscal
year 2000, and deobligate a $29,729 overobligation for fiscal
year 2000.
Violation of the Antideficiency Act 1
As provided by the Antideficiency Act in 31 U. S. C. 1341( a), a government
official may not make or authorize an obligation or expenditure in an amount
in excess of, or in advance of, an amount available in an appropriation.
Obligations or expenditures made in violation of this prohibition are to be
reported to the President and the Congress as provided by 31 U. S. C. 1351.
We found that the obligations entered into by the FAA on behalf of the
Commission totaled $29,729 over its fiscal year 2000 appropriation of
$600,000. Thus, the Commission or the FAA on behalf of the Commission must
report a violation of the Antideficiency Act (31 U. S. C. 1341 (a)) as
required by OMB Circular No. A- 34, Instructions on Budget Execution. The
Commission should determine whether any obligation charged to fiscal year
2000 can be canceled and amounts deobligated in order to address the
violation.
Weakness in Commission Internal Control
We obtained Commission financial records for fiscal years 2000 and 1999: the
Commission?s annual reports for 2000 and 1999, its 5- year budget based on
its financial records and projections, and computer spreadsheets prepared
and maintained by the FAA Office of Administration. We inspected, analyzed,
and compared these records to ascertain whether the spreadsheet amounts
tracked to the Commission?s annual reports and its 5- year budget. None of
these three financial records were complete and without error. In addition
to the above records, the FAA tracks the Commission?s obligations and
expenditures in its accounting system. We determined that the computer
spreadsheets were used as the source of information to track Commission
obligations and expenditures and to make financial decisions for additional
contractual obligations and expenditures. We viewed these spreadsheets
prepared and maintained by the FAA Office of Administration as the financial
records of the Commission and thus based our audit on these records.
We found, and Commission and FAA officials agreed, that a $29,948 computer
services contract modification using fiscal year 2000 funds was erroneously
posted by the FAA to fiscal year 1999. We also found a contractual
obligation that was reported in the Commission?s fiscal year 1999 annual
report but not recorded either in the Commission?s 5- year budget records or
in the computer spreadsheets maintained by the FAA. Upon inquiry, we
obtained documentation of a $40,334 unrecorded transaction for computer
hardware in fiscal year 1999 that should have been included in the budget
records and the computer spreadsheets. When these obligations are recorded
in the appropriate fiscal years, the Commission violates the Antideficiency
Act in fiscal year 2000, in the amount of $29,729.
1 31 U. S. C. 1341, 1342, 1349- 1351 and Subchapter II, Chapter 15.
GAO- 02- 43R Centennial of Flight Commission Page 6 We believe that these
errors are a result of the Commission?s lack of a reconciliation
process between its spreadsheets used to track obligations and expenditures
and the accounting records maintained by the FAA on behalf of the
Commission. 2 According to GAO?s Standards for Internal Control in the
Federal Government (GAO/ AIMD- 00- 21.3.1, November 1999), internal control
should generally be designed to ensure that ongoing monitoring occurs in the
course of normal operations. It is performed continually and is ingrained in
the agency?s operations and includes regular management and supervisory
activities, comparisons, reconciliations, and other actions people take in
performing their duties.
Recommendations
We recommend that the Executive Director of the Commission, or the FAA on
behalf of the Commission
! reconcile all of the financial accounting records kept for the Commission
to correctly account for the $29,948 computer support contract modification
in fiscal year 2000 and the $40,334 contract for computer hardware in fiscal
year 1999.
! report the violation of the Antideficiency Act for fiscal year 2000 as
required by OMB Circular No. A- 34, Instructions on Budget Execution.
! address the overobligation by deobligating $29,729 for fiscal year 2000.
! strengthen Commission internal control by reconciling its record of
approved obligations and expenditures monthly with FAA accounting records
maintained on behalf of the Commission.
Agency Comments
At the conclusion of our work, we provided a draft of this letter to the
Commission?s Executive Director and FAA officials. They agreed with all of
our recommendations and stated that they are acting to implement the
recommendations. Regarding the overobligation, Commission comments point out
that they had already deobligated funds on an existing fiscal year 2000
contract. The Commission?s complete response is presented as an enclosure to
this letter.
---- We are sending copies of this letter to the Chairman of the Centennial
of Flight Commission and other interested parties. This letter will also be
available on our home page at http:// www. gao. gov.
2 The Commission?s funds are provided through an allotment from the FAA?s
annual appropriation for
?Operations,? and there is no separate appropriation or fund account for the
Commission with Treasury. Thus, the Commission is not able to reconcile fund
balance with Treasury.
GAO- 02- 43R Centennial of Flight Commission Page 7 If you or your staffs
have any questions, please contact me at (202) 512- 2600, or by
e- mail at steinhoffj@ gao. gov or Jeanette M. Franzel, Acting Director, at
(202) 512- 9406, or by e- mail at franzelj@ gao. gov. Key contributors to
this report were Roger R. Stoltz, Patricia A. Summers, Patricia P.
Blumenthal, Robert P. Preshlock, Jr., and Richard T. Cambosos.
Jeffrey C. Steinhoff Managing Director Financial Management and Assurance
Enclosure
Enclosure GAO- 02- 43R Centennial of Flight Commission Page 8
Comments From Centennial of Flight Commission and Federal Aviation
Administration
Note: GAO?s comments supplementing those in the letter appear at the end of
this enclosure.
See comment 1. See comment 2.
Enclosure GAO- 02- 43R Centennial of Flight Commission Page 9
Enclosure GAO- 02- 43R Centennial of Flight Commission Page 10 The following
are GAO?s comments on the letter dated October 10, 2001, from the
Centennial of Flight Commission and Federal Aviation Administration.
GAO Comments
1. The ?cuff records? are the computer spreadsheets prepared and maintained
by the FAA Office of Administration to track Commission financial
transactions. We determined that these spreadsheets were the records used by
the Commission to make its financial decisions in fiscal years 2000 and
1999. We considered these records to be the official records of the
Commission and were thus the records that we audited. We did not audit the
FAA and its Departmental Accounting and Financial Information System (DAFIS)
that provided financial services to the Commission.
2. The obligation was entered into by the FAA on behalf of the Commission.
(194036)
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