Federal Reports

What We Looked AtThe Federal Aviation Administration (FAA) Administrative Services Franchise Fund is a Government-run, fee-for-service organization that aims to foster competition, increase efficiency, and reduce costs across the Federal Government. The Fund has six service organizations and reported $480 million in annual revenues in 2018. As required by the FAA Reauthorization Act of 2018, our office initiated an audit to assess FAA’s management and oversight of the Fund’s operations and activities. Specifically, we looked at the Fund’s history, intended purpose, and objectives; conformance to generally accepted accounting principles; and conformance to Federal policies and other guidelines. What We FoundThe Fund’s six service organizations serve multiple types of customers; by law, they are required to receive payment in advance. While the Fund’s annual revenues reflect increases in its services and customers, we found weaknesses in its internal controls. For example, the Fund does not track inventory age; as such, we could not determine if the inventory value, reported to be $656 million in 2018, had been overstated. Fund officials also do not conduct adequate oversight of the financial operations. For example, we found $2.6 million in unexpended funds that should have been returned to customers; we project the total unreturned amount to be $26 million of $338 million in unexpended funds. In addition, if they are not paid in advance, some service organizations use operating reserves to pay for the costs of providing services, contrary to law. Most of them do not fully comply with requirements for capital reserve plans—increasing the risk that funds could be mismanaged. Still, FAA is changing the Fund’s governance structure, which might allow it to measure whether the Fund is receiving adequate oversight and stability. However, FAA could do more to address customer concerns regarding transparency and to avoid the risk of improperly obligating funds. Enhancing financial-related internal controls is key to ensuring the Franchise Fund functions as Congress intended. Our RecommendationsWe made 13 recommendations to help FAA strengthen its management and oversight of the Franchise Fund. FAA fully concurred with recommendations 3 through 13, but did not concur with recommendations 1 and 2. We have asked the Agency to reconsider its position.

Enacted in January 2016, the Grants Oversight and New Efficiency Act requires Federal agencies to report to Congress and the Department of Health and Human Services on open grant and cooperative agreement awards whose periods of performance have been expired for at least 2 years, and take appropriate action to close them. The act also requires the Inspector General of each agency with over $500 million in annual grant funding, such as the Department of Transportation (DOT), to conduct a risk assessment to determine whether an audit or review of the agency’s grant close-out process is warranted. Our risk assessment of DOT’s grant closeout process did not detect a level of risk that warrants an audit or review of the process at this time. However, we will continue to monitor this area and may conduct future audits as appropriate.

An Amtrak Assistant Conductor in Pontiac, Michigan, was terminated from employment on November 12, 2019, following an administrative hearing for violating company policy. Our investigation found that the employee submitted false documentation and made false and misleading statements regarding his claim that he sustained a work-related injury. Additionally, the employee was not truthful when we interviewed him during this investigation.