Fy 2007 Performance and 

Accountability Report

the Next Generation of Flight

Committed to Safety

FY 2008 Performance and Accountability Report

Federal Aviation

Administration
In 1958, number of all-jet airliners in U.S. service (on August 23): 0.

In 2008, estimated number of jet airliners in the U.S. fleet: 4,032.

Credit: Jon Ross, FAA Image Library

On the Cover—Credit (all photos): Corbis
i

Federal Aviation Administration

FY 2008 Performance and Accountability Report

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(New England) 

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(Alaskan) 1 Includes Puerto Rico, the 

 Republic of Panama, and 

 the Virgin Islands 

2 Includes Wake, Samoa, 

 and Guam 

Atlanta 

Ft. Worth 

Oklahoma City 

Los Angeles 

Seattle

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City 

Jamaica, NY 

 Atlantic City 

Washington, DC 

LEGEND 

Regional Oce

Mike Monroney Aeronautical Center

William J. Hughes Technical Center

National Headquarters (DC)

Boston 

Chicago 

AGL 

(Great Lakes) 

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(Southern)1

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Anchorage

Regional Map

Mission

To provide the safest, most efficient aerospace system in the world. 

Vision

To improve continuously the safety and efficiency of aviation, while being responsive 

to our customers and accountable to the public. 

Values

Safety is our passion. We are world leaders in aerospace safety. 

Quality is our trademark. We serve our country, our customers, and each other. 

Integrity is our character. We do the right thing, even if no one is looking. 

People are our strength. We treat each other as we want to be treated. 

MISSION, VISION, AND VALUES— FAA REGIONAL MAP
Federal Aviation Administration

ii FAA At a Glance—ForEword

FAA at a Glance

Established 1958

Headquarters 800 Independence Avenue, SW

 Washington, DC 20591

 www.faa.gov

FY 2008 Budget (enacted) $14.915 billion 

Total Employees 46,521 

Headquarters 6,008 employees 

Regional and Field Offices 35,918 employees

Technical Center 1,063 employees

Atlantic City, NJ

Aeronautical Center 3,532 employees

Oklahoma City, OK

FY 2008 Passengers on 768.3 million (estimate)

U.S. Carriers

FY 2008 Tower Operations 58.6 million arrivals and departures (estimate)

Foreword

The Federal Aviation Administration (FAA) is part of 

the Department of Transportation (DOT). By directives, 

the Office of Management and Budget (OMB), which 

implements the Chief Financial Officers Act of 1990 

(CFO Act), requires us to prepare financial statements 

separate from those of DOT. The FAA is not required 

to prepare a separate Performance and Accountability 

Report (PAR). Instead, key FAA data and information 

are provided to DOT and consolidated into the required 

DOT PAR. We recognize, however, that to demonstrate 

accountability, we should present performance, 

management, and financial information using the same 

statutory and guidance framework. To demonstrate that 

accountability, since FY 2002 we have elected to produce 

our own PAR. In some cases, however, we may depart 

from the format required of CFO Act agencies. 

Last year, we were proud to receive our fourth 

Association of Government Accountants’ prestigious 

Certificate of Excellence in Accountability Reporting 

award. This award is indicative of the progress we have 

made in reporting financial and program performance 

and in candidly assessing our results.

We will continue our efforts to become a more resultsoriented organization, focus on performance and 

financial accountability, and do our part to help DOT 

and the Federal Government excel in providing high 

quality services and products to the taxpayers we serve.
iii

FY 2008 Performance and Accountability Report

Table ofContents

TABLE OF CONTENTS

MISSION, VISION, AND VALUES STATEMENTS......................................................................................i

FAA REGIONAL MAP...........................................................................................................................................i

FAA AT A GLANCE...............................................................................................................................................ii

FOREWORD ...........................................................................................................................................................ii

A MESSAGE FROM THE ADMINISTRATOR..............................................................................................1

FAA—Celebrating a Golden Anniversary...................................................................................4

MANAGEMENT’S DISCUSSION AND ANALYSIS....................................................................................7 

PERFORMANCE RESULTS ..............................................................................................................................47

Safety...........................................................................................................................................................47

Capacity .....................................................................................................................................................52

International Leadership............................................................................................................................57

Organizational Excellence..........................................................................................................................60

Completeness and Reliability of Performance Data ................................................................................66

Safety..............................................................................................................................................66

Capacity .........................................................................................................................................68

International Leadership...............................................................................................................70

Organizational Excellence ............................................................................................................71

Assessing Programs.....................................................................................................................................73

FINANCIAL STATEMENTS .............................................................................................................................77

A Message from the Chief Financial Officer ............................................................................................77

Office of the Inspector General (OIG) Quality Control Review ............................................................79

Independent Auditors’ Report...................................................................................................................81

Financial Statements..................................................................................................................................92

Notes to the Financial Statements ...........................................................................................................97

Required Supplementary Stewardship Information..............................................................................123

Required Supplementary Information....................................................................................................127

Administrative Services Franchise Fund .................................................................................................130

OTHER ACCOMPANYING INFORMATION...........................................................................................137

Inspector General’s Top Management Challenges for FY 2009 ............................................................137

Management Response ...............................................................................................................137

Summary of Audit Results and Management Assurances....................................................................138

Financial Statement Audit Summary........................................................................................138

Management Assurances Summary ..........................................................................................138

Improper Payments Information Act of 2002 ........................................................................................139

Glossary of Acronyms.........................................................................................................................141

Acknowledgments.........................................................................................................Inside Back Cover

We Welcome Your Comments.................................................................................Inside Back Cover

This report and reports from prior years are available on the FAA website at www.faa.gov/about/plans_reports/.
In 1958, the FAA had 26,805 employees.

In 2008, there are 46,521 employees, the vast majority providing air traffic services

 and maintaining the airspace system.

Credit: FAA Image Library
1

FY 2008 Performance and Accountability Report

The Federal Aviation Act of 1958 set safety as its cornerstone. We have kept safety as our top priority for 50 years. It 

is fitting that as we celebrate our golden anniversary, we are proud to be the international gold standard for aviation 

safety. At a time when we’ve never had more planes and passengers in the air, this is the safest period in aviation 

history. 

Even still, we continue to face challenges to maintain this record. We performed a top-to-bottom audit of our oversight 

and maintenance programs that revealed a compliance rate of better than 98%. The International Civil Aviation 

Organization (ICAO) also completed an 18-month review that gave our safety programs an unqualified endorsement. 

Our runway safety efforts have produced enormous advances on the airport surface. We’re deploying more state-ofthe-art technology at a faster rate than ever before. 

The transition from ground-tethered air traffic control to a newer, satellite-based system is well under way. The 

building blocks for the Next Generation Air Transportation System (NextGen) are being put in place with each day. 

We face challenges outside the safety realm as well. The system has never been busier. While we saw a definite pause 

in passenger growth this year due to oil prices and credit market woes, we expect aviation demand will resume its 

robust growth in the future. Over the next few years, we expect international markets to grow twice as fast as 

domestic markets, trends for more, and larger regional jets with more than 50 seats, and increased corporate aviation. 

Even as some markets see a downturn, already congested airspace continues to see high demand, and so we must 

accommodate a sky that’s already nearing capacity. 

Despite the challenges we faced this fiscal year, we continued to meet our demands with an unprecedented safety 

record. 

FY 2008 Highlights

•	 Safety. We are pushing to make a small number of runway incursions even smaller and challenging our industry 

partners to step up their actions to make runways safe. As a result, several solutions have been introduced 

including improving the markings and paint on taxiways at hundreds of airports around the country. We are also 

testing runway status lights—a series of strategically positioned lights—which intuitively tell the pilot it’s safe to 

proceed. In addition, we will soon require airports to implement a Safety Management System (SMS). In airports 

where it is being tested, this systematic, proactive, and well-defined safety program is helping airport operators 

detect and correct safety problems before they result in an aircraft accident or incident. We continued progress on 

upgrading Runway Safety Areas (RSAs) to the extent practicable. Forty RSAs were improved in FY 2008.

A Message from the Administrator

Robert A. Sturgell

Acting Administrator

A MESSAGE FROM THE ADMINISTRATOR
Federal Aviation Administration

2

•	 Capacity. Airfield construction remains the most effective method of increasing arrival and departure rates. Seven 

airports have airfield projects under construction (three new runways, one airfield reconfiguration, one runway 

extension, and two taxiways). The projects will be commissioned through 2012 and will provide these airports 

with the potential to accommodate about 400,000 more annual operations, decrease average delay per operation 

by almost 2 minutes, and significantly reduce runway crossings. Culminating a major set of projects that began 

10 years ago, we will dedicate new runways at Dulles, O’Hare, and Seattle-Tacoma on November 20, 2008. 

•	 International Leadership. We continue our work with our international partners and ICAO to harmonize 

global technological standards and to expand the use of global satellite navigation systems. This year, our efforts 

resulted in a signed memorandum with China to promote seamless NextGen operations around the globe. We also 

expanded our international environmental leadership role by signing an agreement with Airservices Australia and 

Airways New Zealand to establish the Asia and South Pacific Initiative to Reduce Emissions (ASPIRE). 

•	 Organizational Excellence. In 2007, the anticipated wave of controller retirements began to hit record numbers. 

We expect these numbers to continue through 2009. We are on target to meet our recruiting goal to hire 

approximately 17,000 new air traffic controllers by 2017. 

We have embraced the President’s vision to improve financial management throughout the Federal Government. 

We are actively engaging in a comprehensive pay-for-performance program, consolidating operations, improving 

internal financial management, reducing costs, and increasing benefits to our customers. 

•	 NextGen. The move to NextGen is the key to achieving higher levels of safety, efficiency, and environmental 

performance. With Congress’s urging, we are accelerating NextGen technologies such as Required Navigation 

Performance (RNP) and Area Navigation (RNAV) into busy areas like Chicago, Washington, D.C., and New York. 

In the Gulf of Mexico, we’re adding Automatic Dependent Surveillance–Broadcast (ADS-B) coverage so that planes 

can fly closer together without compromising safety. This ensures more efficiency and capacity. We’re testing and 

using Continuous Descent Arrival (CDA) at several facilities. CDA saves time and money while reducing carbon 

emissions and noise. 

Future Challenges

Our accomplishments of the past year are significant. Yet we know that some of our biggest challenges are on the 

horizon, and we are strategically preparing to address them. 

•	 Maintain Safety Record. Our safety record indicates that we have addressed every predictable risk factor that has 

caused accidents or incidents. Our challenge now is to identify any remaining risks and eliminate, minimize, or 

manage them. 

•	 Baby Boomer Retirement. The transformation of our airspace comes at a very precarious time. In addition to air 

traffic controllers, we are starting to see Baby Boomers throughout our organization retiring. As our workforce 

turns over, we must develop the competencies in our human capital that are necessary to implement the complex 

technology and new processes that are inherent in NextGen.

•	 Keep NextGen on Time and on Budget. To safely and efficiently handle dramatic increases in the number and 

type of aircraft using our skies without being overwhelmed by congestion, we must fully fund NextGen and keep 

deployment of its components on schedule. 

•	 State of the Industry. Record oil prices, a slowing economy, and increased competition are just a few factors 

that have created a number of significant challenges for airlines—challenges that certainly will change the face 

of the aviation industry in the years to come. We are already beginning to see that many carriers are raising fares, 

streamlining operations, and reducing service. 

A MESSAGE FROM THE ADMINISTRATOR
3

FY 2008 Performance and Accountability Report

•	 At the Threshold of Space Tourism. In the past 20 years, there have been 180 launches without a fatality or 

property damage to the uninvolved public. With the first of many suborbital space tourism flights expected in 

2010, our challenge is to maintain this spotless record. Also, with the coming surge in commercial activity, we 

need to be sure we have the resources to handle the increase in our licensing activity, permitting activity, and the 

number of inspections.

Our FY 2008 Performance and Accountability Report provides a detailed accounting of our performance and financial 

management to both the flying public and the aviation industry. Our strategic plan—the Flight Plan—focuses our 

performance on the top 29 agency targets that position us to meet the future successfully. We achieved 26 out of the 

29 goals listed in the Flight Plan. 

We are proud to have received an unqualified opinion with no material weaknesses from our auditors on our FY 

2008 financial statements. Internally, we assess the vulnerability of our programs and systems through the Federal 

Managers’ Financial Integrity Act (FMFIA) of 1982. I am pleased to report that, taken as a whole, the management 

controls and financial management systems in effect from October 1, 2007, through September 30, 2008, provide 

reasonable assurance that the objectives of both sections 2 and 4 of FMFIA are being met. Effective management 

controls are in place and our financial systems conform to Government-wide standards. We issued an unqualified 

statement of assurance and can state that the financial data is reliable and complete.

Since our inception 50 years ago, our mission has remained clear—to provide the safest, most efficient aerospace 

system in the world. We know this does not come without a significant effort. However, we also recognize that to be 

good stewards of the money entrusted to us by Congress, we must be efficient and provide an exceptional return on 

investment for the American taxpayer. Thanks to the 46,521 people of the FAA, we are doing just that.

Robert A. Sturgell

Acting Administrator

November 4, 2008 

A MESSAGE FROM THE ADMINISTRATOR
Federal Aviation Administration

4 FAA—Celebrating a Golden Anniversary

FAA—Celebrating a Golden Anniversary

The FAA commemorated 

its 50th anniversary with 

a range of celebrations and 

activities throughout the year. 

One of the most impressive 

was the ceremony held in 

August, which celebrated 

34 employees with 50 or 

more years of government service. All still work for the 

agency. The event also featured an exhibit about the 

next 50 years of aviation. The FAA website included a 

section dedicated to the anniversary (www.faa.gov/

about/history/50th/). It featured a 50-year timeline, 

a detailed chronology, past administrators, and a 

“Today in Aviation History” section. FAA’s employee 

website featured 50 Faces of FAA, where a different 

employee was featured daily for 50 days leading up the 

anniversary date. The agency is also updating its history 

in a new book recounting its past. Two galas in October 

marked the golden anniversary. The first took place at 

the National Air and Space Museum in Washington, 

D.C., and was organized by the American Institute 

of Aeronautics and Astronautics (AIAA). The second 

celebrated a double 50th anniversary. The FAA’s William 

J. Hughes Technical Center held a 50th Anniversary Gala 

banquet, “Flying High at 50,” near its base in Atlantic 

City, New Jersey. All Technical Center Federal employees, 

retirees, contractors, and friends, plus U.S. Navy and 

other veterans and volunteers of Naval Air Station 

Atlantic City were invited.

50 Years ofService... and Going Strong

In the summer of 2007, 71-year-old Ervin Krause 

celebrated 50 years of government service with no 

immediate plans for retirement. 

Krause, an airways transportation system specialist with 

the Centennial System Support Center in Colorado, is 

one of several employees with 50 years of service—or 

more, as in Krause’s case—who traveled to Washington, 

D.C. in August for FAA’s 50th Anniversary celebration at 

FAA Headquarters.

Like many employees who were hired at the dawn of 

the agency, Krause began his government career in the 

military. “I was looking for a job after I got discharged 

from the Air Force [in 1960],” recalled Krause. “[The FAA] 

had open announcements at that time, so I looked into 

it. I had an interview, and I was hired.”

Krause came on-board in Los 

Angeles in May 1961. He 

immediately requested a transfer 

to Denver, and he’s been there 

ever since.

Krause said the biggest change 

he’s seen in the agency over the 

past 50 years is technology. “I 

started out changing brushes 

on a little motor generator,” 

he recalled. “That was my 

first assignment—taking care of what we called a ‘fan 

marker.’ Nobody does that anymore.”

The idea that he would one day be in the nation’s 

capital celebrating the agency’s 50th anniversary never 

even crossed Krause’s mind when he first reported for 

duty nearly a half-century ago. “You don’t think about 

those kinds of things,” he said. “You just kind of think, 

put in your 30, reach 55, and retire. When you’re a 

20-something, that seems a long ways away.”

—Adapted from an article appearing in FocusFAA, FAA’s employee 

news service. 

Ervin Krause (right) with his family: wife Pam (left), son Chad (behind Pam), daughters 

Katie (center left) and Heidi.

A 1959 photo of Ervin Krause
5

FY 2008 Performance and Accountability Report

FAA—Celebrating a Golden Anniversary

FAA—50 Years of Excellence

While the cornerstone of the Federal Government’s regulation of civil aviation began with the Air Commerce Act 

of May 20, 1926, it was not until 1958, with the approaching introduction of jet airliners and a series of midair 

collisions, that President Dwight D. Eisenhower signed the legislation to create the FAA. 

The following timeline highlights the most significant events in the agency’s 50-year history.

1958 The Birth of FAA

•	 TheFederal Aviation Actof1958creates

theFederal Aviation Agency.Thelegislation

gives the new agencyauthoritytocombat

aviation hazardsandresponsibilityfor safety

rulemakinganddevelopingand maintaininga

common civil-militarysystem ofair navigation

andair traffic control.

•	 The firstadministrator,Elwood“Pete”Quesada,

isappointed. 

1960–1970 Changing Duties

•	 The hijackingepidemicof the1960s involves

theagencyin the fieldofaviation security.

•	 In 1968,Congressvests in FAA’s Administrator

thepower toprescribeaircraft noisestandards.

•	 The Airportand Airway Development Actof

1970places theagencyin chargeofa new

airportaidprogram fundedbyaspecial

aviation trust fund.Thesameact makesFAA

responsiblefor safetycertification ofairports

servedbyair carriers.

1967 From Agency to Administration

•	 In 1966,Congressauthorizes thecreation of

acabinetdepartment that wouldcombine

majorFederal transportation responsibilities.

This new DepartmentofTransportation (DOT)

begins fulloperationson April l,1967. On that

day, theFederal Aviation Agencybecomesone

of several modaladministrations within DOT

andreceivesa new name—Federal Aviation

Administration (FAA).

1970s Air Traffic Controller Automation

•	 Bythe mid-1970s,FAA achievesasemiautomatedair traffic control system basedon

a marriageof radarandcomputer technology.

Byautomatingcertain routinetasks, the

system allows controllers toconcentrate

moreefficientlyon thevital taskofproviding

separation ofaircraft. Dataappearingdirectly

on thecontrollers’scopesprovides theidentity,

altitude,andgroundspeedofaircraft carrying

radarbeacons.

1982 Introduction of the National 

 Airspace System Plan

•	 To meet thechallengeof trafficgrowth,duein

part tothecompetitiveenvironment created

bythe Airline Deregulation Actof1978,FAA

unveils the National AirspaceSystem (NAS)

Plan in January1982.The new plan calls for

moreadvancedsystems foren routeand

terminal AirTrafficControl, modernized flight

servicestations,andimprovements in groundto-air surveillanceandcommunication.

1970–1984 The PATCO Strikes

•	 Whilepreparingthe NASPlan,FAA faces

astrikebykey membersof its workforce.

An earlierperiodofdiscordbetween

managementandtheProfessional AirTraffic

Controllers Organization (PATCO) culminates

in a1970“sickout”by3,000controllers.

•	 Although controllersgain additional wageand

retirementbenefits subsequent tothe first

strike,anotherperiodof tension leads toan

illegal strikein August1981.The Government

dismissesover11,000strikeparticipantsand

decertifiesPATCO.

•	 Bythespringof1984,FAA ends thelastof

thespecial restrictions imposedtokeepthe

airspacesystem operatingsafelyduringthe

strike.

1958–2001 Ongoing Structural Changes

•	 In 1961,FAA beginsadecentralization process

that transfers much authoritytoregional

organizations rather than thecentralized

operation favoredbythe first Administrator.

•	 In 1987,Washington Nationaland Dulles

International Airportspass from FAA’s

management tothatofan authority

representing multiplejurisdictions.

•	 In 1988,“straightlining”gives managersat

national headquarters moredirection of field

activities.

•	 In November1994,areorganization structures

FAA alongits sixkeylinesofbusiness to make

betteruseof resources.

•	 In 1995,aseventh lineofbusiness isadded

when the OfficeofCommercialSpace

Transportation is transferredtoFAA from the

Officeof theSecretaryofTransportation (OST).

Theaddition of thisofficegives theagency

regulatoryresponsibilities concerningthe

launchingof spacepayloadsbytheprivate

sector.

•	 Reform legislation givesFAA increased

flexibilityregardingacquisition andpersonnel

polices in 1996.

•	 Further legislation in 2000promptsaction

toestablish a new performance-based

organization with responsibilityforair traffic

services within theagency.

•	 In theaftermath of theterroristattacksof

September11,2001,Congress createsa new

Transportation Security Administration that

relievesFAA of primaryresponsibilityfor

civilaviation security.

1988–Present Technology for the Future

•	 The Aviation Safety Research Actof1988

mandatesgreateremphasison long-range

research planningandon studyof such issues

asagingaircraft structuresand human factors

affectingsafety.

•	 In February1991,FAA replaces the NAS

Plan with the morecomprehensiveCapital

InvestmentPlan.The new plan includes

higher levelsofautomation as wellas

new radar, communications,and weather

forecastingsystems.

•	 As the modernization program evolves,

problems in developingambitiousautomation

systemspromptachangein strategy.FAA

shifts itsemphasis towardenhancingthe

air traffic control system through more

manageable, step-by-stepimprovements. At

thesametime, theagency works tospeed

theapplication of the GlobalPositioning

System satellitetechnologytocivilaeronautics

andintroduces NextGen,a wideranging

transformation of theentire nationalair

transportation system to meet future

demandsandavoidgridlockin theskyand

in theairports.

A full history of the FAA can be found at www.faa.gov/about/history/chronolog_history/.
In 1958, about 49 million passengers boarded airplanes.

In 2008, 768 million are expected.

Credit: Corbis
7

FY 2008 Performance and Accountability Report

MANAGEMENT’S DISCUSSION AND ANALYSIS

FAA Organization

The mission of the FAA, an agency of the U.S. DOT, is 

to provide the safest, most efficient aerospace system in 

the world. The FAA provides air traffic control services, 

establishes and enforces regulations, and oversees 

inspections that maintain the integrity and reliability of 

that system, which has fueled our economy and helped 

ensure our nation’s prosperity for 50 years.

We operate 24 hours a day, 7 days a week, 365 days a 

year. We have a system composed of more than 67,000 

facilities and pieces of equipment with FAA-operated 

or contract towers at almost 500 airports, and we are 

responsible for inspecting and certifying about 233,500 

aircraft and 590,000 pilots. With almost 6,700 takeoffs 

and landings per hour, and more than 765 million 

passengers and 40 billion cargo revenue ton miles of 

freight a year, we safely guide approximately 60,000 

flights through the world’s preeminent NAS every day.

We fulfill our mission through four lines of business that 

work together to create, operate, and maintain the NAS. 

These lines of business are:

•	 Air Traffic Organization (ATO): Responsible 

for moving air traffic safely and efficiently. The 

customers of this performance-based organization 

are commercial, private, and military aviation. ATO 

is aligned around the services delivered to these 

customers. Approximately 35,000 ATO employees 

provide these services—the controllers, technicians, 

engineers, researchers, and support and management 

personnel whose daily efforts keep aircraft moving. 

•	 Aviation Safety (AVS): Oversees the safety of 

aircraft and the credentials and competency of pilots 

and mechanics, develops mandatory safety rules, and 

sets the standards that have helped make air travel 

one of the safest modes of transportation in history. 

•	 Airports (ARP): Provides leadership in planning 

and developing a safe, secure, and efficient airport 

system; manages the Airport Improvement Program 

(AIP), which provides grants to state and local 

governments; enhances environmental quality 

related to airport development; develops standards 

for the design and construction of airport facilities; 

establishes regulations for the safe operation of 

commercial service airports; and inspects airports for 

compliance. 

•	 Commercial Space Transportation (AST):

Oversees the safety of commercial space launches; 

regulates the U.S. commercial space industry, 

including human space flight; and encourages, 

facilitates, and promotes U.S. commercial space 

transportation.

From 1926, when President Calvin Coolidge initiated 

Federal oversight of air safety in the United States by 

signing the Air Commerce Act, to the creation of the 

Federal Aviation Agency in 1958, to our modern-day 

incarnation, the FAA and the aviation community have 

grown and worked together. We have shaped an industry 

that—like shipping and rail before it—conquered 

distance in a new way, lowered transportation costs, 

and created new opportunities that transformed the 

commercial landscape.

Today’s FAA faces the challenge of expanding the 

capacity of our aviation system to meet future 

demand without compromising safety or harming 

our environment. With aviation and related industries 

supporting 11 million jobs and contributing $640 million 

to our annual economy, our success is critical. 

A Year in Highlights

Our workforce of over 46,500 professionals operates and 

maintains the most complex air traffic control system 

in the world with an annual budget of approximately 

$14.9 billion. More than half of the world’s air traffic 

is managed by over 15,000 controllers, who ensure 

ever-increasing levels of safety. We conduct research 

to improve aviation safety and efficiency and provide 

grants to improve 3,354 eligible public-use airports in the 

United States. We also regulate commercial space launch 

activities to ensure public safety. 

As we celebrate our 50th year, we have many 

accomplishments to be proud of. We highlight the most 

significant in the following sections.

Management’s Discussion and Analysis
Federal Aviation Administration

8

NextGen Accomplishments

NextGen is the FAA’s plan to modernize the NAS through 

2025. With Congress pushing for a faster transformation 

of our NAS, we continue to accelerate initiatives that 

yield the greatest and most immediate benefits to our 

stakeholders. As a result, we have shifted focus from 

planning to action.

The introduction and wide-spread use of precision 

navigation tools such as RNAV and RNP into busy areas 

represent the first step in our transition to NextGen. 

These technologies use an aircraft’s onboard technology 

and the Global Positioning System (GPS) to fly more 

accurate and predictable flight paths, which improves 

efficiency, accuracy, and safety. We are also seeing benefits 

from the introduction of CDA. CDA uses a smooth 

descent—rather than the stepped-down approach 

required by current procedures—which saves time and 

money while reducing carbon emissions and noise. Flight 

demonstrations at Louisville’s Standiford Field Airport 

and testing at Atlanta Hartsfield-Jackson International 

Airport have shown fuel savings averaging about 50 to 

60 gallons, a reduction of up to 1,200 pounds of carbon 

dioxide for arrivals, and significant noise reduction. We 

started using CDA at Los Angeles International Airport 

on a permanent basis for some flights. If implemented 

nationwide, we estimate that CDA will save 100 million 

gallons of fuel annually. 

We went operational with Airport Surface Detection 

Equipment–Model X (ASDE-X) at six new sites: 

Washington Dulles, Phoenix Sky Harbor, John F. Kennedy, 

and Los Angeles as well as Detroit Metro Wayne County 

ADMINISTRATOR

AOA

DEPUTY ADMINISTRATOR

ADA

LINES OF BUSINESS

Chief Counsel

AGC

Civil Rights

ACR

 Government & Industry Affairs

AGI

Communications

AOC

International Aviation

API

Security & Hazardous Materials

ASH

Financial Services

ABA

Information Services

AIO

Human Resource Management

AHR

Regions & Center Operations

ARC

Aviation Policy, Planning & Environment

AEP

STAFF OFFICES

AIR TRAFFIC 

ORGANIZATION

ATO

AVIATION SAFETY

AVS

AIRPORTS

ARP

COMMERCIAL SPACE

TRANSPORTATION

AST

FEDERAL AVIATION ADMINISTRATION ORGANIZATION

Management’s Discussion and Analysis
9

FY 2008 Performance and Accountability Report

Airport and Ft. Lauderdale/Hollywood Airport. ASDE-X 

is a ground-breaking runway safety system that uses 

sensors around the airfield to detect plane and vehicle 

movements on the runways. This allows airlines to 

better manage movement of their aircraft in crowded 

ramp areas, which reduces gridlock and better enables 

aircraft to return to gates when required.

We have deployed the ground infrastructure for ADS-B 

in Southern Florida. ADS-B enables pilots in the cockpit 

to receive highly accurate weather and traffic data from 

satellites, which increases their situational awareness. 

The FAA will continue to test these technologies and 

others in an integrated test bed that focuses on Florida, 

the east coast, Texas, and the Gulf of Mexico and takes 

advantage of ADS-B. We continue to work on the 

rulemaking for ADS-B, which we expect to publish in 

2010.

Another key NextGen transformation is the development 

of the Aviation Safety and Information Analysis and 

Sharing (ASIAS) system. The ASIAS program integrates 

a large number of previously unrelated data sources from 

both Government and industry into a comprehensive 

safety picture that can help identify emerging risks and 

enable earlier interventions against these risks before 

they lead to accidents.

In June, we released the NextGen Implementation Plan, 

an upgrade of the Operational Evolution Partnership 

(OEP) management plan. The new plan reflects the 

shift in focus over the past year from concept definition 

to tangible execution planning. It addresses the FAA’s 

portion of the work needed to realize NextGen and is 

the basis for a series of pivotal investment and policy 

decisions over the coming years that will shape our 

future air transportation system. 

Organizationally, we’ve added a Senior Vice President for 

NextGen and Operations Planning. This gives us a clear 

decisionmaker and a distinct line of authority on issues 

relating to this cross-Governmental effort. Under this 

new position are:

•	 NextGen Integration and Implementation

Office, which develops and maintains the NextGen 

Implementation Plan. This office will be deeply 

involved in NextGen system integration, monitoring 

the progress of NextGen development and 

implementation and facilitating key collaboration 

processes. 

WAASExpanded into Canada and Mexico

The FAA has taken a major step forward on the path to NextGen by 

expanding the Wide Area Augmentation System (WAAS) coverage 

into Canada and Mexico. WAAS improves the accuracy and integrity of 

GPS satellite signals and provides highly precise approaches that can 

be used regardless of the weather. This expansion brought nine new 

international wide-area reference stations online. As a result, users 

in Canada and Mexico will be able to land safely in difficult weather 

conditions. 

WAAS also offers potential savings in fuel and operational costs. The 

WAAS infrastructure—which requires no navigation equipment at an 

airport—provides service that exceeds what is currently provided over 

3,000 legacy facilities.

WAAS works by having a network of ground reference stations 

collecting GPS satellite data. These data are sent through ground 

communications lines to master stations that calculate corrections to 

make the data more accurate and ensure its integrity. The correction 

data are broadcast to user aircraft through two or more geostationary 

satellite communications links. The aircraft use the WAAS signal, 

in addition to the GPS service, to fly area navigation and Localizer 

Performance with Vertical (LPV) instrument approaches, equivalent to 

the legacy Instrument Landing System (ILS).

The evolution of WAAS reached a milestone in September when the 

number of runways served by its procedures surpassed the number of 

runways served by ILS equipment. FAA has developed more than 1,000 

WAAS approach procedures since the system was commissioned, and 

the expansion won’t stop there. The FAA is developing hundreds of new 

WAAS procedures each year until every qualified runway in the NAS 

has one.

—Adapted from an article appearing in FocusFAA, FAA’s 

employee news service. 

Management’s Discussion and Analysis

The use of WAAS-type navigation is spreading across the country and 

around the world.

Credit:FAA Image Library
Federal Aviation Administration

10

•	 Operations Planning, which manages the FAA’s 

research and development, Enterprise Architecture, 

system engineering, performance modeling, and 

other key NextGen functions.

•	 Joint Planning and Development Office (JPDO), 

whose focus remains on the long-term NextGen 

vision and facilitation of collaboration among 

Government agencies and other stakeholders that 

contribute to the overall NextGen effort. 

Other Major Accomplishments

Safety Compliance Issues

While we made tremendous strides to improve 

safety this year, we also faced tremendous scrutiny. 

A noncompliance issue at Southwest Airlines raised 

concerns about our safety system, which led us to 

reexamine our airline oversight and maintenance 

program. We conducted an audit, which confirmed that 

our system works and that flying is safer today than at 

any time in the past. It also uncovered ways to increase 

the accountability of all parties, the FAA included, and 

strengthen both the reporting role and the regulatory 

process. As a result, we introduced several initiatives 

to address issues of responsibility, accountability, 

communication, and ethics and have made substantial 

progress toward their completion.

•	 We developed and implemented a Safety Issues 

Reporting System to provide employees an 

additional mechanism to raise safety concerns. This 

is in addition to existing channels, including the 

Administrator’s Hotline and the Safety Hotline, 

which provide employees a method to raise concerns 

anonymously.

•	 We amended the voluntary disclosure reporting 

program to report compliance discrepancies by 

requiring additional signoffs by the appropriate 

air carrier officials. This ensures awareness and 

sensitivity at the highest levels at each airline.

•	 We initiated a rulemaking to address ethics policies 

to impose 2-year restrictions on the interaction 

former inspectors can have with the FAA in postagency employment, bringing them in line with 

or exceeding existing restrictions for other Federal 

employees.

Technical Center Selected as 

Historic Aerospace Site

The nation’s leading Federal laboratory for research, development, 

testing, and evaluation of aviation systems has gained historic status. 

The AIAA designated FAA’s William J. Hughes Technical Center as an 

AIAA Historic Aerospace Site for its pivotal role in creating the nation’s 

modern air traffic control system over the past 50 years.

The Technical Center has played an integral role in advancing key new 

technology for air traffic control, air-to-ground communications, 

weather detection, airport visual guidance, fire research, runway safety, 

aircraft surveillance systems, human factors, airport capacity, tower 

siting, reduced vertical separation minima, and many other initiatives. 

Early highlights include automation data processing center work to 

automate air traffic control (1961); the first wake vortex turbulence 

test by helicopter (1963); the first operational testing of an automated 

en route air traffic control system (1966); the introduction of visual 

approach slope indicator to provide improved guidance to runways 

(1966); and the first tower cab mockup to test controller work areas 

and do airport observations (1972).

The Technical Center joined an impressive list of other historic sites 

recognized by the AIAA, including the original Bendix Aviation Company 

in Teterboro, N.J.; the Boeing Red Barn in Seattle; Kitty Hawk, N.C.; the 

site of the first balloon launch in Annonay, France; and Tranquility Base 

on the moon.

—Adapted from an article appearing in FocusFAA, FAA’s 

employee news service. 

Management’s Discussion and Analysis

Acting Administrator Robert A. Sturgell (left) and Tech Center Director 

Wilson Felder flank William J. Hughes at the ceremony designating the 

Center a historic aerospace site. The Center was named after Hughes.

Credit:FAA Image Library
11

FY 2008 Performance and Accountability Report

•	 We are working with manufacturers and air 

carriers to develop a system to improve the clarity 

of Airworthiness Directives to ensure effective 

implementation by the industry. We are eliminating 

ambiguity by using clear language and ensuring 

better overall coordination.

•	 We are expanding our ASIAS program to include 

Air Transportation Oversight System (ATOS) 

information, providing a new blend of data that 

will afford an additional look at nationwide safety 

trends.

Risk Reduction

Reducing the risk of runway incursions is one of the 

FAA’s top priorities. Focused efforts including outreach 

to pilots, awareness, improved infrastructure, and 

technology are making a difference. The number of 

serious runway incursions dropped by more than 55% 

from FY 2001 through FY 2008. 

Environmental Impact

Aviation represents less than 3% of the world’s total for 

greenhouse gases. Nevertheless, we’re looking at every 

possibility to find ways to be more environmentally 

friendly. This year, we signed a partnership agreement 

with Airways New Zealand and Airservices Australia to 

create ASPIRE. This initiative focuses on upgrading air 

traffic control standards and procedures for trans-Pacific 

flights. To show some potential efficiencies, Airways 

New Zealand operated a demonstration flight from 

Auckland to San Francisco. ASPIRE is the Asia-Pacific 

version of its European sister program, the Atlantic 

Initiative to Reduce Emissions, which launched last year. 

(See related article on page 12). 

We are also exploring the potential of alternative fuels for 

aviation. This year, we helped form and are participating 

in the Commercial Aviation Alternative Fuels Initiative 

(CAAFI). CAAFI’s participants, which include a 

cross-section of airlines, manufacturers, airports, fuel 

producers, Federal agencies, and international players, are 

implementing a roadmap to explore the use of alternative 

fuels for commercial aviation. CAAFI participants have 

already used coal-to-liquid and gas-to-liquid fuels in jets 

and completed a biofuels flight demonstration.

Air Traffic Controller Hiring

Our highly trained air traffic controllers play a critical 

role in achieving the outstanding level of aviation safety 

we enjoy in the United States. With more than 60% 

of the controller workforce eligible to retire over the 

next 10 years, the FAA is recruiting aggressively. We 

are offering a variety of incentives to recruit and retain 

controllers, including recruitment and relocation bonuses 

and repayment of student loans. To accelerate the hiring 

process for qualified individuals, we have implemented 

Pre-Employment Processing Centers (PEPCs), which are 

temporary screening centers throughout the country. 

(See page 25 for more information).

Raising the Bar on Safety

With the expected growth in air transportation, the FAA must make 

even greater efforts and adopt new measures to continue improving 

aviation safety. SMS will help to do this by using and analyzing a wide 

variety of data points together to drive safety-related decisions rather 

than just assessing individual points. This holistic perspective will also 

give the FAA a better understanding of the risks caused by changes to 

the NAS so accidents can be prevented. 

SMS will be implemented at all appropriate FAA organizations by 

2012. With this disciplined, proactive, and standardized approach to 

managing risk, which is conducted before an error occurs, the FAA will 

improve its already impressive safety record.

—Adapted from an article appearing in FocusFAA, FAA’s 

employee news service. 

Management’s Discussion and Analysis

Credit: FAA Image Library
Federal Aviation Administration

12

U.S. citizens should be safe wherever they fly. We 

know that global harmonization of aviation systems 

will increase the safety, capacity, and efficiency of 

international aviation not only for U.S. carriers, but also 

for U.S. citizens traveling on foreign carriers. Adding 

to the complexity, we are on the precipice of explosive 

aviation growth in India, China, and the Middle East. As 

the world leader in aviation safety, it is our responsibility 

to guide and collaborate with these nations and others 

on best safety practices and technologies or risk them 

turning elsewhere for help. As a result, we’re pulled in 

a lot of different directions. Limited resources means 

we can’t be everywhere. But where we do focus our 

attention, we get results. This year, we focused on China, 

South Korea, Canada, Europe, Brazil, and India.

We continue our efforts to better execute and manage 

the budget resources that Congress provides. Our 

transformation over the past 5 years has been steady 

and sure. By implementing improved management 

tools, including better cost accounting systems, and 

by instituting a pay-for-performance program, we 

have made efficient use of our resources. We continue 

to improve business practices to help control costs 

and increase efficiency, as described in the section that 

follows.

Integrating Performance and Financial

Information

Efficiency and Cost-Effectiveness

Since FY 2005, the FAA has included a cost control target 

among the Flight Plan goals we track each month. 

As a result of this emphasis, part of the broader effort 

to operate more like a business, we have been able to 

achieve $189 million in recurring savings from 

efforts put in place from FY 2005 to FY 2007, as well as 

$70 million from efforts initiated during FY 2008. Our 

efforts in this area are described in this section.

Consolidation of Services and Facilities 

We continue to consolidate staffing and facilities to 

capitalize on the synergies derived from cross-utilization 

of resources to reduce the unit cost of services. This 

effort also includes benefits derived from outsourcing 

services to obtain cost efficiencies. 

Aspiring to Cleaner Flying

In September, the future 

of aviation got a breath 

of fresher air at San 

Francisco International 

Airport, in the form of 

an Airways New Zealand 

Boeing 777.

The plane landed in San 

Francisco where a group 

of reporters, gathered to 

witness and learn about the 

great potential of NextGen 

technologies, greeted the 

flight.

The Airways New Zealand 

flight demonstrated the 

positive effects of NextGen, 

especially its potential 

for helping commercial 

aviation reduce carbon 

emissions by millions of 

tons annually. The test flight 

between Auckland, New 

Zealand, and San Francisco 

used a wide array of NextGen technologies and procedures. NextGen 

improves aviation efficiency in all phases of flight: taxiing, takeoff, 

en-route, and landings. In addition to reducing fuel consumption—

thereby reducing emissions—it provides for dramatic declines in noise 

related to air transportation. 

Fuel-saving actions were apparent at the start of the flight. The Boeing 

777 was able to taxi to the runway without delay because of NextGen 

technology. The airplane experienced an unimpeded climb-out on 

departure, followed a preferred route for the oceanic phase of the 

flight, and employed reduced vertical separation minima. The flight 

also benefited from frequent airborne rerouting that helped it save fuel, 

as well as a tailored arrival approach and a no-delay taxi to the gate. 

The flight was planned by ASPIRE, a partnership involving the FAA, 

Airways New Zealand, and Airservices Australia. The group works to 

make commercial air travel more environmentally sustainable. 

—Adapted from an article appearing in FocusFAA, FAA’s 

employee news service. 

Management’s Discussion and Analysis

Credit: FAA Image Library
13

FY 2008 Performance and Accountability Report

Workers’ Compensation Consolidation. We 

centralized responsibility for management of workers’ 

compensation claims and achieved estimated cost 

avoidance of $25.8 million in FY 2008 and total savings 

of $61.9 million since FY 2003. 

Information Technology (IT) Consolidation. As 

in most businesses, IT investments can be expensive 

and quickly become obsolete. To address this, we 

are becoming more proactive about IT decisions by 

implementing agency-wide initiatives to consolidate 

resources as well as physical facilities. This endeavor 

saved the FAA $27 million during FY 2008. 

Competitive Sourcing

The single largest effort by the FAA, and the largest 

nonmilitary outsourcing initiative in the Federal 

Government, involved the A-76 sourcing of 58 flight 

service stations to Lockheed Martin in 2005. This 

initiative is expected to result in a cost savings and 

cost avoidance of over $2.1 billion from 2003 through 

2015. As a result of this transaction, the FAA saved 

approximately $39.5 million in FY 2008. We expect an 

additional savings of approximately $46.5 million for 

FY 2009.

Strategic Sourcing and Demand Management 

SAVES Program. The Strategic Sourcing for the 

Acquisition of Various Equipment and Supplies 

(SAVES) initiative is an ambitious effort begun in 

FY 2006 to implement private sector best practices in 

the procurement of administrative supplies, equipment, 

IT hardware, and courier services.

Seven national contracts in five different categories 

are managed through the SAVES program. Since the 

initiation of the contracts, we have exceeded our 

expected compliance rate. We now purchase 90% of our 

office supplies through our contracts, well above our 

target of 70%. 

The SAVES Program has enabled FAA to have better 

financial oversight in addition to significant cost savings. 

Through the SAVES contracts, FAA achieved over 

$12 million in cost savings for FY 2008 and a total 

savings of $30 million since implementation. Overall 

we continue to save approximately 

• 22% for office supplies; 

• 26% for office equipment; 

• 24% for IT hardware; 

• 10% for courier/overnight services; and 

• 13% for financial systems support. 

Dell Blanket Purchase Agreement. The Office 

of Information Technology at the Mike Monroney 

Aeronautical Center manages a Blanket Purchase 

Agreement (BPA) with Dell Corporation for IT 

equipment including desktops, laptops, servers, printers, 

and monitors. We have realized cost savings of 

$31.8 million since inception of the BPA.

Expense Controls

The FAA has improved its oversight of the acquisition 

process to ensure the agency is a responsible steward of 

the taxpayer’s money. The FAA has established three 

requirements to better manage the agency’s resources 

and to ensure that we make sound business decisions.

Procurements. In 2005, the Administrator directed 

the CFO to exercise greater oversight and fiscal control 

over all agency procurements costing $10 million or 

more. Since that time, the CFO has evaluated over 

165 proposed acquisitions with an estimated contract 

value of $9 billion. With this process in place, we have 

established proper controls to effectively monitor 

contractor performance; enhanced our ability to 

accurately estimate and substantiate cost estimates; and 

improved our ability to articulate and define program 

requirements. 

Support Service Contracts. The FAA requires that 

any proposed support service contract with a total value 

of $1 million or more, and with fewer than three bids 

must be approved by the Deputy Administrator. This 

approval process ensures that we rely on the competitive 

marketplace to obtain the best prices for the services that 

we buy. 

Information Technology. To better coordinate IT 

efforts, any IT-related spending in excess of $250,000 

must be approved by the CFO. This requirement ensures 

that our IT investments are coordinated and fit into the 

agency-wide IT strategy.

Management’s Discussion and Analysis
Federal Aviation Administration

14

Alignment of FAA Costs and Goals 

The alignment of the FAA’s costs with its four strategic 

goal areas is captured in the Cost Accounting System 

(CAS)1. Projects entered into CAS by every organization 

are linked to one or more goals, and the percentage of 

funds that support each goal is identified. At the end 

of each fiscal year the total net costs for the FAA’s four 

lines of business and for its combined staff offices and 

other programs are allocated among each of the agency’s 

goals: Increased Safety, Greater Capacity, International 

Leadership, and Organizational Excellence.

Over $10.8 billion, or about 70% of the FAA’s total net 

cost of more than $15.5 billion for FY 2008, was devoted 

to our primary goal, ensuring the safety of the NAS. The 

ATO spent nearly $7.7 billion, largely to maintain the 

safe separation of aircraft in the air and on the ground. 

ARP directed nearly $2 billion to establishing safe airport 

infrastructure. AVS spent slightly more than $1.1 billion 

on its programs to regulate and certify aircraft, pilots, 

and airlines, directly supporting the safety of commercial 

and general aviation. AST, the FAA staff offices, and 

other programs spent the remaining total—just less 

than $78 million—to further support the agency’s safety 

mission.

Approximately $4.4 billion, or 28% of total net costs, 

was assigned to support the FAA’s goal of expanding the 

capacity of the NAS, particularly through its pursuit 

of programs contributing to the NextGen initiative. 

ATO spent about $2.6 billion, largely to finance its 

facilities and equipment projects. ARP spent nearly $1.8 

1

 For the source of the totals referred to in this section, see Note 11 to the FAA’s 

financial statements, titled “Net Cost by Program and Other Statement of Net 

Cost Disclosures” on page 118. 

billion to enhance the capacity of the country’s airports 

through runway projects and other efforts. AST directed 

almost $2.1 million on its efforts to expand capacity 

and AVS contributed approximately $1.3 million. The 

bulk of the FAA’s remaining net costs, just over $230 

million, supported its Organizational Excellence goal, 

to which nearly all the lines of business and staff offices 

contributed. The FAA committed the remainder, slightly 

over $59.3 million, to promoting its International 

Leadership goal.

Performance Highlights 

The FAA is charged with promoting the safety and 

efficiency of the nation’s aviation system. With broad 

authority to enforce safety regulations and conduct 

oversight of the civil aviation industry, we maintain the 

system’s integrity and reliability. A strategic plan, annual 

business plans, human capital plans, and the annual PAR 

create a recurring cycle of planning, program execution, 

measurement, verification, and reporting. This strong 

link between resources and performance shows our 

accomplishments and reinforces accountability for the 

way we spend taxpayer money.

Managing Performance 

The FAA manages performance by using a four-step 

framework based on best practices from a number 

of private and public sector organizations (see the 

chart below). As we use this framework and instill 

management discipline into the processes, we anticipate 

a multiyear journey of learning and change.

The first step in the process, “Set Goals,” includes 

consulting with management, stakeholders, and 

customers to identify areas for improvement. 

Management’s Discussion and Analysis

NET COSTS BY STRATEGIC GOAL AREA

as of September 30, 2008

(Dollars in Thousands)

Safety

70% ($10,858,136)

International 

Leadership

<1% ($59,305)

Capacity

28% ($4,384,350)

Organizational

Excellence

1.5% ($230,330)

and

Set 

Goals

Monitor 

Work

Assess 

Results

Cascade

Management uses data to 

determine if initiatives are 

delivering intended results, 

and that there is a 

connection between the 

work and the overall 

success of the organization.

Success for each critical 

initiative must be dened in 

measurable terms.

The Monitor Work 

measures become the 

targets for the next level of 

the organization.

Goals must be clear, 

measurable, time-bound, 

and be outcome focused.

Management must identify 

and prioritize the most critical 

work, allocate limited 

resources, and nd new 

resources through eciencies 

and reprioritization.

Plan Work 

and 

Budget
15

FY 2008 Performance and Accountability Report

The second step, “Plan Work and Budget,” focuses on 

the critical work and resources required to achieve 

the goals. Following the framework, the FAA created 

a performance-based budget that links resource 

requirements to the Flight Plan and the DOT Strategic 

Plan. Our FY 2008 Budget in Brief is available at www.

faa.gov/about/budget/ and our Flight Plan is available 

at www.faa.gov/about/plans_reports. 

The third step, “Monitor Work,” develops measurement 

of the work required to achieve our goals. The FAA has 

developed organizational business plans for each line 

of business and staff office. These plans outline the 

initiatives, activities, and performance targets that link 

our work directly to the Flight Plan. Business plans are 

available at www.faa.gov/about/plans_reports. 

“Assess Results” is the last and most important step 

in the performance management process. This year, 

we continued our practice of reviewing and discussing 

annual performance goals every month. In addition, 

we continued to focus more on discussing performance 

results, root causes of performance issues, and 

reallocation of resources to correct underperformance. 

Our performance measures and targets support the 

FAA’s mission to provide citizens with a safe, secure, and 

efficient global aviation system. The chart above provides 

a summary of our year-to-year performance 

goal achievement trend.

As indicated in the chart above, the FAA has expanded 

its strategic focus over the past 7 years. As we continue 

to mature in our strategic management processes and 

our focus becomes sharper, the number and mix of 

performance targets shift. On a yearly basis we review 

the plan to ensure we are on track to meet future 

challenges and to ensure that aviation remains an engine 

of economic growth.

When we first started preparing our annual PAR in 

FY 2002, the FAA had 10 performance goals in the 

strategic areas of Safety, System Efficiency, and 

Organizational Excellence. In 2003, the FAA refined 

its strategic plan and launched the first Flight Plan (FY 

2004–2008). The Flight Plan provides the framework to 

match resources with initiatives for long-term change. 

The new Flight Plan was designed around four ambitious 

strategic goals: Increased Safety, Greater Capacity, 

International Leadership, and Organizational Excellence. 

These strategic goals detail how we will move forward 

into the future. 

In FY 2004, to reflect the increasing emphasis on 

accountability within the FAA organizations, we added 

18 new performance targets. Six of the new performance 

targets were associated with International Leadership 

and placed greater emphasis on our role as a leader in 

the global civil aviation system. In the Safety strategic 

goal area, we introduced Commercial Space Launch 

Accidents, marking a new era in space travel when the 

FAA licensed the first private manned space vehicle—

SpaceShipOne. 

This year—the fifth year of the Flight Plan’s 

implementation—the FAA had 29 performance measures 

and targets that focused our efforts to achieve enhanced 

aviation safety, increase system capacity, provide 

international leadership, and ensure organizational 

success. We met 26—a 90% success rate. 

Safety. Safety is not only a top priority; it is also an 

economic necessity. People will fly only if they feel 

safe. They must trust the system and that trust must 

be earned. In FY 2008, we introduced a new safety 

performance metric and target for commercial air 

carriers. We believe the Commercial Air Carrier Fatality 

Rate is more relevant than the previous one, Commercial 

Air Carrier Accident Rate, because it measures the 

individual risk to the flying public rather than for each 

departure. We achieved five of seven safety goals, missing 

our targets for reducing accidents in Alaska and limiting 

Operational Errors. For a more complete discussion of all 

our safety measures, performance, and steps we plan to 

take in FY 2009, see page 47. 

Management’s Discussion and Analysis

Year-to-Year Performance Goals Achieved

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

PerformanceTargets Met (Number) 9of10 9of12 24of30 28of31 27of30 24of30 26of29

PerformanceTargets Met (Percentage) 90% 75% 80% 90% 90% 80% 90%
Federal Aviation Administration

16

Capacity. Capacity is the backbone of air travel. 

Aviation can grow only if capacity grows. We aim to 

achieve increases in capacity in an environmentally 

sound manner. In FY 2008, we achieved six out of seven 

capacity goals and significantly exceeded our target for 

aviation noise exposure. We did not achieve our NAS 

On-Time Arrivals performance target due largely to 

adverse weather conditions, which played a significant 

part in increasing weather-related airport delays. For a 

more complete discussion of all our capacity measures, 

performance, and steps we plan to take in FY 2009, 

see page 52.

International Leadership. The FAA’s goal is to make 

the international aviation system as safe and efficient 

as the one enjoyed in the United States. In FY 2008, we 

achieved all four international leadership goals. For a 

complete discussion of all our International Leadership 

measures, performance, and steps we plan to take in 

FY 2009, see page 57.

Organizational Excellence. FAA employees are 

our most valuable resource. Together, we operate the 

largest and safest aerospace system in the world. To do 

this efficiently, we must continually provide stronger 

leadership, a better-trained and safer workforce, 

enhanced cost-control measures, and improved 

decision making. In FY 2008, we achieved all 11 of 

our Organizational Excellence goals and significantly 

exceeded our target for Grievance Processing Time. 

Additionally, we revised the customer satisfaction 

measure to reflect a broader base of the customers 

we serve. For a more detailed discussion of all our 

organizational measures, performance, and steps we plan 

to take in FY 2009, see page 60.

President’s Management Agenda 

President George W. Bush’s management agenda, 

announced in 2001, is a strategy for improving 

the management and performance of the Federal 

Government. The objective is a Federal Government 

that is citizen-centered, not bureaucracy-centered; 

results-oriented, not output-oriented; and market-based, 

actively promoting rather than stifling innovation 

through competition.

Management’s Discussion and Analysis

FY 2008 PERFORMANCE AT A GLANCE

Performance Measure FY 2008 Target FY 2008 Results FY 2008 Status FY 2009 Target1

SAFETY

Commercial AirCarrierFatality Rate

(rateof fatalitiesper100 million on board) 8.7 0.42 8.4

General Aviation Fatal Accidents 325 2992 319

Alaska Accidents (numberof fataland nonfatalaccidents) 104 1082 99

RunwayIncursions (rateper million operations) 0.509 0.4283 0.472

CommercialSpace Launch Accidents

(numberof fatalities, injuries,ordamagetotheuninvolvedpublic) 0 0 0

OperationalErrors (rateper million activities) 2.15 2.313 2.10

Safety ManagementSystem

(numberof significant changes in the NAS) 6 6 7

CAPACITY

Average Daily AirportCapacity

(35 OEPairports) 101,868 103,2183 103,328

Average Daily AirportCapacity (7 metropolitan areas) 33,676 35,9883 39,484

AnnualService Volume(ASV)

(operationsaccommodated/numberof runwayprojects)

1.00% 

(1taxiwayproject)

1.06%

(1taxiwayproject)

1.00%

(3runwayprojects)

Adjusted Operational Availability

(service hours for facilities supportingthe35 OEPairports) 99.70% 99.82%3 99.70%

(continued on page 18)
17

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

FY 2008 PERFORMANCE AT A GLANCE

Performance Measure FY 2008 Target FY 2008 Results FY 2008 Status FY 2009 Target1

NAS On-Time Arrivals

(flightsarriving no morethan 15 minutes late) 88.00% 87.29%3 88.22%

NoiseExposure −12.00% −38.00%4 −16.00%

Aviation FuelEfficiency

(cumulativereduction in fuelburnedper mile flown) −6.00% −10.17% −7.00%

INTERNATIONALLEADERSHIP

Aviation Safety Leadership

(numberof safetyenhancements implementedbyChina) 5 CASTSEs 5 CASTSEs 5 CASTSEs

Bilateral Aviation Safety Agreements (BASAs)

(numberof new orexpandedagreements) 2 4 1

ExternalFunding(millionsofdollars secured) $15.00 M $16.70 M $18.00 M

NextGen Technologies

(numberof countries implementingtechnologies) 1 2 1

ORGANIZATIONALEXCELLENCE

STRATEGIC MANAGEMENT OF HUMAN CAPITAL

OfficeofPersonnel Management (OPM) HiringStandard

(external hires filled within OPM 45-daystandard) 50.00% 79.00% 60.00%

ReduceWorkplaceInjuries

(injuryandillness casesper100employees) 2.68per100 2.25per1005 2.60per100

GrievanceProcessingTime

(reduction in averagedays tocompleteprocessing) –15.00% –63.69% –20.00%

AirTrafficControllerWorkforcePlan

(variancebetween plan andactual workforcelevel) 0%to2%overPlan 1.66%overPlan 0%to2%overPlan

IMPROVED FINANCIAL PERFORMANCE

Cost ReimbursableContracts (percentageof contracts closedout) 86.00% 91.67% 87.00%

CostControl (numberofactivitiesperorganization and

achievementsof targetedsavings) 1activityandsavings 1activityandsavings 1activityandsavings

Clean AuditWith No MaterialWeaknesses (NMW) Clean Audit w/NMW Clean Audit w/NMW Clean Audit w/NMW

ACQUISITION MANAGEMENT

Critical Acquisitionson Budget (percentage within projections) 90.00% 96.08% 90.00%

Critical Acquisitionson Schedule

(percentage meetingproject milestones) 90.00% 93.88% 90.00%

CUSTOMER SATISFACTION AND OPERATIONAL CAPABILITY

CustomerSatisfaction (averagescoreforFAA American Customer

Satisfaction Index[ACSI] surveys) 60 60.24 TBD

Information Security(numberof cyber securityevents) 0 0 0

Green: Goal Achieved 

 Red: Goal Not Achieved

Notes: 

	 Foradetaileddescription of theperformance measure,

seeperformancegoal tables in thePerformance Results section.

	 For information on datasourcesandestimatingand finalization of

results, seeCompletenessand ReliabilityofPerformance Data.

TBD:Tobedetermined 1	FY2009targetsarefrom theFY2008–2012Flight Plan. 2Preliminaryestimate.Finaldata willbeavailablein March 2010. 3Preliminaryestimate.Finaldata willbeavailablein January2009. 4Projection from trends.Finaldata willbeavailablein May2009. 5Projection from trends.Finaldata willbeavailablein November2008.
Federal Aviation Administration

18

The President’s Management Agenda (PMA) contains 

5 Government-wide and 11 agency-specific goals to 

improve Federal management and deliver results that 

matter to the American people. Together, these goals 

are referred to as the PMA. The five Government-wide 

initiatives are Strategic Management of Human Capital, 

Commercial Services Management, Improved Financial 

Performance, Expanded Electronic Government, and 

Performance Improvement. In addition to these five 

initiatives, the FAA, as an agency within the DOT, 

participates in two additional agency-specific initiatives: 

Eliminating Improper Payments and Federal Real 

Property Asset Management.

OMB assesses all Federal departments through a 

quarterly Executive Branch Management Scorecard 

rating of green, yellow, or red for status and progress on 

each PMA initiative. While there are 13 agencies within 

the DOT that contribute to the overall PMA, the FAA’s 

contribution is significant and has a major impact on 

the rating results. For the Federal Real Property Asset 

Management initiative, the FAA has over 99% of the real 

property within DOT, effectively driving the initiative 

and its results. For a more detailed description of the 

PMA, see the OMB website at www.whitehouse.gov/

omb/budintegration/pma_index.html.

FY 2008 FAA Accomplishments 

Strategic Management of Human Capital

Strategic Management of Human Capital involves an 

ambitious range of initiatives to ensure that planning 

and management of agency human capital is strategic, 

supports organizational performance, and ensures 

mission accomplishment. For the fourth consecutive 

year, DOT/FAA human capital accomplishments earned 

a “green” status rating on the PMA. 

Workforce Planning. Recruiting a highly qualified, 

high-performing workforce in today’s competitive 

environment remains an important FAA human 

capital challenge. We are implementing comprehensive 

recruitment, marketing, and outreach strategies to 

broaden agency applicant pools and meet the hiring 

needs of our controller, inspector, and other critical 

workforces. The increased outreach is reflected in FAA 

manager feedback that indicates that 72% agree that 

the hiring process is effective at attracting the right 

applicants, up from 68% last year. 

Management’s Discussion and Analysis

FAA is Getting Smart with New ID Cards

As part of its security upgrade, in February 2008 the FAA started issuing 

new personal identification verification (PIV) cards at its Washington 

Headquarters. Beginning in March, the agency began a phased 

deployment of the new ID card at its regions and centers.

The FAA will use a standardized and more stringent set of procedures 

for authorizing PIV cards. This will enhance security by making it harder 

for unauthorized persons to assume an identity not their own and gain 

access to agency facilities and systems. 

This Government-wide effort is being conducted under the umbrella of 

a Homeland Security Presidential Directive (HSPD-12) that mandates 

not only a standardized identification card, but also includes uniform 

procedures for proving and vetting the identities of employees and 

contractors. 

The PIV cards will make it easier for guards to identify Federal employees 

and contractors, and to conduct electronic verification and validation. 

The ID not only looks different, but it is also a “smart card” that in the 

future can be used to grant access to FAA facilities and information 

systems. The effort will better protect personal privacy and enhance 

physical and cyber security. 

To receive a PIV card, all employees and contractors must meet with a 

security representative in person, be photographed, provide two forms 

of identification—including at least one government-issued ID—and 

have their index fingers scanned. After verification of this information, 

employees will meet with a different security officer who will use 

the stored fingerprints to verify the employee’s identity, then give the 

employee the opportunity to store their own secret PIN number in the 

card. The security officer will then finalize the activation of the smart 

card with electronic certificates written to the chip and issue the new 

combined ID and “smart” access card to the cardholder.

—Adapted from an article appearing in FocusFAA, FAA’s 

employee news service. 

The new PIV cards will have 

embedded chips that in the future 

will allow employees to access FAA

facilities and information systems. 

Credit:FAA Image Library
19

FY 2008 Performance and Accountability Report

Several joint initiatives with the Department of Veterans 

Affairs are expanding job opportunities for veterans. 

The FAA is able to offer veterans with disabilities access 

to on-the-job training to become air traffic controllers 

or airway transportation system specialists thanks to 

a new FAA Veteran’s Training Program helping them 

transition into the civilian workforce. The agency can 

also offer eligible developmental controllers Montgomery 

GI Bill education benefits. These new veterans’ training 

initiatives help contribute toward meeting future agency 

hiring goals for controllers and airway transportation 

system specialists. 

As our controllers and other employees become eligible 

to retire over the coming decade, the FAA is building our 

next generation workforce. Agency workforce planning 

helps us prepare for and manage our shifting workforce 

demographics and ensure our future workforce viability. 

The annual updates of the FAA Air Traffic Controller 

Workforce Plan and Aviation Safety Workforce Plan present 

current staffing levels and forecasts of controller and 

aviation safety workforce attrition and hiring. To ensure 

strategic alignment between people, goals, and mission 

accomplishment, we completed the 2008 updates of the 

FAA and Line of Business/Staff Office workforce plans 

in parallel with the FAA’s Flight Plan and organizational 

business plan updates.

The FAA continually assesses mission-critical workforces 

and prioritizes and invests in closing skill gaps as 

necessary to improve organizational performance 

and effectiveness. In 2008, the FAA participated in 

Government- and DOT-wide competency assessments 

for leaders, community planners, and human resource 

specialists and is continuing to make progress in closing 

critical gaps for engineers, information technologists, and 

acquisition specialists. 

Leadership and Succession Management. The 

PMA and FAA Executive Leadership Succession Plan set 

forth specific expectations for ensuring the continuity 

of senior leadership through succession planning and 

executive development. The FAA implements the 

Senior Leadership Development Program, a systematic 

approach to executive level succession planning that 

balances agency-wide priorities with the specific needs 

of participating lines of business and staff offices. During 

FY 2008, the 28 participants received extensive feedback 

through a formal Assessment Center, worked with 

Management’s Discussion and Analysis

Interim Web Pages Pave the Way for e-Onboarding

Acquainting new employees with the FAA—and helping managers 

become acquainted with new employees—is about to get a little easier. 

FAA’s Office of Human Resources has developed a pair of informational 

web pages: one for new hires, the other for their managers. 

The first of the two pages, New Employee Processing, is an area of the 

public website to which new employees are now being directed upon 

receipt of their acceptance letter. The page provides new hires with 

information and links to important forms, as well as information on 

benefits. It details those things that must be done on or before the first 

day of employment.

The second page, the Manager’s Orientation Checklist, is an internal 

page aimed at providing guidance to the managers who are taking 

on new employees. The page offers a standardized approach to new 

employee integration including a checklist so managers can note when 

various pre-employment tasks are completed by the new hire.

Currently this is still a manual process. The employee must print off the 

forms, bring them in, and submit them. Within the next 2 years, this 

process will be electronic, and more robust.

Being developed in 

conjunction with the 

Department of the 

Interior’s National 

Business Center, 

the e-Onboarding 

initiative will create 

a standalone website 

where new hires 

and managers will 

log on to enter and 

retrieve employment 

information. Once 

the new system is in place, new hires will receive an email with login 

information for the e-Onboarding website about 2 weeks prior to their 

scheduled start date. Once logged in, the employee will verify the 

information from their application and be directed to fill out required 

forms online. All of this will help ensure that new employees are ready 

to start working on day one. 

FAA is hopeful that this kind of advanced information will help reduce 

the anxiety felt by new employees, minimize Human Resource’s manual 

data entry into various back-office systems, and improve data integrity 

across the organization.

—Adapted from an article appearing in FocusFAA, FAA’s 

employee news service. 

www.faa.gov/about/office_org/headquarters_offices/

ahr/new_employee_onboard/
Federal Aviation Administration

20

coaches and executive advisors to develop Individual 

Development Plans, and completed three core training 

events: 

• “Policy Dynamics for Senior Managers” conducted 

by the Federal Executive Institute; 

• the Brookings Institution’s “Communicating for 

Success”; and 

• “Leading Change and Organizational Renewal” 

offered through the Harvard Business School.

They also worked with executive coaches to leverage 

on-the-job leadership challenges including a high-level 

action learning project identified by the FAA Acting 

Administrator. 

Performance Culture. We continue to strengthen 

our results- and performance-based culture through our 

compensation and agency performance management 

system. In 2008, Office of Personnel Management (OPM) 

evaluators determined that the FAA had an effective 

performance management system in place that shows 

alignment between individual performance plans and 

the FAA Flight Plan, measurable and results-focused 

standards, and processes for effective oversight and 

accountability.

The FAA implemented an e-Government solution 

that replaced about 46,500 FAA employees’ current 

official personnel folders with electronic employee 

records, which provides employees with direct access to 

their employment folders. The FAA and the National 

Aeronautics and Space Administration (NASA) are 

jointly pursuing a new electronic employee orientation 

process that provides new employees with the valuable 

information they need to start their careers and 

checklists for supervisors regarding their on-boarding 

responsibilities for orienting the new employee. Studies 

show a link between a positive on-boarding experience 

and employee retention, productivity, and engagement 

(see related story on page 19). 

The FAA Human Resource Management (HRM) 

organization is implementing an accountability review 

process to ensure consistent application of human 

capital policy and agency compliance with meritsystem principles. To date, a team of Human Resources 

specialists have conducted five quality reviews of HRM 

operational policies and practices to identify and correct 

local and systemic issues. Service level agreements with 

lines of business establish additional accountabilities for 

efficient and effective delivery of HRM products and 

services. 

Commercial Services Management

In FY 2008, we completed a study of the FAA’s 

National Aeronautical Charting Office (NACO) 

and developed a plan for converting it into a High 

Performing Organization (HPO). The HPO plan 

calls for the adoption of modern, digital cartographic 

methods; enhanced data stewardship through 

database consolidation; business process reengineering; 

elimination of redundant positions; and a NACO model 

to increase efficiencies and the quality of products. The 

plan also uses a new pricing structure that is expected to 

increase NACO revenue by $44.5 million over the 5-year 

HPO period, fund modernization efforts, and reduce 

NACO’s operational base funding needs. The NACO 

HPO plan is projected to save the FAA $45.5 million 

over the 5-year HPO period in both cost savings and cost 

avoidance and, by FY 2013, achieve yearly savings of 

28% from the FY 2007 baseline. Implementation of the 

NACO HPO will begin in the first quarter of FY 2009 

and continue through the 5-year HPO period. 

Improved Financial Performance 

During FY 2008, we continued to closely monitor the 

effectiveness of capitalization improvement efforts 

and the timely processing of construction in progress 

transactions. We also implemented organizational 

changes and added resources at the managerial and staff 

levels.

The FAA designed and tested an improved accounting 

process for reimbursable agreements. The redesign, 

which will be implemented in FY 2009, simplifies 

the accounting transaction flow and the monthly 

reconciliation process.

Expanded Electronic Government 

The FAA’s participation in the DOT’s E-Government 

initiative during FY 2008 led to several important 

accomplishments in Capital Planning, IT Security, 

Enterprise Architecture (EA), and Government-wide 

Initiatives. 

Capital Planning. In FY 2008, the FAA created its 

first IT portfolio to be managed by the Information 

Management’s Discussion and Analysis
21

FY 2008 Performance and Accountability Report

Technology Executive Board (ITEB), a senior level 

executive board chaired by the Chief Information 

Officer. The portfolio consists of over 60 investments 

with annual budgets exceeding $250 million. The Joint 

Resources Council (JRC) approved the ITEB portfolio 

baseline for FY 2010, as recommended by the ITEB, and 

we continue to work critical processes associated with 

the Government Accountability Office’s (GAO’s) IT 

Investment Management Framework. As the portfolio 

management capabilities mature, the FAA expects 

to improve investment performance by completing 

projects in less time, receiving a return/cost savings 

percentage of the total portfolio budget, and managing 

the FAA more like a business. The FAA institutionalized 

the Earned Value Management (EVM) practices, 

including surveillance and certification of EVM systems, 

supporting the Flight Plan goal of having more of our 

systems delivered on time and within budget.

To address the issues surrounding the inclusion of the 

NAS Modernization Program on GAO’s High Risk List, 

the FAA is institutionalizing many best practices in 

investment management. To assist in its efforts, the FAA 

implemented a new portfolio management tool that 

includes components for OMB reporting, dashboards and 

executive decision support, business case development 

and analysis, project planning and scheduling, EVM, 

timekeeping, resource management, cost management, 

process workflows, risk management, dependencies, 

portfolio analysis, and predictive capability.

IT Security. Effective October 1, 2007, the FAA’s 

and DOT’s Cyber Security Incident Response Centers 

merged into a single, cutting edge, state-of-the-art Cyber 

Security Management Center (CSMC). The CSMC 

is designed to provide a centralized and cost effective 

approach to preventing and handling computer security 

events involving targeted DOT systems. The mission of 

the CSMC is to protect information technology assets 

of the DOT via the consolidation and optimization 

of cyber incident management policies, standards, 

practices, and tools. The FAA continues its efforts to 

protect its information infrastructure from malicious 

attack by ensuring that all systems have the appropriate 

security mechanisms in place. To this end, the FAA has 

performed initial certification and authorization on 8 

systems, recertified 67 targeted systems, and is on track 

to complete self-assessments on its remaining IT systems 

by the end of 2008.

Enterprise Architecture (EA). The FAA continues 

to improve its EA. In FY 2008, the FAA updated the EA, 

expanding the scope of its information so as to better 

support investment decisionmaking. The architecture 

and technology boards chartered in 2006 became fully 

institutionalized and held regular meetings to share 

information and make decisions on architecture and 

technology issues. The scope of the FAA EA roadmaps 

approved through the governance boards was increased 

to add regulatory support and non-NAS roadmaps. In 

December 2007, the JRC approved the FAA EA, including 

the agency-wide roadmaps. The FAA EA program 

strengthened its emphasis on segment architecture 

development, continued work on its two major 

segments, and added two new segment architectures. 

The FAA lines of business (LOBs) increased their 

emphasis on completion and use of the EA, hiring several 

additional enterprise architects to coordinate work 

within the individual LOBs to help move the EA forward.

Government-wide Initiatives. The FAA continues to 

participate in eGovernment initiatives, thus contributing 

to DOT’s successful eGovernment scorecard. The FAA 

participates in DOT’s eGrants Executive Committee, 

which is responsible for developing the DOT’s 

consolidated eGrant Management application. The FAA 

also participated in DOT’s migration from its Docket 

Management System to the Federal Docket Management 

System. In addition, the FAA is collaborating with 

the National Archives and Records Administration 

to develop processes and best practices for e-Records 

Management. 

Performance Improvement

The Performance Improvement initiative encourages 

agencies to develop efficiency in executing programs, 

implementing activities, and achieving results while 

avoiding wasted resources, effort, time, and money. 

To achieve this objective, we continue to ensure 

transparency about performance and the steps we 

are taking to correct deficiencies. We regularly and 

systematically measure program performance against 

pre-determined targets to track program viability, one of 

six criteria for reaching “green” status on the PMA report 

card. We continue to integrate performance information 

into budgetary decisionmaking to ensure resources 

are properly aligned with the FAA’s mission and goal 

activities. We link the results of those activities back into 

Management’s Discussion and Analysis
Federal Aviation Administration

22 Management’s Discussion and Analysis

the annual budget planning process. We provide detailed 

information about how increases or decreases in our 

budget affect the achievement of our goals, and how the 

activities across the six DOT strategic goal areas work 

together. 

FAA Flight Plan. Each fiscal year, the FAA’s 

Management Board updates the Flight Plan, our 5-year 

strategic plan. The Flight Plan establishes strategic 

goals, corporate initiatives, and performance targets in 

the FAA’s four strategic goal areas—Safety, Capacity, 

International Leadership, and Organizational Excellence. 

The plan is directly linked to performance results. The 

FAA Administrator holds monthly Flight Plan meetings 

on the status of our performance goals and the results are 

posted on the FAA’s homepage.

Pay for Performance. Accountability for results is 

widespread throughout our organization, with 84% of 

our staff and executives under the pay-for-performance 

system. Agency achievement of Flight Plan performance 

targets are considered when annual pay raises are 

calculated. In addition, executives and managers have 

discretion in rewarding high-performing employees with 

incentives for quality work and innovation. Executives 

are also eligible for short-term incentive bonuses when 

specific performance thresholds are met or exceeded. The 

conversion to pay for performance allows the agency to 

flatten pay bands and tie achievement of goals to pay 

increases.

Improved Performance and Efficiency Measures.

Another important focus of the Performance 

Improvement initiative is the OMB Program Assessment 

Rating Tool (PART) reviews. As part of the process, 

programs that have undergone a PART review develop 

and implement efficiency measures that are tracked 

in PARTWeb, OMB’s web-based editing tool, and in 

our business plans. In FY 2008, OMB undertook a 

comprehensive review of all past PART assessments. 

This review highlighted the need for all efficiency 

measures to address program unit costs. In response, 

AVS implemented a new measure for the Cost of Safety 

Oversight for PART 145 Repair Service Stations. We also 

substantially revised or added new performance measures 

for several programs. Examples of the FAA’s efficiency 

measures follow.

• Air Traffic Overhead Rate. To provide insight 

into cost effectiveness of General and Administration 

(G&A) and Mission Support resources needed to 

support the Air Traffic mission, we capture overhead 

rates. We regularly review current and historic 

performance and selected benchmarking with other 

air navigation service providers. The performance 

indicator informs management decisions on the mix, 

level, and allocation of G&A and Mission Support 

resources.

• Cost per Controlled Flight. This cost-based 

metric provides a broader historic picture of overall 

cost efficiency at the facility level, service level, and 

ATO level. Cost per Controlled Flight is reviewed as 

part of periodic benchmarking initiatives within the 

global air navigation service community.

• Average Cost of Safety Oversight of Part 

145 Repair Stations. This new measure for AVS 

evaluates total safety oversight spent on this critical 

sector of aviation. The FAA plans to use the measure 

to benchmark regional performance and drive 

organizational efficiencies. 

PART Review—ATO Technical Operations. 

Responsible for maintaining and modernizing equipment 

needed in the NAS to deliver air traffic services, ATO 

Technical Operations received an adequate rating on its 

PART review. The PART assessment indicates that the 

program has a clear purpose that focuses on maintaining 

and modernizing equipment needed to deliver air 

traffic services and has long-term outcome measures 

tied to specific programs and projects that support 

the accomplishment of DOT and FAA goals. It also 

indicates that ATO Technical Operations has evaluations 

of several program components including safety and 

capital acquisitions. To improve the performance of 

the program, ATO is baselining annual performance 

measures to set ambitious targets for those measures, 

undertaking a comprehensive study to evaluate program 

efficiencies, and broadening the evaluation of the 

program’s operations.

Eliminating Improper Payments

The PMA strives to instill first class financial 

management practices in departments and agencies 

throughout the Executive Branch. Such efforts ensure 

that taxpayer dollars are spent wisely and efficiently, 
23

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

appropriately accounted for, and protected from fraud or 

misuse. Improper payments are defined by the Improper 

Payment Information Act (IPIA) of 2002 as payments 

“that should not have been made or that were made 

in an incorrect amount.” This definition includes all 

payments to an ineligible recipient, for an ineligible 

service, duplicate payments, payments for services 

not received, etc. The Act requires Federal agencies to 

annually review the susceptibility of all their programs 

and activities and to estimate the improper payments 

amounts and rates for those programs found to be 

susceptible.

Our excellent record of keeping improper payments to an 

insignificant amount caused OMB and DOT to change 

the focus of our improper payments efforts to grant 

payments made under the AIP. 

During FY 2008, we applied that knowledge and 

methodology to a comprehensive effort to test 27 

statistically selected airport improvement projects 

across the nation. We evaluated the validity and 

appropriateness of payments relative to the terms of the 

grant agreement by considering such issues as whether 

contracted goods or services (pavement, excavation, 

design services) were consistent with engineering 

specifications, the reasonableness of progress payments, 

and inspection reports supporting completed work. 

In accordance with the IPIA and following the 

requirements of the OMB, DOT contracted with AOC 

Solutions to determine estimates of improper payments 

for FY 2008 in three DOT grant programs, including 

the AIP.

The review process involved a three-stage sampling 

plan to select a statistically representative sample of 

AIP payments and test their propriety. The sampling 

plan was designed to meet the OMB Circular A-123 

requirements of no more than plus or minus 2.5% 

sampling error at a 90% confidence interval. It ensures 

a reliable nationwide estimate of improper payments 

made by the AIP program. No significant improper 

payments were identified during FY 2008 review. Two 

invoice line items were identified as improper payments 

totaling $1,237.00. These two items were noted in 

the work papers but not projected to the population 

universe because they were not part or the final (third 

stage) testing sample. The test results were submitted 

to OST for review to be compiled with the results of the 

other Operating Administration reviews to develop an 

estimate of improper payments for the DOT.

Federal Real Property Asset Management

The FAA, on behalf of the DOT, continues to provide 

inventory information and performance measures to the 

Federal Real Property Council. The data included metrics 

for the approximately 68,500 DOT real property assets 

and reported performance information on the following 

elements for each real property asset:

• Mission-criticality

• Facility condition index

• Utilization rate

• Annual operating costs

The data and performance measures are maintained 

in the Real Estate Management System application 

that serves as the single-point inventory database for 

DOT real property assets. During FY 2008, the FAA 

conducted a physical inventory of approximately 22,000 

real property assets and again transmitted the data to 

the Federal Real Property Profile for inclusion in the full 

Federal real property inventory database.

In accordance with the Asset Management Plan and 

the Three-Year Timeline for Real Property, the FAA 

participated in periodic reviews of the real property asset 

data and removed more than 2,270 unneeded assets with 

a value of approximately $85 million in FY 2008. 

Since the PMA initiative was established, the DOT’s 

initiatives have resulted in disposals of more than $170 

million worth of real property assets.Savings resulting 

from the disposition of property have been applied 

toward future disposition efforts, as well as updates, 

upgrades, repairs, and renovations of current assets. 

In FY 2008, the OMB recognized DOT’s real property 

achievements and rated the PMA real property initiative 

green in status and progress. The FAA team also received 

national-level honorable mention recognition by the 

General Services Administration (GSA) for exceptional 

real property innovation in Federal Government-wide 

property management initiatives.
Federal Aviation Administration

24 Management’s Discussion and Analysis

CHALLENGE: Addressing Long-andShort-Term Challenges

for Operating, Maintaining,and Modernizingthe National

AirspaceSystem

Hiring and training nearly 15,000 controllers 

over the next 10 years 

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

One of the FAA’s challenges over the next 10 years is 

hiring and training enough air traffic controllers to 

address the surge in retirements. The FAA has developed 

a strategy for this challenge and continues to modify and 

improve it as needed. The FAA’s new hires come largely 

from three sources: experienced military controllers, 

Air Traffic Collegiate Training Initiative (CTI) partner 

schools, and the general public. This year the FAA has 

taken action in all three areas to greatly increase the 

qualified applicant pool and reduce the time and cost 

associated with hiring and training.

The FAA currently offers a recruitment bonus of up to 

$20,000 to previous military air traffic controllers. This 

allows the FAA to attract individuals with previous 

controller experience, which reduces time and costs 

associated with training. The FAA also offers relocation 

incentives and reassignment bonuses for current 

controllers and retention incentives for retirementeligible controllers.

In 2007, the FAA revised the CTI evaluation process and 

added nine new schools. In 2008, to expand the base 

of approved CTI schools further, the FAA opened the 

FY2008INSPECTOR GENERAL’SSummary of Challenges and FAA Actions

DEPARTMENT OF TRANSPORTATION OFFICE OF INSPECTOR GENERAL APPROACH

The OIG issues its annual report on DOT’s top management challenges to provide a forward-looking assessment 

for the coming fiscal year. The report aids DOT’s agencies in focusing attention on and mapping work strategies 

for the most serious management and performance issues facing DOT.

In selecting the challenges for each year’s list, the OIG continually focuses on DOT’s key strategic goals to 

improve transportation safety, capacity, and efficiency. In addition to the OIG’s vigilant oversight of DOT 

programs, budgetary issues, and progress milestones, it also draws from several dynamic factors to identify 

key challenges. These include new departmental initiatives, cooperative goals with other Federal departments, 

recent changes in the nation’s transportation environment and industry, as well as global issues that could have 

implications for the United States’ traveling public. As such, the challenges included on the OIG’s list vary each 

year to reflect the most relevant issues and provide the most useful and effective oversight to DOT agencies. 

As required by OMB Circular A-136, the OIG’s report briefly assesses DOT’s progress in addressing the challenges 

identified. To track management challenges identified from year to year, the OIG provides an exhibit to the 

report that compares the current list of management challenges with the list published the previous fiscal year. 

In addition, the OIG may refine the scope of the management challenge from year to year based on program 

developments, external factors, or other information that becomes available. 

Management Challenges are not issues that are easily solved. In many cases they require investments or 

upgrades to technology or substantial changes in long-standing procedures or program activities. To completely 

address a Management Challenge may take more than one fiscal year. Since the OIG may refine the scope of 

a Management Challenge based on new information, it can be difficult to provide a context showing how 

far the FAA has come in resolving a particular challenge. To provide perspective on the FAA’s progress, the DOT 

assesses the achievements made toward resolving the challenge as currently defined and displays the results 

on a progress meter.
25

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

program for new schools to apply between February and 

March and approved 8 new schools, bringing the total to 

31. The expansion of this program will allow the FAA to 

attract a large pool of qualified candidates with aviationrelated college degrees.

In 2007, the FAA issued numerous public sector job 

announcements throughout the country, resulting 

in about 25,000 applications. The FAA continued 

this practice in 2008 and issued nationwide job 

announcements at a rate of about one per month, 

ensuring a continuous flow of applicants for vacant 

controller positions. 

The FAA has improved the selection process with 

centralized selection and placement (CSP) panels that 

convene regularly throughout the year in Oklahoma 

City. There, the Air Traffic Organization selecting 

officials review referred applications and make selections. 

Each CSP panel takes place in a week and instant 

coordination and communication occur with each of 

the respective stakeholders. The FAA reviews many 

applications, resulting in hundreds of selections at each 

panel. The CSP panel compresses the selection process 

from several months to one week.

CSP panel selectees are invited to a PEPC for the 

remainder of their processing. PEPCs are a streamlined 

and effective initiative that compresses the preemployment application and screening process into 

a week-long session by bringing candidates together 

in a centralized location that allows the FAA to (1) 

conduct job interviews, (2) finalize selections, (3) collect 

security information to initiate the clearance process, (4) 

conduct medical exams, drug testing, and psychological 

evaluations, and (5) process human resources paperwork. 

Traditionally, pre-employment processing took 6 months 

or more. The FAA has been able to cut time and costs in 

hiring by implementing the PEPCs. Ten PEPC sessions 

took place in FY 2008.

The FAA continues to make significant progress in the 

validation of accurate facility-level staffing standards. 

As part of the 2008 Controller Workforce Plan, the FAA 

included updated staffing ranges at the facility level for 

all 314 terminal and en route facilities. In 2007, the FAA 

completed its efforts to revise the standards for tower 

cabs and en route centers. As a result of the updated 

standards, the FAA was able to use data from all tower 

and en route facilities as input to the staffing ranges. In 

addition, the FAA has started updates to the Terminal 

Radar Approach Control staffing model and anticipates 

completion during the fall of 2008.

The FAA is increasing its use of simulators to reduce 

time and costs associated with training new controllers. 

The FAA awarded a contract for 24 Tower Simulation 

Systems (TSS) in December 2007. Installation of the TSS 

has begun in field facilities and the FAA Academy, with 

full installation to be completed in September 2009. The 

agency has also installed additional En Route Training 

Simulation Systems at six Air Route Traffic Control 

Centers (ARTCC) and the FAA Academy to increase 

training capacity. 

The Deployable Air Traffic Training System (DATTS) is 

the FAA’s newest simulation training initiative. DATTS 

is a portable commercial off-the-shelf mobile air traffic 

control training system designed for deployment of “just 

in time” or “as needed” training use. DATTS expands 

training and closes the gap of back-log trainees. The 

DATTS will be installed and tested at various field 

facilities and the FAA Academy in the coming months.

The FAA continues to use operations per controller as 

a baseline metric to measure controller productivity. 

This metric is tracked at the system level to provide a 

comprehensive view of terminal and en route operations. 

Due to decreasing levels of air traffic in recent years 

and the net increases to the controller workforce, the 

operations per controller metric for FY 2009 is projected 

to be 16% lower than in FY 2000. This recent downward 

trend clearly indicates that the FAA is proactively 

meeting the challenge of the air traffic controller 

retirement wave.

Keeping existing modernization projects 

on track 

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

The FAA has created and implemented mitigation 

strategies to comprehensively address the need to keep 

modernization projects on track. Implementation 
Federal Aviation Administration

26 Management’s Discussion and Analysis

of executive and management reviews and wideranging processes have resulted in positive, measurable, 

and dramatic changes in how the FAA manages 

modernization projects.

A major EVM effort has been initiated across the agency. 

For all newly approved IT investments that have current 

year development, maintenance, and enhancement 

funding equal to or greater than $10 million, the FAA 

applies the EVM project management tool. The FAA 

also requires that these programs track and measure 

program performance in accordance with Earned Value 

Management Systems (ANSI/EIA STD-78 EVMS) 

guidelines. By applying this project management tool, 

the FAA ensures optimum project planning and control 

by effectively integrating the project scope of work with 

cost, schedule, and performance elements. The FAA is 

more than half way to full EVM implementation.

The agency is also transforming the way it manages 

acquisitions by implementing an objective measurement 

system to evaluate program performance. In conjunction 

with EVM processes, the FAA has implemented a series 

of 21 program reporting metrics. A comprehensive red/

yellow/green assessment of program performance is 

available through a combination of financial, schedule, 

technical, resources, and external interest metrics as well 

as the program manager’s overall assessment.

The FAA continues efforts to enhance its accountability 

and improve performance reporting. Among other 

initiatives, the Capital Investment Plan now includes 

baseline history for programs selected for acquisition 

performance measurement. In addition, the agency is 

developing standard operating procedures to address 

Program Planning, Baseline Management, and Program 

Performance Reporting. These processes and procedures 

will ensure continuity, discipline, and consistency in the 

way programs are planned, managed, and reviewed at 

all levels within the FAA. In addition, the FAA routinely 

conducts operational analysis and Post-Implementation 

Reviews to ensure our programs are operating in the 

NAS as intended and reports the results to senior FAA 

management.

Reducing cost, schedule, and technical risk with 

NextGen

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

Developing and executing NextGen is the most complex, 

high-risk undertaking the FAA has ever attempted and 

will require multibillion dollar investments from the 

Federal Government and airspace users. The recently 

appointed Senior Vice President for NextGen and 

Operations Planning, in cooperation with the NextGen 

Management Board and NextGen Review Board, leads 

NextGen implementation. The NextGen Integration 

and Implementation Office supports the Senior Vice 

President for NextGen and Operations Planning. This 

new structure will better enable the FAA to successfully 

implement NextGen through careful monitoring of cost, 

schedule, and technical risks.

During FY 2008, the NextGen Integration and 

Implementation Office took steps to acquire the 

necessary expertise to make NextGen a reality. The 

former OEP office and the FAA’s chief systems engineers 

were brought together into the organization, and the 

FAA initiated recruitment actions for the NextGen 

solution set and integration managers and support staff. 

In addition, the FAA entered into an agreement with the 

National Academy of Public Administration to conduct 

a workforce needs analysis to identify the competencies 

needed for all segments of our NextGen workforce 

and to define strategies to obtain this expertise. A final 

report, Identifying the Workforce to Respond to a National 

Imperative—The Next Generation Air Transportation System, 

was delivered in September 2008. The report contains 

recommendations on acquisition workforce strategies, 

strategies to acquire and retain acquisition workforce 

competencies, and NextGen implementation challenges.

The FAA’s NextGen Implementation Plan, which details 

our efforts to transform the NAS using 21st century 

technologies, was published in June 2008. Even with 

this plan, NextGen is not without complex engineering, 

integration, and human factors issues. The FAA 

continues to develop the enterprise architecture roadmap 

to attain the operational capabilities and improvements 
27

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

envisioned with NextGen. The FAA is also developing 

the critical path and risk matrix for NextGen to help 

lessen engineering and integration issues and to identify 

best practices in system integration for complex 

enterprises.

It is widely accepted that EVM is the best project control 

technique for early detection of project performance 

variances. The FAA’s Acquisition Management System 

(AMS) requires all organizations responsible for major 

capital investment programs that involve development, 

modernization, or enhancement to develop and 

implement an EVM system.

NextGen’s transformational programs, such as ADS-B 

and System Wide Information Management (SWIM), 

have already implemented EVM. We expect Data 

Communications and NAS Voice Switch to follow once 

the FAA makes and approves final investment decisions 

and establishes program baselines. Other enabling 

activities within the NextGen portfolio are still in the 

planning stages of the FAA’s standard lifecycle work 

breakdown structure (i.e., concept development and 

feasibility studies, etc.), where EVM is less useful as a 

project control technique. The FAA has not yet decided 

whether to apply EVM to these planning efforts.

To complement the AMS, the FAA is looking at best 

practices to apply research and systems analysis and 

a technology readiness level framework. This will 

help to develop new technology and applications to 

meet approved service needs and transition mature 

technologies through research and systems analysis.

Maintaining FAA’s aging air traffic control 

facilities

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

Today over 500 terminal and en route air traffic control 

systems and facilities are located throughout the 

country. The number and locations of these systems 

and facilities are driven by available technology. In 

preparation for the transition to NextGen, the FAA will 

need to replace or modernize an estimated 400 legacy 

systems and facilities.

In FY 2008, the FAA spent more than $300 million 

for the repair, modernization, and replacement of its 

air traffic control facilities. These projects involve 

replacement of obsolete infrastructure, asbestos and 

mold abatement, repair of roof leaks, and plumbing 

improvements. Specific examples of these initiatives 

follow.

• Mold remediation projects were completed at 29 

facilities, including the Air Traffic Control Tower at 

Chicago O’Hare. An additional 18 mold remediation 

projects are planned for FY 2009. In FY 2009, the 

FAA will complete 15 status mold inspections as part 

of the ARTCC duct inspection process.

• Major asbestos abatement projects at nine ARTCCs. 

To date, the FAA has awarded one construction 

contract with the remaining projects in the 

engineering or procurement phases.

• Replacement of obsolete electrical and mechanical 

equipment as well as the installation of fire 

detection/protection systems in operations support 

and administrative areas.

• Mitigation of operational risks associated with 

mission-critical physical plant infrastructure failure 

modes at all ARTCCs.

• Alignment of unmanned facility infrastructure 

survey data with a passenger-focused facility impact 

database to establish a risk reduction methodology 

to deliver projects that maximize the protection of 

NAS capacity in the minimum time.

A key attribute of NextGen is that air traffic services 

can and will be provided without the constraints 

associated with legacy surveillance and communications 

infrastructure. Moving forward, the FAA will begin to 

provide networked services allowing for greater flexibility 

and service resilience. With these changes, opportunities 

will arise that allow us to transition to a more optimal 

allocation of services to facilities and to remove outdated 

infrastructure from the NAS.

In FY 2008, the FAA continued ongoing analysis of 

requirements for NextGen facilities. As part of the 

analysis, the FAA is evaluating several aspects related to 

future operations and facilities, including the transition 

of new operational requirements, physical security, and 

workforce impact. The analysis includes consideration 
Federal Aviation Administration

28

of existing en route and terminal facilities and how 

operational changes and technology advancements will 

change airspace assignment and facility requirements.

The analysis is being conducted as part of the Concept 

and Requirements Definition (CRD) phase of the 

Acquisition Management System process. The CRD 

product development is scheduled to be completed by 

the end of 2008. The artifacts that are created will be 

used to support an Initial Investment Analysis Readiness 

Decision, which is anticipated in February 2009. The 

products will be provided to the Chief Operating Officer 

as part of an overall package. Some of the products under 

development include Enterprise Architecture, Concept 

of Use, Preliminary Requirements Document, and 

Investment Analysis Plan.

Properly accounting for capital investment 

projects

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

Following extensive corrective actions undertaken 

during FY 2007, the FAA continued to standardize and 

improve its processes for monitoring and accounting 

for capital investment projects. These initiatives are 

described in the Capitalization Program Management 

Plan (PMP), approved in January 2008, which has been 

used to guide the Capitalization Program. The FAA has 

made significant progress against the PMP. The activities 

identified in the PMP have been substantially completed, 

with routine processing tasks and process improvements 

continuing in FY 2009. 

The FAA identified and implemented process 

improvements to existing policy, procedures, business 

processes, and systems. The process improvement 

activities addressed the auditors’ Notification of Findings 

and Recommendations as well as the lessons learned 

from the intensive clean-up activities undertaken during 

FY 2007.

During FY 2008, the FAA developed a financial 

manual that documents the capitalization policies and 

procedures and continues to conduct staff training to 

further communicate policy, process, and procedure 

changes. The FAA also implemented a quality assurance 

review checklist and process to ensure accurate financial 

treatment of capital projects and related assets. The FAA 

established a National Program Capitalization Team to 

document and communicate decisions about capital 

programs to ensure timely and accurate capitalization 

of assets. In addition, the agency added 30 positions 

throughout the organization to enhance capitalization 

efforts.

The FAA continues to develop and implement process 

improvements, including a regional quality assurance 

process and standardized FAA capitalization processes 

in headquarters and the three regional service areas. We 

have implemented standardized business processes and 

quality reviews that have resulted in the FAA processing 

approximately 67% of assets within 65 days in FY 2008. 

Version 2 of the PMP has been developed to guide the 

agency through the next phase of capitalization process 

improvements and standardization in FY 2009.

CHALLENGE: ReducingCongestion in America’s

Transportation System

Congestion limits economic growth, wastes billions 

of gallons of fuel, and costs billions of dollars in lost 

productivity each year. This will likely remain a 

prominent challenge for some time, particularly with 

regard to air travel. 

Reducing delays, improving airline customer 

service and meeting the anticipated demand 

for air travel in the near term

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

The FAA continues to work at reducing delays 

and meeting the anticipated demand for air travel. 

Implementation of NextGen is the long-term solution 

to increasing capacity of the NAS. In the meantime, 

the FAA and the DOT have implemented a number of 

initiatives to reduce delays in the near term.

• New York Aviation Rulemaking Committee. 

The New York Aviation Rulemaking Committee was 

formed in September 2007 to explore operational 

Management’s Discussion and Analysis
29

FY 2008 Performance and Accountability Report

improvements, market-based mechanisms, and other 

options for addressing airspace congestion and flight 

delays in the New York metro area. The final report 

from 2007 summarizing the committee’s discussions 

can be accessed at www.faa.gov/library/reports/

media/NY%20ARC%20Final%20Report.pdf. 

• John F. Kennedy (JFK) International Airport 

Schedule Reduction and Temporary Order. 

The FAA convened a scheduling reduction meeting 

for JFK Airport in October 2007 to address the 

problem of severe congestion and delays. The FAA 

was successful in meeting with air carriers operating 

at the airport and securing flight schedule reductions 

and the re-timing of peak period flights. As a result 

of this meeting, the FAA issued an order in January 

2008 to codify these agreements and cap operations 

at the airport at 81 scheduled operations per hour. 

The cap addresses the congestion and delay that 

peaked in summer 2007. The order became effective 

in March 2008. 

• Newark Liberty International Airport Schedule 

Reduction and Temporary Order. The FAA 

agreed with airlines serving Newark to reduce their 

schedules during peak periods and shift operations to 

off-peak periods. These and other measures adopted 

at Newark will prevent carriers from simply shifting 

the congestion from JFK to Newark. The FAA issued 

an order codifying these schedule agreements in May 

2008. The order limits scheduled operations to 81 per 

hour. The order became effective in June 2008. 

• New York Area Operational Improvements. 

Each day, about 30% of commercial air traffic 

passes through the New York airspace, where a 

substantial number of daily delays begin. The FAA 

is redesigning airspace in the region to improve 

traffic flow, affecting airports in New York, New 

Jersey, and Pennsylvania. The U.S. military worked 

with the FAA to make some of its airspace available 

for civilian airliners during the peak holiday travel 

periods in FY 2008. The use of the military airspace 

was so successful in mitigating congestion over 

the Thanksgiving and Christmas holidays in 2007 

and the July 4th weekend in 2008 that the FAA is 

working with the Department of Defense to ensure 

that military airspace will be available for civilian use 

during future holidays. 

Keeping planned infrastructure and airspace 

projects on schedule to relieve congestion and 

delays

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

New runways and runway extensions provide significant 

capacity increases. Since FY 2000, 15 new airfield projects 

have opened at the 35 busiest airports. The progress of 

each OEP runway and/or taxiway project is monitored 

by a team composed of representatives from key FAA 

organizations and outside stakeholders. The team is 

responsible for ensuring that the runway and/or taxiway 

project is commissioned on schedule, with all necessary 

equipment and airspace procedures in place, to achieve 

the full operational capability of the airfield project. 

The team provides quarterly updates to the NextGen 

Management Board, which is chaired by the FAA Deputy 

Administrator. Any issues relating to the runway project 

are discussed, assigned to an executive to resolve, and 

tracked by the integration team to ensure resolution. 

In June of this year, a new center taxiway was opened 

at Los Angeles International Airport. In September 2008, 

Chicago O’Hare commissioned a 2,856-foot runway 

extension. In November 2008, three additional runways 

will open at Chicago O’Hare, Washington Dulles, and 

Seattle-Tacoma. With these three projects, the agency 

and local communities will deliver to the NAS the 

potential to accommodate an additional 245,000 airport 

operations per year.

In addition, there are four other airfield projects at 

major airports (runways at Philadelphia and Charlotte 

and taxiways at Dallas-Ft. Worth and Boston) under 

construction. These projects will be commissioned by 

2010 and will provide the associated airports with the 

combined potential to accommodate an additional 

80,000 annual operations, which will further reduce 

delays and improve efficiency.

To meet additional near-term needs, the FAA and 

local stakeholders will continue to pursue new airfield 

infrastructure to provide significant capacity, efficiency, 

and safety improvements. Currently under way are 

Management’s Discussion and Analysis
Federal Aviation Administration

30

environmental impact studies for proposed runway 

extensions at Fort Lauderdale International Airport and 

Portland International Airport, as well as an airfield 

reconfiguration at Philadelphia International Airport. 

Houston’s Bush Intercontinental Airport is expected to 

begin the environmental process this year to examine 

alternatives to increase runway capacity. Salt Lake 

City International Airport is expected to begin an 

environmental study within the next few years to 

examine the impact of a runway extension. 

Meeting the future capacity needs of the nation’s 

airports will require innovative approaches, as well 

as continued emphasis on airport expansion and 

technological improvements. The FAA’s report, Capacity 

Needs of the National Airspace System: 2007–2025 

(www.faa.gov/airports_airtraffic/airports/

resources/publications/reports/media/fact_2.pdf) 

identifies 15 metropolitan areas that will experience 

significant population gains and economic growth 

resulting in additional capacity needs by 2025. Within 

these 15 metropolitan areas the FAA must promote 

regional planning, monitor aviation infrastructure 

investment, and identify additional airports with 

potential to accommodate future demand. The FAA and 

local communities are currently focusing on 8 of these 

metropolitan areas, which contain 14 major airports. 

These airports are expected to have the greatest capacity 

shortfalls. The FAA is working with these airports to 

develop potential solutions to address these future 

capacity shortfalls and expects to have initial results 

by the end of 2008.

The FAA continues to monitor the progress of airspace 

redesign projects as near-term commitments in the 

NextGen Implementation Plan. The FAA has made 

progress on critical projects in the past year that reduce 

airspace complexity and restrictions, departure delays, 

taxiing, flying times, and distance as well as increase 

routes.

In December 2007, the FAA implemented the first 

elements of the New York/New Jersey/Philadelphia 

Metropolitan Area Airspace Redesign. The new 

dispersal headings at Newark-Liberty and Philadelphia 

International airports, which allow controllers to use 

side-by-side separation on successive departures, have 

decreased departure delays by as much as 20%. For New 

York, the initial dispersal headings have provided up to 

20% reduction in departure delays (when headings are in 

use) at Philadelphia and Newark. 

In April 2008, five new south departure routes were 

opened as part of the Chicago Airspace Project. These 

new routes work in conjunction with the airfield 

improvements at Chicago O’Hare to significantly 

decrease delays. In Chicago, on-time departure 

improvements were observed after the new southbound 

routes were put in place in April 2008. 

In Houston, customers have identified positive changes 

due to a new departure route. However, due to severe 

weather this summer (several hurricanes and tropical 

storms), the FAA cannot quantify the impacts. In June 

2008, two additional departure routes were implemented, 

one as part of the Houston Area Air Traffic System 

Airspace project and the other as part of the New York/

New Jersey/Philadelphia Metropolitan Area Airspace 

Redesign and the New York Short-Term Initiatives. 

Throughout the year, the FAA has also completed several 

new sectors and airspace realignments, including the 

final phase of the Potomac Airspace Project. The airspace 

changes reduce complexity and congestion, supporting 

the aforementioned implementation of the new routes.

The NextGen Implementation Plan also describes new 

ways of designing and managing airspace that could 

be implemented within the next decade. The NextGen 

Management Board, NextGen Review Board, and 

NextGen Integration and Implementation Office are all 

focused on gaining shared commitment and moving to 

implementation.

Management’s Discussion and Analysis
31

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

CHALLENGE: Continuingto MakeaSafe Aviation

System Safer

Taking proactive steps to improve runway 

safety in light of recent serious incidents

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

Reducing runway incursions lessens the probability of 

accidents that potentially involve fatalities, injuries, 

and significant property damage. The definition of a 

runway incursion was changed in October 2007 to “any 

occurrence at an airport involving the incorrect presence 

of an aircraft, vehicle, or person on the protected area 

of a surface designated for the landing and takeoff of 

aircraft.” The ICAO has also adopted this definition. 

Before its development, countries around the world used 

at least 20 different definitions for a runway incursion. 

With its adoption, the worldwide aviation community 

now has a single runway incursion definition, which will 

help in the search for common factors that contribute to 

these incidents.

Surface Safety Technology Implementation

In FY 2008, the FAA continued the Runway Status 

Lights (RWSL) program, which reduces the likelihood of 

runway accidents. In June 2008, the FAA announced that 

RWSL would be installed at 22 airports.

The ASDE-X, a runway safety tool developed to help 

prevent surface collisions and reducing critical Category 

A and B runway incursions, is currently installed at 17 

airports. Additionally, the FAA is considering the use 

of low-cost, commercially available radar surveillance 

systems that would reduce the risk of runway incursions 

at certain small and medium-sized airports. The FAA 

issued a request for proposals in September 2008, inviting 

industry offers of candidate low-cost ground surveillance 

products at six additional pilot airports. Lower traffic 

levels and less complex operations at these airports allow 

ground operations to be safely conducted through visual 

and voice communication between controllers and pilots. 

A low-cost ground surveillance system (LCGS) would 

further reduce the risk of ground incidents or accidents, 

especially during periods of low visibility. The LCGS will 

provide the basic infrastructure upon which additional 

runway safety applications such as RWSL and Surface 

Movement Guidance and Control Systems can be built. 

A draft of the National Runway Safety Plan is being 

reviewed and will be published in October 2008.

Safety Promotion, Outreach, and Awareness

While pilots have traditionally acquired information 

about what runway or taxiway they are on by looking 

out their windshield, the FAA is making it easier for 

pilots to have an invaluable electronic tool in the 

cockpit—ADS–B. This technology provides a moving 

map display with “own ship position,” changing and 

improving runway safety the way GPS has changed the 

way we safely navigate our cars. Proposals to participate 

in the test program have been sent to industry for a 

program evaluation and are expected to begin during the 

next 12 months and continue for several years. 

In August 2007, the FAA and industry leaders identified 

short-term steps to improve runway safety. These “call 

to action” initiatives focused on improved procedures, 

increased training for airport and airline personnel, and 

enhanced airport markings, lighting, and signage. In the 

past year, the FAA has completed runway safety reviews 

at 20 initial call to action airports based on runway 

incursion data and wrong runway departure data. This 

has resulted in more than 100 short-term and numerous 

mid- and long-term initiatives. Most of the short-term 

initiatives identified have been completed. Additionally, 

75 of the busiest airports enhanced taxiway centerline 

markings and the remaining smaller certificated airports 

must complete these marking enhancements by 

December 2009 or 2010, depending on their size. The 

FAA issued an Advisory Circular on March 31, 2008, 

strongly recommending that certificated airports require 

annual driver training for all persons with access to the 

movement area. The FAA has initiated rulemaking to 

require this annual driver training program at certificated 

airports.
Federal Aviation Administration

32 Management’s Discussion and Analysis

The FAA also conducted a review of air traffic procedures 

that could contribute to runway incursions. The FAA 

implemented the first procedure change, explicit taxi 

clearances, in May, and the second change, which 

requires waiting until all runways are crossed along the 

taxi route before issuing the takeoff clearance, in August. 

The third change, requiring specific runway crossing 

clearances for each runway along the taxi route, may be 

implemented by December 2008.

Also, at Chicago O’Hare International Airport, the FAA 

launched a voluntary reporting system known as Air 

Traffic Safety Action Program that encourages a culture 

of non-retributive open communications about incidents 

and potential problems. The proposed Runway Safety 

Council, a joint FAA-industry group, will address root 

causes including human factors and accountability 

issues.

Ensuring consistency and accuracy in reporting 

and addressing controller operational errors

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

To address this challenge, the FAA will continue to 

focus on the development and implementation of an 

automated software prototype that will depict air 

traffic control separation conformance in the terminal 

environment nationwide. The Traffic Analysis and 

Review Program (TARP) will apply separation logic to 

targets, identify where applicable separation standards 

are not being maintained, and highlight incidents for 

further investigation.

Originally the FAA scheduled the completion of TARP 

implementation at all applicable terminal and en route 

facilities by December 2011. However, in March 2008, 

the FAA accelerated the TARP deployment schedule. 

Since the en route environment currently has the 

Operational Error Detection Program that identifies 

potential losses of separation, the FAA modified the 

TARP implementation strategy to focus first on the area 

with the greatest need—the terminal environment. The 

TARP audit tool implementation will now be complete 

at all applicable terminal facilities by December 2009. 

TARP for en route facilities will be completed by the end 

of FY 2011.

The FAA has developed an additional tool that 

complements TARP—the Continuous Data Recording 

Player Plus (CDRPP). CDRPP has TARP-like separation 

detection logic, playback functions, and near realtime data access. CDRPP will be used to review and 

automatically investigate potential losses of separation 

between aircraft initiated by traditional methods. The 

FAA has deployed CDRPP to all applicable terminal 

facilities.

The En Route and Oceanic Services Unit will remain 

focused on reducing risk in the NAS through effective 

performance management. For FY 2009, En Route and 

Oceanic facilities will develop and implement strategies 

that address the primary causal factors found in their 

operational errors to create a safety culture within the 

facility, ensure the quality of on-the-job training, and 

properly disseminate weather information.

In addition to these initiatives, En Route and Oceanic 

Services will continue daily monitoring of performance 

and will pursue procedural development to enhance the 

safety of NAS operations. En Route and Oceanic Services 

will also continue their communication and awareness 

strategies, including bi-weekly quality assurance and 

training telephone conferences, a weekly quality 

assurance newsletter, and an annual quality assurance 

and training conference.

To ensure consistency and accuracy in reporting and 

addressing controller operational errors, in FY 2008 

the FAA began providing briefings to operational field 

air traffic personnel to emphasize the joint goals of 

the agency toward safety and efficiency. The briefing 

addresses the responsibility and need for air traffic 

personnel to fully report all losses of separation for both 

operational errors and pilot deviations. It also includes 

discussion of the need to accurately capture the casual 

factors during investigation of every loss of separation. 

The FAA completed these briefings to most large 

terminal facilities and some of their associated en route 

facilities in March 2008.
33

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

The FAA is also ensuring more complete and accurate 

reporting of losses of separation through random audits 

of recorded radar data. Each month, ATO Safety selects 

approximately 15 terminal radar facilities and directs 

them to review 2 hours of radar data for dates and 

times specified by the Safety office. In addition, the FAA 

requires approximately three of these facilities to forward 

their radar data for the selected periods to ATO Safety 

for a second, independent review of separation. En Route 

and Oceanic Services facilities continue to use the audit 

process in FAA Order 7210.56.

Strengthening risk-based oversight systems for 

air carriers, external repair facilities, and aircraft 

manufacturers

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

The FAA continues to strengthen its risk-based oversight 

system and has expanded the ATOS to 107 certificate 

management teams (CMT)—the FAA teams that oversee 

the nation’s Title 14 Code of Federal Regulations (14 

CFR) part 121 air carriers.

This system-safety and risk-based process ensures 

that the FAA executes the agency’s responsibilities to 

determine the continuing operational safety of 14 CFR 

part 121 air carriers. About one-third of the inspector 

workforce is assigned to ATOS CMT. The remainder of 

the safety oversight workforce will begin using risk-based 

oversight processes in 2012, when the FAA deploys these 

systems to certificate holders such as 14 CFR part 135 air 

carriers and part 145 repair stations.

The FAA continues to train the inspector workforce in 

risk-based management and has developed new riskbased training courses to teach inspectors how to use the 

redesigned ATOS process and tools. As of April 2008, all 

inspectors currently using ATOS (approximately 1,600) 

have taken the training. No inspector is allowed to 

perform ATOS work assignments until completing the 

training. 

In September 2005, the FAA launched the enhanced 

repair station and air carrier oversight system. This 

risk-based oversight system standardizes the approach 

for surveillance of certificated repair stations and 

noncertificated facilities contracted to perform 

maintenance for air carriers. It also provides for the 

continuous assessment and prioritization of each repair 

station and noncertificated repair facility and provides 

a method of targeting areas of high risk. While the FAA 

has completed an update of 8900.1, Flight Standards 

Information Management System, we are continuing a 

review of the order for needed harmonization with the 

latest practices and surveillance of repair stations and air 

carrier outsourced maintenance providers. The revision 

to the order is expected to be released as completed and 

finalized in June 2009.

The FAA continues to effectively oversee manufacturers’ 

compliance with the regulations. In the interest of safety 

and effective resource allocation, a risk management 

model is used to identify critical impact indicators that 

serve to categorize facilities according to their potential 

for producing nonconforming products and parts.

In June 2008, the FAA revised draft guidance to 

manufacturers to include a process that evaluates and 

selects suppliers based on their capability to perform all 

manufacturing activities, inspections, and tests necessary 

to meet the specified requirements. The FAA expects this 

guidance to be incorporated in Advisory Circular 21-20 

by September 2009. 

Also in June 2008, the FAA developed new risk 

indicators to be used by FAA manufacturing inspectors. 

The indicators emphasize the manufacturers’ use of 

flight-critical parts suppliers. Risk indicators, used 

by FAA manufacturing inspectors to reduce the level 

of subjectivity in evaluating manufacturers so that 

inspectors’ risk assessments are more consistent, were 

revised in January 2008.

The FAA will publish new guidance in March 2009 

to require FAA manufacturing inspectors to review 

a manufacturer’s prior audits of suppliers as part of 

the inspectors’ analysis of risk and determination of 

resource targeting. Also, the FAA will complete revised 

manufacturing inspector training course content in 

September 2009.
Federal Aviation Administration

34 Management’s Discussion and Analysis

Maintaining a sufficient number of inspectors

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

In March 2008, the AVS provided to Congress a 10-year 

Aviation Safety Workforce Plan. This plan ensures that the 

FAA has an adequate safety staff to address oversight 

needs as well as inspector attrition and anticipated 

changes in the aviation industry. The plan also addresses 

competencies and skills required of the AVS workforce 

to stay abreast of new technologies and to meet growing 

industry demands for service. At the end of FY 2008, 

AVS added 225 positions, 121 of which are Aviation 

Safety Inspectors (ASI), putting the agency above the 

planned end-of-year staffing level by 40 positions.

While approximately 35% of the FAA’s safety inspectors 

and 14% its engineer workforce are eligible to retire, the 

agency’s attrition rates for the past 3 years have averaged 

only 6% to 8%. This is because many of our staff are in 

their second career and are relatively new to the FAA. We 

anticipate attrition rates to remain at this rate for the 

next few years.

The FAA has also established recruitment plans to 

fill our most critical positions. The agency’s Office of 

Human Resources Management continues to cultivate 

relationships and partnerships with the industry, 

professional organizations, and the educational 

communities to ensure positive publicity for the FAA in 

order to enhance recruiting opportunities. The agency 

has implemented newly revised qualification standards 

for the ASI occupation. Business and interpersonal 

competencies have been added to the Automated Staffing 

and Application Process for ASI. This addition will help 

to determine whether applicants possess the necessary 

competencies and personal qualities to successfully 

perform the ASI duties and to support the organization’s 

safety mission.

The FAA concurred with the recommendations of the 

National Research Council of the National Academies’ 

Aviation Safety Inspector Staffing Standards Study, 

to create a new staffing model to include the entire 

safety critical workforce. As of the fourth quarter of 

FY 2008, the new staffing model is in the identification 

phase. Based on current activities, including scheduled 

requirements gathering, AVS will implement the Aircraft 

Certification (AIR) inspector workforce component 

by November 2008 and the Flight Standards inspector 

workforce component by October 2009. 

The information collected within the AIR and ASI 

components will serve as an initial baseline with the 

flexibility to update requirements as needed. At the 

direction of the senior leadership team, the FAA will add 

other workforce components to the staffing model in late 

FY 2009. At this time we cannot provide a specific date 

for a comprehensive model since all the requirements 

have been not yet defined and established for other AVS 

technical workforce occupations.

Strengthening oversight of the Airman Medical 

Certification program

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

The Airman Medical Certification Program is a critical 

safety program through which the FAA ensures that 

pilots are medically qualified and fit to pilot aircraft in 

the NAS. Each year the FAA processes approximately 

460,000 airman medical certificate applications. After 

completing FAA training, physicians in private practice 

serve as Aviation Medical Examiners (AMEs). The FAA 

currently has approximately 4,500 AMEs designated to 

examine and evaluate airmen to determine whether they 

meet Title 14 CFR Part 67 airman medical standards. To 

conduct the examinations, AMEs must have detailed 

knowledge and understanding of FAA rules, regulations, 

policies, and procedures related to pilot medical standards 

and the certification process.

With advancements in medicine, including improved 

diagnoses and treatments, and the aging pilot 

population, the medical cases the FAA must review 

have become considerably more complex. As a result, 

the medical certification of pilots requires more analysis 

and time. The President’s FY 2008 budget provided 

for 12 additional positions to address the growing 

medical certification workload and to ensure timely 
35

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

certification of pilots. With these new resources, the FAA 

has hired additional personnel, including physicians, 

program analysts, and program assistants in the 

Regional Aerospace Medicine Divisions and at the Civil 

Aeromedical Institute in Oklahoma City. 

The FAA took several steps this year to improve 

its oversight of aviation medical examiners. The 

agency hired a senior program analyst to coordinate 

development of policies, procedures, and training and one 

additional analyst in each Regional Aerospace Medicine 

Division. It also developed new AME oversight policies, 

procedures, training, and a schedule for conducting at 

least 150 site visits per year.

To address concerns raised in a recent congressional 

hearing about the FAA’s handling of falsified pilot 

medical certificates, the Office of Aerospace Medicine 

revised FAA Form 8500-8, Application for Airmen 

Medical Certificate, to obtain more information 

from applicants. Applicants will be asked whether 

they are receiving disability benefits from the Federal 

Government or any other source. If an applicant 

responds affirmatively to this question, examiners will 

follow up with the applicant to ascertain the nature of 

the disability and determine whether the medical issues 

related to the disability may disqualify them from being 

a pilot. The FAA began distribution of the revised forms 

in September 2008.

In April 2008, the FAA completed a modification of AME 

training to emphasize the importance of thoroughness in 

medical examinations, obtaining good patient histories, 

and correlating the findings from examinations and 

histories. The FAA will address the issue of falsification 

at future AME seminars and other AME trainings.

CHALLENGE: StrengtheningtheProtection of Information

Technology Resources, IncludingtheCritical AirTraffic

ControlSystem

Enhancing air traffic control system security and 

continuity planning 

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

The NAS is one of the most complex aviation systems 

in the world—consisting of thousands of people, 

procedures, facilities, and equipment—that enable safe 

and expeditious air travel in the U.S. and over large 

portions of the world’s oceans. Successful operation of 

the NAS relies on a system that continuously tracks the 

position, routes of flight, and movement of aircraft. ATC 

control activities are geographically distributed among 

ARTCCs, which are responsible for many thousands of 

square miles of airspace. The ARTCCs control aircraft 

from the time they depart terminal airspace (or in certain 

cases airports) to the time they arrive at another airport 

or terminal’s airspace. Centers may also “pick up” aircraft 

that are already airborne and integrate them into the 

system. The need for protection of this information 

processing system cannot be overstated.

 The FAA has experience dealing with partial and full 

outages of the information system at ARTCC. Today, in 

the event of a loss of a single ARTCC, adjacent centers 

can assume some of the workload of the failed ARTCC 

through procedures and existing automation system 

capability. To further enhance this “backup” capability, 

the FAA is working to implement a system security and 

business continuity solution to ensure recovery of as 

close to 100% of a lost ARTCC’s ability, should an outage 

of a single ARTCC occur. The approach is to establish a 

“spare” ARTCC at the FAA’s William J. Hughes Technical 

Center to assume control functions in the event of an 

outage in any one of the centers. While this approach 

may slightly reduce the overall performance of the overall 

NAS, this will enable the FAA to maintain operations 

and capacity during the outage.
Federal Aviation Administration

36 Management’s Discussion and Analysis

The Hughes Technical Center serves as the national 

scientific test facility for the FAA. It was assigned 

the task of conducting a detailed impact analysis to 

determine how technical services would be affected 

by the loss of an ARTCC and the resultant activation 

of a spare ARTCC. It has been outfitted with most of 

the equipment and connectivity necessary to deliver 

air traffic services for any of the contiguous U.S. Air 

Traffic Control Centers. The Hughes Technical Center 

was at the forefront of the development of the recovery 

strategy. Tests and demonstrations were conducted 

throughout 2007 and 2008. At the completion of 

each test and demonstration, resource concerns were 

identified and addressed and a business continuity 

solution developed.

 In addition to the development of the above business 

continuity strategy, several activities have taken place 

to identify and test for unauthorized software changes 

in fielded systems to assess the integrity of the existing 

NAS portfolio of systems and equipment. The FAA 

conducted a review of major systems, beginning with 

en route and oceanic/offshore operational facilities. 

The purpose was to determine the prevalence of 

undocumented system modifications to the national 

system baselines. Site visits have been conducted at 

24 operational facilities collecting data on 16 major en 

route and oceanic/offshore systems. Analysis determined 

that there was a less than 10% deviation from the 

documented baselines. None of the modifications were of 

a malicious nature. 

CHALLENGE: Managing Acquisition andContract

Operations MoreEffectivelyto Obtain Quality Goodsand

Servicesat ReasonablePrices

Increasing incurred-cost audits of procurement 

contracts to reduce unallowable charges 

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

The Office of the Senior Procurement Executive (OSPE) 

issued Acquisition Policy Letter (APL) 2008-06 in April 

2008 to establish a departmental plan for ensuring 

incurred-cost audits are obtained and audit report 

recommendations are resolved in a timely manner. 

The policy letter requires Operating Administration 

Chief Contracting Officers to take action to revise their 

current FY 2008 contract audit plan to identify planned 

contract audits not implemented during FY 2007 or FY 

2008 and included in FY 2009 audit plans, and to resolve 

any pending audit finding with questioned costs by 

November 20, 2008. They are also required to update 

and resolve the list of Defense Contract Audit Agency 

(DCAA)-reported unresolved questioned costs that are 

more than 6 months old as of October 2006 and report 

any costs recovered to the OSPE. Additionally, quarterly 

status reports are to be submitted to address audit hours 

used, resolved and unresolved questioned costs, and 

whether justifications have been placed in the contract 

files when audits were not requested. 

The OSPE continues to work with DCAA, the Operating 

Administrations, and the Office of Inspector General to 

find better methods for obtaining contract audit services.

The FAA was given separate contract authority in 

1996 and therefore the authority to implement its own 

procurement policies. The agency, however, pursues 

acquisition policies similar to the OST on many issues, 

including this one. The FAA continues to emphasize 

incurred cost audits through a centralized audit program. 

For FY 2008, the agency provided $1.6 million to fund 

a central interagency agreement with the DCAA to 

order incurred cost type and other required audits for 

procurement contracts. An interagency agreement was 

executed in February 2008.

The FAA has also established an FY 2008 performance 

goal to require audits of cost-reimbursable contracts of 

$100 million or more. The Contracting Oversight Team, 

using the Procurement Acquisition Management System 

(PRISM) database, identified 86 cost-reimbursable type 

contracts, each with a total estimated potential value 

of $100 million or more. For FY 2008, the FAA issued 

audit requests for 43 contracts, deferred audits for 15 

contracts per DCAA planning, and determined audits 

were not required for 28 contracts, accounting for 86 

contracts. Overall, the FAA has issued audit requests for 

155 contracts including incurred and other type audits. 

The Contracting Oversight Team, under the Acquisition 

Policy and Contracting Office, manages the central 

DCAA audit process and issues audit requests, maintains 

the audit database, and acts as a liaison with DCAA 

Headquarters and Branch offices.
37

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

The FAA also utilizes the National Acquisition 

Evaluation Program (NAEP), which provides oversight 

and evaluation of FAA acquisitions management 

practices. In FY 2008, the NAEP conducted reviews 

for the Southern, Southwest, Northwest, and Eastern 

Regional Contracts Offices, and two Headquarters 

Contracts Groups. The NAEP reviews include an 

evaluation of the appropriate use of DCAA audits for 

procurement contracts.

Fostering high ethical standards throughout the 

DOT and its contracting programs to maintain 

the public trust

Moderate

Progress

Slight Progress

Significant Progress

NO Progress Complete

PROGRESS METER

The FAA uses an integrated and comprehensive approach 

to develop and deliver procurement ethics training. 

Training modules for 2008 included Getting What you 

Pay for on Services Contracts; Organizational Conflicts 

of Interest; Procurement Integrity; and Personal Services. 

The modules highlight current laws, regulations, and 

case studies of noncompliance.

Live training sessions, which reinforce ethics and 

contracting standards that promote the integrity 

of acquisition and grants management processes 

throughout DOT, have been conducted at FAA 

Headquarters and FAA Centers. DVDs of the 

presentations with voiceover discussion will be produced 

for those unable to attend sessions in person. In total, 

approximately 2,100 acquisition and program personnel 

including contracting officers, contracting officer 

technical representatives, program and project managers, 

procurement and other acquisition specialists who 

participate in cooperative agreement and grant matters, 

legal support personnel, and personnel who supervise 

acquisition matters received training.

Management Integrity: Controls, 

Compliance, and Challenges

Every year, the FAA program managers in the lines of 

business and staff offices assess the vulnerability of their 

program and activity management controls. On the basis 

of these assessments, reviews are conducted to determine 

their compliance with sections 2 and 4 of FMFIA. The 

head of the line of business or staff office then identifies 

in writing to the Administrator any potential material 

internal control weakness or system nonconformance. 

Those deemed material are consolidated in a 

memorandum with a Statement of Assurance signed 

by the Administrator and sent to the Secretary of DOT. 

Our response becomes part of the DOT Statement of 

Assurance sent to the President. To help resolve material 

weaknesses or nonconformances, we have developed 

a corrective action plan with specific milestones and 

deadlines. The plan and the status of each action are 

reviewed monthly, with results reported to DOT’s Office 

of the Secretary.

In an October 24, 2007, memorandum, the Acting 

Administrator reported to the Secretary an unqualified 

statement of assurance. Last year, we had a qualified 

statement of assurance due to the limited scope of 

processes tested and a material weakness in the timely 

processing of transactions and accounting for Property, 

Plant, and Equipment. However, this year we continued 

to implement the “To Be” capitalization business process 

in FY 2008. With the implementation of improved 

business processes, standardization of activities, and the 

completion of the clean up of prior year capitalization 

activities, the material weakness identified in FY 2007 

was downgraded to a significant deficiency in FY 2008. 

We will continue to implement process improvements 

and further standardize processes in FY 2009. 
Federal Aviation Administration

38 Management’s Discussion and Analysis

Management Assurances

Federal Managers’ Financial Integrity Act (FMFIA) Assurance Statement—

Fiscal Year 2008

The Federal Aviation Administration is responsible for establishing and maintaining effective internal control and 

financial management systems that meet the objectives of the FMFIA and OMB Circular A-123, Management’s 

Responsibility for Internal Control. These objectives are to ensure:

• Effective and efficient operations,

• Compliance with applicable laws and regulations, and

• Reliable financial reporting. 

Internally, we assess the vulnerability of our programs and systems through FMFIA of 1982. We are pleased to 

report that, taken as a whole, the management controls and financial management systems in effect from October 

1, 2007, through September 30, 2008, provide reasonable assurance that the objectives of both sections 2 and 4 of 

FMFIA are being met. Management controls are in place and our financial systems conform to Government-wide 

standards.

In addition, FAA conducted its assessment of the effectiveness of internal control over financial reporting, which 

includes internal control related to the preparation of its annual financial statements as well as safeguarding of 

assets and compliance with applicable laws and regulations governing the use of budgetary authority and other 

laws and regulations that could have a direct and material effect on the financial statements, in accordance 

with the requirements of Appendix A of OMB Circular A-123. The results of this evaluation provide reasonable 

assurance that FAA’s internal control over financial reporting was operating effectively as of September 30, 

2008. Due to unlimited scope of processes tested this year and no material weaknesses reported on our financial 

statements, FAA is issuing an unqualified statement of assurance. 

Robert A. Sturgell

Acting Administrator

November 4, 2008
39

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

Grants Management Policies and 

Practices

Decisions on distributing AIP funds are centralized at the 

FAA Headquarters, with significant input from regional 

offices. While most of the day-to-day decisions for AIP 

project formulation are delegated to regional offices, the 

FAA Headquarters develops the policy to ensure that 

grants are implemented appropriately and that grantees 

are treated consistently. Policies for administering 

the program are included in an AIP handbook that is 

regularly updated through Policy Guidance Letters issued 

to regional offices and available to grant recipients. The 

FAA also ensures the consistent implementation of AIP 

by participating in airport industry trade conferences and 

training, posting statutory and policy changes on our 

public website, and requiring employees to attend annual 

training that focuses on improving business processes 

and updating personnel on policy changes.

We meet regularly with eligible airport sponsors to 

identify planning and development needs. Through this 

process, we develop the Airport Capital Improvement 

Plan, a 3- to 5-year plan that identifies the planning 

and development needs for airports nationwide, and 

prioritize eligible projects. Only projects identified 

in this plan are awarded grants. After a project has 

been identified, the airport sponsor can apply to 

the FAA regional or district office for a grant. We 

continue to support the development of an electronic 

grant application process. Typically, large grants 

are coordinated with other Federal, state, and local 

government agencies, such as the Environmental 

Protection Agency, the Department of Defense, and state 

aviation agencies.

AIP administration, including the requirements for 

sponsor and project eligibility, is based on multiyear 

authorizing legislation. The current authority expired 

under its own term on September 30, 2007. However, 

Congress has passed a series of short-term extensions 

until such time as they consider a longer multiyear 

program.

FInancial HIghlights

Discussion and Analysis of the Financial 

Statements

The FAA prepares annual financial statements in 

conformity with accounting principles generally accepted 

in the United States. The financial statements are subject 

to an independent audit to ensure that they are free from 

material misstatement and that they can be used to 

assess FAA performance.

FY 2008 Financial Statement Audit

The Chief Financial Officers Act of 1990 (Public Law 

101–576), as amended by the Government Management 

Reform Act of 1994, requires that financial statements 

be prepared by certain agencies and commercial-like 

activities of the Federal Government and that the 

statements be audited in accordance with Government 

auditing standards. The FAA is required to prepare its 

own financial statements under OMB Bulletin No. 06–

03, Audit Requirements for Federal Financial Statements. 

DOT’s OIG is statutorily responsible for the manner 

in which the audit of the FAA’s financial statements is 

conducted. The OIG selected KPMG LLP, an independent 

certified public accounting firm, to audit the FAA’s FY 

2008 financial statements. This firm also audited the 

FAA’s FY 2002–FY 2007 financial statements.

In 2002, DOT’s OIG and CFO, along with the FAA’s 

CFO, established an Audit Coordination Committee to 

promote and encourage open communication among the 

OIG, FAA management, and the independent auditors to 

resolve issues that arise during the audit and to monitor 

the implementation of audit recommendations. The 

committee is chaired by the Director of the Office of 

Financial Management and includes representatives 

from the OIG, DOT’s Office of Financial Management, 

the FAA’s Assistant Administrator for Regions and 

Center Operations, and ATO’s Chief Operating Officer. 

In 2006, committee participation was expanded to 

include representatives from the Chief Counsel’s Office, 

the Assistant Administrator for Human Resources 

Management, Information Services, and Airports. 

KPMG LLP has rendered an unqualified opinion on the 

FAA’s FY 2008 financial statements.
Federal Aviation Administration

40 Management’s Discussion and Analysis

Understanding the Financial Statements

The FAA’s Consolidated Balance Sheets, Statements of 

Net Cost, Changes in Net Position and Financing, and 

Combined Statements of Budgetary Resources, have 

been prepared to report the financial position and results 

of operations of the FAA, pursuant to the requirements 

of the Chief Financial Officers Act of 1990 and the 

Government Management Reform Act of 1994. The 

following section provides a brief description of (a) the 

nature of each financial statement and its relevance 

to the FAA, (b) significant fluctuations from FY 2007 

to FY 2008, and (c) certain significant balances, where 

necessary, to help clarify their link to FAA operations.

Balance Sheet

The balance sheet presents the amounts available for 

use by the FAA (assets) against the amounts owed 

(liabilities) and amounts that comprise the difference 

(net position). 

Assets 

Total assets were $27.4 billion as of September 30, 

2008. The FAA’s assets are the resources available to pay 

liabilities or satisfy future service needs. The Composition 

of Assets chart depicts major categories of assets as a 

percentage of total assets. 

The Assets Comparison chart presents comparisons of 

major asset balances as of September 30, 2007 and 2008. 

Fund Balance with Treasury (FBWT) represents 14% of 

the FAA’s current period assets and consists of funding 

available through Department of Treasury accounts from 

which the FAA is authorized to make expenditures to 

pay liabilities. It also includes passenger ticket and other 

excise taxes deposited to the Airport and Airway Trust 

Fund (AATF), but not yet invested. Fund balance with 

Treasury remained constant at $3.9 billion. 

At $8.8 billion Investments represent 32% of the FAA’s 

current period assets, and are principally derived from 

passenger ticket and other excise taxes deposited to 

the AATF. These amounts are used to finance the 

COMPOSITION OF ASSETS

as of September 30, 2008

Investments

32%

Other

3%

Property, Plant, & Equipment

51%

Fund Balance with Treasury

14%

ASSETS COMPARISON

Dollars in Thousands

Investments

Other

Property, Plant,

& Equipment 

Fund Balance

with Treasury

$0 $4,000,000 $8,000,000 $12,000,000 $16,000,000

2008

2007
41

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

FAA’s operations to the extent authorized by Congress. 

Investments decreased slightly by $58.0 million. 

At $13.8 billion, Property, plant, and equipment, net (PP&E) 

represents 51% of the FAA’s assets as of September 

30, 2008, and is primarily composed of constructionin-progress related to the development of NAS assets, 

and capitalized real and personal property. There was 

a decrease of $126.6 million in the total composition 

of PP&E as purchases of equipment and additions to 

construction-in-progress through the normal course of 

business were offset by retirements and depreciation.

Liabilities 

As of September 30, 2008, the FAA reported liabilities of 

$4.0 billion. Liabilities are probable and measurable future 

outflows of resources arising from past transactions or 

events. The Composition of Liabilities chart depicts the 

FAA’s major categories of liabilities as a percentage of 

total liabilities. 

The Liabilities Comparison chart presents comparisons of 

major liability balances between September 30, 2007 and 

September 30, 2008. Below is a discussion of the major 

categories. 

At $1.4 billion, Employee related and other liabilities

represent 36% of the FAA’s total liabilities. These 

liabilities increased by $173.2 million and as of September 

30, 2008, are comprised mainly of $114.5 million in 

Advances Received, $205.2 million in Federal employee’s 

compensation act payable, $294.9 million in Accrued 

Payroll and Benefits, $472.9 million in Accrued Leave and 

Benefits, $109.4 million in legal claims liability and 

$61.7 million in Capital Lease Liability. 

At $915.2 million, Federal employee and veterans benefits 

represent 23% of the FAA’s current year liabilities, 

and consist of the FAA’s expected liability for death, 

disability, and medical costs for approved workers’ 

compensation cases, plus a component for incurred but 

not reported claims. The Department of Labor (DOL) 

calculates the liability for DOT, and DOT attributes 

a proportionate amount to the FAA based on actual 

workers’ compensation payments to FAA employees 

over the preceding 4 years. This liability is updated an on 

annual basis at year end. 

COMPOSITION OF LIABILITIES

as of September 30, 2008

Employee-Related and Other Liabilities

36% 

Environmental Liabilities

16%

Grants Payable

16%

Accounts Payable

9%

Federal Employee and Veterans Benets

23%

LIABILITIES COMPARISON

Dollars in Thousands

$0 $500,000 $1,000,000 $1,500,000

Federal Employee and

Veterans Benets

Grants Payable

Environmental Liabilities

Employee-related and

Other Liabilities

Accounts Payable

2008

2007
Federal Aviation Administration

42 Management’s Discussion and Analysis

Environmental liabilities represent 16% of the FAA’s total 

liabilities and were $637.8 million as of September 

30, 2008, compared with $566.9 million a year earlier. 

Environmental liabilities include a component for 

remediation of known contaminated sites and the 

estimated environmental cost to decommission assets 

presently in service. The increase of $70.9 million is due 

primarily to the inclusion of the projected periodic costs 

of overhauling the equipment at the William H. Hughes 

Technical Center’s combined water treatment plant. 

The FAA’s grants payable are estimated amounts incurred 

but not yet claimed by AIP grant recipients and represent 

16% of liabilities. Grants payable decreased $11.7 million 

on a comparative basis. Accounts payable decreased $60.0 

million and are amounts the FAA owes to other entities 

for unpaid goods and services. 

Statement of Net Cost

The Statement of Net Cost presents the cost of 

operating FAA programs. The gross expense less any 

earned revenue for each FAA program represents the net 

cost of specific program operations. The FAA has used its 

cost accounting system to prepare the annual Statement 

of Net Cost since FY 1999. 

As of September 30, 2008, and September 30, 2007, the 

FAA’s net costs were $15.5 billion and $14.8 billion, 

respectively. The Composition of Net Cost chart illustrates 

the distribution of costs among the FAA’s lines of 

business.

The Net Cost Comparison chart compares September 30, 

2007, and September 30, 2008 net costs. 

With a net cost of $10.4 billion, the ATO is the FAA’s 

largest line of business, comprising 67% of total net 

costs. ATO’s net costs increased by $744.7 million, 

on a comparative basis, primarily from increases in 

costs related to expensed assets of $527.8 million, legal 

claims of $89.0 million and environmental clean-up and 

remediation of $77.3 million. 

Airports is the FAA’s second largest line of business with a 

net cost of $3.8 billion as of September 30, 2008, which is 

24% of FAA’s total net costs. Net costs decreased $170.0 

million from the prior year and are composed mostly of 

Aviation Insurance Program grant disbursements.

COMPOSITION OF NET COST

as of September 30, 2008

Air Trac Organization

67% 

Regions and Center Operations, & All Other

1%

Aviation Safety

8%

Airports

24%

NET COST COMPARISON

Dollars in Thousands

2008

2007

$0 $3,000,000 $6,000,000 $9,000,000 $12,000,000

Airports

Aviation Safety

Air Trac Organization

Regions and Center Operations, 

& All Other
43

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

The net cost of Aviation Safety represents 8% of FAA’s 

total net costs, while Region and Center Operations and All 

Other comprise 1% of total net costs. The net costs of 

Region and Center Operations and Aviation Safety remained 

relatively constant compared to FY 2007. 

Statement of Changes in Net Position

The Statement of Changes in Net Position presents those 

accounting items that caused the net position section of 

the balance sheet to change from the beginning to the 

end of the reporting period. Various financing sources 

increase net position. These financing sources include 

appropriations received and non-exchange revenue, 

such as excise taxes and imputed financing from costs 

absorbed on the FAA’s behalf by other Federal agencies. 

The agency’s net cost of operations and net transfers to 

other Federal agencies serve to reduce net position. 

The FAA’s cumulative results of operations for the period 

ending September 30, 2008, decreased $299.0 million, on 

a comparative basis, due primarily to a combination of 

increases in net cost of $717.7 million offset by increases 

in beginning balances of $29.3 million and financing 

sources of $389.4 million. Unexpended appropriations 

decreased $179.0 million primarily due to appropriations 

used of $2.5 billion from all eligible funds exceeding the 

current year’s appropriation of $2.3 billion. 

Statement of Budgetary Resources

This statement provides information on the budgetary 

resources available to the FAA as of September 30, 

2008, and September 30, 2007, and the status of those 

budgetary resources. 

Budget authority is the authority provided to the FAA by 

law to enter into obligations that will result in outlays 

of Federal funds. Obligations incurred result from an order 

placed, contract awarded, service received, or similar 

transaction that will require payments during the 

same or a future period. Gross outlays reflect the actual 

cash disbursed by Treasury for FAA obligations. The 

FAA reported total budget authority of $19.5 billion 

on September 30, 2008, compared to $19.7 billion on 

September 30, 2007. Obligations incurred increased $1.4 

billion to $22.3 billion. Gross outlays increased from 

$20.8 billion to $22.0 billion.

Stewardship Investments

Stewardship investments are substantial investments 

made by the FAA for the benefit of the nation, but do 

not result in physical ownership of assets by the FAA. 

When incurred, these amounts are treated as expenses in 

the Consolidated Statements of Net Cost. Our Required 

Supplementary Stewardship Information (RSSI) includes 

disclosure of stewardship investments over the past 5 

years. These are disclosures of Airport Improvement 

Program grants by state/territory and research and 

development investments.

The distribution of total grants expense by state/

territory has been relatively stable over the past 4 years. 

However, expenses began to increase in FY 2005 largely 

as a result of a significant increase in grant funding levels 

in FY 2001. Because these AIP projects are typically 

long-term, and the FAA recognizes the grants expense 

as the recipient accomplishes the improvement work, 

the substantial expansion of this program in FY 2001 is 

resulting in increased expenses in more recent years.

The FAA’s research and development expenses decreased 

in FY 2008 primarily in the category of applied research. 

Some areas of focus this year included applying changes 

to wake separations during landings, predicting aircraft 

STATEMENT OF BUDGETARY RESOURCES COMPARISONS

Dollars in Thousands

$0 $5,000,000 $10,000,000 $15,000,000 $20,000,000

Obligations Incurred

Gross Outlays

Budget Authority

2008

2007
Federal Aviation Administration

44 Management’s Discussion and Analysis

environmental performance scenarios to help monitor 

and improve aviation’s impact on the environment, and 

testing composite fuselage materials for more effective 

inflight fire prevention.

Limitations of the Financial Statements

The FAA has prepared its financial statements to report 

its financial position and results of operations, pursuant 

to the requirements of the Chief Financial Officers Act of 

1990 and the Government Management Reform Act of 

1994.

While the FAA statements have been prepared from 

its books and records in accordance with the formats 

prescribed by 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.

These statements should be read with the understanding 

that they are for a component of the U.S. Government, 

a sovereign entity. Liabilities not covered by budgetary 

resources cannot be liquidated without the enactment 

of an appropriation by Congress, and payment of all 

liabilities, other than for contracts, can be abrogated by 

the Federal Government.

Budgetary Integrity: FAA Resources and 

How They Are Used

For FY 2008, the Airport and Airway Trust Fund (AATF) 

provided approximately 84.3% of the FAA’s enacted 

budget. Created by the Airport and Airway Revenue 

Act of 1970, the AATF derives its monies from excise 

taxes and earned interest. It provides a stable source of 

revenue to finance investments in the airport and airway 

system. To the extent funds are available, the fund also 

covers the operating costs of the airway system. Aviation 

excise taxes, which include taxes on domestic passenger 

tickets, freight waybills, general and commercial 

aviation fuel, and international departures and arrivals, 

are deposited into the fund. The Department of the 

Treasury maintains the fund and invests its monies in 

Government securities, and interest earned is deposited 

into the fund. Monies are withdrawn as needed and 

transferred into each FAA appropriation to cover 

obligations.

The FAA is financed through annual and multiyear 

appropriations authorized by Congress. The FY 2008 

enacted budget of $14.915 billion was 2.6% higher than 

the FY 2007 enacted level. The Combined Statement 

of Budgetary Resources reflects funding enacted by the 

Consolidated Appropriations Act of 2008 (PL 110-161).

The FAA has four appropriations. The largest, 

Operations, is funded by both the Treasury’s General 

Fund and the AATF. In FY 2008, the AATF provided over 

73% of the revenue for Operations. The AATF is the sole 

revenue source for the FAA’s three capital investment 

appropriations:

• Grants-in-Aid for Airports (AIP)

• Facilities and Equipment (F&E)

• Research, Engineering, and Development (R,E,&D)

Operations. The Operations appropriation finances 

operating costs, maintenance, communications, and 

logistical support for the air traffic control and air 

navigation systems. It funds the salaries and costs 

associated with carrying out the FAA’s safety inspection 

and regulatory responsibilities as well. The account 

also covers administrative and managerial costs for 

the FAA’s international, medical, engineering, and 

development programs and for policy oversight and 

overall management functions. The FY 2008 Operations 

FAA ENACTED BUDGET—FY 2008

Dollars in Thousands

Facilities & Equipment (F&E)

$2,513,611

Grants-in-Aid for Airports (AIP)

$3,514,500

Operations

$8,740,000

Research, Engineering, & 

Development (R,E,&D)

$146,828
45

FY 2008 Performance and Accountability Report

Management’s Discussion and Analysis

appropriation was $8.74 billion, approximately 4.4% 

more than in FY 2007, an increase primarily attributable 

to payroll and inflation costs.

AIP. The Secretary of Transportation is authorized to 

award grants for planning and development to maintain 

a safe and efficient nationwide system of public airports. 

These grants fund approximately one-third of all capital 

development at the nation’s public airports. Grants 

are issued to maintain and enhance airport safety, 

preserve existing infrastructure, and expand capacity 

and efficiency throughout the system. The program also 

supports noise compatibility and planning, the military 

airport program, reliever airports, and airport program 

administration. FY 2008 funding for AIP was just over 

$3.5 billion—the same as the FY 2007 level. Similarly, 

funding for the Small Community Air Service program 

was unchanged from the FY 2007 level of $10 million.

F&E. The programs funded by the F&E appropriation 

are the FAA’s principal means of modernizing and 

improving air traffic control and airway facilities, 

particularly through programs supporting NextGen. 

The account also finances major capital investments 

required by other agency programs as well as other 

improvements to enhance the safety and capacity of 

the national airspace system. F&E was funded at $2.5 

billion in FY 2008, approximately the same level as in 

FY 2007. Major systems contributing to the NextGen 

effort included ADS–B, SWIM, En Route Automation 

Modernization, the Wide-Area Augmentation System, 

ASDE–X, NextGen Network Enabled Weather, the Next 

Generation VHF Air/Ground Communications System, 

and National Airspace System Voice Switch.

R,E,&D. The FY 2008 appropriation for R,E,&D was 

nearly $147 million—12.7% more than in FY 2007. 

R,E,&D funds were applied to research programs to 

improve the safety and effectiveness of the air traffic 

control system. In FY 2008, programs focused on the 

environment and energy, weather initiatives, JPDO 

activities, human factors, and aircraft safety. The 

increase over FY 2007 was largely due to expansion 

of programs in Advanced Materials/Structural 

Safety, Aviation Safety Risk Analysis/System Safety 

Management, and Wake Turbulence.
In 1958, U.S domestic passenger and cargo planes used 1.3 billion gallons of fuel.

In 2008, the domestic passenger and cargo fleet is expected to use 13.7 billion gallons. 

Credit: Corbis
47

FY 2008 Performance and Accountability Report

This remains one of the safest periods in aviation history 

for both commercial and general aviation. Over the past 

5 years, nearly 3.6 billion airline passengers reached their 

destination safely. As the stewards of aviation safety in 

the United States, the FAA and its industry partners 

have built a system that operates some 34,000 scheduled 

commercial flights daily and has reduced the risks of 

flying to all-time lows.

Performance Results

Safety

GOAL: Achievethelowestpossibleaccident rateandconstantlyimprovesafety.

FY 2008Safety Performance Measures and Results

Performance Measure

FY 2008 

Target

FY 2008 

Results

FY 2008 

Status

FY 2009 

Target1

Commercial Air Carrier Fatality Rate

Cut therateof fatalitiesper100 million personson boardin halfbyFY2025. 8.7 0.42 8.4

General Aviation Fatal Accidents

ByFY2009, reducethe numberofgeneralaviation and nonscheduledPart135fatalaccidents

from the1996–1998averageof385peryear to no morethan 319accidentsperyear. This

measure willbeconvertedfrom a number toaratein FY2009. Thetargets forFY2009–2012are

underdevelopment.

325 2992 319

Alaska Accidents3

ByFY2009, reduceaccidents in Alaskaforgeneralaviation andallPart135operations from

the2000–2002averageof130accidentsperyear to no morethan 99accidentsperyear. This

measure willbeconvertedfrom a number toarateafterFY2009. Thetargets forFY2010–2012

areunderdevelopment.

104 1082 99

Runway Incursions 

ByFY2010, limitCategory A and B (most serious) runwayincursions toarateof no morethan

0.450per million operations,and maintain or improvethrough FY2012.

0.509 0.4284 0.472

Commercial Space Launch Accidents 

Nofatalities, serious injuries,or significantpropertydamagetotheuninvolvedpublicduring

licensedorpermittedspacelaunch andreentryactivities.

0 0 0

Operational Errors

LimitCategory A and B (most serious)operationalerrors toarateof no morethan 1.95per

million activitiesbyFY2012.

2.15 2.314 2.10

Safety Management System

ByFY2010, implementSMSin the AirTraffic Organization, Officeof Aviation Safety,and Officeof

Airports. ByFY2012, implementSMSpolicyin allappropriateFAA organizations.

6 6 7

1 FY2009targetsarefrom theFY2008–2012Flight Plan. 2

Preliminaryestimateuntil March 2010. 3 This measureincludesboth fataland non-fatalaccidents. 4

Preliminaryestimateuntil January2009.

For information on datasourcesandestimatingand finalization of results, seeCompletenessand ReliabilityofPerformance Data.

Goal Achieved

 Goal Not Achieved

Performance Results
Federal Aviation Administration

48

Commercial Air Carrier Fatality Rate

Commercial Air Carrier FatalITY RATE: 

FY 2008 Target and Result

Target In FY2008, thecommercialair carrier fatalityrate will not

exceed8.7fatalitiesper100 million peopleon board.

Result

0.4(preliminary estimate)

We metour target with aresultof0.4fatalitiesper

100 million personson board.

Note: This measure is new for FY 2008—no trend 

data are available.

In FY 2008, the FAA introduced a new safety 

performance metric and goal for commercial air carriers. 

The metric measures fatalities per 100 million persons on 

board. The new metric is more relevant than the previous 

one because it measures the individual risk to the flying 

public rather than for each departure. Now all fatalities, 

including passengers, crewmembers, ramp workers, and 

ground fatalities, are counted equally. The goal is a 50% 

reduction in fatalities by 2025. To meet this goal, the 

FAA will continue to work in partnership with industry. 

The FAA has met the target for the commercial air carrier 

fatalities per 100 million persons onboard. We achieved a 

rate of 0.4 fatalities per 100 million persons.

The U.S. aviation system has beaten that mark several 

times in recent years, making this the safest era, by far, 

in history. Yet the adopted goal remains a challenge. At 

4.4, the target essentially means that a major accident 

in a small aircraft (typically 30 to 32 passenger seats) 

will assure failure in the out years. Unlike highway 

safety, where the scale of the numbers provides some 

statistical stability, aviation numbers involve years with 

few fatalities, interspersed with spikes in the wake of 

a singular catastrophic accident. Consequently, the 

FAA established interim goals, such as the goal of 8.7 

for FY 2008, as recognition of the volatility in aviation 

measures, as we work our way to a sustained, low 

fatality rate. 

To read about FAA actions to strengthen risk-based 

oversight systems for air carriers, external repair facilities, 

and aircraft manufacturers, see MANAGEMENT 

CHALLENGE: Continuing to Make a Safe Aviation 

System Safer on page 31.

General Aviation Fatal Accidents 

General Aviation Fatal Accidents: 

FY 2008 Target and Result

Target Reducethe numberofgeneralaviation and nonscheduled

Part135fatalaccidents to325.

Result

299(preliminary estimate)

theFAA met thisgoal, reducingthe numberof

generalaviation fatalaccidents to299.

The FAA has met the target this year for reducing 

general aviation (GA) fatal accidents. Since the FAA 

began using GA fatal accidents as a performance target 

7 years ago, the target has been exceeded just once. In 

FY 2008, GA fatal accidents once again decreased from 

the previous year. The FAA and industry’s collaborative 

safety initiatives continue to drive the GA fatal accident 

rate lower. We have consistently met our GA safety 

goals and successfully remained under our ceiling of 

325 fatal accidents for FY 2008. The end of April 2008 

marked a 3-year period that was the safest ever recorded 

in the history of GA. During these 3 years, the FAA 

continued its emphasis on enhancing GA safety and 

directed energies to creating an improved measure. The 

new safety metric tracks the GA fatal accident rate 

rather than the number of fatal accidents. The FAA has 

baselines for the new GA safety metric and goal, which 

will be implemented in FY 2009. The previous measure 

was not rate-based and did not reflect fleet activity levels 

and their relationship to the number of fatal accidents. 

The new performance measure is a true rate-based metric 

and tracks changes in the fatal accident rate for a fixed Number 

NUMBER OF GENERAL AVIATION FATAL ACCIDENTS

200

250

300

350

400

450

500

340 354 3011

331 325

3132 2993 366

374 349 343 337

2007 2008

319

N/A

2003 2004 2005 2006 2009

1 Revised from preliminary estimate of 299. 2 Preliminary estimate until March 2009. Revised from original estimate of 314. 3Preliminary estimate until March 2010.

Fiscal Year

Actual 

Target

Performance Results
49

FY 2008 Performance and Accountability Report

number of flight hours (per 100,000 flight hours). Our 

goal is to reduce GA fatal accidents over the next 10 years 

to no more one accident per 100,000 flight hours.

Alaska Accidents 

Alaska Accidents: 

FY 2008 Target and Result

Target Reduceaccidents in Alaskaforgeneralaviation andallPart

135operations to no morethan 104peryear.

Result

108(preliminary estimate)

Wedid not meetourgoal for reducing Alaska

accidents, resultingin 108accidents in FY2008.

We did not meet our performance target of 104 Alaska 

Accidents. In 2008, there were 108 accidents, 4 over our 

target. Of these, 10 were fatal accidents (3 were Part 

135). Sixty-nine of the accidents were attributed to 

takeoff or landing. In response, during FY 2008, the FAA 

continued its efforts and added new emphasis to several 

other initiatives.

The Medallion (Aviation Safety Action Program)

In FY 2008, the FAA continued to work jointly with 

the Alaska aviation community through a number of 

organizations and safety programs such as the Medallion 

Foundation, Alaska Air Carriers Association, Alaska 

Airman’s Association, the FAA Safety Team, and Circle 

of Safety. This joint industry-FAA cooperative effort 

supports the Flight Plan strategy for sharing safety 

information.

In July, the Medallion Foundation launched the first in 

the world PA-18 simulator. This simulator, developed 

under a NASA grant, was built to reduce aviation 

accidents for the most common aircraft in Alaska. The 

Medallion Foundation is working with the FAA to obtain 

approval for many of the scenarios that will be available 

on the device. Eventually the scenarios will include all 

phases of flight, but initially will target landing and take 

off accidents with emphasis on airports. The scenarios 

will focus on improving flight instruction and pilot 

skills. The motion base for this simulator provides pitch, 

roll, and heave. Visuals are provided by three 46-inch 

flat screens to give 180 degrees of view, allowing the 

pilot to fly traffic patterns. Pilots who use these devices 

can simulate deteriorating weather and other scenarios 

that allow them to practice their decision-making skills. 

Working jointly with the FAA Certified Flight Instructor/

Designated Pilot Examiner (CFI/DPE) initiative, this 

program will help the aviation community raise the bar 

for safety in Alaska.

Improving Flight Instruction Initiative

The FAA is assisting CFIs to form groups in Anchorage 

and the Matanuska-Susitna Valley where more than half 

of the pilots reside. The groups convey national guidance 

as represented in the Flight Instructor Refresher Clinic, 

present Alaskan instructional accident experience, and 

promote dialog between CFIs and DPEs that identifies 

best training practices.

E-mails and post cards were sent in March 2008 to 

every pilot with a current medical certificate in Alaska. 

The communication emphasized the Alaska accident 

data and encouraged flight instruction. This message 

continues to be delivered via tri-fold pamphlets at local 

events.

The FAA and Medallion executed a “See your CFI before 

you fly” media blitz that began broadcasting on radio 

and television in April and May. This effort targets 

the historical rise of accidents each year in spring after 

months of not flying. It encourages pilots to work with 

their CFIs in a Medallion Foundation training device at 

no cost and/or in an aircraft.

Capstone

In addition to these training and education efforts, 

the FAA is using new technology in Alaska, such as 

the satellite-based Capstone navigation and terrain 

awareness avionics. The goal is for 4,000 aircraft owners 

Number 

NUMBER OF ALASKA ACCIDENTS

Fatal and Nonfatal Accidents

50

100

150

98 128 1011

110

922

125 120 115

2007

104

1083

2008

99

N/A

2004 2005 2006 2009

1 Revised from preliminary estimate of 102.

2Preliminary estimate until March 2009.

3Preliminary estimate until March 2010.

Fiscal Year

Actual 

Target

Performance Results
Federal Aviation Administration

50

to use these loans to self-equip their aircraft with 

Capstone equipment, both private and commercial. 

We are also installing 221 additional weather cameras 

throughout the state. These cameras provide a real-time 

depiction of weather events throughout the state. The 

Alaskan pilot now has go/no go information that was 

previously unavailable.

Alaska’s skyways are equivalent to the highway and 

road infrastructure found throughout the continental 

United States, making the use of general aviation aircraft 

essential to everyday life. This includes, but is not 

limited to, enabling children to attend school, traveling 

to medical appointments, and supplying communities 

with groceries, fuel, and mail. Therefore, the FAA 

understands and works to modernize flight service in 

Alaska. 

Runway Incursions 

Runway Incursions: 

FY 2008 Target and Result

Target LimitCategory A and B (most serious) runwayincursions toa

rateof no morethan 0.509per million operations.

Result

0.428(preliminary estimate)

We metourgoal, limitingrunwayincursions toa

rateof0.428per million operations.

The FAA continued efforts to meet its FY 2010 

performance target of limiting Category A and B runway 

incursions to a rate of no more than 0.450 per million 

operations, and to maintain or improve through 2012. 

This fiscal year we achieved a rate of 0.428 (preliminary 

estimate).

A runway incursion is any occurrence at an airfield 

involving the incorrect presence of an aircraft, vehicle, or 

person on the protected area of a surface designated for 

the landing and takeoff of aircraft. Reducing the number 

of runway incursions lessens the probability of accidents 

that potentially involve fatalities, injuries, and significant 

property damage. 

In August 2007, the FAA and industry leaders identified 

short-term steps to improve runway safety. These “call 

to action” initiatives focused on improved procedures, 

increased training for airport and airline personnel, and 

enhanced airport markings, lighting, and signage. 

In FY 2008, the FAA pursued a number of these 

initiatives to reduce runway incursions. The FAA has 

completed runway safety reviews at 20 initial “call to 

action” airports based on runway incursion data and 

wrong runway departure data. This has resulted in more 

than 100 short-term and numerous mid- and long-term 

initiatives. Most of the short-term initiatives identified 

have been completed and the longer-term initiatives are 

well underway.

To read more about FAA actions to improve runway 

safety, see MANAGEMENT CHALLENGE: Continuing 

to Make a Safe Aviation System Safer on page 31.

CommercialSpace Launch Accidents 

Commercial Space Launch Accidents: 

FY 2008 Target and Result

Target

Nofatalities, serious injuries,or significantpropertydamage

totheuninvolvedpublicduringlicensedorpermittedspace

launch andreentryactivities.

Result 0

Weachievedthisgoal.

The U.S. commercial space launch industry has 

conducted 209 launches since 1989. In FY 2008, a total of 

16 launches occurred. Of these, 11 were licensed launches 

and 5 were experimental permits for suborbital reusable 

launch vehicles. None of these launches resulted in a 

public casualty or injury. 

These achievements demonstrate a robust commitment 

to safety by the U.S. space launch industry and the 

FAA. The licensing process is a major reason for the 

Performance Results

Rate

RUNWAY INCURSION RATE

Per Million Operations

Highest Severity—Category A & B 

0.35

0.40

0.45

0.50

0.55

0.60

0.510

N/A

0.444

N/A

2003 2004

0.460

2005

0.507

0.557 0.551

2006

0.393

0.530

2007

0.4281

0.509

2008

N/A

0.472

2009

Fiscal Year

1 Preliminary estimate until January 2009.

Actual 

Target
51

FY 2008 Performance and Accountability Report

FAA’s excellent commercial space transportation safety 

record. The agency currently has 18 active licenses: 12 for 

expendable launch vehicles, 5 for launch site operators, 

and 1 experimental permit. FY 2008 was the second year 

that the FAA issued experimental permits authorizing 

the launch of suborbital reusable launch vehicles. 

Safety inspections also contribute significantly to our 

ability to verify that licensees and permittees remain 

in regulatory compliance and continue to operate 

safely. We perform safety inspections of operators that 

include activities at launch and reentry sites, and at 

manufacturing facilities where activities occur that 

could affect the safety of a launch or reentry operation. 

Further, we partner with other Government agencies 

such as NASA and the Departments of State and Defense 

to ensure that licensed operations operate in accordance 

with U.S. national security and foreign policy interests.

OperationalErrors 

Operational Errors: 

FY 2008 Target and Result

Target LimitCategory A and B (most serious)operationalerrors toa

rateof no morethan 2.15per million activities.

Result

2.31(preliminary estimate)

Wedid not meet thisgoal, reachingan operational

errors rateof2.31per million activities.

Note: This measure was redefined in FY 2008—

no trend data are available.

One of the fundamental principles of aviation safety 

is separation—the need to maintain a safe distance 

from other aircraft, terrain, obstructions, and restricted 

airspace. Air traffic controllers employ rules and 

procedures that define separation standards for this 

environment. An operational error (OE) occurs when 

controllers fail to apply or follow the procedures that 

enforce separation and allow aircraft to end up too close 

to each other or to an obstruction. As traffic continues to 

increase, reducing the risk of operational errors remains 

one of the FAA’s top priorities.

In FY 2008, the FAA revised the way it measures 

operational errors. The new separation conformance 

measure of proximity provides a consistent comparison 

of events. However, the conformity measure needs 

further refinement for enhanced utility. Several types 

of events currently fall outside the conformity index, 

such as errors involving military flights of two (e.g., a 

lead aircraft with another flying at its wing) and errors 

involving dependent ILS approaches. In FY 2009, we 

will add greater definition to operational error categories 

that we will track. These categories will give us a better 

understanding of which events are involved in the 

occurrence of operational errors. Also in FY 2009, the 

FAA will continue to develop an index to describe the 

central tendency and variance of losses of separation. 

The index will allow the FAA to measure performance 

over a period of time, similar to a stock index. This new 

measure will provide indicators that reflect both the risk 

of collision and the degree to which separation standards 

were maintained. 

The FAA continues to focus on the development and 

implementation of an automated software prototype 

that will depict Air Traffic Control separation 

conformance in the terminal environment nationwide. 

The TARP will achieve the following:

• apply separation logic to targets,

• identify where applicable separation standards 

are not being maintained, and

• highlight incidents needing further investigation.

To read more about FAA actions to address controller 

operational errors, see MANAGEMENT CHALLENGE: 

Continuing to Make a Safe Aviation System Safer on 

page 31.

Safety Management System 

Safety Management System : 

FY 2008 Target and Result

Target Applysafetyrisk management toat least sixsignificant

changes in the NAS. 

Result

6

We metourgoalbydevelopingsixsignificant

changes in the NAS.

Safety Risk Management (SRM) is a systematic, 

explicit, and comprehensive approach for managing 

safety risk at all levels and throughout the entire scope 

of an operation and lifecycle of a system. It requires the 

disciplined assessment and management of safety risk. 

The SRM process ensures that safety-related changes are 

documented; risk is assessed and analyzed; unacceptable 

risk is mitigated; hazards are identified and tracked 

Performance Results
Federal Aviation Administration

52 Performance Results

Capacity

AVERAGE DAILY AIRPORT CAPACITY

Arrivals and Departures at the 35 OEP Airports

92,000

96,000

100,000

104,000

108,000

Fiscal Year

98,488 100,041 101,463 101,932

N/A N/A 99,892 101,191

2003 2004 2005 2006

102,5451

101,562

2007

103,2182

101,868

2008

N/A

103,328

2009

Actual 

Target

1

 Revised from original preliminary estimate of 102,539. 2

 Preliminary estimate until January 2009.

Capacity

GOAL:Work with localgovernmentsandairspaceusers toprovideincreasedcapacityin the U.S.airspacesystem

The air transportation system currently handles 

approximately 760 million passengers each year. We 

expect this number to reach one billion by 2016, and 

forecasts indicate increases in demand ranging from a 

factor of two to three by 2025.

In FY 2008, the demands on our NAS were never greater 

and the challenge to increase capacity intensified. The 

overall growth in numbers of aircraft, the diversity in the 

performance and type of aircraft operating (e.g., regional 

jets), and the increasing growth of low-cost carriers 

further exacerbated an already tenuous NAS. Along with 

these factors, adverse weather conditions were a major 

contributing factor to the increase in airport delays this 

year.

Average Daily Airport Capacity 

(35 OEP Airports)

Average Daily Airport Capacity (35 OEP Airports): 

FY 2008 Target and Result

Target Achievean averagedailyairport capacityfor the35 OEP

airportsof101,868arrivalsanddeparturesperday.

Result

103,218(preliminary estimate)

Weachievedan averagedailyairport capacityof

103,218for the35 OEPairports.

OEP airports are commercial U.S. airports with 

significant activity. These airports serve major 

metropolitan areas and also serve as hubs for airline 

operations. More than 70% of passengers move through 

these airports. Delays at the 35 OEP airports have a 

ripple effect to other locations. For example, when delay 

trends at Miami International Airport (MIA) for the 

years 2000–2005 were analyzed, it was found that delay 

increases were not correlated with increases in traffic at 

MIA or at Miami Center, nor were they related to Florida 

weather. Rather, they were highly correlated with delays 

at the other OEP 35 airports. Therefore, improvements at 

the most congested airports will have a positive impact 

on other airports as well.

In FY 2008, we met our target, achieving an average daily 

airport capacity of 103,218 for the 35 OEP airports. Our 

top accomplishments for FY 2008 included the following:

to resolution; the effectiveness of the risk mitigation 

strategies is assessed; and the performance of the change 

is monitored throughout its lifecycle. Applying SRM 

prior to implementing changes to the NAS will ensure 

that unacceptable risk is not introduced. It will also 

improve the documentation of the processes used to 

ensure the safety of the NAS. 

In FY 2008, we developed six important Safety Risk 

Management Documents focusing on unmanned 

Aerial Systems (UASs) in class “D” airspace, detailed 

taxi instructions, takeoff clearance, runway-to-runway 

crossing, explicit crossing, and end around taxiway. 

These actions help reduce the risk of runway incursions.
53

FY 2008 Performance and Accountability Report

Performance Results

FY 2008 Capacity Performance Measures and Results

Performance Measure

FY 2008 

Target

FY 2008 

Results

FY 2008 

Status

FY 2009 

Target1

Average Daily Airport Capacity (35 OEPairports)

Achievean averagedailyairport capacityfor the35 OEPairportsof104,338arrivals

anddeparturesperdaybyFY2011and maintain through FY2012.

101,868 103,2182 103,328

Average Daily Airport Capacity (7 metropolitan areas)

Achievean averagedailyairport capacityfor theseven major metropolitan areasof

39,484arrivalsanddeparturesperdaybyFY2009and maintain through FY2012.

33,676 35,9882 39,484

Annual Service Volume 

Commission nine new runway/taxiwayprojects, increasingtheannual service

volumeof the35 OEPairportsbyat least1%annually, measuredasa5-year moving

average, through FY2012.

1.00% 

(1taxiway

project)

1.06%

(1taxiway

project)

1.00%

(3runway

projects)

Adjusted Operational Availability (35 OEPairports)

Sustain adjustedoperationalavailabilityof99.7percent for thereportablefacilities

that support the35 OEPairports through FY2012.

99.70% 99.82%2 99.70%

NAS On-Time Arrivals

Achievea NASon-timearrival rateof88.76percentat the35 OEPairportsbyFY2011

and maintain through FY2012.

88.00% 87.29%2 88.22%

Noise Exposure

Reducethe numberofpeopleexposedtosignificant noiseby4%each year through

FY2012,as measuredbya3-year movingaverage, from the3-yearaveragefor

calendaryears2000–2002.

−12.00% −38.00%3 −16.00%

Aviation Fuel Efficiency 

Improveaviation fuelefficiencybyanother1%over theFY2007level (foratotalof

6%) through FY2008,and1%each subsequentyear through FY2012to10%,as

measuredbya3-year movingaverageof thefuelburnedper revenue mile flown,

from the3-yearaveragefor calendaryears2000–2002.

−6.00% −10.17% −7.00%

1

FY2009targetsarefrom theFY2008–2012Flight Plan. 2Preliminaryestimateuntil January2009. 3Projection from trendsuntil May2009.

For information on datasourcesandestimatingand finalization of results, seeCompletenessand ReliabilityofPerformance Data.

Goal Achieved

 Goal Not Achieved

• Release of Special Use Airspace. The U.S. 

military worked with the FAA to make some of 

its airspace available for civilian airliners over the 

Thanksgiving and Christmas holidays in 2007 and 

the Memorial Day and Fourth of July weekends this 

summer. The military opened up airspace off the 

East Coast, which helped relieve the most congested 

regions—from Maine to Florida. The use of the 

military airspace was so successful that the FAA is 

working with the Department of Defense (DOD) to 

ensure military airspace will be available for civilian 

use during future holidays. 

• Traffic Flow Management and Route 

Initiatives. Two successful 2007 initiatives, 

Airspace Flow Program (AFP) and Adaptive 

Compression Tool, were continued in 2008 to reduce 

delays, particularly during the summer months, 

when aviation is most affected by weather. AFPs 

manage traffic adjustments to changing weather 

patterns and act like ground delay programs for 

a piece of airspace. We expanded the use of AFPs 

and estimate that airlines saved about $68 million 

last summer. In addition, the continued use of the 

Adaptive Compression Tool had a positive effect 

on delays. The tool identifies unused arrival slots at 
Federal Aviation Administration

54

airports and immediately moves other flights into 

those slots. The use of the Adaptive Compression 

Tool saved airlines $27 million and more than one 

million delay minutes in its first year of operation. 

In addition, the FAA redesigned the Western Atlantic 

Route system to introduce 50 nautical mile separation 

(down from 90) between properly equipped aircraft. This 

redesign allowed pilots flying in the western Atlantic a 

greater choice of routes and available altitudes. 

To read more about FAA actions to relieve congestion 

and delays, see MANAGEMENT CHALLENGE: 

Reducing Congestion in America’s Transportation 

System on page 28.

Average Daily Airport Capacity 

(7 Metropolitan Areas)

Average Daily Airport Capacity

(7 Metropolitan Areas): 

FY 2008 Target and Result

Target Achievean averagedailyairport capacityfor theseven major

metropolitan areasof33,676arrivalsanddeparturesperday.

Result

35,988(preliminary estimate)

Weachievedan averagedailyairport capacityof

35,988for the7 metropolitan areas.

Note: This measure was redefined in FY 2008—

no trend data are available.

Growth in air travel has generally been accomplished 

by increasing the number of flights. Measuring the 

growth of airport capacity indicates the limit at which 

increased service can be accommodated without creating 

delay. Every year after thorough data analysis, the FAA 

identifies the metropolitan areas that will most affect 

total system aviation delays. Airport improvements, 

measured by increases in capacity at these airports, are 

likely to contribute the most to reduce the causes of 

system delay. In FY 2008, we focused on New York, 

Philadelphia, Charlotte, Las Vegas, Los Angeles, San 

Francisco, and Chicago metropolitan areas. 

To read more about FAA actions to relieve congestion 

and delays, see MANAGEMENT CHALLENGE: 

Reducing Congestion in America’s Transportation 

System on page 28.

AnnualService Volume

Annual Service Volume: 

FY 2008 Target and Result

Target Completeonetaxiwayprojectandincreasethe ASV of the35

OEPairportsbyat least1%.

Result

1.06%andonetaxiwayproject

We metourFY2008target, completingone

taxiwayproject with a1.06%increasein ASV.

The ASV measure is intended to estimate and track 

the increase in airport capacity at the 35 OEP airports. 

This measure is calculated as a 5-year moving average 

and estimates the benefit, in terms of additional aircraft 

operations, from runway construction projects. Runway 

construction projects include new runways, runway 

extensions, and airfield reconfigurations. Aircraft 

operations include air carrier, commuter, air taxi, general 

aviation, and military aircraft.

In June 2008, a new center taxiway was opened at Los 

Angeles International Airport and in September, Chicago 

O’Hare commissioned a 2,856-foot runway extension. 

Three additional runways will open at Chicago O’Hare, 

Washington Dulles, and Seattle-Tacoma in November 

2008. With these three projects, the agency and local 

communities will deliver to the NAS the potential to 

accommodate an additional 245,000 airport operations 

per year. 

To read more about FAA actions to relieve congestion 

and delays see, MANAGEMENT CHALLENGE: 

Reducing Congestion in America’s Transportation 

System on page 28.

Performance Results

0

.5

1.0

1.5

2.0

1.07% 1.01% 1.67%

1.00%

0.67% 1.57%

N/A 1.00% 1.00% 1.00%

2007

1.00%

1.06%

2008

1.00%

N/A

2003 2004 2005 2006 2009

Fiscal Year

Actual 

Target

Percentage 

ANNUAL SERVICE VOLUME

Percentage Increase per Year
55

FY 2008 Performance and Accountability Report

Adjusted Operational Availability

Adjusted Operational Availability: 

FY 2008 Target and Result

Target Sustain adjustedoperationalavailabilityat99.70%for the

reportablefacilities that support the35 OEPairports.

Result

99.82%(preliminary estimate)

We metourgoal,achievinga99.82%for

sustainingoperationalavailability.

The equipment necessary to provide service directly 

affects the NAS performance. Loss of radar or 

communications equipment will affect the speed and 

number of aircraft that can be handled where that loss 

occurs. The ability of the NAS to continually provide 

guidance is crucial and affects both safety and capacity. 

We exceeded our FY 2008 goal for sustaining adjusted 

operational availability at 99.70%, achieving a target 

result of 99.82% (preliminary estimate). Most of the 

unscheduled downtime for the fiscal year was due to 

equipment and power outages. 

NAS On-Time Arrivals

NAS On-Time Arrivals: 

FY 2008 Target and Result

Target Achievea NAS On-Time Arrival rateof88.00%at the

35 OEPairports.

Result

87.29%(preliminary estimate)

Wedid not meet thisgoal,achievinga

NAS On-Time Arrival rateof87.29%.

Reducing delays is one of the biggest challenges facing 

the FAA. Commercial airline passenger delays in the 

United States amount to approximately $10 billion 

in costs each year. Increased traffic and congestion 

concentrated at several major airports, particularly in the 

New York metropolitan area, exacerbate the problem. 

Although a reduction in traffic of about 10% is expected 

during fall 2008 as airlines cut schedules due to high 

fuel prices, the large hub airports will probably not 

see significant delay reduction, because their schedules 

are not likely to be reduced. In addition to increases 

in air traffic, adverse weather conditions are a major 

contributing factor in airport delays. Approximately 70% 

of flight delays are caused by weather. 

We did not achieve our FY 2008 NAS On-Time Arrivals 

performance target. Adverse weather conditions played 

a significant part in airport delays. In the first 6 months 

of FY 2008, the percentage of operations conducted in 

severe weather increased almost 25% compared to the 

same time period in FY 2007. Over 20% of operations 

at Boston, Newark, Philadelphia, and Chicago were 

conducted during moderate to severe weather conditions. 

Traffic management initiatives, such as ground delay 

programs and airspace flow programs, were used to 

Performance Results

88.0

88.5

90.0

87.0

87.5

86.5

86.0

88.44% 88.36%

87.67%

86.96%1

87.40% 87.40%

2007

88.00%

87.29%2

2008

88.22%

N/A

2005 2006 2009

Fiscal Year

Actual 

Target

Percentage

NAS ON-TIME ARRIVALS

Percentage of Flights No More Than 15 Minutes Late

1

 Revised from original preliminary estimate of 86.32%. 2

 Preliminary estimate until January 2009.

99.2

99.0

98.8

99.4

99.6

99.8

100.0

99.72% 99.76% 99.79%1

99.70%

99.83%2 99.74%

N/A 99.00% 99.00% 99.50%

2007

99.70%

99.82%3

2008

99.70%

N/A

2003 2004 2005 2006 2009

Fiscal Year

Actual 

Target

Percentage 

ADJUSTED OPERATIONAL AVAILABILITY

Percentage of Service Hours for Facilities

Supporting the 35 OEP Airports

1

 Revised from preliminary estimate of 99.78%.

2

 Revised from preliminary estimate of 99.82%. 3

 Preliminary estimate until January 2009.
Federal Aviation Administration

56 Performance Results

combat the effects of thunderstorms and maximize 

system efficiency as much as possible. 

To help increase on-time arrival rates in the future, 

the FAA will continue to evaluate new tools and 

technologies to improve arrival times. These include 

greater collaboration with stakeholders (commercial 

airlines, business aviation, general aviation, military, 

OMB, and Congress), evaluation of separation standards, 

implementation of improved weather information tools, 

and airspace redesign where beneficial. Airspace redesign 

is one of the key components in optimizing U.S. airspace 

and allowing for increased capacity. Efficient airspace 

operations will require redesigning routes and changing 

the size and shape of airspace. This increased flexibility 

will help address volume, congestion, and weather in en 

route airspace.

The FAA anticipates that meeting the target of 88.22% in 

FY 2009 will be a challenge. We will continue to work at 

reducing delays and meeting the anticipated demand for 

air travel. Implementation of NextGen is the long-term 

solution to increasing capacity of the NAS. 

To read more about FAA actions to relieve congestion 

and delays, see MANAGEMENT CHALLENGE: 

Reducing Congestion in America’s Transportation 

System on page 28. 

Noise Exposure

Noise Exposure: 

FY 2008 Target and Result

Target

Reducethe numberofpeopleexposedtosignificant noise,

as measuredbya3-year movingaverage, to12%below the

3-yearaveragefor calendaryears2000–2002.

Result

–38.00%(projection from trends)

WeexceededourFY2008performancetargetby

achievinga38.00%reduction.

The significant reduction in noise exposure since the 

base year average has been driven by air carrier fleet and 

operational changes that took place in the aftermath 

of September 11, 2001. It was expected that a return to 

more typical fleet compositions and a return to air traffic 

growth would narrow the “positive gap.” However, 

the return of fleet composition and air traffic to pre9/11 levels has not occurred at the pace expected. Fuel 

prices are driving carriers to retire older, less efficient 

aircraft that produce more noise. Consequently, the 

actual number of residents exposed to significant noise 

remains well below the current target. To correct this 

variance, we increased the FY 2007 noise exposure target 

from a 1% to a 4% annual reduction and continued to 

calculate using a 3-year moving average from the base 

year from the 2000–2002 average. Although the number 

of residents exposed to significant noise is currently 

well below the target, a flattening of the exposure trend 

coupled with a more aggressive target has begun to 

narrow the margin.

The FAA continues to pursue a program of aircraft noise 

control, in cooperation with the aviation community 

and local governments, through aircraft source noise 

reduction, soundproofing, buyouts of homes and other 

noise-sensitive buildings near airports, operational flight 

control measures, and land use planning strategies. While 

the FAA is authorized to provide funds for airport noise 

compatibility projects, each project must be locally 

sponsored and approved by the FAA. Percent Reduction (Cumulative)

NUMBER OF PEOPLE EXPOSED TO SIGNIFICANT NOISE

Cumulative Percentage Reduction From Baseline

–25

–30

–35

–40

–20

–15

–10

–5

0

2005 2006

Fiscal Year

2003 2004

–36.00%1 –16.00%1 –32.00%1 –35.00%1

–1.00% –2.00% –3.00% –4.00%

2007

–37.00%2

–8.00%

2008

–38.00%3

–12.00%

2009

N/A

–16.00%

1

 Revised from original result due to improvement in noise exposure model. 2

 Revised from projection of –27.00%.

3

 Projection to be nalized in May 2009.

Actual 

Target
57

FY 2008 Performance and Accountability Report

Aviation FuelEfficiency

Aviation Fuel Efficiency: 

FY 2008 Target and Result

Target

Improveaviation fuelefficiencyper revenueplane-mile

by6%,as measuredbya3-year movingaverage, from the

3-yearaveragefor calendaryears2000–2002.

Result

–10.17%

WeexceededourFY2008performancetargetby

achievinga10.17%reduction.

There is increasing concern over the potential impact 

of aircraft greenhouse gas emissions on global climate. 

The primary greenhouse gas from aircraft operations is 

carbon dioxide, which is directly related to the amount 

of fuel consumed.

The level of FY 2008 performance (10.17%) reflects 

continued improvement in fuel efficiency. This result 

takes into account 2007 operations relative to 2006 

operations and is based on an increase in fuel burned 

(about 3.5%) with a greater increase in distance traveled 

(about 4.5%). This improvement in efficiency ensures 

the public that the aviation sector is continuing to do 

its part in reducing the environmental impact of aircraft 

operations while improving the system to accommodate 

the public’s growing demand for air travel.

Measuring and tracking fuel efficiency from aircraft 

operations allows the FAA to monitor improvements in 

aircraft/engine technology, operational procedures, and 

enhancements in the airspace transportation system. 

We measure performance against this target using an 

FAA-developed computer model that estimates aircraft 

fuel burn and emissions for variable year emissions 

inventories and for operational, policy, and technologyrelated scenarios. 

Performance Results

AVIATION FUEL BURNED PER MILE

Cumulative Percentage Reduction From Baseline

Percent Reduction (Cumulative)

–6.00

–7.00

–8.00

–9.00

–10.00

–11.00

–5.00

–4.00

–3.00

–2.00

–1.00

0

Fiscal Year

–3.46%1

–1.00%

2004

–5.84%

–2.00%

2005

–8.23%

–5.00%

2006

–9.52%1

–5.00%

2007

–10.17%

–6.00%2

2008

N/A

–7.00%

2009

Actual 

Target

1

 Revised from original result of –10.82%.

2

 Target revised from –5.00% in FY 2008.

International Leadership

GOAL: Increasethesafetyandcapacityof theglobal civilaerospacesystem in an environmentallysound manner.

International leadership is the way the FAA advances 

safety and efficiency around the world, to wherever 

Americans might travel. The FAA is uniquely positioned 

for this undertaking in the global aviation community 

through expanded technical assistance to other civil 

aviation authorities and continued emphasis on bilateral 

agreements to help harmonize aviation safety and 

environmental quality around the world. Today, the 

agency has operational responsibility for about half 

of the world’s air traffic, has certified more than twothirds of the world’s large jet aircraft, and has provided 

assistance to more than 130 countries to improve their 

aviation systems.

While safety is the FAA’s top priority domestically and 

internationally, one cannot overlook the potential that 

global aviation has with respect to trade and commerce. 

Aviation systems within and among nations are lifelines 

to the future, freer trade, accelerated economic growth, 

and greater cultural exchange. Seamless global aviation is 

critical to an increasingly global economy that hinges on 

efficient supply chains and just-in-time manufacturing.
Federal Aviation Administration

58 Performance Results

Aviation Safety Leadership

Aviation Safety Leadership: 

FY 2008 Target and Result

Target

AssistChinain implementingat least fiveof the mutually

agreedupon safetyenhancements (SE) toChina’saviation

system.

Result

5 CASTSEs

Target met.TheChinesegovernment implemented

fiveCASTrecommendedSEs.

For FY 2008, the FAA and China agreed on a target of 

implementing at least five CAST safety enhancements 

within China. The Chinese government implemented 

five. 

CAST was formed in 1997 as a joint government 

and industry organization dedicated to reducing the 

commercial air carrier fatal accident rate in the United 

States. It focused on the causes of major accidents 

and developed a series of safety enhancements that 

eliminated their precursors. These safety enhancements 

have contributed significantly to the improvement of the 

U.S. commercial aviation system and have had the same 

desired results when implemented around the world.

The FAA works with various countries in an advisory 

capacity to improve safety systems and processes around 

the world. Our efforts in China are one example of how 

we have a global impact. 

Bilateral Aviation Safety Agreement 

(BASAs)

Bilateral Aviation Safety Agreements (BASAs): 

FY 2008 Target and Result

Target

Concludeat least two(new orexpanded)bilateralaviation

safetyagreements (BASAs) that will facilitatean increasein

theabilitytoexchangeaviation productsandservices.

Result

4

Target met. TheFAA concludedfour (new or

expanded) BASAs.

BASAs promote aviation safety and environmental 

quality, enhance cooperation, and increase efficiency in 

the civil aviation system. The agreements are based on 

recognized comparability of U.S. and foreign systems 

for approval and surveillance of the aviation industry. 

By building a network of competent civil aviation 

authorities and concluding agreements with additional 

countries and/or regional authorities, the FAA increases 

safety and competitiveness globally. Improved global 

FY 2008 International Leadership Performance Measures and Results

Performance Measure

FY 2008 

Target

FY 2008 

Results

FY 2008 

Status

FY 2009 

Target1

Aviation Safety Leadership 

Work with theChineseaviation authoritiesandindustrytoadopt27proven

Commercial Aviation SafetyTeam (CAST) safetyenhancementsbyFY2011.This

supportsChina’sefforts toreducefatalaccidents toarateof0.030fatalaccidents

per100,000departuresbyFY2012.

5 CASTSEs 5 CASTSEs 5 CASTSEs

Bilateral Aviation Safety Agreements (BASAs)

Concludeat leasteight (new orexpanded)bilateral safetyagreements that will

facilitatean increasein theabilitytoexchangeaviation productsandservicesby

FY2012.

2 4 1

External Funding

Secureayearlyincreasein internationalaviation development fundingto

strengthen theglobalaviation infrastructure. IncreasetheFY2007external funding

baselinetargetof$12 million in $3 million increments foran FY2012targetof

$27 million.

$15.00 M $16.70 M $18.00 M

NextGen Technologies

ByFY2012,expandtheuseof the NextGen performance-basedsystems to five

prioritycountries.

1 2 1

1

FY2009targetsarefrom theFY2008–2012 Flight Plan.

Goal Achieved
59

FY 2008 Performance and Accountability Report

understanding of U.S. safety regulations, processes, 

and procedures leads to better international regulatory 

oversight and evens the market by holding more 

international players to comparable standards. 

In FY 2008, the FAA exceeded its performance target, 

concluding four new or expanded BASAs that will 

facilitate an increase in the ability to exchange aviation 

products and services thereby expanding opportunities 

for the global aviation industry. 

• We completed negotiations with South Korea for one 

Executive Agreement and one BASA Implementation 

Procedures for Airworthiness (IPA). Both documents 

were signed at the 2008 Singapore Air Show. The 

BASA IPA allows the FAA to request technical 

assistance from the Korean Civil Aviation Safety 

Authority on matters related to South Korean 

suppliers to U.S. manufacturers. 

• A revision to update the U.S./Canada BASA IPA 

was signed in June 2008. The changes include new 

provisions for Canadian acceptance of rebuilt U.S. 

engines and FAA-approved alterations data. 

• An agreement between the United States and the 

European Community was signed in June 2008. The 

agreement provides for streamlined repair station 

certifications between the U.S. and Europe. When 

ratified, the agreement will also allow more European 

companies to apply for FAA design approvals.

We do not expect to conclude any new or expand 

existing BASA Executive Agreements or Implementation 

Procedures in FY 2009 and have not set a target for this 

performance measure in the next fiscal year. We are 

continuing to lay the groundwork for future BASAs with 

countries experiencing aviation industry growth, such as 

India.

External Funding

External Funding: 

FY 2008 Target and Result

Target Secure$15 million in internationalaviation development

fundingtostrengthen theglobalaviation infrastructure.

Result

$16.70 million

TheFAA met its target, securing$16.70 million in

FY2008.

Our external funding performance goal seeks to 

influence the limited resources we are able to contribute 

to international safety and capacity efforts with 

technical and financial assistance from U.S Government 

organizations, multilateral banks, and industry to 

support global aviation system infrastructure projects. 

In FY 2007, the FAA revised this target from a 20% 

annual increase to a specific dollar target, with 

subsequent annual increases in $3 million increments 

from the FY 2007 baseline of $12 million. We set the FY 

2007 target below the previous year’s result to adjust for 

the unusually high FY 2006 result, which was due to a 

one-time grant of $25 million for Afghanistan.

Thanks to hard work and continual outreach, the FAA’s 

international team secured funds to surpass the $15 

million target. The $16.70 million secured included the 

U.S. Department of State funding for an International 

Visitor Leadership Program project for Singapore, the U.S. 

Trade and Development Agency funds for developmental 

projects in India, and two orientation visits for Brazil’s 

air traffic organization and civil aviation agency. The 

program benefited reconstruction programs by securing 

funds for shipping a radar system to Afghanistan and for 

a technical assistance project for the Iraqi Civil Aviation 

Authority. 

Performance Results

5

10

15

20

25

30

35

$11.97 M $19.51 M $33.04 M

$12.00 M

$13.36 M

$6.00 M $14.36 M $23.41 M

2007

$15.00 M

$16.70 M

2008

$18.00 M

N/A

2004 2005 2006 2009

Fiscal Year

Actual 

Target

In Millions

EXTERNAL FUNDING1

Funding Secured per Year

1

 Targets rebaselined in FY 2007.
Federal Aviation Administration

60

Organizational excellence is an ongoing challenge. As the 

aviation community continues to face a tough economic 

environment, the FAA faces many difficult management 

challenges as well. The FAA’s central management 

strategy for achieving organizational excellence is to 

deliver the results described in the Flight Plan and to 

refine our focus on the PMA. 

Our efforts this year focused on air traffic controller 

recruitment and placement as well as continued efforts 

to enhance our cost-control measures. We sustained 

success on the PMA–Human Capital, accomplishing our 

goals for the past 4 years. 

Strategic Management of Human Capital

OPM Hiring Standard

OPM Hiring Standard: 

FY 2008 Target and Result

Target

In FY2008,50%of theFAA external hires willbe filled

within the OPM 45-daystandardfor Government-wide

hiring.

Result

79.00%

We metour target, filling79.00%ofexternal hires

within the OPM 45-day hiringstandard.

Note: Air Traffic Controllers (series 2152s) and 

Executive Service positions are not included in this 

target.

Note: This measure is new in FY 2008—no trend 

data are available.

Throughout Government and industry, there is fierce 

competition to attract a skilled workforce. The FAA 

must hire adequate staff with the requisite competencies 

in a timely manner. Using the OPM 45-day hiring 

standard as a new FAA performance target in FY 2008, 

Performance Results

Organizational Excellence

GOAL:Ensurethesuccessof theFAA’s mission through stronger leadership,abetter trained workforce,enhanced

cost-control measures,andimproveddecisionmakingbasedon reliabledata.

NextGen Technologies

NextGen Technologies: 

FY 2008 Target and Result

Target Expandtheuseof NextGen performance-basedsystems to

oneprioritycountry.

Result

2

TheFAA expandedtheuseof NextGen

performance-basedsystems totwopriority

countries, Australiaand New Zealand,exceeding

theFY2008target setatoneprioritycountry.

By working with international civil aviation authorities, 

organizations, and states, the FAA continues to 

enhance its international leadership role and ensure 

harmonization of NextGen technologies, procedures, 

and concepts with global, regional, and state-level air 

traffic management modernization efforts. This global 

harmonization of aviation systems will increase the 

safety, capacity, and efficiency of international aviation 

not only for the U.S. carriers, but also for U.S. citizens 

traveling on foreign flag carriers. 

In FY 2008, the FAA, Airservices Australia, and Airways 

New Zealand launched ASPIRE, a forward-looking 

collaborative effort to accelerate the transition from 

today’s operating norms to more advanced, efficient, 

and environmentally friendly concepts. For more 

information, see page 11 and related story on page 12.
61

FY 2008 Performance and Accountability Report

Performance Results

FY 2008 Organizational Excellence Performance Measures and Results

Performance Measure

FY 2008 

Target

FY 2008 

Results

FY 2008 

Status

FY 2009 

Target1

STRATEGIC Management Of Human Capital

OPMHiring Standard

ByFY2010,70percentofFAA external hires willbe filled within OPM’s45-day

standardforgovernment-wide hiring.

50.00% 79.00% 60.00%

Reduce Workplace Injuries 

Reducethetotal workplaceinjuryandillness caserateto no morethan 2.44per100

employeesbytheendofFY2011and maintain through FY2012.

2.68per100 2.25per1002 2.60per100

Grievance Processing Time

Reducegrievance-processingtimeby30%(toan averageof102days)by

FY2010over theFY2006baselineof146daysand maintain thereduction through

FY2012.

–15.00% –63.69% –20.00%

Air Traffic Controller Workforce Plan

Maintain theair traffic control workforceatorabovetheprojectedannual totals in

the AirTrafficControllerWorkforcePlan.

0%to2%over

Plan 1.66%overPlan 0%to2%overPlan

IMPROVED FINANCIAL PERFORMANCE

Cost Reimbursable Contracts

Increasecost reimbursablecontract closeoutsby1%peryear, from 86%in FY2008

to90%in FY2012.

86.00% 91.67% 87.00%

Cost Control 

Organizations throughout theagency will continuetoimplement costefficiency

initiatives such as10-15%savings for strategic sourcingfor selectedproductsand

services;bytheendofFY2009, reduceleasedspacefor AutomatedFlightService

Stations from approximately510,000squarefeet toapproximately150,000square

feet;3%reduction in helpdeskoperatingcosts through consolidations;and

annual reduction of$15 million in Information Technologyoperatingcosts.

1activityand

savings

1activityand

savings

1activityand

savings

Clean Audit With No Material Weaknesses 

Obtain an unqualifiedopinion on theagency’s financial statements (Clean Audit

With No MaterialWeaknesses)each fiscalyear.

Clean Audit w/

NMW

Clean Audit w/

NMW

Clean Audit w/

NMW

ACQUISITION MANAGEMENT

Critical Acquisitions on Budget

In FY2008,90%of major system acquisition investmentsare within 10% ofannual

budgetand maintain through FY2012.

90.00% 96.08% 90.00%

Critical Acquisitions on Schedule

In FY2008,90%of major system acquisition investmentsareon scheduleand

maintain through FY2012.

90.00% 93.88% 90.00%

CUSTOMER SATISFACTION AND OPERATIONALCAPABILITY

Customer Satisfaction 

Maintain theannualaverageofFAA surveyson the ACSIatorabovetheaverage

Federal Regulatory Agencyscorein theprevious fiscalyear.

60 60.24 TBD

Information Security

Achievezerocyber securityevents thatdisableor significantlydegradeFAA services. 0 0 0

TBD:Tobedetermined 1 FY2009targetsarefrom theFY2008–2012Flight Plan. 2Projection from trends.Finaldataavailablein November2008.

For information on datasourcesandestimatingand finalization of results, seeCompletenessand ReliabilityofPerformance Data.

Goal Achieved

 Goal Not Achieved
Federal Aviation Administration

62

we achieved greater efficiencies in hiring applicants who 

are new to the Federal Government. In anticipation of 

the forthcoming retirement bubble, it is in the agency’s 

best interest to ensure that the hiring process nets the 

qualified individuals needed to achieve mission results 

and that we hire in a timely manner. Measuring hiring 

time is a critical step in improving this process.

Our OPM Hiring Standard performance goal measures 

the percentage of external hire (applicants outside the 

Federal Government) job offers made with the OPM 45-

day standard. The OPM 45-day hiring process is defined 

as beginning one day after a vacancy announcement 

closes and ending the day a tentative or firm job offer 

is made to an applicant, whichever is first. Air traffic 

controllers (series 2152s) and executive service positions 

are not included in this target.

In addition to the emphasis on process efficiency, the 

FAA provides selecting officials an awareness of their 

ownership of a large part of the hiring process. This 

practice has promoted better understanding and working 

partnerships between selecting officials and local Human 

Resources staffing offices. Also, our internal review 

and emphasis on data integrity have led to a more 

standardized and documented data collection process. 

These procedures, along with our ongoing assessment 

and correction of process barriers, have contributed 

to our success in achieving the FY 2008 target for this 

performance goal. 

Reduce Workplace Injuries 

Reduce Workplace Injuries: 

FY 2008 Target and Result

Target Reducethetotal workplaceinjuryandillness caserateto no

morethan 2.68per100employees.

Result

2.25(projection from trends)

We metourgoal, reducingthe workplaceinjury

andillness caserateto2.25.

In FY 2008, we met our goal by reducing the workplace 

injury and illness case rate to 2.25 (projection from 

trends), down from last year’s rate of 2.43 per 100 

employees. Final case rates are usually available 

approximately 45 days after the end of the fiscal year.

This measure shows progress in reducing workplace 

injuries and illnesses, which in turn leads to improved 

productivity and quality of life for the FAA workforce 

and lower cost for the FAA. Injury reduction is achieved 

throughout the FAA when employee awareness and 

participation are high, leadership supports the National 

Occupational Safety and Health (NOSH) activities, and 

risks are identified and mitigated. 

The FAA’s continued efforts to reduce the total 

workplace injury and illness case rate in FY 2008 

included analyzing the types and causes of mishaps and 

evaluating and implementing various ways to prevent 

them. Additionally, we have begun to systematically 

apply Occupational Safety and Health (OSH) 

Administration recordkeeping criteria, which helps 

identify injury causes quickly and allows us to target 

solutions before those types of injuries recur. 

Grievance Processing Time (GPT) 

Grievance Processing Time (GPT): 

FY 2008 Target and Result

Target Reduceaverage GPTby15%to124days from theFY2006

baselineof146days.

Result

–63.69%(preliminary estimate)

We metourgoal,achievinga53-dayaverage GPT

fora63.69%reduction.

Note: This measure was new in FY 2007—no trend 

data are available.

In FY 2008, we aggressively tracked and processed 3,936 

grievances, averaging 53 days in processing time for a 

63.69% reduction, exceeding the 15% reduction target. 

Our continued efforts to reduce processing time for 

grievances supports our objective to resolve employee 

and union complaints at the lowest level possible, with 

the least amount of time, resources, and disruptions to 

the work environment and mission. 

Performance Results

2.25

2.75

2.5

3.0

2.17

2.762

2.43

2.851

2007

2.68

2.253

2008

2.6

N/A

2006 2009

Fiscal Year

Actual 

Target

Percentage

WORKPLACE INJURIES

Per 100 Employees

2.0

1

 Revised from projection of 2.21/100.

2

 Revised from projection of 2.56/100. 3

 Projection to be nalized in December 2008.
63

FY 2008 Performance and Accountability Report

Air Traffic Controller Workforce Plan

Air Traffic Controller Workforce Plan: 

FY 2008 Target and Result

Target

Maintain air traffic control workforceatorupto2%above

theprojectedannual totals in the AirTrafficController

WorkforcePlan.

Result

1.66%

We metour target,achieving1.66%over theplan.

Note: This measure was new in FY 2007—no trend 

data are available.

In FY 2008, the FAA achieved its target with an endof-year air traffic control workforce level at 1.66% over 

the plan. The FAA took many actions to accomplish its 

aggressive hiring plan. By creating and implementing 

PEPCs, we have been able to cut time and costs in hiring. 

During FY 2008, we conducted 10 PEPCs and processed 

all clearance requirements for over 2,000 applicants, 

cutting the application processing time for controller 

candidates from 6 to 9 months to 2 to 3 months. 

The FAA understands how critical it is to have an 

adequately staffed air traffic controller workforce. We 

continue to monitor staffing at all facilities and to take 

action at the facility level when adjustments become 

necessary due to changes in traffic volume, unanticipated 

retirements, or other attrition. All planning actions are 

completed for FY 2009, and we intend to hire at least 

1,914 controllers during the year.

To read more about FAA actions to hire and train Air 

Traffic Controllers, see Management Challenge: 

Addressing Long and Short-Term Challenges for 

Operating, Maintaining, and Modernizing the National 

Airspace System on page 24.

Improved FinancialPerformance

Cost Reimbursable Contracts

Cost Reimbursable Contracts: 

FY 2008 Target and Result

Target Closeout86%ofeligiblecost reimbursablecontracts.

Result

91.67%

TheFAA exceededitsgoal, closingout55

contracts. Note: Thepercentageof contracts

closedvariesyear-to-yearduetothediffering

numberof contractseligiblefor closeouteach year

andthedifferent circumstances thataffect the

closeoutprocess.

In addition to losing the use of funds that could 

otherwise be recouped, a high number of unclosed 

contracts can create potentially large liabilities where 

final amounts are due to or from the contractor. By 

focusing on contracts eligible for closeout, the FAA can 

administer contracts more efficiently, reduce liability, pay 

only allowable and allocable charges under the agency’s 

contracts, and remain diligent in the efficient and 

appropriate use of public funds.

To read more about FAA actions to reduce unallowable 

charges, see Management Challenge: Managing 

Acquisition and Contract Operations More Effectively to 

Obtain Quality Goods and Services at reasonable Prices 

on page 36.

Performance Results

100

150

125

175

170.00% 102.00%

85.00%

95.00%

85.00% 85.00%

2007

86.00%1

91.67%

2008

87.00%

N/A

2005 2006 2009

Fiscal Year

Actual 

Target

Percentage

COST REIMBURSABLE CONTRACTS

Percentage of Eligible Contracts Closed Out

75

1

 Target revised from 85.00% in FY 2008.
Federal Aviation Administration

64

Cost Control

Cost Control: 

FY 2008 Target and Result

Target

Approvedorganizations throughout theFAA will continueto

implement costefficiencyinitiatives. Theagency willalso

achieveFY2008savings towards thefour specific targets

listedin theFlight Plan.

Result

Oneactivityperapprovedorganization and

achievementof targetedsavings.

TheFAA met itsgoal for thefourth consecutive

year.

The FAA continues to take aggressive steps to stem the 

growth of its operating costs. Our Cost Control program 

provides the necessary impetus for implementing 

sustained and successful cost control activities. In 

FY 2008, we met our end-of-year goal. Organizations 

throughout the FAA implemented at least one cost 

saving or avoidance activity, accruing total cost 

efficiencies of approximately $82 million. These savings 

resulted from strategic sourcing of selected products 

and services, effective management of the Workers’ 

Compensation Program, and reductions in helpdesk 

operating costs and IT costs.

Clean Audit With No Material Weaknesses

Clean Audit With No Material Weaknesses: 

FY 2008 Target and Result

Target

Obtain an unqualifiedopinion on theagency’s financial

statements (Clean Audit with no material weaknesses

[NMW]).

Result Clean audit with no material weaknesses.

TheFAA met this target in FY2008.

The unqualified opinion target is a critical indicator of 

an agency’s financial condition, because it independently 

assesses the fair presentation of the FAA’s financial 

statements and, in connection with that process, 

considers the internal controls over financial reporting.

In FY 2008, we obtained our target of receiving an 

unqualified opinion with no material weaknesses. This 

success follows a period of focused improvement to 

remediate an FY 2006 and FY 2007 material weakness 

in the area of timely processing of transactions and 

accounting for Property, Plant, and Equipment, including 

our Construction in Progress (CIP) account.

Acquisition Management

Critical Acquisitions on Budget/ Critical 

Acquisitions on Schedule

Critical Acquisitions on Budget/Critical

Acquisitions on Schedule: 

FY 2008 Target and Result

Target

Ensurethat90%of criticalacquisition programsareon

scheduleand90%of criticalacquisition programsare within

10%ofbudgetas reflectedin theCapital InvestmentPlan.

Result

96.08%on budget

93.88%on schedule

TheFAA met itsperformancegoals forboth

targets.

The FAA met these 2008 targets. We tracked 98 

milestones against 51 acquisition programs for this 

performance measure. Through September 2008, the FAA 

met the cost targets for 96.08% of programs included in 

Performance Results

75

80

85

90

95

100

105

91.50% 92.00% 97.44%

87.50%

97.00%

90.00%

77.00% 93.88%

80.00% 80.00% 80.00% 85.00%

2003 2004 2005 2006 2007 2008

Fiscal Year

Actual 

Target

Percentage 

CRITICAL ACQUISITIONS ON SCHEDULE

Percentage of Programs Meeting Scheduled Milestones

90.00%

N/A

2009

75

80

85

90

95

100

105

100.00% 97.00% 100.00%

87.50%

88.00% 100.00%

80.00% 80.00% 80.00% 85.00%

2007

90.00%

96.08%

2008

90.00%

N/A

2003 2004 2005 2006 2009

Fiscal Year

Actual 

Target

Percentage 

CRITICAL ACQUISITIONS ON BUDGET

Percentage of Programs Within Planned Budget
65

FY 2008 Performance and Accountability Report

the goal and 93.88% of the scheduled milestones. Any 

program with a total budget-at-completion variance of 

less than 10% between the beginning and end of FY 2008 

is considered to have met the established fiscal year cost 

performance goal. 

Lifecycle acquisition management is built around a 

logical sequence of phases and decision points. The FAA 

uses these phases and decision points to determine and 

prioritize its needs, make sound investment decisions, 

implement solutions efficiently, and manage services 

and assets over their lifecycle. The overarching goal is 

continuous improvement in the delivery of safe, secure, 

and efficient services over time. The FAA ensures that 

taxpayer dollars spent through the FAA’s acquisition 

programs achieve required performance outcomes by 

tracking cost and schedule milestones.

One of the most important steps in controlling costs 

is to ensure that capital programs, such as those 

that provide navigation, surveillance, computer 

processing capabilities, tools for air traffic controllers, 

telecommunications infrastructure, and weather 

information, are effectively managed. The FAA major 

capital programs are on track to meet established targets.

Beginning in FY 2009, the FAA will implement standard 

written criteria for selection of programs and milestones 

included in the agency’s FY 2009 Cost and Schedule 

acquisition goals, as recommended by GAO and the DOT 

Inspector General. The milestones selected will include 

major efforts or events contributing to the completion 

of total program acquisition baseline or events that are 

of significant priority to the agency for advancing major 

programs. 

To read more about what the FAA is doing to keep 

existing modernization projects on track and reducing 

cost and schedule with NextGen, see Management

Challenge: Addressing Long- and Short-Term 

Challenges for Operating, Maintaining, and Modernizing 

the National Airspace System on page 24.

Customer Satisfaction and Operational

Capability 

Customer Satisfaction

Customer Satisfaction: 

FY 2008 Target and Result

Target

Achievean averagescorefor theFAA surveyson the ACSIat

orabovetheFY2007averageFederal Regulatory Agency

scoreof60.

Result

60.24

We metour target forCustomerSatisfaction

achievingan ACSI scoreof60.24.

The FAA uses the ACSI to measure customer 

satisfaction. The ACSI tracks trends in customer 

satisfaction and provides benchmarking insights into 

the consumer economy for companies, industry trade 

associations, and Government agencies. Surveys are 

administered by the National Quality Research Center 

at the University of Michigan Ross School of Business, in 

partnership with the Claes Fornell International Group, 

Foresee Results, and the Federal Consulting Group. 

In FY 2008, the FAA revised the customer satisfaction 

measure to include four surveys reflecting a broader base 

of the customers we serve. The result for the customer 

satisfaction measure is the weighted average annual 

score of the FAA surveys conducted. The FAA score is 

measured against the Federal Regulatory Agency annual 

average ACSI score for the previous fiscal year (excluding 

the FAA), establishing our FY 2008 target at 60 or above. 

The FAA achieved a combined ACSI score of 60.24. 

This year’s four surveys, along with their individual 

results and total weight, are 

• Airport Industry (Results: 69, weighted at 28%) 

• Aviation Maintenance Technicians (Results: 54, 

weighted at 28%)

• Commercial Pilots (Results: 51, weighted at 28%) 

• FAA Web Users (Results: 72, weighted at 16%). 

The pilot and maintenance technician surveys scored 

low, highlighting dissatisfaction with FAA regulations 

and surveillance. All surveys have the requirement to 

complete action plans to increase future scores based 

on the results and comments received. We expect these 

action plans to be part of FY 2009 business plans. 

Performance Results
Federal Aviation Administration

66

Information Security

Information Security: 

FY 2008 Target and Result

Target Zerocyber securityevents that significantlydisableor

degradeFAA services.

Result

0

TheFAA met itsgoalof zerocyber securityevents

for thefourth consecutiveyear. 

Hackers seek to disrupt or exploit critical infrastructure 

across the United States. One critical infrastructure, 

as identified by the President in HSPD-7, is our 

transportation system, including aviation. Accordingly, 

the FAA must be protected against the threat of cyber 

attacks. 

During FY 2008, there were approximately 26 million 

monthly cyber attempts made on our network, with 

no successful cyber events that significantly disabled or 

degraded our service. 

To read more about DOT/FAA actions to test and 

strengthen the information system security program, 

see Management Challenge: Strengthening 

the Protection of Information Technology Resources, 

Including the Critical Air Traffic Control System on 

page 35.

Completeness and Reliability of 

Performance Data

The FAA uses performance data extensively for program 

management, personnel evaluation, and accountability 

in prioritizing its facility evaluations and audits. The 

data are also used on a daily basis to track progress 

toward achieving performance goals.

The following are summaries of the FAA’s processes 

for maintaining the completeness and reliability of 

its performance reporting. For a discussion of the 

management controls established by the FAA to 

ensure the quality of performance data, see Verification 

and Validation of Performance Information in the 

Performance Highlights section of this report.

Safety

Commercial Air Carrier Fatality Rate/General 

Aviation Fatal Accidents/Alaska Accidents

Fatality data for the Commercial Air Carrier measure 

and accident data for the General Aviation and Alaska 

measures come from the National Transportation 

Safety Board (NTSB) Aviation Accident Database. 

Aviation accident investigators under the auspices of 

the NTSB develop the data. The number of passengers 

on board used to calculate the Fatality Rate includes 

both passengers and crew members. Air carriers submit 

data for all passengers on board to the Office of Airline 

Information within the Bureau of Transportation 

Statistics (BTS). The crew estimate is based on fleet 

makeup and crew requirements per number of seats. 

For the current fleet, the number of crew is equal to 

about 7% of all Part 121 enplanements. The average 

number of cargo crew on board is 3.5 per departure, 

based on data from subscription services such as Air 

Claims, a proprietary database used by insurers to obtain 

information such as fleet mix, accidents, and claims. 

Part 135 data also come from BTS and Air Claims 

databases, but are not as complete. The FAA Office of 

Aviation Policy, Planning, and Environment calls the 

operators where BTS data have gaps. Based on previous 

accident and incident reports, the average Part 135 

enplanement is five per departure. Crew estimates for 

Part 135 are based on previous accident and incident 

data. Any error that might be introduced by estimating 

Performance Results
67

FY 2008 Performance and Accountability Report

crew will be very small and will be overwhelmed by the 

passenger census. Also note that the fatality rate is small 

and could significantly fluctuate from year to year due to 

a single accident.

Both accidents and departures are censuses, having no 

sampling error. While the number of crew on board is 

an estimate, crew staffing in fact varies only within a 

very small range for any given aircraft make and model. 

NTSB and the FAA’s Office of Accident Investigation 

meet regularly to validate information on the number 

of accidents. Accident data are considered preliminary. 

NTSB usually completes investigations and issues reports 

on accidents that occur during any fiscal year by the 

end of the next fiscal year. Results are considered final 

when all those accidents have been reported in the NTSB 

press release published each March. FY 2008 results will 

therefore be final after the March 2010 press release. In 

general, however, accident numbers are not likely to 

change significantly between the end of the fiscal year 

and the date they are finalized.

The number of actual persons on board for any given 

period of time is considered preliminary for up to 18 

months after the close of the reporting period. This is 

due to amended reports subsequently filed by the air 

carriers. Preliminary estimates are based on projections 

of the growth in departures developed by the FAA Office 

of Policy, Planning, and Environment. However, changes 

to the number of persons on board should rarely have 

an effect on the annual fatality rate. NTSB and the 

FAA’s Office of Accident Investigation meet regularly to 

validate the accident and fatality count.

The FAA does comparison checking of the departure data 

collected by the BTS for the Commercial Air Carrier Fatal 

Accident Rate. However, the FAA has no independent 

data sources against which to validate the numbers 

submitted to BTS. The FAA compares its list of carriers 

to the DOT list to validate completeness.

To overcome reporting delays of 60 to 90 days, the FAA 

relies on historical data, partial internal data sources, and 

Official Airline Guide (OAG) scheduling information 

to project at least part of the fiscal year departure data. 

Due to reporting procedures in place, it is unlikely that 

calculation of future fiscal year departure data will be 

markedly improved. Lacking complete historical data on 

a monthly basis and independent sources of verification 

increases the risk of error in the activity data.

Most accident investigations are a joint undertaking—

NTSB has the statutory responsibility, but in fact most 

of the accident investigations related to general aviation 

are conducted by the FAA Aviation Safety Inspectors 

without direct involvement of NTSB. The FAA’s 

own accident investigators and other FAA employees 

participate in all accident investigations led by NTSB 

investigators.

Runway Incursions

Runway incursion data are recorded in the FAA National 

Airspace Information Monitoring System. Preliminary 

incident reports are entered by air traffic controllers and 

pilots. They are evaluated when received and can take up 

to 90 days to complete. Following the close of the fiscal 

year, the year-end data are typically not finalized for 90 

days.

Surface operational error/deviation, surface pilot 

deviation, and vehicle/pedestrian deviation reports are 

reviewed on a daily basis to determine whether the 

incident meets the definition of a runway incursion. 

Runway incursions are a subset of all the incident data 

collected; completeness of the data is based on the 

reporting requirements for each of the incident types.

The FAA verifies and validates the accuracy of the 

data through reviews or preliminary and final reports. 

Reconciliation of the data is conducted monthly, and 

anomalies are explored and resolved. In cases where 

major problems are identified, a request to resubmit is 

issued. The FAA conducts annual reviews of reported 

data and compares them with data reported from 

previous years.

Commercial Space Launch Accidents

The source of commercial space launch data is the FAA’s 

Office of the Associate Administrator for AST. AST 

monitors all licensed launch operations and maintains 

documented reports of each licensed event. These reports 

are generated by AST’s assigned field inspectors and 

duty officers for a given launch event. They include all 

relevant details pertaining to the outcome of the licensed 

launch or reentry operation including the occurrence 

of any public fatalities, injuries, or property damage. 

AST also uses other sources of data such as the launch 

Performance Results
Federal Aviation Administration

68 Performance Results

vehicle operator and Federal, state, and local government 

officials.

AST’s Licensing and Safety Division maintains and 

verifies reports that an accident resulting from a 

licensed launch operation has occurred and supports 

coordination with other Federal agencies, which may 

include the NTSB and the military on any subsequent 

investigations. If an accident occurs, the FAA and the 

NTSB will complete official reports fully documenting 

circumstances associated with the event.

Operational Errors

Air traffic controllers are required to report operational 

errors. In addition, the Operational Error Detection 

Patch (OEDP), a software program used by the FAA’s air 

traffic facilities, detects possible operational errors and 

sends alert messages to supervisory personnel. Facility 

management reviews OEDP alerts and data provided 

from the National Track Analysis Program to determine 

if an operational error has occurred. The information is 

summarized in the FAA Air Traffic Operational Error and 

Deviation Database.

FAA’s Air Traffic Order 7210.56 requires all facilities 

to submit operational error reports within 3 hours of 

the event. The data are typically not finalized for 90 

days following the close of the fiscal year. The agency 

has implemented procedures that require facilities 

to conduct random audits of radar data to identify 

unreported operational errors. FAA Headquarters also 

conducts random audits of selected facilities based on the 

identification of unreported events. Facility management 

and personnel are subject to corrective action for 

noncompliance in reporting operational errors.

The FAA verifies and validates the accuracy of the 

data through reviews or preliminary and final reports. 

Reconciliation of the databases is conducted monthly 

and anomalies are explored and resolved. In cases where 

major problems are identified, a request to resubmit is 

issued. The FAA conducts annual reviews of reported 

data and compares the data with data reported from 

previous years.

Safety Management System

The SRM process ensures that safety-related changes 

are documented, hazards are identified and tracked 

to resolution, and the performance of each change is 

monitored throughout its lifecycle. ATO works with 

its operational service units to compile a repository 

of hazards associated with changes to the NAS in a 

database known as the FAA Hazard Tracking System. In 

addition, WebCM, a configuration management tool, is 

updated to require SRM on all NAS Change Proposals. 

These data are then used to audit the application of 

SRM.

Each ATO Service Unit is responsible for ensuring that 

safety analyses are documented, complete, and accurate. 

The FAA approves SRM documents and checks for 

service unit compliance with SRM through an audit 

process developed in 2007.

Capacity

Daily Airport Capacity (35 OEP Airports/

7 Metropolitan Areas)

The Aviation System Performance Metrics (ASPM) 

database, maintained by the FAA’s Office of Aviation 

Policy and Plans, provides the data for these measures. 

By agreement with the FAA, ASPM flight data are 

filed monthly by 23 major air carriers for all flights to 

and from most large and medium hubs. These data 

are supplemented by flight records contained in the 

Enhanced Traffic Management System (ETMS) and 

flight movement times provided by Aeronautical Radio, 

Inc. (ARINC). Also included within ASPM are arrival and 

departure rates provided by the individual facilities.

Fiscal year data are finalized approximately 90 days after 

the close of the fiscal year. The reliability of ASPM is 

verified on a daily basis by the execution of a number 

of audit checks, comparison to other published data 

metrics, and through the use of ASPM by over 1,500 

registered users.

Annual Service Volume

ASV is calculated using the Runway Delay Simulation 

Model. The measure is derived from model estimates 

that are subject to errors in model specification. Delay 

curves are developed for each of the 35 OEP airports for 

the existing airport layout and with new runways where 

proposed. The calculation of airport capacity is based on 

demand schedules and fleet mixes, supplemented with 

flight counts and standard air traffic control procedures 
69

FY 2008 Performance and Accountability Report

Performance Results

for each airport. Demand schedules and fleet mixes are 

developed from recent OAG information. Flight counts 

are obtained from airport traffic control tower logs.

ATO’s Capacity Analysis Group provides technical 

support to develop a consistent method of calculating 

the individual airport ASV through the Operations 

Planning Service at the FAA’s Technical Center in 

Atlantic City, NJ. Recalculations of the original ASV 

studies have not been necessary. Once developed, the 

delay curves remain accurate unless a major change 

in fleet mix or operational characteristics occurs at an 

airport.

Adjusted Operational Availability

The National Airspace System Performance Analysis 

System (NASPAS) is the official source of equipment 

and service performance data for the FAA. NASPAS 

receives monthly updates of outage data from the 

National Outage Database (NODB). The Maintenance 

Management System (MMS) contains individual 

equipment outage data as recorded by the system 

specialist.

The FAA’s Quality Assurance and Performance Team 

conducts monthly reviews of all Log Interrupt Reports 

entered into the MMS to ensure the data, which reside in 

the NODB, are as complete and accurate as possible.

NAS On-Time Arrivals

The FAA’s ASPM database, supplemented by DOT’s 

Airline Service Quality Performance (ASQP) causation 

database, provides the data for this measure. By 

agreement with the FAA, ASPM flight data are filed by 

certain major air carriers for all flights to and from most 

large and medium hubs. The data are further augmented 

by flight records contained in the ETMS and flight 

movement times provided by ARINC.

Fiscal year data are finalized approximately 90 days after 

the close of the fiscal year. The reliability of ASPM is 

verified on a daily basis by the execution of a number 

of audit checks, comparison to other published data 

metrics, and use of ASPM by over 1,500 registered users. 

ASQP data are filed monthly with DOT under 14 CFR 

Part 234, Airline Service Quality Performance Reports, 

which separately requires reporting by major air carriers 

on flights to and from all large hubs.

Noise Exposure

The FAA uses the Model for Assessing Global Exposure 

to the Noise of Transport Aircraft (MAGENTA) to 

estimate exposure to significant aircraft noise, defined 

as noise above the Day-Night Sound Level (DNL) of 65 

decibels. MAGENTA uses the FAA’s Integrated Noise 

Model (INM) to calculate DNL contours for the top 97 

U.S. airports. These contours are superimposed on census 

data to determine the number of people residing within 

them. For smaller airports, the contour is calculated using 

statistical analysis of operations data. Individual airport 

data are summed, and the number of people relocated 

through the Airport Improvement Program is deducted 

from the total number exposed.

The U.S. version of MAGENTA uses updated population 

data from the 2000 census. The data source for 

airport traffic is the ETMS database, which includes 

unscheduled air traffic and allows for accurate modeling 

of freight, general aviation, and military operations. The 

ETMS also provides details on aircraft type for accurate 

distribution of aircraft fleet mix. Data on the number 

of people relocated through the Airport Improvement 

Program are collected from FAA regional offices. Local 

traffic utilization data are collected from individual 

airports and updated periodically.

The ETMS does not contain current-year data, so the 

FAA Terminal Area Forecast (TAF) is used to provide 

current and accurate information on projected increases 

at specific airports. The preliminary results reported at 

the end of the fiscal year are based on TAF projections. 

These results are finalized using actual ETMS data by the 

following May.

The noise exposure results for FY 2008 show a larger 

reduction in the number of people exposed than in 

previous years. This is due to several factors. An upgrade 

to the INM has produced changes to the airport noise 

contours. In addition, military operations for the KC-135 

were updated based on more accurate information from 

the Air Force. Finally, errors were detected in the aircraft 

fleet beginning in 2004, resulting in noise contours that 

were larger than they should have been. As a result of 

these changes, the U.S. noise exposure results from 

FY 2000 to FY 2007 were reestimated so that percent 

changes for FY 2008 could be calculated against historical 

values in a consistent manner.
Federal Aviation Administration

70 Performance Results

The noise exposure measure is derived from estimates 

that are subject to errors in model specification. The use 

of a 3-year average stabilizes noise trends, which can 

fluctuate from year to year and are affected by unusual 

events such as the 9/11 attacks and the subsequent 

economic downturn.

No actual count is made of the number of people 

exposed to aircraft noise. Aircraft type and event level 

are current. However, some of the databases used to 

establish route and runway utilization are now over 

10 years old. Changes in airport layout, including 

expansions, may not be reflected. The FAA continues to 

update these databases as they become available. The 

benefits of federally funded mitigation, such as buyouts, 

are accounted for.

The noise studies obtained from U.S. airports have gone 

through a thorough public review process, either under 

the National Environmental Policy Act requirements 

or as part of airport noise compatibility programs. The 

Integrated Noise Model has been validated with actual 

acoustic measurements. External forecast data are from 

primary sources. The MAGENTA population exposure 

methodology has been thoroughly reviewed by the ICAO 

task group and was most recently validated for a sample 

of airport-specific cases.

Aviation Fuel Efficiency

The FAA measures aviation fuel consumption using 

the Aviation Environmental Design Tool /System for 

assessing Aviation Global Emissions (AEDT/SAGE) 

computer model, which uses radar-based data from 

the ETMS and OAG schedule information to generate 

annual inventories of fuel burn and total distance flown 

data for all U.S. commercial operations.

Potential seasonal and year-to-year variability can be 

expected when analyzing air traffic data and commercial 

aircraft operations. The use of a 3-year moving average 

for reporting the fuel efficiency measure smoothes this 

variability.

The extent to which enhancements are incorporated to 

improve model accuracy, via more robust aerodynamic 

performance modeling algorithms and database of 

aircraft/engine fuel burn information, will impact the 

overall results and thus the performance target. This 

could create some statistical variability from year to year 

if not properly taken into account. In cases where such 

enhancements have the potential to create a significant 

shift in baseline, annual inventories may need to be 

reprocessed and/or adjusted to ensure consistency and 

accuracy of results. 

The extent to which aircraft fleet improvements cannot 

be sufficiently modeled because of a lack of manufacturer 

proprietary data may also influence the performance 

target results. In this case, attempts will be made to 

characterize such aircraft with the best publicly available 

information, recognizing that newer aircraft types in the 

fleet will likely exist in significantly lesser numbers, thus 

minimizing their influence upon the results.

Data used to measure performance against the target 

are assessed for quality control purposes. Input data for 

the AEDT/SAGE model are validated before proceeding 

with model runs. Radar data from the ETMS are assessed 

to remove any anomalies, checked for completeness, 

and preprocessed for input to the model. ETMS data 

are verified against the OAG information to avoid any 

duplication of flights in the annual inventory. Data from 

the AEDT/SAGE model are verified by comparing output 

from previous years and analyzing trends to ensure that 

they are consistent with expectations. In other cases 

monthly inventories may be analyzed to validate the 

results.

The measuring procedure used for this performance 

target is highly reliable. The processing of data through 

the AEDT/SAGE model, including the performance of 

algorithms, is not subject to random factors that could 

influence the results. However, the performance target 

is potentially influenced by factors outside the control 

of the FAA. For example, a major sustained disruption 

or enhancement in air traffic and/or a significant shift in 

commercial operations among airlines, including changes 

in fleet composition and missions, could have a profound 

effect on the results.

International Leadership

Aviation Safety Leadership

Proof of the implementation of CAST safety 

enhancements will come from a variety of sources, 

including, but not limited to, e-mail from U.S. officials 

who have attended meetings with Chinese aviation 

officials, minutes of meetings with the Chinese Aviation 
71

FY 2008 Performance and Accountability Report

Performance Results

Administration, and pronouncements by senior Chinese 

officials. Because China is a sovereign nation, the FAA 

does not have the means to independently verify 

implementation of these initiatives throughout China. 

The measure is a simple count of the projects completed. 

Again, the FAA relies on the words and deeds of Chinese 

officials for verification. Over time, verification will 

also come when the accidents that the Chinese have 

do not display the precursors that the CAST safety 

enhancements are designed to prevent.

Bilateral Aviation Safety Agreements

The FAA tracks the execution of bilateral executive 

agreements and implementation procedures. Executive 

agreements are negotiated and maintained by the 

Department of State, and implementation procedures are 

negotiated and concluded by the FAA. The official signed 

documents are maintained at the FAA. This performance 

target is monitored monthly by tracking interim 

negotiation steps leading to completion of a BASA and 

tracking FAA internal coordination of the negotiated 

draft text.

The final signing of executive agreements is generally out 

of the FAA’s control. Many sovereign nations view these 

agreements as treaties that require legislative approval. 

The FAA and the U.S. Government cannot control the 

timing of legislatures in other countries. Therefore, the 

FAA will count executive agreements only when signed. 

The negotiation of implementation procedures is more 

within the FAA’s control.

The signed executive agreement constitutes evidence of 

completion. For implementation procedures, evidence 

will be some form of agreement between the parties that 

material negotiations are concluded but a formal signing 

ceremony is still pending. Evidence of completion can 

take the form of a signed agreement stating that fact, 

e-mail, meeting minutes, or other mutual agreement 

between the two parties that the implementation 

procedures agreement has been concluded.

External Funding

The success of this effort is measured in terms of the 

amount of new funding that the agency secures for 

international aviation infrastructure and capacitybuilding projects from external sources. The FAA 

develops the funding proposals, puts forward 

recommendations to funding organizations, and works 

closely with these sources to finalize the funding for each 

project.

The FAA tracks the progress of all funding proposals 

that it develops and supports. The funding secured 

from these proposals is the basis for measuring success. 

Public documents (press releases, letters, contracts, 

memorandums of agreement) are used to verify the 

amounts reported.

NextGen Technologies

The FAA’s ATO Operations Planning International Office 

manages and oversees international cooperation and is 

also actively involved in the global efforts of the JPDO 

NextGen Global Harmonization Working Group. As 

such, the ATO Operations Planning International Office 

monitors all activity related to NextGen supporting 

technologies, procedures, and concepts and determines 

which country or state cooperative activity will 

ultimately close out this performance target for FY 2008.

As the owner of this performance target, the ATO 

Operations Planning International Office collects all 

pertinent documentation related to its completion. The 

office also coordinates with other supporting FAA offices 

to cross-check and validate the reported results.

Organizational Excellence

Strategic Management of Human Capital

OPM Hiring Standard

To compute hiring time, the FAA uses data extracted 

from its Automated Staffing and Application Process 

(ASAP) system. ASAP was developed by the agency 

to automate the application and hiring process. AHR 

staffing specialists across the country fill jobs through 

external sources using ASAP. ASAP tracks pertinent steps 

in the hiring process and can be used to record the time it 

takes to fill positions.

The FAA has implemented several practices to ensure 

the integrity of data in ASAP. For example, monthly 

teleconferences with regional staffing personnel 

provide a forum for discussions about efficiencies in 

hiring processes, resulting in more standardization and 

streamlined practices. In addition, monthly and quarterly 
Federal Aviation Administration

72 Performance Results

monitoring of the hiring process ensures more proactive 

management of hiring processes.

ASAP is a dynamic system, with hiring actions entered 

continually by field and headquarters staffing specialists. 

Because the system is constantly updated, monthly 

reports reflect only the data entered before the report’s 

cut-off date. The job offer data are finalized and 

stabilized for the year-end status report.

Reduce Workplace Injuries

The data source for the number of workplace injury cases 

is the Department of Labor (DOL) SHARE Initiative 

website (www.dol.gov/esa/owcp/share/), which 

summarizes injuries and illnesses reported by the various 

agencies. The data source for the number of employees 

is the DOT Workforce Demographics website (http://

dothr.ost.dot.gov/workforceinfo/index.htm). The 

SHARE data reports are available quarterly, with an 

approximate 1-month lag time. The FAA reports the case 

rates quarterly, with a 1-month lag time. Because of the 

lag in data availability, the most current data available 

are used to project the results to the end of the fiscal year. 

The most current data from both websites cover three 

quarters of the fiscal year.

Data quality is high because the computation follows 

a well-established formula from the DOL and the 

data sources for each variable in the formula are 

Federal department-level databases. The key source 

of possible inaccuracy is the data entry for the injury 

and illness reports. The FAA has consolidated workers’ 

compensation case management for headquarters, all 

nine regions, and both centers, further increasing data 

accuracy. In addition, some FAA safety professionals use 

the Safety Management Information System to crosscheck mishap reports against workers’ compensation 

claims to improve data accuracy.

Grievance Processing Time

The FAA uses its Grievance Electronic Tracking System 

(GETS) for tracking and processing grievances. Data are 

entered and updated by authorized labor relations users 

in regions, centers, and headquarters.

Grievances are identified and tracked by a unique 

identifying number that is assigned by GETS only after 

critical information (e.g., submission date) is entered into 

the system. Similarly, to close a record requires the entry 

of a decision date. A monthly report is produced to verify 

completeness, accuracy, consistency, and timeliness of 

GETS data.

The GETS database has built-in control elements that 

must be populated before a record can be accepted into 

the database. Completed records are not deleted and can 

be used for multiple purposes. Both current records and 

completed records can be measured.

Air Traffic Controller Workforce Plan

Data on the total number of air traffic controllers on 

board are collected and compiled monthly by the ATO 

Office of Finance. 

The source of the ATO staffing data is the Federal 

Personnel Payroll System Datamart. The staffing data 

are collected and compiled monthly. Completeness is 

guaranteed through validation of the reports generated 

from the Datamart. The reliability of these reports is 

ensured by (1) obtaining the staffing data from the same 

source each month; (2) resources in the Financial Metrics 

Team that produce reports when the data are available; 

and (3) a review of the staffing data to ensure that 

all controllers are coded correctly and show up in the 

controller staffing level. Data fields requiring corrections 

are directed to the appropriate ATO Vice President for 

action.

Improved Financial Performance

Cost Reimbursable Contracts

The FAA’s procurement management system, PRISM, 

is used to identify cost reimbursable-type contracts for 

which performance has ended. On a monthly basis, 

closed contracts are reported by either the contracting 

officer who closed out the contract(s) or the contractor 

tasked with closing out FAA contracts.

The FAA’s Contract Support Systems branch maintains 

a database of all closed contracts. In addition, 

closed contract files are received in the branch for 

distribution to central archives. There is a slight risk 

of underreporting the number of closed contracts if 

any are not reported and entered into the database. 

However, contract closeouts are proactively managed by 

the group managers. Only contracts that are closed out 

completely, with no outstanding issues, are entered into 

the database.
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FY 2008 Performance and Accountability Report

Performance Results

Cost Control

Each FAA organization proposes a cost saving, cost 

avoidance, and/or productivity improvement activity. 

This proposed cost control measure undergoes thorough 

management review to validate the viability of the 

proposal and associated computations. The individual 

organizations are responsible for maintaining files 

containing supporting documentation for their activity 

to ensure verification by audit. Risk of inaccurate 

reporting is minimal.

The data are subjected to a four-layer data verification 

process to ensure accuracy and reliability. First, the 

report information is checked against original templates 

submitted by FAA organizations. Second, the accuracy 

and reliability of the data are independently confirmed. 

Third, FAA management checks the information before 

it is submitted to the FAA’s CFO. Last, the CFO and 

senior financial management staff conduct a final data 

verification review prior to final approval of the cost 

control report.

Clean Audit With No Material Weaknesses

The FAA’s performance against this target is reported 

in the independent auditors’ report, issued as a result 

of their audit of the FAA’s annual financial statements, 

related footnotes, and required supplementary 

information. The auditors’ report and the financial 

statements are published annually.

Acquisition Management

Critical Acquisitions on Budget/Critical Acquisitions

on Schedule

The FAA tracks and reports the status of all schedule and 

cost performance targets using an automated database, 

known as Simplified Program Information Reporting 

and Evaluation (SPIRE). The performance status for each 

program tracked in SPIRE is reported monthly to the 

ATO Executive Committee through the ATO Strategic 

Management Process and to the FAA Administrator 

through FAA Flight Plan meetings.

The programs selected each fiscal year represent a cross 

section of programs within the ATO. They include 

programs that have an Exhibit 300 as well as “buyby-the-pound” programs. The latter are typically not 

required to undergo a standard acquisition life cycle 

process. Each DOT organization maintains its own 

quality control checks for cost, schedule, and technical 

performance data of each major systems acquisition in 

accordance with OMB Circulars A-11, A-109, and A-130, 

Federal Acquisition Regulations, and Departmental 

orders implementing those directives and regulations. 

Customer Satisfaction and Operational Capability

Customer Satisfaction

The ACSI is a uniform and independent measure of 

household consumption experience. This measure 

provides a recognized, independent source of customer 

satisfaction information that can be used to benchmark 

against other ACSI scores for regulatory and Federal 

Government satisfaction indices. Using a weighted 

average of customer satisfaction scores as a measure 

allows us to broaden the FAA’s indicators of customer 

satisfaction to include nine customer bases: commercial 

pilots, general aviation pilots, mechanics, repair 

stations, air carriers, and customers of the Air Traffic 

Organization’s services, manufacturers, airports, and 

web users. Four FAA offices (including AVS, ATO, ARP, 

and the Office of Communications) are responsible for 

conducting the surveys and providing their final results 

to the Office of Planning, Policy, and Environment, 

which calculates the score for the FAA average. 

Information Security

Data on cyber security attacks are collected by the 

DOT/FAA CSMC, which is part of AIO. AIO maintains 

sensors on the DOT/FAA networks. As outlined in 

FAA Order 1370.82A, the CSMC is the focal point for 

information on all cyber incidents in the FAA. The 

CSMC works collaboratively with other information 

systems security components in the Federal Government 

to validate cyber incidents on FAA and departmental 

systems. This process provides the most accurate and 

up-to-date measure of the level of incidents. The FAA 

and the DOT use current and historical data to validate 

trends, which indicate an increase in the number and 

complexity of cyber attacks.

Assessing Programs

Program Evaluation. A critical component of 

managing our performance is the periodic evaluation of 

FAA programs. Performance measures show if intended 
Federal Aviation Administration

74 Performance Results

outcomes are occurring and assess any trends. Program 

evaluation uses analytic techniques to assess the extent 

to which our programs are contributing to those 

outcomes and trends.

Aircraft Delay Reduction. More than one in 

four flights either arrived late or was canceled in 

2007—making it one of the worst years for delays in the 

past decade. Flight delays are typically the worst at the 

New York metropolitan airports. The purpose of this 

study was to assess the effect of FAA’s Aircraft Delay 

Reduction Program on flight delays and cancellations 

that have plagued the U.S. aviation system. The U.S. 

GAO conducted a study of 

• the trends in the extent and principal sources of 

flight delays and cancellations over the past 10 years; 

• the status of Federal Government actions to reduce 

flight delays and cancellations by the summer of 

2008; and 

• the extent to which these actions may reduce delays 

and cancellations for the summer 2008 travel season. 

[See GAO-08-934T at www.gao.gov/new.items/

d08934t.pdf]. Although GAO’s scope covers the 

NAS as a whole, its work highlighted the New York 

region. 

The study based its conclusions on an analysis of DOT 

data on airline on-time performance, a review of relevant 

documents and reports, and interviews with officials 

from DOT, FAA, airport operators, and airlines, as well 

as aviation industry experts and associations on the 

status and potential impact of the Federal Government’s 

actions to reduce delays. 

Findings. The annual number of domestic airline flight 

delays and cancellations has increased about 62% while 

the annual number of scheduled flights has increased 

by 38% since 1998. In the New York area, the trend is 

even more pronounced. Cancellations in recent years 

have become more problematic as the airlines are now 

operating with fewer empty seats per flight. 

Data provide an incomplete picture of the sources of 

flight delay. Current on-time performance data do not 

capture the full extent of delays or cancellations due to 

reporting practices by some airlines. Data also fail to 

capture the extent to which passengers’ average travel 

times have increased due to the fact that DOT tracks 

flights, not passengers, which leaves out passenger 

delays due to missed connections from other delays or 

overbooked flights.

The FAA has implemented actions to reduce delays. 

The GAO study commended the DOT and the FAA 

for taking steps to reduce mounting flight delays and 

cancellations for the 2008 summer travel season. DOT 

and the FAA worked with the aviation industry to 

develop and implement several actions—capacity 

enhancing initiatives, demand management policies, and 

air traffic procedures—to reduce congestion and delays 

for the summer 2008 travel season. 

Actions may help reduce delays, but the extent of delay 

reduction in the summer of 2008 will likely be limited. 

The growing air traffic congestion and delay problem is 

the result of many factors, including airline practices, 

inadequate investment in airport and air traffic control 

infrastructure, and how aviation infrastructure is priced. 

Addressing this problem involves difficult choices, which 

affect the interests of passengers, airlines, airports, and 

local economies. If not addressed, congestion problems 

will intensify as the growth in demand is expected to 

increase over the next 10 years.

Recommendations. No recommendations were 

made as part of this GAO evaluation. The findings and 

conclusions served as testimony to the U.S. Senate’s 

Committee on Commerce, Science, and Transportation, 

Subcommittee on Aviation Operations, Safety, and 

Security. However, the DOT and the FAA continue work 

on short-term mitigation and long-term planning. 

Short-term Solutions. Solutions that lessen the 

short-term impact are capacity-enhancing initiatives 

and demand management policies. One capacityenhancing initiative is the New York/New Jersey/

Philadelphia Airspace Redesign, which is projected to 

reduce flight delays by 20% after full implementation 

in 2012. Demand management policies are being 

pursued for the three major New York airports that 

will limit the number of scheduled and unscheduled 

flights, prompting a reduction in delays by up to 41% 

depending on the airport. The proposed rules for 

LaGuardia, John F. Kennedy International, and Newark 

Liberty International are expected be become effective in 

December 2008 and expire in 2018. 

Long-term Solutions. The FAA’s long-term objective 

is to reduce congestion by increasing capacity to 
75

FY 2008 Performance and Accountability Report

Performance Results

accommodate demand. To address capacity in the 

medium to long term, DOT is working full-time to 

develop and implement NextGen technology so the air 

traffic system will be able to accommodate more traffic, 

more efficiently.

Operational Error Program

An OIG audit of the FAA’s Investigating and Reporting 

of OEs was initiated in November 2007. The objectives 

of the audit are to 

• determine whether the FAA has adequate policies 

and procedures in place to ensure the accuracy and 

consistency of operational error reporting and 

• review the roles and responsibilities of the ATO and 

FAA’s Aviation Safety lines of business in reporting 

and investigating operational errors. 

The OIG is in the process of concluding the study and 

will have a final report in early FY 2009.
In 1958, there were 9 fatal commercial air accidents in the United States resulting 

in 145 fatalities. 

In 2008, and for the past 2 years, there have been no fatal passenger airline accidents

and no fatalities among the more than 1.5 billion passengers who have flown during 

this time period.

Credit: Corbis
77

FY 2008 Performance and Accountability Report

A Message from the 

Chief Financial Officer

Financial Statements

Ramesh K. Punwani

Assistant Administrator for Financial Services/

Chief Financial Officer

A Message From the Chief Financial Officer

Safety is our number one mission. Yet while always keeping this mission as our beacon, we must also be mindful of 

how we spend the taxpayer’s dollars. 

I am proud of our many achievements this year to better execute and manage the budget resources that Congress 

provides. At the FAA, “acting more like a business” is not just a slogan. We continue to make every effort to control our 

operating costs. We are improving the discipline with which programs and contracts are first approved, bettering the 

tracking and monitoring of approved programs, and reducing our overhead costs so that more of the taxpayer dollars 

are spent on a safe, efficient, and accessible aviation system. 

The following accomplishments of FY 2008 underscore our commitment to improve our financial management.

• We achieved an unqualified opinion on our FY 2008 financial statements with no material weaknesses. 

• For the fourth time in 5 years, the AGA awarded us top honors for our 2007 Performance and Accountability 

Report. This is considered the highest form of recognition in Federal Government management reporting.

• We received our fifth consecutive award from the League of American Communication Professionals for the FY 

2006 Performance and Accountability Highlights, recognizing it as one of the top Government annual reports in 

the country. 

• 84% of our employees are now on the pay-for-performance system, including our executives. This means that 

performance targets must be achieved before annual pay raises are calculated. As part of this system, we provide 

incentives to ensure quality work and reward innovation. 

• We have worked to slow the growth in labor costs through back-filling positions with new employees at lower pay 

grades when possible and increased workforce productivity by cutting multiple levels of management and better 

managing our worker’s compensation caseload.

• The outsourcing of our flight service station function has saved $278 million since its inception and will save 

$2.1 billion through 2015.

• We created a capital investment team to review potential capital investments based upon financial and 

performance data. To date, business case reviews have identified $460 million in lifecycle savings by restructuring 

and/or terminating 10 programs. We also have improved the tracking of spending on approved programs so that 

both cost and schedule performance are closely monitored using Earned Value Management methods.
Federal Aviation Administration

78

• We are expecting to achieve $9 million in savings annually—a savings of 10 to 15% from current costs—through 

the Strategic Sourcing for the Acquisition of Various Equipment and Supplies (SAVES) initiative. The initiative has 

been extended to cover wireless contracts as well as Enterprise License agreements with Oracle and Dell. 

• We upgraded our general ledger, purchasing, and cost accounting systems so we can produce top quality financial 

data for decisionmaking. 

Our financial management transformation over the past 5 years has been steady and sure, but there is still a significant 

amount of work to do to maximize our efficiency. We are on track. Our aggressive strategies to improve performance 

and best practices from the corporate world are resulting in billions of saved dollars and avoided costs. Our incentive is 

simple. We know that every dollar saved can be used to make our aviation system safer. 

Ramesh K. Punwani

Assistant Administrator for Financial Services/Chief Financial Officer

November 4, 2008

A Message From the Chief Financial Officer
79

FY 2008 Performance and Accountability Report

OIG Qualit y Control Review

OIG QUALITYCONTROL REVIEW

U.S. Department of 

Memorandum

Transportation 

Office of the Secretary 

of Transportation 

Office of Inspector General 

Subject: ACTION: Quality Control Review of Audited 

Financial Statements for FY 2008 and FY 2007, 

Federal Aviation Administration 

Report Number: QC-2009-0008 

Date: November 13, 2008 

From: Calvin L. Scovel III

Inspector General

Reply to 

Attn. of: JA-20

To: The Secretary

Acting Federal Aviation Administrator 

The audit of the Federal Aviation Administration’s (FAA) Financial Statements as 

of and for the years ended September 30, 2008, and September 30, 2007, was 

completed by KPMG LLP of Washington, D.C. (see Attachment). We performed 

a quality control review of the audit work to ensure that it complied with 

applicable standards. These standards include the Chief Financial Officers Act, as 

amended; Generally Accepted Government Auditing Standards; and Office of 

Management and Budget Bulletin 07-04, “Audit Requirements for Federal 

Financial Statements,” as amended.

KPMG concluded that FAA’s consolidated financial statements presented fairly, 

in all material respects, the financial position of FAA as of September 30, 2008, 

and September 30, 2007, and its net costs, changes in net position, and budgetary 

resources, for the years then ended, in conformity with accounting principles 

generally accepted in the United States. KPMG reported two internal control 

significant deficiencies but no material weaknesses. The report did not identify 

any instances of noncompliance with laws and regulations. 

FAA should be commended for corrections leading to the downgrading of the 

material weakness associated with its accounting for Property, Plant, and 

Equipment, including the Construction in Progress account, to a significant 

deficiency. This material weakness was reported in the last three consecutive 

years and resulted in a qualified audit opinion on FAA’s Fiscal Year 2006 

financial statements. Similarly, FAA slipped from an unqualified audit opinion to 

a qualified audit opinion in Fiscal Year 2000 due to deficiencies in this area. 
Federal Aviation Administration

80

2

FAA must remain vigilant in sustaining good financial management operations 

and continue improving its accounting for Property, Plant, and Equipment. 

Significant Deficiencies

1. Timely Processing of Transactions for Property, Plant, and Equipment, 

including the Construction in Progress Account 

2. Information Technology Controls over FAA and Third-Party Systems and 

Applications

KPMG made 11 recommendations for corrective action, we agree with all and, 

therefore, are making no additional recommendations. FAA concurred with the 

significant deficiencies, agreed with the recommendations; and committed to 

implement corrective actions by March 31, 2009. In accordance with DOT Order 

8000.1C, the corrective actions taken in response to the recommendations are 

subject to follow-up. In our opinion, the audit work performed by KPMG 

complied with applicable standards.

We appreciate the cooperation and assistance of FAA, Office of Financial 

Management, and KPMG representatives. If we can answer any questions, please 

call me at (202) 366-1959; David Dobbs, Principal Assistant Inspector General for 

Auditing and Evaluation, at (202) 366-1427; or Rebecca C. Leng, Assistant 

Inspector General for Financial and Information Technology Audits, at 

(202) 366-1407.

Attachment

OIG Qualit y Control Review
81

FY 2008 Performance and Accountability Report

Independent Auditors’Report

KPMG LLP 

2001 M Street, NW 

Washington, DC 20036 

Independent Auditors’ Report 

Administrator, Federal Aviation Administration

Inspector General, U.S. Department of Transportation: 

We have audited the accompanying consolidated balance sheets of the U.S. Department of Transportation 

Federal Aviation Administration (FAA) as of September 30, 2008 and 2007, and the related consolidated 

statements of net cost, changes in net position, and the combined statements of budgetary resources 

(hereinafter referred to as “consolidated financial statements”) for the years then ended. The objective of 

our audits was to express an opinion on the fair presentation of these consolidated financial statements. 

We did not audit the financial statements of the FAA Franchise Fund (FF), a component entity of the 

FAA, as of September 30, 2008. The financial statements of the FF were audited by other auditors whose 

report, dated November 4, 2008, has been furnished to us, and our opinion, insofar as it relates to the 

amounts included for the FF, is based solely on the report of the other auditors. 

In connection with our fiscal year 2008 audit, we also considered the FAA’s internal controls over 

financial reporting and tested the FAA’s compliance with certain provisions of applicable laws, 

regulations, contracts, and grant agreements that could have a direct and material effect on the 

consolidated financial statements. This report does not include the results of the other auditors’ testing of 

internal control over financial reporting or compliance and other matters that are reported on separately 

by those auditors. 

Summary 

As stated in our opinion on the consolidated financial statements, based on our audits and the report of the 

other auditors, we concluded that the FAA’s consolidated financial statements as of and for the years 

ended September 30, 2008 and 2007, are presented fairly, in all material respects, in conformity with U.S. 

generally accepted accounting principles. 

Our consideration of internal controls over financial reporting resulted in the following conditions being 

identified as significant deficiencies: 

A. Timely Processing of Transactions for Property, Plant, and Equipment, including the 

Construction in Progress Account 

B. Information Technology Controls over FAA and Third-Party Systems and Applications 

However, neither of the significant deficiencies are considered to be material weaknesses. 

The results of our tests of compliance with certain provisions of laws, regulations, contracts, and grant 

agreements disclosed no instances of noncompliance or other matters that are required to be reported 

herein under Government Auditing Standards and OMB Bulletin No. 07-04, Audit Requirements for 

Federal Financial Statements.

KPMG LLP, a U.S. limited liability partnership, is the U.S. 

member firm of KPMG International, a Swiss cooperative. 

Independent Auditors’ Report
Federal Aviation Administration

82

The following sections discuss our opinion on the FAA’s consolidated financial statements; our 

consideration of the FAA’s internal controls over financial reporting; our tests of the FAA’s compliance 

with certain provisions of applicable laws, regulations, contracts, and grant agreements; and 

management’s and the auditors’ responsibilities. 

Opinion on the Financial Statements 

We have audited the accompanying consolidated balance sheets of the U.S. Department of Transportation 

Federal Aviation Administration (FAA) as of September 30, 2008 and 2007, and the related consolidated 

statements of net cost, changes in net position, and the combined statements of budgetary resources 

(hereinafter referred to as “consolidated financial statements”) for the years then ended. We did not audit 

the amounts included in the consolidated financial statements related to the financial statements of the 

FAA Franchise Fund (FF), a component of the FAA, which reflect 2.6% of total assets and 20% of 

exchange revenue (after elimination of inter-agency revenues), as of and for the year ended September 30, 

2008. The financial statements of the FF as of and for the year ended September 30, 2008, were audited 

by other auditors whose report dated November 4, 2008, has been provided to us and our opinion, insofar 

as it relates to the amounts included for the FF’s financial statements, is based solely on the report of the 

other auditors. 

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements 

referred to above present fairly, in all material respects, the financial position of the Federal Aviation 

Administration as of September 30, 2008 and 2007, and its net costs, changes in net position, and 

budgetary resources for the years then ended, in conformity with U.S. generally accepted accounting 

principles.

As discussed in Notes 1 and 12, the consolidated financial statements reflect actual excise tax revenues 

deposited in the Airport and Airway Trust Fund through June 30, 2008 and excise tax receipts estimated 

by the Department of Treasury’s Office of Tax Analysis for the quarter ended September 30, 2008. 

The information in the Management’s Discussion and Analysis, Required Supplementary Information, 

and Required Supplementary Stewardship Information sections is not a required part of the consolidated 

financial statements, but is supplementary information required by U.S. generally accepted accounting 

principles. We and the other auditors have applied certain limited procedures, which consisted principally 

of inquiries of management regarding the methods of measurement and presentation of this information. 

However, we did not audit this information and, accordingly, we express no opinion on it. 

Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements 

taken as a whole. The information in the Performance Results Section is presented for purposes of 

additional analysis and is not required as part of the consolidated financial statements. This information 

has not been subjected to auditing procedures and, accordingly, we express no opinion on it. 

Internal Control Over Financial Reporting 

Our consideration of the internal control over financial reporting was for the limited purpose described in 

the Responsibilities section of this report and would not necessarily identify all deficiencies in the internal 

control over financial reporting that might be significant deficiencies or material weaknesses. 

A control deficiency exists when the design or operation of a control does not allow management or 

employees, in the normal course of performing their assigned functions, to prevent or detect 

misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of 

control deficiencies, that adversely affects the FAA’s ability to initiate, authorize, record, process, or 

report financial data reliably in accordance with U.S. generally accepted accounting principles such that 

Independent Auditors’ Report
83

FY 2008 Performance and Accountability Report

there is more than a remote likelihood that a misstatement of the FAA’s consolidated financial statements 

that is more than inconsequential will not be prevented or detected by the FAA’s internal control. A 

material weakness is a significant deficiency, or combination of significant deficiencies, that results in 

more than a remote likelihood that a material misstatement of the financial statements will not be 

prevented or detected by the FAA’s internal control. 

In our fiscal year 2008 audit, we consider the deficiencies described in Exhibit I to be significant 

deficiencies in internal control over financial reporting. However, we believe that neither of the 

significant deficiencies described in Exhibit I are material weaknesses. Exhibit II presents the status of 

prior year significant deficiencies. 

Compliance and Other Matters 

The results of our tests of compliance described in the Responsibilities section of this report, exclusive of 

those referred to in FFMIA, disclosed no instances of noncompliance or other matters that are required to 

be reported herein under Government Auditing Standards or OMB Bulletin No. 07-04. 

The results of our tests of FFMIA disclosed no instances in which the FAA’s financial management 

systems did not substantially comply with the (1) Federal financial management systems requirements, 

(2) applicable Federal accounting standards, and (3) the United States Government Standard General 

Ledger at the transaction level. 

* * * * * * * 

Responsibilities

Management’s Responsibilities. Management is responsible for the consolidated financial statements; 

establishing and maintaining effective internal control; and complying with laws, regulations, contracts, 

and grant agreements applicable to the FAA. 

Auditors’ Responsibilities. Our responsibility is to express an opinion on the fiscal year 2008 and 2007 

consolidated financial statements of the FAA based on our audits. We conducted our audits in accordance 

with auditing standards generally accepted in the United States of America; the standards applicable to 

financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 

United States; and OMB Bulletin No. 07-04. Those standards and OMB Bulletin No. 07-04 require that 

we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial 

statements are free of material misstatement. An audit includes consideration of internal control over 

financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but 

not for the purpose of expressing an opinion on the effectiveness of the FAA’s internal control over 

financial reporting. Accordingly, we express no such opinion. 

An audit also includes: 

x Examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 

financial statements; 

x Assessing the accounting principles used and significant estimates made by management; and 

x Evaluating the overall consolidated financial statement presentation. 

We believe that our audits, and the report of the other auditors, provide a reasonable basis for our opinion. 

In planning and performing our fiscal year 2008 audit, we considered the FAA’s internal control over 

financial reporting by obtaining an understanding of the FAA’s internal control, determining whether 

Independent Auditors’ Report
Federal Aviation Administration

84

internal controls had been placed in operation, assessing control risk, and performing tests of controls as a 

basis for designing our auditing procedures for the purpose of expressing our opinion on the consolidated 

financial statements. We did not test all internal controls relevant to operating objectives as broadly 

defined by the Federal Managers’ Financial Integrity Act of 1982. The objective of our audit was not to 

express an opinion on the effectiveness of the FAA’s internal control over financial reporting. 

Accordingly, we do not express an opinion on the effectiveness of the FAA’s internal control over 

financial reporting. 

As part of obtaining reasonable assurance about whether the FAA’s fiscal year 2008 consolidated 

financial statements are free of material misstatement, we performed tests of the FAA’s compliance with 

certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could 

have a direct and material effect on the determination of the consolidated financial statement amounts, 

and certain provisions of other laws and regulations specified in OMB Bulletin No. 07-04, including the 

provisions referred to in Section 803(a) of FFMIA. We limited our tests of compliance to the provisions 

described in the preceding sentence, and we did not test compliance with all laws, regulations, contracts, 

and grant agreements applicable to the FAA. However, providing an opinion on compliance with laws, 

regulations, contracts, and grant agreements was not an objective of our audit, and, accordingly, we do 

not express such an opinion. 

______________________________ 

The FAA’s response to the findings identified in our audit is presented in Exhibit I. We did not audit the 

FAA’s response and, accordingly, we express no opinion on it. 

This report is intended solely for the information and use of the U.S. Department of Transportation and 

FAA management, the U.S. Department of Transportation Office of Inspector General, OMB, the U.S. 

Government Accountability Office, and the U.S. Congress and is not intended to be and should not be 

used by anyone other than these specified parties. 

November 4, 2008 

Independent Auditors’ Report
85

FY 2008 Performance and Accountability Report

Independent Auditors’ Report EXHIBIT I

Significant Deficiencies in Internal Control 

SIGNIFICANT DEFICENCIES

A. Timely Processing of Transactions and Accounting for Property, Plant, and Equipment, 

including the Construction in Progress Account (Repeat/Update) 

Background: The FAA constructs significant capital assets, such as radar, navigational, 

communications, and other technology equipment that is used to operate the United States 

National Airspace System. The FAA’s Property, Plant and Equipment (PP&E) portfolio totals 

approximately $13.8 billion, including Construction in Progress (CIP) of approximately $2.3 

billion. CIP consists of thousands of projects which range in size from a few thousand dollars to 

hundreds of millions of dollars. Most of the projects involve sophisticated technology that may 

take years to develop from concept to deployment. CIP is often deployed in multiple units and 

locations, causing FAA to allocate accumulated CIP to general property, plant, and equipment as 

each asset is deployed in various locations. The allocation of cost to a single deployed asset can 

involve complex calculations of incurred and projected direct and indirect costs. The rapid 

advancement of technology and changes in FAA programs sometimes causes the FAA to 

abandon projects resulting in an expense of capitalized amounts before deployment. 

In FY 2006, FAA management was unable to assert to the accuracy and completeness of certain 

CIP and related balances at September 30, 2006. Consequently, we were unable to complete our 

audit procedures over those balances and related accounts. We also reported that FAA’s material 

weakness in internal controls over its CIP balances and related accounts was uncorrected. In FY 

2007, the FAA executed an extensive corrective action plan, involving a complete review of the 

CIP balance reported by FAA at September 30, 2006. Management’s review of CIP resulted in a 

restatement during FY 2007 of its 2006 consolidated financial statements including a 

reclassification of CIP to general property, plant, and equipment of $1.7 billion and a charge to 

expense of more than $900 million, in addition to other corrections of FY 2006 PP&E related 

expenses. In FY 2007, we continued to report a material weakness in internal controls over 

PP&E, including CIP. 

Conditions: During fiscal year 2008, we noted: 

1. Weaknesses in the controls over the additions and adjustment to PP&E (excluding CIP) 

at the FAA regional level. As of March 31, 2008, we noted 17 instances where assets 

were capitalized with balances less than the capitalization threshold of $25,000 totaling 

$.1 million, 18 instances where assets were capitalized at the regional level when the 

programs were determined to be expensed projects at the national level totaling $7.4 

million, 2 instances of incorrect useful lives totaling $.5 million, and 7 instances where 

the recording of an asset in two parts (one regional and one headquarters) occurred. As a 

result of the high error rate, we were unable to determine the accuracy of the regional 

additions and adjustments totaling $116 million as of March 31, 2008. In order to 

address the control weaknesses at the regional level, FAA implemented additional 

controls over regional projects and conducted a thorough review of all 

additions/adjustments to regional PP&E throughout the remainder of FY 2008. As a 

result of FAA’s review, we noted a $34 million overstatement of expenses as of 

September 30, 2008 recorded in the current year but related to prior year activity. We 

further noted that regional additions and adjustments to PP&E were fairly stated as of 

September 30, 2008. 

2. Weaknesses in the controls over the additions to CIP at the headquarters and regional 

level. We noted 7 instances where FAA personnel at the headquarters and regional level 

Independent Auditors’ Report
Federal Aviation Administration

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Independent Auditors’ Report EXHIBIT I

Significant Deficiencies in Internal Control 

were not following established policies and procedures related to the capitalization of CIP 

transactions totaling $1.9 million, which projected to a potential overstatement of CIP of 

approximately $33.9 million as of September 30, 2008. Specifically, we noted instances 

of costs capitalized to CIP that did not meet the capitalization threshold, maintenance and 

repair costs capitalized to CIP, and routine non-capitalizable costs recorded as CIP. 

3. Weaknesses in the controls over FAA’s quarterly PP&E accrual. In FY 2007, the FAA 

updated their Accounting Capitalization Desk Guide through FAA Policy 2007-1, 

Timeliness of Asset Capitalization and In-Service Dates, to ensure that assets are 

capitalized within 75 calendar days of placing the assets in-service. As a result of FAA 

changing their capitalization policy to 75 days, an accrual is necessary at the end of each 

quarter to account for assets that have been deployed and placed in service, but not 

capitalized from CIP to PP&E. During FY 2008, we noted instances where FAA did not 

accrue for all projects placed in service at period end (March 31, 2008) totaling $33.8 

million and situations where FAA did not accrue for project “trailing dollars” totaling 

$1.8 million. “Trailing Dollars” are expenditures necessary to bring the PP&E to a form 

and location suitable for its intended use, but had not been accrued to the asset task when 

the asset was capitalized from CIP to PP&E. We noted that these errors were not initially 

identified by FAA as a “look-back” process was not in place for the first six months of 

the year. FAA implemented a “look-back” process for the remainder of the fiscal year, 

however, we identified a potential understatement of PP&E in the amount of $15 million 

as of September 30, 2008 related to costs incurred as of year-end not capitalized into 

PP&E.

4. A lack of adherence to policies and procedures by program offices to ensure the timely 

removal of fixed assets from the accounting system upon retirement. Through inspection 

of retirement documentation and physical observation of general property, plant, and 

equipment on-hand, we noted 4 instances where an asset no longer existed and was not 

removed from the fixed assets subsidiary ledger in a timely manner totaling $4.2 million 

in net book value as of September 30, 2008. 

5. Improper expensing during FY 2008 of CIP projects. Specifically, we noted that the 

FAA expensed approximately $17 million of CIP projects with balances less then 

$25,000 that related to prior year activity. Therefore, the expenses were recorded in the 

incorrect fiscal year. In addition, we noted that FAA expensed approximately $20.5 

million of CIP projects with current balances between $25,000 and $100,000, in 

preparation for the new capitalization threshold of $100,000 to be in place as of October 

1, 2008. However, expensing these projects during FY 2008 was not in accordance with 

FAA’s current policies and procedures. As a result of both issues noted above, current 

year operating expense was overstated by $37.5 million, and CIP was understated by 

$20.5 million. 

6. Improper up-front coding of a headquarters project as capital when the project met the 

criteria for expense coding. Up-front coding is the process utilized by FAA when 

initially establishing a project as either capital or expense. If a project is coded as capital 

all costs are capitalized to CIP and if coded as expense all costs are recorded to expense 

when incurred. As a result of the improper up-front coding, we noted that FAA 

capitalized approximately $2 million to CIP that should have been recorded to operating 

expense. FAA’s subsequent review of up-front coding adjusted the amount to operating 

expense prior to September 30, 2008. 

Independent Auditors’ Report
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FY 2008 Performance and Accountability Report

Independent Auditors’ Report EXHIBIT I

Significant Deficiencies in Internal Control 

7. Improper classification of CIP projects during FY 2008. Specifically, we noted that 

FAA’s CIP balance as of August 31, 2008 included costs of approximately $76K for a 

project that should have been expensed, which projected to an overall overstatement in 

CIP of approximately $1 million. FAA subsequently corrected the error prior to 

September 30, 2008. 

8. Correction of asset useful life, date placed in service, and/or asset cost during FY 2008 

due to input errors in the prior year. Specifically, we noted 2,690 assets in service as of 

September 30, 2007 had an appropriate change in their useful life, date placed in service, 

and/or asset cost during FY 2008, which resulted in a net overstatement of current year 

depreciation expense of $1.9 million. 

Cause/Effect: In FY 2004, the FAA implemented a new accounting system. During the 

conversion, some CIP data was transferred at the summary level which made the identification of 

some assets in CIP more difficult, causing assets to remain in CIP long after they had been placed 

in service or abandoned, and required manual intervention to review and capitalize assets. 

Historically, communication has been weak between the FAA’s accounting offices, the 

intermediary lines of business finance staff or comptrollers, and program/project managers. Until 

recently, programmatic and operating personnel did not always adhere to policies and procedures 

to enable the timely recording of PP&E placed in service. This created a challenge in recording 

transfers from CIP to PP&E in a timely manner. Communication has improved during FY 2008 

and a strong effort was put in place to develop and implement policies and procedures to address 

the weaknesses noted in the prior year audits. However, as new policies and procedures were 

implemented, the FAA was faced with the challenge of properly implementing these controls 

throughout the agency. Weaknesses noted during FY 2008 are the result of the newly developed 

policies and procedures not operating effectively or not being implemented throughout the FAA. 

Finally, accounting for FAA CIP is very complex, with many variables and inputs that affect the 

capitalized value, including estimates, indirect costs, projection of future spend rates, timing and 

number of asset deployments. Property, plant, and equipment (including CIP) as of September 

30, 2008 is overstated (net) by approximately $4.5 million. In addition, related expenses as of 

September 30, 2008 are overstated by approximately $33.4 million. If FAA is unable to correct 

these conditions early in FY 2009 the CIP, PP&E and related financial statement balances may 

not be fairly stated at any point during FY 2009, and in future years. 

Criteria: Statement of Federal Financial Accounting Standards (SFFAS) No. 6, Accounting for 

Property, Plant, and Equipment, requires that: 

x Constructed PP&E be recorded as CIP until the asset is placed in service, at which time it 

is to be transferred to general PP&E, and depreciation expense should be taken over the 

estimated useful life of the asset; 

x PP&E is recorded at historical cost with an adjustment recorded for depreciation. In the 

absence of such information, estimates may be used based on a comparison of similar 

assets with known values or inflation-adjusted current costs; and 

x PP&E accounts be adjusted for disposals, retirements and removal of PP&E, including 

associated depreciation. 

Independent Auditors’ Report
Federal Aviation Administration

88

Independent Auditors’ Report EXHIBIT I

Significant Deficiencies in Internal Control 

OMB Circular No. A-123, Management’s Responsibility for Internal Control, states that 

transactions should be promptly recorded, properly classified and accounted for in order to 

prepare timely and reliable financial and other reports. Documentation for transactions, 

management controls, and other significant events must be clear and readily available for 

examination. 

GAO’s Standards for Internal Control in the Federal Government states that internal controls 

should generally be designed to ensure that on-going monitoring occurs in the course of normal 

operations. Management is responsible for developing control activities, which are the policies, 

procedures, techniques, and mechanisms that enforce management’s directives and help ensure 

that actions address risks. The activities include reviews by management at the functional or 

activity level; proper execution of transactions and events; accurate and timely recording of 

transactions and events; and appropriate documentation of transactions and internal control. 

Recommendations: Properly accounting for PP&E and CIP transactions will require a 

commitment of resources, detailed policies and procedures, and clear communications with 

programmatic personnel for key inputs. FAA senior management personnel have developed a 

plan to actively monitor PP&E, including CIP activity. However, the new policies and 

procedures implemented during FY 2008 were either not in place or operating effectively for the 

entire fiscal year. As FAA continues to implement and revise its policies and procedures and 

train personnel, we recommend that the FAA: 

1. Fully comply with the existing policies and procedures, including policies on capitalization 

thresholds, asset retirements, up-front coding, and procedures for timely entry of transactions 

in the fixed asset subsidiary ledger, to ensure that CIP and related PP&E balances are 

accurate, complete and exist throughout the year. 

2. Ensure that supporting documentation for capitalization of PP&E, including CIP, is properly 

managed, maintained and available for examination upon request. 

3. Implement a three-year rolling inventory of personal and real property that is owned by the 

FAA and input the results into the Delphi property records. 

4. Continue to strengthen communication and reporting between Financial Management, Air 

Traffic Organization-Airports, Air Traffic Organization-Finance, and Region and Center 

Operations to ensure that all assets that are deployed and placed in service but not capitalized 

from CIP to PP&E are properly accounted for in the quarterly PP&E accrual. Continue the 

validation of the quarterly accrual utilizing the “look-back” process implemented during FY 

2008. 

5. Continue reviewing the useful life and date placed in service of capitalized assets. In 

addition, implement procedures to track the effect of changing the useful life, date placed in 

service, and/or cost of an asset on current year and prior year depreciation expense on a 

quarterly basis. 

6. Continue improving the functionality of IT systems to automate transactions wherever 

possible and reduce the extent of manual intervention to record routine transactions involving 

CIP and PP&E.

7. Continue training and strengthening communication between the field, regions, and the 

operating accounting offices to ensure that they follow newly implemented guidance resulting 

from the Corrective Action Plans over PP&E, including CIP. 

Independent Auditors’ Report
89

FY 2008 Performance and Accountability Report

Independent Auditors’ Report EXHIBIT I

Significant Deficiencies in Internal Control 

FAA’s Response: The FAA has reviewed the significant deficiency related to PP&E, including 

CIP, and agrees with KPMG’s recommendations. We are committed to implementing KPMG's 

recommendations by March 31, 2009 as well as to continuously improving our property 

accounting practices related to the timeliness and quality controls over our capitalization process. 

In FY 2009, we will continue to emphasize the need for improved communication with the 

regional offices, closer monitoring of our quarterly accruals, automated improvements, and 

adequate supporting documentation throughout the year. As we further standardize, we believe 

these actions will resolve the conditions that resulted in this significant deficiency and, at the 

same time, improve our overall business process.

B. Information Technology Controls over FAA and Third-party Systems and Applications 

(Repeat/Update) 

Background: The FAA relies on extensive information technology to administer internal controls 

over the performance of financial management related activities and the preparation of financial 

statements. Information Technology (IT) systems are essential to ensure the integrity, 

confidentiality, availability, and accuracy of critical data. Effective IT general controls are 

typically defined by the GAO’s Federal Information System Controls Audit Manual (FISCAM) 

in six key control areas: entity-wide security program planning and management, access control, 

application software development and change control, system software, segregation of duties, and 

service continuity. 

Conditions: During our FY 2008 audit, we noted that FAA made progress in improving various 

aspects of IT general controls weaknesses that were reported as a significant deficiency in FY 

2007. However, during FY 2008 we noted weaknesses still exist related to access controls, 

application software development and change control, segregation of duties, and system software. 

1. Access controls – weaknesses noted related to Delphi (core accounting system used by 

FAA), System of Airport Reporting (SOAR), Purchasing Request Information System 

Management (PRISM), Cost Accounting System (CAS), and Consolidated Automated 

System for Time and Labor Entry (CASTLE). 

2. Application software development and change control – weaknesses noted related to 

Delphi, SOAR, CAS, and PRISM. 

3. Segregation of duties – weaknesses noted related to CASTLE. 

4. System Software – weaknesses noted related to Delphi, SOAR, CAS, and PRISM. 

Cause/Effect: Effective policies and procedures have not been implemented to ensure that 

controls are in place and operating effectively in the information technology environment. 

The deficiencies noted could adversely affect the FAA’s ability to record, process, summarize, 

and report financial data consistent with the assertions of management in the FAA’s consolidated 

financial statements. 

Independent Auditors’ Report
Federal Aviation Administration

90

Independent Auditors’ Report EXHIBIT I

Significant Deficiencies in Internal Control 

Criteria: The Federal Information Security Management Act (FISMA) passed as part of the EGovernment Act of 2002, mandates that Federal entities maintain IT security programs in 

accordance with National Institute of Standards and Technology (NIST) guidance. 

The Federal Financial Management Improvement Act (FFMIA) set forth legislation prescribing 

policies and standards for executive departments and agencies to follow in developing, operating, 

evaluating, and reporting on financial management systems. The purpose of FFMIA is: (1) to 

provide for consistency of accounting by an agency from one fiscal year to the next, and uniform 

accounting standards throughout the Federal Government; (2) require Federal financial 

management systems to support full disclosure of Federal financial data, including the full costs 

of Federal programs and activities; (3) increase the accountability and credibility of federal 

financial management; (4) improve performance, productivity and efficiency of Federal 

Government financial management; and (5) establish financial management systems to support 

controlling the cost of Federal Government. 

OMB Circular No. A-130, Management of Federal Information Resources, Appendix III, 

requires Federal agencies to establish adequate security controls for information collected, 

processed, transmitted, stored, or disseminated in general support and application systems 

commensurate with the risk and magnitude of harm resulting from the loss, misuse, or 

unauthorized access to or modification of information. 

National Institute of Standards and Technology Special Publication Number 800-53,

Recommended Security Controls for Federal Information Systems, addresses minimum security 

control requirements that Federal agencies should implement in their general support and 

application systems that are consistent with the control issues addressed in this report. 

Recommendations: We recommend that the FAA: 

1. Access controls – Implement policies and procedures to enforce appropriate password 

controls throughout the FAA. 

2. Application Software Development and Change Control – Enhance existing policies 

and procedures related to software development and change control to include the 

documentation of compensating controls to reduce the likelihood of the related 

vulnerability being exploited and centrally maintain documentation of the associated risk 

acceptances. 

3. Segregation of Duties – Implement policies and procedures to ensure compliance with 

segregation of duties requirements. 

4. System Software – Enhance existing policies and procedures related to system software 

to include the documentation of compensating controls to reduce the likelihood of the 

related vulnerability being exploited and centrally maintain documentation of the 

associated risk acceptances. 

FAA’s Response: The FAA has reviewed the significant deficiency related to information 

technology controls over the FAA and third-party systems applications and agrees with KPMG’s 

recommendations. The FAA, through the Chief Information Officer, is committed to maintaining 

system security and will implement KPMG’s recommendations no later than March 31, 2009. We 

will also work with any third parties that operate systems for the FAA to ensure that these 

systems comply with KPMG’s recommendations as well.

Independent Auditors’ Report
91

FY 2008 Performance and Accountability Report

Independent Auditors’ Report EXHIBIT II

Significant Deficiencies in Internal Control 

STATUS OF PRIOR YEAR SIGNIFICANT DEFICIENCIES AND NON-COMPLIANCE 

WITH SIGNIFICANT LAWS AND REGULATIONS 

Prior Year Condition As Reported At 

September 30, 2007 

Status As Of

September 30, 2008 

Timely Processing of 

Transactions and 

Accounting for 

Property, Plant, and 

Equipment, including 

the Construction in 

Progress Account 

(Repeat/Update) 

Material weakness: There were 

certain internal control 

weaknesses related to the 

timeliness of transaction 

processing and accounting for 

PP&E, including CIP 

transactions.

Continue as a significant 

deficiency: Although the FAA 

was successful in implementing 

new policies and procedures to 

address the prior year issues, 

weaknesses still remain in the 

timely and accurate recording of 

property, plant, and equipment, 

including CIP transactions. 

Information

technology controls 

over FAA and thirdparty systems and 

applications

Significant deficiency: Certain 

general controls related to the 

FAA’s primary financial 

applications owned by the FAA 

and the DOT need to be 

strengthened.

Continue as a significant 

deficiency: Certain general 

control weaknesses continue to 

exist related to FAA’s primary 

financial applications. 

Management 

Oversight and 

Reporting of 

Inventory

Significant deficiency: There 

were certain internal control 

weaknesses related to the 

reporting of inventory 

transactions. Specifically, we 

noted instances of double 

counting of transactions between 

inventory and CIP, inconsistent 

inventory allowance calculations, 

and improper classification of 

inventory accounts. 

No longer considered a 

significant deficiency.

Non-compliance with 

the Federal Financial 

Management

Improvement Act

Instance of non-compliance:

The FAA’s financial systems did 

not comply with U.S. 

Government Standard General 

Ledger at the transaction level 

and management was unable to 

account for transactions and 

present balances in its periodic 

financial statements in 

accordance with applicable 

accounting standards, as of and 

for the year ended, September 30, 

2007. 

No longer considered an 

instance of non-compliance.

Independent Auditors’ Report
Federal Aviation Administration

92

Assets 2008 2007

Intragovernmental

Fund balance with Treasury (Note 2) $ 3,926,742 $ 3,895,095

Investments, net (Note 3) 8,846,350 8,904,357

Accounts receivable, prepayments, and other (Note 4) 195,119 374,209

Total intragovernmental 12,968,211 13,173,661

Accounts receivable, prepayments, and other, net (Note 4) 134,695 108,347

Inventory, operating materials, and supplies, net (Note 5) 538,837 507,527

Property, plant, and equipment, net (Notes 6 and 9) 13,765,187 13,891,770

Total assets $ 27,406,930 $ 27,681,305

Liabilities

Intragovernmental liabilities

Accounts payable $ 11,521 $ 20,379

Employee related and other (Note 8) 379,002 332,249

Total intragovernmental liabilities 390,523 352,628

Accounts payable 335,937 387,036

Grants payable 642,041 653,790

Environmental (Note 7, 15 & 16) 637,825 566,886

Employee related and other (Notes 8, 9 & 16) 1,037,837 911,410

Federal employee benefits (Note 10) 915,242 883,982

Total liabilities 3,959,405 3,755,732

Commitments and contingencies (Notes 9 & 16)

Net position

Unexpended appropriations—earmarked funds (Note 12) 920,894 1,097,039

Unexpended appropriations—other funds - 2,877

Subtotal unexpended appropriations 920,894 1,099,916

Cumulative results of operations—earmarked funds (Note 12) 11,182,229 11,647,347

Cumulative results of operations—other funds 11,344,402 11,178,310

 Subtotal cumulative results of operations 22,526,631 22,825,657

Total net position 23,447,525 23,925,573

 Total liabilities and net position $ 27,406,930 $ 27,681,305

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

CONSOLIDATED BALANCE SHEETS

As of September 30

The accompanying notes are an integral part of these financial statements.

Financial Statements

FinancialStatements
93

FY 2008 Performance and Accountability Report

Line of business programs (Note 11) 2008 2007

Air Traffic Organization

Expenses $ 10,596,417 $ 9,825,077

Less earned revenues (171,211) (144,601)

Net costs 10,425,206 9,680,476

Aviation Safety

Expenses 1,161,014 1,018,315

Less earned revenues (6,142) (5,566)

Net costs 1,154,872 1,012,749

Airports

Expenses 3,753,840 3,923,719

Less earned revenues (165) (114)

Net costs 3,753,675 3,923,605

Commercial Space Transportation

Expenses 11,257 10,768

Net costs 11,257 10,768

Non line of business programs

Regions and center operations and other programs

Expenses 557,994 604,529

Less earned revenues (370,883) (417,673)

Net costs 187,111 186,856

Net cost of operations

Total expenses 16,080,522 15,382,408

Less earned revenues (548,401) (567,954)

Total net cost $ 15,532,121 $ 14,814,454

(Dollars in Thousands)

For the Years Ended September 30

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

CONSOLIDATED STATEMENTS OF NET COST

The accompanying notes are an integral part of these financial statements.

Financial Statements
Federal Aviation Administration

94

2008 2008 2008 2007 2007 2007

Earmarked Other funds Totals Earmarked Other funds Totals

Unexpended Unexpended Unexpended Unexpended Unexpended Unexpended 

appropriations appropriations appropriations appropriations appropriations appropriations

Beginning balances $ 1,097,039 $ 2,877 $ 1,099,916 $ 426,474 $ 2,877 $ 429,351

Budgetary financing sources

Appropriations received (Note 14) 2,342,939 - 2,342,939 2,746,317 - 2,746,317

Appropriations transferred-in/out - - - 621 - 621

Rescissions, cancellations, and other (20,393) - (20,393) (65,511) - (65,511)

Appropriations used (2,498,691) (2,877) (2,501,568) (2,010,862) (2,010,862) - 

Total budgetary financing sources (176,145) (2,877) (179,022) 670,565 - 670,565

Ending balances $ 920,894 $ - $ 920,894 $ 1,097,039 $ 2,877 $ 1,099,916

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION 

For the Years Ended September 30 

UNEXPENDED APPROPRIATIONS

The accompanying notes are an integral part of these financial statements.

Financial Statements
95

FY 2008 Performance and Accountability Report

2008 2008 2008 2007 2007 2007

Earmarked Other funds Totals Earmarked Other funds Totals

Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative

results of results of results of results of results of results of

operations operations operations operations operations operations

Beginning balances $ 11,647,347 $ 11,178,310 $ 22,825,657 $ 12,775,897 $ 10,020,495 $ 22,796,392

Budgetary financing sources

Appropriations used 2,498,691 2,877 2,501,568 2,010,862 2,010,862 - 

Nonexchange revenue—excise taxes and other (Note 12) 12,283,879 (5,119) 12,278,760 12,372,397 1,170 12,373,567

Transfers-in/out without reimbursement (111,563) - (111,563) (132,708) 58,062 (74,646)

Other financing sources

Transfers-in/out without reimbursement (1,898,366) 1,898,366 (2,447,251) - 2,447,463 212

Imputed financing from costs

 absorbed by others (Note 13) 514,478 49,852 564,330 474,119 59,605 533,724

Total financing sources 13,287,119 1,945,976 15,233,095 12,277,419 2,566,300 14,843,719

Net cost of operations 13,752,237 1,779,884 15,532,121 13,405,969 1,408,485 14,814,454

Net change (465,118) 166,092 (299,026) (1,128,550) 1,157,815 29,265

Ending balances $ 11,182,229 $ 11,344,402 $ 22,526,631 $ 11,647,347 $ 11,178,310 $ 22,825,657

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION 

For the Years Ended September 30 

CUMULATIVE RESULTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements.

Financial Statements
Federal Aviation Administration

96

Budgetary resources (Note 14) 2008 2007

$ 2,753,668 $ 2,305,222

Recoveries of prior year obligations 471,076 291,059

Budget authority 19,485,521 19,725,794

Spending authority from offsetting collections 7,174,115 6,502,604

Nonexpenditure transfers, net (41,566) (46,331)

Temporarily not available pursuant to public law - -

Permanently not available (4,697,732) (5,058,781)

Total budgetary resources $ 25,145,082 $ 23,719,567

Status of budgetary resources

Obligations incurred $ 22,322,802 $ 20,965,899

Unobligated balance available 1,395,626 1,347,769

Unobligated balance not available 1,426,654 1,405,899

Total status of budgetary resources $ 25,145,082 $ 23,719,567

Change in obligated balance

Obligated balance, net, beginning of period $ 8,513,195 $ 8,494,510

Obligations incurred 22,322,802 20,965,899

Gross outlays (21,955,876) (20,817,520)

Recoveries of prior years unpaid obligations, actual (471,076) (291,059)

Change in uncollected customer payments from

 Federal sources 62,499 161,365

Obligated balance, net, end of period $ 8,471,544 $ 8,513,195

Unpaid obligations $ 8,904,432 $ 9,008,582

Uncollected customer payments from Federal sources (432,888) (495,387)

Obligated balance, net, end of period $ 8,471,544 $ 8,513,195

Outlays

Gross outlays $ 21,955,876 $ 20,817,520

Collections, net of offsetting receipts (7,237,024) (6,663,969)

Distributed offsetting receipts (1,970) (103)

Net outlays $ 14,716,882 $ 14,153,448

Unobligated balance brought forward, transfers and other 

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

COMBINED STATEMENTS OF BUDGETARY RESOURCES

For the Years Ended September 30

The accompanying notes are an integral part of these financial statements.

Financial Statements
97

FY 2008 Performance and Accountability Report

NOTESTO THE FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting 

Policies 

A. Basis of Presentation

The financial statements have been prepared to report 

the financial position, net cost of operations, changes 

in net position, and status and availability of budgetary 

resources of the FAA. The statements are a requirement 

of the Chief Financial Officers Act of 1990 and the 

Government Management Reform Act of 1994. They 

have been prepared from, and are fully supported by, the 

books and records of the FAA in accordance with (1) the 

hierarchy of accounting principles generally accepted in 

the United States of America and standards approved 

by the principals of the Federal Accounting Standards 

Advisory Board (FASAB), (2) Office of Management 

and Budget (OMB) Circular Number A-136, Financial 

Reporting Requirements, 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 different from financial management 

reports, which are also prepared pursuant to OMB 

directives that are used to monitor and control the FAA’s 

use of budgetary resources. The statements are subjected 

to audit, as required by OMB Bulletin Number 07-04, 

Audit Requirements for Federal Financial Statements.

Notes 4 and 8 include the necessary information to 

present “other assets” and “other liabilities” as defined by 

OMB Circular Number A-136. This presentation is used 

to support the preparation of the consolidated financial 

statements of the U.S. Government. 

Unless specified otherwise, all dollar amounts are 

presented in thousands.

B. Reporting Entity

The FAA, which was created in 1958, is a component of 

the DOT, a cabinet-level agency of the Executive Branch 

of the U.S. Government. The FAA’s mission is to provide 

a safe, secure, and efficient global aerospace system that 

contributes to national security and the promotion 

of U.S. aerospace safety. As the leading authority in 

the international aerospace community, the FAA is 

responsive to the dynamic nature of customer needs, 

economic conditions, and environmental concerns. The 

FAA reporting entity is composed of the following major 

funds: 

• Airport and Airway Trust Fund (AATF).

The AATF is funded by excise taxes that the 

Internal Revenue Service (IRS) collects from 

airway system users. These receipts are unavailable 

until appropriated by the U.S. Congress. Once 

appropriated for use, the FAA transfers AATF 

receipts necessary to meet cash disbursement needs 

to several other funds, from which expenditures 

are made. The AATF fully finances the following 

additional FAA funds: 

• Grants-in-Aid to Airports—AATF. As authorized, 

grants are awarded with Grants-in-Aid to 

Airports funding and used for planning and 

development to maintain a safe and efficient 

nationwide system of public airports. These 

grants fund approximately one-third of all 

capital development at the nation’s public 

airports and are administered through the Airport 

Improvement Program. 

• Facilities and Equipment—AATF. The Facilities 

and Equipment funds are the FAA’s principal 

means of modernizing and improving air traffic 

control and airway facilities. These funds also 

finance major capital improvements required 

by other FAA programs as well as other 

improvements to enhance the safety and capacity 

of the national airspace system. 

• Research, Engineering, and Development—AATF. 

Research, Engineering, and Development funds 

finance long-term research programs to improve 

the air traffic control system.

• Operations General Fund and Operations—

AATF. Operations finances operating costs, 

maintenance, communications, and logistical 

support for the air traffic control and air navigation 

systems. It also finances the salaries and costs 

associated with carrying out the FAA’s safety 

and inspection and regulatory responsibilities. 

Operations—AATF is financed through transfers 

Notes To The Financial Statements
Federal Aviation Administration

98

from the Airport and Airway Trust Fund. For 

administrative ease in obligating and expending for 

operational activities, those funds are then in turn 

transferred to the Operations General Fund, which 

is supplemented by appropriations from the U.S. 

Treasury. Expenditures for operational activities, 

whether originally funded by the AATF or the 

General Fund of the U.S. Treasury, are generally 

made from the Operations General Fund. 

• Aviation Insurance Revolving Fund. Revolving 

funds are accounts established by law to finance 

a continuing cycle of operations with receipts 

derived from such operations usually available in 

their entirety for use by the fund without further 

action by the U.S. Congress. The Aviation Insurance 

Revolving Fund provides products that address the 

insurance needs of the U.S. domestic airline industry 

not adequately met by the commercial insurance 

market. The FAA is currently providing war-risk hull 

loss and passenger, crew, and third-party liability 

insurance as required by the Homeland Security 

Act of 2002 as amended by the Federal Aviation 

Administration Extension Act of 2008. Current 

insurance coverage expires on December 31, 2008.

• Administrative Services Franchise Fund 

(Franchise Fund). The Franchise Fund is a 

revolving fund designed to create competition within 

the public sector in the performance of a wide 

variety of support services. 

• Other Funds. The consolidated financial 

statements include other funds such as (a) Aviation 

Overflight User Fees, which is a special fund in 

which receipts are earmarked by law for a specific 

purpose; (b) Facilities, Engineering, & Development 

General Fund; and (c) General Fund Miscellaneous 

Receipts accounts established for receipts of nonrecurring activity, such as fines, penalties, fees, and 

other miscellaneous receipts for services and benefits.

The FAA has rights and ownership of all assets reported 

in these financial statements. The FAA does not possess 

any nonentity assets.

C. Budgets and Budgetary Accounting

Congress annually enacts appropriations to permit the 

FAA to incur obligations for specified purposes. In FY 

2008 and 2007, the FAA was accountable for amounts 

made available in appropriations laws from the AATF, 

Revolving Funds, a Special Fund, and General Fund 

appropriations. The FAA recognizes budgetary resources 

as assets when cash (funds held by the U.S. Treasury) is 

made available through Department of Treasury General 

Fund warrants and transfers from the AATF.

D. Basis of Accounting

Transactions are recorded on both an accrual accounting 

basis and a budgetary accounting 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. 

Budgetary accounting facilitates compliance with legal 

requirements on the use of Federal funds. All material 

intraagency transactions and balances have been 

eliminated for presentation on a consolidated basis. 

However, the Statement of Budgetary Resources is 

presented on a combined basis, in accordance with OMB 

Circular A-136.

Intragovernmental transactions and balances result 

from exchange transactions made between the FAA 

and another Federal Government reporting entity, 

while those classified as “with the public” result from 

exchange transactions between the FAA and nonFederal entities. For example, if the FAA purchases 

goods or services from the public and sells them to 

another Federal entity, the costs would be classified as 

“with the public,” but the related revenues would be 

classified as “intragovernmental.” This could occur, for 

example, when the FAA provides goods or services to 

another Federal Government entity on a reimbursable 

basis. The purpose of this classification is to enable 

the Federal Government to prepare consolidated 

financial statements, and not to match public and 

intragovernmental revenue with costs that are incurred 

to produce public and intragovernmental revenue. 

E. Revenues and Other Financing Sources

Congress enacts annual, multi-year, and no-year 

appropriations to be used, within statutory limits, for 

operating, capital, and grant expenditures. Additional 

amounts are obtained from service fees (e.g., landing, 

registry, and overflight fees), war risk insurance 

premiums (see note 16), and through reimbursements for 

products and services provided to domestic and foreign 

governmental entities.

Notes To The Financial Statements
99

FY 2008 Performance and Accountability Report

The AATF is sustained by excise taxes that the IRS 

collects from airway system users. Excise taxes 

collected are initially deposited to the General Fund of 

the U.S. Treasury. The IRS does not receive sufficient 

information at the time the taxes are collected to 

determine how these payments should be distributed to 

specific earmarked funds. Therefore, the U.S. Treasury 

makes initial semi-monthly distributions to earmarked 

funds based on estimates prepared by its Office of Tax 

Analysis (OTA). These estimates are based on historical 

excise tax data applied to current excise tax receipts. 

The FAA’s September 30, 2008, financial statements 

reflect excise taxes certified by the IRS through June 

30, 2008, and excise taxes estimated by OTA for the 

period July 1 through September 30, 2008, as specified 

by the Statement of Federal Financial Accounting 

Standards (SFFAS) Number 7, Accounting for Revenue 

and Other Financing Sources. Actual tax collections data 

for the quarter ended September 30, 2008, will not be 

available from the IRS until December 2008. When 

actual amounts are available from the IRS, generally 

3 months after each quarter-end, adjustments are 

made to the estimated amounts and the difference is 

accrued as an intragovernmental receivable or payable. 

FAA management does not believe that the actual tax 

collections for the quarter ended September 30, 2008, will 

be materially different from the OTA estimate based on 

historical results.

The AATF also earns interest from investments in U.S. 

Government securities. Interest income is recognized as 

revenue on the accrual basis of such collections for those 

quarters.

Appropriations are recognized as a financing source 

when expended. Revenues from services provided by 

the FAA associated with reimbursable agreements 

are recognized concurrently with the recognition of 

accrued expenditures for performing the services. Warrisk insurance premiums are recognized as revenue on a 

straight-line basis over the period of coverage. Aviation 

overflight user fees are recognized as revenue in the 

period in which the flights took place. 

The FAA recognizes as an imputed financing source the 

amount of accrued pension and post-retirement benefit 

expenses for current employees paid on the FAA’s behalf 

by the Office of Personnel Management (OPM), as well 

as amounts paid from the U.S. Treasury Judgment Fund 

in settlement of claims or court assessments against the 

FAA.

F. Taxes

The FAA, as a Federal entity, is not subject to Federal, 

state, or local income taxes and, accordingly, no provision 

for income taxes has been recorded in the accompanying 

financial statements.

G. Fund Balance With the U.S. Treasury

The U.S. Treasury processes cash receipts and 

disbursements. Funds held at the Treasury are available 

to pay agency liabilities. The FAA does not maintain 

cash in commercial bank accounts or foreign currency 

balances. Foreign currency payments are made either by 

Treasury or the Department of State and are reported by 

the FAA in the U.S. dollar equivalent.

H. Investment in U.S. Government Securities

Unexpended funds in the AATF and Aviation Insurance 

Revolving Fund (war-risk premiums) are invested in U.S. 

Government securities at cost. A portion of the AATF 

investments is liquidated semi-monthly in amounts 

needed to provide cash for FAA appropriation accounts, 

to the extent authorized. The Aviation Insurance 

Revolving Fund investments are usually held to maturity. 

Investments, redemptions, and reinvestments are held 

and managed under the direction of the FAA by the U.S. 

Treasury. 

I. Accounts Receivable

Accounts receivable consists of amounts owed to the 

FAA by other Federal agencies and the public. Amounts 

due from Federal agencies are considered fully collectible. 

Accounts receivable from the public include, for example, 

overflight fees, fines and penalties, reimbursements 

from employees, and services performed for foreign 

governments. These amounts due from the public are 

presented net of an allowance for loss on uncollectible 

accounts based on historical collection experience or an 

analysis of the individual receivables. 

The FAA reports deposits in transit when the U.S. 

Treasury has not yet recognized FAA’s collections 

received from the public or other Federal entities. 

Notes To The Financial Statements
Federal Aviation Administration

100

J. Inventory

Within the FAA’s Franchise Fund, inventory is held for 

sale to FAA field locations and other domestic entities 

and foreign governments. Inventory consists of materials 

and supplies used to support the National Airspace 

System (NAS) and is predominantly located at the FAA 

Mike Monroney Aeronautical Center in Oklahoma City. 

Inventory cost includes material, labor, and applicable 

manufacturing overhead and is determined using the 

weighted moving average cost method.

FAA field locations trade nonoperational repairable 

components with the Franchise Fund. These components 

are classified as “held for repair.” An allowance is 

established for repairable inventory based on the average 

historical cost of such repairs. The cost of repair is 

capitalized and these items are reclassified as “held for 

sale.”

Inventory may be classified as excess, obsolete, and 

unserviceable if, for example, the quantity exceeds 

projected demand for the foreseeable future or if the 

item has been technologically surpassed. An allowance 

is established for excess, obsolete, and unserviceable 

inventory based on the condition of various inventory 

categories as well as the FAA’s historical experience with 

disposing of such inventory.

K. Operating Materials and Supplies

In contrast to inventory, which is held for sale by the 

Franchise Fund, operating materials and supplies are used 

in the operations of the agency. Operating materials 

and supplies primarily consist of unissued materials and 

supplies that will be used in the repair and maintenance 

of FAA owned aircraft. They are valued based on the 

weighted moving average cost method or on the basis of 

actual prices paid. Operating materials and supplies are 

expensed using the consumption method of accounting.

Operating materials and supplies “held for use” are those 

items that are consumed on a regular and ongoing basis. 

Operating materials and supplies “held for repair” are 

awaiting service to restore their condition to “held for 

use.” 

Operating materials and supplies may be classified as 

excess, obsolete, and unserviceable if, for example, the 

quantity exceeds projected demand for the foreseeable 

future, or if the item has been technologically surpassed. 

An allowance is established for “held for use” and 

excess, obsolete, and unserviceable operating materials 

and supplies based on the condition of various asset 

categories as well as the FAA’s historical experience with 

disposing of such assets. 

L. Property, Plant, and Equipment (PP&E)

The FAA capitalizes acquisitions of PP&E when the 

cost equals or exceeds $25,000 and the useful life equals 

or exceeds 2 years. The FAA records PP&E at original 

acquisition cost. However, where applicable, the FAA 

allocates an average cost of like assets within a program, 

commonly referred to as unit costing. The FAA purchases 

some capital assets in large quantities, which are known 

as “bulk purchases.” If the cost per unit is below the 

capitalization threshold of the FAA, then these items are 

expensed.

Depreciation expense is calculated using the straight-line 

method. Depreciation commences the first month after 

the asset is placed in service. The FAA does not recognize 

residual value of its PP&E. 

Real property assets such as buildings, air traffic control 

towers, en route air traffic control centers, mobile 

buildings, roads, sidewalks, parking lots, and other 

structures are depreciated over a useful life of up to 40 

years.

Personal property assets such as aircraft, decision support 

systems, navigation, surveillance, communications and 

weather-related equipment, office furniture, internal use 

software, vehicles, and office equipment are depreciated 

over a useful life of up to 20 years.

Buildings and equipment 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 (CIP) is valued at actual direct 

costs plus applied overhead and other indirect costs.

The FAA occupies certain real property that is leased 

by the DOT from the General Services Administration. 

Payments made by the FAA are based on the fair market 

value for similar rental properties.

Notes To The Financial Statements
101

FY 2008 Performance and Accountability Report

The FAA conducts a significant amount of research and 

development into new technologies to support the NAS. 

Until such time as the research and development project 

reaches “technological feasibility,” the costs associated 

with the project are expensed in the year incurred. 

M. Prepaid Charges

The FAA generally does not pay for goods and services 

in advance, except for certain reimbursable agreements, 

subscriptions, and payments to contractors and 

employees. 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.

N. Liabilities

Liabilities covered by budgetary or other resources are 

those liabilities for which Congress has appropriated 

funds or funding is otherwise available to pay amounts 

due. Liabilities not covered by budgetary or other 

resources represent amounts owed in excess of available, 

congressionally appropriated funds or other amounts. 

The liquidation of liabilities not covered by budgetary 

or other resources is dependent on future congressional 

appropriations or other funding, including the AATF. 

Intragovernmental liabilities are claims against the FAA 

by other Federal agencies.

O. Accounts Payable 

Accounts payable are amounts the FAA owes to other 

Federal agencies and the public. Accounts payable to 

Federal agencies generally consist of amounts due under 

interagency reimbursable agreements. Accounts payable 

to the public primarily consist of unpaid goods and 

services received by the FAA in support of the NAS, and 

estimated amounts incurred but not yet claimed by 

Airport Improvement Program grant recipients.

P. Annual, Sick, and Other Leave

Annual leave is accrued as it is earned, and the accrual 

is reduced as leave is taken. For each bi-weekly 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 based on latest pay rates and unused hours 

of leave. Sick leave is generally nonvested, 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. 

Q. Accrued Workers’ Compensation

A liability is recorded for actual and estimated future 

payments to be made for workers’ compensation 

pursuant to the Federal Employees’ Compensation 

Act (FECA). The actual costs incurred are reflected as a 

liability because the FAA will reimburse the Department 

of Labor (DOL) 2 years after the actual payment of 

expenses by the DOL. Future appropriations will be used 

for the reimbursement to DOL. The liability consists of 

(1) the net present value of estimated future payments 

calculated by the DOL, and (2) the unreimbursed cost 

paid by DOL for compensation to recipients under the 

FECA. 

R. Retirement Plan

FAA employees participate in either the Civil Service 

Retirement System (CSRS) or the Federal Employees 

Retirement System (FERS). The employees who 

participate in CSRS are beneficiaries of the FAA’s 

matching contribution, equal to 7% of pay, distributed 

to their annuity account in the Civil Service Retirement 

and Disability Fund. 

FERS went into effect on January 1, 1987. 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% of pay and matches any employee contribution up to 

an additional 4% of pay. For FERS participants, the FAA 

also contributes the employer’s matching share for Social 

Security. 

The FAA recognizes the imputed cost of pensions and 

other retirement benefits during an employee’s active 

years of service. 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 FAA for current period expense reporting. OPM 

Notes To The Financial Statements
Federal Aviation Administration

102

also provides information regarding the full cost of health 

and life insurance benefits. The FAA recognizes the 

offsetting revenue as imputed financing sources to the 

extent these expenses will be paid by OPM.

S. Grants

The FAA records an obligation at the time a grant is 

awarded. As grant recipients conduct eligible activities 

under the terms of their grant agreement, they request 

payment by the FAA, typically via an electronic payment 

process. Expenses are recorded at the time of payment 

approval during the year. The FAA also recognizes an 

accrued liability and expense for estimated eligible grant 

payments not yet requested by grant recipients. Grant 

expenses, including associated administrative costs, are 

classified on the Consolidated Statements of Net Cost 

under the line of business program “Airports.”

T. Use of Estimates

Management has made certain estimates and 

assumptions when reporting assets, liabilities, revenue, 

and expenses and in the note disclosures. Actual results 

could differ from these estimates. Significant estimates 

underlying the accompanying financial statements 

include (a) the allocation of AATF receipts by the OTA, 

(b) legal, environmental, and contingent liabilities, (c) 

accruals of accounts and grants payable, (d) accrued 

workers’ compensation, (e) allowance for doubtful 

accounts receivable, (f) allowances for repairable and 

obsolete inventory balances, (g) allocations of common 

costs to CIP, and (h) the allocation of an average cost of 

like assets within a program, commonly referred to as 

unit costing. 

U. Environmental Liabilities

The FAA recognizes two types of environmental 

liabilities: environmental remediation, and cleanup 

and decommissioning. The liability for environmental 

remediation is an estimate of costs necessary to bring 

a known contaminated site into compliance with 

applicable environmental standards. The increase or 

decrease in the annual liability is charged to current year 

expense.

Environmental cleanup and decommissioning is the 

estimated cost that will be incurred to remove, contain, 

and/or dispose of hazardous materials when an asset 

presently in service is shut down. The FAA estimates 

the environmental cleanup and decommissioning costs 

at the time an FAA-owned asset is placed in service. For 

assets placed in service through FY 1998, the increase or 

decrease in the estimated environmental cleanup liability 

is charged to expense over the life of the associated asset. 

Assets placed in service in FY 1999 and after do not have 

associated environmental liabilities. 

FAA environmental liabilities are recorded using 

un-inflated estimates. There are no known possible 

changes to these estimates based on inflation, deflation, 

technology, or applicable laws and regulations. 

V. Contingencies

Liabilities are deemed contingent when the existence 

or amount of the liability cannot be determined with 

certainty pending the outcome of future events. The FAA 

recognizes contingent liabilities in the accompanying 

balance sheet and statement of net cost when they are 

both probable and can be reasonably estimated. The 

FAA discloses contingent liabilities in the notes to the 

financial statements (see Note 16) when the conditions 

for liability recognition are not met or when a loss from 

the outcome of future events is more than remote. In 

some cases, once losses are certain, payments may be 

made from the Judgment Fund maintained by the U.S. 

Treasury rather than from the amounts appropriated 

to the FAA for agency operations. Payments from the 

Judgment Fund are recorded as an “Other Financing 

Source” when made.

W. Earmarked Funds Reporting

The FAA adopted the SFFAS Number 27, Identifying and 

Reporting Earmarked Funds, effective October 1, 2005. 

SFFAS Number 27 defines “earmarked funds” as those 

being financed by specifically identified revenues, often 

supplemented by other financing sources, which remain 

available over time. These specifically identified revenues 

and financing sources are required by statute to be used 

for designated activities, benefits, or purposes and must 

be accounted for separately from the Government’s 

general revenues. The FAA’s financial statements include 

the following funds, considered to be “earmarked”:

• Airport and Airway Trust Fund (AATF)

• Operations—AATF

• Operations General Fund

• Grants-in-Aid for Airports—AATF

• Facilities and Equipment—AATF

Notes To The Financial Statements
103

FY 2008 Performance and Accountability Report

• Research, Engineering, and Development—AATF

• Aviation Insurance Fund

• Aviation User Fees

The AATF is funded by excise taxes that the IRS 

collects from airway system users. These receipts are 

unavailable until appropriated by the U.S. Congress. 

Once appropriated for use, the FAA transfers AATF 

receipts necessary to meet cash disbursement needs to 

several other funds, from which expenditures are made. 

Those funds that receive transfers from the AATF are 

the Operations Trust Fund, Grants-in-Aid for Airports, 

Facilities and Equipment, and Research, Engineering, 

and Development, all of which are funded exclusively 

by the AATF. These funds represent the majority of 

FAA annual expenditures. In addition, the Operations 

General Fund is primarily funded through transfers from 

Operations—AATF, but is also supplemented by funding 

from the General Fund of the U.S. Treasury through 

annual appropriations. Because the Operations General 

Fund is primarily funded from the AATF, and because it 

is not reasonably possible to differentiate cash balances 

between those originally flowing from the AATF versus 

General Fund appropriations, the Operations General 

Fund is presented as an earmarked fund. The earmarked 

funds from the Facilities and Equipment fund are used 

to purchase or construct property, plant, and equipment 

(PP&E). When earmarked funds are used to purchase 

or construct PP&E, they are no longer available for 

future expenditure, have been used for their intended 

purpose, and therefore are classified as other funds on 

the balance sheet and the statement of changes in net 

position. The intended result of this presentation is to 

differentiate between earmarked funds available for 

future expenditure and earmarked funds previously 

expended on PP&E projects and therefore unavailable for 

future expenditure. 

Additional disclosures concerning earmarked funds can 

be found in Note 12.

Notes To The Financial Statements

Note 2. Fund Balance with Treasury

Fund balance with Treasury account balances as of September 30, 2008 and 2007, were:

2008 2007

Earmarked and other funds, excluding AATF $ 2,754,364 $ 2,849,721

Franchise fund 255,873 266,668

Aviation Insurance Revolving Fund 68,133 63,128

AATF (Note 12) 848,372 715,578

Total $ 3,926,742 $ 3,895,095

Unobligated balance

 Available $ 1,395,626 $ 1,347,769

 Not available 1,426,654 1,405,899

Obligated balance not yet disbursed 1,104,462 1,141,427

Total $ 3,926,742 $ 3,895,095

Status of fund balance with Treasury

Unobligated fund balances are either available or not 

available. Amounts are reported as not available when 

they are no longer legally available to the FAA for 

obligation. However, balances that are not available can 

change over time, because they can be used for upward 

adjustments of obligations that were incurred during the 

period of availability or for paying claims attributable to 

that time period. 
Federal Aviation Administration

104

Note 3. Investments

As of September 30, 2008 and 2007, the FAA’s investment balances were as follows:

2008

Amortized Market

(Premium) Investments Value

Intragovernmental Securities Cost Discount (Net) Disclosure

 Nonmarketable par value 7,673,709 $ $ 7,673,709 - $ $ 7,673,709

 Market-based 1,087,268 (533) 1,086,735 1,086,735

 Subtotal 8,760,977 (533) 8,760,444 8,760,444

 Accrued Interest 85,906 85,906

 Total $ 8,846,883 $ (533) $ 8,846,350 $ 8,760,444

2007

Amortized Market

(Premium) Investments Value

Intragovernmental Securities Cost Discount (Net) Disclosure

 Nonmarketable par value 7,930,943 $ $ 7,930,943 - $ $ 7,930,943

 Market-based 884,882 1,521 886,403 886,403

 Subtotal 8,815,825 1,521 8,817,346 8,817,346

 Accrued Interest 87,011 87,011

 Total $ 8,902,836 $ 1,521 $ 8,904,357 $ 8,817,346

Notes To The Financial Statements

The Secretary of the Treasury invests AATF funds on 

behalf of the FAA. FAA investments are considered 

investment authority and available to offset the cost 

of operations to the extent authorized by Congress. 

As of September 30, 2008 and 2007, $7.7 billion and 

$7.9 billion were invested respectively in U.S. Treasury 

Certificates of Indebtedness. Nonmarketable par value 

Treasury Certificates of Indebtedness are special series 

debt securities issued by the Bureau of Public Debt to 

Federal accounts and are purchased and redeemed at par 

(face value) exclusively through the Federal Investment 

Branch of the U.S. Treasury’s Bureau of Public Debt. 

The securities are held to maturity and redeemed at face 

value on demand; thus, investing entities recover the 

full amount invested plus interest. Investments as of 

September 30, 2008, mature on various dates through 

June 30, 2009, and investments as of September 30, 2007, 

matured on various dates through June 30, 2008. The 

annual rate of return on Certificates of Indebtedness is 

established in the month of issuance. The average rate of 

return for certificates issued during FY 2008 and FY 2007 

was 4.3% and 4.9%, respectively.

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. The FAA invests Aviation Insurance Fund 

collections in nonmarketable, market-based securities 

and amortizes premiums and discounts over the life of 

the security using the interest method. As of September 

30, 2008, these nonmarketable, market-based securities 

had maturity dates ranging from November 2008 to 

August 2013 and have an average rate of return of 

approximately 4.3%. 
105

FY 2008 Performance and Accountability Report

Notes To The Financial Statements

The U.S. Treasury does not set aside assets to pay the 

future expenditures of the AATF and the Aviation 

Insurance Fund. Instead, the cash collected from the 

public for the AATF and the Aviation Insurance Fund 

is deposited to the U.S. Treasury and used for general 

Government purposes. Treasury securities are issued to 

the FAA as evidence of the collections by the AATF and 

Aviation Insurance Fund. Treasury securities are an asset 

to the FAA and a liability to the U.S. Treasury. Because 

the FAA and the U.S. Treasury are both parts of the 

U.S. Government, these assets and liabilities offset each 

other from the standpoint of the U.S. Government as 

a whole. For this reason, they do not represent an asset 

or a liability in the U.S. Government-wide financial 

statements. 

To the extent authorized by law, the FAA has the ability 

to redeem its Treasury securities to make expenditures. 

When the FAA requires redemption of these securities, 

the U.S. Government finances those expenditures out 

of accumulated cash balances by raising tax or other 

receipts, borrowing from the public, repaying less debt, or 

curtailing other expenditures. This is the same way that 

the U.S. Government finances all other expenditures. 

Note 4. Accounts Receivable, Prepayments, and Other Assets

Accounts receivable, prepayments, and other assets as of September 30, 2008 and 2007, were composed of the 

following: 

2008 2007

Intragovernmental

Accounts receivable $ 105,968 $ 337,983

Prepayments and other 89,151 36,226

 Intragovernmental total 195,119 374,209

With the public

Accounts receivable, net 51,589 56,834

Prepayments 28,124 27,166

Deposits in transit and other 54,982 24,347

With the public total 134,695 108,347

Total accounts receivable, 

prepayments, and other $ 329,814 $ 482,556

Intragovernmental prepayments represent advance 

payments to other Federal Government entities for 

agency expenses not yet incurred or for goods or services 

not yet received.

Accounts receivable from the public are shown net of 

allowances for uncollectible amounts of $10.9 million 

and $12.4 million, as of September 30, 2008 and 2007, 

respectively.
Federal Aviation Administration

106

Note 5. Inventory, Operating Materials, and Supplies 

As of September 30, 2008 and 2007, inventory, operating materials, and supplies were as follows: 

Inventory 2008 2007

Held for sale, net $ 66,427 $ 51,673

Held for repair, net 390,876 370,746

Raw materials, finished goods, and other, net 15,708 17,996

Excess, obsolete, and unserviceable, net - -

 Inventory total, net 473,011 440,415

Operating materials and supplies

Held for use, net 48,845 49,856

Held for repair, net 16,981 17,256

Excess, obsolete, and unserviceable, net - -

 Operating materials and supplies total, net 65,826 67,112

Total inventory, operating materials, and supplies, net 538,837 $ $ 507,527

Inventory 2008 2007

Held for sale $ (96) $ (6,631)

Held for repair (96,240) (95,600)

Raw materials, finished goods, and other (10,591) (17,996)

Excess, obsolete, and unserviceable (19,583) -

 Inventory allowances total (126,510) (120,227)

Operating materials and supplies

Held for use - (826)

Held for repair (17,972) (17,255)

Excess, obsolete, and unserviceable (526) (480)

 Operating materials and supplies total (18,498) (18,561)

Total allowances $ (145,008) $ (138,788)

Inventory, operating materials, and supplies, presented above, are shown net of the following allowances:

Inventory 2008 2007

Held for sale, net $ 66,427 $ 51,673

Held for repair, net 390,876 370,746

Raw materials, finished goods, and other, net 15,708 17,996

Excess, obsolete, and unserviceable, net - -

 Inventory total, net 473,011 440,415

Operating materials and supplies

Held for use, net 48,845 49,856

Held for repair, net 16,981 17,256

Excess, obsolete, and unserviceable, net - -

 Operating materials and supplies total, net 65,826 67,112

Total inventory, operating materials, and supplies, net 538,837 $ $ 507,527

Inventory 2008 2007

Held for sale $ (96) $ (6,631)

Held for repair (96,240) (95,600)

Raw materials, finished goods, and other (10,591) (17,996)

Excess, obsolete, and unserviceable (19,583) -

 Inventory allowances total (126,510) (120,227)

Operating materials and supplies

Held for use - (826)

Held for repair (17,972) (17,255)

Excess, obsolete, and unserviceable (526) (480)

 Operating materials and supplies total (18,498) (18,561)

Total allowances $ (145,008) $ (138,788)

Inventory is considered held for repair based on the 

condition of the asset or item, and the allowance for 

repairable inventory is based on the average historical 

cost of such repairs. 

The FAA transfers excess items for disposal into the 

Government-wide automated disposal system. Disposal 

proceeds, recognized upon receipt, may go to the U.S. 

Treasury’s General Fund or to an FAA appropriation, 

depending on the nature of the item and the disposal 

method. 

Notes To The Financial Statements
107

FY 2008 Performance and Accountability Report

Note 6. Property, Plant, and Equipment, Net 

Property, plant, and equipment balances at September 30, 2008 and 2007 were as follows: 

Acquisition Accumulated Net

Class of fixed asset value depreciation book value

Real property, including land $ 4,928,461 $ (2,588,037) $ 2,340,424

Personal property 19,290,502 (10,266,822) 9,023,680

Assets under capital lease (Note 9) 166,387 (125,137) 41,250

Construction in progress 2,341,968 2,341,968 - 

Property not in use 95,013 (77,148) 17,865

Total property, plant, and equipment 26,822,331 $ $ (13,057,144) $ 13,765,187

Acquisition Accumulated Net

Class of fixed asset value depreciation book value

Real property, including land $ 4,765,283 $ (2,441,132) $ 2,324,151

Personal property 18,125,252 (9,420,105) 8,705,147

Assets under capital lease (Note 9) 166,387 (111,373) 55,014

Construction in progress 2,787,868 2,787,868 - 

Property not in use 93,593 (74,003) 19,590

Total property, plant, and equipment 25,938,383 $ $ (12,046,613) $ 13,891,770

2008

2007

The FAA’s CIP relates primarily to NAS assets, which 

are derived from centrally funded national systems 

development contracts, site preparation and testing, raw 

materials, and internal labor charges. 

Assets temporarily not in use, including decommissioned 

assets awaiting disposal, are reflected in FAA financial 

records as Property Not in Use.

Note 7. Environmental Liabilities

The FAA’s environmental liabilities as of September 30, 2008 and 2007 were as follows:

2008 2007

Environmental remediation $ 384,381 $ 316,748

Environmental cleanup and decommissioning 253,444 250,138

 

Total environmental liabilities $ 637,825 $ 566,886

Notes To The Financial Statements
Federal Aviation Administration

108

The FAA’s increase in the remediation liability from FY 

2007 is primarily a result of the projected periodic cost 

of overhauling the equipment at the William H. Hughes 

Technical Center’s combined water treatment plant.

Additional information on environmental projects is 

disclosed in Note 16.

Note 8. Employee-Related and Other Liabilities

As of September 30, 2008 and 2007, the FAA’s employee related and other liabilities were as follows: 

Intragovernmental

Non-current 

liabilities

Current 

liabilities Total

Advances received $ - $ 48,017 $ 48,017

Accrued payroll & benefits payable to other agencies - 67,523 67,523

Other liabilities - 13,617 13,617

Liabilities covered by budgetary or other resources 129,157 - 129,157

Federal Employees' Compensation Act payable 118,177 86,994 205,171

Other - 44,674 44,674

Liabilities not covered by budgetary or other resources 118,177 131,668 249,845

Intragovernmental total 118,177 260,825 379,002

With the public

Advances received and other - 66,473 66,473

Accrued payroll & benefits payable to employees 227,360 - 227,360

Liabilities covered by budgetary or other resources 293,833 - 293,833

Accrued unfunded annual & other leave & assoc. benefits 48,386 344,989 393,375

Sick leave compensation benefits for air traffic controllers 63,595 15,930 79,525

Capital leases (Note 9) 49,271 12,400 61,671

Legal claims 109,450 - 109,450

Other accrued liabilities 99,983 - 99,983

Liabilities not covered by budgetary or other resources 261,235 482,769 744,004

Public total 261,235 776,602 1,037,837

Total employee related and other liabilities $ 379,412 $ 1,037,427 $ 1,416,839

2008

Notes To The Financial Statements
109

FY 2008 Performance and Accountability Report

Intragovernmental

Non-current 

liabilities

Current 

liabilities Total

Advances received $ - $ 46,379 $ 46,379

Accrued payroll & benefits payable to other agencies - 75,464 75,464

Other liabilities - 11,219 11,219

Liabilities covered by budgetary or other resources 133,062 - 133,062

Federal Employees' Compensation Act payable 113,426 85,761 199,187

Liabilities not covered by budgetary or other resources 113,426 85,761 199,187

Intragovernmental total 113,426 218,823 332,249

With the public

Advances received and other 101,989 - 101,989

Accrued payroll & benefits payable to employees 182,483 - 182,483

Liabilities covered by budgetary or other resources 284,472 - 284,472

Accrued unfunded annual & other leave & assoc. benefits 46,423 330,992 377,415

Sick leave compensation benefits for air traffic controllers 65,405 13,319 78,724

Capital leases (Note 9) 57,612 14,499 72,111

Legal claims - 14,200 14,200

Other accrued liabilities 84,488 - 84,488

Liabilities not covered by budgetary or other resources 253,928 373,010 626,938

Public total 253,928 657,482 911,410

Total employee related and other liabilities $ 367,354 $ 876,305 $ 1,243,659

2007

Accrued payroll and benefits to other agencies consist of 

FAA contributions payable to other Federal agencies for 

employee benefits. These include the FAA’s contributions 

payable toward life, health, retirement benefits, Social 

Security, and matching contributions to the Thrift 

Savings Plan.

An unfunded liability is recorded for the actual cost of 

workers’ compensation benefits to be reimbursed to 

the DOL, pursuant to the FECA. Because DOL bills 

the FAA 2 years after it pays such claims, the FAA’s 

liability accrued as of September 30, 2008, includes 

workers’ compensation benefits paid by DOL during the 

periods July 1, 2006, through June 30, 2008, and accrued 

liabilities for the quarter July 1, 2008, through September 

30, 2008. The FAA’s liability accrued as of September 30, 

2007, included workers’ compensation benefits paid by 

DOL during the period July 1, 2005, through June 30, 

2007, and accrued liabilities for the quarter July 1, 2007, 

through September 30, 2007. 

The estimated liability for accrued unfunded leave and 

associated benefits includes annual and other types of 

vested leave, and sick leave under the terms of certain 

collective bargaining agreements, including the National 

Air Traffic Controllers Association (NATCA) agreement, 

Article 25, Section 13. For example, the NATCA 

agreement gives air traffic controllers, who are covered 

under FERS, the option to receive a lump sum payment 

for 40% of their accumulated sick leave as of their 

Notes To The Financial Statements
Federal Aviation Administration

110 Notes To The Financial Statements

effective retirement date. Based on sick leave balances, 

this liability was $79.5 million and $78.7 million as of 

September 30, 2008 and 2007, respectively.

The FAA estimated that 100% of its $109.5 million and 

$14.2 million legal claims liabilities as of September 30, 

2008 and 2007, respectively, would be paid from the 

permanent appropriation for judgments, awards, and 

compromise settlements (Judgment Fund) administered 

by the Department of Treasury.

Other Accrued Liabilities with the Public is composed 

primarily of accruals for utilities, leases, and travel 

obligations. Total liabilities not covered by budgetary 

resources are presented in Note 15. 

Note 9. Leases 

Capital Leases 

Following is a summary of the FAA’s assets under capital lease as of September 30, 2008 and 2007:

2008 2007

Land, buildings, and machinery 166,387 $ $ 166,387

Accumulated depreciation (125,137) (111,373)

Assets under capital lease, net $ 41,250 $ 55,014

As of September 30, 2008, the FAA’s future payments due on assets under capital lease were as follows:

Year 1 (FY 2009) $ 13,502

Year 2 (FY 2010) 12,833

Year 3 (FY 2011) 11,816

Year 4 (FY 2012) 8,637

Year 5 (FY 2013) 5,709

After 5 years 54,240

Less: Imputed interest (45,066)

Total capital lease liability $ 61,671

Future payments due by fiscal year

(Liabilities not covered by budgetary or other resources)

The FAA’s capital lease payments are authorized to 

be funded annually as codified in the United States 

Code, Title 49, Section 40110(c)(1), which addresses 

general procurement authority. The remaining principal 

payments are recorded as unfunded lease liabilities. The 

imputed interest is funded and expensed annually.
111

FY 2008 Performance and Accountability Report

Notes To The Financial Statements

Operating Leases

The FAA has operating leases for real property, aircraft, and telecommunications equipment. Future operating lease 

payments due as of September 30, 2008, were as follows:

Year 1 (FY 2009) $ 156,789

Year 2 (FY 2010) 147,791

Year 3 (FY 2011) 123,399

Year 4 (FY 2012) 105,909

Year 5 (FY 2013) 51,550

After 5 years 157,143

Total future operating lease payments $ 742,581

Operating lease expense incurred during the years 

ended September 30, 2008 and 2007, was $201.0 million 

and $190.5 million, respectively, including General 

Services Administration (GSA) leases that have a short 

termination privilege but the FAA intends to remain 

in the lease. The operating lease amounts due after 5 

years do 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. 

Note 10. Federal Employee and Veterans Benefits Payable

As of September 30, 2008 and 2007, FECA actuarial 

liabilities were $915.2 million and $884.0 million, 

respectively. The DOL calculates the FECA liability for 

DOT, and DOT allocates the liability amount to the FAA 

based on actual workers’ compensation payments to FAA 

employees over the preceding 4 years. FECA 

liabilities include the expected liability for death, 

disability, medical, and miscellaneous costs for approved 

compensation cases, plus a component for incurred 

but not reported claims. The estimated liability is not 

covered by budgetary or other resources and thus will 

require future appropriated funding. 
Federal Aviation Administration

112

Note 11. Net Cost by Program and Other Statement of Net Cost Disclosures

The FAA’s four lines of business represent the programs 

reported on the Statement of Net Cost. Cost centers 

assigned 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. 

The following are net costs for the years ended 

September 30, 2008 and 2007, by strategic goal:

Notes To The Financial Statements

Organizational International 

Line of business programs Safety Capacity Excellence Leadership Total

Air Traffic Organization $ 7,678,165 $ 2,592,749 $ 105,295 $ 48,997 $ 10,425,206

Aviation Safety 1,131,312 1,270 13,050 9,240 1,154,872

Airports 1,970,680 1,782,621 374 - 3,753,675

Commercial Space Transportation 9,160 2,097 - - 11,257

Non line of business programs 

Regions and center operations and other 68,819 5,613 111,611 1,068 187,111

Total net cost $ 10,858,136 $ 4,384,350 $ 230,330 $ 59,305 $ 15,532,121

Organizational International 

Line of business programs Safety Capacity Excellence Leadership Total

Air Traffic Organization $ 7,109,342 $ 2,515,956 $ 18,393 $ 36,785 $ 9,680,476

Aviation Safety 993,305 1,418 11,343 6,683 1,012,749

Airports 2,059,893 1,863,712 - - 3,923,605

Commercial Space Transportation 8,298 2,468 2 - 10,768

Non line of business programs 

Regions and center operations and other 6,615 9,343 170,710 188 186,856

Total net cost $ 10,177,453 $ 4,392,897 $ 200,448 $ 43,656 $ 14,814,454

For the Year Ended September 30, 2008

Strategic Goal Areas

For the Year Ended September 30, 2007

Strategic Goal Areas
113

FY 2008 Performance and Accountability Report

The following is the FAA’s distribution of FY 2008 and FY 2007 net costs by intragovernmental related activity versus 

with the public: 

For the Year Ended September 30, 2008

Intra- With the

Line of business programs governmental Public Total

Air Traffic Organization

 Expenses $ 2,139,999 $ 8,456,418 $ 10,596,417

 Less earned revenues (170,683) (528) (171,211)

Net costs 1,969,316 8,455,890 10,425,206

Aviation Safety

 Expenses 174,605 986,409 1,161,014

 Less earned revenues (6,117) (25) (6,142)

Net costs 168,488 986,384 1,154,872

Airports

 Expenses 18,138 3,735,702 3,753,840

 Less earned revenues - (165) (165)

Net costs 18,138 3,735,537 3,753,675

Commercial Space Transportation

 Expenses 1,693 9,564 11,257

 Net costs 1,693 9,564 11,257

Non line of business programs

Regions and center operations and

other programs

 Expenses 83,917 474,077 557,994

 Less earned revenues (17,718) (353,165) (370,883)

Net costs 66,199 120,912 187,111

Net cost of operations

 Total expenses 2,418,352 13,662,170 16,080,522

 Less earned revenues (194,518) (353,883) (548,401)

Total net costs $ 2,223,834 $ 13,308,287 $ 15,532,121

Notes To The Financial Statements
Federal Aviation Administration

114

For the Year Ended September 30, 2007

Intra- With the

Line of business programs governmental Public Total

Air Traffic Organization

 Expenses $ 2,121,741 $ 7,703,336 $ 9,825,077

 Less earned revenues (143,584) (1,017) (144,601)

Net costs 1,978,157 7,702,319 9,680,476

Aviation Safety

 Expenses 158,478 859,837 1,018,315

 Less earned revenues (2,231) (3,335) (5,566)

Net costs 156,247 856,502 1,012,749

Airports

 Expenses 17,955 3,905,764 3,923,719

 Less earned revenues - (114) (114)

Net costs 17,955 3,905,650 3,923,605

Commercial Space Transportation

 Expenses 1,676 9,092 10,768

 Net costs 1,676 9,092 10,768

Non line of business programs

Regions and center operations and

other programs

 Expenses 94,081 510,448 604,529

 Less earned revenues (100,381) (317,292) (417,673)

Net costs (6,300) 193,156 186,856

Net cost of operations

 Total expenses 2,393,931 12,988,477 15,382,408

 Less earned revenues (246,196) (321,758) (567,954)

Total net costs $ 2,147,735 $ 12,666,719 $ 14,814,454

Notes To The Financial Statements
115

FY 2008 Performance and Accountability Report

Note 12. Earmarked Funds

Notes To The Financial Statements

The FAA’s earmarked funds are presented among two 

classifications. The first includes the AATF and all 

related funds that receive funding from the AATF: the 

Operations Trust Fund, Grants-in-Aid for Airports, 

Facilities and Equipment, and Research Engineering 

and Development, all of which are funded exclusively 

by the AATF. The AATF classification also includes 

the Operations General Fund, which is primarily 

funded through transfers from Operations—AATF, 

but is additionally supplemented by the General Fund 

of the U.S. Treasury through annual appropriations. 

Because the Operations General Fund is primarily 

funded from the AATF, and because it is not reasonably 

possible to differentiate cash balances between those 

originally flowing from the AATF versus general fund 

appropriations, the Operations General Fund is presented 

as an earmarked fund. In addition, this note presents 

only the earmarked funds that retain available financing 

sources. As such, the balances in the PP&E fund, though 

funded from the Facilities and Equipment earmarked 

fund, are reported as other funds and therefore are 

excluded. 

The second classification of earmarked funds includes the 

Aviation Insurance Revolving Fund and Aviation User 

Fees. 

Airport and Airway Trust Fund

The FAA’s consolidated financial statements include 

the results of operations and financial position of the 

AATF. The U.S. Congress created the AATF with the 

passage of the Airport and Airway Revenue Act of 1970. 

The Act provides a dedicated source of funding to the 

nation’s aviation system through the collection of several 

aviation-related excise taxes. The IRS collects these 

taxes on behalf of the FAA’s AATF. These taxes can be 

withdrawn only as appropriated by the U.S. Congress. 

Twice a month, Treasury estimates the amount collected 

and adjusts the estimates to reflect actual collections 

quarterly. The total taxes recognized in FY 2008 included 

OTA’s estimate of $2.6 billion for the quarter ended 

September 30, 2008. This amount was unchanged from 

OTA’s FY 2007 estimate for the quarter ended September 

30, 2007.

Other Earmarked Funds

• The FAA has authority under the Aviation Insurance 

Program to insure commercial airlines that may be 

called upon to perform various services considered 

necessary to the foreign policy interests of the 

United States, when insurance is not available 

commercially or is available only on unreasonable 

terms and conditions. The insurance issued, 

commonly referred to war-risk insurance, covers 

losses resulting from war, terrorism, or other hostile 

acts. The FAA reported premium insurance revenues 

of $171.3 million and $171.0 million for the periods 

ended September 30, 2008 and 2007, respectively. 

The Aviation Insurance Program activity is reported 

below as other earmarked funds. The Aviation 

Insurance Program is discussed further in Note 16.

• Aviation User Fees, commonly referred to as 

overflight fees, are charged to commercial airlines 

that fly in U.S. controlled air space but neither take 

off nor land in the United States. The FAA reported 

overflight fees of $58.5 million and $50.3 million 

for the periods ended September 30, 2008 and 2007, 

respectively. Aviation User Fees activity is reported 

below as other earmarked funds. 

Fiscal data as of and for the years ended September 30, 

2008 and 2007, are summarized in the following charts. 

Intraagency transactions have not been eliminated from 

the amounts presented. 
Federal Aviation Administration

116

2008

Other Earmarked Total Earmarked

Balance Sheet AATF Funds Funds

Assets

Fund balance with Treasury $ 848,372 $ 2,748,123 $ 3,596,495

Investments, net 7,746,547 1,099,803 8,846,350

Accounts receivable, net - 3,913,411 3,913,411

Other assets - 2,569,494 2,569,494

Total assets $ 8,594,919 $ 10,330,831 $ 18,925,750

Liabilities and net position

AATF amounts due to FAA $ 3,772,307 $ - $ 3,772,307

Other liabilities - 3,050,320 3,050,320

Unexpended appropriations - 920,894 920,894

Cumulative results of operations 4,822,612 6,359,617 11,182,229

Total liabilities and net position $ 8,594,919 $ 10,330,831 $ 18,925,750

Statement of net cost 

Program costs $ 13,466,390 $ 692,130 $ 14,158,520

Less earned revenue: -

Aviation insurance premiums - (171,271) (171,271)

Overflight user fees - (58,498) (58,498)

Other revenue - (176,514) (176,514)

Net cost of operations $ 13,466,390 $ 285,847 $ 13,752,237

Statement of changes in net position

Cumulative results, beginning of period $ 6,046,786 $ 5,600,561 $ 11,647,347

Nonexchange revenue:

Passenger ticket tax 8,260,611 - 8,260,611

International departure tax 2,462,375 - 2,462,375

Investment income 429,572 - 429,572

Fuel taxes 624,493 - 624,493

Waybill tax 521,040 - 521,040

Tax refunds and credits (55,957) - (55,957)

Other revenue 82 41,663 41,745

Budgetary financing sources - 2,387,128 2,387,128

Other financing sources - (1,383,888) (1,383,888)

Unexpended appropriations - 920,894 920,894

Net cost of operations (13,466,390) (285,847) (13,752,237)

Change in net position $ (1,224,174) $ 1,679,950 $ 455,776

Net position, end of period $ 4,822,612 $ 7,280,511 $ 12,103,123

Notes To The Financial Statements
117

FY 2008 Performance and Accountability Report

2007

Other Earmarked Total Earmarked

Balance Sheet AATF Funds Funds

Assets

Fund balance with Treasury $ 715,578 $ 2,810,935 $ 3,526,513

Investments, net 8,006,774 897,583 8,904,357

Accounts receivable, net 179,673 3,048,845 3,228,518

Other assets - 2,850,676 2,850,676

Total assets $ 8,902,025 $ 9,608,039 $ 18,510,064

Liabilities and net position

AATF amounts due to FAA $ 2,855,239 $ - $ 2,855,239

Other liabilities - 2,910,439 2,910,439

Unexpended appropriations - 1,097,039 1,097,039

Cumulative results of operations 6,046,786 5,600,561 11,647,347

Total liabilities and net position $ 8,902,025 $ 9,608,039 $ 18,510,064

Statement of net cost 

Program costs $ 12,695,908 $ 1,169,634 $ 13,865,542

Less earned revenue:

Aviation insurance premiums - 171,022 171,022

Overflight user fees - 50,305 50,305

Other revenue - 238,246 238,246

Net cost of operations $ 12,695,908 $ 710,061 $ 13,405,969

Statement of changes in net position

Cumulative results, beginning of period $ 6,398,812 $ 6,377,085 $ 12,775,897

Nonexchange revenue:

Passenger ticket tax 8,321,262 - 8,321,262

International departure tax 2,212,814 - 2,212,814

Investment income 473,252 - 473,252

Fuel taxes 835,128 - 835,128

Waybill tax 568,591 - 568,591

Tax refunds and credits (67,229) - (67,229)

Other revenue 64 28,515 28,579

Budgetary financing sources - 1,878,154 1,878,154

Other financing sources - (1,973,132) (1,973,132)

Unexpended appropriations - 1,097,039 1,097,039

Net cost of operations (12,695,908) (710,061) (13,405,969)

Change in net position $ (352,026) $ 320,515 $ (31,511)

Net position, end of period $ 6,046,786 $ 6,697,600 $ 12,744,386

Notes To The Financial Statements
Federal Aviation Administration

118

Note 13. Imputed Financing Sources

Notes To The Financial Statements

The FAA recognizes as imputed financing the amount 

of accrued pension and postretirement benefit expenses 

for current employees. The assets and liabilities 

associated with such benefits are the responsibility of the 

administering agency, the OPM. Amounts paid from the 

U.S. Treasury’s Judgment Fund in settlement of claims or 

court assessments against the FAA are also recognized as 

imputed financing. For the fiscal years ended September 

30, 2008 and 2007, imputed financing was as follows:

2008 2007

Office of Personnel Management $ 550,856 $ 517,911

Treasury Judgment Fund 13,474 15,813

Total imputed financing sources $ 564,330 $ 533,724

Note 14. Statement of Budgetary Resources Disclosures

The Required Supplementary Stewardsip Information 

section of this report includes a schedule of budgetary 

resources by each of the FAA’s major fund types. Budget 

authority as reported in the Combined Statements of 

Budgetary Resources includes amounts made available 

to the FAA from general, earmarked, and special funds. 

In contrast, appropriations received as reported in the 

Consolidated Statements of Changes in Net Position 

pertain only to amounts made available to the FAA from 

general funds. The following is a reconciliation of these 

amounts:

2008 2007

Combined Statement of Budgetary

 Resources—budget authority $ 19,485,521 $ 19,725,794

Less amounts made available to FAA

 from AATF dedicated collections (17,042,518) (16,884,638)

Net transfers of budget authority and other (41,566) (46,331)

Less special fund aviation user fees (58,498) (48,508)

Consolidated Statement of Changes in Net

 Position—appropriations received $ 2,342,939 $ 2,746,317
119

FY 2008 Performance and Accountability Report

The FAA had rescissions of budgetary resources in FY 

2008 to Grant-in-Aid to Airports of $270.5 million. In FY 

2007, the FAA did not have any rescissions of budgetary 

resources as a result of operating under a continuing 

resolution. 

As of September 30, 2008 and 2007, the amount of 

budgetary resources obligated for undelivered orders was 

$8.3 billion and $8.2 billion, respectively. 

Budget authority on the FY 2007 Combined Statement 

of Budgetary Resources includes contract authority 

of $4.2 billion and expired funds of $.1 billion that 

are not presented in the Budget of the United States 

Government. Also, obligations incurred on the FY 2007 

Combined Statement of Budgetary Resources include 

$21.1 million of expired funds and $658.4 million of 

certain reimbursable and revolving fund obligations 

incurred that are not presented in the Budget of the 

United States Government. As a result, the FAA’s FY 

2007 Combined Statement of Budgetary Resources 

differs from FY 2007 “actuals” reported in the appendix 

of the FY 2008 Budget of the United States Government

available at www.whitehouse.gov/omb/budget/

fy2009/. As of the date of issuance of the FAA’s FY 

2008 Combined Statement of Budgetary Resources, the 

Budget of the United States Government for FY 2010, 

which will contain “actual” FY 2008 amounts, was not 

yet published. The Office of Management and Budget 

is expected to publish this information early in calendar 

year 2009.

OMB Circular A-136 requires the following additional 

Combined Statement of Budgetary Resources disclosures:

• 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.

• The FAA does not have obligations classified as 

“exempt from apportionment.” However, during 

FY 2008 and FY 2007, direct and reimbursable 

obligations incurred against amounts apportioned 

under categories A and B, as defined in OMB Circular 

No. A-11, Part 4, Instructions on Budget Execution, were 

as follows:

Notes To The Financial Statements

Direct Reimbursable Direct Reimbursable

Category A 6,959,806 $ $ 416,908 $ 6,114,486 $ 396,088

Category B 14,686,661 259,427 14,193,011 262,314

Total 21,646,467 $ $ 676,335 $ 20,307,497 $ 658,402

2008 2007

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. At the end of FY 2007, $49.5 million of 

obligated balances were in appropriations cancelled at 

year-end pursuant to 31 U.S.C. 1552 and thus have not 

been brought forward to FY 2008. Additionally, transfers 

in FY 2008 to DOT for Essential Air Services also reduced 

balances available for obligation.
Federal Aviation Administration

120

Note 15. Financing Sources Yet To Be Provided

The following table shows the relationship between 

liabilities not covered by budgetary or other resources as 

reported on the balance sheets as of September 30, 2008 

and 2007, and the change in components of net cost 

of operations that will require or generate resources in 

future periods. 

Notes To The Financial Statements

2008 2007 Change

Legal claims (Note 8) $ 109,450 $ 14,200 $ 95,250

FECA payable (Note 8) 205,171 199,187 5,984

FECA actuarial (Note 10) 915,242 883,982 31,260

Environmental liabilities (Note 7 & 16) 637,825 566,886 70,939

Unfunded annual & other leave & associated benefits (Note 8) 393,375 377,415 15,960

Sick leave compensation benefits (Note 8) 79,525 78,724 801

Other accrued liabilities (Note 8) 144,657 84,488 60,169

 Increases—components of net cost of operations

 requiring or generating resources in future periods (Note 17) 280,363

Capital leases (Notes 8 and 9) 61,671 72,111 (10,440)

 Decreases—resources that fund expenses

 recognized in prior periods (Note 17) (10,440)

Total liabilities not covered by budgetary resources 2,546,916 2,276,993 269,923

Total liabilities covered by budgetary resources 1,412,489 1,478,739 (66,250)

Total liabilities $ 3,959,405 $ 3,755,732 $ 203,673
121

FY 2008 Performance and Accountability Report

Note 16. Commitments, Contingencies, and Other Disclosures

Reauthorization. Effective October 1, 2008, the FAA 

is operating under a continuing resolution (CR), Public 

Law 110-329, for its appropriation and many of its 

programmatic and financing authorities. The CR will be 

in effect through March 6, 2009, and includes a provision 

that allows the FAA to collect aviation-related excise 

taxes and to continue spending at fiscal 2008 rates. It 

also provides sufficient contract authority for the Airport 

Improvement Program. 

Without legislative action, many of the FAA’s 

programmatic and financing authorities, including 

Airport Improvement Program contract authority and 

the authority to collect excise taxes into and make 

expenditures from the AATF, will expire after March 6, 

2008. The outcome of future legislative and executive 

negotiation of these matters is uncertain. 

Contract Options. As of September 30, 2008, the FAA 

had contract options of $3.69 billion. These contract 

options give the 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.

Airport Improvement Program. The Airport 

Improvement Program provides grants for the planning 

and development of public-use airports that are included 

in the National Plan of Integrated Airport Systems. 

Eligible projects generally include improvements related 

to enhancing airport safety, capacity, security, and 

environmental concerns. The FAA’s share of eligible costs 

for large and medium primary hub airports is 75% with 

the exception of noise program implementation, which is 

80%. For remaining airports (small primary, reliever, and 

general aviation), the FAA’s share of eligible costs is 95%.

The FAA has authority under 49 U.S.C. 47110(e) to 

issue letters of intent to enter into Airport Improvement 

Program grant agreements. The FAA records an 

obligation when a grant is awarded. Through September 

30, 2008, the FAA issued letters of intent beginning in 

FY 1988 and extending through FY 2020 totaling $5.7 

billion. As of September 30, 2008, the FAA had obligated 

$4.6 billion of this total amount, leaving $1.1 billion 

unobligated.

Through September 30, 2007, the FAA issued letters of 

intent beginning FY 1988 and extending through FY 

2020 totaling $5.6 billion. As of September 30, 2007, 

the FAA had obligated $4.3 billion of this total amount, 

leaving $1.3 billion unobligated.

Aviation Insurance Program. The FAA is authorized 

to issue hull and liability insurance under the Aviation 

Insurance Program for air carrier operations for which 

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. The FAA may issue (1) nonpremium insurance, 

and (2) premium insurance for which a risk-based 

premium is charged to the air carrier, to the extent 

practical.

During FY 2008, the FAA provided premium war-risk 

insurance to 77 airlines. For these airlines, combined 

hull and liability per occurrence coverage limits range 

from $100 million to $4 billion. The FAA also provided 

nonpremium war-risk insurance to 38 carriers with 1,667 

aircraft for Department of Defense charter operations for 

Central Command and standby nonpremium war-risk 

insurance policies for 8 carriers for State Department 

charter operations. 

As of September 30, 2008, there are no pending aviation 

insurance claims. There is approximately $1.1 billion 

available in the Aviation Insurance Revolving Fund to 

pay claims to carriers covered by premium insurance. If 

premium insurance claims should exceed that amount, 

additional funding could be appropriated from the 

General Fund. The Department of Defense and State 

Department have agreed to pay claims to the carriers 

covered by nonpremium insurance. 

Legal Claims. As of September 30, 2008 and 2007, the 

FAA’s contingent liabilities for asserted and pending legal 

claims reasonably possible of loss were estimated at $80.6 

million and $23.7 million, respectively. 

Environmental Liabilities. As of September 30, 

2008, the FAA has estimated contingent liabilities, 

categorized as reasonably possible, of $114.1 million 

related to environmental remediation. Contingency costs 

are defined for environmental liabilities as those costs 

that may result from incomplete design, unforeseen 

and unpredictable conditions, or uncertainties within a 

defined project scope.

Notes To The Financial Statements
Federal Aviation Administration

122

Note 17. Reconciliation of Net Cost of Operations to Budget

This note reconciles the resources available to FAA to finance operations and the net cost of operating FAA programs.

Resources used to finance activities 2008 2007

Budgetary resources obligated

Obligations incurred $ 22,322,802 $ 20,965,899

Less: Spending authority from offsetting collections and

receipts and recoveries of prior year obligations 7,645,191 6,793,663

Obligations, net of offsetting collections 14,677,611 14,172,236

Other resources

Transfers in/(out) without reimbursement - 212

Imputed financing from costs absorbed by others 564,330 533,724

Net other resources used to finance activities 564,330 533,936

Total resources used to finance activities 15,241,941 14,706,172

Resources used to finance items not part of the net cost of operations

Change in budgetary resources obligated for goods, services, and

benefits ordered but not yet received (103,627) (322,969)

Resources that fund expenses recognized in prior periods (decreases in

unfunded liabilities) (Note 15) 10,440 138,694

Resources that finance the acquisition of assets 1,249,137 1,261,156

Other resources or adjustments to net obligated resources that do not

affect net cost of operations 11,367 (15,678)

Total resources used to finance items not part of net cost of operations 1,167,317 1,061,203

Total resources used to finance net cost of operations 14,074,624 13,644,969

Components of net cost of operations that will not require or generate

resources in the current period

Components requiring or generating resources in future periods

Increases in annual leave liability and other unfunded liabilities (Note 15) 280,363 36,434

Components not requiring or generating resources in future periods

Depreciation and amortization 1,130,852 1,163,413

Other 46,282 (30,362)

Total components of net cost of operations that will not require or

generate resources 1,177,134 1,133,051

Total components of net cost of operations that will not require or 

generate resources in the current period 1,457,497 1,169,485

Net cost of operations $ 15,532,121 $ 14,814,454

Notes To The Financial Statements
123

FY 2008 Performance and Accountability Report

REQUIRED SUPPLEMENTARYSTEWARDSHIPINFORMATION

State/Territory 2008 2007 2006 2005 2004

Alabama $ 53,568 $ 58,006 $ 75,753 $ 59,571 $ 55,527

Alaska 228,082 238,486 182,020 210,446 153,237

Arizona 87,839 64,170 100,235 85,226 52,286

Arkansas 40,313 41,002 48,454 42,342 23,198

California 402,378 377,060 330,255 322,128 236,031

Colorado 54,327 95,914 90,421 61,916 101,792

Connecticut 13,388 8,279 9,154 9,991 8,511

Delaware 11,163 12,109 7,127 9,707 2,813

District of Columbia 5,652 47,131 - 5,657 555

Florida 157,214 209,219 210,656 181,151 145,690

Georgia 118,644 78,564 70,484 128,053 96,081

Hawaii 41,556 74,179 45,815 33,097 21,020

Idaho 21,905 22,307 30,687 24,855 22,677

Illinois 116,104 197,470 111,302 152,307 106,145

Indiana 66,825 57,649 69,098 45,537 49,219

Iowa 37,843 33,501 32,866 34,064 24,282

Kansas 22,059 32,735 32,497 25,864 24,118

Kentucky 32,981 62,393 70,784 64,216 51,904

Louisiana 58,036 66,659 59,783 79,747 59,438

Maine 26,631 24,413 16,960 26,324 45,987

Maryland 30,575 52,523 54,956 38,864 39,450

Massachusetts 42,092 30,217 70,894 27,907 23,495

Michigan 121,795 99,889 120,606 137,814 125,928

Minnesota 68,027 64,822 88,144 67,267 50,472

Mississippi 69,768 69,488 40,229 41,696 39,061

Missouri 104,980 91,667 92,826 116,612 89,848

Montana 28,997 50,018 45,161 27,877 36,754

Nebraska 17,051 30,227 31,567 28,633 25,280

Nevada 51,045 58,106 95,972 56,148 58,418

New Hampshire 24,337 49,344 17,327 22,245 7,996

New Jersey 111,692 88,620 94,207 53,960 55,174

New Mexico 23,273 27,373 27,799 19,761 12,756

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

Stewardship Investment

Non-Federal Physical Property

Airport Improvement Program

For the Fiscal Years Ended September 30

Unaudited

Required Supplementary Stewardship Information
Federal Aviation Administration

124

 Unaudited

State/Territory 2008 2007 2006 2005 2004

New York $ 80,292 $ 121,806 $ 124,315 $ 118,853 $ 86,382

North Carolina 97,242 70,696 79,245 102,669 44,668

North Dakota 19,395 26,433 17,530 23,074 29,007

Ohio 150,547 113,446 126,327 100,776 118,138

Oklahoma 33,975 40,475 43,459 42,941 31,272

Oregon 35,154 34,823 43,946 53,329 33,793

Pennsylvania 119,807 90,909 135,097 126,833 105,293

Rhode Island 13,177 24,985 16,085 11,901 10,861

South Carolina 34,553 24,614 43,391 38,246 23,772

South Dakota 29,557 24,161 18,489 22,065 20,915

Tennessee 76,141 96,290 78,238 45,678 47,298

Texas 299,473 212,737 260,496 235,495 174,336

Utah 56,319 49,935 38,669 41,200 26,008

Vermont 6,234 10,234 7,325 4,333 6,657

Virginia 64,932 104,667 97,613 82,330 70,688

Washington 97,078 111,797 97,519 168,764 73,153

West Virginia 25,256 34,623 35,917 26,991 20,637

Wisconsin 48,781 50,008 55,632 53,074 60,615

Wyoming 19,323 18,687 25,509 38,536 33,544

American Samoa 5,195 9,732 4,792 9,615 6,328

Guam 18,683 29,920 12,428 11,137 2,244

Northern Mariana Island 12,151 20,024 13,302 10,274 8,014

Puerto Rico 16,578 9,760 26,024 16,209 9,323

Virgin Islands 6,892 4,732 1,114 4,702 2,726

Administration 96,965 74,685 75,640 82,415 86,485

 Totals $ 3,753,840 $ 3,923,719 $ 3,852,141 $ 3,712,423 $ 2,977,300

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

Stewardship Investment

Non-Federal Physical Property

Airport Improvement Program

For the Fiscal Years Ended September 30

Required Supplementary Stewardship Information

The FAA makes project grants for airport planning and 

development under the Airport Improvement Program 

to maintain a safe and efficient nationwide system of 

public-use airports that meets both present and future 

needs of civil aeronautics. The FAA works to improve 

the infrastructure of the nation’s airports, in cooperation 

with airport authorities, local and state governments, 

and metropolitan planning authorities.
125

FY 2008 Performance and Accountability Report

Expenses FY 2008 FY 2007 FY 2006 FY 2005 FY 2004

Applied Research 88,114 $ $ 102,782 $ 106,390 $ 103,659 $ 91,743

Development 814 844 587 547 478

Administration 33,519 32,050 30,566 29,163 28,643

R&D Plant 3,498 4,217 3,821 5,287 4,230

Total $ 125,945 $ 139,893 $ 141,364 $ 138,656 $ 125,094

For the Fiscal Years Ended September 30

Unaudited

 U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

 Stewardship Investment

Research and Development

The FAA conducts research and provides the essential air 

traffic control infrastructure to meet increasing demands 

for higher levels of safety, efficiency, and environmental 

improvement.

Research priorities include aircraft structures and 

materials; fire and cabin safety; crash injury protection; 

explosive detection systems; ground de-icing operations 

and decreased in-flight ice buildup; better tools to predict 

and warn of weather hazards, turbulence, and wake 

vortices; aviation medicine; and human factors. Human 

factors refer to research on how people (e.g., air traffic 

controllers and pilots) perform when interacting with, 

for example, technology and equipment, under various 

conditions. Optimizing this interaction contributes 

toward higher levels of safe air travel. 

The following are some of the FAA’s top FY 2008 research 

and development accomplishments. 

• Oceanic Trajectory-Based Operations Proof of 

Concept Demonstration. The FAA demonstrated 

that four-dimensional trajectory-based air traffic 

management can provide more efficient aircraftcentric oceanic routes and reduce fuel burn and 

environmental footprint. The initial demonstrations 

resulted in approximately 330 gallons of fuel savings 

and a reduction of approximately 6,700 pounds of 

CO2 emissions. 

• Air Traffic Control Change in Applying Wake 

Separations. The FAA approved a national air 

traffic control order permitting controllers at specific 

airports with closely-spaced parallel runways 

(spaced less than 2,500 feet apart) to use an aircraft 

separation procedure that mitigates the effects 

of wake turbulence and allows 6 to 10 additional 

landings per hour on those runways. The procedure 

will be used when weather conditions would 

otherwise force controllers to use a separation 

procedure equivalent to having all aircraft land on a 

single runway. 

• Predicting Aircraft Environmental 

Performance Scenarios. The FAA completed 

validations of current technology 300-passenger 

twin-aisle and 150-passenger single-aisle aircraft, 

which cover a significant portion of the commercial 

fleet, using the Environment Design System. The 

system estimates source noise, exhaust emissions, 

performance, and economic parameters for aircraft 

designs under different technological, policy, and 

market scenarios. It will lead to more effective 

regulations to reduce aviation environmental 

impacts within the ICAO Committee on Aviation 

Environmental Protection and help focus industry 

and research and development efforts on the most 

cost beneficial technologies.

Required Supplementary Stewardship Information
Federal Aviation Administration

126 Required Supplementary Stewardship Information

• In-flight Fire Exposure of Aluminum and 

Composite Fuselage Materials. Composite 

materials are replacing aluminum in today’s 

aircraft, however the performance of composites 

under in-flight and post crash fire conditions is 

essentially unknown. Live fire tests were performed 

to determine performance of both aluminum and 

composite hull materials when exposed to an 

internal fire in flight. The panels are effective at 

preventing burnthrough, even though the resin is 

flammable because they have some insulating effect. 

The fire did damage the exposed face of the panel, 

burning the resin away and exposing the fiber. Once 

the outer layer of resin is burned away, however, 

the exposed fiber material acts like a fire blocking 

layer, limiting further damage. Burnthrough did not 

occur within the time frame of these tests, which 

were up to 25 minutes. Off-gassing from the heated 

composite panel did produce a flammable mixture in 

the box resulting in a flash fire. Further work in this 

area is needed to determine the magnitude of this 

hazard and the implications on safety.
127

FY 2008 Performance and Accountability Report

Required Supplementary Information

Required Supplementary Information

Asset Costs to return to

Category Method condition* acceptable condition

Buildings Condition assessment 4&5 116,785 $ 

Other structures

and facilities Condition assessment 4&5 124,828 $ 

* Condition Rating Scale: 4—Poor; 5—Very Poor

 As of September 30, 2008

 Unaudited

 U.S. Department of Transportation

 FEDERAL AVIATION ADMINISTRATION

 Supplementary Information

 Deferred Maintenance

Deferred maintenance is maintenance that was not 

performed when it should have been, or was scheduled 

to be performed but was delayed until a future period 

due to a lack of resources or funding. The FAA reports 

deferred maintenance only on assets with condition 

ratings of 4 and 5, in compliance with the Statement of 

Federal Financial Accounting Standards (SFFAS) Number 

6, “Accounting for Property, Plant, and Equipment”, 

SFFAS Number 8, “Supplemental Stewardship 

Reporting” and SFFAS Number 14, “Amendments to 

Deferred Maintenance Reporting” (amends SFFASs 6 

and 8). 

Deferred maintenance is estimated using condition 

assessment surveys and includes the following 

buildings, structures, and facilities: Enroute, Terminal, 

FAA Technical Center, FAA Aeronautical Center, and 

unstaffed facilities. The FAA recognizes maintenance 

expense as incurred. 
Federal 

Aviation Administration

128Required SupplementaryInformation

Trust Fund

Trust Fund Trust Fund Research, Aviation

Grants-in-Aid Facilities & Eng. & Insurance Franchise Other Combined

Budgetary Resources to Airports Equipment Development Revolving Fund Operations Funds Total

Unobligated balance brought forward and transfers 203,054 $ 1,117,706 $ 31,341 $ 939,626 $ 162,635 $ 288,338 $ 10,968 $ 2,753,668 $ Recoveries of prior year obligations 160,164 168,813 10,523 53 42,546 88,977 - 471,076Budget authority 8,074,000 2,471,327 146,831 - - 8,740,000 53,363 19,485,521

Spending authority from offsetting collections 10,973 54,090 6,901 199,545 403,080 6,499,577 (51) 7,174,115

Nonexpenditure transfers, net - - - - - - (41,566) (41,566)Temporarily not available - - - - - - - -Permanently not available (4,669,500) - (6,015) - - (22,217) - (4,697,732)

Total Budgetary Resources 3,778,691 $ 3,811,936 $ 189,581 $ 1,139,224 $ 608,261 $ 15,594,675 $ 22,714 $ 25,145,082 $ Status of Budgetary Resources

Obligations incurred 3,675,919 $ 2,665,659 $ 150,600 $ 2,480 $ 415,352 $ 15,412,792 $ - $ 22,322,802 $ 

Unobligated balances available 102,772 1,047,013 32,911 4,668 173,561 34,701 - 1,395,626Unobligated balances not available - 99,264 6,070 1,132,076 19,348 147,182 22,714 1,426,654

Total Status of Budgetary Resources 3,778,691 $ 3,811,936 $ 189,581 $ 1,139,224 $ 608,261 $ 15,594,675 $ 22,714 $ 25,145,082 $ 

Change in Obligated Balances

Obligated balance, net, beginning of period 5,367,986 $ 1,800,673 $ 122,913 $ 8,975 $ 104,032 $ 1,108,611 $ 5 $ 8,513,195 $ Obligations incurred 3,675,919 2,665,659 150,600 2,480 415,352 15,412,792 - 22,322,802 $ 

Gross outlays (3,819,303) (2,559,690) (119,172) (5,575) (379,211) (15,072,922) (3) (21,955,876)

Recoveries of prior year obligations, actual (160,164) (168,813) (10,523) (53) (42,546) (88,977) - (471,076)

Change in uncollected customer payments from  Federal sources - 48,068 (6,382) - (34,665) 55,478 - 62,499

Obligated balance, net, end of period 5,064,438 $ 1,785,897 $ 137,436 $ 5,827 $ 62,962 $ 1,414,982 $ 2 $ 8,471,544 $ 

Obligated balance, net, end of period 

Unpaid obligations 5,064,498 $ 1,876,366 $ 146,645 $ 5,827 $ 139,659 $ 1,671,435 $ 2 $ 8,904,432 $ Uncollected customer payments from  Federal sources (60) (90,469) (9,209) - (76,697) (256,453) - (432,888)

Total unpaid obligated balance, net end of period 5,064,438 $ 1,785,897 $ 137,436 $ 5,827 $ 62,962 $ 1,414,982 $ 2 $ 8,471,544 $ 

Net Outlays

Gross outlays 3,819,303 $ 2,559,690 $ 119,172 $ 5,575 $ 379,211 $ 15,072,922 $ 3 $ 21,955,876 $ Offsetting collections (10,986) (102,085) (604) (199,930) (368,415) (6,555,055) 51 (7,237,024)

 Distributed offsetting receipts - - - - - - (1,970) (1,970)

Net Outlays 3,808,317 $ 2,457,605 $ 118,568 $ (194,355) $ 10,796 $ 8,517,867 $ (1,916) $ 14,716,882 $ 

Unaudited

U. S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

Schedule of Budgetary Resources by Major Fund Type

As of September 30, 2008
129

FY 2008 Performance and Accountability Report

Required SupplementaryInformation

Trust Fund

Trust Fund Trust Fund Research, Aviation

Grants-in-Aid Facilities & Eng. & Insurance Franchise Other Combined

Budgetary Resources to Airports Equipment Development Revolving Fund Operations Funds Total

Unobligated balance brought forward and transfers 39,713 $ 1,037,373 $ 28,805 $ 742,563 $ 159,302 $ 287,688 $ 9,778 $ 2,305,222 $ 

Recoveries of prior year obligations 177,493 56,976 2,984 - 2,393 51,213 - 291,059

Budget authority 8,691,480 2,481,346 130,243 - - 8,374,217 48,508 19,725,794

Spending authority from offsetting collections 5,522 99,916 4 202,764 382,068 5,812,330 - 6,502,604Nonexpenditure transfers, net - - - - - - (46,331) (46,331)

Temporarily not available - - - - - - - -

Permanently not available (5,020,000) - (1,981) - - (36,800) - (5,058,781)

Total Budgetary Resources 3,894,208 $ 3,675,611 $ 160,055 $ 945,327 $ 543,763 $ 14,488,648 $ 11,955 $ 23,719,567 $ 

Status of Budgetary Resources

Obligations incurred 3,691,167 $ 2,557,905 $ 128,714 $ 5,701 $ 381,128 $ 14,200,297 $ 987 $ 20,965,899 $ 

Unobligated balances available 6,264 1,055,933 26,510 999 162,635 95,428 - 1,347,769

Unobligated balances not available 196,777 61,773 4,831 938,627 - 192,923 10,968 1,405,899

Total Status of Budgetary Resources 3,894,208 $ 3,675,611 $ 160,055 $ 945,327 $ 543,763 $ 14,488,648 $ 11,955 $ 23,719,567 $ 

Change in Obligated Balances

Obligated balance, net, beginning of period 5,733,848 $ 1,689,580 $ 149,184 $ 8,296 $ 59,759 $ 853,843 $ - $ 8,494,510 $ 

Obligations incurred 3,691,167 2,557,905 128,714 5,701 381,128 14,200,297 987 20,965,899Gross outlays (3,877,723) (2,513,372) (152,724) (5,021) (375,121) (13,892,574) (985) (20,817,520)Recoveries of prior year obligations, actual (177,493) (56,976) (2,984) - (2,393) (51,213) - (291,059)

Change in uncollected customer payments from  Federal sources (1,812) 123,538 724 - 40,660 (1,745) - 161,365

Obligated balance, net, end of period 5,367,987 $ 1,800,675 $ 122,914 $ 8,976 $ 104,033 $ 1,108,608 $ 2 $ 8,513,195 $ 

Obligated balance, net, end of period 

Unpaid obligations 5,368,043 $ 1,939,212 $ 125,741 $ 8,976 $ 146,065 $ 1,420,543 $ 2 $ 9,008,582 $ Uncollected customer payments from  Federal sources (56) (138,537) (2,827) - (42,032) (311,935) - (495,387)

Total unpaid obligated balance, net end of period 5,367,987 $ 1,800,675 $ 122,914 $ 8,976 $ 104,033 $ 1,108,608 $ 2 $ 8,513,195 $ 

Net Outlays

Gross outlays 3,877,723 $ 2,513,372 $ 152,724 $ 5,021 $ 375,121 $ 13,892,574 $ 985 $ 20,817,520 $ 

Offsetting collections (3,709) (223,452) (727) (202,764) (422,729) (5,810,588) - (6,663,969)

 Distributed offsetting receipts - - - - - - (103) (103)

Net Outlays 3,874,014 $ 2,289,920 $ 151,997 $ (197,743) $ (47,608) $ 8,081,986 $ 882 $ 14,153,448 $ 

Unaudited

U. S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

Schedule of Budgetary Resources by Major Fund Type

As of September 30, 2007
Federal Aviation Administration

130 ADMINISTRATIVE SERVICES FRANCHISE FUND

ADMINISTRATIVESERVICES FRANCHISE FUND 

Background

Public Law 104-205, “Department of Transportation and 

Related Agencies Appropriation Act, 1997,” authorized 

the FAA to establish an Administrative Services Franchise 

Fund (Franchise Fund). The Franchise Fund is designed 

to create competition within the public sector in the 

performance of a wide variety of support services. 

It 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.

The FAA’s Franchise Fund is composed of several 

programs, within which it offers a wide variety of 

services. These services include accounting, travel, 

duplicating, multi-media, information technology, 

logistics and material management, aircraft 

maintenance, international training, and management 

training. The Franchise Fund’s major customers are FAA 

lines of business programs. Other customers include 

Department of Transportation (DOT) entities, non-DOT 

Government agencies, and international government 

entities.

Description of Programs and Services

Several programs within the Franchise Fund are 

organized around an Enterprise Services Center (ESC) 

concept, designed to integrate the key components 

necessary to be a full service financial management 

provider. The efficiencies and economies of scale created 

by this integration offer the opportunity to compete for 

customers seeking a provider of financial management 

services. As new customers come on board, this further 

reduces the cost of providing the services by spreading 

the fixed cost of operations over a larger customer base. 

There are three components of the ESC, all falling within 

the single Franchise Fund:

• Enterprise System—configuration and support of 

application software and databases

• Financial Operations—transaction processing, 

financial reporting, and analysis services 

• Information Technology—hosting, 

telecommunications, information system security, 

and end user support services

During FY 2005, OMB selected ESC as a Financial 

Management Center of Excellence (COE). As a COE, the 

ESC now has the ability to compete to provide financial 

management services for other Government agencies. 

The ESC currently provides financial management 

services to all DOT agencies, the National Endowment 

for the Arts, Commodity Futures Trading Commission, 

Institute of Museum and Library Services, and the U.S. 

Government Accountability Office and also has several 

proposals out to other agencies.

In addition to being selected as a COE, the ESC was 

chosen by the FAA Administrator to serve as the 

consolidated provider of all financial management 

services for all FAA organizations. The ESC committed 

to providing an improved level of service, meeting all 

Joint Financial Management Improvement Program 

(JFMIP) requirements.

The Franchise Fund also includes the following program 

areas:

The Aircraft Maintenance and Engineering Group

in the office of Aviation System Standards is located at 

the Mike Monroney Aeronautical Center (Aeronautical 

Center) in Oklahoma City. It provides total aircraft 

support including maintenance, quality assurance, and 

overall program management. This service includes 

preventive as well as repair/overhaul and/or modification 

requirements and reliability and maintainability studies. 

The Aircraft Maintenance and Engineering Group can 

provide full or partial support depending on customer 

requirements, from short-term preventive maintenance 

or one time engineering tasks to more involved activities 

such as a full complement of maintenance services with 

quality assurance and engineering support.
131

FY 2008 Performance and Accountability Report

ADMINISTRATIVE SERVICES FRANCHISE FUND

The Center for Management and Executive 

Leadership (CMEL), located at Palm Coast, Florida, 

provides nontechnical training in support of the 

FAA mission. The center designs and delivers faceto-face centralized training both onsite and at field 

locations. Students also complete more than 5,000 

distance learning programs each year. CMEL is fully 

accredited with commendations by the Commission on 

Occupational Education, and the American Council on 

Education has determined that CMEL courses are worthy 

of upper division college credit. The Federal, professional, 

and local communities also recognize CMEL as a premier 

resource for leadership and teambuilding training.

The International Training Division (ITD) in the 

FAA Academy at the Aeronautical Center in Oklahoma 

City delivers technical assistance and training to 

enhance international aviation safety and security while 

promoting U.S. aviation system technologies, products, 

and services overseas. The products and services of the 

ITD include training program management, instructional 

services, training design/development/revision, technical 

training evaluations, and consulting services tailored 

to meet specifically defined needs of the FAA and its 

international customers.

The FAA Logistics Center, also located at the 

Aeronautical Center, provides comprehensive logistics 

support and a highly sophisticated level of maintenance 

and repair services to ensure the safety of the flying 

public and to satisfy the critical needs of the NAS 

and related requirements. Services include materiel 

management (e.g., provisioning, cataloging, acquisition, 

inventory management, inventory supply), reliable 

and cost-effective depot-level repair of line replaceable 

units, life cycle and performance cost analysis, logistics 

automation, distribution services, disposal of items no 

longer required, and technical support in the repair and 

maintenance of national airspace and related equipment.
Federal Aviation Administration

132 ADMINISTRATIVE SERVICES FRANCHISE FUND

2008 2007

Assets

Fund balance with Treasury $ 255,873 $ 266,809

Accounts receivable, net 6,082 1,875

Inventory and related property, net 457,302 422,419

General property, plant, and equipment, net 6,540 9,838

Other 491 263

Total assets $ 726,288 $ 701,204

Liabilities

Accounts payable $ 15,440 $ 26,000

Advances from others 160,340 171,038

Employee related 15,169 13,222

Other 4,309 10,367

Total liabilities 195,258 220,627

Net position

Cumulative results of operations 531,030 480,577

Total net position 531,030 480,577

Total liabilities and net position $ 726,288 $ 701,204

As of September 30

(Dollars in Thousands)

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

FRANCHISE FUND

Condensed Information

ASSETS, LIABILITIES, and NET POSITION
133

FY 2008 Performance and Accountability Report

ADMINISTRATIVE SERVICES FRANCHISE FUND

2008 2007

Enterprise Services Center Revenues 109,592 $ $ 99,971

Expenses 127,695 111,627

Profit/(loss) (18,103) (11,656)

Aircraft Maintenance and Engineering Group Revenues 51,722 42,154

Expenses 54,521 52,017

Profit/(loss) (2,799) (9,863)

FAA Academy Revenues 13,929 11,730

Expenses 13,475 11,367

Profit/(loss) 454 363

FAA Logistics Center Revenues 266,208 297,673

Expenses 228,781 259,636

Profit/(loss) 37,427 38,037

Total Consolidated Revenues 441,451 451,528

Expenses 424,472 434,647

Profit/(loss) 16,979 $ $ 16,881

REVENUES AND EXPENSES

September 30

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

FRANCHISE FUND

Condensed Information

For the years ended

(Dollars in Thousands)
Federal Aviation Administration

134 ADMINISTRATIVE SERVICES FRANCHISE FUND

2008 2007

Beginning balance, net position $ 480,577 $ 416,025

Financing sources

Transfers-in/out without reimbursement (16,240) (11,594)

Imputed financing from costs absorbed by others 49,714 59,265

Total financing sources 33,474 47,671

Profit (loss) 16,979 16,881

Ending balance, net position $ 531,030 $ 480,577

Cumulative results of operations

U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION

FRANCHISE FUND

Condensed Information

(Dollars in Thousand)

FINANCING SOURCES AND NET POSITION
135

FY 2008 Performance and Accountability Report

ADMINISTRATIVE SERVICES FRANCHISE FUND

This page is intentionally left blank.
In 1958, there were 107,072 active aviation mechanics.

In 2008, that number has grown to 322,852.

Credit: Corbis
137

FY 2008 Performance and Accountability Report

Other Accompanying Information

Inspector General’s Top Management 

Challenges for FY 2009

Near each fiscal year end, the DOT Office of Inspector 

General (OIG) identifies and reports the top challenges 

that management will face in the following fiscal year. 

This report of top challenges is prepared for the DOT 

as a whole and includes certain challenges that pertain 

specifically to the FAA. At the time of publication of 

the FAA’s FY 2008 PAR, the OIG’s report had not been 

finalized. Therefore, we have included excerpts of the 

draft that pertain to the FAA.

OIG Top Challenges for FY 2009

Enhancing Aviation Safety and Maintaining 

Confidence in FAA’s Ability To Provide Effective 

Oversight of a Rapidly Changing Industry

• Maintaining confidence in the FAA’s oversight 

of air carriers and certification and production of 

new segments of the aircraft industry

• Following through on longstanding 

commitments to improve oversight of external 

repair facilities

• Improving runway safety by implementing new 

technologies, making airport-specific changes, 

and reinvigorating FAA initiatives

Enhancing Mobility and Reducing Congestion in 

America’s Transportation System

• Reducing delays and improving airline customer 

service as the airlines struggle with higher fuel 

costs

• Keeping airport infrastructure and airspace 

projects on track

Operating the National Airspace System While 

Developing and Transitioning to the Next 

Generation Air Transportation System

• Hiring and training 17,000 new controllers 

through 2017

• Keeping existing projects on track and reducing 

risks with NextGen

• Sustaining the FAA’s extensive network of aging 

facilities

Protecting Against Increasing Cyber Security 

Risks and Enhancing the Protection of Personally 

Identifiable Information

• Enhancing security protection of the air traffic 

control system as a critical national infrastructure

Improving Contract Operations and Maintaining 

Procurement Integrity

• Developing and maintaining a competent 

acquisition workforce to support the DOT’s 

mission

• Improving award-fee contracting processes to 

better achieve acquisition objectives

• Ensuring that suspended or debarred contractors 

do not obtain Government contracts or 

assistance agreements

• Ensuring that the greater acquisition workforce 

maintains high ethical standards

Management Response

We agree that the FAA faces significant challenges in 

aviation and, as outlined in the FAA’s FY 2008 PAR, we 

have aligned our resources and performance targets so 

that we can be successful. The challenges stated above 

will be met by focusing on improving safety, increasing 

capacity, and achieving organizational excellence.

Making a safe aviation system even safer is an ongoing 

challenge. Our safety record indicates that we have 

addressed every predictable risk factor that could cause 

an accident or incident. Our challenge now is to identify 

any remaining risks and eliminate, minimize, or manage 

them. We have already taken steps to address a number 

of OIG’s recommendations regarding our oversight of 

the air carriers as well as the outsourcing of aircraft 

maintenance. In general, we believe that introducing 

additional management controls in programs such as the 

Voluntary Disclosure Reporting Program (VDRP) and 

the Air Transportation Oversight System (ATOS) will 

be beneficial. These are extremely valuable programs in 

terms of their contributions to the FAA’s safety mission.

Other Accompa nyi ng Information
Federal Aviation Administration

138

We are also redoubling our efforts to continue reducing 

runway incursions and operational errors. We have 

challenged our industry partners to step up their 

actions to make runways safe, and they are responding 

by improving the markings and paint on taxiways at 

hundreds of airports around the country. In addition, 

we are expanding our runway status lights program, 

which will eventually be installed at 22 airports, and 

we have reached agreements with four airlines to fund 

in-cockpit runway safety systems in exchange for critical 

operational data. In the coming year, we will continue 

the accelerated deployment of the Traffic Analysis and 

Review Program (TARP) that identifies loss of separation 

incidents for further investigation.

Reducing delays while keeping the system safe is a 

must. We are on track in planning and implementing 

new runway projects and have begun more significant 

communication with our aviation stakeholders to 

help resolve delays and improve service to the flying 

public. We continue to work with DOT to meet our 

funding challenges and ensure planned infrastructure 

improvements remain on course.

Pursuing our organizational excellence goals directly 

supports many challenges cited by the OIG. Our people 

are our most valuable resource. Hiring and training the 

next generation of air traffic controllers and aviation 

safety inspectors is key to our success, and we are 

aggressively pursuing our hiring goals. Equally important, 

we must ensure that there is a pipeline of candidates to 

support our acquisition workforce needs now and well 

into the future. To modernize the NAS requires adept 

management of highly complex, multi-year initiatives, 

like NextGen. This initiative requires multiple contract 

vehicles to successfully deploy the technology that keeps 

our aviation system the safest in the world. We will 

manage and close out our contracts on time, capitalize 

the assets they produce in a timely manner, ensure the 

information technology used is secure, and keep our 

facilities that house these assets in good condition. All 

of this must be managed with the highest of ethical 

standards. These challenges are all significant, but we are 

prepared to measure our performance routinely and hold 

ourselves accountable to the American taxpayers.

Summary of Audit Results and 

Management Assurances 

Financial Statement Audit Summary

Table 1 is a summary of the results of the independent 

audit of the FAA’s consolidated financial statements, as 

well as information on the material weakness reported 

by the FAA’s auditors in connection with the FY 2007 

audit.

Management Assurances Summary

Table 2 is a summary of management assurances related 

to the effectiveness of internal control over the FAA’s 

financial reporting and operations, and its conformance 

with financial management system requirements under 

Sections 2 and 4, respectively, of the Federal Manager’s 

Financial Integrity Act (FMFIA). The last portion of 

Table 2 is a summary of the FAA’s compliance with 

the Federal Financial Management Improvement Act 

(FFMIA).

Table 1. Summary of Financial Statement Audit

Audit Opinion

FY2008—unqualified

FY2007—unqualified

Restatement No

MaterialWeakness FY 2007—number of 

material weaknesses

Revised and Reissued FY 2008—number of 

material weaknesses

TimelyProcessingofTransactionsand AccountingforProperty,Plant,and

Equipment, IncludingtheConstruction in Progress (CIP) Account.

1 0 0

Other Accompa nyi ng Information
139

FY 2008 Performance and Accountability Report

Improper Payment Information Act of 2002

The Improper Payments Information Act of 2002 and 

OMB Circular A-123 Appendix C guidance require 

Federal agencies to review all programs and activities 

annually, identify those that may be susceptible to 

significant erroneous payments, and determine an annual 

estimated amount of erroneous payments made in those 

programs. The FAA reports its progress on reducing 

erroneous payments to both the President and Congress. 

Our FY 2008 review did not identify any programs or 

activities at risk for “significant erroneous payments” 

in accordance with OMB’s criteria (i.e., programs with 

erroneous payments exceeding both $10 million and 

2.5% of program payments). (Refer to the President’s 

Management Agenda section, page 16, for more 

information).

Table 2. Summary of Management Assurances

Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)

Statementof Assurance Unqualifiedstatementofassurance

MaterialWeakness FY 2007—number of 

material weaknesses

Revised and Reissued FY 2008—number of 

material weaknesses

TimelyProcessingofTransactionsand AccountingforProperty,Plant,and

Equipment, IncludingtheConstruction in Progress (CIP) Account.

1 0 0

Total Material Weaknesses 1 0 0

Effectiveness of Internal Control over Operations (FMFIA § 2)

Statementof Assurance Unqualifiedstatementofassurance

MaterialWeakness FY 2007—number of 

material weaknesses

Revised and Reissued FY 2008—number of 

material weaknesses

TimelyProcessingofTransactionsand AccountingforProperty,Plant,and

Equipment, IncludingtheConstruction in Progress (CIP) Account.

1 0 0

Total Material Weaknesses 1 0 0

Conformance with Financial Management System Requirements (FMFIA § 4)

Statementof Assurance Systems conform to financial management system

Non-Conformances FY 2007—number of 

material weaknesses

Revised and Reissued FY 2008—number of 

material weaknesses

No Non-Conformances 0 0 0

Compliance with Federal Financial Management Improvement Act (FFMIA)

Agency Auditor

OverallSubstantialCompliance Yes Yes

1. System Requirements Yes

2. AccountingStandards Yes

3. USSGL atTransaction Level Yes

Other Accompa nyi ng Information
In 1958, FAA air traffic control towers handled 26.6 million takeoffs and landings.

In 2008, FAA and contract towers will handle approximately 44.2 million operations.

Credit: FAA Image Library
141

FY 2008 Performance and Accountability Report

Glossary of Acronyms

Glossary of Acronym s

Acronym Name

AAL Alaskan (Regional Office)

AATF Airportand AirwayTrustFund

ABA FinancialServices, OfficeofChiefFinancial Officer

(FAA Staff Office)

ACE Central (Regional Office)

ACR Civil Rights (FAA Staff Office)

ACSI American CustomerSatisfaction Survey

ADA Officeof theFAA Deputy Administrator

ADS-B Automatic DependentSurveillanceñBroadcast

AEA Eastern (Regional Office)

AEDT Aviation Environmental Design Tool

AEP Aviation Policy,Planning, & Environment (FAA Staff Office)

AFP AirspaceFlow Program

AGA Association of Government Accountants

AGC ChiefCounsel (FAA Staff Office)

AGI Government & Industry Affairs (FAA Staff Office)

AGL Great Lakes (Regional Office)

AHR Human Resource Management (FAA Staff Office)

AIAA American Instituteof Aeronauticsand Astronautics

AIO Information Services (FAA Staff Office)

AIP Airport ImprovementProgram

AIR AircraftCertification

AME Aviation MedicalExaminer

AMS Acquisition ManagementSystem

ANE New England(Regional Office)

ANM Northwest Mountain (Regional Office)

AOA FAA Officeof the Administrator

AOC Communications (FAA Staff Office)

API International Aviation (FAA Staff Office)

APL Acquisition Policy Letter

ARC RegionsandCenter Operations (FAA Staff Offices)

ARINC Aeronautical Radio, Inc.

ARP Airports (FAA Lineof Business)

ARTCC Air RouteTrafficControlCenter

ASAP AutomatedStaffingand Application Process

ASDE-X AirportSurface Detection Equipment Model X

ASH Securityand Hazardous Materials (FAA Staff Office)

ASI Aviation SafetyInspectors

Acronym Name

ASIAS Aviation SafetyandInformation Analysisand

Sharing

ASO Southern (Regional Office)

ASPIRE AsiaandSouth Pacific Initiativeto ReduceEmissions

ASPM Aviation System Performance Metrics

ASQP AirlineService QualityPerformance

AST CommercialSpaceTransportation (FAA Lineof Business)

ASV AnnualService Volume

ASW Southwest (Regional Office)

ATO AirTraffic Organization (FAA Lineof Business)

ATOS AirTraffic OversightSystem

AVS Aviation Safety(FAA lineofbusiness)

AWP Western Pacific (Regional Office)

BASA Bilateral Aviation Safety Agreement

BCP BusinessContinuityPlan

BPA BlanketPurchase Agreement

BTS BureauofTransportation Statistics

CAAFI Commercial Aviation AlternativeFuels Initiative

CAS Cost AccountingSystem

CAST Commercial Aviation SafetyTeam

CDA Continuous Descent Arrival

CASTLE Consolidated AutomatedSystem forTimeand LaborEntry

CDRPP Continuous Data RecordingPlayerPlus

CEAR CertificateofExcellencein Accountability Reporting

CFI CertifiedFlyingInstructor

CFO ChiefFinancial Officer

CFR CodeofFederal Regulations

CIP Construction in Progress

CMEL Center for ManagementandExecutive Leadership

CMT Certificate ManagementTeams

COE CenterofExcellence

CR Continuing Resolution

CRD Conceptand Requirements Definition

CSMC CyberSecurity ManagementCenter

CSP CentralizedSelection andPlacement

CSRS CivilService RetirementSystem

CTI AirTrafficCollegiateTrainingInitiative

DATTS Deployable AirTrafficTrainingSystem
Federal Aviation Administration

142 Glossary of Acronym s

Acronym Name

DC DistrictofColumbia

DCAA DefenseContract Audit Agency

DNL Day-NightSound Level

DOD Departmentof Defense

DOL Departmentof Labor

DOT DepartmentofTransportation

DPE DesignatedPilotExaminer

EA Enterprise Architecture

ESC EnterpriseServicesCenter

ETMS EnhancedTraffic ManagementSystem

EVM Earned Value Management

F&E FacilitiesandEquipment

FAA Federal Aviation Administration

FASAB Federal AccountingStandards Advisory Board

FBWT Fund Balance with Treasury

FECA FederalEmployees’Compensation Act

FERS FederalEmployees RetirementSystem

FF FranchiseFund

FFMIA FederalFinancial Management Improvement Act

FISCAM Federal Information System Controls Audit Manual

FISMA Federal Information Security Management Act

FMFIA Federal Managers’Financial Integrity Act

FY FiscalYear

G&A Generaland Administration

GA General Aviation

GAO Government Accountability Office

GETS GrievanceElectronicTrackingSystem

GPS GlobalPositioningSystem

GPT GrievanceProcessingTime

GSA GeneralServices Administration

HPO High Performing Organization

HRM Human Resource Management

HSPD HomelandSecurityPresidential Directive

ICAO InternationalCivil Aviation Organization

IG Inspector General

ILS Instrument LandingSystem

INM Integrated Noise Model

IPA Implementation Procedures for Airworthiness

IPIA ImproperPayment Information Act

IRS Internal RevenueService

Acronym Name

ISS Information SystemsSecurity

IT Information Technology

ITD InternationalTraining Division

ITEB Information TechnologyExecutive Board

JFK John F. Kennedy

JFMIP JointFinancial Management ImprovementProgram

JPDO JointPlanningand Development Office

JRC Joint ResourcesCouncil

LCGS Low-Cost GroundSurveillanceSystem

LOB Linesof Business

LPV LocalizerPerformance with Vertical

MAGENTA Model for Assessing GlobalExposuretothe Noiseof

Transport Aircraft

MIA Miami International Airport

MMS Maintenance ManagementSystem

NACO National AeronauticalCharting Office

NAEP National Acquisition Evaluation Program

NAS National AirspaceSystem

NASA National AeronauticsandSpace Administration

NASPAS National AirspaceSystem Performance AnalysisSystem

NATCA National AirTrafficControllers Association

NextGen Next Generation AirTransportation System

NIST National InstituteofStandardsandTechnology

NMW No MaterialWeaknesses

NODB National Outage Database

NOSH National OccupationalSafetyand Health

NTSB NationalTransportation Safety Board

OAG Official Airline Guide

OE OperationalError

OEDP OperationalError Detection Patch

OEP OperationalEvolution Partnership

OIG Officeof theInspector General

OMB Officeof Managementand Budget

OPM OfficeofPersonnel Management

OSH OccupationalSafetyand Health

OSPE Officeof theSeniorProcurementExecutive

OST Officeof theSecretaryofTransportation

OTA OfficeofTax Analysis

PAR Performanceand Accountability Report

PART Program Assessment RatingTool
143

FY 2008 Performance and Accountability Report

Glossary of Acronym s

Acronym Name

PATCO Professional AirTrafficControllers Organization

PEPC Pre-EmploymentProcessingCenters

PIV Personal Identification Verification

PMA Presidentís Management Agenda

PMP Program ManagementPlan

PP&E Property,Plant,andEquipment

PRISM Procurement Acquisition ManagementSystem

R,E,&D Research,Engineering,and Development

RNAV Required Area Navigation

RNP Required Navigation Performance

RSA RunwaySafety Area

RSSI RequiredSupplementaryStewardshipInformation

RWSL RunwayStatus Lights

SAGE System for Assessing Aviation GlobalEmissions

SAVES StrategicSourcingfor the Acquisition of Various

EquipmentandSupplies

SE SafetyEnhancement

SFFAS StatementofFederalFinancial AccountingStandards

SHARE Safety, Health and Return toEmploymentPresidential

Initiative

SMS Safety ManagementSystem

SOAR System of Airport Reporting

SPARTCC Spare ARTCC(Air RouteTrafficControlCenter)

SPIRE SimplifiedProgram Information ReportingandEvaluation

SRM Safety Risk Management

SWIM SystemWideInformation Management

TAF Terminal AreaForecast

TARP Traffic Analysis Review Program

TBD To Be Determined

TSS TowerSimulation Systems

UAS Unmanned AerialSystem

VDRP Voluntary Disclosure ReportingProgram

WAAS Wide-Area Augmentation System
In 1958, there were 354,365 active pilots.

In 2008, there are 590,349 active pilots. 

Credit: Corbis
Acknowledgments

This FY 2008 Performance and Accountability Report is a collaborative endeavor on the part of many FAA employees and 

contractors. We would like to acknowledge and thank them for their hard work and commitment in successfully 

preparing this report and supporting the audit of the financial statements. 

We Welcome Your Comments!

Thank you for your interest in the FAA’s FY 2008 Performance and Accountability Report. We welcome your comments on 

how we can make this report more informative for our readers. 

Please send your comments to 

Mail:

Office of Financial Management 

Federal Aviation Administration 

800 Independence Avenue, SW 

Room 612 

Washington, DC 20591 

Phone: (202) 267-3018

E-mail: Allison.Ritman@faa.gov 

Fax: (202) 493-4191 

This report and reports from prior years are available on the FAA website at www.faa.gov/about/plans_reports/. 

For a printed copy, call (202) 267-3018 or email Allison.Ritman@faa.gov.
This report and reports from prior years are available on the FAA website at 

www.faa.gov/about/plans_reports/.

HQ-08655

U.S. Department of Transportation

Federal Aviation Administration

800 Independence Avenue, SW

Washington, DC 20591

www.faa.gov