Message from the Administrator

FAA FY 2001 FINANCIAL STATEMENTS

A MESSAGE FROM THE ADMINISTRATOR 

I am pleased to present the FY 2001 audited financial 

statements of the Federal Aviation Administration (FAA). 

The statements offer Congress and the public a clear and 

concise source of information regarding our mission, 

operations, and performance. The unqualified audit opinion 

we received on this year’s financial statements is strong 

evidence of our commitment to effective management of our 

resources. 

The horrific events of September 11 challenged aviation in 

ways that we could never have imagined. All of us at the FAA 

express our deep sorrow and unwavering support to fellow 

Americans in the wake of the attacks on our Nation. We will 

carry forward with our pledge to provide safe, expeditious air 

traffic service and to restore confidence in air travel.

As we closed out one fiscal year and began another, aviation security continued to be our 

uppermost concern. With leadership from President Bush, Secretary Mineta, and the Congress, 

a major ramping-up of our security system is underway. Aviation security, which had been the 

responsibility of the airlines, is now a direct Federal responsibility, overseen by a new 

Transportation Security Administration (TSA) under the leadership of Undersecretary John 

Magaw. Aviation security oversight responsibilities performed by the FAA have also been 

transferred to the TSA. This vastly expanded effort will help to fortify America against future 

acts of terrorism in aviation and across all modes of transportation. We at the FAA will work 

with the TSA to ensure that the Nation’s air transportation system operates with the highest 

possible levels of security. 

The coming months will require even higher levels of vigilance and preparedness, but also give 

us the opportunity to make real progress in resolving some longstanding issues in aviation. 

Confidence in the safety and security of air travel will be restored. Our economy will recover. 

And with renewed growth will come renewed concern and frustration over congestion and 

delays. We are continuing our efforts to build an aviation system designed to meet the 

burgeoning needs of the 21st century. This effort is spelled out in Version 4.0 of the FAA’s 

Operational Evolution Plan (OEP) – a flexible, programmatic approach that will allow us to 

deliver almost 30 percent additional capacity by 2010. 

FY 2001 saw significant advances toward this goal. We can report substantial progress in 

eliminating “choke points” in the airspace of the eastern United States, and we have taken steps 

to streamline procedures to speed the environmental review process for new runways. 

During the past year, we also accelerated the rollout of the user request evaluation tool

(URET), bringing us near to the successful completion of Free Flight Phase 1. Controllers are 

excited about the value of this tool for increasing productivity, helping them better focus 

attention on critical tasks, and adding a new conflict probe capability. With this 

accomplishment, we are delivering on our commitment to modernize the air traffic control 

system–providing tangible benefits with the surface movement advisor, collaborative 

Table of Contents 3

FAA FY 2001 FINANCIAL STATEMENTS

Table of Contents

Message from the Administrator.......................................................................................1

Introduction......................................................................................................................5

CHAPTER 1. Management Discussion and Analysis .......................................................7

Overview .....................................................................................................................7

FAA Strategic Goals ................................................................................................... 19

FAA Performance Goals.............................................................................................. 21

FY 2001 Financial Highlights...................................................................................... 35

Comparative Analysis ................................................................................................. 39

CHAPTER 2. Financial Statements................................................................................45

Management Report of the Chief Financial Officer ....................................................... 45

Financial Statement Audit Report ................................................................................ 47

Limitations of the Financial Statements........................................................................ 61

Financial Statements................................................................................................... 62

Notes to the Financial Statements................................................................................. 67

Required Supplementary Information..........................................................................114

Glossary of Acronyms ................................................................................................... 117
4

FAA FY 2001 FINANCIAL STATEMENTS

(Intentionally left blank)
Introduction 5

FAA FY 2001 FINANCIAL STATEMENTS

INTRODUCTION

The FAA FY 2001 Financial Statements have been prepared in accordance with the Chief 

Financial Officers Act of 1990, with guidance on form and content provided by the Office of 

Management and Budget (OMB) and the Federal accounting standards provided by the Federal 

Accounting Standards Advisory Board (FASAB). It consists of two chapters.

The first chapter contains a three-part Management Discussion and Analysis. Part one 

provides a high-level overview of the FAA, its mission, and organization–who we are and what 

we do – and a summary of how the agency responded to the unprecedented assault on America 

on September 11, 2001. Part two contains a set of performance measures used to track the 

agency’s overall progress toward achieving its strategic plan goals. These performance 

measures are primarily for FY 2000, as FY 2001 data will not be available until the DOT 

Performance Report is sent to Congress on March 31, 2002. It should be understood, therefore, 

that the performance measures are based on goals, objectives, and strategies planned before the 

September 11, 2001, terrorist attacks. Part three of the chapter contains the FY 2001 financial 

highlights describing how the FAA is financed and the funding of major programs. New to 

this year’s report is a comparative analysis of current year to prior year finances.

The second chapter presents the FAA’s detailed FY 2001 financial statements. It opens with a 

message from the Chief Financial Officer, followed by the auditor’s report, the financial 

statements and notes, and required supplemental information pertaining to the agency’s 

stewardship of its resources and other matters. 

Relationship of the Financial Statements to Other Plans

The FAA Strategic Plan formally states the agency’s mission and sets the goals, long-range 

objectives (i.e., 5 to 20 years), and key strategies for achieving the mission. FAA measures 

contained in the DOT Performance Plan define the performance indicators and strategies that 

are used to gauge progress in achieving the agency’s Strategic Plan goals. The FAA Strategic 

Plan 2001 Supplement brings together the Strategic Plan and the FAA measures contained in 

the DOT Performance Plan to provide a focused set of initiatives that the FAA will take in the 

near-term (i.e., 3 years) to achieve its objectives. The Supplement describes each performance 

goal, the major projects that support it, how long it will take, who will accomplish it, and the 

estimated investment required. 

FAA is investing in improved financial systems that will provide the flexibility to more clearly 

relate the agency’s budgetary resources with activities, outputs, outcomes, and performance 

goals. 
FAA Organization Chart 6

FAA FY 2001 FINANCIAL STATEMENTS

FAA ORGANIZATION CHART
Overview 7 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

MANAGEMENT DISCUSSION AND ANALYSIS

FEDERAL AVIATION ADMINISTRATION

OVERVIEW

The Federal Aviation Administration 

(FAA) is the leading Federal agency 

responsible for the safety of civil 

aviation and for guiding and helping 

develop commercial space 

transportation. Major activities include 

issuing and enforcing aviation safety 

rules and standards; rating and certifying 

pilots, aircraft, and airports; around-theclock operation and maintenance of the 

Nation’s air traffic control system; 

modernizing the National Airspace 

System (NAS) infrastructure; working with local security, intelligence, and law enforcement 

agencies to prevent incidents that threaten airport and aircraft security; the distribution of 

Federal funds to airports to maintain and enhance airport safety and security, preserve existing 

infrastructure, and expand capacity and efficiency; the regulation of the commercial space 

industry; and the licensing of commercial space launches. 

On September 11, 2001, terrorists hijacked four U.S. commercial jet airliners, crashing them 

into the twin towers of the World Trade Center in New York, the Pentagon, and the 

Pennsylvania countryside. Once the nature and scale of the attacks were realized, Secretary of 

Transportation Norman Y. Mineta ordered, for the first time ever, the closing of America’s 

airspace. Moments after the first attack, FAA issued a ground stop to prevent any aircraft from 

taking off and ordered the 4,873 aircraft already airborne to land as quickly as possible at the 

nearest available airport. Each of these planes landed safely. 

Stringent new security measures were implemented immediately in response to the attacks. 

The new measures included close monitoring of vehicles parked near the airport; 

discontinuance of curbside and off-airport check-in; the increased presence of law enforcement 

officers and canine units; random security and identification checks throughout the entire 

terminal areas; restricted access beyond the screening area; enhanced screening procedures; the 

banning of all cutting instruments from carry-on luggage and the selling of such instruments 

beyond the security checkpoints; and other restrictions. 

The national airspace was reopened to commercial aviation at 11 a.m., eastern standard 

time, September 13, 2001. Before resuming operations, airports and air carriers had to meet 

the enhanced security requirements through a certification process. In addition, 

President George W. Bush directed the expansion of the Federal Air Marshals program to 

provide a substantially increased level of coverage within the United States. 

The events of September 11 changed fundamentally the assumptions underlying aviation 

security. On September 27, President Bush announced that he would seek congressional 

approval to make the expansion of the Federal Air Marshals Program permanent, and
Overview 8 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

that he would work with Congress to put the Federal Government in charge of managing 

airport security and screening services. The President called for the National Guard to be 

stationed at every commercial airport nationwide until the new security plans are put in place.

The President also announced that effective October 1, 2001, a $500 million Federal grant 

program would be available to finance aircraft modifications to delay or deny access to 

the cockpit. Two Rapid Response Teams created by Secretary Mineta contributed 

recommendations for consideration. The teams’ most substantive recommendations included a 

major program for securing the cockpit doors of the Nation’s entire commercial aircraft fleet 

and the establishment of a $20 million grant for innovative, new technology that will further 

enhance flight deck security.

FAA MISSION 

The FAA’s mission has always been, and continues to be, to provide the American people with 

the safest, most secure, and most technologic ally advanced aviation system available. This 

mission has never been more vital than it is today. In the months ahead, FAA will take 

whatever steps are necessary to maintain safety, tighten security, and ensure the efficient flow 

of air traffic throughout our Nation. 

FAA ORGANIZATION

The FAA is headed by an Administrator and 

a Deputy Administrator who provide overall 

leadership and management direction. Both 

the Administrator and Deputy Administrator 

are appointed by the President and 

confirmed by the Senate. 

Reporting to the Administrator are six 

Associate Administrators who direct the 

organizations that carry out the agency’s 

principal mission. These lines of business 

account for over 92 percent of the FAA’s 

workforce. Also reporting to the 

Administrator are the Chief Counsel and nine Assistant Administrators responsible for other 

key programs and without whose support the agency could not operate or hope to achieve its 

goals. FAA's field organizations – where more than 90 percent of all FAA employees work –

are concentrated in nine geographical regions and two major centers, the Mike Monroney 

Aeronautical Center and the William J. Hughes Technical Center. Together, the FAA team of 

over 48,000 employees administers the world’s busiest and safest civil aviation system. 

FAA provides a safe, secure, and efficient global aerospace system that 

contributes to national security and the promotion of U.S. aerospace 

safety. As the le ading authority in the international aerospace 

community, FAA is responsive to the dynamic nature of customer 

needs, economic conditions, and environmental concerns.

FAA Headquarters, 800 Independence Avenue SW 

Washington, D.C. 
Overview 9 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

FAA Employment

 (Permanent Employees)

Staff Offices

Regulation and 8%

Certification

12%

Research and 

Acquisitions

4%

Commercial 

Space 

Transportation

.1%

Airports

.9% Civil Aviation 

Security

2%

Air Traffic 

Services

73%

FAA is one of 11 operating arms of the Department of Transportation (DOT) and is a full 

partner in the ONE DOT Management Strategy – a program that emphasizes collaboration 

among departmental branches. 

FAA Employment

(Full-Time and Part-Time Permanent Employees)

FY00 FY01

Line of Business

Air Traffic Services 35,425 35,425

Regulation and Certification 5,864 5,865

Civil Aviation Security 1,153 1,153

Airports 446 448

Research and Acquisitions 1,898 1,897

Commercial Space Transportation 25 25

Staff Offices 3,652 3,653

Total 48,463 48,466

Region/Center/Headquarters (included in above total)

Mike Monroney Aeronautical Center 1,566 1,566

Alaskan 1,348 1,358

Central 2,511 2,512

Eastern 5,326 5,324 

Great Lakes 6,515 6,514

New England 1,923 1,923

Northwest Mountain 4,175 4,175

Southern 7,718 7,718

Southwest 5,340 5,340

Western Pacific 5,562 5,562 

Washington Headquarters (DC area) 3,672 3,676

 Washington Headquarters (Field) 1,825 1,825

William J. Hughes Technical Center 972 972

Percent of Staffing

By Major Organization
Overview 10 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

ASDE provides radar 

surveillance of aircraft and 

airport service vehicles at high 

activity airports.

FY 2001 PROGRAM ACTIVITY HIGHLIGHTS

Air Traffic Services

From the time pilots begin pre-flight activities 

until they shut down the aircraft at their 

destination, air traffic controllers provide an 

integrated set of services to ensure that each 

aircraft operation is safe. Controllers at local 

airport towers direct airplanes that are taking off, 

landing, or flying within the visual range of their 

tower – usually 2 to 5 miles. Controllers in 

terminal radar approach control (TRACON) 

facilities handle aircraft approaching or departing 

within 5 to 50 miles of the airport. Controllers at 

21 air route traffic control centers (ARTCC) 

guide airplanes in flight from one city to another. 

Traffic management specialists at the David J. 

Hurley Air Traffic Control Systems Command 

Center (ATCSCC) plan and balance the flow of 

air traffic, nationwide, to maximize safety and minimize delays and congestion. Flight service 

station (FSS) specialists provide flight plan filing, weather data, and information briefings to 

pilots. Controllers rely on a complex network of radar, computer, and communications 

systems that is kept operating at peak efficiency by highly trained electronics and 

environmental technicians.

Throughout FY 2001, DOT and FAA continued work to minimize delays in the air traffic 

control system. Capacity benchmarks, representing the maximum number of flights that an 

individual airport can routinely handle, were established for 31 major airports. Plans were also 

developed to improve operational efficiency at the eight airports with the highest delay rates 

(Atlanta, Boston, Chicago O’Hare, Newark, New York Kennedy, New York LaGuardia, 

Philadelphia, and San Francisco). FAA also identified tactical measures to alleviate the 

chokepoints, or bottlenecks, in the “triangle” between Chicago, Washington, D.C., and Boston. 

These initiatives focus on the creation of new procedures and changes to existing programs 

designed to gain greater efficiency from the current airspace. Of 21 initiatives identified, 

16 were completed in FY 2001, and five are planned for completion in FY 2002.

The reduction of runway incursions continues to be one of 

the FAA’s most important safety initiatives. FAA is 

working to enhance pilot and controller communication, 

identify and implement procedural changes to reduce surface 

operational errors, and develop and promote runway safety 

training for airline, airport, and FAA personnel. Sitespecific solutions are underway at approximately ten airports 

that sustain the highest number of runway incursions. In 

FY 2001, FAA began commissioning the airport movement 

area safety system (AMASS) – an enhancement to the 

airport surface detection equipment Model 3 (ASDE-3) that 

provides controllers with visual and aural alerts of potential 

Airport traffic control towers, such as this one 

at Salt Lake City, Utah, are the public’s most 

recognizable air traffic control function.
Overview 11 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

FAA safety inspectors and industry 

partners work together to ensure high 

standards of airworthiness.

runway accidents caused by runway incursions. AMASS will be installed at the Nation’s 34 

busiest airports. It became operational at airports in San Francisco and Detroit in June 2001, 

with the remaining 32 airports scheduled to have the system in operation by the end of 2003. 

FAA is also developing a new surveillance system, called ASDE-X, which will be deployed at 

the 25 next busiest airports. 

On September 11, 2001, FAA air traffic controllers responded to a challenge that was 

unprecedented in the history of aviation after terrorists hijacked four planes and turned them 

into guided missiles. Four minutes after receiving the order to shut down the national airspace, 

controllers had directed 700 planes to safe landings. Another 2,800 planes had landed within 

54 minutes. By 12:16 p.m., 3 1/2 hours after the first attack, FAA air traffic controllers had 

safely cleared the U.S. airspace of air traffic. The quick action and extraordinary performance 

of controllers under these trying conditions have been credited with possibly preventing more 

attacks and saving hundreds of lives. In recognition of their services, the Nation’s air traffic 

controllers were presented the Secretary’s 2001 Gold Award.

Safety Regulation and Certification

FAA aviation safety inspectors and technical staff 

oversee the safety of planes and the credentials and 

competency of pilots and mechanics, develop 

mandatory safety rules, and set the standards that have 

helped make air travel among the safest modes of 

transportation. On May 7, 2001, for example, FAA 

issued a rule that requires airplane manufacturers and 

operators to change how airplane fuel tanks are 

designed, maintained, and operated. It includes 

regulation to minimize the potential for failures that 

could cause ignition sources in fuel tanks on new and 

existing airplanes and, for the first time, mandates 

airplane design changes to minimize the flammability of fuel tanks on new airplanes. The rule 

is the most comprehensive fuel tank safety initiative ever put forward. 

On August 16, 2001, FAA unveiled a broad new initiative designed to enhance the continued 

safety of aircraft wiring systems from their design and installation through their retirement. 

The enhanced airworthiness program for airplane systems (EAPAS) is based on results from an 

intensive data-gathering effort on aircraft wiring systems done in cooperation with industry. It 

combines a variety of near- and longer-term actions into a plan to increase awareness of wiring 

system degradation, implement improved procedures for wiring maintenance and design, and 

disseminate that information throughout the aviation community.

Two of the FAA Administrator’s top priorities are the air transportation oversight system

(ATOS) and the Safer Skies initiative.

ATOS, which the FAA implemented 3 years ago, is a new approach to FAA certification and 

surveillance oversight of the Nation’s airlines. The program incorporates the structured 

application of new inspection tasks, analytical processes, and data collection techniques to the 

oversight of individual air carriers. This approach enables Flight Standards inspectors to be 

more effective by focusing on the most critical safety aspects of an air carrier’s operation. 
Overview 12 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

The deployment of new technology and 

improved training and testing of screeners 

will enhance the safety and security of

passengers.

ATOS is being applied for the Nation’s 10 largest airlines – which handle 95% of U.S. 

passengers – and will ultimately include all U.S. airlines. A new training management course 

on system safety and risk management was developed in FY 2001 that will provide the 

knowledge of the concepts needed for enhanced ATOS implementation. 

The Safer Skies initiative, begun in partnership with the industry in June 1998, is designed to 

bring about a five-fold reduction in fatal accidents. Safer Skies focuses on the prevention of 

accidents by addressing recurrent causes, sharing safety information, and improving 

certification and surveillance. The initiative has already produced 13 actions that are being 

used in day-to-day commercial operations to prevent some of the leading causes of accidents. 

Safety interventions are being implemented for controlled flight into terrain, uncontained 

engine failures, and approach and landing accidents. Intervention strategies for runway 

incursions, loss of control, and weather are in development.

In the aftermath of the September 11 attacks, Regulation and Certification personnel are 

working to expedite recommendations of President Bush and the Rapid Response Teams to 

restrict access to the cockpit during flight; fortify cockpit doors against forced entry; to alert 

the cockpit crew to activity in the cabin; and to ensure continuous operation of the aircraft 

transponder in the event the crew faces an emergency. FAA issued a Special Federal Aviation 

Regulation (SFAR) allowing airlines to quickly strengthen cockpit doors without having to 

follow normal requirements for modifying planes. At the end of 6 months, each airline must 

submit a plan for a long-term fix. The President has made $500 million available to the FAA 

to finance aircraft modifications to support near- and long-term fixes, and the FAA is prepared 

to quickly evaluate each airline’s proposal. 

Civil Aviation Security

FAA works with local security, intelligence, and law 

enforcement agencies to protect passengers, 

personnel, aircraft, and critical national airspace 

facilities against terrorist and other criminal acts. 

Since implementing the new security measures on 

September 11, 2001, FAA has continuously 

monitored the effectiveness of these measures and 

has worked with airports and air carriers to refine 

and expand them as necessary. On October 8, FAA 

issued new guidance on the kinds of items that can 

be carried on board and limited passengers to one 

carry-on bag and a pocketbook or briefcase. The 

restrictions on carry-on luggage were recommended 

by the Rapid Response Team for Airport Security 

and mirror rules imposed on flights to and from 

Reagan National Airport. 

Since the early 1970’s, the FAA has required the screening of passengers and property to 

prevent unlawful or dangerous weapons, explosives, or other destructive substances from being 

carried onto commercial aircraft. Under current law, the FAA sets the standards for screener 

selection, training and testing, and the airlines implement those requirements, usually through 

contracting with security screening companies. Before they are hired, security screeners and 
Overview 13 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

their supervisors are subject to an employment investigation and, in some cases, a criminal 

history background check (i.e. an FBI fingerprint check). Last year, under the Airport Security 

Improvement Act of 2000 (Security Act), Congress expanded the fingerprinting requirement 

to include all new screeners. This additional level of scrutiny is already in effect at major 

airports and will include all other regulated airports by November 2003. 

The Security Act also directed the FAA to accelerate its rulemaking on the certification of 

screening companies and set a minimum of 40 hours of classroom instruction or its equivalent, 

40 hours of on-the-job training, and passage of a written and practical, on-the-job exam. 

FAA’s proposed rule incorporating these requirements would also give the agency direct 

oversight of screening companies, impose uniformly high standards for training and testing of 

security screeners, and give the FAA a role in monitoring the ability of screening companies to 

meet performance criteria at checkpoints. Although this rule was ready to be published, action 

has been temporarily suspended as part of the ongoing congressional evaluation of what further 

security measures are needed.

For effective performance, screeners must be given the best tools available and trained to use 

them properly. In addition to the conventional screening tools, hand-held and walk-through 

metal detectors, and the x-ray system, screeners now have explosives trace detection (ETD) 

devices that can detect the presence of explosive materials in a passenger's carry-on items. To 

help test and measure screeners’ performance, FAA is deploying a new software technology 

called threat image projection (TIP) that runs on the checkpoint x-ray machines. FAA expects 

to replace x-ray machines at every airport security checkpoint in the country with new 

TIP-installed x-rays. 

FAA is also continuing airport placement of explosives detection systems (EDS) for checked 

bags. EDS detects, without human intervention, the amounts and types of explosives likely to 

be used by terrorists to cause catastrophic damage to commercial aircraft. 

FAA is also working with airport operators to deploy additional canine teams to screen 

suspicious packages, cargo and bags, and to search airlines and terminals. FAA-certified 

canine teams are in place at 39 of the largest U.S. airports. FAA has identified 25 additional 

airports that will have FAA-certified teams. The goal is to place teams at each of the Nation’s 

busiest airports.

The phenomenal growth of the Internet and computer skills of the public has created 

unprecedented potential to threaten the critical infrastructure of the United States, including the 

air traffic management system. Compounding these risks is the rapid growth of automated 

information exchange between the FAA and airspace users. Responding to these threats, FAA 

has developed a comprehensive program to assure that the NAS and its supporting systems are 

immune to attack. Additionally, the agency has established a computer security incident 

response center that will analyze attacks when they occur, ensure that they are promptly 

addressed, and continually probe the agency’s information systems for new weaknesses.
Overview 14 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

Airports

FAA provides leadership in planning and developing a safe, secure, and efficient national 

airport system. As part of its safety oversight mission, FAA certifies airports serving 

commercial aircraft operating with more than 30 seats and periodically inspects those airports 

for compliance with established safety standards. 

The Airport Improvement Program (AIP) is the primary

program for distributing Federal funds to airports to 

maintain and enhance airport safety and security, 

preserve existing airport infrastructure, expand capacity 

and efficiency throughout the airports system, and reduce 

the impact of airport noise on the surrounding 

community. The AIP, which receives funds from the 

Airport and Airway Trust Fund maintained through the 

payment of user taxes, makes it possible to fund onefourth to one-third of all capital development at the 

Nation’s public use airports. In FY 2001, airport grants 

were funded at $3,193 million. The Passenger Facility 

Charge (PFC) Program provides an additional source of 

capital funding for improving airports. At the end of 

calendar year 2000, annual PFC collections exceeded 

$1.6 billion. 

In FY 2001, DOT and FAA streamlined the approval procedures for moving major new 

runway projects through the environmental review pipeline. The goal is to reduce unnecessary 

delays while complying with all environmental protection requirements. FAA has established 

an environmental impact statement (EIS) team of experts for each planned major runway 

project that has not completed FAA’s environmental review and is reallocating staff to help 

speed the process. FAA is also working with the Council on Environmental Quality to revise 

FAA’s environmental orders and has entered into an agreement with the National Association 

of State Aviation Organizations to improve Federal/state coordination. A guide to best 

practices for EIS management and preparation, issued on July 13, 2001, is available on the 

FAA website, www.faa.gov.

In response to the September 11 attacks, FAA reexamined the existing statutory provisions of 

AIP grants to broaden eligibility for funding security equipment. In particular, FAA expanded 

the definition of equipment and revised the standards for determining what constitutes a 

“significant contribution” to security to fund projects to protect passengers and terminal 

buildings. Previously, the focus of AIP had been on the security of aircraft. Under the new 

policies, FAA is prepared to fund equipment identified by the FAA Civil Avia tion Security 

Office as needed at an individual airport. Examples include canines trained for explosives 

detection, kennels, and security equipment of the type normally required by regulation at larger 

air carrier airports. FAA is also giving higher priority to the funding of equipment necessary to 

satisfy airline security requirements. 

Recognizing that some individual airports, particularly smaller airports, might be in dire 

financial circumstances following the attacks, FAA reviewed the statutes and regulations 

There are 429 US airports with 

commercial service. 
Overview 15 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

This controller at the El Paso TRACON is 

using the new STARS.

The Operational Evolution Plan will allow 

FAA to deliver almost 30 percent additional 

capacity by 2010.

governing AIP and PFC to identify any flexibility to provide emergency financial assistance. 

Specifically, FAA is prepared to grant individual airports short-term emergency authority to 

borrow unliquidated PFC cash balances to cover general airport expenses. 

Research and Acquisitions

FAA provides the essential infrastructure and 

conducts research to meet increasing demands for 

higher levels of system safety, security, capacity, 

and efficiency. In order to sustain the current 

systems and renew the aviation infrastructure, FAA 

is incorporating both major and minor changes to the 

air traffic control system. FAA’s 21 en route centers 

are significantly upgraded with new equipment – the 

display system replacement (DSR), the new Host 

computer, and air traffic control voice switching. 

FAA has also begun to deploy the standard terminal 

automation replacement system (STARS). STARS 

will replace computer and radar displays at 173 

terminal radar approach control (TRACON) 

facilities. The initial phase of STARS, called the early display configuration (EDC) , is 

operational at two sites: El Paso, Texas, and Syracuse, New York, setting the stage for national 

deployment to 11 additional EDC sites starting in early 2002. 

In June 2001, FAA unveiled a cooperative 10-year 

Operational Evolution Plan (OEP) that addresses the 

growing gap between demand and capacity in the air 

transportation system. The OEP is unique in that it 

integrates and aligns the agency’s activities with 

those of the aviation industry and users of the 

system. It calls for changes in how aircraft operate 

to better utilize available capacity; a redesign of the 

airspace to accommodate greater numbers of aircraft 

while maintaining safety; deployment of new 

technology to increase flexibility; construction of 

new runways; and new procedures to improve 

management and mitigation of delays. 

FAA’s FY 2001 Research, Engineering and 

Development (R,E&D) initiatives included increased 

efforts in safety-critical areas such as runway 

incursion prevention; aircraft safety, improved weather prediction, detection, and 

dissemination; wake turbulence monitoring technologies; programs that support the 

introduction of Free Flight; the improvement of airport surface operations; the investigation of 

human factors in the aviation environment, and other programs that support the Safer Skies 

initiative.
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FAA FY 2001 FINANCIAL STATEMENTS

URET aids controllers in granting pilot requests to 

change their flight path for more direct routes or for 

different altitudes.

A major element of FAA’s research program is the development of new security technologies. 

Researchers at the William J. Hughes Technical Center are investigating technology that can 

improve metal detectors so they can detect very small quantities of metal, such as those found 

in some plastic guns. FAA is accelerating this research and is looking at a variety of imaging 

technologies that could be used to detect items like plastic guns or plastic knives hidden on a 

passenger’s person. Researchers and engineers are working aggressively with industry to 

determine how best to harden the flight deck. As part of the $500 million initiative announced 

by President Bush, Secretary Mineta created a $20 million grant program to develop new 

technologies for improved aircraft security. The grants can be used to test any new technology 

that leads to safer, more secure aircraft. 

Following the September 11 attacks, FAA Administrator Garvey expanded the Research, 

Engineering & Development Advisory Committee (REDAC) Security Subcommittee and 

tasked them to assess various aviation security research opportunities. The Committee will 

assemble a list of all relevant research and development across Government and industry that 

could potentially mitigate terrorist activities associated with aviation and submit their 

recommendations to the Administrator. FAA has also issued an announcement on its website

(www.faa.gov) requesting information about any product or technology that could be helpful in 

improving aviation security. 

Commercial Space Transportation

The Office of Commercial Space Transportation oversees the safety of commercial space 

launches and regulates the growing commercial space industry. The Office licenses 

commercial space launches that take place in the United States or are conducted by U.S. 

entities anywhere in the world. Since the first launch in 1989, there have been 137 licensed 

commercial launches. In February 2001, FAA released the first study of the U.S. commercial 

launch industry’s effect on the Nation’s economy. The report shows that, in 1999, over 

$61.2 billion in economic activity was linked to the U.S. commercial space industry and that 

over 497,000 people were employed in the United States as a direct or indirect result of 

commercial space transportation and enabled industries. 

Free Flight 

The Free Flight program was established in 

1998 to develop and install selected 

automation capabilities for controllers to 

provide more flexible and efficient 

management of the airspace. Both Free 

Flight Phases 1 (FFP1) and 2 (FFP2) are on 

track. 

The FFP1 segments of the center/TRACON 

automation system (CTAS), surface 

management, and collaborative 

decisionmaking tools are complete. 
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FAA FY 2001 FINANCIAL STATEMENTS

The prototype of the user request evaluation tool (URET) reached 1 million hours of use at 

Memphis and Indianapolis Air Route Traffic Control Centers (ARTCC) in May 2001 and was 

deployed to the Kansas City ARTCC in December 2001. URET will be delivered to 

Indianapolis, Memphis, Atlanta, Chicago, Cleveland, and Washington Centers in early 2002. 

The CTAS en route tool, known as the traffic management advisor or TMA, is operational at 

all seven of the seven scheduled centers. The CTAS prototype for terminal airspace is 

operational at the Southern California TRACON through the use of auxiliary displays at the 

controller position and large screen displays at the Traffic Management Unit. 

Administration

FAA strives to make its operations more efficient and responsive by employing sound business 

practices, introducing advanced information technology, maintaining a highly skilled 

workforce, and operating a model workplace. To this end, FAA is implementing a 

comprehensive new cost accounting system (CAS) that will provide financial information to 

better understand and manage the cost of FAA products and services. The CAS also provides 

the agency credible information on the cost of end-user services in support of user fees. To 

strengthen the CAS, a labor distribution reporting process is being put in place to capture the 

time that FAA employees spend on various project and activities. Both CAS and LDR are 

tools for providing cost data which, when combined with performance data, will assist the FAA 

in achieving its cost and performance measurement objectives. 

Because of its complexity, CAS is being accomplished in a phased approach. In FY 1999, 

CAS produced the annual cost of air traffic services (ATS) en route and oceanic services, 

which were used as the basis for overflight fees. In FY 2000, CAS produced cost data 

quarterly and added ATS flight services. CAS was expanded in FY 2001 to include monthly 

reporting and costs associated with ATS terminal services. By the end of FY 2002, FAA 

expects to complete the implementation of CAS in the remaining FAA lines-of-business. 

FAA has also begun implementing “portfolio management”–an investment management 

approach that will be used to identify the investment opportunities that will deliver the most 

value to the agency and its customers, in terms of operational benefits, and to manage those 

investments to ensure that value is delivered. With the implementation of portfolio 

management, FAA is shifting its focus from product delivery to service delivery. The 

Terminal Business Service, established in January 2001, is evaluating key aspects of the 

portfolio management approach.

In FY 2001, FAA also completed work on a new performance management system that 

became effective on October 1, 2001. The new system covers most FAA employees, 

excluding senior executives. Unlike the old “once-a-year, check-the-box” performance rating, 

the new system is an ongoing process that links performance standards to organization and 

agency goals. Designed with feedback and input from employees, it also expands the role of 

employees in the performance management process through shared responsibility and 

accountability with their supervisors. Most employees will transition into the new performance 

management system during FY 2002.
Overview 18 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

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Overview 19 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

FAA STRATEGIC GOALS

STRATEGIC PLAN

The FAA’s Strategic Plan sets forth the overall vision, mission, and direction of the agency that 

will guide FAA activities for the next 5 to 20 years as it responds to the challenges and changes 

facing aviation. The Plan sets three mission-based strategic goals for the aerospace system: 

Safety, Security, and System Efficiency. Each goal stems directly from FAA’s legal charter 

and the DOT 1998 and 2000 Strategic Plans. FAA has defined long-term objectives and 

strategies, near-term projects, and performance targets to achieve each goal. In addition, the 

Strategic Plan sets supporting goals that will enable FAA to achieve its mission. These goals 

address people (model work environment), reform, environment, and global leadership. A 

strategic plan supplement is published annually that describes proposed near-term (1-3 years) 

accomplishments, interim milestones, and the investment needed to achieve the missionoriented goals.

FAA’s Mission Driven Goals

Safety Security System Efficiency

Reduce fatal aviation accident rates 

by 80 percent in 10 years (2007)

Prevent security incidents in 

the aviation system

Provide an aerospace transportation 

system that meets the needs of users and is 

efficient in applying resources

Annual Performance Goals

• Reduce commercial 

aviation fatal accident rate

• Limit general aviation 

accidents

• Reduce runway incursions

• Reduce operational errors

2001 Projects

• Safer Skies – runway 

safety

• Safer Skies – commercial

• Safer Skies – GA

• GPS implementation

• Air Transportation 

Oversight System (ATOS)

• Aviation Safety Action 

Program (ASAP)

• Space transportation 

safety

Annual Performance Goals

• Improve explosive 

devices and weapons 

detection

2001 Projects

• Certification of 

screening companies

• Deploy advanced 

technology

• Passenger bag 

match/screening

• Information systems 

security 

Annual Performance Goals

• Reduce rate of air travel delays

• Maintain runway pavement 

condition

• Improve all weather access to 

airports by adding vertical 

guidance approaches

• Increase flight route flexibility

with non-ATC preferred routings

2001 Projects

• Free Flight Phases 1 and 2

• National Airspace Redesign

• STARS

• Improve Weather Information

• Revitalize existing structures, 

technology, and operational 

resources 

• En route automation 

modernization (ERAM)

• Major procurement program 

goals

• Capacity improvements

FAA’s Supporting Goals

People Reform Environment Global Leadership

Prepare the workforce for 

the demands of the 21st

century.

Become more 

businesslike while 

increasing customer 

responsiveness.

Maintain number of 

people exposed to aircraft 

noise at current levels.

Improve safety and security 

of the international aviation 

system.
Overview 20 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

DOT ANNUAL PERFORMANCE PLAN/FAA STRATEGIC PLAN 

SUPPLEMENT

The DOT Annual Performance Plan includes the performance goals and measures that FAA 

will use to monitor progress toward achieving its three overarching strategic goals. The FAA 

Strategic Plan and the performance measures contained in the DOT Plan serve as top-level 

links to the program activities found in the agency’s fiscal year budget request. Taken 

together, they guide the FAA in its effort to provide the American people with the safest, most 

secure, and most efficient airspace system possible. 

The following section reviews FAA’s progress in attaining its key performance goals. As 

discussed previously, the performance measures in this Financial Statement are for FY 2000, as

FY 2001 data will not be available until the DOT Performance Report is sent to Congress on 

March 31, 2002. Therefore, the impact of the events of September 11, 2001, is not reflected in 

these goals and measures. 
FAA Performance Goals 21 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

FAA PERFORMANCE GOALS

SAFETY

AIR CARRIER FATAL ACCIDENT RATE

Performance Measure: Fatal aviation 

accidents (U.S. commercial carriers) per 

100,000 departures

2002 Goal: .038

2001 Goal: .043

2000 Goal: .045

2000 Performance: .033

Commercial aviation is one of the safest forms of transportation. But when passengers board 

an airplane, they give up personal control and face an unfamiliar risk. While fairly rare, 

aviation accidents can have catastrophic consequences, with large loss of life. The public 

demands a high standard of safety and expects continued improvement. FAA’s goal is an 

80 percent reduction in the U.S. commercial air carrier fatal accident rate by 2007. Based on 

preliminary data, FAA met the FY 2000 increment of this goal: the air carrier fatal accident 

rate was .033 per 100,000 departures. 

In absolute terms, the fatal accident rate in commercial aviation is very low. One of the 

primary reasons for this is the use of jet aircraft. Also contributing to a lower accident rate are 

technological advances in both avionics and radar and operational procedural improvements. 

Under the FAA and industry partnership’s Safer Skies agenda, several critical steps were 

completed in addressing problems related to controlled flight into terrain and uncontained 

engine failure. Interventions for controlled flight into terrain included:

• Improved training aids for both pilots and air traffic controllers; 

• Validation of software parameters for minimum safe altitude warning; and 

• A final rule related to the manufacture and installation of terrain awareness warning 

system equipment—a new generation of automated warning systems used on flight 

decks. 

Interventions for uncontained engine failure included: 

• Additional airworthiness directives addressing low pressure turbine engine 

components and compression priority parts; and 

• An advisory circular to incorporate an enhanced inspection methodology in the 

aircraft engine design approval process was opened for public comment. 

Intervention strategies being developed under Safer Skies rely heavily on historical data. New 

methods of collecting, analyzing, and using current data are being developed and deployed. 

The FAA documented a prototype flight operations quality assurance (FOQA) system that 

provides maximum potential for the use of digital flight data to determine national trends 

relevant to the safety of flight operations, aircraft performance, and aircraft maintenance. 
FAA Performance Goals 22 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

The FAA’s safety performance analysis system (SPAS) continued to be expanded by the 

addition of new performance measures covering aircraft and engines, rotorcraft, air agency 

schools, and repair stations. The air transportation oversight system (ATOS) element query 

was also linked to SPAS. SPAS assists FAA in improving its deployment of inspection 

resources. ATOS is a systems approach to safety oversight of air transport operators.

FAA continued to sharpen programmatic focus on safety, with inspection and technological 

resources being concentrated on the highest risk areas. Work continued on aging aircraft and 

their systems, fuel tank safety, wiring harness, and fuselage insulation flammability. 

Management Challenge – Commercial and General Aviation Safety (IG/GAO) 

The DOT Inspector General (IG) and the General Accounting Office (GAO) have stated that the FAA 

must take steps to reverse the trend in known safety risks such as runway incursions and operational 

errors, strengthen oversight and rulemakings, and manage the aviation safety and air traffic control 

workforce strategically over the long term. The IG stated that safety must take priority over the 

impact of increased demand, new technologies, and budget cuts. The IG listed several safety issues 

that the FAA needs to address.

FAA faces many challenges in promoting aviation safety in a dynamic industry. To judge its 

progress in promoting aviation safety, DOT/FAA has done and will plan to do the following:

FY 2000

• Initiated DOT/FAA oversight of U.S. carriers’ safety audits of their foreign code-share 

partners. Guidelines were announced, and FAA began quarterly audits of U.S. carriers’ 

code-share partners in November 2000.

• Continued to implement the Aircraft Safety Act of 2000 that stiffened penalties for 

trafficking in suspected unapproved parts (SUP). FAA initiated 262 SUP investigation 

cases, and the IG obtained nine indictments related to the sale and use of SUP’s.

• FAA issued over 40 airworthiness directives on electrical wiring and 18 on fuel systems for 

large commercial aircraft. FAA and industry also conducted inspections of inservice aircraft 

that are 20 years old or more to assess the condition of the U.S. transport fleet with respect 

to wiring and to identify other areas of concern.

• Publis hed Flight Operational Quality Assurance (FOQA) NPRM in July 2000.

FY 2001

• To help improve runway safety, the first four airport movement area safety systems 

(AMASS) were commissioned (34 scheduled sites by December 2003).

• FAA has begun initial system safety training for ATOS inspectors.

• Published a notice of enforcement policy, Flight Crewmember Flight Time Limitations and 

Rest Requirements.

• As part of a general Departmental effort, FAA is developing a strategic human resource plan 

for safety and air traffic control personnel, ensuring that workforce training and succession 

issues are embedded in FAA’s strategic and resource plans.

• FAA is in the process of publis hing an NPRM for National Air Tour Safety Standards.

• The FAA receives several hundred reports per year relating to SUP’s and has set a standard 

for assigning an investigation to the responsible field office within 5 days from receipt. 

Field offices are carrying out these investigations as quickly as possible.

FY 2002

• FAA will determine the feasibility of expanding ATOS beyond currently covered large air 

carriers to smaller commercial air carriers.
FAA Performance Goals 23 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

GENERAL AVIATION FATAL ACCIDENTS

Performance Measure: 

Number of fatal general aviation accidents

2002 Goal: 379

2001 Goal: 379

2000 Goal: 379

2000 Performance: 341

Public and corporate aircraft provide a wide range of services–such as crop dusting, 

firefighting, law enforcement, news coverage, sightseeing, industrial work, on-demand air taxi 

service, and corporate transportation – and privately owned aircraft provide personal 

transportation and recreation. General aviation (GA), as it is commonly called, is an important 

element of the U.S. transportation system and the U.S. economy, and the majority of aviation 

fatalities have occurred in this segment of aviation. Since 1988, there has been a gradual trend 

downward in the number of general aviation accidents, but progress has not been steady. FAA 

is working with the GA community to achieve further improvements in safety.

GA includes all segments of the aviation industry except commercial air carriers and the 

military. Aircraft range from single -seat home-built aircraft, to rotary wing craft, balloons, and 

extended-range turbojets. Levels of risk are highly variable within this aviation segment, and 

regulatory oversight varies considerably. Some elements of general aviation operate in 

hazardous environments, such as agricultural application, external-load operations, firefighting, 

and pipeline/power line patrol.

Based on preliminary data, FAA met its target. The GA community and the FAA jointly 

developed the annual performance goal. The goal takes into consideration a projected 

1.6 percent per year increase in activity in this sector. With this increase in activity, the 

number of GA accidents would also increase if there were no further interventions. 

Working together, FAA and the general aviation industry formed a Joint Steering Committee to 

link safety improvement efforts, focusing in particular on five causal factors: controlled flight 

into terrain, loss of control, runway incursions, weather, aeronautical decisionmaking, and 

survivability. The Committee has completed accident and incident data analysis in the 

categories of controlled flight into terrain and weather, settled on an appropriate set of 

interventions, and devised and initiated detailed implementation plans. Implementation will 

continue through FY 2005.
FAA Performance Goals 24 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

RUNWAY INCURSIONS

Performance Measure:

Number of Runway Incursions

2002 Goal: 236

2001 Goal: 243

2000 Goal: 250

2000 Performance: 405

Runway incursions create dangerous situations that can lead to serious accidents. A runway 

incursion occurs when an aircraft, vehicle, person, or object on the ground creates a collision 

hazard or results in a loss of separation with an aircraft taking off, intending to take off, 

landing, or intending to land. Reducing the number of runway incursions lessens the 

probability of accidents that potentially involve fatalities, injuries, and significant property 

damage.

Increases in airport operations raise the risk of runway incursions. Some of the additional 

factors that contribute to the complexity of this safety problem are aircraft of different types 

and capabilities moving in close proximity; weather changes that impact visibility and conceal 

normal visual cues; unclear signs and surface markings; pilots unfamiliar with an airport; and 

complex and varied airport geometry. 

FAA did not meet the target, and the trend is in the opposite direction from the goal. Runway 

incursions increased to 429 from 322 in CY 1999, a 33 percent increase. Runway incursions 

fall into three general classifications: operational errors, pilot deviations, and vehicle/pedestrian 

deviations, with different characteristics and rates of change. 

• Total pilot deviations, the largest category of runway incursions, increased by more 

than 38 percent. Over half the deviations were attributable to communications lapses 

and pilots’ unfamiliarity with airports. 

• Total vehicle/pedestrian deviations were up by more than 12 percent, almost twothirds of which were due to maintenance, construction, and security or emergency 

vehicle deviations.

• Operational errors increased by more than 7 percent, mostly attributable to 

communications and procedural lapses. 

The main causal factors for runway incursions continue to be communications, airport 

knowledge, and situational awareness when operating on the airport surface. Improved 

guidelines and incident reporting provisions resulted in increased reporting and revealed 

shortcomings in both areas. The FAA broadened its approach by creating a comprehensive 

Runway Safety Program. Using this approach, FAA conducted a series of regional runway 

safety workshops, reaching out to all interested members of the aviation community and 

culminating in a human factors workshop. These events focused on recommendations, actions, 

and results to improve runway safety. 
FAA Performance Goals 25 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

The FAA published a National Blueprint for Runway Safety containing major action areas. 

FAA began implementation of the near-term initiatives in October 2000. Regional runway 

safety managers were selected; a centralized library of training, education, and awareness was 

established; and improved runway marking standards were promulgated. Each area includes 

initiatives that may be implemented individually or integrated with other initiatives to provide 

an effective, comprehensive solution to this important problem. The major areas are:

• Training—Several initiatives are designed to enhance knowledge, skills, and overall 

performance of pilots, controllers, vehicle operators, and other personnel who interact 

on the airport surface. 

• Technology—Establish a Runway Incursion Technical Evaluation Team, complete 

implementation of existing technology (ASDE, AMASS, and ASDE-Model X), 

coordinate runway safety technology initiatives with NASA and the aviation 

community, and develop innovative implementation strategies to ensure promising 

runway safety technologies are made available for various airports.

• Communications—Simplify and standardize radio communications within the 

community to those involved in surface operations. 

• Procedures—Segregate ground vehicles from the airport operations area whenever 

possible, followup on perimeter road construction, continue studies on strengthening 

the Code of Federal Regulations section that requires positive clearance onto runways, 

and develop and implement national standard operating procedures for tower 

controllers.

• Airport Signs/Markings/Lighting—Improve the airport environment, increase 

visibility, enhance safe and efficient movement of aircraft, and test pilot knowledge of 

airport signs, markings, and lighting. 

• Data, Analysis, and Metrics—In an effort to better measure how well initiatives are 

performing, the Runway Safety Office plans to change FAA policy, where necessary, 

to improve the quality and quantity of data on runway incursions. 

Although prevention of all incursions is important, analysis indicates that all runway incursions 

do not pose the same level of risk. FAA has developed a way to categorize risk to more 

effectively focus on root causes and to target resources appropriately. Risk categorization and 

analysis will also yie ld better indicators of FAA’s effectiveness in improving runway safety. 

Risks are now classified A through D, with A/B being the most severe and C/D being minor.

Management Challenge – Runway Safety (IG) 

Despite significant management focus, FAA has been unable to reverse the upward 

trend in runway incursions. The IG has indicated that reversing the sharp increase in 

runway incursions is a critical management challenge for DOT. FAA is pursuing a 

number of initiatives begun in 2000 to solve this problem and, as the IG states, is 

identifying and evaluating technologies that can be quickly put to use in high-risk 

airports.

This goal in its entirety addresses the IG’s discussion of runway safety in the recent 

Management Challenges Report. 
FAA Performance Goals 26 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

AIR TRAFFIC OPERATIONAL ERRORS

Performance Measure: Operational 

errors per 1 million activities

2002 Goal: 5

2001 Goal: 5

2000 Goal: 4.86

2000 Performance: 6.83

One of the fundamental principles of aviation safety is “separation”—the need to maintain a 

safe distance from aircraft, terrain, obstructions, and certain airspace not designated for routine 

air travel. Air traffic controllers employ separation rules and procedures that define separation 

standards for many different environments where aircraft operate. Pilots flying under visual 

flight rules operate under a "see and avoid" policy. Pilots using instrument procedures rely on 

air traffic controllers' instructions to guide them. When the rules and procedures that define 

separation standards are not applied or followed appropriately by a controller, and separation is 

less than required, an operational error occurs. FAA seeks to reduce operational errors.

The continued increase in the volume of air traffic activity in congested and restricted airspace 

is a major factor affecting operational errors. From 1999 to 2000, air traffic operations in the 

top 30 airports increased by 4.3 percent, compared to a 0.2 percent increase from 1998 to 1999.

FAA did not meet the target for reducing operational errors. Operational errors totaled 1,145, 

or 0.683 per 100,000 activities, significantly above the goal of 0.486. 

FAA continued its effort to improve the procedures, reporting, and correction of operational 

errors and deviations after instituting a quality assurance review (QAR) process in 1999 to 

identify and correct controller performance deficiencies through training. The FAA improved 

its internal procedures, requiring management involvement in controller recertification 

following an operational error or deviation. 

More importantly, safety improvement is emphasized by means of operational error reporting, 

causal analysis, and problem correction, rather than on using controller error reports as an 

indication of a failure requiring punitive action. This renewed emphasis on data quality and 

procedural improvement and the lessening of punitive measures has contributed to the increase 

in reported errors and deviations. This structural change is evident in the increase in the level 

of monthly operational errors for FY 2000, compared to 1997-1999.
FAA Performance Goals 27 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

SECURITY

The United States and its citizens remain targets for terrorist groups seeking to challenge or 

influence international affairs. Thus, protecting air travelers against terrorist and other criminal 

acts is a national security concern. Beyond national security policy, public confidence in the 

safety and security of air travel enables its continued growth. Tourism and world economies 

depend upon effective aviation security measures being efficiently applied. Governments, 

airlines, and airports must work together cooperatively to achieve our common goal: safe and 

secure air transportation.

FAA’s goals in the security performance area include actions to provide stricter oversight of 

screening companies and improve screener performance, increase the detection of explosive 

devices and weapons that may be brought aboard aircraft, prevent unauthorized access to 

parked aircraft, and ensure that FAA facilities fully meet security standards. 

On November 19, 2001, Congress enacted the Aviation and Transportation Security Act–

creating the Transportation Security Administration (TSA). The TSA is charged with security 

for all modes of transportation, including those security responsibilities previously assigned to 

the FAA. As part of the transition, FAA is working with the TSA to implement its program 

initiatives.

Sensitive security information is protected by 14 C.F.R. Part 191, and the actual target levels 

will be released to appropriate parties in keeping with the provisions outlined in the 

Government Performance and Results Act.
FAA Performance Goals 28 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

SYSTEM EFFICIENCY

AVIATION DELAY

Performance Measure: 

Aviation delay per 100,000 activities

2002 Goal: 171

2001 Goal: 171

2000 Goal: 171

2000 Performance: 250

Commercial aviation delays are estimated to cost airlines over $3 billion per year. Passengers 

are directly affected by missed flight connections, missed meetings, and loss of personal time. 

There are approximately 20 congested airports, each averaging over 20,000 hours of flight 

delay per year. Delays throughout the system are projected to increase as passenger travel 

demand continues to rise.

Delays throughout the National Airspace System (NAS) are generally the result of air traffic 

density, adverse weather, and capacity constraints, particularly at large hub airports. As traffic 

increases throughout the system, delays are likely to increase. Consequently, maintaining the 

current delay rate would represent a significant accomplishment.

FAA did not meet its performance target. In fact, the overall delay rate significantly exceeded 

the target, primarily because of bad weather, which accounts for about 70 percent of all delays. 

Over 270 delays per 100,000 activities were due to weather alone in June 2000, the worst 

month of flight delay in FAA history. 

Volume delays, at about 34 per 100,000 activities, increased significantly in 2000, partly due to 

the overall increase in activities from FY 1999 to FY 2000 (1.9 percent) and partly due to the 

increase in exempted flights operating out of congested, high-density airports. For example, 

while August 2000 operations at LaGuardia were 4.7 percent above those in August 1999, 

terminal volume delays rose by 329 percent.

Approximately four delays per 100,000 activities were due to equipment failure in 2000, less 

than the 1999 rate of five per 100,000. The Nationa l Operations Control Center (NOCC) will 

continue to collaborate daily with Air Traffic System managers to ensure NAS equipment and 

services available on any given day are put to optimal use.

"Other" delays (including runway delays), at about 39 per 100,000 activities, are slightly above 

last year. While delays due to runway construction at Minneapolis and Seattle have abated, 

projects are underway at Houston, Phoenix, and St. Louis. The unavailability of land and hold 

short operations (LAHSO) at several airports has also added to delays. 
FAA Performance Goals 29 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

RUNWAY PAVEMENT CONDITION

Performance Measure: Percent of runways in 

good or fair condition (commercial service, 

reliever, and selected general aviation airports).

2002 Goal: 95%

2001 Goal: 93%

2000 Goal: 93%

2000 Performance: 95%

Deteriorated airport runway pavement can damage propellers, turbines, and airplane landing 

gear. Proper design, construction, and maintenance can slow this deterioration, but runways 

still need complete rehabilitation every 15 to 20 years–5% to 7% of runways during a typical 

year. Federal airport funding helps achieve this necessary level of rehabilitation, and–

combined with proper maintenance–helps keep runway conditions at or above the minimum 

level needed to ensure efficient airport operation.

FAA met its goal of maintaining over 93% of runway pavement in good or fair condition. In 

2000, 95% of the runways at airports included in the National Plan of Integrated Airport 

Systems (NPIAS) were reported in good or fair condition. At NPIAS airports with commercial 

service, 98% of runways were in good or fair condition. A robust national economy helped 

enable local government investment in runway pavement maintenance and rehabilitation. 

Many state aviation agencies are using computer-based pavement management systems to 

predict when pavement maintenance and rehabilitation are needed and most likely to be cost 

effective. These measures enhance the effectiveness of state and Federal expenditures on 

airfield pavement. The National Pavement Test Facility at the William J. Hughes Technical 

Center was completed and is in operation.

Management Challenge — Airport Revenue Diversion (IG)

A significant ongoing challenge for FAA is ensuring the appropriate use of airport funds. 

A wide range of FAA actions is meeting this challenge. FAA implemented all the 

revenue use provisions of the Federal Aviation Reauthorization Act of 1996, issued a 

comprehensive policy statement, and issued an advisory circular instructing airports on 

the filing of annual reports to the FAA. FAA is using FAA-sponsored outreach forums; 

appearances at conferences and seminars conducted by airport industry trade associations 

and regional, state, and local aviation organizations; and similar venues to educate airport 

sponsors about their Federal obligations regarding proper use of airport revenue. Local 

government airport sponsors are required to review airport revenue use as part of their 

annual audit of Federal programs under the Single Audit Act. FAA, working with the 

Office of Management and Budget and the General Accounting Office, has issued 

detailed guidance to auditors on the conduct of those reviews. Enforcement actions may 

include withholding of grants under the Airport Improvement Program. 
FAA Performance Goals 30 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

ALL WEATHER ACCESS TO AIRPORTS

Performance Measure: Number of runways 

that are accessible in low visibility conditions.

2002 Goal: 1,354

2001 Goal: 1,191

2000 Goal: N/A

2000 Performance: 1,109

There are nearly 4,000 public use airports with paved runways in the United States. Currently, 

about 600 of these airports have an instrument landing system (ILS) for precision approaches. 

Precision approaches improve access to airports and enhance safety by providing guidance 

when visibility is limited. Because many airports have more than one runway, the total number 

of runways with precision landing guidance is about 1,200. FAA seeks to improve airport 

access in all weather conditions, consistent with flight safety in the critical landing phase. 

Developing vertically guided approaches requires accurate survey information for airport 

runway locations and any obstacles near the flightpath for approach. The National Geodetic 

Survey does these surveys. Increasing all-weather access depends on both having a published 

approach and increasing the number of aircraft equipped to make precision approaches.

FAA met the performance target. FAA published 504 new approaches in 2000 through a 

cooperative effort with the National Oceanic and Atmospheric Administration.

FAA expects to meet the performance target for 2001.

Access to airports, airspace, and air traffic services are basic needs of all airspace users. While 

there are many aspects of system accessibility that impact end users, increasing the availability 

of vertical descent guidance during low visibility weather conditions is critical. For aircraft to 

land in restricted visibility, the airport must have published procedures for a vertically guided 

approach and the electronic guidance to ensure the aircraft is able to follow the published 

approach. The FAA’s navigation and landing systems are evolving from ground-based 

navigation aids to a satellite-based system. The system consists of the global positioning

system (GPS) augmented by wide area augmentation systems (WAAS) and local area 

augmentation systems (LAAS). GPS/WAAS and LAAS will provide vertically guided 

approaches to selected airports.
FAA Performance Goals 31 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

AIRPORT CAPACITY AND EN ROUTE EFFICIENCY IMPROVEMENTS

Performance Measure: Cumulative increase in 

throughput during peak periods at certain major 

airports.

2002 Goal: 3.8%

2001 Goal: 2.0%

2000 Goal: N/A

2000 Performance N/A

Performance Measure: Cumulative increase in 

direct routings for en route flight phase.

2002 Goal: 7.6%

2001 Goal: 3.9%

2000 Goal: N/A

2000 Performance N/A

Air travel demand is growing steadily. U.S. airlines transport over 600 million passengers 

annually, and this number is expected to increase over 50 percent by 2010. In 2000, there were 

approximately 5 million scheduled operations for the top 10 air carriers. FAA will need to 

utilize available airspace more efficiently in the future to keep pace with aviation activity and 

increase passenger throughput.

In 2000, 79.1 percent of flights were able to fly off air traffic control (ATC) preferred routes, 

falling just short of the goal of 80 percent. This is approaching the upper limit of preferred 

route exclusions without technological improvements. The aim of eliminating required 

routings is to give increased flexibility to aircraft routings, which may translate into improved 

scheduling efficiency and reduced flight miles. The action of eliminating an ATC-preferred 

route does not automatically increase aviation efficiency since the ATC-preferred route might 

also be the air carrier preferred routing. The benefit of eliminating a required routing is 

determined by the amount of traffic on the route and whether air carriers use the flexibility to 

improve efficiency.

In 2000, FAA eliminated 219 preferred routes, up from 170 in FY 1999. However, route 

flexibility was also increased through significant use of the North American Route Program 

(NRP) and departure procedures (DP)/standard terminal arrival route (STAR) program. The 

NRP, which begins 200 miles from the departure airport and ends 200 miles from the arrival 

airport, enables the use of more efficient routes unimpeded by the preferred route system. 

DP/STAR expands the entry and exit positions for aircraft transitioning to NRP to points 

within the 200-mile limit near airports.
FAA Performance Goals 32 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

FAA estimates that it will meet the 2001 performance targets.

To determine capacity increases, FAA measures throughput during peak periods of operational 

activity. If throughput increases during peak periods, it is an indicator that capacity has 

increased.

Through the Free Flight program, grants for new runway construction, and other focused 

efforts, FAA seeks to improve use of available airspace capacity by creating new technological 

decision tools for controllers, either in airport towers or in en route control centers.

Since it takes many years to build additional runways, which provide the greatest increase in 

total capacity for growing levels of air traffic, FAA is undertaking projects to provide 

efficiency tools in the near term to maximize use of existing airspace and runway capacity. 

This will increase usable capacity, flexibility, and efficiency of the air traffic system. FAA has 

efficiency tools in use at the following locations:

• Center TRACON automation system (CTAS), a decision support tool for air traffic 

controllers, is operational at Minneapolis-St. Paul and Los Angeles, enabling more 

efficient arrival flows into terminal airspace and onto runways. CTAS is a 

combination of the passive final approach spacing tool (pFAST) and traffic 

management advisor (TMA).

• User request evaluation tool (URET), a conflict probe, is installed at the Memphis and 

Indianapolis En Route Centers and will enable controllers to more quickly approve 

user requests in en route airspace by identifying potential aircraft-to-aircraft conflicts 

up to 20 minutes in advance.

FAA is also examining ways to streamline environmental review of new runway construction 

and ways in which to shorten the overall authorization process for locally initiated expansion of 

airport capacity.
FAA Performance Goals 33 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

ENVIRONMENT

AIRCRAFT NOISE EXPOSURE

Performance Measure: Number of people in 

the U.S. (in thousands) who are exposed to 

significant aircraft noise levels (65 decibels or 

more).

2002 Goal: 440

2001 Goal: 440

2000 Goal: N/A

2000 Performance: 440

Public concern and sensitivity to aircraft noise around airports are high. In recent years, noise 

complaints have increased even while quieter aircraft technology has been introduced. Aircraft 

noise is an undesired by-product of our mobility, and the Government acts to reduce the 

public’s exposure to unreasonable noise levels.

Much of the recent progress has been achieved by the legislatively mandated transition of 

airplane fleets to newer-generation aircraft that produce less noise. Most of the gains from this 

change were achieved by 2000. The Airport Noise and Capacity Act (ANCA) of 1990 set 

December 31, 1999, as the deadline for elimination of Stage 2 (older, noisier) aircraft weighing 

more than 75,000 pounds. Population growth around airports or increasing flight activity can 

impact FAA’s ability to meet this goal. These factors have generally increased the numbers of 

people potentially exposed to aircraft noise. A positive factor in lowering noise exposure has 

been aircraft fleet recapitalization within the industry.

FAA appears to have met the performance target, since trends apparent in both measurement 

methodologies are moving in the right direction. The results reflect using a new, more accurate 

methodology to assess the number of people exposed to significant levels of aircraft noise 

around airports, known as MAGENTA. The model development has been done in conjunction 

with the Committee on Aviation Environmental Protection (CAEP) under the International 

Civil Aviation Organization (ICAO).

Updated airline fleet data for 1999 indicate a higher than expected introduction of airplanes 

that have been “hushkitted” to comply with the Stage 3 noise standard. At the end of 1999, 

airplanes that met the most stringent FAA noise standard (Stage 3 airplanes) comprised 

100 percent of the total fleet of large civil subsonic turbojet airplanes, compared to an 

estimated 45 percent in 1990 when Congress enacted ANCA. 

Activities in 2000 included funding for noise reduction activities such as the soundproofing of 

residences and buildings used for educational or medical purposes in the vicinity of airports, 

the purchase of buffer zones around airports, and noise reduction planning. 
FAA Performance Goals 34 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

The FAA, representing the United States, was successful in achieving agreement at the fifth 

meeting of CAEP (CAEP/5) on a new international noise standard for subsonic jets and 

propeller-driven large transports. The new standard, which would become effective in 2006 

when approved by the ICAO Council, is cumulatively 10 decibels more stringent than the 

current standards (“Stage 3”).
Financial Highlights 35 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

FY 2001 FINANCIAL HIGHLIGHTS

FAA BUDGET

The FAA is financed through annual and multi-year appropriations authorized by the Congress. 

The largest appropriation–Operations–funds the salaries and associated costs to operate and 

maintain the air traffic control system and to carry out its safety inspection, regulatory, and 

security responsibilities. The FAA budget also includes three capital investment programs: 

(1) the Facilities and Equipment (F&E) appropriation authorizes funds to modernize and 

expand the air traffic control system; (2) the Airport Improvement Program (AIP) provides 

grants funding to expand and improve the Nation’s public -use airports; and (3) the Research, 

Engineering, and Development (R,E&D) appropriation provides funds to develop new aviation 

technology and systems. 

FY 2001 FAA BUDGET

Distribution by Appropriation and Obligation Limitation 

(Dollars in Millions)

F&E $2651

R,E&D $187 Airports 

Grants $3200

Operations 

$6480

The Airport and Airway Trust Fund (Trust Fund), maintained through the deposit of aviation 

excise taxes, finances 100 percent of the F&E, AIP, and R,E&D capital investment programs. 

These critical capital investment programs are described in three regularly issued plans: the 

National Airspace Capital Investment Plan (CIP); the National Aviation Research Plan; and 

concept planning for the National Plan of Integrated Airport Systems (NPIAS). In addition to 

funding the capital programs, in FY 2001 the Trust Fund paid 68 percent of the FAA’s 

operating cost. From FY 1995 through FY 2001, the Operations appropriation has received 

between 34 to 100 percent of its funding from the Trust Fund and the balance from the General 

Fund. 

Airport and Airway Trust Fund. The Airport and Airway Revenue Act of 1970 created the 

Trust Fund to provide a stable source of funding to finance investments in the airport and 

airway system and, to the extent funds were available, cover the operating costs of the airway 

system. The Act provided for the deposit of aviation excise taxes into the Trust Fund. Since 

its establishment, various changes have been made to the rate structure supporting the Trust 

Fund. The most recent changes were centered in the Taxpayer Relief Act of 1997 (P.L. 105-

34), effective October 1, 1997:
Financial Highlights 36 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

• Extends aviation taxes for 10 years (through September 30, 2007).

• Retains existing freight waybill, general aviation fuel/gas taxes. 

• Converts the 10 percent ad valorem tax on domestic passenger tickets to a 

combination ad valorem/flight segment tax over 3 years beginning October 1, 1997, 

where a domestic flight segment is a flight involving a single takeoff and a single 

landing. The timetable for these taxes is as follows:

9% plus $1 per segment from Oct.1, 1997, through Sept. 30, 1998

8% plus $2 per segment from Oct.1, 1998, through Sept. 30, 1999

7.5% plus $2.25 per segment from Oct.1, 1999, through Dec. 31, 1999

7.5% plus $2.50 per segment from Jan.1, 2000, through Dec. 31, 2000

7.5% plus $2.75 per segment from Jan.1, 2001, through Dec. 31, 2001

7.5% plus $ 3 per segment from Jan.1, 2002, through Dec. 31, 2002

After 2002, the $3 segment rate will be indexed to the Consumer Price 

Index (CPI)

• Imposes a new 7.5 percent tax on payments to airlines for frequent flyer and similar 

awards by banks and credit card companies, merchants, frequent flyer program 

partners, other airlines, hotels, or rental car companies, and other businesses.

• Increases the current $6 international departure tax to $12 per passenger and adds a 

$12 international arrival tax. If an intermediate stop exceeds 12 hours, subsequent 

domestic segments are taxed as domestic transportation. These taxes were indexed to 

the CPI as of January 1, 1999.

• Retains a special rule for flights between the Continental United States and Alaska or 

Hawaii at $6 for departures. This tax was indexed to the CPI as of January 1, 1999. 

• Lowers tax rate on flights to certain rural airports to 7.5 percent and omits flight 

segment tax component beginning October 1, 1997.

• Transfers revenues from the 4.3 cents-per-gallon aviation fuel tax formerly dedicated 

to reduce the national U.S. deficit from the General Fund to the Airport and Airway 

Trust Fund.

While held by Treasury, Trust Fund monies are invested in Government securities. Any 

interest earned is deposited into the Trust Fund. Amounts are withdrawn from the Trust Fund 

as it is needed and transferred into each FAA appropriation to cover necessary outlays. The 

uncommitted balance in the Trust Fund was approximately $7.3 billion at the end of FY 2001. 

Operations. Funds from the Operations appropriation are used to pay salaries and other costs 

required to operate and maintain the air traffic control (ATC) system on a 24-hour basis. For 

FY 2001, Congress provided separate amounts for individual organizations funded under the 

Operations appropriations.

The establishment of separate amounts prohibited the Administrator from moving funds among 

organizations, thereby limiting her ability to manage most effectively FAA Operations and the 

programs this appropriation supports. Realizing this, the Administration has proposed that for 

FY 2002 individual amounts not be specified. 
Financial Highlights 37 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

Facilities and Equipment (F&E). Funds from the F&E appropriation are used to modernize, 

expand, and replenish the ATC infrastructure. Examples of F&E programs include the 

deployment of improved controller-pilot data link communications; the replacement of aging 

ATC computer hardware and software in en route centers and terminal radar approach control 

facilities; the insta llation of advanced radar for airport surveillance to help prevent runway 

incursions and to warn of hazardous weather; the augmentation of GPS; the fielding of 

automated decision support tools that will enable controllers to allow users greater freedom to

fly more direct routes; and the deployment of explosives detection systems (EDS) and other 

security devices for screening passengers, baggage, and cargo. 

The NAS Architecture is a comprehensive plan that describes the joint FAA and industry 

operational concept and long-term plan for evolving the NAS to handle future growth in 

aviation while enhancing safety. It outlines capabilities and proposed timelines needed to 

meet goals identified in the FAA Strategic Plan. F&E programs are implemented to obtain 

capabilities outlined in the NAS Architecture. The NAS Architecture is the principal 

framework of NAS infrastructure investment decisions. 

Research, Engineering and Development (R,E&D). The FAA’s R,E&D programs are 

directed toward improving safety, security, capacity, efficiency, and ensuring the 

environmental compatibility of the NAS. Areas of primary focus include continued research 

in aircraft safety, aircraft structures and materials; systems security research; improved aviation 

weather products, and resolution of environmental issues. FAA human factors and aviation 

medicine research will focus on how to best accommodate changes in equipment and 

procedures and other studies to reduce the risk of human error by agency personnel and air 

crewmembers. 

The FAA publishes an annual National Aviation Research Plan. This plan describes the 

R,E&D efforts to improve technologies, systems, and procedures to fulfill the agency’s 

principal operation and regulatory responsibilities in air traffic services; certification of 

aircraft and aviation personnel; operations and certification of airports; civil aviation security; 

and environmental standards for civil avia tion.

Airport Improvement Program (AIP). Section 47104 of Title 49, U.S.C., authorizes the 

Secretary of Transportation to make project grants for airport planning and development under 

the AIP to maintain a safe and efficient nationwide system of public -use airports that meet both 

present and future needs of civil aeronautics. The payment of user taxes to the Federal 

Government by air travelers and shippers contributes to the Airport and Airway Trust Fund and 

makes it possible to fund one-fourth to one-third of all capital development at the Nation’s 

public-use airports. Consequently, no Federal monies are withdrawn from the General Fund 

for federally assisted projects to maintain and enhance airport safety, preserve existing airport 

infrastructure, and expand capacity and efficiency throughout the airport system. Since 

FY 2000, the administrative expenses to implement the airports program have been paid under 

the AIP program.

The National Plan of Integrated Airport Systems (NPIAS) draws selectively from local, 

regional, and state planning studies to estimate the costs associated with establishing a system 

of airports adequate to meet the needs of civil aviation. Costs identified in the NPIAS are 

eligible (nominally) for Federal grants-in-aid. The most recent publication, in March 1999, 

included costs of $7 billion annually through 2002.
Financial Highlights 38 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

The Passenger Facility Charge (PFC) Program, authorized by the Aviation, Safety and 

Capacity Expansion Act of 1990, provides an additional source of capital funding for the 

expansion and preservation of airport infrastructure in the national air transportation system. 

After receiving approval from the FAA, this legislation allows public agencies controlling 

commercial service airports to charge enplaning passengers a $1, $2, $3, $4, or $4.50 facility 

charge.

PFC collections and AIP funds are complementary in the overall funding of airport 

improvements. The majority of PFC approved projects are also eligible for further funding 

under the AIP. As of September 30, 2001, authorized collections for the 326 locations 

approved since 1992 totaled $32.5 billion, of which $9.3 billion has been collected. As of 

September 30, 2001, 58 percent of those commercial service airports eligible to collect PFC's 

were approved to do so, including 85 of the largest 100 airports. Collections, which first began 

on June 1, 1992, now produce revenue for airports at a rate exceeding $1.8 billion per year. 

(NOTE: Decreased enplanements caused by the September 11 terrorist attacks will negatively 

impact this estimate for CY 2001.)

Although these revenues are not considered Federal funds, the public agency’s application to 

impose a PFC must be approved by the FAA. 
Comparative Analysis 39 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

COMPARATIVE ANALYSIS

BALANCE SHEET - ASSETS

As of fiscal year end, FAA's total assets were $29 billion. The assets of the FAA are the 

resources available to pay liabilities or to satisfy future service needs. FAA's major categories 

of assets as of September 30, 2001, as a percentage of total assets, are shown in the

accompanying chart: 

The following chart presents comparisons of major asset balances between FY 2000 and 

FY 2001. A discussion of the significant fluctuations follows.

Balance Sheet Assets Comparison

(Dollars in thousands)

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

Fund Balance with

Treasury (Note 2)

Investments (Note 3) Accounts Receivable,

Net (Note 4) 

Inventory and Related

Property, Net (Note 8)

2001

2000

ß 48% Investments 

ß 40% General Property, Plant, 

and Equipment, Net 

ß 7% Fund Balance with Treasury 

ß 4% Inventory and Related 

Property, Net 

ß 1% Accounts Receivable, Net 

(Note 4) and Other

Balance Sheet Assets 2001

Accounts Receivable

1%

Fund Balance with 

Treasury

7%

Investments

48%

Inventory

4%

PP&E

40%
Comparative Analysis 40 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

Fund Balance with Treasury

Fund Balance with Treasury increased $1.1 billion, from $886 million as of September 30, 

2000, to $1.9 billion as of September 30, 2001. This increase is partly attributable to a 

$600 million increase in the Operations appropriation, from $5.9 billion in FY 2000 to 

$6.5 billion in FY 2001. The remaining increase results because FAA's Operations 

appropriation was funded differently in FY 2000 versus FY 2001. Each year, all or a part of 

FAA's Operations appropriation is funded via the Airport and Airway Trust Fund. Amounts 

are transferred from the Trust Fund biweekly to meet cash outlay needs. Trust Fund 

appropriations not yet transferred are invested and reflected on the balance sheet as 

Investments rather than Fund Balance with Treasury. In FY 2000, 100 percent of FAA's 

Operations appropriation was funded via the Trust Fund; at year-end, $487 million of these 

appropriations had not yet been transferred from the Trust Fund and thus were reported as 

Investments rather than Fund Balance with Treasury. In contrast, in FY 2001 the Operations 

appropriation was partially funded via a combination of the Trust Fund and through 

appropriations from the General Fund of the U.S. Treasury. General Fund appropriations are 

transferred to the agency at the beginning of the year, and are reported as Fund Balance with 

Treasury until disbursed. 

Investments

Investments increased $512 million, from $13.4 billion in FY 2000 to $13.9 billion in 

FY 2001. The change was the net of a $563 million increase in investments of the Airport and 

Airway Trust Fund, slightly offset by a $79 million decrease of Aviation Insurance Revolving 

Fund investments. The remainder of the net change in investments is attributable to accrued 

interest. 

Airport and Airway Trust Fund investments increased $563 million because in FY 2000, 

$10.0 billion was drawn down from the Trust Fund to meet cash outlay needs, while in 

FY 2001, $9.4 billion was drawn down, leaving more Trust Funds available for investment at 

the end of FY 2001. The variation in draw downs results from the manner in which the FAA 

Operations appropriation was funded in FY 2000 and FY 2001, as described above under Fund 

Balance with Treasury. In FY 2000, the Operations appropriation was fully funded via the 

Trust Fund, while in FY 2001, the Operations appropriation was only partially funded by the 

Trust Fund. 

Following the terrorist attacks of September 11, 2001, all Aviation Insurance Revolving Fund 

investments were redeemed so the funds would be available for various aviation insurance 

initiatives. 

Accounts Receivable, Net

Intragovernmental accounts receivable decreased by $140 million, from $267 million in 

FY 2000 to $127 million in FY 2001. This decrease stems from a decrease in taxes receivable 

from the Internal Revenue Service to the Airport and Airway Trust Fund related to passenger 

ticket and other types of taxes. 
Comparative Analysis 41 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

Inventory and Related Property, Net 

Inventory and Related Property increased from $988 million in FY 2000 to $1.1 billion in 

FY 2001. This increase of $133 million primarily relates to a change in the method of 

estimating the allowance for items held for repair. In FY 2000, the allowance was estimated at 

65 percent of the gross value of associated assets. Beginning in FY 2001, the estimate was 

based on a detailed analysis of the historical cost to repair such items.

BALANCE SHEET – LIABILITIES

At the end of FY 2001, the FAA reported liabilities of $5.4 billion. Liabilities are probable and 

measurable future outflows of resources arising out of past transactions or events. The chart 

above depicts FAA's major categories of liabilities, as a percentage of total liabilities, while the 

chart below presents comparisons of major liability balances between FY 2000 and FY 2001. 

A discussion of the significant fluctuations between the two years follows. 

Balance Sheet Liabilities Comparison

(Dollars in thousands)

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

Accounts Payable

Intragovernmental 

Other

Intragovernmental

Liabilities (Note 12)

Accounts Payable Federal Employee

and Veterans

Benefits (Note 14)

Other Liabilities

(Notes 12 & 13)

2001

2000

Balance Sheet Liabilities 2001

Other Liabilities

29%

Accounts Payable

12%

Environmental Cleanup

33%

Fed Employees & Veterans 

Benefits

19%

Other Intragovernmental

7%

ß 7% Other 

Intragovernmental 

Liabilities

ß 19% Federal Employees 

and Veterans Benefits

ß 33% Environmental 

Cleanup Costs

ß 29% Other Liabilities 

ß 12% Accounts Payable
Comparative Analysis 42 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

Federal Employee and Veterans Benefits

Federal Employee and Veterans Benefits consist of FAA’s liability for workers compensation 

benefits under the Federal Employees Compensation Act (FECA). The workers compensation 

liability increased $99.5 million, from $944.5 million in FY 2000 to $1,044 million in 

FY 2001. The Department of Labor calculates the liability actuarially, and DOT attributes a 

proportionate amount to FAA based upon actual workers compensation payments to FAA 

employees over the preceding four years. The increase in the actuarially determined liability 

and the amount attributable to FAA results from historical increases in payments to FAA 

employees, and other factors considered in the actuarial calculation.

Other Liabilities

Other liabilities increased by $240 million, from $1.33 billion in FY 2000 to $1.57 billion in 

FY 2001, primarily as a result of increased contingent liabilities for legal claims. As shown in 

Note 12, FAA's legal claims liability increased by $141 million; this increase pertains 

substantially to tort claims. 

NET COSTS

Net costs are FAA's expenses less earned revenue. For the fiscal year ending September 30, 

2001, the FAA's total net costs were $10.8 billion, compared to $9.7 billion in FY 2000. The 

following chart illustrates the distribution of net costs by FAA's programs: 

7% 65%

6%

20%

2%

ß 65% Air Traffic Service

ß 20% Airports

ß 7% Regulations & 

 Certification

ß 6% Research & Acquisitions

ß 2% Civil Aviation Security

Air Traffic Service

Airports

Regulations & 

Certification

Research & 

Acquisitions

Civil Aviation Security

Net Cost 2001
Comparative Analysis 43 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

The chart below presents comparisons of net costs by program from FY 2000 to FY 2001. The 

most significant fluctuations were to Air Traffic Service and Airports. 

.

Net Cost Comparison 

(Dollars in thousands)

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

Air Traffic Service Airports All Other Programs 

2001

2000

Air Traffic Service

Net costs of Air Traffic Service increased $329 million (5 percent) primarily due to increased 

expenses in personnel compensation and benefits, workers compensation (see discussion of 

Federal Employees and Veterans Benefits above), legal claims, and other communication 

services.

Airports

Net Airports costs increased $803 million (58 percent) because, under the provisions of the 

Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (P.L. 106-181), 

significantly increased Airport Improvement Program (AIP) funding was made available in 

FY 2001. 
Comparative Analysis 44 Chapter 1

FAA FY 2001 FINANCIAL STATEMENTS

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Management Report of the CFO 45 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

 MANAGEMENT REPORT OF THE CHIEF FINANCIAL 

OFFICER

During my first year as the Chief Financial Officer for the FAA, 

I have continued to lay the foundation for better management 

and greater accountability of FAA programs. A major milestone 

toward achieving these goals was to restore FAA’s unqualified 

audit opinion. With the FY 2001 financial statements, I am 

pleased to report that FAA has achieved this milestone. 

This is just one step toward more accurate, timely, and useful 

financial information and an integrated state-of-the-art financial 

management system. Like so many other Federal agencies, we 

in the FAA, as part of a larger Department of Transportation 

effort, are implementing a new accounting system, the Delphi 

Accounting System. Our existing accounting system, called the 

Departmental Accounting and Financial Information System, is not compliant with the 

governmentwide Standard General Ledger, nor does it provide the necessary data for preparing 

our financial statements. Our implementation strategy focuses on meeting the FAA’s specific 

business requirements. In the next year, with the November 2002 implementation date ahead 

of us, we will be performing detailed assessments to ensure that these requirements can be met 

by the new system. 

Another key step toward achieving our goals has been the establishment of a cost accounting 

system for the FAA. Our cost accounting system now generates monthly reports for about 

70 percent of total FAA costs. For the first time FAA tracks the full cost (including overhead 

and capital projects) of every air route traffic control center, air traffic control tower, flight 

service station, and oceanic operation. We can benchmark our air traffic services against 

others performing comparable services. Our implementation of cost accounting in the agency 

will be completed during FY 2002.

Our new Cost and Performance Management Program will help integrate organizational 

performance with the budget and focus us more intently on managing for results. This year, we 

continued to provide our senior management with a monthly report to monitor performance 

goals and the corporate projects supporting these goals. Our objective is to create a resultsoriented culture where every organization and every employee knows how their work and their 

resources contribute to delivering improved performance. 

Our success in receiving an unqualified audit opinion for FY 2001 was a difficult challenge. 

Last year we did not receive a “clean” audit, principally due to weaknesses in our property 

system. Our new financial system will have an integrated financial/property capability. In the 

interim, we have installed temporary fixes that improve the quality and accuracy of our 

property data and that automatic ally, rather than manually, produce depreciation schedules. 

The interim fixed asset system aggregates into a single, central, automated system all financial 

data from a multitude of legacy property systems and performs edit checks, such as validating 

acquisition dates, the class of the asset, and the asset’s disposition, to allow us to track our 

assets better. 















Limitations of the Financial Statements 61 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

LIMITATIONS OF THE FINANCIAL STATEMENTS

The financial statements have been prepared to report the financial position and results of 

operations of the Federal Aviation Administration, pursuant to the requirements of 31 U.S.C. 

3515(b).

While the statements have been prepared from the books and records of the FAA in accordance 

with the formats prescribed by the Office of Management and Budget (OMB), the statements 

are in addition to the financial reports used to monitor and control budgetary resources which 

are prepared from the same books and records.

The statements should be read with the realization that they are for a component of the 

U.S. Government, a sovereign entity. One implication of this is that liabilities cannot be 

liquidated without legislation that provides resources to do so.
Financial Statements 62 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

U. S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

Assets 2001 2000

Intragovernmental

Fund Balance with Treasury (Note 2) $ 1,998,297 $ 886,325

Investments (Note 3) 13,866,780 13,355,134

Accounts Receivable, Net (Note 4) 127,429 267,438

Other (Note 5) 46,093 45,030

Total Intragovernmental Assets $ 16,038,599 $ 14,553,927

Accounts Receivable, Net (Note 4) $ 51,280 $ 36,593

Loans Receivable and Related 

 Foreclosed Property, Net (Note 6) - 283

Cash and Other Monetary Assets (Note7) 44,665 69,354

Inventory and Related Property, Net (Note 8) 1,121,698 988,158

General Property, Plant, and Equipment, Net (Note 9) 11,726,534 11,529,336

Other (Note 5) 67,204 52,642

Total Assets $ 29,049,980 $ 27,230,293

Liabilities

Intragovernmental Liabilities:

Accounts Payable $ 49,930 $ 130,245

Debt (Note 11) 28 26

Other Intragovernmental Liabilities (Note 12) 367,392 344,564

Total Intragovernmental Liabilities $ 417,350 $ 474,835

Accounts Payable $ 602,482 $ 488,952

Loan Guarantees - -

Federal Employee and Veterans Benefits (Note 14) 1,044,259 944,533

Environmental Cleanup Costs (Note 10) 1,756,000 1,815,744

Other Liabilities (Notes 12 & 13) 1,573,545 1,333,068

Total Liabilities $ 5,393,636 $ 5,057,132

Net Position Balances

Unexpended Appropriations (Note 15) $ 551,139 $ 125,217

Cumulative Results of Operations 23,105,205 22,047,944

Total Net Position $ 23,656,344 $ 22,173,161

Total Liabilities and Net Position $ 29,049,980 $ 27,230,293

As of September 30
Financial Statements 63 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Programs (Notes 16 & 17) 2001 2000

Air Traffic Service

Intragovernmental $ 991,401 $ 1,006,551

With the Public 6,083,177 5,660,107

Total 7,074,578 6,666,658

Less Earned Revenues (112,832) (33,777)

Net Air Traffic Service Costs $ 6,961,746 $ 6,632,881

Regulations & Certification

Intragovernmental $ 110,027 $ 109,663

With the Public 690,212 623,641

Subtotal 800,239 733,304

Less Earned Revenues (1,276) (1,650)

Net Regulations & Certification Costs $ 798,963 $ 731,654

Research & Acquisitions

Intragovernmental $ 121,041 $ 115,019

With the Public 581,605 456,916

Total 702,646 571,935

Less Earned Revenues (38,966) (30,679)

Net Research & Acquisitions Costs $ 663,680 $ 541,256

Airports

Intragovernmental

 Administration $ 8,080 $ 8,203

With the Public -

 Grants Program 2,120,034 1,320,097

 Administration 50,462 46,993

Total 2,178,576 1,375,293

Less Earned Revenues - -

Net Airports Costs $ 2,178,576 $ 1,375,293

Civil Aviation Security

Intragovernmental $ 32,425 $ 28,356

With the Public 195,130 156,467

Total 227,555 184,823

Less Earned Revenues (1,031) (921)

Net Civil Aviation Security Costs $ 226,524 $ 183,902

Commercial Space

Intragovernmental $ 1,329 $ 1,102

With the Public 8,243 6,175

Total 9,572 7,277

Less Earned Revenues - (20)

Net Commercial Space Costs $ 9,572 $ 7,257

Other Programs

Intragovernmental $ 77,880 $ 66,794

With the Public 101,676 106,200

Total 179,556 172,994

Less Earned Revenues (11,560) (43,895)

Net Other Program Costs $ 167,996 $ 129,099

Costs Not Assigned to Programs $ (149,298) $ 146,304

 Less Earned Revenues Not Assigned to Programs (43,190) (11,695)

Net Cost of Operations $ 10,814,569 $ 9,735,951

For the Years Ending September 30

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

CONSOLIDATED STATEMENTS OF NET COST
Financial Statements 64 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Net Cost of Operations $ (10,814,569)

Financing Sources

Appropriations Used 1,770,844

Taxes and Other Non-Exchange Revenues (Note 18) 9,984,094

Donations (Non-Exchange Revenue) 19,420

Imputed Financing (Note 19) 506,234

Transfers-In 1,225

Transfers-Out (52,255)

Other 95

Total Financing Sources $ 12,229,657

Net Results of Operations $ 1,415,088

Prior Period Adjustments (Note 20) $ (357,828)

Net Change in Cumulative Results of Operations 1,057,260

Increase (Decrease) in Unexpended Appropriations 425,923

Change in Net Position 1,483,183

Net Position Beginning of Period $ 22,173,161

Net Position End of Period $ 23,656,344

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION

FEDERAL AVIATION ADMINISTRATION

U. S. Department of Transportation

(Dollars in Thousands)

For the Year Ending September 30, 2001
Financial Statements 65 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Budgetary Resources (Note 21)

Budget Authority $ 15,564,674

Unobligated Balances - Beginning of Period 11,823,061

Spending Authority From Offsetting Collections 4,823,630

Adjustments (3,971,414)

Total Budgetary Resources $ 28,239,951

Status Of Budgetary Resources

Obligations Incurred $ 17,204,055

Unobligated Balances-Available 10,930,356

Unobligated Balances-Not Available $ 105,540

Total Status of Budgetary Resources $ 28,239,951

Outlays

Obligations Incurred $ 17,204,055

Less: Spending Authority From Offsetting 

 Collections and Adjustments (5,063,282)

Obligated Balance, Net Beginning of Period 5,722,404

Obligated Balance Transferred, Net -

Less: Obligated Balance, Net - End of Period (7,130,268)

Total Outlays $ 10,732,909

(Dollars in Thousands)

U. S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

COMBINED STATEMENT OF BUDGETARY RESOURCES

For the Year Ending September 30, 2001
Financial Statements 66 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Obligations and Nonbudgetary Resources

Obligations Incurred $ 17,204,055

Less: Spending Authority from Offsetting 

 Collections and Adjustments (5,063,282)

Donations not in the Budget 19,420

Financing Sources for Cost Subsidies 506,234

Net Transfers-in (out) (51,031)

Exchange Revenue not in the Budget (14,678)

Nonexchange Revenue Not in the Entity's Budget 24,625

Less: Trust or Special Fund Receipts Related to

 Exchange Revenue in the Entity's Budget (401,491)

Other (Year-End Accounts Payable and Grant Accruals) 334,313

Total Obligations as Adjusted and Nonbudgetary Resources $ 12,558,165

Resources That Do Not Fund Net Cost of Operations

Change in Amount of Goods, Services, and Benefits 

 Ordered but not yet Received or Provided $ (1,399,370)

Change in Unfilled Customer Orders 134,586

Costs Capitalized on the Balance Sheet 

 General Property, Plant & Equipment (1,392,616)

 Loans 276

 Purchase of Inventory (130,139)

 Adjustment to Cost Capitalized on the Balance Sheet (25,830)

Financing Sources that Fund Costs of Prior Periods (Note 22) (74,549)

Adjustment for Trust Fund Outlays that do not Affect Net Cost -

Other - Identified Prior Period Adjustments (323,968)

Total Resources That Do Not Fund Net Cost of Operations $ (3,211,610)

Costs That Do Not Require Resources

Depreciation and Amortization $ 811,305

Net Loss/(Gain) on Disposition of Assets 120,965

Cost of Goods Sold 197,057

Other 87,147

Total Costs That Do Not Require Resources $ 1,216,474

Financing Sources Yet To Be Provided (Note 22) $ 251,540

Net Cost Of Operations $ 10,814,569

(Dollars in Thousands)

For the Year Ending September 30, 2001

U. S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

COMBINED STATEMENT OF FINANCING
Notes to the Financial Statements 67 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies 

A. Basis of Presentation

These consolidated financial statements have been prepared to report the financial position, net 

cost of operations, changes in net position, status and availability of budgetary resources, and 

the reconciliation between proprietary and budgetary accounts of the Federal Avia tion 

Administration (FAA). The statements are required by 31 U.S.C. 3515, the Chief Financial 

Officers Act of 1990, and, as amended, by the Federal Financial Management Act of 1994, 

which is Title IV of the Government Management Reform Act of 1994. They have been 

prepared from the books and records of FAA in accordance with (1) the hierarchy of 

accounting principles and standards approved by the principals of the Federal Accounting 

Standards Advisory Board, (2) the Office of Management and Budget's (OMB) Bulletins 97-01 

and 01-09, Form and Content of Agency Financial Statements, and (3) Department of 

Transportation (DOT) and FAA accounting policies which are summarized in this note. These 

statements, with the exception of the statement of Budgetary Resources, are, therefore, 

different from financial management reports, which are also prepared by the FAA pursuant to 

OMB directives that are used to monitor and control the FAA’s use of budgetary resources.

The FAA applies accounting principles and standards in accordance with the hierarchy of 

Generally Accepted Accounting Principles (GAAP) established by the American Institute of 

Certified Public Accountants (AICPA) through Statement on Auditing Standards (SAS) No. 

69, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting 

Principles in the Independent Auditor's Report, as amended by SAS No. 91, Federal GAAP 

Hierarchy. This hierarchy of accounting principles for Federal governmental entities is:

1. Federal Accounting Standards Advisory Board (FASAB) Statements and Interpretations 

plus American Institute of Certified Public Accountants (AICPA) and Financial 

Accounting Standards Board (FASB) pronouncements if made applicable to Federal 

governmental entities by a FASAB Statement or Interpretation;

2. FASAB Technical Bulletins and the following pronouncements if specifically made 

applicable to Federal governmental entities by the AICPA and cleared by the FASAB: 

AICPA Industry Audit and Accounting Guides and AICPA Statements of Position;

3. AICPA Accounting Standards Executive Committee (ACSEC) Practice Bulletins if 

specifically applicable to Federal governmental entities and cleared by the FASAB and 

Technical Releases of the Accounting and Auditing Policy Committee of the FASAB;

4. Implementation guides published by the FASAB staff and practices that are widely 

recognized and prevalent in the Federal Government; and

5. Accounting principles published by authoritative standard-setting bodies and other 

authoritative sources (1) in the absence of other guidance in the first four parts of this 

hierarchy and (2) if the use of such accounting standards improves the meaningfulness of 

these financial statements.

The FAA also follows Department of Transportation (DOT) accounting policies and reporting 

requirements, and FAA accounting policies summarized in this note and FAA Order 

2700.31.A, Uniform Accounting Systems Operations Manual, and related documentation 

containing the FAA-specific accounting policy.
Notes to the Financial Statements 68 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

In FY 2001, the FAA adopted a phased-in approach for presenting its financial statements on a 

two-year comparative basis, in accordance with OMB Federal financial statement form and 

content guidance. Consistent with the phased-in approach specified by the OMB, in FY 2001, 

the Balance Sheet and Statement of Net Cost are presented comparatively, as are all associated 

footnotes and supplementary information. The guidance calls for fully comparative financial 

statements in FY 2003.

B. Reporting Entity

The FAA was created in 1958. Its mission is to operate the Nation’s air traffic control system 

and to regulate aviation system safety and security. The FAA is responsible to provide U.S. air 

travelers with an efficient, safe, secure, and technically advanced airspace system. The FAA 

reporting entity is comprised of four primary types of funds: 

Fund Type Title/Type of Services

Trust Fund Airport and Airway Trust Fund, including:

 Grants-in-Aid for Airports

 Facilities and Equipment

 Research, Engineering and Development .

Revolving Funds Aviation Insurance

Administrative Services Franchise Fund

Special Fund Aviation User Fees

General Funds Operations

Facilities, Engineering and Development

Aircra ft Purchase Loan Guarantee Program

Other General Fund Miscellaneous Receipts

C. Budgets and Budgetary Accounting

Congress annually enacts appropriations to permit the FAA to incur obligations for specified 

purposes. In FY 2001 and 2000, the FAA was accountable for Trust Fund appropriations, 

Revolving Funds, a Special Fund, General Fund appropriations, and borrowing authority. The 

FAA recognizes budgetary resources as assets when cash (funds held by Treasury) is made 

available through Treasury General Fund warrants and Trust Fund transfers.

D. Basis of Accounting

With the exception of Trust Fund revenues, transactions are recorded on an accrual accounting 

basis and a budgetary basis. Under the accrual method, revenues are recognized when earned, 

and expenses are recognized when a liability is incurred, without regard to receipt or payment 

of cash. Trust Fund revenues derived from excise taxes are recorded on the basis of cash 

transferred from the General Fund of the U.S. Treasury to the Trust Fund. See paragraph E for 

further discussion of Trust Fund revenues.

Budgetary accounting facilitates compliance with legal controls on the use of Federal funds.
Notes to the Financial Statements 69 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

E. Revenues and Other Financing Sources

Congress enacts annual, multi-year, and no-year appropriations to be used, within statutory 

limits, for operating and capital expenditures. Additional amounts are obtained from service 

fees (e.g., landing and registry fees) and through reimbursements for services performed for 

domestic and foreign governmental entities.

The Trust Fund is sustained by excise taxes collected by the Internal Revenue Service (IRS) 

from airway system users. The IRS records excise tax revenues deposited in the General Fund 

on a cash basis; Treasury transfers an equivalent amount from the General Fund to the Trust 

Fund. The Trust Fund also earns interest from investments in Treasury securities. Interest 

income is recognized as revenue on the accrual basis.

Appropriations are recognized as a financing source when expended. Revenues from service 

fees and reimbursements are recognized concurrently with the recognition of accrued 

expenditures for performing the services. 

F. Fund Balances with the U.S. Treasury and Cash

The U.S. Treasury processes cash receipts and disbursements. Funds at the Treasury are 

available to pay agency liabilities. The FAA maintains credit card checks and a few petty cash 

(imprest) funds outside the Treasury to facilitate small emergency purchases. The FAA does 

not maintain cash in commercial bank accounts or foreign currency balances. Foreign currency 

payments are made either by the Treasury or the Department of State and are reported by the 

FAA in the U.S. dollar equivalent.

G. Investment in U.S. Government Securities

Unexpended funds in the Trust Fund and Aviation Insurance Revolving Fund are invested in 

U.S. Government securities. A portion of the Trust Fund investments is liquidated semimonthly in amounts needed to provide cash for the FAA appropriation accounts. The 

Revolving Fund investments are usually held to maturity. Investments, redemptions, and 

reinvestments are controlled and processed by the Treasury. 

H. Accounts and Loans Receivable

The FAA’s financial statements include the activities and balances of relevant Treasury 

General Fund Miscellaneous Receipt accounts. The FAA maintains accountability for 

defaulted loans under the Aircraft Purchase Loan Guarantee Program. Authorization for 

issuing new loan guarantees expired in 1988; however, FAA's policy with respect to loan 

guarantees is to establish accounts receivable in the General Fund Miscellaneous Receipts 

account to reflect the amount due from the borrower for principal and interest. The FAA also 

establishes an intragovernmental liability to offset the accounts receivable which represents an 

asset of the Treasury, not the FAA.

I. Operating Materials and Supplies

Operating materials and supplies consist primarily of unissued materials and supplies that will 

be consumed in normal operations. Operating materials and supplies are valued based on the 

moving weighted average, and are expensed when issued. Other classifications of materials 
Notes to the Financial Statements 70 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

and supplies are valued on the basis of actual prices paid. Adjustments for the proper valuation 

of excess, obsolete, and unserviceable items are made to the allowance account at fiscal yearend. The allowance for excess, obsolete, and unserviceable items is recognized as a gain or 

loss. Operating materials and supplies are expensed or reclassified as asset field spares or work 

in process when consumed or issued.

J. Inventory

Inventory cost includes material, labor, and applicable manufacturing overhead, and is 

determined using the moving average weighted cost method.

K. Property, Plant and Equipment (PP&E)

FAA capitalizes an acquisition if its costs equal or exceed $25,000 and has a useful life equal 

to or exceeding 2 years. The FAA records general PP&E at original acquisition cost.

Depreciation expense is calculated using the straight-line method. Depreciation commences 

beginning with the first month of the fiscal year after the asset is placed in service. The FAA 

does not recognize residual value of its PP&E. The useful life classifications for capitalized 

assets are as follows: 

Asset Classification - Real Property Useful Life 

(years)

Offices, buildings, warehouse buildings, residential properties, air traffic control towers, 

and enroute air traffic control centers

40

Mobile homes 20

Original roads, sidewalks, parking lots, and all other structures 15

Capital improvements, facility modifications, leasehold improvements (or expiration of the 

lease, whichever comes first) 

10*

Asset Classification - Personal Property

Aircraft 20

Navigation/landing equipment, including electronic and visual navigational aids 20

Surveillance equipment, including surveillance radars, radar transmitters, and radar 

receivers

20

Weather-related equipment, including general purpose weather sensors, weather radars, 

radar transmitters, and radar receivers

20-15

Communications-related equipment, including voice switches, air-ground radios, and 

microwave network

20-10

Decision support systems, including computer operating systems, FAA developed 

hardware, mainframe and mini computers, high-end workstations, and displays

20-4

Printing, photographic, and projection equipment 13

Portable and installed communications equipment excluding air navigation and air traffic 

control facilities, and avionics equipment

10

Office furniture and equipment 7

Vehicles and automatic data processing equipment 5

Software 3

*Depreciated over the remaining life of the "parent" asset; if the parent asset is fully depreciated, then the useful life 

of improvement or modification is considered to be 10 years.
Notes to the Financial Statements 71 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Buildings acquired under capital leases are amortized over the lease term. If the lease 

agreement contains a bargain purchase option or otherwise provides for transferring title of the 

asset to the FAA, the building is depreciated over a 40-year service life. 

Construction in progress is valued at actual (direct) costs, plus applied overhead and other 

indirect costs.

The FAA occupies certain real property, which is leased by the Department of Transportation 

from the General Services Administration. Payments for these leases are from an appropriation 

of the Office of the Secretary of Transportation; FAA's portion is derived from the Trust Fund.

L. Prepaid and Deferred Charges

Advance payments are generally prohibited by law; there are some exceptions, such as 

subscriptions. When permitted, payments made in advance of the receipt of goods and services 

are recorded as prepaid charges at the time of prepayment and recognized as expenses when the 

related goods and services are received.

M. Liabilities

A liability represents the amount to be paid by the FAA as the result of a transaction or event 

that has already occurred. The FAA, absent of an appropriation, cannot liquidate any 

liabilities. Liabilities for which an appropriation has not yet been enacted are, therefore, 

classified as unfunded liabilities, and there is no certainty that such appropriation will be 

enacted.

N. Borrowing and Interest Payable to the Treasury

Borrowing involves loans from the Treasury to fund expenses in the Aircraft Purchase Loan 

Guarantee Program. Treasury renews the debt obligation until the FAA receives an 

appropriation to liquidate the principal and interest. No such appropriation was enacted for FY 

2001 or 2000. The FAA owes interest to the Treasury based on this debt.

O. Annual, Sick, and Other Leave

Annual leave is accrued as it is earned, and the accrual is reduced as leave is taken. At each biweekly pay period, the balance in the accrued annual leave account is adjusted to reflect the 

latest pay rates and unused hours of leave. Liabilities associated with other types of vested 

leave, including compensatory, credit hours, restored leave, and sick leave in certain 

circumstances, are accrued at year-end, based on latest pay rates and unused hours of leave. 

Sick leave is generally non-vested, except for sick leave balances at retirement under the terms 

of certain union agreements. Funding will be obtained from future financing sources to the 

extent that current or prior year appropriations are not available to fund annual and other types 

of vested leave earned but not taken. Nonvested leave is expensed when used. 

P. Accrued Workers' Compensation

A liability is recorded for estimated and actual future payments to be made for workers' 

compensation pursuant to the Federal Employees' Compensation Act (FECA). The liability 

consists of the net present value of estimated future payments calculated by the U.S. 
Notes to the Financial Statements 72 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Department of Labor (DOL) and the unreimbursed cost paid by DOL for compensation paid to 

recipients under FECA. The actual costs incurred are reflected as a liability because FAA will 

reimburse DOL 2 years after the actual payment of expenses. Future appropriations will be 

used for the reimbursement to DOL.

Q. Retirement Plan

The FAA employees who participate in the Civil Service Retirement System (CSRS) are 

beneficiaries of the FAA’s matching contribution equal to 7 percent of pay to their annuity 

account in the Civil Service Retirement and Disability Fund. 

On January 1, 1987, the Federal Employees Retirement System (FERS) went into effect 

pursuant to Public Law 99-335. FERS and Social Security automatically cover most 

employees hired after December 31, 1983. Employees hired prior to January 1, 1984 could 

elect either to join FERS and Social Security, or to remain in CSRS. FERS offers a savings 

plan to which the FAA automatically contributes 1 percent of pay and matches any employee 

contribution up to an additional 4 percent of pay. For FERS participants, the FAA also 

contributes the employer’s matching share for Social Security. 

Beginning in fiscal year 1997, the FAA began to recognize the cost of pensions and other 

retirement benefits during the employees' active years of service. The Office of Personnel 

Management (OPM) actuaries determine pension cost factors by calculating the value of 

pension benefits expected to be paid in the future and communicate these factors to the FAA 

for current period expense reporting. OPM also provides information regarding the full cost of 

health and life insurance benefits. The FAA recognized the offsetting revenue as imputed 

financing sources for the extent of these additional expenses that will be paid by OPM.

R. Environmental Liabilities

The FAA recognizes two types of environmental liabilities: environmental cleanup and 

remediation. Environmental cleanup is the estimated cost that will be incurred to remove, 

contain, and/or dispose of hazardous waste when an asset presently in service is shutdown. The 

FAA estimates the environmental cleanup costs at the time an FAA-owned asset is placed in 

service and expenses the liability over the life of the asset.

Environmental remediation is the cost to bring a known contaminated site into compliance with 

applicable environmental standards. The liability for environmental remediation is an estimate 

of all costs necessary to bring the site to resolution of the environmental matters. The increase 

or decrease in the annual liability is charged to expense. 

S. Contingencies

The FAA recognizes losses for contingent liabilities when such losses are probable, reasonably 

estimable, and material in amount. 

T. Reclassifications

The balance of FY 2000 intragovernmental environmental liabilities has been reclassified as 

non-intragovernmental for consistency with FY 2001 reporting. 
Notes to the Financial Statements 73 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

U. Change in Accounting Principle

Effective October 1, 2000, the FAA adopted the provisions of Statement of Federal Financial 

Accounting Standards (SFFAS) Number 10, Accounting for Internal Use Software. Pursuant 

to this standard, the FAA capitalizes the cost of internal use software on a prospective basis. 

Previously, the FAA expensed the cost of internal use software at the time of acquisition in 

accordance with SFFAS Number 6, Accounting for Property, Plant, and Equipment.

Note 2. Fund Balance with Treasury

Fund balances with Treasury as of September 30, 2001 and 2000, respectively, were: 

Unobligated Unobligated

Obligated & Available & Restricted Total

Trust Fund $ 3,034,348 $ (2,393,305) $ 57,720 $ 698,763

Operations General Fund 858,570 138,700 39,278 1,036,548

Franchise Fund 48,843 25,682 - 74,525

Revolving Fund (3,160) 88,241 - 85,081

Other Funds (5,438) 108,818 - 103,380

Total $ 3,933,163 $ (2,031,864) $ 96,998 $ 1,998,297

Unobligated Unobligated

Obligated & Available & Restricted Total

Trust Fund $ 2,977,773 $ (2,003,690) $ (183,576) $ 790,507

Operations General Fund 87,516 3,359 62,707 153,582

Franchise Fund 4,943 4,024 8,967

Revolving Fund (71,788) (8,026) 79,953 141

Other Funds 114 (66,986) - (66,872)

Total $ 2,998,558 $ (2,071,319) $ (40,916) $ 886,325

As of September 30, 2000

(Dollars in Thousands)

(Dollars in Thousands)

As of September 30, 2001

Unobligated and restricted fund balances represent balances of appropriations for which the 

period of availability for (voluntary) obligation has expired. These balances are available for 

upward adjustments of obligations incurred only during the period for which the appropriation 

was available for obligation or for paying claims attributable to the appropriation. Pursuant to 

31 USC 1552, appropriation accounts are canceled at the close of the fifth fiscal year following 

the last fiscal year for which they were available for obligation. Fund balances in Operations 
Notes to the Financial Statements 74 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

General Fund appropriations cancelled at year-end, and thus removed from the balance sheet, 

were $28.2 million and $11.6 million as of September 30, 2001 and 2000, respectively. The 

amount withdrawn biweekly from the Trust Fund is based on cash outlays, not on obligational 

authority, to minimize interest costs. Negative unobligated balances are covered by invested 

funds in the Airport and Airway Trust Fund.

.

Note 3. Investments

At September 30, FAA's investment balances were as follows: 

Nonmarketable par value Treasury securities are special series debt securities, issued by the 

Bureau of the Public Debt to Federal accounts, and are purchased and redeemed at par (face 

value) exclusively through Treasury’s Finance and Funding Branch. The securities are 

redeemed at face value on demand; thus, investing entities recover the full amount invested, 

plus interest. The Fund's trustee, the Secretary of the Treasury, makes Trust Fund investments. 

As of September 30, 2001 and 2000, $13.7 billion and $13.1 billion, respectively, was invested 

in U.S. Treasury Certificates of Indebtedness. FY 2001 amounts were invested at a rate of 

6.125 percent, maturing June 30, 2002, and FY 2000 amounts were invested at a rate of 

6.5 percent, maturing June 30, 2001. 

 Cost 

Amortization 

Method

Unamortized 

(Premium) 

Discount Investments Net

Other 

Adjustments

Market Value 

Disclosure

Intragovernmental 

Securities:

Nonmarketable, Par Value

Trust Fund $ 13,096,852 $ - $ 13,096,852 $ - $ 13,096,852

Nonmarketable, 

Market-Based

Aviation Insurance Interest

Revolving Fund 75,932 Method 2,581 78,513 78,513

Subtotal 13,172,784 $ 2,581 $ 13,175,365 $ - $ 13,175,365

Accrued Interest 182,350 182,350

Total $ 13,355,134 $ 13,357,715

(Dollars in Thousands)

As of September 30, 2000

 Cost 

Amortization 

Method

Unamortized 

(Premium) 

Discount Investments Net

Other 

Adjustments

Market Value 

Disclosure

Intragovernmental 

Securities:

Nonmarketable, Par Value

Trust Fund $ 13,659,804 $ - $ 13,659,804 $ - $ 13,659,804

Accrued Interest 206,976 206,976

Total $ 13,866,780 $ 13,866,780

As of September 30, 2001

(Dollars in Thousands)
Notes to the Financial Statements 75 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Nonmarketable, market-based Treasury securities are debt securities that the Treasury issues to 

Federal entities without statutorily fixed interest rates. Although the securities are not 

marketable, their terms (prices and interest rates) mirror the terms of marketable Treasury 

securities. FAA amortizes premiums and discounts on market-based Treasury securities over 

the life of the security using the interest method. Following the terrorist attacks of September 

11, 2001, all market-based Treasury securities were redeemed prior to fiscal year-end, so they 

would be available for use in various initiatives related to the Aviation Insurance Program. As 

of September 30, 2000, the following amounts were invested in market-based Treasury 

securities: 

(Dollars in Thousands)

Effective

Maturity Interest

Date Rate Amount

1 12/08/00 5.33% $ 14,798

2 03/01/01 5.90% 25,823

3 05/31/01 5.79% 17,993

4 08/30/01 5.75% 19,899

$ 78,513

Note 4. Accounts Receivable

Accounts receivable as of September 30, 2001 and 2000 were as follows: 

Gross Allowance for Net

Accounts Uncollectible Amount

Due Amounts Due

Intragovernmental Receivables $ 127,429 $ - $ 127,429

Other Receivables 56,640 (5,360) 51,280

Total Accounts Receivable $ 184,069 $ (5,360) $ 178,709

Reconciliation of Uncollectible Amounts: Intragovernmental Other

Beginning Balance $ - $ (3,209)

Additions - (5,122)

Reductions - 2,971

Ending Balance $ - $ (5,360)

As of September 30, 2001

(Dollars in Thousands)
Notes to the Financial Statements 76 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

FAA sends a delinquency notice to each debtor when billings remain uncollected for 30 days 

after the Bill for Collection date. A second delinquency notice is sent in another 30 days if the 

debtor does not respond to the first notice. Salary or retirement offset action may be taken 

when the debtor is a current or former Federal employee. Other attempts at collection may be 

taken for debtors who are not current or former Federal employees. In 1997, the FAA 

implemented certain provisions of the Debt Collection Improvement Act of 1996, P.L.1041-34, 

which requires, among other things, that Federal agencies submit accounts receivable that are 

over 180 days delinquent to the Department of Treasury (Treasury) for collection. Treasury 

may take such actions as tax refund offset, consumer reporting, and referral to collection 

agencies. An allowance for uncollectible accounts receivable is established when either (1) 

based upon a monthly review of outstanding accounts and the failure of all collection efforts, 

management determines that collection is unlikely to occur, or (2) when an account for which 

no allowance has been established is submitted to Treasury for collection. Accounts receivable 

in appropriations canceled at year-end, pursuant to 31 USC 1552, are no longer FAA assets. 

Accordingly, accounts receivable balances totaling $459,832 and $116,732 in canceled 

appropriations as of September 30, 2001 and 2000, respectively, were removed from the 

balance sheet.

Gross Allowance for Net

Accounts Uncollectible Amount

Due Amounts Due

Intragovernmental Receivables $ 267,438 $ - $ 267,438

Other Receivables 39,803 (3,210) 36,593

Total Accounts Receivable $ 307,241 $ (3,210) $ 304,031

Reconciliation of Uncollectible Amounts: Intragovernmental Other

Beginning Balance $ - $ (6,803)

Additions - (2,884)

Reductions - 6,477

Ending Balance $ - $ (3,210)

As of September 30, 2000

(Dollars in Thousands)
Notes to the Financial Statements 77 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 5. Other Assets

Other assets as of September 30, 2001 and 2000, respectively, were: 

Intragovernmental advances and prepayments represent advance payments to other Federal 

Government entities under the 31 USC 1535 for agency expenses not yet incurred or for goods 

or services not yet received.

Other undistributed intragovernmental assets include assets transferred between FAA regions. 

Transferred items remain in the undistributed asset account until removed by the recipient 

region. Transfer transactions may include some expenses.

Advances and prepayments (non-intragovernmental) represent advance payments to 

contractors and employees for agency expenses not yet incurred.

2001 2000

Other Entity Assets Intragovernmental

Advances and Prepayments $ 40,442 $ 43,576

Undistributed Foreign Costs 34 188

Undistributed Costs - Treasury Clearing 685 947

Other Assets - Undistributed 4,932 319

Total Other Assets Intragovernmental $ 46,093 $ 45,030

Other Entity Assets

Advances and Prepayments 67,204 52,642

Total Other Entity Assets $ 113,297 $ 97,672

(Dollars in Thousands)
Notes to the Financial Statements 78 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 6. Loans and Loan Guarantees, Non-Federal Borrowers

FAA has no direct loan programs, but FAA administers the Aircraft Purchase Loan Guarantee 

Program. Authorization for issuing new loan guarantees expired in 1988. The only remaining 

program function is to maximize recoveries from defaulted loans. As of September 30, 2001 

and 2000, respectively, defaulted guaranteed loans receivable, which are under this program, 

were as follows: 

2001 2000

Defaulted Guaranteed Loans Receivable, Gross $ 569 $ 613

Interest Receivable - 7

Allowance for Loan Losses (569) (337)

 

Defaulted Guaranteed Loans Receivable, Net $ - $ 283

(Dollars in Thousands)

During FY 2001, the allowance was increased thereby reducing net defaulted guarantees loans 

receivable to zero because the balance was deemed uncollectible . 

The Federal Credit Reform Act was enacted after the authority to issue new guarantees expired 

and, therefore, does not apply to FAA’s loan guarantees. 

Administrative expenses to maintain residual values in this program are minimal. FAA has no 

full-time employees administering the program. 

Note 7. Cash and Other Monetary Assets

As of September 30, 2001 and 2000, respectively, cash and other monetary assets were 

comprised of the following: 

Note 8. Inventory and Related Property

On October 1, 2000, the FAA's Franchise Fund changed its administrative services operating 

model to one in which inventory is held for sale. In connection with this operational change, 

$470.9 million in gross value of operating materials and supplies as of September 30, 2000 was 

reclassified to inventory held by the Franchise Fund on October 1, 2000. 

2001 2000

Imprest Fund $ 4 $ 4

Undeposited Collections 44,661 69,350

Total Cash and Other Monetary Assets $ 44,665 $ 69,354

(Dollars in Thousands)
Notes to the Financial Statements 79 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Inventory consists of parts, materials, and supplies that support the National Airspace System 

(NAS) located at the Mike Monroney Aeronautical Center in Oklahoma City. Operating 

materials and supplies consists of general materials and supplies and spare parts located at field 

facilities. FAA uses the moving weighted average cost method to value inventory and 

operating materials and supplies. Operating materials and supplies are expensed, or are 

reclassified as asset field spares or work in process when issued or consumed. As of 

September 30, 2001 and 2000, inventory and operating materials and supplies, the associated 

allowances, and net values were as follows:

Inventory is considered for repair based on condition levels and if the maximum repair cost 

does not exceed 65 percent of the original cost. The allowance for repairable inventory is 

based on the average historical cost of such repairs. An allowance for repairable operating 

materials and supplies, which is applicable to FY 2000 only, was 65 percent. Beginning in 

As of September 30, 2001

(Dollars in Thousands)

Operating Material and Supplies: Value Allowance Net Value

Items Held For Use $ 556,900 $ - $ 556,900

Held in Reserve 96,248 96,248

Excess, Obsolete, and Unserviceable 13,830 (6,085) 7,745

Subtotal, Operating Material and Supplies $ 666,978 $ (6,085) $ 660,893

Inventory:

Items Held for Sale $ 63,154 $ - $ 63,154

Items Held for Repair 417,937 (55,167) 362,770

Raw Materials 1,272 1,272

Work-In-Process 3 3

Finished Goods 2,126 2,126

Other Inventory 10,896 10,896

Excess, Obsolete, and Unserviceable 36,112 (15,528) 20,584

Subtotal, Inventory $ 531,500 $ (70,695) $ 460,805

Total Inventory and Related Property $ 1,198,478 $ (76,780) $ 1,121,698

(Dollars in Thousands)

Operating Material and Supplies: Value Allowance Net Value

Items Held For Use $ 877,734 $ - $ 877,734

Excess, Obsolete, and Unserviceable 32,054 (13,376) 18,678

Items Held for Repair 262,131 (170,385) 91,746

Total Operating Materials and Supplies $ 1,171,919 $ (183,761) $ 988,158

As of September 30, 2000
Notes to the Financial Statements 80 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

FY 2001, the repairable classification pertains to inventory only. Current period expenses are 

recognized for the amount of the annual increase or decrease to the repairable allowance 

account. During FY 2001 and FY 2000, FAA recognized the following changes in its

allowance for items held for repair:

FY 2001 FY 2000

Operating materials and supplies held for repair N/A $18.2 million increase

Inventory held for repair $55.2 million increase N/A

Scrap and salvage items, which are reported under the caption excess, obsolete, and 

unserviceable, are written down to zero value and may be sold for nominal amounts. FAA 

transfers excess items for disposal into the Government-wide automated disposal system. 

Disposal proceeds may go to the General Fund or to an FAA appropriation, depending upon 

the nature of the item and the disposal method. 

Note 9. Property, Plant, and Equipment, Net

Property, Plant, and Equipment balances at September 30, 2001 and 2000, respectively, were 

as follows: 

Deprec. Service Acquisition Accumulated Net

Class of Fixed Assets Method Life Value Depreciation Book Value

Land None None $ 86,294 $ - $ 86,294

Buildings & Structures SL 15-40 3,192,205 (1,549,181) 1,643,024

Leasehold Improvements SL * 22,195 (3,807) 18,388

Aircraft SL 20 456,253 (206,584) 249,669

ADP Software SL 3 30,592 (7,775) 22,817

Internal Use Software in Development SL None 54,823 - 54,823

Equipment SL 5-20 10,687,768 (4,271,735) 6,416,033

Assets Under Capital Lease SL Term-40 110,432 (38,769) 71,663

Construction in Progress None None 3,163,823 - 3,163,823

Property Not in Use - - 966 (966) -

Total Property, Plant, and Equipment $ 17,805,351 $ (6,078,817) $ 11,726,534

*Depreciated over the lesser of the remaining life of the "parent" asset or 10 years.

As of September 30, 2001

(Dollars in Thousands)
Notes to the Financial Statements 81 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

In FY 2001, FAA implemented an Interim Fixed Asset System (IFAS) for its real and personal 

property included within the captions of Land, Buildings & Structures, Leasehold 

Improvements, Aircraft, ADP Software, Equipment, and Property Not in Use. IFAS serves as 

the subsidiary record supporting the acquisition value and accumulated depreciation for 

financial statement reporting as of September 30, 2001. 

FAA reviewed its major system acquisition costs expended in FY 2001 and FY 2000, and 

identified additional capital costs of approximately $605 million and $553 million, 

respectively. A capitalization percentage was applied to both the FY 2001 and FY 2000 

expenditures based on results of an FY 1999 detailed analysis of two decades of NAS 

acquisitions. These centrally funded capital expenditures were then assigned to individual 

Construction-in-Progress projects and/or in-use assets as appropriate. As a result of this 

distribution, a combined $985 million was added to the Equipment and Aircraft acquisition 

values. The remaining centrally funded capital expenditures were assigned to Construction-inProgress accounts. 

FAA monitors its Construction-in-Progress accounts with performance measures to ensure that 

projects are closed to in-use assets within 6 months after new assets/capital improvements are 

placed in service. In both FY 2001 and FY 2000, the FAA closed more than $1 billion of 

Construction-in-Progress to the in-use accounts.

Beginning in FY 2001, the FAA is reporting $11.3 million of its Property Not in Use asset cost 

and associated accumulated depreciation based on its IFAS subsidiary system. In FY 2000, 

FAA recognized approximately $95 million (*) in current and prior year losses for Property 

Not in Use. Of this amount, $37.4 million was recognized as a loss on fixed assets for excess 

and surplus property as identified in the Utilization Screening and Disposal System (USD).

Deprec. Service Acquisition Accumulated Net

Class of Fixed Assets Method Life Value Depreciation Book Value

Land None None $ 84,422 $ - $ 84,422

Buildings & Structures SL 15-40 3,198,406 (1,403,311) 1,795,095

Leasehold Improvements SL 10 27,619 - 27,619

Aircraft SL 20 395,361 (173,474) 221,887

Aircraft Engines SL 7 2,761 - 2,761

ADP Software SL 3 54,062 (30,063) 23,999

Equipment SL 5-20 10,017,381 (3,659,425) 6,357,956

Assets Under Capital Lease SL Term-40 109,319 (27,995) 81,324

Construction in Progress None None 2,934,273 - 2,934,273

Property Not in Use - - 95,244 (95,244) (*) -

Total Property, Plant, and Equipment $ 16,918,848 $ (5,389,512) $ 11,529,336

As of September 30, 2000

(Dollars in Thousands)
Notes to the Financial Statements 82 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 10. Environmental and Disposal Liabilities

FAA's environmental liabilities consist of environmental cleanup and remediation. 

Environmental cleanup is estimated at the time an FAA-owned asset is placed in service and 

includes the estimated cost to remove, contain, and/or dispose of hazardous waste at the time 

that asset will be shutdown. The environmental cleanup liability is charged to expense over the 

life of the associated asset. Environmental remediation is an estimate of all costs necessary to 

bring a known contaminated site into compliance with applicable environmental standards. The 

increase or decrease in the annual environmental remediation liability is charged to expense. 

As of September 30, 2001, the number of sites identified for environmental remediation 

decreased to 240, from 436 as of September 30, 2000. 

FAA's environmental liabilities as of September 30, 2001 and 2000, respectively, were as 

follows:

2001 2000

Environmental Remediation $ 382,200 $ 441,944

Environmental Cleanup and Decommissioning 1,373,800 1,373,800

 

Total Environmental Liabilities $ 1,756,000 $ 1,815,744

(Dollars in Thousands)

Note 11. Debt

As of September 30, debt outstanding to the U.S. Treasury under the Aircraft Purchase Loan 

Guarantee Program was as follows:

Not Covered by

Budgetary Resources 2001 2000

Beginning Balance $ 26 $ 24

Interest Payable 2

Net Borrowing - 2

Ending Balance $ 28 $ 26

(Dollars in Thousands)
Notes to the Financial Statements 83 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 12. Other Liabilities

FAA's Other Liabilities as of September 30, 2001 and 2000 were as follows:

Other Intragovernmental Liabilities

Non-Current 

Liabilities

Current 

Liabilities Total

Advances from Others $ - $ 22,537 $ 22,537

Accrued Payroll & Benefits to Other Agencies - 55,478 55,478

Proceeds From Replacement of Property - 12 12

Other - 95,047 95,047

Liabilities Covered by Budgetary Resources $ - $ 173,074 $ 173,074

Federal Employees Compensation Act 109,981 84,337 194,318

Liabilities Not Covered by Budgetary Resources $ 109,981 $ 84,337 $ 194,318

Total Other Intragovernmental Liabilities $ 109,981 $ 257,411 $ 367,392

Other Liabilities

Advances from Others, Unclassified $ - $ 6,687 $ 6,687

Accrued Payroll & Benefits to Employees - 249,063 249,063

Liability for Unapplied Collections - (25,384) (25,384)

Other Accrued Liabilities - 3,188 3,188

Liabilities Covered by Budgetary Resources $ - $ 233,554 $ 233,554

Accrued Unfunded Annual & Other Leave & Assoc. Benefits $ 412,590 $ - $ 412,590

Sick Leave Compensation Benefits for Air Traffic Controllers 48,661 - 48,661

Capital Leases (Note 13) 80,271 - 80,271

Contingent Liabilities for Legal Claims 679,023 - 679,023

Contingent Liabilities for Return Rights 10,100 - 10,100

Other Accrued Liabilities 109,346 109,346

Liabilities Not Covered by Budgetary Resources $ 1,339,991 $ - $ 1,339,991

Total Other Liabilities $ 1,339,991 $ 233,554 $ 1,573,545

(Dollars in Thousands)

As of September 30, 2001
Notes to the Financial Statements 84 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Accrued payroll and benefits to employees at fiscal year-end represent the unpaid pay periods 

September 9-30, 2001 and September 10-30, 2000, respectively.

An unfunded liability is recorded for the actual cost of workers' compensation benefits to be 

reimbursed to the Department of Labor (DOL), pursuant to the Federal Employees’ 

Compensation Act (FECA). DOL administers the Federal Employees’ Compensation Fund. 

Funding for the amount charged by DOL to FAA is normally appropriated for the fiscal year 

ending 2 years after the FAA accounting period in which the expense was incurred. Therefore, 

FAA’s liability accrued as of September 30, 2001 includes workers' compensation benefits 

paid by DOL during the period July 1, 1999 through June 30, 2001, and accrued liabilities for 

the quarter July 1, 2001 through September 30, 2001. FAA's accrued liability as of September 

30, 2000 was for the corresponding period July 1, 1998 through September 30, 2000.

The estimated liability for accrued unfunded annual leave, other leave, and associated benefits 

includes annual, compensatory hours (credit hours and restored leave), and sick leave under the 

terms the National Air Traffic Controllers Association (NATCA) agreement, Article 25, 

Other Intragovernmental Liabilities

Non-Current 

Liabilities

Current 

Liabilities Total

Advances from Others $ - $ 27,325 $ 27,325

Accrued Payroll & Benefits to Other Agencies - 36,645 36,645

Proceeds From Replacement of Property - 12 12

Other - 88,567 88,567

Liabilities Covered by Budgetary Resources $ - $ 152,549 $ 152,549

Federal Employees Compensation Act 108,681 83,334 192,015

Liabilities Not Covered by Budgetary Resources $ 108,681 $ 83,334 $ 192,015

Total Other Intragovernmental Liabilities $ 108,681 $ 235,883 $ 344,564

Other Liabilities

Advances from Others, Unclassified $ - $ 2,758 $ 2,758

Accrued Payroll & Benefits to Employees - 239,790 239,790

Liability for Unapplied Collections - (86,437) (86,437)

Other Accrued Liabilities - 96,965 96,965

Liabilities Covered by Budgetary Resources $ - $ 253,077 $ 253,076

Accrued Unfunded Annual & Other Leave & Assoc. Benefits $ 398,093 $ - $ 398,093

Sick Leave Compensation Benefits for Air Traffic Controllers 43,715 - 43,715

Capital Leases (Note 13) 87,765 - 87,765

Contingent Liabilities for Legal Claims 537,768 537,768

Contingent Liabilities for Return Rights 12,651 12,651

Liabilities Not Covered by Budgetary Resources $ 1,079,993 $ - $ 1,079,993

Total Other Liabilities $ 1,079,993 $ 253,077 $ 1,333,068

(Dollars in Thousands)

As of September 30, 2000
Notes to the Financial Statements 85 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Section 13. This agreement gives air traffic controllers who are covered under the Federal 

Employees Retirement System (FERS) the option to receive a lump-sum payment for 40 

percent of their accumulated sick leave as of their retirement effective date. FAA's estimated 

sick leave buy-back contingency for those air traffic controllers eligible for retirement, based 

on current sick leave balances, is $48.7 million and $43.7 million, as of September 30, 2001 

and 2000, respectively.

As of September 30, 2001 and 2000, respectively, FAA recognized a contingent liability of 

$679.0 million and $537.8 million for legal claims that were asserted and pending, an increase 

of $141.2 million. Of the $679.0 million 2001 liability, $63 million was estimated to be paid 

from agency appropriations with the remaining $616 million to be paid from the permanent 

appropriation for judgments, awards, and compromise settlements (Judgment Fund) 

administered by the Department of Justice. During FY 2001, FAA recognized the $141.2 

million increase in the liability from September 30, 2000 to 2001, as legal claims expense. As 

of September 30, 2001, FAA's maximum loss exposure for contingent liabilities associated 

with asserted and pending legal claims, in addition to amounts accrued, is estimated at $20.1 

billion.

The Return Rights Program pertains to employees who previously accepted transfers to 

overseas or certain domestic locations for a period of 2 to 4 years, and entitles the employees to 

a future return move at Government expense. As of September 30, 2001 and 2000, 202 and 

253 employees, respectively, were contractually entitled to these "return rights." The return 

rights contingent liability is estimated at the typical cost per move, $50,000. This contingent 

liability may be overstated because not every employee remaining in the program will exercise 

his or her right. If every employee in the program did exercise his or her right, the future 

payments comprising the contingent liability for return rights would be as follows:

The FY 2000 returns rights liability of $12.65 million represented a decrease of $13.25 million, 

from $25.9 million in FY 1999. Because of evidence that the FY 1999 liability may have been 

overstated, the $13.25 million decrease was treated as a prior period adjustment in FY 2000. 

Number of Payment Number of Payment

employees Amount employees Amount

FY 2002 121 $ 6,050 FY 2001 102 $ 5,100

FY 2003 48 2,400 FY 2002 132 6,600

FY 2004 33 1,650 FY 2003 19 950

Total 202 $ 10,100 Total 253 $ 12,650

As of September 30, 2001 As of September 30, 2000

(Dollars in Thousands)
Notes to the Financial Statements 86 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 13. Leases

FAA as Lessee

Capital Leases

Following is a summary of FAA's assets under capital lease as of September 30, 2001 and 

2000:

FAA’s capital lease payments are funded annually. Capital lease assets are recorded at the net 

present value of the total minimum lease payments over the lease duration, valued at the lease 

inception. Amounts due within the current fiscal year corresponding to the principal portion of 

the lease payments are recorded as current year obligations. The remaining principal payments 

are recorded as unfunded lease liabilities. The imputed interest is funded and expensed 

annually. Interest amounts imputed to subsequent years are not recorded as unfunded liabilities 

in the Departmental Accounting and Financial Information System (DAFIS).

Operating Leases

FAA leases property, aircraft, equipment, and telecommunications under operating leases. 

Future payments due as of September 30, 2001 and 2000, were:

(Dollars in Thousands)

 Summary of Assets Under Capital Leases:

2001 2000

Land, Buildings & Machinery: $ 110,432 $ 109,319

Less: Accumulated Amortization (38,769) $ (27,995)

Net Assets Under Capital Lease $ 71,663 $ 81,324

Future Payments Due 

Fiscal Year

 Year 1 $ 15,256 $ 15,885

 Year 2 15,228 15,707

 Year 3 15,167 15,016

 Year 4 14,277 14,957

 Year 5 12,254 14,197

 After 5 Years (Year 6 to Contract End) 66,947 78,902

Less: Imputed Interest (58,858) (66,899)

 Total Capital Lease Liability $ 80,271 $ 87,765

Liabilities Not Covered by Budgetary Resources $ 80,271 $ 87,765
Notes to the Financial Statements 87 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

FAA's operating leases are funded annually and expensed as recurring charges. Unfunded 

liabilities and future funding requirements for operating lease payments due in future years are 

not recorded. 

The cumulative operating lease amounts due after 5 years does not include estimated payments 

for leases with annual renewal options. Estimates of the lease termination dates are subjective, 

and any projection of future lease payments would be arbitrary. 

Future Payments Due 

Land & Machinery &

Fiscal Year Buildings Equipment Other Total

 Year 1 (FY 2002) $ 54,906 $ 4,749 $ 427 $ 60,082

 Year 2 (FY 2003) 91,699 3,163 368 95,230

 Year 3 (FY 2004) 86,933 2,094 349 89,376

 Year 4 (FY 2005) 80,808 1,497 340 82,645

 Year 5 (FY 2006) 75,925 757 264 76,946

 After 5 Years (FY 2007 to Contract End) 118,181 699 436 119,316

 Total Future Operating Lease Payments $ 508,452 $ 12,959 $ 2,184 $ 523,595

Future Payments Due 

Land & Machinery &

Fiscal Year Buildings Equipment Other Total

 Year 1 (FY 2001) $ 45,685 $ 2,809 $ 264 $ 48,757

 Year 2 (FY 2002) 41,143 2,721 245 44,110

 Year 3 (FY 2003) 37,818 2,732 227 40,777

 Year 4 (FY 2004) 33,655 2,444 208 36,307

 Year 5 (FY 2005) 30,887 1,881 199 32,967

 After 5 Years (FY 2006 to Contract End) 71,848 3,370 142 75,359

 Total Future Operating Lease Payments $ 261,035 $ 15,957 $ 1,285 $ 278,277

As of September 30, 2000

(Dollars in Thousands)

As of September 30, 2001

(Dollars in Thousands)
Notes to the Financial Statements 88 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

FAA as Lessor

Operating Leases

As of September 30, 2001 and 2000, future lease payments on operating leases in which FAA 

is the lessor were as follows:

FAA leases Ronald Reagan Washington National Airport and Washington Dulles International 

Airport to the Metropolitan Washington Airports Authority, the airports’ sponsor. The lease 

took effect in March 1987 at $3 million per year for a 50-year term. Subsequent annual rental 

payments are adjusted by applying the Implicit Price Deflator for the Gross National Product 

published by the Department of Commerce. Additionally, the parties may renegotiate the level 

of lease payments attributable to inflation costs every 10 years. Upon lease expiration, the 

airports and facilities, originally valued at $244 million, together with any improvements 

thereto, will revert to the Federal Government. In addition, FAA leases equipment to foreign 

governments and leases parcels of Government-owned land, generally for agriculture.

Future Payments Due 

 Land & Machinery &

Fiscal Year Buildings Equipment Other Total

 Year 1 (FY 2002) $ 5,308 $ 90 $ 34 $ 5,432

 Year 2 (FY 2003) 5,402 90 34 5,526

 Year 3 (FY 2004) 5,501 90 34 5,625

 Year 4 (FY 2005) 5,601 90 34 5,725

 Year 5 (FY 2006) 5,704 90 - 5,794

 After 5 Years (FY 2007 to Contract End) 139,890 90 - 139,980

 Total Future Operating Lease Payments $ 167,406 $ 540 $ 136 $ 168,082

Future Payments Due 

 Land & Machinery &

Fiscal Year Buildings Equipment Other Total

 Year 1 (FY 2001) $ 4,264 $ 90 $ 57 $ 4,411

 Year 2 (FY 2002) 4,682 90 52 4,824

 Year 3 (FY 2003) 5,142 90 50 5,282

 Year 4 (FY 2004) 5,644 90 41 5,775

 Year 5 (FY 2005) 6,200 - 35 6,236

 After 5 Years (FY 2006 to Contract End) 146,222 - 34 146,257

 Total Future Operating Lease Payments $ 172,155 $ 358 $ 270 $ 172,783

(Dollars in Thousands)

As of September 30, 2001

As of September 30, 2000

(Dollars in Thousands)
Notes to the Financial Statements 89 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 14. Federal Employee and Veterans Benefits Payable

Note 15. Unexpended Appropriations

Unexpended appropriations as of September 30, 2001 and 2000 were as follows: 

(Dollars In Thousands)

2001 2000

Other Post-Employment Benefits

Federal Employees Compensation Act:

Actuarial Liabilities $ 1,044,259 $ 944,533

Total $ 1,044,259 $ 944,533

Operations 

General Fund Other Funds Total

Unobligated

 Available $ 138,281 $ 56 $ 138,337

 Unavailable 39,696 238 39,934

Undelivered Orders 437,695 170 437,865

Sub-total 615,672 464 616,136

Other Differences (65,706) 709 (64,997)

Total Unexpended Appropriations $ 549,966 $ 1,173 $ 551,139

Operations 

General Fund Other Funds Total

Unobligated

 Available $ 3,359 $ 54 $ 3,413

 Unavailable 62,707 959 63,666

 Undelivered Orders 95,081 173 95,254

Sub-total 161,147 1,186 162,333

Other Differences (37,105) (11) (37,116)

Total Unexpended Appropriations $ 124,042 $ 1,175 $ 125,217

As of September 30, 2001

(Dollars in Thousands)

As of September 30, 2000

(Dollars in Thousands)
Notes to the Financial Statements 90 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Other FY 2001 and FY 2000 differences include a rescission for $11.8 million in Treasury 

Symbol 6971301. $32.3 million and $21.5 million in transfers from the reimbursable to the 

direct apportionment reported in FY 2001 and FY 2000, respectively, may also contribute to 

the differences. The remaining differences include adjustments to the financial statements.

Note 16. Total Cost and Earned Revenue by Budget Functional Classification

FAA's consolidated costs and costs net of earned revenue are shown below by budget 

functional classification as of September 30, 2001 and 2000. FAA's intragovernmental portion 

of total consolidated costs and earned revenues are also depicted.

Gross Cost and Earned Revenue by Budget Functional Classification

Budget Functional Classification Total Cost Earned Revenue Net Cost

Transportation Programs $ 11,023,423 $ (208,856) $ 10,814,567

Community and Regional Development Programs 2 - 2

General Government Programs - - -

Total Cost $ 11,023,425 $ (208,856) $ 10,814,569

Intragovernmental Gross Cost and Earned Revenue by Budget Functional Classification

Budget Functional Classification Total Cost Earned Revenue Net Cost

Transportation Programs $ 1,342,233 $ (78,745) $ 1,263,488

Community and Regional Development Programs - - -

General Government Programs - - -

Total Intragovernmental Gross Cost $ 1,342,233 $ (78,745) $ 1,263,488

For the Year Ended September 30, 2001

(Dollars in Thousands)
Notes to the Financial Statements 91 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 17. Net Cost by Programs

FAA's six lines of business represent the programs reported on the Statement of Net Cost. 

Assigned cost centers to each line of business permit the direct accumulation of costs. Other 

costs that are not directly traced to each line of business, such as agency overhead, are 

allocated by applying ratios representing the cost for each line of business cost compared to 

total expenses, excluding grants.

Note 18. Taxes and Other Nonexchange Revenue

The Department of Treasury (Treasury) Internal Revenue Service collects various taxes on 

behalf of the FAA's Airport and Airway Trust Fund. These taxes can be withdrawn only as 

authorized by FAA appropriations. Treasury estimates taxes to be collected each quarter and 

adjusts the estimates by actual collections. As of September 30, 2001 and 2000, respectively, 

Treasury reported to FAA the following taxes collected:

Gross Cost and Earned Revenue by Budget Functional Classification

Budget Functional Classification Total Cost Earned Revenue Net Cost

Transportation Programs $ 9,857,853 $ (122,639) $ 9,735,214

Community and Regional Development Programs 690 - 690

General Government Programs 47 - 47

Total Cost $ 9,858,590 $ (122,639) $ 9,735,951

Intragovernmental Gross Cost and Earned Revenue by Budget Functional Classification

Budget Functional Classification Total Cost Earned Revenue Net Cost

Transportation Programs $ 1,334,622 $ (84,811) $ 1,249,811

Community and Regional Development Programs -

General Government Programs -

Total Intragovernmental Gross Cost $ 1,334,622 $ (84,811) $ 1,249,811

(Dollars in Thousands)

For the Year Ended September 30, 2000

2001 2000

Passenger Ticket Tax $ 6,482,379 $ 7,158,909

International Departure Tax 1,351,245 1,384,659

Investment Income 907,104 817,933

Fuel Taxes 854,309 909,144

Waybill Tax 441,616 522,969

Tax Refunds and Credits (52,559) (45,761)

Total Taxes and Other Nonexchange Revenue $ 9,984,094 $ 10,747,853

(Dollars in Thousands)
Notes to the Financial Statements 92 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 19. Imputed Financing

The FAA recognizes as imputed financing the amount of accrued pension and post-retirement 

benefit expenses for current employees. The assets and liabilities associated with such benefits 

are the responsibility of the administering agency, OPM. Amounts paid by the Judgment Fund 

in settlement of claims or court assessments against the FAA are also recognized as imputed 

financing. For the fiscal years ending September 30, 2001 and 2000, imputed financing was as 

follows:

Note 20. Prior Period Adjustments

For the year ending September 30, 2001, the FAA recognized the following prior period 

adjustments:

The net of these prior period adjustments serves to reduce net position. Thus, the amount is 

shown bracketed on the Statement of Changes in Net Position.

Note 21. Statement of Budgetary Resources Disclosures

For FY 2001, both the Trust Fund and the General Fund financed FAA's Operations 

Appropriation. In preparing the Combined Statement of Budgetary Resources, the “Budget 

Authority” and “Obligations Incurred” lines include amounts from the SF 133s of both the 

Operations Appropriation (6911301) and Operations Trust Fund (6918104). 

"Total Budgetary Resources" includes $4.4 billion transferred between the Operations Trust 

Fund and the Operations Appropriation. The "Obligations Incurred" line includes $4.4 billion, 

which is classified on the SF 133 of appropriation 6911301 as "reimbursable obligations." 

2001 2000

Office of Personnel Management $ 360,208 $ 330,870

Dept. of Justice Judgment Fund 146,026 83,340

Total Imputed Financing $ 506,234 $ 414,210

(Dollars in Thousands)

Reconciliation of General Ledger to Property 

Systems $ 296,357

Other Adjustments Relating to Property 40,189

Other 21,282

Total Prior Period Adjustments $ 357,828

(Dollars in Thousands)
Notes to the Financial Statements 93 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

These are obligations that are recorded in the Operations Appropriation and are funded by 

spending authority from offsetting collections (the amount transferred from the Operations 

Trust Fund).

The net amount of budgetary resources obligated for undelivered orders at the end of FY 2001 

was $6.5 billion. 

Under Congressional legislation in FY 2001, FAA was authorized $3.2 billion in contract 

authority and liquidating authority for $3.2 billion, which are derived from the Airport and 

Airway Trust Fund and available until expended, for the Grants-in-Aid Programs. The contract 

authority available at the end of FY 2001 was $903.9 million. 

On April 5, 2000, the Wendell H. Ford Aviation Investment and Reform Act for the 21st

Century, P.L. 106-181 (AIR-21), restored $324,474,133 in FY 1999 contract authority for the 

Grants-in-Aid for Airports Program (AIP). OMB did not permit the FAA SF-132 that was 

approved on May 3, 2000 to reflect this restoration because OMB had not then completed 

considering a legal opinion on the status of the restored funds. The approved SF-132 showed 

an “amount temporarily not available pursuant to P.L. 106-113 and 106-181” as $579,362,000. 

OMB did not reach a decision on this matter until February 2001. As a result of that decision, 

the SF-132 approved February 9, 2001, shows the FY 2001 AIP actual unobligated balance

brought forward as of October 1, 2000, was $903,900,816 instead of $579,362,000, as shown 

on the prior SF-132.

Congress mandated permanent indefinite appropriations for the Facilities and Equipment, 

Grants-in-Aid, and Research, Development and Engineering to fully fund special projects that 

were ongoing and spanned several years.

FAA does not have any material differences between the information reported on the statement 

and the amounts described as FY 2001 “actual” in the Budget of the United States Government 

for FY 2003. 

Unobligated balances of budgetary resources for unexpired accounts are available in 

subsequent years until expiration, upon receipt of an apportionment from OMB. Unobligated 

balances of expired accounts are not available.

FAA incurred several recissions of budgetary resources in FY 2001, including reductions to 

Facilities & Equipment Fund of $5.8 million and Grants-in-Aid for Airports contract authority 

of $609 million.

Subsequent to submission of FACTS II budgetary data to the Department of the Treasury, audit 

adjustments were received decreasing undelivered orders and increasing outlays $2.2 million, 

and reclassifying $34.2 million from obligations incurred to unobligated balances. These 

adjustments are reflected in the Statement of Budgetary Resources. Certain differences are 

also reflected between FY 2001 beginning balances and FY 2000 ending balances of 

obligations incurred and unobligated balances as a result of FY 2001 beginning balance 

adjustments to these accounts.

The Statement of Budgetary Resources is a combined statement and, as such, intraentity 

transactions have not been eliminated.
Notes to the Financial Statements 94 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 22. Financing Sources Yet to be Provided

The Statement of Financing is a combined statement and, as such, intra-entity transactions have 

not been eliminated. Recognized liabilities not covered by budgetary resources equals the total 

financing sources yet to be provided. 

Financing Sources Not Covered by

 Budgetary Resources, Beginning of Period: $ 4,202,912

Decreases:

Environmental Liabilities $ 59,744

Capital Leases 7,494

Accrued and Other Liabilites 4,761

Contingent Liabilities for Return Rights 2,550

Financing Sources That Fund Costs of Prior Periods $ 74,549

Increases:

Contingent Liabilities for Legal Claims $ 141,254

Federal Employee Compensation Act (FECA Actuarial) 99,727

Contingent Liabilities for Sick Leave Buy-Back Option 4,946

Contingent Liabilities for Warranties 3,310

Federal Employee Compensation Act (FECA Actual) 2,303

Total Financing Sources Yet to be Provided $ 251,540

Financing Sources Not Covered by

 Budgetary Resources, End of Period $ 4,379,903

(Dollars in Thousands)

For the Year Ended September 30, 2001
Notes to the Financial Statements 95 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Note 23. Custodial Activity

FAA's custodial activity for the years ending September 30, 2001 and 2000 was as follows:

Note 24. Other Disclosures

Contract Negotiations. As of September 30, 2001 and 2000, FAA had a total of 

$106.4 million and $88.9 million, respectively, in commitments (funds reserved for possible 

future obligations) under unexpired Facilities and Equipment, and Research, Engineering, and 

Development appropriations. The commitments were for purchases of goods and services for 

which contract negotiations have not been completed (i.e., agency obligations had not been 

incurred) at the end of each respective fiscal year.

Contract Options. As of September 30, 2001 and 2000, FAA had $17.9 billion and 

$13.1 billion, respectively, in unobligated contracts. The terms of these contracts give FAA the 

unilateral right to purchase additional equipment or services or to extend the contract terms. 

Exercising this right would require the obligation of funds in future years.

Letters of Intent. FAA has authority under 49 U.S.C. 47110(e) to issue letters of intent (LOI) 

to enter into AIP grant obligations, but LOI’s do not create obligations. Through September 

30, 2001, FAA issued LOI’s covering FY 1988 through FY 2014 totaling $3.9 billion. As of 

fiscal year-end, FAA had obligated $2.4 billion of this total amount leaving $1.5 billion 

unobligated. FAA anticipates obligating $242 million in FY 2002.

As of September 30, 2000, LOI’s covering FY 1998 through FY 2010 totaled $3.2 billion. Of 

this amount, FAA had obligated $2 billion, leaving $1.2 billion unobligated as of September 

30, 2000.

Revenue Activity: 2001 2000

Sources of Cash Collections:

Tax Revenues $ - $ -

Miscellaneous 23,447 21,942

Total Cash Collections 23,447 21,942

Accrual Adjustments (+/-) 5,912 1,811

Total Custodial Revenue $ 29,359 $ 23,753

Disposition of Collections:

Transferred to Treasury General Fund $ 23,447 $ 21,942

Increase in Amounts Yet to be Transferred 5,912 1,811

Refunds and Other Payments - -

Retained by the Reporting Entity - -

Net Custodial Revenue Activity $ - $ -

For the Year Ending September 30

(Dollars in Thousands)
Notes to the Financial Statements 96 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

AIP Grants. FY 2001 AIP grant authority totaled $3.1 billion, including $1.4 billion in 

entitlements to specific locations. Of entitlements to specific locations, sponsors have claimed 

$1.1 billion, and $298 million remains available from unused or newly enacted contract 

authority to those sponsors through FY 2002, or in the case of non-hub primary airport 

locations, through FY 2003.

In FY 2000, AIP grant authority was $1.85 billion, including over $965 million in entitlements 

to specific locations. Of this amount, the sponsors had claimed $868 million through the end 

of FY 2000, leaving $97 million available from unused or newly enacted contract authority.

Aviation Insurance Program. FAA is authorized to issue hull and liability insurance under 

the Aviation Insurance Program for air carrier operations where commercial insurance is not 

available on reasonable terms and when continuation of U.S. flag commercial air service is 

necessary in the interest of air commerce, national security, and the foreign policy of the 

United States. FAA may issue (1) non-premium insurance, and (2) premium insurance for 

which a risk-based premium is charged to the air carrier. 

FAA maintains standby non-premium war-risk insurance policies for 48 air carriers having 

approximately 1,050 aircraft available for Defense or State Department charter operations. As 

of September 30, 2001, non-premium insurance coverage in the amount of $8.75 million was 

in force to cover two helicopters under a Department of Defense charter. 

On September 22, 2001, the premium insurance program was expanded by the Air 

Transportation Safety and Stabilization Act (Public Law 107-42, 115 Stat.230), to include all 

scheduled domestic air carriers. Under this program, the FAA provided temporary war-risk 

insurance to U.S. carriers whose coverage was cancelled following the terrorist attacks on 

September 11, 2001. As of September 30, 2001, $121.68 billion of war risk insurance was 

extended to 74 carriers for a period of 30 days. On October 18, this war risk coverage was 

extended through January 11, 2002. The issuance of temporary war-risk coverage to all 

scheduled domestic carriers provides necessary insurance to qualifying carriers while allowing 

time for the commercial insurance market to stabilize. Premiums under this program are 

established by the FAA and are assessed per departure. During FY 2001, the FAA recognized 

$4.7 million in revenue related to the Aviation Insurance Program, $4.6 million of which is 

insurance premiums. Premium revenue is reported as earned revenues on the Consolidated 

Statement of Net Cost, under Other Programs.

In the past, the FAA has insured a small number of air carrier operations and establishes a 

maximum liability for losing one aircraft. Typically, the maximum liability for both hull loss 

and liability, per aircraft, is $1.75 billion. 

No claims for losses were pending as of September 30, 2001. Since the inception of the 

Aviation Insurance Program (including the predecessor Aviation War Risk Insurance Program 

dating back to 1951) only four claims ranging between $626 and $122,469 have been paid. 

Because of the unpredictable nature of war risk and the absence of historical claims experience 

on which to base an estimate, no reserve for insurance losses has been recorded. 
Notes to the Financial Statements 97 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Overflight User Fees. The FAA issued an interim final rule (IFR) on August 1, 2000, that 

required aircraft operators to pay fees for air traffic control and related services provided to 

aircraft that operate in U.S.-controlled airspace but neither takeoff nor land in the United 

States. The authority to charge these fees is contained in the Federal Aviation Reauthorization 

Act of 1996. Several airlines and an air carrier association challenged this IFR in the U.S. 

Court of Appeals. On July 13, 2001, the Court, in its preliminary opinion, ruled in favor of the 

airlines and the FAA ceased all billing and collection activities under the IFR. In August 2001, 

the FAA issued a Final Rule on overflight fees authorizing the agency to begin charging fees, 

which were subsequently billed in October 2001. On behalf of the FAA, the Department of 

Justice filed a motion for reconsideration of the Court's ruling on the IFR stating that the 

concerns that the Court expressed on the IFR were addressed in the Final Rule. The Court 

granted the FAA's motion on December 28, 2001, which allowed the IFR to remain in place. 

The financial statements include $29.3 million in overflight user fee revenue for the year 

ending September 30, 2001. 

Other Legal Claims. FAA normally processes all its legal claims through traditional judicial 

and administrative forums; however, there are certain claims, e.g. equal employment 

opportunity (EEO) cases and contract disputes, that are under an alternative dispute resolution 

program, which are resolved using consensual dispute resolution techniques such as mediation 

and neutral evaluation. As of September 30, 2001 and 2000, the FAA identified $3.9 million 

and $5.4 million, respectively, of these types of cases, as well as other threatened matters of 

litigation.

Note 25. Subsequent Events

Pursuant to the Air Transportation System Safety and Stabilization Act (Public Law 107-42, 

115 Stat. 230), on October 26, 2001 the Aviation Insurance Program offered to partially 

reimburse eligible air carriers for increases in war risk insurance premiums taking place after 

the September 11, 2001 terrorist attacks. Reimbursement is subject to certain specifications of 

the offer and limited to Aviation Insurance Program funds available for this purpose. The 

FAA estimates that reimbursements under this offer will range between $58 million and 

$65 million. This estimate includes $50 million in funding from the overall $40 billion 

2001 Emergency Supplemental Appropriations Act for Recovery From and Response to 

Terrorist Attacks on the United States (Public Law 107-38).

The Aviation and Transportation Security Act (Public Law 107-71, 115 Stat. 597), which was 

enacted on November 19, 2001, established the Transportation Security Administration (TSA) 

and transferred the Civil Aviation Security functions and responsibilities of the FAA to the 

TSA not later than 3 months after the date of enactment.
Notes to the Financial Statements 98 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

State/Territory FY 2001 FY2000 FY 1999

Alabama $ 27,421 $ 19,653 $ 18,134

Alaska 83,563 51,788 70,802

Arizona 51,783 58,381 53,135

Arkansas 32,412 17,534 21,694

California 179,447 87,617 106,161

Colorado 26,340 29,860 43,452

Connecticut 3,480 1,788 4,971

Delaware 4,704 2,515 197

District of Columbia 61 83 54

Florida 110,428 64,694 71,746

Georgia 33,652 43,911 43,556

Hawaii 34,569 6,567 12,131

Idaho 25,477 13,106 15,578

Illinois 85,566 66,003 63,596

Indiana 30,544 24,141 27,467

Iowa 35,159 16,169 30,450

Kansas 7,587 7,378 7,451

Kentucky 46,166 26,205 32,741

Louisiana 32,841 29,200 24,442

Maine 7,496 3,828 4,943

Maryland 18,953 14,900 18,136

Massachusetts 20,709 14,560 15,259

Michigan 99,278 27,363 50,995

Minnesota 49,143 30,561 27,902

Mississippi 28,203 9,281 14,393

Missouri 62,701 35,137 30,089

Montana 19,254 13,157 16,727

Nebraska 22,983 8,534 14,240

Nevada 57,332 32,106 22,981

New Hampshire 16,173 8,582 8,789

New Jersey 18,047 10,012 25,906

New Mexico 10,882 7,671 10,149

New York 118,792 57,671 86,754

North Carolina 60,908 26,084 50,572

North Dakota 25,221 11,490 8,263

Ohio 51,601 45,691 46,374

Non Federal Physical Property

Airport Improvement Program

For the Fiscal Years Ended September 30

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

Stewardship Investment
Notes to the Financial Statements 99 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

State/Territory FY 2001 FY2000 FY 1999

Oklahoma 19,780 8,678 14,949

Oregon 31,655 9,847 16,138

Pennsylvania 62,343 34,011 57,544

Rhode Island 9,547 11,705 10,813

South Carolina 18,895 11,792 22,926

South Dakota 10,466 12,301 8,893

Tennessee 58,638 39,237 36,477

Texas 127,046 111,585 103,308

Utah 39,235 14,328 8,808

Vermont 5,487 1,157 4,141

Virginia 75,555 41,109 31,069

Washington 34,023 35,498 44,454

West Virginia 18,564 7,400 12,592

Wisconsin 27,541 26,278 25,512

Wyoming 16,446 14,972 7,871

American Samoa 5,374 241 676

Guam 3,653 3,399 10,341

Northern Mariana Island 5,455 1,610 4,027

Puerto Rico 6,399 9,179 7,163

Trust Territory of Pacific - 138 27

Virgin Islands 5,056 2,411 9,231

Administration 58,542 55,196 75,680

 Totals $ 2,178,576 $ 1,375,293 $ 1,612,867

STEWARDSHIP INVESTMENT

Non-Federal Physical Property.

Airport Improvement Program. FAA makes project grants for airport planning and development under

the Airport Improvement Program (AIP) to maintain a safe and efficient nationwide system of public-use 

airports that meets both present and future needs of civil aeronautics. FAA works to improve the infrastructure

of the Nation's airports, in cooperation with airport authorities, local and state governments, and metropolitan

planning authorities.

Non Federal Physical Property

Airport Improvement Program

For the Fiscal Years Ended September 30

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

Stewardship Investment
Notes to the Financial Statements 100 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Expenditures 2001 2000 1999

Applied Research $ 120,395 $ 99,777 $ 118,834

Development 3,419 7,175 18,358

R&D Plant 46,988 12,800 14,290

Administration 10,130 46,219 36,466

Total $ 180,932 $ 165,971 $ 187,948

Stewardship Investment

Research and Development.

FAA conducts research and provides the essential air traffic control infrastructure to meet

increasing demands for higher levels of system safety, security, capacity, and efficiency.

Research priorities include aircraft structures and materials; fire and cabin safety;

crash injury-protection; explosive detection systems; improved in-flight icing and ground

de-icing operations; better tools to predict and warn of weather hazards, turbulence, and

wake vortices; aviation medicine, and human factors.

NOTE: The FY 1999 amounts reported above are based on actual amounts and

differ from those reported in FY 1999, which were based on estimates.

(Dollars in Thousands)

U.S. Department of Transportation

Federal Aviation Administration

Stewardship Investment

Research and Development

For the Fiscal Years Ended September 30
Notes to the Financial Statements 101 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Intragovernmental Assets

Agency

Fund Balance 

with Treasury

Accounts 

Receivable Investments Other

Department of the Treasury $ 1,998,297 $ 76,862 $ 13,866,780 $ -

Department of Agriculture 245 -

Department of Commerce 75 -

Department of Defense 3,614 -

Department of Justice 1,322 -

Department of the Air Force 12,578 5,355

Department of the Army 1,782 -

Department of the Interior 3,521 -

Department of the Navy 5,131 46

Department of State 105 -

Department of Transportation 5,025 32,200

Fed. Emergency Mgmt. Agency 160 -

General Services Administration 333 3

National Aeronautics & Space Admin. 2,252 -

Other Agencies 14,424 8,489

Total $ 1,998,297 $ 127,429 $ 13,866,780 $ 46,093

Intragovernmental Liabilities

Agency Accounts Payable 

 Debt/ Borrowings 

from Other 

Agencies Other

Other Agencies $ 49,930 $ - $ 105,834

Department of Agriculture 5,632

Department of Commerce 1,187

Department of Defense 463

Department of Education 20

Department of Energy 42

Department of Health & Human Services 13

Department of Justice 3,463

Department of Labor 194,318

Department of the Air Force 2,634

Department of the Army 125

Department of the Interior 67

Department of the Navy 136

Department of the Treasury 28 733

Fed. Emergency Management Agency 245

General Services Administration 66

National Aeronautics & Space Admin. 2,560

National Science Foundation 9

Office of Personnel Management 40,064

Social Security Administration 9,781

Total $ 49,930 $ 28 $ 367,392

For the Fiscal Year Ended September 30, 2001

(Dollars in Thousands)

U.S. Department Of Transportation

FEDERAL AVIATION ADMINISTRATION

Supplementary Information

Intragovernmental Transactions
Notes to the Financial Statements 102 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Intragovernmental Expenses and Revenues

Agency Expenses Revenues

Department of the Treasury $ 1,986 $ 1,986

Department of Agriculture 248 248

Department of the Air Force 35,792 35,792

Department of the Army 2,018 2,018

Department of Commerce 1,320 1,320

Department of Defense 3,263 3,263

Department of the Interior 444 444

Department of Justice* 148,144 2,118

Department of Labor 13 13

Department of Labor - FECA* 86,365

Department of the Navy 9,588 9,588

Department of Transportation 15,524 15,524

Fed. Emergency Mgmt. Agency 216 216

General Services Administration 314 314

Health & Human Services 87 87

National Aeronautics & Space Admin. 5,739 5,739

Office of Personnel Management* 1,031,099

Veterans Administration 73 73

Total Expenses $ 1,342,233 $ 78,743

* Unfunded Expenses not associated with revenue Represents imputed costs funded by other agencies

on behalf of FAA and/or employee-related expenses.

Intragovernmental Non-Exchange Revenue

Transfers-In Transfers-Out

Department of the Air Force $ - $ 27

Department of Commerce 350

Department of the Navy 15

General Services Administration 67 119

Office of the Secretary of Defense - Defense Agencies 4,516

Other Agencies 1,158 47,228

Total $ 1,225 $ 52,255

For the Fiscal Year Ended September 30, 2001

(Dollars in Thousands)

U.S. Department Of Transportation

FEDERAL AVIATION ADMINISTRATION

Supplementary Information

Intragovernmental Transactions
Notes to the Financial Statements 103 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Intragovernmental Assets

Agency

Fund Balance 

with Treasury Accounts Receivable Investments Other

Department of the Treasury $ 886,325 $ 226,265 $ 13,355,134 $ -

Department of Agriculture 12

Department of Commerce 1,130

Department of the Interior 1,372

Department of Justice 544

Department of Labor 5

Department of State 3,925

Department of the Army 45

Department of the Navy 729

General Services Administration 42

Department of the Air Force 6,443 7,742

Fed. Emergency Mgmt. Agency 46

National Aeronautics & Space Admin. 3,991

Department of Energy 362

Department of Education 20

Department of Defense 3,692

Department of Transportation 6948

Other Agencies 11,867 37,288

Total $ 886,325 $ 267,438 $ 13,355,134 $ 45,030

Intragovernmental Liabilities

Agency Accounts Payable 

 Debt/ Borrowings 

from Other 

Agencies Other

Other Agencies $ 130,245 $ - $ 115,904

Department of the Treasury 26

Department of Labor 192,015

Office of Personnel Management 36,645

Total $ 130,245 $ 26 $ 344,564

For the Fiscal Year Ended September 30, 2000

(Dollars in Thousands)

U.S. Department Of Transportation

FEDERAL AVIATION ADMINISTRATION

Supplementary Information

Intragovernmental Transactions
Notes to the Financial Statements 104 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Intragovernmental Expenses and Revenues

Agency Expenses Revenues

Department of the Treasury $ 7,449 $ 7,449

Department of Agriculture 112 112

Department of Commerce 516 516

Department of the Interior 139 139

Department of Justice* 84,110 771

Department of Labor 20 20

Department of Labor - FECA* 84,364

Department of the Navy 9,633 9,633

Office of Personnel Management* 937,826

Department of the Army 476 476

Veterans Administration 90 90

General Services Administration 69 69

Department of the Air Force 16,418 16,418

Fed. Emergency Mgmt. Agency 601 601

Health & Human Services 112 112

National Aeronautics & Space Admin. 3,470 3,470

Department of Defense 437 437

Department of Transportation 16,350 16,350

Other Agencies 172,430 28,149

Total Expenses $ 1,334,622 $ 84,811

* Unfunded Expenses not associated with revenue Represents imputed costs funded by other agencies

on behalf of FAA and/or employee-related expenses.

Intragovernmental Non-Exchange Revenue

Transfers-In Transfers-Out

Department of Commerce 39 15

Department of the Treasury 136 20

Department of Health and Human Services 343

Office of the Secretary of Defense - Defense Agencies 51 5,221

Department of Interior 31

Department of the Navy 41

Department of the Army 6,498

Social Security Administration 21

General Services Administration 1,555

Department of the Air Force 1,972

Department of Housing and Urban Development 16

Department of Justice 11

Other Agencies 625 10,247

Total $ 1,194 $ 25,648

(Dollars in Thousands)

U.S. Department Of Transportation

FEDERAL AVIATION ADMINISTRATION

Supplementary Information

For the Fiscal Year Ended September 30, 2000

Intragovernmental Transactions
Notes to the Financial Statements 105 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Asset

Method Condition*

FY 2001 FY 2000 FY 1999 FY 1998

Land - - - - [a]

Buildings Condition Assessment 4&5 $ 50,568 $ 30,971 $ 17,539 $ 18,214

Survey

Other Structures and Facilities Condition Assessment 4&5 22,928 59,290 37,442 1,231

Survey

Aircraft and Aircraft Engines - - - [b]

National Airspace System

 (NAS) Equipment - - - [c]

General Purpose Equipment - - - [d]

Assets Under Capital Lease - - -

Total $ 73,496 $ 90,261 $ 54,981 $ 19,445

* Condition Rating Scale: 1: Excellent; 2: Good; 3: Fair; 4: Poor; 5: Very Poor

Information on FAA’s deferred maintenance is based on condition assessment survey (annual inspection).

 Standards (orders) are provided for evaluating the fixed assets condition. These standards are combined with 

FAA’s technicians’ knowledge, past experiences, and judgment to provide the following: 

-- Minimum and desirable condition descriptions

-- Suggested maintenance schedules

-- Standard costs for maintenance actions

-- Standardized condition codes 

There have not been material changes in the standards in recent years. FAA recognizes maintenance expense as incurred.

However, maintenance was insufficient during the past several years and resulted in deferred maintenance on Buildings

and Other Structures and Facilities. 

[a] No material maintenance was deferred on land.

[b] Maintenance was not deferred on the FAA aircraft. The aircraft maintenance was ensured through the aircraft

maintenance, inspection, preventive maintenance, and alteration programs of the Flight Inspection Maintenance

Division programs.

[c] The FAA did not defer maintenance on NAS equipment. The maintenance of the Airway Facilities (AF) system,

subsystems, and equipment in the NAS is guided by the general principle of ensuring availability and reliability of

air traffic control, navigation, and communication services. In order to minimize the quantity and duration of service

interruption and outages, both planned and unplanned, AF does not generally defer the maintenance of the

electronic equipment. Various reasons may cause a maintenance cycle to be skipped, but the maintenance is performed

during the next cycle. FAA Order 6000.30 states the minimum standards for reliability and availability of NAS

equipment. AF’s following initiatives ensure the highest possible levels of performance of NAS equipment:

 -- Periodic and preventive maintenance programs

 -- Maintenance of backup equipment for key services in case of equipment interruption or missed maintenance 

 -- Competent technical maintenance staff

[d] The amount recorded as FAA’s general purpose equipment was not material; therefore, no material 

maintenance was deferred on these equipment. 

U.S. Department Of Transportation

Costs to Return to

Acceptable Condition

FEDERAL AVIATION ADMINISTRATION

Supplementary Information

Deferred Maintenance

For the Fiscal Years Ended September 30

(Dollars in Thousands)

Category
Notes to the Financial Statements 106 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Airport & Airway Trust Fund Trust Fund Trust Fund

Trust Fund Grants-in-Aid Facilities & Research, Eng. &

Corpus to Airports Equipment Development

BUDGETARY RESOURCES

 Budget Authority $ (334,826) $ 6,402,500 2,656,765 $ 187,000

 Unobligated Balances - Beginning 

 of Period 10,445,872 903,901 282,850 15,900

 Spending Authority From 

 Offsetting Collections - 72,091 4,302

 Adjustments - (4,020,418) 63,427 5,747

 Total Budgetary Resources $ 10,111,046 $ 3,285,983 $ 3,075,133 $ 212,949

STATUS OF BUDGETARY RESOURCES

 Obligations Incurred $ - 3,285,593 2,521,288 193,549

 Unobligated Balances-Available 10,111,046 390 508,983 15,740

 Unobligated Balances-Not Available - - 44,862 3,660

Total Status of Budgetary Resources $ 10,111,046 $ 3,285,983 $ 3,075,133 $ 212,949

OUTLAYS

 Obligations Incurred $ - 3,285,593 2,521,288 193,549

 Less: Spending Authority From Offsetting 

 Collections and Adjustments - (90,529) (172,791) (10,460)

 Obligated Balance, Net Beginning of Period - 3,199,772 1,538,631 147,352

 Obligated Balance Transferred, Net - - -

 Less: Obligated Balance, Net - End of Period - (4,378,147) (1,619,922) (163,192)

Total Outlays $ - $ 2,016,689 $ 2,267,206 $ 167,249

(Dollars in Thousands)

`

FEDERAL AVIATION ADMINISTRATION

SUPPLEMENTARY STATEMENT OF BUDGETARY RESOURCES

AS OF SEPTEMBER 30, 2001
Notes to the Financial Statements 107 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Aviation

Insurance Franchise Other Combined

Revolving Fund Operations Funds Total

BUDGETARY RESOURCES

 Budget Authority $ - $ - $ 6,617,235 $ 36,000 $ 15,564,674

 Unobligated Balances - Beginning 

 of Period 79,211 71 94,962 294 11,823,061

 Spending Authority From - -

 Offsetting Collections 9,329 235,234 4,502,674 - 4,823,630

 Adjustments 58 - (20,228) - (3,971,414)

 Total Budgetary Resources $ 88,598 $ 235,305 $ 11,194,643 $ 36,294 $ 28,239,951

STATUS OF BUDGETARY RESOURCES

 Obligations Incurred $ 357 206,686 $ 10,996,582 $ - $ 17,204,055

 Unobligated Balances-Available 88,241 28,619 147,714 29,623 10,930,356

 Unobligated Balances-Not Available - - 50,347 6,671 105,540

Total Status of Budgetary Resources $ 88,598 $ 235,305 $ 11,194,643 $ 36,294 $ 28,239,951

OUTLAYS

 Obligations Incurred $ 357 206,686 $ 10,996,582 $ - $ 17,204,055

 Less: Spending Authority From Offsetting 

 Collections and Adjustments (9,387) (235,234) (4,544,881) - (5,063,282)

 Obligated Balance, Net Beginning of Period 149 8,983 827,241 276 5,722,404

 Obligated Balance Transferred, Net - - - -

 Less: Obligated Balance, Net - End of Period (128) (45,993) (922,614) (272) (7,130,268)

Total Outlays $ (9,009) $ (65,558) $ 6,356,328 $ 4 $ 10,732,909

(Dollars in Thousands)

U. S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

SUPPLEMENTARY STATEMENT OF BUDGETARY RESOURCES

AS OF SEPTEMBER 30, 2001
Notes to the Financial Statements 108 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

2001 2000

Assets

 Intragovernmental

 Fund Balance with Treasury $ 74,525 $ 8,967

 Accounts Receivable, Net 3,686 447

 Other (Note 5) 93 10

 Total Intragovernmental Assets $ 78,304 $ 9,424

 Accounts Receivable, Net $ (60) $ 1

 Inventory and Related Property, Net 438,101

 General Property, Plant, and Equipment, Net 48,260 2,014

 Other Assets 17

Total Assets $ 564,622 $ 11,439

Liabilities

 Intragovernmental Liabilities:

 Accounts Payable $ - $ (238)

 Other Intragovernmental Liabilities 63,184 1,542

 Total Intragovernmental Liabilities $ 63,184 1,304

 Accounts Payable 10,340 3,859

 Other Liabilities 13,997 1,812

Total Liabilities 87,521 $ 6,975

Net Position Balances:

 Cumulative Results of Operations $ 477,101 $ 4,464

Total Net Position 477,101 $ 4,464

Total Liabilities and Net Position $ 564,622 $ 11,439

As of September 30

(Dollars in Thousands)

U. S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

FRANCHISE FUND

BALANCE SHEETS
Notes to the Financial Statements 109 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Costs: 2001 2000

Programs 

Intragovernmental $ 203,470 $ 32,209

Less Earned Revenues (208,945) (31,231)

Net Program Costs (5,475) 978

Net Cost of Operations $ (5,475) $ 978

September 30

U. S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

FRANCHISE FUND

STATEMENTS OF NET COST

(Dollars in Thousands)

For the Years Ending
Notes to the Financial Statements 110 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Net Cost of Operations $ 5,475

Financing Sources

Imputed Financing 4,283

Transfers-In 481,792

Transfers-Out (18,913)

Total Financing Sources $ 467,162

Net Results of Operations $ 472,637

Prior Period Adjustments -

Net Change in Cumulative Results of Operations 472,637

Change in Net Position 472,637

Net Position Beginning of Period 4,464

Net Position End of Period $ 477,101

For the Fiscal Year Ended September 30, 2001

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

FRANCHISE FUND

 STATEMENT OF CHANGES IN NET POSITION
Notes to the Financial Statements 111 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Assets 2001 2000

 Intragovernmental

 Fund Balance with Treasury $ 85,081 $ 140

 Investments 75,932

 Other

 Total Assets $ 85,081 $ 76,072

Liabilities

Intragovernmental

 Accounts Payable $ 2 $ -

 Other 5 5

 Total Intragovernmental Liabilities $ 7 $ 5

 Accounts Payable $ 2 $ 4

 Other Liabilities 24 21

Total Liabilities $ 33 $ 30

Net Position Balances:

 Cumulative Results of Operations 85,048 76,042

Total Net Position $ 85,048 $ 76,042

Total Liabilities and Net Position $ 85,081 $ 76,072

As of September 30

(Dollars in Thousands)

U. S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

AVIATION INSURANCE REVOLVING FUND

BALANCE SHEETS
Notes to the Financial Statements 112 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

2001 2000

Costs:

Programs 

Public $ 331 $ 219

Less Earned Revenues (9,329) (4,009)

Net Program Costs $ (8,998) $ (3,790)

Net Cost of Operations $ (8,998) $ (3,790)

FEDERAL AVIATION ADMINISTRATION

U. S. Department of Transportation

For the Year Ended

September 30

(Dollars in Thousands)

STATEMENTS OF NET COST

AVIATION INSURANCE REVOLVING FUND
Notes to the Financial Statements 113 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

Net Cost of Operations $ 8,998

Financing Sources

Imputed Financing 9

Net Results of Operations 9,007

Prior Period Adjustments (1)

Net Change in Cumulative Results of Operations 9,006

Change in Net Position 9,006

Net Position Beginning of Period 76,042

Net Position End of Period $ 85,048

For the year ended September 30, 2001

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

AVIATION INSURANCE REVOLVING FUND

STATEMENT OF CHANGES IN NET POSITION
Required Supplementary Information 114 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

REQUIRED SUPPLEMENTARY INFORMATION

ADMINISTRATIVE SERVICES FRANCHISE FUND

Background/Fund Establishment

The Government Management Reform Act (GMRA) of 1994, Public Law 103-356, provided 

for the establishment of a franchise fund pilot program. This program is designed to create 

competition within the public sector in the performance of a wide variety of support services. 

The franchise allows for the establishment of an environment to maximize the use of internal 

resources through the consolidation and joint-use of like functions and the recognition of 

economies of scale and efficiencies associated with the competitive offering of services to 

other Government agencies.

Six franchise fund pilot programs were created by GMRA; and the pilots were selected by the 

President’s Chief Financial Officers’ (CFO) Council for participation in the program prior to 

submission of the FAA Franchise Fund proposal. However, the CFO Council’s Franchise 

Fund Working Group strongly endorsed the FAA proposal, and recommended submission to 

Congress as a franchise-like operation. This endorsement resulted in Congressional approval 

of the application, and the FAA Administrative Services Franchise Fund was authorized under 

Public Law 104-205, Department of Transportation and Related Agencies Appropriation Act, 

1997.

Services

The Administrative Services Franchise Fund offers a wide variety of services. These include 

accounting, payroll, travel, duplicating, multi-media, information technology, and international 

and management training. In FY 2001, the fund was expanded to include logistics functions at 

the FAA Logistics Center and aircraft maintenance functions in the Office of Aviation System 

Standards. The customer base includes Department of Transportation (DOT) and non-DOT 

government agencies.

Benefits/Accomplishments

The objective of the franchise is to enhance the support provided to the core programmatic 

mission functions within FAA. Benefits from the franchise environment occur incrementally 

over time through efficiencies and economies of scale associated with development of 

partnerships, consolidation of like functions, and expansion of volume. Efforts in the franchise 

are directed toward identifying the most efficient and cost effective methods to provide support 

services, and this is consistent with current Presidents’ initiatives relating to competitive 

sources.

The franchise has been a catalyst for management initiatives relating to improved business 

practices that have resulted in the following general impacts/benefits:

• Reduced unit cost of services/products by spreading fixed cost across increased volumes

• Increased emphasis on cost accounting and labor distribution by franchise organizations
Required Supplementary Information 115 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

• Increased emphasis on development and tracking of cost and performance measures

• Improved business practices and a more business-like orientation

• Increased focus on customer satisfaction and customer-driven decisions

• Improved analysis relating to the mix of in-house versus contract support; currently over 

60 percent of the total franchise budget can be identified as paid to private sector sources

• Ability to grow new capital over time to enhance and refresh technology and systems 

through use of the revolving fund environment

• Generated retained earnings for capital improvements that enhance services and reduce 

their cost

• Increased emphasis on the cost of providing services/products and on the full recovery of 

costs

• Ability to level the budget from one fiscal year to another and to accommodate delays in 

the appropriation process through use of flexibilities associated with the revolving fund 

environment

• The carryover provision of the revolving fund allows a “buy on demand/need” ability 

versus forced buying to avoid expiration of funding authority

Specific accomplishments associated with a few of the individual franchise activities include:

• Implemented a process in the FAA Logistics Center to allocate budgets to field offices and 

charge against these allocations when products are ordered. This has resulted in improved 

buyer behavior patterns and a reduction in demand as customers order according to need

• Improvements in many key cost and performance measures in the FAA Logistics Center as 

a result of the franchise initiative including:

- Customer satisfaction has maintained a high level during time of considerable 

organizational change (up from 3.93 in 1997 to a current level of 4.02 on a scale of 5)

- Customer delivery time on shipments within 24 hours up from 86.92% in FY 2000 to 

91.14% in FY 2001

- Warehouse refusals decreased from 7.3 per thousand in FY 1999 to 2.1 per thousand 

in FY 2001

- Reduced average cost recovery (mark-up rate for parts and repairs by 7.41% in FY 

2001

- Reduced the distribution cost per issue from $51.77 in FY 1999 to $41.52 in FY 2001

- Improved inventory accuracy from 96.65% in FY 1999 to 99.9 % in FY 2001

- Reduced shipping errors per 1,000 issued by 4.9% in one year

• Reduced in-house cost per printing impression by 8% by spreading fixed cost across a 

greater workload volume. Maintained this reduction for 2 years resulting in a cost savings 

to customers of $128,678
Required Supplementary Information 116 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

• Used the carryover provision of the revolving fund to invest in up-to-date printing 

technology resulting in a wider range of available products and services, greater level of 

productivity, and competitive costs

• Optimized efficiency in delivery of domestic training courses by filling unused quota with 

tuition-paying international students, and by reimbursing the FAA Academy for contract 

and government employees used during off-peak periods to instruct international training 

courses

• Enhanced the FAA’s financial systems and statement posture through extensive support 

actions relating to asset and inventory management processes in the franchise environment

• Increased support to DOT and FAA strategic goals in global aviation system leadership 

(e.g., Safe Skies) without an increase in appropriated funds through advancement of the 

international training program.
Required Supplementary Information 117 Chapter 2

FAA FY 2001 FINANCIAL STATEMENTS

•

GLOSSARY OF ACRONYMS

A DP/STAR departure procedures 

/standard terminal arrival 

route

AC advisory circular DSR display system replacement

AD advisory directive

AF Airway Facilities E

AIP Airport Improvement 

Program

EAPS enhanced airworthiness 

program for airplane systems

AMASS airport movement area 

safety system

EDC early display configuration

ANCA Airport Noise and 

Capacity Act

EDS explosives detection system

ARTCC air route traffic control 

center

EIS environmental impact 

statement

ASAP Aviation Safety Action 

Program

ERAM en route automation 

modernization

ASDE airport surface detection 

equipment

ETD explosives trace detectors

AT air traffic

ATC air traffic control F

ATCSCC ATC Systems Control 

Center

F&E Facilities and Equipment

ATO Air Traffic Organization FAA Federal Aviation 

Administration

ATOS Air Transportation 

Oversight System

FAR Federal Aviation Regulations

ATS Air Traffic Services FASAB Federal Accounting 

Standards Advisory Board

FAST final approach spacing tool

C FFP1 Free Flight Phase 1

CAEP Committee on Aviation 

Environmental Protection

FFP2 Free Flight Phase 2

CAS cost accounting system FOQA flight operations quality 

assurance

CFO Chief Financial Officer FSS flight service station

CIP Aviation System Capital 

Investment Plan

FY fiscal year

CTAS center/TRACON 

automation system

CY calendar year G

GA general aviation

D GAO General Accounting Office

DOT Department of 

Transportation

GPS global positioning system
Glossary of Acronyms 118

FAA FY 2001 FINANCIAL STATEMENTS

Transportation

I Q

ICAO International Civil 

Aviation Organization

QAR quality assurance review 

process

ILS instrument landing system

R

L R,E&D Research, Engineering, 

and Development

LAAS local area augmentation 

systems

REDAC Research, Engineering & 

Development Advisory 

Committee

LDR labor distribution 

reporting

RESTORE revitalizing existing 

structures, technology, 

and operational resources

N S

NAS National Airspace System SFAR Special Federal Aviation 

Regulation

NASA National Aeronautics and 

Space Administration

SPAS safety performance 

analysis system

NOCC National Operations 

Control Center

STAR standard terminal arrival 

route

NPIAS National Plan of 

Integrated Airport 

Systems

STARS standard terminal 

automation replacement 

system

NPRM Notice of Proposed 

Rulemaking

SUP suspected unapproved 

parts

NRP North American Route 

Program

T

O TIP threat image projection

OEP Operational Evolution 

Plan

TMA traffic management 

advisor

OIG Office of the Inspector 

General, Department of 

Transportation

TRACON terminal radar approach 

control

OMB Office of Management 

and Budget

TSA Transportation Security 

Administration

P U

PFAST passive final approach 

spacing tool

URET user request evaluation 

tool

PFC passenger facility charge

PP&E property, plant and 

equipment

W

WAAS wide area augmentation 

systems
Glossary of Acronyms 119

FAA FY 2001 FINANCIAL STATEMENTS