Financial Management: Audit of the Centennial of Flight 	 
Commission for Fiscal Year 2002 (31-JUL-03, GAO-03-888R).	 
                                                                 
The Centennial of Flight Commission (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 commemorate the 100th anniversary
of the Wright Brothers' flight at Kitty Hawk, North Carolina, on 
December 17, 1903. 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 of the Commission's fiscal year
2002 financial transactions, with cumulative information since	 
the Commission's inception. We previously reported the results of
our audits on Commission financial transactions for fiscal years 
1999 and 2000, and 2001.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-888R					        
    ACCNO:   A07828						        
  TITLE:     Financial Management: Audit of the Centennial of Flight  
Commission for Fiscal Year 2002 				 
     DATE:   07/31/2003 
  SUBJECT:   Audit reports					 
	     Aviation						 
	     Financial records					 
	     Reporting requirements				 
	     Internal controls					 
	     Financial statement audits 			 

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GAO-03-888R

Page 1 GAO- 03- 888R, Centennial of Flight Commission FY 2002 Audit

United States General Accounting Office Washington, DC 20548

July 31, 2003 The Honorable John McCain Chairman The Honorable Ernest F.
Hollings Ranking Minority Member Committee on Commerce, Science, and
Transportation United States Senate

The Honorable Don Young Chairman The Honorable James L. Oberstar Ranking
Minority Member Committee on Transportation and Infrastructure House of
Representatives

Subject: Financial Management: Audit of the Centennial of Flight
Commission for Fiscal Year 2002 The Centennial of Flight Commission
(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
commemorate the 100th anniversary of the Wright Brothers* flight at Kitty
Hawk, North Carolina, on December 17, 1903. 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 of the
Commission*s fiscal year 2002 financial transactions, with cumulative
information since the Commission*s inception. We previously reported the
results of our audits on Commission financial transactions for fiscal
years 1999 and 2000, 1 and 2001. 2 1 GAO, Financial Management: Audit of
the Centennial of Flight Commission, GAO- 02- 43R (Washington, D. C.: Oct.
22, 2001).

2 GAO, Financial Management: Audit of the Centennial of Flight Commission
for FY 2001, GAO- 02- 730R (Washington, D. C.: June 21, 2002).

GAO- 03- 888R, Centennial of Flight Commission FY 2002 Audit Page 2

The Centennial of Flight Commemoration Act created the Commission and
authorized appropriations to the Commission in specific amounts 3 for
fiscal years 1999 through 2004 (Public Law No. 105- 389, 112 Stat. 3486,
3494). For fiscal years 1999 through 2001, the Congress provided in the
annual appropriation for the Federal Aviation Administration (FAA)
operations that either a specific amount or a minimum specified amount
should be for the Commission. During our review of the Commission*s fiscal
year 2002 transactions, we noticed that unlike the 3 prior years, FAA*s
fiscal year 2002 appropriation did not explicitly provide that any part of
FAA*s appropriation was for the Commission. Nevertheless, FAA allotted
$900,000 in fiscal year 2002 from its operations account to the
Commission. In a separate letter dated July 10, 2003, we asked the FAA*s
Chief Counsel about the basis for FAA*s use of its lump sum operations
appropriation to fund the Commission for fiscal year 2002. After
considering the Chief Counsel*s views, we will separately report any
matter that should be brought to the Congress* attention.

Results in Brief We found that all 114 of the Commission*s recorded
obligations and expenditures during fiscal year 2002 were supported by
documentation that was approved by management. In addition, the Commission
recorded the receipt of one payment under a licensing agreement for use of
the logo of the Centennial of Flight Commission. The Commission recorded
no other receipts for user fees, cash donations, or in- kind donations for
fiscal year 2002. When comparing Commission transactions recorded by FAA,
and the National Aeronautics

and Space Administration (NASA), which provide administrative support to
the Commission, we found a minor error of $937 by NASA in underrecording
Commission travel expenses. We also identified an internal control
weakness over licensing agreements by the Commission in not monitoring the
timely receipt of fees in accordance with the agreements. This resulted in
the Commission receiving no minimum quarterly licensing fees for the
quarters June 30, 2002, and September 30, 2002, as of May 30, 2003.

We are making recommendations to the Commission to correct the travel
expense error, strengthen internal controls by monitoring licensing
agreements, and collect licensing fees that are due. The Commission agreed
with our recommendations.

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 national and international
participation and sponsorship by companies, governments, individuals, and
organizations to commemorate the centennial of powered flight;

3 The Commemoration Act authorized $250,000 for fiscal year 1999; $600,
000 for fiscal year 2000; $750, 000 for fiscal year 2001; $900,000 for
both fiscal years 2002 and 2003; and $600, 000 for fiscal year 2004.

GAO- 03- 888R, Centennial of Flight Commission FY 2002 Audit Page 3

(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.

For fiscal year 2002, FAA made funds available to the Commission by
allotment. Only the administrators of NASA or 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. FAA and NASA give the Commission
personnel support and other services without charge. The Commission
reimburses NASA for office space, printing, supplies, and equipment. NASA
and FAA provide accounting services to the Commission, and FAA provided
all procurement services on behalf of the Commission for fiscal year 2002.
The Commission recognizes expenditures when paid.

Scope and Methodology We examined all of the Commission*s financial
transactions (obligations, expenditures, and receipts) recorded during
fiscal year 2002 for proper supporting documentation and management
approval. Because we limited our examination to those transactions
recorded for the Commission by FAA and NASA, the risk exists that there
could be unrecorded transactions not included in our examination. We
traced the recorded transactions to supporting documentation, including
contracts, invoices, credit card receipts, travel vouchers, and copies of
checks. FAA maintains all contracts and supporting documentation for the
Commission*s transactions. FAA and NASA processed all of the Commission*s
114 obligation and expenditure transactions and one receipt transaction
recorded during fiscal year 2002.

We also obtained an understanding of the accounting procedures and related
internal controls of the Commission, financial accounting services
provided by the FAA operations office, and other services provided by
NASA. We also performed procedures to determine whether Commission
management had approved the transactions.

GAO- 03- 888R, Centennial of Flight Commission FY 2002 Audit Page 4

We performed our work in Washington, D. C., from April through June 2003
in accordance with U. S. generally accepted government auditing standards
for performance audits. We requested comments on a draft of this report
from the Executive Director of the Centennial of Flight Commission and
received a written response from the Commission, which incorporated views
from FAA and NASA. Those comments are summarized in a later section and
are included as an enclosure to this report.

Minor Errors In Fiscal Year 2001 Commission Records Were Corrected As we
previously reported, 4 the Commission*s financial records for fiscal year
2001 contained some minor errors that resulted in Commission travel
expenditures being understated by a net amount of $957. We also found that
a NASA interagency agreement totaling $122,387 was overpaid by $700 by
FAA. In that report we recommended, and the Commission agreed to (1)
correct the understated travel expenditures, and (2) direct FAA to obtain
a refund for the $700 that was overpaid to NASA. During fiscal year 2002,
the $957 of travel expenses were recorded and a refund of $750 was
obtained from NASA.

These errors were caused by the lack of effective reconciliation of
Commission transactions by the Commission, NASA, and FAA to verify that
Commission accounts were complete and accurate. To improve this situation,
we also recommended that the Commission strengthen internal control by
reconciling its record of approved obligations and expenditures monthly
with FAA accounting records maintained on behalf of the Commission. 5
However, due to the small number of transactions, we agreed with the
Commission and FAA that periodic instead of monthly reconciliation would
be sufficient and this was substantially implemented by September 30,
2002.

Fiscal Year 2002 Audit of Commission Financial Transactions We found that
all 114 of the Commission*s recorded obligations and expenditures during
fiscal year 2002 were supported by documentation that was approved by
management. In addition, the Commission recorded the receipt of one
payment under a licensing agreement for the use of the logo of the
Centennial of Flight Commission. The Commission recorded no other receipts
for user fees, cash donations, or in- kind donations for fiscal year 2002.
During fiscal year 2002, the Commission expended $89,694 to pay fiscal
year 2000

obligations and $617,247 to pay fiscal year 2001 obligations. For fiscal
year 2002, the Commission received from FAA an allotment of $900,000 from
its operations appropriation and received $1,000 in fees under a licensing
agreement for the Commission*s logo. The Commission*s obligations for
fiscal year 2002 totaled $899,198 and consisted of:

$380,000 for services related to the Commission*s Outreach Plan;

$196,000 for a modification of a fiscal year 2000 contract for Web site
maintenance;

$146,174 for NASA interagency reimbursable services;

$120,000 for online presentations of the Wright brothers* wind tunnel,
1899 and 1901 gliders, and 1903 flyer;

4 GAO- 02- 43R 5 GAO- 02- 730R

GAO- 03- 888R, Centennial of Flight Commission FY 2002 Audit Page 5

$40,000 for a modification of a fiscal year 2000 contract to develop
timeline and essay content for the Web site;

$14,950 for videos of the 1901 wind tunnel, the 1902 glider, the 1903
flyer, and the 1905 first practical airplane; and

$2,074 for travel and miscellaneous expenses. As of September 30, 2002,
$479,153 had been expended against the fiscal year 2002 obligations. The
schedule in table 1 below presents the Commission*s appropriations,
receipts,

obligations, and expenditures (cash outlays) for fiscal years 1999 through
2002.

Table 1: Centennial of Flight Commission Schedule of Appropriations,
Receipts, Obligations, and Expenditures for Fiscal Years 1999 through 2002
as of September 30, 2002

Fiscal year 1999 Fiscal year

2000 Fiscal year 2001 Fiscal year

2002 Total

Appropriations $250,000 $600,000 $748,350 a $900,000 $2,498,350 Plus:
Receipts $0 $0 $0 $1,000 b $1,000

Less: Obligations $249,658 $599,929 $739,828 $899,198 $2,488,613
Unobligated c $342 $71 $8,522 $1,802 $10,737 Expenditures as of 9- 30- 02
(cash outlays) $249,658 $595,312 $636,799 $479,153 $1,960,922

Unexpended obligations $0 $4,617 $103,029 $420,045 $527,691

Source: Centennial of Flight Commission accounting data. d a Less
rescission of $1,650. b Licensing fee for Commission logo. c These amounts
are not available for new obligations but may be used to adjust existing
obligations for up to 5 years when the account is closed and any remaining
balance is cancelled. d Received from the Commission but maintained by FAA
on behalf of the Commission, as adjusted for errors detected during our
audit.

GAO- 03- 888R, Centennial of Flight Commission FY 2002 Audit Page 6

Fiscal Year 2002 Audit Findings When comparing Commission transactions
recorded by FAA and NASA, who provide administrative support to the
Commission, we found a minor error of $937 by NASA in underrecording
Commission travel expenses. This amount was incorrectly coded to be
withdrawn from direct funds instead of reimbursable funds and NASA is in
the process of correcting this error.

We also identified an internal control weakness over licensing agreements
by the Commission in not monitoring the timely receipt of fees in
accordance with the agreements. This was because fiscal year 2002 was the
first year of the agreements, the amount of fees involved is small, and
Commission oversight was lacking. One agreement stated that a minimum of
$500 was to be received by the Commission each quarter beginning with the
June 30, 2002 quarter. We found that the Commission had received no
minimum payments for the June 30, 2002, and September 30, 2002, quarters
as of May 30, 2003. Based upon this information, the Commission corrected
this oversight by contacting the licensee and is currently in the process
of collecting payments due since the June 30, 2002, quarter.

Recommendations We recommend that the Executive Director of the
Commission:

Direct NASA to correctly record the Commission travel expenditure of $937
that was improperly coded and paid out of NASA*s direct funds.

Strengthen internal controls over licensing agreements by monitoring the
timely receipt of fees in accordance with the agreements.

Collect licensing fees due the Commission since the beginning of the June
30, 2002, quarter, in accordance with licensing agreements.

Agency Comments The Commission*s Executive Director agreed with our
recommendations and stated that the Commission has (1) requested that NASA
correctly record the travel expenditure, (2) developed a spreadsheet to
monitor the timely receipt of licensing fees, and (3) collected licensing
fees due it for the quarters ended June 30 and September 30, 2002. The
Commission*s response, which incorporated FAA and NASA views, is presented
as an enclosure to this report.

***** We are sending copies of this report to the Chairman of the
Centennial of Flight Commission and other interested parties. This report
will also be available on our home page at http:// www. gao. gov.

GAO- 03- 888R, Centennial of Flight Commission FY 2002 Audit Page 7

If you or your staffs have any questions, please contact me at (202) 512-
6906, or by e- mail at williamsm1@ gao. gov or Roger R. Stoltz, Assistant
Director, at (202) 512- 9408, or by e- mail at stoltzr@ gao. gov. A key
contributor to this report was Deborah A. Silk.

McCoy Williams Director Financial Management and Assurance Enclosure

GAO- 03- 888R, Centennial of Flight Commission FY 2002 Audit Page 8

Enclosure Comments from the Centennial of Flight Commission

GAO- 03- 888R, Centennial of Flight Commission FY 2002 Audit Page 9

Enclosure

Comments from the Centennial of Flight Commission (195009)

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