Quality Control Review of the Management Letter for the Federal Aviation Administration's Audited Consolidated Financial Statements for Fiscal Years 2024 and 2023

Date Issued

Wednesday, February 12, 2025

Submitting OIG

Department of Transportation OIG

Agencies Reviewed/Investigated

Department of Transportation

Components

Federal Aviation Administration

Report Number

QC2025020

Report Description

Our Objective(s)To perform a quality control review (QCR) of KPMG LLP's management letter related to the audit of the Federal Aviation Administration's (FAA) consolidated financial statements as of and for the fiscal years ended September 30, 2024, and September 30, 2023. We reviewed KPMG's management letter, dated November 27, 2024, and related documentation.
About This ReportWe contracted with the independent public accounting firm KPMG to audit FAA's consolidated financial statements. KPMG also issued a management letter discussing internal control matters that KPMG was not required to include in its audit report.
What We FoundThe independent auditor, KPMG, found 12 internal control matters in FAA's management of operations. Two of the matters are related to DOT's internal controls and, although they affect FAA's control environment, FAA is not required to take corrective actions. The remaining 10 internal control matters are weaknesses in FAA's:

procurement system separation of users,
procurement system new user and recertification processes,
timely recording of procurement
accounting for costs incurred in projects with both construction and operating
and accuracy of intragovernmental lease payments
over the timely deobligation of grant undelivered orders,
calculation of non-letter of intent and additional Infrastructure Investment and Jobs Act grant accruals, and
Headquarters review of manual journal vouchers.
In addition, documentation weaknesses exist in the Enterprise Services Center's review of FAA journal entries, and
FAA has an insufficient number of personnel to support the annual recertification of payroll system users.

Our QCR disclosed no instances in which KPMG did not comply, in all material respects, with U.S. generally accepted Government auditing standards.
RecommendationsWe agree with KPMG's 15 recommendations to strengthen FAA's information technology and service organization system, business process, and manual journal voucher controls.

Report Type

Audit

Agency Wide

Yes

Number of Recommendations

Questioned Costs

Funds for Better Use

Report updated under NDAA 5274

External Link

https://www.oig.dot.gov/library-item/46641

Open Recommendations

This report has 15 open recommendations.

Recommendation Number	Significant Recommendation	Recommended Questioned Costs	Recommended Funds for Better Use
1	Yes	$0	$0
KPMG recommends that FAA management formally communicate to procurement system users supervisors their responsibility to ensure that the system administrators are notified by the individual users or their supervisors when individuals separate from FAA.
2	Yes	$0	$0
KPMG recommends that FAA management provide procurement system administrators additional resources or tools, such as a reviewer checklist, to help facilitate adequate review of the procurement system New User ID Form and the annual procurement system User Recertification Request Forms prior to provisioning or recertifying user access to the procurement system, to include verifying that users are provisioned with the appropriate roles and approval thresholds.
3	Yes	$0	$0
KPMG recommends that FAA management design and implement a monitoring control to ensure procurement system administrators consistently verify that the procurement system new user and recertification forms were completed appropriately and signed by the authorized supervisor or COR for all active users prior to provisioning or recertifying user access to the procurement system.
4	Yes	$0	$0
KPMG recommends that FAA management implement measures to ensure the timely and accurate completion of the annual recertification of FAA employees with access to the service organizations payroll system, in accordance with the reporting timeline prescribed by DOT (e.g., identifying specific individuals to serve as backup control operators, modifying the annual recertification timeline, or adopting other effective measures).
5	Yes	$0	$0
KPMG recommends that FAA design and implement a procedure to identify and timely record contracting actions within the general ledger that were executed outside of the standard business process (i.e., CO authorizations documented outside of the procurement system).
6	Yes	$0	$0
KPMG recommends that FAA design and implement a procedure to periodically assess the risk associated with the final project allocations of costs incurred for project obligations with both capitalized and expensed costs, particularly when there has been a change in the scope of the project or there have been de-obligations of project funding. If management determines the risk related to the cost allocation is material, perform additional procedures to respond to the risk identified and determine if adjustments to project cost allocations are necessary.
7	Yes	$0	$0
KPMG recommends that FAA ensure that its detailed financial reporting procedures for identifying and disclosing intragovernmental lease payments are consistent with its existing SFFAS 54 accounting policy for intragovernmental leases.
8	Yes	$0	$0
KPMG recommends that FAA management enforce its existing grant monitoring control procedures, such as strengthen quarterly inactive obligation reviews and requiring regions to certify completion of their dashboard review periodically and consider prioritizing the review of potential inactive grants based on historical grantee disbursement activity.
9	Yes	$0	$0
KPMG recommends that FAA management design and implement a procedure to review Q4 IIJA grant expense activity, used in the additional IIJA accrual, for outliers in the data (e.g., journal vouchers or unusually large invoices).
10	Yes	$0	$0
KPMG recommends that FAA management analyze the reasons for the change in the calculated average billing cycle for FY 2024 and document the impact on its grant accrual methodology as part of its annual retrospective review.
11	Yes	$0	$0
KPMG recommends that FAA management design and implement a policy or procedure to ensure the consistent fund classification of IIJA grants payable and related gross costs activity.
12	Yes	$0	$0
KPMG recommends that the ESC enforce its existing policy on evidencing the review and approval of journal vouchers (e.g., evidencing review manual journal vouchers with signature and/or certified electronic timestamp).
13	Yes	$0	$0
KPMG recommends that the ESC perform procedures to validate that FAA journal vouchers it recorded during FY2024 were authorized per its policy.
14	Yes	$0	$0
KPMG recommends that the ESC design a procedure to review the impact of proposed changes to its manual journal voucher controls prior to implementation.
15	Yes	$0	$0
KPMG recommends that AFM-300 update its quarterly financial reporting checklist or similar documentation to review amounts reported as federal transfers and non-federal donations during the period and verify that the corresponding journal entries are prepared accurately.